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NETSCOUT Reports Second Quarter Fiscal Year 2023 Financial Results

October 27, 2022

Delivers Strong Financial Performance and Advances Strategic Growth Priorities

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 ended September 30, 2022.

“We delivered strong financial results and drove progress across our strategic growth priorities in the second quarter,” stated Anil Singhal, NETSCOUT’s president and chief executive officer. “Our service assurance and cybersecurity product lines have continued to perform well, delivering healthy revenue growth in the second quarter and first half of fiscal year 2023 on a year-over-year basis. Looking ahead, we plan to continue managing our operations prudently for a balanced approach to revenue growth and profitability. We believe our business prospects remain solid, despite the challenging macroeconomic environment, which we continue to monitor closely.”

Singhal continued, “Organizations around the globe are facing an increasingly complex digital environment. As a result, our purpose as ‘Guardians of the Connected World’ is more important than ever. By providing a state-of-the-art platform for increased visibility and defensibility, we play a vital role in this ecosystem and remain confident in our ability to help our customers navigate these challenges.”

Q2 FY23 Financial Results

Total revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2023 was $228.1 million, compared with $211.9 million (GAAP and non-GAAP) in the second quarter of fiscal year 2022. A reconciliation of GAAP and non-GAAP results is included in the financial tables below.

Product revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2023 was $111.8 million, which was approximately 49% of total revenue in the period. This compares with product revenue (GAAP and non-GAAP) of $101.6 million in the second quarter of fiscal year 2022, which was approximately 48% of total revenue in the period.

Service revenue (GAAP and non-GAAP) for the second quarter of fiscal year 2023 was $116.3 million, or approximately 51% of total revenue in the period. This compares with service revenue (GAAP and non-GAAP) of $110.3 million in the second quarter of fiscal year 2022, which was approximately 52% of total revenue for the period.

NETSCOUT’s income from operations (GAAP) was $21.4 million in the second quarter of fiscal year 2023, compared with $12.2 million in the second quarter of fiscal year 2022. Non-GAAP EBITDA from operations in the second quarter of fiscal year 2023 was $59.1 million, or 25.9% of non-GAAP quarterly revenue for the period. This compares to non-GAAP EBITDA from operations of $53.0 million in the second quarter of fiscal year 2022, or 25.0% of non-GAAP quarterly revenue for the period. The Company’s operating margin (GAAP) was 9.4% in the second quarter of fiscal year 2023, versus 5.7% in the same period of the prior fiscal year. Non-GAAP income from operations was $54.0 million with a non-GAAP operating margin of 23.7% in the second quarter of fiscal year 2023. This compares to non-GAAP income from operations of $47.3 million and a non-GAAP operating margin of 22.3% in the second quarter of fiscal year 2022.

Net income (GAAP) for the second quarter of fiscal year 2023 was $17.4 million, or $0.24 per share (diluted), versus $7.9 million, or $0.11 per share (diluted), for the second quarter of fiscal year 2022. On a non-GAAP basis, net income for the second quarter of fiscal year 2023 was $41.3 million, or $0.57 per share (diluted), compared with $35.3 million, or $0.47 per share (diluted), for the second quarter of fiscal year 2022.

As of September 30, 2022, cash, cash equivalents, and marketable securities were $367.1 million, compared with $703.2 million as of March 31, 2022, and $475.8 million as of September 30, 2021. The change in cash, cash equivalents, and marketable securities since March 31, 2022, was primarily driven by two factors. First, NETSCOUT entered into an accelerated share repurchase agreement (the “ASR agreement”) in the first quarter of fiscal year 2023 to repurchase $150 million of the Company’s common stock. NETSCOUT received 70 percent of the total shares estimated to be repurchased pursuant to the ASR agreement in the first quarter of fiscal year 2023, receiving approximately 3.3 million shares in the period, and expects to receive the remaining 30 percent when the ASR agreement transaction concludes, which is expected to occur no later than December 31, 2022. Second, NETSCOUT repaid $150 million of its outstanding debt balance under its revolving credit facility during the first quarter of fiscal year 2023. The Company’s outstanding debt balance under its revolving credit facility was $200 million as of September 30, 2022. The Company’s $800 million revolving credit facility will expire in July 2026.

