EX-99.1 2 a5196652ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 NetScout Systems Reports First Quarter Financial Results for Fiscal 2007 WESTFORD, Mass.--(BUSINESS WIRE)--July 26, 2006-- EPS Up 100% Year over Year 3 Million Additional Share Repurchase Announced Fiscal 2007/2008 EPS Growth to Exceed 40% NetScout Systems, Inc. (NASDAQ:NTCT), a leading provider of network performance management solutions, today announced financial results for its first quarter of fiscal year 2007. Total revenue for the first quarter was $23.6 million, flat year-over-year and a 9% decrease sequentially. Net income for the first quarter was $1.4 million, or $0.04 per diluted share, compared to net income of $652,000, or $0.02 per diluted share, in the first quarter of fiscal year 2006 and compared to net income of $1.8 million, or $0.06 per diluted share, for the previous quarter. Operating income for the quarter was $1.1 million, which includes stock-based compensation expense of $387,000 and amortization of intangible assets of $143,000. "We were disappointed that our first quarter results came in below our original expectation. We historically experience seasonal weakness in the first quarter, but this year's seasonality was accentuated by an unusual softness in Europe. After careful review of our first quarter performance and outlook for the remainder of this fiscal year and beyond, we believe this is a temporary slowdown. We remain confident about our competitive position in an attractive and growing market," said Anil Singhal, President and CEO of NetScout Systems. "The underlying drivers of our revenue and market share growth remain intact, evidenced by strong new product flow and expanding sales force. We remain focused on tight expense control and expanding operating margins as we have over the last several years. Based on these factors, we remain confident about full year EPS growth for fiscal 2007 and 2008 of 40 percent or more. Because of our confidence in the future of our business, we are announcing today an expansion of our existing stock repurchase program which enables us to purchase up to three million shares in addition to the 850,000 shares currently authorized for repurchase, using our strong cash flow to provide increased returns to shareholders," he added. During the quarter NetScout released two new products based upon its next generation Application Fabric Performance Management architecture -- nGenius Analytics and Application Fabric Monitor. The new products are market-leading solutions that proactively identify and resolve performance problems faster and assure business service reliability in increasingly complex, high-speed networks. Guidance: For the second quarter of fiscal year 2007, the Company expects total revenue to be in the range of $25 million to $26 million and net income per diluted share to be in the range of $0.05 to $0.06. The Company modifies its long-range guidance for net income per diluted share to grow by 40% or more in each of fiscal years 2007 and 2008. Financial Highlights for the First Fiscal Quarter 2007: -- Product revenue decreased 5% year-over-year and 17 % sequentially. Total revenue was flat year-over-year and down 9% sequentially. -- Operating margin was 4% of total revenue, up 2 points year-over-year and down 4 points sequentially. -- Cash and short and long-term marketable securities increased by $3.3 million to $90.8 million in the first quarter. The increase in cash was provided by strong positive cash flow from operations, as well as a one-time federal tax refund of $1.1 million. -- 32 new customers were added worldwide. -- 261 customers made repeat purchases. -- 47 customers placed orders over $100,000. -- 16% of total revenue came from international operations. 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: 2920982. A replay of the call will be available after 7:30 p.m. ET on July 26 for approximately two weeks. The number for the replay is 800-642-1687 for U.S./Canada and 706-645-9291 for international callers. The conference ID is: 2920982. 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, 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, 2006 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)2006 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. NetScout Systems, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited) Three Months Ended June 30, ----------------- 2006 2005 -------- -------- Revenue: Product $14,227 $15,046 Service 9,348 8,271 License and royalty - 184 -------- -------- Total revenue 23,575 23,501 -------- -------- Cost of revenue: Product (1), (2) 3,856 4,626 Service (1) 1,267 1,257 -------- -------- Total cost of revenue 5,123 5,883 -------- -------- Gross margin 18,452 17,618 -------- -------- Operating expenses: Research and development (1) 4,422 4,614 Sales and marketing (1) 10,830 10,022 General and administrative (1) 2,106 2,286 Amortization of other intangible assets 39 32 In-process research and development - 143 -------- -------- Total operating expenses 17,397 17,097 -------- -------- Income from operations 1,055 521 Interest income and other expenses, net 1,015 515 -------- -------- Income before income tax expense and cumulative effect of accounting change 2,070 1,036 Income tax expense 766 384 -------- -------- Income before cumulative effect of accounting change 1,304 652 Cumulative effect of accounting change, net of taxes of $41 70 - -------- -------- Net income $1,374 $652 ======== ======== Earnings Per Common Share Basic Income before cumulative effect of accounting change $0.04 $0.02 Cumulative effect of accounting change $- $- Net income per share $0.04 $0.02 Diluted Income before cumulative effect of accounting change $0.04 $0.02 Cumulative effect of accounting change $- $- Net income per share $0.04 $0.02 Weighted Average Shares Outstanding: Basic shares 31,480 30,840 Diluted shares 33,049 31,413 (1) Share-based compensation expense included in these amounts are as follows: Cost of product revenue 9 - Cost of service revenue 13 - Research and development 133 59 Sales and marketing 157 20 General and administrative 75 - (2) Amortization expense related to acquired software included in these amounts are as follows: Cost of product revenue 104 87 NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) June 30, March 31, 2006 2006 ----------- --------- Assets Current assets: Cash and cash equivalents $51,999 $61,676 Marketable securities 32,761 19,810 Accounts receivable, net 15,021 16,765 Inventories 4,386 2,816 Refundable income taxes 202 985 Deferred income taxes 2,837 2,896 Restricted Cash 1,342 1,339 Prepaids and other current assets 2,953 3,119 ----------- --------- Total current assets 111,501 109,406 Fixed assets, net 7,757 7,577 Goodwill 36,561 36,561 Other intangible assets, net 872 1,015 Capitalized software development costs 293 312 Deferred income taxes 4,803 4,889 Long-term marketable securities 6,030 5,979 Other assets 13 16 ----------- --------- Total assets $167,830 $165,755 =========== ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,469 $2,727 Accrued compensation 7,490 8,635 Accrued other 2,139 2,325 Income tax payable 467 - Deferred acquisition payment - Quantiva 1,342 1,339 Deferred revenue 21,747 21,382 ----------- --------- Total current liabilities 35,654 36,408 Accrued other 1,103 1,157 Long-term deferred revenue 1,248 1,599 ----------- --------- Total liabilities 38,005 39,164 ----------- --------- Stockholders' equity: Common stock 36 35 Additional paid-in capital 117,494 120,057 Accumulated other comprehensive income (134) (122) Deferred compensation - (4,434) Treasury stock (26,490) (26,490) Retained earnings 38,919 37,545 ----------- --------- Total stockholders' equity 129,825 126,591 ----------- --------- Total liabilities and stockholders' equity $167,830 $165,755 =========== ========= CONTACT: NetScout Systems, Inc. Catherine Taylor, 978-614-4286 IR@netscout.com