What led to the stock pressure: F5 Networks, Inc. (NASDAQ: FFIV) stock fell over 2.2% on January 24th, 2019 (Source: Google finance) after the company posted mixed results for the first quarter of 2019. FFIV in the first quarter of 2019 has reported the adjusted earnings per share of $2.70, while adjusted revenue growth of 3.9 percent to $543.77 million in the first quarter of 2019, missing the analysts’ estimates for revenue of $546.7 million. systems revenue made up approximately 81% of product revenue and was down less than a 1% year-over-year. Services revenue of $310 million grew 5% year-over-year and represented approximately 57% of total revenue. On a regional basis in Q1, Americas revenue was flat year-over-year and represented 54% of total revenue. EMEA revenue grew 7% year-over-year and accounted for 27% of overall revenue.
Overall Performance update: The company also saw increasing demand for security solutions, particularly Advanced Web Application Firewalls. The new software consumption models, including Virtual Editions subscriptions and ELAs also contributed to software growth in the quarter. The ELA pipeline continues to grow, accelerating in Q1 and we expect ELA sales to continue to pick up as our the company’s customers continue to shift to multi-cloud deployments. Overall, the software story is evolving to plan, putting the company on pace to achieve the Horizon 1 target of 30% to 35% software growth in the fiscal year 2019 to fiscal year 2020 time frame.
Q1 product revenue of $234 million was up 3% year-over-year and accounted for approximately 43% of total revenue. Software was approximately 19% of product revenue and grew 21% year-over-year. S
Moreover, Sales to enterprise customers represented 65% of total sales for the quarter. Service providers accounted for 14% and government sales were 21%, including 10% from US Federal. In Q1, the company had three greater than 10% distributors, Ingram Micro, which accounted for 17% of total revenue, and Westcon and Arrow, each of which accounted for 11% of total revenue.
Non-GAAP gross margin was 85.2%, on improving product margins, which were benefiting from an increasing mix of software sales, as well as continuing strength in the services margins.
In Q1 the company has generated $198 million in cash flow from operations, which contributed to cash and investments totaling $1.55 billion at quarter end.