NTCT
$32.10
Netscout Systems
$.44
1.39%
Earnings Details
3rd Quarter December 2022
Thursday, January 26, 2023 7:30:00 AM
Tweet Share Watch
Summary

NetScout Systems Raises Guidance

Netscout Systems (NTCT) reported 3rd Quarter December 2022 earnings of $0.87 per share on revenue of $269.5 million. The consensus earnings estimate was $0.53 per share on revenue of $242.7 million. Revenue grew 2.8% on a year-over-year basis.

The company said it expects fiscal 2023 non-GAAP earnings of $2.06 to $2.10 per share on revenue of $905.0 million to $915.0 million. The company's previous guidance was earnings of $1.97 to $2.03 per share on revenue of $895.0 million to $925.0 million and the current consensus earnings estimate is $2.00 per share on revenue of $911.39 million for the year ending March 31, 2023.

NetScout Systems, Inc designs, develops, manufactures, markets, licenses, sells and supports application and network performance management and service assurance solutions.

Results
Reported Earnings
$0.87
Earnings Whisper
-
Consensus Estimate
$0.53
Reported Revenue
$269.5 Mil
Revenue Estimate
$242.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NETSCOUT Reports Third Quarter Fiscal Year 2023 Financial Results

Delivers Solid Financial Performance and Updates FY23 Financial Outlook

WESTFORD, Mass.--(BUSINESS WIRE)--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of cybersecurity, service assurance, and business analytics solutions, today announced financial results for its third quarter ended December 31, 2022.

“We advanced our strategic objectives and delivered solid financial results in the third quarter,” commented Anil Singhal, NETSCOUT’s president and chief executive officer. “Strong service assurance performance, supported by the acceleration of service provider orders previously forecast to occur in our fourth quarter, drove higher quarterly sales, margins, and profitability year over year. With this increased visibility, we are narrowing our revenue range, and increasing our EPS ranges for fiscal year 2023.”

Singhal added, “We continue to play a mission-critical role for organizations around the globe. As ‘Guardians of the Connected World,’ we provide our customers with what we believe is unparalleled visibility into the performance and security of their digital operations through our integrated platform. This allows our customers to better navigate and capitalize on the opportunities and challenges of today’s increasingly complex digital world, including the rise of 5G networks, digital transformation through cloud migration, and expanding cybersecurity threat landscape. Looking ahead, as we continue to closely monitor the dynamic macro environment, we believe that we are well-positioned for the future and remain focused on achieving our long-term objectives.”

Q3 FY23 Financial Results

Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2023 was $269.5 million, compared with $262.2 million (GAAP and non-GAAP) in the third quarter of fiscal year 2022. A reconciliation of GAAP and non-GAAP results is included in the financial tables below.

Product revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2023 was $149.5 million, or approximately 55% of total revenue in the period. This compares with product revenue (GAAP and non-GAAP) of $144.4 million in the third quarter of fiscal year 2022, which was approximately 55% of total revenue in the period.

Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2023 was $120.1 million, or approximately 45% of total revenue in the period. This compares with service revenue (GAAP and non-GAAP) of $117.8 million in the third quarter of fiscal year 2022, which was approximately 45% of total revenue for the period.

NETSCOUT’s income from operations (GAAP) was $63.8 million in the third quarter of fiscal year 2023, compared with $55.5 million in the third quarter of fiscal year 2022. Non-GAAP EBITDA from operations in the third quarter of fiscal year 2023 was $100.9 million, or 37.4% of non-GAAP quarterly revenue for the period. This compares to non-GAAP EBITDA from operations of $92.6 million in the third quarter of fiscal year 2022, or 35.3% of non-GAAP quarterly revenue for the period. The Company’s operating margin (GAAP) was 23.7% in the third quarter of fiscal year 2023, versus 21.2% in the same period of fiscal year 2022. Non-GAAP income from operations was $95.6 million with a non-GAAP operating margin of 35.5% in the third quarter of fiscal year 2023. This compares to non-GAAP income from operations of $87.2 million and a non-GAAP operating margin of 33.2% in the third quarter of fiscal year 2022.

