NETSCOUT Reports Financial Results for Fourth Quarter and Full Fiscal Year 2019
WESTFORD, Mass.--(BUSINESS WIRE)-- 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:
- In mid-April, NETSCOUT held its annual user conference, Engage19, where it showcased its solutions to over 700 attendees representing many of the world’s largest and most innovative service providers and enterprises, highlighted product roadmaps including new enterprise threat analytics and packet forensics, and provided hands-on tutorial workshops.
- NETSCOUT has continued to advance key partnerships to help enterprises extend application visibility across hybrid cloud environments and quickly identify and resolve issues impacting application performance. In late March, NETSCOUT announced that it is co-sell ready to collaborate with Microsoft sales to assist mutual customers with migrating and managing applications and services in hybrid Microsoft Azure environments. In mid-February, the Company’s nGeniusONE Service Assurance Platform was verified as Citrix Ready on Citrix Virtual Apps and Desktops.
- In late February, the Company showcased its market-leading service assurance solutions for leading mobile, fixed line and cable operators at Mobile World Congress.
- NETSCOUT appointed Michael Szabados, the Company’s chief operating officer, and Vivian Vitale, an experienced human resources executive at top technology companies, to its Board of Directors in late February with Szabados becoming vice chairman. In conjunction with these appointments, Vincent J. Mullarkey, a NETSCOUT director since 2000, retired from the Board.
- NETSCOUT completed its previously announced restructuring program that began in the second quarter of fiscal year 2019. The restructuring included a voluntary separation program (VSP) and other related measures that resulted in a net reduction of approximately 140 employees. In conjunction with these actions, the Company recorded a restructuring charge of $1.2 million in the fourth quarter associated with the headcount reduction. NETSCOUT’s restructuring actions are expected to produce total run-rate annual cost savings of approximately $23 million. The Company realized cost savings of approximately $6 million in the fourth quarter. The Company expects to generate savings of approximately $6 million in both the first and second quarters of fiscal year 2020.
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
- For fiscal year 2019, total revenue (GAAP) was $909.9 million and non-GAAP total revenue was $911.5 million versus total revenue (GAAP) of $986.8 million and non-GAAP total revenue of $999.3 million in fiscal year 2018. Non-GAAP revenue for fiscal year 2019 and fiscal year 2018 included $18.0 million and $44.1 million, respectively, from the divested HNT tools business. Excluding revenue from the HNT tools business, organic non-GAAP revenue in fiscal year 2019 declined by 6% from fiscal year 2018.
- Product revenue (GAAP) in fiscal year 2019 was $467.3 million compared with $520.4 million in fiscal year 2018. Non-GAAP product revenue in fiscal year 2019 was $467.7 million compared with $523.5 million in fiscal year 2018. Non-GAAP product revenue for the HNT tools business for fiscal year 2019 was $13.4 million versus $32.1 million in fiscal year 2018.
- For fiscal year 2019, service revenue (GAAP) was $442.6 million versus $466.4 million in the same period last year. Non-GAAP service revenue in fiscal year 2019 was $443.8 million, compared with $475.8 million in fiscal year 2018. The HNT tools business non-GAAP service revenue in fiscal year 2019 was $4.6 million versus $12.0 million in fiscal year 2018.
- NETSCOUT’s loss from operations (GAAP) in fiscal year 2019 was $71.6 million, compared with a loss from operations (GAAP) of $4.1 million in fiscal year 2018. The Company’s operating margin (GAAP) in fiscal year 2019 was -7.9% versus -0.4% in fiscal year 2018. In fiscal year 2019, the Company’s non-GAAP EBITDA from operations was $193.0 million, or 21.2% of non-GAAP total revenue versus non-GAAP EBITDA from operations of $220.9 million, or 22.1% of non-GAAP total revenue, in fiscal year 2018. The Company’s fiscal year 2019 non-GAAP income from operations was $161.6 million with a non-GAAP operating margin of 17.7%, compared with non-GAAP income from operations in fiscal year 2018 of $183.4 million and a non-GAAP operating margin of 18.4%.
- NETSCOUT’s net loss (GAAP) in fiscal year 2019 was $73.3 million, or $0.93 per share (diluted) compared with net income of $79.8 million, or $0.90 per share (diluted) in fiscal year 2018. Non-GAAP net income in fiscal year 2019 was $109.2 million, or $1.38 per share (diluted) versus non-GAAP net income in fiscal year 2018 of $124.7 million, or $1.41 per share (diluted).
- In addition to the common stock repurchased during the fourth quarter of fiscal year 2019, NETSCOUT also completed its $300 million Accelerated Share Repurchase in the second quarter of fiscal year 2019. As of March 31, 2019, there were 14,359,590 shares available for repurchase under NETSCOUT’s previously disclosed 25 million share repurchase program.
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:
- NETSCOUT expects GAAP and non-GAAP revenue in the range of $895 million to $915 million in fiscal year 2020 with organic revenue growth (which excludes the $18.0 million in HNT tools revenue from fiscal year 2019) in the low single digit range.
- The Company’s fiscal year 2020 GAAP net income per share (diluted) is expected to range from $0.03 to $0.08. NETSCOUT’s fiscal year 2020 non-GAAP net income per share (diluted) performance is expected to range from $1.40 to $1.45.
- A reconciliation between GAAP and non-GAAP revenue and net income per share (diluted) for NETSCOUT’s guidance is included in the attached financial tables.
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.
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| 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 | |||||||||||||
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| 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 | � | |||
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| � | |||||||||
| 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 | � | |||
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| 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%. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005112/en/
Investors
Andrew Kramer
Vice President of Investor
Relations
978-614-4279
[email protected]
Media
Maribel
Lopez
Manager, Marketing & Corporate Communications
781-362-4330
[email protected]
Source: NETSCOUT SYSTEMS, INC.