WESTFORD, Mass.--(BUSINESS WIRE)--Oct. 19, 2000--NetScout Systems,
Inc. (NASDAQ: NTCT), the leading provider of infrastructure
performance management solutions, today announced financial results
for its second quarter of fiscal 2001 ended September 30, 2000.
Revenue for the second quarter of fiscal 2001 was $28.8 million, a
42% increase over revenue of $20.3 million for the same period a year
earlier, and a 15% increase over revenue of $25.2 million for the
first quarter of fiscal 2001. Excluding non-cash amortization of
intangible assets, IPR&D and stock-based compensation, net income for
the second quarter of fiscal 2001 was $3.5 million, or $0.11 per
diluted share, compared to $3.3 million, or $0.12 per diluted share,
for the same quarter last year. Net loss for the second quarter of
fiscal 2001 was $761,000, or $0.03 per diluted share, compared to net
income of $3.2 million, or $0.12 per diluted share for the second
quarter of fiscal 2000. Weighted average diluted shares for the second
quarter of fiscal 2001 were 28.6 million, compared to 26.6 million for
the second quarter of fiscal 2000, and 28.0 million for the first
quarter of fiscal 2001.
For the six months ended September 30, 2000, NetScout reported
total revenue of $54.0 million, an increase of 37% over revenue of
$39.4 million for the same period last year. Excluding non-cash
amortization of intangible assets, IPR&D and stock-based compensation,
net income for the period was $7.8 million, or $0.27 per diluted
share, compared to $6.5 million, or $0.25 per diluted share for the
same period last year. Net income for the six months ended September
30, 2000, was $3.5 million, or $0.12 per diluted share, compared to
$6.3 million, or $0.25 per diluted share for the same period of fiscal
2000.
"We are reporting record results and spectacular growth for the
period," said Anil Singhal, chairman and CEO of NetScout Systems. "We
are very pleased with the results of this quarter and the progress we
have made during the past 12 months. Since our IPO in August 1999, we
have steadily increased our top line year over year growth rate from
the low 20s to more than 40 percent. In addition, we continue to
maintain our long track record of profitability, even as we increase
our investments in sales and engineering. This performance reflects
the strong demand for our products, the strength of our unique
business model, and major investments we made in our sales operations
during the beginning of this fiscal year."
BUSINESS HIGHLIGHTS:
During the second quarter of fiscal 2001, NetScout:
-
Completed its acquisition of NextPoint Networks. The Company has
fulfilled a number of milestones for integration of operations,
products and sales, including: product training of sales and channel
partners; marketing programs; initial integration of NextPoint
products into the nGenius suite, and presentations of our expanded
offerings to key accounts.
-
Signed more than 40 new accounts. Large deals--valued at more
than $100,000--were up 21% from last quarter from both new and
existing customers. Business from our installed base comprised
approximately 60% of total revenue, representing the strong
willingness of our clients to invest strategically in NetScout
technology.
-
Received new and follow-on business from domestic enterprise and
e-business clients such as: Nickelodeon, 123Signup.com, Net QOS, Bear
Stearns, AmeriGroup, New York Life and Northern Light. Domestic
business from service providers included new and repeat orders from
several of our major US telecommunication clients, Exenet Networks,
and Cable and Wireless. Cable and Wireless selected NetScout
instrumentation as the data source for a new, usage-based billing
initiative the company is considering for rollout over its high-speed,
global IP network.
-
Business channeled through Cisco Systems, Inc. remains strong,
representing 55% of revenue during the quarter, although slightly
lower than our previous quarter. This reflects the strength of the
continued alliance between NetScout and Cisco sales activities, both
domestically and overseas.
-
Generated approximately 25% of total revenue from international
business. These sales included new and follow-on orders from our major
accounts in the banking and insurance industries, as well as BMW, Arag
Insurance, Provinzial Insurance, the Hong Kong Futures Exchange, D2,
China Telecom, Samsung SDS, Nipon Telecom and ChungHwa Telecom. Demand
for infrastructure performance management is emerging particularly
strong in the AsiaPac region where service providers are building new,
wide-scale, IP-based networks.
-
Shipped the initial components of its nGenius Performance
Management System -- the nGenius Server and the nGenius Traffic
Monitor. These components will be sold through all NetScout sales
channels including our direct sales force, Cisco Systems and other
resellers.
-
Announced new, innovative pricing models for nGenius solutions.
The new pricing offers simplified server- and site-based licensing.
This highly attractive pricing can deliver significant savings to our
customers versus the element-based pricing used elsewhere in the
industry.
-
Launched its DS3/E3 Frame Probe, which is designed to monitor
DS3/E3 frame-based wide area network (WAN) links.
OUTLOOK
Commenting on the company's business outlook, Singhal said, "Our
goal for the future is to continue to grow above 40%, a growth rate we
estimate to be higher than the average growth in the network
management industry. Initiatives for sustaining future strong growth
include successful integration of NextPoint Networks, the delivery of
nGenius as a fully JAVA-based platform with attractive features and
pricing, extensions and enhancements to NetScout's probe line, and
increased focus on service provider opportunities."
Consistent with NetScout's business model, the company's near-term
financial objectives are as follows: revenue growth at or above 40%;
gross margins between 70% and 73%; operating expenses between 48% and
53%; and operating income between 18% and 20%.
