EX-99.1 2 ns1892ex991.txt Exhibit 99.1 NETSCOUT SYSTEMS REPORTS THIRD QUARTER FINANCIAL RESULTS FOR FISCAL 2005 WESTFORD, Mass., Jan. 26 /PRNewswire-FirstCall/ -- NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network performance management solutions, today announced financial results for its third quarter of fiscal year 2005. Revenue for the third quarter of fiscal year 2005, ended December 31, 2004, was $22.0 million, compared to revenue of $20.5 million in the previous quarter and revenue of $18.9 million in the third quarter of fiscal year 2004. Net profit for the quarter was $906,000, or $0.03 per diluted share, compared to a net profit of $1.1 million, or $0.03 per diluted share, for the previous quarter and compared to net profit of $184,000, or $0.01 per diluted share, in the third quarter of fiscal year 2004. "We reported another quarter of good results, exceeding our expectations, resulting from strong customer year-end activity," said Anil Singhal, President and CEO of NetScout Systems. "This quarter we released a series of new products including two appliance-based extensions to the nGenius(R) product line, the nGenius(R) Flow Recorder and nGenius(R) Flow Collector. We also made a strategic announcement of a new technology initiative called High Definition Performance Management (HDPM) that will provide a greater level of detail and granular visibility for application performance management. Representing the next evolutionary step of NetScout's CDM architecture and strategy, HDPM is a powerful initiative that will further differentiate us from our competition. We will be releasing further details about HDPM in the coming quarter." Financial Highlights for the Third Quarter: * Total revenue increased 7% sequentially and increased 16% from the third quarter of fiscal year 2004. Product revenue increased 8% sequentially and increased 18% from the third quarter of fiscal year 2004. Service revenue increased 7% sequentially and increased 15% from the third quarter of fiscal year 2004. Royalty revenue decreased 5% sequentially and decreased 4% from the third quarter of fiscal year 2004. * Gross margin was 77% of total revenue, up 1 point sequentially and up 1 point compared to the third quarter of fiscal year 2004. * Cash flow from operations was positive. * Cash and short and long-term marketable securities increased by $1.1 million to $79.3 million in the third quarter and increased by $5.6 million year-over-year. * 36 new customers were added worldwide. * 296 customers made repeat purchases. * 58 customers placed orders over $100,000. * International business comprised approximately 24% of total revenue. Product and Company Highlights: * NetScout announced an important new technology initiative called High Definition Performance Management (HDPM), addressing the critical need for more detailed, granular visibility for application performance management. HDPM, the next evolutionary step for NetScout's CDM architecture, will extend the functionality of the nGenius(R) Performance Management System with increased visibility into the activity and usage of web services and other complex and multi-layered applications, including more granular measurement of application and network traffic data at shorter intervals and enhanced reporting of user and application utilization. Upcoming HDPM enhancements to nGenius(R) Performance Manager and nGenius Probes(R) will be made available as free upgrades to current NetScout MasterCare customers. * NetScout launched the nGenius Flow Recorder, a Linux-based appliance providing continuous recording of network traffic for audit trails and forensic analyses, including anomaly detection, replay and long- interval detailed troubleshooting. * NetScout announced the nGenius Flow Collector, a new appliance used in combination with nGenius Performance Manager for dedicated, high- volume collection and analysis of NetFlow conversation records drawn from network infrastructure devices. * NetScout released a new software module, nGenius (R) Integrator for Cisco Network Analysis Modules (NAMs), as a migration solution for customers using NetScout's legacy nGenius(R) Real Time Monitor. * NetScout began shipping the nGenius Eight-Port T1/E1 Probe(R), the market's first high-density probe for monitoring T1/E1 wide area networks. * NetScout released an enhancement to the nGenius Performance Management System extending its leading-edge application-layer visibility across IPSec and MPLS-based Virtual Private Network (VPN) environments. Guidance: For the fourth quarter of fiscal year 2005, the Company expects revenue to be in the range of $21.5 million to $22 million and net profit per diluted share to be in the range of $0.00 to $0.01. 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 888-423-3281 for U.S./Canada and 612-288-0329 for international callers. A replay of the call will be available after 8:00 p.m. ET on January 26 for approximately two weeks. The number for the replay is 800-475-6701 for U.S./Canada and 320-365-3844 for international callers. The access code is 765874. About NetScout Systems, Inc. NetScout Systems, Inc. (Nasdaq: NTCT) is a market leader and pioneer of integrated network performance management products that unify performance across the enterprise. NetScout's nGenius Performance Management System is helping more than 3,000 leading companies increase their return on infrastructure investments by optimizing the performance of networks and applications according to business priorities. NetScout is headquartered in Westford, Massachusetts, and has offices worldwide. Further information is