Q1 GAAP and Non-GAAP Revenue Up 7% Year-over-Year
Q1 GAAP EPS Flat Year-over-Year and Non-GAAP EPS Up 11% Year-over-Year
WESTFORD, Mass.--(BUSINESS WIRE)--Jul. 18, 2013--
NetScout Systems, Inc. (NASDAQ: NTCT):
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Q1 FY 2014
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GAAP
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Non-GAAP
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Revenue
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$81.8 million
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$81.9 million
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Net income
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$5.3 million
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$8.7 million
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Net Income per share
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$0.12
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$0.21
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NetScout
Systems, Inc. (NASDAQ: NTCT), an industry leader for advanced
application and service assurance solutions, today announced financial
results for its first quarter of fiscal year 2014 ended June 30, 2013.
“We are pleased with our business results this quarter, despite
continued weakness in the government sector,” said Anil Singhal,
President and CEO, NetScout Systems. “We are, however, most excited
about the positive feedback from our recently released nGeniusONE™
solution. nGeniusONE is our single integrated platform for combining NPM
and APM for IT operations. nGeniusONE is based on our second generation
ASI technology which enables faster triage of complex performance
problems and provides a holistic view of interactions between users,
groups of users, and their related infrastructure and applications. We
believe this is a one-of-a-kind solution, solving problems that
traditional NPM and APM approaches cannot,” Mr. Singhal added.
Total GAAP revenue for the first quarter was $81.8 million; non-GAAP
revenue was $81.9 million. A reconciliation of GAAP and non-GAAP results
is included in the attached financial tables.
Product revenue for the first quarter, on a GAAP and non-GAAP basis was
$43.0 million. Service revenue on a GAAP basis was $38.8 million and
non-GAAP service revenue was $38.9 million.
GAAP net income for the first quarter was $5.3 million, or $0.12 per
diluted share. GAAP income from operations was $8.9 million. On a
non-GAAP basis, net income for the quarter was $8.7 million, or $0.21
per diluted share, and non-GAAP income from operations was $14.1 million.
Financial Highlights:
For the first quarter:
-
GAAP and non-GAAP revenue increased 7% year-over-year and decreased
17% sequentially.
-
GAAP and non-GAAP product revenue increased 7% year-over-year and
decreased 28% sequentially.
-
GAAP service revenue increased 8% year-over-year and increased 1%
sequentially. Non-GAAP service revenue increased 8% year-over-year and
remained flat sequentially.
-
GAAP operating margin was 11%, flat from a year ago and down eleven
points sequentially. Non-GAAP operating margin was 17%, flat from a
year ago and down eleven points sequentially.
-
As of June 30, 2013, cash and cash equivalents and short and long-term
marketable securities were $162.8 million, up $8.7 million from $154.1
million as of the end of the prior quarter.
In addition:
-
NetScout announced the release of the nGeniusONE™ Unified Performance
Management platform. The nGeniusONE platform converges application and
network performance management functionality into a single unified
platform that delivers a top-down, serviced-focused perspective of
performance characteristics of all infrastructure and application
elements associated with service delivery.
Guidance:
For fiscal year 2014, we are reiterating the guidance we issued last
quarter. We expect GAAP revenue to be in the range of $384 million to
$399 million and non-GAAP revenue to be in the range of $385 million to
$400 million. GAAP net income per diluted share is expected to be in the
range of $1.06 to $1.16 and non-GAAP net income per diluted share
between $1.40 and $1.50.
For fiscal year 2014, the non-GAAP net income per diluted share
expectation excludes the acquisition accounting adjustment to fair value
of approximately $0.6 million for deferred revenue, forecasted
share-based compensation expenses of approximately $12.8 million,
estimated amortization of acquired intangible assets of approximately
$6.7 million, compensation for post combination services of
approximately $2.6 million, business development charges of
approximately $0.2 million, the related impact of these adjustments on
the provision for income taxes of $8.7 million and a tax offset for tax
impact of non-GAAP reconciling items in loss jurisdictions of
approximately $0.4 million.
CONFERENCE CALL INSTRUCTIONS:
NetScout invites shareholders to listen to its conference call today at
8:30 a.m. ET, which will be webcast live through NetScout’s website at http://ir.netscout.com/phoenix.zhtml?c=92658&p=irol-irhome.
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: 16779166. A replay of the call will be available after
11:30 a.m. ET on July 18, 2013 for approximately one week. The number
for the replay is (855)859-2056 for U.S./Canada and (404)537-3406 for
international callers. The conference ID is: 16779166.
