Exhibit 99.1
NetScout Systems Reports Financial Results for Second Quarter Fiscal Year 2017
WESTFORD, Mass.--(BUSINESS WIRE)--October 27, 2016--NetScout Systems, Inc. (NASDAQ: NTCT), a leading provider of business assurance, a powerful combination of service assurance, cybersecurity, and business intelligence solutions, today announced financial results for its second quarter of fiscal year 2017 ended September 30, 2016.
“NetScout delivered good second-quarter results and made important progress on major new product initiatives,” stated Anil Singhal, NetScout’s president and CEO. “Our second-quarter 2017 revenue performance reflected solid enterprise-related service assurance growth and excellent top-line results at Arbor Networks. This, however, was mostly offset by a decline in the service provider service assurance revenue due to the timing and magnitude of a very large project in the same period last year. Most importantly, we launched our new InfiniStreamNG real-time information platform. We are now able to deliver new and enhanced analytics along with complementary products that address the service assurance, cybersecurity and business intelligence requirements of our customers around the world.”
Singhal concluded, “Service provider spending continues to be constrained primarily due to their focus on investment return for their LTE networks. As a result, the timing and magnitude of certain service provider orders remains fluid as we approach their calendar year-end budgeting timeframes. Fortunately, our competitive position with major mobile operators and MSOs worldwide is very strong. Our ability to invest in innovation and deliver compelling solutions will play an important role in continuing to differentiate NetScout in the marketplace, assist our customers with their digital transformation challenges, and drive strong performance over the longer term.”
Notable second-quarter and recent operational highlights include:
- In early September 2016, NetScout announced the availability of its next-generation, real-time information platform called the InfiniStreamNG™. This new platform, powered by its patented, proprietary Adaptive Service Intelligence Plus (ASI Plus) technology, targets both enterprise and service provider customers across their data center, cloud and hybrid infrastructures, thereby enabling them to gain seamless, end-to-end visibility and dramatically accelerate their digital transformation initiatives;
- During the second quarter, NetScout acquired the technology assets of Avvasi Incorporated, a privately held, Waterloo, Ontario-based provider of award-winning solutions used by top-tier service providers to measure, improve and monetize video in their networks. Video traffic continues to grow and service providers are recognizing that delivering high-quality video streams is becoming increasingly critical to enhancing the customer experience. This acquisition builds on NetScout’s ongoing investment to enhance its service assurance capabilities for video traffic over 4G/LTE mobile networks. In conjunction with this transaction, approximately a dozen engineers and other staff of Avvasi joined NetScout.
- In mid-September 2016, the Company unveiled additions to its nGenius® Packet Flow Switch (PFS) portfolio, designed for performance and scale at 40G;
- In early October 2016, Arbor Networks introduced version 2.2 of Arbor Networks Spectrum™, a high-performance network traffic analysis platform integrating NetFlow packet and threat intelligence data for real-time and retrospective investigation of advanced threats;
- Arbor has continued to receive industry accolades for its distributed-denial-of-service (DDoS) capabilities including Frost & Sullivan’s 2016 Asia-Pacific On-Premise DDoS Protection Solution Vendor of the Year, and the Golden Bridge Awards’ Gold Winner in the Security Services category for Arbor Cloud DDoS Protection while also marking the 20-year anniversary of DDoS attacks targeting the availability of internet service provider (ISP) networks; and
- In mid-October 2016, NetScout also announced the NETSCOUT edition of the OptiView® XG network analysis tablet with a new customizable dashboard, enhanced reporting and integration with the NETSCOUT nGeniusONE® Service Assurance platform. NETSCOUT’s portable analyzer provides infrastructure diagnostics for both wireless and wired LANs.
Q2 FY17 Financial Results
As a reminder, NetScout acquired Danaher’s Communications Business in mid-July 2015. Accordingly, the Company’s second-quarter fiscal year 2016 results reflect an approximately two and one-half month contribution from the acquired assets.
Total revenue (GAAP) for the second quarter of fiscal year 2017 was $272.0 million. Non-GAAP total revenue for the second quarter of fiscal year 2017 was $283.3 million. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.
Product revenue (GAAP) for the second quarter of fiscal year 2017 was $168.9 million, which was approximately 62% of total revenue. On a non-GAAP basis, product revenue for the second quarter of fiscal year 2017 was $174.9 million, which was approximately 62% of total non-GAAP revenue. Service revenue (GAAP) for the second quarter of fiscal year 2017 was $103.2 million, or approximately 38% of total revenue. On a non-GAAP basis, service revenue for fiscal year 2017’s second quarter was $108.4 million, which was approximately 38% of total non-GAAP revenue.
NetScout’s income from operations (GAAP) was $0.8 million in the second quarter of fiscal year 2017. The Company’s GAAP operating profit margin was 0.3%. Second-quarter fiscal year 2017 non-GAAP EBITDA from operations was $67.0 million, or 23.6% of non-GAAP quarterly revenue. Second-quarter fiscal year 2017 non-GAAP income from operations was $58.0 million. NetScout’s non-GAAP operating margin for the second quarter of fiscal year 2017 was 20.5%.
