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): May 2, 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | NTCT | Nasdaq Global Select Market |
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 May 2, 2019, NetScout Systems, Inc. (the “Company”) issued a press release regarding its financial results for the fourth fiscal quarter and the fiscal year 2019 each ended March 31, 2019, 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. |
|||
|
|||
|
|
By: |
/s/ Jean Bua |
Jean Bua |
|||
Executive Vice President and |
|||
Chief Financial Officer |
|||
Date: |
May 2, 2019 |
Exhibit 99.1
NETSCOUT Reports Financial Results for Fourth Quarter and Full Fiscal Year 2019
WESTFORD, Mass.--(BUSINESS WIRE)--May 2, 2019--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of service assurance, security, and business analytics, today announced financial results for its fourth quarter and full fiscal year 2019 ended March 31, 2019.
“Our fourth-quarter fiscal year 2019 performance was fundamentally consistent with the preliminary results that we announced last month,” stated Anil Singhal, NETSCOUT’s president and CEO. “Our fourth-quarter revenue was lower than planned primarily due to delayed revenue recognition on a large service assurance project at an international mobile operator. Nevertheless, we produced a good quarter in our enterprise customer segment with solid organic expansion due to strong growth in our DDoS product area and relatively stable results in the service assurance product area. Our operating profitability was driven by strong gross margins due in part to higher software sales and lower operating expenses, with EPS exceeding our preliminary estimate due to a lower-than-anticipated tax rate.”
Commenting on the Company’s plans and outlook for fiscal year 2020, Singhal said, “We move forward with a broader and more compelling range of higher margin, software-centric products that address our customers’ most pressing performance management and security needs arising from their digital transformation initiatives. We also have taken important steps during the past year to adjust our cost structure, refine our product lines, and realign our global sales organization to drive better cross-selling of our solutions into our installed base. With the most severe headwinds behind us, we are optimistic about our prospects for improved organic revenue performance and modest EPS expansion in fiscal year 2020.”
Notable developments and highlights:
Q4 FY19 Financial Results
Total revenue (GAAP) for the fourth quarter of fiscal year 2019 was $235.0 million, compared with $235.2 million in the same quarter one year ago. Non-GAAP total revenue for the fourth quarter of fiscal year 2019 was $235.2 million versus $238.5 million in the same quarter one year ago. Fourth-quarter non-GAAP revenue in fiscal year 2018 included $10.7 million attributable to the handheld network test (HNT) tools business that was divested in mid-September 2018. Excluding revenue from the HNT tools business, fourth-quarter fiscal year 2019 organic non-GAAP revenue grew by 3% from the fourth 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 positive impact of $10.7 million on fourth-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 and non-GAAP) for the fourth quarter of fiscal year 2019 was $125.5 million, which was approximately 53% of total revenue. This compares with fourth-quarter fiscal year 2018 product revenue (GAAP) of $122.2 million, which was approximately 52% of total revenue, and fourth-quarter fiscal year 2018 non-GAAP product revenue of $123.1 million, which was approximately 52% of total non-GAAP revenue. Fourth-quarter fiscal year 2018 non-GAAP product revenue included $7.8 million associated with the divested HNT tools business.
Service revenue (GAAP) for the fourth quarter of fiscal year 2019 was $109.5 million, or approximately 47% of total revenue versus service revenue (GAAP) of $113.0 million, or approximately 48% of total revenue, for the same period one year ago. On a non-GAAP basis, service revenue for fiscal year 2019’s fourth quarter was $109.8 million, or approximately 47% of total non-GAAP revenue, versus non-GAAP service revenue of $115.3 million, or approximately 48% of total non-GAAP revenue, for the same quarter one year ago. Fourth-quarter fiscal year 2018 non-GAAP service revenue included $2.9 million associated with the divested HNT tools business.
NETSCOUT’s income from operations (GAAP) was $29.2 million in the fourth quarter of fiscal year 2019, compared with a loss from operations (GAAP) of $7.5 million in the comparable quarter one year ago. The Company’s fourth-quarter fiscal year 2019 (GAAP) operating margin was 12.4% versus -3.2% in the prior fiscal year’s fourth quarter. Fourth-quarter fiscal year 2019 non-GAAP EBITDA from operations was $76.0 million, or 32.3% of non-GAAP quarterly revenue, which compares with $51.5 million, or 21.6% of non-GAAP quarterly revenue in the fourth quarter of fiscal year 2018. Fourth-quarter fiscal year 2019 non-GAAP income from operations was $68.7 million with a non-GAAP operating margin of 29.2%. This compares with fourth-quarter fiscal year 2018 non-GAAP income from operations of $42.5 million and a non-GAAP operating margin of 17.8%.