Net income (GAAP) for the third quarter of fiscal year 2023 was $52.6 million, or $0.72 per share (diluted), versus $47.7 million, or $0.64 per share (diluted), for the third quarter of fiscal year 2022. On a non-GAAP basis, net income for the third quarter of fiscal year 2023 was $73.0 million, or $1.00 per share (diluted), compared with $66.5 million, or $0.89 per share (diluted), for the third quarter of fiscal year 2022.

As of December 31, 2022, cash, cash equivalents, and short- and long-term marketable securities were $416.2 million, compared with $703.2 million as of March 31, 2022, and $553.5 million as of December 31, 2021. The change in cash, cash equivalents, and marketable securities since March 31, 2022, was primarily driven by two factors. First, NETSCOUT entered into an accelerated share repurchase agreement (the “ASR agreement”) in the first quarter of fiscal year 2023 to repurchase $150 million of the Company’s common stock. The ASR agreement concluded in the third quarter of fiscal year 2023, resulting in a total repurchase of approximately 4.6 million shares at a weighted average price per share of $32.97. Second, NETSCOUT repaid $150 million of its outstanding debt balance under its revolving credit facility during the first quarter of fiscal year 2023. The Company’s outstanding debt balance under its revolving credit facility was $200 million as of December 31, 2022. The Company’s $800 million revolving credit facility will expire in July 2026.

Nine-Months FY23 Financial Results

  • Total revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2023, was $706.4 million, compared with total revenue (GAAP and non-GAAP) of $664.4 million in the first nine months of fiscal year 2022. A reconciliation of GAAP and non-GAAP results is included in the financial tables below.
  • Product revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2023 was $359.5 million, compared with $328.0 million in the first nine months of fiscal year 2022.
  • Service revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2023 was $346.9 million, compared with $336.4 million in the first nine months of fiscal year 2022.
  • NETSCOUT’s income from operations (GAAP) for the first nine months of fiscal year 2023 was $76.0 million, compared with $57.0 million in the first nine months of fiscal year 2022. The Company’s operating margin (GAAP) for the first nine months of fiscal year 2023 was 10.8%, versus 8.6% in the first nine months of fiscal year 2022. The Company’s non-GAAP EBITDA from operations for the first nine months of fiscal year 2023 was $189.8 million, or 26.9% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $173.2 million, or 26.1% of non-GAAP total revenue, in the first nine months of fiscal year 2022. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2023 was $174.1 million with a non-GAAP operating margin of 24.6%, compared with non-GAAP income from operations of $156.3 million and a non-GAAP operating margin of 23.5% for the first nine months of fiscal year 2022.
  • For the first nine months of fiscal year 2023, NETSCOUT’s net income (GAAP) was $62.9 million, or $0.86 per share (diluted), compared with a net income (GAAP) of $44.3 million, or $0.59 per share (diluted), in the first nine months of fiscal year 2022. Non-GAAP net income for the first nine months of fiscal year 2023 was $132.4 million, or $1.81 per share (diluted), compared with non-GAAP net income of $116.8 million, or $1.56 per share (diluted), for the first nine months of fiscal year 2022.

Financial Outlook

Upon review of its year-to-date performance and the future timing and delivery of orders, NETSCOUT has updated its outlook for fiscal year 2023. This updated outlook reflects a narrower range for the Company’s total revenue (GAAP and non-GAAP) results in fiscal year 2023 while maintaining the same revenue midpoint of its prior forecast. In addition, the Company is raising the ranges of its GAAP and non-GAAP net income per share (diluted) outlook for fiscal year 2023. NETSCOUT’s financial outlook for fiscal year 2023 is now as follows:

  • Revenue (GAAP and non-GAAP) is expected to be in the range of $905 million to $915 million, compared to the previous range of $895 million to $925 million.
  • GAAP net income per share (diluted) is expected to be in the range of $0.71 to $0.75, compared to the previous range of $0.62 to $0.68. Non-GAAP net income per share (diluted) is expected to be in the range of $2.06 to $2.10, compared to the previous range of $1.97 to $2.03.
  • A reconciliation between GAAP and non-GAAP numbers for NETSCOUT’s fiscal year 2023 outlook is included in the financial tables below.

