F5 Networks Announces Fourth Quarter And Fiscal 2012 Results

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 core 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. 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 the company’s operational performance and financial results.

For reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, please see the section in our Condensed Consolidated Statement of Operations entitled “GAAP to Non-GAAP Reconciliation.”

F5 Networks, Inc.
Consolidated Balance Sheets
(unaudited, in thousands)
	September 30,				September 30,
		2012				2011
Assets
Current assets
Cash and cash equivalents	$	211,181			$	216,784
Short-term investments		320,970				325,766
Accounts receivable, net of allowances of $3,254 and $2,898		185,172				165,676
Inventories		17,410				17,149
Deferred tax assets		10,362				8,391
Other current assets		30,986				29,907
Total current assets		776,081				763,673
Property and equipment, net		59,604				47,998
Long-term investments		662,803				470,203
Deferred tax assets		35,478				34,762
Goodwill		348,239				234,691
Other assets, net		28,996				17,222
Total assets	$	1,911,201			$	1,568,549
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	27,026			$	33,525
Accrued liabilities		86,409				67,902
Deferred revenue		352,594				270,880
Total current liabilities		466,029				372,307
Other long-term liabilities		21,078				18,388
Deferred revenue, long-term		94,694				72,418
Total long-term liabilities		115,772				90,806
Commitments and contingencies
Shareholders’ equity
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding		-				-
Common stock, no par value; 200,000 shares authorized, 78,715 and 79,145
shares issued and outstanding		326,922				380,737
Accumulated other comprehensive loss		(3,829	)			(6,422	)
Retained earnings		1,006,307				731,121
Total shareholders' equity		1,329,400				1,105,436
Total liabilities and shareholders' equity	$	1,911,201			$	1,568,549

F5 Networks, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
			2012				2011				2012				2011
Net revenues
Products		$	209,718			$	197,446			$	818,555			$	721,975
Services			152,841				117,169				558,692				429,859
Total			362,559				314,615				1,377,247				1,151,834
Cost of net revenues (1)(2)
Products			35,752				34,485				137,102				129,325
Services			26,929				21,435				99,066				78,679
Total			62,681				55,920				236,168				208,004
Gross Profit			299,878				258,695				1,141,079				943,830
Operating expenses (1)(2)(3)
Sales and marketing			116,298				100,945				445,595				370,735
Research and development			47,731				36,552				177,406				138,910
General and administrative			24,015				21,867				91,775				83,523
Total			188,044				159,364				714,776				593,168
Income from operations			111,834				99,331				426,303				350,662
Other income, net			909				4,087				5,911				10,089
Income before income taxes			112,743				103,418				432,214				360,751
Provision for income taxes			45,026				35,808				157,028				119,354
Net Income		$	67,717			$	67,610			$	275,186			$	241,397
Net income per share - basic		$	0.86			$	0.84			$	3.48			$	2.99
Weighted average shares - basic			78,980				80,317				79,135				80,658
Net income per share - diluted		$	0.85			$	0.84			$	3.45			$	2.96
Weighted average shares - diluted			79,425				80,766				79,780				81,482
Non-GAAP Financial Measures
Net income as reported		$	67,717			$	67,610			$	275,186			$	241,397
Stock-based compensation expense (4)			26,343				22,134				95,348				89,747
Amortization of purchased intangible assets (5)			1,610				-				4,843				-
Acquisition-related charges (5)			-				-				750				-
Tax effects related to above items			(6,965	)			(4,499	)			(27,495	)			(22,835	)
Net income excluding stock-based compensation, amortization of purchased
intangible assets and acquisition-related charges (non-GAAP) - diluted		$	88,705			$	85,245			$	348,632			$	308,309
Net income per share excluding stock-based compensation, amortization of
purchased intangible assets and acquisition-related charges (non-GAAP) - diluted		$	1.12			$	1.06			$	4.37			$	3.78
Weighted average shares - diluted			79,425				80,766				79,780				81,482
(1) Includes stock-based compensation as follows:
Cost of net revenues		$	3,082			$	2,565			$	10,910			$	9,358
Sales and marketing			10,043				8,756				36,988				34,682
Research and development			8,036				5,913				27,876				23,312
General and administrative			5,182				4,900				19,574				22,395
		$	26,343			$	22,134			$	95,348			$	89,747
(2) Includes amortization of purchased intangible assets as follows:
Cost of net revenues		$	1,458			$	-			$	4,361			$	-
Sales and marketing			152				-				482				-
		$	1,610			$	-			$	4,843			$	-
(3) Includes acquisition-related charges as follows:
General and administrative		$	-			$	-			$	750			$	-
		$	-			$	-			$	750			$	-
(4) Stock-based compensation is accounted for 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”)
(5) Beginning with the second quarter of fiscal 2012, the company will exclude amortization of purchased intangible assets and acquisition-related charges in addition to stock-based compensation expense as a non-GAAP financial measure

F5 Networks, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
	Years Ended
	September 30,
		2012				2011
Operating activities
Net income	$	275,186			$	241,397
Adjustments to reconcile net income to net cash provided by operating activities:
Realized loss (gain) on disposition of assets and investments		546				(163	)
Stock-based compensation		95,348				89,747
Provisions for doubtful accounts and sales returns		1,572				982
Depreciation and amortization		35,139				20,887
Deferred income taxes		(4,293	)			4,487
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable		(20,207	)			(54,526	)
Inventories		(262	)			1,666
Other current assets		(998	)			8,000
Other assets		(134	)			81
Accounts payable and accrued liabilities		9,953				20,476
Deferred revenue		103,587				83,904
Net cash provided by operating activities		495,437				416,938
Investing activities
Purchases of investments		(1,059,853	)			(979,597	)
Maturities of investments		784,601				795,142
Sales of investments		81,444				80,877
(Increase) decrease in restricted cash		(19	)			19
Acquisition of intangible assets		(250	)			(5,715	)
Acquisition of businesses, net of cash acquired		(128,335	)			-
Purchases of property and equipment		(29,867	)			(30,445	)
Net cash used in investing activities		(352,279	)			(139,719	)
Financing activities
Excess tax benefit from stock-based compensation		10,371				23,623
Proceeds from the exercise of stock options and
purchases of stock under employee stock purchase plan		25,174				21,239
Repurchase of common stock		(184,776	)			(271,526	)
Net cash used in financing activities		(149,231	)			(226,664	)
Net (decrease) increase in cash and cash equivalents		(6,073	)			50,555
Effect of exchange rate changes on cash and cash equivalents		470				(2,525	)
Cash and cash equivalents, beginning of period		216,784				168,754
Cash and cash equivalents, end of period	$	211,181			$	216,784

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