F5 Networks: Fiscal 3Q08 Financial Results

For the third quarter of fiscal 2008, F5 Networks, Inc. announced revenue of $165.6 million, up 4 percent from $159.1 million in the prior quarter and 25 percent from $132.4 million in the third quarter of fiscal 2007.

GAAP net income was $19.1 million ($0.23 per diluted share), compared to $17.7 million ($0.21 per diluted share) in the prior quarter and $21.8 million ($0.26 per diluted share) in the third quarter a year ago.

Excluding the impact of stock-based compensation net of tax, non-GAAP net income was $30.2 million ($0.37 per diluted share), compared to $28.9 million ($0.35 per diluted share) in the prior quarter and $30.3 million ($0.36 per diluted share) in the third quarter of fiscal 2007.

A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated Statements of Operations.

"During the third quarter, we saw continued strengthening in our core application delivery controller (ADC) business", said John McAdam, F5 president and chief executive officer. "As we anticipated, our chassis-based VIPRION controller was a key driver of product revenue growth. Sales of VIPRION were especially robust among large internet content and service providers, and we continue to see strong demand heading into the close of fiscal 2008. With VIPRION contributing to strong sales at the high end of our product line, we believe our new entry-level ADC products, announced today, will have a positive impact on our low-end sales. BIG-IP 1600 and BIG-IP 3600 represent the first phase of a complete platform refresh that will roll out during fiscal 2009, delivering higher performance and more functionality across our ADC product line."

Along with solid revenue and earnings growth, balance sheet highlights for the third quarter included a 13 percent increase in deferred revenue to $139 million and $56 million in cash flow from operations. After repurchasing another $50 million of the company’s outstanding common stock, F5 ended the quarter with $447 million in cash and investments.

Despite continuing uncertainty in the macroeconomic environment, McAdam said he is encouraged by the company’s solid third quarter results and the prospect of further improvement driven by new products. For the current quarter, management has set a revenue goal of $172 million to $174 million with a GAAP earnings target of $0.19 to $0.20 per diluted share. Management’s GAAP earnings target includes a charge of $5.3 million related to a loss on facility exit and sublease ($3.3 million net of tax). Excluding this charge and stock-based compensation expense, the company’s non-GAAP earnings target is $0.38 to $0.39 per diluted share.