UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 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): January 30, 2019
NETSCOUT
SYSTEMS, INC.
(Exact name of registrant as specified in
its charter)
Delaware
(State or other jurisdiction of
incorporation)
000-26251 |
04-2837575 |
|
(Commission File Number) |
(IRS Employer Identification No.) |
310 Littleton Road |
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). |
|
Emerging growth company |
⃞ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞ |
|
|
|
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, 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, except as expressly set forth by specific reference in such filing.
On January 30, 2019, NetScout Systems, Inc. (the “Company”) issued a press release regarding its financial results for the third quarter of fiscal year 2019 ended December 31, 2018, 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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The Company hereby furnishes the following exhibit:
Exhibit Number | Description |
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. |
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|
|
By: |
/s/ Jean Bua |
Jean Bua |
|||
Executive Vice President and |
|||
Chief Financial Officer |
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Date: |
January 30, 2019 |
Exhibit 99.1
NETSCOUT SYSTEMS Reports Financial Results for Third Quarter Fiscal Year 2019
WESTFORD, Mass.--(BUSINESS WIRE)--January 30, 2019--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of service assurance, security, and business analytics, today announced financial results for its third quarter of fiscal year 2019 ended December 31, 2018.
“The combination of relatively strong revenue, savings from recent restructuring actions and ongoing efforts to control costs facilitated an EPS performance at the high end of our plans,” stated Anil Singhal, NETSCOUT’s president and CEO. “We were pleased to see that our efforts to expand our enterprise product portfolio are starting to yield tangible results while we also continued to make progress fortifying our incumbency with our service provider customers. As we move forward, we remain focused on key product, go-to-market and other operational initiatives that can help us elevate our value proposition, expand customer relationships and achieve our financial objectives in fiscal year 2019.”
Notable developments and highlights:
Q3 FY19 Financial Results
Total revenue (GAAP) for the third quarter of fiscal year 2019 was $246.0 million, compared with $268.9 million in the same quarter one year ago. Non-GAAP total revenue for the third quarter of fiscal year 2019 was $246.3 million versus $272.0 million in the same quarter one year ago. Third-quarter non-GAAP revenue in fiscal year 2018 included $12.0 million attributable to the handheld network test (HNT) tools business that was divested in mid-September 2018. Excluding revenue from the HNT tools business, third-quarter fiscal year 2019 organic non-GAAP revenue declined by 5% from the third quarter of fiscal year 2018. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.
On April 1, 2018, NETSCOUT adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606), using the modified retrospective approach. The adoption of ASC 606 had a slightly positive impact of approximately $0.7 million on third-quarter fiscal year 2019 revenue. In addition, starting in the first quarter of fiscal year 2019, revenue and related costs for certain subscription-oriented security offerings were classified as services rather than product. Prior period revenue and related costs for those offerings have been reclassified to conform to the current period presentation for comparability purposes and this information is available in the attached financial tables as supplementary data.
Product revenue (GAAP) for the third quarter of fiscal year 2019 was $134.1 million, which was approximately 55% of total revenue. This compares with third-quarter fiscal year 2018 product revenue (GAAP) of $146.6 million, which was approximately 54% of total revenue. On a non-GAAP basis, product revenue for the third quarter of fiscal year 2019 was also $134.1 million, which was approximately 54% of total non-GAAP revenue. This compares with third-quarter fiscal year 2018 non-GAAP product revenue $147.3 million, which was approximately 54% of total non-GAAP revenue. Third-quarter fiscal year 2018 non-GAAP product revenue included $9.1 million associated with the divested HNT tools business.
Service revenue (GAAP) for the third quarter of fiscal year 2019 was $111.9 million, or approximately 45% of total revenue versus service revenue (GAAP) of $122.4 million, or approximately 46% of total revenue, for the same period one year ago. On a non-GAAP basis, service revenue for fiscal year 2019’s third quarter was $112.1 million, or approximately 46% of total non-GAAP revenue, versus non-GAAP service revenue of $124.7 million, or approximately 46% of total non-GAAP revenue, for the same quarter one year ago. Third-quarter fiscal year 2018 non-GAAP service revenue included $3.0 million associated with the divested HNT tools business.
