x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-2837575 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | ||||
Smaller reporting company | ¨ | Emerging growth company | ¨ |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | ||
December 31, 2018 | March 31, 2018 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 369,054 | $ | 369,821 | |||
Marketable securities | 105,753 | 77,941 | |||||
Accounts receivable and unbilled costs, net of allowance for doubtful accounts of $1,705 and $1,991 at December 31, 2018 and March 31, 2018, respectively | 247,690 | 213,438 | |||||
Inventories and deferred costs | 28,909 | 34,774 | |||||
Prepaid income taxes | 23,826 | 22,932 | |||||
Prepaid expenses and other current assets (related party balances of $336 and $3,187 at December 31, 2018 and March 31, 2018, respectively) | 27,001 | 33,502 | |||||
Total current assets | 802,233 | 752,408 | |||||
Fixed assets, net | 60,789 | 52,511 | |||||
Goodwill | 1,715,523 | 1,712,764 | |||||
Intangible assets, net | 693,763 | 831,374 | |||||
Deferred income taxes | 4,776 | 6,685 | |||||
Long-term marketable securities | 1,002 | — | |||||
Other assets | 19,298 | 12,866 | |||||
Total assets | $ | 3,297,384 | $ | 3,368,608 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable (related party balances of $601 and $369 at December 31, 2018 and March 31, 2018, respectively) | $ | 29,432 | $ | 30,133 | |||
Accrued compensation | 71,612 | 46,552 | |||||
Accrued other | 24,185 | 33,164 | |||||
Income taxes payable | 210 | 1,526 | |||||
Deferred revenue and customer deposits | 260,926 | 301,925 | |||||
Total current liabilities | 386,365 | 413,300 | |||||
Other long-term liabilities | 20,057 | 8,308 | |||||
Deferred tax liability | 129,284 | 151,563 | |||||
Accrued long-term retirement benefits | 33,320 | 35,246 | |||||
Long-term deferred revenue and customer deposits | 84,881 | 91,409 | |||||
Long-term debt | 600,000 | 600,000 | |||||
Total liabilities | 1,253,907 | 1,299,826 | |||||
Commitments and contingencies (Note 13) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $0.001 par value: | |||||||
5,000,000 shares authorized; no shares issued or outstanding at December 31, 2018 and March 31, 2018 | — | — | |||||
Common stock, $0.001 par value: | |||||||
300,000,000 shares authorized; 119,417,029 and 117,744,913 shares issued and 77,831,786 and 80,270,023 shares outstanding at December 31, 2018 and March 31, 2018, respectively | 119 | 117 | |||||
Additional paid-in capital | 2,809,901 | 2,665,120 | |||||
Accumulated other comprehensive income (loss) | (608 | ) | 2,895 | ||||
Treasury stock at cost, 41,585,243 and 37,474,890 shares at December 31, 2018 and March 31, 2018, respectively | (1,104,042 | ) | (995,843 | ) | |||
Retained earnings | 338,107 | 396,493 | |||||
Total stockholders' equity | 2,043,477 | 2,068,782 | |||||
Total liabilities and stockholders' equity | $ | 3,297,384 | $ | 3,368,608 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Product | $ | 134,135 | $ | 146,569 | $ | 341,815 | $ | 398,201 | |||||||
Service | 111,873 | 122,375 | 333,101 | 353,362 | |||||||||||
Total revenue | 246,008 | 268,944 | 674,916 | 751,563 | |||||||||||
Cost of revenue: | |||||||||||||||
Product (related party balances of $0, $0, $0 and $245, respectively) | 40,517 | 39,810 | 107,974 | 120,643 | |||||||||||
Service (related party balances of $83, $192, $403 and $480, respectively) | 29,067 | 24,699 | 87,617 | 84,671 | |||||||||||
Total cost of revenue | 69,584 | 64,509 | 195,591 | 205,314 | |||||||||||
Gross profit | 176,424 | 204,435 | 479,325 | 546,249 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development (related party balances of $0, $0, $2 and $3, respectively) | 49,925 | 44,287 | 161,347 | 161,762 | |||||||||||
