Affirms 2009 Outlook
Fourth Quarter GAAP Revenue up 111% Year-over-Year
Fourth Quarter Non-GAAP Revenue up 134% Year-over-Year
Following the Acquisition of Network General
WESTFORD, Mass.--(BUSINESS WIRE)--May 1, 2008--NetScout Systems,
Inc.
Q4 FY 2008 FY 2008
-----------------------------------
GAAP Non-GAAP GAAP Non-GAAP
$57.7 $64.0 $169.0 $181.6
Revenue million million million million
($4.9) $4.8 ($2.1) $17.5
Net income (loss) million million million million
Earnings (loss) per share ($0.13) $0.12 ($0.06) $0.48
----------------------------------------------------------------------
NetScout Systems, Inc. (NASDAQ: NTCT), an industry pacesetter for
advanced network and service assurance solutions, today announced
financial results for its fourth quarter and fiscal year ended March
31, 2008.
Total GAAP revenue for the fourth quarter of fiscal year 2008 was
$57.7 million. Non-GAAP revenue for the fourth quarter was $64.0
million. Non-GAAP revenue excludes the purchase accounting adjustment
to record at fair value the acquired Network General deferred revenue.
Product revenue on a GAAP basis was $33.7 million, and service revenue
was $24.0 million.
GAAP net loss for the quarter was $4.9 million, or a net loss per
share of $0.13. GAAP loss from operations was $9.3 million. On a
non-GAAP basis, net income was $4.8 million, or $0.12 per diluted
share, and non-GAAP income from operations was $6.3 million. Non-GAAP
income from operations excludes the purchase accounting adjustment to
record at fair value the acquired Network General deferred revenue, as
well as share-based compensation expenses, amortization of acquired
intangible assets, and non-recurring integration expenses. Non-GAAP
net income excludes these effects as well as their related impact on
the provision for income taxes. A reconciliation between GAAP and
non-GAAP results is included in the attached financial tables.
For the fiscal year ended March 31, 2008, NetScout reported total
GAAP revenue of $169.0 million; non-GAAP revenue was $181.6 million.
Non-GAAP revenue excludes the purchase accounting adjustment to record
at fair value the acquired Network General deferred revenue. GAAP net
loss for the fiscal year was $2.1 million, or a net loss per share of
$0.06. Non-GAAP net income for the fiscal year was $17.5 million or
$0.48 per diluted share. Non-GAAP net income excludes the purchase
accounting adjustment to record at fair value the acquired Network
General deferred revenue, as well as share-based compensation
expenses, amortization of acquired intangible assets, inventory fair
value adjustments, non-recurring integration expenses and their
related impact on the provision for income taxes. A reconciliation
between GAAP and non-GAAP results is included in the attached
financial tables.
"Our business was very strong in the fourth quarter and our
acquisition of Network General is proving to be a watershed event for
NetScout. Both revenue and profits exceeded our expectations and came
in at the high-end of guidance," said Anil Singhal, President and CEO
of NetScout Systems. "This was the first full quarter of combined
financial results following the acquisition and the strength of orders
we are seeing demonstrates our customers' strong confidence in the
future of the new, post-acquisition NetScout. Our integration efforts
continue to progress smoothly according to plan and in the June
quarter we intend to take the final step with the full integration of
the sales force. Our product integration plan for fiscal 2009 is in
place and on schedule for the delivery of new products and upgrades
that support our vision of providing our customers with the most
sophisticated technologies for managing their modern IP networks," he
added.
NetScout also announced that two directors, Mr. Bryan Taylor and
Mr. Kenneth Hao, have indicated their intention to leave NetScout's
Board of Directors effective at the Annual Stockholders Meeting
scheduled for September 10, 2008, because of other business
priorities. Mr. Taylor, who represents TPG, and Mr. Hao, who
represents Silver Lake, which were major investors in Network General,
joined the board upon the Network General acquisition on November 1,
2007. "We are delighted with NetScout's great results and the smooth,
rapid integration of Network General that the management team has
accomplished," said Bryan Taylor, Partner, TPG. Added Kenneth Hao,
Managing Director, Silver Lake, "We have high confidence in NetScout's
prospects and hope to continue to contribute to the Company's long
term success." Mr. Singhal commented, "We have been working with Ken
and Bryan for over a year on the acquisition of Network General. I am
grateful for their vision and assistance in making the combination of
our two companies successful and for the support of TPG and Silver
Lake going forward. We will continue to work hard to maximize the
value of their investment in NetScout."
