NETSCOUT Reports Third Quarter Fiscal Year 2020 Financial Results
Company Exceeds its Third Quarter Revenue and EPS Expectations
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 third quarter fiscal year 2020 ended December 31, 2019.
“We delivered strong third-quarter results with both revenue and earnings per share performance exceeding the high-end of our expectations,” stated Anil Singhal, NETSCOUT’s president and chief executive officer. “Our performance included solid revenue growth in both our service provider and enterprise verticals. We also continued to see strong adoption of our software solutions, which contributed to higher profitability and strong earnings per share performance in the quarter.”
Commenting on the Company’s plans and outlook for the remainder of fiscal year 2020, Singhal said, “With one quarter remaining, we are narrowing our revenue guidance range to $900 million to $910 million and increasing our non-GAAP earnings per share guidance range, by $0.06, to $1.51 to $1.56, due primarily to benefits associated with the clarification of tax reform legislation. These ranges reflect a low-single-digit revenue growth rate and a high-single to low-teens non-GAAP earnings per share growth rate as compared with our prior fiscal year’s performance, excluding the divested HNT tools business.”
Notable developments and highlights:
- NETSCOUT plans to showcase its 5G service assurance capabilities at Mobile World Congress in Barcelona, Spain in late February, highlight its market leading DDoS and other security solutions at the RSA Conference in San Francisco, CA in late February, and hold its annual Engage Technology and User Summit from April 27th to May 1st in Hollywood, FL. More information on each of these events can be found at https://www.netscout.com/events.
- In January, NETSCOUT announced Arbor Sightline with Sentinel to deliver the next generation of DDoS visibility and protection for service providers and large enterprises. Combining core ARBOR NETWORKS™ and NETSCOUT™ Layer 7 technologies with intelligent analytics, machine learning, and automation, Sightline with Sentinel integrates network infrastructure defense functions into an orchestrated capability that delivers unparalleled protection for network, customer and application services at a lower cost.
- In January, NETSCOUT announced that on December 13, 2019, a jury in the United States District Court for the Eastern District of Texas returned a verdict of non-infringement in favor of NETSCOUT against patent assertion entity Implicit, LLC. The jury's unanimous verdict vindicated NETSCOUT's determination to fight an unwarranted accusation. Equally important, the jury's decision reinforced the hard work and original designs of NETSCOUT leaders and engineers who have worked for years to build the Company’s award-winning service assurance and cybersecurity products.
- In December, NETSCOUT announced that it had introduced new capabilities to NETSCOUT’s nGeniusPULSE that enable testing of network and application availability and performance over Wi-Fi connections and business transaction testing (BTT) that test performance within an application. These capabilities improve visibility of the end-user experience regardless of where end-users are located, such as remote offices, retail stores, or sporting and entertainment events. These additions allow IT professionals to uncover, isolate, and help resolve application and network performance issues within a wired or Wi-Fi environment. With earlier domain identification, IT can reduce mean-time-to-resolve to improve the user experience across any cloud or hybrid environment.
Q3 FY20 Financial Results
Total revenue (GAAP) for the third quarter of fiscal year 2020 was $260.0 million, compared with $246.0 million in the same quarter one year ago. Non-GAAP total revenue for the third quarter of fiscal year 2020 was $260.1 million versus $246.3 million in the same quarter one year ago. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.
Product revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2020 was $143.3 million, which was approximately 55% of total revenue. This compares with third-quarter fiscal year 2019 product revenue (GAAP and non-GAAP) of $134.1 million, which was approximately 54% of total revenue.
Service revenue (GAAP) for the third quarter of fiscal year 2020 was $116.7 million, or approximately 45% of total revenue versus service revenue (GAAP) of $111.9 million, or approximately 45% of total revenue, for the same period one year ago. On a non-GAAP basis, service revenue for fiscal year 2020’s third quarter was $116.8 million, or approximately 45% of total non-GAAP revenue, versus non-GAAP service revenue of $112.1 million, or approximately 46% of total non-GAAP revenue, for the same quarter one year ago.
NETSCOUT’s income from operations (GAAP) was $36.8 million in the third quarter of fiscal year 2020, compared with a loss from operations (GAAP) of $0.6 million in the comparable quarter one year ago. Third-quarter fiscal year 2020 non-GAAP EBITDA from operations was $77.3 million, or 29.7% of non-GAAP quarterly revenue, which compares with $60.4 million, or 24.5% of non-GAAP quarterly revenue in the third quarter of fiscal year 2019. The Company’s third-quarter fiscal year 2020 (GAAP) operating margin was 14.2% versus -0.3% in the prior fiscal year’s third quarter. Third-quarter fiscal year 2020 non-GAAP income from operations was $70.9 million with a non-GAAP operating margin of 27.3%. This compares with third-quarter fiscal year 2019 non-GAAP income from operations of $52.6 million and a non-GAAP operating margin of 21.4%.
