WESTFORD, Mass., July 16 /PRNewswire-FirstCall/ -- NetScout Systems, Inc.
(Nasdaq: NTCT), a leading provider of network performance management
solutions, today announced financial results for its first quarter of fiscal
year 2004.
Revenue for the first quarter of fiscal year 2004 was $15.6 million,
compared to revenue of $17.7 million in the previous quarter and revenue of
$17.8 million in the first quarter of fiscal year 2003. The net loss for the
quarter was ($552,000), or ($0.02) per basic and diluted share, compared to a
net loss of ($354,000), or ($0.01) per basic and diluted share, for the
previous quarter and compared to a net loss of ($1.1 million), or ($0.04) per
basic and diluted share, in the first quarter of fiscal year 2003.
Pro forma net loss for the first quarter of fiscal year 2004 was
($233,000), or ($0.01) per basic and diluted share, versus pro forma net loss
of ($27,000), or $0.00 per basic and diluted share, in the previous quarter
and compared to pro forma net loss of ($163,000), or ($0.01) per basic and
diluted share in the first quarter of fiscal year 2003. Pro forma net income
and net loss excludes acquisition and stock-based compensation costs.
In the quarter, GAAP and pro forma earnings reflect a $1,068,000 reduction
of research and development expense due to capitalization of software
development costs related to post-technological feasibility development work
on major new product releases. The after tax GAAP and pro forma earnings per
share impact of the capitalization is approximately $0.02 per share.
"Despite our disappointing results for the first quarter, which resulted
primarily from stagnant IT spending and our new product transition, we are
seeing indications of growth for the remainder of this fiscal year," said Anil
Singhal, President and CEO of NetScout Systems. "We have a stronger sales
pipeline going into the second quarter, including a number of orders that were
deferred out of the first quarter and we are confident that significant
competitive advantages from our new products will enable us to drive revenue
and market share growth over the longer term. We are pleased to have
announced, this week, nGenius(R) Performance Manager 2.0, our new unified
performance management application, along with significantly expanded data
collection and analysis capabilities for our nGenius probe family. The new
products are the first in the industry to unify the information, features and
functions of multiple performance management disciplines within a single
product, far more effectively and efficiently than independent point products
or loosely connected product suites. Our customers are very excited about our
delivery on the promise of our CDM strategy with market leading products that
set us apart from the competition. In addition, our announcement of a new
product offering, nGenius Express, will accelerate our customers' time to
value and appeal particularly to new customers."
Financial Highlights for the First Quarter:
* Total revenue decreased 12% sequentially and decreased 13% from the
first quarter of fiscal year 2003. Product revenue decreased 16%
sequentially, and was down 16% from the first quarter of fiscal year
2003. Service revenue increased 2% sequentially, and increased 14% from
the first quarter of fiscal year 2003. Royalty revenue decreased 60%
sequentially and was down 77% from the first quarter of fiscal year
2003.
* Gross margin was 75% of total revenue, down 1 point sequentially and
down 1 point compared to the first quarter of fiscal year 2003.
* Cash flow from operations was positive.
* Cash and short and long-term marketable securities increased by $1.9
million in the first quarter to $73.2 million.
* 21 new customers were added worldwide in the first quarter.
* 246 customers made repeat purchases.
* 33 orders over $100,000 were received.
* Direct sales represented 45% of total revenue; reseller revenue
represented 55% of total revenue.
* International business comprised approximately 22% of total revenue in
the first quarter.
Product Highlights:
* In July, NetScout announced a major product release, the nGenius
Performance Manager 2.0 and related nGenius Probe firmware 6.0, the
first solution in the market to unify the information, features and
functions of multiple performance management disciplines within a single
product. The solution delivers network and application monitoring,
capacity planning and reporting, troubleshooting, fault prevention and
service level management using enterprise-wide information that has been
gathered and analyzed using NetScout's patent-pending CDM(TM)
technology. Key features include the ability to gather and analyze
flows from network infrastructure devices, such as routers and switches,
in addition to nGenius probes, Power Alarms that automatically collect
detailed evidence for troubleshooting, and a common framework for
passive and active response time measurement and QoS analysis. Other
important features include a distributed server architecture for
virtually unlimited scalability; enhanced application and protocol
support for applications such as Citrix, IP-based storage protocols, SIP
for Voice over IP traffic, and packet capture and decode for 450
protocols and applications including wireless and multicast; workspaces
for real-time troubleshooting and planning; and special interfaces
allowing partners and end-users to tap into the CDM data repository for
business management purposes, such as network usage-based billing or
modeling.
* We also announced a new product offering this week, called nGenius
Express. Express is a lower cost offering with full CDM functionality,
ease of implementation and fast time to value that is targeted primarily
at new customers and additional market segments. These market segments
include customers with little or no formal network performance
management, middle market enterprises and autonomous units of large
enterprises. We expect Express to have shorter sales cycles and be more
channel-friendly due to its lower price point, short learning curve and
ease of deployment.
* Also in July, NetScout and Foundry announced that they are now offering
an integrated network management solution that will enhance IT managers'
abilities to proactively monitor and optimize their network and
application performance. The two companies recently completed testing
of the joint solution at the San Diego Supercomputer Center (SDSC),
which used NetScout's new CDM(TM) Adaptor to recognize sFlow statistics
from Foundry network switches, combine them with other nGenius(R)
network traffic flow information, in real-time displays and reports to
provide IT managers with an efficient and highly integrated view of
network and application performance.
