Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries NETSCOUT Reports Third Quarter Fiscal Year 2024 Financial Results By: NETSCOUT SYSTEMS, INC via Business Wire January 25, 2024 at 07:30 AM EST NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of performance management, cybersecurity, and DDoS attack protection solutions, today announced financial results for its third quarter ended December 31, 2023. Remarks by Anil Singhal, NETSCOUT’s President and Chief Executive Officer: “We delivered third fiscal quarter revenue ahead of expectations as we benefitted from the timing of calendar year-end customer budget spending. While the market environment remains challenging with constrained customer spending and elongated sales cycles, primarily impacting our service assurance business, our cybersecurity business once again grew year-over-year as enterprise and service provider customers continue to prioritize spending in this area. “Looking ahead, we expect to deliver full fiscal year 2024 revenue at the low-end of our previously disclosed target range as we continue to navigate the current market environment. From a bottom-line standpoint, our GAAP results for the fiscal year will include a third quarter non-cash goodwill impairment charge. Our non-GAAP EPS performance is expected to be at the higher end of our previously disclosed range due to benefits from our ongoing cost containment actions. Strategically, we remain focused on leveraging our industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value.” Q3 FY24 Financial Results Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $218.1 million, compared with $269.5 million (GAAP and non-GAAP) in the third quarter of fiscal year 2023. 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 2024 was $95.8 million, or approximately 44% of total revenue in the period. This compares with product revenue (GAAP and non-GAAP) of $149.5 million in the third quarter of fiscal year 2023, which was approximately 55% of total revenue in the period. Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $122.2 million, or approximately 56% of total revenue in the period. This compares with service revenue (GAAP and non-GAAP) of $120.1 million in the third quarter of fiscal year 2023, which was approximately 45% of total revenue for the period. NETSCOUT’s third quarter of fiscal 2024 loss from operations (GAAP) was $134.4 million, which includes a non-cash goodwill impairment charge of $167.1 million. This compares with income from operations of $63.8 million in the third quarter of fiscal year 2023. The Company’s operating margin (GAAP) was -61.7% in the third quarter of fiscal year 2024, versus 23.7% in the same period of fiscal year 2023. Non-GAAP income from operations was $63.2 million with a non-GAAP operating margin of 29.0% in the third quarter of fiscal year 2024. This compares to non-GAAP income from operations of $95.6 million and a non-GAAP operating margin of 35.5% in the third quarter of fiscal year 2023. Non-GAAP EBITDA from operations in the third quarter of fiscal year 2024 was $67.6 million, or 31.0% of non-GAAP quarterly revenue for the period. This compares to non-GAAP EBITDA from operations of $100.9 million in the third quarter of fiscal year 2023, or 37.4% of non-GAAP quarterly revenue for the period. Net loss (GAAP) for the third quarter of fiscal year 2024 was $132.6 million, or ($1.87) per share (diluted), which includes the previously mentioned non-cash goodwill impairment charge, versus net income (GAAP) of $52.6 million, or $0.72 per share (diluted), for the third quarter of fiscal year 2023. On a non-GAAP basis, net income for the third quarter of fiscal year 2024 was $52.0 million, or $0.73 per share (diluted), compared with $73.0 million, or $1.00 per share (diluted), for the third quarter of fiscal year 2023. As of December 31, 2023, cash, cash equivalents, short- and long-term marketable securities, and investments were $330.1 million, compared with $427.9 million as of March 31, 2023. During the third quarter of fiscal year 2024, NETSCOUT repurchased a total of 705,892 shares of its common stock at an average price of $26.66 per share for an aggregate purchase price of approximately $18.8 million. The Company’s outstanding debt balance under its revolving credit facility was $100 million as of December 31, 2023. The Company’s $800 million revolving credit facility will expire in July 2026. Nine-Months FY24 Financial Results Total revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024, was $626.0 million, compared with total revenue (GAAP and non-GAAP) of $706.4 million in the first nine months of fiscal year 2023. 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 2024 was $271.0 million, compared with $359.5 million in the first nine months of fiscal year 2023. Service revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024 was $355.0 million, compared with $346.9 million in the first nine months of fiscal year 2023. NETSCOUT’s loss from operations (GAAP) for the first nine months of fiscal year 2024 was $112.9 million, which includes the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with income from operations (GAAP) of $76.0 million in the first nine months of fiscal year 2023. The Company’s operating margin (GAAP) for the first nine months of fiscal year 2024 was -18.0%, versus 10.8% in the first nine months of fiscal year 2023. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2024 was $148.0 million with a non-GAAP operating margin of 23.6%, compared with non-GAAP income from operations of $174.1 million and a non-GAAP operating margin of 24.6% for the first nine months of fiscal year 2023. The Company’s non-GAAP EBITDA from operations for the first nine months of fiscal year 2024 was $162.2 million, or 25.9% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $189.8 million, or 26.9% of non-GAAP total revenue, in the first nine months of fiscal year 2023. For the first nine months of fiscal year 2024, NETSCOUT’s net loss (GAAP) was $115.3 million, or ($1.61) per share (diluted), primarily due to the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with a net income (GAAP) of $62.9 million, or $0.86 per share (diluted), for the first nine months of fiscal year 2023. Non-GAAP net income for the first nine months of fiscal year 2024 was $119.3 million, or $1.65 per share (diluted), compared with non-GAAP net income of $132.4 million, or $1.81 per share (diluted), for the first nine months of fiscal year 2023. Financial Outlook Upon review of its year-to-date performance and the future timing and delivery of orders, NETSCOUT has updated its financial outlook for fiscal year 2024 as follows: Revenue (GAAP and non-GAAP) is now expected to be approximately $840 million, at the low end of the previously disclosed range of $840 million to $860 million. GAAP loss per share is now expected