Net income (GAAP) for the third quarter of fiscal year 2020 was $36.7 million, or $0.49 per share (diluted) versus net loss (GAAP) of $3.6 million, or $0.05 per share (diluted), for the third quarter of fiscal year 2019. On a non-GAAP basis, net income for the third quarter of fiscal year 2020 was $54.7 million, or $0.73 per share (diluted), which compares with $35.2 million, or $0.45 per share (diluted), for the third quarter of fiscal year 2019.
As of December 31, 2019, cash and cash equivalents, and short and long-term marketable securities were $346.5 million, compared with $307.8 million as of September 30, 2019 and $487.0 million as of March 31, 2019. During the third quarter of fiscal year 2020, NETSCOUT repurchased 1,003,757 shares of its common stock through its share repurchase program at an average price of $24.91 per share, totaling approximately $25.0 million in the aggregate. At the end of the third quarter of fiscal year 2020 NETSCOUT had $450.0 million outstanding on its $1.0 billion revolving credit facility.
Nine-Months FY20 Financial Results
- For the first nine months of fiscal year 2020, total revenue (GAAP) was $662.5 million and non-GAAP total revenue was $662.6 million versus total revenue (GAAP) of $674.9 million and non-GAAP total revenue of $676.3 million for the comparable nine-month period of fiscal year 2019. Non-GAAP revenue for the first nine months of fiscal year 2019 included $18.0 million attributable to the handheld network test (HNT) tools business that was divested in mid-September 2018. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.
- Product revenue (GAAP) for the first nine months of fiscal year 2020 was $321.8 million compared with $341.8 million in the same period one year ago. Non-GAAP product revenue for the first nine months of fiscal year 2020 was $321.8 million compared with $342.2 million in the same period of fiscal year 2019. The first nine months of fiscal year 2019 non-GAAP product revenue included $13.4 million associated with the divested HNT tools business.
- For the first nine months of fiscal year 2020, service revenue (GAAP) was $340.7 million versus $333.1 million in the same period last year. Non-GAAP service revenue for the first nine months of fiscal year 2020 was $340.8 million compared with $334.1 million for the comparable period of fiscal year 2019. The HNT tools business non-GAAP service revenue for the first nine months of fiscal year 2019 was $4.6 million.
- NETSCOUT’s income from operations (GAAP) during the first nine months of fiscal year 2020 was $5.1 million, compared with a loss from operations of $100.8 million for the comparable nine-month period of fiscal year 2019. NETSCOUT’s loss from operations (GAAP) in the first nine months of fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. The Company’s operating margin (GAAP) for the first nine months of fiscal year 2020 was 0.8% versus -14.9% in the comparable period of fiscal year 2019. During the first nine months of fiscal year 2020, the Company’s non-GAAP EBITDA from operations was $134.7 million, or 20.3% of non-GAAP total revenue versus non-GAAP EBITDA from operations of $117.0 million, or 17.3% of non-GAAP total revenue, for the first nine months of fiscal year 2019. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2020 was $114.6 million with a non-GAAP operating margin of 17.3% compared with non-GAAP income from operations of $92.9 million and a 13.7% non-GAAP operating margin for the same period of fiscal year 2019.
- For the first nine months of fiscal year 2020, NETSCOUT’s net loss (GAAP) was $10.1 million, or -$0.13 per share (diluted) compared with a net loss of $92.5 million, or -$1.17 per share (diluted) in the same nine-month period one year ago. NETSCOUT’s net loss (GAAP) in the first nine months of fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. Non-GAAP net income for the first nine months of fiscal year 2020 was $81.6 million, or $1.07 per share (diluted) versus non-GAAP net income for the same period of fiscal year 2019 of $57.3 million, or $0.72 per share (diluted).
Guidance:
NETSCOUT’s fiscal year 2020 guidance, which was last provided in October 2019, has been updated to narrow the revenue range with one quarter remaining in the fiscal year and to adjust the earnings per share range to reflect the impacts associated with the clarification of tax reform legislation and recent share repurchases. The Company’s current guidance for fiscal year 2020 is as follows:
- NETSCOUT expects GAAP and non-GAAP revenue to range from $900 million to $910 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 now expected to range from $0.01 to $0.06. NETSCOUT’s fiscal year 2020 non-GAAP net income per share (diluted) performance is now expected to range from $1.51 to $1.56.