Use of Non-GAAP Financial Information
To supplement the financial measures presented in NetScout's press
release in accordance with accounting principles generally accepted in
the United States ("GAAP"), NetScout also reports the following non-GAAP
measures: non-GAAP revenue, non-GAAP net income and non-GAAP net income
per diluted share. Non-GAAP revenue eliminates the GAAP effects of
acquisitions by adding back revenue related to deferred revenue
revaluation. Non-GAAP net income includes the foregoing adjustment and
also removes expenses related to the amortization of acquired intangible
assets, stock-based compensation, restructuring, certain expenses
relating to acquisitions including compensation for post-combination
services and business development charges, net of related income tax
effects. Non-GAAP diluted net income per share also excludes these
expenses as well as the related impact of all these adjustments on the
provision for income taxes.
These non-GAAP measures are not in accordance with GAAP, should not be
considered an alternative for measures prepared in accordance with GAAP
(revenue, net income and diluted net income per share), 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.
NetScout believes these non-GAAP financial measures will enhance the
reader’s overall understanding of NetScout’s current financial
performance and NetScout'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. NetScout believes that
providing these non-GAAP measures affords investors a view of NetScout’s
operating results that may be more easily compared to peer companies and
also enables investors to consider NetScout’s operating results on both
a GAAP and non-GAAP basis during and following the integration period of
NetScout’s acquisitions. Presenting the GAAP measures on their own would
not be indicative of NetScout’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.
NetScout 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.
About NetScout Systems, Inc.
NetScout
Systems, Inc. (NASDAQ: NTCT) is the market leader in Unified Service
Delivery Management enabling comprehensive end-to-end network and
application assurance. For 28 years, NetScout has delivered breakthrough
packet-flow technology that provides trusted and comprehensive real-time
network and application performance intelligence enabling unified
assurance of the network, applications and users. These solutions enable
IT staff to predict, preempt and resolve network and service delivery
problems while facilitating the optimization and capacity planning of
the network infrastructure. NetScout nGenius® and Sniffer®
solutions are deployed at more than 20,000 of the world’s largest
enterprises, government agencies, and more than 148 service providers,
on over one million physical and 2,000 virtual network segments to
assure the network, applications, and service delivery to their users
and customers. For more information about NetScout go to 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, as
amended, and other federal securities laws. Investors are cautioned that
statements in this press release, which are not strictly historical
statements, including without limitation, our financial guidance for
fiscal 2014, 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, NetScout’s relationships with
strategic partners, dependence upon broad-based acceptance of NetScout’s
network performance management solutions, NetScout’s ability to achieve
and maintain a high rate of growth, introduction and market acceptance
of new products and product enhancements, 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 and the ability of NetScout to successfully
integrate Psytechnics, Fox Replay, Simena, Accanto Systems and ONPATH
Technologies, and achieve operational efficiencies. For a more detailed
description of the risk factors associated with NetScout, please refer
to NetScout’s Annual Report on Form 10-K for the fiscal year ended March
31, 2013 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.
©2013 NetScout Systems, Inc. All rights reserved. NetScout and the
NetScout logo and nGenius are registered trademarks of NetScout
Systems, Inc.
NetScout Systems, Inc.
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Condensed Consolidated Statements of Operations
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(In thousands, except per share data)
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Three Months Ended
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June 30,
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2013
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2012
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Revenue:
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Product
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$
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42,977
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$
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40,262
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Service
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38,828
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36,099
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Total revenue
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81,805
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76,361
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Cost of revenue:
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Product
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9,773
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10,070
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Service
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7,149
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6,793
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Total cost of revenue
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16,922
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16,863
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|
Gross profit
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64,883
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59,498
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Operating expenses:
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Research and development
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15,965
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14,077
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Sales and marketing
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32,200
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30,149
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General and administrative
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6,981
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6,557
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Amortization of acquired intangible assets
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854
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586
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Restructuring charges
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-
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(87
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)
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Total operating expenses
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56,000
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51,282
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Income from operations
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8,883
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|
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8,216
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Interest and other expense, net
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(73
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)
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(356
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)
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Income before income tax expense
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8,810
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|
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7,860
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Income tax expense
|
|
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3,557
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|
|
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|
2,852
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Net income
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$
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5,253
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|
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$
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5,008
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Basic net income per share
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$
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0.13
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$
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0.12
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Diluted net income per share
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$
|
0.12
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$
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0.12
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Weighted average common shares outstanding used in computing:
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Net income per share - basic
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41,405
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|
|
|
|
41,742
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Net income per share - diluted
|
|
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42,068
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|
|
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|
42,453
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
NetScout Systems, Inc.
