NETSCOUT Reports Financial Results For Fourth Quarter and Full Fiscal Year 2020

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 2020 ended March 31, 2020.

“For fiscal year 2020, we delivered solid earnings per share growth on relatively flat revenue compared with fiscal year 2019, excluding the divested HNT Tools business, despite some order delays in our fourth quarter related to the COVID-19 global pandemic. These delays occurred in one of our historically stronger quarters, as customers were focused on adjusting their operations to react to the rapidly evolving COVID-19 situation,” stated Anil Singhal, NETSCOUT’s president and CEO.

Singhal added, “In these unprecedented times, our purpose as “Guardians of the Connected World” has never been more important. Our customers rely on our service assurance and security solutions to support and protect critical networks and infrastructure that connect people and support businesses around the globe. We believe that this global pandemic could accelerate certain trends such as digital transformation and cloud migration, security requirements, and 5G over the longer term. We are committed and well positioned to fulfill our purpose. As we move forward, we will maintain our disciplined cost and capital management approach while continuing to innovate and invest in our technology and solutions to maintain our leadership position. In the meantime, we are confident that our solid balance sheet and strong financial position will provide us with the liquidity and flexibility necessary to weather these uncertain and challenging times.”

Notable developments and highlights:

  • In April, NETSCOUT held its annual user conference, Engage20, virtually. The interest hit record levels with approximately 3,500 people registered (vs. approximately 900 last year) representing more than 1,000 companies globally, which included many of the world’s largest and most innovative service providers and enterprises. At the event, we demonstrated our products, highlighted product roadmaps, and provided virtual tutorial workshops.
  • In March, NETSCOUT announced the public availability of Cyber Threat Horizon, a free threat intelligence portal that offers network and security operators greater visibility into Distributed Denial of Service (DDoS) attacks in real-time. Cyber Threat Horizon collects, analyzes, prioritizes, and disseminates data on past and emerging DDoS threats across the internet. This macro view gives users contextual awareness of the DDoS attacks that could impact their organizations and allows them to gain unique insights into DDoS attack trends to provide the situational awareness they need to assess risk and prepare for cyberattacks.
  • In mid-February, NETSCOUT released the findings of its Threat Intelligence Report for the second half of 2019, which also incorporates insights from its 15th Annual Worldwide Infrastructure Security Report™ (WISR™) survey. The report underscores the proliferation of risks faced by global enterprises and service providers. These organizations must now not only defend IT infrastructures, but also manage risks caused by increased Distributed Denial of Service (DDoS) attacks on customer-facing services and applications, mobile networks, and unsecured IoT devices.
  • In early February, NETSCOUT announced the availability of its 7000 series nGenius® Packet Flow Switches (PFS 7000 Series), nGenius Decryption Appliance (nDA), NETSCOUT™ External PowerSafe Tap (EPT) and PFS Monitor, which enable unified security and visibility to address the growing need for simplified data center security management.
  • In early February, NETSCOUT completed the acquisition of Gigavation Incorporated, a cyber security company with technology that provides security to device communication protocols, end point protection and security analytics. The technology and engineering talent will support the ongoing enhancement of the service assurance product portfolio.

Q4 FY20 Financial Results

Total revenue (GAAP) for the fourth quarter of fiscal year 2020 was $229.4 million, compared with $235.0 million in the same quarter one year ago. Non-GAAP total revenue for the fourth quarter of fiscal year 2020 was $229.4 million versus $235.2 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 fourth quarter of fiscal year 2020 was $116.5 million, which was approximately 51% of total revenue. This compares with fourth-quarter fiscal year 2019 product revenue (GAAP and non-GAAP) of $125.5 million, which was approximately 53% of total revenue.

Service revenue (GAAP) for the fourth quarter of fiscal year 2020 was $112.8 million, or approximately 49% of total revenue versus service revenue (GAAP) of $109.5 million, or approximately 47% of total revenue, for the same period one year ago. On a non-GAAP basis, service revenue for fiscal year 2020’s fourth quarter was $112.9 million, or approximately 49% of total non-GAAP revenue, versus non-GAAP service revenue of $109.8 million, or approximately 47% of total non-GAAP revenue, for the same quarter one year ago.