NETSCOUT’s loss from operations (GAAP) was $0.6 million in the third quarter of fiscal year 2019, compared with income from operations (GAAP) of $38.3 million in the comparable quarter one year ago. The Company’s third-quarter fiscal year 2019 (GAAP) operating margin was -0.3% versus 14.2% in the prior fiscal year’s third quarter. NETSCOUT’s third-quarter fiscal year 2019 loss from operations included $13.9 million of restructuring charges associated with previously disclosed actions to combine its previously separate service assurance and security engineering teams, consolidate certain facilities and implement a voluntary separation program (VSP) and other related measures to reduce headcount. The Company’s third-quarter fiscal year 2018 income from operations included restructuring charges of $3.4 million and it also benefited from one-time actions that removed approximately $25 million in operating expenses primarily through adjusting variable incentive compensation. Third-quarter fiscal year 2019 non-GAAP EBITDA from operations was $60.4 million, or 24.5% of non-GAAP quarterly revenue, which compares with $93.6 million, or 34.4% of non-GAAP quarterly revenue in the third quarter of fiscal year 2018. Third-quarter fiscal year 2019 non-GAAP income from operations was $52.6 million with a non-GAAP operating margin of 21.4%. This compares with third-quarter fiscal year 2018 non-GAAP income from operations of $83.9 million and a non-GAAP operating margin of 30.9%.
Net loss (GAAP) for the third quarter of fiscal year 2019 was $3.6 million, or $0.05 per share (diluted) versus net income (GAAP) of $89.7 million, or $1.02 per share (diluted), for the third quarter of fiscal year 2018. On a non-GAAP basis, net income for the third quarter of fiscal year 2019 was $35.2 million, or $0.45 per share (diluted), which compares with $60.7 million, or $0.69 per share (diluted), for the third quarter of fiscal year 2018.
As of December 31, 2018, cash and cash equivalents, and short and long-term marketable securities were $475.8 million, compared with $452.1 million as of September 30, 2018 and $447.8 million as of March 31, 2018. During the third quarter of fiscal year 2019, NETSCOUT did not repurchase any of its common stock.
Nine-Months FY19 Financial Results
Guidance:
NETSCOUT’s fiscal year 2019 guidance, which was last provided in November 2018, has been updated to primarily reflect the Company’s results to date, the benefits associated with the recent restructuring actions, ongoing expense management initiatives and fourth-quarter fiscal year 2019 revenue plans.
Conference Call Instructions:
NETSCOUT will host a
conference call to discuss its third-quarter fiscal year 2019 financial
results, its outlook for fiscal year 2019 and other matters today at
8:30 a.m. ET. This call will be webcast live through NETSCOUT’s website
at https://ir.netscout.com/investors/overview/default.aspx.
Alternatively, people can listen to the call by dialing (785) 424-1669.
The conference call ID is NTCTQ319. A replay of the call will be
available after 12:00 p.m. ET on January 30, 2019 for approximately one
week. The number for the replay is (800) 677-7320 for U.S./Canada and
(402) 220-0666 for international callers.
Use of Non-GAAP Financial Information:
To supplement
the financial measures presented in NETSCOUT's press release in
accordance with accounting principles generally accepted in the United
States ("GAAP"), NETSCOUT also reports the following non-GAAP measures:
non-GAAP total revenue, non-GAAP product revenue, non-GAAP service
revenue, non-GAAP income from operations, non-GAAP operating margin,
non-GAAP earnings before interest and other expense, income taxes,
depreciation and amortization (EBITDA) from operations, non-GAAP net
income, and non-GAAP net income per share (diluted). Non-GAAP revenue
(total, product and service) eliminates the GAAP effects of acquisitions
by adding back revenue related to deferred revenue revaluation, as well
as revenue impacted by the amortization of intangible assets. Non-GAAP
income from operations includes the aforementioned revenue adjustments
and also removes expenses related to the amortization of acquired
intangible assets, stock-based compensation, transitional service
agreement income, restructuring charges, intangible asset impairment
charges, loss on divestiture, costs related to new accounting standard
implementation, and certain expenses relating to acquisitions including
depreciation costs, compensation for post-combination services and
business development and integration costs while adding back
transitional service agreement income. Non-GAAP EBITDA from operations,
which has been presented herein as a measure of NETSCOUT’s performance,
includes the aforementioned items related to non-GAAP income from
operations and also removes non-acquisition-related depreciation
expense. Non-GAAP operating margin is calculated based on the non-GAAP
financial metrics discussed above. Non-GAAP net income includes the
aforementioned items related to non-GAAP income from operations and
removes transitional service agreement income, net of related income tax
effects. Non-GAAP diluted net income per share also excludes these
expenses as well as the related impact of all these adjustments on the
provision for income taxes. Investors are encouraged to review the
related GAAP financial measures and the reconciliation of these non-GAAP
financial measures to their most directly comparable GAAP financial
measures included in the attached tables within this press release.
