F5 Networks Inc. (FFIV) has posted fourth quarter fiscal 2011 earnings per share (EPS) of 84 cents, strongly beating the Zacks Consensus Estimate of 77 cents.

The outperformance was attributable to solid revenues aided by the growing demand for the company’s products, as well as market share gains.

Revenues

F5 Networks reported revenues of $314.6 million in the fourth quarter, up 23.7% from $254.3 million in the year-ago period.

The quarter’s revenue was above the company’s guided range of $307.0-$312.0 million. Revenue growth were driven by strong demand for the new mid-range VIPRION 2400 and high-end VIPRION 4400 across all geographic regions and market verticals, Americas and Telecom in particular.

Continuous enhancement of product suites during the quarter led to a year-over-year 19.7% growth in the Product segment. Revenues from the Services segment climbed 31.2% year over year, fueled by growth in new and renewed service maintenance contracts booked during the quarter.

Geographically, on a year-over-year basis, Americas grew 25% year over year and represented 60% of revenue. EMEA grew 14% year over year, accounting for 20% of revenue, and APAC and Japan each grew 32% from the prior-year quarter, representing 13% and 7% of revenue, respectively.

By vertical, telco represented 26% of sales during the quarter and both technology and financial accounted for 19%. Total government revenue was 12% of sales, including 7% from the US federal.

Operating Results

Gross profit in the fourth quarter surged 24.7% from the year-ago quarter to $258.7 million. Gross margin was up 60 basis points year over year at 82.2%. The increase was supported by a stable pricing environment for the company’s products and an improved product mix.

F5 Networks’ operating expenses increased 21.5% over the prior year, mainly due to a 25.1% increase in sales and marketing expenses resulting from increased hiring. Despite the substantial rise in expenses, operating income came in at $99.3 million, up 30.2% from $76.3 million reported in the year-ago quarter. Operating margin in the quarter was 31.6%, up from 30.0% in the year-ago quarter. The margin improvement could be attributed to higher revenues.

Net income was $67.6 million or 84 cents per share, up from $48.2 million or 59 cents in the comparable quarter last year. The company’s earnings exceeded its own guided range of 75-77 cents.

All the figures in the quarter include the effect of stock-based compensation expense. There was no other one-time item in the quarter.

Balance Sheet, Cash Flow & Share Repurchase

Cash, cash equivalents and short-term investments totaled approximately $542.6 million at the end of the September quarter, down from $585.3 million in the prior quarter. Receivables grew $11.0 million sequentially to $165.7 million. Inventories were $17.1 million, down from $17.9 million in the prior quarter.

Total deferred revenue was $343.3 million, compared to $321.8 million in the previous quarter. F5 Networks is free of any long-term debt. Cash flow from operations was $121.5 million, up from $101.0 million in the prior quarter. Capital expenditure was $9.9 million, up from $8.8 million in the prior quarter. F5 Networks repurchased 1.91 million outstanding shares worth $150.0 million.

Guidance

For the first quarter of fiscal 2012, F5 Networks expects revenues of $315.0 million to $320.0 million. On a GAAP basis, earnings per share are expected in the range of 79-81 cents. The Zacks Consensus Estimate for the first quarter is 81 cents. Excluding stock-based compensation expense, the company estimates non-GAAP earnings per share between 99 cents and $1.01.

Our Take

F5 Networks delivered impressive fourth quarter results, beating the Zacks Consensus Estimate on the bottom line. Better execution and focus on enterprise and service providers has placed F5 Networks well in the application delivery controller (ADC) market and helped it grab share from Cisco Systems Inc. (CSCO). F5 Networks is also keen on expanding its cloud exposure.

With the rollout of TMOS ver.11, F5 Networks is seeing strong demand for its VIPRION products, which is reflected in the fiscal 2012 guidance. On the other hand, the company appears positive about its North American business and seasonal strength in the U.S. federal business.

Currently, F5 Networks has a Zacks #2 Rank, implying a short-term Buy recommendation.

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