-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUd58d0lgHXGAoNtqWpPwWI2BDy7vXvwZbggeRN6zxXazjNM+XAp9ZmInLZT1sZz bNiumR7xmkPtrDxIecNv+Q== 0001157523-07-004541.txt : 20070503 0001157523-07-004541.hdr.sgml : 20070503 20070503160543 ACCESSION NUMBER: 0001157523-07-004541 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070503 DATE AS OF CHANGE: 20070503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETSCOUT SYSTEMS INC CENTRAL INDEX KEY: 0001078075 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 042837575 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26251 FILM NUMBER: 07815604 BUSINESS ADDRESS: STREET 1: 4 TECHNOLOGY PARK DR CITY: WESTFORD STATE: MA ZIP: 01886 BUSINESS PHONE: 9786144000 MAIL ADDRESS: STREET 1: 4 TECHNOLOGY PARK DRIVE CITY: WESTFORD STATE: MA ZIP: 01886 8-K 1 a5394260.txt NETSCOUT SYSTEMS, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 3, 2007 NetScout Systems, Inc. ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Delaware ------------------------------------------------------ (State or Other Jurisdiction of Incorporation) 0000-26251 04-2837575 - ------------------------ --------------------------------- (Commission File Number) (IRS Employer Identification No.) 310 Littleton Road, Westford, Massachusetts 01886 - ------------------------------------------- --------------------------------- (Address of Principal Executive Offices) (Zip Code) (978) 614-4000 ------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable ------------------------------------------------------------- (Former Name or Former Address, If Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following information and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. On May 3, 2007, NetScout Systems, Inc. (the "Company") issued a press release regarding its financial results for the quarter and fiscal year ended March 31, 2007, its expectations of future performance and its intention to hold a conference call regarding these topics. The Company's press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference. Use of Non-GAAP Financial Information Non-GAAP Financial Information To supplement the financial measures presented in the Company's press release in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company also presented non-GAAP measures relating to operating margin and earnings per share, which figures were adjusted from amounts determined based on GAAP to exclude a charge related to certain payments to be made to Narendra Popat, a co-founder and former Chairman of the Company in connection with his retirement and advisory agreement with the Company. The non-GAAP financial measures appeared in the statements in the press release that the charge of $1.4 million or $0.03 per share related to Mr. Popat's agreement accounted for a five percentage point reduction in operating margin, and, excluding such charge, non-GAAP operating margin would have been 12% for the fourth quarter and non-GAAP earnings per diluted share would have been $0.26 per share for the full fiscal year 2007, representing growth of 43% year-over-year and exceeding full year guidance of 40% growth. The Company believes these non-GAAP financial measures will enhance the reader's overall understanding of the Company's current financial performance and the Company's prospects for the future. Presenting the GAAP measures on their own would not be indicative of the Company's core operating results and would not provide a meaningful comparison to prior periods. The Company gave significant weight to the fact that the charges related to Mr. Popat's retirement and advisory agreement were non-recurring in deciding to present such information. The Company relies on these non-GAAP financial measures generally in connection with evaluating and running its business operations, including managing sales efforts, measuring the attainment of the Company's internal financial goals, making compensation decisions and managing headcount requirements. The Company gave greater prominence in the release to the amounts determined based on GAAP. The presentation of this non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits. The Company hereby furnishes the following exhibit: 99.1 Press release dated May 3, 2007. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NETSCOUT SYSTEMS, INC. By: /s/ David P. Sommers -------------------- David P. Sommers Chief Financial Officer and Senior Vice President, General Operations Date: May 3, 2007 EXHIBIT INDEX Exhibit Number Description - -------------- ---------------------------------------------------------- 99.1 Press release dated May 3, 2007. EX-99.1 2 a5394260ex991.txt EXHIBIT 99.1 Exhibit 99.1 NetScout Systems Reports Fourth Quarter & Year-End Financial Results for Fiscal 2007 WESTFORD, Mass.