WESTFORD, Mass.--(BUSINESS WIRE)--Oct. 19, 2000--NetScout Systems, Inc. (NASDAQ: NTCT), the leading provider of infrastructure performance management solutions, today announced financial results for its second quarter of fiscal 2001 ended September 30, 2000. Revenue for the second quarter of fiscal 2001 was $28.8 million, a 42% increase over revenue of $20.3 million for the same period a year earlier, and a 15% increase over revenue of $25.2 million for the first quarter of fiscal 2001. Excluding non-cash amortization of intangible assets, IPR&D and stock-based compensation, net income for the second quarter of fiscal 2001 was $3.5 million, or $0.11 per diluted share, compared to $3.3 million, or $0.12 per diluted share, for the same quarter last year. Net loss for the second quarter of fiscal 2001 was $761,000, or $0.03 per diluted share, compared to net income of $3.2 million, or $0.12 per diluted share for the second quarter of fiscal 2000. Weighted average diluted shares for the second quarter of fiscal 2001 were 28.6 million, compared to 26.6 million for the second quarter of fiscal 2000, and 28.0 million for the first quarter of fiscal 2001. For the six months ended September 30, 2000, NetScout reported total revenue of $54.0 million, an increase of 37% over revenue of $39.4 million for the same period last year. Excluding non-cash amortization of intangible assets, IPR&D and stock-based compensation, net income for the period was $7.8 million, or $0.27 per diluted share, compared to $6.5 million, or $0.25 per diluted share for the same period last year. Net income for the six months ended September 30, 2000, was $3.5 million, or $0.12 per diluted share, compared to $6.3 million, or $0.25 per diluted share for the same period of fiscal 2000. "We are reporting record results and spectacular growth for the period," said Anil Singhal, chairman and CEO of NetScout Systems. "We are very pleased with the results of this quarter and the progress we have made during the past 12 months. Since our IPO in August 1999, we have steadily increased our top line year over year growth rate from the low 20s to more than 40 percent. In addition, we continue to maintain our long track record of profitability, even as we increase our investments in sales and engineering. This performance reflects the strong demand for our products, the strength of our unique business model, and major investments we made in our sales operations during the beginning of this fiscal year." BUSINESS HIGHLIGHTS: During the second quarter of fiscal 2001, NetScout:
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Completed its acquisition of NextPoint Networks. The Company has fulfilled a number of milestones for integration of operations, products and sales, including: product training of sales and channel partners; marketing programs; initial integration of NextPoint products into the nGenius suite, and presentations of our expanded offerings to key accounts.
Signed more than 40 new accounts. Large deals--valued at more than $100,000--were up 21% from last quarter from both new and existing customers. Business from our installed base comprised approximately 60% of total revenue, representing the strong willingness of our clients to invest strategically in NetScout technology.
Received new and follow-on business from domestic enterprise and e-business clients such as: Nickelodeon, 123Signup.com, Net QOS, Bear Stearns, AmeriGroup, New York Life and Northern Light. Domestic business from service providers included new and repeat orders from several of our major US telecommunication clients, Exenet Networks, and Cable and Wireless. Cable and Wireless selected NetScout instrumentation as the data source for a new, usage-based billing initiative the company is considering for rollout over its high-speed, global IP network.
Business channeled through Cisco Systems, Inc. remains strong, representing 55% of revenue during the quarter, although slightly lower than our previous quarter. This reflects the strength of the continued alliance between NetScout and Cisco sales activities, both domestically and overseas.
Generated approximately 25% of total revenue from international business. These sales included new and follow-on orders from our major accounts in the banking and insurance industries, as well as BMW, Arag Insurance, Provinzial Insurance, the Hong Kong Futures Exchange, D2, China Telecom, Samsung SDS, Nipon Telecom and ChungHwa Telecom. Demand for infrastructure performance management is emerging particularly strong in the AsiaPac region where service providers are building new, wide-scale, IP-based networks.
Shipped the initial components of its nGenius Performance Management System -- the nGenius Server and the nGenius Traffic Monitor. These components will be sold through all NetScout sales channels including our direct sales force, Cisco Systems and other resellers.
Announced new, innovative pricing models for nGenius solutions. The new pricing offers simplified server- and site-based licensing. This highly attractive pricing can deliver significant savings to our customers versus the element-based pricing used elsewhere in the industry.
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Launched its DS3/E3 Frame Probe, which is designed to monitor DS3/E3 frame-based wide area network (WAN) links.