to be in the range of ($1.29) to ($1.24), compared to the previous range of $0.69 to $0.89, primarily due to the non-cash goodwill impairment charge in the third quarter of fiscal 2024. Non-GAAP net income per share (diluted) is now expected to be in the range of $2.15 to $2.20, at the higher end of the previously disclosed range of $2.00 to $2.20. NETSCOUT now expects the effective tax rate for fiscal year 2024 to be closer to the lower end of the outlook range of 20% to 22%. It also now expects approximately 72 million to 73 million diluted shares outstanding at the end of fiscal year 2024, which includes the benefit of its recent share repurchase program. This compares with the prior estimated range of 73 million to 74 million diluted shares outstanding. A reconciliation between GAAP and non-GAAP numbers for NETSCOUT’s fiscal year 2024 outlook is included in the financial tables below. Conference Call Instructions: NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2024 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 (203) 518-9708. The conference call ID is NTCTQ324. 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) 839-2383 for U.S./Canada and (402) 220-7202 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 operating margin, 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 (Non-GAAP 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 gain on the divestiture of a business, legal expenses related to civil judgments, restructuring charges, and goodwill impairment charges. Non-GAAP operating margin includes the foregoing adjustments related to non-GAAP income from operations. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes change in fair value of derivative instruments, 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, income from operations, 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) 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 financial results, its financial outlook for the full fiscal year 2024, its focus on leveraging its industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value, and statements relating to the potential benefit of a market for the Company’s products and 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, macroeconomic factors and 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; liquidity concerns at, and failures of, banks and other financial institutions; 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, 2023, 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. ©2024 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, 2023 2022 2023 2022 Revenue: Product $ 95,832 $ 149,452 $ 271,038 $ 359,519 Service 122,240 120,092 354,974 346,918 Total revenue 218,072 269,544 626,012 706,437 Cost of revenue: Product 15,251 25,281 48,006 77,967 Service 28,373 31,521 89,066 94,190 Total cost of revenue 43,624 56,802 137,072 172,157 Gross profit 174,448 212,742 488,940 534,280 Operating expenses: Research and development 37,023 42,558 117,655 129,932 Sales and marketing 69,124 66,994 209,070 209,435 General and administrative 23,109 25,533 73,975 75,584 Amortization of acquired intangible assets 12,533 13,818 37,790 41,500 Goodwill impairment 167,106 - 167,106 - Gain on divestiture of a business - - (3,806 ) - Restructuring charges - 89 - 1,803 Total operating expenses 308,895 148,992 601,790 458,254 Income (loss) from operations (134,447 ) 63,750 (112,850 ) 76,026 Interest and other income (expense), net 729 (3,172 ) 1,272 (6,554 ) Income (loss) before income tax expense (benefit) (133,718 ) 60,578 (111,578 ) 69,472 Income tax expense (benefit) (1,141 ) 7,960 3,737 6,603 Net income (loss) $ (132,577 ) $ 52,618 $ (115,315 ) $ 62,869 Basic net income (loss) per share $ (1.87 ) $ 0.73 $ (1.61 ) $ 0.87 Diluted net income (loss) per share $ (1.87 ) $ 0.72 $ (1.61 ) $ 0.86 Weighted average common shares outstanding used in computing: Net income (loss) per share - basic 71,077 71,744 71,577 72,015 Net income (loss) per share - diluted 71,077 73,049 71,577 73,271 NETSCOUT SYSTEMS, INC. Consolidated Balance Sheets (In thousands) December 31, March 31, 2023 2023 (unaudited) Assets Current assets: Cash, cash equivalents, marketable securities and investments $ 329,112 $ 418,998 Accounts receivable and unbilled costs, net 221,574 143,855 Inventories and deferred costs 15,342 17,956 Prepaid expenses and other current assets 43,290 36,551 Total current assets 609,318 617,360 Fixed assets, net 27,955 34,735 Operating lease right-of-use assets 44,977 51,456 Goodwill and intangible assets, net 1,875,440 2,090,995 Long-term marketable securities 1,010 8,940 Other assets 31,099 17,074 Total assets $ 2,589,799 $ 2,820,560 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 15,132 $ 16,473 Accrued compensation 42,283 83,279 Accrued other 19,448 30,674 Deferred revenue and customer deposits 293,410 311,531 Current portion of operating lease liabilities 11,979 11,650 Total current liabilities 382,252 453,607 Other long-term liabilities 7,312 7,683 Deferred tax liability 4,505 24,939 Accrued long-term retirement benefits 26,310 26,049 Long-term deferred revenue and customer deposits 124,619 129,814 Operating lease liabilities, net of current portion 40,898 48,819 Long-term debt 100,000 100,000 Total liabilities 685,896 790,911 Stockholders' equity: Common stock 131 128 Additional paid-in capital 3,158,283 3,099,698 Accumulated other comprehensive income 5,870 5,738 Treasury stock, at cost (1,615,279 ) (1,546,128 ) Retained earnings 354,898 470,213 Total stockholders' equity 1,903,903 2,029,649 Total liabilities and stockholders' equity $ 2,589,799 $ 2,820,560 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, 2023 2022 2023 2023 2022 GAAP and Non-GAAP Revenue $ 218,072 $ 269,544 $ 196,802 $ 626,012 $ 706,437 Gross Profit (GAAP) $ 174,448 $ 212,742 $ 153,750 $ 488,940 $ 534,280 Share-based compensation expense (1) 2,375 2,043 2,638 7,924 6,475 Amortization of acquired intangible assets (2) 1,636 2,315 1,638 4,912 6,955 Acquisition related depreciation expense (3) 2 5 4 11 16 Non-GAAP Gross Profit $ 178,461 $ 217,105 $ 158,030 $ 501,787 $ 547,726 Income (Loss) from Operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 GAAP Operating Margin -61.7 % 23.7 % 13.4 % -18.0 % 10.8 % Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Legal expenses related to civil judgments (4) 45 426 44 130 426 Non-GAAP Income from Operations $ 63,249 $ 95,600 $ 55,200 $ 148,043 $ 174,118 Non-GAAP Operating Margin 29.0 % 35.5 % 28.0 % 23.6 % 24.6 % Net Income (Loss) (GAAP) $ (132,577 ) $ 52,618 $ 21,462 $ (115,315 ) $ 62,869 Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Legal expenses related to civil judgments (4) 45 426 44 130 426 Change in fair value of derivative instrument (5) - - - (206 ) - Income tax adjustments (6) (13,085 ) (11,449 ) (5,829 ) (26,085 ) (28,585 ) Non-GAAP Net Income $ 52,034 $ 73,019 $ 44,541 $ 119,287 $ 132,376 Diluted Net Income (Loss) Per Share (GAAP) $ (1.87 ) $ 0.72 $ 0.29 $ (1.61 ) $ 0.86 Share impact of non-GAAP adjustments identified above 2.60 0.28 0.32 3.26 0.95 Non-GAAP Diluted Net Income Per Share $ 0.73 $ 1.00 $ 0.61 $ 1.65 $ 1.81 Shares used in computing non-GAAP diluted net income per share 71,638 73,049 72,797 72,355 73,271 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, 2023 2022 2023 2023 2022 (1) Share-based compensation expense included in these amounts is as follows: Cost of product revenue $ 306 $ 262 $ 349 $ 1,027 $ 869 Cost of service revenue 2,069 1,781 2,289 6,897 5,606 Research and development 4,498 4,174 4,988 14,872 13,185 Sales and marketing 5,680 5,445 6,675 19,639 17,238 General and administrative 3,811 3,481 4,144 12,218 10,327 Total share-based compensation expense $ 16,364 $ 15,143 $ 18,445 $ 54,653 $ 47,225 (2) Amortization expense related to acquired software and product technology, tradenames, customer relationships included in these amounts is as follows: Cost of product revenue $ 1,636 $ 2,315 $ 1,638 $ 4,912 $ 6,955 Operating expenses 12,533 13,818 12,550 37,790 41,500 Total amortization expense $ 14,169 $ 16,133 $ 14,188 $ 42,702 $ 48,455 (3) Acquisition related depreciation expense included in these amounts is as follows: Cost of product revenue $ 2 $ 3 $ 2 $ 7 $ 9 Cost of service revenue - 2 2 4 7 Research and development 8 42 25 74 129 Sales and marketing 2 8 6 16 25 General and administrative - 4 2 7 13 Total acquisition related depreciation expense $ 12 $ 59 $ 37 $ 108 $ 183 (4) Legal expenses related to civil judgments included in this amount is as follows: General and administrative $ 45 $ 426 $ 44 $ 130 $ 426 Total legal judgments expense $ 45 $ 426 $ 44 $ 130 $ 426 (5) Change in fair value of derivative instrument included in this amount is as follows: Interest and other (income) expense, net $ - $ - $ - $ (206 ) $ - Total change in fair value of derivative instrument $ - $ - $ - $ (206 ) $ - (6) Total income tax adjustment included in this amount is as follows: Tax effect of non-GAAP adjustments above $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) Total income tax adjustments $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) 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, 2023 2022 2023 2023 2022 Income (loss) from operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 Previous adjustments to determine non-GAAP income from operations 197,696 31,850 28,908 260,893 98,092 Non-GAAP Income from operations 63,249 95,600 55,200 148,043 174,118 Depreciation excluding acquisition related-depreciation expense 4,337 5,263 4,749 14,118 15,664 Non-GAAP EBITDA from operations $ 67,586 $ 100,863 $ 59,949 $ 162,161 $ 189,782 Non-GAAP EBITDA from operations as a % of revenue 31.0 % 37.4 % 30.5 % 25.9 % 26.9 % NETSCOUT SYSTEMS, INC. Reconciliation of GAAP Financial Outlook to Non-GAAP Financial Outlook (Unaudited) (In millions, except net income per share - diluted) FY'23 FY'24 GAAP & Non-GAAP revenue $ 914.5 ~$840 million FY'23 FY'24 GAAP net income $ 59.6 ~($92) million to ~($89) million Amortization of intangible assets $ 64.7 ~$57 million Share-based compensation expenses $ 62.0 ~$70 million Business development & integration expenses* $ 0.2 ~Less than $1 million Gain on divestiture of a business $ - ~($3.8 million) Change in fair value of derivative instrument $ 1.4 ~Less than $1 million Legal expenses related to civil judgments $ 0.5 - New accounting standard implementation $ 0.0 - Restructuring charges $ 1.8 - Goodwill impairment $ - ~$167 million Total adjustments $ 130.6 ~$290 million Related impact of adjustments on income tax $ (30.7 ) (~$42 million) Non-GAAP net income $ 159.6 ~$156 million to ~$159 million GAAP net income per share (diluted) $ 0.82 ~($1.29) to ~($1.24) Non-GAAP net income per share (diluted) $ 2.18 ~$2.15 to ~$2.20 Average weighted shares outstanding (diluted GAAP) 73.0 ~71 million to ~72 million Average weighted shares outstanding (diluted Non-GAAP) 73.0 ~ 72 million to ~73 million *Business development & integration expenses include acquisition-related depreciation expense **Figures in table may not total due to rounding View source version on businesswire.com: https://www.businesswire.com/news/home/20240125507242/en/Contacts Investors Sean K. F. Hannan Head of Investor Relations 978-614-4374 IR@netscout.com Media Chris Lucas AVP, Marketing & Corporate Communications 978-614-4124 Chris.Lucas@netscout.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
NETSCOUT Reports Third Quarter Fiscal Year 2024 Financial Results By: NETSCOUT SYSTEMS, INC via Business Wire January 25, 2024 at 07:30 AM EST NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of performance management, cybersecurity, and DDoS attack protection solutions, today announced financial results for its third quarter ended December 31, 2023. Remarks by Anil Singhal, NETSCOUT’s President and Chief Executive Officer: “We delivered third fiscal quarter revenue ahead of expectations as we benefitted from the timing of calendar year-end customer budget spending. While the market environment remains challenging with constrained customer spending and elongated sales cycles, primarily impacting our service assurance business, our cybersecurity business once again grew year-over-year as enterprise and service provider customers continue to prioritize spending in this area. “Looking ahead, we expect to deliver full fiscal year 2024 revenue at the low-end of our previously disclosed target range as we continue to navigate the current market environment. From a bottom-line standpoint, our GAAP results for the fiscal year will include a third quarter non-cash goodwill impairment charge. Our non-GAAP EPS performance is expected to be at the higher end of our previously disclosed range due to benefits from our ongoing cost containment actions. Strategically, we remain focused on leveraging our industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value.” Q3 FY24 Financial Results Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $218.1 million, compared with $269.5 million (GAAP and non-GAAP) in the third quarter of fiscal year 2023. 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 2024 was $95.8 million, or approximately 44% of total revenue in the period. This compares with product revenue (GAAP and non-GAAP) of $149.5 million in the third quarter of fiscal year 2023, which was approximately 55% of total revenue in the period. Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $122.2 million, or approximately 56% of total revenue in the period. This compares with service revenue (GAAP and non-GAAP) of $120.1 million in the third quarter of fiscal year 2023, which was approximately 45% of total revenue for the period. NETSCOUT’s third quarter of fiscal 2024 loss from operations (GAAP) was $134.4 million, which includes a non-cash goodwill impairment charge of $167.1 million. This compares with income from operations of $63.8 million in the third quarter of fiscal year 2023. The Company’s operating margin (GAAP) was -61.7% in the third quarter of fiscal year 2024, versus 23.7% in the same period of fiscal year 2023. Non-GAAP income from operations was $63.2 million with a non-GAAP operating margin of 29.0% in the third quarter of fiscal year 2024. This compares to non-GAAP income from operations of $95.6 million and a non-GAAP operating margin of 35.5% in the third quarter of fiscal year 2023. Non-GAAP EBITDA from operations in the third quarter of fiscal year 2024 was $67.6 million, or 31.0% of non-GAAP quarterly revenue for the period. This compares to non-GAAP EBITDA from operations of $100.9 million in the third quarter of fiscal year 2023, or 37.4% of non-GAAP quarterly revenue for the period. Net loss (GAAP) for the third quarter of fiscal year 2024 was $132.6 million, or ($1.87) per share (diluted), which includes the previously mentioned non-cash goodwill impairment charge, versus net income (GAAP) of $52.6 million, or $0.72 per share (diluted), for the third quarter of fiscal year 2023. On a non-GAAP basis, net income for the third quarter of fiscal year 2024 was $52.0 million, or $0.73 per share (diluted), compared with $73.0 million, or $1.00 per share (diluted), for the third quarter of fiscal year 2023. As of December 31, 2023, cash, cash equivalents, short- and long-term marketable securities, and investments were $330.1 million, compared with $427.9 million as of March 31, 2023. During the third quarter of fiscal year 2024, NETSCOUT repurchased a total of 705,892 shares of its common stock at an average price of $26.66 per share for an aggregate purchase price of approximately $18.8 million. The Company’s outstanding debt balance under its revolving credit facility was $100 million as of December 31, 2023. The Company’s $800 million revolving credit facility will expire in July 2026. Nine-Months FY24 Financial Results Total revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024, was $626.0 million, compared with total revenue (GAAP and non-GAAP) of $706.4 million in the first nine months of fiscal year 2023. 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 2024 was $271.0 million, compared with $359.5 million in the first nine months of fiscal year 2023. Service revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024 was $355.0 million, compared with $346.9 million in the first nine months of fiscal year 2023. NETSCOUT’s loss from operations (GAAP) for the first nine months of fiscal year 2024 was $112.9 million, which includes the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with income from operations (GAAP) of $76.0 million in the first nine months of fiscal year 2023. The Company’s operating margin (GAAP) for the first nine months of fiscal year 2024 was -18.0%, versus 10.8% in the first nine months of fiscal year 2023. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2024 was $148.0 million with a non-GAAP operating margin of 23.6%, compared with non-GAAP income from operations of $174.1 million and a non-GAAP operating margin of 24.6% for the first nine months of fiscal year 2023. The Company’s non-GAAP EBITDA from operations for the first nine months of fiscal year 2024 was $162.2 million, or 25.9% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $189.8 million, or 26.9% of non-GAAP total revenue, in the first nine months of fiscal year 2023. For the first nine months of fiscal year 2024, NETSCOUT’s net loss (GAAP) was $115.3 million, or ($1.61) per share (diluted), primarily due to the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with a net income (GAAP) of $62.9 million, or $0.86 per share (diluted), for the first nine months of fiscal year 2023. Non-GAAP net income for the first nine months of fiscal year 2024 was $119.3 million, or $1.65 per share (diluted), compared with non-GAAP net income of $132.4 million, or $1.81 per share (diluted), for the first nine months of fiscal year 2023. Financial Outlook Upon review of its year-to-date performance and the future timing and delivery of orders, NETSCOUT has updated its financial outlook for fiscal year 2024 as follows: Revenue (GAAP and non-GAAP) is now expected to be approximately $840 million, at the low end of the previously disclosed range of $840 million to $860 million. GAAP loss per share is now expected to be in the range of ($1.29) to ($1.24), compared to the previous range of $0.69 to $0.89, primarily due to the non-cash goodwill impairment charge in the third quarter of fiscal 2024. Non-GAAP net income per share (diluted) is now expected to be in the range of $2.15 to $2.20, at the higher end of the previously disclosed range of $2.00 to $2.20. NETSCOUT now expects the effective tax rate for fiscal year 2024 to be closer to the lower end of the outlook range of 20% to 22%. It also now expects approximately 72 million to 73 million diluted shares outstanding at the end of fiscal year 2024, which includes the benefit of its recent share repurchase program. This compares with the prior estimated range of 73 million to 74 million diluted shares outstanding. A reconciliation between GAAP and non-GAAP numbers for NETSCOUT’s fiscal year 2024 outlook is included in the financial tables below. Conference Call Instructions: NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2024 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 (203) 518-9708. The conference call ID is NTCTQ324. 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) 839-2383 for U.S./Canada and (402) 220-7202 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 operating margin, 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 (Non-GAAP 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 gain on the divestiture of a business, legal expenses related to civil judgments, restructuring charges, and goodwill impairment charges. Non-GAAP operating margin includes the foregoing adjustments related to non-GAAP income from operations. