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F5 (FFIV) Q3 Earnings and Revenues Surpass Expectations
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F5, Inc. (FFIV - Free Report) was trading 14.3% higher during the pre-market session today as the company’s third-quarter fiscal 2024 results crushed estimates. This Seattle, WA-based company’s non-GAAP earnings of $3.36 per share beat the Zacks Consensus Estimate of $2.97 and increased 4.7% from the year-ago quarter’s $3.21.
The bottom line also surpassed management’s guidance range of $2.89-$3.01 per share. The robust bottom-line performance reflected the combined impact of gross margin improvement and disciplined operating expense management.
F5’s revenues of $695 million for the fiscal third quarter surpassed the consensus mark of $686.6 million but declined 1.1% on a year-over-year basis. Revenues came at the higher end of the company’s guidance range of $675-$695 million.
Product revenues (44.4% of total revenues), which comprise the Software and Systems sub-divisions, decreased 6% year over year to $308.5 million. The decline in Product revenues was mainly due to lower Systems sales, partially offset by increased Software sales. The company’s reported non-GAAP Product revenues were higher than our estimate of $304.5 million.
Systems revenues plunged 16% year over year to $130 million, accounting for approximately 42% of the total Product revenues. The company revealed that the decline reflected a lower level of backlog-related shipments compared with prior quarters, while the demand showed some signs of stabilization. Our estimate for Systems revenues was pegged at $137 million.
The negative impacts of lower Systems sales were partially offset by the improved performance of Software. Software revenues increased 3% year over year to $179 million in the fiscal third quarter. Software revenues grew on the back of renewals. Our estimate was pegged at $167.5 million.
Global Service revenues (55.6% of the total revenues) grew 3.4% to $387 million. The robust growth was mainly driven by price increases introduced in fiscal 2022. Our estimate for Global Services revenues was pegged at $381.2 million.
F5 registered lower sales across the Americas and APAC regions, witnessing a year-over-year decrease of 4% and 1%, respectively. However, revenues from the EMEA region grew 5% on a year-over-year basis. Revenue contributions from the Americas, EMEA and APAC regions were 55%, 27% and 18%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 67%, 12% and 21% of product bookings, respectively.
Margins
On a year-over-year basis, GAAP and non-GAAP gross margins expanded 60 basis points each to 80.4% and 83.1%, respectively. The improvement was driven by price realization and ease in supply-chain constraints, as well as reductions in ancillary supply-chain costs.
The company’s fiscal third-quarter GAAP operating expenses declined 13.4% to $396 million, while non-GAAP operating expenses marginally declined from $346 million registered in the year-ago quarter to $345.5 million in the third quarter of fiscal 2024.
F5’s GAAP operating profit jumped 56.7% to $163 million, while the margin expanded 870 bps to 23.4%. However, the non-GAAP operating profit remained flat year over year at $233 million, while the margin improved 20 bps to 33.4%. An increase in the non-GAAP operating margin was primarily driven by an improvement in the gross margin and lower operating expenses as a percentage of revenues.
Balance Sheet & Cash Flow
F5 exited the June-ended quarter with cash and short-term investments of $935.6 million compared with the previous quarter’s $903.4 million. The company generated an operating cash flow of $546 million in the fiscal third quarter.
During the fiscal third quarter, FFIV repurchased shares worth $150 million. The company is committed to using at least 50% of free cash flow for share repurchases.
Guidance
F5 projects non-GAAP revenues in the $720-$740 million band (midpoint of $730 million) and non-GAAP earnings per share (EPS) in the range of $3.38-$3.50 (midpoint of $3.44) for the fourth quarter of fiscal 2024. The non-GAAP gross margin is forecasted to be 83%.
The company expects non-GAAP operating expenses between $350 million and $362 million for the fiscal fourth quarter. Share-based compensation expenses are anticipated in the range of $54-$56 million.
For fiscal 2024, F5 now expects its revenue growth to be mid to high single-digit percentage.
The company reiterated the non-GAAP EPS growth in the range of 7-9%. F5 now projects the effective tax rate for fiscal 2024 to be 19.5-20% from the 20-22% projected previously.
Moreover, FFIV still intends to return at least 50% of its fiscal 2024 free cash flow to shareholders through share buybacks.
Zacks Rank & Stocks to Consider
FFIV currently carries a Zacks Rank #3 (Hold). Shares of LOGI have lost 3.2% year to date (YTD).
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised upward by a penny to $2.69 per share in the past seven days, suggesting year-over-year growth of 107%. The long-term estimated earnings growth rate for the stock is 37.6%. The stock has soared 125.4% YTD.
The Zacks Consensus Estimate for AppFolio’s 2024 earnings has been revised downward by 2 cents to $3.98 per share in the past 60 days, indicating an increase of 132.8% on a year-over-year basis. Shares of APPF have jumped 32.2% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 2 cents to $3.12 per share over the past 30 days, indicating a 27.4% increase from 2023. It has a long-term earnings growth expectation of 33%. The stock has plunged 22.8% YTD.
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F5 (FFIV) Q3 Earnings and Revenues Surpass Expectations
F5, Inc. (FFIV - Free Report) was trading 14.3% higher during the pre-market session today as the company’s third-quarter fiscal 2024 results crushed estimates. This Seattle, WA-based company’s non-GAAP earnings of $3.36 per share beat the Zacks Consensus Estimate of $2.97 and increased 4.7% from the year-ago quarter’s $3.21.
