NetScout Systems Reports Financial Results for Fourth Quarter & Fiscal Year End 2013

  NetScout Systems Reports Financial Results for Fourth Quarter & Fiscal Year
  End 2013

          FY 2013 Revenue Up 14% Year-over-Year (GAAP and Non-GAAP)

         FY 2013 Net Income Up Year-over-Year: 25% GAAP; 19% Non-GAAP

Business Wire

WESTFORD, Mass. -- April 25, 2013

NetScout Systems, Inc. (NASDAQ: NTCT):

                           FY 2013               Q4 FY 2013
                             GAAP     Non-GAAP   GAAP    Non-GAAP
Revenue (in millions)        $350.6   $351.8     $98.1   $98.6
Net income (in millions)     $40.6      $56.0        $14.6     $18.1
Net income per share       $0.96    $1.32      $0.34   $0.43
                                                               

NetScout Systems, Inc. (NASDAQ: NTCT), an industry leader for advanced
application and service assurance solutions, today announced financial results
for its fourth quarter and fiscal year ended March 31, 2013.

“We are very pleased with our fiscal year 2013 results, which came in at the
high end of both the revenue and the non-GAAP EPS guidance we provided one
year ago,” said Anil Singhal, President and CEO of NetScout Systems. “Over the
past two years, we have worked to reach our growth milestones passing both
$300 million in revenue in FY ’12 and then $350 million in revenue in FY ‘13.
This year, as our non-GAAP revenue guidance range of $385 million to $400
million indicates, we are approaching another revenue growth milestone for the
Company.”

“Our customers continue to validate our Unified Service Delivery Management
strategy. We completed two technology acquisitions during this fiscal year,
furthering our innovative approach in enhancing the value of our product
line,” added Mr. Singhal. “We acquired voice technology that will be released
over the coming year, providing our service provider customers with a complete
solution supporting legacy, Voice over IP, and important next generation
(VoLTE) infrastructures. We also added a scalable packet flow switch to our
switch portfolio that has quickly gained market acceptance. In addition, we
will be unveiling exciting new product capabilities in the coming months that
we believe will provide the market with a differentiated approach to
traditional Application Performance Management (APM).”

Total GAAP revenue for the fourth quarter was $98.1 million; non-GAAP revenue
was $98.6 million. A reconciliation of GAAP and non-GAAP results is included
in the attached financial tables.

Product revenue for the fourth quarter, on a GAAP and non-GAAP basis was $59.6
million. Service revenue on a GAAP basis was $38.5 million and non-GAAP
service revenue was $39.0 million.

GAAP net income for the fourth quarter was $14.6 million, or $0.34 per diluted
share. GAAP income from operations was $21.9 million. On a non-GAAP basis, net
income for the quarter was $18.1 million, or $0.43 per diluted share, and
non-GAAP income from operations was $27.6 million.

For the fiscal year ended March 31, 2013, NetScout reported total GAAP revenue
of $350.6 million and non-GAAP revenue was $351.8 million. GAAP net income for
the fiscal year was $40.6 million, or $0.96 per diluted share. GAAP income
from operations was $64.5 million. Non-GAAP net income for the fiscal year was
$56.0 million, or $1.32 per diluted share, and non-GAAP income from operations
was $88.6 million. A reconciliation of GAAP and non-GAAP results is included
in the attached financial tables.

Fiscal year 2013 GAAP and non-GAAP revenue results were within the range of
original guidance issued a year ago of $340 million to $355 million. Fiscal
year 2013 GAAP net income per share results were at the low end of the
original guidance range of $0.96 to $1.05. Non-GAAP net income per share
results were above the original guidance range of $1.21 to $1.30. In January
2013, the company narrowed the revenue and net income per share guidance for
fiscal year 2013. Fiscal year 2013 revenue results on a GAAP basis were at the
high end of the narrowed range of $346 million to $351 million, while non-GAAP
revenue was also at the high end of the range of $347 million to $352 million.
Fiscal year 2013 GAAP and non-GAAP net income per diluted share results were
at the high end of the narrowed guidance ranges. GAAP net income per diluted
share range was narrowed to be in the range of $0.92 to $0.96. The non-GAAP
net income per diluted share was raised to be between $1.28 and $1.32.

Financial Highlights:

For the fourth quarter:

  *GAAP and non-GAAP revenue increased 10% year-over-year and increased 7%
    sequentially.
  *GAAP and non-GAAP product revenue increased 9% year-over-year and
    increased 13% sequentially.
  *GAAP service revenue increased 10% year-over-year and decreased 1%
    sequentially. Non-GAAP service revenue increased 11% year-over-year and
    decreased 1% sequentially.
  *GAAP operating margin was 22%, down one point from 23% a year ago and up
    three points sequentially. Non-GAAP operating margin was 28%, down one
    point from 29% a year ago and up two points sequentially.