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes change in fair value of derivative instruments, 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, income from operations, 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) 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 financial results, its financial outlook for the full fiscal year 2024, its focus on leveraging its industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value, and statements relating to the potential benefit of a market for the Company’s products and 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, macroeconomic factors and 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; liquidity concerns at, and failures of, banks and other financial institutions; 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, 2023, 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. ©2024 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, 2023 2022 2023 2022 Revenue: Product $ 95,832 $ 149,452 $ 271,038 $ 359,519 Service 122,240 120,092 354,974 346,918 Total revenue 218,072 269,544 626,012 706,437 Cost of revenue: Product 15,251 25,281 48,006 77,967 Service 28,373 31,521 89,066 94,190 Total cost of revenue 43,624 56,802 137,072 172,157 Gross profit 174,448 212,742 488,940 534,280 Operating expenses: Research and development 37,023 42,558 117,655 129,932 Sales and marketing 69,124 66,994 209,070 209,435 General and administrative 23,109 25,533 73,975 75,584 Amortization of acquired intangible assets 12,533 13,818 37,790 41,500 Goodwill impairment 167,106 - 167,106 - Gain on divestiture of a business - - (3,806 ) - Restructuring charges - 89 - 1,803 Total operating expenses 308,895 148,992 601,790 458,254 Income (loss) from operations (134,447 ) 63,750 (112,850 ) 76,026 Interest and other income (expense), net 729 (3,172 ) 1,272 (6,554 ) Income (loss) before income tax expense (benefit) (133,718 ) 60,578 (111,578 ) 69,472 Income tax expense (benefit) (1,141 ) 7,960 3,737 6,603 Net income (loss) $ (132,577 ) $ 52,618 $ (115,315 ) $ 62,869 Basic net income (loss) per share $ (1.87 ) $ 0.73 $ (1.61 ) $ 0.87 Diluted net income (loss) per share $ (1.87 ) $ 0.72 $ (1.61 ) $ 0.86 Weighted average common shares outstanding used in computing: Net income (loss) per share - basic 71,077 71,744 71,577 72,015 Net income (loss) per share - diluted 71,077 73,049 71,577 73,271 NETSCOUT SYSTEMS, INC. Consolidated Balance Sheets (In thousands) December 31, March 31, 2023 2023 (unaudited) Assets Current assets: Cash, cash equivalents, marketable securities and investments $ 329,112 $ 418,998 Accounts receivable and unbilled costs, net 221,574 143,855 Inventories and deferred costs 15,342 17,956 Prepaid expenses and other current assets 43,290 36,551 Total current assets 609,318 617,360 Fixed assets, net 27,955 34,735 Operating lease right-of-use assets 44,977 51,456 Goodwill and intangible assets, net 1,875,440 2,090,995 Long-term marketable securities 1,010 8,940 Other assets 31,099 17,074 Total assets $ 2,589,799 $ 2,820,560 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 15,132 $ 16,473 Accrued compensation 42,283 83,279 Accrued other 19,448 30,674 Deferred revenue and customer deposits 293,410 311,531 Current portion of operating lease liabilities 11,979 11,650 Total current liabilities 382,252 453,607 Other long-term liabilities 7,312 7,683 Deferred tax liability 4,505 24,939 Accrued long-term retirement benefits 26,310 26,049 Long-term deferred revenue and customer deposits 124,619 129,814 Operating lease liabilities, net of current portion 40,898 48,819 Long-term debt 100,000 100,000 Total liabilities 685,896 790,911 Stockholders' equity: Common stock 131 128 Additional paid-in capital 3,158,283 3,099,698 Accumulated other comprehensive income 5,870 5,738 Treasury stock, at cost (1,615,279 ) (1,546,128 ) Retained earnings 354,898 470,213 Total stockholders' equity 1,903,903 2,029,649 Total liabilities and stockholders' equity $ 2,589,799 $ 2,820,560 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, 2023 2022 2023 2023 2022 GAAP and Non-GAAP Revenue $ 218,072 $ 269,544 $ 196,802 $ 626,012 $ 706,437 Gross Profit (GAAP) $ 174,448 $ 212,742 $ 153,750 $ 488,940 $ 534,280 Share-based compensation expense (1) 2,375 2,043 2,638 7,924 6,475 Amortization of acquired intangible assets (2) 1,636 2,315 1,638 4,912 6,955 Acquisition related depreciation expense (3) 2 5 4 11 16 Non-GAAP Gross Profit $ 178,461 $ 217,105 $ 158,030 $ 501,787 $ 547,726 Income (Loss) from Operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 GAAP Operating Margin -61.7 % 23.7 % 13.4 % -18.0 % 10.8 % Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Legal expenses related to civil judgments (4) 45 426 44 130 426 Non-GAAP Income from Operations $ 63,249 $ 95,600 $ 55,200 $ 148,043 $ 174,118 Non-GAAP Operating Margin 29.0 % 35.5 % 28.0 % 23.6 % 24.6 % Net Income (Loss) (GAAP) $ (132,577 ) $ 52,618 $ 21,462 $ (115,315 ) $ 62,869 Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Legal expenses related to civil judgments (4) 45 426 44 130 426 Change in fair value of derivative instrument (5) - - - (206 ) - Income tax adjustments (6) (13,085 ) (11,449 ) (5,829 ) (26,085 ) (28,585 ) Non-GAAP Net Income $ 52,034 $ 73,019 $ 44,541 $ 119,287 $ 132,376 Diluted Net Income (Loss) Per Share (GAAP) $ (1.87 ) $ 0.72 $ 0.29 $ (1.61 ) $ 0.86 Share impact of non-GAAP adjustments identified above 2.60 0.28 0.32 3.26 0.95 Non-GAAP Diluted Net Income Per Share $ 0.73 $ 1.00 $ 0.61 $ 1.65 $ 1.81 Shares used in computing non-GAAP diluted net income per share 71,638 73,049 72,797 72,355 73,271 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, 2023 2022 2023 2023 2022 (1) Share-based compensation expense included in these amounts is as follows: Cost of product revenue $ 306 $ 262 $ 349 $ 1,027 $ 869 Cost of service revenue 2,069 1,781 2,289 6,897 5,606 Research and development 4,498 4,174 4,988 14,872 13,185 Sales and marketing 5,680 5,445 6,675 19,639 17,238 General and administrative 3,811 3,481 4,144 12,218 10,327 Total share-based compensation expense $ 16,364 $ 15,143 $ 18,445 $ 54,653 $ 47,225 (2) Amortization expense related to acquired software and product technology, tradenames, customer relationships included in these amounts is as follows: Cost of product revenue $ 1,636 $ 2,315 $ 1,638 $ 4,912 $ 6,955 Operating expenses 12,533 13,818 12,550 37,790 41,500 Total amortization expense $ 14,169 $ 16,133 $ 14,188 $ 42,702 $ 48,455 (3) Acquisition related depreciation expense included in these amounts is as follows: Cost of product revenue $ 2 $ 3 $ 2 $ 7 $ 9 Cost of service revenue - 2 2 4 7 Research and development 8 42 25 74 129 Sales and marketing 2 8 6 16 25 General and administrative - 4 2 7 13 Total acquisition related depreciation expense $ 12 $ 59 $ 37 $ 108 $ 183 (4) Legal expenses related to civil judgments included in this amount is as follows: General and administrative $ 45 $ 426 $ 44 $ 130 $ 426 Total legal judgments expense $ 45 $ 426 $ 44 $ 130 $ 426 (5) Change in fair value of derivative instrument included in this amount is as follows: Interest and other (income) expense, net $ - $ - $ - $ (206 ) $ - Total change in fair value of derivative instrument $ - $ - $ - $ (206 ) $ - (6) Total income tax adjustment included in this amount is as follows: Tax effect of non-GAAP adjustments above $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) Total income tax adjustments $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) 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, 2023 2022 2023 2023 2022 Income (loss) from operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 Previous adjustments to determine non-GAAP