EX-99.1 2 e18403ex99_1.txt PRESS RELEASE Exhibit 99.1 NetScout Systems Reports First Quarter Financial Results for Fiscal 2005 WESTFORD, Mass., July 14 /PRNewswire-FirstCall/ -- NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network performance management solutions, today announced financial results for its first quarter of fiscal year 2005. Revenue for the first quarter of fiscal year 2005 ended June 30, 2004 was $20.1 million, compared to revenue of $19.5 million in the previous quarter and revenue of $15.6 million in the first quarter of fiscal year 2004. Net profit for the quarter was $297,000, or $0.01 per diluted share, compared to a net loss of $177,000, or ($0.01) per basic and diluted share, for the previous quarter and compared to a net loss of $552,000, or ($0.02) per basic and diluted share, in the first quarter of fiscal year 2004. "We are pleased to report another quarter of good results, exceeding our initial expectations and showing strong growth over this same period a year ago," said Anil Singhal, President and CEO of NetScout Systems. "We are encouraged by continuing strong demand for our products as well as increased activity in our key vertical markets, even in our seasonally slow first quarter. We continue to focus on expanding our market share through product innovation and broader partnerships worldwide." Financial Highlights for the First Quarter: * Total revenue increased 3% sequentially and increased 29% from the first quarter of fiscal year 2004. Product revenue decreased 2% sequentially and increased 34% from the first quarter of fiscal year 2004. Service revenue increased 11% sequentially and increased 24% from the first quarter of fiscal year 2004. Royalty revenue decreased 7% sequentially and increased 3% from the first quarter of fiscal year 2004. * Gross margin was 77% of total revenue, up 1 point sequentially and 2 points compared to the first quarter of fiscal year 2004. * Cash flow from operations was positive. * Cash and short and long-term marketable securities increased by $1 million to $76.5 million in the first quarter and increased by $3.3 million year-over-year. * 21 new customers were added worldwide. * 288 customers made repeat purchases. * 49 customers placed orders over $100,000. * Direct sales represented 50% of total revenue; indirect sales to resellers represented 50% of total revenue. * International business comprised approximately 14% of total revenue. Product and Company Highlights for the First Quarter: * NetScout released new features for monitoring the performance of applications for enterprises using Multiprotocol Label Switching (MPLS) in their wide area networks providing critical visibility into the usage and activity of applications that would otherwise be obscured in MPLS environments. * During the quarter NetScout released a new software module called the nGenius(R) Trace Analyzer Integrator that allows nGenius Performance Manager and nGenius Probes to inter-operate with Network Associates'(R) Sniffer products as well as other third party trace analysis products. * NetScout announced a multi-tiered channel partner program with added incentives and increased support, including training, technical support, marketing resources and sales promotions, aimed at improving partners' success in selling NetScout products to enterprises and governmental agencies. * NetScout further expanded its sales channels in Asia by signing a new partnership agreement with Shanghai Posts & Telecommunications Equipment Co., Ltd. to resell its nGenius products in the Eastern China region. * NetScout announced a new agreement with Evident Software(R) to jointly deliver IT demand and cost analysis solutions for major enterprises' outsourcing, utility computing and application delivery programs. Evident also joined NetScout's nGenius Alliance Program. Guidance: For the second quarter of fiscal year 2005, the Company expects revenue to be in the range of $20 million to $21 million and net income per diluted share to be in the range of $0.00 to $0.01. The Company expects to be cash positive in the quarter. 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 800-230-1085 for U.S./Canada and 612-332-0226 for international callers. A replay of the call will be available after 8:00 p.m. ET on July 14 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 737209. 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. 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 strategic relationships with Cisco Systems and other 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 such as the delivery of nGenius(R) product platform probes and software solutions and the implementation of the Company's CDM(TM) 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, as well as risks associated with a continued climate of tight IT spending, 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, 2004 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. NetScout and the NetScout logo and nGenius are registered trademarks of NetScout Systems, Inc. CDM and the CDM logo, Universal Response Time, Power Alarms, Workspaces and MasterCare and the MasterCare logo are trademarks of NetScout Systems, Inc. NetScout reserves the right, at its sole discretion, to make changes at any time in its technical information and specifications and service and support programs. The Company's condensed consolidated statements of operations and balance sheets are attached. Contact: Catherine Taylor Director of Investor Relations NetScout Systems, Inc. 978-614-4286 IR@netscout.com NetScout Systems, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited) Three Months Ended June 30, 2004 2003 Revenue: Product $11,560 $8,628 Service 8,105 6,557 License and royalty 432 418 Total revenue 20,097 15,603 Cost of revenue: Product(1) 3,653 2,781 Service 1,065 1,044 Total cost of revenue 4,718 3,825 Gross margin 15,379 11,778 Operating expenses: Research and development(2) 4,319 3,009 Sales and marketing 8,783 7,944 General and administrative 1,954 1,649 Amortization of other intangible assets - 272 Total operating expenses 15,056 12,874 Income (Loss) from operations 323 (1,096) Interest income and other expenses, net 179 197 Income (loss) before income tax expense (benefit) 502 (899) Income tax expense (benefit) 205 (347) Net income (loss) $297 $(552) Basic net income (loss) per share $0.01 $(0.02) Diluted net income (loss) per share $0.01 $(0.02) Shares used in computing: Basic net income (loss) per share 30,448 30,034 Diluted net income (loss) per share 31,710 30,034 (1) Cost of product revenue includes amortization of capitalized software of $166 for the three months ended June 30, 2004 (2) Research and development costs are net of capitalized software development costs of $1,068 for the three months ended June 30, 2003. NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) June 30, March 31, 2004 2004 Assets Current assets: Cash and cash equivalents $30,092 $19,011 Marketable securities 40,443 50,432 Accounts receivable, net 11,521 10,851 Inventories 2,985 3,366 Refundable income taxes 2,172 2,102 Deferred income taxes 1,687 1,667 Prepaids and other current assets 2,283 2,175 Total current assets 91,183 89,604 Fixed assets, net 5,686 5,415 Capitalized software development costs 718 884 Goodwill, net 28,839 28,839 Deferred income taxes 8,208 8,378 Long-term prepaid expense 36 45 Long-term marketable securities 5,968 6,016 Total assets $140,638 $139,181 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,435 $1,984 Accrued compensation 5,018 4,481 Accrued other 2,334 2,140 Income tax payable 490 490 Deferred revenue 15,536 15,968 Total current liabilities 25,813 25,063 Long-term liabilities: Long-term deferred revenue 887 1,006 Total liabilities 26,700 26,069 Stockholders' equity: Common stock 35 34 Additional paid-in capital 111,341 110,683 Accumulated other comprehensive income (123) 7 Treasury stock (26,490) (26,490) Retained earnings 29,175 28,878 Total stockholders' equity 113,938 113,112 Total liabilities and stockholders' equity $140,638 $139,181 SOURCE NetScout Systems, Inc. -0- 07/14/2004 /CONTACT: Catherine Taylor, Director of Investor Relations of NetScout Systems, Inc., +1-978-614-4286, IR@netscout.com/ /Web site: http://www.netscout.com/ (NTCT) CO: NetScout Systems, Inc. ST: Massachusetts IN: CPR NET STW SU: ERN CCA MAV