* During the quarter NetScout delivered enhanced capabilities for Storage
Area Networks through its nGenius Performance Management System. The
new capabilities comprise an expanded set of real time and historical
statistics on the performance of storage traffic traversing the LAN, WAN
and storage networks within the enterprise.
Guidance:
NetScout's near term expectations are based on the continued climate of
tight enterprise IT spending and the uncertain timing of general economic
improvement. For the second quarter of fiscal 2004, the Company expects
revenue to be in the range of $17 million to $18 million and GAAP loss per
share to be in the range of ($0.02) to $0.00. The Company plans to give
guidance and report only on a GAAP basis in the future. The Company expects a
small decline in cash in the quarter.
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. Alternatively, people can listen to the call by
dialing 888-273-9890 for U.S./Canada and 612-332-0632 for international
callers. A replay of the call will be available after 7:15 p.m. ET on July 16
for approximately two weeks. The number for the replay is 800-475-6701 for
U.S./Canada, and 320-365-3844 for international callers. The access code is
690911.
About NetScout Systems, Inc.
NetScout Systems, Inc. (Nasdaq: NTCT) is a market leader and pioneer of
integrated network performance management products that unify performance
across the enterprise. NetScout's nGenius(R) Performance Management System is
helping more than 3000 leading companies 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.
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
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 such as the delivery of nGenius(R) product
platform probes and software solutions and the implementation of the Company's
CDM(TM) Technology strategy, 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 associated with a continued climate of tight IT spending, and
risks of further 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, 2003 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. In this press release we have also disclosed various non-GAAP
financial measures as defined by SEC Regulation G. The most directly
comparable GAAP financial measures and a reconciliation of the differences
between the GAAP financial measures and the non-GAAP financial measures can be
found in the financial information attached to this press release.
NetScout and the NetScout logo, and nGenius are registered trademarks of
NetScout Systems, Inc. CDM and the CDM logo, Universal Response Time, Power
Alarms, Workspaces and MasterCare and the MasterCare logo, are trademarks of
NetScout Systems, Inc. NetScout reserves the right, at its sole discretion,
to make changes at any time in its technical information and specifications,
and service and support programs.
The Company's condensed consolidated statements of operations and balance
sheets are attached.
Contact:
Catherine Taylor
Director of Investor Relations
NetScout Systems, Inc.
978-614-4286
IR@netscout.com
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, March 31,
2003 2003
Assets
Current assets:
Cash and cash equivalents $40,168 $43,823
Marketable securities 27,991 27,442
Accounts receivable, net 8,639 11,906
Inventories 2,388 2,982
Refundable income taxes 1,476 1,226
Deferred income taxes 1,793 1,782
Prepaids and other current assets 1,794 2,088
Total current assets 84,249 91,249
Fixed assets, net 6,654 6,912
Capitalized software development
costs 1,068 -
Goodwill, net 28,839 28,839
Other intangible assets, net - 272
Deferred income taxes 7,807 7,651
Long-term marketable securities 5,022 -
Total assets $133,639 $134,923
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,294 $1,403
Accrued compensation 3,944 3,658
Accrued other 1,664 1,819
Deferred revenue 15,331 16,242
Total current liabilities 22,233 23,122
Stockholders' equity:
Common stock 34 34
Additional paid-in capital 109,060 108,835
Other comprehensive income 11 7
Deferred compensation (80) (132)
Treasury stock (26,490) (26,366)
Retained earnings 28,871 29,423
Total stockholders' equity 111,406 111,801
Total liabilities and
stockholders' equity $133,639 $134,923
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2003 2002
Revenue:
Product $8,628 $10,321
Service 6,557 5,739
License and royalty 418 1,789
Total revenue 15,603 17,849
Cost of revenue:
Product 2,781 3,374
Service (including stock-based
compensation of $1 and $2,
respectively) 1,044 974
Total cost of revenue 3,825 4,348
Gross margin 11,778 13,501
Operating expenses:
Research and development
(including stock-based
compensation of
$39 and $687, respectively)(1) 3,009 4,802
Sales and marketing (including
stock-based compensation of
$7 and $21, respectively) 7,944 8,471
General and administrative
(including stock-based
compensation
of $- and $2, respectively) 1,649 2,107
Amortization of other intangible
assets 272 272
Total operating expenses 12,874 15,652
Loss from operations (1,096) (2,151)
Interest income and other expenses,
net 197 313
Loss before benefit from income taxes (899) (1,838)
Benefit from income taxes (347) (691)
Net loss $(552) $(1,147)
Basic and diluted net loss per share $(0.02) $(0.04)
Shares used in computing:
Basic and diluted net loss per
share 30,034 29,804
(1) Research and development, net of capitalized software development
costs of $1,068 for the three months ended June 30, 2003.
Supplemental information:
Net loss $(552) $(1,147)
Stock-based compensation (as detailed
in expense categories above) 47 712
Amortization of other intangible
assets 272 272
Pro forma net loss, excluding
acquisition and stock-based
compensation costs $(233) $(163)
Pro forma diluted net loss per share,
excluding acquisition
and stock-based compensation costs $(0.01) $(0.01)
Shares used in computing pro forma
diluted net loss per share,
excluding acquisition and stock-based
compensation costs 30,034 29,804
SOURCE NetScout Systems, Inc.