NETSCOUT Reports Third Quarter Fiscal Year 2021 Financial Results
NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) reported its third-quarter fiscal 2021 results, revealing total revenue of $228.7 million, down from $260.0 million year-over-year. Product revenue declined to $115.0 million, while service revenue was $113.8 million. The company’s net income was $29.0 million, or $0.39 per share (GAAP), compared to $36.7 million, or $0.49 per share, in the prior year. NETSCOUT raised its fiscal year 2021 earnings outlook, projecting revenue between $825 million and $840 million, with diluted EPS expected between $0.21 and $0.28.
- Raised fiscal year 2021 earnings per share outlook.
- Non-GAAP net income increased to $48.9 million or $0.66 per share.
- Improved non-GAAP EBITDA margin at 23.4%.
- Total revenue decreased by 12% year-over-year.
- Product revenue fell by 20% compared to the prior year.
- GAAP net income dropped from $36.7 million to $29.0 million.
NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of service assurance, security, and business analytics, today announced financial results for its third-quarter fiscal year 2021 ended December 31, 2020.
“We are pleased with our third-quarter results and strong year-to-date earnings per share performance compared with our prior fiscal year,” stated Anil Singhal, NETSCOUT’s president and chief executive officer. “Our offerings are being well received in the market given our ability to provide service assurance, with real-time, pervasive visibility and insight, and security solutions that mitigate disruption for our customers regardless of their underlying infrastructure. This is important as customers further safeguard their Information Technology infrastructure in this pandemic environment that is straining networks in terms of volume and attempted security breaches. Our focus during these challenging times has been to keep our team safe and productive, to serve our customers well with the highest quality solutions and service, and to drive overall margin expansion while preserving liquidity to maintain a strong balance sheet and financial flexibility.”
Singhal continued, “Our relevant solutions, trusted brand, strong customer relationships, dedicated team, and solid financial profile have positioned us well as we continue to weather the current macro-economic environment. We remain committed to enhancing our profitability and are raising our fiscal year 2021 earnings per share outlook given our performance year-to-date. With long-term market trends, such as digital transformation, cloud migration, cyber threats, and 5G networks, in NETSCOUT’s favor, we believe we are well-positioned as “Guardians of the Connected World” when we emerge from this global crisis.”
Notable developments and highlights:
Notable developments and highlights in the third quarter included extending partnerships with AWS and Vodafone, custom research on the Information Technology challenges brought about by the pandemic, announcement of NETSCOUT’s Engage 21 Virtual Technology and User Summit, and sponsorship and grant funding to provide digital services to underserved students.
- NETSCOUT announced the extension of its Smart Perimeter Protection to AWS. The combination of NETSCOUT’s Cyber Investigator (NCI) and CyberStream software with new AWS packet access services helps contain costs and achieve better efficiencies in mitigating novel security threats as enterprises move applications to the cloud. As the threat surface expands, the solution uses packet data and powerful cyber analytics to get to the root cause of cybersecurity issues quickly.
- NETSCOUT announced the extension of its long-term partnership with Vodafone. The exclusive, multi-year agreement leverages NETSCOUT’s InfiniStreamNG platform to help provide real-time, end-to-end visibility across Vodafone’s hybrid environment.
- NETSCOUT announced findings from a survey it commissioned to understand the network infrastructure challenges associated with keeping employees connected in remote-work environments. The findings confirmed the increased use of unified communications and collaboration (UC&C) solutions since the start of the pandemic and the impact and challenges the increased use has had on Information Technology teams.
- NETSCOUT plans to host, virtually, customers and partners at its annual Engage Technology and User Summit from April 19th through April 30th. Over the two-week Engage 2021 event, it will showcase its Security, Service Assurance and DDoS capabilities through presentations, panel discussions, demonstrations, and hands-on training. An annual tradition, the event is a highlight of the year for the Company given the opportunity to meet with its user and partner community and discuss how it truly offers Visibility Without Borders.
- NETSCOUT announced it has partnered with Tech Goes Home (TGH), a Massachusetts nonprofit dedicated to ending digital inequity, to provide digital devices, internet access, and digital skills training to more than 160 households in Roxbury, MA. Through a grant, NETSCOUT is sponsoring virtual Tech Goes Home courses at Roxbury partner sites, including Boston Central Adult High School and Vine Street Community Center.
