Exhibit 99.1
NetScout Systems Reports Third Quarter Financial Results for Fiscal 2006;
Product Revenue up 23%;
Year-over-Year Adjusted Operating Margin at 10%
WESTFORD, Mass.--(BUSINESS WIRE)--Jan. 25, 2006--NetScout Systems,
Inc. (NASDAQ: NTCT), a leading provider of network and application
performance management solutions, today announced financial results
for its third quarter of fiscal year 2006.
Revenue for the third quarter of fiscal year 2006 was $24.9
million, compared to revenue of $23.6 million in the previous quarter
and revenue of $22.0 million in the third quarter of fiscal year 2005.
Net profit for the quarter was $1.9 million, or $0.06 per diluted
share, compared to net profit of $1.5 million, or $0.05 per diluted
share, for the previous quarter and compared to a net profit of $906
thousand, or $0.03 per diluted share, in the third quarter of fiscal
year 2005.
On an adjusted basis, the net profit for the third quarter of
fiscal year 2006 was $2.2 million, or $0.07 per diluted share,
compared to net profit of $1.7 million, or $0.05 per diluted share for
the second quarter of fiscal year 2006. Adjusted net profit and
earnings per share exclude non-cash acquisition and stock-based
compensation expenses; they are used by management internally to
evaluate business performance. A reconciliation to GAAP results is
provided on the Statements of Operations included in this release.
"We are very pleased to report that this quarter was the tenth
quarter of sequential growth for the company, allowing us to reach our
10% adjusted operating margin target a quarter ahead of the goal we
set at the beginning of our fiscal year," said Anil Singhal, President
and CEO of NetScout Systems. "The strong performance this quarter was
backed by superior execution on all fronts. Order flow was strong in
all geographies, our orders were larger and we won many competitive
deals based on our differentiated technology and compelling solution
set," he added.
Guidance:
For the fourth quarter of fiscal year 2006, the Company expects
revenue to be in the range of $25.0 million to $26.0 million and net
profit per diluted share on a GAAP basis to be in the range of $0.04
to $0.05. On an adjusted basis, the Company expects net profit per
diluted share to be in the range of $0.05 to $0.06.
Financial Highlights for the Third Quarter:
-- Total revenue increased 5% sequentially and increased 13% from
the third quarter of fiscal year 2005. Product revenue
increased 8% sequentially and increased 23% from the third
quarter of fiscal year 2005. Service revenue increased 1%
sequentially and increased 3% from the third quarter of fiscal
year 2005.
-- Gross margin was 76% of total revenue, down 1 point
sequentially and down 1 point compared to the third quarter of
fiscal year 2005.
-- Cash and short and long-term marketable securities decreased
by $166 thousand to $77.3 million, and decreased by $2 million
year-over-year. The decrease in cash year-over-year is a
result of the acquisition of Quantiva.
-- 39 new customers were added worldwide.
-- 298 customers made repeat purchases.
-- 69 customers placed orders over $100,000.
-- Direct sales represented 42% of total revenue; indirect sales
to resellers represented 58% of total revenue.
-- International business comprised approximately 22% of total
revenue.
Product Highlights for the Third Quarter:
-- NetScout introduced a new, highly scalable nGenius(R)
Performance Manager Appliance for the cost-effective
monitoring and analysis of large, Cisco NetFlow-enabled
network environments. The new Appliance is security-hardened
and dedicated to aggregating and analyzing data from large
deployments of Cisco's NetFlow routers and switches. The
nGenius Performance Manager Appliance is available in Windows
2003 or Red Hat Linux platforms and scales to support data
collected from thousands of NetFlow interfaces.
-- NetScout also released the nGenius(R) Performance Manager
Standby Server to support its customers' needs for
high-availability of their business networks and applications
during times of crisis. Addressing large enterprises and
government agencies' regulated requirements for business
continuity, including disaster recovery, the nGenius Standby
Server helps network administrators monitor network and
application activity during a crisis by showing which systems
and applications are on-line, which sites and users are able
to continue to conduct business, and how business services are
performing on backup or redundant networks and systems. The
nGenius Performance Manager Standby Server maintains a
frequently updated, replicated copy of the primary server's
performance data and configuration settings so that if a
primary server becomes unavailable, the administrator can
quickly enable the standby server to assume control of all
performance management processes.