Net income (GAAP) for the fourth quarter of fiscal year 2019 was $19.2 million, or $0.24 per share (diluted) versus net income (GAAP) of $16.8 million, or $0.20 per share (diluted), for the fourth quarter of fiscal year 2018. On a non-GAAP basis, net income for the fourth quarter of fiscal year 2019 was $52.0 million, or $0.66 per share (diluted), which compares with $30.1 million, or $0.36 per share (diluted), for the fourth quarter of fiscal year 2018.
As of March 31, 2019, cash and cash equivalents, and short and long-term marketable securities were $487.0 million, compared with $475.8 million as of December 31, 2018 and $447.8 million as of March 31, 2018. During the fourth quarter of fiscal year 2019, NETSCOUT repurchased 543,251 shares of its common stock at an average price of $26.63 per share, totaling approximately $14.5 million in the aggregate. In addition, during the fourth quarter, NETSCOUT repaid $50.0 million of the $600.0 million outstanding on its $1.0 billion revolving credit facility.
Full-Year FY19 Financial Results
Guidance:
NETSCOUT’s fiscal year 2019 non-GAAP revenue of $911.5 million included revenue of $18.0 million associated with the since divested handheld network testing (HNT) tools business, which had roughly breakeven operating profitability and no impact on fiscal year 2019 non-GAAP net income per share (diluted) of $1.38. The Company’s guidance for fiscal year 2020 is as follows:
Conference Call Instructions:
NETSCOUT will host a
conference call to discuss its fourth-quarter and full-year fiscal year
2019 financial results, its outlook for fiscal year 2020 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) 424-1667.
The conference call ID is NTCTQ419. A replay of the call will be
available after 12:00 p.m. ET on May 2, 2019 for approximately one week.
The number for the replay is (800) 283-8217 for U.S./Canada and (402)
220-0868 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, share-based compensation, 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 also removes changes in contingent consideration, 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 moves
forward with a broader and more compelling range of higher margin,
software-centric products that address its customers’ most pressing
performance management and security needs arising from their digital
transformation initiatives; the statement that the most severe headwinds
are behind the Company; the statement that we are optimistic about our
prospects for improved organic revenue performance and modest EPS
expansion in fiscal year 2020; the statement that NETSCOUT’s
restructuring actions are expected to produce total run-rate annual cost
savings of approximately $23 million; and the statement that the Company
expects to generate savings of approximately $6 million in both the
first and second quarters of fiscal year 2020; constitute forward
looking statements that involve risks and uncertainties. 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 Reports 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 | Twelve Months Ended | ||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Revenue: | |||||||||||||||||
Product | $ | 125,474 | $ | 122,217 | $ | 467,289 | $ | 520,418 | |||||||||
Service | 109,528 | 113,007 | 442,629 | 466,369 | |||||||||||||
Total revenue | 235,002 | 235,224 | 909,918 | 986,787 | |||||||||||||
Cost of revenue: | |||||||||||||||||
Product | 32,964 | 37,985 | 140,938 | 158,628 | |||||||||||||
Service | 25,572 | 28,606 | 113,189 | 113,277 | |||||||||||||
Total cost of revenue | 58,536 | 66,591 | 254,127 | 271,905 | |||||||||||||