Q3 FY21 Financial Results
Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was
Product revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was
Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was
NETSCOUT’s income from operations (GAAP) was
Net income (GAAP) for the third quarter of fiscal year 2021 was
As of December 31, 2020, cash and cash equivalents, and short and long-term marketable securities were
Nine-Months FY21 Financial Results
-
For the first nine months of fiscal year 2021, total revenue (GAAP and non-GAAP) was
$617.9 million versus total revenue (GAAP) of$662.5 million and total revenue (non-GAAP) of$662.6 million for the comparable nine-month period of fiscal year 2020. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables. -
Product revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2021 was
$278.6 million , compared with$321.8 million in the same period one year ago. -
For the first nine months of fiscal year 2021, total service revenue (GAAP and non-GAAP) was
$339.3 million versus (GAAP)$340.7 million and (non-GAAP)$340.8 million in the same period last year. -
NETSCOUT’s income from operations (GAAP) during the first nine months of fiscal year 2021 was
$21.1 million , compared with income from operations of$5.1 million for the comparable nine-month period of fiscal year 2020. The Company’s operating margin for the first nine months of fiscal year 2021 (GAAP) was3.4% versus0.8% in the comparable period of fiscal year 2020. During the first nine months of fiscal year 2021, the Company’s non-GAAP EBITDA from operations was$144.3 million , or23.4% of non-GAAP total revenue versus non-GAAP EBITDA from operations of$134.7 million , or20.3% of non-GAAP total revenue, in the first nine months of fiscal year 2020. The Company’s non-GAAP income from operations for the first nine months of fiscal year 2021 was$125.0 million with a non-GAAP operating margin of20.2% , compared with non-GAAP income from operations for the same period of fiscal year 2020 of$114.6 million and a non-GAAP operating margin of17.3% . -
For the first nine months of fiscal year 2021, NETSCOUT’s net income (GAAP) was
$7.9 million , or$0.11 per share (diluted) compared with a net loss of$10.1 million , or a loss of$0.13 per share (diluted) in the same nine-month period one year ago. Non-GAAP net income for the first nine months of fiscal year 2021 was$89.3 million , or$1.21 per share (diluted) versus non-GAAP net income for the same period of fiscal year 2020 of$81.6 million , or$1.07 per share (diluted). -
During the first three quarters of fiscal year 2021, NETSCOUT repurchased a total of 154,271 shares of its common stock at an average price of
$21.23 per share, totaling approximately$3.3 million in the aggregate.
Guidance:
NETSCOUT is updating its fiscal year 2021 guidance, originally issued on October 29, 2020, with one quarter remaining in the fiscal year. The expected revenue range is being narrowed, while maintaining the mid-point, and the expected net income per share range is being raised. The Company’s guidance for fiscal year 2021 is now as follows:
-
Revenue, GAAP and non-GAAP, is expected to be in the range of
$825 million to$840 million . -
GAAP net income per share (diluted) is now expected to be in the range of
$0.21 t o$0.28 . -
Non-GAAP net income per share (diluted) is now expected to be in the range of
$1.60 t o$1.67 . - A reconciliation between GAAP and non-GAAP revenue and net income per share (diluted) for NETSCOUT’s guidance is included in the attached financial tables.
NETSCOUT also plans to repay
Conference Call Instructions:
NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2021 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, people can listen to the call by dialing (785) 424-1667. The conference call ID is NTCTQ321. A replay of the call will be available after 12:00 p.m. ET on January 28, 2021 for approximately one week. The number for the replay is (800) 283-8183 for U.S./Canada and (402) 220-0867 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 revenue, non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per share (diluted) and non-GAAP earnings before interest and other expense, income taxes, depreciation and amortization (EBITDA) from operations. Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, 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, legal expenses related to a civil judgment, restructuring charges, and costs related to new accounting standard implementation, and adds back transitional service agreement income. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, net of related income tax effects while removing transitional service agreement income and changes in contingent consideration. 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 (revenue, gross profit, operating margin, net income and diluted net income per share), and may have limitations because they do not reflect all of NETSCOUT’s results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate NETSCOUT’s results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP.