Financial and Company Highlights for the Fourth Quarter 2008:
- In the fourth quarter GAAP revenue increased 111%
year-over-year and 7% sequentially as a result of organic
growth and the acquisition of Network General in the prior
quarter. Non-GAAP revenue increased 134% year-over-year and 7%
sequentially. GAAP product revenue increased 96%
year-over-year and declined 7% sequentially. GAAP service
revenue increased 137% year-over-year and increased 36%
sequentially.
- For fiscal year 2008, GAAP revenue increased 65%
year-over-year and non-GAAP revenue increased 77%
year-over-year. GAAP product revenue increased 67%
year-over-year and GAAP service revenue increased 61%
year-over-year.
- As of March 31, 2008 cash and cash equivalents and short and
long-term marketable securities were $100.9 million, up from
$81.7 million in the prior quarter. The increase is due to
strong cash collections during the quarter, including
collections of $13.5 million from product shipments that were
classified as deferred revenue.
- In the fourth quarter NetScout released a new software
product, nGenius K2, an application services dashboard
providing IT professionals a clear, high-level view of the
current status of key business services and early warning of
impending performance problems by automating the detection of
anomalies and providing contextual evidence for faster, more
accurate diagnosis.
Guidance:
NetScout's guidance remains unchanged for fiscal year 2009.
NetScout expects GAAP revenue to be in the range of $250 million to
$260 million and GAAP earnings per diluted share to be in the range of
$0.08 to $0.18. NetScout expects non-GAAP revenue to be in the range
of $260 million to $270 million and non-GAAP earnings per diluted
share to be in the range of $0.50 to $0.60. The fiscal year 2009
non-GAAP revenue and earnings estimates exclude the purchase
accounting adjustment to fair value of approximately $11.2 million of
Network General's deferred revenue, share-based compensation expenses
of approximately $6.9 million, amortization of acquired intangible
assets of approximately $6 million, and integration expenses of
approximately $1.5 million. The revenue guidance for FY 2009
recognizes the logistical and market challenges of the integration
with Network General as NetScout combines and reorganizes the sales
force and introduces new and integrated products to the market early
in the fiscal year.
Use of Non-GAAP Financial Information
To supplement the financial measures presented in the Company's
press release in accordance with accounting principles generally
accepted in the United States ("GAAP"), the Company also presents
non-GAAP measures relating to revenue, income from operations, net
income and earnings per diluted share which were adjusted from amounts
determined based on GAAP to exclude the purchase accounting adjustment
representing the fair value of Network General's deferred revenue,
share-based compensation expenses, amortization of acquired intangible
assets, integration expenses as well as the related income tax
effects.
These non-GAAP measures are not in accordance with, and should not
be considered an alternative for measures prepared in accordance with
GAAP, and these non-GAAP measures may have limitations in that they do
not reflect all of NetScout's results of operations as determined in
accordance with GAAP. These non-GAAP measures should only be used to
evaluate NetScout's results of operations in conjunction with the
corresponding GAAP measures. The presentation of non-GAAP information
is not meant to be considered superior to, in isolation from or as a
substitute for results prepared in accordance with GAAP.
The Company believes these non-GAAP financial measures will
enhance the reader's overall understanding of NetScout's current
financial performance and the Company's prospects for the future by
providing a higher degree of transparency for certain financial
measures and providing a level of disclosure that helps investors
understand how the Company plans and measures its own business. The
Company believes that providing these non-GAAP measures affords
investors a view of the Company's operating results that may be more
easily compared to peer companies and also enables investors to
consider the Company's operating results on both a GAAP and non-GAAP
basis during the integration period of the Company's acquisition of
Network General. Presenting the GAAP measures on their own would not
be indicative of the Company's core operating results. Furthermore,
NetScout believes that the presentation of non-GAAP measures when
shown in conjunction with the corresponding GAAP measures provide
useful information to management and investors regarding present and
future business trends relating to its financial conditions and
results of operations.
As discussed above, the Company management regularly uses
supplemental non-GAAP financial measures internally to understand,
manage and evaluate its business and to make operating decisions.
These non-GAAP measures are among the primary factors that management
uses in planning and forecasting future periods.
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:
44705513. A replay of the call will be available after 7:30 p.m. ET on
May 1 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: 44705513.