First-Half FY23 Financial Results

  • For the first half of fiscal year 2023, total revenue (GAAP and non-GAAP) was $436.9 million, versus total revenue (GAAP and non-GAAP) of $402.2 million in the first half of fiscal year 2022. A reconciliation of GAAP and non-GAAP results is included in the financial tables below.
  • Product revenue (GAAP and non-GAAP) for the first half of fiscal year 2023 was $210.1 million, compared with $183.6 million in the first half of fiscal year 2022.
  • Service revenue (GAAP and non-GAAP) for the first half of fiscal year 2023 was $226.8 million, compared with $218.6 million in the first half of fiscal year 2022.
  • NETSCOUT’s income from operations (GAAP) for the first half of fiscal year 2023 was $12.3 million, compared with $1.5 million in the first half of fiscal year 2022. The Company’s operating margin (GAAP) for the first half of fiscal year 2023 was 2.8%, versus 0.4% in the first half of fiscal year 2022. The Company’s non-GAAP EBITDA from operations for the first half of fiscal year 2023 was $88.9 million, or 20.4% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $80.6 million, or 20.0% of non-GAAP total revenue, in the first half of fiscal year 2022. The Company’s non-GAAP income from operations for the first half of fiscal year 2023 was $78.5 million with a non-GAAP operating margin of 18.0%, compared with non-GAAP income from operations of $69.1 million and a non-GAAP operating margin of 17.2% for the first half of fiscal year 2022.
  • For the first half of fiscal year 2023, NETSCOUT’s net income (GAAP) was $10.3 million, or $0.14 per share (diluted), compared with a net loss (GAAP) of $3.4 million, or a loss of $0.05 per share (diluted), in the first half of fiscal year 2022. Non-GAAP net income for the first half of fiscal year 2023 was $59.4 million, or $0.81 per share (diluted), compared with non-GAAP net income of $50.3 million, or $0.67 per share (diluted), for the first half of fiscal year 2022.

Financial Outlook:

NETSCOUT is reiterating its revenue outlook (GAAP and non-GAAP) as well as its diluted net income per share outlook (GAAP and non-GAAP) for fiscal year 2023, all of which were previously issued by the Company on August 4, 2022, in its first quarter fiscal year 2023 earnings press release. NETSCOUT’s financial outlook for fiscal year 2023 remains as follows:

  • Revenue (GAAP and non-GAAP) is expected to remain in the range of $895 million to $925 million.
  • GAAP net income per share (diluted) is expected to remain in the range of $0.62 to $0.68. Non-GAAP net income per share (diluted) is expected to remain in the range of $1.97 to $2.03.
  • A reconciliation between GAAP and non-GAAP numbers for NETSCOUT’s fiscal year 2023 outlook is included in the financial tables below.

Recent Developments and Highlights

  • In October 2022, Swisscom, NETSCOUT, and Ericsson jointly announced what’s believed to be the world’s first solution to enable 5G packet data processing in the cloud. The combination of Ericsson’s cloud-native dual-mode 5G Core with built-in software probes and NETSCOUT’s vSTREAM addresses the industry challenge of providing end-to-end monitoring and securing 5G networks when handling cloudification and encryption. By enabling cloud-based packet data processing and network function monitoring, this solution allows for dramatic improvements in network service assurance, analytics, and cybersecurity. The solution has been introduced to Swisscom’s newly deployed cloud-native, TLS-encrypted 5G network.
  • In late September 2022, NETSCOUT announced the findings from its 1H2022 DDoS Threat Intelligence Report. The findings demonstrate how sophisticated cybercriminals have become at bypassing defenses with new Distributed Denial of Service (DDoS) attack vectors and successful methodologies. By constantly innovating and adapting, these attackers are designing new and more effective DDoS attack vectors, as well as doubling down on those existing methodologies that are already effective. According to the report, there were more than six million global DDoS attacks in the first half of 2022. In addition, attackers conducted more pre-attack reconnaissance, exercised a new attack vector called TP240 PhoneHome, created a tsunami of TCP flooding attacks, and rapidly expanded high-powered botnets to plague network-connected resources. The report also highlighted the significant geopolitical implications of DDoS attackers today, as many of these bad actors have openly embraced online aggression to cause geopolitical unrest through high-profile DDoS attack campaigns.
  • In mid-September 2022, NETSCOUT announced that it had completed validation of the integration of its Omnis® Cyber Intelligence (OCI), the central console for its advanced network detection and response solution, with Palo Alto Networks Panorama™ management platform, which centrally manages all form factors of Palo Alto Networks market-leading ML-Powered Next-Generation Firewalls. This integration will provide enterprise security operation teams with end-to-end, packet-based visibility at scale, which is critically important for blocking threats with speed and consistency. In addition, this partnership will allow joint customers to solve their network and security challenges more easily.
  • In early September 2022, NETSCOUT announced its successful collaboration with Aruba, a Hewlett Packard Enterprise company, to test and validate the use of NETSCOUT services with Amazon Web Services (AWS) Cloud WAN and Aruba EdgeConnect Enterprise SD-WAN. As a result, shared customers can now leverage an architecture that offers end-to-end visibility into the performance of workloads and application services deployed across data centers, remote sites, and the AWS global network.
  • In August 2022, NETSCOUT introduced Arbor® Insight, a groundbreaking technology that, when combined with Arbor Sightline, dramatically enhances and extends threat detection, service delivery, and network operator visibility to address the evolving threat landscape. This combination extends NETSCOUT’s DDoS leadership to unparalleled levels.