Recent Developments and Highlights

  • In January 2023, NETSCOUT announced the addition of Shannon Nash and Marlene Pelage to the NETSCOUT Board of Directors. Ms. Nash and Ms. Pelage are expected to bring valuable expertise to the Board including strategic experience, insights from their international work, and strong financial acumen as qualified financial experts. With the addition of Ms. Nash and Ms. Pelage, NETSCOUT’s Board of Directors is now composed of 11 directors.
  • During the third quarter of fiscal year 2023, NETSCOUT was awarded two prestigious awards in recognition of both its service assurance and cybersecurity solutions. First, NETSCOUT received Frost & Sullivan’s 2022 Global Company of the Year Award for its wireless network monitoring and service assurance solutions. NETSCOUT received this award based on its compelling customer value proposition, customer experience, strong brand equity, and overall solid performance. Second, NETSCOUT’s Arbor Edge Defense solution received Security Today’s 2022 CyberSecured Award for Network Security. This recognition was based on the Arbor Edge Defense solution’s ability to effectively stop both inbound and outbound threats, and in doing so, to serve as both the first and last line of defense for organizations.
  • In November 2022, NETSCOUT announced the successful interoperability of Omnis™ Cyber Intelligence with Amazon Security Lake, powered by Amazon Web Services, to deliver advanced network detection and response insights. With comprehensive network visibility, contextual cybersecurity investigation, and smart detection, Omnis Cyber Intelligence enhances the quality of Amazon Security Lake, to help companies better manage threats across complex hybrid-cloud infrastructures.
  • In November 2022, NETSCOUT announced that it launched the DPI Consortium, a non-profit organization established to improve patent quality and deter frivolous patent claims. The consortium provides resources to support and advance the field of Deep Packet Inspection (DPI) technology by making historical research and development resources available to all.

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2023 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, investors can listen to the call by dialing (785) 424-1677. The conference call ID is NTCTQ323. A replay of the call will be available after 12:00 p.m. ET today, for approximately one week. The number for the replay is (800) 839-1192 for U.S./Canada callers and (402) 220-0402 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 gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP diluted net income per share and non-GAAP earnings before interest and other expense, income taxes, depreciation, and amortization (EBITDA) from operations. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets, share based compensation, and acquisition-related depreciation. Non-GAAP income from operations includes the aforementioned adjustments and also removes business development and integration expense, compensation for post-combination services, restructuring charges, legal expenses related to civil judgements, and transitional service agreement expenses. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes loss on extinguishment of debt and change in fair value of contingent consideration, net of related income tax effects. Non-GAAP diluted net income per share includes the foregoing adjustments related to non-GAAP net income. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense. 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.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (gross profit, operating margin, net income, and diluted net income per share), and may have limitations because they do not reflect all 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) protects the connected world from cyberattacks and performance disruptions through advanced network detection and response and pervasive network visibility. Powered by our pioneering deep packet inspection at scale, we serve the world’s largest enterprises, service providers, and public sector organizations. Learn more at www.netscout.com or follow @NETSCOUT on LinkedIn, Twitter, or Facebook.

Safe Harbor

Certain information provided in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Examples of forward-looking statements include statements regarding our future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as “may”, “will”, “anticipate”, “expect”, “believe”, “estimate”, “intend”, “plan”, “should”, “seek”, or other comparable terms. Investors are cautioned that such forward-looking statements in this press release including, without limitation, statements regarding NETSCOUT’s outlook for fiscal year 2023, that NETSCOUT continues to play a mission-critical role for organizations around the globe, that as “Guardians of the Connected World,” NETSCOUT provides customers with what they believe to be unparalleled visibility into the performance of and security for their digital operations, through our integrated platform, that this allows its customers to better navigate and capitalize on the opportunities and challenges of today’s increasingly complex digital world, including the rise of 5G networks, digital transformation through cloud migration, and expanding cybersecurity threat landscape, and that NETSCOUT is closely monitoring today’s dynamic macro environment, believes that it is well-positioned for the future and remains focused on achieving its long-term objectives, as well as statements regarding product releases, updates, and functionality all constitute forward looking statements that involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors. Such factors include, but are not limited to, COVID-19 related impacts, 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 the Company has, and their strategic response to the Company’s products; the Company’s 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. The risks included above are not exhaustive. We caution readers not to place undue reliance on any forward-looking statements included in this press release which speak only as to the date of this press release. We undertake no responsibility to update or revise any forward-looking statements, except as required by law. 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, 2022, filed 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.