NETSCOUT’s income from operations (GAAP) was $12.6 million in the fourth quarter of fiscal year 2020, compared with income from operations (GAAP) of $29.2 million in the comparable quarter one year ago. Fourth-quarter fiscal year 2020 non-GAAP EBITDA from operations was $54.9 million, or 24.0% of non-GAAP quarterly revenue, which compares with $76.0 million, or 32.3% of non-GAAP quarterly revenue in the fourth quarter of fiscal year 2019. The Company’s fourth-quarter fiscal year 2020 (GAAP) operating margin was 5.5% versus 12.4% in the prior fiscal year’s fourth quarter. Fourth-quarter fiscal year 2020 non-GAAP income from operations was $48.7 million with a non-GAAP operating margin of 21.2%. This compares with fourth-quarter fiscal year 2019 non-GAAP income from operations of $68.7 million and a non-GAAP operating margin of 29.2%.

Net income (GAAP) for the fourth quarter of fiscal year 2020 was $7.3 million, or $0.10 per share (diluted) versus net income (GAAP) of $19.2 million, or $0.24 per share (diluted), for the fourth quarter of fiscal year 2019. On a non-GAAP basis, net income for the fourth quarter of fiscal year 2020 was $37.4 million, or $0.50 per share (diluted), which compares with $52.0 million, or $0.66 per share (diluted), for the fourth quarter of fiscal year 2019.

As of March 31, 2020, cash and cash equivalents, and short and long-term marketable securities were $389.1 million, compared with $346.5 million as of December 31, 2019 and $487.0 million as of March 31, 2019. During the fourth quarter of fiscal year 2020, NETSCOUT repurchased 1,951,566 shares of its common stock through its share repurchase program at an average price of $25.62 per share, totaling approximately $50.0 million in the aggregate. As of March 31, 2020, NETSCOUT had $450.0 million outstanding on its $1.0 billion revolving credit facility.

Full Year FY20 Financial Results

  • For fiscal year 2020, total revenue (GAAP) was $891.8 million and non-GAAP total revenue was $892.0 million compared with total revenue (GAAP) of $909.9 million and non-GAAP total revenue of $911.5 million for fiscal year 2019. Non-GAAP revenue for 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) in fiscal year 2020 was $438.3 million compared with $467.3 million in fiscal year 2019. Non-GAAP product revenue in fiscal year 2020 was $438.3 million compared with $467.7 million in fiscal year 2019. Non-GAAP product revenue for the HNT tools business for fiscal year 2019 was $13.4 million.
  • For fiscal year 2020, service revenue (GAAP) was $453.5 million compared with $442.6 million in fiscal years 2019. Non-GAAP service revenue in fiscal year 2020 was $453.7 million compared with $443.8 million for fiscal year 2019. The HNT tools business non-GAAP service revenue for fiscal year 2019 was $4.6 million.
  • NETSCOUT’s income from operations (GAAP) in fiscal year 2020 was $17.6 million, compared with a loss from operations of $71.6 million in fiscal year 2019. NETSCOUT’s loss from operations (GAAP) in fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. The Company’s operating margin (GAAP) in fiscal year 2020 was 2.0% versus -7.9% in fiscal year 2019. In fiscal year 2020, the Company’s non-GAAP EBITDA from operations was $189.6 million, or 21.3% of non-GAAP total revenue versus non-GAAP EBITDA from operations of $193.0 million, or 21.2% of non-GAAP total revenue, for fiscal year 2019. The Company’s non-GAAP income from operations for fiscal year 2020 was $163.3 million with a non-GAAP operating margin of 18.3% compared with non-GAAP income from operations of $161.6 million and a 17.7% non-GAAP operating margin for fiscal year 2019.
  • NETSCOUT’s net loss (GAAP) in fiscal year 2020 was $2.8 million, or a loss of $0.04 per share (diluted) compared with a net loss of $73.3 million, or a loss of $0.93 per share (diluted) in fiscal year 2019. NETSCOUT’s net loss (GAAP) in fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. Non-GAAP net income in fiscal year 2020 was $119.1 million, or $1.57 per share (diluted) versus non-GAAP net income in fiscal year 2019 of $109.2 million, or $1.38 per share (diluted).