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its second-quarter fiscal year 2023 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) 424-1677. The conference call ID is NTCTQ223. A replay of the call will be available after 12:00 p.m. ET today, for approximately one week. The number for the replay is (800) 839-3516 for U.S./Canada callers and (402) 220-7238 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 gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP diluted net income per share and non-GAAP earnings before interest and other expense, income taxes, depreciation, and amortization (EBITDA) from operations. Non-GAAP gross profit 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, 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 diluted net income per share removes the share impact of non-GAAP adjustments utilized in the calculation of non-GAAP net income. 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) protects the connected world from cyberattacks and performance disruptions through advanced network detection and response and pervasive network visibility. Powered by our pioneering deep packet inspection at scale, we serve the world’s largest enterprises, service providers, and public sector organizations. Learn more at www.netscout.com or follow @NETSCOUT on LinkedIn, Twitter, or Facebook.

Safe Harbor

Certain information provided in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Examples of forward-looking statements include statements regarding our future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as “may”, “will”, “anticipate”, “expect”, “believe”, “estimate”, “intend”, “plan”, “should”, “seek”, or other comparable terms. Investors are cautioned that such forward-looking statements in this press release including, without limitation, statements regarding NETSCOUT’s outlook for fiscal year 2023, that NETSCOUT plans to continue to manage its operations prudently for a balanced approach to growth and profitability, that NETSCOUT’s business prospects remain solid, despite the challenging macro environment, which it continues to monitor closely, that organizations across the globe are facing an increasingly complex digital environment, that NETSCOUT’s purpose as “Guardians of the Connected World” is more important than ever, that NETSCOUT provides a state-of-the-art platform for increased visibility and defensibility and plays a vital role in this ecosystem and remains confident in its ability to help its customers navigate these challenges, that NETSCOUT expects to receive the remaining 30 percent of shares to be repurchased under the ASR agreement when the ASR program concludes, no later than December 31, 2022, as well as statements regarding product releases, updates, and functionality all 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, but are not limited to, COVID-19 related impacts; the war in Ukraine and global geopolitical conflict; macroeconomic conditions, including increasing inflation and interest rates and 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. The risks included above are not exhaustive. We caution readers not to place undue reliance on any forward-looking statements included in this press release which speak only as to the date of this press release. We undertake no responsibility to update or revise any forward-looking statements, except as required by law. 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, 2022, 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.

©2022 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 Six Months Ended
September 30, September 30,

2022

2021

2022

2021

Revenue:
Product

$

111,816

 

$

101,619

 

$

210,067

 

$

183,569

 

Service

 

116,265

 

 

110,299

 

 

226,826

 

 

218,621

 

Total revenue

 

228,081

 

 

211,918

 

 

436,893

 

 

402,190

 

 
Cost of revenue:
Product

 

25,881

 

 

20,340

 

 

52,686

 

 

43,505

 

Service

 

31,760

 

 

31,304

 

 

62,669

 

 

62,549

 

Total cost of revenue

 

57,641

 

 

51,644

 

 

115,355

 

 

106,054

 

 
Gross profit

 

170,440

 

 

160,274

 

 

321,538

 

 

296,136

 

 
Operating expenses:
Research and development

 

43,917

 

