Pro Forma Net Income of $1.4 Million and Pro Forma EPS of $0.05 per Share
Delivers 7% Sequential Revenue Growth and 8% Product Sales Increase
WESTFORD, Mass., April 24 --
NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network
performance management solutions, today announced financial results for its
fourth quarter and fiscal year ended March 31, 2002.
Revenue for the fourth quarter of fiscal 2002 was $22.9 million, a 7%
increase over revenue of $21.5 million in the previous quarter. Pro forma net
income for the three months ended March 31, 2002 was $1.4 million, or $0.05
per pro forma diluted share, versus pro forma net income of $627,000 or $0.02
per pro forma diluted share, in the previous quarter. Excluding a tax benefit
of $397,000, earnings for the quarter would have been $0.03 per pro forma
diluted share. Pro forma net income 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 March 31, 2002 were 30.3
million, compared to weighted average pro forma diluted shares of 30.0 million
in the quarter ended December 31, 2001.
On a GAAP basis, the net loss for the quarter was $1.7 million, or ($0.06)
per basic and diluted share, compared to a net loss of $2.6 million, or
($0.09) per basic and diluted share for the previous quarter.
For the year ended March 31, 2002, NetScout reported revenue of $82.3
million, a 24 percent decrease from $108.0 million for the year ended March
31, 2001. Pro forma net income for the year ended March 31, 2002 was $1.4
million, or $0.05 per pro forma diluted share, compared to pro forma net
income of $13.7 million, or $0.46 per pro forma diluted share, for the prior
year. Weighted average pro forma diluted shares for the year ended March 31,
2002 were 30.1 million, compared to 29.7 million for the year ended March 31,
2001.
On a GAAP basis, the net loss for the year was $11.4 million, or ($0.39)
per basic and diluted share, compared to net income of $3.7 million, or $0.12
per diluted share, in fiscal 2001.
"We are pleased with this quarter's results. Once again, our revenue and
pro forma profitability grew sequentially, driven by strong product revenue
indicating broad market acceptance of our solution," said Anil Singhal,
President and CEO of NetScout Systems. "We are winning competitive bids in an
environment where IT budget dollars are constrained. Our customers recognize
that our nGenius(TM) suite of products offer a complete performance management
solution with a strong ROI value that helps them optimize the performance of
their networks, conserve network capacity and reduce the impact of lost
business due to poor network performance. We are building for the future, and
looking forward we will be rolling out our strategic growth plan that will
include a number of new product launches, further extending our leadership in
network performance management."
Financial Highlights for the Fourth Quarter and Fiscal Year 2002:
* Total revenue grew 7% sequentially, and grew 7% over fourth quarter FY
2001. Product revenue grew 8% sequentially, and is up 15% over fourth
quarter FY 2001. Service revenue grew 12% sequentially, and is up 17%
over fourth quarter FY 2001.
* Gross margin remained at 74% sequentially and is up 1% over fourth
quarter FY 2001.
* Pro forma operating margin was 3% of revenues in the fourth quarter.
* Cash and all marketable securities increased by $6.5 million in the
fourth quarter to $69.3 million.
* 40 new customers worldwide in the fourth quarter and 180 for the year.
* Sales to repeat customers were approximately 90% of revenue in the
fourth quarter.
* 50 large deals valued over $100,000 in the fourth quarter.
* Direct sales represented 46% of total revenue; reseller revenue
represented 54% of total revenue, including Cisco-channeled sales, which
accounted for 14% of total revenue in the fourth quarter.
* Added 27 new channel partners for the year, with emphasis on building
international presence.
* International business comprised approximately 19% of total revenue in
the fourth quarter.
* Competitive wins totaled over $4 million in the fourth quarter,
involving approximately 30 deals against other leading network
management vendors.
Fiscal Year 2002 in Review:
For Fiscal 2002, the Company focused on enhancing its nGenius product
suite by adding powerful functions, improved performance and innovative ease-
of-use, including the monitoring of Voice-over-IP traffic and Packet over
SONET topologies.
Highlights included:
* Launched nGenius Real Time Monitor(TM) 1.3 with faster retrieval of
traffic data and smarter data reduction.
