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NETSCOUT Reports Second Quarter Fiscal Year 2022 Financial Results

November 04, 2021

WESTFORD, Mass.--(BUSINESS WIRE)-- NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of cybersecurity, service assurance, and business analytics solutions, today announced financial results for its second quarter fiscal year 2022 ended September 30, 2021.

“We are pleased with our second quarter results, which have contributed to our solid foundation as we move into the second half of the fiscal year,” stated Anil Singhal, NETSCOUT’s president and chief executive officer. “The strong growth of our ‘software-only’ product revenue in the second quarter supported our overall revenue increase, enhanced our margins, and improved our diluted earnings per share on a year-over-year basis. Additionally, as customers dealt with the challenging supply chain environment and experienced procurement issues, our ‘software-only’ solutions enabled them to utilize their budgets more effectively by accelerating the timing of their purchases with us.”

Singhal continued, “As ‘Guardians of the Connected World,’ our solutions continue to be vital. We provide borderless visibility and cybersecurity solutions that assure and secure the performance, availability, and security of our customers’ digital ecosystems. Our customers can leverage these solutions to compete more efficiently and effectively in the new economy, which is increasingly essential given the most-recent challenges brought about by the COVID-19 pandemic. Looking ahead, long-term technology trends, including 5G, digital transformation through cloud migration, and the requirement for greater cybersecurity protection, are all setting the stage for NETSCOUT’s continued advancement.”

Recent developments and highlights:

  • In early-November 2021, NETSCOUT announced the availability of Omnis® Cyber Intelligence (OCI), the industry's fastest and most scalable network security software solution, built on the foundation of the industry's most prominent network monitoring and packet recording and analysis technology. OCI uniquely detects and investigates suspicious activities in real-time and retrospectively, identifies threats early in the attack life cycle to prevent infections from spreading, stops future attacks, and identifies compromised assets.
  • In October 2021, NETSCOUT introduced its NETSCOUT Visibility as a Service (VaaS) managed service offering, which provides 24x7 testing, monitoring, troubleshooting, and reporting for customers' critical IT services and applications. Built on NETSCOUT's nGenius® service assurance solutions, the service leverages the deep expertise of the company's VaaS engineering team to help alleviate the burdens faced by corporate and government IT organizations worldwide.
  • In late-September 2021, NETSCOUT announced that the Company and Palo Alto Networks (NYSE: PANW), the global cybersecurity leader, had fully integrated security solutions that are now available to support security operations centers (SOCs) in detecting, analyzing, and mitigating security threats in complex hybrid environments.
  • In late September 2021, NETSCOUT announced that it had begun working with NTT Communications Corporation (NTT Com) to conduct research and resilience testing to detect and mitigate cyberattacks by leveraging the resources of NETSCOUT's ATLAS Security Engineering & Response Team (ASERT). NTT Com is taking active measures to ensure that its network can support increased traffic and security needs while also providing a more resilient network for the future.
  • In mid-September 2021, NETSCOUT released its findings from its bi-annual Threat Intelligence Report. These findings underscore the dramatic impact that cyberattacks continue to have on private and public organizations as well as governments worldwide. In the first half of 2021, cybercriminals launched approximately 5.4 million Distributed Denial of Services (DDoS) attacks, increasing 11% over 1H2020 figures. Additionally, data projections from NETSCOUT's Active Level Threat Analysis System (ATLAS™) Security Engineering and Response Team (ASERT) point to 2021 as another record-setting year that is on track to surpass 11 million global DDoS attacks. ASERT expects the long tail of attacker innovation to last going forward, fueling a growing cybersecurity crisis that will continue to impact both public and private organizations alike.
  • In August 2021, NETSCOUT announced that it had issued its inaugural Environmental, Social, and Governance (ESG) Report. The report details the Company's efforts on multiple ESG front, which include but are not limited to 1) supporting community-based digital inclusion programs, 2) driving diversity, equity, and inclusion (DEI), 3) reducing electricity demands across the Company’s facilities, and 4) continuing to design solutions that help customers to reduce their environmental impacts.