Sales and marketing (related party balances of $0, $0, $0 and $2, respectively) | 74,024 | 77,270 | 224,207 | 239,897 | |||||||||||
General and administrative (related party balances of $0, $753, $15 and $1,697, respectively) | 22,788 | 23,033 | 74,141 | 82,400 | |||||||||||
Amortization of acquired intangible assets | 16,433 | 18,221 | 57,879 | 54,902 | |||||||||||
Restructuring charges | 13,895 | 3,363 | 17,514 | 3,821 | |||||||||||
Impairment of intangible assets | — | — | 35,871 | — | |||||||||||
Loss on divestiture of business | — | — | 9,177 | — | |||||||||||
Total operating expenses | 177,065 | 166,174 | 580,136 | 542,782 | |||||||||||
Income (loss) from operations | (641 | ) | 38,261 | (100,811 | ) | 3,467 | |||||||||
Interest and other expense, net: | |||||||||||||||
Interest income | 1,455 | 307 | 3,688 | 1,196 | |||||||||||
Interest expense | (7,005 | ) | (2,798 | ) | (19,320 | ) | (7,914 | ) | |||||||
Other income (expense) | 986 | (616 | ) | 429 | (2,847 | ) | |||||||||
Total interest and other expense, net | (4,564 | ) | (3,107 | ) | (15,203 | ) | (9,565 | ) | |||||||
Income (loss) before income tax benefit | (5,205 | ) | 35,154 | (116,014 | ) | (6,098 | ) | ||||||||
Income tax benefit | (1,602 | ) | (54,531 | ) | (23,479 | ) | (69,093 | ) | |||||||
Net income (loss) | $ | (3,603 | ) | $ | 89,685 | $ | (92,535 | ) | $ | 62,995 | |||||
Basic net income (loss) per share | $ | (0.05 | ) | $ | 1.03 | $ | (1.17 | ) | $ | 0.71 | |||||
Diluted net income (loss) per share | $ | (0.05 | ) | $ | 1.02 | $ | (1.17 | ) | $ | 0.70 | |||||
Weighted average common shares outstanding used in computing: | |||||||||||||||
Net income (loss) per share - basic | 77,774 | 87,210 | 78,916 | 88,985 | |||||||||||
Net income (loss) per share - diluted | 77,774 | 87,860 | 78,916 | 89,882 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | (3,603 | ) | $ | 89,685 | $ | (92,535 | ) | $ | 62,995 | |||||
Other comprehensive income (loss): | |||||||||||||||
Cumulative translation adjustments | (1,170 | ) | (195 | ) | (3,319 | ) | 3,435 | ||||||||
Changes in market value of investments: | |||||||||||||||
Changes in unrealized gains (losses), net of (benefit) taxes of $12, ($22), $21 and ($16), respectively | 12 | (41 | ) | 35 | (32 | ) | |||||||||
Total net change in market value of investments | 12 | (41 | ) | 35 | (32 | ) | |||||||||
Changes in market value of derivatives: | |||||||||||||||
Changes in market value of derivatives, net of (benefit) taxes of ($53), ($47), ($193) and $299, respectively | (162 | ) | (66 | ) | (601 | ) | 497 | ||||||||
Reclassification adjustment for net gains (losses) included in net income (loss), net of taxes (benefit) of $51, ($96), $122 and ($238), respectively | 157 | (157 | ) | 382 | (382 | ) | |||||||||
Total net change in market value of derivatives | (5 | ) | (223 | ) | (219 | ) | 115 | ||||||||
Other comprehensive income (loss) | (1,163 | ) | (459 | ) | (3,503 | ) | 3,518 | ||||||||
Total comprehensive income (loss) | $ | (4,766 | ) | $ | 89,226 | $ | (96,038 | ) | $ | 66,513 |
Nine Months Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (92,535 | ) | $ | 62,995 | ||
Adjustments to reconcile net income (loss) to cash provided by operating activities, net of the effects of acquisitions: | |||||||
Depreciation and amortization | 106,509 | 112,859 | |||||
Loss on divestiture of business | 7,390 | — | |||||
Loss on disposal of fixed assets | 181 | 458 | |||||
Deal-related compensation expense and accretion charges | 102 | 114 | |||||
Share-based compensation expense | 44,142 | 35,254 | |||||