- 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 third-quarter fiscal year 2020 financial results 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 NTCTQ320. A replay of the call will be available after 12:00 p.m. ET on January 30, 2020 for approximately one week. The number for the replay is (800) 283-7928 for U.S./Canada and (402) 220-0866 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 gross profit, 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. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, certain expenses related to acquisitions including depreciation cost, and adds back transitional service agreement income. 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 margin, 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, 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, 2019 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.
©2020 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries.
| NETSCOUT SYSTEMS, INC. | ||||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||||
| Revenue: | ||||||||||||||||||
| Product | $ |
143,309 |
|
$ |
134,135 |
|
$ |
321,803 |
|
$ |
341,815 |
|
||||||
| Service |
|
116,715 |
|
|
111,873 |
|
|
340,666 |
|
|
333,101 |
|
||||||
| Total revenue |
|
260,024 |
|
|
246,008 |
|
|
662,469 |
|
|
674,916 |
|
||||||
| Cost of revenue: | ||||||||||||||||||
| Product |
|
34,197 |
|
|
40,517 |
|
|
90,500 |
|
|
107,974 |
|
||||||
| Service |
|
31,388 |
|
|
29,067 |
|
|
88,960 |
|
|
87,617 |
|
||||||
| Total cost of revenue |
|
65,585 |
|
|
69,584 |
|
|
179,460 |
|
|
195,591 |
|
||||||
| Gross profit |
|
194,439 |
|
|
176,424 |
|
|
483,009 |
|
|
479,325 |
|
||||||
| Operating expenses: | ||||||||||||||||||
| Research and development |
|
48,606 |
|
|
49,925 |
|
|
142,391 |
|
|
161,347 |
|
||||||
| Sales and marketing |
|
67,653 |
|
|
74,024 |
|
|
214,245 |
|
|
224,207 |
|
||||||
| General and administrative |
|
25,048 |
|
|
22,788 |
|
|
72,436 |
|
|
74,141 |
|
||||||
| Amortization of acquired intangible assets |
|
16,120 |
|
|
16,433 |
|
|
48,395 |
|
|
57,879 |
|
||||||
| Impairment of intangible assets |
|
- |
|
|
- |
|
|
- |
|
|
35,871 |
|
||||||
| Loss on divestiture |
|
- |
|
|
- |
|
|
- |
|
|
9,177 |
|
||||||
| Restructuring charges |
|
193 |
|
|
13,895 |
|
|
466 |
|
|
17,514 |
|
||||||
| Total operating expenses |
|
157,620 |
|
|
177,065 |
|
|
477,933 |
|
|
580,136 |
|
||||||
| Income (loss) from operations |
|
36,819 |
|
|
(641 |
) |
|
5,076 |
|
|
(100,811 |
) |
||||||
| Interest and other expense, net |
|
(3,915 |
) |
|
(4,564 |
) |
|
(11,930 |
) |
|
(15,203 |
) |
||||||
| Income (loss) before income tax expense (benefit) |
|
32,904 |
|
|
(5,205 |
) |
|
(6,854 |
) |
|
(116,014 |
) |
||||||
| Income tax expense (benefit) |
|
(3,821 |
) |
|
(1,602 |
) |
|
3,236 |
|
|
(23,479 |
) |
||||||
| Net income (loss) | $ |
36,725 |
|
$ |
(3,603 |
) |
$ |
(10,090 |
) |
$ |
(92,535 |
) |
||||||
| Basic net income (loss) per share | $ |
0.49 |
|
$ |
(0.05 |
) |
$ |
(0.13 |
) |
$ |
(1.17 |
) |
||||||
| Diluted net income (loss) per share | $ |
0.49 |
|
$ |
(0.05 |
) |
$ |
(0.13 |
) |
$ |
(1.17 |
) |
||||||
| Weighted average common shares outstanding used in computing: | ||||||||||||||||||
| Net income (loss) per share - basic |
|
74,367 |
|
|
77,774 |
|
|
75,780 |
|
|
78,916 |
|
||||||
| Net income (loss) per share - diluted |
|
74,700 |
|
|
77,774 |
|
|
75,780 |
|
|
78,916 |
|
||||||
