GAAP Revenue down 4% Year-over-Year; Non-GAAP Revenue down 10% Year-over-Year
WESTFORD, Mass.--(BUSINESS WIRE)--Jul. 23, 2009--
NetScout Systems, Inc. (NASDAQ: NTCT):
|
|
Q1 FY 2010
|
|
|
GAAP
|
|
Non-GAAP
|
Revenue
|
|
$58.1 million
|
|
$58.7 million
|
Net income
|
|
$5.2 million
|
|
$7.3 million
|
Net Income per share
|
|
$0.13
|
|
$0.18
|
NetScout
Systems, Inc. (NASDAQ: NTCT), an industry leader for advanced
network and service assurance solutions, today announced financial
results for its first quarter of fiscal year 2010, ended June 30, 2009.
Total GAAP revenue for the first quarter of fiscal year 2010 was $58.1
million, and non-GAAP revenue was $58.7 million. Non-GAAP revenue
excludes the purchase accounting adjustment to record the acquired
Network General deferred revenue at fair value. Product revenue was
$28.4 million on a GAAP and non-GAAP basis. Service revenue was $29.7
million on a GAAP basis and $30.3 million on a non-GAAP basis.
GAAP net income for the quarter was $5.2 million, or net income per
diluted share of $0.13. GAAP income from operations was $8.9 million. On
a non-GAAP basis, net income was $7.3 million, or $0.18 per diluted
share, and non-GAAP income from operations was $12.2 million. Non-GAAP
income from operations excludes the purchase accounting adjustment to
record the acquired Network General deferred revenue at fair value, as
well as share-based compensation expenses and amortization of acquired
intangible assets. 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.
“We continue to see the slowing effects of the economy on IT spending
across most of our verticals, although we expect that to moderate as the
year progresses,” said Anil Singhal, President and CEO of NetScout
Systems. “As a result we are reaffirming our fiscal year 2010 guidance
and we remain confident in our ability to return to the same level of
growth we achieved prior to the economic downturn. We are currently
focused on our key growth verticals, particularly wireless service
providers, which we expect will continue to be a significant growth
driver for our company as we bring new service provider solutions to
market. We continue to execute well on cost and expense management
during these difficult times as we have achieved a 15% GAAP operating
margin and 21% non-GAAP operating margin despite reduced revenue.”
The NetScout Board of Directors has reinstated the previously authorized
stock buyback program. The remaining authorization is for 3.5 million
shares. Execution of the program is expected to begin during the current
fiscal year, depending on market conditions.
Company and Financial Highlights for
the First Quarter 2010:
-
During the quarter we announced a new partnership with Cisco’s Unified
Wireless program based on our Sniffer® Global enterprise
troubleshooting solution. Beginning in the fall of 2009, our Sniffer
Global network analyzer will be integrated with Cisco’s Mobility
Services Engine to more quickly identify and resolve network and
service performance issues over wired and wireless networks. Cisco
will include Sniffer Global in their reference design for their
wireless LAN resellers.
-
NetScout’s nGenius Performance Manager was recognized as the “Testing
and Monitoring Product of the Year” in the third annual Network
Computing Awards.
-
IDC released a report recognizing NetScout as top vendor with 14%
market share in its annual “Worldwide Network Performance and
Operations Management 2009-2013 Forecast and 2008 Vendor Shares.”
-
GAAP revenue decreased 4% year-over-year and 12% sequentially.
Non-GAAP revenue decreased 10% year-over-year and 12% sequentially.
-
GAAP and non- GAAP product revenue decreased 19% year-over-year and
23% sequentially. GAAP service revenue increased 15% year-over-year
and 1% sequentially. Non-GAAP service revenue was unchanged
year-over-year and increased 1% sequentially.
-
GAAP operating margin was 15% up from 7% a year ago. Non-GAAP
operating margin was 21% up from 19% a year ago.
-
As of June 30, 2009, total cash and cash equivalents and short and
long-term marketable securities were $141.6 million, up $5.7 million
from $135.9 million as of the end of the prior quarter.
Guidance
NetScout reaffirms guidance for fiscal year 2010. GAAP revenue is
expected to be in the range of $259 to $279 million and non-GAAP revenue
between $260 million to $280 million. GAAP net income per diluted share
is expected to be in the range of $0.60 to $0.75 and non-GAAP net income
per diluted share is expected to be between $0.80 and $0.95. The fiscal
year 2010 non-GAAP revenue expectation excludes the purchase accounting
adjustment to fair value of approximately $1.3 million of Network
General’s deferred revenue and the non-GAAP net income per diluted share
expectation excludes the deferred revenue purchase accounting
adjustment, as well as share-based compensation expenses of
approximately $5.6 million, amortization of acquired intangible assets
of approximately $5.9 million, and the related impact of these
adjustments on the provision for income taxes of $4.9 million.
