F5 Networks: Fiscal 1Q09 Financial Results

F5 Networks, Inc. announced revenue of $165.6 million for the first quarter of fiscal 2009, down 3.3 percent from $171.3 million in the prior quarter and up 7.4 percent from $154.2 million in the first quarter of fiscal 2008.

GAAP net income for the first quarter was $21.4 million ($0.27 per diluted share) compared to $19.7 million ($0.24 per diluted share) in the fourth quarter of 2008 and $17.8 million ($0.21 per diluted share) in the first quarter a year ago. Excluding the impact of stock-based compensation, non-GAAP net income for the first quarter was $32.3 million ($0.40 per diluted share), compared to $33.4 million ($0.41 per diluted share) in the prior quarter and $28.8 million ($0.33 per diluted share) in the first quarter of fiscal 2008.

“As we announced on January 6th, the primary reason for the revenue shortfall was a sudden fall-off in North American sales during the last week of December,” said John McAdam, F5 president and chief executive officer. “Our current analysis indicates that most of these deals were pushed into our second or third quarter of 2009 due to budget constraints.  However, several were postponed indefinitely as customers evaluate their expense budgets in light of the continued recession.”

McAdam said he was pleased that during the quarter the company continued to maintain solid margins, achieved its earnings targets, and generated strong cash flow.

During the first quarter, cash flow from operations was $57.9 million. After repurchasing $20 million of F5 common stock, the company ended the year with $487.4 million in cash and investments.

Given the likelihood of continued uncertainty and further slowing in the overall economy, McAdam said management has lowered its expectations for the current quarter.  For the second quarter of fiscal 2009, ending March 31st, the company has set a revenue target of $157 million to $164 million and a GAAP earnings target of $0.19 to $0.21 per diluted share. Management expects to record a $4.5 to $5.5 million (pre-tax) restructuring charge in the second quarter related to a loss on facility exit, workforce reduction and accelerated depreciation on tenant improvements. Excluding this charge and stock-based compensation expense, the company’s non-GAAP earnings target is $0.36 to $0.38 per diluted share. Both the GAAP and non-GAAP earnings targets for the second quarter reflect the anticipated return to a normalized effective tax rate, which was lower in the first quarter of fiscal 2009 due to the retroactive extension of the federal R&D tax credit.