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Why Is F5 (FFIV) Down 1.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is F5 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
F5 Networks' Q1 Earnings Beat, Revenues Miss Estimates
F5 reported mixed first-quarter fiscal 2023 results, wherein the top line missed but the bottom line surpassed the Zacks Consensus Estimates.
The Seattle-based company’s non-GAAP earnings of $2.47 per share beat the Zacks Consensus Estimate of $2.34. Although the bottom line declined 1.5% from the year-ago quarter’s $2.89 per share, the figure came in way higher than management’s guided range of $2.25-$2.37 per share.
During the reported quarter, F5 Networks witnessed a 2% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $700.4 million, which missed the Zacks Consensus Estimate of $700.6 million. The top line was in line with the mid-point of the guided range of $690-$710 million.
Top Line in Detail
Product revenues (48.6% of total revenues), which comprise Software and Systems sub-divisions, decreased 1% year on year to $341 million. Software sales jumped 3% year over year to $168 million, accounting for approximately 49.3% of the total Product revenues. However, System revenues slumped 4% to $173 million, making up the remaining 50.7% of the total Product revenues. This downside was due to the ongoing global chip shortage.
Global Service revenues (51.4% of total revenues) grew 5% to $359.8 million.
F5 Networks registered sales growth across the EMEA, witnessing a year-over-year increase of 13.6%. The company registered 0.2% and 6.6% decrease in sales growth from the Americas and APAC regions, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 57%, 26% and 16%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 62%, 21% and 17% of product bookings, respectively.
Margins
GAAP and non-GAAP gross margins contracted 240 basis points (bps) and 260 bps to 77.9% and 80.4%, respectively.
GAAP and non-GAAP operating expenses went up 3.7% and 9.5%, respectively, to $454.2 million and $378 million. F5 Networks’ GAAP and non-GAAP operating margins shrunk 360 bps and 620 bps to 13% and 26.5%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the December-ended quarter with cash and short-term investments of $660 million compared with the previous quarter’s $884.6 million.
During the fiscal first quarter, the company generated $158 million of operating cash flow compared with the $154 million reported in the previous quarter. 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 $40 million during first-quarter fiscal 2023.
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 $2.36-$2.48 band (mid-point of $2.42) for second-quarter fiscal 2023.
For fiscal 2023, F5 Networks provided an estimate of 9-11% total revenue growth. The company expects global services sales to grow in mid-single digit. F5 Networks anticipates non-GAAP earnings to grow in the low-to-mid teens.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.15% due to these changes.
VGM Scores
Currently, F5 has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, F5 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is F5 (FFIV) Down 1.8% Since Last Earnings Report?
A month has gone by since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is F5 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
F5 Networks' Q1 Earnings Beat, Revenues Miss Estimates
F5 reported mixed first-quarter fiscal 2023 results, wherein the top line missed but the bottom line surpassed the Zacks Consensus Estimates.
The Seattle-based company’s non-GAAP earnings of $2.47 per share beat the Zacks Consensus Estimate of $2.34. Although the bottom line declined 1.5% from the year-ago quarter’s $2.89 per share, the figure came in way higher than management’s guided range of $2.25-$2.37 per share.
During the reported quarter, F5 Networks witnessed a 2% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $700.4 million, which missed the Zacks Consensus Estimate of $700.6 million. The top line was in line with the mid-point of the guided range of $690-$710 million.
Top Line in Detail
Product revenues (48.6% of total revenues), which comprise Software and Systems sub-divisions, decreased 1% year on year to $341 million. Software sales jumped 3% year over year to $168 million, accounting for approximately 49.3% of the total Product revenues. However, System revenues slumped 4% to $173 million, making up the remaining 50.7% of the total Product revenues. This downside was due to the ongoing global chip shortage.
Global Service revenues (51.4% of total revenues) grew 5% to $359.8 million.
F5 Networks registered sales growth across the EMEA, witnessing a year-over-year increase of 13.6%. The company registered 0.2% and 6.6% decrease in sales growth from the Americas and APAC regions, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 57%, 26% and 16%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 62%, 21% and 17% of product bookings, respectively.
Margins
GAAP and non-GAAP gross margins contracted 240 basis points (bps) and 260 bps to 77.9% and 80.4%, respectively.
GAAP and non-GAAP operating expenses went up 3.7% and 9.5%, respectively, to $454.2 million and $378 million. F5 Networks’ GAAP and non-GAAP operating margins shrunk 360 bps and 620 bps to 13% and 26.5%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the December-ended quarter with cash and short-term investments of $660 million compared with the previous quarter’s $884.6 million.
During the fiscal first quarter, the company generated $158 million of operating cash flow compared with the $154 million reported in the previous quarter. 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 $40 million during first-quarter fiscal 2023.
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 $2.36-$2.48 band (mid-point of $2.42) for second-quarter fiscal 2023.
For fiscal 2023, F5 Networks provided an estimate of 9-11% total revenue growth. The company expects global services sales to grow in mid-single digit.
F5 Networks anticipates non-GAAP earnings to grow in the low-to-mid teens.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.15% due to these changes.
VGM Scores
Currently, F5 has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, F5 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.