Strong Q1 FY '06 Revenue, Up 17% Year-over-Year
WESTFORD, Mass., July 27 /PRNewswire-FirstCall/ -- NetScout Systems, Inc.
(Nasdaq: NTCT), a leading provider of network and application performance
management solutions, today announced financial results for its first quarter
of fiscal year 2006.
Revenue for the first quarter of fiscal year 2006 was $23.5 million,
compared to revenue of $22.6 million in the previous quarter and revenue of
$20.1 million in the first quarter of fiscal year 2005. Net profit for the
quarter was $652,000, or $0.02 per diluted share, compared to net profit of
$610,000, or $0.02 per diluted share, for the previous quarter and compared to
a net profit of $297,000, or $0.01 per diluted share, in the first quarter of
fiscal year 2005.
On an adjusted (pro forma) basis, the net profit for the first quarter of
fiscal year 2006 was $945,000, or $0.03 per diluted share, compared to net
profit of $610,000, or $0.02 per diluted share for the fourth quarter of
fiscal year 2005. Adjusted net profit excludes non-cash acquisition and stock-
based compensation expenses and a tax adjustment resulting from the
acquisition of substantially all of the assets of Quantiva, Inc. completed
early in the first quarter of fiscal year 2006. Adjusted earnings are
presented because management believes they better reflect operational trends
and performance. A reconciliation to GAAP results is provided on the
Statements of Operations included in this release.
"We are pleased to report that we achieved our eighth quarter of revenue
growth, up 17% year-over-year, and grew our adjusted operating margin to 4%.
We are on track to achieve our goal of 15-20% revenue growth for the fiscal
year and 10% adjusted operating margin in the fourth quarter," said Anil
Singhal, President and CEO of NetScout Systems. "In the first quarter, we
delivered our new High Definition Performance Management (HDPM) technology
that provides unparalleled application traffic visibility across the
enterprise. This new technology combined with our acquisition of Quantiva,
furthers our strategy to deliver automated analytics to our customers. We are
on schedule to deliver those products in the second half of this fiscal year."
Guidance:
For the second quarter of fiscal year 2006, the Company expects revenue to
be in the range of $23.5 million to $24.5 million and net profit per diluted
share on a GAAP basis to be in the range of $0.02 to $0.03. On an adjusted
basis, the Company expects net profit per diluted share to be in the range of
$0.03 to $0.04. The Company reiterates its previous guidance of growing
revenue 15-20% for the full 2006 fiscal year and of attaining 10% adjusted
operating margin by the fourth quarter.
Financial Highlights for the First Quarter:
- Total revenue increased 4% sequentially and increased 17% from the
first quarter of fiscal year 2005. Product revenue increased 5%
sequentially and increased 30% from the first quarter of fiscal year
2005. Service revenue increased 6% sequentially and increased 2% from
the first quarter of fiscal year 2005. As expected, royalty revenue
decreased 59% sequentially and decreased 57% from the first quarter of
fiscal year 2005.
- Gross margin was 75% of total revenue, up 1 point sequentially and down
2 points compared to the first quarter of fiscal year 2005.
- Cash and short and long-term marketable securities decreased by $6.6
million to $77.3 million as a result of the acquisition of Quantiva,
Inc., and increased by $781,000 year-over-year. Excluding the cash
used in the Quantiva acquisition, cash grew $2.9 million in the
quarter.
- 16 new customers were added worldwide.
- 287 customers made repeat purchases.
- 54 customers placed orders over $100,000.
- Direct sales represented 39% of total revenue; indirect sales to
resellers represented 61% of total revenue.
- International business comprised approximately 21% of total revenue.
Product and Company Highlights for the First Quarter:
- NetScout completed the acquisition of the business and assets of
privately held Quantiva, Inc., a provider of automated analytics
solutions for application performance management. The purchase price
totaled approximately $9.4 million in cash.
- NetScout released its High Definition Performance Management (HDPM)
technology, delivered in nGenius(R) Performance Manager 3.0 and
nGenius(R) Probe firmware release CDM 3.0. HDPM is an important new
technology initiative that significantly improves performance
information detail and granularity, extending the functionality of the
nGenius Performance Management System with increased visibility into
the activity and usage of web services and other complex and multi-
layered applications, including more accurate metrics for application
and network traffic data at shorter intervals and enhanced reporting of
user and application utilization.
- NetScout released its first-to-market OC-48 Packet-over-SONET Probe for
the performance management of high-speed optical core networks. The
nGenius OC-48 Probe addresses wireless carriers needs for visibility
into converged IP-based voice, data, and video services as they deploy
third-generation networks.
- NetScout updated its integration with HP OpenView Network Node Manager
and has become a Platinum Business Partner in the HP Enterprise
Management Alliance Program.
CONFERENCE CALL INSTRUCTIONS:
The Company invites shareholders to listen to its conference call today at
4:30 p.m. ET, which will be webcast live through the Company's website at
http://www.netscout.com. Alternatively, people can listen to the call by
dialing 866-219-5264 for U.S./Canada and 703-639-1118 for international
callers. A replay of the call will be available after 8:00 p.m. ET on July 27
for approximately two weeks. The number for the replay is 800-475-6701 for
U.S./Canada and 320-365-3844 for international callers. The access code is
789837.
About NetScout Systems, Inc.