Gross profit | 176,466 | 168,633 | 655,791 | 714,882 | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 42,241 | 53,314 | 203,588 | 215,076 | |||||||||||||
Sales and marketing | 67,663 | 72,639 | 291,870 | 312,536 | |||||||||||||
General and administrative | 19,431 | 27,079 | 93,572 | 109,479 | |||||||||||||
Amortization of acquired intangible assets | 16,426 | 21,738 | 74,305 | 76,640 | |||||||||||||
Impairment of intangible assets | - | - | 35,871 | - | |||||||||||||
Loss on divestiture | 295 | - | 9,472 | - | |||||||||||||
Restructuring charges | 1,179 | 1,388 | 18,693 | 5,209 | |||||||||||||
Total operating expenses | 147,235 | 176,158 | 727,371 | 718,940 | |||||||||||||
Income (loss) from operations | 29,231 | (7,525 | ) | (71,580 | ) | (4,058 | ) | ||||||||||
Interest and other expense, net | (6,129 | ) | (5,036 | ) | (21,332 | ) | (14,601 | ) | |||||||||
Income (loss) before income tax benefit | 23,102 | (12,561 | ) | (92,912 | ) | (18,659 | ) | ||||||||||
Income tax expense (benefit) | 3,891 | (29,378 | ) | (19,588 | ) | (98,471 | ) | ||||||||||
Net Income (loss) | $ | 19,211 | $ | 16,817 | $ | (73,324 | ) | $ | 79,812 | ||||||||
Basic net income (loss) per share | $ | 0.25 | $ | 0.20 | $ | (0.93 | ) | $ | 0.91 | ||||||||
Diluted net income (loss) per share | $ | 0.24 | $ | 0.20 | $ | (0.93 | ) | $ | 0.90 | ||||||||
Weighted average common shares outstanding used in computing: | |||||||||||||||||
Net income (loss) per share - basic | 77,705 | 82,655 | 78,617 | 87,425 | |||||||||||||
Net income (loss) per share - diluted | 78,562 | 83,359 | 78,617 | 88,261 | |||||||||||||
NETSCOUT SYSTEMS, INC. | |||||||||
Consolidated Balance Sheets | |||||||||
(In thousands) | |||||||||
March 31, | March 31, | ||||||||
2019 | 2018 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash, cash equivalents and marketable securities | $ | 485,976 | $ | 447,762 | |||||
Accounts receivable and unbilled costs, net | 235,318 | 213,438 | |||||||
Inventories | 26,270 | 34,774 | |||||||
Prepaid expenses and other current assets | 53,658 | 56,434 | |||||||
Total current assets | 801,222 | 752,408 | |||||||
Fixed assets, net | 58,951 | 52,511 | |||||||
Goodwill and intangible assets, net | 2,384,603 | 2,544,138 | |||||||
Long-term marketable securities | 1,012 | - | |||||||
Other assets | 24,206 | 19,551 | |||||||
Total assets | $ | 3,269,994 | $ | 3,368,608 | |||||
Liabilities and Stockholders' Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 24,582 | $ | 30,133 | |||||
Accrued compensation | 58,501 | 46,552 | |||||||
Accrued other | 24,345 | 34,690 | |||||||
Deferred revenue and customer deposits | 272,508 | 301,925 | |||||||
Total current liabilities | 379,936 | 413,300 | |||||||
Other long-term liabilities | 19,493 | 8,308 | |||||||
Deferred tax liability | 124,229 | 151,563 | |||||||
Accrued long-term retirement benefits | 36,284 | 35,246 | |||||||
Long-term deferred revenue | 94,619 | 91,409 | |||||||
Long-term debt | 550,000 | 600,000 | |||||||
Total liabilities | 1,204,561 | 1,299,826 | |||||||
Stockholders' equity: | |||||||||
Common stock | 120 | 117 | |||||||
Additional paid-in capital | 2,828,922 | 2,665,120 | |||||||
Accumulated other comprehensive income (loss) |
(2,639 | ) | 2,895 | ||||||
Treasury stock, at cost | (1,119,063 | ) | (995,843 | ) | |||||
Retained earnings | 358,093 | 396,493 | |||||||
Total stockholders' equity | 2,065,433 | 2,068,782 | |||||||
Total liabilities and stockholders' equity | $ | 3,269,994 | $ | 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 | Twelve Months Ended | |||||||||||||||||||||
March 31, | December 31, | March 31, | |||||||||||||||||||||