* Launched nGenius Capacity Planner(TM) 3.0 and nGenius Application
Service Level Manager(TM) 3.0 with improved, easy-to-read customized
reporting including options for web-based distribution.
* Expanded partnership with OpNet Technologies.
* Delivered integration of nGenius Real Time Monitor 1.3 with Hewlett
Packard's OpenView.
* Cisco shipped nGenius Real Time Monitor 1.3 as part of their
CiscoWorks2000.
* Broadened product line with additional probes for growing gigabit and
high-speed markets.
Outlook:
Commenting on NetScout's future outlook, Singhal said, "Our engineering
team is focused on keeping us at the forefront of technological change. We
have growth plans in place and a commitment to deliver to our customers a
robust network management platform that will provide for converged network
management data from many data sources allowing our customers to further
consolidate a number of network tools. In the coming months we will make an
announcement which will begin to unfold this broad strategy."
Future product announcements include the following:
* A new product release called nGenius Performance Manager(TM) 1.4,
implementing advanced architecture providing for converged network
management data from many data sources such as probes, routers, switches
and agents that will integrate that data into real time, historical, and
projected trend information. This product is currently in beta test
with enterprise and service providers and will begin shipment in the
first quarter of fiscal 2003.
* New probes incorporating reduced size, higher function and speeds such
as OC-12 for ATM and gigabit LAN probes.
Guidance:
Consistent with NetScout's current business model, the Company maintains
its longer-term financial objectives as follows: Gross Margins between 72% and
75%, R&D operating expense to revenue ratios of 12% to 14%, Sales and
Marketing operating expense to revenue ratios of 33% to 35%, G&A operating
expense to revenue ratios of 5% to 6%, and Operating Income margin target
between 18% and 20%.
The Company is adjusting its guidance format for fiscal 2003. The Company
expects to continue to increase investments in sales, support and R&D this
year, to strengthen its competitive position and to be poised to accelerate
growth when IT spending picks up. The Company expects Q1 revenue of $23 to
$24 million dollars and pro forma EPS of $0.03 to $0.04. Beyond Q1 the
Company expects revenue growth to be within the former guidance range of 5 to
10% sequentially. This will lead to modest pro forma EPS growth. Guidance
for Q2 is revenue of $24 to $25 million dollars and pro forma EPS of $0.04 to
$0.05. Q3 revenue is expected to be in the range of $25 to $27 million
dollars and pro forma EPS of $0.05 to $0.07 cents. Q4 revenue is expected to
be in the range of $27 to $30 million dollars and pro forma EPS of $0.06 to
$0.09. For the full fiscal year, the Company expects revenue to be in the
range of $100 to $106 million dollars and pro forma EPS of $0.18 to $0.25
cents.
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, people can listen to the call by dialing 888-273-
9889 for U.S./Canada and 612-332-0632 for international callers. A replay of
the call will be available after 9:45 p.m. EDT this evening for approximately
one week. The number for the replay is 800-475-6701 for U.S./Canada, and 320-
365-3844 for international callers. The access code is 635079.
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, MBNA, Nextel Communications, Northwest Airlines,
Optimus Telecommunications, Samsung SDS, Siemens Health Services Corporation,
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
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 December 31, 2001, on file
with the Securities and Exchange Commission. NetScout assumes no obligation
to update any forward-looking information contained in this press release or
with respect to the announcements described herein.
NetScout is a registered trademark, and the NetScout logo, nGenius,
nGenius Application Service Level Manager, nGenius Real-Time Monitor and
nGenius Capacity Planner and nGenius Performance Manager are trademarks of
NetScout Systems, Inc.
The Company's condensed consolidated statements of operations and balance
sheets are attached.
