NetScout Systems Reports Record Third Quarter Fiscal Year 2000 Financial Results
Recent Achievements Highlighted by the Extension of the Company's Strategic Partnership with Cisco Systems; NetScout Announces Departure of CFO
WESTFORD, Mass.--(BUSINESS WIRE)--Jan. 20, 2000-- NetScout Systems, Inc. (NASDAQ: NTCT), a leading provider of products that enable businesses to monitor, analyze and improve the performance of their computer networks and software applications, today announced financial results for its fiscal third quarter ended December 31, 1999.
Revenue for the third quarter of fiscal 2000 was $22.8 million, a 31 percent increase from revenue of $17.5 million in the same period last year. Net income for the three months ended December 31, 1999 was $4.4 million, or $0.16 per pro forma diluted share, an increase of 51 percent from net income of $2.9 million, or $0.12 per pro forma diluted share, for the three months ended December 31, 1998. The results for the third quarter of fiscal 2000 include $818,000 in fiscal 2000 second quarter royalties that one of NetScout's OEM partners did not report until the fiscal 2000 third quarter.
Excluding this amount, NetScout would have reported revenue of $22.0 million, 26 percent higher than the third quarter of fiscal 1999, and net income of $3.8 million, or $0.14 per pro forma diluted share.
Weighted average pro forma diluted shares for the three month period ended December 31, 1999 were 28.2 million, compared to 24.0 million for the same period in 1998.
For the nine months ended December 31, 1999, NetScout reported revenue of $62.2 million, a 27 percent increase from $48.9 million for the nine months ended December 31, 1998. Net income for the first nine months of fiscal 2000 was $10.7 million, or $0.40 per pro forma diluted share compared to net income of $7.7 million, or $0.32 per pro forma diluted share, for the same period in fiscal 1999.
"Our third quarter financial results reflect revenue growth across the board," said Anil Singhal, NetScout Chairman and Chief Executive Officer. "We also had record net income in the quarter, driven by higher sales and stronger gross margins."
Singhal continued, "Sales in North America were strong, particularly for high-speed products such as our Gigabit Ethernet Probe, introduced in August. Many of our existing customers placed large orders during the quarter to extend coverage to new segments and topologies. We were also pleased with the number of orders involving wider-scale implementations of our solutions. E-business proliferation is translating into great opportunities for NetScout as the need for, and value of, our solutions become increasingly recognized. Our view into the network, its components and applications remains unsurpassed. NetScout products not only facilitate far more intelligent, more relevant monitoring and management decisions, but they also enable better choices in deploying point solutions."
Key Partnerships - Cisco
Partnerships and alliances continue to be an important element in NetScout's strategy to expand its business. As previously announced yesterday, NetScout extended its OEM and technology sharing partnership with Cisco Systems, Inc. (NASDAQ: CSCO) through October 2002 and made the agreement automatically renewable. Under the agreement, Cisco has integrated NetScout technology in its recently released Routed WAN Management solution, providing network managers access to the same powerful set of system level tools as provided within Cisco's CWSI Campus LAN management solution. In addition, Cisco will continue to license NetScout's comprehensive Application Flow Management technology in network probes, for managing and monitoring the network, as a key component of the CiscoWorks2000 solution.
"The extension and expansion of our OEM and strategic partnership agreement with Cisco reinforces the importance of our solutions in the marketplace," Singhal said. "Since 1994, NetScout has worked closely with Cisco to provide enterprise network management solutions, resulting in the support of key Cisco technologies including CDP, Ether Channel, ISL, NetFlow, SPAN technology, WAN compression and the entire Catalyst switch family."
In recent weeks, NetScout also has increased its presence in the United Kingdom by establishing strategic relationships with two of the region's top systems integrators, Siemens Network Systems and Logical Networks. Partnering with leading resellers and systems integrators is an integral component to NetScout's strategy for expanding its international operations. The company also continues to invest in growing its direct and channel sales, domestically.
NetScout CFO Resigns to Pursue Other Opportunities
Separately, NetScout announced that Chief Financial Officer Charles W. Tillett will leave the Company at the end of January to pursue other opportunities. Mr. Tillett joined NetScout in 1991.
"I am grateful to Charlie for his dedication throughout his eight-year tenure at NetScout and all of us wish him well in his future endeavors," Singhal said. "We regret that Charlie has made the decision to leave the Company, however, he is leaving financial operations in the capable hands of Lisa Fiorentino, who we are promoting to Vice President of Finance. Ms. Fiorentino, 33, who has worked for NetScout for four-and-a-half years, will continue with her responsibility of managing NetScout's day-to-day financial operations as we begin the process of selecting a new CFO."