Net loss (GAAP) for the second quarter of fiscal year 2017 was $1.3 million, or $0.01 per share (diluted). On a non-GAAP basis, net income for the second quarter was $36.4 million, or $0.39 per share (diluted).
As of September 30, 2016, cash and cash equivalents, and short and long-term marketable securities were $303.4 million, compared with $334.9 million as of June 30, 2016. During the second quarter of fiscal year 2017, NetScout repurchased 929,009 shares of its common stock at an average price of $28.62 per share, totaling approximately $26.6 million in the aggregate. As of September 30, 2016, NetScout had approximately 6.9 million shares available for repurchase under its existing common stock repurchase plan that authorized the repurchase of up to 20 million shares of its common stock.
First-Half FY17 Financial Results
Highlights for the first two quarters of fiscal year 2017 included:
- For the first half of fiscal year 2017, total revenue (GAAP) was $541.0 million and non-GAAP total revenue was $561.2 million.
- Product revenue (GAAP) for the first six months of fiscal year 2017 was $333.5 million and non-GAAP product revenue was $343.7 million. First-half fiscal year 2017 service revenue (GAAP) was $207.5 million and non-GAAP service revenue was $217.5 million.
- NetScout’s loss from operations (GAAP) during the first six months of fiscal year 2017 was $9.9 million, or -1.8% of total GAAP revenue. During the first two quarters of fiscal year 2017, the Company’s non-GAAP EBITDA from operations was $118.1 million, or 21.0% of non-GAAP total revenue. The Company’s non-GAAP operating income for the same period of fiscal year 2017 was $101.1 million with a non-GAAP operating margin of 18.0%.
- For the first six months of fiscal year 2017, NetScout’s net loss (GAAP) was $10.3 million, or $0.11 per share (diluted). Non-GAAP net income for the same period of fiscal year 2017 was $62.8 million, or $0.67 per share (diluted).
- During the first two quarters of fiscal year 2017, NetScout repurchased a total of 3,029,391 shares of its common stock at an average price of $25.28 per share, totaling approximately $76.6 million in the aggregate.
Guidance:
NetScout fiscal year 2017 guidance reflects the Company’s progress to date, share repurchase activity during the first half of fiscal year 2017, updated assumptions to certain anticipated acquisition-related adjustments to revenue and to various costs and expenses, and its plans for the second half of the fiscal year:
- For fiscal year 2017, the Company’s GAAP revenue guidance has been updated to reflect changes in the assumptions regarding the deferred revenue fair value adjustment and revenue affected by the amortization of intangible assets associated with the acquisition of the Danaher Communications Business. The Company now expects fiscal year 2017 GAAP revenue to be in the range of approximately $1.165 billion to $1.215 billion versus prior GAAP revenue guidance that ranged from approximately $1.178 billion to $1.228 billion. The non-GAAP revenue guidance for fiscal year 2017 is unchanged from prior quarters, and it ranges from $1.2 billion to $1.25 billion.
- GAAP net income per share (diluted) guidance for fiscal year 2017 is unchanged from July 2016, and it ranges from $0.49 to $0.74. Non-GAAP net income per share (diluted) for fiscal year 2017 is also unchanged from July 2016, and it ranges $1.87 to $2.12 based on approximately 93 million shares outstanding.
- A reconciliation between GAAP and non-GAAP revenue and net income per share (diluted) for NetScout’s guidance is included in the attached financial tables.