--(BUSINESS WIRE)--May 3, 2007--NetScout Systems, Inc. (NASDAQ: NTCT), an industry pacesetter for advanced network and service assurance solutions, today announced financial results for its fourth quarter and fiscal year ended March 31, 2007. Total revenue for the fourth quarter of fiscal year 2007 was $27.3 million, up 6% year-over-year. Net income was $2.1 million, an increase of 15% on a year-over-year basis, leading to net income per diluted share of $0.06. Operating income, which included stock-based compensation expense of $398,000 and amortization of acquired intangible assets of $143,000, was $1.8 million in the fourth quarter of fiscal 2007, representing an operating margin of 7%. For the fiscal year ended March 31, 2007, NetScout reported total revenue of $102.5 million, up 5% year-over-year. Net income was $7.7 million, or $0.23 per diluted share an increase of 33% year-over-year. Included in the fourth quarter net income is a charge of $1.4 million or $0.03 per diluted share related to the accrued expense for the retirement agreement with Co-Founder and former Chairman, Mr. Narendra Popat, which had an operating margin impact of 5 percentage points. Excluding the retirement charge, non-GAAP operating margin would have been 12% for the fourth quarter, and non-GAAP net income per diluted share for the full fiscal year 2007 would have been $0.26 per share, representing growth of 43% year-over-year, exceeding full year guidance of 40% growth. "We ended our fiscal year on a very positive note with strong fourth quarter bookings and operating margin improvement. Our fourth quarter EPS exceeded our previously issued guidance and revenue was at the high end of guidance," said Anil Singhal, President and CEO of NetScout Systems. "We are particularly pleased that our solutions are building strong momentum against the competition in our targeted vertical markets. Wireless service providers and financial services customers are finding our nGenius products to be very effective for cutting the Mean Time To Restore their networked applications and services to optimal efficiency. We are confident that our strategy and execution will continue to produce profitable growth. We anticipate repeating our fiscal 2007 EPS growth target at or above 40% in fiscal year 2008." Financial and Company Highlights for the Fourth Quarter 2007: -- Fourth quarter revenue increased 6% year-over-year and 3% sequentially. -- Operating margin was 7% of total revenue, down 1 point year-over-year and flat sequentially, and, excluding Mr. Popat's retirement charge, it was 12% of total revenue, up 4 points year-over-year. -- Cash and short and long-term marketable securities increased by $5.0 million to $100.1 million in the fourth quarter. -- During the quarter NetScout's Chairman and Co-Founder Narendra Popat retired from the Board of Directors and his daily role at the company and will continue to be available on an advisory basis. Co-Founder and CEO Anil Singhal was also elected Chairman. -- Billing World and OSS Today Magazine selected NetScout's nGenius solution as a finalist for the "Best New Product Award". Current News: -- NetScout appointed Michael Szabados as Chief Operating Officer. Mr. Szabados has been with the Company for more than 10 years and was previously Senior Vice President, Product Operations. -- In mid-April NetScout released substantial upgrades to two products with the release of version 4.0 of nGenius(R) Application Fabric Monitor and nGenius(R) Performance Manager featuring integration of flow and packet-based data to accelerate troubleshooting by allowing network managers to quickly identify network problems through high-level views and then "drill-down" to packet detail for further verification and analysis. Guidance: For the first quarter of fiscal year 2008, the Company expects total revenue to be in the range of $26.0 million to $27.0 million and net income per diluted share to be in the range of $0.05 to $0.06 representing year-over-year growth of 10% to 15% in revenue and 25% to 50% in net income per diluted share. The Company reiterates its long-range guidance for net income per diluted share growth at or above 40% in fiscal year 2008. 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. 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: 5028946. A replay of the call will be available after 7:30 p.m. ET on May 3 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: 5028946. 