Q2 FY22 Financial Results

Total revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2022 was $211.9 million, compared with $205.3 million in the same quarter one year ago. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.

Product revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2022 was $101.6 million, which was approximately 48% of total revenue. This compares with second-quarter fiscal year 2021 product revenue (GAAP and non-GAAP) of $92.0 million, which was approximately 45% of total revenue.

Service revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2022 was $110.3 million, or approximately 52% of total revenue, compared to service revenue (GAAP and non-GAAP) of $113.4 million, or approximately 55% of total revenue, for the same period one year ago.

NETSCOUT’s income from operations (GAAP) was $12.2 million in the second quarter of fiscal year 2022, compared with income from operations (GAAP) of $3.8 million in the comparable quarter one year ago. Second-quarter fiscal year 2022 non-GAAP EBITDA from operations was $53.0 million, or 25.0% of non-GAAP quarterly revenue, compared with $46.8 million of non-GAAP EBITDA from operations, or 22.8% of non-GAAP quarterly revenue in the second quarter of fiscal year 2021. The Company’s second-quarter fiscal year 2022 (GAAP) operating margin was 5.7% versus 1.8% in the prior fiscal year’s second quarter. Second-quarter fiscal year 2022 non-GAAP income from operations was $47.3 million with a non-GAAP operating margin of 22.3%. This compares with non-GAAP income from operations of $39.8 million and a non-GAAP operating margin of 19.4% in the second-quarter fiscal year 2021.

Net income (GAAP) for the second quarter of fiscal year 2022 was $7.9 million, or $0.11 per share (diluted), versus a net loss (GAAP) of $3.7 million, or $0.05 per share, for the second quarter of fiscal year 2021. On a non-GAAP basis, net income for the second quarter of fiscal year 2022 was $35.3 million, or $0.47 per share (diluted), compared with $28.2 million, or $0.38 per share (diluted), for the second quarter of fiscal year 2021.

As of September 30, 2021, cash, cash equivalents, and short and long-term marketable securities were $475.8 million, compared with $476.5 million as of March 31, 2021, and $427.8 million as of September 30, 2020. During the second quarter of fiscal year 2022, NETSCOUT repurchased a total of 921,299 shares of its common stock at an average price of $26.75 per share for an approximate total of $24.6 million spent in aggregate. At the end of the second quarter of fiscal year 2022, NETSCOUT had $350.0 million outstanding on its $800 million revolving credit facility, which will expire in July 2026.

First-Half FY22 Financial Results

  • For the first half of fiscal year 2022, total revenue (GAAP and non-GAAP) was $402.2 million versus total revenue (GAAP and non-GAAP) of $389.2 million for the comparable six-month period of fiscal year 2021. A reconciliation of GAAP and non-GAAP results is included in the financial tables below.
  • Product revenue (GAAP & non-GAAP) for the first six months of fiscal year 2022 was $183.6 million, compared with $163.7 million in the same period one year ago.
  • First-half fiscal year 2022 service revenue (GAAP & non-GAAP) was $218.6 million versus $225.5 million in the same period last year.
  • NETSCOUT’s income from operations (GAAP) during the first six months of fiscal year 2022 was $1.5 million, compared with a loss from operations (GAAP) of $10.7 million for the comparable six-month period of fiscal year 2021. The Company’s first-half fiscal year 2022 (GAAP) operating margin was 0.4% versus (2.8%) in the comparable period of fiscal year 2021. During the first six months of fiscal year 2022, the Company’s non-GAAP EBITDA from operations was $80.6 million, or 20.0% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $73.4 million, or 18.9% of non-GAAP total revenue, in the first six months official year 2021. The Company’s non-GAAP income from operations for the first half of fiscal year 2022 was $69.1 million with a non-GAAP operating margin of 17.2%, compared with non-GAAP income from operations of $60.5 million and a non-GAAP operating margin of 15.5% for the same period of fiscal year 2021.
  • For the first six months of fiscal year 2022, NETSCOUT’s net loss (GAAP) was $3.4 million, or $0.05 per share (diluted), compared with a net loss (GAAP) of $21.1 million, or $0.29 per share (diluted), in the same six-month period one year ago. Non-GAAP net income for the first half of fiscal year 2022 was $50.3 million, or $0.67 per share (diluted), compared with non-GAAP net income of $40.5 million, or $0.55 per share (diluted), for the same period of fiscal year 2021.