Conference Call Instructions:
NetScout will host a conference call to discuss its second-quarter fiscal year 2017 financial results today at 8:30 a.m. ET. This call will be webcast live through NetScout’s website at http://ir.netscout.com/phoenix.zhtml?c=92658&p=irol-irhomedf. Alternatively, people can listen to the call by dialing (785) 424-1051. The conference call ID is NTCTQ217. A replay of the call will be available after 12:00 p.m. ET on October 27, 2016 for approximately one week. The number for the replay is (800) 753-8591 for U.S./Canada and (402) 220-0686 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 total revenue, non-GAAP product revenue, non-GAAP service revenue, non-GAAP income from operations, non-GAAP operating margin, non-GAAP EBITDA from operations, and non-GAAP EBITDA from operations margin, non-GAAP net income, and non-GAAP net income per share (diluted). Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation, and revenue impacted by the amortization of intangible assets. Non-GAAP income from operations includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, stock-based compensation, certain expenses relating to acquisitions including inventory fair value adjustments, depreciation costs, compensation for post-combination services and business development and integration costs. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition-related depreciation expense. Non-GAAP operating margin is calculated based on the non-GAAP financial metrics discussed above. Non-GAAP net income includes the aforementioned items related to non-GAAP income from operations, 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. 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, 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 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) is a leading provider of business assurance – a powerful combination of service assurance, cybersecurity, and business intelligence solutions – for today’s most demanding service provider, enterprise and government networks. NETSCOUT’s Adaptive Service Intelligence (ASI) technology continuously monitors the service delivery environment to identify performance issues and provides insight into network-based security threats, helping teams to quickly resolve issues that can cause business disruptions or impact user experience. NETSCOUT delivers unmatched service visibility and protects the digital infrastructure that supports our connected world. To learn more, visit www.netscout.com or follow @NETSCOUT 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, the statements related to the financial guidance for NetScout; the delivery of new and enhanced analytics along with complementary products that address customer requirements; the timing and magnitude of certain service provider orders that remain fluid; and that our ability to invest in innovation and deliver compelling solutions will play an important role in continuing to differentiate NetScout in the marketplace, assist our customers with their digital transformation challenges, and drive strong performance over the longer term, constitute forward-looking statements which involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to known and unknown risk, uncertainties, assumptions and other factors. Such factors include slowdowns or downturns in economic conditions generally and in the market for advanced network and service assurance 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 we have, and their strategic response to our products; our ability to retain key executives and employees; lower than expected demand for the Company’s products and services; and the ability of NetScout to successfully integrate the merged assets and the associated technology and achieve operational efficiencies. 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, 2016 and the Company’s subsequent Quarterly Report on Form 10-Q, which are 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.
©2016 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.
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| 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, |
| | | | | 2016 | | | | | | 2015 | | | | | | | 2016 | | | | | | 2015 | |
| Revenue: | | | | | | | | | | | | | | | | | |
| Product | | | | $ | 168,873 | | | | | $ | 174,899 | | | | | | $ | 333,462 | | | | | $ | 228,492 | |
| Service | | | | | 103,175 | | | | | | 86,211 | | | | | | | 207,538 | | | | | | 133,361 | |
| Total revenue | | | | | 272,048 | | | | | | 261,110 | | | | | | | 541,000 | | | | | | 361,853 | |
