F5 Revenue Exceeds One Billion Q4 And Fiscal 2011 Earnings

PRESS RELEASE

SEATTLE, WA—October 25, 2011—F5 Networks, Inc. (NASDAQ: FFIV) today announced revenue of $314.6 million for the fourth quarter of fiscal year 2011, up 8 percent from $290.7 million in the prior quarter and 24 percent from $254.3 million in the fourth quarter of fiscal year 2010. For fiscal year 2011, revenue was $1.15 billion, up 31 percent from $882.0 million in fiscal year 2010.

GAAP net income for the fourth quarter was $67.6 million ($0.84 per diluted share) compared to $62.5 million ($0.77 per diluted share) in the third quarter of 2011 and $48.2 million ($0.59 per diluted share) in the fourth quarter a year ago. GAAP net income for the year was $241.4 million ($2.96 per diluted share) versus $151.2 million ($1.86 per diluted share) in fiscal year 2010.

Excluding the impact of stock-based compensation, non-GAAP net income for the fourth quarter was $85.2 million ($1.06 per diluted share), compared to $79.4 million ($0.97 per diluted share) in the prior quarter and $63.9 million ($0.79 per diluted share) in the fourth quarter of fiscal 2010. For fiscal year 2011, non-GAAP net income was $308.3 million ($3.78 per diluted share) versus $203.8 million ($2.51 per diluted share) in fiscal year 2010.

A reconciliation of GAAP net income to non-GAAP net income is included on the attached Consolidated Statements of Operations.

F5 president and chief executive officer John McAdam said the company’s fourth quarter results reflect solid year-over-year gains across all regions and vertical market segments. In addition, product sales strengthened during the quarter, driving product revenue up 10 percent sequentially and 20 percent year-over-year.

“In the first full quarter that VIPRION 2400 was generally available, demand for the new mid-range chassis exceeded our expectations. During the fourth quarter, we also saw strong demand for VIPRION 4400, our high-end chassis, particularly among our Telco customers.

“Since we announced the availability of TMOS v.11 early in the quarter, customer response has been very positive. As more customers begin to roll out TMOS v.11 across their organizations, we expect to see strengthening demand for our VIPRION products, which are designed to support the full range of features and functions available in the new software. Several VIPRION customers are starting to deploy vCMP, a feature of TMOS v.11 that allows them to run multiple instances of BIG-IP on the same platform. During calendar 2012 we plan to release several new BIG-IP platforms designed to support vCMP and the other advanced capabilities of TMOS v.11,” McAdam said.

Reflecting slightly higher software attach rates and strong product and service revenue, gross margin ticked up during the quarter. GAAP operating margin increased to 31.6 percent and non-GAAP operating margin rose to 38.6 percent. In the fourth quarter, the company added 140 employees, increasing total headcount to 2,490.

On the company’s balance sheet, deferred revenue grew 7 percent sequentially to $343.3 million, up 32 percent from the fourth quarter of fiscal 2010. Cash flow from operations was $121.5 million in the fourth quarter and $417 million for the year. After repurchasing $150 million of F5 common stock during the quarter, the company ended the year with $1.01 billion in cash and investments.

“The fourth quarter of fiscal 2011 was a strong finish to the year,” McAdam said. “As we begin a new fiscal year, we anticipate that the seasonality we experienced in the first quarter of last year will be a recurring factor in our first quarter results going forward.

“With that in mind, our revenue target for the first quarter of fiscal 2012, ending December 31, is $315 million to $320 million with a GAAP earnings target of $0.79 to $0.81 per diluted share. Excluding stock-based compensation expense, the company’s non-GAAP earnings target is $0.99 to $1.01 per diluted share. For fiscal 2012, we expect sequential revenue growth throughout the year and solid year-over-year growth.”

A reconciliation of the company’s expected GAAP and non-GAAP earnings is provided in the following table:

Three months ended

December 31, 2011

Reconciliation of Expected Non-GAAP First Quarter Earnings Low High

Net income $63.7 $65.3

Stock-based compensation expense, net of tax 16.4 16.5

Non-GAAP net income excluding stock-based compensation expense $80.1 $81.8

Net income per share - diluted $0.79 $0.81

Non-GAAP net income per share - diluted $0.99 $1.01

Share Repurchase Program

The company also announced today that its board of directors had authorized an additional $200 million for the company’s common stock share repurchase program. This new authorization is incremental to the $166 million currently in the existing program which was initially authorized in October 2010.

Acquisitions for the share repurchase program will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The program may be modified or discontinued at any time.

Analyst/Investor Meeting

F5 will hold a meeting for analysts and investors at the New York Hilton in New York City, from 8:00 a.m. to 12:30 p.m. Eastern Time on Thursday, November 3, 2011.

To register online, please visit: https://www.f5.com/about/investor-relations/analyst-meeting/

For more information contact Darlene Henderson (206.272.6170) or email [email protected].

The meeting will also be webcast live and an archived version will be available through January 18, 2012. The link for the live webcast and the archived version is http://www.f5.com/about/investor-relations/events-calendar.html.

About F5 Networks

F5 Networks, Inc., the global leader in Application Delivery Networking (ADN), helps the world’s largest enterprises and service providers realize the full value of virtualization, cloud computing, and on-demand IT. F5' solutions help integrate disparate technologies to provide greater control of the infrastructure, improve application delivery and data management, and give users seamless, secure, and accelerated access to applications from their corporate desktops and smart devices. An open architectural framework enables F5 customers to apply business policies at “strategic points of control” across the IT infrastructure and into the public cloud. F5 products give customers the agility they need to align IT with changing business conditions, deploy scalable solutions on demand, and manage mobile access to data and services. Enterprises, service and cloud providers, and leading online companies worldwide rely on F5 to optimize their IT investments and drive business forward. For more information, go to www.f5.com.

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