For the 2013 fiscal year:

  *GAAP and non-GAAP revenue increased 14% year-over-year.
  *GAAP and non-GAAP product revenue increased 18% year-over-year.
  *GAAP service revenue increased 8% year-over-year. Non-GAAP service revenue
    increased 9% year-over-year.
  *GAAP operating margin was 18%, up from 17% in fiscal year 2012. Non-GAAP
    operating margin was 25%, up from 24% in fiscal year 2012.
  *As of March 31, 2013 cash and cash equivalents and short and long-term
    marketable securities were $154.1 million, up $17.4 million from $136.7
    million as of the end of the prior quarter. Year-over-year, cash and
    securities decreased $59.4 million due to debt retirement of $62.0
    million, acquisition and stock buyback activity.

Guidance:

For fiscal year 2014, we expect GAAP revenue to be in the range of $384
million to $399 million and non-GAAP revenue to be in the range of $385
million to $400 million. GAAP net income per diluted share is expected to be
in the range of $1.06 to $1.16 and non-GAAP net income per diluted share
between $1.40 and $1.50.

For fiscal year 2014, the non-GAAP net income per diluted share expectation
excludes the acquisition accounting adjustment to fair value of approximately
$0.8 million for deferred revenue, forecasted share-based compensation
expenses of approximately $13.0 million, estimated amortization of acquired
intangible assets of approximately $6.7 million, compensation for post
combination services of approximately $2.8 million, and the related impact of
these adjustments on the provision for income taxes of $8.9 million.

CONFERENCE CALL INSTRUCTIONS:

NetScout invites shareholders to listen to its conference call today at 8:30
a.m. ET, which will be webcast live through NetScout’s website at
http://ir.netscout.com/phoenix.zhtml?c=92658&p=irol-irhome. Alternatively,
people can listen to the call by dialing(866)701-8242 for U.S./Canada and
(763)416-6912 for international callers and using conference ID: 36424445. A
replay of the call will be available after 11:30 a.m. ET on April 25, 2013 for
approximately one week. The number for the replay is (855)859-2056 for
U.S./Canada and (404)537-3406 for international callers. The conference ID is:
36424445.

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
revenue, non-GAAP net income and non-GAAP net income per diluted share.
Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back
revenue related to deferred revenue revaluation. Non-GAAP net income includes
the foregoing adjustment and also removes inventory fair value adjustments,
expenses related to the amortization of acquired intangible assets,
stock-based compensation, restructuring, certain expenses relating to
acquisitions including compensation for post-combination services and business
development charges and loss on early extinguishment of debt, 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.

These non-GAAP measures are not in accordance with GAAP, should not be
considered an alternative for measures prepared in accordance with GAAP
(revenue, net income and diluted net income per share), and may have
limitations in that 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 would 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 provide 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 future periods.

About NetScout Systems, Inc.

NetScout Systems, Inc. (NASDAQ: NTCT) is the market leader in Unified Service
Delivery Management enabling comprehensive end-to-end network and application
assurance. For 28 years, NetScout has delivered breakthrough packet-flow
technology that provides trusted and comprehensive real-time network and
application performance intelligence enabling unified assurance of the
network, applications and users. These solutions enable IT staff to predict,
preempt and resolve network and service delivery problems while facilitating
the optimization and capacity planning of the network infrastructure. NetScout
nGenius^® and Sniffer^® solutions are deployed at more than 20,000 of the
world’s largest enterprises, government agencies, and more than 148 service
providers, on over one million physical and 2,000 virtual network segments to
assure the network, applications, and service delivery to their users and
customers. For more information about NetScout go to www.netscout.com.

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, as
amended, and other federal securities laws. Investors are cautioned that
statements in this press release, which are not strictly historical
statements, including without limitation, our financial guidance for fiscal
2014, 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 slowdowns
or downturns in economic conditions generally and in the market for advanced
network and service assurance solutions specifically, NetScout’s relationships
with strategic partners, dependence upon broad-based acceptance of NetScout’s
network performance management solutions, NetScout’s ability to achieve and
maintain a high rate of growth, introduction and market acceptance of new
products and product enhancements, the ability of NetScout to take advantage
of service provider opportunities, competitive pricing pressures, reliance on
sole source suppliers, successful expansion and management of direct and
indirect distribution channels and dependence on proprietary technology and
the ability of NetScout to successfully integrate Psytechnics, Fox Replay,
Simena, Accanto Systems and ONPATH Technologies, and achieve operational
efficiencies. For a more detailed description of the risk factors associated
with NetScout, please refer to NetScout’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2012 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.