Guidance:

Given the rapidly evolving COVID-19 situation, it is not possible, with reasonable accuracy, to estimate the impact of the pandemic on future financial performance. Therefore, the Company will defer providing fiscal year 2021 guidance until there is greater visibility on the duration, magnitude, and effects of the COVID-19 global pandemic.

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its fourth quarter and full fiscal year 2020 financial results on Thursday, May 7, 2020 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 NTCTQ420. A replay of the call will be available after 12:00 p.m. ET on May 7, 2020 for approximately one week. The number for the replay is (800) 388-5895 for U.S./Canada and (402) 220-1110 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, statements that NetScout believes that this global pandemic could accelerate certain trends such as digital transformation and cloud migration, security requirements, and 5G over the longer term; that NetScout is committed and well positioned to fulfill its purpose; that NetScout will maintain its disciplined cost and capital management approach while continuing to innovate and invest in its technology and solutions to maintain its leadership position; and that NetScout is confident that its solid balance sheet and financial position provides it with the liquidity and flexibility necessary to weather these uncertain and challenging times, 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, including the potential impact of the COVID-19 pandemic; 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 anticipated savings from any 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 Twelve Months Ended
March 31, March 31,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:
Product

$

116,538

 

$

125,474

 

$

438,341

 

$

467,289

 

Service

 

112,813

 

 

109,528

 

 

453,479

 

 

442,629

 

Total revenue

 

229,351

 

 

235,002

 

 

891,820

 

 

909,918

 

 
Cost of revenue:
Product

 

32,332

 

 

32,964

 

 

122,832

 

 

140,938

 

Service

 

30,400

 

 

25,572

 

 

119,360

 

 

113,189

 

Total cost of revenue

 

62,732

 

 

58,536

 

 

242,192

 

 

254,127

 

 
Gross profit

 

166,619

 

 

176,466

 

 

649,628

 

 

655,791

 

 
Operating expenses:
Research and development

 

45,903

 

 

42,241

 

 

188,294

 

 

203,588

 

Sales and marketing

 

62,278

 

 

67,663

 

 

276,523

 

 

291,870

 

General and administrative

 

27,558

 

 

19,431

 

 

99,994

 

 

93,572

 

Amortization of acquired intangible assets

 

16,110

 

 

16,426

 

 

64,505

 

 

74,305

 

Impairment of intangible assets

 

 

 

 

 

 

 

35,871

 

Loss on divestiture

 

 

 

295

 

 

 

 

9,472

 

Restructuring charges

 

2,208

 

 

1,179

 

 

2,674

 

 

18,693

 

 
Total operating expenses

 

154,057

 

 

147,235

 

 

631,990

 

 

727,371

 

 
Income (loss) from operations

 

12,562

 

 

29,231

 

 

17,638

 

 

(71,580

)

Interest and other expense, net

 

(3,784

)

 

(6,129

)

 

(15,714

)

 

(21,332

)

 
Income (loss) before income tax expense (benefit)

 

8,778

 

 

23,102

 

 

1,924

 

 

(92,912

)

Income tax expense (benefit)

 

1,442

 

 

3,891

 

 

4,678

 

 

(19,588

)

Net income (loss)

$

7,336

 

$

19,211

 

$

(2,754

)

$

(73,324

)

 
 
Basic net income (loss) per share

$

0.10

 

$

0.25

 

$

(0.04

)

$

(0.93

)

Diluted net income (loss) per share

$

0.10

 

$

0.24

 

$

(0.04

)

$

(0.93

)

Weighted average common shares outstanding used in computing
Net income (loss) per share – basic

 

73,293

 

 

77,705

 

 

75,162

 

 

78,617

 

Net income (loss) per share – diluted

 

74,134

 

 

78,562

 

 

75,162

 

 

78,617

 

 
 
NETSCOUT SYSTEMS, INC.
Consolidated Balance Sheets
(In thousands)
 
March 31, March 31,

 

2020

 

 

2019

 

 
Assets
Current assets:
Cash, cash equivalents and marketable securities

$

386,458

 

$

485,976

 

Accounts receivable and unbilled costs, net

 

213,514

 

 

235,318

 

Inventories

 

22,227

 

 

26,270

 

Prepaid expenses and other current assets

 

37,544

 