NETSCOUT believes these non-GAAP financial measures will enhance the reader’s overall understanding of NETSCOUT’s current financial performance and NETSCOUT's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. NETSCOUT believes that providing these non-GAAP measures affords investors a view of NETSCOUT’s operating results that may be more easily compared to peer companies and also enables investors to consider NETSCOUT’s operating results on both a GAAP and non-GAAP basis during and following the integration period of NETSCOUT’s acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of NETSCOUT’s core operating results. Furthermore, NETSCOUT believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to its financial condition and results of operations.
NETSCOUT management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions. These non-GAAP measures are among the primary factors that management uses in planning and forecasting.
About NETSCOUT SYSTEMS, INC.
NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) assures digital business services against disruptions in availability, performance, and security. Our market and technology leadership stems from combining our patented smart data technology with smart analytics. We provide real-time, pervasive visibility, and insights customers need to accelerate and secure their digital transformation. Our approach transforms the way organizations plan, deliver, integrate, test, and deploy services and applications. Our nGenius service assurance solutions provide real-time, contextual analysis of service, network, and application performance. Arbor security solutions protect against DDoS attacks that threaten availability and advanced threats that infiltrate networks to steal critical business assets. To learn more about improving service, network, and application performance in physical or virtual data centers, or in the cloud, and how NETSCOUT’s performance and security solutions, powered by service intelligence can help you move forward with confidence, visit www.netscout.com or follow @NETSCOUT and @ArborNetworks on Twitter, Facebook, or LinkedIn.
Safe Harbor
Forward-looking statements in this release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws. Investors are cautioned that statements in this press release, which are not strictly historical statements, including, without limitation, statements regarding NetScout’s revenue and earnings per share financial performance for fiscal year 2021, that NetScout’s offerings are being well received in the market given our ability to provide service assurance, with real-time, pervasive visibility and insight, and security solutions that mitigate disruption for our customers regardless of their underlying infrastructure, that it is important as customers further safeguard their IT infrastructure in this pandemic environment that is straining networks in terms of volume and attempted security breaches, that our focus during these challenging times has been to keep our team safe and productive, to serve our customers well with the highest quality solutions and service, and to drive overall margin expansion while preserving liquidity to maintain a strong balance sheet and financial flexibility, that NetScout’s relevant solutions, trusted brand, strong customer relationships, dedicated team, and solid financial profile have positioned it well as it continue to weather the current macro-economic environment, that NetScout remains committed to enhancing its profitability and is raising its fiscal year 2021 earnings per share outlook given its performance year-to-date, and that long-term market trends, such as digital transformation, cloud migration, cyber threats, and 5G networks, are in NetScout’s favor and have NetScout well-positioned as “Guardians of the Connected World” when it emerges from this global crisis constitute forward looking statements that involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to impacts known and unknown risk, uncertainties, assumptions, and other factors. Such factors include impacts from the COVID-19 pandemic, 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 we have, and their strategic response to our products; our ability to retain key executives and employees; the Company’s ability to realize the anticipated savings from restructuring actions and other expense management programs; lower than expected demand for the Company’s products and services; and the timing and magnitude of stock buyback activity based on market conditions, corporate considerations, debt agreements, and regulatory requirements. For a more detailed description of the risk factors associated with the Company, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and the Company’s subsequent Quarterly Reports on Form 10-Q, which are on file with the Securities and Exchange Commission. NetScout assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.