| | | | | | | | | | | | | | | | | |
| Cost of revenue: | | | | | | | | | | | | | | | | | |
| Product | | | | | 56,647 | | | | | | 75,421 | | | | | | | 116,474 | | | | | | 87,919 | |
| Service | | | | | 27,863 | | | | | | 24,766 | | | | | | | 55,070 | | | | | | 33,564 | |
| Total cost of revenue | | | | | 84,510 | | | | | | 100,187 | | | | | | | 171,544 | | | | | | 121,483 | |
| | | | | | | | | | | | | | | | | |
| Gross profit | | | | | 187,538 | | | | | | 160,923 | | | | | | | 369,456 | | | | | | 240,370 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | |
| Research and development | | | | | 61,046 | | | | | | 65,896 | | | | | | | 121,597 | | | | | | 83,954 | |
| Sales and marketing | | | | | 76,706 | | | | | | 79,153 | | | | | | | 158,294 | | | | | | 117,245 | |
| General and administrative | | | | | 31,527 | | | | | | 41,301 | | | | | | | 62,454 | | | | | | 51,400 | |
| Amortization of acquired intangible assets | | | | | 17,559 | | | | | | 9,843 | | | | | | | 35,131 | | | | | | 10,652 | |
| Restructuring charges | | | | | (105 | ) | | | | | - | | | | | | | 1,929 | | | | | | - | |
| Total operating expenses | | | | | 186,733 | | | | | | 196,193 | | | | | | | 379,405 | | | | | | 263,251 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | | | | 805 | | | | | | (35,270 | ) | | | | | | (9,949 | ) | | | | | (22,881 | ) |
| Interest and other expense, net | | | | | (2,430 | ) | | | | | (828 | ) | | | | | | (5,334 | ) | | | | | (974 | ) |
| | | | | | | | | | | | | | | | | |
| Loss before income tax benefit | | | | | (1,625 | ) | | | | | (36,098 | ) | | | | | | (15,283 | ) | | | | | (23,855 | ) |
| Income tax benefit | | | | | (359 | ) | | | | | (28,183 | ) | | | | | | (5,019 | ) | | | | | (23,609 | ) |
| Net loss | | | | $ | (1,266 | ) | | | | $ | (7,915 | ) | | | | | $ | (10,264 | ) | | | | $ | (246 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic net loss per share | | | | $ | (0.01 | ) | | | | $ | (0.09 | ) | | | | | $ | (0.11 | ) | | | | $ | - | |
| Diluted net loss per share | | | | $ | (0.01 | ) | | | | $ | (0.09 | ) | | | | | $ | (0.11 | ) | | | | $ | - | |
| Weighted average common shares outstanding used in computing: | | | | | | | | | | | | | | |
| Net loss per share - basic | | | | | 91,919 | | | | | | 91,410 | | | | | | | 92,628 | | | | | | 66,232 | |
| Net loss per share - diluted | | | | | 91,919 | | | | | | 91,410 | | | | | | | 92,628 | | | | | | 66,232 | |
| | | | | | | | | |
| NetScout Systems, Inc. |
| Consolidated Balance Sheets |
| (In thousands) |
| | | | | | | | | |
| | | | September 30, | | | | | March 31, |
| | | | 2016 | | | | | 2016 |
| | | | (unaudited) | | | | | |
| | | | | | | | | |
| Assets | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash, cash equivalents and marketable securities | | | | $ | 294,720 | | | | | | $ | 338,714 | |
| Accounts receivable and unbilled costs, net | | | | | 240,599 | | | | | | | 247,199 | |
| Inventories | | | | | 52,860 | | | | | | | 58,029 | |
| Prepaid expenses and other current assets | | | | | 76,879 | | | | | | | 96,536 | |
| | | | | | | | | |
| Total current assets | | | | | 665,058 | | | | | | | 740,478 | |
| | | | | | | | | |
| Fixed assets, net | | | | | 64,003 | | | | | | | 62,033 | |
| Goodwill and intangible assets, net | | | | | 2,712,708 | | | | | | | 2,763,409 | |
| Long-term marketable securities | | | | | 8,675 | | | | | | | 13,361 | |
| Other assets | | | | | 9,341 | | | | | | | 13,562 | |
| | | | | | | | | |
| Total assets | | | | $ | 3,459,785 | | | | | | $ | 3,592,843 | |
| | | | | | | | | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable | | | | $ | 45,853 | | | | | | $ | 43,969 | |
| Accrued compensation | | | | | 65,226 | | | | | | | 82,303 | |
| Accrued other | | | | | 29,454 | | | | | | | 34,136 | |
| Deferred revenue and customer deposits | | | | | 282,045 | | | | | | | 296,648 | |
| | | | | | | | | |
| Total current liabilities | | | | | 422,578 | | | | | | | 457,056 | |
| | | | | | | | | |
| Other long-term liabilities | | | | | 7,936 | | | | | | | 7,539 | |
| Deferred tax liability | | | | | 259,625 | | | | | | | 285,359 | |
| Accrued long-term retirement benefits | | | | | 31,493 | | | | | | | 31,378 | |
| Long-term deferred revenue | | | | | 64,201 | | | | | | | 68,129 | |
| Long-term debt | | | | | 300,000 | | | | | | | 300,000 | |
| | | | | | | | | |
| Total liabilities | | | | | 1,085,833 | | | | | | | 1,149,461 | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | | |
| Common stock | | | | | 115 | | | | | | | 114 | |