NETSCOUT also references organic non-GAAP revenue, which includes all of
the aforementioned revenue adjustments for non-GAAP revenue and also
removes revenue associated with the HNT tools business for comparability
purposes with the Company’s quarterly and year-to-date fiscal year 2019
results.
These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, gross profit, operating profit, net income and diluted net income per share), and may have limitations because they do not reflect all of NETSCOUT’s results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate NETSCOUT’s results of operations in conjunction with the corresponding GAAP measures. The presentation of 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.
NETSCOUT believes these non-GAAP financial measures will enhance the reader’s overall understanding of NETSCOUT’s current financial performance and NETSCOUT's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. NETSCOUT believes that providing these non-GAAP measures affords investors a view of NETSCOUT’s operating results that may be more easily compared to peer companies and also enables investors to consider NETSCOUT’s operating results on both a GAAP and non-GAAP basis during and following the integration period of NETSCOUT’s acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of NETSCOUT’s core operating results. Furthermore, NETSCOUT believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to its financial condition and results of operations.
NETSCOUT management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions. These non-GAAP measures are among the primary factors that management uses in planning and forecasting.
About NETSCOUT SYSTEMS, INC.
NETSCOUT SYSTEMS, INC.
(NASDAQ: NTCT) assures digital business services against disruptions in
availability, performance, and security. Our market and technology
leadership stems from combining our patented smart data technology with
smart analytics. We provide real-time, pervasive visibility, and
insights customers need to accelerate and secure their digital
transformation. Our approach transforms the way organizations plan,
deliver, integrate, test, and deploy services and applications. Our
nGenius service assurance solutions provide real-time, contextual
analysis of service, network, and application performance. Arbor
security solutions protect against DDoS attacks that threaten
availability and advanced threats that infiltrate networks to steal
critical business assets. To learn more about improving service,
network, and application performance in physical or virtual data
centers, or in the cloud, and how NETSCOUT’s performance and security
solutions, powered by service intelligence can help you move forward
with confidence, visit www.netscout.com or follow @NETSCOUT and
@ArborNetworks on Twitter, Facebook, or LinkedIn.
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 without limitation, the
financial guidance for NETSCOUT; the statement that the Company remains
focused on key product, go-to-market and other operational initiatives
that can help the Company elevate its value proposition, expand customer
relationships and achieve its financial objectives in fiscal year 2019;
the statement related to the magnitude and timing of cost savings
related to recent restructuring actions; the statement regarding
anticipated fourth-quarter fiscal year 2019 restructuring charges, and
the statement regarding plans to participate in various industry
conferences to showcase its offerings to current and prospective
customers. Actual results could differ materially from the
forward-looking statements due to known and unknown risk, uncertainties,
assumptions and other factors. Such factors include slowdowns or
downturns in economic conditions generally and in the market for
advanced network, service assurance and cybersecurity solutions
specifically; the volatile foreign exchange environment; the Company’s
relationships with strategic partners and resellers; dependence upon
broad-based acceptance of the Company’s network performance management
solutions; the presence of competitors with greater financial resources
than we have, and their strategic response to our products; our ability
to retain key executives and employees; the Company’s ability to realize
the anticipated savings from recent restructuring actions and other
expense management programs; lower than expected demand for the
Company’s products and services; and the timing and magnitude of stock
buyback activity based on market conditions, corporate considerations,
debt agreements, and regulatory requirements. 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, 2018 and the Company’s subsequent Quarterly Report on
Form 10-Q, all of which are 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.
©2019 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries.
