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F5 Networks (NASDAQ:FFIV) Q4: Beats On Revenue, Next Quarter Growth Looks Optimistic


Kayode Omotosho /
2021/10/26 4:21 pm EDT
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Network application delivery and security specialist F5 (NASDAQ:FFIV) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 10.9% year on year to $681.9 million. Guidance also exceeded expectations with next quarter revenues guided to $675 million, or 1.15% above analyst estimates. F5 Networks made a GAAP profit of $110.7 million, improving on its profit of $77.6 million, in the same quarter last year.

Is now the time to buy F5 Networks? Access our full analysis of the earnings results here, it's free.

F5 Networks (FFIV) Q4 FY2021 Highlights:

  • Revenue: $681.9 million vs analyst estimates of $671.5 million (1.55% beat)
  • EPS (non-GAAP): $3.01 vs analyst estimates of $2.75 (9.46% beat)
  • Revenue guidance for Q1 2022 is $675 million at the midpoint, above analyst estimates of $667.2 million
  • Free cash flow of $189.9 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 81.1%, in line with same quarter last year

“Our very strong fourth quarter results cap a year of robust financial performance for F5,” said François Locoh-Donou, F5’s President and CEO.

While the company initially started in the late 90s by selling hardware appliances, these days F5 (NASDAQ:FFIV) is making software that helps large enterprises ensure their web applications are always available, by distributing network traffic and protecting them from cyber attacks.

Communication, work, shopping and consuming content are all increasingly done online these days, and it is critical for companies to ensure that their services are always available to their users and customers. That drives demand for software and services that help companies handle massive traffic surges and ensure stability, availability and security of their web applications.

Sales Growth

As you can see below, F5 Networks's revenue growth has been solid over the last year, growing from quarterly revenue of $614.8 million, to $681.9 million.

F5 Networks Total Revenue

This quarter, F5 Networks's quarterly revenue was up 10.9% year on year, which is above average for the company. We can see that the company increased revenue by $30.4 million quarter on quarter. That's a solid improvement on the $6.22 million increase in Q3 2021, so shareholders should appreciate the acceleration of growth.

Analysts covering the company are expecting the revenues to grow 6.51% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than F5 Networks. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. F5 Networks's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 81.1% in Q4.

F5 Networks Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.81 left to spend on developing new products, marketing & sales and the general administrative overhead. This is a great gross margin, that allows companies like F5 Networks to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity. It is good to see that the gross margin is staying stable which indicates that F5 Networks is doing a good job controlling costs and is not under a pressure from competition to lower prices.

Key Takeaways from F5 Networks's Q4 Results

Sporting a market capitalization of $12.5 billion, more than $910.6 million in cash and with positive free cash flow over the last twelve months, we're confident that F5 Networks has the resources it needs to pursue a high growth business strategy.

It was good to see F5 Networks provide next quarter revenue outlook exceeding analysts’ expectations. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 2.5% on the results and currently trades at $209.05 per share.

Should you invest in F5 Networks right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.