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F5 Networks Announces Fiscal First Quarter Revenue in Line with Management Guidance

Continued operational improvements generate increased cash, smaller than expected net loss

F5 Networks, Inc. (NASDAQ: FFIV), today announced revenue of $27.0 million for the first quarter of fiscal 2002, in line with guidance provided by management in the company's October 25th quarterly release and conference call and up 9 percent from the first quarter a year ago. A net loss of $2.1 million ($0.08 per share) was better than management's anticipated loss of $0.09 to $0.11 per share. In the first quarter of fiscal 2001, the company reported a net loss of $8.9 million ($0.41 per share).

F5 president and chief executive officer John McAdam said the smaller than expected loss was a result of continuing operational improvements that boosted the company's gross margin and reduced operating expenses. In addition, he noted several improvements reflected on the company's balance sheet, including a reduction in days sales outstanding (DSOs) to 70 days and $3.4 million in positive cash flow from operations which increased the company's cash balance to $72.4 million.

"In the face of continuing economic weakness I'm pleased that the company was able to achieve our revenue goal, further strengthen our financial position and continue to fine-tune our operating model," McAdam said. "Looking forward, I believe the discipline reflected in our operating results and balance sheet improvements will enable us to leverage future revenue growth to achieve break-even or better results in fiscal Q3 and deliver solid sequential gains in subsequent quarters." He added that while management anticipates only modest sequential growth during the second quarter, expectations for annual growth in excess of 20 percent are predicated on a significant upturn in revenues in the second half of fiscal 2002.

McAdam said the drivers for the company's anticipated revenue growth include new product introductions, a significant ramp in OEM revenue, and opportunities to sell F5's traffic management software into the emerging blade server market.

"During the first quarter, sales of our IP application switch family increased steadily and the products continued to win kudos from customers, industry analysts and the media. Near the end of the quarter, we began shipping BIG-IP 2000, a scaled-down version of the BIG-IP 5000 with a single processor and fewer ports, which was formally introduced this month. During the summer, we plan to expand the line further with the introduction of a BIG-IP application switch that features Layer 4 traffic management functionality built into the hardware.

"On the OEM front, Dell's PowerApp BIG-IP, which uses our traffic management software, continues to be a solid contributor to our revenue stream. In addition, as we announced in a joint press release on December 5, Nokia began shipping its first Nokia BIG-IP solutions this month, and we expect to see a steady ramp in sales of these products throughout the remainder of the year. Toward the end of summer, we expect Enterasys to begin shipping its first products under the OEM agreement we signed last October, and we look for incremental revenue from those products as they enter the market during fiscal Q4.

"Since we announced plans to sell our BIG-IP traffic management software as a fully integrated, plug-and-play component of HP's blade server, we have entered negotiations with several other hardware vendors to develop a similar product for their pending blade server offerings. Over the next six to eighteen months, vendors and industry analysts are projecting dramatic growth for blade-based products as an efficient and highly-scalable alternative to current server architectures. As the only company that currently offers a Layer 7 software solution that is Intel-compatible and easily portable, we believe F5 is uniquely well-positioned to benefit from this projected growth," McAdam said.

As a result of these opportunities, McAdam said he believes the company's business will accelerate in the second half of fiscal 2002. However, he said growth is likely to remain slow through the first half of the year. Accordingly, the company has set a revenue target of $27.5 million to $29 million for the second quarter of fiscal 2002 and expects to report a loss of $0.04 to $0.06 per share.

About F5 Networks

F5 Networks is the leader in Internet Traffic and Content Management (iTCM), and delivers application aware networks through its open Internet Control Architecture. F5 features the industry's leading set of integrated products and services that manage, control and optimize Internet traffic and content. Our solutions automatically and intelligently deliver the best possible Internet performance, availability and content distribution for service providers, enterprises and e-businesses. Our products remove bandwidth congestion and optimize the availability and speed of mission-critical Internet servers and applications, including web publishing, content delivery, e-commerce, caching, firewalls and more. Our solutions are widely deployed in large enterprises, the top service providers, financial institutions, government agencies, healthcare, and portals throughout the world. The company is headquartered in Seattle, Washington, and has offices throughout North America, Europe and Asia Pacific. F5 Networks is located on the web at www.f5.com.

Forward Looking Statements

Statements in this press release regarding leveraging future revenue growth to achieve break even or better financial results in Q3, sequential gains in subsequent quarters, annual growth in excess of 20%, significant upturn in revenues in the second half, significant ramp in OEM revenue, the emerging blade server market, expansion of the of the BIG-IP line with Layer 4 functionality in the hardware, Dell's continuing contribution to the revenue stream, a ramp of Nokia and Dell OEM sales throughout the year, Enterasys shipping OEM products, acceleration of F5's business in the second half of 2002, the revenue and loss targets for the second fiscal quarter and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others: the success of the F5's products in the emerging blade-server market, the new BIG-IP application switch and the company's iControl architecture, competitive pricing pressures, increased sales discounts, the timely development and introduction of additional new products and features by F5 or its competitors or other factors; F5's ability to sustain or develop distribution relationships; F5's ability to attract, train and retain qualified marketing and sales and professional services and customer support personnel; F5's ability to expand in the international markets and the unpredictability of F5's sales cycle. More information about potential risk factors that could affect F5's business and financial results is included in the Company's annual report on Form 10K for the fiscal year ended September 30, 2001, and other public filings with the Securities and Exchange Commission.

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This press release may contain forward looking statements relating to future events or future financial performance that involve risks and uncertainties. Such statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or comparable terms. These statements are only predictions and actual results could differ materially from those anticipated in these statements based upon a number of factors including those identified in the company's filings with the SEC.

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