NETSCOUT SYSTEMS, INC. | ||||||||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Product | $ | 134,135 | $ | 146,569 | $ | 341,815 | $ | 398,201 | ||||||||||||||
Service | 111,873 | 122,375 | 333,101 | 353,362 | ||||||||||||||||||
Total revenue | 246,008 | 268,944 | 674,916 | 751,563 | ||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||
Product | 40,517 | 39,810 | 107,974 | 120,643 | ||||||||||||||||||
Service | 29,067 | 24,699 | 87,617 | 84,671 | ||||||||||||||||||
Total cost of revenue | 69,584 | 64,509 | 195,591 | 205,314 | ||||||||||||||||||
Gross profit | 176,424 | 204,435 | 479,325 | 546,249 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Research and development | 49,925 | 44,287 | 161,347 | 161,762 | ||||||||||||||||||
Sales and marketing | 74,024 | 77,270 | 224,207 | 239,897 | ||||||||||||||||||
General and administrative | 22,788 | 23,033 | 74,141 | 82,400 | ||||||||||||||||||
Amortization of acquired intangible assets | 16,433 | 18,221 | 57,879 | 54,902 | ||||||||||||||||||
Impairment of intangible assets | - | - | 35,871 | - | ||||||||||||||||||
Loss on divestiture | - | - | 9,177 | - | ||||||||||||||||||
Restructuring charges | 13,895 | 3,363 | 17,514 | 3,821 | ||||||||||||||||||
Total operating expenses | 177,065 | 166,174 | 580,136 | 542,782 | ||||||||||||||||||
Income (loss) from operations | (641 | ) | 38,261 | (100,811 | ) | 3,467 | ||||||||||||||||
Interest and other expense, net | (4,564 | ) | (3,107 | ) | (15,203 | ) | (9,565 | ) | ||||||||||||||
Income (loss) before income tax benefit | (5,205 | ) | 35,154 | (116,014 | ) | (6,098 | ) | |||||||||||||||
Income tax benefit | (1,602 | ) | (54,531 | ) | (23,479 | ) | (69,093 | ) | ||||||||||||||
Net Income (loss) | $ | (3,603 | ) | $ | 89,685 | $ | (92,535 | ) | $ | 62,995 | ||||||||||||
Basic net income (loss) per share | $ | (0.05 | ) | $ | 1.03 | $ | (1.17 | ) | $ | 0.71 | ||||||||||||
Diluted net income (loss) per share | $ | (0.05 | ) | $ | 1.02 | $ | (1.17 | ) | $ | 0.70 | ||||||||||||
Weighted average common shares outstanding used in computing: | ||||||||||||||||||||||
Net income (loss) per share - basic | 77,774 | 87,210 | 78,916 | 88,985 | ||||||||||||||||||
Net income (loss) per share - diluted | 77,774 | 87,860 | 78,916 | 89,882 |
NETSCOUT SYSTEMS, INC. | ||||||||||
Consolidated Balance Sheets | ||||||||||
(In thousands) | ||||||||||
December 31 | March 31, | |||||||||
2018 | 2018 | |||||||||
(Unaudited) | ||||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash, cash equivalents and marketable securities | $ | 474,807 | $ | 447,762 | ||||||
Accounts receivable and unbilled costs, net | 247,690 | 213,438 | ||||||||
Inventories | 28,909 | 34,774 | ||||||||
Prepaid expenses and other current assets | 50,827 | 56,434 | ||||||||
Total current assets | 802,233 | 752,408 | ||||||||
Fixed assets, net | 60,789 | 52,511 | ||||||||
Goodwill and intangible assets, net | 2,409,286 | 2,544,138 | ||||||||
Long-term marketable securities | 1,002 | - | ||||||||
Other assets | 24,074 | 19,551 | ||||||||
Total assets | $ | 3,297,384 | $ | 3,368,608 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 29,432 | $ | 30,133 | ||||||
Accrued compensation | 71,612 | 46,552 | ||||||||
Accrued other | 24,395 | 34,690 | ||||||||
Deferred revenue and customer deposits | 260,926 | 301,925 | ||||||||
Total current liabilities | 386,365 | 413,300 | ||||||||
Other long-term liabilities | 20,057 | 8,308 | ||||||||
Deferred tax liability | 129,284 | 151,563 | ||||||||
Accrued long-term retirement benefits | 33,320 | 35,246 | ||||||||
Long-term deferred revenue | 84,881 | 91,409 | ||||||||
Long-term debt | 600,000 | 600,000 | ||||||||
Total liabilities | 1,253,907 | 1,299,826 | ||||||||
Stockholders' equity: | ||||||||||
Common stock | 119 | 117 | ||||||||
Additional paid-in capital | 2,809,901 | 2,665,120 | ||||||||
