F5 Networks, Inc. (
F4Q 2011 Earnings Call
October 25, 2011 4:30 PM ET
John Eldridge – Head, IR
Andrew Reinland – SVP and CFO
John McAdam – President and CEO
Dan Matte – SVP, Marketing and Business Development
Karl Triebes – CTO and SVP, Product Development
Mark Anderson – SVP, Worldwide Sales
Ittai Kidron – Oppenheimer
John Slack – Citigroup
Rod Hall – JP Morgan
Brian Modoff – Deutsche Bank
Alex Henderson – Miller Tabak
Brian Marshall – ISI Group
Jason Ader – William Blair
Tim Long – BMO Capital Markets
Jayson Noland – Robert W Baird
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Good afternoon and welcome to the F5 fourth quarter and fiscal 2011 financial results conference call. At this time, all parties will be able to listen only until the question-and-answer portion. Today’s conference is being recorded. If you have any objections, please disconnect at this time.
I would now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Sir, you may begin.
Thank you very much and welcome all of you to our conference call for the fourth quarter and fiscal year 2011. Speakers on today’s call are John McAdam, President and CEO; and Andy Reinland, Senior Vice President, Chief Financial Officer. Other members of our exec team are also with us to answer questions following our prepared comments. If you have any follow-up questions after the call, please direct them to me 206-272-6571.
A copy of today’s press release is available on our website at F5.com. In addition, you can access an archived version of today’s live webcast from the Events Calendar page of the website through January 18. From 4:30 PM today until 5:00 PM Pacific Time, October 26, you can also listen to a telephone replay at 888-568-0521 or 402-998-1495.
During the call today, our discussions will make forward-looking statements including words such as believe, anticipate, expect, and target. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by these comments. Factors that may affect our results are summarized in our quarterly release, described in detail in our SEC filings. Please note that F5 has no duty to update any information presented in this call.
Before we begin the call today, I want to remind you that we are holding our 2011 analyst/investor meeting in New York on November 3. If you’re planning to attend the meeting and have not registered, you can register online at the link on our Events Calendar entry for November 3. We look forward to the prospect of seeing you all there.
Now I’ll turn the call over to Andy Reinland.
Thank you, John. Fiscal year 2011 represents a landmark year for F5, as we surpassed the $1 billion threshold in annual revenue, posted 31% year-over-year growth, and ended the year with just under 2,500 employees. In my comments, I will review our results for our fourth quarter and for fiscal 2011. I will provide guidance for Q1 2012 and discuss our general planning assumptions and expectations for fiscal 2012.
For the fourth quarter of 2011, revenue of $314.6 million was above our guided range of $307 million to $312 million, growing 8% from the prior quarter and 24% from the fourth quarter a year ago. Book-to-bill for the quarter was greater than one.
Q4 product revenue of $197.4 million was up 10% from the prior quarter, 20% from the fourth quarter of last year, and represented 63% of revenue. Service revenue of $117.2 million increased 5% sequentially, 31% year over year, and accounted for 37% of revenue. Revenue from our core application delivery networking business was $307.3 million compared to $282.5 million in Q3. ARX revenue was $7.3 million, down from $8.3 million in the prior quarter.
By geography, the Americas grew 25% year over year and represented 60% of revenue. EMEA grew 14% year over year, accounting for 20% of revenue. And APAC and Japan each grew 32% from a year ago, representing 13% and 7% of revenue respectively.
By vertical, telco represented 26% of sales during the quarter, and technology and financial each accounted for 19%. Total government was 12% of sales, including 7% from U.S. federal.
During Q4, we had two greater than 10% distributors: Avnet Technologies, which accounted for 17.8% of total revenue; and Ingram Micro, which represented 12.3%
Continuing down the income statement, GAAP gross margin in Q4 was 82.2%. Excluding $2.6 million of stock-based compensation, non-GAAP gross margin was 83%. Operating expenses were $159.4 million. Excluding $19.6 million of stock-based compensation, non-GAAP operating expenses were $139.8 million.
GAAP operating margin was 31.6%. Excluding stock-based compensation, our non-GAAP operating margin was 38.6%.
Other income for the quarter was $4.1 million. This includes a $1.9 million foreign currency gain that was recognized during the quarter.
Our effective tax rate for the quarter was 34.6%. Our non-GAAP effective tax rate was 32.1%.
GAAP net income for the quarter was $67.6 million or $0.84 per diluted share, above our guided range of $0.75 to $0.77. Non-GAAP net income was $85.2 million or $1.06 per diluted share, also above our guided range of $0.97 to $0.99.
For the full year, revenue for fiscal 2011 was $1.15 billion, up 31% from fiscal 2010. Product revenue of $722 million was up 29% from the prior year and accounted for 63% of total revenue. Service revenue of $430 million grew 34% during the year and represented 37% of the total.