| NETSCOUT SYSTEMS, INC. | |||||||
| Consolidated Balance Sheets | |||||||
| (In thousands) | |||||||
| December 31, | March 31, | ||||||
2019 |
2019 |
||||||
(Unaudited) |
|||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash, cash equivalents and marketable securities | $ |
343,934 |
|
$ |
485,976 |
|
|
| Accounts receivable and unbilled costs, net |
|
244,877 |
|
|
235,318 |
|
|
| Inventories |
|
24,977 |
|
|
26,270 |
|
|
| Prepaid expenses and other current assets |
|
40,261 |
|
|
53,658 |
|
|
| Total current assets |
|
654,049 |
|
|
801,222 |
|
|
| Fixed assets, net |
|
58,700 |
|
|
58,951 |
|
|
| Goodwill and intangible assets, net |
|
2,321,352 |
|
|
2,384,603 |
|
|
| Long-term marketable securities |
|
2,561 |
|
|
1,012 |
|
|
| Operating lease right-of-use assets |
|
65,738 |
|
|
- |
|
|
| Other assets |
|
24,939 |
|
|
24,206 |
|
|
| Total assets | $ |
3,127,339 |
|
$ |
3,269,994 |
|
|
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ |
19,756 |
|
$ |
24,582 |
|
|
| Accrued compensation |
|
70,430 |
|
|
58,501 |
|
|
| Accrued other |
|
21,676 |
|
|
24,345 |
|
|
| Current portion of operating lease liabilities |
|
11,091 |
|
|
- |
|
|
| Deferred revenue and customer deposits |
|
261,151 |
|
|
272,508 |
|
|
| Total current liabilities |
|
384,104 |
|
|
379,936 |
|
|
| Other long-term liabilities |
|
6,997 |
|
|
19,493 |
|
|
| Deferred tax liability |
|
115,470 |
|
|
124,229 |
|
|
| Accrued long-term retirement benefits |
|
35,808 |
|
|
36,284 |
|
|
| Long-term deferred revenue |
|
104,339 |
|
|
94,619 |
|
|
| Operating lease liabilities, net of current portion |
|
67,814 |
|
|
- |
|
|
| Long-term debt |
|
450,000 |
|
|
550,000 |
|
|
| Total liabilities |
|
1,164,532 |
|
|
1,204,561 |
|
|
| Stockholders' equity: | |||||||
| Common stock |
|
122 |
|
|
120 |
|
|
| Additional paid-in capital |
|
2,873,702 |
|
|
2,828,922 |
|
|
| Accumulated other comprehensive loss |
|
(3,345 |
) |
|
(2,639 |
) |
|
| Treasury stock, at cost |
|
(1,255,675 |
) |
|
(1,119,063 |
) |
|
| Retained earnings |
|
348,003 |
|
|
358,093 |
|
|
| Total stockholders' equity |
|
1,962,807 |
|
|
2,065,433 |
|
|
| Total liabilities and stockholders' equity | $ |
3,127,339 |
|
$ |
3,269,994 |
|
|
| NETSCOUT SYSTEMS, INC. | ||||||||||||||||||||||||
| Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures | ||||||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| December 31, | September 30, | December 31, | ||||||||||||||||||||||
2019 |
2018 |
2019 |
2019 |
2018 |
||||||||||||||||||||
| Product Revenue (GAAP) | $ |
143,309 |
|
$ |
134,135 |
|
$ |
102,775 |
|
$ |
321,803 |
|
$ |
341,815 |
|
|||||||||
| Product deferred revenue fair value adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
|||||||||
| Non-GAAP Product Revenue | $ |
143,309 |
|
$ |
134,135 |
|
$ |
102,775 |
|
$ |
321,803 |
|
$ |
342,206 |
|
|||||||||
| Service Revenue (GAAP) | $ |
116,715 |
|
$ |
111,873 |
|
$ |
113,646 |
|
$ |
340,666 |
|
$ |
333,101 |
|
|||||||||
| Service deferred revenue fair value adjustment |
|
48 |
|
|
243 |
|
|
48 |
|
|
144 |
|
|
957 |
|
|||||||||
| Non-GAAP Service Revenue | $ |
116,763 |
|
$ |
112,116 |
|
$ |
113,694 |
|
$ |
340,810 |
|
$ |
334,058 |
|
|||||||||
| Revenue (GAAP) | $ |
260,024 |
|
$ |
246,008 |
|
$ |
216,421 |
|
$ |
662,469 |
|
$ |
674,916 |
|
|||||||||
| Product deferred revenue fair value adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
|||||||||