Accumulated other comprehensive income | (608 | ) | 2,895 | |||||||
Treasury stock, at cost | (1,104,042 | ) | (995,843 | ) | ||||||
Retained earnings | 338,107 | 396,493 | ||||||||
Total stockholders' equity | 2,043,477 | 2,068,782 | ||||||||
Total liabilities and stockholders' equity | $ | 3,297,384 | $ | 3,368,608 |
NETSCOUT SYSTEMS, INC. | |||||||||||||||||||||||||||
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures | |||||||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
December 31, | September 30, | December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||||||||||
Product Revenue (GAAP) | $ | 134,135 | $ | 146,569 | $ | 110,753 | $ | 341,815 | $ | 398,201 | |||||||||||||||||
Product deferred revenue fair value adjustment | - | 719 | - | 391 | 2,154 | ||||||||||||||||||||||
Amortization of acquired intangible assets (2) | - | 3 | - | - | 7 | ||||||||||||||||||||||
Non-GAAP Product Revenue | $ | 134,135 | $ | 147,291 | $ | 110,753 | $ | 342,206 | $ | 400,362 | |||||||||||||||||
Service Revenue (GAAP) | $ | 111,873 | $ | 122,375 | $ | 113,044 | $ | 333,101 | $ | 353,362 | |||||||||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 243 | 957 | 7,081 | ||||||||||||||||||||||
Non-GAAP Service Revenue | $ | 112,116 | $ | 124,720 | $ | 113,287 | $ | 334,058 | $ | 360,443 | |||||||||||||||||
Revenue (GAAP) | $ | 246,008 | $ | 268,944 | $ | 223,797 | $ | 674,916 | $ | 751,563 | |||||||||||||||||
Product deferred revenue fair value adjustment | - | 719 | - | 391 | 2,154 | ||||||||||||||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 243 | 957 | 7,081 | ||||||||||||||||||||||
Amortization of acquired intangible assets (2) | - | 3 | - | - | 7 | ||||||||||||||||||||||
Non-GAAP Revenue | $ | 246,251 | $ | 272,011 | $ | 224,040 | $ | 676,264 | $ | 760,805 | |||||||||||||||||
Gross Profit (GAAP) | $ | 176,424 | $ | 204,435 | $ | 159,817 | $ | 479,325 | $ | 546,249 | |||||||||||||||||
Product deferred revenue fair value adjustment | - | 719 | - | 391 | 2,154 | ||||||||||||||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 243 | 957 | 7,081 | ||||||||||||||||||||||
Share-based compensation expense (1) | 1,894 | 1,588 | 2,389 | 5,882 | 4,404 | ||||||||||||||||||||||
Amortization of acquired intangible assets (2) | 7,554 | 9,314 | 7,731 | 23,687 | 27,864 | ||||||||||||||||||||||
Business development and integration expense (3) | - | (405 | ) | - | - | 244 | |||||||||||||||||||||
Acquisition related depreciation expense (6) | 13 | 33 | 17 | 63 | 111 | ||||||||||||||||||||||
Transitional service agreement income (7) | - | - | 2 | 2 | - | ||||||||||||||||||||||
Non-GAAP Gross Profit | $ | 186,128 | $ | 218,029 | $ | 170,199 | $ | 510,307 | $ | 588,107 | |||||||||||||||||
Income (Loss) from Operations (GAAP) | $ | (641 | ) | $ | 38,261 | $ | (23,117 | ) | $ | (100,811 | ) | $ | 3,467 | ||||||||||||||
Product deferred revenue fair value adjustment | - | 719 | - | 391 | 2,154 | ||||||||||||||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 243 | 957 | 7,081 | ||||||||||||||||||||||
Share-based compensation expense (1) | 13,759 | 12,425 | 17,418 | 44,142 | 35,254 | ||||||||||||||||||||||
Amortization of acquired intangible assets (2) | 23,987 | 27,535 | 25,712 | 81,566 | 82,766 | ||||||||||||||||||||||
Business development and integration expense (3) | 1 | (2,335 | ) | 366 | 386 | 2,577 | |||||||||||||||||||||
New standard implementation expense (4) | 72 | 903 | 54 | 888 | 1,334 | ||||||||||||||||||||||
Compensation for post-combination services (5) | 99 | 225 | 169 | 717 | 866 | ||||||||||||||||||||||
Restructuring charges | 13,895 | 3,363 | 2,472 | 17,514 | 3,821 | ||||||||||||||||||||||
Impairment of intangible assets | - | - | - | 35,871 | - | ||||||||||||||||||||||
Acquisition related depreciation expense (6) | 122 | 498 | 164 | 784 | 1,559 | ||||||||||||||||||||||