| Additional paid-in capital | | | | | 2,666,997 | | | | | | | 2,642,745 | |
| Accumulated other comprehensive loss | | | | | (1,705 | ) | | | | | | (1,501 | ) |
| Treasury stock, at cost | | | | | (564,581 | ) | | | | | | (481,366 | ) |
| Retained earnings | | | | | 273,126 | | | | | | | 283,390 | |
| | | | | | | | | |
| Total stockholders' equity | | | | | 2,373,952 | | | | | | | 2,443,382 | |
| | | | | | | | | |
| Total liabilities and stockholders' equity | | | | $ | 3,459,785 | | | | | | $ | 3,592,843 | |
| | | | | | | | | | | | | | | | | | | | |
| 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, |
| | | | 2016 | | | | 2015 | | | | 2016 | | | | 2016 | | | | 2015 |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Product Revenue | | | | $ | 168,873 | | | | | $ | 174,899 | | | | | $ | 164,589 | | | | | $ | 333,462 | | | | | $ | 228,492 | |
| Product deferred revenue fair value adjustment | | | | | 3,130 | | | | | | 3,107 | | | | | | 1,345 | | | | | | 4,475 | | | | | | 3,107 | |
| Delayed transfer entity adjustment (1) | | | | | - | | | | | | 633 | | | | | | - | | | | | | - | | | | | | 633 | |
| Amortization of acquired intangible assets (3) | | | | | 2,869 | | | | | | 2,028 | | | | | | 2,877 | | | | | | 5,746 | | | | | | 2,028 | |
| Non-GAAP Product Revenue | | | | $ | 174,872 | | | | | $ | 180,667 | | | | | $ | 168,811 | | | | | $ | 343,683 | | | | | $ | 234,260 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Service Revenue | | | | $ | 103,175 | | | | | $ | 86,211 | | | | | $ | 104,363 | | | | | $ | 207,538 | | | | | $ | 133,361 | |
| Service deferred revenue fair value adjustment | | | | | 5,218 | | | | | | 14,945 | | | | | | 4,783 | | | | | | 10,001 | | | | | | 14,945 | |
| Non-GAAP Service Revenue | | | | $ | 108,393 | | | | | $ | 101,156 | | | | | $ | 109,146 | | | | | $ | 217,539 | | | | | $ | 148,306 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Revenue | | | | $ | 272,048 | | | | | $ | 261,110 | | | | | $ | 268,952 | | | | | $ | 541,000 | | | | | $ | 361,853 | |
| Product deferred revenue fair value adjustment | | | | | 3,130 | | | | | | 3,107 | | | | | | 1,345 | | | | | | 4,475 | | | | | | 3,107 | |
| Service deferred revenue fair value adjustment | | | | | 5,218 | | | | | | 14,945 | | | | | | 4,783 | | | | | | 10,001 | | | | | | 14,945 | |
| Delayed transfer entity adjustment (1) | | | | | - | | | | | | 633 | | | | | | - | | | | | | - | | | | | | 633 | |
| Amortization of acquired intangible assets (3) | | | | | 2,869 | | | | | | 2,028 | | | | | | 2,877 | | | | | | 5,746 | | | | | | 2,028 | |
| Non-GAAP Revenue | | | | $ | 283,265 | | | | | $ | 281,823 | | | | | $ | 277,957 | | | | | $ | 561,222 | | | | | $ | 382,566 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Gross Profit | | | | $ | 187,538 | | | | | $ | 160,923 | | | | | $ | 181,918 | | | | | $ | 369,456 | | | | | $ | 240,370 | |
| Product deferred revenue fair value adjustment | | | | | 3,130 | | | | | | 3,107 | | | | | | 1,345 | | | | | | 4,475 | | | | | | 3,107 | |
| Service deferred revenue fair value adjustment | | | | | 5,218 | | | | | | 14,945 | | | | | | 4,783 | | | | | | 10,001 | | | | | | 14,945 | |
| Inventory fair value adjustment | | | | | - | | | | | | 12,773 | | | | | | - | | | | | | - | | | | | | 12,773 | |
| Delayed transfer entity adjustment (1) | | | | | - | | | | | | 535 | | | | | | - | | | | | | - | | | | | | 535 | |
| Share-based compensation expense (2) | | | | | 1,511 | | | | | | 921 | | | | | | 993 | | | | | | 2,504 | | | | | | 1,396 | |
| Amortization of acquired intangible assets (3) | | | | | 13,253 | | | | | | 16,835 | | | | | | 13,246 | | | | | | 26,499 | | | | | | 17,593 | |
| Business development and integration expense (4) | | | | | (68 | ) | | | | | 225 | | | | | | 158 | | | | | | 90 | | | | | | 225 | |
| Compensation for post-combination services (5) | | | | | 381 | | | | | | 2,079 | | | | | | 144 | | | | | | 525 | | | | | | 2,079 | |
| Acquisition related depreciation expense (6) | | | | | (12 | ) | | | | | 87 | | | | | | 165 | | | | | | 153 | | | | | | 87 | |
| Non-GAAP Gross Profit | | | | $ | 210,951 | | | | | $ | 212,430 | | | | | $ | 202,752 | | | | | $ | 413,703 | | | | | $ | 293,110 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Income (Loss) from Operations | | | | $ | 805 | | | | | $ | (35,270 | ) | | | | $ | (10,754 | ) | | | | $ | (9,949 | ) | | | | $ | (22,881 | ) |
| Product deferred revenue fair value adjustment | | | | | 3,130 | | | | | | 3,107 | | | | | | 1,345 | | | | | | 4,475 | | | | | | 3,107 | |