| Service deferred revenue fair value adjustment |
|
48 |
|
|
243 |
|
|
48 |
|
|
144 |
|
|
957 |
|
|||||||||
| Non-GAAP Revenue | $ |
260,072 |
|
$ |
246,251 |
|
$ |
216,469 |
|
$ |
662,613 |
|
$ |
676,264 |
|
|||||||||
| Gross Profit (GAAP) | $ |
194,439 |
|
$ |
176,424 |
|
$ |
157,289 |
|
$ |
483,009 |
|
$ |
479,325 |
|
|||||||||
| Product deferred revenue fair value adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
|||||||||
| Service deferred revenue fair value adjustment |
|
48 |
|
|
243 |
|
|
48 |
|
|
144 |
|
|
957 |
|
|||||||||
| Share-based compensation expense (1) |
|
1,506 |
|
|
1,894 |
|
|
2,187 |
|
|
5,427 |
|
|
5,882 |
|
|||||||||
| Amortization of acquired intangible assets (2) |
|
6,222 |
|
|
7,554 |
|
|
6,225 |
|
|
18,677 |
|
|
23,687 |
|
|||||||||
| Acquisition related depreciation expense (6) |
|
7 |
|
|
13 |
|
|
6 |
|
|
26 |
|
|
63 |
|
|||||||||
| Transitional service agreement income (7) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|||||||||
| Non-GAAP Gross Profit | $ |
202,222 |
|
$ |
186,128 |
|
$ |
165,755 |
|
$ |
507,283 |
|
$ |
510,307 |
|
|||||||||
| Income (loss) from Operations (GAAP) | $ |
36,819 |
|
$ |
(641 |
) |
$ |
(7,295 |
) |
$ |
5,076 |
|
$ |
(100,811 |
) |
|||||||||
| Product deferred revenue fair value adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
|||||||||
| Service deferred revenue fair value adjustment |
|
48 |
|
|
243 |
|
|
48 |
|
|
144 |
|
|
957 |
|
|||||||||
| Share-based compensation expense (1) |
|
11,361 |
|
|
13,759 |
|
|
15,857 |
|
|
39,961 |
|
|
44,142 |
|
|||||||||
| Amortization of acquired intangible assets (2) |
|
22,342 |
|
|
23,987 |
|
|
22,357 |
|
|
67,072 |
|
|
81,566 |
|
|||||||||
| Business development and integration expense (3) |
|
20 |
|
|
1 |
|
|
39 |
|
|
38 |
|
|
386 |
|
|||||||||
| New standard implementation expense (4) |
|
1 |
|
|
72 |
|
|
- |
|
|
10 |
|
|
888 |
|
|||||||||
| Compensation for post-combination services (5) |
|
125 |
|
|
99 |
|
|
135 |
|
|
453 |
|
|
717 |
|
|||||||||
| Restructuring charges |
|
193 |
|
|
13,895 |
|
|
150 |
|
|
466 |
|
|
17,514 |
|
|||||||||
| Impairment of intangible assets |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
35,871 |
|
|||||||||
| Acquisition related depreciation expense (6) |
|
61 |
|
|
122 |
|
|
69 |
|
|
251 |
|
|
784 |
|
|||||||||
| Loss on divestiture |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
9,177 |
|
|||||||||
| Transitional service agreement income (expense) (7) |
|
(25 |
) |
|
1,055 |
|
|
275 |
|
|
1,159 |
|
|
1,274 |
|
|||||||||
| Non-GAAP Income from Operations | $ |
70,945 |
|
$ |
52,592 |
|
$ |
31,635 |
|
$ |
114,630 |
|
$ |
92,856 |
|
|||||||||
| Net Income (loss) (GAAP) | $ |
36,725 |
|
$ |
(3,603 |
) |
$ |
(17,472 |
) |
$ |
(10,090 |
) |
$ |
(92,535 |
) |
|||||||||
| Product deferred revenue fair value adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
|||||||||
| Service deferred revenue fair value adjustment |
|
48 |
|
|
243 |
|
|
48 |
|
|
144 |
|
|
957 |
|
|||||||||
| Share-based compensation expense (1) |
|
11,361 |
|
|
13,759 |
|
|
15,857 |
|
|
39,961 |
|
|
44,142 |
|
|||||||||
| Amortization of acquired intangible assets (2) |
|
22,342 |
|
|
23,987 |
|
|
22,357 |
|
|
67,072 |
|
|
81,566 |
|
|||||||||
| Business development and integration expense (3) |
|
20 |
|
|
1 |
|
|
39 |
|
|
38 |
|
|
386 |
|
|||||||||
| New standard implementation expense (4) |
|
1 |
|
|
72 |
|
|
- |
|
|