CONFERENCE CALL INSTRUCTIONS:
To participate in today's conference call at 5:15pm ET, interested
parties may listen via Webcast that will be broadcast through the
Company's Web site, www.netscout.com, or dial (719) 457-2633. The call
will be replayed from 8:00PM ET, this evening, through midnight,
October 26. The replay number is (719) 457-0820, with a confirmation
code 631945. The call will also be audio-archived on the Company's Web
site.
ABOUT NETSCOUT SYSTEMS
NetScout Systems, Inc. is the leading provider of infrastructure
performance management solutions for leading companies and service
providers worldwide. NetScout serves approximately half of the Fortune
500 and counts among its customers 3M Corporation, AT&T, Datek Online,
Bristol-Myers Squibb, Amazon.com, Webhire, Intel Online, Fidelity
Investments and Sun Microsystems.
NetScout's nGenius (TM) Performance Management System is a
solutions-based system offering advanced monitoring and reporting
applications suites that draw on the rich performance data generated
by NetScout's real-time, application-aware probe suite, advanced
intelligent software agents, and network devices. The nGenius System
helps organizations increase their return on infrastructure
investments by optimizing the performance of their network,
applications and content. NetScout is headquartered in Westford,
Massachusetts and has approximately 320 employees, with offices in
North America, Europe and Asia. Further information on the company is
available on the World Wide Web at www.netscout.com.
Forward-looking statements in this release are made pursuant to
the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934. 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 strategic relationships
with Cisco Systems and other partners, dependence upon broad-based
acceptance of the company's Infrastructure Performance Management
solutions, the company's ability to achieve and maintain a growth rate
of 40% or greater, introduction and market acceptance of new products
and product enhancements such as the delivery of nGenius product
platform probes and software solutions, the ability of NetScout to
take advantage of service provider opportunities, competitive pricing
pressures, reliance on sole source suppliers, successful expansion and
management of the indirect distribution channels, the integration of
NextPoint Networks and dependence on proprietary technology, as well
as risks of slowdowns or downturns in economic conditions generally
and in the market for infrastructure 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, 2000, and
Quarterly Report on 10-Q for the quarter ended June 30, 2000, on file
with the Securities and Exchange Commission.
NetScout is a registered trademark, and the NetScout logo,
nGenius, nGenius Application Service Level Manager, nGenius
Real-Time Monitor and nGenius Capacity Planner are trademarks of
NetScout Systems, Inc.
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, March 31,
2000 2000
Assets
Current assets:
Cash and cash equivalents $ 37,204 $48,515
Marketable securities 17,785 21,807
Accounts receivable, net 13,237 10,390
Inventories 3,634 3,131
Refundable income taxes 274 1,899
Deferred income taxes 1,164 1,022
Prepaids and other current assets 3,878 3,728
Total current assets 77,176 90,492
Fixed assets, net 6,887 5,657
Intangible assets, net 46,442 -
Deferred income taxes 4,652 599
Total assets $135,157 $96,748
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,417 $ 2,789
Accrued compensation 3,631 3,673
Accrued other 2,295 2,448
Customer deposits 24 78
Deferred revenue 8,608 6,638
Total current liabilities 17,975 15,626
Stockholders' equity:
Common stock 33 31
Additional paid-in capital 104,045 67,366
Deferred compensation (4,800) (636)
Treasury stock (25,306) (25,306)
Retained earnings 43,210 39,667
Total stockholders' equity 117,182 81,122
Total liabilities and stockholders'
equity $135,157 $96,748
NetScout Systems, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenue:
Product $ 20,790 $ 13,541 $ 38,551 $ 26,355
Service 4,427 3,099 8,404 5,564
License and royalty 3,602 3,664 7,033 7,456
Total revenue 28,819 20,304 53,988 39,375
Cost of revenue:
Product 7,262 5,086 13,356 9,900
Service 857 397 1,451 801
Total cost of revenue 8,119 5,483 14,807 10,701
Gross margin 20,700 14,821 39,181 28,674
Operating expenses:
Research and
development 3,818 2,447 6,380 4,675
Sales and marketing 10,197 6,644 18,864 12,629
General and
administrative 2,347 1,146 3,939 2,079
Stock-based
compensation 576 94 649 175
Amortization of
intangible assets 2,666 -- 2,666 --
In-process research
and development 268 -- 268 --
Total operating
expenses 19,872 10,331 32,766 19,558
Income from operations 828 4,490 6,415 9,116
Interest income, net 1,108 504 2,142 776
Income before provision
for income taxes 1,936 4,994 8,557 9,892
Provision for income
taxes 2,697 1,800 5,014 3,564
Net income (loss) $ (761) $ 3,194 $ 3,543 $ 6,328
Basic net income (loss)
per share $ (0.03) $ 0.16 $ 0.13 $ 0.36
Diluted net income
(loss) per share $ (0.03) $ 0.12 $ 0.12 $ 0.25
Shares used in
computing:
Basic net income
(loss) per share 28,585 20,556 27,561 17,461
Diluted net income
(loss) per share 28,585 26,575 28,955 25,749
Supplemental
information:
Net income excluding
acquisition and
stock-based
compensation costs (1) $ 3,454 $ 3,287 $ 7,830 $ 6,504
Diluted net income per
share excluding
acquisition and
stock-based
compensation costs $ 0.11 $ 0.12 $ 0.27 $ 0.25
Shares used in computing
diluted net income per
share excluding
acquisition and
stock-based
compensation costs 30,182 26,575 28,955 25,749
(1) Net income excluding acquisition and stock-based compensation
costs assumes an effective tax rate of 35.5% which represents the
effective tax rate before factoring in non-deductible costs related to
the acquisition of NextPoint and stock-based compensation costs.
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