 

44,483

 

 

87,374

 

 

87,303

 

Sales and marketing

 

66,118

 

 

65,185

 

 

142,441

 

 

131,143

 

General and administrative

 

25,261

 

 

23,471

 

 

50,051

 

 

46,216

 

Amortization of acquired intangible assets

 

13,801

 

 

14,970

 

 

27,682

 

 

29,976

 

Restructuring charges

 

(60

)

 

-

 

 

1,714

 

 

-

 

 
Total operating expenses

 

149,037

 

 

148,109

 

 

309,262

 

 

294,638

 

 
Income from operations

 

21,403

 

 

12,165

 

 

12,276

 

 

1,498

 

Interest and other expense, net

 

(2,024

)

 

(2,336

)

 

(3,382

)

 

(4,756

)

 
Income (loss) before income tax benefit

 

19,379

 

 

9,829

 

 

8,894

 

 

(3,258

)

Income tax expense (benefit)

 

1,996

 

 

1,933

 

 

(1,357

)

 

187

 

Net income (loss)

$

17,383

 

$

7,896

 

$

10,251

 

$

(3,445

)

 
 
Basic net income (loss) per share

$

0.24

 

$

0.11

 

$

0.14

 

$

(0.05

)

Diluted net income (loss) per share

$

0.24

 

$

0.11

 

$

0.14

 

$

(0.05

)

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

 

71,856

 

 

74,382

 

 

72,152

 

 

74,122

 

Net income (loss) per share - diluted

 

72,891

 

 

75,093

 

 

73,494

 

 

74,122

 

NETSCOUT SYSTEMS, INC.
Consolidated Balance Sheets
(In thousands)
 
September 30, March 31,

2022

2022

(Unaudited)
Assets
Current assets:
Cash, cash equivalents and marketable securities

$

367,131

 

$

703,198

 

Accounts receivable and unbilled costs, net

 

139,126

 

 

148,245

 

Inventories

 

24,063

 

 

28,220

 

Prepaid expenses and other current assets

 

58,069

 

 

42,276

 

 
Total current assets

 

588,389

 

 

921,939

 

 
Fixed assets, net

 

38,752

 

 

41,337

 

Goodwill and intangible assets, net

 

2,126,992

 

 

2,156,575

 

Operating lease right-of-use assets

 

49,757

 

 

54,996

 

Other assets

 

18,163

 

 

19,862

 

 
Total assets

$

2,822,053

 

$

3,194,709

 

 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable

$

21,474

 

$

21,959

 

Accrued compensation

 

55,385

 

 

75,788

 

Accrued other

 

27,546

 

 

36,417

 

Current portion of operating lease liabilities

 

10,463

 

 

11,411

 

Deferred revenue and customer deposits

 

287,328

 

 

330,585

 

 
Total current liabilities

 

402,196

 

 

476,160

 

 
Other long-term liabilities

 

7,468

 

 

7,470

 

Deferred tax liability

 

71,510

 

 

78,899

 

Accrued long-term retirement benefits

 

30,917

 

 

34,737

 

Long-term deferred revenue

 

123,477

 

 

133,121

 

Operating lease liabilities, net of current portion

 

48,839

 

 

53,927

 

Long-term debt

 

200,000

 

 

350,000

 

 
Total liabilities

 

884,407

 

 

1,134,314

 

 
Stockholders' equity:
Common stock

 

128

 

 

126

 

Additional paid-in capital

 

3,015,644

 

 

3,023,403

 

Accumulated other comprehensive income (loss)

 

(1,056

)

 

141

 

Treasury stock, at cost

 

(1,497,886

)

 

(1,373,840

)

Retained earnings

 

420,816

 

 

410,565

 

 
Total stockholders' equity

 

1,937,646

 

 

2,060,395

 

 
Total liabilities and stockholders' equity

$

2,822,053

 

$

3,194,709

 

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 Three Months Ended Six Months Ended
September 30, June 30, September 30,

2022

2021

2022

2022

2021

 
GAAP and Non-GAAP Revenue

$

228,081

 

$

211,918

 

$

208,812

 

$

436,893

 

$

402,190

 

 
Gross Profit (GAAP)

$

170,440

 

$

160,274

 

$

151,098

 

$

321,538

 

$

296,136

 

Share-based compensation expense (1)

 

2,395

 

 