CONFERENCE CALL INSTRUCTIONS:
The Company invites shareholders to listen to its conference call
today at 4:30 p.m. ET, which will be webcast live through the
Company's website at http://www.netscout.com/investors. Alternatively,
people can listen to the call by dialing 800-288-8961 for U.S./Canada
and 612-332-0530 for international callers. A replay of the call will
be available after 8:00 p.m. ET on January 25 for approximately two
weeks. The number for the replay is 800-475-6701 for U.S./Canada and
320-365-3844 for international callers. The access code is 814025.
About NetScout Systems, Inc.
NetScout Systems, Inc. (NASDAQ: NTCT) is a market leader and
pioneer of integrated network performance management products that
unify performance across the enterprise. NetScout's nGenius(R)
Performance Management System is helping more than 3,000 leading
companies increase their return on infrastructure investments by
optimizing the performance of networks and applications according to
business priorities. NetScout is headquartered in Westford,
Massachusetts and has offices worldwide. Further information is
available at http://www.netscout.com.
Safe Harbor:
Forward-looking statements in this release are made pursuant to
the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934 and other federal securities laws. Investors are cautioned
that statements in this press release, which are not strictly
historical statements, including the plans, objectives and future
financial performance of NetScout,constitute forward-looking
statements which involve risks and uncertainties. Actual results could
differ materially from the forward-looking statements. Risks and
uncertainties which could cause actual results to differ include,
without limitation, risks and uncertainties associated with the
Company's relationships with strategic partners, dependence upon
broad-based acceptance of the Company's network performance management
solutions, the Company's ability to achieve and maintain a high rate
of growth, the effects and challenges related to the Quantiva
acquisition, including any integration issues, introduction and market
acceptance of new products and product enhancements such as the
delivery of nGenius product platform probes and software solutions,
High Definition Performance Management functionality, the analytic
solutions acquired from Quantiva and the implementation of the
Company's CDM Technology strategy, the ability of the Company to take
advantage of service provider opportunities, competitive pricing
pressures, reliance on sole source suppliers, successful expansion and
management of direct and indirect distribution channels and dependence
on proprietary technology, and risks of further slowdowns or downturns
in economic conditions generally and in the market for network
performance management solutions specifically. 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, 2005 and its quarterly report on Form 10-Q for the
quarter ended September 30, 2005 on file with the Securities and
Exchange Commission. NetScout assumes no obligation to update any
forward-looking information contained in this press release or with
respect to the announcements described herein.
(C)2005 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo, nGenius, and Quantiva are registered trademarks of
NetScout Systems, Inc. Other brands, product names and trademarks are
property of their respective owners.
