WESTFORD, Mass., July 19 /PRNewswire/ --
NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network
performance management solutions, today announced financial results for the
first quarter of its fiscal year 2002. Revenue and income were within the
ranges the company announced on July 6, 2001.
Revenue for the first quarter of fiscal 2002 was $18.2 million, compared
to revenue of $25.2 million for the same period last year. Pro forma net loss
for the three months ended June 30, 2001 was $929,000, or ($0.03) per basic
and diluted share, compared to pro forma net income of $4.4 million, or $0.16
per diluted share, for the same period last year. Pro forma net loss excludes
non-cash amortization of goodwill and other intangible assets and stock-based
compensation. Weighted average basic shares for the three-month period ended
June 30, 2001 were 29.4 million, compared to 28.0 million diluted shares for
the same period in fiscal 2000.
On a GAAP basis, the net loss for the quarter was $4.1 million, or ($0.14)
per basic and diluted share, compared to net income of $4.3 million, or $0.15
per diluted share for the same period last year.
"Despite the long sales cycles still prevalent among many customers, there
are compelling reasons for our customers to implement our solutions as soon as
their IT spending constraints ease," said Anil Singhal, President and CEO of
NetScout Systems. "Our nGenius products deliver unique, critical capabilities
that enable IT organizations to achieve the high reliability, high performance
and lowered cost objectives mandated by their organizations."
"Some customers are now indicating that they intend to resume major
projects that have been on hold, which include our products," Mr. Singhal
added, "Our solutions are highly effective in helping to further leverage
existing infrastructure investments and enable more successful introduction of
new technologies, such as IP telephony and network storage. Providing a high
return on investment-through substantial, proactive controls over asset
utilization, infrastructure growth, performance and uptime-is what places
NetScout products high on the priority list as budget dollars become
available."
Highlights for the first quarter included:
-- The addition of NetScout's nGenius Real-Time Monitor, NetScout's next
generation real-time monitoring software solution, to Cisco's CiscoWorks2000
Routed WAN and LAN Management Solutions. This reinforces NetScout's strategic
relationship with Cisco for real-time performance management technology.
-- The announcement of a sales transition where Cisco would discontinue
reselling NetScout probes and refer its customers to purchase directly from
NetScout. Over time, support will also be transitioned. In the announcement,
Cisco and NetScout also reaffirmed their technology partnership in support of
managing next-generation network environments.
-- Approximately 40 new customers worldwide. New accounts included, among
others: Provident Mutual Life, Delmonte Corporation, Virtual ESI-Prime,
Telecel, Bundeswehr, and Heleba.
-- Continued strength in ongoing business from our existing customers,
totaling approximately 90 percent of total revenue. Companies such as TRW,
John Deere, Genuity, TeleGlobe Communications, Credit Suisse First Boston,
British Telecom, and UTA Telecom continued to expand their use of NetScout
solutions through the addition of both new probes and software products.
-- Direct sales at 31 percent of revenue, slightly higher than last
quarter. Cisco-channeled sales at 52 percent of total revenue, also slightly
higher than last quarter; the Cisco-channeled portion of total revenue
includes 16 percent of total revenue related to royalties from Cisco's resale
of our real-time monitoring software. Other channel partners accounted for 17
percent of total revenue, down from 20 percent in the fourth quarter. This
decrease was primarily a result of lower sales in continental Europe and Asia
Pacific markets.
-- International business comprised approximately 20 percent of product
revenue, level with last quarter. Spending in the UK was strongest, partly due
to deployments still taking place through US multinationals.
-- Major new releases from our suite of nGenius Performance Management
Software products: nGenius Capacity Planner v3.0 and nGenius Application
Service Level Manager v3.0. In addition, we added the nGenius NewsStand to our
nGenius reporting architecture, which enables customized, newspaper-style
report generation via Web-based distribution.
Outlook
The Company believes that opportunities remain strong. NetScout remains
committed to maintaining its leadership position in pioneering performance
management and integrated solutions for high speed, complex and mission
critical network environments. The Company recently announced its multi-port
Gigabit probe, another industry first that continues NetScout's expansion of
probe products to meet customer needs for managing their investments in higher
speed links. This offering is to be soon followed by additional new probes for
OC3/OC12 Packet Over Sonet and ATM environments. NetScout also continues its
technology and engineering exchanges as part of its strategic relationship
with Cisco. The Company is working aggressively to provide additional
enhancements to its nGenius product line and is developing additional support
for assuring effective management of QoS, VoIP and Storage applications by the
end of this fiscal year. As NetScout emerges from the temporary sales
disruption caused by the conclusion of Cisco's reselling of probes, the
Company expects that its maturing, expanded sales force will successfully
assume direct access to the large base of Cisco customers now relying on
NetScout technology, and propel those relationships forward more aggressively.