2019 | 2018 | 2018 | 2019 | 2018 | |||||||||||||||||||
Product Revenue (GAAP) | $ | 125,474 | $ | 122,217 | $ | 134,135 | $ | 467,289 | $ | 520,418 | |||||||||||||
Product deferred revenue fair value adjustment | - | 910 | - | 391 | 3,064 | ||||||||||||||||||
Amortization of acquired intangible assets (2) | - | 2 | - | - | 9 | ||||||||||||||||||
Non-GAAP Product Revenue | $ | 125,474 | $ | 123,129 | $ | 134,135 | $ | 467,680 | $ | 523,491 | |||||||||||||
Service Revenue (GAAP) | $ | 109,528 | $ | 113,007 | $ | 111,873 | $ | 442,629 | $ | 466,369 | |||||||||||||
Service deferred revenue fair value adjustment | 242 | 2,328 | 243 | 1,199 | 9,409 | ||||||||||||||||||
Non-GAAP Service Revenue | $ | 109,770 | $ | 115,335 | $ | 112,116 | $ | 443,828 | $ | 475,778 | |||||||||||||
Revenue (GAAP) | $ | 235,002 | $ | 235,224 | $ | 246,008 | $ | 909,918 | $ | 986,787 | |||||||||||||
Product deferred revenue fair value adjustment | - | 910 | - | 391 | 3,064 | ||||||||||||||||||
Service deferred revenue fair value adjustment | 242 | 2,328 | 243 | 1,199 | 9,409 | ||||||||||||||||||
Amortization of acquired intangible assets (2) | - | 2 | - | - | 9 | ||||||||||||||||||
Non-GAAP Revenue | $ | 235,244 | $ | 238,464 | $ | 246,251 | $ | 911,508 | $ | 999,269 | |||||||||||||
Gross Profit (GAAP) | $ | 176,466 | $ | 168,633 | $ | 176,424 | $ | 655,791 | $ | 714,882 | |||||||||||||
Product deferred revenue fair value adjustment | - | 910 | - | 391 | 3,064 | ||||||||||||||||||
Service deferred revenue fair value adjustment | 242 | 2,328 | 243 | 1,199 | 9,409 | ||||||||||||||||||
Share-based compensation expense (1) | 1,540 | 1,579 | 1,894 | 7,422 | 5,983 | ||||||||||||||||||
Amortization of acquired intangible assets (2) | 7,551 | 9,468 | 7,554 | 31,238 | 37,332 | ||||||||||||||||||
Business development and integration expense (3) | - | - | - | - | 244 | ||||||||||||||||||
Acquisition related depreciation expense (6) | 12 | 34 | 13 | 75 | 145 | ||||||||||||||||||
Transitional service agreement income (7) | - | - | - | 2 | - | ||||||||||||||||||
Non-GAAP Gross Profit | $ | 185,811 | $ | 182,952 | $ | 186,128 | $ | 696,118 | $ | 771,059 | |||||||||||||
Income (Loss) from Operations (GAAP) | $ | 29,231 | $ | (7,525 | ) | $ | (641 | ) | $ | (71,580 | ) | $ | (4,058 | ) | |||||||||
Product deferred revenue fair value adjustment | - | 910 | - | 391 | 3,064 | ||||||||||||||||||
Service deferred revenue fair value adjustment | 242 | 2,328 | 243 | 1,199 | 9,409 | ||||||||||||||||||
Share-based compensation expense (1) | 12,186 | 12,063 | 13,759 | 56,328 | 47,317 | ||||||||||||||||||
Amortization of acquired intangible assets (2) | 23,977 | 31,206 | 23,987 | 105,543 | 113,972 | ||||||||||||||||||
Business development and integration expense (3) | 488 | 112 | 1 | 874 | 2,689 | ||||||||||||||||||
New standard implementation expense (4) | 26 | 1,296 | 72 | 914 | 2,630 | ||||||||||||||||||
Compensation for post-combination services (5) | 72 | 242 | 99 | 789 | 1,108 | ||||||||||||||||||
Restructuring charges | 1,179 | 1,388 | 13,895 | 18,693 | 5,209 | ||||||||||||||||||
Impairment of intangible assets | - | - | - | 35,871 | - | ||||||||||||||||||
Acquisition related depreciation expense (6) | 121 | 498 | 122 | 905 | 2,057 | ||||||||||||||||||
Loss on divestiture | 295 | - | - | 9,472 | - | ||||||||||||||||||
Transitional service agreement income (7) | 912 | - | 1,055 | 2,186 | - | ||||||||||||||||||
Non-GAAP Income from Operations | $ | 68,729 | $ | 42,518 | $ | 52,592 | $ | 161,585 | $ | 183,397 | |||||||||||||
Net Income (Loss) (GAAP) | $ | 19,211 | $ | 16,817 | $ | (3,603 | ) | $ | (73,324 | ) | $ | 79,812 | |||||||||||