| Service deferred revenue fair value adjustment | | | | | 5,218 | | | | | | 14,945 | | | | | | 4,783 | | | | | | 10,001 | | | | | | 14,945 | |
| Inventory fair value adjustment | | | | | - | | | | | | 12,773 | | | | | | - | | | | | | - | | | | | | 12,773 | |
| Delayed transfer entity adjustment (1) | | | | | - | | | | | | 383 | | | | | | - | | | | | | - | | | | | | 383 | |
| Share-based compensation expense (2) | | | | | 11,678 | | | | | | 7,503 | | | | | | 8,132 | | | | | | 19,810 | | | | | | 12,098 | |
| Amortization of acquired intangible assets (3) | | | | | 30,812 | | | | | | 26,678 | | | | | | 30,818 | | | | | | 61,630 | | | | | | 28,245 | |
| Business development and integration expense (4) | | | | | 2,977 | | | | | | 14,544 | | | | | | 3,669 | | | | | | 6,646 | | | | | | 17,906 | |
| Compensation for post-combination services (5) | | | | | 2,867 | | | | | | 21,661 | | | | | | 1,715 | | | | | | 4,582 | | | | | | 21,682 | |
| Restructuring charges | | | | | (105 | ) | | | | | - | | | | | | 2,034 | | | | | | 1,929 | | | | | | - | |
| Acquisition related depreciation expense (6) | | | | | 666 | | | | | | 1,177 | | | | | | 1,359 | | | | | | 2,025 | | | | | | 1,177 | |
| Non-GAAP Income from Operations | | | | $ | 58,048 | | | | | $ | 67,501 | | | | | $ | 43,101 | | | | | $ | 101,149 | | | | | $ | 89,435 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Net Loss | | | | $ | (1,266 | ) | | | | $ | (7,915 | ) | | | | $ | (8,998 | ) | | | | $ | (10,264 | ) | | | | $ | (246 | ) |
| Product deferred revenue fair value adjustment | | | | | 3,130 | | | | | | 3,107 | | | | | | 1,345 | | | | | | 4,475 | | | | | | 3,107 | |
| Service deferred revenue fair value adjustment | | | | | 5,218 | | | | | | 14,945 | | | | | | 4,783 | | | | | | 10,001 | | | | | | 14,945 | |
| Inventory fair value adjustment | | | | | - | | | | | | 12,773 | | | | | | - | | | | | | - | | | | | | 12,773 | |
| Share-based compensation expense (2) | | | | | 11,678 | | | | | | 7,503 | | | | | | 8,132 | | | | | | 19,810 | | | | | | 12,098 | |
| Amortization of acquired intangible assets (3) | | | | | 30,812 | | | | | | 26,678 | | | | | | 30,818 | | | | | | 61,630 | | | | | | 28,245 | |
| Business development and integration expense (4) | | | | | 2,977 | | | | | | 14,544 | | | | | | 3,669 | | | | | | 6,646 | | | | | | 17,906 | |
| Compensation for post-combination services (5) | | | | | 2,867 | | | | | | 21,661 | | | | | | 1,715 | | | | | | 4,582 | | | | | | 21,682 | |
| Restructuring charges | | | | | (105 | ) | | | | | - | | | | | | 2,034 | | | | | | 1,929 | | | | | | - | |
| Acquisition related depreciation expense (6) | | | | | 666 | | | | | | 1,177 | | | | | | 1,359 | | | | | | 2,025 | | | | | | 1,177 | |
| Loss on extinguishment of debt (7) | | | | | - | | | | | | 55 | | | | | | - | | | | | | - | | | | | | 55 | |
| Income tax adjustments (8) | | | | | (19,544 | ) | | | | | (50,868 | ) | | | | | (18,528 | ) | | | | | (38,072 | ) | | | | | (54,420 | ) |
| Non-GAAP Net Income | | | | $ | 36,433 | | | | | $ | 43,660 | | | | | $ | 26,329 | | | | | $ | 62,762 | | | | | $ | 57,322 | |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Diluted Net loss Per Share | | | | $ | (0.01 | ) | | | | $ | (0.09 | ) | | | | $ | (0.10 | ) | | | | $ | (0.11 | ) | | | | $ | - | |
| Share impact of non-GAAP adjustments identified above | | | | | 0.40 | | | | | | 0.56 | | | | | | 0.38 | | | | | | 0.78 | | | | | | 0.86 | |
| Non-GAAP Diluted Net Income Per Share | | | | $ | 0.39 | | | | | $ | 0.47 | | | | | $ | 0.28 | | | | | $ | 0.67 | | | | | $ | 0.86 | |
| | | | | | | | | | | | | | | | | | | | |
| Shares used in computing non-GAAP diluted net income per share | | | | | 92,716 | | | | | | 91,967 | | | | | | 94,008 | | | | | | 93,337 | | | | | | 66,811 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| NetScout Systems, Inc. |
| Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued |
| (In thousands, except per share data) |
| (Unaudited) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Three Months Ended | | | | Three Months Ended | | | | Six Months Ended |
| | | | | | | September 30, | | | | June 30, | | | | September 30, |
| | | | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2016 | | | | 2015 |
| (1 | ) | | Delayed transfer entity adjustment included in these amounts | | | | | | | | | | | | | | | | | | | | |
| | is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Product revenue | | | | $ | - | | | | | $ | 633 | | | | | $ | - | | | | | $ | - | | | | | $ | 633 | |
| | Cost of product revenue | | | | | - | | | | | | (98 | ) | | | | | - | | | | | | - | | | | | | (98 | ) |
