F5 Networks, Inc. Net Income increased on 7.8% and Revenue increased on 3.4%
10/24/2018 • About F5 Networks, Inc. (
$FFIV) • By InTwits
F5 Networks, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is relatively stable: 30.1% in FY2018 vs. 29.9% in FY2017 vs. 31.2% in FY2014
- F5 Networks, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 7.7%. Average EBITDA Margin for the same period was 30.6%
- F5 Networks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $53m in FY2018, $39m in FY2017, $63m in FY2016, $60m in FY2015, $23m in FY2014
- The company has highly profitable business model: ROIC is 47.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 3.4%. Revenue growth showed acceleration in FY18Q4 - it increased 4.6% YoY. Revenue decline was accelerating on average at -3.3 pp per annum in FY2014-FY2018. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018.
Gross Margin showed almost no change in FY2018. Gross Margin grew at 0.27 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 0.57 pp from 38.7% to 38.1% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2017 at 38.7%. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.1 pp from 8.4% to 7.3% in FY2018. During FY2014-FY2018 SBC as a % of Revenue topped in FY2017 at 8.4%.
Net Income margin increased slightly on 0.86 pp from 20.1% to 21.0% in FY2018. Net Income margin stuck to a growing trend at 0.72 pp per annum in FY2014-FY2018. The efficient tax rate was 24.9% in FY2018 while the average for the last five years was 31.3%.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 2.5%. CAPEX/Revenue decreased slightly on 0.67 pp from 3.1% in FY2015 to 2.5% in FY2018. It's average level of CAPEX/Revenue for the last three years was 2.5%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue showed almost no change at 1.4% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.6 pp from 14.4% to 16.0% in FY2018.
Return on investment
The company operates at high and attractive ROIC (47.9%) and ROE (36.1%). ROIC increased slightly on 1.0 pp from 46.9% to 47.9% in FY2018. ROE increased slightly on 1.2 pp from 34.9% to 36.1% in FY2018. ROIC followed a growing trend at 3.4 pp per annum in the last 5 years. ROE grew at 3.7 pp per annum in FY2014-FY2018.
Leverage (Debt)
The company has no debt. Cash dropped on 36.9%.
Valuation and dividends
F5 Networks, Inc.'s trades at EV/EBITDA 15.5x and P/E 23.2x.
Management team
Francois Locoh-Donou is a F5 Networks, Inc.'s CEO. Francois Locoh-Donou is a founder and has spent 2 years with the company. CEO total compensation was
$6,857,047 in FY2018 which included
$810,000 salary. F5 Networks, Inc.'s CFO Francis J Pelzer V "Frank" has spent 1 year with the company.
0.25% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 4,409 employees. The number of employees increased slightly on 0.98%. Average revenue per employee in FY2018 was
$490,226 and it increased on 2.4%.
Financial and operational results
FY ended 09/30/2018
F5 Networks, Inc. ($FFIV) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,732 | 1,920 | 1,995 | 2,090 | 2,161 | 3.4% |
| Gross Profit | 1,422 | 1,588 | 1,658 | 1,737 | 1,800 | 3.6% |
| SG&A | 665 | 738 | 767 | 809 | 825 | 1.9% |
| EBITDA | 540 | 605 | 604 | 625 | 650 | 4.0% |
| EBIT | 494 | 553 | 547 | 564 | 591 | 4.8% |
| Tax | 186 | 196 | 184 | 155 | 150 | -3.0% |
| Net Income | 311 | 365 | 366 | 421 | 454 | 7.8% |
| Stock Based Compensation | 127 | 146 | 157 | 175 | 158 | -10.0% |
Balance Sheet
|
|---|
| Cash | 282 | 390 | 515 | 673 | 425 | -36.9% |
| Accounts Receivable | 242 | 279 | 268 | 292 | 295 | 1.2% |
| Inventory | 24 | 34 | 34 | 30 | 31 | 2.5% |
| Accounts Payable | 44 | 51 | 34 | 51 | 58 | 13.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 23 | 60 | 63 | 39 | 53 | 38.2% |
| Acquisitions | 49 | | | | | |
Ratios
|
|---|
| Revenue growth | 16.9% | 10.8% | 3.9% | 4.8% | 3.4% | |
| EBITDA growth | 14.6% | 12.2% | -0.2% | 3.5% | 4.0% | |
|
|---|
| Gross Margin | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% | 0.2% |
| EBITDA Margin | 31.2% | 31.5% | 30.3% | 29.9% | 30.1% | 0.2% |
| EBIT Margin | 28.5% | 28.8% | 27.4% | 27.0% | 27.3% | 0.4% |
| SG&A, % of revenue | 38.4% | 38.4% | 38.5% | 38.7% | 38.1% | -0.6% |
| SBC, % of revenue | 7.3% | 7.6% | 7.9% | 8.4% | 7.3% | -1.1% |
| Net Income Margin | 18.0% | 19.0% | 18.3% | 20.1% | 21.0% | 0.9% |
| CAPEX, % of revenue | 1.3% | 3.1% | 3.2% | 1.9% | 2.5% | 0.6% |
|
|---|
| ROIC | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% | 1.0% |
| ROE | 21.4% | 27.2% | 29.2% | 34.9% | 36.1% | 1.2% |
| Net Debt/EBITDA | -0.5x | -0.6x | -0.9x | -1.1x | -0.7x | 0.4x |
People
|
|---|
| Insider ownership | 0.2% | 0.2% | 0.2% | 0.2% | 0.2% | 0.0% |
| Employees | 3,834 | 4,178 | 4,395 | 4,366 | 4,409 | 1.0% |
| Revenue/Employee, th. $ | 452 | 460 | 454 | 479 | 490 | 2.4% |
F5 Networks, Inc. ($FFIV) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 523 | 533 | 542 | 563 | | 1.4% | 2.9% | 4.7% | 4.6% |
| EBITDA | 157 | 158 | 166 | 169 | | 3.2% | 2.8% | 7.5% | 2.8% |
| Net Income | 88 | 110 | 123 | 133 | | -6.1% | 17.7% | 25.7% | -2.1% |
Balance Sheet
|
|---|
| Cash | 612 | 596 | 599 | 425 | | 6.8% | -9.1% | -13.3% | -36.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 83.3% | 83.2% | 83.2% | 83.4% | | -0.2% | 0.2% | 0.6% | 0.2% |
| EBITDA Margin | 30.0% | 29.7% | 30.6% | 30.0% | | 0.5% | -0.0% | 0.8% | -0.5% |
| Net Income Margin | 16.9% | 20.6% | 22.6% | 23.6% | | -1.4% | 2.6% | 3.8% | -1.6% |
Peers in Communications Equipment
Below we provide F5 Networks, Inc. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.6% | 5.6% | 2.9% |
|---|
| F5 Networks, Inc. ($FFIV) | | 10.8% | 3.9% | 4.8% | 3.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| Palo Alto Networks, Inc. ($PANW) | 73.3% | 72.9% | 73.2% | 72.9% | 71.6% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| F5 Networks, Inc. ($FFIV) | 31.2% | 31.5% | 30.3% | 29.9% | 30.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| F5 Networks, Inc. ($FFIV) | 1.3% | 3.1% | 3.2% | 1.9% | 2.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| Ceragon Networks Ltd. ($CRNT) | -5.8% | 13.8% | 13.2% | 16.2% | 17.6% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.8x | -0.6x | 0.2x |
|---|
| F5 Networks, Inc. ($FFIV) | -0.5x | -0.6x | -0.9x | -1.1x | -0.7x |