Loss on divestiture | - | - | 9,177 | 9,177 | - | ||||||||||||||||||||||
Transitional service agreement income (7) | 1,055 | - | 219 | 1,274 | - | ||||||||||||||||||||||
Non-GAAP Income from Operations | $ | 52,592 | $ | 83,939 | $ | 32,877 | $ | 92,856 | $ | 140,879 | |||||||||||||||||
Net Income (Loss) (GAAP) | $ | (3,603 | ) | $ | 89,685 | $ | (26,428 | ) | $ | (92,535 | ) | $ | 62,995 | ||||||||||||||
Product deferred revenue fair value adjustment | - | 719 | - | 391 | 2,154 | ||||||||||||||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 243 | 957 | 7,081 | ||||||||||||||||||||||
Share-based compensation expense (1) | 13,759 | 12,425 | 17,418 | 44,142 | 35,254 | ||||||||||||||||||||||
Amortization of acquired intangible assets (2) | 23,987 | 27,535 | 25,712 | 81,566 | 82,766 | ||||||||||||||||||||||
Business development and integration expense (3) | 1 | (2,335 | ) | 366 | 386 | 2,577 | |||||||||||||||||||||
New standard implementation expense (4) | 72 | 903 | 54 | 888 | 1,334 | ||||||||||||||||||||||
Compensation for post-combination services (5) | 99 | 225 | 169 | 717 | 866 | ||||||||||||||||||||||
Restructuring charges | 13,895 | 3,363 | 2,472 | 17,514 | 3,821 | ||||||||||||||||||||||
Impairment of intangible assets | - | - | - | 35,871 | - | ||||||||||||||||||||||
Acquisition related depreciation expense (6) | 122 | 498 | 164 | 784 | 1,559 | ||||||||||||||||||||||
Loss on divestiture | - | - | 9,177 | 9,177 | - | ||||||||||||||||||||||
Transitional service agreement income (7) | (45 | ) | - | - | (45 | ) | - | ||||||||||||||||||||
Income tax adjustments (8) | (13,334 | ) | (74,640 | ) | (9,367 | ) | (42,563 | ) | (105,861 | ) | |||||||||||||||||
Non-GAAP Net Income | $ | 35,196 | $ | 60,723 | $ | 19,980 | $ | 57,250 | $ | 94,546 | |||||||||||||||||
Diluted Net Income (Loss) Per Share (GAAP) | $ | (0.05 | ) | $ | 1.02 | $ | (0.34 | ) | $ | (1.17 | ) | $ | 0.70 | ||||||||||||||
Share impact of non-GAAP adjustments identified above | 0.50 | (0.33 | ) | 0.59 | 1.89 | 0.35 | |||||||||||||||||||||
Non-GAAP Diluted Net Income Per Share | $ | 0.45 | $ | 0.69 | $ | 0.25 | $ | 0.72 | $ | 1.05 | |||||||||||||||||
Shares used in computing non-GAAP diluted net income per share | 78,208 | 87,860 | 79,363 | 79,648 | 89,882 | ||||||||||||||||||||||
NETSCOUT SYSTEMS, INC. | |||||||||||||||||||||||||||
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued | |||||||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
December 31, | September 30, | December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||||||||||
(1) | Share-based compensation expense included in these amounts | ||||||||||||||||||||||||||
is as follows: | |||||||||||||||||||||||||||
Cost of product revenue | $ | 375 | $ | 301 | $ | 544 | $ | 1,188 | $ | 807 | |||||||||||||||||
Cost of service revenue | 1,519 | 1,287 | 1,845 | 4,694 | 3,597 | ||||||||||||||||||||||
Research and development | 3,979 | 3,730 | 5,414 | 13,544 | 10,820 | ||||||||||||||||||||||
Sales and marketing | 4,649 | 4,022 | 6,043 | 15,051 | 11,613 | ||||||||||||||||||||||
General and administrative | 3,237 | 3,085 | 3,572 | 9,665 | 8,417 | ||||||||||||||||||||||
Total share-based compensation expense | $ | 13,759 | $ | 12,425 | $ | 17,418 | $ | 44,142 | $ | 35,254 | |||||||||||||||||
(2) | Amortization expense related to acquired software and product | ||||||||||||||||||||||||||
technology, tradenames, customer relationships included in these | |||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
Total revenue adjustment | $ | - | $ | 3 | $ | - | $ | - | $ | 7 | |||||||||||||||||
Cost of product revenue | 7,554 | 9,311 | 7,731 | 23,687 | 27,857 | ||||||||||||||||||||||
Operating expenses | 16,433 | 18,221 | 17,981 | 57,879 | 54,902 | ||||||||||||||||||||||
Total amortization expense | $ | 23,987 | $ | 27,535 | $ | 25,712 | $ | 81,566 | $ | 82,766 | |||||||||||||||||
