Company Delivers on Forecasted Profitability and Revenue Goals;
Sequential Revenue Grows 9% as nGenius Product Sales Rise 18%
WESTFORD, Mass., Oct. 18 /PRNewswire/ --
NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network
performance management solutions, today announced financial results for its
second quarter of fiscal 2002 ended September 30, 2001.
Revenue for the second quarter of fiscal 2002 was $19.7 million, a
9 percent increase over revenue of $18.2 million from the previous quarter.
Pro forma net income was $271,000, or $0.01 per pro forma diluted share,
versus a pro forma net loss of $929,000, or ($0.03) per pro forma diluted
share, in the previous quarter. Pro forma net income and loss excludes
non-cash amortization of goodwill and other intangible assets and stock-based
compensation. Weighted average pro forma diluted shares for the three-month
period ended September 31, 2001 were 29.8 million, compared to weighted
average pro forma shares of 29.4 million for the three-month period ended
June 30, 2001.
On a GAAP basis, the net loss for the quarter was $2.9 million, or
($0.10) per basic and diluted share, versus a sequential net loss of
$4.1 million, or ($0.14) per basis and diluted share for the previous quarter.
"Our second quarter results reflect the strong performance of our maturing
sales force and the heightened appeal of NetScout's network management
products in today's tight economic environment," said Anil Singhal, President
and CEO of NetScout Systems. "We have delivered the top line growth which we
forecasted, and returned to pro forma profitability after our first quarterly
loss in seven years. Another key fundamental driver of our underlying
financial performance is the high priority enterprises are giving our products
when allocating their constrained budget dollars."
BUSINESS HIGHLIGHTS:
* NetScout achieves profitability as total revenue grew 9% sequentially
to $19.7 million.
* Product revenue rose 18% sequentially to $12.3 million.
* Service revenue grew 7% sequentially to $5.0 million.
* Gross margins expanded to 74% sequentially from 70%.
* Momentum increased from our expanded direct sales organization. Direct
sales grew to 35% of total revenue and the number of large deals valued
over $100,000 nearly doubled from the previous quarter.
* Competitive wins totaled over $1 million, involving large deals against
leading vendors of both probe and software products. Investments in
technology leadership continued with the announcement of new Multi-Port
Gigabit and Packet-Over-SONET probes, and significant enhancements to
nGenius Real-Time Monitor(TM).
* Transition of Cisco customers to direct or reseller relationships
began. All deals in process were successfully transitioned. Second
quarter revenue included between $1 and $2 million in business
transitioned from Cisco. Cisco-channeled revenue accounted for 40% of
total revenue, down from 52%. NetScout sales personnel participated in
closing the majority of that revenue.
* More than 40 new accounts signed. Repeat orders comprised
approximately 80% of total revenue. New and repeat orders were
received from customers including Air Products and Chemicals, Fortis,
Inc., Masergy Communications, NorCom Incorporated, Regence BlueCross
BlueShield of Oregon, The Intelligent Choice International, and
Wachovia Bank.
OUTLOOK
Commenting on the company's business outlook, Singhal said, "We are
extremely optimistic about our position to capture emerging opportunities in
the network management market. Our expanded sales force has been able to
drive home the ROI advantage of our nGenius solutions with increasing success,
resulting in competitive wins and a substantial increase in large orders. We
continue to believe that the revenue growth we demonstrated this quarter is
indicative of our long term growth prospects."
NetScout remains committed to maintaining its leadership in pioneering
integrated network performance management solutions for global,
mission-critical networks, and to expanding those solutions to meet its
customers' broader network management requirements. The Company is pursuing
new strategic initiatives in technology, distribution and service, including
strategic partnership development, which will provide the impetus for wider
use of its network management solutions. In addition, the Company expects to
continue to benefit from the transition of probe customer relationships from
Cisco to its direct sales force.