income from operations 197,696 31,850 28,908 260,893 98,092 Non-GAAP Income from operations 63,249 95,600 55,200 148,043 174,118 Depreciation excluding acquisition related-depreciation expense 4,337 5,263 4,749 14,118 15,664 Non-GAAP EBITDA from operations $ 67,586 $ 100,863 $ 59,949 $ 162,161 $ 189,782 Non-GAAP EBITDA from operations as a % of revenue 31.0 % 37.4 % 30.5 % 25.9 % 26.9 % NETSCOUT SYSTEMS, INC. Reconciliation of GAAP Financial Outlook to Non-GAAP Financial Outlook (Unaudited) (In millions, except net income per share - diluted) FY'23 FY'24 GAAP & Non-GAAP revenue $ 914.5 ~$840 million FY'23 FY'24 GAAP net income $ 59.6 ~($92) million to ~($89) million Amortization of intangible assets $ 64.7 ~$57 million Share-based compensation expenses $ 62.0 ~$70 million Business development & integration expenses* $ 0.2 ~Less than $1 million Gain on divestiture of a business $ - ~($3.8 million) Change in fair value of derivative instrument $ 1.4 ~Less than $1 million Legal expenses related to civil judgments $ 0.5 - New accounting standard implementation $ 0.0 - Restructuring charges $ 1.8 - Goodwill impairment $ - ~$167 million Total adjustments $ 130.6 ~$290 million Related impact of adjustments on income tax $ (30.7 ) (~$42 million) Non-GAAP net income $ 159.6 ~$156 million to ~$159 million GAAP net income per share (diluted) $ 0.82 ~($1.29) to ~($1.24) Non-GAAP net income per share (diluted) $ 2.18 ~$2.15 to ~$2.20 Average weighted shares outstanding (diluted GAAP) 73.0 ~71 million to ~72 million Average weighted shares outstanding (diluted Non-GAAP) 73.0 ~ 72 million to ~73 million *Business development & integration expenses include acquisition-related depreciation expense **Figures in table may not total due to rounding View source version on businesswire.com: https://www.businesswire.com/news/home/20240125507242/en/Contacts Investors Sean K. F. Hannan Head of Investor Relations 978-614-4374 IR@netscout.com Media Chris Lucas AVP, Marketing & Corporate Communications 978-614-4124 Chris.Lucas@netscout.com
NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of performance management, cybersecurity, and DDoS attack protection solutions, today announced financial results for its third quarter ended December 31, 2023. Remarks by Anil Singhal, NETSCOUT’s President and Chief Executive Officer: “We delivered third fiscal quarter revenue ahead of expectations as we benefitted from the timing of calendar year-end customer budget spending. While the market environment remains challenging with constrained customer spending and elongated sales cycles, primarily impacting our service assurance business, our cybersecurity business once again grew year-over-year as enterprise and service provider customers continue to prioritize spending in this area. “Looking ahead, we expect to deliver full fiscal year 2024 revenue at the low-end of our previously disclosed target range as we continue to navigate the current market environment. From a bottom-line standpoint, our GAAP results for the fiscal year will include a third quarter non-cash goodwill impairment charge. Our non-GAAP EPS performance is expected to be at the higher end of our previously disclosed range due to benefits from our ongoing cost containment actions. Strategically, we remain focused on leveraging our industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value.” Q3 FY24 Financial Results Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $218.1 million, compared with $269.5 million (GAAP and non-GAAP) in the third quarter of fiscal year 2023. 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 2024 was $95.8 million, or approximately 44% of total revenue in the period. This compares with product revenue (GAAP and non-GAAP) of $149.5 million in the third quarter of fiscal year 2023, which was approximately 55% of total revenue in the period. Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2024 was $122.2 million, or approximately 56% of total revenue in the period. This compares with service revenue (GAAP and non-GAAP) of $120.1 million in the third quarter of fiscal year 2023, which was approximately 45% of total revenue for the period. NETSCOUT’s third quarter of fiscal 2024 loss from operations (GAAP) was $134.4 million, which includes a non-cash goodwill impairment charge of $167.1 million. This compares with income from operations of $63.8 million in the third quarter of fiscal year 2023. The Company’s operating margin (GAAP) was -61.7% in the third quarter of fiscal year 2024, versus 23.7% in the same period of fiscal year 2023. Non-GAAP income from operations was $63.2 million with a non-GAAP operating margin of 29.0% in the third quarter of fiscal year 2024. This compares to non-GAAP income from operations of $95.6 million and a non-GAAP operating margin of 35.5% in the third quarter of fiscal year 2023. Non-GAAP EBITDA from operations in the third quarter of fiscal year 2024 was $67.6 million, or 31.0% of non-GAAP quarterly revenue for the period. This compares to non-GAAP EBITDA from operations of $100.9 million in the third quarter of fiscal year 2023, or 37.4% of non-GAAP quarterly revenue for the period. Net loss (GAAP) for the third quarter of fiscal year 2024 was $132.6 million, or ($1.87) per share (diluted), which includes the previously mentioned non-cash goodwill impairment charge, versus net income (GAAP) of $52.6 million, or $0.72 per share (diluted), for the third quarter of fiscal year 2023. On a non-GAAP basis, net income for the third quarter of fiscal year 2024 was $52.0 million, or $0.73 per share (diluted), compared with $73.0 million, or $1.00 per share (diluted), for the third quarter of fiscal year 2023. As of December 31, 2023, cash, cash equivalents, short- and long-term marketable securities, and investments were $330.1 million, compared with $427.9 million as of March 31, 2023. During the third quarter of fiscal year 2024, NETSCOUT repurchased a total of 705,892 shares of its common stock at an average price of $26.66 per share for an aggregate purchase price of approximately $18.8 million. The Company’s outstanding debt balance under its revolving credit facility was $100 million as of December 31, 2023. The Company’s $800 million revolving credit facility will expire in July 2026. Nine-Months FY24 Financial Results Total revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024, was $626.0 million, compared with total revenue (GAAP and non-GAAP) of $706.4 million in the first nine months of fiscal year 2023. 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 2024 was $271.0 million, compared with $359.5 million in the first nine months of fiscal year 2023. Service revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2024 was $355.0 million, compared with $346.9 million in the first nine months of fiscal year 2023. NETSCOUT’s loss from operations (GAAP) for the first nine months of fiscal year 2024 was $112.9 million, which includes the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with income from operations (GAAP) of $76.0 million in the first nine months of fiscal year 2023. The Company’s operating margin (GAAP) for the first nine months of fiscal year 2024 was -18.0%, versus 10.8% in the first nine months of fiscal year 2023. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2024 was $148.0 million with a non-GAAP operating margin of 23.6%, compared with non-GAAP income from operations of $174.1 million and a non-GAAP operating margin of 24.6% for the first nine months of fiscal year 2023. The Company’s non-GAAP EBITDA from operations for the first nine months of fiscal year 2024 was $162.2 million, or 25.9% of non-GAAP total revenue, versus non-GAAP EBITDA from operations of $189.8 million, or 26.9% of non-GAAP total revenue, in the first nine months of fiscal year 2023. For the first nine months of fiscal year 2024, NETSCOUT’s net loss (GAAP) was $115.3 million, or ($1.61) per share (diluted), primarily due to the previously mentioned $167.1 million non-cash goodwill impairment charge that occurred in the third quarter of fiscal year 2024. This compares with a net income (GAAP) of $62.9 million, or $0.86 per share (diluted), for the first nine months of fiscal year 2023. Non-GAAP net income for the first nine months of fiscal year 2024 was $119.3 million, or $1.65 per share (diluted), compared with non-GAAP net income of $132.4 million, or $1.81 per share (diluted), for the first nine months of fiscal year 2023. Financial Outlook Upon review of its year-to-date performance and the future timing and delivery of orders, NETSCOUT has updated its financial outlook for fiscal year 2024 as follows: Revenue (GAAP and non-GAAP) is now expected to be approximately $840 million, at the low end of the previously disclosed range of $840 million to $860 million. GAAP loss per share is now expected to be in the range of ($1.29) to ($1.24), compared to the previous range of $0.69 to $0.89, primarily due to the non-cash goodwill impairment charge in the third quarter of fiscal 2024. Non-GAAP net income per share (diluted) is now expected to be in the range of $2.15 to $2.20, at the higher end of the previously disclosed range of $2.00 to $2.20. NETSCOUT now expects the effective tax rate for fiscal year 2024 to be closer to the lower end of the outlook range of 20% to 22%. It also now expects approximately 72 million to 73 million diluted shares outstanding at the end of fiscal year 2024, which includes the benefit of its recent share repurchase program. This compares with the prior estimated range of 73 million to 74 million diluted shares outstanding. A reconciliation between GAAP and non-GAAP numbers for NETSCOUT’s fiscal year 2024 outlook is included in the financial tables below. Conference Call Instructions: NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2024 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 (203) 518-9708. The conference call ID is NTCTQ324. 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) 839-2383 for U.S./Canada and (402) 220-7202 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 operating margin, 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 (Non-GAAP 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 gain on the divestiture of a business, legal expenses related to civil judgments, restructuring charges, and goodwill impairment charges. Non-GAAP operating margin includes the foregoing adjustments related to non-GAAP income from operations. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes change in fair value of derivative instruments, 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, income from operations, 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) 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 financial results, its financial outlook for the full fiscal year 2024, its focus on leveraging its industry leading ‘Visibility Without Borders’ platform to help customers tackle the performance, availability, and security challenges of the increasingly complex connected digital world while delivering shareholder value, and statements relating to the potential benefit of a market for the Company’s products and 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, macroeconomic factors and 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; liquidity concerns at, and failures of, banks and other financial institutions; 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, 2023, 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. ©2024 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, 2023 2022 2023 2022 Revenue: Product $ 95,832 $ 149,452 $ 271,038 $ 359,519 Service 122,240 120,092 354,974 346,918 Total revenue 218,072 269,544 626,012 706,437 Cost of revenue: Product 15,251 25,281 48,006 77,967 Service 28,373 31,521 89,066 94,190 Total cost of revenue 43,624 56,802 137,072 172,157 Gross profit 174,448 212,742 488,940 534,280 Operating expenses: Research and development 37,023 42,558 117,655 129,932 Sales and marketing 69,124 66,994 209,070 209,435 General and administrative 23,109 25,533 73,975 75,584 Amortization of acquired intangible assets 12,533 13,818 37,790 41,500 Goodwill impairment 167,106 - 167,106 - Gain on divestiture of a business - - (3,806 ) - Restructuring charges - 89 - 1,803 Total operating expenses 308,895 148,992 601,790 458,254 Income (loss) from operations (134,447 ) 63,750 (112,850 ) 76,026 Interest and other income (expense), net 729 (3,172 ) 1,272 (6,554 ) Income (loss) before income tax expense (benefit) (133,718 ) 60,578 (111,578 ) 69,472 Income tax expense (benefit) (1,141 ) 7,960 3,737 6,603 Net income (loss) $ (132,577 ) $ 52,618 $ (115,315 ) $ 62,869 Basic net income (loss) per share $ (1.87 ) $ 0.73 $ (1.61 ) $ 0.87 Diluted net income (loss) per share $ (1.87 ) $ 0.72 $ (1.61 ) $ 0.86 Weighted average common shares outstanding used in computing: Net income (loss) per share - basic 71,077 71,744 71,577 72,015 Net income (loss) per share - diluted 71,077 73,049 71,577 73,271 NETSCOUT SYSTEMS, INC. Consolidated Balance Sheets (In thousands) December 31, March 31, 2023 2023 (unaudited) Assets Current assets: Cash, cash equivalents, marketable securities and investments $ 329,112 $ 418,998 Accounts receivable and unbilled costs, net 221,574 143,855 Inventories and deferred costs 15,342 17,956 Prepaid expenses and other current assets 43,290 36,551 Total current assets 609,318 617,360 Fixed assets, net 27,955 34,735 Operating lease right-of-use assets 44,977 51,456 Goodwill and intangible assets, net 1,875,440 2,090,995 Long-term marketable securities 1,010 8,940 Other assets 31,099 17,074 Total assets $ 2,589,799 $ 2,820,560 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 15,132 $ 16,473 Accrued compensation 42,283 83,279 Accrued