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F5 Networks' (FFIV) Q4 Earnings & Revenues Outpace Estimates

F5 Networks FFIV reported strong fourth-quarter fiscal 2022 results, wherein both the top and bottom lines surpassed the respective Zacks Consensus Estimate.

The Seattle-based company’s non-GAAP earnings of $2.62 per share beat the Zacks Consensus Estimate of $2.54. Although the bottom line declined 13% from the year-ago quarter’s $3.01 per share, the figure came in way higher than management’s guided range of $2.45-$2.57 per share.

During the reported quarter, F5 Networks witnessed a 3% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $700 million, which surpassed the Zacks Consensus Estimate of $692.2 million. The top line was in line with the top end of the guided range of $680-$700 million.

F5, Inc. Price, Consensus and EPS Surprise

F5, Inc. Price, Consensus and EPS Surprise
F5, Inc. Price, Consensus and EPS Surprise

F5, Inc. price-consensus-eps-surprise-chart | F5, Inc. Quote

Top Line in Detail

Product revenues (50% of total revenues), which comprise Software and Systems sub-divisions, increased 3% year on year to $350 million. Software sales jumped 13% year over year to $172 million, accounting for approximately 49.1% of the total Product revenues. However, System revenues slumped 5% to $178 million, making up the remaining 50.9% of the total Product revenues. This downside was due to the ongoing global chip shortage.

Global Service revenues (50% of total revenues) grew 2% to $350.1 million.

F5 Networks registered sales growth across the Americas, witnessing a year-over-year increase of 6.3%. The company registered a 3% and 1.7% decrease in sales growth from the EMEA and APAC regions, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 61%, 23% and 17%, respectively.

Customer-wise, Enterprises, Service providers and Government represented 66%, 13% and 21% of product bookings, respectively.

Margins

GAAP and non-GAAP gross margins contracted 220 and 230 basis points (bps) to 78.9% and 81.4%., respectively.

GAAP and non-GAAP operating expenses went up 4.2% and 8.2%, respectively, to $445 million and $378.8 million. F5 Networks’ GAAP and non-GAAP operating margins shrunk 310 and 510 bps to 15.4% and 27.3%, respectively.

Balance Sheet & Cash Flow

F5 Networks exited the September-ended quarter with cash and short-term investments of $884.6 million compared with the previous quarter’s $738.4 million.

During the fiscal fourth quarter, the company generated $154.3 million of operating cash flow compared with the $71 million reported in the previous quarter.

In fiscal 2022, F5 Networks’ operating cash flow totaled $442.6 million. The operating cash flow remained under pressure due to strong multi-year subscription sales, which impacted the cash collection process.

F5 Networks repurchased shares worth $500 million during fiscal 2022.

Full-Year Highlights

For fiscal 2022, F5 Networks reported revenues of $2.7 billion, indicating an increase of 3% year over year. The company reported non-GAAP earnings of $10.19 per share compared with $10.81 per share reported a year ago.

Non-GAAP gross margin contracted 130 bps to 82.6%. Non-GAAP operating expenses increased 6.6% to $1.45 billion.

Non-GAAP operating income decreased from $822.2 million a year ago to $778.3 million in fiscal 2022. Consequently, the non-GAAP operating margin contracted 270 bps to 28.9%.

Guidance

F5 Networks projects non-GAAP revenues in the $690-$710 million (mid-point of $700 million) and non-GAAP earnings per share in the $2.25-$2.37 band (mid-point of $2.31) for first-quarter fiscal 2023.

For fiscal 2023, F5 Networks provided an estimate of 9-11% total revenue growth. The company expects software sales to grow 15-20%.

F5 Networks anticipates non-GAAP earnings to grow in the low-to-mid teens.

Zacks Rank & Other Stocks to Consider

F5 Networks currently carries a Zacks Rank #2 (Buy). Shares of FFIV have slumped 24.8% in the past year.

Some other top-ranked stocks from the broader Computer and Technology sector are Zscaler ZS, Digi International DGII and Baidu BIDU. While Zscaler and Digi International sport a Zacks Rank #1 (Strong Buy), Baidu carries a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 7 cents north to 26 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved a penny north to $1.18 per share in the past 30 days.

Zscaler’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 51% in the past year.

The Zacks Consensus Estimate for Digi’s fourth-quarter fiscal 2022 earnings has increased by 2 cents to 42 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved 3.2% up to $1.61 per share in the past 30 days.

DGII's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have increased 87.3% in the past year.

The Zacks Consensus Estimate for Baidu's third-quarter 2022 earnings has been revised 46 cents southward to $2.51 per share over the past 60 days. For 2022, earnings estimates have moved 16.2% north to $9.16 per share in the past 60 days.

Baidu's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 58.1%. Shares of BIDU have slumped 52.2% in the past year.


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