Product deferred revenue fair value adjustment | - | 910 | - | 391 | 3,064 | ||||||||||||||||||
Service deferred revenue fair value adjustment | 242 | 2,328 | 243 | 1,199 | 9,409 | ||||||||||||||||||
Share-based compensation expense (1) | 12,186 | 12,063 | 13,759 | 56,328 | 47,317 | ||||||||||||||||||
Amortization of acquired intangible assets (2) | 23,977 | 31,206 | 23,987 | 105,543 | 113,972 | ||||||||||||||||||
Business development and integration expense (3) | 488 | 112 | 1 | 874 | 2,689 | ||||||||||||||||||
New standard implementation expense (4) | 26 | 1,296 | 72 | 914 | 2,630 | ||||||||||||||||||
Compensation for post-combination services (5) | 72 | 242 | 99 | 789 | 1,108 | ||||||||||||||||||
Restructuring charges | 1,179 | 1,388 | 13,895 | 18,693 | 5,209 | ||||||||||||||||||
Impairment of intangible assets | - | - | - | 35,871 | - | ||||||||||||||||||
Acquisition related depreciation expense (6) | 121 | 498 | 122 | 905 | 2,057 | ||||||||||||||||||
Loss on divestiture | 295 | - | - | 9,472 | - | ||||||||||||||||||
Transitional service agreement income (7) | - | - | (45 | ) | (45 | ) | - | ||||||||||||||||
Change in contingent consideration | 1,495 | - | - | 1,495 | - | ||||||||||||||||||
Other income | - | (57 | ) | - | - | (57 | ) | ||||||||||||||||
Income tax adjustments (8) | (7,314 | ) | (36,685 | ) | (13,334 | ) | (49,877 | ) | (142,546 | ) | |||||||||||||
Non-GAAP Net Income | $ | 51,978 | $ | 30,118 | $ | 35,196 | $ | 109,228 | $ | 124,664 | |||||||||||||
Diluted Net Income (Loss) Per Share (GAAP) | $ | 0.24 | $ | 0.20 | $ | (0.05 | ) | $ | (0.93 | ) | $ | 0.90 | |||||||||||
Share impact of non-GAAP adjustments identified above | 0.42 | 0.16 | 0.50 | 2.31 | 0.51 | ||||||||||||||||||
Non-GAAP Diluted Net Income Per Share | $ | 0.66 | $ | 0.36 | $ | 0.45 | $ | 1.38 | $ | 1.41 | |||||||||||||
Shares used in computing non-GAAP diluted net income per share | 78,562 | 83,359 | 78,208 | 79,323 | 88,261 | ||||||||||||||||||
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 | Twelve Months Ended | |||||||||||||||||||||
March 31, | December 31, | March 31, | |||||||||||||||||||||
2019 | 2018 | 2018 | 2019 | 2018 | |||||||||||||||||||
(1) |
Share-based compensation expense included in these amounts |
||||||||||||||||||||||
is as follows: | |||||||||||||||||||||||
Cost of product revenue | $ | 275 | $ | 352 | $ | 375 | $ | 1,463 | $ | 1,159 | |||||||||||||
Cost of service revenue | 1,265 | 1,227 | 1,519 | 5,959 | 4,824 | ||||||||||||||||||
Research and development | 3,777 | 3,891 | 3,979 | 17,321 | 14,711 | ||||||||||||||||||
Sales and marketing | 3,872 | 3,600 | 4,649 | 18,923 | 15,213 | ||||||||||||||||||
General and administrative | 2,997 | 2,993 | 3,237 | 12,662 | 11,410 | ||||||||||||||||||
Total share-based compensation expense | $ | 12,186 | $ | 12,063 | $ | 13,759 | $ | 56,328 | $ | 47,317 | |||||||||||||
(2) |
Amortization expense related to acquired software and product |
||||||||||||||||||||||
technology, tradenames, customer relationships included in these | |||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||
Total revenue adjustment | $ | - | $ | 2 | $ | - | $ | - | $ | 9 | |||||||||||||
Cost of product revenue | 7,551 | 9,466 | 7,554 | 31,238 | 37,323 | ||||||||||||||||||
Operating expenses | 16,426 | 21,738 | 16,433 | 74,305 | 76,640 | ||||||||||||||||||
Total amortization expense | $ | 23,977 | $ | 31,206 | $ | 23,987 | $ | 105,543 | $ | 113,972 | |||||||||||||
(3) |
Business development and integration expense included in |
||||||||||||||||||||||
these amounts is as follows: | |||||||||||||||||||||||