other 19,448 30,674 Deferred revenue and customer deposits 293,410 311,531 Current portion of operating lease liabilities 11,979 11,650 Total current liabilities 382,252 453,607 Other long-term liabilities 7,312 7,683 Deferred tax liability 4,505 24,939 Accrued long-term retirement benefits 26,310 26,049 Long-term deferred revenue and customer deposits 124,619 129,814 Operating lease liabilities, net of current portion 40,898 48,819 Long-term debt 100,000 100,000 Total liabilities 685,896 790,911 Stockholders' equity: Common stock 131 128 Additional paid-in capital 3,158,283 3,099,698 Accumulated other comprehensive income 5,870 5,738 Treasury stock, at cost (1,615,279 ) (1,546,128 ) Retained earnings 354,898 470,213 Total stockholders' equity 1,903,903 2,029,649 Total liabilities and stockholders' equity $ 2,589,799 $ 2,820,560 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, 2023 2022 2023 2023 2022 GAAP and Non-GAAP Revenue $ 218,072 $ 269,544 $ 196,802 $ 626,012 $ 706,437 Gross Profit (GAAP) $ 174,448 $ 212,742 $ 153,750 $ 488,940 $ 534,280 Share-based compensation expense (1) 2,375 2,043 2,638 7,924 6,475 Amortization of acquired intangible assets (2) 1,636 2,315 1,638 4,912 6,955 Acquisition related depreciation expense (3) 2 5 4 11 16 Non-GAAP Gross Profit $ 178,461 $ 217,105 $ 158,030 $ 501,787 $ 547,726 Income (Loss) from Operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 GAAP Operating Margin -61.7 % 23.7 % 13.4 % -18.0 % 10.8 % Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Legal expenses related to civil judgments (4) 45 426 44 130 426 Non-GAAP Income from Operations $ 63,249 $ 95,600 $ 55,200 $ 148,043 $ 174,118 Non-GAAP Operating Margin 29.0 % 35.5 % 28.0 % 23.6 % 24.6 % Net Income (Loss) (GAAP) $ (132,577 ) $ 52,618 $ 21,462 $ (115,315 ) $ 62,869 Share-based compensation expense (1) 16,364 15,143 18,445 54,653 47,225 Amortization of acquired intangible assets (2) 14,169 16,133 14,188 42,702 48,455 Restructuring charges - 89 - - 1,803 Gain on divestiture of a business - - (3,806 ) (3,806 ) - Goodwill impairment 167,106 - - 167,106 - Acquisition related depreciation expense (3) 12 59 37 108 183 Legal expenses related to civil judgments (4) 45 426 44 130 426 Change in fair value of derivative instrument (5) - - - (206 ) - Income tax adjustments (6) (13,085 ) (11,449 ) (5,829 ) (26,085 ) (28,585 ) Non-GAAP Net Income $ 52,034 $ 73,019 $ 44,541 $ 119,287 $ 132,376 Diluted Net Income (Loss) Per Share (GAAP) $ (1.87 ) $ 0.72 $ 0.29 $ (1.61 ) $ 0.86 Share impact of non-GAAP adjustments identified above 2.60 0.28 0.32 3.26 0.95 Non-GAAP Diluted Net Income Per Share $ 0.73 $ 1.00 $ 0.61 $ 1.65 $ 1.81 Shares used in computing non-GAAP diluted net income per share 71,638 73,049 72,797 72,355 73,271 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, 2023 2022 2023 2023 2022 (1) Share-based compensation expense included in these amounts is as follows: Cost of product revenue $ 306 $ 262 $ 349 $ 1,027 $ 869 Cost of service revenue 2,069 1,781 2,289 6,897 5,606 Research and development 4,498 4,174 4,988 14,872 13,185 Sales and marketing 5,680 5,445 6,675 19,639 17,238 General and administrative 3,811 3,481 4,144 12,218 10,327 Total share-based compensation expense $ 16,364 $ 15,143 $ 18,445 $ 54,653 $ 47,225 (2) Amortization expense related to acquired software and product technology, tradenames, customer relationships included in these amounts is as follows: Cost of product revenue $ 1,636 $ 2,315 $ 1,638 $ 4,912 $ 6,955 Operating expenses 12,533 13,818 12,550 37,790 41,500 Total amortization expense $ 14,169 $ 16,133 $ 14,188 $ 42,702 $ 48,455 (3) Acquisition related depreciation expense included in these amounts is as follows: Cost of product revenue $ 2 $ 3 $ 2 $ 7 $ 9 Cost of service revenue - 2 2 4 7 Research and development 8 42 25 74 129 Sales and marketing 2 8 6 16 25 General and administrative - 4 2 7 13 Total acquisition related depreciation expense $ 12 $ 59 $ 37 $ 108 $ 183 (4) Legal expenses related to civil judgments included in this amount is as follows: General and administrative $ 45 $ 426 $ 44 $ 130 $ 426 Total legal judgments expense $ 45 $ 426 $ 44 $ 130 $ 426 (5) Change in fair value of derivative instrument included in this amount is as follows: Interest and other (income) expense, net $ - $ - $ - $ (206 ) $ - Total change in fair value of derivative instrument $ - $ - $ - $ (206 ) $ - (6) Total income tax adjustment included in this amount is as follows: Tax effect of non-GAAP adjustments above $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) Total income tax adjustments $ (13,085 ) $ (11,449 ) $ (5,829 ) $ (26,085 ) $ (28,585 ) 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, 2023 2022 2023 2023 2022 Income (loss) from operations (GAAP) $ (134,447 ) $ 63,750 $ 26,292 $ (112,850 ) $ 76,026 Previous adjustments to determine non-GAAP income from operations 197,696 31,850 28,908 260,893 98,092 Non-GAAP Income from operations 63,249 95,600 55,200 148,043 174,118 Depreciation excluding acquisition related-depreciation expense 4,337 5,263 4,749 14,118 15,664 Non-GAAP EBITDA from operations $ 67,586 $ 100,863 $ 59,949 $ 162,161 $ 189,782 Non-GAAP EBITDA from operations as a % of revenue 31.0 % 37.4 % 30.5 % 25.9 % 26.9 % NETSCOUT SYSTEMS, INC. Reconciliation of GAAP Financial Outlook to Non-GAAP Financial Outlook (Unaudited) (In millions, except net income per share - diluted) FY'23 FY'24 GAAP & Non-GAAP revenue $ 914.5 ~$840 million FY'23 FY'24 GAAP net income $ 59.6 ~($92) million to ~($89) million Amortization of intangible assets $ 64.7 ~$57 million Share-based compensation expenses $ 62.0 ~$70 million Business development & integration expenses* $ 0.2 ~Less than $1 million Gain on divestiture of a business $ - ~($3.8 million) Change in fair value of derivative instrument $ 1.4 ~Less than $1 million Legal expenses related to civil judgments $ 0.5 - New accounting standard implementation $ 0.0 - Restructuring charges $ 1.8 - Goodwill impairment $ - ~$167 million Total adjustments $ 130.6 ~$290 million Related impact of adjustments on income tax $ (30.7 ) (~$42 million) Non-GAAP net income $ 159.6 ~$156 million to ~$159 million GAAP net income per share (diluted) $ 0.82 ~($1.29) to ~($1.24) Non-GAAP net income per share (diluted) $ 2.18 ~$2.15 to ~$2.20 Average weighted shares outstanding (diluted GAAP) 73.0 ~71 million to ~72 million Average weighted shares outstanding (diluted Non-GAAP) 73.0 ~ 72 million to ~73 million *Business development & integration expenses include acquisition-related depreciation expense **Figures in table may not total due to rounding View source version on businesswire.com: https://www.businesswire.com/news/home/20240125507242/en/
Investors Sean K. F. Hannan Head of Investor Relations 978-614-4374 IR@netscout.com Media Chris Lucas AVP, Marketing & Corporate Communications 978-614-4124 Chris.Lucas@netscout.com