Accretion of contingent consideration | (64 | ) | — | ||||
Impairment of intangible assets | 35,871 | — | |||||
Deferred income taxes | (27,667 | ) | (100,042 | ) | |||
Other (gains) losses | (206 | ) | 68 | ||||
Changes in assets and liabilities | |||||||
Accounts receivable and unbilled costs | (33,928 | ) | 47,439 | ||||
Due from related party | 171 | 554 | |||||
Inventories | 2,683 | (1,222 | ) | ||||
Prepaid expenses and other assets | 5,582 | 29,324 | |||||
Accounts payable | 582 | (5,378 | ) | ||||
Accrued compensation and other expenses | 28,385 | (18,884 | ) | ||||
Due to related party | 232 | (82 | ) | ||||
Income taxes payable | (1,754 | ) | (1,286 | ) | |||
Deferred revenue | (6,162 | ) | (13,253 | ) | |||
Net cash provided by operating activities | 69,514 | 148,918 | |||||
Cash flows from investing activities: | |||||||
Purchase of marketable securities | (184,104 | ) | (71,323 | ) | |||
Proceeds from maturity of marketable securities | 155,346 | 180,018 | |||||
Purchase of fixed assets | (19,462 | ) | (12,352 | ) | |||
Payments related to the divestiture of business | (2,911 | ) | — | ||||
Purchase of intangible assets | — | (505 | ) | ||||
Increase in deposits | (97 | ) | (26 | ) | |||
Acquisition of businesses, net of cash acquired | — | (8,334 | ) | ||||
Contingent purchase consideration | — | 523 | |||||
Capitalized software development costs | (132 | ) | (136 | ) | |||
Net cash (used in) provided by investing activities | (51,360 | ) | 87,865 | ||||
Cash flows from financing activities: | |||||||
Issuance of common stock under stock plans | 2 | 1 | |||||
Payment of contingent consideration | (2,851 | ) | (660 | ) | |||
Treasury stock repurchases | — | (200,000 | ) | ||||
Tax withholding on restricted stock units | (11,415 | ) | (12,957 | ) | |||
Net cash used in financing activities | (14,264 | ) | (213,616 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (5,380 | ) | 3,929 | ||||
Net (decrease) increase in cash and cash equivalents | (1,490 | ) | 27,096 | ||||
Cash and cash equivalents and restricted cash, beginning of period | 370,731 | 305,726 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 369,241 | $ | 332,822 | |||
Supplemental disclosures: | |||||||
Non-cash transactions: | |||||||
Transfers of inventory to fixed assets | $ | 2,152 | $ | 5,556 | |||
Additions to property, plant and equipment included in accounts payable | $ | 1,190 | $ | 314 | |||
Tenant improvement allowance | $ | 10,171 | $ | — | |||
Issuance of common stock under employee stock plans | $ | 7,575 | $ | 8,603 | |||
Contingent consideration related to acquisition | $ | — | $ | 523 | |||
Fair value of contingent consideration received as partial consideration for divestiture of business | $ | 2,257 | $ | — |
Balance at March 31, 2018 | Adjustments from Adopting Topic 606 | Balance at April 1, 2018 | |||||||||
ASSETS: | |||||||||||
Accounts receivable and unbilled costs | $ | 213,438 | $ | 1,195 | $ | 214,633 | |||||
Prepaid expenses and other current assets | 33,502 | 4,626 | 38,128 | ||||||||
Other assets | 12,866 | 4,748 | 17,614 | ||||||||
LIABILITIES: | |||||||||||
Deferred revenue and customer deposits | 301,925 | (30,227 | ) | 271,698 | |||||||
Deferred tax liability | 151,563 | 7,899 | 159,462 | ||||||||
Long-term deferred revenue and customer deposits | 91,409 | (1,252 | ) | 90,157 | |||||||
STOCKHOLDERS' EQUITY: | |||||||||||
Retained earnings | 396,493 | 34,149 | 430,642 |
December 31, 2018 | |||||||||||
As Reported | Balance without Adoption of Topic 606 | Effect of Change Higher (Lower) | |||||||||
ASSETS: | |||||||||||
Accounts receivable and unbilled costs | $ | 247,690 | $ | 237,738 | $ | 9,952 | |||||