2,228

 

 

2,037

 

 

4,432

 

 

4,115

 

Amortization of acquired intangible assets (2)

 

2,312

 

 

3,352

 

 

2,328

 

 

4,640

 

 

6,712

 

Acquisition related depreciation expense (5)

 

4

 

 

7

 

 

7

 

 

11

 

 

12

 

Non-GAAP Gross Profit

$

175,151

 

$

165,861

 

$

155,470

 

$

330,621

 

$

306,975

 

 
Income (Loss) from Operations (GAAP)

$

21,403

 

$

12,165

 

$

(9,127

)

$

12,276

 

$

1,498

 

Share-based compensation expense (1)

 

16,501

 

 

16,735

 

 

15,581

 

 

32,082

 

 

30,700

 

Amortization of acquired intangible assets (2)

 

16,113

 

 

18,322

 

 

16,209

 

 

32,322

 

 

36,688

 

Business development and integration expense (3)

 

-

 

 

-

 

 

-

 

 

-

 

 

(5

)

Compensation for post-combination services (4)

 

-

 

 

-

 

 

-

 

 

-

 

 

2

 

Restructuring charges

 

(60

)

 

-

 

 

1,774

 

 

1,714

 

 

-

 

Acquisition related depreciation expense (5)

 

59

 

 

64

 

 

65

 

 

124

 

 

124

 

Transitional service agreement expense (6)

 

-

 

 

59

 

 

-

 

 

-

 

 

117

 

Non-GAAP Income from Operations

$

54,016

 

$

47,345

 

$

24,502

 

$

78,518

 

$

69,124

 

 
Net Income (Loss) (GAAP)

$

17,383

 

$

7,896

 

$

(7,132

)

$

10,251

 

$

(3,445

)

Share-based compensation expense (1)

 

16,501

 

 

16,735

 

 

15,581

 

 

32,082

 

 

30,700

 

Amortization of acquired intangible assets (2)

 

16,113

 

 

18,322

 

 

16,209

 

 

32,322

 

 

36,688

 

Business development and integration expense (3)

 

-

 

 

-

 

 

-

 

 

-

 

 

(5

)

Compensation for post-combination services (4)

 

-

 

 

-

 

 

-

 

 

-

 

 

2

 

Restructuring charges

 

(60

)

 

-

 

 

1,774

 

 

1,714

 

 

-

 

Acquisition related depreciation expense (5)

 

59

 

 

64

 

 

65

 

 

124

 

 

124

 

Loss on extinguishment of debt (7)

 

-

 

 

596

 

 

-

 

 

-

 

 

596

 

Income tax adjustments (8)

 

(8,691

)

 

(8,315

)

 

(8,445

)

 

(17,136

)

 

(14,404

)

Non-GAAP Net Income

$

41,305

 

$

35,298

 

$

18,052

 

$

59,357

 

$

50,256

 

 
Diluted Net Income (Loss) Per Share (GAAP)

$

0.24

 

$

0.11

 

$

(0.10

)

$

0.14

 

$

(0.05

)

Share impact of non-GAAP adjustments identified above

 

0.33

 

 

0.36

 

 

0.34

 

 

0.67

 

 

0.72

 

Non-GAAP Diluted Net Income Per Share

$

0.57

 

$

0.47

 

$

0.24

 

$

0.81

 

$

0.67

 

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

 

72,891

 

 

75,093

 

 

74,187

 

 

73,494

 

 

75,112

 

NETSCOUT SYSTEMS, INC.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued
(In thousands)
(Unaudited)
   
  Three Months Ended Three Months Ended Six Months Ended
  September 30, June 30, September 30,
 

2022

2021

2022

2022

2021

   

(1

)

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

$

315

 

$

321

 

$

292

 

$

607

 

$

595

 

  Cost of service revenue

 

2,080

 

 

1,907

 

 

1,745

 

 

3,825

 

 

3,520

 

  Research and development

 

4,580

 

 

4,902

 

 

4,431

 

 

9,011

 

 

8,993

 

  Sales and marketing

 

6,043

 

 

5,842

 

 

5,750

 

 

11,793

 

 

10,656

 

  General and administrative

 

3,483

 

 

3,763

 

 

3,363

 

 

6,846

 

 

6,936

 

  Total share-based compensation expense

$

16,501

 

$

16,735

 

$

15,581

 