Outlook:

NETSCOUT is reiterating its revenue and diluted net income per share outlook (GAAP and non-GAAP) previously issued on July 29, 2021. The current outlook is as follows:

  • GAAP and non-GAAP revenue expectations remain in the range of $835 million to $865 million.
  • GAAP net income per share (diluted) expectations remain in the range of $0.36 to $0.42. Non-GAAP net income per share (diluted) expectations remain in the range of $1.71 to $1.77.
  • A reconciliation between GAAP and non-GAAP revenue and net income per share (diluted) for NETSCOUT’s guidance is included in the financial tables below.

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its second-quarter fiscal year 2022 financial results today at 8:30 a.m. ET. This call will be webcast live through NETSCOUT’s website at https://ir.netscout.com/investors/overview/default.aspx. Alternatively, people can listen to the call by dialing (785) 424-1667. The conference call ID is NTCTQ222. A replay of the call will be available after 12:00 p.m. ET on November 04, 2021, for approximately one week. The number for the replay is (800) 839-5128 for U.S./Canada and (402) 220-1504 for international callers.

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 gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per share (diluted) and non-GAAP earnings before interest and other expense, income taxes, depreciation, amortization, and (EBITDA) from operations. Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share based compensation, and acquisition-related depreciation. Non-GAAP income from operations includes the aforementioned adjustments and also removes business development and integration expense, compensation for post-combination services, legal expenses related to a civil judgment, restructuring charges, and transitional service agreement expenses. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes loss on extinguishment of debt, net of related income tax effects. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures included in the attached tables within this press release.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, gross profit, operating margin, net income, and diluted net income per share), and may have limitations because they do not reflect all 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, without the supplemental non-GAAP disclosures, might 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 provides 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.

About NETSCOUT SYSTEMS, INC.

NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) assures digital business services against disruptions in availability, performance, and security. Our market and technology leadership stems from combining our patented smart data technology with smart analytics. We provide real-time, pervasive visibility, and insights customers need to accelerate and secure their digital transformation. Our approach transforms the way organizations plan, deliver, integrate, test, and deploy services and applications. Our nGenius service assurance solutions provide real-time, contextual analysis of service, network, and application performance. Arbor security solutions protect against DDoS attacks that threaten availability and advanced threats that infiltrate networks to steal critical business assets. To learn more about improving service, network, and application performance in physical or virtual data centers, or in the cloud, and how NETSCOUT’s performance and security solutions, powered by service intelligence can help you move forward with confidence, visit www.netscout.com or follow @NETSCOUT and @ArborNetworks on Twitter, Facebook, or LinkedIn.

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 without limitation, statements regarding NETSCOUT’s outlook, NETSCOUT being “Guardians of the Connected World,” and that NETSCOUT solutions continue to be vital, that NETSCOUT provides borderless visibility and cybersecurity solutions that assure and secure the performance, availability, and security of its customers’ digital ecosystems, that NETSCOUT customers can leverage these solutions to compete more efficiently and effectively in the new economy, which is increasingly essential given the most-recent challenges brought about by the COVID-19 pandemic, and that long-term technology trends, including 5G, digital transformation through cloud migration, and the requirement for greater cybersecurity protection, are all setting the stage for NETSCOUT’s continued advancement, constitute forward looking statements that involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors. Such factors include COVID-19 related impacts, slowdowns or downturns in economic conditions generally and in the market for advanced network, service assurance and cybersecurity solutions specifically; the volatile foreign exchange environment; the Company’s relationships with strategic partners and resellers; dependence upon broad-based acceptance of the Company’s network performance management solutions; the presence of competitors with greater financial resources than the Company has, and their strategic response to the company’s products; the Company’s ability to retain key executives and employees; the Company’s ability to realize the anticipated savings from recent restructuring actions and other expense management programs; lower than expected demand for the Company’s products and services; and the timing and magnitude of stock buyback activity based on market conditions, corporate considerations, debt agreements, and regulatory requirements. 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, 2021, and the Company’s subsequent Quarterly Reports on Form 10-Q, filed 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.