10 |
|
|
888 |
|
|||||||||
| Compensation for post-combination services (5) |
|
125 |
|
|
99 |
|
|
135 |
|
|
453 |
|
|
717 |
|
|||||||||
| Restructuring charges |
|
193 |
|
|
13,895 |
|
|
150 |
|
|
466 |
|
|
17,514 |
|
|||||||||
| Impairment of intangible assets |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
35,871 |
|
|||||||||
| Acquisition related depreciation expense (6) |
|
61 |
|
|
122 |
|
|
69 |
|
|
251 |
|
|
784 |
|
|||||||||
| Loss on divestiture |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
9,177 |
|
|||||||||
| Transitional service agreement expense (7) |
|
- |
|
|
(45 |
) |
|
- |
|
|
- |
|
|
(45 |
) |
|||||||||
| Change in contingent consideration |
|
- |
|
|
- |
|
|
(6 |
) |
|
517 |
|
|
- |
|
|||||||||
| Income tax adjustments (8) |
|
(16,182 |
) |
|
(13,334 |
) |
|
181 |
|
|
(17,176 |
) |
|
(42,563 |
) |
|||||||||
| Non-GAAP Net Income | $ |
54,694 |
|
$ |
35,196 |
|
$ |
21,358 |
|
$ |
81,646 |
|
$ |
57,250 |
|
|||||||||
| Diluted Net Loss Per Share (GAAP) | $ |
0.49 |
|
$ |
(0.05 |
) |
$ |
(0.23 |
) |
$ |
(0.13 |
) |
$ |
(1.17 |
) |
|||||||||
| Share impact of non-GAAP adjustments identified above |
|
0.24 |
|
|
0.50 |
|
|
0.51 |
|
|
1.20 |
|
|
1.89 |
|
|||||||||
| Non-GAAP Diluted Net Income Per Share | $ |
0.73 |
|
$ |
0.45 |
|
$ |
0.28 |
|
$ |
1.07 |
|
$ |
0.72 |
|
|||||||||
| Shares used in computing non-GAAP diluted net income per share |
|
74,700 |
|
|
78,208 |
|
|
76,310 |
|
|
76,474 |
|
|
79,648 |
|
|||||||||
| NETSCOUT SYSTEMS, INC. | ||||||||||||||||||||||||
| Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued | ||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| December 31, | September 30, | December 31, | ||||||||||||||||||||||
2019 |
2018 |
2019 |
2019 |
2018 |
||||||||||||||||||||
(1) |
Share-based compensation expense included in these amounts | |||||||||||||||||||||||
| is as follows: | ||||||||||||||||||||||||
| Cost of product revenue | $ |
231 |
|
$ |
375 |
|
$ |
345 |
|
$ |
843 |
|
$ |
1,188 |
|
|||||||||
| Cost of service revenue |
|
1,275 |
|
|
1,519 |
|
|
1,842 |
|
|
4,584 |
|
|
4,694 |
|
|||||||||
| Research and development |
|
3,437 |
|
|
3,979 |
|
|
4,820 |
|
|
12,076 |
|
|
13,544 |
|
|||||||||
| Sales and marketing |
|
3,910 |
|
|
4,649 |
|
|
5,288 |
|
|
13,333 |
|
|
15,051 |
|
|||||||||
| General and administrative |
|
2,508 |
|
|
3,237 |
|
|
3,562 |
|
|
9,125 |
|
|
9,665 |
|
|||||||||
| Total share-based compensation expense | $ |
11,361 |
|
$ |
13,759 |
|
$ |
15,857 |
|
$ |
39,961 |
|
$ |
44,142 |
|
|||||||||
(2) |
Amortization expense related to acquired software and product | |||||||||||||||||||||||
| technology, tradenames, customer relationships included in these | ||||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| Cost of product revenue | $ |
6,222 |
|
$ |
7,554 |
|
$ |
6,225 |
|
$ |
18,677 |
|
$ |
23,687 |
|
|||||||||
| Operating expenses |
|
16,120 |
|
|
16,433 |
|
|
16,132 |
|
|
48,395 |
|
|
57,879 |
|
|||||||||
| Total amortization expense | $ |
22,342 |
|
$ |
23,987 |
|
$ |
22,357 |
|
$ |
67,072 |
|
$ |
81,566 |
|
|||||||||
(3) |
Business development and integration expense included in | |||||||||||||||||||||||
| these amounts is as follows: | ||||||||||||||||||||||||
| Research and development | $ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
43 |
|
$ |
356 |
|
|||||||||
| General and administrative |
|
20 |
|
|
1 |
|
|
39 |
|
|
(5 |
) |
|
30 |
|
|||||||||
