Strong FY '05 Revenue, Up 19% Year-over-Year
Strong FY '05 Product Revenue, Up 24% Year-over-Year
FY '05 Net Profit of $2.9M - EPS of $0.09
WESTFORD, Mass., May 4 /PRNewswire-FirstCall/ -- 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, 2005.
Revenue for the fourth quarter of fiscal year 2005 was $22.6 million,
compared to revenue of $22.0 million in the previous quarter and revenue of
$19.5 million in the fourth quarter of fiscal year 2004. Net profit for the
quarter was $610,000, or $0.02 per diluted share, compared to net profit of
$906,000, or $0.03 per diluted share, for the previous quarter and compared to
a net loss of $177,000, or ($0.01) per basic and diluted share, in the fourth
quarter of fiscal year 2004.
For the fiscal year ended March 31, 2005, NetScout reported revenue of
$85.2 million, an increase of 19% over revenue of $71.5 million for the fiscal
year ended March 31, 2004. The net profit for the fiscal year ended March 31,
2005 was $2.9 million, or $0.09 per diluted share, compared to a net loss of
$545,000, or ($0.02) per basic and diluted share, for the prior fiscal year.
"Overall, fiscal year 2005 was a banner year for NetScout in many areas,"
said Anil Singhal, President and CEO of NetScout Systems. "We delivered solid
financial fundamentals with 19% revenue growth and significantly improved
profitability. We also saw the highest rate of new product introductions in
the history of the company thus forming a foundation for strong product
revenue growth going forward. In the coming year we will continue to improve
our go-to-market execution, strengthening our channel relationships, launching
new marketing programs aimed at growing our market share and leveraging our
recently announced products. In addition, we expect that our newly acquired
technology from Quantiva will start contributing positively towards the end of
the year."
Guidance:
For the first quarter of fiscal year 2006, the Company expects revenue to
be in the range of $23 million to $24 million and net income per diluted share
to be in the range of $0.02 to $0.03. The Company expects 15-20% revenue
growth for fiscal year 2006 and to reach 10% operating margin in the fourth
quarter.
Financial Highlights for the Fourth Quarter:
- Total revenue increased 3% sequentially and increased 16% from the
fourth quarter of fiscal year 2004. Product revenue increased 8%
sequentially and increased 22% from the fourth quarter of fiscal year
2004. Service revenue decreased 6% sequentially and increased 7% from
the fourth quarter of fiscal year 2004. Royalty revenue increased 9%
sequentially and decreased 3% from the fourth quarter of fiscal year
2004.
- Gross margin was 74% of total revenue, down 3 points sequentially and
down 2 points compared to the fourth quarter of fiscal year 2004.
- Cash flow from operations was positive.
- Cash and short and long-term marketable securities increased by $4.5
million to $83.9 million in the fourth quarter and increased by $8.4
million year-over-year.
- 26 new customers were added worldwide.
- 278 customers made repeat purchases.
- 60 customers placed orders over $100,000.
- Direct sales represented 48% of total revenue; indirect sales to
resellers represented 52% of total revenue.
- International business comprised approximately 16% of total revenue.
Product and Company Highlights for the Fourth Quarter:
- NetScout is pleased to announce that in the fourth quarter, SBC
Services, Inc., a subsidiary of SBC Communications Inc., selected
NetScout's nGenius(R) Performance Management System as a toolset that
will be utilized in its consulting services business. NetScout's
nGenius Solution will be utilized to facilitate advanced network
consulting services performed by the SBC companies. Earlier in the
year, NetScout signed a Reseller Agreement with SBC to offer NetScout
products to large enterprises.
- NetScout announced 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 $9.3 million in cash. Quantiva's unique
analytics will further solidify NetScout's strategic direction toward
automated performance management, an automated system for identifying
and diagnosing performance anomalies before they affect end users.
- NetScout announced that its nGenius(R) Performance Management System
has completed network testing by the U.S. Defense Information Systems
Agency (DISA) Joint Interoperability Test Command (JITC). This
successful interoperability testing by JITC enables NetScout products
to be considered in a wide-ranging set of U.S. defense industry
applications.
- NetScout received the NorthFace ScoreBoard(R) award for excellence in
customer satisfaction by the Omega Management Group Corp. NetScout
qualified for the award by scoring consistently high customer
satisfaction levels as measured by Omega surveys throughout 2004.
- NetScout expanded its sales channels in Asia by signing a new reseller
agreement with Shenzhen Netsky Co., Ltd., a provider of computer
networking solutions and system integration with a strong presence in
South China.
- NetScout saw increased business within its telecommunications segment
coming from wireless service providers, representing 17% of order
volume up from 8% in the third quarter.
Fiscal Year 2005 in Review:
- NetScout announced a multi-tiered channel partner program with added
incentives and increased support, including training, technical
support, marketing resources and sales promotions. The success of
this program has already been evidenced by the expansion of business
with our premier partners such as Northrop Grumman. In addition,
NetScout added 65 new partners to its channel partner program,
including Siemens Business Services and a number of alliances in Asia:
Shenzhen Netsky, Co, Ltd. (China), Transition Systems (Southeast Asia)
and Shanghai Posts & Telecommunications Equipment Co., Ltd. (China).