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Reconciliation of Current GAAP to Current and Historical Non-GAAP
Financial Measures
|
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
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|
|
Three Months Ended
|
|
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June 30,
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|
|
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|
2013
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|
|
2012
|
|
|
|
|
|
|
|
|
GAAP Revenue
|
|
|
|
$
|
81,805
|
|
|
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$
|
76,361
|
|
Deferred revenue fair value adjustment
|
|
|
|
|
140
|
|
|
|
|
138
|
|
Non-GAAP Revenue
|
|
|
|
$
|
81,945
|
|
|
|
$
|
76,499
|
|
|
|
|
|
|
|
|
|
GAAP Gross profit
|
|
|
|
$
|
64,883
|
|
|
|
$
|
59,498
|
|
Deferred revenue fair value adjustment
|
|
|
|
|
140
|
|
|
|
|
138
|
|
Shared-based compensation expense (1)
|
|
|
|
|
190
|
|
|
|
|
115
|
|
Amortization of acquired intangible assets (2)
|
|
|
|
|
819
|
|
|
|
|
1,417
|
|
Compensation for post combination services (4)
|
|
|
|
|
8
|
|
|
|
|
-
|
|
Non-GAAP Gross profit
|
|
|
|
$
|
66,040
|
|
|
|
$
|
61,168
|
|
|
|
|
|
|
|
|
|
GAAP Income from operations
|
|
|
|
$
|
8,883
|
|
|
|
$
|
8,216
|
|
Deferred revenue fair value adjustment
|
|
|
|
|
140
|
|
|
|
|
138
|
|
Shared-based compensation expense (1)
|
|
|
|
|
2,812
|
|
|
|
|
2,247
|
|
Amortization of acquired intangible assets (2)
|
|
|
|
|
1,673
|
|
|
|
|
2,003
|
|
Business development and integration expense (3)
|
|
|
|
|
170
|
|
|
|
|
357
|
|
Compensation for post combination services (4)
|
|
|
|
|
444
|
|
|
|
|
372
|
|
Restructuring charges
|
|
|
|
|
-
|
|
|
|
|
(87
|
)
|
Non-GAAP Income from operations
|
|
|
|
$
|
14,122
|
|
|
|
$
|
13,246
|
|
|
|
|
|
|
|
|
|
GAAP Net income
|
|
|
|
$
|
5,253
|
|
|
|
$
|
5,008
|
|
Deferred revenue fair value adjustment
|
|
|
|
|
140
|
|
|
|
|
138
|
|
Shared-based compensation expense (1)
|
|
|
|
|
2,812
|
|
|
|
|
2,247
|
|
Amortization of acquired intangible assets (2)
|
|
|
|
|
1,673
|
|
|
|
|
2,003
|
|
Business development and integration expense (3)
|
|
|
|
|
170
|
|
|
|
|
357
|
|
Compensation for post combination services (4)
|
|
|
|
|
444
|
|
|
|
|
372
|
|
Restructuring charges
|
|
|
|
|
-
|
|
|
|
|
(87
|
)
|
Income tax adjustments (5)
|
|
|
|
|
(1,785
|
)
|
|
|
|
(1,911
|
)
|
Non-GAAP Net income
|
|
|
|
$
|
8,707
|
|
|
|
$
|
8,127
|
|
|
|
|
|
|
|
|
|
GAAP Diluted Net income per share
|
|
|
|
$
|
0.12
|
|
|
|
$
|
0.12
|
|
Share impact of non-GAAP adjustments identified above
|
|
|
|
|
0.09
|
|
|
|
|
0.07
|
|
Non-GAAP Diluted net income per share
|
|
|
|
$
|
0.21
|
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
Shares used in computing non-GAAP diluted net income per share
|
|
|
|
|
42,068
|
|
|
|
|
42,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Share-based compensation expense included in these amounts is
as follows:
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
|
|
$
|
44
|
|
|
|
$
|
49
|
|
Cost of service revenue
|
|
|
|
|
146
|
|
|
|
|
66
|
|
Research and development
|
|
|
|
|
896
|
|
|
|
|
644
|
|
Sales and marketing
|
|
|
|
|
845
|
|
|
|
|
718
|
|
General and administrative
|
|
|
|
|
881
|
|
|
|
|
770
|
|
Total share-based compensation expense
|
|
|
|
$
|
2,812
|
|
|
|
$
|
2,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Amortization expense related to acquired software and product
technology included in these amounts is as follows:
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
|
|
$
|
819
|
|
|
|
$
|
1,417
|
|
Operating expenses
|
|
|
|
|
854
|
|
|
|
|
586
|
|
Total amortization expense