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) has been an industry leader
for advanced network and service assurance solutions for over twenty
years. NetScout's breakthrough technology solutions provide trusted,
comprehensive real-time and historical performance intelligence,
including advanced early warnings and rapid, definitive problem
analysis. These capabilities are vital to IT operators who are
accountable for reducing the Mean Time to Resolution. The world's
largest enterprises, government agencies, and service providers depend
upon NetScout's nGenius and Sniffer (formerly Network General) brand
solutions to assure service levels to their users by reducing or
preventing disruptions and degradations. More information about
NetScout 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 release, which are not strictly historical
statements, including the plans, objectives and future financial
performance of NetScout, such as the statement that the Company
intends to complete the integration of its sales force in the June
quarter and release new products and upgrades during fiscal year 2009
as well as the Company's guidance for fiscal year 2009 contained in
this release, 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 acquisition of Network
General, including the ability to integrate the acquisition
successfully, costs associated with the acquisition, the ability to
achieve market introduction and acceptance of new products from the
acquisition, difficulties in managing geographically dispersed
operations and in achieving expected synergies and expense reductions,
and other factors relating to acquisitions generally, as well as 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, 2007 and Quarterly Report on Form 10-Q for the quarter
ended December 31, 2007 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)2008 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo and nGenius are registered trademarks of NetScout
Systems, Inc.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Twelve Months
Ended Ended
March 31 March 31
----------------- ------------------
2008 2007 2008 2007
--------- ------- --------- --------
Revenue:
Product $ 33,673 $17,173 $106,182 $ 63,524
Service 24,017 10,145 62,774 38,948
--------- ------- --------- --------
Total revenue 57,690 27,318 168,956 102,472
--------- ------- --------- --------
Cost of revenue:
Product 12,482 4,417 33,965 17,184
Service 6,056 1,744 13,721 6,444
--------- ------- --------- --------
Total cost of revenue 18,538 6,161 47,686 23,628
--------- ------- --------- --------
Gross profit 39,152 21,157 121,270 78,844
--------- ------- --------- --------
Operating expenses:
Research and development 11,482 4,630 30,000 18,320
Sales and marketing 25,835 11,061 69,652 42,470
General and administrative 10,670 3,618 26,149 10,531
Amortization of acquired
intangible assets 491 39 811 155
--------- ------- --------- --------
Total operating expenses 48,478 19,348 126,612 71,476
--------- ------- --------- --------
Income(loss) from operations (9,326) 1,809 (5,342) 7,368
Interest and other income
(expense), net (1,933) 894 (1,207) 3,898
--------- ------- --------- --------
Income(loss) before income tax
expense(benefit) and
cumulative effect of accounting
change (11,259) 2,703 (6,549) 11,266
Income tax expense(benefit) (6,347) 625 (4,461) 3,598
--------- ------- --------- --------
Income(loss) before cumulative
effect of accounting change (4,912) 2,078 (2,088) 7,668
Cumulative effect of accounting
change, net of taxes of $42 - - - 69
--------- ------- --------- --------
Net income(loss) $ (4,912) $ 2,078 $ (2,088) $ 7,737
========= ======= ========= ========
Basic net income(loss) per share $ (0.13) $ 0.06 $ (0.06) $ 0.24
Diluted net income(loss) per
share $ (0.13) $ 0.06 $ (0.06) $ 0.23
Shares used in computing:
Basic net income(loss) per
share 38,726 31,979 34,913 31,713
Diluted net income(loss) per
share 38,726 33,353 34,913 33,050
NetScout Systems, Inc.
