EPS up 40% Year-over-Year
WESTFORD, Mass.--(BUSINESS WIRE)--Oct. 25, 2006--NetScout Systems,
Inc. (NASDAQ: NTCT), a leading provider of network performance
management solutions, today announced financial results for its second
quarter of fiscal year 2007.
Total revenue for the second quarter was $25.1 million, up 6%
year-over-year and up 6% sequentially. Net income for the second
quarter of fiscal 2007 was $2.3 million, an increase of 53% on a
year-over-year basis, leading to net income per diluted share of $0.07
per diluted share, an increase of 40% on a year-over-year basis.
Operating income, which included stock-based compensation expense of
$333,000 and amortization of intangible assets of $143,000, was $2.6
million in the second quarter of fiscal 2007, representing an
operating margin of 10% and growth of 3 points on a year-over-year
basis.
"Our second quarter financial results were at or above our
previously issued guidance, highlighted by better-than-expected
profitability," said Anil Singhal, President and CEO of NetScout
Systems. "We generated a double digit operating margin in the second
quarter as we continue to drive operating leverage through tight
expense controls, and we remain confident in our EPS growth target of
40% in each of fiscal years 2007 and 2008. We continue to see
enthusiastic customer response to our new products that support our
Application Fabric Performance Management strategy, which was further
validated by record attendance at our recent User Forum held during
October."
Financial and Company Highlights for the Second Fiscal Quarter
2007:
- Total revenue increased 6% year-over-year and 6% sequentially.
- EPS increased 40% year-over-year and 75% sequentially.
- Operating margin was 10% of total revenue, up 3 points
year-over-year and up 6 points sequentially.
- Cash and short and long-term marketable securities were $90.7
million at the end of the quarter, essentially flat compared
to the end of the prior quarter. Cash outflows for shares
repurchased and one-time annual incentive compensation
payments were largely offset by positive cash flow from
operations.
- During the quarter NetScout received a patent for its Anomaly
Detection System in nGenius(R) Analytics. The sophisticated,
self-learning analysis technology from the acquisition of
Quantiva, enables intelligent, timely recognition and
diagnosis of application and network performance problems.
- NetScout's nGenius Analytics product, based on the Quantiva
technology, has achieved a certified integration with HP
OpenView Network Node Manager and HP OpenView Operations. The
integrations enable nGenius Analytics to provide highly
qualified, proactive alarms of network and application
performance anomalies to HP OpenView to help customers prevent
and resolve operational problems faster, improving business
service reliability and IT efficiency.
- In early October, NetScout hosted its fifth annual User Forum
conference, titled "Conquering the Chaos: Real Performance in
a Virtual World" where a record number of customers from
around the world shared best practices and learned how
NetScout's products are focused on meeting the complex
operational challenges introduced by virtualization in today's
application and network infrastructures.
Guidance:
For the third quarter of fiscal year 2007, the Company expects
total revenue to be in the range of $25.5 million to $26.5 million and
net income per diluted share to be in the range of $0.05 to $0.06. The
Company reiterates its long-range guidance for net income per diluted
share growth of 40% in each of fiscal years 2007 and 2008
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:
8803807. A replay of the call will be available after 7:00 p.m. ET on
October 25 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: 8803807.