©2021 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries.

NETSCOUT SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,

2021

2020

2021

2020

Revenue:
Product

$

101,619

 

$

91,979

 

$

183,569

 

$

163,672

 

Service

 

110,299

 

 

113,360

 

 

218,621

 

 

225,482

 

Total revenue

 

211,918

 

 

205,339

 

 

402,190

 

 

389,154

 

 
Cost of revenue:
Product

 

20,340

 

 

26,977

 

 

43,505

 

 

48,129

 

Service

 

31,304

 

 

31,923

 

 

62,549

 

 

63,751

 

Total cost of revenue

 

51,644

 

 

58,900

 

 

106,054

 

 

111,880

 

 
Gross profit

 

160,274

 

 

146,439

 

 

296,136

 

 

277,274

 

 
Operating expenses:
Research and development

 

44,483

 

 

46,455

 

 

87,303

 

 

91,836

 

Sales and marketing

 

65,185

 

 

60,300

 

 

131,143

 

 

119,734

 

General and administrative

 

23,471

 

 

20,573

 

 

46,216

 

 

45,726

 

Amortization of acquired intangible assets

 

14,970

 

 

15,363

 

 

29,976

 

 

30,624

 

Restructuring charges

 

-

 

 

(31

)

 

-

 

 

62

 

 
Total operating expenses

 

148,109

 

 

142,660

 

 

294,638

 

 

287,982

 

 
Income (loss) from operations

 

12,165

 

 

3,779

 

 

1,498

 

 

(10,708

)

Interest and other expense, net

 

(2,336

)

 

(3,394

)

 

(4,756

)

 

(8,174

)

 
Income (loss) before income tax expense

 

9,829

 

 

385

 

 

(3,258

)

 

(18,882

)

Income tax expense

 

1,933

 

 

4,071

 

 

187

 

 

2,224

 

Net income (loss)

$

7,896

 

$

(3,686

)

$

(3,445

)

$

(21,106

)

 
 
Basic net income (loss) per share

$

0.11

 

$

(0.05

)

$

(0.05

)

$

(0.29

)

Diluted net income (loss) per share

$

0.11

 

$

(0.05

)

$

(0.05

)

$

(0.29

)

Weighted average common shares outstanding used in computing:
Net income (loss) per share - basic

 

74,382

 

 

73,058

 

 

74,122

 

 

72,682

 

Net income (loss) per share - diluted

 

75,093

 

 

73,058

 

 

74,122

 

 

72,682

 

NETSCOUT SYSTEMS, INC.
Consolidated Balance Sheets
(In thousands)
 
September 30,
2021
(Unaudited)
March 31,
2021
Assets
Current assets:
Cash, cash equivalents and marketable securities

$ 475,817

$ 476,453

Accounts receivable and unbilled costs, net

162,888

197,717

Inventories

25,728

22,813

Prepaid expenses and other current assets

37,155

25,489

 
Total current assets

701,588

722,472

 
Fixed assets, net

45,008

48,474

Goodwill and intangible assets, net

2,192,318

2,229,420

Operating lease right-of-use assets

56,715

61,512

Other assets

20,769

23,160

 
Total assets

$ 3,016,398

$ 3,085,038

 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable

$ 17,644

$ 17,964

Accrued compensation

57,783

83,057

Accrued other

36,642

28,152

Current portion of operating lease liabilities

11,992

12,354

Deferred revenue and customer deposits

246,726

269,748

 
Total current liabilities

370,787

411,275

 
Other long-term liabilities

12,315

21,641

Deferred tax liability

85,987

92,287

Accrued long-term retirement benefits

39,704

39,479

Long-term deferred revenue

102,457

103,310

Operating lease liabilities, net of current portion

56,144

61,267

Long-term debt

350,000

350,000

 
Total liabilities

1,017,394

1,079,259

 
Stockholders' equity:
Common stock

126

124

Additional paid-in capital

2,991,704

2,955,400

Accumulated other comprehensive loss

(1,931)