Non-GAAP Financial Measures and Reconciliations
(In thousands)
(Unaudited)
Three Months Twelve Months Ended
Ended
March 31, March 31,
----------------- -------------------
2008 2007 2008 2007
-------- -------- --------- ---------
GAAP Revenue $57,690 $27,318 $168,956 $102,472
Product deferred revenue fair
value adjustment 85 - 410 -
Service deferred revenue fair
value adjustment 6,270 - 12,230 -
-------- -------- --------- ---------
Non-GAAP revenue $64,045 $27,318 $181,596 $102,472
======== ======== ========= =========
GAAP Gross profit $39,152 $21,157 $121,270 $ 78,844
Deferred revenue fair value
adjustment 6,355 - 12,640 -
Shared-based compensation
expense 70 26 135 92
Amortization of acquired
intangible assets 1,100 104 2,077 418
Inventory fair value
adjustment - - 1,287 -
Integration expense 642 - 1,080 -
-------- -------- --------- ---------
Non-GAAP Gross profit $47,319 $21,287 $138,489 $ 79,354
======== ======== ========= =========
GAAP Income(loss) from
operations $(9,326) $ 1,809 $ (5,342) $ 7,368
Deferred revenue fair value
adjustment 6,355 - 12,640 -
Shared-based compensation
expense (1) 1,013 398 2,069 1,473
Amortization of acquired
intangible assets (2) 1,591 143 2,888 573
Inventory fair value
adjustment - - 1,287 -
Integration expense (3) 6,684 - 12,708 -
-------- -------- --------- ---------
Non-GAAP Income from operations $ 6,317 $ 2,350 $ 26,250 $ 9,414
======== ======== ========= =========
GAAP Net income(loss) $(4,912) $ 2,078 $ (2,088) $ 7,737
Deferred revenue fair value
adjustment 6,355 - 12,640 -
Shared-based compensation
expense (1) 1,013 398 2,069 1,473
Amortization of acquired
intangible assets (2) 1,591 143 2,888 573
Inventory fair value
adjustment - - 1,287 -
Integration expense (3) 6,684 - 12,708 -
Income tax adjustments (4) (5,944) (206) (12,005) (777)
-------- -------- --------- ---------
Non-GAAP Net income $ 4,787 $ 2,413 $ 17,499 $ 9,006
======== ======== ========= =========
GAAP Diluted Net income(loss)
per share $ (0.13) $ 0.06 $ (0.06) $ 0.23
Share impact of non-GAAP
adjustments identified above $ 0.25 $ 0.01 $ 0.54 $ 0.04
Non-GAAP Diluted net income per
share $ 0.12 $ 0.07 $ 0.48 $ 0.27
Shares used in computing
non-GAAP diluted net
income per share 40,035 33,353 36,308 33,050
(1)Share-based compensation
expense included in these
amounts
is as follows:
Cost of product revenue $ 35 $ 12 $ 57 $ 41
Cost of service revenue 35 14 78 51
Research and development 238 137 502 503
Sales and marketing 524 167 997 608
General and administrative 181 68 435 270
-------- -------- --------- ---------
Total share-based
compensation expense $ 1,013 $ 398 $ 2,069 $ 1,473
======== ======== ========= =========
(2)Amortization expense related
to acquired software and
product technology included in
these amounts is as follows:
Cost of Product Revenue $ 1,100 $ 104 $ 2,077 $ 418
Operating expenses 491 39 811 155
-------- -------- --------- ---------
Total amortization
expense $ 1,591 $ 143 $ 2,888 $ 573
======== ======== ========= =========
(3)Integration expense included
in these amounts is as follows:
Cost of product revenue $ 353 $ - $ 655 $ -
Cost of service revenue 289 - 425 -
Research and development 495 - 1,140 -
Sales and marketing 681 - 1,475 -
General and administrative 4,866 - 9,013 -
-------- -------- --------- ---------
Total integration
expense $ 6,684 $ - $ 12,708 $ -
======== ======== ========= =========
(4)Reflects the tax effect of non-GAAP adjustments above at the
statutory rate of 38%
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In
thousands)
(Unaudited)
March 31 March 31,
2008 2007
----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 56,702 $ 18,925
Marketable securities 10,465 69,204
Accounts receivable, net 32,048 18,317
Inventories 12,083 4,562
Refundable income taxes 5,036 657
Deferred income taxes 6,052 2,535
Prepaid expenses and other current assets 13,546 3,380
----------- ---------
Total current assets 135,932 117,580
Fixed assets, net 16,729 8,262
Goodwill 131,802 36,561
Acquired intangible assets, net 65,569 442
Capitalized software development costs, net 7 170
Deferred financing costs 956 -
Deferred income taxes 34,891 5,382
Long-term marketable securities 33,764 11,975
Restricted cash 121 -
Other assets 1,166 47
----------- ---------
Total assets $420,937 $180,419
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 9,207 $ 3,023
Accrued compensation 23,594 8,271
Accrued other 8,563 2,609
Income taxes payable 1,065 192
Long-term debt, current portion 6,250 -
Deferred revenue 74,257 23,992
----------- ---------
Total current liabilities 122,936 38,087
Other long-term liabilities 159 1,008
Accrued long-term retirement benefits 1,245 1,155
Long-term deferred revenue 6,764 1,762
Long-term debt, net of current portion 92,500 -
----------- ---------
Total liabilities 223,604 42,012
----------- ---------
Stockholders' equity:
Common stock 43 36
Additional paid-in capital 182,789 122,074
Accumulated other comprehensive loss 246 (46)
Treasury stock (28,939) (28,939)
Retained earnings 43,194 45,282
----------- ---------
Total stockholders' equity 197,333 138,407
----------- ---------
Total liabilities and stockholders' equity $420,937 $180,419
=========== =========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com
SOURCE: NetScout Systems, Inc.