available at http://www.netscout.com. Safe Harbor: Forward-looking statements in this release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release, which are not strictly historical statements, including the plans, objectives and future financial performance of NetScout, constitute forward-looking statements which involve risks and uncertainties. Actual results could differ materially from the forward-looking statements. Risks and uncertainties which could cause actual results to differ include, without limitation, risks and uncertainties associated with the Company's relationships with strategic partners, dependence upon broad-based acceptance of the Company's network performance management solutions, the Company's ability to achieve and maintain a high rate of growth, introduction and market acceptance of new products and product enhancements such as the delivery of nGenius product platform probes and software solutions, the delivery of HDPM functionality and the implementation of the Company's CDM Technology strategy, the ability of the Company to take advantage of service provider opportunities, competitive pricing pressures, reliance on sole source suppliers, successful expansion and management of direct and indirect distribution channels and dependence on proprietary technology, as well as risks associated with a continued climate of tight IT spending, and risks of further slowdowns or downturns in economic conditions generally and in the market for network performance management solutions specifically. For a more detailed description of the risk factors associated with the Company, please refer to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2004 and its quarterly report on Form 10-Q for the quarter ended September 30, 2004 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. NetScout and the NetScout logo and nGenius are registered trademarks of NetScout Systems, Inc. The CDM logo, Universal Response Time, Power Alarms, Workspaces and MasterCare and the MasterCare logo are trademarks of NetScout Systems, Inc. NetScout reserves the right, at its sole discretion, to make changes at any time in its technical information and specifications and service and support programs. The Company's condensed consolidated statements of operations and balance sheets are attached. Contact: Catherine Taylor Director of Investor Relations NetScout Systems, Inc. 978-614-4286 IR@netscout.com NetScout Systems, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, --------------------- --------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Revenue: Product $ 13,231 $ 11,190 $ 37,015 $ 29,696 Service 8,354 7,268 24,285 21,017 License and royalty 415 432 1,286 1,295 Total revenue 22,000 18,890 62,586 52,008 Cost of revenue: Product(1) 4,069 3,462 11,623 9,601 Service respectively) 1,085 1,066 3,227 3,132 Total cost of revenue 5,154 4,528 14,850 12,733 Gross margin 16,846 14,362 47,736 39,275 Operating expenses: Research and development(2) 4,180 3,836 12,557 10,515 Sales and marketing 9,531 8,655 27,116 24,637 General and administrative 2,062 1,553 5,822 4,752 Amortization of other intangible assets - - - 272 Total operating expenses 15,773 14,044 45,495 40,176 Income (Loss) from operations 1,073 318 2,241 (901) Interest income and other expenses, net 346 167 644 524 Income (loss) before income tax expense (benefit) 1,419 485 2,885 (377) Income tax expense (benefit) 513 301 625 (9) Net income (loss) $ 906 $ 184 $ 2,260 $ (368) Basic net income (loss) per share $ 0.03 $ 0.01 $ 0.07 $ (0.01) Diluted net income (loss) per share $ 0.03 $ 0.01 $ 0.07 $ (0.01) Shares used in computing: Basic net income (loss) per share 30,621 30,182 30,534 30,092 Diluted net income (loss) per share 31,702 31,440 31,579 30,092
(1) Cost of product revenue includes amortization of capitalized software of $166 for the three months ended December 31, 2004 and 2003 and $497 and $276 for the nine months ended December 31, 2004 and 2004, respectively. (2) Research and development costs are net of capitalized software development costs of $- and $1,325 for the three and nine months ended December 31, 2003. NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) December 31, March 31, 2004 2004 ------------ --------- Assets Current assets: Cash and cash equivalents $ 33,500 $ 19,011 Marketable securities 39,842 50,432 Accounts receivable, net 13,172 10,851 Inventories 3,113 3,366 Refundable income taxes 1,231 2,102 Deferred income taxes 2,082 1,667 Prepaids and other current assets 2,486 2,175 Total current assets 95,426 89,604 Fixed assets, net 6,252 5,415 Capitalized software development costs 387 884 Goodwill, net 28,839 28,839 Deferred income taxes 8,006 8,378 Long-term prepaid expense 18 45 Long-term marketable securities 5,972 6,016 Total assets $ 144,900 $ 139,181 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 2,674 $ 1,984 Accrued compensation 5,323 4,481 Accrued other 3,093 2,140 Income tax payable - 490 Deferred revenue 15,751 15,968 Total current liabilities 26,841 25,063 Long-term liabilities: Long-term deferred revenue 1,247 1,006 Total liabilities 28,088 26,069 Stockholders' equity: Common stock 35 34 Additional paid-in capital 112,236 110,683 Accumulated other comprehensive income (107) 7 Treasury stock (26,490) (26,490) Retained earnings 31,138 28,878 Total stockholders' equity 116,812 113,112 Total liabilities and stockholders' equity $ 144,900 $ 139,181 SOURCE NetScout Systems, Inc. -0- 01/26/2005 /CONTACT: Catherine Taylor, Director of Investor Relations of NetScout Systems, Inc., +1-978-614-4286, IR@netscout.com/ /Web site: http://www.netscout.com/ -