Inventories and deferred costs | 28,909 | 29,130 | (221 | ) | |||||||
Prepaid expenses and other current assets | 27,001 | 23,434 | 3,567 | ||||||||
Other assets | 19,298 | 13,851 | 5,447 | ||||||||
LIABILITIES: | |||||||||||
Deferred revenue and customer deposits | 260,926 | 278,939 | (18,013 | ) | |||||||
Deferred tax liability | 129,284 | 123,333 | 5,951 | ||||||||
Long-term deferred revenue and customer deposits | 84,881 | 98,239 | (13,358 | ) | |||||||
STOCKHOLDERS' EQUITY: | |||||||||||
Retained earnings | 338,107 | 311,636 | 26,471 |
Three Months Ended December 31, 2018 | Nine Months Ended December 31, 2018 | ||||||||||||||||||||||
As Reported | Balance without Adoption of Topic 606 | Effect of Change Higher (Lower) | As Reported | Balance without Adoption of Topic 606 | Effect of Change Higher (Lower) | ||||||||||||||||||
Total revenues | $ | 246,008 | $ | 245,318 | $ | 690 | $ | 674,916 | $ | 664,666 | $ | 10,250 | |||||||||||
Total cost of revenue | 69,584 | 69,609 | (25 | ) | 195,591 | 195,370 | 221 | ||||||||||||||||
Sales and marketing expense | 74,024 | 74,607 | (583 | ) | 224,207 | 223,804 | 403 | ||||||||||||||||
Income tax benefit | (1,602 | ) | (2,001 | ) | 399 | (23,479 | ) | (25,427 | ) | 1,948 | |||||||||||||
Net loss | (3,603 | ) | (4,502 | ) | 899 | (92,535 | ) | (100,213 | ) | 7,678 | |||||||||||||
Basic net loss per share | $ | (0.05 | ) | $ | (0.06 | ) | $ | 0.01 | $ | (1.17 | ) | $ | (1.27 | ) | $ | 0.10 | |||||||
Diluted net loss per share | $ | (0.05 | ) | $ | (0.06 | ) | $ | 0.01 | $ | (1.17 | ) | $ | (1.27 | ) | $ | 0.10 |
April 1, 2018 | December 31, 2018 | Increase/ (Decrease) | |||||||||
ASSETS: | |||||||||||
Customer accounts receivable | $ | 205,299 | $ | 267,409 | $ | 62,110 | |||||
Unbilled receivables | 4,338 | 3,404 | (934 | ) | |||||||
Other receivables | 4,996 | 3,106 | (1,890 | ) | |||||||
Long-term unbilled receivables | 2,254 | 3,254 | 1,000 | ||||||||
$ | 216,887 | $ | 277,173 | $ | 60,286 | ||||||
LIABILITIES: | |||||||||||
Deferred revenue | $ | 271,698 | $ | 260,926 | $ | (10,772 | ) | ||||
Deferred revenue, long-term | 90,157 | 84,881 | (5,276 | ) | |||||||
$ | 361,855 | $ | 345,807 | $ | (16,048 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of product revenue | $ | 375 | $ | 301 | $ | 1,188 | $ | 807 | |||||||
Cost of service revenue | 1,519 | 1,287 | 4,694 | 3,597 | |||||||||||
Research and development | 3,979 | 3,730 | 13,544 | 10,820 | |||||||||||
Sales and marketing | 4,649 | 4,022 | 15,051 | 11,613 | |||||||||||
General and administrative | 3,237 | 3,085 | 9,665 | 8,417 | |||||||||||
$ | 13,759 | $ | 12,425 | $ | 44,142 | $ | 35,254 |
December 31, 2018 | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||||||
Cash and cash equivalents | $ | 369,054 | $ | 369,821 | $ | 331,912 | $ | 304,880 | |||||||
Restricted cash | 187 | 910 | 910 | 846 | |||||||||||
Total cash, cash equivalents and restricted cash | $ | 369,241 | $ | 370,731 | $ | 332,822 | $ | 305,726 |
Amortized Cost | Unrealized (Losses) Gains | Fair Value | |||||||||
Type of security: | |||||||||||
U.S. government and municipal obligations | $ | 53,972 | $ | (7 | ) | $ | 53,965 | ||||
Commercial paper | 50,783 | — | 50,783 | ||||||||
Corporate bonds | 1,005 | — | 1,005 | ||||||||
Total short-term marketable securities | 105,760 | (7 | ) | 105,753 | |||||||
Corporate bonds | 1,001 | 1 | 1,002 | ||||||||
Total long-term marketable securities | 1,001 | 1 | 1,002 | ||||||||
Total marketable securities | $ | 106,761 | $ | (6 | ) | $ | 106,755 |
Amortized Cost | Unrealized Losses | Fair Value | |||||||||
Type of security: | |||||||||||