(1,940)

Treasury stock, at cost

(1,362,141)

(1,322,496)

Retained earnings

371,246

374,691

 
Total stockholders' equity

1,999,004

2,005,779

 
Total liabilities and stockholders' equity

$ 3,016,398

$ 3,085,038

NETSCOUT SYSTEMS, INC.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
 

Three Months Ended
September 30,

Three Months Ended
June 30,

Six Months Ended
September 30,

2021

2020

2021

2021

2020

 
Revenue (GAAP)

$

211,918

 

$

205,339

 

$

190,272

 

$

402,190

 

$

389,154

 

Service deferred revenue fair value adjustment

 

-

 

 

1

 

 

-

 

 

-

 

 

3

 

Non-GAAP Revenue

$

211,918

 

$

205,340

 

$

190,272

 

$

402,190

 

$

389,157

 

 
Gross Profit (GAAP)

$

160,274

 

$

146,439

 

$

135,862

 

$

296,136

 

$

277,274

 

Service deferred revenue fair value adjustment

 

-

 

 

1

 

 

-

 

 

-

 

 

3

 

Share-based compensation expense (1)

 

2,228

 

 

2,154

 

 

1,887

 

 

4,115

 

 

3,749

 

Amortization of acquired intangible assets (2)

 

3,352

 

 

4,765

 

 

3,360

 

 

6,712

 

 

9,500

 

Acquisition related depreciation expense (5)

 

7

 

 

5

 

 

5

 

 

12

 

 

11

 

Non-GAAP Gross Profit

$

165,861

 

$

153,364

 

$

141,114

 

$

306,975

 

$

290,537

 

 
Income (Loss) from Operations (GAAP)

$

12,165

 

$

3,779

 

$

(10,667

)

$

1,498

 

$

(10,708

)

Service deferred revenue fair value adjustment

 

-

 

 

1

 

 

-

 

 

-

 

 

3

 

Share-based compensation expense (1)

 

16,735

 

 

15,736

 

 

13,965

 

 

30,700

 

 

27,832

 

Amortization of acquired intangible assets (2)

 

18,322

 

 

20,128

 

 

18,366

 

 

36,688

 

 

40,124

 

Business development and integration expense (3)

 

-

 

 

-

 

 

(5

)

 

(5

)

 

16

 

Compensation for post-combination services (4)

 

-

 

 

63

 

 

2

 

 

2

 

 

127

 

Restructuring charges

 

-

 

 

(31

)

 

-

 

 

-

 

 

62

 

Acquisition related depreciation expense (5)

 

64

 

 

60

 

 

60

 

 

124

 

 

121

 

Transitional service agreement expense (6)

 

59

 

 

101

 

 

58

 

 

117

 

 

101

 

Legal judgments expense (8)

 

-

 

 

-

 

 

-

 

 

-

 

 

2,804

 

Non-GAAP Income from Operations

$

47,345

 

$

39,837

 

$

21,779

 

$

69,124

 

$

60,482

 

 
Net Income (Loss) (GAAP)

$

7,896

 

$

(3,686

)

$

(11,341

)

$

(3,445

)

$

(21,106

)

Service deferred revenue fair value adjustment

 

-

 

 

1

 

 

-

 

 

-

 

 

3

 

Share-based compensation expense (1)

 

16,735

 

 

15,736

 

 

13,965

 

 

30,700

 

 

27,832

 

Amortization of acquired intangible assets (2)

 

18,322

 

 

20,128

 

 

18,366

 

 

36,688

 

 

40,124

 

Business development and integration expense (3)

 

-

 

 

-

 

 

(5

)

 

(5

)

 

16

 

Compensation for post-combination services (4)

 

-

 

 

63

 

 

2

 

 

2

 

 

127

 

Restructuring charges

 

-

 

 

(31

)

 

-

 

 

-

 

 

62

 

Acquisition related depreciation expense (5)

 

64

 

 

60

 

 

60

 

 

124

 

 

121

 

Loss on extinguishment of debt (7)