GUIDANCE
NetScout's near term expectations are based on external economic forecasts
and the economic uncertainty caused by recent world events. Long term,
NetScout expects its prospects will be driven by the continued growth of
global, high-speed network usage and the expanding applicability of its
network management solutions to those networks. Accordingly, NetScout expects
that, over the long term, quarterly sequential growth will continue to be in
the range of 7 to 10 percent, and that profitability will increase to its
target business model range detailed below. In the short term, the Company is
cautious about the global impact of recent political and economic uncertainty
on its customers' business performance and their IT spending. Nevertheless,
the Company is confident that the demonstrated ROI value of its nGenius
solutions will allow the Company to continue to grow revenue and to maintain
profitability in the short term.
NetScout's long term business model remains: gross margins between
72 and 75 percent, operating expenses between 50 and 55 percent of revenue,
and operating margins of 18 to 20 percent.
CONFERENCE CALL INSTRUCTIONS
The Company invites shareholders to listen to its conference call today at
4:30 p.m. EDT, which will be webcast live through the Company's website at
http://www.netscout.com. Please log onto the website 15 minutes prior to the
broadcast. Alternatively, you can access the conference call via telephone at
800-829-0786 for U.S./Canada and 913-981-5515 for international callers. A
replay of the call will be available after 8:00 p.m. EDT this evening for
approximately one week. The number for the replay is 888-203-1112 for
U.S./Canada, and 719-457-0820 for international callers. The access code is
595241.
About NetScout Systems
NetScout Systems, Inc. (Nasdaq: NTCT) is a market leader and pioneer of
integrated infrastructure performance management solutions for leading
companies and service providers worldwide. NetScout serves a major portion of
the Fortune 500 and counts among its customers AmericanGreetings.com,
ArvinMeritor, Blue Cross and Blue Shield of Massachusetts, Cable and Wireless,
Cisco Systems, China Telecom, Fidelity Investments, Getronics, Goodyear Tire &
Rubber, Hold Brothers, Nextel Communications, Northwest Airlines, Optimus
Telecommunications, Samsung SDS, Siemens Health Services Corporation, Starband
Communications, Travelocity.com, and Wachovia Bank. NetScout's solutions are
offered through its nGenius(TM) Performance Management System, an integrated
solutions-based suite of advanced monitoring and reporting applications that
draw on the rich performance data generated by NetScout's real-time,
application-aware probe suite, advanced intelligent software agents, and
network devices. The nGenius System helps organizations increase their return
on infrastructure investments by optimizing the performance of their network,
applications and content. NetScout is headquartered in Westford,
Massachusetts and has approximately 360 employees, with offices in North
America, Europe and Asia. Further information on the company is available on
the World Wide Web at http://www.netscout.com.
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934.
Investors are cautioned that statements in this press release which are not
strictly historical statements, including the plans, objectives and future
financial performance of NetScout, constitute forward-looking statements which
involve risks and uncertainties. Actual results could differ materially from
the forward-looking statements. Risks and uncertainties which could cause
actual results to differ include, without limitation, risks and uncertainties
associated with the company's strategic relationships with Cisco Systems and
other partners, dependence upon broad-based acceptance of the company's
integrated infrastructure performance management solutions, the company's
ability to achieve and maintain a high rate of growth, introduction and market
acceptance of new products and product enhancements such as the delivery of
nGenius product platform probes and software solutions, the ability of
NetScout to take advantage of service provider opportunities, competitive
pricing pressures, reliance on sole source suppliers, successful expansion and
management of direct and indirect distribution channels, and dependence on
proprietary technology, as well as risks of slowdowns or downturns in economic
conditions generally and in the market for infrastructure performance
management solutions specifically. For a more detailed description of the
risk factors associated with the company, please refer to the company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2001, and its
quarterly report on Form 10-Q for the quarter ended June 30, 2001, on file
with the Securities and Exchange Commission.