©2013 NetScout Systems, Inc. All rights reserved. NetScout and the NetScout
logo and nGenius are registered trademarks of NetScout Systems, Inc.

NetScout Systems, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
                                                            
                           Three Months Ended        Twelve Months Ended
                           March 31,                 March 31,
                           2013         2012         2013          2012
Revenue:
    Product                $ 59,649     $ 54,525     $ 198,749     $ 168,141
    Service                 38,428     34,937     151,801     140,538 
        Total revenue       98,077     89,462     350,550     308,679 
                                                                   
Cost of revenue:
    Product                  13,170       11,832       45,752        39,271
    Service                 7,870      7,128      28,256      26,401  
        Total cost of       21,040     18,960     74,008      65,672  
        revenue
                                                                   
Gross profit                77,037     70,502     276,542     243,007 
                                                                   
Operating expenses:
    Research and             16,916       13,405       61,546        49,478
    development
    Sales and marketing      29,810       28,480       116,807       109,624
    General and              7,647        7,353        29,718        27,488
    administrative
    Amortization of
    acquired intangible      800          590          2,877         2,131
    assets
    Restructuring           -          231        1,065       603     
    charges
        Total operating     55,173     50,059     212,013     189,324 
        expenses
                                                                   
Income from operations       21,864       20,443       64,529        53,683
Interest and other          (217   )    (323   )    (793    )    (2,765  )
expense, net
                                                                   
Income before income tax     21,647       20,120       63,736        50,918
expense
Income tax expense          7,094      7,173      23,127      18,490  
Net income                 $ 14,553    $ 12,947    $ 40,609     $ 32,428  
                                                                   
                                                                   
Basic net income per       $ 0.35       $ 0.31       $ 0.97        $ 0.77
share
Diluted net income per     $ 0.34       $ 0.30       $ 0.96        $ 0.76
share
Weighted average common
shares outstanding used
in computing:
    Net income per share     41,517       41,711       41,665        42,035
    - basic
    Net income per share     42,199       42,530       42,322        42,750
    - diluted
                                                                   

NetScout Systems, Inc.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial
Measures
(In thousands, except per share data)
                                                             
                           Three Months Ended        Twelve Months Ended
                           March 31,                 March 31,
                           2013         2012         2013          2012
                                                                   
GAAP Revenue               $ 98,077     $ 89,462     $ 350,550     $ 308,679
Deferred revenue fair       544        154        1,215       312     
value adjustment
Non-GAAP Revenue           $ 98,621    $ 89,616    $ 351,765    $ 308,991 
                                                                   
GAAP Gross profit          $ 77,037     $ 70,502     $ 276,542     $ 243,007
Deferred revenue fair        544          154          1,215         312
value adjustment
Inventory fair value         204          -            453           -
adjustment
Shared-based                 152          121          577           419
compensation expense (1)
Amortization of acquired     686          1,239        4,547         4,651
intangible assets (2)
Business development and     -            -            -             10
integration expense (3)
Compensation for post       7          -          14          -       
combination services (4)
Non-GAAP Gross profit      $ 78,630    $ 72,016    $ 283,348    $ 248,399 
                                                                   
GAAP Income from           $ 21,864     $ 20,443     $ 64,529      $ 53,683
operations
Deferred revenue fair        544          154          1,215         312
value adjustment
Inventory fair value         204          -            453           -
adjustment
Shared-based                 2,337        2,585        9,580         8,702
compensation expense (1)
Amortization of acquired     1,486        1,829        7,424         6,782
intangible assets (2)
Business development and     244          462          1,618         4,347
integration expense (3)
Compensation for post        902          270          2,721         438
combination services (4)
Restructuring charges       -          231        1,065       603     
Non-GAAP Income from       $ 27,581    $ 25,974    $ 88,605     $ 74,867  
operations
                                                                   
GAAP Net income            $ 14,553     $ 12,947     $ 40,609      $ 32,428
Deferred revenue fair        544          154          1,215         312
value adjustment
Inventory fair value         204          -            453           -
adjustment
Shared-based                 2,337        2,585        9,580         8,702
compensation expense (1)
Amortization of acquired     1,486        1,829        7,424         6,782
intangible assets (2)
Business development and     244          462          1,618         4,715
integration expense (3)
Compensation for post        902          270          2,721         438
combination services (4)
Restructuring charges        -            231          1,065         603
Loss on extinguishment       -            -            -             690
of debt (5)
Income tax adjustments      (2,174 )    (2,102 )    (8,671  )    (7,700  )
(6)
Non-GAAP Net income        $ 18,096    $ 16,376    $ 56,014     $ 46,970  
                                                                   