 

596

 

 

-

 

 

-

 

 

596

 

 

-

 

Legal judgments expense (8)

 

-

 

 

-

 

 

-

 

 

-

 

 

2,804

 

Income tax adjustments (9)

 

(8,315

)

 

(4,027

)

 

(6,089

)

 

(14,404

)

 

(9,523

)

Non-GAAP Net Income

$

35,298

 

$

28,244

 

$

14,958

 

$

50,256

 

$

40,460

 

 
Diluted Net Income (Loss) Per Share (GAAP)

$

0.11

 

$

(0.05

)

$

(0.15

)

$

(0.05

)

$

(0.29

)

Share impact of non-GAAP adjustments identified above

 

0.36

 

 

0.43

 

 

0.35

 

 

0.72

 

 

0.84

 

Non-GAAP Diluted Net Income Per Share

$

0.47

 

$

0.38

 

$

0.20

 

$

0.67

 

$

0.55

 

 
Shares used in computing non-GAAP diluted net income per share

 

75,093

 

 

73,594

 

 

75,212

 

 

75,112

 

 

73,521

 

NETSCOUT SYSTEMS, INC.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued
(In thousands)
(Unaudited)
 

Three Months Ended
September 30,

Three Months Ended
June 30,

Six Months Ended
September 30,

 

 

 

 

2021

 

2020

 

2021

 

2021

 

2020

 

(1

)

Share-based compensation expense included in these amounts
is as follows:
Cost of product revenue

$

321

 

$

344

 

$

274

 

$

595

 

$

589

 

Cost of service revenue

 

1,907

 

 

1,810

 

 

1,613

 

 

3,520

 

 

3,160

 

Research and development

 

4,902

 

 

4,935

 

 

4,091

 

 

8,993

 

 

8,716

 

Sales and marketing

 

5,842

 

 

5,357

 

 

4,814

 

 

10,656

 

 

9,349

 

General and administrative

 

3,763

 

 

3,290

 

 

3,173

 

 

6,936

 

 

6,018

 

Total share-based compensation expense

$

16,735

 

$

15,736

 

$

13,965

 

$

30,700

 

$

27,832

 

 

(2

)

Amortization expense related to acquired software and product
technology, tradenames, customer relationships included in these
amounts is as follows:
Cost of product revenue

$

3,352

 

$

4,765

 

$

3,360

 

$

6,712

 

$

9,500

 

Operating expenses

 

14,970

 

 

15,363

 

 

15,006

 

 

29,976

 

 

30,624

 

Total amortization expense

$

18,322

 

$

20,128

 

$

18,366

 

$

36,688

 

$

40,124

 

 

(3

)

Business development and integration expense included in
these amounts is as follows:
General and administrative

$

-

 

$

-

 

$

(5

)

$

(5

)

$

16

 

Total business development and integration expense

$

-

 

$

-

 

$

(5

)

$

(5

)

$

16

 

 

(4

)

Compensation for post-combination services included in these
amounts is as follows:
Research and development

$

-

 

$

62

 

$

2

 

$

2

 

$

125

 

Sales and marketing

 

-

 

 

1

 

 

-

 

 

-

 

 

2

 

Total compensation for post-combination services

$

-

 

$

63

 

$

2

 

$

2

 

$

127

 

 

(5

)

Acquisition related depreciation expense included in these
amounts is as follows:
Cost of product revenue

$

4

 

$

3

 

$

3

 

$

7

 

$

7

 

Cost of service revenue

 

3

 

 

2

 

 

2

 

 

5

 

 

4

 

Research and development

 

45

 

 

42

 

 

42

 

 

87

 

 

84

 

Sales and marketing

 

8

 

 

9

 

 

9

 

 

17

 

 

18

 

General and administrative

 

4

 

 

4

 

 

4

 

 

8

 

 

8

 

Total acquisition related depreciation expense

$

64

 

$

60

 

$

60

 

$

124

 

$

121

 

 

(6

)

Transitional service agreement (income) expense included in
these amounts is as follows:
Research and development

$

7

 

$

11

 

$

6

 