©2023 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,

2022

 

2021

 

2022

 

2021

Revenue:
Product

$

149,452

 

$

144,420

$

359,519

 

$

327,989

 

Service

 

120,092

 

 

117,774

 

346,918

 

 

336,395

 

Total revenue

 

269,544

 

 

262,194

 

706,437

 

 

664,384

 

 
Cost of revenue:
Product

 

25,281

 

 

30,338

 

77,967

 

 

73,843

 

Service

 

31,521

 

 

30,132

 

94,190

 

 

92,681

 

Total cost of revenue

 

56,802

 

 

60,470

 

172,157

 

 

166,524

 

 
Gross profit

 

212,742

 

 

201,724

 

534,280

 

 

497,860

 

 
Operating expenses:
Research and development

 

42,558

 

 

41,637

 

129,932

 

 

128,940

 

Sales and marketing

 

66,994

 

 

66,048

 

209,435

 

 

197,191

 

General and administrative

 

25,533

 

 

23,665

 

75,584

 

 

69,881

 

Amortization of acquired intangible assets

 

13,818

 

 

14,919

 

41,500

 

 

44,895

 

Restructuring charges

 

89

 

 

-

 

1,803

 

 

-

 

 
Total operating expenses

 

148,992

 

 

146,269

 

458,254

 

 

440,907

 

 
Income from operations

 

63,750

 

 

55,455

 

76,026

 

 

56,953

 

Interest and other income (expense), net

 

(3,172

)

 

177

 

(6,554

)

 

(4,579

)

 
Income before income tax expense

 

60,578

 

 

55,632

 

69,472

 

 

52,374

 

Income tax expense

 

7,960

 

 

7,907

 

6,603

 

 

8,094

 

Net income

$

52,618

 

$

47,725

$

62,869

 

$

44,280

 

 
 
Basic net income per share

$

0.73

 

$

0.65

$

0.87

 

$

0.60

 

Diluted net income per share

$

0.72

 

$

0.64

$

0.86

 

$

0.59

 

Weighted average common shares outstanding used in computing:
Net income per share - basic

 

71,744

 

 

73,898

 

72,015

 

 

74,048

 

Net income per share - diluted

 

73,049

 

 

74,899

 

73,271

 

 

74,976

 

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

December 31,

 

March 31,

2022

 

2022

(Unaudited)
Assets
Current assets:
Cash, cash equivalents and marketable securities

$

409,306

 

$

703,198

 

Accounts receivable and unbilled costs, net

 

215,838

 

 

148,245

 

Inventories

 

18,621

 

 

28,220

 

Prepaid expenses and other current assets

 

38,182

 

 

42,276

 

 
Total current assets

 

681,947

 

 

921,939

 

 
Fixed assets, net

 

37,590

 

 

41,337

 

Goodwill and intangible assets, net

 

2,107,986

 

 

2,156,575

 

Long-term marketable securities

 

6,906

 

 

-

 

Operating lease right-of-use assets

 

51,096

 

 

54,996

 

Other assets

 

18,587

 

 

19,862

 

 
Total assets

$

2,904,112

 

$

3,194,709

 

 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable

$

15,451

 

$

21,959

 

Accrued compensation

 

72,259

 

 

75,788

 

Accrued other

 

24,114

 

 

36,417

 

Current portion of operating lease liabilities

 

10,779

 

 

11,411

 

Deferred revenue and customer deposits

 

317,406

 

 

330,585

 

 
Total current liabilities

 

440,009

 

 

476,160

 

 
Other long-term liabilities

 

7,554

 

 

7,470

 

Deferred tax liability

 

