Revenue up 6% Sequentially
WESTFORD, Mass., Jan 25, 2007 (BUSINESS WIRE) -- NetScout Systems, Inc. (NASDAQ: NTCT), a leading provider of
network and application performance management solutions, today
announced financial results for its third quarter of fiscal year 2007.
Total revenue for the third quarter of fiscal year 2007 was $26.5
million, up 6% year-over-year. Net income was $2.0 million, an
increase of 5% on a year-over-year basis, leading to net income per
diluted share of $0.06. Operating income, which included stock-based
compensation expense of $357,000 and amortization of acquired
intangible assets of $143,000, was $1.9 million in the third quarter
of fiscal 2007, representing an operating margin of 7%.
"We are pleased with our financial results in the third quarter
with revenue and EPS at the high end of our previously issued
guidance," said Anil Singhal, President and CEO of NetScout Systems.
"During the quarter we released enhancements to our nGenius
Performance Management Solution targeted at the wireless service
provider market for deployment in their revenue generating, customer
facing networks. We expect the wireless service provider segment to
continue to provide significant opportunity with our new product
focus. Looking ahead we expect the strength we saw in the third
quarter will continue through next quarter and accelerate going
forward. In addition, we remain confident in our EPS growth target of
40% in fiscal year 2008."
Financial and Company Highlights for the Third Fiscal Quarter
2007:
- Total revenue increased 6% year-over-year and 6% sequentially.
- Operating margin was 7% of total revenue, down 2 points
year-over-year and down 3 points sequentially.
- Cash and short and long-term marketable securities increased
by $4.4 million to $95.1 million in the third quarter.
- During the quarter NetScout provided enhancements to its
nGenius Performance Management Solution targeted at wireless
service providers' revenue generating, customer facing
networks. NetScout's carrier-class capabilities will give
service providers requisite deep visibility into IP traffic to
accurately plan for capacity expansion and to reduce Mean Time
to Restore by rapidly troubleshooting IP service degradations.
- NetScout introduced nGenius Performance Manager for NetFlow
that supports Cisco's NetFlow and IP SLA by combining nGenius
Performance Manager with nGenius Collector appliances in a
cost effective solution.
- NetScout's nGenius Performance Manager and nGenius Analytics
received IBM's "Ready for IBM Tivoli Software" validation with
the integration of the nGenius Solution with IBM Tivoli
NetView.
- NetScout received Frost & Sullivan's 2006 Customer Value
Enhancement Award, recognizing innovation in the network
performance monitoring & management category.
- During the quarter NetScout increased its presence in the
growing Asia Pacific region with a new office in Australia and
a channel partnership agreement with Tenfold Network Solutions
Pty. serving the Australia and New Zealand markets. In
addition NetScout expanded coverage in the Middle East with a
channel partnership with Equinox International based in Dubai.
Guidance:
For the fourth quarter of fiscal year 2007, the Company expects
total revenue to be in the range of $26.5 million to $27.5 million and
net income per diluted share to be in the range of $0.04 to $0.05.
Included in forecasted net income per diluted share is a non-recurring
charge of $0.03 per share relating to a retirement and advisory
agreement for the Company's outgoing Founder and Chairman, Mr.
Narendra Popat. The Company expects a fourth quarter operating margin
of 7 to 8 percent which would equate to a 12 to 13 percent operating
margin if the non-recurring charges related to Mr. Popat's agreement,
which account for a five point reduction in operating margin, were
excluded. The Company reiterates its long-range guidance for net
income per diluted share growth of 40% in fiscal year 2008.
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:
6233829. A replay of the call will be available after 7:30 p.m. ET on
January 25 for approximately one week. The number for the replay is
800-642-1687 for U.S./Canada and 706-645-9291 for international
callers. The conference ID is: 6233829.
About NetScout Systems, Inc.