U.S. government and municipal obligations | $ | 42,246 | $ | (60 | ) | $ | 42,186 | ||||
Commercial paper | 33,003 | — | 33,003 | ||||||||
Corporate bonds | 2,754 | (2 | ) | 2,752 | |||||||
Total short-term marketable securities | 78,003 | (62 | ) | 77,941 | |||||||
Total long-term marketable securities | — | — | — | ||||||||
Total marketable securities | $ | 78,003 | $ | (62 | ) | $ | 77,941 |
December 31, 2018 | March 31, 2018 | ||||||
Available-for-sale securities: | |||||||
Due in 1 year or less | $ | 105,753 | $ | 77,941 | |||
Due after 1 year through 5 years | 1,002 | — | |||||
$ | 106,755 | $ | 77,941 |
Fair Value Measurements at | |||||||||||||||
December 31, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
ASSETS: | |||||||||||||||
Cash and cash equivalents | $ | 369,054 | $ | — | $ | — | $ | 369,054 | |||||||
U.S. government and municipal obligations | 35,668 | 18,297 | — | 53,965 | |||||||||||
Commercial paper | — | 50,783 | — | 50,783 | |||||||||||
Corporate bonds | 2,007 | — | — | 2,007 | |||||||||||
Derivative financial instruments | — | 21 | — | 21 | |||||||||||
Contingent consideration | — | — | 2,321 | 2,321 | |||||||||||
$ | 406,729 | $ | 69,101 | $ | 2,321 | $ | 478,151 | ||||||||
LIABILITIES: | |||||||||||||||
Derivative financial instruments | — | (224 | ) | — | (224 | ) | |||||||||
$ | — | $ | (224 | ) | $ | — | $ | (224 | ) |
Fair Value Measurements at | |||||||||||||||
March 31, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
ASSETS: | |||||||||||||||
Cash and cash equivalents | $ | 369,821 | $ | — | $ | — | $ | 369,821 | |||||||
U.S. government and municipal obligations | 14,513 | 27,673 | — | 42,186 | |||||||||||
Commercial paper | — | 33,003 | — | 33,003 | |||||||||||
Corporate bonds | 2,752 | — | — | 2,752 | |||||||||||
Derivative financial instruments | — | 122 | — | 122 | |||||||||||
$ | 387,086 | $ | 60,798 | $ | — | $ | 447,884 | ||||||||
LIABILITIES: | |||||||||||||||
Contingent purchase consideration | $ | — | $ | — | $ | (5,464 | ) | $ | (5,464 | ) | |||||
Derivative financial instruments | — | (40 | ) | — | (40 | ) | |||||||||
$ | — | $ | (40 | ) | $ | (5,464 | ) | $ | (5,504 | ) |
Contingent Purchase Consideration | Contingent Consideration | ||||||
Balance at March 31, 2018 | $ | (5,464 | ) | $ | — | ||
Contingent consideration pursuant to divestiture of HNT tools business | — | 2,257 | |||||
Change in fair value of contingent consideration | (102 | ) | 64 | ||||
Payments of contingent consideration | 5,566 | — | |||||
Balance at December 31, 2018 | $ | — | $ | 2,321 |
December 31, 2018 | March 31, 2018 | ||||||
Raw materials | $ | 16,462 | $ | 20,860 | |||
Work in process | 989 | 2,589 | |||||
Finished goods | 6,754 | 8,500 | |||||
Deferred costs | 4,704 | 2,825 | |||||
$ | 28,909 | $ | 34,774 |
Balance at March 31, 2018 | $ | 1,712,764 | |
Divestiture of the HNT tools business | (4,414 | ) | |
Foreign currency translation impact | 7,173 | ||
Balance at December 31, 2018 | $ | 1,715,523 |
Cost | Accumulated Amortization | Net | |||||||||
Developed technology | $ | 242,270 | $ | (160,816 | ) | $ | 81,454 | ||||
Customer relationships | 773,004 | (202,940 | ) | 570,064 | |||||||
Distributor relationships and technology licenses | 6,882 | (4,880 | ) | 2,002 | |||||||
Definite-lived trademark and trade name | 39,303 | (19,267 | ) | 20,036 | |||||||
Core technology | 7,200 | (6,781 | ) | 419 | |||||||
Net beneficial leases | 336 | (336 | ) | — | |||||||
Non-compete agreements | 293 | (293 | ) | — | |||||||
Leasehold interest | 500 | (500 | ) | — | |||||||
Backlog | 16,383 | (16,383 | ) | — | |||||||
Capitalized software | 3,315 | (2,417 | ) | 898 | |||||||
Other | 1,208 | (918 | ) | 290 | |||||||