 

53,658

 

 
Total current assets

 

659,743

 

 

801,222

 

 
Fixed assets, net

 

57,715

 

 

58,951

 

Goodwill and intangible assets, net

 

2,307,859

 

 

2,384,603

 

Long-term marketable securities

 

2,613

 

 

1,012

 

Operating lease right-of-use assets

 

68,583

 

 

 

Other assets

 

23,990

 

 

24,206

 

 
Total assets

$

3,120,503

 

$

3,269,994

 

 
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable

$

20,004

 

$

24,582

 

Accrued compensation

 

75,632

 

 

58,501

 

Accrued other

 

22,743

 

 

24,345

 

Current portion of operating lease liabilities

 

10,337

 

 

 

Deferred revenue and customer deposits

 

270,281

 

 

272,508

 

 
Total current liabilities

 

398,997

 

 

379,936

 

 
Other long-term liabilities

 

10,039

 

 

19,493

 

Deferred tax liability

 

114,394

 

 

124,229

 

Accrued long-term retirement benefits

 

34,256

 

 

36,284

 

Long-term deferred revenue

 

104,240

 

 

94,619

 

Operating lease liabilities, net of current portion

 

70,658

 

 

 

Long-term debt

 

450,000

 

 

550,000

 

 
Total liabilities

 

1,182,584

 

 

1,204,561

 

 
Stockholders’ equity:
Common stock

 

122

 

 

120

 

Additional paid-in capital

 

2,891,553

 

 

2,828,922

 

Accumulated other comprehensive loss

 

(3,160

)

 

(2,639

)

Treasury stock, at cost

 

(1,305,935

)

 

(1,119,063

)

Retained earnings

 

355,339

 

 

358,093

 

 
Total stockholders’ equity

 

1,937,919

 

 

2,065,433

 

 
Total liabilities and stockholders’ equity

$

3,120,503

 

$

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 Twelve Months Ended

March 31,

 

December 31,

 

March 31,

 

2020

 

 

 

2019

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 
Product Revenue (GAAP)

$

116,538

 

$

125,474

 

$

143,309

 

$

438,341

 

$

467,289

 

Product deferred revenue fair value adjustment

 

 

 

 

 

 

 

 

 

391

 

Non-GAAP Product Revenue

$

116,538

 

$

125,474

 

$

143,309

 

$

438,341

 

$

467,680

 

 
Service Revenue (GAAP)

$

112,813

 

$

109,528

 

$

116,715

 

$

453,479

 

$

442,629

 

Service deferred revenue fair value adjustment

 

48

 

 

242

 

 

48

 

 

192

 

 

1,199

 

Non-GAAP Service Revenue

$

112,861

 

$

109,770

 

$

116,763

 

$

453,671

 

$

443,828

 

 
Revenue (GAAP)

$

229,351

 

$

235,002

 

$

260,024

 

$

891,820

 

$

909,918

 

Product deferred revenue fair value adjustment

 

 

 

 

 

 

 

 

 

391

 

Service deferred revenue fair value adjustment

 

48

 

 

242

 

 

48

 

 

192

 

 

1,199

 

Non-GAAP Revenue

$

229,399

 

$

235,244

 

$

260,072

 

$

892,012

 

$

911,508

 

 
Gross Profit (GAAP)

$

166,619

 

$

176,466

 

$

194,439

 

$

649,628

 

$

655,791

 

Product deferred revenue fair value adjustment

 

 

 

 

 

 

 

 

 

391

 

Service deferred revenue fair value adjustment

 

48

 

 

242

 

 

48

 

 

192

 

 

1,199

 

Share-based compensation expense (1)

 

1,416

 

 

1,540

 

 

1,506

 

 

6,843

 

 

7,422

 

Amortization of acquired intangible assets (2)

 

6,297

 

 

7,551

 

 

6,222

 

 

24,974

 

 

31,238

 

Acquisition related depreciation expense (6)

 

5

 

 

12

 

 

7

 

 

31

 

 

75

 

Transitional service agreement income (7)

 

 

 

 

 

 

 

 

 

2

 

Non-GAAP Gross Profit

$

174,385

 

$

185,811

 

$

202,222

 

$

681,668

 

$

696,118

 

