WESTFORD, Mass., Oct. 16 --
NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network
performance management solutions, today announced financial results for its
second quarter of fiscal year 2003.
Revenue for the second quarter of fiscal 2003 was $17.9 million, compared
to revenue of $17.8 million in the previous quarter and revenue of $19.7
million in the second quarter of fiscal 2002. On a GAAP basis, the net loss
for the quarter was $710,000, or ($0.02) per basic and diluted share, compared
to a net loss of $1.1 million, or ($0.04) per basic and diluted share, for the
previous quarter and compared to a net loss of $2.9 million, or ($0.10) per
basic and diluted share, in the second quarter of fiscal 2002.
Pro forma net loss for the second quarter of fiscal 2003 was $373,000, or
($0.01) per pro forma basic and diluted share, versus pro forma net loss of
$163,000, or ($0.01) per pro forma basic and diluted share, in the previous
quarter and compared to pro forma net income of $271,000, or $0.01 per pro
forma diluted share, in the second quarter of fiscal 2002. Pro forma net
income excludes acquisition and stock-based compensation costs.
"Despite the challenging market conditions we continue to generate
positive cash flow from operations and our results underscore the long-term
strength and importance of our products in helping our customers improve the
performance of their networks and increase ROI," said Anil Singhal, President
and CEO of NetScout Systems. "We will be delivering new products at an
increasing pace over the next few quarters. We are encouraged by our
customers' enthusiasm with our new CDM(TM) strategy that provides a truly
integrated solution reducing the need for multiple tools and controlling
hidden costs. That customer enthusiasm is reflected in strong interest in
our first upcoming User Forum scheduled in November, 2002."
Financial Highlights for the Quarter:
-- Total revenue was flat sequentially and decreased 9% from the second
quarter of fiscal year 2002. Product revenue increased 2%
sequentially, and is down 14% from the second quarter of fiscal year
2002. Service revenue increased 4% sequentially, and increased 18%
from the second quarter of fiscal year 2002. Royalty revenue
decreased 17% sequentially and was down 39% from the second quarter of
fiscal year 2002.
-- Gross margin was 74% of total revenue, down 2 points sequentially and
flat compared to the second quarter of fiscal year 2002.
-- Cash flow from operations was positive.
-- Cash and short and long-term marketable securities increased by
$300,000 in the second quarter to $70.0 million.
-- 38 new customers were added worldwide contributing 20% of orders in the
second quarter.
-- Sales to 282 repeat customers were approximately 80% of orders in the
second quarter.
-- 47 large deals valued over $100,000 were placed in the second quarter.
-- Direct sales represented 47% of total revenue; reseller revenue
represented 53% of total revenue.
-- International business comprised approximately 13% of total revenue in
the second quarter.
-- Competitive wins totaled over $3 million in the second quarter,
involving approximately 29 deals against other leading network
management vendors.
Product Highlights:
-- Two new gigabit probes were released during the quarter, the
nGenius(TM) Gigabit Ethernet Aggregation Probe and the nGenius eight-
port Gigabit Ethernet Probe for the fast growing gigabit Ethernet
market.
-- A new ATM OC-3/OC-12 probe was released during the quarter.
-- Shortly after the end of the quarter a new storage area network
solution began beta testing and is planned for general release by year-
end.
-- The long-standing agreement with Cisco Systems was extended to allow
Cisco to continue shipping nGenius Real-Time Monitor as part of its
CiscoWorks LAN Management Solution.
Guidance:
NetScout's near term expectations are based on the current climate of
tight enterprise IT spending and the uncertain timing of the impact of
improving general economic conditions. For the third quarter, the Company
expects revenue and GAAP and pro forma earnings per share to show little
change from the second quarter and we expect to be cash neutral in the
quarter. Due to the uncertain economic climate, the Company is not able to
give guidance beyond the third quarter. The Company expects to update
guidance in its third quarter earnings release.
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/investors. Please log onto the website 15 minutes
prior to the broadcast. Alternatively, shareholders can listen to the call by
dialing 888-273-9891 (U.S.) and 651-224-7472 (International). A replay of the
call will be available after 9:45 p.m. EDT this evening for approximately one
week. The numbers for the replay are 800-475-6701 (U.S.) and 320-365-3844
(International). The access code is 655076.
About NetScout Systems, Inc.
