8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  May 7, 2020

NETSCOUT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-26251	04-2837575
(Commission File Number)	(IRS Employer Identification No.)

310 Littleton Road Westford, Massachusetts	01886
(Address of principal executive offices)	(Zip Code)

(978) 614-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	NTCT	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company                ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02.   Results of Operations and Financial Condition.

            The following information and the Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

            On May 7, 2020, NetScout Systems, Inc. (the “Company”) issued a press release regarding its financial results for the fourth fiscal quarter and the fiscal year 2020 each ended March 31, 2020, its expectations of future performance and its intention to hold a conference call regarding these topics. The Company's press release is furnished as Exhibit 99.1 to this report.

Item 9.01.   Financial Statements and Exhibits.

(d)  Exhibits.

     The Company hereby furnishes the following exhibit:

Exhibit Number	Description
99.1	Press release dated May 7, 2020.
104	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NETSCOUT SYSTEMS, INC.
By:	/s/ Jean Bua
	Jean Bua
	Executive Vice President and   Chief Financial Officer

Date: May 7, 2020

EX-99.1

Exhibit 99.1

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

WESTFORD, Mass.--(BUSINESS WIRE)--May 7, 2020--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of service assurance, security, and business analytics, today announced financial results for its fourth quarter and full fiscal year 2020 ended March 31, 2020.

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

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

Notable developments and highlights:

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

Q4 FY20 Financial Results

Total revenue (GAAP) for the fourth quarter of fiscal year 2020 was $229.4 million, compared with $235.0 million in the same quarter one year ago. Non-GAAP total revenue for the fourth quarter of fiscal year 2020 was $229.4 million versus $235.2 million in the same quarter one year ago. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.

Product revenue (GAAP and non-GAAP) for the fourth quarter of fiscal year 2020 was $116.5 million, which was approximately 51% of total revenue. This compares with fourth-quarter fiscal year 2019 product revenue (GAAP and non-GAAP) of $125.5 million, which was approximately 53% of total revenue.

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

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

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

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

Full Year FY20 Financial Results

• For fiscal year 2020, total revenue (GAAP) was $891.8 million and non-GAAP total revenue was $892.0 million compared with total revenue (GAAP) of $909.9 million and non-GAAP total revenue of $911.5 million for fiscal year 2019. Non-GAAP revenue for fiscal year 2019 included $18.0 million attributable to the Handheld Network Test (HNT) tools business that was divested in mid-September 2018. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.
• Product revenue (GAAP) in fiscal year 2020 was $438.3 million compared with $467.3 million in fiscal year 2019. Non-GAAP product revenue in fiscal year 2020 was $438.3 million compared with $467.7 million in fiscal year 2019. Non-GAAP product revenue for the HNT tools business for fiscal year 2019 was $13.4 million.
• For fiscal year 2020, service revenue (GAAP) was $453.5 million compared with $442.6 million in fiscal years 2019. Non-GAAP service revenue in fiscal year 2020 was $453.7 million compared with $443.8 million for fiscal year 2019. The HNT tools business non-GAAP service revenue for fiscal year 2019 was $4.6 million.
• NETSCOUT’s income from operations (GAAP) in fiscal year 2020 was $17.6 million, compared with a loss from operations of $71.6 million in fiscal year 2019. NETSCOUT’s loss from operations (GAAP) in fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. The Company’s operating margin (GAAP) in fiscal year 2020 was 2.0% versus -7.9% in fiscal year 2019. In fiscal year 2020, the Company’s non-GAAP EBITDA from operations was $189.6 million, or 21.3% of non-GAAP total revenue versus non-GAAP EBITDA from operations of $193.0 million, or 21.2% of non-GAAP total revenue, for fiscal year 2019. The Company’s non-GAAP income from operations for fiscal year 2020 was $163.3 million with a non-GAAP operating margin of 18.3% compared with non-GAAP income from operations of $161.6 million and a 17.7% non-GAAP operating margin for fiscal year 2019.
• NETSCOUT’s net loss (GAAP) in fiscal year 2020 was $2.8 million, or a loss of $0.04 per share (diluted) compared with a net loss of $73.3 million, or a loss of $0.93 per share (diluted) in fiscal year 2019. NETSCOUT’s net loss (GAAP) in fiscal year 2019 included approximately $45 million in charges associated with the sale of the HNT tools business. Non-GAAP net income in fiscal year 2020 was $119.1 million, or $1.57 per share (diluted) versus non-GAAP net income in fiscal year 2019 of $109.2 million, or $1.38 per share (diluted).

