EX-99.1 2 a5528611-ex991.txt EXHIBIT 99.1 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