| | Sales and marketing | | | | | - | | | | | | (152 | ) | | | | | - | | | | | | - | | | | | | (152 | ) |
| | Other income (expense) | | | | | - | | | | | | (383 | ) | | | | | - | | | | | | - | | | | | | (383 | ) |
| | Total delayed transfer entity adjustment | | | | $ | - | | | | | $ | - | | | | | $ | - | | | | | $ | - | | | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (2 | ) | | Share-based compensation expense included in these amounts | | | | | | | | | | | | | | | | | | | | |
| | is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Cost of product revenue | | | | $ | 266 | | | | | $ | 167 | | | | | $ | 195 | | | | | $ | 461 | | | | | $ | 269 | |
| | Cost of service revenue | | | | | 1,245 | | | | | | 754 | | | | | | 798 | | | | | | 2,043 | | | | | | 1,127 | |
| | Research and development | | | | | 3,872 | | | | | | 2,572 | | | | | | 2,633 | | | | | | 6,505 | | | | | | 4,062 | |
| | Sales and marketing | | | | | 3,726 | | | | | | 2,240 | | | | | | 2,611 | | | | | | 6,337 | | | | | | 3,643 | |
| | General and administrative | | | | | 2,569 | | | | | | 1,770 | | | | | | 1,895 | | | | | | 4,464 | | | | | | 2,997 | |
| | Total share-based compensation expense | | | | $ | 11,678 | | | | | $ | 7,503 | | | | | $ | 8,132 | | | | | $ | 19,810 | | | | | $ | 12,098 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (3 | ) | | Amortization expense related to acquired software and product | | | | | | | | | | | | | | | | | | | | |
| | technology, tradenames, customer relationships included in these | | | | | | | | | | | | | | | | | | | | |
| | amounts is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Total revenue adjustment | | | | $ | 2,869 | | | | | $ | 2,028 | | | | | $ | 2,877 | | | | | $ | 5,746 | | | | | $ | 2,028 | |
| | Cost of product revenue | | | | | 10,384 | | | | | | 14,807 | | | | | | 10,369 | | | | | | 20,753 | | | | | | 15,565 | |
| | Operating expenses | | | | | 17,559 | | | | | | 9,843 | | | | | | 17,572 | | | | | | 35,131 | | | | | | 10,652 | |
| | Total amortization expense | | | | $ | 30,812 | | | | | $ | 26,678 | | | | | $ | 30,818 | | | | | $ | 61,630 | | | | | $ | 28,245 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (4 | ) | | Business development and integration expense included in | | | | | | | | | | | | | | | | | | | | |
| | these amounts is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Cost of product revenue | | | | $ | (68 | ) | | | | $ | 131 | | | | | $ | 158 | | | | | $ | 90 | | | | | $ | 131 | |
| | Cost of service revenue | | | | | - | | | | | | 94 | | | | | | - | | | | | | - | | | | | | 94 | |
| | Research and development | | | | | - | | | | | | 256 | | | | | | - | | | | | | - | | | | | | 256 | |
| | Sales and marketing | | | | | 24 | | | | | | 271 | | | | | | 10 | | | | | | 34 | | | | | | 1,254 | |
| | General and administrative | | | | | 3,021 | | | | | | 13,792 | | | | | | 3,501 | | | | | | 6,522 | | | | | | 16,171 | |
| | Total business development and integration expense | | | | $ | 2,977 | | | | | $ | 14,544 | | | | | $ | 3,669 | | | | | $ | 6,646 | | | | | $ | 17,906 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (5 | ) | | Compensation for post-combination services included in these | | | | | | | | | | | | | | | | | | | | |
| | amounts is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Cost of product revenue | | | | $ | 113 | | | | | $ | 328 | | | | | $ | 42 | | | | | $ | 155 | | | | | $ | 328 | |
| | Cost of service revenue | | | | | 268 | | | | | | 1,751 | | | | | | 102 | | | | | | 370 | | | | | | 1,751 | |
| | Research and development | | | | | 768 | | | | | | 8,262 | | | | | | 793 | | | | | | 1,561 | | | | | | 8,283 | |
| | Sales and marketing | | | | | 720 | | | | | | 7,472 | | | | | | 1,006 | | | | | | 1,726 | | | | | | 7,472 | |
| | General and administrative | | | | | 998 | | | | | | 3,848 | | | | | | (228 | ) | | | | | 770 | | | | | | 3,848 | |
| | Total compensation for post-combination services | | | | $ | 2,867 | | | | | $ | 21,661 | | | | | $ | 1,715 | | | | | $ | 4,582 | | | | | $ | 21,682 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (6 | ) | | Acquisition related depreciation expense included in these | | | | | | | | | | | | | | | | | | | | |
| | amounts is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Cost of product revenue | | | | $ | (32 | ) | | | | $ | 46 | | | | | $ | 117 | | | | | $ | 85 | | | | | $ | 46 | |
| | Cost of service revenue | | | | | 20 | | | | | | 41 | | | | | | 48 | | | | | | 68 | | | | | | 41 | |
