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F5 Networks Announces Results for the Second Quarter of Fiscal 2006

F5 Networks, Inc. (NASDAQ: FFIV) - For the second quarter of fiscal 2006, F5 Networks announced revenue of $94.1 million, up 7 percent from $88.1 million in the prior quarter and 39 percent from $67.7 million in the second quarter of fiscal 2005. Net income was $16.1 million ($0.39 per diluted share), compared to $15.2 million ($0.37 per diluted share) in the prior quarter and $12.1 million ($0.31 per diluted share) in the second quarter a year ago.

During the fourth quarter of fiscal 2005, the company began expensing stock-based compensation. To facilitate a comparison of this quarter's results with the results of prior quarters, the company is presenting pro forma net income for the second quarter and first half of fiscal 2006. Excluding stock compensation expense, net income for the second quarter of fiscal 2006 was $20.3 million ($0.49 per diluted share) compared to pro forma net income $19.0 million ($0.47 per diluted share) in the prior quarter. A reconciliation of reported net income to pro forma net income is included on the attached Condensed Consolidated Statements of Operations.

F5 president and chief executive officer John McAdam said revenue during the second quarter grew sequentially in all international regions and across all product categories, including the company's security offerings and its recently acquired WAN optimization and application acceleration products. "As expected, we saw strong growth in Japan, which achieved its highest quarterly revenue to date. In addition, both EMEA and Asia Pacific delivered solid sequential growth."

"The one area where we saw marked softness during the quarter was in our North American business, which was down sequentially due to a slowdown in our US Federal business during the last few weeks of the quarter. Excluding US Federal revenue, North American revenue was up sequentially from the prior quarter."

During the third quarter, McAdam said he expects continued sequential growth tempered by seasonal softness that characterizes the first quarter of Japan's fiscal year. Accordingly, management has set a revenue target of $96 million to $98 million and an earnings target of $0.40 to $0.41 per diluted share, including charges for stock-based compensation. Excluding the compensation charges, the anticipated earnings range is expected to be $0.50 to $0.51 per diluted share.

A reconciliation of the company's expected reported and pro forma earnings is provided in the following table:

  Three months ended
June 30, 2006
Reconciliation of Expected Pro Forma Third Quarter Earnings   Low   High
Net income   $16,800   $17,200
Stock-based compensation expense, net of tax   4,300   4,300
Pro forma net income excluding stock-based compensation expense   $21,100   $21,500
 
Net income per share - diluted   $0.40   $0.41
Pro forma net income per share - diluted   $0.50   $0.51

About F5 Networks

F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that make applications secure, fast, and available for everyone, helping organizations get the most out of their investment. By adding intelligence and manageability into the network to offload applications, F5 optimizes applications and allows them to work faster and consume fewer resources. F5's extensible architecture intelligently integrates application optimization, protects the application and the network, and delivers application reliability - all on one universal platform. The company is headquartered in Seattle, Washington with offices worldwide. For more information, go to www.f5.com.

Forward Looking Statements

Statements in this press release concerning revenue and earnings target ranges, with and without the charge for stock-based compensation, 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 our actual results, performance or achievements, 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, security, application delivery and WAN optimization offerings; the timely development, introduction and acceptance of additional new products and features by us or our competitors; competitive pricing pressures; increased sales discounts; our ability to sustain, develop and effectively utilize distribution relationships; our ability to attract, train and retain qualified product development, marketing, sales, professional services and customer support personnel; our ability to expand in international markets and the unpredictability of our sales cycle. We have no duty to update any guidance provided or other matters discussed in this press release. More information about potential risk factors that could affect our business and financial results is included in our annual report on Form 10-K for the fiscal year ended September 30, 2005, 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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