EPS Up 100% Year over Year
3 Million Additional Share Repurchase Announced
Fiscal 2007/2008 EPS Growth to Exceed 40%
WESTFORD, Mass.--(BUSINESS WIRE)--July 26, 2006-- NetScout Systems, Inc. (NASDAQ: NTCT), a leading provider of
network performance management solutions, today announced financial
results for its first quarter of fiscal year 2007.
Total revenue for the first quarter was $23.6 million, flat
year-over-year and a 9% decrease sequentially. Net income for the
first quarter was $1.4 million, or $0.04 per diluted share, compared
to net income of $652,000, or $0.02 per diluted share, in the first
quarter of fiscal year 2006 and compared to net income of $1.8
million, or $0.06 per diluted share, for the previous quarter.
Operating income for the quarter was $1.1 million, which includes
stock-based compensation expense of $387,000 and amortization of
intangible assets of $143,000.
"We were disappointed that our first quarter results came in below
our original expectation. We historically experience seasonal weakness
in the first quarter, but this year's seasonality was accentuated by
an unusual softness in Europe. After careful review of our first
quarter performance and outlook for the remainder of this fiscal year
and beyond, we believe this is a temporary slowdown. We remain
confident about our competitive position in an attractive and growing
market," said Anil Singhal, President and CEO of NetScout Systems.
"The underlying drivers of our revenue and market share growth remain
intact, evidenced by strong new product flow and expanding sales
force. We remain focused on tight expense control and expanding
operating margins as we have over the last several years. Based on
these factors, we remain confident about full year EPS growth for
fiscal 2007 and 2008 of 40 percent or more. Because of our confidence
in the future of our business, we are announcing today an expansion of
our existing stock repurchase program which enables us to purchase up
to three million shares in addition to the 850,000 shares currently
authorized for repurchase, using our strong cash flow to provide
increased returns to shareholders," he added.
During the quarter NetScout released two new products based upon
its next generation Application Fabric Performance Management
architecture -- nGenius Analytics and Application Fabric Monitor. The
new products are market-leading solutions that proactively identify
and resolve performance problems faster and assure business service
reliability in increasingly complex, high-speed networks.
Guidance:
For the second quarter of fiscal year 2007, the Company expects
total revenue to be in the range of $25 million to $26 million and net
income per diluted share to be in the range of $0.05 to $0.06. The
Company modifies its long-range guidance for net income per diluted
share to grow by 40% or more in each of fiscal years 2007 and 2008.
Financial Highlights for the First Fiscal Quarter 2007:
- Product revenue decreased 5% year-over-year and 17 %
sequentially. Total revenue was flat year-over-year and down
9% sequentially.
- Operating margin was 4% of total revenue, up 2 points
year-over-year and down 4 points sequentially.
- Cash and short and long-term marketable securities increased
by $3.3 million to $90.8 million in the first quarter. The
increase in cash was provided by strong positive cash flow
from operations, as well as a one-time federal tax refund of
$1.1 million.
- 32 new customers were added worldwide.
- 261 customers made repeat purchases.
- 47 customers placed orders over $100,000.
- 16% of total revenue came from international operations.
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/investors. Alternatively,
people can listen to the call by dialing 866-701-8242 for U.S./Canada
and 706-634-5113 for international callers and using conference ID:
2920982. A replay of the call will be available after 7:30 p.m. ET on
July 26 for approximately two weeks. The number for the replay is
800-642-1687 for U.S./Canada and 706-645-9291 for international
callers. The conference ID is: 2920982.
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, 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, introduction and market acceptance of new products and
product enhancements such as the delivery of nGenius product platform
probes and software solutions, High Definition Performance Management
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, 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, 2006 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.
(C)2006 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo, nGenius, and Quantiva are registered trademarks of
NetScout Systems, Inc. Other brands, product names and trademarks are
property of their respective owners.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended
June 30,
-----------------
2006 2005
-------- --------
Revenue:
Product $14,227 $15,046
Service 9,348 8,271
License and royalty - 184
-------- --------
Total revenue 23,575 23,501
-------- --------
Cost of revenue:
Product (1), (2) 3,856 4,626
Service (1) 1,267 1,257
-------- --------
Total cost of revenue 5,123 5,883
-------- --------
Gross margin 18,452 17,618
-------- --------
Operating expenses:
Research and development (1) 4,422 4,614
Sales and marketing (1) 10,830 10,022
General and administrative (1) 2,106 2,286
Amortization of other intangible assets 39 32
In-process research and development - 143
-------- --------
Total operating expenses 17,397 17,097
-------- --------
Income from operations 1,055 521
Interest income and other expenses, net 1,015 515
-------- --------
Income before income tax expense and cumulative
effect of accounting change 2,070 1,036
Income tax expense 766 384
-------- --------
Income before cumulative effect of accounting change 1,304 652
Cumulative effect of accounting change, net of taxes
of $41 70 -
-------- --------
Net income $1,374 $652
======== ========
Earnings Per Common Share
Basic
Income before cumulative effect of accounting
change $0.04 $0.02
Cumulative effect of accounting change $- $-
Net income per share $0.04 $0.02
Diluted
Income before cumulative effect of accounting
change $0.04 $0.02
Cumulative effect of accounting change $- $-
Net income per share $0.04 $0.02
Weighted Average Shares Outstanding:
Basic shares 31,480 30,840
Diluted shares 33,049 31,413
(1) Share-based compensation expense included in these
amounts are as follows:
Cost of product revenue 9 -
Cost of service revenue 13 -
Research and development 133 59
Sales and marketing 157 20
General and administrative 75 -
(2) Amortization expense related to acquired software
included in these amounts are as follows:
Cost of product revenue 104 87
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, March 31,
2006 2006
----------- ---------
Assets
Current assets:
Cash and cash equivalents $51,999 $61,676
Marketable securities 32,761 19,810
Accounts receivable, net 15,021 16,765
Inventories 4,386 2,816
Refundable income taxes 202 985
Deferred income taxes 2,837 2,896
Restricted Cash 1,342 1,339
Prepaids and other current assets 2,953 3,119
----------- ---------
Total current assets 111,501 109,406
Fixed assets, net 7,757 7,577
Goodwill 36,561 36,561
Other intangible assets, net 872 1,015
Capitalized software development costs 293 312
Deferred income taxes 4,803 4,889
Long-term marketable securities 6,030 5,979
Other assets 13 16
----------- ---------
Total assets $167,830 $165,755
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,469 $2,727
Accrued compensation 7,490 8,635
Accrued other 2,139 2,325
Income tax payable 467 -
Deferred acquisition payment - Quantiva 1,342 1,339
Deferred revenue 21,747 21,382
----------- ---------
Total current liabilities 35,654 36,408
Accrued other 1,103 1,157
Long-term deferred revenue 1,248 1,599
----------- ---------
Total liabilities 38,005 39,164
----------- ---------
Stockholders' equity:
Common stock 36 35
Additional paid-in capital 117,494 120,057
Accumulated other comprehensive income (134) (122)
Deferred compensation - (4,434)
Treasury stock (26,490) (26,490)
Retained earnings 38,919 37,545
----------- ---------
Total stockholders' equity 129,825 126,591
----------- ---------
Total liabilities and stockholders'
equity $167,830 $165,755
=========== =========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
IR@netscout.com
SOURCE: NetScout Systems