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Why Is F5 (FFIV) Down 3.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is F5 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
F5 Networks delivered robust first-quarter fiscal 2022 results wherein both earnings and revenues not only surpassed the Zacks Consensus Estimate but also registered double-digit year-over-year growth.
The company’s fiscal first-quarter non-GAAP earnings per share of $2.89 beat the Zacks Consensus Estimate of $2.79. The figure increased 11.6% from the year-ago quarter and was well above management’s guidance of $2.71-$2.83 per share.
During the fiscal first quarter, non-GAAP revenues climbed 10% year on year to $687 million surpassing the Zacks Consensus Estimate of $679 million. The top line was slightly higher than F5 Networks’ guided range of $665-$685 million.
Top Line Details
Product revenues (49.9% of total revenues), which comprise Software and Systems sub-divisions, surged 19% year on year to $343 million. Software sales jumped 47% year over year to $163 million, accounting for approximately 47.5% of the total Product revenues. System revenues inched up 1% to $180 million, making up the remaining 52.5% of the total Product revenues.
Global Service revenues (50.1% of total revenues) increased 2% to $344 million.
F5 Networks registered sales growth across the Americas and APAC witnessing year-over-year increase of 17% and 2%, respectively. Meanwhile, it registered no growth in the EMEA region. Revenue contributions from the Americas, EMEA and APAC regions were 59%, 24% and 18%, respectively.
Customer wise, Enterprises, Service providers and Government represented 71%, 15% and 14% of product bookings, respectively.
Margins
The GAAP gross margin contracted 130 basis points (bps) to 80.3%. The non-GAAP gross margin shrunk 140 bps to 83%.
The GAAP operating expenses flared up 11.7% year over year to $437.9 million, while the non-GAAP operating expenses rose 7.4% to $345.2 million. F5 Networks’ GAAP and non-GAAP operating margins contracted 230 bps to 16.6% and 30 bps to 32.7%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the October-December quarter with cash and short-term investments of $859 million compared with the previous quarter’s $911 million.
During the fiscal first quarter, the company generated $90.4 million of operating cash flow compared with $197 million reported in the previous quarter. This downside was mainly due to solid multi-year subscription sales and significant prepayments to contract manufacturers.
F5 Networks repurchased shares worth $125 million during the quarter reported.
Guidance
F5 Networks anticipates that supply-chain disruptions caused by the pandemic might restrict its ability to meet high demand for its solutions across on-premise and cloud environments. Hence, the company issued a downbeat business outlook for the second quarter of fiscal 2022.
F5 Networks projects non-GAAP revenues to be $610-$650 million (mid-point of $630 million) for the second quarter of fiscal 2022, reflecting a $60-80 million shortfall in its ability to ship.
The company anticipates non-GAAP earnings per share in the $1.75-$2.15 band (mid-point of $1.95).
For fiscal 2022, F5 Networks now expects revenues to grow 4.5-8% on a year-over-year basis compared with the previous range of 8-9% year-over-year growth. However, it expects increase in software sales to remain in-line with its prior guidance of 35-40%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -41.26% due to these changes.
VGM Scores
At this time, F5 has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise F5 has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is F5 (FFIV) Down 3.9% Since Last Earnings Report?
It has been about a month since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is F5 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
F5 Networks' Q1 Earnings & Revenues Beat Estimates
F5 Networks delivered robust first-quarter fiscal 2022 results wherein both earnings and revenues not only surpassed the Zacks Consensus Estimate but also registered double-digit year-over-year growth.
The company’s fiscal first-quarter non-GAAP earnings per share of $2.89 beat the Zacks Consensus Estimate of $2.79. The figure increased 11.6% from the year-ago quarter and was well above management’s guidance of $2.71-$2.83 per share.
During the fiscal first quarter, non-GAAP revenues climbed 10% year on year to $687 million surpassing the Zacks Consensus Estimate of $679 million. The top line was slightly higher than F5 Networks’ guided range of $665-$685 million.
Top Line Details
Product revenues (49.9% of total revenues), which comprise Software and Systems sub-divisions, surged 19% year on year to $343 million. Software sales jumped 47% year over year to $163 million, accounting for approximately 47.5% of the total Product revenues. System revenues inched up 1% to $180 million, making up the remaining 52.5% of the total Product revenues.
Global Service revenues (50.1% of total revenues) increased 2% to $344 million.
F5 Networks registered sales growth across the Americas and APAC witnessing year-over-year increase of 17% and 2%, respectively. Meanwhile, it registered no growth in the EMEA region. Revenue contributions from the Americas, EMEA and APAC regions were 59%, 24% and 18%, respectively.
Customer wise, Enterprises, Service providers and Government represented 71%, 15% and 14% of product bookings, respectively.
Margins
The GAAP gross margin contracted 130 basis points (bps) to 80.3%. The non-GAAP gross margin shrunk 140 bps to 83%.
The GAAP operating expenses flared up 11.7% year over year to $437.9 million, while the non-GAAP operating expenses rose 7.4% to $345.2 million. F5 Networks’ GAAP and non-GAAP operating margins contracted 230 bps to 16.6% and 30 bps to 32.7%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the October-December quarter with cash and short-term investments of $859 million compared with the previous quarter’s $911 million.
During the fiscal first quarter, the company generated $90.4 million of operating cash flow compared with $197 million reported in the previous quarter. This downside was mainly due to solid multi-year subscription sales and significant prepayments to contract manufacturers.
F5 Networks repurchased shares worth $125 million during the quarter reported.
Guidance
F5 Networks anticipates that supply-chain disruptions caused by the pandemic might restrict its ability to meet high demand for its solutions across on-premise and cloud environments. Hence, the company issued a downbeat business outlook for the second quarter of fiscal 2022.
F5 Networks projects non-GAAP revenues to be $610-$650 million (mid-point of $630 million) for the second quarter of fiscal 2022, reflecting a $60-80 million shortfall in its ability to ship.
The company anticipates non-GAAP earnings per share in the $1.75-$2.15 band (mid-point of $1.95).
For fiscal 2022, F5 Networks now expects revenues to grow 4.5-8% on a year-over-year basis compared with the previous range of 8-9% year-over-year growth. However, it expects increase in software sales to remain in-line with its prior guidance of 35-40%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -41.26% due to these changes.
VGM Scores
At this time, F5 has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise F5 has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.