$ | 1,090,694 | $ | (415,531 | ) | $ | 675,163 |
Cost | Accumulated Amortization | Net | |||||||||
Developed technology | $ | 259,758 | $ | (148,937 | ) | $ | 110,821 | ||||
Customer relationships | 845,490 | (176,425 | ) | 669,065 | |||||||
Distributor relationships and technology licenses | 9,019 | (5,389 | ) | 3,630 | |||||||
Definite-lived trademark and trade name | 44,387 | (18,138 | ) | 26,249 | |||||||
Core technology | 7,345 | (6,712 | ) | 633 | |||||||
Net beneficial leases | 336 | (336 | ) | — | |||||||
Non-compete agreements | 317 | (317 | ) | — | |||||||
Leasehold interest | 2,600 | (2,130 | ) | 470 | |||||||
Backlog | 18,544 | (18,544 | ) | — | |||||||
Capitalized software | 3,183 | (1,621 | ) | 1,562 | |||||||
Other | 1,247 | (903 | ) | 344 | |||||||
$ | 1,192,226 | $ | (379,452 | ) | $ | 812,774 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Amortization of intangible assets included as: | |||||||||||||||
Product revenue | $ | — | $ | 3 | $ | — | $ | 7 | |||||||
Cost of product revenue | 8,176 | 10,088 | 25,858 | 30,032 | |||||||||||
Operating expense | 16,438 | 18,227 | 57,894 | 54,919 | |||||||||||
$ | 24,614 | $ | 28,318 | $ | 83,752 | $ | 84,958 |
2019 (remaining three months) | $ | 24,619 | |
2020 | 90,926 | ||
2021 | 79,645 | ||
2022 | 69,234 | ||
2023 | 61,515 | ||
Thereafter | 349,224 | ||
$ | 675,163 |
Notional Amounts (a) | Prepaid Expenses and Other Current Assets | Accrued Other | |||||||||||||||||||||
December 31, 2018 | March 31, 2018 | December 31, 2018 | March 31, 2018 | December 31, 2018 | March 31, 2018 | ||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||
Forward contracts | $ | 9,071 | $ | 11,225 | $ | 21 | $ | 122 | $ | 224 | $ | 40 |
(a) | Notional amounts represent the gross contract/notional amount of the derivatives outstanding. |
Derivatives in Cash Flow Hedging Relationships | Effective Portion | Ineffective Portion | |||||||||||||||||||||||||
Loss Recognized in OCI on Derivative (a) | Gain (Loss) Reclassified from Accumulated OCI into Income (b) | Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c) | |||||||||||||||||||||||||
December 31, 2018 | December 31, 2017 | Location | December 31, 2018 | December 31, 2017 | Location | December 31, 2018 | December 31, 2017 | ||||||||||||||||||||
Forward contracts | $ | (215 | ) | $ | (113 | ) | Research and development | $ | 60 | $ | (24 | ) | Research and development | $ | 26 | $ | 9 | ||||||||||
Sales and marketing | 148 | (229 | ) | Sales and marketing | (60 | ) | (28 | ) | |||||||||||||||||||
$ | (215 | ) | $ | (113 | ) | $ | 208 | $ | (253 | ) | $ | (34 | ) | $ | (19 | ) |
(a) | The amount represents the change in fair value of derivative contracts due to changes in spot rates. |
(b) | The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings. |
(c) | The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges. |
Derivatives in Cash Flow Hedging Relationships | Effective Portion | Ineffective Portion | |||||||||||||||||||||||||
Gain (Loss) Recognized in OCI on Derivative (a) | Gain (Loss) Reclassified from Accumulated OCI into Income (b) | Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c) | |||||||||||||||||||||||||
December 31, 2018 | December 31, 2017 | Location | December 31, 2018 | December 31, 2017 | Location | December 31, 2018 | December 31, 2017 | ||||||||||||||||||||
Forward contracts | $ | (794 | ) | $ | 796 | Research and development | $ | 147 | $ | (106 | ) | Research and development | $ | 58 | $ | 46 | |||||||||||
Sales and marketing | 357 | (514 | ) | Sales and marketing | (171 | ) | (102 | ) | |||||||||||||||||||
$ | (794 | ) | $ | 796 | $ | 504 | $ | (620 | ) | $ | (113 | ) | $ | (56 | ) |