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 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, 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)2007 NetScout Systems, Inc. All rights reserved. NetScout and the NetScout logo and nGenius are registered trademarks of NetScout Systems, Inc. NetScout Systems, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited) Three Months Ended Twelve Months Ended March 31 March 31 ------------------- ------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Revenue: Product $ 17,173 $ 17,202 $ 63,524 $ 63,591 Service 10,145 8,612 38,948 34,101 License and royalty - - - 184 --------- --------- --------- --------- Total revenue 27,318 25,814 102,472 97,876 --------- --------- --------- --------- Cost of revenue: Product (1) (2) 4,418 4,959 17,184 18,639 Service (1) 1,426 1,319 5,424 4,928 --------- --------- --------- --------- Total cost of revenue 5,844 6,278 22,608 23,567 --------- --------- --------- --------- Gross margin 21,474 19,536 79,864 74,309 --------- --------- --------- --------- Operating expenses: Research and development (1) 4,631 4,508 18,320 18,141 Sales and marketing (1) 11,378 10,859 43,490 40,467 General and administrative (1) (3) 3,618 2,090 10,531 8,873 Amortization of acquired intangible assets 39 39 155 149 In-process research and development - - - 143 --------- --------- --------- --------- Total operating expenses 19,666 17,496 72,496 67,773 --------- --------- --------- --------- Income from operations 1,808 2,040 7,368 6,536 Interest income and other expenses, net 895 836 3,898 2,627 --------- --------- --------- --------- Income before income tax expense and cumulative effect of accounting change 2,703 2,876 11,266 9,163 Income tax expense 625 1,072 3,598 3,366 --------- --------- --------- --------- Income before cumulative effect of accounting change 2,078 1,804 7,668 5,797 Cumulative effect of accounting change, net of taxes of $41 - - 69 - --------- --------- --------- --------- Net income $ 2,078 $ 1,804 $ 7,737 $ 5,797 ========= ========= ========= ========= Basic net income per share $ 0.06 $ 0.06 $ 0.24 $ 0.19 Diluted net income per share $ 0.06 $ 0.06 $ 0.23 $ 0.18 Shares used in computing: Basic net income per share 31,979 31,250 31,713 31,041 Diluted net income per share 33,353 32,314 33,050 31,885 (1) Share-based compensation expense included in these amounts is as follows: Cost of product revenue $ 12 $ 11 $ 41 $ 11 Cost of service revenue 14 14 51 14 Research and development 137 196 503 411 Sales and marketing 167 160 608 228 General and administrative 68 74 270 131 --------- --------- --------- --------- Total share-based compensation expense $ 398 $ 455 $ 1,473 $ 795 ========= ========= ========= ========= (2) Amortization expense related to acquired software included in these amounts is as follows: Cost of Product Revenue $ 104 $ 104 $ 416 $ 400 (3) Includes a non-recurring charge of $1.4 million relating to the retirement of the Company's outgoing Founder and Chairman during the fourth quarter of fiscal year 2007 NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) March 31 March 31, 2007 2006 ---------- ---------- Assets Current assets: Cash and cash equivalents $ 18,925 $ 61,676 Marketable securities 69,204 19,810 Accounts receivable, net 18,317 16,765 Inventories 4,562 2,816 Refundable income taxes 657 985 Deferred income taxes 2,535 2,896 Restricted cash - 1,339 Prepaids and other current assets 3,380 3,119 ---------- ---------- Total current assets 117,580 109,406 Fixed assets, net 8,262 7,577 Goodwill 36,561 36,561 Acquired intangible assets, net 442 1,015 Capitalized software development costs, net 170 312 Deferred income taxes 5,382 4,889 Long-term marketable securities 11,975 5,979 Other assets 47 16 ---------- ---------- Total assets $ 180,419 $ 165,755 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 3,023 $ 2,727 Accrued compensation 8,271 8,635 Accrued other 2,609 2,325 Income taxes payable 192 - Deferred acquisition payment - Quantiva - 1,339 Deferred revenue 23,992 21,382 ---------- ---------- Total current liabilities 38,087 36,408 Accrued other 1,008 1,157 Accrued long-term retirement benefits 1,155 - Long-term deferred revenue 1,762 1,599 ---------- ---------- Total liabilities 42,012 39,164 ---------- ---------- Stockholders' equity: Common stock 36 35 Additional paid-in capital 122,074 120,057 Accumulated other comprehensive loss (46) (122) Deferred compensation - (4,434) Treasury stock (28,939) (26,490) Retained earnings 45,282 37,545 ---------- ---------- Total stockholders' equity 138,407 126,591 ---------- ---------- Total liabilities and stockholders' equity $ 180,419 $ 165,755 ========== ========== CONTACT: NetScout Systems, Inc. Catherine Taylor, 978-614-4286 Director of Investor Relations IR@netscout.com -----END PRIVACY-ENHANCED MESSAGE-----