Guidance:

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

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its fourth quarter and full fiscal year 2020 financial results on Thursday, May 7, 2020 at 8:30 a.m. ET. This call will be webcast live through NETSCOUT’s website at https://ir.netscout.com/investors/overview/default.aspx. Alternatively, people can listen to the call by dialing (785) 424-1667. The conference call ID is NTCTQ420. A replay of the call will be available after 12:00 p.m. ET on May 7, 2020 for approximately one week. The number for the replay is (800) 388-5895 for U.S./Canada and (402) 220-1110 for international callers.

Use of Non-GAAP Financial Information:

To supplement the financial measures presented in NETSCOUT's press release in accordance with accounting principles generally accepted in the United States ("GAAP"), NETSCOUT also reports the following non-GAAP measures: non-GAAP total revenue, non-GAAP product revenue, non-GAAP service revenue, non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP earnings before interest and other expense, income taxes, depreciation and amortization (EBITDA) from operations, non-GAAP net income, and non-GAAP net income per share (diluted). Non-GAAP revenue (total, product and service) eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, certain expenses related to acquisitions including depreciation cost, and adds back transitional service agreement income. Non-GAAP income from operations includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, restructuring charges, intangible asset impairment charges, loss on divestiture, costs related to new accounting standard implementation, and certain expenses relating to acquisitions including depreciation costs, compensation for post-combination services and business development and integration costs while adding back transitional service agreement income. Non-GAAP EBITDA from operations, which has been presented herein as a measure of NETSCOUT’s performance, includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition-related depreciation expense. Non-GAAP operating margin is calculated based on the non-GAAP financial metrics discussed above. Non-GAAP net income includes the aforementioned items related to non-GAAP income from operations, and also removes changes in contingent consideration, net of related income tax effects. Non-GAAP diluted net income per share also excludes these expenses as well as the related impact of all these adjustments on the provision for income taxes. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures included in the attached tables within this press release. NETSCOUT also references organic non-GAAP revenue, which includes all of the aforementioned revenue adjustments for non-GAAP revenue and also removes revenue associated with the HNT tools business for comparability purposes with the Company’s quarterly and year-to-date fiscal year 2019 results.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, gross profit, operating margin, net income and diluted net income per share), and may have limitations because they do not reflect all of NETSCOUT’s results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate NETSCOUT’s results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP.

NETSCOUT believes these non-GAAP financial measures will enhance the reader’s overall understanding of NETSCOUT’s current financial performance and NETSCOUT's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. NETSCOUT believes that providing these non-GAAP measures affords investors a view of NETSCOUT’s operating results that may be more easily compared to peer companies and also enables investors to consider NETSCOUT’s operating results on both a GAAP and non-GAAP basis during and following the integration period of NETSCOUT’s acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of NETSCOUT’s core operating results. Furthermore, NETSCOUT believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to its financial condition and results of operations.

NETSCOUT management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions. These non-GAAP measures are among the primary factors that management uses in planning and forecasting.

About NETSCOUT SYSTEMS, INC.

NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) assures digital business services against disruptions in availability, performance, and security. Our market and technology leadership stems from combining our patented smart data technology with smart analytics. We provide real-time, pervasive visibility, and insights customers need to accelerate and secure their digital transformation. Our approach transforms the way organizations plan, deliver, integrate, test, and deploy services and applications. Our nGenius service assurance solutions provide real-time, contextual analysis of service, network, and application performance. Arbor security solutions protect against DDoS attacks that threaten availability and advanced threats that infiltrate networks to steal critical business assets. To learn more about improving service, network, and application performance in physical or virtual data centers, or in the cloud, and how NETSCOUT’s performance and security solutions, powered by service intelligence can help you move forward with confidence, visit www.netscout.com or follow @NETSCOUT and @ArborNetworks on Twitter, Facebook, or LinkedIn.

Safe Harbor

Forward-looking statements in this release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws. Investors are cautioned that statements in this press release, which are not strictly historical statements, including without limitation, statements that NetScout believes that this global pandemic could accelerate certain trends such as digital transformation and cloud migration, security requirements, and 5G over the longer term; that NetScout is committed and well positioned to fulfill its purpose; that NetScout will maintain its disciplined cost and capital management approach while continuing to innovate and invest in its technology and solutions to maintain its leadership position; and that NetScout is confident that its solid balance sheet and financial position provides it with the liquidity and flexibility necessary to weather these uncertain and challenging times, constitute forward looking statements that involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to known and unknown risk, uncertainties, assumptions and other factors. Such factors include slowdowns or downturns in economic conditions generally and in the market for advanced network, service assurance and cybersecurity solutions specifically, including the potential impact of the COVID-19 pandemic; the volatile foreign exchange environment; the Company’s relationships with strategic partners and resellers; dependence upon broad-based acceptance of the Company’s network performance management solutions; the presence of competitors with greater financial resources than we have, and their strategic response to our products; our ability to retain key executives and employees; the Company’s ability to realize anticipated savings from any restructuring actions and other expense management programs; lower than expected demand for the Company’s products and services; and the timing and magnitude of stock buyback activity based on market conditions, corporate considerations, debt agreements, and regulatory requirements. For a more detailed description of the risk factors associated with the Company, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and the Company’s subsequent Quarterly Reports on Form 10-Q, all of which are on file with the Securities and Exchange Commission. NETSCOUT assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

©2020 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries.

NETSCOUT SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
		2020			2019			2020			2019
Revenue:
Product	$	116,538		$	125,474		$	438,341		$	467,289
Service		112,813			109,528			453,479			442,629
Total revenue		229,351			235,002			891,820			909,918
Cost of revenue:
Product		32,332			32,964			122,832			140,938
Service		30,400			25,572			119,360			113,189
Total cost of revenue		62,732			58,536			242,192			254,127
Gross profit		166,619			176,466			649,628			655,791
Operating expenses:
Research and development		45,903			42,241			188,294			203,588
Sales and marketing		62,278			67,663			276,523			291,870
General and administrative		27,558			19,431			99,994			93,572
Amortization of acquired intangible assets		16,110			16,426			64,505			74,305
Impairment of intangible assets		-			-			-			35,871
Loss on divestiture		-			295			-			9,472
Restructuring charges		2,208			1,179			2,674			18,693
Total operating expenses		154,057			147,235			631,990			727,371
Income (loss) from operations		12,562			29,231			17,638			(71,580	)
Interest and other expense, net		(3,784	)		(6,129	)		(15,714	)		(21,332	)
Income (loss) before income tax expense (benefit)		8,778			23,102			1,924			(92,912	)
Income tax expense (benefit)		1,442			3,891			4,678			(19,588	)
Net income (loss)	$	7,336		$	19,211		$	(2,754	)	$	(73,324	)
Basic net income (loss) per share	$	0.10		$	0.25		$	(0.04	)	$	(0.93	)
Diluted net income (loss) per share	$	0.10		$	0.24		$	(0.04	)	$	(0.93	)
Weighted average common shares outstanding used in computing
Net income (loss) per share - basic		73,293			77,705			75,162			78,617
Net income (loss) per share - diluted		74,134			78,562			75,162			78,617

