Yahoo Finance F5 (NASDAQ:FFIV) Posts Q1 Sales In Line With Estimates But Stock Drops 12.2% on Weak Guide
Network application delivery and security specialist F5 (NASDAQ:FFIV) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 3.1% year on year to $681.4 million. On the other hand, next quarter's revenue guidance of $685 million was less impressive, coming in 1.6% below analysts' estimates. It made a non-GAAP profit of $2.91 per share, improving from its profit of $2.53 per share in the same quarter last year.
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F5 (FFIV) Q1 CY2024 Highlights:
Revenue: $681.4 million vs analyst estimates of $684.3 million (small miss)
EPS (non-GAAP): $2.91 vs analyst estimates of $2.87 (1.5% beat)
Revenue Guidance for Q2 CY2024 is $685 million at the midpoint, below analyst estimates of $696.5 million (EPS guidance for the period also missed by a wide margin)
Gross Margin (GAAP): 79.3%, up from 77.9% in the same quarter last year
Free Cash Flow of $212.2 million, up 35.8% from the previous quarter
Market Capitalization: $10.7 billion
“We delivered a solid second quarter, with revenue near the midpoint of our guidance range and earnings per share at the high end of our guidance in an environment where customers remain cautious and are forecasting largely flat IT budgets for calendar 2024,” said François Locoh-Donou, F5’s President and CEO.
Initially started as a hardware appliances company in the late 1990s, F5 (NASDAQ:FFIV) makes software that helps large enterprises ensure their web applications are always available by distributing network traffic and protecting them from cyberattacks.
Content Delivery
The amount of content on the internet is exploding, whether it is music, movies and or e-commerce stores. Consumer demand for this content creates network congestion, much like a digital traffic jam which drives demand for specialized content delivery networks (CDN) services that alleviate potential network bottlenecks.
Sales Growth
As you can see below, F5's revenue growth has been unimpressive over the last three years, growing from $645.3 million in Q2 2021 to $681.4 million this quarter.
This quarter, F5's revenue was down 3.1% year on year, which might disappointment some shareholders.
Next quarter, F5 is guiding for a 2.5% year-on-year revenue decline to $685 million, a further deceleration from the 4.2% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 2% over the next 12 months before the earnings results announcement.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. F5's free cash flow came in at $212.2 million in Q1, up 62.9% year on year.
F5 has generated $692.9 million in free cash flow over the last 12 months, an impressive 24.9% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.
Key Takeaways from F5's Q1 Results
We struggled to find many strong positives in these results. Its revenue and EPS guidance for next quarter missed analysts' expectations and its billings missed Wall Street's estimates. Overall, this was a mixed quarter for F5. The company is down 12.3% on the results and currently trades at $159.75 per share.
F5 may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
