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F5 Networks Inc. Reports Operating Results (10-Q)

February 08, 2013 | About:
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10qk

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F5 Networks Inc. (FFIV) filed Quarterly Report for the period ended 2012-12-31.

F5 Networks, Inc. has a market cap of $8.27 billion; its shares were traded at around $105.08 with a P/E ratio of 30.1205 and P/S ratio of 5.9032. F5 Networks, Inc. had an annual average earning growth of 38.6% over the past 10 years.

Highlight of Business Operations:

In August 2010, the Company granted 181,334 and 83,000 RSUs to certain current executive officers as part of the annual equity and retention awards programs, respectively. Fifty percent of the aggregate number of RSUs granted as part of the annual equity awards program vest in equal quarterly increments over three years, until such portion of the grant is fully vested on August 1, 2013. One-sixth of the annual equity awards RSU grant, or a portion thereof, was subject to the Company achieving specified quarterly revenue and EBITDA goals during the period beginning in the fourth quarter of fiscal year 2010 through the third quarter of fiscal year 2011. In each case, 50% of the quarterly performance stock grant is based on achieving at least 80% of the quarterly revenue goal and the other 50% is based on achieving at least 80% of the quarterly EBITDA goal. The quarterly performance stock grant is paid linearly above 80% of the targeted goals. At least 100% of both goals must be attained in order for the quarterly performance stock grant to be awarded over 100%. Each goal is evaluated individually and subject to the 80% achievement threshold and 100% over-achievement threshold. The remaining 33.33% of this annual equity awards RSU grant shall be subject to performance based vesting for each of the four quarter periods beginning with the fourth quarters of fiscal years 2011 and 2012 (16.66% in each period). The Compensation Committee of the Board of Directors will set applicable performance targets and vesting formulas for each of these periods. All RSUs granted as part of the retention awards program fully vest on August 1, 2013.

Three worldwide distributors of the Companys products accounted for 16.9%, 15.2%, and 11.0% of total net revenue for the three month period ended December 31, 2012. Two worldwide distributors of the Companys products accounted for 17.9% and 13.7% of total net revenue for the three month period ended December 31, 2011. Two worldwide distributors accounted for 11.2% and 10.3% of the Companys accounts receivable as of December 31, 2012. One worldwide distributors accounted for 15.6% of the Companys accounts receivable as of December 31, 2011. No other distributors accounted for more than 10% of total net revenue or receivables.

Net product revenues increased 4.2% for the three months ended December 31, 2012, from the same period in the prior year. The increase in net product revenues for the three months ended December 31, 2012 was primarily due to an increase of $8.2 million in sales of our ADN products from the same period in the prior year. Sales of our ADN products represented 98.8% of product revenues for the three months ended December 31, 2012, compared to 98.7% of product revenues for the three months ended December 31, 2011.

Avnet Technology Solutions, Ingram Micro, and Westcon, three of our worldwide distributors, accounted for 16.9%, 15.2%, and 11.0% of our total net revenue for the three months ended December 31, 2012, respectively. Avnet Technology Solutions and Ingram Micro accounted for 17.9% and 13.7% of our total net revenue for the three months ended December 31, 2011, respectively. Avnet Technology Solutions and Ingram Micro accounted for 11.2% and 10.3% of our accounts receivable as of December 31, 2012, respectively. Avnet Technology Solutions accounted for 15.6% of our accounts receivable as of December 31, 2011. No other distributors accounted for more than 10% of total net revenue or receivables.

Research and development. Research and development expenses consist of the salaries and related benefits of our product development personnel, prototype materials and other expenses related to the development of new and improved products, facilities and depreciation expenses. Research and development expenses increased 24.1% for the three months ended December 31, 2012, from the comparable period in the prior year. The increase in research and development expense was primarily due to an increase of $7.4 million in personnel costs for the three months ended December 31, 2012, from the comparable period in the prior year. Research and development headcount at the end of December 2012 increased to 802 from 646 at the end of December 2011. Research and development expense included stock-based compensation expense of $7.8 million for the three months ended December 31, 2012, compared to $5.8 million for the same period in the prior year. We expect research and development expenses to remain consistent as a percentage of net revenue in the foreseeable future.

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