NETSCOUT SYSTEMS, INC.
Consolidated Balance Sheets
(In thousands)
	March 31,			March 31,
		2020			2019
Assets
Current assets:
Cash, cash equivalents and marketable securities	$	386,458		$	485,976
Accounts receivable and unbilled costs, net		213,514			235,318
Inventories		22,227			26,270
Prepaid expenses and other current assets		37,544			53,658
Total current assets		659,743			801,222
Fixed assets, net		57,715			58,951
Goodwill and intangible assets, net		2,307,859			2,384,603
Long-term marketable securities		2,613			1,012
Operating lease right-of-use assets		68,583			-
Other assets		23,990			24,206
Total assets	$	3,120,503		$	3,269,994
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,004		$	24,582
Accrued compensation		75,632			58,501
Accrued other		22,743			24,345
Current portion of operating lease liabilities		10,337			-
Deferred revenue and customer deposits		270,281			272,508
Total current liabilities		398,997			379,936
Other long-term liabilities		10,039			19,493
Deferred tax liability		114,394			124,229
Accrued long-term retirement benefits		34,256			36,284
Long-term deferred revenue		104,240			94,619
Operating lease liabilities, net of current portion		70,658			-
Long-term debt		450,000			550,000
Total liabilities		1,182,584			1,204,561
Stockholders' equity:
Common stock		122			120
Additional paid-in capital		2,891,553			2,828,922
Accumulated other comprehensive loss		(3,160	)		(2,639	)
Treasury stock, at cost		(1,305,935	)		(1,119,063	)
Retained earnings		355,339			358,093
Total stockholders' equity		1,937,919			2,065,433
Total liabilities and stockholders' equity	$	3,120,503		$	3,269,994