NetScout Systems, Inc. (Nasdaq: NTCT) is a market leader and pioneer of
integrated network performance management products that unify performance
across the enterprise. NetScout's nGenius(R) Performance Management System is
helping more than 3,000 leading companies increase their return on
infrastructure investments by optimizing the performance of networks and
applications according to business priorities. NetScout is headquartered in
Westford, Massachusetts and has offices worldwide. Further information is
available at http://www.netscout.com.
Safe Harbor:
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934 and
other federal securities laws. 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 and the
statements concerning the expected effects, synergies and product offerings
resulting from the Quantiva acquisition, 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 relationships with strategic
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, the effects and challenges related to the
Quantiva acquisition, including any integration issues, introduction and
market acceptance of new products and product enhancements such as the
delivery of nGenius product platform probes and software solutions, HDPM
functionality, the analytic solutions acquired from Quantiva and the
implementation of the Company's CDM Technology strategy, the ability of the
Company 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, 2005 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 and the NetScout logo, nGenius, and Quantiva are registered
trademarks of NetScout Systems, Inc. The CDM logo, MasterCare and the
MasterCare logo, are trademarks of NetScout Systems, Inc. Other brands,
product names and trademarks are property of their respective owners
The Company's condensed consolidated statements of operations and balance
sheets are attached.
Contact:
Catherine Taylor
Director of Investor Relations
NetScout Systems, Inc.
978-614-4286
IR@netscout.com
NetScout Systems, Inc.
Condensed Consolidated
Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2005 2004
Revenue:
Product $15,046 $11,560
Service 8,271 8,105
License and royalty 184 432
Total revenue 23,501 20,097
Cost of revenue:
Product 4,539 3,653
Service 1,257 1,065
Total cost of revenue 5,796 4,718
Gross margin 17,705 15,379
Operating expenses:
Research and development (including stock-
based compensation of $59 and $0,
respectively) 4,614 4,319
Sales and marketing (including stock-based
compensation of $20 and $0, respectively) 10,022 8,783
General and administrative 2,285 1,954
Amortization of other intangible assets 119 -
In-process research and development 143 -
Total operating expenses 17,183 15,056
Income from operations 522 323
Interest income and other expenses, net 514 179
Income before income tax expense 1,036 502
Income tax expense 384 205
Net income $652 $297
Basic net income per share $0.02 $0.01
Diluted net income per share $0.02 $0.01
Shares used in computing:
Basic net income per share 30,840 30,448
Diluted net income per share 31,413 31,710
Reconciliation of GAAP & Adjusted Net Income:
Net income $652 $297
Stock-based compensation (as detailed
in expense categories above) 79 -
Amortization of other intangible assets 119 -
In-process research and development 143 -
Tax adjustment(1) (48) -
Adjusted net income excluding acquisition
and stock-based compensation costs $945 $297
Adjusted basic net income per share excluding $0.03 $0.01
acquisition and stock-based compensation
costs
Adjusted diluted net income per share excluding $0.03 $0.01
acquisition and stock-based compensation
costs
Shares used in computing adjusted basic net
income per share excluding acquisition and
stock-based compensation costs 30,840 30,448
Shares used in computing adjusted basic net
income per share excluding acquisition and
stock-based compensation costs 31,413 31,710
(1) Tax adjustment for three month period ended June 30, 2005, which was
the period of the Quantiva acquisition, assumes an effective tax rate
of 31% which represents an effective tax rate before factoring in
costs related to the acquisition of Quantiva and stock-based
compensation.
NetScout Systems, Inc.
Condensed Consolidated
Balance Sheets
(In thousands)
(Unaudited)
June 30, March 31,
2005 2005
Assets
Current assets:
Cash and cash equivalents $33,498 $57,070
Marketable securities 43,786 26,793
Accounts receivable, net 11,107 11,886
Inventories 3,123 3,114
Refundable income taxes 1,477 1,399
Deferred income taxes 2,361 2,356
Prepaids and other current assets 2,954 3,003
Total current assets 98,306 105,621
Fixed assets, net 6,407 6,011
Capitalized software development costs 55 221
Other intangible assets, net 1,446 -
Goodwill 36,533 28,839
Deferred income taxes 7,286 7,586
Restricted cash 1,332 -
Other assets 12 9
Total assets $151,377 $148,287
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,524 $2,520
Accrued compensation 6,595 6,385
Accrued other 2,927 2,976
Deferred revenue 17,425 17,680
Total current liabilities 29,471 29,561
Long-term liabilities:
Accrued compensation 16 -
Deferred acquisition payment -- Quantiva 1,332 -
Long-term deferred revenue 1,260 1,277
Total long-term liabilities 2,608 1,277
Total liabilities 32,079 30,838
Stockholders' equity:
Common stock 35 35
Additional paid-in capital 114,158 112,286
Accumulated other comprehensive income (92) (130)
Deferred compensation (713) -
Treasury stock (26,490) (26,490)
Retained earnings 32,400 31,748
Total stockholders' equity 119,298 117,449
Total liabilities and stockholders'
equity $151,377 $148,287
SOURCE NetScout Systems, Inc.
CONTACT: Catherine Taylor, Director of Investor Relations of NetScout
Systems, Inc., +1-978-614-4286, IR@netscout.com
Web site: http://www.netscout.com