F5 Networks Inc. (FFIV - Free Report) reported third-quarter fiscal 2019 GAAP earnings per share of $2.52, missing the Zacks Consensus Estimate of $2.57 but inching up 3.3% year over year. Excluding the impact of the NGINX buyout, non-GAAP earnings would have been in line with estimates.
F5 Networks revenues rose 4% year over year to $563.4 million and also surpassed the Zacks Consensus Estimate of $555 million. The acquisition of NGINX contributed $5.1 million to revenues in the quarter under review.
Quarterly Details
Products revenues (44.2% of total revenues) during the reported quarter totaled $248.9 million, up 4.2% from the year-ago period, driven by software. NGINX contributed to $4 million of subscription software revenues.
Software soared 91% year over year and represented 27% of product revenues. This upside can be attributed to the growing adoption of the Enterprise License Agreement (ELA) and annual subscriptions among customers.
Excluding NGINX, software revenues surged 79% year over year and accounted for 26% of the product revenues.
Software growth is consistently aided by security use cases, which include web application firewall, bot-defense and mitigation. A few multimillion-dollar ELA deals were also a tailwind in the quarter under consideration.
Systems revenues, denoting 73% of product revenues, declined 11% on a year-over-year basis.
Services revenues (55.8%) increased 3.7% year over year to $314.5 million with $1.1 million contributed by NGINX.
Geographically, on a year-over-year basis, revenues from the Americas — reflecting 53% of the total count — dipped 1%. Asia Pacific and Japan revenues rose 22% and generated 23% of the total top line. EMEA was nudged up 2% and accounted for 24% of the total revenue tally.
Going by the verticals, Enterprise, Service providers and Government (including 8% from the U.S. Federal) depicted 60%, 20% and 19% of the total revenue stream, respectively.
The company’s distributor Ingram Micro translated to 18% of the company’s revenues. Tech Data and Westcon contributed 11% and 10%, respectively, to the total revenue base.
Margins
Non-GAAP gross margin expanded 90 basis points (bps) to 85.4% during the quarter.
Non-GAAP operating margin contracted 290 bps to 33.1%. Excluding NGINX, non-GAAP operating margin was 34.2% in the quarter under discussion.
Balance Sheet & Cash Flow
F5 Networks exited the reported quarter with cash, cash equivalents and short-term investments of approximately $986.5 million compared with $1.31 billion in the sequential quarter.
Long-term liabilities were $481 million compared with $448 million in the previous reported quarter.
The company reported cash flow of $150 million from operations in the quarter under consideration.
Outlook
Management remains optimistic that increasing demand for the multi-cloud application services will be a stable key driver. Rising traction of subscription and ELA offerings is a tailwind.
For fourth-quarter fiscal 2019, F5 Networks expects revenues in the range of $577-$587 million (mid-point $582 million). Of the same, NGINX is anticipated to contribute less than $8 million. The Zacks Consensus Estimate for revenues is pegged at $577.4 million.
The company anticipates non-GAAP earnings per share in the band of $2.53-$2.56, lower than the current Zacks Consensus Estimate of $2.79.
The company will incur capital expenditure of $25-$35 million for the development of its new corporate headquarters in the fiscal fourth quarter.
Zacks Rank and Stocks to Consider
Currently, F5 Networks has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Rosetta Stone , Lattice Semiconductor Corporation (LSCC - Free Report) and Alteryx , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Rosetta Stone, Lattice and Alteryx is currently projected at 12.5%, 12.5% and 13.7%, respectively.
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F5 Networks Inc. (FFIV - Free Report) reported third-quarter fiscal 2019 GAAP earnings per share of $2.52, missing the Zacks Consensus Estimate of $2.57 but inching up 3.3% year over year. Excluding the impact of the NGINX buyout, non-GAAP earnings would have been in line with estimates.
F5 Networks revenues rose 4% year over year to $563.4 million and also surpassed the Zacks Consensus Estimate of $555 million. The acquisition of NGINX contributed $5.1 million to revenues in the quarter under review.
Quarterly Details
Products revenues (44.2% of total revenues) during the reported quarter totaled $248.9 million, up 4.2% from the year-ago period, driven by software. NGINX contributed to $4 million of subscription software revenues.
Software soared 91% year over year and represented 27% of product revenues. This upside can be attributed to the growing adoption of the Enterprise License Agreement (ELA) and annual subscriptions among customers.
Excluding NGINX, software revenues surged 79% year over year and accounted for 26% of the product revenues.
Software growth is consistently aided by security use cases, which include web application firewall, bot-defense and mitigation. A few multimillion-dollar ELA deals were also a tailwind in the quarter under consideration.
Systems revenues, denoting 73% of product revenues, declined 11% on a year-over-year basis.
Services revenues (55.8%) increased 3.7% year over year to $314.5 million with $1.1 million contributed by NGINX.
Geographically, on a year-over-year basis, revenues from the Americas — reflecting 53% of the total count — dipped 1%. Asia Pacific and Japan revenues rose 22% and generated 23% of the total top line. EMEA was nudged up 2% and accounted for 24% of the total revenue tally.
Going by the verticals, Enterprise, Service providers and Government (including 8% from the U.S. Federal) depicted 60%, 20% and 19% of the total revenue stream, respectively.
The company’s distributor Ingram Micro translated to 18% of the company’s revenues. Tech Data and Westcon contributed 11% and 10%, respectively, to the total revenue base.
Margins
Non-GAAP gross margin expanded 90 basis points (bps) to 85.4% during the quarter.
Non-GAAP operating margin contracted 290 bps to 33.1%. Excluding NGINX, non-GAAP operating margin was 34.2% in the quarter under discussion.
Balance Sheet & Cash Flow
F5 Networks exited the reported quarter with cash, cash equivalents and short-term investments of approximately $986.5 million compared with $1.31 billion in the sequential quarter.
Long-term liabilities were $481 million compared with $448 million in the previous reported quarter.
The company reported cash flow of $150 million from operations in the quarter under consideration.
Outlook
Management remains optimistic that increasing demand for the multi-cloud application services will be a stable key driver. Rising traction of subscription and ELA offerings is a tailwind.
For fourth-quarter fiscal 2019, F5 Networks expects revenues in the range of $577-$587 million (mid-point $582 million). Of the same, NGINX is anticipated to contribute less than $8 million. The Zacks Consensus Estimate for revenues is pegged at $577.4 million.
The company anticipates non-GAAP earnings per share in the band of $2.53-$2.56, lower than the current Zacks Consensus Estimate of $2.79.
The company will incur capital expenditure of $25-$35 million for the development of its new corporate headquarters in the fiscal fourth quarter.
Zacks Rank and Stocks to Consider
Currently, F5 Networks has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Rosetta Stone , Lattice Semiconductor Corporation (LSCC - Free Report) and Alteryx , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Rosetta Stone, Lattice and Alteryx is currently projected at 12.5%, 12.5% and 13.7%, respectively.
This Could Be the Fastest Way to Grow Wealth in 2019
Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.
These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.
Click here to see these breakthrough stocks now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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