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Why Is F5 (FFIV) Up 5.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is F5 due for a pullback? 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 catalysts.
F5 Networks' Q2 Earnings and Sales Top Estimates
F5 reported second-quarter fiscal 2023 results, wherein the top and the bottom lines surpassed the Zacks Consensus Estimate.
This Seattle-based company’s non-GAAP earnings of $2.53 per share beat the Zacks Consensus Estimate of $2.42. The bottom line increased 18.8% from the year-ago quarter’s $2.13 per share and was way higher than management’s guided range of $2.36-$2.48 per share.
During the reported quarter, F5 Networks witnessed a 11% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $703.2 million, which beat the Zacks Consensus Estimate of $700.7 million. The top line was above the mid-point of the guided range of $690-$710 million.
Top Line in Detail
Product revenues (48.4% of total revenues), which comprise Software and Systems sub-divisions, increased 14% year over year to $340.6 million. System sales jumped 43% year over year to $209 million, accounting for approximately 61.3% of the total Product revenues. However, Software revenues slumped 13% to $132 million, making up the remaining 38.7% of the total Product revenues.
Global Service revenues (51.6% of total revenues) grew 8% to $362.6 million.
F5 Networks registered sales growth across the Americas, EMEA and APAC regions, witnessing a year-over-year increase of 7%, 22% and 9%, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 54%, 27% and 18%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 67%, 13% and 20% of product bookings, respectively.
Margins
GAAP and non-GAAP gross margins contracted 220 basis points (bps) and 250 bps to 77.9% and 80.4%, respectively.
GAAP and non-GAAP operating expenses went up 1.9% and 4.6%, respectively, to $441.5 million and $374.1 million. F5 Networks’ GAAP and non-GAAP operating margins expanded 330 bps and 70 bps to 15.1% and 27.2%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the March-ended quarter with cash and short-term investments of $755.3 million compared with the previous quarter’s $660 million.
During the fiscal second quarter, the company generated $141 million of operating cash flow compared with the $158 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.
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 $2.78-$2.90 band (mid-point of $2.84) for third-quarter fiscal 2023. Non-GAAP gross margin is forecast to be around 82%.
For fiscal 2023, F5 Networks expects low-to-mid-single digit revenue growth. The company anticipates non-GAAP earnings to grow in 7-11% band. Non
GAAP operating margin is forecasted to be roughly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, F5 has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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) Up 5.8% Since Last Earnings Report?
It has been about a month since the last earnings report for F5 Networks (FFIV - Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is F5 due for a pullback? 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 catalysts.
F5 Networks' Q2 Earnings and Sales Top Estimates
F5 reported second-quarter fiscal 2023 results, wherein the top and the bottom lines surpassed the Zacks Consensus Estimate.
This Seattle-based company’s non-GAAP earnings of $2.53 per share beat the Zacks Consensus Estimate of $2.42. The bottom line increased 18.8% from the year-ago quarter’s $2.13 per share and was way higher than management’s guided range of $2.36-$2.48 per share.
During the reported quarter, F5 Networks witnessed a 11% increase in its revenues amid a global chip shortage scenario in the semiconductor industry. The company’s non-GAAP revenues were $703.2 million, which beat the Zacks Consensus Estimate of $700.7 million. The top line was above the mid-point of the guided range of $690-$710 million.
Top Line in Detail
Product revenues (48.4% of total revenues), which comprise Software and Systems sub-divisions, increased 14% year over year to $340.6 million. System sales jumped 43% year over year to $209 million, accounting for approximately 61.3% of the total Product revenues. However, Software revenues slumped 13% to $132 million, making up the remaining 38.7% of the total Product revenues.
Global Service revenues (51.6% of total revenues) grew 8% to $362.6 million.
F5 Networks registered sales growth across the Americas, EMEA and APAC regions, witnessing a year-over-year increase of 7%, 22% and 9%, respectively. Revenue contributions from the Americas, EMEA and APAC regions were 54%, 27% and 18%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 67%, 13% and 20% of product bookings, respectively.
Margins
GAAP and non-GAAP gross margins contracted 220 basis points (bps) and 250 bps to 77.9% and 80.4%, respectively.
GAAP and non-GAAP operating expenses went up 1.9% and 4.6%, respectively, to $441.5 million and $374.1 million. F5 Networks’ GAAP and non-GAAP operating margins expanded 330 bps and 70 bps to 15.1% and 27.2%, respectively.
Balance Sheet & Cash Flow
F5 Networks exited the March-ended quarter with cash and short-term investments of $755.3 million compared with the previous quarter’s $660 million.
During the fiscal second quarter, the company generated $141 million of operating cash flow compared with the $158 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.
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 $2.78-$2.90 band (mid-point of $2.84) for third-quarter fiscal 2023. Non-GAAP gross margin is forecast to be around 82%.
For fiscal 2023, F5 Networks expects low-to-mid-single digit revenue growth.
The company anticipates non-GAAP earnings to grow in 7-11% band. Non
GAAP operating margin is forecasted to be roughly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, F5 has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.