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 3,000 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 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 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 such as the delivery of nGenius product platform
probes and software solutions, High Definition Performance Management
functionality, the analytic solutions acquired from Quantiva and the
implementation of the Company's Application Fabric Performance
Management strategy, 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 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, 2006 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)2006 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo, nGenius, and Quantiva are registered trademarks of
NetScout Systems, Inc. Other brands, product names and trademarks are
property of their respective owners.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Six Months
Ended Ended
September 30, September 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue:
Product $15,758 $15,069 $29,985 $30,115
Service 9,322 8,581 18,670 16,852
License and royalty - - - 184
-------- -------- -------- --------
Total revenue 25,080 23,650 48,655 47,151
-------- -------- -------- --------
Cost of revenue:
Product (1) (2) 4,382 4,300 8,238 8,926
Service (1) 1,315 1,177 2,582 2,434
-------- -------- -------- --------
Total cost of
revenue 5,697 5,477 10,820 11,360
-------- -------- -------- --------
Gross margin 19,383 18,173 37,835 35,791
-------- -------- -------- --------
Operating expenses:
Research and
development (1) 4,486 4,639 8,908 9,253
Sales and marketing
(1) 10,028 9,532 20,858 19,554
General and
administrative (1) 2,236 2,211 4,342 4,496
Amortization of
other intangible
assets 39 39 78 71
In-process research
and development - - - 143
-------- -------- -------- --------
Total operating
expenses 16,789 16,421 34,186 33,517
-------- -------- -------- --------
Income from operations 2,594 1,752 3,649 2,274
Interest income and
other expenses, net 1,072 569 2,087 1,083
-------- -------- -------- --------
Income before income tax expense
and cumulative effect of
accounting change 3,666 2,321 5,736 3,357
Income tax expense 1,364 867 2,130 1,251
-------- -------- -------- --------
Income before cumulative effect of
accounting change 2,302 1,454 3,606 2,106
Cummulative effect of accounting
change, net of taxes of $41 - - 70 -
-------- -------- -------- --------
Net income $2,302 $1,454 $3,676 $2,106
======== ======== ======== ========
Basic net income per
share $0.07 $0.05 $0.12 $0.07
Diluted net income per
share $0.07 $0.05 $0.11 $0.07
Shares used in
computing:
Basic net income
per share 31,661 30,970 31,571 30,905
Diluted net income
per share 32,673 31,614 32,867 31,512
(1) Share-based compensation expense
included in these amounts are as follows:
Cost of product
revenue $10 $- $19 $-
Cost of service
revenue 12 - 25 -
Research and
development 99 83 232 142
Sales and marketing 145 24 302 44
General and
administrative 67 8 142 8
-------- -------- -------- --------
Total share-based
compensation expense $333 $115 $720 $194
======== ======== ======== ========
(2) Amortization expense related to acquired
software included in theses amounts are as follows:
Cost of Product
Revenue $104 $105 $208 $191
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September March
30, 31,
2006 2006
----------- ---------
Assets
Current assets:
Cash and cash equivalents $56,108 $61,676
Marketable securities 31,247 19,810
Accounts receivable, net 17,913 16,765
Inventories 4,323 2,816
Refundable income taxes 198 985
Deferred income taxes 2,827 2,896
Restricted cash - 1,339
Prepaids and other current assets 2,198 3,119
----------- ---------
Total current assets 114,814 109,406
Fixed assets, net 8,217 7,577
Goodwill 36,561 36,561
Other intangible assets, net 729 1,015
Capitalized software development costs, net 252 312
Deferred income taxes 4,640 4,889
Long-term marketable securities 3,315 5,979
Other assets 29 16
----------- ---------
Total assets $168,557 $165,755
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $4,070 $2,727
Accrued compensation 6,074 8,635
Accrued other 2,249 2,325
Income tax payable 1,135 -
Deferred acquisition payment - Quantiva - 1,339
Deferred revenue 20,250 21,382
----------- ---------
Total current liabilities 33,778 36,408
Accrued other 1,101 1,157
Long-term deferred revenue 1,510 1,599
----------- ---------
Total liabilities 36,389 39,164
----------- ---------
Stockholders' equity:
Common stock 36 35
Additional paid-in capital 118,445 120,057
Accumulated other comprehensive loss (60) (122)
Deferred compensation - (4,434)
Treasury stock (27,473) (26,490)
Retained earnings 41,220 37,545
----------- ---------
Total stockholders' equity 132,168 126,591
----------- ---------
Total liabilities and stockholders'
equity $168,557 $165,755
=========== =========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com
SOURCE: NetScout Systems, Inc.