EXHIBIT 99.1
NetScout Systems Reports Financial Results for
Second Quarter of Fiscal 2008
Record Second Quarter Revenue of $29.6 Million
Product Revenue Up 20% Year-over-Year
Operating Margin Up 2 Points to 12%
WESTFORD, Mass.--(BUSINESS WIRE)--Oct. 25, 2007--NetScout Systems,
Inc. (NASDAQ: NTCT), an industry pacesetter for advanced network and
service assurance solutions, today announced financial results for its
second quarter of fiscal year 2008, ended September 30, 2007.
Total revenue for the second quarter of fiscal year 2008 was $29.6
million, up 18% year-over-year. Product revenue was $18.9 million, up
20% from 2007. Net income was $3.3 million, an increase of 41%
year-over-year. Net income per diluted share was $0.10. Operating
income was $3.6 million in the second quarter of fiscal 2008, yielding
an operating margin of 12%. Included in operating income are
share-based compensation expense of $326,000 and amortization of
acquired intangible assets of $105,000.
"We posted another strong quarter in bookings, revenue and
operating margin improvement," said Anil Singhal, President and CEO of
NetScout Systems. "Our operating results demonstrate the continued
success of the strategy we implemented a year ago when we expanded our
sales force and positioned our products to serve high-growth vertical
markets."
"Our recently announced acquisition of Network General, which has
been well received by investors, was applauded by customers and
analysts who attended our recent User Forum held in early October," he
added. "We have received Hart-Scott-Rodino regulatory approval for the
transaction which we expect to close in early November. We believe the
combination with Network General will make NetScout the strongest
provider of network-based application performance data and analysis in
the market and will enable us to accelerate our revenue and
profitability growth by providing our larger, joint customer base the
most comprehensive, best-in-class solution available."
Financial and Company Highlights for the Second Quarter 2008:
-- Revenue increased 18% year-over-year and 6% sequentially.
-- Product revenue increased 20% year-over-year and 8%
sequentially.
-- Operating margin was 12% of total revenue, up 2 points
year-over-year and up 2 points sequentially.
-- Cash and cash equivalents and short and long-term marketable
securities increased by $3.7 million to $108.9 million.
-- NetScout announced on September 20th a definitive agreement to
acquire Network General, a privately-held company based in San
Jose, California, in a combined cash, stock and debt
transaction valued at approximately $205 million at the time
of announcement. The acquisition, subject to customary closing
conditions, is expected to be completed in early November.
Network General is a leading provider of IT management
solutions under the Sniffer(R) brand name with recognized
industry leadership in expert packet analysis and data mining.
-- In early October, NetScout hosted its sixth annual User Forum
conference in Miami, titled "Race to Resolution". A record
number of attendees from around the world gathered to learn
about best practices, discuss product directions and
collaborate with NetScout engineers, executives and fellow
customers.
Guidance:
NetScout is not providing guidance for the December quarter or for
fiscal 2008 because the Network General acquisition transaction is
still pending. The Company expects to resume providing quarterly
guidance at its third quarter earnings announcement in January.
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 866-701-8242 for U.S./Canada
and 706-634-5113 for international callers and using conference ID:
21043348. A replay of the call will be available after 7:30 p.m. ET on
October 25 for approximately one week. The number for the replay is
800-642-1687 for U.S./Canada and 706-645-9291 for international
callers. The conference ID is: 21043348.
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) has been an industry
pacesetter for advanced network and service assurance solutions for
over a decade, and counts the world's largest enterprises, government
agencies, and service providers among its customers. Enterprise and
government IT organizations deploy NetScout's nGenius(R) Performance
Management System to increase service levels to their users by
reducing or preventing service disruptions. Service providers depend
on NetScout's proven IP performance management technology and
expertise to protect the quality of their customers' experience with
IP-based services. 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
satisfaction of the applicable closing conditions for the Network
General acquisition, the Company's ability to integrate the
acquisition successfully, costs associated with the acquisition, the
ability to achieve market introduction and acceptance of new products
from the acquisition, difficulties in managing geographically
dispersed operations, and other factors relating to acquisitions
generally, as well as 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, introduction and market
acceptance of new products and product enhancements, 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 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, 2007 and
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 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)2007 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo and nGenius are registered trademarks of NetScout
Systems, Inc.