$

32,082

 

$

30,700

 

   

(2

)

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

$

2,312

 

$

3,352

 

$

2,328

 

$

4,640

 

$

6,712

 

  Operating expenses

 

13,801

 

 

14,970

 

 

13,881

 

 

27,682

 

 

29,976

 

  Total amortization expense

$

16,113

 

$

18,322

 

$

16,209

 

$

32,322

 

$

36,688

 

   

(3

)

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

$

-

 

$

-

 

$

-

 

$

-

 

$

(5

)

  Total business development and integration expense

$

-

 

$

-

 

$

-

 

$

-

 

$

(5

)

   

(4

)

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

$

-

 

$

-

 

$

-

 

$

-

 

$

2

 

  Total compensation for post-combination services

$

-

 

$

-

 

$

-

 

$

-

 

$

2

 

   

(5

)

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

$

2

 

$

4

 

$

4

 

$

6

 

$

7

 

  Cost of service revenue

 

2

 

 

3

 

 

3

 

 

5

 

 

5

 

  Research and development

 

42

 

 

45

 

 

45

 

 

87

 

 

87

 

  Sales and marketing

 

8

 

 

8

 

 

9

 

 

17

 

 

17

 

  General and administrative

 

5

 

 

4

 

 

4

 

 

9

 

 

8

 

  Total acquisition related depreciation expense

$

59

 

$

64

 

$

65

 

$

124

 

$

124

 

   

(6

)

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

$

-

 

$

7

 

$

-

 

$

-

 

$

13

 

  Sales and marketing

 

-

 

 

9

 

 

-

 

 

-

 

 

19

 

  General and administrative

 

-

 

 

43

 

 

-

 

 

-

 

 

85

 

  Other (income) expense, net

 

-

 

 

(59

)

 

-

 

 

-

 

 

(117

)

  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

)

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

$

(8,691

)

$

(8,315

)

$

(8,445

)

$

(17,136

)

$

(14,404

)

  Total income tax adjustments

$

(8,691

)

$

(8,315

)

$

(8,445

)

$

(17,136

)

$

(14,404

)

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 Three Months Ended Six Months Ended
September 30, June 30, September 30,

2022

2021

2022

2022

2021

 
Income (Loss) from operations (GAAP)

$

21,403

$

12,165

$

(9,127

)

$

12,276

$

1,498

Previous adjustments to determine non-GAAP income from operations

 

32,613

 

35,180

 

33,629

 

 

66,242

 

67,626

Non-GAAP Income from operations

 

54,016

 

47,345

 

24,502

 

 

78,518

 

69,124

 
Depreciation excluding acquisition related

 

5,090

 

5,623

 

5,311

 

 

10,401

 

11,434

 
Non-GAAP EBITDA from operations

$

59,106

$

52,968

$

29,813

 

$

88,919

$

80,558

NETSCOUT SYSTEMS, INC.
Reconciliation of GAAP Financial Outlook to Non-GAAP Financial Outlook
(Unaudited)
(In millions, except net income per share - diluted)
 
FY'22

FY'23

GAAP & Non-GAAP revenue

$

855.6

~$895 million to ~$925 million

 

 
FY'22

FY'23

GAAP net income

$

37.0

~$46 million to ~$50 million

Amortization of intangible assets

$

73.1

~$65 million

Share-based compensation expenses

$

56.1

~$60 million

Business development & integration expenses*

$

(0.6)

~Less than $1 million

Interest Exp - Loss on Debt Extinguishment

$

0.6

-

Restructuring charges

$

-

~$1.8 million

Total adjustments

$

129.2

~$127 million

Related impact of adjustments on income tax

$

(27.8)

(~$28 million)

Non-GAAP net income

$

138.4

~$145 million to ~$149 million

 

 
GAAP net income per share (diluted)

$

0.49

~$0.62 to ~$0.68

Non-GAAP net income per share (diluted)

$

1.84

~$1.97 to ~$2.03

 
Average weighted shares outstanding (diluted GAAP)

 

75.1

~73 million to ~74 million
Average weighted shares outstanding (diluted Non-GAAP)

 

75.1

~73 million to ~74 million
 
*Business development & integration expenses include change in value of contingent consideration, and acquisition-related depreciation expense
**Figures in table may not total due to rounding

 

Investors
Anthony Piazza
Senior 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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