 
Income (loss) from Operations (GAAP)

$

12,562

 

$

29,231

 

$

36,819

 

$

17,638

 

$

(71,580

)

Product deferred revenue fair value adjustment

 

 

 

 

 

 

 

 

 

391

 

Service deferred revenue fair value adjustment

 

48

 

 

242

 

 

48

 

 

192

 

 

1,199

 

Share-based compensation expense (1)

 

10,900

 

 

12,186

 

 

11,361

 

 

50,861

 

 

56,328

 

Amortization of acquired intangible assets (2)

 

22,407

 

 

23,977

 

 

22,342

 

 

89,479

 

 

105,543

 

Business development and integration expense (3)

 

335

 

 

488

 

 

20

 

 

373

 

 

874

 

New standard implementation expense (4)

 

(5

)

 

26

 

 

1

 

 

5

 

 

914

 

Compensation for post-combination services (5)

 

125

 

 

72

 

 

125

 

 

578

 

 

789

 

Restructuring charges

 

2,208

 

 

1,179

 

 

193

 

 

2,674

 

 

18,693

 

Impairment of intangible assets

 

 

 

 

 

 

 

 

 

35,871

 

Acquisition related depreciation expense (6)

 

61

 

 

121

 

 

61

 

 

312

 

 

905

 

Loss on divestiture

 

 

 

295

 

 

 

 

 

 

9,472

 

Transitional service agreement income (7)

 

53

 

 

912

 

 

(25

)

 

1,212

 

 

2,186

 

Non-GAAP Income from Operations

$

48,694

 

$

68,729

 

$

70,945

 

$

163,324

 

$

161,585

 

 
Net Income (loss) (GAAP)

$

7,336

 

$

19,211

 

$

36,725

 

$

(2,754

)

$

(73,324

)

Product deferred revenue fair value adjustment

 

 

 

 

 

 

 

 

 

391

 

Service deferred revenue fair value adjustment

 

48

 

 

242

 

 

48

 

 

192

 

 

1,199

 

Share-based compensation expense (1)

 

10,900

 

 

12,186

 

 

11,361

 

 

50,861

 

 

56,328

 

Amortization of acquired intangible assets (2)

 

22,407

 

 

23,977

 

 

22,342

 

 

89,479

 

 

105,543

 

Business development and integration expense (3)

 

335

 

 

488

 

 

20

 

 

373

 

 

874

 

New standard implementation expense (4)

 

(5

)

 

26

 

 

1

 

 

5

 

 

914

 

Compensation for post-combination services (5)

 

125

 

 

72

 

 

125

 

 

578

 

 

789

 

Restructuring charges

 

2,208

 

 

1,179

 

 

193

 

 

2,674

 

 

18,693

 

Impairment of intangible assets

 

 

 

 

 

 

 

 

 

35,871

 

Acquisition related depreciation expense (6)

 

61

 

 

121

 

 

61

 

 

312

 

 

905

 

Loss on divestiture

 

 

 

295

 

 

 

 

 

 

9,472

 

Transitional service agreement income (7)

 

 

 

 

 

 

 

 

 

(45

)

Change in contingent consideration

 

245

 

 

1,495

 

 

 

 

762

 

 

1,495

 

Income tax adjustments (8)

 

(6,239

)

 

(7,314

)

 

(16,182

)

 

(23,415

)

 

(49,877

)

Non-GAAP Net Income

$

37,421

 

$

51,978

 

$

54,694

 

$

119,067

 

$

109,228

 

 
Diluted Net Income (loss) Per Share (GAAP)

$

0.10

 

$

0.24

 

$

0.49

 

$

(0.04

)

$

(0.93

)

Share impact of non-GAAP adjustments identified above

 

0.40

 

 

0.42

 

 

0.24

 

 

1.61

 

 

2.31

 

Non-GAAP Diluted Net Income Per Share

$

0.50

 

$

0.66

 

$

0.73

 

$

1.57

 

$

1.38

 

 
Shares used in computing non-GAAP diluted net income per share

 

74,134

 

 

78,562

 

 

74,700

 

 

75,837

 

 

79,323

 

 
 
 

 

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 Twelve Months Ended
March 31, December 31, March 31,

 

2020

 

 

 

2019

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

(1

)