| Total business development and integration expense | $ |
20 |
|
$ |
1 |
|
$ |
39 |
|
$ |
38 |
|
$ |
386 |
|
|||||||||
(4) |
New standard implementation expense included in these | |||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| General and administrative | $ |
1 |
|
$ |
72 |
|
$ |
- |
|
$ |
10 |
|
$ |
888 |
|
|||||||||
| Total new standard implementation expense | $ |
1 |
|
$ |
72 |
|
$ |
- |
|
$ |
10 |
|
$ |
888 |
|
|||||||||
(5) |
Compensation for post-combination services included in these | |||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| Research and development | $ |
125 |
|
$ |
87 |
|
$ |
135 |
|
$ |
453 |
|
$ |
620 |
|
|||||||||
| Sales and marketing |
|
- |
|
|
- |
|
|
- |
|
|
19 |
|
||||||||||||
| General and administrative |
|
- |
|
|
12 |
|
|
- |
|
|
78 |
|
||||||||||||
| Total compensation for post-combination services | $ |
125 |
|
$ |
99 |
|
$ |
135 |
|
$ |
453 |
|
$ |
717 |
|
|||||||||
(6) |
Acquisition related depreciation expense included in these | |||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| Cost of product revenue | $ |
4 |
|
$ |
10 |
|
$ |
4 |
|
$ |
18 |
|
$ |
34 |
|
|||||||||
| Cost of service revenue |
|
3 |
|
|
3 |
|
|
2 |
|
|
8 |
|
|
29 |
|
|||||||||
| Research and development |
|
43 |
|
|
83 |
|
|
48 |
|
|
174 |
|
|
504 |
|
|||||||||
| Sales and marketing |
|
8 |
|
|
11 |
|
|
9 |
|
|
27 |
|
|
67 |
|
|||||||||
| General and administrative |
|
3 |
|
|
15 |
|
|
6 |
|
|
24 |
|
|
150 |
|
|||||||||
| Total acquisition related depreciation expense | $ |
61 |
|
$ |
122 |
|
$ |
69 |
|
$ |
251 |
|
$ |
784 |
|
|||||||||
(7) |
Transitional service agreement income included in these | |||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| Cost of service revenue | $ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
2 |
|
|||||||||
| Research and development |
|
(25 |
) |
|
104 |
|
|
10 |
|
|
87 |
|
|
127 |
|
|||||||||
| Sales and marketing |
|
- |
|
|
128 |
|
|
42 |
|
|
168 |
|
|
178 |
|
|||||||||
| General and administrative |
|
- |
|
|
823 |
|
|
223 |
|
|
904 |
|
|
967 |
|
|||||||||
| Other Income (expense), net |
|
25 |
|
|
(1,100 |
) |
|
(275 |
) |
|
(1,159 |
) |
|
(1,319 |
) |
|||||||||
| Total transitional service agreement income | $ |
- |
|
$ |
(45 |
) |
$ |
- |
|
$ |
- |
|
$ |
(45 |
) |
|||||||||
(8) |
Total income tax adjustment included in these | |||||||||||||||||||||||
| amounts is as follows: | ||||||||||||||||||||||||
| Tax effect of non-GAAP adjustments above | $ |
(16,182 |
) |
$ |
(13,334 |
) |
$ |
181 |
|
$ |
(17,176 |
) |
$ |
(42,563 |
) |
|||||||||
| Total income tax adjustments | $ |
(16,182 |
) |
$ |
(13,334 |
) |
$ |
181 |
|
$ |
(17,176 |
) |
$ |
(42,563 |
) |
|||||||||
| NETSCOUT SYSTEMS, INC. | |||||||||||||
| Reconciliation of GAAP Revenue to Non-GAAP Organic Revenue | |||||||||||||
| (In thousands) | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||
| GAAP Product Revenue | $ |
143,309 |
$ |
134,135 |
$ |
321,803 |
$ |
341,815 |
|
||||
| Adjustments |
|
- |
|
- |
|
- |
|
391 |
|
||||
| Non-GAAP Product Revenue | $ |
143,309 |
$ |
134,135 |
$ |
321,803 |
$ |
342,206 |
|
||||
| HNT Tools Product Revenue |
|
- |
|
- |
|
- |
|
(13,430 |
) |
||||
| Organic Non-GAAP Product Revenue | $ |
143,309 |
$ |
134,135 |
$ |
321,803 |
$ |
328,776 |
|
||||
| GAAP Service Revenue | $ |
116,715 |
$ |
111,873 |
$ |
340,666 |
$ |
333,101 |
|
||||
| Adjustments |
|
48 |
|
243 |
|
144 |
|