		NETSCOUT SYSTEMS, INC.
		Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures
		(In thousands, except per share data)
		(Unaudited)
			Three Months Ended						Three Months Ended			Twelve Months Ended
			March 31,						December 31,			March 31,
				2020			2019			2019			2020			2019
Product Revenue (GAAP)			$	116,538		$	125,474		$	143,309		$	438,341		$	467,289
Product deferred revenue fair value adjustment				-			-			-			-			391
Non-GAAP Product Revenue			$	116,538		$	125,474		$	143,309		$	438,341		$	467,680
Service Revenue (GAAP)			$	112,813		$	109,528		$	116,715		$	453,479		$	442,629
Service deferred revenue fair value adjustment				48			242			48			192			1,199
Non-GAAP Service Revenue			$	112,861		$	109,770		$	116,763		$	453,671		$	443,828
Revenue (GAAP)			$	229,351		$	235,002		$	260,024		$	891,820		$	909,918
Product deferred revenue fair value adjustment				-			-			-			-			391
Service deferred revenue fair value adjustment				48			242			48			192			1,199
Non-GAAP Revenue			$	229,399		$	235,244		$	260,072		$	892,012		$	911,508
Gross Profit (GAAP)			$	166,619		$	176,466		$	194,439		$	649,628		$	655,791
Product deferred revenue fair value adjustment				-			-			-			-			391
Service deferred revenue fair value adjustment				48			242			48			192			1,199
Share-based compensation expense (1)				1,416			1,540			1,506			6,843			7,422
Amortization of acquired intangible assets (2)				6,297			7,551			6,222			24,974			31,238
Acquisition related depreciation expense (6)				5			12			7			31			75
Transitional service agreement income (7)				-			-			-			-			2
Non-GAAP Gross Profit			$	174,385		$	185,811		$	202,222		$	681,668		$	696,118
Income (loss) from Operations (GAAP)			$	12,562		$	29,231		$	36,819		$	17,638		$	(71,580	)
Product deferred revenue fair value adjustment				-			-			-			-			391
Service deferred revenue fair value adjustment				48			242			48			192			1,199
Share-based compensation expense (1)				10,900			12,186			11,361			50,861			56,328
Amortization of acquired intangible assets (2)				22,407			23,977			22,342			89,479			105,543
Business development and integration expense (3)				335			488			20			373			874
New standard implementation expense (4)				(5	)		26			1			5			914
Compensation for post-combination services (5)				125			72			125			578			789
Restructuring charges				2,208			1,179			193			2,674			18,693
Impairment of intangible assets				-			-			-			-			35,871
Acquisition related depreciation expense (6)				61			121			61			312			905
Loss on divestiture				-			295			-			-			9,472
Transitional service agreement income (7)				53			912			(25	)		1,212			2,186
Non-GAAP Income from Operations			$	48,694		$	68,729		$	70,945		$	163,324		$	161,585
Net Income (loss) (GAAP)			$	7,336		$	19,211		$	36,725		$	(2,754	)	$	(73,324	)
Product deferred revenue fair value adjustment				-			-			-			-			391
Service deferred revenue fair value adjustment				48			242			48			192			1,199
Share-based compensation expense (1)				10,900			12,186			11,361			50,861			56,328
Amortization of acquired intangible assets (2)				22,407			23,977			22,342			89,479			105,543
Business development and integration expense (3)				335			488			20			373			874
New standard implementation expense (4)				(5	)		26			1			5			914
Compensation for post-combination services (5)				125			72			125			578			789
Restructuring charges				2,208			1,179			193			2,674			18,693
Impairment of intangible assets				-			-			-			-			35,871
Acquisition related depreciation expense (6)				61			121			61			312			905
Loss on divestiture				-			295			-			-			9,472
Transitional service agreement income (7)				-			-			-			-			(45	)
Change in contingent consideration				245			1,495			-			762			1,495
Income tax adjustments (8)				(6,239	)		(7,314	)		(16,182	)		(23,415	)		(49,877	)
Non-GAAP Net Income			$	37,421		$	51,978		$	54,694		$	119,067		$	109,228
Diluted Net Income (loss) Per Share (GAAP)			$	0.10		$	0.24		$	0.49		$	(0.04	)	$	(0.93	)
Share impact of non-GAAP adjustments identified above				0.40			0.42			0.24			1.61			2.31
Non-GAAP Diluted Net Income Per Share			$	0.50		$	0.66		$	0.73		$	1.57		$	1.38
Shares used in computing non-GAAP diluted net income per share				74,134			78,562			74,700			75,837			79,323
		NETSCOUT SYSTEMS, INC.
		Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued
		(In thousands)
		(Unaudited)
			Three Months Ended						Three Months Ended			Twelve Months Ended
			March 31,						December 31,			March 31,
				2020			2019			2019			2020			2019
(1	)	Share-based compensation expense included in these amounts
		is as follows:
		Cost of product revenue	$	226		$	275		$	231		$	1,069		$	1,463
		Cost of service revenue		1,190			1,265			1,275			5,774			5,959
		Research and development		3,435			3,777			3,437			15,511			17,321
		Sales and marketing		3,752			3,872			3,910			17,085			18,923
		General and administrative		2,297			2,997			2,508			11,422			12,662
		Total share-based compensation expense	$	10,900		$	12,186		$	11,361		$	50,861		$	56,328
(2	)	Amortization expense related to acquired software and product
		technology, tradenames, customer relationships included in these
		amounts is as follows:
		Cost of product revenue	$	6,297		$	7,551		$	6,222		$	24,974		$	31,238
		Operating expenses		16,110			16,426			16,120			64,505			74,305
		Total amortization expense	$	22,407		$	23,977		$	22,342		$	89,479		$	105,543
(3	)	Business development and integration expense included in
		these amounts is as follows:
		Research and development	$	-		$	-		$	-		$	43		$	356
		General and administrative		335			488			20			330			518
		Total business development and integration expense	$	335		$	488		$	20		$	373		$	874
(4	)	New standard implementation expense included in these
		amounts is as follows:
		General and administrative	$	(5	)	$	26		$	1		$	5		$	914
		Total new standard implementation expense	$	(5	)	$	26		$	1		$	5		$	914
(5	)	Compensation for post-combination services included in these
		amounts is as follows:
		Research and development	$	125		$	85		$	125		$	578		$	705
		Sales and marketing		-			-			-			-			19
		General and administrative		-			(13	)		-			-			65
		Total compensation for post-combination services	$	125		$	72		$	125		$	578		$	789
(6	)	Acquisition related depreciation expense included in these
		amounts is as follows:
		Cost of product revenue	$	3		$	9		$	4		$	21		$	43
		Cost of service revenue		2			3			3			10			32
		Research and development		42			84			43			216			588
		Sales and marketing		9			10			8			36			77
		General and administrative		5			15			3			29			165
		Total acquisition related depreciation expense	$	61		$	121		$	61		$	312		$	905
(7	)	Transitional service agreement income included in these
		amounts is as follows:
		Cost of service revenue	$	-		$	-		$	-		$	-		$	2
		Research and development		6			101			(25	)		93			228
		Sales and marketing		8			124			-			176			302
		General and administrative		39			687			-			943			1,654
		Other Income (expense), net		(53	)		(912	)		25			(1,212	)		(2,231	)
		Total transitional service agreement income	$	-		$	-		$	-		$	-		$	(45	)
(8	)	Total income tax adjustment included in these
		amounts is as follows:
		Tax effect of non-GAAP adjustments above	$	(6,239	)	$	(7,314	)	$	(16,182	)	$	(23,415	)	$	(49,877	)
		Total income tax adjustments	$	(6,239	)	$	(7,314	)	$	(16,182	)	$	(23,415	)	$	(49,877	)

