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F5 Networks Inc. (FFIV - Free Report) reported second-quarter fiscal 2018 non-GAAP earnings per share (excluding amortization of intangible assets, stock-based compensation and other one-time items) of $2.31, surpassing the Zacks Consensus Estimate of $2.26 as well as the guidance of $2.24-$2.27. Furthermore, earnings increased 18.5% from the year-ago bottom-line figure.
Revenues
F5 Networks’ revenues grew 2.9% year over year to $533.3 million and came ahead of the Zacks Consensus Estimate of $530 million. Notably, revenues were also above the mid-point of the guided range of $525-$535 million.
Revenues were boosted by around 6.7% increase in service revenues, which accounted for 55% of total revenues. However, product revenues witnessed a decrease of 1.5% on a year-over-year basis.
Geographically, on a year-over-year basis, revenues from the Americas were up 1% and contributed 55% to total revenues. EMEA increased 8% and accounted for 26% of total revenues. Asia Pacific was up 2% on a year-over-year basis, representing 14% of total revenues. Japan revenues decreased 6% and represented 4% of total revenues.
By verticals, Enterprise, Service providers and Government (including 5% from the U.S. federal) accounted for 66%, 21% and 13% of total revenues, respectively.
The company’s distributors Ingram Micro and Tech Data accounted for 17% and 12% of revenues, respectively. Arrow, Westcon and Cynics contributed 11% each to total revenues.
Operating Results
F5 Networks’ non-GAAP gross profit (excluding amortization of intangible assets, other one-time items and stock-based compensation) was up 2.9% on a year-over-year basis and came in at $451.2 million. Non-GAAP gross margin decreased 30 basis points (bps) during the quarter and came in at 84.7%, primarily due to higher cost of sales.
The company’s non-GAAP operating profit (excluding amortization of intangible assets, other one-time items and stock-based compensation) totaled $187.5 million, up 1% from the year-ago quarter. Non-GAAP operating margin was almost flat on a year-over-year basis.
The company’s non-GAAP net income (excluding amortization of intangible assets, other one-time items and stock-based compensation) came in at approximately $143.3 million compared with $127 million reported in the year-ago quarter. On a GAAP basis, net income came in at $109.6 million compared with $93.1 million reported in the year-ago period.
F5 Networks, Inc. Price, Consensus and EPS Surprise
F5 Networks exited the quarter with cash, cash equivalents and short-term investments of approximately $1.02 billion compared with $1 billion in the prior quarter.
Long-term liabilities were $328.4 million. It reported cash flow from operations of $374.7 million. During the quarter, F5 Networks repurchased shares worth approximately $300 million.
Guidance
For third-quarter fiscal 2018, F5 Networks expects revenues in the range of $535-$545 million. The Zacks Consensus Estimate is pegged at $536.5 million.
The company expects non-GAAP earnings per share in the range of $2.36-$2.39. The Zacks Consensus Estimate is pegged at $2.26 per share.
Bottom Line
F5 Networks’ impressive second-quarter fiscal 2018 results were backed by growth in services and software solutions segment. Management is particularly optimistic about the traction in public cloud deployments, given the surge in demand for security in the multi-cloud environment.
The company’s ability to structure Enterprise License Agreement (ELA) has increased overall growth opportunities. Management noted that F5 Network’s advanced WAF, which is capable of detecting bots, blocking automated attacks and detecting DDOS via the use of machine learning and behavioral analytics is another positive.
The company is also extremely optimistic about the BIG IP Cloud Edition that was unveiled on the day of the announcement of the quarter results. Its Advanced Web Application Firewall is anticipated to boost the top line in the long run. Management is also banking on a strong pipeline for future growth.
Twitter and Western Digital have a long-term earnings growth rate of 21.5% and 19%, respectively.