957 |
|
||||
| Non-GAAP Service Revenue | $ |
116,763 |
$ |
112,116 |
$ |
340,810 |
$ |
334,058 |
|
||||
| HNT Tools Service Revenue |
|
- |
|
- |
|
- |
|
(4,555 |
) |
||||
| Organic Non-GAAP Service Revenue | $ |
116,763 |
$ |
112,116 |
$ |
340,810 |
$ |
329,503 |
|
||||
| GAAP Revenue | $ |
260,024 |
$ |
246,008 |
$ |
662,469 |
$ |
674,916 |
|
||||
| Adjustments |
|
48 |
|
243 |
|
144 |
|
1,348 |
|
||||
| Non-GAAP Revenue | $ |
260,072 |
$ |
246,251 |
$ |
662,613 |
$ |
676,264 |
|
||||
| HNT Tools Revenue |
|
- |
|
- |
|
- |
|
(17,985 |
) |
||||
| Organic Non-GAAP Revenue | $ |
260,072 |
$ |
246,251 |
$ |
662,613 |
$ |
658,279 |
|
||||
| NETSCOUT SYSTEMS, INC. | ||||||||||||||||||
| Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Non-GAAP EBITDA | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||
| December 31, | September 30, | December 31, | ||||||||||||||||
2019 |
2018 |
2019 |
2019 |
2018 |
||||||||||||||
| Loss from operations (GAAP) | $ |
36,819 |
$ |
(641 |
) |
$ |
(7,295 |
) |
$ |
5,076 |
$ |
(100,811 |
) |
|||||
| Previous adjustments to determine non-GAAP income from operations |
|
34,126 |
|
53,233 |
|
|
38,930 |
|
|
109,554 |
|
193,667 |
|
|||||
| Non-GAAP Income from operations |
|
70,945 |
|
52,592 |
|
|
31,635 |
|
|
114,630 |
|
92,856 |
|
|||||
| Depreciation excluding acquisition related |
|
6,339 |
|
7,842 |
|
|
6,905 |
|
|
20,085 |
|
24,159 |
|
|||||
| Non-GAAP EBITDA from operations | $ |
77,284 |
$ |
60,434 |
|
$ |
38,540 |
|
$ |
134,715 |
$ |
117,015 |
|
|||||
| 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 |
|
~$900 million to ~$910 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 |
|
~$900 million to ~$910 million | |
| HNT Tools Revenue | $ |
(18.0 |
) |
- |
|
| Organic non-GAAP revenue | $ |
893.5 |
|
~$900 million to ~$910 million | |
| FY'19 | FY'20 | ||||
| GAAP Net Income (Loss) | $ |
(73.3 |
) |
~$1 million to ~$5 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 |
|
~$90 million | |
| Share-based compensation expenses | $ |
56.3 |
|
~$51 million | |
| Business development & integration expenses* | $ |
2.5 |
|
Less than $1 million | |
| New accounting standard implementation | $ |
0.9 |
|
- |
|
| Restructuring costs | $ |
18.7 |
|
Less than $1 million | |
| Impairment of Intangibles | $ |
35.9 |
|
- |
|
| Loss on divestiture | $ |
9.5 |
|
- |
|
| Change in contingent consideration | $ |
1.5 |
|
Less than $1 million | |
| Total Adjustments | $ |
232.4 |
|
~$142 million to ~$143 million | |
| Related impact of adjustments on income tax | $ |
(49.9 |
) |
(~$29 million) | |
| Non-GAAP Net Income | $ |
109.2 |
|
~$115 million to ~$119 million | |
| GAAP net income (loss) per share (diluted) | $ |
(0.93 |
) |
~$0.01 to ~$0.06 | |
| Non-GAAP net income per share (diluted) | $ |
1.38 |
|
~$1.51 to ~$1.56 | |
| Average Weighted Shares Outstanding (diluted GAAP) |
|
78.6 |
|
76.0 million | |
| Average Weighted Shares Outstanding (diluted Non-GAAP) |
|
79.3 |
|
76.0 million | |
| *Business development & integration expenses include compensation for post-combination services and acquisition-related depreciation expense | |||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200130005100/en/
Investors
Anthony Piazza
Vice President, Corporate Finance
978-614-4286
[email protected]
Media
Maribel Lopez
Manager, Marketing & Corporate Communications
781-362-4330
[email protected]
Source: NETSCOUT SYSTEMS, INC.