©2021 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, |
||||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||||
| Revenue: | ||||||||||||||||||
| Product | $ |
114,965 |
|
$ |
143,309 |
|
$ |
278,637 |
|
$ |
321,803 |
|
||||||
| Service |
|
113,774 |
|
|
116,715 |
|
|
339,256 |
|
|
340,666 |
|
||||||
| Total revenue |
|
228,739 |
|
|
260,024 |
|
|
617,893 |
|
|
662,469 |
|
||||||
| Cost of revenue: | ||||||||||||||||||
| Product |
|
24,263 |
|
|
34,197 |
|
|
72,392 |
|
|
90,500 |
|
||||||
| Service |
|
31,012 |
|
|
31,388 |
|
|
94,763 |
|
|
88,960 |
|
||||||
| Total cost of revenue |
|
55,275 |
|
|
65,585 |
|
|
167,155 |
|
|
179,460 |
|
||||||
| Gross profit |
|
173,464 |
|
|
194,439 |
|
|
450,738 |
|
|
483,009 |
|
||||||
| Operating expenses: | ||||||||||||||||||
| Research and development |
|
43,769 |
|
|
48,606 |
|
|
135,605 |
|
|
142,391 |
|
||||||
| Sales and marketing |
|
60,934 |
|
|
67,653 |
|
|
180,668 |
|
|
214,245 |
|
||||||
| General and administrative |
|
21,718 |
|
|
25,048 |
|
|
67,444 |
|
|
72,436 |
|
||||||
| Amortization of acquired intangible assets |
|
15,273 |
|
|
16,120 |
|
|
45,897 |
|
|
48,395 |
|
||||||
| Restructuring charges |
|
- |
|
|
193 |
|
|
62 |
|
|
466 |
|
||||||
| Total operating expenses |
|
141,694 |
|
|
157,620 |
|
|
429,676 |
|
|
477,933 |
|
||||||
| Income from operations |
|
31,770 |
|
|
36,819 |
|
|
21,062 |
|
|
5,076 |
|
||||||
| Interest and other expense, net |
|
(3,583 |
) |
|
(3,915 |
) |
|
(11,757 |
) |
|
(11,930 |
) |
||||||
| Income (loss) before income tax expense (benefit) |
|
28,187 |
|
|
32,904 |
|
|
9,305 |
|
|
(6,854 |
) |
||||||
| Income tax expense (benefit) |
|
(834 |
) |
|
(3,821 |
) |
|
1,390 |
|
|
3,236 |
|
||||||
| Net income (loss) | $ |
29,021 |
|
$ |
36,725 |
|
$ |
7,915 |
|
$ |
(10,090 |
) |
||||||
| Basic net income (loss) per share | $ |
0.39 |
|
$ |
0.49 |
|
$ |
0.11 |
|
$ |
(0.13 |
) |
||||||
| Diluted net income (loss) per share | $ |
0.39 |
|
$ |
0.49 |
|
$ |
0.11 |
|
$ |
(0.13 |
) |
||||||
| Weighted average common shares outstanding used in computing: | ||||||||||||||||||
| Net income (loss) per share - basic |
|
73,492 |
|
|
74,367 |
|
|
72,953 |
|
|
75,780 |
|
||||||
| Net income (loss) per share - diluted |
|
73,878 |
|
|
74,700 |
|
|
73,618 |
|
|
75,780 |
|
||||||
| NETSCOUT SYSTEMS, INC. | ||||||||
Consolidated Balance Sheets |
||||||||
(In thousands) |
||||||||
December 31, |
|
March 31, |
||||||
2020 |
|
2020 |
||||||
(Unaudited) |
|
|
||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash, cash equivalents and marketable securities | $ |
490,444 |
|
$ |
386,458 |
|
||
| Accounts receivable and unbilled costs, net |
|
208,016 |
|
|
213,514 |
|
||
| Inventories |
|
26,040 |
|
|
22,227 |
|
||
| Prepaid expenses and other current assets |
|
38,114 |
|
|
37,544 |
|
||
| Total current assets |
|
762,614 |
|
|
659,743 |
|
||
| Fixed assets, net |
|
51,265 |
|
|
57,715 |
|
||
| Goodwill and intangible assets, net |
|
2,249,204 |
|
|
2,307,859 |
|
||
| Long-term marketable securities |
|
- |
|
|
2,613 |
|
||
| Operating lease right-of-use assets |
|
63,257 |
|
|
68,583 |
|
||
| Other assets |
|
19,983 |
|
|
23,990 |
|
||
| Total assets | $ |
3,146,323 |
|
$ |
3,120,503 |
|
||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ |
19,219 |
|
$ |
20,004 |
|
||
| Accrued compensation |
|
76,900 |
|
|
75,632 |
|
||
| Accrued other |
|
37,034 |
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FAQ
What were NETSCOUT's Q3 FY21 earnings results for NTCT?
How did NETSCOUT's revenue change compared to the previous year?
What guidance has NETSCOUT provided for FY21?
What factors contributed to the changes in NETSCOUT's financial performance?