- NetScout joined the Citrix(R) Alliance Partner program as a Premier
member and was a sponsor of the Citrix iForum(TM) 2004.
- Customer implementations of nGenius(R) during the year include: Aqua
America, Bank North, Consumers Energy, Chunghwa Telecom (Taiwan),
Drummond Company, Financial Partners, Hamburger Sparkasse (Germany),
Kaiser Permanente, Lowes, Sony Electronics, Shin Kong Life (Taiwan),
and the United States Special Operations Command.
During the year NetScout announced the largest number of new products in
the history of the company including an important new technology initiative
called High Definition Performance Management (HDPM).
- HDPM significantly expands 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.
- nGenius(R) Flow Recorder, a Linux-based appliance providing continuous
recording of network traffic for audit trails and forensic analyses,
including anomaly detection, session replay and long-interval detailed
troubleshooting.
- nGenius(R) Flow Collector, a new appliance used in combination with
nGenius Performance Manager for dedicated, high-volume collection and
analysis of NetFlow conversation records drawn from network
infrastructure devices.
- nGenius(R) Integrator for Cisco Network Analysis Modules (NAMs), a
migration solution for customers using NetScout's legacy nGenius(R)
Real Time Monitor.
- nGenius(R) Trace Analyzer Integrator, a new software module that allows
nGenius Performance Manager and nGenius Probes to interoperate with
Network Associates'(R) Sniffer products as well as other third party
trace analysis products.
- Enhancements to the nGenius Performance Management System included new
features for monitoring the performance of applications for
enterprises using Multiprotocol Label Switching (MPLS) in their wide
area networks, and wide area networks using Inverse Multiplexing over
ATM (IMA) technology.
- New probes delivered during the year included the nGenius Eight-Port
T1/E1 Probe(R), the market's first high-density probe for monitoring
T1/E1 wide area networks and the industry's first multi-port probe for
T1/E1 IMA networks.
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 877-209-0397 for U.S./Canada and 612-332-1025 for international
callers. A replay of the call will be available after 7:00 p.m. ET on May 4
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
780085.
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, 2004 and its quarterly report on
Form 10-Q for the quarter ended December 31, 2004 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.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Twelve Months
Three Months Ended Ended
March 31, March 31,
2005 2004 2005 2004
Revenue:
Product $14,337 $11,746 $51,352 $41,442
Service 7,839 7,314 32,124 28,331
License and royalty 452 466 1,738 1,761
Total revenue 22,628 19,526 85,214 71,534
Cost of revenue:
Product(1) 4,628 3,534 16,251 13,135
Service 1,157 1,111 4,384 4,243
Total cost of revenue 5,785 4,645 20,635 17,378
Gross margin 16,843 14,881 64,579 54,156
Operating expenses:
Research and development(2) 4,232 4,189 16,789 14,704
Sales and marketing 9,773 9,725 36,889 34,362
General and administrative 2,299 1,772 8,121 6,524
Amortization of other intangible
assets - - - 272
Total operating expenses 16,304 15,686 61,799 55,862
Income (Loss) from operations 539 (805) 2,780 (1,706)
Interest income and other expenses,
net 395 170 1,039 694
Income (loss) before income tax
expense (benefit) 934 (635) 3,819 (1,012)
Income tax expense (benefit) 324 (458) 949 (467)
Net income (loss) $610 $(177) $2,870 $(545)
Basic net income (loss) per share $0.02 $(0.01) $0.09 $(0.02)
Diluted net income (loss) per share $0.02 $(0.01) $0.09 $(0.02)
Shares used in computing:
Basic net income (loss) per share 30,686 30,346 30,572 30,155
Diluted net income (loss) per
share 31,304 30,346 31,521 30,155
(1) Cost of product revenue includes amortization of capitalized software
of $166 for the three months ended March 31, 2005 and 2004 and $663
and $442 for the twelve months ended March 31, 2005 and 2004,
respectively.
(2) Research and development costs are net of capitalized software
development costs of $- and $1,325 for the three and twelve months
ended March 31, 2004.
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, March 31,
2005 2004
Assets
Current assets:
Cash and cash equivalents $57,070 $19,011
Marketable securities 26,793 50,432
Accounts receivable, net 11,886 10,851
Inventories 3,114 3,366
Refundable income taxes 1,399 2,102
Deferred income taxes 2,356 1,667
Prepaids and other current assets 3,003 2,175
Total current assets 105,621 89,604
Fixed assets, net 6,011 5,415
Capitalized software development
costs 221 884
Goodwill, net 28,839 28,839
Deferred income taxes 7,586 8,378
Long-term prepaid expense 9 45
Long-term marketable securities - 6,016
Total assets $148,287 $139,181
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,520 $1,984
Accrued compensation 6,385 4,481
Accrued other 2,976 2,140
Income tax payable - 490
Deferred revenue 17,680 15,968
Total current liabilities 29,561 25,063
Long-term liabilities:
Long-term deferred revenue 1,277 1,006
Total liabilities 30,838 26,069
Stockholders' equity:
Common stock 35 34
Additional paid-in capital 112,286 110,683
Accumulated other comprehensive
income (130) 7
Treasury stock (26,490) (26,490)
Retained earnings 31,748 28,878
Total stockholders' equity 117,449 113,112
Total liabilities and
stockholders' equity $148,287 $139,181
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/
(NTCT)