The bottom line also surpassed management’s guidance range of $2.89-$3.01 per share. The robust bottom-line performance reflected the combined impact of gross margin improvement and disciplined operating expense management.
F5’s revenues of $695 million for the fiscal third quarter surpassed the consensus mark of $686.6 million but declined 1.1% on a year-over-year basis. Revenues came at the higher end of the company’s guidance range of $675-$695 million.
F5, Inc. Price, Consensus and EPS Surprise
F5, Inc. price-consensus-eps-surprise-chart | F5, Inc. Quote
Top Line in Detail
Product revenues (44.4% of total revenues), which comprise the Software and Systems sub-divisions, decreased 6% year over year to $308.5 million. The decline in Product revenues was mainly due to lower Systems sales, partially offset by increased Software sales. The company’s reported non-GAAP Product revenues were higher than our estimate of $304.5 million.
Systems revenues plunged 16% year over year to $130 million, accounting for approximately 42% of the total Product revenues. The company revealed that the decline reflected a lower level of backlog-related shipments compared with prior quarters, while the demand showed some signs of stabilization. Our estimate for Systems revenues was pegged at $137 million.
The negative impacts of lower Systems sales were partially offset by the improved performance of Software. Software revenues increased 3% year over year to $179 million in the fiscal third quarter. Software revenues grew on the back of renewals. Our estimate was pegged at $167.5 million.
Global Service revenues (55.6% of the total revenues) grew 3.4% to $387 million. The robust growth was mainly driven by price increases introduced in fiscal 2022. Our estimate for Global Services revenues was pegged at $381.2 million.
F5 registered lower sales across the Americas and APAC regions, witnessing a year-over-year decrease of 4% and 1%, respectively. However, revenues from the EMEA region grew 5% on a year-over-year basis. Revenue contributions from the Americas, EMEA and APAC regions were 55%, 27% and 18%, respectively.
Customer-wise, Enterprises, Service providers and Government represented 67%, 12% and 21% of product bookings, respectively.
Margins
On a year-over-year basis, GAAP and non-GAAP gross margins expanded 60 basis points each to 80.4% and 83.1%, respectively. The improvement was driven by price realization and ease in supply-chain constraints, as well as reductions in ancillary supply-chain costs.
The company’s fiscal third-quarter GAAP operating expenses declined 13.4% to $396 million, while non-GAAP operating expenses marginally declined from $346 million registered in the year-ago quarter to $345.5 million in the third quarter of fiscal 2024.
F5’s GAAP operating profit jumped 56.7% to $163 million, while the margin expanded 870 bps to 23.4%. However, the non-GAAP operating profit remained flat year over year at $233 million, while the margin improved 20 bps to 33.4%. An increase in the non-GAAP operating margin was primarily driven by an improvement in the gross margin and lower operating expenses as a percentage of revenues.
Balance Sheet & Cash Flow
F5 exited the June-ended quarter with cash and short-term investments of $935.6 million compared with the previous quarter’s $903.4 million. The company generated an operating cash flow of $546 million in the fiscal third quarter.
During the fiscal third quarter, FFIV repurchased shares worth $150 million. The company is committed to using at least 50% of free cash flow for share repurchases.
Guidance
F5 projects non-GAAP revenues in the $720-$740 million band (midpoint of $730 million) and non-GAAP earnings per share (EPS) in the range of $3.38-$3.50 (midpoint of $3.44) for the fourth quarter of fiscal 2024. The non-GAAP gross margin is forecasted to be 83%.
The company expects non-GAAP operating expenses between $350 million and $362 million for the fiscal fourth quarter. Share-based compensation expenses are anticipated in the range of $54-$56 million.
For fiscal 2024, F5 now expects its revenue growth to be mid to high single-digit percentage.
The company reiterated the non-GAAP EPS growth in the range of 7-9%. F5 now projects the effective tax rate for fiscal 2024 to be 19.5-20% from the 20-22% projected previously.
Moreover, FFIV still intends to return at least 50% of its fiscal 2024 free cash flow to shareholders through share buybacks.
Zacks Rank & Stocks to Consider
FFIV currently carries a Zacks Rank #3 (Hold). Shares of LOGI have lost 3.2% year to date (YTD).
Some better-ranked stocks in the broader technology sector are NVIDIA (NVDA - Free Report) , AppFolio (APPF - Free Report) and Twilio (TWLO - Free Report) . While Twilio and AppFolio sport a Zacks Rank #1 (Strong Buy) each, NVDA carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised upward by a penny to $2.69 per share in the past seven days, suggesting year-over-year growth of 107%. The long-term estimated earnings growth rate for the stock is 37.6%. The stock has soared 125.4% YTD.
The Zacks Consensus Estimate for AppFolio’s 2024 earnings has been revised downward by 2 cents to $3.98 per share in the past 60 days, indicating an increase of 132.8% on a year-over-year basis. Shares of APPF have jumped 32.2% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 2 cents to $3.12 per share over the past 30 days, indicating a 27.4% increase from 2023. It has a long-term earnings growth expectation of 33%. The stock has plunged 22.8% YTD.