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F5 Networks Announces Results for the First Quarter of Fiscal 2005

Continuing strength in core business drives 66 percent year-over-year revenue growth, further improvement in profitability

F5 Networks, Inc. (NASDAQ: FFIV) -- For the first quarter of fiscal 2005, F5 Networks announced revenue of $60.0 million, a 20 percent increase over revenue of $50.2 million in the fourth quarter of fiscal 2004 and a 66 percent increase over revenue of $36.1 million in the first quarter a year ago. The company's operating margin for the quarter was 24 percent, compared to 20 percent in the prior quarter and 11 percent in the first quarter of fiscal 2004.

Net income for first quarter of fiscal 2005 was $10.0 million ($0.26 per diluted share).

During the fourth quarter of 2004, F5 became subject to income taxes on U.S. income and also reversed the valuation allowance on U.S. deferred tax assets, resulting in net income of $15.8 million ($0.43 per diluted share), which included a net tax benefit of $5.5 million. To present prior results on a tax-affected basis that is comparable to the current period, the company's financial statements include pro forma earnings for the first and fourth quarters of fiscal 2004. On a pro forma basis, excluding the net tax benefit resulting from the reversal of the valuation allowance and including a 37 percent provision for income taxes, net income for the fourth quarter of fiscal 2004 would have been $6.8 million ($0.18 per diluted share).

In the first quarter of fiscal 2004 the company reported net income of $3.8 million ($0.11 per diluted share). On a pro forma basis, net income for the first quarter of fiscal 2004 would have been $2.6 million ($0.08 per diluted share) had the company recorded a 37 percent provision for income taxes.

F5 president and chief executive officer John McAdam said the company's strong revenue growth was driven by continuing strength in its core traffic management business across all geographic regions. In addition, McAdam said he believes the recent introduction of the company's new products (the BIG-IP 6400, 3400 and 1500 running version 9 of the BIG-IP software), will expand its growth opportunities by enabling customers to secure, optimize and deliver their applications in ways that go beyond traditional definitions of application traffic management. Leveraging the full-proxy architecture of the company's new Traffic Management Operating System (TM/OS), BIG-IP's advanced functionality includes delivery and optimization features such as IPv6 translation, universal persistence, error response handling, connection pooling, intelligent compression, L7 rate shaping and TCP optimization, as well as a number of security features, including cookie encryption, resource cloaking, advanced client authentication and selective content encryption.

During the first full quarter of shipment, McAdam said demand for the Version 9 BIG-IP products was strong, with sales of the new platforms accounting for 30 percent of application traffic management revenue.

In addition to continued improvement in profitability, McAdam said, the company's strong revenue growth and leveraged business model enabled it to further strengthen its financial position. During the quarter, collections resulting in 42 days sales outstanding (DSO) contributed to a record $13.5 million in cash from operations and total cash and investments of $254 million at quarter end.

For the second quarter of fiscal 2005, McAdam said management believes the company will continue to grow sequentially and has set a target range of $63.0 million to $65.0 million in revenue with net income of $0.28 to $0.29 per diluted share.

About F5 Networks

F5 enables organizations to successfully deliver business-critical applications and gives them the greatest level of agility to stay ahead of growing business demands. As the pioneer and global leader in Application Traffic Management, F5 continues to lead the industry by driving more intelligence into the network to deliver advanced application agility. F5 products ensure the secure and optimized delivery of applications to any user - anywhere. Through its flexible and cohesive architecture, F5 delivers unmatched value by dramatically improving the way organizations serve their employees, customers and constituents, while lowering operational costs. The company is headquartered in Seattle, Washington with offices worldwide. For more information go to

Forward Looking Statements

Statements in this press release concerning sequential growth, revenue and net income targets for the second quarter of fiscal 2005 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: customer acceptance of our new traffic management and security offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; 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 and the unpredictability of F5's sales cycle. F5 has no duty to update any guidance provided or other matters discussed in this press release. 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, 2004, 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.