The Company's condensed consolidated statements of operations and
balance sheets are attached.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
December 31, December 31,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue:
Product $16,274 $13,231 $46,389 $37,015
Service 8,637 8,354 25,489 24,285
License and royalty - 415 184 1,286
-------- -------- -------- --------
Total revenue 24,911 22,000 72,062 62,586
-------- -------- -------- --------
Cost of revenue:
Product (including
amortization expense related
to acquired software of
$104, $0, $296, and $0,
respectively) 4,754 4,069 13,680 11,623
Service 1,175 1,085 3,609 3,227
-------- -------- -------- --------
Total cost of
revenue 5,929 5,154 17,289 14,850
-------- -------- -------- --------
Gross margin 18,982 16,846 54,773 47,736
-------- -------- -------- --------
Operating expenses:
Research and development
(including stock-based
compensation of $73, $0, $215,
and $0, respectively) 4,380 4,180 13,633 12,557
Sales and marketing (including
stock-based compensation of
$24, $0, $68, and $0,
respectively) 10,054 9,531 29,608 27,116
General and administrative
(including stock-based
compensation of $49, $0, $57,
and $0, respectively) 2,266 2,062 6,762 5,822
Amortization of
other intangible
assets 39 - 110 -
In-process research
and development - - 143 -
-------- -------- -------- --------
Total operating
expenses 16,739 15,773 50,256 45,495
-------- -------- -------- --------
Income from operations 2,243 1,073 4,517 2,241
Interest income and
other expenses, net 687 346 1,770 644
-------- -------- -------- --------
Income before income
tax expense 2,930 1,419 6,287 2,885
Income tax expense 1,043 513 2,294 625
-------- -------- -------- --------
Net income $1,887 $906 $3,993 $2,260
======== ======== ======== ========
Basic net income per
share $0.06 $0.03 $0.13 $0.07
Diluted net income per
share $0.06 $0.03 $0.13 $0.07
Shares used in
computing:
Basic net income
per share 31,106 30,621 30,972 30,534
Diluted net income
per share 31,736 31,702 31,600 31,579
Reconciliation of GAAP & adjusted
income from operations
GAAP income from
operations $2,243 $1,073 $4,517 $2,241
Stock-based
compensation 146 - 340 -
Amortization of
acquired intangible
assets 143 - 406 -
In-process research and
development - - 143 -
-------- -------- -------- --------
Adjusted income from
operations excluding
acquisition and stock-
based compensation
costs 2,532 1,073 5,406 2,241
-------- -------- -------- --------
Reconciliation of GAAP
& adjusted net income:
GAAP Net income $1,887 $906 $3,993 $2,260
Stock-based
compensation, net of
tax 160 - 346 -
Amortization of acquired
intangible assets, net of tax 156 - 407 -
In-process research and
development, net of
tax - - 123 -
-------- -------- -------- --------
Adjusted net income
excluding acquisition
and stock-based
compensation costs $2,203 $906 $4,869 $2,260
======== ======== ======== ========
Adjusted basic net
income per share
excluding acquisition
related and stock-
based compensation
costs $0.07 $0.03 $0.16 $0.07
Adjusted diluted net
income per share
excluding acquisition
related and stock-
based compensation
costs $0.07 $0.03 $0.15 $0.07
Shares used in
computing adjusted
basic net income per
share 31,106 30,621 30,972 30,534
Shares used in
computing adjusted
diluted net income per
share 31,736 31,702 31,600 31,579
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December March
31, 31,
2005 2005
----------- ----------
Assets
Current assets:
Cash and cash equivalents $56,278 $57,070
Marketable securities 18,043 26,793
Accounts receivable, net 18,998 11,886
Inventories 4,121 3,114
Refundable income taxes 1,319 1,399
Deferred income taxes 2,406 2,356
Restricted Cash 1,337 -
Prepaids and other current assets 2,225 3,003
----------- ----------
Total current assets 104,727 105,621
Fixed assets, net 7,415 6,011
Capitalized software development costs 84 221
Other intangible assets, net 1,159 -
Goodwill 36,561 28,839
Deferred income taxes 5,744 7,586
Other assets 19 9
Long-term marketable securities 3,022 -
----------- ----------
Total assets $158,731 $148,287
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,818 $2,520
Accrued compensation 7,279 6,385
Accrued other 2,469 2,058
Deferred acquisition payment - Quantiva 1,337 -
Deferred revenue 18,265 17,680
----------- ----------
Total current liabilities 32,168 28,643
Accrued compensation 53 -
Accrued other 1,066 918
Long-term deferred revenue 1,465 1,277
----------- ----------
Total liabilities 34,752 30,838
----------- ----------
Stockholders' equity:
Common stock 35 35
Additional paid-in capital 115,435 112,286
Accumulated other comprehensive income (104) (130)
Deferred compensation (638) -
Treasury stock (26,490) (26,490)
Retained earnings 35,741 31,748
----------- ----------
Total stockholders' equity 123,979 117,449
----------- ----------
Total liabilities and stockholders'
equity $158,731 $148,287
=========== ==========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com