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F5 Q4 Earnings & Revenue Beat: Will Strong Results Lift the Stock?
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F5, Inc. (FFIV - Free Report) delivered fourth-quarter fiscal 2024 non-GAAP earnings of $3.67 per share, which beat the Zacks Consensus Estimate of $3.45 and increased 4.9% from the year-ago quarter’s $3.50.
The bottom line also surpassed management’s guidance of $3.38-$3.50. The robust bottom-line performance reflected the combined impact of gross margin improvement, disciplined operating expense management and strong top-line growth.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
F5’s revenues of $746.7 million for the fiscal fourth quarter surpassed the consensus mark of $729.60 million and increased 5.7% on a year-over-year basis. Revenues also surpassed management’s guidance of $720-$740 million. The robust revenue growth was a result of strong growth in the software division.
F5’s strong quarterly performance is likely to have given a fresh boost to its share price. Year to date, FFIV stock has soared 34.5%, outperforming the Zacks Internet - Software industry’s return of 23.3%.
Product revenues (48% of total revenues), which comprise the Software and Systems sub-divisions, increased 10% year over year to $358.3 million. The increase in Product revenues was mainly due to strong growth in Software revenues, partially offset by lower Systems sales. The company’s reported non-GAAP Product revenues were higher than our estimate of $331 million.
Systems revenues declined 3% year over year to $130 million, accounting for approximately 36.3% of the total Product revenues. The company revealed that it is experiencing an improvement in the Systems division, driven by increased demand for systems upgrades among customers. Our estimate for Systems revenues was pegged at $122.7 million.
The negative impacts of lower Systems sales were partially offset by the improved performance of Software. Software revenues increased 19% year over year to $228 million in the fiscal fourth quarter. Software revenues grew on the back of renewals. Our estimate was pegged at $208.3 million.
Global Service revenues (52% of the total revenues) grew 1.8% to $388.4 million. The growth was mainly driven by price increases introduced in fiscal 2022. Our estimate for Global Services revenues was pegged at $397.9 million.
F5 registered sales growth across the Americas and EMEA regions, witnessing a year-over-year increase of 9% and 4%, respectively. However, revenues from the APAC region declined 3% on a year-over-year basis. Revenue contributions from the Americas, EMEA and APAC regions were 58%, 26% and 16%, respectively.
Customer-wise, Enterprises, Government and Service providers represented 72%, 18% and 10% of product bookings, respectively.
Margins of FFIV
On a year-over-year basis, GAAP gross margin expanded 70 basis points (bps) to 80.8% and non-GAAP gross margin expanded 30 bps to 83%.
The company’s fiscal fourth-quarter GAAP operating expenses increased 4.5% to $412 million. Non-GAAP operating expenses increased from $344.8 million registered in the year-ago quarter to $362.6 million in the fourth quarter of fiscal 2024.
F5’s GAAP operating profit jumped 11.3% to $191 million, while the margin expanded 130 bps to 25.6%. The non-GAAP operating profit increased 7.1% year over year to $256.8 million, while the margin improved 50 bps to 34.4%. 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.
F5’s Balance Sheet & Cash Flow
F5 exited the September-ended quarter with cash and short-term investments of $1.07 billion compared with the previous quarter’s $935.6 million. The company generated an operating cash flow of $247 million in the fiscal fourth quarter.
During the fiscal fourth quarter, FFIV repurchased shares worth $100 million. The company is committed to using at least 50% of free cash flow for share repurchases. FFIV also announced that its board of directors has authorized an additional $1 billion for its common stock repurchase program that is incremental to the $422 million remaining in the existing program.
F5’s Fiscal 2025 Guidance
FFIV has released the first-quarter 2025 outlook and the guidance for fiscal 2025. F5 projects non-GAAP revenues in the $705-$725 million band (midpoint of $715 million) and non-GAAP earnings per share (EPS) in the range of $3.29-$3.41 (midpoint of $3.35) for the first quarter of fiscal 2025. The Zacks Consensus Estimate for first-quarter top and bottom lines are currently pegged at $701 million and $3.36 per share, respectively.
For fiscal 2025, FFIV expects its revenues to grow in the band of 4-5% compared with 2024. Non-GAAP earnings per share are expected to grow in the range of 5-7% year over year. The consensus mark for fiscal 2025 revenues and non-GAAP earnings indicates year-over-year growth of 2.6% and 4.9%, respectively.
The consensus mark for Shopify’s 2024 earnings has been revised upward by 13 cents to $1.12 per share over the past 90 days, indicating a 51.4% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have soared 2.6% in the year-to-date period.
The Zacks Consensus Estimate for PANW’s fiscal 2025 earnings has been revised upward by a penny to $6.26 per share in the past 60 days, suggesting a year-over-year increase of 12.4%. It has a long-term earnings growth expectation of 19.3%. Shares of PANW have risen 23% in the year-to-date period.
The Zacks Consensus Estimate for ServiceNow’s 2024 earnings has been revised upward by a penny to $13.82 per share in the past seven days, indicating an increase of 28.20% on a year-over-year basis. It has a long-term earnings growth expectation of 28.70%. Shares of NOW have jumped 33.8% in the year-to-date period.
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F5 Q4 Earnings & Revenue Beat: Will Strong Results Lift the Stock?
