F5 Networks, Inc. Net Income dropped on 28.1% while Revenue increased on 4.8%
10/26/2020 • About F5 Networks, Inc. (
$FFIV) • By InTwits
F5 Networks, Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- F5 Networks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $60m in FY2020, $104m in FY2019, $53m in FY2018, $39m in FY2017, $63m in FY2016
- The company has highly profitable business model: ROIC is 16.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
F5 Networks, Inc.'s Revenue increased on 4.8%. Revenue growth showed slowdown in FY20Q4 - it was 4.1% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 3.3 pp from 26.2% to 22.9% in FY2020. EBITDA Margin stuck to a declining trend at -1.9 pp per annum in FY2016-FY2020.
Gross Margin decreased slightly on 1.4 pp from 84.1% to 82.6% in FY2020. SG&A as a % of Revenue increased on 4.1 pp from 42.8% to 46.9% in FY2020. SG&A as a % of Revenue followed a growing trend at 2.1 pp per annum in the last 5 years.
Net Income margin decreased on 6.0 pp from 19.1% to 13.1% in FY2020. During the last 5 years Net Income margin topped in FY2018 at 21.0% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 F5 Networks, Inc. had CAPEX/Revenue of 2.5%. CAPEX/Revenue increased slightly on 0.70 pp from 1.9% in FY2017 to 2.5% in FY2020. For the last three years the average CAPEX/Revenue was 3.2%.
Return on investment
The company operates at good ROIC (16.5%) and ROE (15.4%). ROIC dropped on 17.6 pp from 34.1% to 16.5% in FY2020. ROE dropped on 12.7 pp from 28.1% to 15.4% in FY2020. During the last 5 years ROIC topped in FY2018 at 47.9% and was declining since that time. During FY2016-FY2020 ROE topped in FY2018 at 36.1% and was declining since that time.
Leverage (Debt)
Debt level is -0.1x Net Debt / EBITDA and 1.4x Debt / EBITDA. Debt surged while cash surged on 41.8%.
F5 Networks, Inc. has no short term refinancing risk: cash is higher than short term debt (1,301.3%).
Valuation and dividends
The company's trades at EV/EBITDA 14.7x and P/E 26.0x.
Management team
Francois Locoh-Donou is a F5 Networks, Inc.'s CEO. Francois Locoh-Donou has spent 3 years with the company. The company's CFO is Francis J Pelzer V "Frank". Francis J Pelzer V "Frank" has 2 years tenure at the company.
Financial and operational results
FY ended 09/30/2020
F5 Networks, Inc. ($FFIV) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,995 | 2,090 | 2,161 | 2,242 | 2,351 | 4.8% |
| Gross Profit | 1,658 | 1,737 | 1,800 | 1,886 | 1,943 | 3.0% |
| SG&A | 767 | 809 | 825 | 959 | 1,102 | 14.8% |
| EBITDA | 604 | 625 | 650 | 587 | 538 | -8.3% |
| EBIT | 547 | 564 | 591 | | | |
| Tax | 184 | 155 | 150 | | | |
| Net Income | 366 | 421 | 454 | 428 | 307 | -28.1% |
| Stock Based Compensation | 157 | 175 | 158 | | | |
Balance Sheet
|
|---|
| Cash | 515 | 673 | 425 | 599 | 850 | 41.8% |
| Accounts Receivable | 268 | 292 | 295 | | | |
| Inventory | 34 | 30 | 31 | | | |
| Accounts Payable | 34 | 51 | 58 | | | |