NetScout is a registered trademark, and the NetScout logo, nGenius,
nGenius Application Service Level Manager, nGenius Real-Time Monitor and
nGenius Capacity Planner are trademarks of NetScout Systems, Inc.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
September 30, September 30,
2001 2000 2001 2000
Revenue:
Product $12,263 $20,790 $22,688 $38,551
Service 5,031 4,427 9,730 8,404
License and royalty 2,438 3,602 5,480 7,033
Total revenue 19,732 28,819 37,898 53,988
Cost of revenue:
Product 4,336 7,262 8,786 13,356
Service (including stock-based
compensation of $2, $0, $4
and $1, respectively 870 857 1,787 1,452
Total cost of revenue 5,206 8,119 10,573 14,808
Gross margin 14,526 20,700 27,325 39,180
Operating expenses:
Research and development (including
stock-based compensation of
$549, $521, $1,091
and $531, respectively) 4,983 4,339 9,596 6,911
Sales and marketing (including
stock-based compensation
of $29, $53, $58 and $113,
respectively) 8,487 10,250 17,577 18,977
General and administrative
(including stock-based
compensation of $2, $2, $4 and $4,
respectively) 1,904 2,349 3,618 3,943
Amortization of goodwill and other
intangible assets 2,634 2,666 5,268 2,666
In-process research and development -- 268 -- 268
Total operating expenses 18,008 19,872 36,059 32,765
Income (loss) from operations (3,482) 828 (8,734) 6,415
Interest income and other expenses,
net 499 1,108 1,186 2,142
Income (loss) before provision for
(benefit from) income taxes (2,983) 1,936 (7,548) 8,557
Provision for (benefit from) income
taxes (38) 2,697 (465) 5,014
Net income (loss) $(2,945) $(761) $(7,083) $3,543
Basic net income (loss) per share $(0.10) $(0.03) $(0.24) $0.13
Diluted net income (loss) per share $(0.10) $(0.03) $(0.24) $0.12
Shares used in computing:
Basic net income (loss) per share 29,444 28,585 29,441 27,561
Diluted net income (loss) per
share 29,444 28,585 29,441 28,955
Supplemental information:
Pro forma net income (loss) excluding
acquisition and stock-based
compensation costs $271 $3,454 $(658) $7,830
Pro forma diluted net income (loss)
per share excluding acquisition
and stock-based compensation costs $0.01 $0.11 $(0.02) $0.27
Shares used in computing pro forma
diluted net income (loss) per
share excluding acquisition and
stock-based compensation costs 29,785 30,182 29,441 28,955
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, March 31,
2001 2001
Assets
Current assets:
Cash and cash equivalents $44,744 $61,382
Marketable securities 15,095 --
Accounts receivable, net 10,410 11,753
Inventories 6,497 8,653
Refundable income taxes 2,503 2,412
Deferred income taxes 1,269 1,374
Prepaids and other current assets 3,764 3,126
Total current assets 84,282 88,700
Fixed assets, net 8,363 6,937
Goodwill and other intangible assets, net 36,281 41,549
Deferred income taxes 5,522 4,894
Total assets $134,448 $142,080
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $3,298 $4,220
Accrued compensation 4,052 5,013
Accrued other 2,371 1,749
Deferred revenue 9,891 10,053
Total current liabilities 19,612 21,035
Stockholders' equity:
Common stock 34 33
Additional paid-in capital 106,486 106,354
Deferred compensation (2,224) (3,409)
Treasury stock (25,750) (25,306)
Retained earnings 36,290 43,373
Total stockholders' equity 114,836 121,045
Total liabilities and
stockholders' equity $134,448 $142,080
MAKE YOUR OPINION COUNT - Click Here
http://tbutton.prnewswire.com/prn/11690X46145211
SOURCE NetScout Systems, Inc.
Web site: http: //www.netscout.com
CONTACT: Peggy Flynn, Director of Corporate Relations of NetScout Systems, Inc., +1-978-614-4162, flynnp@netscout.com; or Bill Zima, Associate Director of Thomson Financial-Carson, +1-212-510-9261, bill.zima@tfn.com, for NetScout Systems, Inc.