OUTLOOK Commenting on the company's business outlook, Singhal said, "Our goal for the future is to continue to grow above 40%, a growth rate we estimate to be higher than the average growth in the network management industry. Initiatives for sustaining future strong growth include successful integration of NextPoint Networks, the delivery of nGenius as a fully JAVA-based platform with attractive features and pricing, extensions and enhancements to NetScout's probe line, and increased focus on service provider opportunities." Consistent with NetScout's business model, the company's near-term financial objectives are as follows: revenue growth at or above 40%; gross margins between 70% and 73%; operating expenses between 48% and 53%; and operating income between 18% and 20%. CONFERENCE CALL INSTRUCTIONS: To participate in today's conference call at 5:15pm ET, interested parties may listen via Webcast that will be broadcast through the Company's Web site, www.netscout.com, or dial (719) 457-2633. The call will be replayed from 8:00PM ET, this evening, through midnight, October 26. The replay number is (719) 457-0820, with a confirmation code 631945. The call will also be audio-archived on the Company's Web site. ABOUT NETSCOUT SYSTEMS NetScout Systems, Inc. is the leading provider of infrastructure performance management solutions for leading companies and service providers worldwide. NetScout serves approximately half of the Fortune 500 and counts among its customers 3M Corporation, AT&T, Datek Online, Bristol-Myers Squibb, Amazon.com, Webhire, Intel Online, Fidelity Investments and Sun Microsystems. NetScout's nGenius (TM) Performance Management System is a solutions-based system offering advanced monitoring and reporting applications suites that draw on the rich performance data generated by NetScout's real-time, application-aware probe suite, advanced intelligent software agents, and network devices. The nGenius System helps organizations increase their return on infrastructure investments by optimizing the performance of their network, applications and content. NetScout is headquartered in Westford, Massachusetts and has approximately 320 employees, with offices in North America, Europe and Asia. Further information on 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, including the plans, objectives and future financial performance of NetScout, constitute forward-looking statements which involve risks and uncertainties. Actual results could differ materially from the forward-looking statements. Risks and uncertainties which could cause actual results to differ include, without limitation, risks and uncertainties associated with the company's strategic relationships with Cisco Systems and other partners, dependence upon broad-based acceptance of the company's Infrastructure Performance Management solutions, the company's ability to achieve and maintain a growth rate of 40% or greater, introduction and market acceptance of new products and product enhancements such as the delivery of nGenius product platform probes and software solutions, the ability of NetScout to take advantage of service provider opportunities, competitive pricing pressures, reliance on sole source suppliers, successful expansion and management of the indirect distribution channels, the integration of NextPoint Networks and dependence on proprietary technology, as well as risks of slowdowns or downturns in economic conditions generally and in the market for infrastructure performance management solutions specifically. For a more detailed description of the risk factors associated with the company, please refer to the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000, and Quarterly Report on 10-Q for the quarter ended June 30, 2000, on file with the Securities and Exchange Commission. NetScout is a registered trademark, and the NetScout logo, nGenius, nGenius Application Service Level Manager, nGenius Real-Time Monitor and nGenius Capacity Planner are trademarks of NetScout Systems, Inc.
NetScout Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, March 31,
2000 2000
Assets
Current assets:
Cash and cash equivalents $ 37,204 $48,515
Marketable securities 17,785 21,807
Accounts receivable, net 13,237 10,390
Inventories 3,634 3,131
Refundable income taxes 274 1,899
Deferred income taxes 1,164 1,022
Prepaids and other current assets 3,878 3,728
Total current assets 77,176 90,492
Fixed assets, net 6,887 5,657
Intangible assets, net 46,442 -
Deferred income taxes 4,652 599
Total assets $135,157 $96,748
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,417 $ 2,789
Accrued compensation 3,631 3,673
Accrued other 2,295 2,448
Customer deposits 24 78
Deferred revenue 8,608 6,638
Total current liabilities 17,975 15,626
Stockholders' equity:
Common stock 33 31
Additional paid-in capital 104,045 67,366
Deferred compensation (4,800) (636)
Treasury stock (25,306) (25,306)
Retained earnings 43,210 39,667
Total stockholders' equity 117,182 81,122
Total liabilities and stockholders'
equity $135,157 $96,748
NetScout Systems, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenue:
Product $ 20,790 $ 13,541 $ 38,551 $ 26,355
Service 4,427 3,099 8,404 5,564
License and royalty 3,602 3,664 7,033 7,456
Total revenue 28,819 20,304 53,988 39,375
Cost of revenue:
Product 7,262 5,086 13,356 9,900
Service 857 397 1,451 801
Total cost of revenue 8,119 5,483 14,807 10,701
Gross margin 20,700 14,821 39,181 28,674
Operating expenses:
Research and
development 3,818 2,447 6,380 4,675
Sales and marketing 10,197 6,644 18,864 12,629
General and
administrative 2,347 1,146 3,939 2,079
Stock-based
compensation 576 94 649 175
Amortization of
intangible assets 2,666 -- 2,666 --
In-process research
and development 268 -- 268 --
Total operating
expenses 19,872 10,331 32,766 19,558
Income from operations 828 4,490 6,415 9,116
Interest income, net 1,108 504 2,142 776
Income before provision
for income taxes 1,936 4,994 8,557 9,892
Provision for income
taxes 2,697 1,800 5,014 3,564
Net income (loss) $ (761) $ 3,194 $ 3,543 $ 6,328
Basic net income (loss)
per share $ (0.03) $ 0.16 $ 0.13 $ 0.36
Diluted net income
(loss) per share $ (0.03) $ 0.12 $ 0.12 $ 0.25
Shares used in
computing:
Basic net income
(loss) per share 28,585 20,556 27,561 17,461
Diluted net income
(loss) per share 28,585 26,575 28,955 25,749
Supplemental
information:
Net income excluding
acquisition and
stock-based
compensation costs (1) $ 3,454 $ 3,287 $ 7,830 $ 6,504
Diluted net income per
share excluding
acquisition and
stock-based
compensation costs $ 0.11 $ 0.12 $ 0.27 $ 0.25
Shares used in computing
diluted net income per
share excluding
acquisition and
stock-based
compensation costs 30,182 26,575 28,955 25,749
(1) Net income excluding acquisition and stock-based compensation
costs assumes an effective tax rate of 35.5% which represents the
effective tax rate before factoring in non-deductible costs related to
the acquisition of NextPoint and stock-based compensation costs.
Copyright © 2001. NetScout Systems, Inc. All rights reserved.
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