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 net income
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 GAAP, should not be
considered an alternative for measures prepared in accordance with GAAP,
and 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 period where GAAP
results are affected by 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 condition and results of operations.
As discussed above, 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 763-416-6912 for international callers and using
conference ID: 20002134. A replay of the call will be available after
7:30 p.m. ET on July 23 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: 20002134.
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) is the industry leader in advanced
network, application and service delivery management solutions. For over
twenty years, NetScout has delivered breakthrough technology solutions
that provide trusted, comprehensive real-time and historical performance
intelligence, including advanced early warnings and rapid, definitive
problem analysis. These capabilities have become vital, and increasingly
strategic, to IT organizations. The world’s largest enterprises,
government agencies, and service providers depend upon NetScout nGenius
solutions to assure service delivery to their users by preventing
disruptions and degradations. More information about NetScout Systems 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 slowdowns or downturns in economic
conditions generally and in the market for advanced network and service
assurance solutions specifically, 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. 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, 2009 and subsequent Quarterly Reports on Form 10-Q 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.
©2009 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, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2009
|
|
2008
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
28,391
|
|
|
$
|
34,917
|
|
Service
|
|
|
29,671
|
|
|
|
25,690
|
|
Total revenue
|
|
|
58,062
|
|
|
|
60,607
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Product
|
|
|
7,259
|
|
|
|
10,346
|
|
Service
|
|
|
4,909
|
|
|
|
4,992
|
|
Total cost of revenue
|
|
|
12,168
|
|
|
|
15,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
45,894
|
|
|
|
45,269
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
9,218
|
|
|
|
10,173
|
|
Sales and marketing
|
|
|
22,106
|
|
|
|
24,059
|
|
General and administrative
|
|
|
5,230
|
|
|
|
6,532
|
|
Amortization of acquired intangible assets
|
|
|
490
|
|
|
|
490
|
|
Total operating expenses
|
|
|
37,044
|
|
|
|
41,254
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
8,850
|
|
|
|
4,015
|
|
Interest and other income (expense), net
|
|
|
(719
|
)
|
|
|
(1,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
8,131
|
|
|
|
2,263
|
|
Income tax expense
|
|
|
2,894
|
|
|
|
766
|
|
Net income
|
|
$
|
5,237
|
|
|
$
|
1,497
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.13
|
|
|
$
|
0.04
|
|
Diluted net income per share
|
|
$
|
0.13
|
|
|
$
|
0.04
|
|
Weighted average common shares outstanding used in computing:
|
|
|
|
|
|
|
|
|
Net income per share - basic
|
|
|
40,309
|
|
|
|
38,954
|
|
Net income per share - diluted
|
|
|
41,119
|
|
|
|
40,504
|
|
NetScout Systems, Inc.
|
Reconciliation of GAAP to Non-GAAP Financial Measures
|
(In thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Revenue
|
|
$
|
58,062
|
|
|
$
|
60,607
|
|
Product deferred revenue fair value adjustment
|
|
|
9
|
|
|
|
190
|
|
Service deferred revenue fair value adjustment
|
|
|
600
|
|
|
|
4,582
|
|
Non-GAAP revenue
|
|
$
|
58,671
|
|
|
$
|
65,379
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross profit
|
|
$
|
45,894
|
|
|
$
|
45,269
|
|
Deferred revenue fair value adjustment
|
|
|
609
|
|
|
|
4,772
|
|
Shared-based compensation expense (1)
|
|
|
84
|
|
|
|
66
|
|
Amortization of acquired intangible assets (2)
|
|
|
995
|
|
|
|
1,012
|
|
Integration expense (3)
|
|
|
-
|
|
|
|
246
|
|
Non-GAAP Gross profit
|
|
$
|
47,582
|
|
|
$
|
51,365
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Income (loss) from operations
|
|
$
|
8,850
|
|
|
$
|
4,015
|
|
Deferred revenue fair value adjustment
|
|
|
609
|
|
|
|
4,772
|
|
Shared-based compensation expense (1)
|
|
|
1,283
|
|
|
|
1,191
|
|
Amortization of acquired intangible assets (2)
|
|
|
1,485
|
|
|
|
1,502
|
|
Integration expense (3)
|
|