NetScout Systems, Inc. (Nasdaq: NTCT) is a market leader and pioneer of
integrated network performance management solutions for leading companies and
service providers worldwide. NetScout serves the Global 5000 and counts among
its customers Arvin Meritor, Blue Cross and Blue Shield of Massachusetts,
Cable and Wireless, Cisco Systems, China Telecom, Fidelity Investments,
Getronics, Goodyear Tire & Rubber, Nextel Communications, Samsung SDS, Siemens
Health Services Corporation, StarBand Communications, Travelocity.com, Visa
International and Wachovia Bank. NetScout's solutions are offered through its
nGenius(TM) Performance Management System, an integrated suite of advanced
monitoring and reporting applications that draw on the rich performance data
generated by NetScout's real-time, application-aware probes, 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
network 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, and the implementation of the
Company's CDM(TM) technology strategy, 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 associated with a continued climate of tight IT
spending, and risks of further slowdowns or downturns in economic conditions
generally and in the market for network 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, 2002, and its quarterly report on Form 10-
Q for the quarter ended June 30, 2002 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 Performance Manager, CDM, nGenius Capacity Planner, nGenius
Application Service Level Manager, nGenius Real-Time Monitor and nGenius Probe
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)
September 30, March 31,
2002 2002
Assets
Current assets:
Cash and cash equivalents $26,921 $19,332
Marketable securities 37,978 44,849
Accounts receivable, net 10,201 12,932
Inventories 3,098 3,698
Deferred income taxes 1,418 1,293
Prepaids and other current assets 1,152 2,876
Total current assets 80,768 84,980
Fixed assets, net 7,889 8,628
Goodwill and other intangible assets,
net 29,655 30,199
Deferred income taxes 8,968 7,617
Long-term marketable securities 5,070 5,084
Other assets - 790
Total assets $132,350 $137,298
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,611 $2,456
Accrued compensation 3,825 5,775
Accrued other 2,211 2,715
Income tax payable 346 542
Deferred revenue 12,350 13,103
Total current liabilities 20,343 24,591
Stockholders' equity:
Common stock 34 34
Additional paid-in capital 108,437 107,529
Other comprehensive income 55 -
Deferred compensation (258) (1,063)
Treasury stock (26,366) (25,755)
Retained earnings 30,105 31,962
Total stockholders' equity 112,007 112,707
Total liabilities and
stockholders' equity $132,350 $137,298
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2002 2001 2002 2001
Revenue:
Product $10,511 $12,263 $20,832 $22,688
Service 5,946 5,031 11,685 9,730
License and royalty 1,480 2,438 3,269 5,480
Total revenue 17,937 19,732 35,786 37,898
Cost of revenue:
Product 3,475 4,336 6,849 8,786
Service (including stock-based
compensation of $1, $2, $3
and $4, respectively) 1,160 870 2,134 1,787
Total cost of revenue 4,635 5,206 8,983 10,573
Gross margin 13,302 14,526 26,803 27,325
Operating expenses:
Research and development (including
stock-based compensation
$46, $549, $733 and $1,091,
respectively) 3,982 4,983 8,784 9,596
Sales and marketing (including
stock-based compensation of $16
$29, $37 and $58, respectively) 8,316 8,487 16,787 17,577
General and administrative
(including stock-based
compensation
of $2, $2, $4 and $4, respectively) 2,138 1,904 4,245 3,618
Amortization of other intangible
assets 272 359 544 718
Amortization of goodwill - 2,275 - 4,550
Total operating expenses 14,708 18,008 30,360 36,059
Loss from operations (1,406) (3,482) (3,557) (8,734)
Interest income and other expenses,
net 326 499 639 1,186
Loss before benefit from income taxes (1,080) (2,983) (2,918) (7,548)
Benefit from income taxes (370) (38) (1,061) (465)
Net loss $(710) $(2,945) $(1,857) $(7,083)
Basic and diluted net loss per share $(0.02) $(0.10) $(0.06) $(0.24)
Shares used in computing:
Basic and diluted net loss per
share 29,865 29,444 29,834 29,441
Supplemental information:
Net loss $(710) $(2,945) $(1,857) $(7,083)
Stock-based compensation (as detailed
in expense categories above) 65 582 777 1,157
Amortization of goodwill and other
intangible assets 272 2,634 544 5,268
Pro forma net income (loss) excluding
acquisition and stock-based
compensation costs $(373) $271 $(536) $(658)
Pro forma diluted net income (loss)
per share, excluding
acquisition and stock-based
compensation costs $(0.01) $0.01 $(0.02) $(0.02)
Shares used in computing pro forma
diluted net income (loss) per share
excluding acquisition and stock-
based compensation costs 29,865 29,785 29,834 29,441
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, IR@netscout.com