For the third quarter of fiscal 2011, F5 Networks, Inc. (NASDAQ: FFIV) announced revenue of $290.7 million, up 4.7 percent from $277.6 million in the prior quarter and 26.1 percent from $230.5 million in the third quarter of fiscal 2010.

GAAP net income was $62.5 million ($0.77 per diluted share), compared to $55.6 million ($0.68 per diluted share) in the prior quarter and $40.5 million ($0.50 per diluted share) in the third quarter a year ago.

Excluding the impact of stock-based compensation net of tax, non-GAAP net income was $79.4 million ($0.97 per diluted share), compared to $71.5 million ($0.88 per diluted share) in the prior quarter and $53.3 million ($0.66 per diluted share) in the third quarter of fiscal 2010.

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

“Strong sales in APAC and Japan, in particular of our high-end products, accounted for most of the revenue growth during the quarter,” said John McAdam, F5 president and chief executive officer. “EMEA revenue was down from the prior quarter, and Americas revenue was up only slightly, due in part to a slowdown in U.S. Federal sales.

“In June we began shipping VIPRION 2400, our new chassis-based application delivery controller that offers scalable performance and other advanced features of the VIPRION architecture at a price in the mid-range of our ADC product family. Both enterprise customers and service providers have expressed growing interest in this product, and we expect sales to ramp steadily over the next several quarters. This quarter, we are on track to release version 11.0 of our TMOS operating system, which includes user-friendly application templates, support for virtual clustered multi-processing, and more than 150 new features, many of them geared toward service providers.

“With the rollout of these new products and a number of others over the coming year, we continue to believe that our competitive position in the traditional ADC market has never been stronger, and that the opportunity to expand our footprint in adjacent markets has never been greater. As a result, we remain confident in our ability to sustain top-line growth and profitability by continuing to expand our reach into new and existing markets and by hiring and retaining the best people.

“During the third quarter we added 95 employees, roughly a third of them in sales and sales support. At the same time, productivity across the organization enabled us to achieve a non-GAAP operating profit margin of 38.2 percent,” McAdam said.

The company also continued to strengthen its financial position during the quarter, generating $101 million in cash from operations. After repurchasing 471,633 shares of our outstanding common stock F5 ended the quarter with $1.06 billion in cash and investments.

For the current quarter, ending September 30, management has set a revenue goal of $307 million to $312 million with a GAAP earnings target of $0.75 to $0.77 per diluted share. Excluding stock-based compensation expense, the company’s non-GAAP earnings target is $0.97 to $0.99 per diluted share.

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

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.

You can also follow @f5networks on Twitter or visit us on Facebook for more information about F5, its partners, and technology. For a complete listing of F5 community sites, please visit www.f5.com/news-press-events/web-media/community.html.

Forward Looking Statements

Statements in this press release concerning the continuing strength of F5's business, sequential growth, the target revenue and earnings range, share amount and share price assumptions, demand for application delivery networking and storage virtualization products and other statements that are not historical facts are forward-looking statements. Such forward-looking statements involve risks and uncertainties, as well as assumptions and other factors that, if they do not fully materialize or prove correct, could 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, but are not limited to: customer acceptance of our new traffic management, security, application delivery, WAN optimization and storage virtualization offerings; the timely development, introduction and acceptance of additional new products and features by F5 or its competitors; competitive pricing pressures; increased sales discounts; uncertain global economic conditions which may result in reduced customer demand for our products and services and changes in customer payment patterns; 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; the unpredictability of F5's sales cycle; the share repurchase program; future prices of F5's common stock; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. All forward-looking statements in this press release are based on information available as of the date hereof and qualified in their entirety by this cautionary statement. F5 assumes no obligation to revise or update these forward-looking statements.

GAAP to non-GAAP Reconciliation

F5's management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its products, services operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is net income excluding stock-based compensation, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. This measure consists of GAAP net income excluding, as applicable, stock-based compensation. Net income excluding stock-based compensation (non-GAAP) is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability. Stock-based compensation is a non-cash expense that F5 has accounted for since July 1, 2005 in accordance with the fair value recognition provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 Compensation – Stock Compensation ("FASB ASC Topic 718").

Management believes that net income excluding stock-based compensation (non-GAAP) provides useful supplemental information to management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Although F5's management finds this non-GAAP measure to be useful in evaluating the performance of the business, management's reliance on this measure is limited because items excluded from such measures could have a material effect on F5's earnings and earnings per share calculated in accordance with GAAP. Therefore, F5's management will use its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations when evaluating the performance of the company's business. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures in accordance with GAAP.

F5 believes that presenting its non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company's business and which management uses in its own evaluation of the company's performance. Investors are encouraged to look at GAAP results as the best measure of financial performance. For example, stock-based compensation is an obligation of the company that should be considered and each line item is important to financial performance generally. However, while the GAAP results are more complete, the company provides investors this supplemental measure since, with reconciliation to GAAP, it may provide additional insight into its operational performance and financial results.