EX-99.1 2 ns3197ex991.txt Exhibit 99.1 NETSCOUT SYSTEMS REPORTS FIRST QUARTER FINANCIAL RESULTS FOR FISCAL 2006 STRONG Q1 FY '06 REVENUE, UP 17% YEAR-OVER-YEAR WESTFORD, Mass., July 27 /PRNewswire-FirstCall/ -- NetScout Systems, Inc. (Nasdaq: NTCT), a leading provider of network and application performance management solutions, today announced financial results for its first quarter of fiscal year 2006. Revenue for the first quarter of fiscal year 2006 was $23.5 million, compared to revenue of $22.6 million in the previous quarter and revenue of $20.1 million in the first quarter of fiscal year 2005. Net profit for the quarter was $652,000, or $0.02 per diluted share, compared to net profit of $610,000, or $0.02 per diluted share, for the previous quarter and compared to a net profit of $297,000, or $0.01 per diluted share, in the first quarter of fiscal year 2005. On an adjusted (pro forma) basis, the net profit for the first quarter of fiscal year 2006 was $945,000, or $0.03 per diluted share, compared to net profit of $610,000, or $0.02 per diluted share for the fourth quarter of fiscal year 2005. Adjusted net profit excludes non-cash acquisition and stock- based compensation expenses and a tax adjustment resulting from the acquisition of substantially all of the assets of Quantiva, Inc. completed early in the first quarter of fiscal year 2006. Adjusted earnings are presented because management believes they better reflect operational trends and performance. A reconciliation to GAAP results is provided on the Statements of Operations included in this release. "We are pleased to report that we achieved our eighth quarter of revenue growth, up 17% year-over-year, and grew our adjusted operating margin to 4%. We are on track to achieve our goal of 15-20% revenue growth for the fiscal year and 10% adjusted operating margin in the fourth quarter," said Anil Singhal, President and CEO of NetScout Systems. "In the first quarter, we delivered our new High Definition Performance Management (HDPM) technology that provides unparalleled application traffic visibility across the enterprise. This new technology combined with our acquisition of Quantiva, furthers our strategy to deliver automated analytics to our customers. We are on schedule to deliver those products in the second half of this fiscal year." Guidance: For the second quarter of fiscal year 2006, the Company expects revenue to be in the range of $23.5 million to $24.5 million and net profit per diluted share on a GAAP basis to be in the range of $0.02 to $0.03. On an adjusted basis, the Company expects net profit per diluted share to be in the range of $0.03 to $0.04. The Company reiterates its previous guidance of growing revenue 15-20% for the full 2006 fiscal year and of attaining 10% adjusted operating margin by the fourth quarter. Financial Highlights for the First Quarter: * Total revenue increased 4% sequentially and increased 17% from the first quarter of fiscal year 2005. Product revenue increased 5% sequentially and increased 30% from the first quarter of fiscal year 2005. Service revenue increased 6% sequentially and increased 2% from the first quarter of fiscal year 2005. As expected, royalty revenue decreased 59% sequentially and decreased 57% from the first quarter of fiscal year 2005. * Gross margin was 75% of total revenue, up 1 point sequentially and down 2 points compared to the first quarter of fiscal year 2005. * Cash and short and long-term marketable securities decreased by $6.6 million to $77.3 million as a result of the acquisition of Quantiva, Inc., and increased by $781,000 year-over-year. Excluding the cash used in the Quantiva acquisition, cash grew $2.9 million in the quarter. * 16 new customers were added worldwide. * 287 customers made repeat purchases. * 54 customers placed orders over $100,000. * Direct sales represented 39% of total revenue; indirect sales to resellers represented 61% of total revenue. * International business comprised approximately 21% of total revenue. Product and Company Highlights for the First Quarter: * NetScout completed the acquisition of the business and assets of privately held Quantiva, Inc., a provider of automated analytics solutions for application performance management. The purchase price totaled approximately $9.4 million in cash. * NetScout released its High Definition Performance Management (HDPM) technology, delivered in nGenius(R) Performance Manager 3.0 and nGenius Probe firmware release CDM 3.0. HDPM is an important new technology initiative that significantly improves performance information detail and granularity, extending 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 accurate metrics for application and network traffic data at shorter intervals and enhanced reporting of user and application utilization. * NetScout released its first-to-market OC-48 Packet-over-SONET Probe for the performance management of high-speed optical core networks. The nGenius OC-48 Probe addresses wireless carriers needs for visibility into converged IP-based voice, data, and video services as they deploy third-generation networks. * NetScout updated its integration with HP OpenView Network Node Manager and has become a Platinum Business Partner in the HP Enterprise Management Alliance Program. 