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F5 Networks Inc. (FFIV)
F1Q10 Earnings Call
January 20, 2010 4:30 pm ET
John McAdam - President & Chief Executive Officer
Andy Reinland - Senior Vice President & Chief Financial Officer
Mark Anderson - Senior Vice President of Worldwide Sales
Karl Triebes - Senior Vice President of Product Development and Chief Technical Officer
John Eldridge - Director of Investor Relations
Brian White - Ticonderoga
Ittai Kidron - Oppenheimer & Co
Jason Ader - William Blair
Samuel Wilson - JMP Securities
Troy Jensen - Piper Jaffray
Brian Marshall - Broadpoint AmTech
Mark Sue - RBC Capital
Erik Suppiger - Signal Hill
Jeff Kvaal - Barclays Capital
Ryan Hutchinson - Lazard Capital Markets
Min Park - Goldman Sachs
Brian Modoff - Deutsche Bank
Jeff Luber - Wells Fargo Securities
Previous Statements by FFIV
» F5 Networks Inc. F2Q09 (Qtr End 03/31/09) Earnings Call Transcript
» F5 Networks, Inc. F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
» F5 Networks, Inc. F4Q08 (Qtr End 9/30/08) Earnings Call Transcript
I’d now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Thank you, sir. You may begin.
Thank you Brian and welcome all of you to our conference call for the first quarter of fiscal 2010. Speakers on today's call are John McAdam, President and CEO and Andy Reinland, Senior VP and Chief Financial Officer. Other members of our executive team are also with us to answer questions following our prepared comments. If you have questions following today's call, please direct them to me at 206-272-6571. If you haven't seen a copy of today's press release, it’s available on our website www.f5.com.
In addition, you can access an archived version of today's live webcast in the events calendar page of our website through April 21. From 4:30 pm today until midnight Pacific Time January 21, you can also listen to a telephone replay at 800-217-1705, 402-220-3900. During today's call, our discussion will contain forward-looking statements, which include words such as believe, anticipate, expect and target.
These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by those statements. Factors that may affect our results are summarized in our quarterly release described in detail on our SEC filings. Please note that F5 Networks has no duty to update any information presented in this call.
With that, I'll turn the call over to Andy Reinland.
Thank you, John. Q1 of fiscal 2010 was a quarter of solid growth for F5. Revenue of $191.2 million was up 9% sequentially from $175.1 million in the prior quarter and above our guided range of $182 to $187 million. GAAP EPS of $0.36 per diluted share was above our guided range of $0.31 to $0.33. Excluding stock-based compensation expense, non-GAAP EPS of $0.52 per diluted share was also above our guidance of $0.47 to $0.49.
Product revenue of $119.2 million grew 9% sequentially and represented 62% of total revenue. Service revenue of $71.9 million also grew 9% sequentially and accounted for 38%. Book-to-bill for the quarter was greater than one. On a regional basis, the Americas represented 58% of total revenue. AMEA accounted for 24%, APAC, 11% and Japan, 6%. Revenue from our core application delivery networking business was $178.7 million or 93% of total revenue.
Revenue of $5.7 million from our ARX file virtualization products was up from $5.4 million in the prior quarter and accounted for 3% of total revenue. FirePass revenue of $6.8 million declined slightly from Q4 and represented 4% of total revenue. During Q1, the financial vertical was 31% of revenue driven in part by shipping a significant portion of the large financial deal, one in Q4.
Telco accounted for 21%; all government was 12%, including 7% for US Federal. At 12% of revenue, the technology vertical is lower than normal. It is worth noting that technology bookings were, in fact, up from the prior quarter and exceeded our internal forecast. The decrease in the number reported is a reflection of a mix shift in our backlog.
As we shift out a significant portion of our large financial deal from beginning backlog, we saw a sizable increase in technology orders reflected in our ending backlog. As I already mentioned, book-to-bill for Q1 was greater than one, resulting in backlog increasing over the prior quarter. During Q1, we had two greater than 10% distributors, tech data which accounted for 12.5% of revenue and Avnet which represented 11.6%.
Moving down the income statement, GAAP gross margin in Q1 was 79.5%. Excluding approximately $1.6 million of stock based compensation expense, non-GAAP gross margin was 80.4%. GAAP operating expenses of $108.3 million were within our target range of $105 million to $109 million. Excluding $15.5 million of stock-based compensation expense, non-GAAP operating expenses were $92.8 million.
GAAP operating margin was 22.9%. Non-GAAP operating margin, which exclude stock based compensation expense was 31.8%. Our GAAP effective tax rate was 35.5%. Excluding stock based compensation, our non-GAAP effective tax rate was 33.7%. On the balance sheet, we ended the quarter with $647 million in cash and investments.
Cash flow from operations was $74 million. During the quarter, we repurchased approximately 309,000 shares of our common stock at an average price of $48.47 per share for a total of approximately $15 million. DSO ended the period at 51 days. Inventories the quarter end were $14.8 million.
Deferred revenue increased 15% sequentially to $211.4 million. Capital expenditures for the quarter were $3.6 million and depreciation and amortization expense was $6 million. We ended the quarter with approximately 1740 employees, an increase of 95 from the prior quarter.