Share-based compensation expense included in these amounts

is as follows:
Cost of product revenue

$

226

 

$

275

 

$

231

 

$

1,069

 

$

1,463

 

Cost of service revenue

 

1,190

 

 

1,265

 

 

1,275

 

 

5,774

 

 

5,959

 

Research and development

 

3,435

 

 

3,777

 

 

3,437

 

 

15,511

 

 

17,321

 

Sales and marketing

 

3,752

 

 

3,872

 

 

3,910

 

 

17,085

 

 

18,923

 

General and administrative

 

2,297

 

 

2,997

 

 

2,508

 

 

11,422

 

 

12,662

 

Total share-based compensation expense

$

10,900

 

$

12,186

 

$

11,361

 

$

50,861

 

$

56,328

 

 

(2

)

Amortization expense related to acquired software and product

technology, tradenames, customer relationships included in these
amounts is as follows:
Cost of product revenue

$

6,297

 

$

7,551

 

$

6,222

 

$

24,974

 

$

31,238

 

Operating expenses

 

16,110

 

 

16,426

 

 

16,120

 

 

64,505

 

 

74,305

 

Total amortization expense

$

22,407

 

$

23,977

 

$

22,342

 

$

89,479

 

$

105,543

 

 

(3

)

Business development and integration expense included in

these amounts is as follows:
Research and development

$

 

$

 

$

 

$

43

 

$

356

 

General and administrative

 

335

 

 

488

 

 

20

 

 

330

 

 

518

 

Total business development and integration expense

$

335

 

$

488

 

$

20

 

$

373

 

$

874

 

 

(4

)

New standard implementation expense included in these

amounts is as follows:
General and administrative

$

(5

)

$

26

 

$

1

 

$

5

 

$

914

 

Total new standard implementation expense

$

(5

)

$

26

 

$

1

 

$

5

 

$

914

 

 

 

(5

 

)

Compensation for post-combination services included in these

amounts is as follows:
Research and development

$

125

 

$

85

 

$

125

 

$

578

 

$

705

 

Sales and marketing

 

 

 

 

 

 

 

 

 

19

 

General and administrative

 

 

 

(13

)

 

 

 

 

 

65

 

Total compensation for post-combination services

$

125

 

$

72

 

$

125

 

$

578

 

$

789

 

 

(6

)

Acquisition related depreciation expense included in these

amounts is as follows:
Cost of product revenue

$

3

 

$

9

 

$

4

 

$

21

 

$

43

 

Cost of service revenue

 

2

 

 

3

 

 

3

 

 

10

 

 

32

 

Research and development

 

42

 

 

84

 

 

43

 

 

216

 

 

588

 

Sales and marketing

 

9

 

 

10

 

 

8

 

 

36

 

 

77

 

General and administrative

 

5

 

 

15

 

 

3

 

 

29

 

 

165

 

Total acquisition related depreciation expense

$

61

 

$

121

 

$

61

 

$

312

 

$

905

 

 

(7

)

Transitional service agreement income included in these

amounts is as follows:
Cost of service revenue

$

 

$

 

$

 

$

 

$

2

 

Research and development

 

6

 

 

101

 

 

(25

)

 

93

 

 

228

 

Sales and marketing

 

8

 

 

124

 

 

 

 

176

 

 

302

 

General and administrative

 

39

 

 

687

 

 

 

 

943

 

 

1,654

 

Other Income (expense), net

 

(53

)

 

(912

)

 

25

 

 

(1,212

)

 

(2,231

)

Total transitional service agreement income

$

 

$

 

$

 

$

 

$

(45

)

 

(8

)

Total income tax adjustment included in these

amounts is as follows:
Tax effect of non-GAAP adjustments above

$

(6,239

)

$

(7,314

)

$

(16,182

)

$

(23,415

)

$

(49,877

)

Total income tax adjustments

$

(6,239

)

$

(7,314

)

$

(16,182

)

$

(23,415

)

$

(49,877

)

 
 

Contacts

Investors
Anthony Piazza

Vice President, Corporate Finance

978-614-4286

IR@netscout.com

Media
Maribel Lopez

Manager, Marketing & Corporate Communications

781-362-4330

Maribel.Lopez@netscout.com

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