|
-
|
|
|
|
824
|
|
Non-GAAP Income from operations
|
|
$
|
12,227
|
|
|
$
|
12,304
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net income
|
|
$
|
5,237
|
|
|
$
|
1,497
|
|
Deferred revenue fair value adjustment
|
|
|
609
|
|
|
|
4,772
|
|
Shared-based compensation expense (1)
|
|
|
1,283
|
|
|
|
1,191
|
|
Amortization of acquired intangible assets (2)
|
|
|
1,485
|
|
|
|
1,502
|
|
Integration expense (3)
|
|
|
-
|
|
|
|
824
|
|
Income tax adjustments (4)
|
|
|
(1,283
|
)
|
|
|
(3,150
|
)
|
Non-GAAP Net income
|
|
$
|
7,331
|
|
|
$
|
6,636
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted Net income per share
|
|
$
|
0.13
|
|
|
$
|
0.04
|
|
Share impact of non-GAAP adjustments identified above
|
|
|
0.05
|
|
|
|
0.12
|
|
Non-GAAP Diluted net income per share
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing non-GAAP diluted net income per share
|
|
|
41,119
|
|
|
|
40,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Share-based compensation expense included in these amounts
|
|
|
|
|
|
|
|
|
is as follows:
|
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
$
|
28
|
|
|
$
|
26
|
|
Cost of service revenue
|
|
|
56
|
|
|
|
40
|
|
Research and development
|
|
|
308
|
|
|
|
311
|
|
Sales and marketing
|
|
|
556
|
|
|
|
530
|
|
General and administrative
|
|
|
335
|
|
|
|
284
|
|
Total share-based compensation expense
|
|
$
|
1,283
|
|
|
$
|
1,191
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)Amortization expense related to acquired software and product
|
|
|
|
|
|
|
|
|
technology included in these amounts is as follows:
|
|
|
|
|
|
|
|
|
Cost of Product Revenue
|
|
$
|
995
|
|
|
$
|
1,012
|
|
Operating expenses
|
|
|
490
|
|
|
|
490
|
|
Total amortization expense
|
|
$
|
1,485
|
|
|
$
|
1,502
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)Integration expense included in these amounts is as follows:
|
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
$
|
-
|
|
|
$
|
141
|
|
Cost of service revenue
|
|
|
-
|
|
|
|
105
|
|
Research and development
|
|
|
-
|
|
|
|
102
|
|
Sales and marketing
|
|
|
-
|
|
|
|
114
|
|
General and administrative
|
|
|
-
|
|
|
|
362
|
|
Total integration expense
|
|
$
|
-
|
|
|
$
|
824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
June 30
|
|
March 31
|
|
2009
|
|
2009
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
75,733
|
|
|
$
|
82,222
|
|
Marketable securities
|
|
37,032
|
|
|
|
24,162
|
|
Accounts receivable, net
|
|
29,016
|
|
|
|
39,827
|
|
Inventories
|
|
7,260
|
|
|
|
6,850
|
|
Refundable income taxes
|
|
6,650
|
|
|
|
8,389
|
|
Deferred income taxes
|
|
2,796
|
|
|
|
2,796
|
|
Prepaid expenses and other current assets
|
|
5,108
|
|
|
|
4,939
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
163,595
|
|
|
|
169,185
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
13,279
|
|
|
|
13,848
|
|
Goodwill
|
|
128,177
|
|
|
|
128,177
|
|
Acquired intangible assets, net
|
|
58,125
|
|
|
|
59,610
|
|
Deferred income taxes
|
|
34,181
|
|
|
|
34,941
|
|
Long-term marketable securities
|
|
28,798
|
|
|
|
29,528
|
|
Other assets
|
|
1,260
|
|
|
|
1,445
|
|
Total assets
|
$
|
427,415
|
|
|
$
|
436,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
6,946
|
|
|
$
|
6,385
|
|
Accrued compensation
|
|
12,205
|
|
|
|
23,156
|
|
Accrued other
|
|
5,132
|
|
|
|
5,407
|
|
Income taxes payable
|
|
3,122
|
|
|
|
1,702
|
|
Long-term debt, current portion
|
|
13,144
|
|
|
|
10,000
|
|
Deferred revenue
|
|
66,279
|
|
|
|
70,815
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
106,828
|
|
|
|
117,465
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
730
|
|
|
|
771
|
|
Accrued long-term retirement benefits
|
|
1,424
|
|
|
|
1,330
|
|
Long-term deferred revenue
|
|
8,958
|
|
|
|
8,937
|
|
Long-term debt, net of current portion
|
|
76,856
|
|
|
|
82,500
|
|
Total liabilities
|
|
194,796
|
|
|
|
211,003
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Common stock
|
|
45
|
|
|
|
45
|
|
Additional paid-in capital
|
|
194,632
|
|
|
|
192,844
|
|
Accumulated other comprehensive loss
|
|
(1,598
|
)
|
|
|
(1,461
|
)
|
Treasury stock
|
|
(28,939
|
)
|
|
|
(28,939
|
)
|
Retained earnings
|
|
68,479
|
|
|
|
63,242
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
232,619
|
|
|
|
225,731
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
$
|
427,415
|
|
|
$
|
436,734
|
|
Source: NetScout Systems, Inc.
NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director
of Investor Relations
IR@netscout.com