Completes Q1 Sales Force Integration
First Quarter GAAP Revenue up 117% Year-over-Year
First Quarter Non-GAAP Revenue up 134% Year-over-Year
Following Acquisition of Network General
WESTFORD, Mass.--(BUSINESS WIRE)--July 24, 2008--NetScout Systems,
Inc.:
Q1 FY 2009
------------------------------------------
GAAP Non-GAAP
Revenue $60.6 million $65.4 million
Net income $1.5 million $6.6 million
Net Income per share $0.04 $0.16
----------------------------------------------------------------------
NetScout Systems, Inc. (NASDAQ: NTCT), industry pacesetter for
advanced network and service assurance solutions, today announced
financial results for its first quarter of fiscal year 2009, ended
June 30, 2008.
Total GAAP revenue for the first quarter of fiscal year 2009 was
$60.6 million. Non-GAAP revenue for the first quarter was $65.4
million. Non-GAAP revenue excludes the purchase accounting adjustment
to record at fair value the acquired Network General deferred revenue.
Product revenue on a GAAP basis was $34.9 million, and service revenue
was $25.7 million.
GAAP net income for the quarter was $1.5 million, or net income
per diluted share of $0.04. GAAP income from operations was $4.0
million. On a non-GAAP basis, net income was $6.6 million, or $0.16
per diluted share, and non-GAAP income from operations was $12.3
million. Non-GAAP income from operations excludes the purchase
accounting adjustment to record at fair value the acquired Network
General deferred revenue, as well as share-based compensation
expenses, amortization of acquired intangible assets, and
non-recurring integration expenses. 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 have started our new fiscal year on very solid footing posting
good revenue growth and strong profitability. In our seasonally slow
first quarter, we are pleased with the strength of our business from
our high-end vertical markets, financial services, telecommunications
and government," said Anil Singhal, President and CEO of NetScout
Systems. "We successfully integrated the two sales forces without
major disruption in order flow. This was the last important
organizational step in the integration of the two companies. We are on
schedule for the delivery of new products and upgrades that will
support our growth and extend our market leadership. Despite growing
indications of an economic slowdown we have not yet seen significant
cutbacks in IT spending for our products, because we believe our
customers recognize the high value derived from our integrated packet
flow-based application management solutions," he added.
Financial and Company Highlights for the First Quarter 2009:
- In the first quarter GAAP revenue increased 117%
year-over-year and 5% sequentially as a result of organic
growth and the acquisition of Network General. Non-GAAP
revenue increased 134% year-over-year and 2% sequentially.
GAAP product revenue increased 99% year-over-year and
increased 4% sequentially. GAAP service revenue increased 147%
year-over-year and increased 7% sequentially.
- As of June 30, 2008 cash and cash equivalents and short and
long-term marketable securities were $109.8 million, up from
$100.9 million in the prior quarter.
- During the quarter NetScout joined the Riverbed Technology
Alliance (RTA) program. Through this alliance NetScout has
extended its nGenius(R) Performance Management system to
support the signaling protocol used among Riverbed's
Steelhead(R) appliances providing customers with unprecedented
visibility into the performance of applications over optimized
wide area networks. The technology alliance allows enterprises
to accurately assess the impact and performance of Steelhead
appliances as is common practice with any key piece of the
enterprise IT infrastructure.
- NetScout was recently named to the "FSB 100" list, Fortune's
Small Business 100 fastest growing small public companies in
the U.S., ranked #66 based upon three-year annualized rates of
revenue growth, EPS growth, and total return to investors.
Guidance:
NetScout reaffirms revenue guidance for fiscal year 2009 and
raises its profitability outlook for GAAP and non-GAAP net income per
diluted share. The new range for net income per share has increased by
five cents compared to guidance in the prior quarter, incorporating
the earnings performance of the first quarter. For the 2009 fiscal
year, NetScout expects GAAP revenue to be in the range of $250 million
to $260 million and the new GAAP net income per diluted share expected
range is $0.13 to $0.23. NetScout expects non-GAAP revenue to be in
the range of $260 million to $270 million and the new non-GAAP net
income per diluted share expected range is $0.55 to $0.65. The fiscal
year 2009 non-GAAP revenue and net income per diluted share estimates
exclude the purchase accounting adjustment to fair value of
approximately $11.5 million of Network General's deferred revenue,
share-based compensation expenses of approximately $4.8 million,
amortization of acquired intangible assets of approximately $6
million, and integration expenses of approximately $1.7 million. The
revenue guidance for FY 2009 recognizes the challenging economic
environment and its potential impact on enterprise IT spending and the
introduction of new, integrated products to the market throughout the
fiscal year.
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, and should not
be considered an alternative for measures prepared in accordance with
GAAP, and these non-GAAP measures 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 integration period of 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 conditions and
results of operations.
As discussed above, the 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 706-634-5113 for international callers and using conference ID:
55969842. A replay of the call will be available after 7:30 p.m. ET on
July 24 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: 55969842.
