F5 Networks Announces Results for Third Quarter of Fiscal 2007

SEATTLE--(BUSINESS WIRE)--For the third quarter of fiscal 2007, ended June 30, F5 Networks (NASDAQ:FFIV) announced revenue of $132.4 million, up 4 percent from $127.6 million in the prior quarter and 32 percent from $100.1 million in the third quarter of fiscal 2006. Net income was $21.8 million ($0.51 per diluted share), compared to $20.0 million ($0.47 per diluted share) in the prior quarter and $17.0 million ($0.41 per diluted share) in the third quarter a year ago.

“For a variety of reasons, including seasonal strength in North America, Japan and the U.S. Federal market, Q4 is typically our strongest quarter. We also expect to begin seeing a significant return on the investments we made in expanding our sales organization during the first half of the year.”

Representing the company’s 18^th consecutive quarter of sequential revenue growth, results were within the company’s guided revenue range and above its published earnings target. According to F5 president and chief executive officer, John McAdam, bookings outpaced revenue during the quarter, resulting in a positive book-to-bill at quarter-end.

In addition to solid revenue and earnings growth, the company continued to strengthen its balance sheet during the third quarter. Deferred revenue, principally from service maintenance contracts, grew 11% compared to the prior period to $83.2 million. Cash flow from operations was $38.2 million, and the company ended the quarter with $633 million in cash and investments.

Commenting on the current quarter, McAdam said he believes F5 is positioned for a strong finish to fiscal 2007. “For a variety of reasons, including seasonal strength in North America, Japan and the U.S. Federal market, Q4 is typically our strongest quarter. We also expect to begin seeing a significant return on the investments we made in expanding our sales organization during the first half of the year.”

For the fourth quarter of fiscal 2007, ending September 30, McAdam said management has set a revenue goal of $142 million to $144 million with an earnings target of $0.53 to $0.55 per diluted share.

Two-for-One Forward Stock Split

F5 also announced today that its Board of Directors has approved a two-for-one forward stock split of the Company’s common stock. This stock split will be effected by the issuance of a dividend of one share of F5 common stock for every share of its common stock issued and outstanding as of the record date of August 10, 2007. New shares of F5 common stock resulting from the stock split will be issued by F5 transfer agent, American Stock Transfer, and F5 common stock will begin trading on the Nasdaq Global Select Market on a split-adjusted basis on August 20, 2007. Following the stock split, F5 will have approximately 84.2 million shares outstanding, based on the number of shares outstanding as of July 23, 2007. Reflecting the effect of the stock split, management's earnings guidance of $0.53 to $0.55 per diluted share referenced above translates to $0.27 to $0.28 per diluted share on a post-split basis. In addition, F5 will amend its articles of incorporation to increase its authorized number of shares of common stock from 100 million shares to 200 million shares concurrent with the stock split.

If a shareholder is contemplating a sale of F5 shares between the record date and the payment date, he or she should consult a broker regarding entitlement to the split shares.

About F5 Networks

F5 Networks is the global leader in Application Delivery Networking. F5 provides solutions that make applications secure, fast and available for everyone, helping organizations get the most out of their investment. By adding intelligence and manageability into the network to offload applications, F5 optimizes applications and allows them to work faster and consume fewer resources. F5's extensible architecture intelligently integrates application optimization, protects the application and the network, and delivers application reliability - all on one universal platform. Over 10,000 organizations and service providers worldwide trust F5 to keep their applications running. The company is headquartered in Seattle, Washington with offices worldwide. For more information, go to www.f5.com.

Forward-Looking Statements

Statements in this press release concerning the continuing strength of F5's business, sequential growth, the target revenue and earnings range, demand for application delivery networking and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others: customer acceptance of our new traffic management, security, application delivery and WAN optimization offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; F5's ability to sustain, develop and effectively utilize distribution relationships; F5's ability to attract, train and retain qualified product development, marketing, sales, professional services and customer support personnel; F5's ability to expand in international markets; and the unpredictability of F5's sales cycle.

F5 has no duty to update any matters discussed in this press release. More information about potential risk factors that could affect F5's business and financial results is included in the company's annual report on Form 10-K for the fiscal year ended September 30, 2006, and other public filings with the Securities and Exchange Commission.


F5 Networks, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

	June 30,			Sept. 30,
		2007			2006

Assets
Current assets
Cash and cash equivalents	$	48,040		$	37,746
Short-term investments		345,899			336,427
Accounts receivable, net of allowances of $2,578 and $2,858		77,693			62,750
Inventories		9,278			5,763
Deferred tax assets		4,503			4,682
Other current assets		19,627			15,607
Total current assets		505,040			462,975

Restricted cash		3,946			3,929
Property and equipment, net		33,307			29,951
Long-term investments		238,818			118,003
Deferred tax assets		10,889			18,657
Goodwill		81,701			81,701
Other assets, net		13,109			14,295
Total assets	$	886,810		$	729,511

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	23,225		$	13,174
Accrued liabilities		30,008			31,583
Deferred revenue		73,425			54,880
Total current liabilities		126,658			99,637

Other long-term liabilities		8,488			7,976
Deferred revenue, long-term		9,824			5,440
Total long-term liabilities		18,312			13,416

Commitments and contingencies

Shareholders’ equity
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding		-			-
Common stock, no par value; 100,000 shares authorized, 41,956 and 40,778 shares issued and outstanding
		583,349			521,791
Accumulated other comprehensive loss		(1,332	)		(1,038	)
Retained earnings		159,823			95,705
Total shareholders' equity		741,840			616,458
Total liabilities and shareholders' equity	$	886,810		$	729,511



F5 Networks, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)


	Three months ended				Nine months ended
	June 30,				June 30,
		2007		2006		2007		2006


Net revenues
Products	$	97,751	$	77,192	$	285,939	$	218,558
Services		34,674		22,937		94,121		63,774
Total		132,425		100,129		380,060		282,332

Cost of net revenues (1)
Products		20,770		15,869		60,411		45,903
Services		8,867		6,649		24,565		17,469
Total		29,637		22,518		84,976		63,372
Gross Profit		102,788		77,611		295,084		218,960

Operating expenses (1)
Sales and marketing		45,158		32,364		127,390		92,391
Research and development		17,476		12,517		49,101		35,271
General and administrative		12,375		10,175		38,060		24,720
Total		75,009		55,056		214,551		152,382

Income from operations		27,779		22,555		80,533		66,578
Other income, net		7,175		4,759		20,836		11,606
Income before income taxes		34,954		27,314		101,369		78,184
Provision for income taxes		13,145		10,349		37,251		29,931
Net Income	$	21,809	$	16,965	$	64,118	$	48,253


Net income per share - basic	$	0.52	$	0.42	$	1.55	$	1.21
Weighted average shares - basic		41,807		40,553		41,417		39,942

Net income per share - diluted	$	0.51	$	0.41	$	1.51	$	1.16
Weighted average shares - diluted		42,655		41,659		42,416		41,426


(1) Includes stock-based compensation as follows:

Cost of net revenues	$	622	$	385	$	1,815	$	1,083
Sales and marketing		4,040		2,289		11,877		6,578
Research and development		2,562		1,622		7,541		4,600
General and administrative		3,349		1,457		9,774		4,335
	$	10,573	$	5,753	$	31,007	$	16,596