Guidance:
NetScout's expectations looking forward are based on widely reported
economic forecasts that foresee the current difficult economic conditions
continuing through the end of calendar 2001. However, NetScout anticipates
that the current slowdown in network management spending by many large
enterprises will begin to ease over the next quarter, as they begin to
forecast a normalization of their own businesses over the next several
quarters and resume high priority IT projects including the use of our
products. Based on these assumptions, NetScout expects quarterly sequential
revenue growth in the range of 7% to 10%, off the lower revenue base of the
fiscal first quarter, for the next several quarters. NetScout continues to
take significant actions to control discretionary spending and headcount in
order to maintain level operating expenses. NetScout expects to be profitable
on a pro forma basis through the balance of the fiscal year and to improve pro
forma financial performance to return to historical profitability levels next
fiscal year.
As a result of the Cisco relationship change, NetScout has revised its
long term business model ranges to the following: gross margins between 72
percent and 75 percent, operating expenses between 50 percent and 55 percent
of revenue, and operating margins of 18 percent to 20 percent. This revision
effectively increases gross margin objectives by 2 percentage points,
increases operating expenses by 2 percentage points, in sales and marketing,
while operating margin objectives remain unchanged. NetScout expects to return
to these business model objectives in fiscal 2003.
The Company invites shareholders to listen into a conference call today at
5:30 p.m. EDT, which will be Webcast live through the Company's Website at
http://www.netscout.com. Please log on to the Web site 15 minutes prior to
the broadcast. The numbers for the call are 800-289-0468 for U.S./Canada and
913-981-5517 for International callers. A replay of the call will be
available after 8:00 p.m. EDT this evening for approximately one week. The
number for the replay is 888-203-1112 for U.S./Canada, and 719-457-0820 for
International callers. The access code is 563313.
About NetScout Systems
NetScout Systems, Inc. is a 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 solutions are offered through its nGenius (TM) Performance
Management System, an integrated solutions-based suite of advanced monitoring
and reporting applications 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 360 employees,
with offices in North America, Europe and Asia. Further information on the
company is available on the World Wide Web at http://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 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, the ability of NetScout 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, 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, 2001, 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)
June 30, March 31,
2001 2001
Assets
Current assets:
Cash and cash equivalents $60,566 $61,382
Accounts receivable, net 7,957 11,753
Inventories 8,288 8,653
Refundable income taxes 2,966 2,412
Deferred income taxes 1,342 1,374
Prepaids and other current assets 3,058 3,126
Total current assets 84,177 88,700
Fixed assets, net 7,408 6,937
Goodwill and other intangible assets,
net 38,915 41,549
Deferred income taxes 4,846 4,894
Total assets $135,346 $142,080
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,177 $4,220
Accrued compensation 3,740 5,013
Accrued other 2,035 1,749
Deferred revenue 9,804 10,053
Total current liabilities 17,756 21,035
Stockholders' equity:
Common stock 33 33
Additional paid-in capital 106,462 106,354
Deferred compensation (2,834) (3,409)
Treasury stock (25,306) (25,306)
Retained earnings 39,235 43,373
Total stockholders' equity 117,590 121,045
Total liabilities and
stockholders' equity $135,346 $142,080
NetScout Systems, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30
2001 2000
Revenue:
Product $10,425 $17,761
Service 4,699 3,976
License and royalty 3,042 3,432
Total revenue 18,166 25,169
Cost of revenue:
Product 4,450 6,094
Service (including stock-based
compensation
of $2 and $0, respectively) 917 595
Total cost of revenue 5,367 6,689
Gross margin 12,799 18,480
Operating expenses:
Research and development
(including stock-based
compensation of $542 and
$10, respectively) 4,613 2,572
Sales and marketing (including
stock-based
compensation of $29 and $60,
respectively) 9,090 8,727
General and administrative
(including stock-
based compensation of $2 and $2,
respectively) 1,714 1,594
Amortization of goodwill and other
intangible assets 2,634 --
Total operating expenses 18,051 12,893
Income (loss) from operations (5,252) 5,587
Interest income, net 687 1,034
Income (loss) before provision for
income taxes (4,565) 6,621
Provision for income taxes (427) 2,317
Net income (loss) $(4,138) $4,304
Basic net income (loss) per share $(0.14) $0.16
Diluted net income (loss) per share $(0.14) $0.15
Shares used in computing:
Basic net income (loss) per
share 29,407 26,762
Diluted net income (loss) per
share 29,407 27,954
Supplemental information:
Pro forma net income (loss) excluding
acquisition and stock-based
compensation costs $(929) $4,376
Pro forma diluted net income (loss)
per share excluding acquisition $(0.03) $0.16
and stock-based compensation
costs
Shares used in computing pro forma
diluted net income (loss) per
share excluding acquisition and
stock-based compensation costs 29,407 27,954
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SOURCE NetScout Systems, Inc.
CONTACT: Peggy Flynn, Director of Corporate Relations of NetScout Systems, Inc., +1-978-614-4162, flynnp@netscout.com; or Bill Zima, Associate Director of Thomson Financial-Carson Group, 212-510-9261, bill.zima@tfn.com, for NetScout Systems, Inc.