Cost of product revenue | $ | - | $ | - | $ | - | $ | - | $ | 226 | |||||||||||||
Cost of service revenue | - | - | - | - | 18 | ||||||||||||||||||
Research and development | - | - | - | 356 | 61 | ||||||||||||||||||
Sales and marketing | - | - | - | - | 357 | ||||||||||||||||||
General and administrative | 488 | 112 | 1 | 518 | 2,027 | ||||||||||||||||||
Total business development and integration expense | $ | 488 | $ | 112 | $ | 1 | $ | 874 | $ | 2,689 | |||||||||||||
(4) |
New standard implementation expense included in these |
||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||
General and administrative | $ | 26 | $ | 1,296 | $ | 72 | $ | 914 | $ | 2,630 | |||||||||||||
Total new standard implementation expense |
$ | 26 | $ | 1,296 | $ | 72 | $ | 914 | $ | 2,630 | |||||||||||||
(5) |
Compensation for post-combination services included in these |
||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||
Cost of product revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Cost of service revenue | - | - | - | - | - | ||||||||||||||||||
Research and development | 85 | 209 | 87 | 705 | 911 | ||||||||||||||||||
Sales and marketing | - | 12 | - | 19 | 140 | ||||||||||||||||||
General and administrative | (13 | ) | 21 | 12 | 65 | 57 | |||||||||||||||||
Total compensation for post-combination services | $ | 72 | $ | 242 | $ | 99 | $ | 789 | $ | 1,108 | |||||||||||||
(6) |
Acquisition related depreciation expense included in these |
||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||
Cost of product revenue | $ | 9 | $ | 14 | $ | 10 | $ | 43 | $ | 69 | |||||||||||||
Cost of service revenue | 3 | 20 | 3 | 32 | 76 | ||||||||||||||||||
Research and development | 84 | 306 | 83 | 588 | 1,268 | ||||||||||||||||||
Sales and marketing | 10 | 42 | 11 | 77 | 182 | ||||||||||||||||||
General and administrative | 15 | 116 | 15 | 165 | 462 | ||||||||||||||||||
Total acquisition related depreciation expense | $ | 121 | $ | 498 | $ | 122 | $ | 905 | $ | 2,057 | |||||||||||||
(7) |
Transitional service agreement income included in these |
||||||||||||||||||||||
amounts is as follows: | |||||||||||||||||||||||
Cost of service revenue | $ | - | $ | - | $ | - | $ | 2 | $ | - | |||||||||||||
Research and development | 101 | - | 104 | 228 | - | ||||||||||||||||||
Sales and marketing | 124 | - | 128 | 302 | - | ||||||||||||||||||
General and administrative | 687 | - | 823 | 1,654 | - | ||||||||||||||||||
Other Income (expense), net | (912 | ) | - | (1,100 | ) | (2,231 | ) | - | |||||||||||||||
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 | $ | (7,314 | ) | $ | (36,685 | ) | $ | (13,334 | ) | $ | (49,877 | ) | $ | (142,546 | ) | ||||||||
Total income tax adjustments | $ | (7,314 | ) | $ | (36,685 | ) | $ | (13,334 | ) | $ | (49,877 | ) | $ | (142,546 | ) | ||||||||
NETSCOUT SYSTEMS, INC. | ||||||||||||||||
Reconciliation of GAAP Revenue to Non-GAAP Organic Revenue | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
GAAP Product Revenue | $ | 125,474 | $ | 122,217 | $ | 467,289 | $ | 520,418 | ||||||||
Adjustments | - | 912 | 391 | 3,073 | ||||||||||||
Non-GAAP Product Revenue | $ | 125,474 | $ | 123,129 | $ | 467,680 | $ | 523,491 | ||||||||
HNT Tools Product Revenue | - | (7,802 | ) | (13,430 | ) | (32,106 | ) | |||||||||
Organic Non-GAAP Product Revenue | $ | 125,474 | $ | 115,327 | $ | 454,250 | $ | 491,385 | ||||||||
GAAP Service Revenue | $ | 109,528 | $ | 113,007 | $ | 442,629 | $ | 466,369 | ||||||||
Adjustments | 242 | 2,328 | 1,199 | 9,409 | ||||||||||||
Non-GAAP Service Revenue | $ | 109,770 | $ | 115,335 | $ | 443,828 | $ | 475,778 | ||||||||
