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F5 Networks Announces Fourth Quarter and Fiscal 2011 Results

F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of $314.6 million for the fourth quarter of fiscal year 2011, up 8 percent from $290.7 million in the prior quarter and 24 percent from $254.3 million in the fourth quarter of fiscal year 2010. For fiscal year 2011, revenue was $1.15 billion, up 31 percent from $882.0 million in fiscal year 2010.

GAAP net income for the fourth quarter was $67.6 million ($0.84 per diluted share) compared to $62.5 million ($0.77 per diluted share) in the third quarter of 2011 and $48.2 million ($0.59 per diluted share) in the fourth quarter a year ago. GAAP net income for the year was $241.4 million ($2.96 per diluted share) versus $151.2 million ($1.86 per diluted share) in fiscal year 2010.

Excluding the impact of stock-based compensation, non-GAAP net income for the fourth quarter was $85.2 million ($1.06 per diluted share), compared to $79.4 million ($0.97 per diluted share) in the prior quarter and $63.9 million ($0.79 per diluted share) in the fourth quarter of fiscal 2010. For fiscal year 2011, non-GAAP net income was $308.3 million ($3.78 per diluted share) versus $203.8 million ($2.51 per diluted share) in fiscal year 2010.

A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated Statements of Operations.

F5 president and chief executive officer John McAdam said the company's fourth quarter results reflect solid year-over-year gains across all regions and vertical market segments. In addition, product sales strengthened during the quarter, driving product revenue up 10 percent sequentially and 20 percent year-over-year.

"In the first full quarter that VIPRION 2400 was generally available, demand for the new mid-range chassis exceeded our expectations. During the fourth quarter, we also saw strong demand for VIPRION 4400, our high-end chassis, particularly among our Telco customers.

"Since we announced the availability of TMOS v.11 early in the quarter, customer response has been very positive. As more customers begin to roll out TMOS v.11 across their organizations, we expect to see strengthening demand for our VIPRION products, which are designed to support the full range of features and functions available in the new software. Several VIPRION customers are starting to deploy vCMP, a feature of TMOS v.11 that allows them to run multiple instances of BIG-IP on the same platform. During calendar 2012 we plan to release several new BIG-IP platforms designed to support vCMP and the other advanced capabilities of TMOS v.11," McAdam said.

Reflecting slightly higher software attach rates and strong product and service revenue, gross margin ticked up during the quarter. GAAP operating margin increased to 31.6 percent and non-GAAP operating margin rose to 38.6 percent. In the fourth quarter, the company added 140 employees, increasing total headcount to 2,490.

On the company's balance sheet, deferred revenue grew 7 percent sequentially to $343.3 million, up 32 percent from the fourth quarter of fiscal 2010. Cash flow from operations was $121.5 million in the fourth quarter and $417 million for the year. After repurchasing $150 million of F5 common stock during the quarter, the company ended the year with $1.01 billion in cash and investments.

"The fourth quarter of fiscal 2011 was a strong finish to the year," McAdam said. "As we begin a new fiscal year, we anticipate that the seasonality we experienced in the first quarter of last year will be a recurring factor in our first quarter results going forward.

"With that in mind, our revenue target for the first quarter of fiscal 2012, ending December 31, is $315 million to $320 million with a GAAP earnings target of $0.79 to $0.81 per diluted share. Excluding stock-based compensation expense, the company's non-GAAP earnings target is $0.99 to $1.01 per diluted share. For fiscal 2012, we expect sequential revenue growth throughout the year and solid year-over-year growth."

A reconciliation of the company's expected GAAP and non-GAAP earnings is provided in the following table:

Three months ended December 30, 2011
Reconciliation of Expected Non-GAAP First Quarter Earnings Low High

Net income $63.7 $65.3
Stock-based compensation expense, net of tax 16.4 16.5
Non-GAAP net income excluding stock-based compensation expense
$80.1 $81.8
Net income per share - diluted $0.79 $0.81
Non-GAAP net income per share - diluted $0.99 $1.01

Share Repurchase Program

The company also announced today that its board of directors had authorized an additional $200 million for the company's common stock share repurchase program. This new authorization is incremental to the $166 million currently in the existing program which was initially authorized in October 2010.

Acquisitions for the share repurchase program will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The program may be modified or discontinued at any time.

Analyst/Investor Meeting

F5 will hold a meeting for analysts and investors at the New York Hilton in New York City, from 8:00 a.m. to 12:30 p.m. Eastern Time on Thursday, November 3, 2011.

To register online, please visit:

For more information contact Darlene Henderson (206.272.6170) or email

The meeting will also be webcast live and an archived version will be available through January 18, 2012. The link for the live webcast and the archived version is

About F5 Networks

F5 Networks is the global leader in Application Delivery Networking (ADN), focused on ensuring the secure, reliable, and fast delivery of applications. F5's flexible architectural framework enables community-driven innovation that helps organizations enhance IT agility and dynamically deliver services that generate true business value. F5's vision of unified application and data delivery offers customers an unprecedented level of choice in how they deploy ADN solutions. It redefines the management of application, server, storage, and network resources, streamlining application delivery and reducing costs. Global enterprise organizations, service and cloud providers, and Web 2.0 content providers trust F5 to keep their business moving forward. For more information, go to

You can also follow @f5networks on Twitter or visit us on Facebook for more information about F5, its partners, and technology. For a complete listing of F5 community sites, please visit

Forward Looking Statements

Statements in this press release concerning the continuing strength of F5's business, sequential growth, the target revenue and earnings range, share amount and share price assumptions, demand for application delivery networking and storage virtualization products and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve risks and uncertainties, as well as assumptions and other factors that, if they do not fully materialize or prove correct, could 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, but are not limited to: customer acceptance of our new traffic management, security, application delivery, WAN optimization and storage virtualization offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; uncertain global economic conditions which may result in reduced customer demand for our products and services and changes in customer payment patterns; F5's ability to sustain, develop and effectively utilize distribution relationships; F5's ability to attract, train and retain qualified product development, marketing, sales, professional services and customer support personnel; F5's ability to expand in international markets; the unpredictability of F5's sales cycle; the share repurchase program; future prices of F5's common stock; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. All forward-looking statements in this press release are based on information available as of the date hereof and qualified in their entirety by this cautionary statement. F5 assumes no obligation to revise or update these forward-looking statements.

GAAP to non-GAAP Reconciliation

F5's management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its products, services operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is net income excluding stock-based compensation, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. This measure consists of GAAP net income excluding, as applicable, stock-based compensation. Net income excluding stock-based compensation (non-GAAP) is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability. Stock-based compensation is a non-cash expense that F5 has accounted for since July 1, 2005 in accordance with the fair value recognition provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 Compensation – Stock Compensation ("FASB ASC Topic 718").

Management believes that net income excluding stock-based compensation (non-GAAP) provides useful supplemental information to management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Although F5's management finds this non-GAAP measure to be useful in evaluating the performance of the business, management's reliance on this measure is limited because items excluded from such measures could have a material effect on F5's earnings and earnings per share calculated in accordance with GAAP. Therefore, F5's management will use its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations when evaluating the performance of the company's business. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures in accordance with GAAP.

F5 believes that presenting its non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company's business and which management uses in its own evaluation of the company's performance. Investors are encouraged to look at GAAP results as the best measure of financial performance. For example, stock-based compensation is an obligation of the company that should be considered and each line item is important to financial performance generally. However, while the GAAP results are more complete, the company provides investors this supplemental measure since, with reconciliation to GAAP, it may provide additional insight into its operational performance and financial results.

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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.