| | Research and development | | | | | 488 | | | | | | 802 | | | | | | 872 | | | | | | 1,360 | | | | | | 802 | |
| | Sales and marketing | | | | | 67 | | | | | | 125 | | | | | | 146 | | | | | | 213 | | | | | | 125 | |
| | General and administrative | | | | | 123 | | | | | | 163 | | | | | | 176 | | | | | | 299 | | | | | | 163 | |
| | Total acquisition related depreciation expense | | | | $ | 666 | | | | | $ | 1,177 | | | | | $ | 1,359 | | | | | $ | 2,025 | | | | | $ | 1,177 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (7 | ) | | Loss on extinguishment of debt included in these | | | | | | | | | | | | | | | | | | | | |
| | amounts is as follows | | | | | | | | | | | | | | | | | | | | |
| | Interest and other income/(expense), net | | | | $ | - | | | | | $ | 55 | | | | | $ | - | | | | | $ | - | | | | | $ | 55 | |
| | Total loss on extinguishment of debt | | | | $ | - | | | | | $ | 55 | | | | | $ | - | | | | | $ | - | | | | | $ | 55 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (8 | ) | | Total income tax adjustment included in these | | | | | | | | | | | | | | | | | | | | |
| | amounts is as follows: | | | | | | | | | | | | | | | | | | | | |
| | Tax effect of non-GAAP adjustments above | | | | $ | (19,544 | ) | | | | $ | (50,868 | ) | | | | $ | (18,528 | ) | | | | $ | (38,072 | ) | | | | $ | (54,493 | ) |
| | Tax impact of non-GAAP reconciling items in loss jurisdictions | | | | | - | | | | | | - | | | | | | - | | | | | | - | | | | | | 73 | |
| | Total income tax adjustments | | | | $ | (19,544 | ) | | | | $ | (50,868 | ) | | | | $ | (18,528 | ) | | | | $ | (38,072 | ) | | | | $ | (54,420 | ) |
| | | | | | | | | | | | | | | | | | | | |
| NetScout Systems, Inc. |
| Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Non-GAAP EBITDA |
| (In thousands, except per share data) |
| (Unaudited) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | | | Three Months Ended | | | | Six Months Ended |
| | | | September 30, | | | | June 30, | | | | September 30, |
| | | | 2016 | | | | 2015 | | | | 2016 | | | | 2016 | | | | 2015 |
| | | | | | | | | | | | | | | | | | | | |
| GAAP Income (loss) from operations | | | | $ | 805 | | | | $ | (35,270 | ) | | | | $ | (10,754 | ) | | | | $ | (9,949 | ) | | | | $ | (22,881 | ) |
| Previous adjustments to determine non-GAAP income from operations | | | | | 57,243 | | | | | 102,771 | | | | | | 53,855 | | | | | | 111,098 | | | | | | 112,316 | |
| Non-GAAP Income from operations | | | | | 58,048 | | | | | 67,501 | | | | | | 43,101 | | | | | | 101,149 | | | | | | 89,435 | |
| | | | | | | | | | | | | | | | | | | | |
| Depreciation excluding acquisition related | | | | | 8,929 | | | | | 6,183 | | | | | | 7,997 | | | | | | 16,926 | | | | | | 9,602 | |
| | | | | | | | | | | | | | | | | | | | |
| Non-GAAP EBITDA from operations | | | | $ | 66,977 | | | | $ | 73,684 | | | | | $ | 51,098 | | | | | $ | 118,075 | | | | | $ | 99,037 | |
| |
| NetScout Systems, Inc. |
| Reconciliation of GAAP Financial Guidance to Non-GAAP Financial Guidance |
| (Unaudited) |
| (In millions, except EPS) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | FY 2017 |
| | | | | | Low | | | | High |
| | | | | | | | | | |
| GAAP revenue | | | | | | $ | 1,165 | | | | | $ | 1,215 | |
| Deferred revenue fair value adjustment | | | | | | | 24 | | | | | | 24 | |
| Amortization of intangible assets | | | | | | | 11 | | | | | | 11 | |
| Non-GAAP revenue | | | | | | $ | 1,200 | | | | | $ | 1,250 | |
| | | | | | | | | | |
| GAAP Net Income | | | | | | $ | 46 | | | | | $ | 69 | |
| Deferred revenue fair value adjustment | | | | | | | 24 | | | | | | 24 | |
| Amortization of intangible assets | | | | | | | 123 | | | | | | 123 | |
| Share-based compensation expenses | | | | | | | 37 | | | | | | 37 | |
| Business development expenses | | | | | | | 10 | | | | | | 10 | |
| Compensation for post-combination services | | | | | | | 4 | | | | | | 4 | |
| Acquisition-related depreciation expense | | | | | | | 3 | | | | | | 3 | |
| Restructuring costs | | | | | | | 2 | | | | | | 2 | |
| Related impact of adjustments on income tax | | | | | | | (75 | ) | | | | | (75 | ) |
| Non-GAAP Net Income | | | | | | $ | 174 | | | | | $ | 197 | |
| | | | | | | | | | |
| Average Weighted Shares | | | | | | | 93 | | | | | | 93 | |
| GAAP EPS | | | | | | $ | 0.49 | | | | | $ | 0.74 | |
| Non-GAAP EPS | | | | | | $ | 1.87 | | | | | $ | 2.12 | |
CONTACT:
NetScout Systems, Inc.
Investors
Andrew Kramer, 978-614-4279
Vice President of Investor Relations
IR@netscout.com
or
Media
Donna Candelori, 408-571-5226
Senior Public Relations Manager
Donna.Candelori@netscout.com