40,119

 

 

78,899

 

Accrued long-term retirement benefits

 

34,182

 

 

34,737

 

Long-term deferred revenue

 

127,513

 

 

133,121

 

Operating lease liabilities, net of current portion

 

49,582

 

 

53,927

 

Long-term debt

 

200,000

 

 

350,000

 

 
Total liabilities

 

898,959

 

 

1,134,314

 

 
Stockholders' equity:
Common stock

 

128

 

 

126

 

Additional paid-in capital

 

3,077,866

 

 

3,023,403

 

Accumulated other comprehensive income (loss)

 

(353

)

 

141

 

Treasury stock, at cost

 

(1,545,922

)

 

(1,373,840

)

Retained earnings

 

473,434

 

 

410,565

 

 
Total stockholders' equity

 

2,005,153

 

 

2,060,395

 

 
Total liabilities and stockholders' equity

$

2,904,112

 

$

3,194,709

 

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,

2022

 

2021

 

2022

 

2022

 

2021

 
GAAP and Non-GAAP Revenue

$

269,544

 

$

262,194

 

$

228,081

 

$

706,437

 

$

664,384

 

 
Gross Profit (GAAP)

$

212,742

 

$

201,724

 

$

170,440

 

$

534,280

 

$

497,860

 

Share-based compensation expense (1)

 

2,043

 

 

1,516

 

 

2,395

 

 

6,475

 

 

5,631

 

Amortization of acquired intangible assets (2)

 

2,315

 

 

3,342

 

 

2,312

 

 

6,955

 

 

10,054

 

Acquisition related depreciation expense (5)

 

5

 

 

6

 

 

4

 

 

16

 

 

18

 

Non-GAAP Gross Profit

$

217,105

 

$

206,588

 

$

175,151

 

$

547,726

 

$

513,563

 

 
Income from Operations (GAAP)

$

63,750

 

$

55,455

 

$

21,403

 

$

76,026

 

$

56,953

 

Share-based compensation expense (1)

 

15,143

 

 

12,681

 

 

16,501

 

 

47,225

 

 

43,381

 

Amortization of acquired intangible assets (2)

 

16,133

 

 

18,261

 

 

16,113

 

 

48,455

 

 

54,949

 

Business development and integration expense (3)

 

-

 

 

-

 

 

-

 

 

-

 

 

(5

)

Compensation for post-combination services (4)

 

-

 

 

-

 

 

-

 

 

-

 

 

2

 

Restructuring charges

 

89

 

 

-

 

 

(60

)

 

1,803

 

 

-

 

Acquisition related depreciation expense (5)

 

59

 

 

65

 

 

59

 

 

183

 

 

189

 

Transitional service agreement expense (6)

 

-

 

 

697

 

 

-

 

 

-

 

 

814

 

Legal expenses related to civil judgments (7)

 

426

 

 

-

 

 

-

 

 

426

 

 

-

 

Non-GAAP Income from Operations

$

95,600

 

$

87,159

 

$

54,016

 

$

174,118

 

$

156,283

 

 
Net Income (GAAP)

$

52,618

 

$

47,725

 

$

17,383

 

$

62,869

 

$

44,280

 

Share-based compensation expense (1)

 

15,143

 

 

12,681

 

 

16,501

 

 

47,225

 

 

43,381

 

Amortization of acquired intangible assets (2)

 

16,133

 

 

18,261

 

 

16,113

 

 

48,455

 

 

54,949

 

Business development and integration expense (3)

 

-

 

 

-

 

 

-

 

 

-

 

 

(5

)

Compensation for post-combination services (4)

 

-

 

 

-

 

 

-

 

 

-

 

 

2

 

Restructuring charges

 

89

 

 

-

 

 

(60

)

 

1,803

 

 

-

 

Acquisition related depreciation expense (5)

 

59

 

 

65

 

 

59

 

 

183

 

 

189

 

Legal expenses related to civil judgments (7)

 

426

 

 

-

 

 

-

 

 

426

 

 

-

 

Loss on extinguishment of debt (8)

 

-

 

 

-

 

 

-

 

 

-

 