HNT Tools Service Revenue | - | (2,852 | ) | (4,555 | ) | (11,976 | ) | |||||||||
Organic Non-GAAP Service Revenue | $ | 109,770 | $ | 112,483 | $ | 439,273 | $ | 463,802 | ||||||||
GAAP Revenue | $ | 235,002 | $ | 235,224 | $ | 909,918 | $ | 986,787 | ||||||||
Adjustments | 242 | 3,240 | 1,590 | 12,482 | ||||||||||||
Non-GAAP Revenue | $ | 235,244 | $ | 238,464 | $ | 911,508 | $ | 999,269 | ||||||||
HNT Tools Revenue |
- | (10,654 | ) | (17,985 | ) | (44,082 | ) | |||||||||
Organic Non-GAAP Revenue | $ | 235,244 | $ | 227,810 | $ | 893,523 | $ | 955,187 | ||||||||
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 | Twelve Months Ended | ||||||||||||||||||
March 31, | December 31, | March 31, | ||||||||||||||||||
2019 | 2018 | 2018 | 2019 | 2018 | ||||||||||||||||
Income (loss) from operations (GAAP) | $ | 29,231 | $ | (7,525 | ) | $ | (641 | ) | $ | (71,580 | ) | $ | (4,058 | ) | ||||||
Previous adjustments to determine non-GAAP income from operations | 39,498 |
|
50,043 | 53,233 | 233,165 | 187,455 | ||||||||||||||
Non-GAAP Income from operations | 68,729 | 42,518 | 52,592 | 161,585 | 183,397 | |||||||||||||||
Depreciation excluding acquisition related | 7,271 | 8,940 | 7,842 | 31,430 | 37,474 | |||||||||||||||
Non-GAAP EBITDA from operations | $ | 76,000 | $ | 51,458 | $ | 60,434 | $ | 193,015 | $ | 220,871 | ||||||||||
NETSCOUT SYSTEMS, INC | |||||||||
Reconciliation of GAAP Financial Guidance to Non-GAAP Financial Guidance | |||||||||
(Unaudited) | |||||||||
(In millions, except net income per share - diluted) | |||||||||
FY'19 | FY'20 | ||||||||
GAAP revenue | $ | 909.9 | ~$895 million to ~$915 million | ||||||
Deferred service revenue fair value adjustment | $ | 1.2 | Less than $1 million | ||||||
Deferred product revenue fair value adjustment | $ | 0.4 | - | ||||||
Non-GAAP revenue | $ | 911.5 | ~$895 million to ~$915 million | ||||||
HNT Tools Revenue |
$ | (18.0 | ) | - | |||||
Organic non-GAAP revenue | $ | 893.5 | ~$895 million to ~$915 million | ||||||
FY'19 | FY'20 | ||||||||
GAAP Net Income (loss) |
$ | (73.3 | ) | ~$2 million to ~$6 million | |||||
Deferred service revenue fair value adjustment | $ | 1.2 | Less than $1 million | ||||||
Deferred product revenue fair value adjustment | $ | 0.4 | - | ||||||
Amortization of intangible assets | $ | 105.5 | ~$91 million | ||||||
Share-based compensation expenses | $ | 56.3 | ~$50 million | ||||||
Business development & integration expenses* | $ | 2.5 | ~$1 million | ||||||
New accounting standard implementation | $ | 0.9 | - | ||||||
Restructuring costs | $ | 18.7 | - | ||||||
Impairment of Intangibles | $ | 35.9 | - | ||||||
Loss on divestiture | $ | 9.5 | - | ||||||
Change in contingent consideration | $ | 1.5 | - | ||||||
Total Adjustments |
$ | 232.4 | ~$142 million | ||||||
Related impact of adjustments on income tax** | $ | (49.9 | ) | (~$34 million) | |||||
Non-GAAP Net Income |
$ | 109.2 | ~$110 million to ~$113 million | ||||||
GAAP net income (loss) per share (diluted) |
$ | (0.93 | ) | ~$0.03 to ~$0.08 | |||||
Non-GAAP net income per share (diluted) | $ | 1.38 | ~$1.40 to ~$1.45 | ||||||
Average Weighted Shares Outstanding (diluted GAAP) | 78.6 | 78.2 million | |||||||
Average Weighted Shares Outstanding (diluted Non-GAAP) | 79.3 | 78.2 million |
* | Business development & integration expenses include compensation for post-combination services and acquisition-related depreciation expense. | |
** | Assumes an effective non-GAAP tax rate of 24%, which represents the mid-point of the Company's FY'20 effective tax rate estimates that ranges from 23% to 25%. |
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