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, March 31,
2002 2001
Assets
Current assets:
Cash and cash equivalents $19,332 $56,372
Marketable securities 44,849 5,010
Accounts receivable, net 12,932 11,753
Inventories 3,698 8,653
Refundable income taxes - 2,412
Deferred income taxes 1,293 1,374
Prepaids and other current assets 2,876 3,126
Total current assets 84,980 88,700
Fixed assets, net 8,628 6,937
Goodwill and other intangible assets, net 30,199 41,549
Deferred income taxes 7,617 4,894
Long-term marketable securities 5,084 -
Other assets 790 -
Total assets $137,298 $142,080
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,456 $4,220
Accrued compensation 5,775 5,013
Accrued other 2,715 1,749
Income tax payable 542 -
Deferred revenue 13,103 10,053
Total current liabilities 24,591 21,035
Stockholders' equity:
Common stock 34 33
Additional paid-in capital 107,529 106,354
Deferred compensation (1,063) (3,409)
Treasury stock (25,755) (25,306)
Retained earnings 31,962 43,373
Total stockholders' equity 112,707 121,045
Total liabilities and
stockholders' equity $137,298 $142,080
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
2002 2001 2002 2001
Revenue:
Product $15,016 $13,058 $51,583 $75,673
Service 6,000 5,109 21,102 18,506
License and royalty 1,887 3,323 9,599 13,772
Total revenue 22,903 21,490 82,284 107,951
Cost of revenue:
Product (including stock-based
compensation of $0, $0, $1
and $1, respectively) 5,043 4,734 18,465 25,737
Service (including stock-based
compensation of $2, $2, $8
and $9, respectively) 960 1,036 3,628 3,453
Total cost of revenue 6,003 5,770 22,093 29,190
Gross margin 16,900 15,720 60,191 78,761
Operating expenses:
Research and development
(including stock-based
compensation of $551, $533,
$2,193 and $1,577, respectively) 5,361 4,388 19,841 15,424
Sales and marketing (including
stock-based compensation of $26,
$57, $109 and $236, respectively) 9,079 10,211 36,017 39,985
General and administrative
(including stock-based
compensation of $2, $2, $7 and
$11, respectively) 2,376 1,881 8,107 8,382
Amortization of goodwill and other
intangible assets 2,582 2,609 10,483 7,892
In-process research and
development - - - 268
Total operating expenses 19,398 19,089 74,448 71,951
Income (loss) from operations (2,498) (3,369) (14,257) 6,810
Interest income and other expenses,
net 360 851 1,919 3,923
Income (loss) before provision for
(benefit from) income taxes (2,138) (2,518) (12,338) 10,733
Provision for (benefit from) income
taxes (397) (11) (927) 7,027
Net income (loss) $(1,741) $(2,507) $(11,411) $3,706
Basic net income (loss) per share $(0.06) $(0.09) $(0.39) $0.13
Diluted net income (loss) per share $(0.06) $(0.09) $(0.39) $0.12
Shares used in computing:
Basic net income (loss) per
share 29,606 29,282 29,533 28,487
Diluted net income (loss) per
share 29,606 29,282 29,533 29,726
Supplemental information:
Net income (loss) $(1,741) $(2,507) $(11,411) $3,706
Tax adjustment (1) - (23) - -
Stock-based compensation (as detailed
in expense categories above) 581 594 2,318 1,834
Amortization of goodwill and other
intangible assets 2,582 2,609 10,483 7,892
In-process research and development - - - 268
Pro forma net income excluding
acquisition and stock-based
compensation costs $1,422 $673 $1,390 $13,700
Pro forma diluted net income per
share, excluding acquisition and $0.05 $0.02 $0.05 $0.46
stock-based compensation costs
Shares used in computing pro forma
diluted net income per share
excluding acquisition and stock-based
compensation costs 30,341 29,961 30,051 29,726
(1) Tax adjustment for the three months ended March 31, 2001, which was in
the year of the NextPoint acquisition, assumes an effective tax rate
of 35% which represents the effective tax rate before factoring in timing
issues due to non-deductible costs related to the acquisition of NextPoint
and stock-based compensation.
Contacts:
Catherine Taylor
Director of Investor Relations
NetScout Systems, Inc.
978-614-4286
IR@netscout.com
SOURCE NetScout Systems, Inc.<>
Web site: http://www.netscout.com
CONTACT: Catherine Taylor, Director of Investor Relations of
NetScout Systems, Inc., +1-978-614-4286, or IR@netscout.com