 

596

 

Change in fair value of contingent consideration (9)

 

-

 

 

(837

)

 

-

 

 

-

 

 

(837

)

Income tax adjustments (10)

 

(11,449

)

 

(11,398

)

 

(8,691

)

 

(28,585

)

 

(25,802

)

Non-GAAP Net Income

$

73,019

 

$

66,497

 

$

41,305

 

$

132,376

 

$

116,753

 

 
Diluted Net Income Per Share (GAAP)

$

0.72

 

$

0.64

 

$

0.24

 

$

0.86

 

$

0.59

 

Share impact of non-GAAP adjustments identified above

 

0.28

 

 

0.25

 

 

0.33

 

 

0.95

 

 

0.97

 

Non-GAAP Diluted Net Income Per Share

$

1.00

 

$

0.89

 

$

0.57

 

$

1.81

 

$

1.56

 

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

 

73,049

 

 

74,899

 

 

72,891

 

 

73,271

 

 

74,976

 

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,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

(1)

Share-based compensation expense included in these amounts

 

is as follows:

 

Cost of product revenue

$

262

 

$

214

 

$

315

 

$

869

 

$

809

 

 

Cost of service revenue

 

1,781

 

 

1,302

 

 

2,080

 

 

5,606

 

 

4,822

 

 

Research and development

 

4,174

 

 

3,297

 

 

4,580

 

 

13,185

 

 

12,290

 

 

Sales and marketing

 

5,445

 

 

4,727

 

 

6,043

 

 

17,238

 

 

15,383

 

 

General and administrative

 

3,481

 

 

3,141

 

 

3,483

 

 

10,327

 

 

10,077

 

 

Total share-based compensation expense

$

15,143

 

$

12,681

 

$

16,501

 

$

47,225

 

$

43,381

 

 

 

(2)

Amortization expense related to acquired software and product

 

technology, tradenames, customer relationships included in these

 

amounts is as follows:

 

Cost of product revenue

$

2,315

 

$

3,342

 

$

2,312

 

$

6,955

 

$

10,054

 

 

Operating expenses

 

13,818

 

 

14,919

 

 

13,801

 

 

41,500

 

 

44,895

 

 

Total amortization expense

$

16,133

 

$

18,261

 

$

16,113

 

$

48,455

 

$

54,949

 

 

 

(3)

Business development and integration expense included in

 

these amounts is as follows:

 

General and administrative

$

-

 

$

-

 

$

-

 

$

-

 

$

(5

)

 

Total business development and integration expense

$

-

 

$

-

 

$

-

 

$

-

 

$

(5

)

 

 

(4)

Compensation for post-combination services included in these

 

amounts is as follows:

 

Research and development

$

-

 

$

-

 

$

-

 

$

-

 

$

2

 

 

Total compensation for post-combination services

$

-

 

$

-

 

$

-

 

$

-

 

$

2

 

 

 

(5)

Acquisition related depreciation expense included in these

 

amounts is as follows:

 

Cost of product revenue

$

3

 

$

4

 

$

2

 

$

9

 

$

11

 

 

Cost of service revenue

 

2

 

 

2

 

 

2

 

 

7

 

 

7

 

 

Research and development

 

42

 

 

45

 

 

42

 

 

129

 

 

132

 

 

Sales and marketing

 

8

 

 

9

 

 

8

 

 

25

 

 

26

 

 

General and administrative

 

4

 

 

5

 

 

5

 

 

13

 

 

13

 

 

Total acquisition related depreciation expense

$

59

 

$

65

 

$

59

 

$

183

 

$

189

 

 

 

(6)

Transitional service agreement (income) expense included in

 

these amounts is as follows:

 

Research and development

$

-

 

$

77

 

$

-

 

$

-

 

$

90

 

 

Sales and marketing

 

-

 

 

111

 

 

-

 

 

-

 

 

130

 

 

General and administrative

 

-

 

 

509

 

 

-

 

 

-

 

 

594

 

 

Other (income) expense, net

 

-

 

 

(697

)

 

-

 

 

-

 

 

(814

)

 

Total transitional service agreement (income) expense

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

(7)