(3) | Business development and integration expense included in | ||||||||||||||||||||||||||
these amounts is as follows: | |||||||||||||||||||||||||||
Cost of product revenue | $ | - | $ | (107 | ) | $ | - | $ | - | $ | 226 | ||||||||||||||||
Cost of service revenue | - | (298 | ) | - | - | 18 | |||||||||||||||||||||
Research and development | - | (661 | ) | 356 | 356 | 61 | |||||||||||||||||||||
Sales and marketing | - | (620 | ) | - | - | 357 | |||||||||||||||||||||
General and administrative | 1 | (649 | ) | 10 | 30 | 1,915 | |||||||||||||||||||||
Total business development and integration expense | $ | 1 | $ | (2,335 | ) | $ | 366 | $ | 386 | $ | 2,577 | ||||||||||||||||
(4) | New standard implementation expense included in these | ||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
General and administrative | $ | 72 | $ | 903 | $ | 54 | $ | 888 | $ | 1,334 | |||||||||||||||||
Total new standard implementation expense | $ | 72 | $ | 903 | $ | 54 | $ | 888 | $ | 1,334 | |||||||||||||||||
(5) | Compensation for post-combination services included in these | ||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
Cost of product revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||
Cost of service revenue | - | - | - | - | - | ||||||||||||||||||||||
Research and development | 87 | 193 | 148 | 620 | 702 | ||||||||||||||||||||||
Sales and marketing | - | 13 | 7 | 19 | 128 | ||||||||||||||||||||||
General and administrative | 12 | 19 | 14 | 78 | 36 | ||||||||||||||||||||||
Total compensation for post-combination services | $ | 99 | $ | 225 | $ | 169 | $ | 717 | $ | 866 | |||||||||||||||||
(6) | Acquisition related depreciation expense included in these | ||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
Cost of product revenue | $ | 10 | $ | 13 | $ | 11 | $ | 34 | $ | 55 | |||||||||||||||||
Cost of service revenue | 3 | 20 | 6 | 29 | 56 | ||||||||||||||||||||||
Research and development | 83 | 307 | 115 | 504 | 962 | ||||||||||||||||||||||
Sales and marketing | 11 | 42 | 13 | 67 | 140 | ||||||||||||||||||||||
General and administrative | 15 | 116 | 19 | 150 | 346 | ||||||||||||||||||||||
Total acquisition related depreciation expense | $ | 122 | $ | 498 | $ | 164 | $ | 784 | $ | 1,559 | |||||||||||||||||
(7) | Transitional service agreement income | ||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
Cost of service revenue | $ | - | $ | - | $ | 2 | $ | 2 | $ | - | |||||||||||||||||
Research and development | 104 | - | 23 | 127 | - | ||||||||||||||||||||||
Sales and marketing | 128 | - | 50 | 178 | - | ||||||||||||||||||||||
General and administrative | 823 | - | 144 | 967 | - | ||||||||||||||||||||||
Other Income (expense), net | (1,100 | ) | - | (219 | ) | (1,319 | ) | - | |||||||||||||||||||
Total transitional service agreement income | $ | (45 | ) | $ | - | $ | - | $ | (45 | ) | $ | - | |||||||||||||||
(8) | Total income tax adjustment included in these | ||||||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||||||
Tax effect of non-GAAP adjustments above | $ | (13,334 | ) | $ | (74,640 | ) | $ | (9,367 | ) | $ | (42,563 | ) | $ | (105,861 | ) | ||||||||||||
Total income tax adjustments | $ | (13,334 | ) | $ | (74,640 | ) | $ | (9,367 | ) | $ | (42,563 | ) | $ | (105,861 | ) |
NETSCOUT SYSTEMS, INC. | |||||||||||||||||||
Reconciliation of GAAP Revenue to Non-GAAP Organic Revenue | |||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
GAAP Product Revenue | $ | 134,135 | $ | 146,569 | $ | 341,815 | $ | 398,201 | |||||||||||
Adjustments | - | 722 | 391 | 2,161 | |||||||||||||||
Non-GAAP Product Revenue | $ | 134,135 | $ | 147,291 | $ | 342,206 | $ | 400,362 | |||||||||||
HNT Tools Product Revenue | - | (9,058 | ) | (13,429 | ) | (24,304 | ) | ||||||||||||
Organic Non-GAAP Product Revenue | $ | 134,135 | $ |