(a) | The amount represents the change in fair value of derivative contracts due to changes in spot rates. |
(b) | The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings. |
(c) | The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges. |
Q3 FY 2018 Plan | VSP | ||||||||||||||
Employee-Related | Facility-Related | Employee-Related | Total | ||||||||||||
Balance at March 31, 2018 | $ | 3,696 | $ | — | $ | — | $ | 3,696 | |||||||
Restructuring charges to operations | 1,017 | 643 | 16,104 | 17,764 | |||||||||||
Cash payments | (4,241 | ) | (458 | ) | (14,897 | ) | (19,596 | ) | |||||||
Other adjustments | (462 | ) | (185 | ) | 74 | (573 | ) | ||||||||
Balance at December 31, 2018 | $ | 10 | $ | — | $ | 1,281 | $ | 1,291 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Service cost | $ | 61 | $ | 67 | $ | 187 | $ | 208 | |||||||
Interest cost | 118 | 132 | 362 | 405 | |||||||||||
Net periodic pension cost | $ | 179 | $ | 199 | $ | 549 | $ | 613 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Net income (loss) | $ | (3,603 | ) | $ | 89,685 | $ | (92,535 | ) | $ | 62,995 | |||||
Denominator: | |||||||||||||||
Denominator for basic net income (loss) per share - weighted average common shares outstanding | 77,774 | 87,210 | 78,916 | 88,985 | |||||||||||
Dilutive common equivalent shares: | |||||||||||||||
Weighted average restricted stock units | — | 650 | — | 897 | |||||||||||
Denominator for diluted net income (loss) per share - weighted average shares outstanding | 77,774 | 87,860 | 78,916 | 89,882 | |||||||||||
Net income (loss) per share: | |||||||||||||||
Basic net income (loss) per share | $ | (0.05 | ) | $ | 1.03 | $ | (1.17 | ) | $ | 0.71 | |||||
Diluted net income (loss) per share | $ | (0.05 | ) | $ | 1.02 | $ | (1.17 | ) | $ | 0.70 |
Three Months Ended | Nine Months Ended | ||||||||||
December 31, | December 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Restricted stock units | 435 | 1,873 | 733 | 1,405 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
United States | $ | 148,379 | $ | 156,511 | $ | 412,377 | $ | 448,761 | |||||||
Europe | 45,058 | 53,938 | 109,529 | 132,488 | |||||||||||
Asia | 18,187 | 23,076 | 54,285 | 67,804 | |||||||||||
Rest of the world | 34,384 | 35,419 | 98,725 | 102,510 | |||||||||||
$ | 246,008 | $ | 268,944 | $ | 674,916 | $ | 751,563 |
December 31, 2018 | March 31, 2018 | ||||||
Danaher | $ | 1 | $ | 252 | |||
Fortive | 335 | 2,935 | |||||
$ | 336 | $ | 3,187 |
December 31, 2018 | March 31, 2018 | ||||||
Danaher | $ | 241 | $ | — | |||
Fortive | 360 | 369 | |||||
$ | 601 | $ | 369 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Danaher: | |||||||||||||||
Cost of product revenue | $ | — | $ | — | $ | — | $ | — | |||||||
Cost of service revenue | — | — | — | — | |||||||||||
Research and development expenses | — | — | — | — | |||||||||||
Sales and marketing | — | — | — | 2 | |||||||||||
General and administrative expenses | — | 3 | — | 7 | |||||||||||
$ | — | $ | 3 | $ | — | $ | 9 | ||||||||
Fortive: | |||||||||||||||
Cost of product revenue | $ | — | $ | — | $ | — | $ | 245 | |||||||
Cost of service revenue | 83 | 192 | 403 | 480 | |||||||||||
Research and development expenses | — | — | 2 | 3 | |||||||||||
Sales and marketing | — | — | — | — | |||||||||||
General and administrative expenses | — | 750 | 15 | 1,690 | |||||||||||
$ | 83 | $ | 942 | $ | 420 | $ | 2,418 |
Nine Months Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Due from related party: | |||||||
Danaher | $ | 57 | $ | 154 | |||
Fortive | 114 | 400 | |||||
Total | $ | 171 | $ | 554 | |||
Due to related party: | |||||||
Danaher | $ | 241 | $ | — | |||
