EX-99.1 2 e19282ex99_1.txt PRESS RELEASE Exhibit 99.1 NetScout Systems Reports Second Quarter Financial Results For Fiscal 2005 WESTFORD, Mass., Oct. 14 /PRNewswire-FirstCall/ -- NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network performance management solutions, today announced financial results for its second quarter of fiscal year 2005. Revenue for the second quarter of fiscal year 2005, ended September 30, 2004, was $20.5 million, compared to revenue of $20.1 million in the previous quarter and revenue of $17.5 million in the second quarter of fiscal year 2004. Net profit for the quarter was $1.1 million or $0.03 per diluted share, compared to a net profit of $297,000, or $0.01 per diluted share, for the previous quarter and compared to breakeven, or $0.00 per diluted share, in the second quarter of fiscal year 2004. The second quarter net profit includes an adjustment of $368,000, or $0.01 per diluted share, from completion of an IRS tax audit for fiscal years 2000 through 2003. "In an environment that continues to be challenging, we are pleased that NetScout has had another strong quarter," said Anil Singhal, President and CEO of NetScout Systems. "It is indicative of the market acceptance of our CDM(TM) strategy and products that have been in the market for more than a year. We are now well positioned to use CDM as a platform to drive future growth, both by continuing to enhance our existing products and by adding new products to the nGenius(R) family. In the third quarter, we will be announcing yet another significant initiative in the ongoing evolution of CDM." Financial Highlights for the Second Quarter: -- Total revenue increased 2% sequentially and increased 17% from the second quarter of fiscal year 2004. Product revenue increased 6% sequentially and increased 24% from the second quarter of fiscal year 2004. Service revenue decreased 3% sequentially and increased 9% from the second quarter of fiscal year 2004. Royalty revenue increased 2% sequentially and decreased 1% from the second quarter of fiscal year 2004. -- Gross margin was 76% of total revenue, down 1 point sequentially and up 1 point compared to the second quarter of fiscal year 2004. -- Cash flow from operations was positive. -- Cash and short and long-term marketable securities increased by $1.7 million to $78.2 million in the second quarter and increased by $6 million year-over-year. -- 31 new customers were added worldwide. -- 249 customers made repeat purchases. -- 52 customers placed orders over $100,000. -- International business comprised approximately 18% of total revenue. Product and Company Highlights: -- NetScout announced the market's first solution for optimizing the performance of applications in wide area networks using Inverse Multiplexing over ATM (IMA) technology. Delivered via NetScout's new nGenius T1/E1 IMA Probes and NetScout's nGenius(R) Performance Manager v2.0, the new solution allows enterprises to effectively monitor, troubleshoot and report on the performance of applications being delivered across IMA links, as well as manage the performance of those links in conjunction with the rest of the network. -- NetScout joined the Citrix(R) Alliance Partner program as a Premier member and was a sponsor of the Citrix iForum(TM) 2004. -- NetScout further expanded its sales channels in Asia by signing a new partnership agreement with Transition Systems, a distributor of data communications products to enterprises and government organizations in Southeast Asia. Under the agreement, Transition Systems will resell NetScout's nGenius Performance Management Solution through its extensive network of system integrators and value-added resellers in Malaysia, Thailand and the Philippines. -- NetScout hosted its third annual User Forum conference in early October. The three-day conference, titled "Path to Performance," provided a forum for NetScout customers to learn more about future product and technology direction and to exchange information about new ways to use nGenius to bring value to their business. Attendance increased by 50% over the prior year with customers and resellers coming from North America, Asia and Europe. Guidance: For the third quarter of fiscal year 2005, the Company expects revenue to be in the range of $20.5 million to $21.5 million and net profit per diluted share to be in the range of $0.01 to $0.02. 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 888-273-9885 for U.S./Canada and 612-332-0637 for international callers. A replay of the call will be available after 8:00 p.m. ET on October 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 750086. 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 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 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 such as the delivery of nGenius product platform probes and software solutions 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, 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 and its quarterly report on Form 10-Q for the quarter ended June 30, 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. NetScout Systems, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited) Three Months Ended Six Months Ended September 30, September 30, 2004 2003 2004 2003 Revenue: Product $12,224 $9,878 $23,784 $18,506 Service 7,826 7,192 15,931 13,749 License and royalty 439 445 871 863 Total revenue 20,489 17,515 40,586 33,118 Cost of revenue: Product(1) 3,901 3,358 7,554 6,139 Service respectively) 1,077 1,022 2,142 2,066 Total cost of revenue 4,978 4,380 9,696 8,205 Gross margin 15,511 13,135 30,890 24,913 Operating expenses: Research and development(2) 4,058 3,670 8,377 6,679 Sales and marketing 8,802 8,038 17,585 15,982 General and administrative 1,806 1,550 3,760 3,199 Amortization of other intangible assets - - - 272 Total operating expenses 14,666 13,258 29,722 26,132 Income (Loss) from operations 845 (123) 1,168 (1,219) Interest income and other expenses, net 119 160 298 357 Income (loss) before income tax expense (benefit) 964 37 1,466 (862) Income tax expense (benefit) (93) 37 112 (310) Net income (loss) $1,057 $- $1,354 $(552) Basic net income (loss) per share $0.03 $- $0.04 $(0.02) Diluted net income (loss) per share $0.03 $- $0.04 $(0.02) Shares used in computing: Basic net income (loss) per share 30,533 30,058 30,491 30,046 Diluted net income (loss) per share 31,288 30,585 31,517 30,046 (1) Cost of product revenue includes amortization of capitalized software of $166 and $110 for the three months ended September 30, 2004 and 2003, respectively and $331 and $110 for the six months ended September 30, 2004 and 2004, respectively. (2) Research and development costs are net of capitalized software development costs of $258 and $1,325 for the three and six months ended September 30, 2003. NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) September 30, March 31, 2004 2004 Assets Current assets: Cash and cash equivalents $37,870 $19,011 Marketable securities 34,416 50,432 Accounts receivable, net 9,653 10,851 Inventories 2,949 3,366 Refundable income taxes 1,411 2,102 Deferred income taxes 1,750 1,667 Prepaids and other current assets 2,706 2,175 Total current assets 90,755 89,604 Fixed assets, net 5,810 5,415 Capitalized software development costs 552 884 Goodwill, net 28,839 28,839 Deferred income taxes 8,645 8,378 Long-term prepaid expense 39 45 Long-term marketable securities 5,962 6,016 Total assets $140,602 $139,181 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $1,863 $1,984 Accrued compensation 4,995 4,481 Accrued other 2,480 2,140 Income tax payable - 490 Deferred revenue 14,832 15,968 Total current liabilities 24,170 25,063 Long-term liabilities: Long-term deferred revenue 1,258 1,006 Total liabilities 25,428 26,069 Stockholders' equity: Common stock 35 34 Additional paid-in capital 111,474 110,683 Accumulated other comprehensive income (77) 7 Treasury stock (26,490) (26,490) Retained earnings 30,232 28,878 Total stockholders' equity 115,174 113,112 Total liabilities and stockholders' equity $140,602 $139,181 Contact: Catherine Taylor Director of Investor Relations NetScout Systems, Inc. 978-614-4286 IR@netscout.com SOURCE NetScout Systems, Inc. -0- 10/14/2004 /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 STW NET SU: ERN CCA MAV