138,233 |
$ |
328,777 |
$ |
376,058 |
|||||||||||
GAAP Service Revenue | $ | 111,873 | $ | 122,375 | $ | 333,101 | $ | 353,362 | |||||||||||
Adjustments | 243 | 2,345 | 957 | 7,081 | |||||||||||||||
Non-GAAP Service Revenue | $ | 112,116 | $ | 124,720 | $ | 334,058 | $ | 360,443 | |||||||||||
HNT Tools Service Revenue | - | (2,967 | ) | (4,710 | ) | (9,123 | ) | ||||||||||||
Organic Non-GAAP Service Revenue | $ | 112,116 | $ | 121,753 | $ | 329,348 | $ | 351,320 | |||||||||||
GAAP Revenue | $ | 246,008 | $ | 268,944 | $ | 674,916 | $ | 751,563 | |||||||||||
Adjustments | 243 | 3,067 | 1,348 | 9,242 | |||||||||||||||
Non-GAAP Revenue | $ | 246,251 | $ | 272,011 | $ | 676,264 | $ | 760,805 | |||||||||||
HNT Tools | - | (12,025 | ) | (18,139 | ) | (33,427 | ) | ||||||||||||
Organic Non-GAAP Revenue | $ | 246,251 | $ | 259,986 | $ | 658,125 | $ | 727,378 |
NETSCOUT SYSTEMS, INC. | |||||||||||||||||||||||
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Non-GAAP EBITDA | |||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
December 31, | September 30, | December 31, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||||||
Income (Loss) from operations (GAAP) | $ | (641 | ) | $ | 38,261 | $ | (23,117 | ) | $ | (100,811 | ) | $ | 3,467 | ||||||||||
Previous adjustments to determine non-GAAP income from operations | 53,233 |
|
45,678 | 55,994 | 193,667 | 137,412 | |||||||||||||||||
Non-GAAP Income from operations | 52,592 | 83,939 | 32,877 | 92,856 | 140,879 | ||||||||||||||||||
Depreciation excluding acquisition related | 7,842 | 9,617 | 8,335 | 24,159 | 28,534 | ||||||||||||||||||
Non-GAAP EBITDA from operations | $ | 60,434 | $ | 93,556 | $ | 41,212 | $ | 117,015 | $ | 169,413 |
NETSCOUT SYSTEMS, INC. |
|||||||
Reconciliation of GAAP Financial Guidance to Non-GAAP Financial Guidance | |||||||
(Unaudited) | |||||||
(In millions, except net income per share - diluted) | |||||||
FY'18 | FY'19 | ||||||
GAAP revenue | $ | 986.8 | ~$923 million | ||||
Deferred service revenue fair value adjustment | $ | 9.4 | ~$1 million to ~$2 million | ||||
Deferred product revenue fair value adjustment | $ | 3.1 | Less than $1 million | ||||
Non-GAAP revenue | $ | 999.3 | ~$925 million | ||||
FY'18 | FY'19 | ||||||
GAAP Net Income | $ | 79.8 | (~$76 million to ~$70 million ) | ||||
Deferred service revenue fair value adjustment | $ | 9.4 | ~$1 million | ||||
Deferred product revenue fair value adjustment | $ | 3.1 | Less than $1 million | ||||
Amortization of intangible assets | $ | 114.0 | ~$107 million | ||||
Share-based compensation expenses | $ | 47.3 | ~$55 million to ~$56 million | ||||
Business development & integration expenses* | $ | 5.9 | ~$2 million to ~$3 million | ||||
New accounting standard implementation | $ | 2.6 | ~$1 million | ||||
Loss on Divestiture | $ | - | ~$9 million | ||||
Restructuring costs | $ | 5.2 | ~$19 million to ~$20 million | ||||
Impairment of Intangibles | $ | - | ~$36 million | ||||
Other income | $ | (0.1) | - | ||||
Total Adjustments | $ | 187.4 | ~$231 million to ~$233 million | ||||
Related impact of adjustments on income tax | $ | (142.6) | (~$53 million to ~$54 million) | ||||
GAAP net income (loss) per share (diluted) | $ | 0.90 | ($0.96) to ($0.89) | ||||
Non-GAAP net income per share (diluted) | $ | 1.41 | $1.30 to $1.35 | ||||
Average Weighted Shares Outstanding (diluted GAAP) | 88.3 | 79.3 million | |||||
Average Weighted Shares Outstanding (diluted Non-GAAP) | 88.3 | 79.3 million |
* Business development & integration expenses include compensation for post-combination services, deal-related compensation and acquisition-related depreciation expense.
CONTACT:
Investors
Andrew Kramer
Vice President of
Investor Relations
978-614-4279
IR@netscout.com
Media
Maribel Lopez
Manager, Marketing & Corporate
Communications
781-362-4330
Maribel.Lopez@netscout.com