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F5 Networks (FFIV) Surpasses Q2 Earnings & Revenue Estimates
F5 Networks Inc. (FFIV - Free Report) reported second-quarter fiscal 2018 non-GAAP earnings per share (excluding amortization of intangible assets, stock-based compensation and other one-time items) of $2.31, surpassing the Zacks Consensus Estimate of $2.26 as well as the guidance of $2.24-$2.27. Furthermore, earnings increased 18.5% from the year-ago bottom-line figure.
Revenues
F5 Networks’ revenues grew 2.9% year over year to $533.3 million and came ahead of the Zacks Consensus Estimate of $530 million. Notably, revenues were also above the mid-point of the guided range of $525-$535 million.
Revenues were boosted by around 6.7% increase in service revenues, which accounted for 55% of total revenues. However, product revenues witnessed a decrease of 1.5% on a year-over-year basis.
Geographically, on a year-over-year basis, revenues from the Americas were up 1% and contributed 55% to total revenues. EMEA increased 8% and accounted for 26% of total revenues. Asia Pacific was up 2% on a year-over-year basis, representing 14% of total revenues. Japan revenues decreased 6% and represented 4% of total revenues.
By verticals, Enterprise, Service providers and Government (including 5% from the U.S. federal) accounted for 66%, 21% and 13% of total revenues, respectively.
The company’s distributors Ingram Micro and Tech Data accounted for 17% and 12% of revenues, respectively. Arrow, Westcon and Cynics contributed 11% each to total revenues.
Operating Results
F5 Networks’ non-GAAP gross profit (excluding amortization of intangible assets, other one-time items and stock-based compensation) was up 2.9% on a year-over-year basis and came in at $451.2 million. Non-GAAP gross margin decreased 30 basis points (bps) during the quarter and came in at 84.7%, primarily due to higher cost of sales.
The company’s non-GAAP operating profit (excluding amortization of intangible assets, other one-time items and stock-based compensation) totaled $187.5 million, up 1% from the year-ago quarter. Non-GAAP operating margin was almost flat on a year-over-year basis.
The company’s non-GAAP net income (excluding amortization of intangible assets, other one-time items and stock-based compensation) came in at approximately $143.3 million compared with $127 million reported in the year-ago quarter. On a GAAP basis, net income came in at $109.6 million compared with $93.1 million reported in the year-ago period.
F5 Networks, Inc. Price, Consensus and EPS Surprise
F5 Networks, Inc. Price, Consensus and EPS Surprise | F5 Networks, Inc. Quote
Balance Sheet & Cash Flow
F5 Networks exited the quarter with cash, cash equivalents and short-term investments of approximately $1.02 billion compared with $1 billion in the prior quarter.
Long-term liabilities were $328.4 million. It reported cash flow from operations of $374.7 million. During the quarter, F5 Networks repurchased shares worth approximately $300 million.
Guidance
For third-quarter fiscal 2018, F5 Networks expects revenues in the range of $535-$545 million. The Zacks Consensus Estimate is pegged at $536.5 million.
The company expects non-GAAP earnings per share in the range of $2.36-$2.39. The Zacks Consensus Estimate is pegged at $2.26 per share.
Bottom Line
F5 Networks’ impressive second-quarter fiscal 2018 results were backed by growth in services and software solutions segment. Management is particularly optimistic about the traction in public cloud deployments, given the surge in demand for security in the multi-cloud environment.
The company’s ability to structure Enterprise License Agreement (ELA) has increased overall growth opportunities. Management noted that F5 Network’s advanced WAF, which is capable of detecting bots, blocking automated attacks and detecting DDOS via the use of machine learning and behavioral analytics is another positive.
The company is also extremely optimistic about the BIG IP Cloud Edition that was unveiled on the day of the announcement of the quarter results. Its Advanced Web Application Firewall is anticipated to boost the top line in the long run. Management is also banking on a strong pipeline for future growth.
Zacks Rank and Stocks to Consider
F5 Networks carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Twitter, Inc and Western Digital Corporation (WDC - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Twitter and Western Digital have a long-term earnings growth rate of 21.5% and 19%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>