NETSCOUT SYSTEMS, INC.
Reconciliation of GAAP Revenue to Non-GAAP Organic Revenue
(In thousands)
(Unaudited)
	Three Months Ended				Twelve Months Ended
	March 31,				March 31,
		2020		2019		2020		2019
GAAP Product Revenue	$	116,538	$	125,474	$	438,341	$	467,289
Adjustments		-		-		-		391
Non-GAAP Product Revenue	$	116,538	$	125,474	$	438,341	$	467,680
HNT Tools Product Revenue		-		-		-		(13,430	)
Organic Non-GAAP Product Revenue	$	116,538	$	125,474	$	438,341	$	454,250
GAAP Service Revenue	$	112,813	$	109,528	$	453,479	$	442,629
Adjustments		48		242		192		1,199
Non-GAAP Service Revenue	$	112,861	$	109,770	$	453,671	$	443,828
HNT Tools Service Revenue		-		-		-		(4,555	)
Organic Non-GAAP Service Revenue	$	112,861	$	109,770	$	453,671	$	439,273
GAAP Revenue	$	229,351	$	235,002	$	891,820	$	909,918
Adjustments		48		242		192		1,590
Non-GAAP Revenue	$	229,399	$	235,244	$	892,012	$	911,508
HNT Tools Revenue		-		-		-		(17,985	)
Organic Non-GAAP Revenue	$	229,399	$	235,244	$	892,012	$	893,523

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		Twelve Months Ended
	March 31,				December 31,		March 31,
		2020		2019	2019			2020		2019
Income (loss) from operations (GAAP)	$	12,562	$	29,231	$	36,819	$	17,638	$	(71,580	)
Previous adjustments to determine non-GAAP income from operations		36,132		39,498		34,126		145,686		233,165
Non-GAAP Income from operations		48,694		68,729		70,945		163,324		161,585
Depreciation excluding acquisition related		6,239		7,271		6,339		26,313		31,430
Non-GAAP EBITDA from operations	$	54,933	$	76,000	$	77,284	$	189,637	$	193,015

Contacts

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

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

XML

Document and Entity Information	May 07, 2020
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 07, 2020
Entity Registrant Name	NETSCOUT SYSTEMS, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-26251
Entity Tax Identification Number	04-2837575
Entity Address, Address Line One	310 Littleton Road
Entity Address, City or Town	Westford
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01886
City Area Code	978
Local Phone Number	614-4000
Entity Information, Former Legal or Registered Name	Not Applicable
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001078075
Title of 12(b) Security	Common Stock
Trading Symbol	NTCT
Security Exchange Name	NASDAQ