About NetScout Systems
NetScout Systems, Inc. is a leading provider of business-oriented network management solutions. NetScout enables large enterprises to depend on their network to deliver business-critical applications in areas such as e-commerce, enterprise resource planning and supply chain management. The Company's solutions are based on its unique Application Flow Management technology, which uses the rich set of application traffic information collected by NetScout's instrumentation. NetScout's AFM solutions address network optimization and fault isolation, capacity management, application performance measurement & reporting, and usage-based billing. Headquartered in Westford, Massachusetts, NetScout has 247 employees and has offices in North America, Europe and Asia. Further information about the Company is available on the World Wide Web at www.netscout.com
Forward-looking statements in this release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release which are not strictly historical statements 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 strategic relationships with Cisco Systems and other partners, dependence upon broad-based acceptance of the company's Application Flow Management solutions, introduction and market acceptance of new products and product enhancements, competitive pricing pressures, reliance on sole source suppliers, successful expansion and management of the indirect distribution channels, and dependence on proprietary technology, as well as risks of downturns in economic conditions generally and in the market for network and application performance management solutions specifically, and risks associated with year 2000 problems affecting the company, its partners and its customers. For a more detailed description of the risk factors associated with the company, please refer to the company's prospectus dated August 12, 1999 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, on file with the Securities and Exchange Commission. NetScout is a registered trademark and the NetScout logo, AppScout, NetScout Server and NetScout Manager Plus are trademarks of NetScout Systems, Inc. All other trademarks are the property of their respective owners. -0-
NetScout Systems, Inc.
Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
Revenue:
Product $ 14,584 $ 13,327 $ 40,939 $ 36,737
Service 3,348 2,172 8,912 6,329
License and
royalty 4,910 1,972 12,366 5,814
Total revenue 22,842 17,471 62,217 48,880
Cost of revenue:
Product 5,389 4,927 15,290 13,614
Service 422 222 1,242 838
Total cost
of revenue 5,811 5,149 16,532 14,452
Gross margin 17,031 12,322 45,685 34,428
Operating expenses:
Research and
development 2,322 1,803 7,022 5,295
Sales and
marketing 7,370 5,191 20,121 14,726
General and
administrative 1,334 1,030 3,421 3,058
Total operating
expenses 11,026 8,024 30,564 23,079
Income from
operations 6,005 4,298 15,121 11,349
Interest income, net 833 224 1,609 667
Income before provision
for income taxes 6,838 4,522 16,730 12,016
Provision for
income taxes 2,467 1,629 6,031 4,327
Net income $ 4,371 $ 2,893 $ 10,699 $ 7,689
Basic net income
per share $ 0.17 $ 0.15 $ 0.53 $ 0.39
Diluted net income
per share $ 0.16 $ 0.12 $ 0.40 $ 0.32
Shares used in
computing:
Basic net income
per share 25,796 19,668 20,249 19,568
Diluted net income
per share 28,154 23,980 26,562 23,792
Pro forma basic
net income
per share $ 0.17 $ 0.13 $ 0.44 $ 0.35
Pro forma diluted
net income
per share $ 0.16 $ 0.12 $ 0.40 $ 0.32
Shares used in
computing:
Pro forma basic net
income per share 25,796 22,194 24,235 22,095
Pro forma diluted
net income
per share 28,154 23,980 26,562 23,792
NetScout Systems, Inc.
Consolidated Balance Sheet
(In thousands)
December 31, March 31,
1999 1999
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 51,277 $ 25,477
Short-term investments 12,747 -
Accounts receivable, net 8,600 6,550
Inventories 4,452 3,165
Refundable income taxes 304 217
Deferred income taxes 1,196 1,196
Prepaids and other current assets 3,330 821
Total current assets 81,906 37,426
Fixed assets, net 5,327 4,227
Notes receivable - stockholders - 2,000
Deferred income taxes 321 321
Total assets $ 87,554 $ 43,974
Liabilities, Redeemable Convertible Common Stock and
Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 2,802 $ 3,945
Accrued compensation 3,761 3,539
Accrued other 2,468 1,165
Customer deposits 34 34
Deferred revenue 6,332 4,254
Total current liabilities 15,397 12,937
Commitments and contingencies:
Class B redeemable convertible common stock - 44,161
Stockholder's equity (deficit):
Series A convertible preferred stock - 5,964
Common stock:
Voting 31 16
Non-voting - 4
Additional paid-in capital 63,251 2,143
Deferred compensation (973) (1,312)
Treasury stock (25,306) (44,394)
Retained earnings 35,154 24,455
Total stockholder's equity (deficit) 72,157 (13,124)
Total liabilities, redeemable
convertible common stock and
stockholders' equity (deficit) $ 87,554 $ 43,974
Copyright © 2001. NetScout Systems, Inc. All rights reserved.
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