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) has been an industry leader
for advanced network and service assurance solutions for over twenty
years. NetScout's breakthrough technology solutions provide trusted,
comprehensive real-time and historical performance intelligence,
including advanced early warnings and rapid, definitive problem
analysis. These capabilities are vital to IT operators who are
accountable for reducing the Mean Time to Resolution. The world's
largest enterprises, government agencies, and service providers depend
upon NetScout's nGenius and Sniffer (formerly Network General) brand
solutions to assure service levels to their users by reducing or
preventing disruptions and degradations. More information about
NetScout 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 release, which are not strictly historical
statements, including the plans, objectives and future financial
performance of NetScout, such as the statement that the Company
intends to release new products and upgrades during fiscal year 2009
as well as the Company's guidance for fiscal year 2009 contained in
this release, 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 acquisition of Network
General, including the ability to integrate the acquisition
successfully, costs associated with the acquisition, the ability to
achieve market introduction and acceptance of new products from the
acquisition, difficulties in managing geographically dispersed
operations and in achieving expected synergies and expense reductions,
and other factors relating to acquisitions generally, as well as 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, and risks of 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, 2008 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)2008 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)
(Unaudited)
Three Months
Ended
June 30,
-----------------
2008 2007
-------- -------
Revenue:
Product $34,917 $17,512
Service 25,690 10,400
-------- -------
Total revenue 60,607 27,912
-------- -------
Cost of revenue:
Product 10,346 4,652
Service 4,992 1,800
-------- -------
Total cost of revenue 15,338 6,452
-------- -------
Gross profit 45,269 21,460
-------- -------
Operating expenses:
Research and development 10,173 4,534
Sales and marketing 24,059 11,228
General and administrative 6,532 2,833
Amortization of acquired intangible assets 490 6
-------- -------
Total operating expenses 41,254 18,601
-------- -------
Income from operations 4,015 2,859
Interest and other income (expense), net (1,752) 1,009
-------- -------
Income before income tax expense 2,263 3,868
Income tax expense 766 1,188
-------- -------
Net income $ 1,497 $ 2,680
======== =======
Basic net income per share $ 0.04 $ 0.08
Diluted net income per share $ 0.04 $ 0.08
Shares used in computing:
Basic net income per share 38,954 32,140
Diluted net income per share 40,504 33,253
NetScout Systems, Inc.
Non-GAAP Financial Measures and Reconciliations
(In thousands)
(Unaudited)
Three Months Ended
June 30,
------------------
2008 2007
-------- --------
GAAP revenue $60,607 $27,912
Product deferred revenue fair value adjustment 190 -
Service deferred revenue fair value adjustment 4,582 -
-------- --------
Non-GAAP revenue $65,379 $27,912
======== ========
GAAP gross profit $45,269 $21,460
Deferred revenue fair value adjustment 4,772 -
Shared-based compensation expense 66 23
Amortization of acquired intangible assets 1,012 105
Integration expense 246 -
-------- --------
Non-GAAP gross profit $51,365 $21,588
======== ========
GAAP income from operations $ 4,015 $ 2,859
Deferred revenue fair value adjustment 4,772 -
Shared-based compensation expense (1) 1,191 385
Amortization of acquired intangible assets (2) 1,502 111
Integration expense (3) 824 -
-------- --------
Non-GAAP income from operations $12,304 $ 3,355
======== ========
GAAP net income $ 1,497 $ 2,680
Deferred revenue fair value adjustment 4,772 -
Shared-based compensation expense (1) 1,191 385
Amortization of acquired intangible assets (2) 1,502 111
Integration expense (3) 824 -
Income tax adjustments (4) (3,150) (188)
-------- --------
Non-GAAP net income $ 6,636 $ 2,988
======== ========
GAAP diluted net income per share $ 0.04 $ 0.08
Per share impact of non-GAAP adjustments
identified above 0.12 0.01
-------- --------
Non-GAAP diluted net income per share $ 0.16 $ 0.09
======== ========
Shares used in computing non-GAAP diluted net
income per share 40,504 33,253
(1)Share-based compensation expense included in
these amounts is as follows:
Cost of product revenue $ 26 $ 11
Cost of service revenue 40 12
Research and development 311 114
Sales and marketing 530 171
General and administrative 284 77
-------- --------
Total share-based compensation expense $ 1,191 $ 385
======== ========
(2)Amortization expense related to acquired
software and product technology included in
these amounts is as follows:
Cost of product revenue $ 1,012 $ 105
Operating expenses 490 6
-------- --------
Total amortization expense $ 1,502 $ 111
======== ========
(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
2008 2008
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 68,708 $ 56,702
Marketable securities 8,556 10,465
Accounts receivable, net 26,433 32,048
Inventories 12,590 12,083
Refundable income taxes 5,629 5,036
Deferred income taxes 5,985 6,052
Prepaid expenses and other current assets 6,804 13,546
---------- ----------
Total current assets 134,705 135,932
Fixed assets, net 15,747 16,729
Goodwill 131,802 131,802
Acquired intangible assets, net 64,066 65,569
Deferred financing costs 892 956
Deferred income taxes 34,891 34,891
Long-term marketable securities 32,522 33,764
Restricted cash 121 121
Other assets 787 1,173
---------- ----------
Total assets $ 415,533 $ 420,937
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 7,319 $ 9,207
Accrued compensation 20,397 23,594
Accrued other 5,842 7,805
Income taxes payable 1,290 1,065
Long-term debt, current portion 7,500 6,250
Deferred revenue 73,651 74,257
---------- ----------
Total current liabilities 115,999 122,178
Other long-term liabilities 853 917
Accrued long-term retirement benefits 1,277 1,245
Long-term deferred revenue 7,008 6,764
Long-term debt, net of current portion 90,000 92,500
---------- ----------
Total liabilities 215,137 223,604
---------- ----------
Stockholders' equity:
Common stock 43 43
Additional paid-in capital 185,497 182,789
Accumulated other comprehensive income
(loss) (896) 246
Treasury stock (28,939) (28,939)
Retained earnings 44,691 43,194
---------- ----------
Total stockholders' equity 200,396 197,333
---------- ----------
Total liabilities and stockholders'
equity $ 415,533 $ 420,937
========== ==========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com
SOURCE: NetScout Systems, Inc.