Legal expenses related to civil judgments included in this amount is

 

as follows:

 

General and administrative

$

426

 

$

-

 

$

-

 

$

426

 

$

-

 

 

Total legal judgments expense

$

426

 

$

-

 

$

-

 

$

426

 

$

-

 

 

 

(8)

Loss on extinguishment of debt included in this amount is

 

as follows:

 

Interest and other (income) expense, net

$

-

 

$

-

 

$

-

 

$

-

 

$

596

 

 

Total loss on extinguishment of debt

$

-

 

$

-

 

$

-

 

$

-

 

$

596

 

 

 

(9)

Change in fair value of contingent consideration included in

 

this amount is as follows:

 

Interest and other (income) expense, net

$

-

 

$

(837

)

$

-

 

$

-

 

$

(837

)

 

Total change in fair value of contingent consideration

$

-

 

$

(837

)

$

-

 

$

-

 

$

(837

)

 

 

(10)

Total income tax adjustment included in this

 

amount is as follows:

 

Tax effect of non-GAAP adjustments above

$

(11,449

)

$

(11,398

)

$

(8,691

)

$

(28,585

)

$

(25,802

)

 

Total income tax adjustments

$

(11,449

)

$

(11,398

)

$

(8,691

)

$

(28,585

)

$

(25,802

)

NETSCOUT SYSTEMS, INC.
Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures -
Non-GAAP EBITDA from Operations
(In thousands)
(Unaudited)
 
 

Three Months Ended

 

Three Months Ended

 

Nine Months Ended

December 31,

 

September 30,

 

December 31,

2022

 

2021

 

2022

 

2022

 

2021

 
Income from operations (GAAP)

$

63,750

$

55,455

$

21,403

$

76,026

$

56,953

Previous adjustments to determine non-GAAP income from operations

 

31,850

 

31,704

 

32,613

 

98,092

 

99,330

Non-GAAP Income from operations

 

95,600

 

87,159

 

54,016

 

174,118

 

156,283

 
Depreciation excluding acquisition related

 

5,263

 

5,475

 

5,090

 

15,664

 

16,909

 
Non-GAAP EBITDA from operations

$

100,863

$

92,634

$

59,106

$

189,782

$

173,192

NETSCOUT SYSTEMS, INC.
Reconciliation of GAAP Financial Outlook to Non-GAAP Financial Outlook
(Unaudited)
(In millions, except net income per share - diluted)
 
FY'22

FY'23

GAAP & Non-GAAP revenue

$

855.6

 

~$905 million to ~$915 million

 

FY'22

FY'23

GAAP net income

$

37.0

 

~$52 million to ~$55 million

Amortization of intangible assets

$

73.1

 

~$65 million

Share-based compensation expenses

$

56.1

 

~$61 million

Business development & integration expenses*

$

(0.6

)

~Less than $1 million

Interest Exp - Loss on Debt Extinguishment

$

0.6

 

-

Legal expenses related to civil judgments

$

-

 

~Less than $1 million

Restructuring charges

$

-

 

~$1.8 million

Total adjustments

$

129.2

 

~$129 million

Related impact of adjustments on income tax

$

(27.8

)

(~$30 million)

Non-GAAP net income

$

138.4

 

~$151 million to ~$154 million

 

GAAP net income per share (diluted)

$

0.49

 

~$0.71 to ~$0.75

Non-GAAP net income per share (diluted)

$

1.84

 

~$2.06 to ~$2.10

 

Average weighted shares outstanding (diluted GAAP)

 

75.1

 

~73 million to ~74 million

Average weighted shares outstanding (diluted Non-GAAP)

 

75.1

 

~73 million to ~74 million

*Business development & integration expenses include change in value of contingent consideration, and acquisition-related depreciation expense
**Figures in table may not total due to rounding

 

Investors
Anthony Piazza
Senior Vice President, Corporate Finance
978-614-4286
IR@netscout.com

Media
Maribel Lopez
Manager, Marketing & Corporate Communications
781-362-4330
Maribel.Lopez@netscout.com

Source: NETSCOUT SYSTEMS, INC.