Press Release Details

GAAP Revenue up 34% Year-over-Year Non-GAAP Revenue up 24% Year-over-Year

WESTFORD, Mass., Jan 22, 2009 (BUSINESS WIRE) -- NetScout Systems, Inc. (NASDAQ: NTCT):

NetScout Systems, Inc. (NASDAQ: NTCT), an industry leader for advanced network and service assurance solutions, today announced financial results for its third quarter of fiscal year 2009, ended December 31, 2008.

Total GAAP revenue for the third quarter of fiscal year 2009 was $72.0 million, and non-GAAP revenue was $74.2 million. Non-GAAP revenue excludes the purchase accounting adjustment to record the acquired Network General deferred revenue at fair value. Product revenue was $42.9 million on a GAAP basis and $43.2 million non-GAAP. Service revenue was $29.1 million GAAP and $31.0 million non-GAAP.

GAAP net income for the quarter was $7.9 million, or net income per diluted share of $0.20. GAAP income from operations was $13.3 million. On a non-GAAP basis, net income was $11.1 million, or $0.27 per diluted share, and non-GAAP income from operations was $18.4 million. Non-GAAP income from operations excludes the purchase accounting adjustment to record the acquired Network General deferred revenue at fair value, 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 are announcing results today slightly above the high end of our preliminary announcement earlier this month, primarily because operating expenses were lower than originally estimated. In addition, we are reiterating the raised guidance for the balance of the 2009 fiscal year. Order flow in our seasonally strong third quarter was good with bookings from our core vertical markets offsetting weakness in sectors more impacted by the economy," said Anil Singhal, President and CEO of NetScout Systems. "We are entering our fiscal fourth quarter with good visibility, however, we remain cautious about the impact of the historic economic downturn on our business in fiscal 2010."

Company and Financial Highlights for the Third Quarter 2009:

• During the quarter NetScout released a software upgrade fulfilling our promise to our customers to deliver a single software solution unifying the two product lines from the acquisition of Network General: nGenius^(R) AFMON and Network General InfiniStream into the new nGenius InfiniStream platform.
• Strongest bookings came from financial services led by commercial banks and exchange and high-speed trading, telecommunications led by wireless carriers, government, healthcare and energy sectors.
• GAAP revenue increased 34% year-over-year and 5% sequentially as a result of the continued strong performance from wireless carriers, financials, and government. Non-GAAP revenue increased 24% year-over-year and 2% sequentially. Note: year-over-year comparisons to third quarter fiscal year 2008 include two months of Network General revenue following the acquisition on November 1, 2007.
• GAAP product revenue increased 19% year-over-year and 9% sequentially. Non-GAAP product revenue increased 19% year-over-year and 5% sequentially.
• GAAP service revenue increased 65% year-over-year and decreased 1% sequentially. Non-GAAP service revenue increased 31% year-over-year and decreased 3% sequentially.
• Non-GAAP operating margin improved to a record 25% driven principally by product cost improvement. GAAP operating margin was 18%.
• As of December 31, 2008, total cash and cash equivalents and short and long-term marketable securities were $119.2 million, versus $109.4 million at September 30, 2008.

Guidance

On January 6, 2009 NetScout raised its outlook for revenue and net income per diluted share for fiscal year 2009 ending March 31. GAAP revenue is now expected to be in the range of $266 million to $274 million, with GAAP net income per diluted share between $0.44 and $0.54, and non-GAAP revenue in the range of $278 million to $286 million, with non-GAAP net income per diluted share between $0.81 and $0.91. The fiscal year 2009 non-GAAP revenue expectation excludes the purchase accounting adjustment to fair value of approximately $11.8 million of Network General's deferred revenue and the non-GAAP net income per diluted share expectation excludes the deferred revenue purchase accounting adjustment , as well as share-based compensation expenses of approximately $4.8 million, amortization of acquired intangible assets of approximately $6 million, non-recurring integration expenses of approximately $1.7 million, and the related impact of these adjustments on the provision for income taxes of $9.3 million.

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 GAAP, should not be considered an alternative for measures prepared in accordance with GAAP, and 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 condition and results of operations.

As discussed above, 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 763-416-6912 for international callers and using conference ID: 81397934. A replay of the call will be available after 7:30 p.m. ET on January 22 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: 81397934.

About NetScout Systems

NetScout Systems, Inc. (NASDAQ: NTCT) is the industry leader in advanced network, application and service delivery management solutions. For over twenty years, NetScout has delivered breakthrough technology solutions that provide trusted, comprehensive real-time and historical performance intelligence, including advanced early warnings and rapid, definitive problem analysis. These capabilities have become vital, and increasingly strategic, to IT organizations. The world's largest enterprises, government agencies, and service providers depend upon NetScout nGenius solutions to assure service delivery to their users by preventing disruptions and degradations. More information about NetScout Systems 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 slowdowns or downturns in economic conditions generally and in the market for advanced network and service assurance solutions specifically, 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. 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 and subsequent Quarterly Reports on Form 10-Q 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)2009 NetScout Systems, Inc. All rights reserved. NetScout and the NetScout logo and nGenius are registered trademarks of NetScout Systems, Inc.

SOURCE: NetScout Systems, Inc.

NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com