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. Alternatively, people can listen to the call by dialing 866-219-5264 for U.S./Canada and 703-639-1118 for international callers. A replay of the call will be available after 8:00 p.m. ET on July 27 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 789837. 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(R) 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 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 and the statements concerning the expected effects, synergies and product offerings resulting from the Quantiva acquisition, 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, the effects and challenges related to the Quantiva acquisition, including any integration issues, introduction and market acceptance of new products and product enhancements such as the delivery of nGenius product platform probes and software solutions, HDPM functionality, the analytic solutions acquired from Quantiva 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, 2005 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, nGenius, and Quantiva are registered trademarks of NetScout Systems, Inc. The CDM logo, MasterCare and the MasterCare logo, are trademarks of NetScout Systems, Inc. Other brands, product names and trademarks are property of their respective owners 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 June 30, ----------------------- 2005 2004 --------- ---------- Revenue: Product $ 15,046 $ 11,560 Service 8,271 8,105 License and royalty 184 432 Total revenue 23,501 20,097 Cost of revenue: Product 4,539 3,653 Service 1,257 1,065 Total cost of revenue 5,796 4,718 Gross margin 17,705 15,379 Operating expenses: Research and development (including stock- based compensation of $59 and $0, respectively) 4,614 4,319 Sales and marketing (including stock-based compensation of $20 and $0, respectively) 10,022 8,783 General and administrative 2,285 1,954 Amortization of other intangible assets 119 - In-process research and development 143 - Total operating expenses 17,183 15,056 Income from operations 522 323 Interest income and other expenses, net 514 179 Income before income tax expense 1,036 502 Income tax expense 384 205 Net income $ 652 $ 297 Basic net income per share $ 0.02 $ 0.01 Diluted net income per share $ 0.02 $ 0.01 Shares used in computing: Basic net income per share 30,840 30,448 Diluted net income per share 31,413 31,710 Reconciliation of GAAP & Adjusted Net Income: Net income $ 652 $ 297 Stock-based compensation (as detailed in expense categories above) 79 - Amortization of other intangible assets 119 - In-process research and development 143 - Tax adjustment(1) (48) - Adjusted net income excluding acquisition and stock-based compensation costs $ 945 $ 297 Adjusted basic net income per share excluding $ 0.03 $ 0.01 acquisition and stock-based compensation costs Adjusted diluted net income per share excluding $ 0.03 $ 0.01 acquisition and stock-based compensation costs Shares used in computing adjusted basic net income per share excluding acquisition and stock-based compensation costs 30,840 30,448 Shares used in computing adjusted basic net income per share excluding acquisition and stock-based compensation costs 31,413 31,710 (1) Tax adjustment for three month period ended June 30, 2005, which was the period of the Quantiva acquisition, assumes an effective tax rate of 31% which represents an effective tax rate before factoring in costs related to the acquisition of Quantiva and stock-based compensation. NetScout Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) June 30, March 31, 2005 2005 --------- --------- Assets Current assets: Cash and cash equivalents $ 33,498 $ 57,070 Marketable securities 43,786 26,793 Accounts receivable, net 11,107 11,886 Inventories 3,123 3,114 Refundable income taxes 1,477 1,399 Deferred income taxes 2,361 2,356 Prepaids and other current assets 2,954 3,003 Total current assets 98,306 105,621 Fixed assets, net 6,407 6,011 Capitalized software development costs 55 221 Other intangible assets, net 1,446 - Goodwill 36,533 28,839 Deferred income taxes 7,286 7,586 Restricted cash 1,332 - Other assets 12 9 Total assets $ 151,377 $ 148,287 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 2,524 $ 2,520 Accrued compensation 6,595 6,385 Accrued other 2,927 2,976 Deferred revenue 17,425 17,680 Total current liabilities 29,471 29,561 Long-term liabilities: Accrued compensation 16 - Deferred acquisition payment -- Quantiva 1,332 - Long-term deferred revenue 1,260 1,277 Total long-term liabilities 2,608 1,277 Total liabilities 32,079 30,838 Stockholders' equity: Common stock 35 35 Additional paid-in capital 114,158 112,286 Accumulated other comprehensive income (92) (130) Deferred compensation (713) - Treasury stock (26,490) (26,490) Retained earnings 32,400 31,748 Total stockholders' equity 119,298 117,449 Total liabilities and stockholders' equity $ 151,377 $ 148,287 SOURCE NetScout Systems, Inc. -0- 07/27/2005 /CONTACT: Catherine Taylor, Director of Investor Relations of NetScout Systems, Inc., +1-978-614-4286, IR@netscout.com/ /Web site: http://www.netscout.com/ -