NetScout Systems, Inc. (NASDAQ: NTCT) is a market leader and
pioneer of integrated network and application performance management
products and solutions that assure critical business services across
the enterprise. More than 3200 organizations worldwide have deployed
NetScout's nGenius(R) Performance Management System to 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, 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 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)2007 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 Nine Months Ended
Ended
December 31 December 31
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue:
Product $16,366 $16,274 $46,351 $46,389
Service 10,133 8,637 28,803 25,489
License and royalty - - - 184
-------- -------- -------- --------
Total revenue 26,499 24,911 75,154 72,062
-------- -------- -------- --------
Cost of revenue:
Product (1) (2) 4,528 4,754 12,766 13,680
Service (1) 1,416 1,175 3,998 3,609
-------- -------- -------- --------
Total cost of revenue 5,944 5,929 16,764 17,289
-------- -------- -------- --------
Gross margin 20,555 18,982 58,390 54,773
-------- -------- -------- --------
Operating expenses:
Research and development (1) 4,782 4,380 13,690 13,633
Sales and marketing (1) 11,253 10,054 32,112 29,608
General and administrative
(1) 2,571 2,266 6,913 6,762
Amortization of other acquired
intangible assets 39 39 116 110
In-process research and
development - - - 143
-------- -------- -------- --------
Total operating expenses 18,645 16,739 52,831 50,256
-------- -------- -------- --------
Income from operations 1,910 2,243 5,559 4,517
Interest income and other
expenses, net 917 687 3,004 1,770
-------- -------- -------- --------
Income before income tax expense
and cumulative effect of
accounting change 2,827 2,930 8,563 6,287
Income tax expense 844 1,043 2,973 2,294
-------- -------- -------- --------
Income before cumulative effect
of accounting change 1,983 1,887 5,590 3,993
Cummulative effect of accounting
change, net of taxes of $42 - - 69 -
-------- -------- -------- --------
Net income $1,983 $1,887 $5,659 $3,993
======== ======== ======== ========
Basic net income per share $0.06 $0.06 $0.18 $0.13
Diluted net income per share $0.06 $0.06 $0.17 $0.13
Shares used in computing:
Basic net income per share 31,735 31,106 31,626 30,972
Diluted net income per
share 33,026 31,736 32,925 31,600
(1) Share-based compensation
expense included in these amounts
are as follows:
Cost of product revenue $10 $- $30 $-
Cost of service revenue 12 - 37 -
Research and development 135 73 366 215
Sales and marketing 140 24 442 68
General and administrative 60 49 202 57
-------- -------- -------- --------
Total share-based
compensation expense $357 $146 $1,077 $340
======== ======== ======== ========
(2) Amortization expense related
to acquired software included in
theses amounts are as follows:
Cost of Product Revenue $104 $104 $312 $296
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31 March 31,
2006 2006
----------- ---------
Assets
Current assets:
Cash and cash equivalents $70,151 $61,676
Marketable securities 14,130 19,810
Accounts receivable, net 16,468 16,765
Inventories 4,426 2,816
Refundable income taxes 300 985
Deferred income taxes 2,909 2,896
Restricted cash - 1,339
Prepaids and other current assets 3,285 3,119
----------- ---------
Total current assets 111,669 109,406
Fixed assets, net 8,069 7,577
Goodwill 36,561 36,561
Acquired intangible assets, net 586 1,015
Capitalized software development costs, net 211 312
Deferred income taxes 5,050 4,889
Long-term marketable securities 10,813 5,979
Other assets 71 16
----------- ---------
Total assets $173,030 $165,755
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,799 $2,727
Accrued compensation 7,211 8,635
Accrued other 2,365 2,325
Income tax payable 936 -
Deferred acquisition payment - Quantiva - 1,339
Deferred revenue 21,369 21,382
----------- ---------
Total current liabilities 34,680 36,408
Other long-term liabilities 1,054 1,157
Long-term deferred revenue 1,606 1,599
----------- ---------
Total liabilities 37,340 39,164
----------- ---------
Stockholders' equity:
Common stock 36 35
Additional paid-in capital 120,394 120,057
Accumulated other comprehensive loss (54) (122)
Deferred compensation - (4,434)
Treasury stock (27,890) (26,490)
Retained earnings 43,204 37,545
----------- ---------
Total stockholders' equity 135,690 126,591
----------- ---------
Total liabilities and stockholders'
equity $173,030 $165,755
=========== =========
SOURCE: NetScout Systems
Catherine Taylor
Director of Investor Relations
NetScout Systems, Inc.
978-614-4286
IR@netscout.com