F5, Inc. (FFIV - Free Report) delivered fourth-quarter fiscal 2024 non-GAAP earnings of $3.67 per share, which beat the Zacks Consensus Estimate of $3.45 and increased 4.9% from the year-ago quarter’s $3.50.
The bottom line also surpassed management’s guidance of $3.38-$3.50. The robust bottom-line performance reflected the combined impact of gross margin improvement, disciplined operating expense management and strong top-line growth.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
F5’s revenues of $746.7 million for the fiscal fourth quarter surpassed the consensus mark of $729.60 million and increased 5.7% on a year-over-year basis. Revenues also surpassed management’s guidance of $720-$740 million. The robust revenue growth was a result of strong growth in the software division.
F5’s strong quarterly performance is likely to have given a fresh boost to its share price. Year to date, FFIV stock has soared 34.5%, outperforming the Zacks Internet - Software industry’s return of 23.3%.
F5, Inc. Price, Consensus and EPS Surprise
F5, Inc. price-consensus-eps-surprise-chart | F5, Inc. Quote
Top-Line Details of FFIV
Product revenues (48% of total revenues), which comprise the Software and Systems sub-divisions, increased 10% year over year to $358.3 million. The increase in Product revenues was mainly due to strong growth in Software revenues, partially offset by lower Systems sales. The company’s reported non-GAAP Product revenues were higher than our estimate of $331 million.
Systems revenues declined 3% year over year to $130 million, accounting for approximately 36.3% of the total Product revenues. The company revealed that it is experiencing an improvement in the Systems division, driven by increased demand for systems upgrades among customers. Our estimate for Systems revenues was pegged at $122.7 million.
The negative impacts of lower Systems sales were partially offset by the improved performance of Software. Software revenues increased 19% year over year to $228 million in the fiscal fourth quarter. Software revenues grew on the back of renewals. Our estimate was pegged at $208.3 million.
Global Service revenues (52% of the total revenues) grew 1.8% to $388.4 million. The growth was mainly driven by price increases introduced in fiscal 2022. Our estimate for Global Services revenues was pegged at $397.9 million.
F5 registered sales growth across the Americas and EMEA regions, witnessing a year-over-year increase of 9% and 4%, respectively. However, revenues from the APAC region declined 3% on a year-over-year basis. Revenue contributions from the Americas, EMEA and APAC regions were 58%, 26% and 16%, respectively.
Customer-wise, Enterprises, Government and Service providers represented 72%, 18% and 10% of product bookings, respectively.
Margins of FFIV
On a year-over-year basis, GAAP gross margin expanded 70 basis points (bps) to 80.8% and non-GAAP gross margin expanded 30 bps to 83%.
The company’s fiscal fourth-quarter GAAP operating expenses increased 4.5% to $412 million. Non-GAAP operating expenses increased from $344.8 million registered in the year-ago quarter to $362.6 million in the fourth quarter of fiscal 2024.
F5’s GAAP operating profit jumped 11.3% to $191 million, while the margin expanded 130 bps to 25.6%. The non-GAAP operating profit increased 7.1% year over year to $256.8 million, while the margin improved 50 bps to 34.4%. 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.
F5’s Balance Sheet & Cash Flow
F5 exited the September-ended quarter with cash and short-term investments of $1.07 billion compared with the previous quarter’s $935.6 million. The company generated an operating cash flow of $247 million in the fiscal fourth quarter.
During the fiscal fourth quarter, FFIV repurchased shares worth $100 million. The company is committed to using at least 50% of free cash flow for share repurchases. FFIV also announced that its board of directors has authorized an additional $1 billion for its common stock repurchase program that is incremental to the $422 million remaining in the existing program.
F5’s Fiscal 2025 Guidance
FFIV has released the first-quarter 2025 outlook and the guidance for fiscal 2025. F5 projects non-GAAP revenues in the $705-$725 million band (midpoint of $715 million) and non-GAAP earnings per share (EPS) in the range of $3.29-$3.41 (midpoint of $3.35) for the first quarter of fiscal 2025. The Zacks Consensus Estimate for first-quarter top and bottom lines are currently pegged at $701 million and $3.36 per share, respectively.
For fiscal 2025, FFIV expects its revenues to grow in the band of 4-5% compared with 2024. Non-GAAP earnings per share are expected to grow in the range of 5-7% year over year. The consensus mark for fiscal 2025 revenues and non-GAAP earnings indicates year-over-year growth of 2.6% and 4.9%, respectively.
FFIV’s Zacks Rank & Other Stocks to Consider
FFIV currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Shopify (SHOP - Free Report) , Palo Alto Networks (PANW - Free Report) and ServiceNow (NOW - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus mark for Shopify’s 2024 earnings has been revised upward by 13 cents to $1.12 per share over the past 90 days, indicating a 51.4% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have soared 2.6% in the year-to-date period.
The Zacks Consensus Estimate for PANW’s fiscal 2025 earnings has been revised upward by a penny to $6.26 per share in the past 60 days, suggesting a year-over-year increase of 12.4%. It has a long-term earnings growth expectation of 19.3%. Shares of PANW have risen 23% in the year-to-date period.
The Zacks Consensus Estimate for ServiceNow’s 2024 earnings has been revised upward by a penny to $13.82 per share in the past seven days, indicating an increase of 28.20% on a year-over-year basis. It has a long-term earnings growth expectation of 28.70%. Shares of NOW have jumped 33.8% in the year-to-date period.