|
|
|
|
$
|
1,673
|
|
|
|
$
|
2,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Business development and integration expense included in these
amounts is as follows:
|
|
|
|
|
|
|
|
Cost of service revenue
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
Research and development
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Sales and marketing
|
|
|
|
|
-
|
|
|
|
|
-
|
|
General and administrative
|
|
|
|
|
170
|
|
|
|
|
357
|
|
Other income (expense), net
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Total business development and integration expense
|
|
|
|
$
|
170
|
|
|
|
$
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) Compensation for post combination services included in these
amounts is as follows:
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
|
|
|
6
|
|
|
|
|
-
|
|
Cost of service revenue
|
|
|
|
|
2
|
|
|
|
|
-
|
|
Research and development
|
|
|
|
|
113
|
|
|
|
|
372
|
|
Sales and marketing
|
|
|
|
|
39
|
|
|
|
|
-
|
|
General and administrative
|
|
|
|
|
284
|
|
|
|
|
-
|
|
Total compensation for post combination services
|
|
|
|
$
|
444
|
|
|
|
$
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) Total income tax adjustment is as follows:
|
|
|
|
|
|
|
|
Tax effect of non-GAAP adjustments above at 38%
|
|
|
|
$
|
(1,992
|
)
|
|
|
$
|
(1,911
|
)
|
Tax impact of non-GAAP reconciling items in loss jurisdictions
|
|
|
|
|
207
|
|
|
|
|
-
|
|
Total income tax adjustments
|
|
|
|
$
|
(1,785
|
)
|
|
|
$
|
(1,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NetScout Systems, Inc.
|
Consolidated Balance Sheets
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2013
|
|
|
2013
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
|
|
$
|
149,060
|
|
|
|
$
|
137,268
|
|
Accounts receivable, net
|
|
|
|
|
50,922
|
|
|
|
|
73,900
|
|
Inventories
|
|
|
|
|
10,940
|
|
|
|
|
7,563
|
|
Prepaid expenses and other current assets
|
|
|
|
|
18,319
|
|
|
|
|
18,581
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
229,241
|
|
|
|
|
237,312
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
|
|
20,565
|
|
|
|
|
19,678
|
|
Goodwill and intangible assets, net
|
|
|
|
|
264,899
|
|
|
|
|
266,280
|
|
Deferred income taxes
|
|
|
|
|
8,751
|
|
|
|
|
9,211
|
|
Long-term marketable securities
|
|
|
|
|
13,762
|
|
|
|
|
16,823
|
|
Other assets
|
|
|
|
|
2,439
|
|
|
|
|
2,872
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
539,657
|
|
|
|
$
|
552,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
12,130
|
|
|
|
$
|
10,161
|
|
Accrued compensation
|
|
|
|
|
20,132
|
|
|
|
|
31,585
|
|
Accrued other
|
|
|
|
|
6,671
|
|
|
|
|
8,370
|
|
Deferred revenue
|
|
|
|
|
93,749
|
|
|
|
|
95,055
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
132,682
|
|
|
|
|
145,171
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
6,738
|
|
|
|
|
6,497
|
|
Deferred tax liability
|
|
|
|
|
950
|
|
|
|
|
941
|
|
Accrued long-term retirement benefits
|
|
|
|
|
1,747
|
|
|
|
|
1,757
|
|
Long-term deferred revenue
|
|
|
|
|
24,087
|
|
|
|
|
25,907
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
166,204
|
|
|
|
|
180,273
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
49
|
|
|
|
|
49
|
|
Additional paid-in capital
|
|
|
|
|
256,762
|
|
|
|
|
253,202
|
|
Accumulated other comprehensive income
|
|
|
|
|
878
|
|
|
|
|
671
|
|
Treasury stock, at cost
|
|
|
|
|
(90,950
|
)
|
|
|
|
(83,480
|
)
|
Retained earnings
|
|
|
|
|
206,714
|
|
|
|
|
201,461
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
|
|
373,453
|
|
|
|
|
371,903
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
539,657
|
|
|
|
$
|
552,176
|
|

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