(C)2007 Network General Corporation. All Rights Reserved. Network
General, and the Network General logo are registered trademarks or
trademarks of Network General Corporation and/or its affiliates in the
United States and/or other countries. Only Network General Corporation
makes Sniffer(R) brand products.
NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Six Months
Ended Ended
September 30, September 30,
--------------- ---------------
2007 2006 2007 2006
------- ------- ------- -------
Revenue:
Product $18,911 $15,758 $36,424 $29,985
Service 10,701 9,322 21,101 18,670
------- ------- ------- -------
Total revenue 29,612 25,080 57,525 48,655
------- ------- ------- -------
Cost of revenue:
Product (1) (2) 5,204 4,382 9,856 8,238
Service (1) 1,499 1,315 2,986 2,582
------- ------- ------- -------
Total cost of revenue 6,703 5,697 12,842 10,820
------- ------- ------- -------
Gross profit 22,909 19,383 44,683 37,835
------- ------- ------- -------
Operating expenses:
Research and development (1) 4,711 4,486 9,246 8,908
Sales and marketing (1) 11,436 10,028 22,977 20,858
General and administrative (1) 3,192 2,236 6,025 4,342
Amortization of acquired intangible
assets - 39 6 78
------- ------- ------- -------
Total operating expenses 19,339 16,789 38,254 34,186
------- ------- ------- -------
Income from operations 3,570 2,594 6,429 3,649
Interest and other income, net 1,061 1,072 2,070 2,087
------- ------- ------- -------
Income before income tax expense and
cumulative effect of accounting
change 4,631 3,666 8,499 5,736
Income tax expense 1,380 1,364 2,568 2,130
------- ------- ------- -------
Income before cumulative effect of
accounting change 3,251 2,302 5,931 3,606
Cumulative effect of accounting
change, net of taxes of $41 - - - 70
------- ------- ------- -------
Net income $ 3,251 $ 2,302 $ 5,931 $ 3,676
======= ======= ======= =======
Basic net income per share $ 0.10 $ 0.07 $ 0.18 $ 0.12
Diluted net income per share $ 0.10 $ 0.07 $ 0.18 $ 0.11
Shares used in computing:
Basic net income per share 32,302 31,661 32,221 31,571
Diluted net income per share 33,600 32,673 33,435 32,867
(1) Share-based compensation expense included
in these amounts is as follows:
Cost of product revenue $ 10 $ 10 $ 21 $ 19
Cost of service revenue 14 12 26 25
Research and development 70 99 184 232
Sales and marketing 150 145 321 302
General and administrative 82 67 159 142
------- ------- ------- -------
Total share-based compensation
expense $ 326 $ 333 $ 711 $ 720
======= ======= ======= =======
(2) Amortization expense related to acquired software
included in these amounts is as follows:
Cost of Product Revenue $ 105 $ 104 $ 209 $ 208
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, March 31,
2007 2007
------------- ----------
Assets
Current assets:
Cash and cash equivalents $ 31,923 $ 18,925
Marketable securities 70,856 69,204
Accounts receivable, net 18,709 18,317
Inventories 4,846 4,562
Refundable income taxes 309 657
Deferred income taxes 2,747 2,535
Prepaid expenses and other current assets 2,845 3,380
------------- ----------
Total current assets 132,235 117,580
Fixed assets, net 8,869 8,262
Goodwill 36,561 36,561
Acquired intangible assets, net 226 442
Capitalized software development costs, net 89 170
Deferred income taxes 5,462 5,382
Long-term marketable securities 6,094 11,975
Other assets 1,692 47
------------- ----------
Total assets $ 191,228 $ 180,419
============= ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,507 $ 3,023
Accrued compensation 8,219 8,271
Accrued other 3,690 2,609
Income taxes payable 380 192
Deferred revenue 22,365 23,992
------------- ----------
Total current liabilities 39,161 38,087
Other long-term liabilities 961 1,008
Accrued long-term retirement benefits 1,315 1,155
Long-term deferred revenue 3,223 1,762
------------- ----------
Total liabilities 44,660 42,012
------------- ----------
Stockholders' equity:
Common stock 37 36
Additional paid-in capital 124,260 122,074
Accumulated other comprehensive loss (3) (46)
Treasury stock (28,939) (28,939)
Retained earnings 51,213 45,282
------------- ----------
Total stockholders' equity 146,568 138,407
------------- ----------
Total liabilities and stockholders'
equity $ 191,228 $ 180,419
============= ==========
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com