| Short Term Debt | 0 | 0 | 0 | 0 | 65 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 708 | |
Cash flow
|
|---|
| Capex | 63 | 39 | 53 | 104 | 60 | -42.1% |
Ratios
|
|---|
| Revenue growth | 3.9% | 4.8% | 3.4% | 3.7% | 4.8% | |
| EBITDA growth | -0.2% | 3.5% | 4.0% | -9.8% | -8.3% | |
|
|---|
| Gross Margin | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% | -1.4% |
| EBITDA Margin | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% | -3.3% |
| EBIT Margin | 27.4% | 27.0% | 27.3% | | |
| SG&A, % of revenue | 38.5% | 38.7% | 38.1% | 42.8% | 46.9% | 4.1% |
| SBC, % of revenue | 7.9% | 8.4% | 7.3% | | |
| Net Income Margin | 18.3% | 20.1% | 21.0% | 19.1% | 13.1% | -6.0% |
| CAPEX, % of revenue | 3.2% | 1.9% | 2.5% | 4.6% | 2.5% | -2.1% |
|
|---|
| ROIC | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% | -17.6% |
| ROE | 29.2% | 34.9% | 36.1% | 28.1% | 15.4% | -12.7% |
| Net Debt/EBITDA | -0.9x | -1.1x | -0.7x | -1.0x | -0.1x | 0.9x |
People
|
|---|
| Insider ownership | 0.2% | 0.2% | 0.2% | | | |
| Employees | 4,395 | 4,366 | 4,409 | | | |
| Revenue/Employee, th. $ | 454 | 479 | 490 | | | |
F5 Networks, Inc. ($FFIV) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 569 | 583 | 583 | 615 | | 4.7% | 7.1% | 3.5% | 4.1% |
| EBITDA | 153 | 121 | 127 | 144 | | -11.4% | -23.1% | 5.1% | 5.6% |
| Net Income | 99 | 61 | 70 | 78 | | -24.7% | -47.1% | -18.7% | -18.1% |
Balance Sheet
|
|---|
| Cash | 735 | 573 | 714 | 850 | | 53.2% | -21.2% | 3.8% | 41.8% |
| Short Term Debt | 43 | 66 | 66 | 65 | | - | - | - | - |
| Long Term Debt | 342 | 736 | 719 | 708 | | - | - | - | - |
Ratios
|
|---|
| Gross Margin | 84.4% | 82.6% | 81.8% | 81.8% | | 0.4% | -1.2% | -2.1% | -2.8% |
| EBITDA Margin | 26.8% | 20.7% | 21.8% | 23.5% | | -4.9% | -8.1% | 0.3% | 0.3% |
| Net Income Margin | 17.3% | 10.5% | 12.0% | 12.6% | | -6.8% | -10.8% | -3.3% | -3.4% |
Peers in Communications Equipment
Below you can find F5 Networks, Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.6% | 2.9% | 3.7% | 2.1% |
|---|
| F5 Networks, Inc. ($FFIV) | - | 4.8% | 3.4% | 3.7% | 4.8% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| EchoStar Corporation ($SATS) | 59.9% | 59.8% | 62.7% | 58.3% | 60.6% |
| |
|---|
| Median (33 companies) | 43.7% | 41.0% | 40.5% | 43.2% | 44.9% |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| AudioCodes Ltd. ($AUDC) | 8.0% | 8.1% | 10.8% | 0.3% | 18.4% |
| |
|---|
| Median (32 companies) | 5.5% | 6.0% | 4.6% | 3.1% | 8.8% |
|---|
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 1.9% | 1.8% | 1.6% | 2.4% | 2.0% |
|---|
| F5 Networks, Inc. ($FFIV) | 3.2% | 1.9% | 2.5% | 4.6% | 2.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| Ciena Corporation ($CIEN) | 7.9% | 8.3% | 7.6% | 11.9% | 15.5% |
| |
|---|
| Median (35 companies) | 2.2% | 2.1% | 0.3% | -1.6% | 1.9% |
|---|
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| |
|---|
| Median (24 companies) | -0.8x | -0.6x | 0.2x | -0.1x | -0.5x |
|---|
| F5 Networks, Inc. ($FFIV) | -0.9x | -1.1x | -0.7x | -1.0x | -0.1x |