GAAP Diluted Net income    $ 0.34       $ 0.30       $ 0.96        $ 0.76
per share
Share impact of non-GAAP
adjustments identified      0.09       0.09       0.36        0.34    
above
Non-GAAP Diluted net       $ 0.43      $ 0.39      $ 1.32       $ 1.10    
income per share
                                                                   
Shares used in computing
non-GAAP diluted net         42,199       42,530       42,322        42,750
income per share
                                                                   
                                                                   
     Share-based
     compensation
(1 ) expense included in
     these amounts is as
     follows:
         Cost of product   $ 59         $ 55         $ 235         $ 192
         revenue
         Cost of service     93           66           342           227
         revenue
         Research and        780          784          2,944         2,486
         development
         Sales and           734          900          3,035         3,052
         marketing
         General and        671        780        3,024       2,745   
         administrative
         Total
         share-based       $ 2,337     $ 2,585     $ 9,580      $ 8,702   
         compensation
         expense
                                                                   
                                                                   
     Amortization
     expense related to
     acquired software
(2 ) and product
     technology included
     in these amounts is
     as follows:
         Cost of product   $ 686        $ 1,239      $ 4,547       $ 4,651
         revenue
         Operating          800        590        2,877       2,131   
         expenses
         Total
         amortization      $ 1,486     $ 1,829     $ 7,424      $ 6,782   
         expense
                                                                   
                                                                   
     Business
     development and
(3 ) integration expense
     included in these
     amounts is as
     follows:
         Cost of service   $ -          $ -          $ -           $ 10
         revenue
         Research and        -            134          15            1,545
         development
         Sales and           10           41           10            346
         marketing
         General and         234          287          1,593         2,446
         administrative
         Other income       -          -          -           368     
         (expense), net
         Total business
         development and   $ 244       $ 462       $ 1,618      $ 4,715   
         integration
         expense
                                                                   
                                                                   
     Compensation for
     post combination
(4 ) services included
     in these amounts is
     as follows:
         Cost of product     7            -            10            -
         revenue
         Cost of service     -            -            4             -
         revenue
         Research and        467          270          1,670         438
         development
         Sales and           39           -            64            -
         marketing
         General and        389        -          973         -       
         administrative
         Total
         compensation
         for post          $ 902       $ 270       $ 2,721      $ 438     
         combination
         services
                                                                   
                                                                   
     Loss on
     extinguishment of
(5 ) debt included in                                           
     this amount is as
     follows:
         Interest and
         other income      $ -         $ -         $ -          $ 690     
         (expense), net
                                                                   
                                                                   
     Total income tax
(6 ) adjustment is as
     follows:
         Tax effect of
         non-GAAP          $ (2,174 )   $ (2,102 )   $ (9,149  )   $ (8,452  )
         adjustments
         above at 38%
         Discrete tax       -          -          478         752     
         adjustment
         Total income      $ (2,174 )   $ (2,102 )   $ (8,671  )   $ (7,700  )
         tax adjustments
                                                                   

NetScout Systems, Inc.
Consolidated Balance Sheets
(In thousands)
                                                              
                                                   March 31,     March 31,
                                                   2013          2012
                                                                 
Assets
Current assets:
Cash, cash equivalents and marketable securities   $ 137,268     $ 196,872
Accounts receivable, net                             73,900        69,795
Inventories                                          7,563         8,021
Prepaid expenses and other current assets           18,581      14,999  
                                                                 
Total current assets                                 237,312       289,687
                                                                 
Fixed assets, net                                    19,678        16,457
Goodwill and intangible assets, net                  266,280       225,069
Deferred income taxes                                9,211         17,892
Long-term marketable securities                      16,823        16,644
Other assets                                        2,872       2,008   
                                                                 
Total assets                                       $ 552,176    $ 567,757 
                                                                 
                                                                 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                   $ 10,161      $ 7,539
Accrued compensation                                 31,585        23,050
Accrued other                                        10,916        10,009
Deferred revenue                                    95,055      93,493  
                                                                 
Total current liabilities                            147,717       134,091
                                                                 
Deferred tax liability                               941           1,410
Other long-term liabilities                          3,951         7,175
Accrued long-term retirement benefits                1,757         1,990
Long-term deferred revenue                           25,907        18,722
Long-term debt                                      -           62,000  
                                                                 
Total liabilities                                   180,273     225,388 
                                                                 
Stockholders' equity:
Common stock                                         49            48
Additional paid-in capital                           253,202       237,289
Accumulated other comprehensive income               671           212
Treasury stock, at cost                              (83,480 )     (56,032 )
Retained earnings                                   201,461     160,852 
                                                                 
Total stockholders' equity                          371,903     342,369 
                                                                 
Total liabilities and stockholders' equity         $ 552,176    $ 567,757 

Contact:

NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com
 
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