$

13

 

$

11

 

Sales and marketing

 

9

 

 

16

 

 

10

 

 

19

 

 

16

 

General and administrative

 

43

 

 

74

 

 

42

 

 

85

 

 

74

 

Other (income) expense, net

 

(59

)

 

(101

)

 

(58

)

 

(117

)

 

(101

)

Total transitional service agreement (income) expense

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

(7

)

Loss on extinguishment of debt included in this amount is
as follows:
Interest and other expense, net

$

596

 

$

-

 

$

-

 

$

596

 

$

-

 

Total loss on extinguishment of debt

$

596

 

$

-

 

$

-

 

$

596

 

$

-

 

 

(8

)

Legal judgments expense included in this amount is
as follows:
General and administrative

$

-

 

$

-

 

$

-

 

$

-

 

$

2,804

 

Total legal judgments expense

$

-

 

$

-

 

$

-

 

$

-

 

$

2,804

 

 

(9

)

Total income tax adjustment included in this
amount is as follows:
Tax effect of non-GAAP adjustments above

$

(8,315

)

$

(4,027

)

$

(6,089

)

$

(14,404

)

$

(9,523

)

Total income tax adjustments

$

(8,315

)

$

(4,027

)

$

(6,089

)

$

(14,404

)

$

(9,523

)

NETSCOUT SYSTEMS, INC.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures -
Non-GAAP EBITDA from Operations
(In thousands)
(Unaudited)
 

Three Months Ended
September 30,

Three Months Ended
June 30,

Six Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2021

 

2020

 
Income (loss) from operations (GAAP)

$

12,165

$

3,779

$

(10,667

)

$

1,498

$

(10,708

)

Previous adjustments to determine non-GAAP income from operations

 

35,180

 

36,058

 

32,446

 

 

67,626

 

71,190

 

Non-GAAP Income from operations

 

47,345

 

39,837

 

21,779

 

 

69,124

 

60,482

 

 
Depreciation excluding acquisition related

 

5,623

 

6,955

 

5,811

 

 

11,434

 

12,907

 

 
Non-GAAP EBITDA from operations

$

52,968

$

46,792

$

27,590

 

$

80,558

$

73,389

 

NETSCOUT SYSTEMS, INC.
Reconciliation of GAAP Financial Guidance to Non-GAAP Financial Guidance
(Unaudited)
(In millions, except net income per share - diluted)

 

FY'21

FY'22

GAAP & Non-GAAP revenue

$

831.3

 

~$835 million to ~$865 million

 

FY'21

FY'22

GAAP net income

$

19.4

 

~$27 million to ~$32 million

Deferred service revenue fair value adjustment

$

-

 

-

Amortization of intangible assets

$

80.2

 

~$73 million to ~$74 million

Share-based compensation expenses

$

51.9

 

~$53 million to ~$54 million

Business development & integration expenses*

$

0.5

 

Less than $1 million

Interest Exp - Loss on Debt Extinguishment

$

-

 

Less than $1 million

Legal judgments expense

$

2.8

 

-

Restructuring costs

$

0.1

 

-

Total adjustments

$

135.5

 

~$128 million to ~$129 million

Related impact of adjustments on income tax

$

(29.0

)

(~$27 million)

Non-GAAP net income

$

125.8

 

~$128 million to ~$133 million

 

GAAP net income per share (diluted)

$

0.26

 

~$0.36 to ~$0.42

Non-GAAP net income per share (diluted)

$

1.70

 

~$1.71 to ~$1.77

 

Average weighted shares outstanding (diluted GAAP)

 

73.8

 

~75 million

Average weighted shares outstanding (diluted Non-GAAP)

 

73.8

 

~75 million

*Business development & integration expenses include compensation for post-combination services and acquisition-related depreciation expense
**Figures in table may not total due to rounding

 

Investors
Anthony Piazza
Vice President, Corporate Finance
978-614-4286
IR@netscout.com

Media
Maribel Lopez
Manager, Marketing & Corporate Communications
781-362-4330
Maribel.Lopez@netscout.com

Source: NETSCOUT SYSTEMS, INC.

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