F5 Networks Inc FFIV
Q4 2010 Earnings Call Transcript

Transcript Call Date 10/26/2010

Operator: Good afternoon and welcome to the F5 Fourth Quarter and Fiscal 2010 Financial Results Conference Call. At this time, all parties will be able to listen only until the questions-and-answers portion. Also today’s conference is being recorded. If anyone has any objections, please disconnect at this time.

I’d now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Sir, you may begin.

John Eldridge - IR: Thank you, Ashlee. Welcome all of you to our today’s conference call for reviewing the results of the fourth quarter and fiscal year for 2010. Speakers on today’s call are John McAdam, President and CEO; and Andy Reinland, Senior VP and Chief Finance Officer. The other members of our exec team are also with us to answer questions following our prepared comments.

If you have any follow-up questions after the call, please direct them to me at 206-272-6571. The copy of today’s press release is available on our website at In addition, you can access an archived version of today’s live webcast from the Events Calendar page of our website through January 19. From 4.30 pm today until 5.00 pm Pacific Time, October 27, you can also listen to a telephone replay at 800-947-4566 or 203-369-3552.

During today’s call, our discussion will contain forward-looking statements to include words such as believe, anticipate, expect and target. These statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by the statements.

Factors that may affect our results are summarized in our quarterly releases and described in detail in our SEC filings. Please note that F5 has no duty to update any information presented in this call.

Before we begin, I also want to remind you that we are holding our 2010 Analyst Investor Meeting in New York on November 16. If you are planning to attend the meeting and have not registered, you can register online from the link on our IR Events Calendar entry for November 16 or call Darlene Henderson at 206-272-6170.

Now, I’ll turn the call over to Andy Reinland.

Andy Reinland - SVP and CFO: Thank you, John. Q4 marked another quarter of strong sequential and year-over-year revenue growth and profitability capping a very strong year for F5. Following my review of our results for the fourth quarter and fiscal year 2010, I will provide guidance for Q1 and discuss our general planning assumptions for fiscal 2011.

For the fourth quarter of fiscal 2010, revenue of $254.3 million was above our target range of $242 million to $247 million representing an increase of 10% from the prior quarter and 45% from the fourth quarter a year ago. Book-to-bill was greater than one. Q4 product revenue of $165 million, up 12% from the prior quarter, and 52% from the fourth quarter of last year represented 65% of total revenue.

Service revenue of $89.3 million increased 7% sequentially and 35% year-over-year accounting for 35% of total revenue. Revenue from our core Application Delivery Networking business was $241.8 million compared to $218.5 million in Q3, and represented 95% of total revenue. ARX revenue was $7.3 million up from $6.2 million in the prior quarter, and represented 3% of total revenue. FirePass revenue of $5.2 million was down from $5.7 million in Q3, and accounted for 2% of total revenue. This decrease was primarily driven by increasing sales of our access policy manager, and Edge Gateway products which incorporate many of the features and capabilities of FirePass and are included in our overall ADN solution portfolio. As these products continue to gain traction, we anticipate the sales of standalone FirePass will continue to decline.

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