Fortive | (9 | ) | (82 | ) | |||
Total | $ | 232 | $ | (82 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP revenue | $ | 246,008 | $ | 268,944 | $ | 674,916 | $ | 751,563 | |||||||
Product deferred revenue fair value adjustment | — | 719 | 391 | 2,154 | |||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 957 | 7,081 | |||||||||||
Amortization of acquired intangible assets | — | 3 | — | 7 | |||||||||||
Non-GAAP revenue | $ | 246,251 | $ | 272,011 | $ | 676,264 | $ | 760,805 | |||||||
GAAP gross profit | $ | 176,424 | $ | 204,435 | $ | 479,325 | $ | 546,249 | |||||||
Product deferred revenue fair value adjustment | — | 719 | 391 | 2,154 | |||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 957 | 7,081 | |||||||||||
Share-based compensation expense | 1,894 | 1,588 | 5,882 | 4,404 | |||||||||||
Amortization of acquired intangible assets | 7,554 | 9,314 | 23,687 | 27,864 | |||||||||||
Business development and integration expense | — | (405 | ) | — | 244 | ||||||||||
Acquisition related depreciation expense | 13 | 33 | 63 | 111 | |||||||||||
Transitional service agreement income | — | — | 2 | — | |||||||||||
Non-GAAP gross profit | $ | 186,128 | $ | 218,029 | $ | 510,307 | $ | 588,107 | |||||||
GAAP income (loss) from operations | $ | (641 | ) | $ | 38,261 | $ | (100,811 | ) | $ | 3,467 | |||||
Product deferred revenue fair value adjustment | — | 719 | 391 | 2,154 | |||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 957 | 7,081 | |||||||||||
Share-based compensation expense | 13,759 | 12,425 | 44,142 | 35,254 | |||||||||||
Amortization of acquired intangible assets | 23,987 | 27,535 | 81,566 | 82,766 | |||||||||||
Business development and integration expense | 1 | (2,335 | ) | 386 | 2,577 | ||||||||||
New standard implementation expense | 72 | 903 | 888 | 1,334 | |||||||||||
Compensation for post-combination services | 99 | 225 | 717 | 866 | |||||||||||
Restructuring charges | 13,895 | 3,363 | 17,514 | 3,821 | |||||||||||
Impairment of intangible assets | — | — | 35,871 | — | |||||||||||
Acquisition related depreciation expense | 122 | 498 | 784 | 1,559 | |||||||||||
Loss on divestiture | — | — | 9,177 | — | |||||||||||
Transitional service agreement income | 1,055 | — | 1,274 | — | |||||||||||
Non-GAAP income from operations | $ | 52,592 | $ | 83,939 | $ | 92,856 | $ | 140,879 |
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP net income (loss) | $ | (3,603 | ) | $ | 89,685 | $ | (92,535 | ) | $ | 62,995 | |||||
Product deferred revenue fair value adjustment | — | 719 | 391 | 2,154 | |||||||||||
Service deferred revenue fair value adjustment | 243 | 2,345 | 957 | 7,081 | |||||||||||
Share-based compensation expense | 13,759 | 12,425 | 44,142 | 35,254 | |||||||||||
Amortization of acquired intangible assets | 23,987 | 27,535 | 81,566 | 82,766 | |||||||||||
Business development and integration expense | 1 | (2,335 | ) | 386 | 2,577 | ||||||||||
New standard implementation expense | 72 | 903 | 888 | 1,334 | |||||||||||
Compensation for post-combination services | 99 | 225 | 717 | 866 | |||||||||||
Restructuring charges | 13,895 | 3,363 | 17,514 | 3,821 | |||||||||||
Impairment of intangible assets | — | — | 35,871 | — | |||||||||||
Acquisition-related depreciation expense | 122 | 498 | 784 | 1,559 | |||||||||||
Loss on divestiture | — | — | 9,177 | — | |||||||||||
Transitional service agreement income | (45 | ) | — | (45 | ) | — | |||||||||
Income tax adjustments | (13,334 | ) | (74,640 | ) | (42,563 | ) | (105,861 | ) | |||||||
Non-GAAP net income | $ | 35,196 | $ | 60,723 | $ | 57,250 | $ | 94,546 | |||||||
GAAP diluted net income (loss) per share | $ | (0.05 | ) | $ | 1.02 | $ | (1.17 | ) | $ | 0.70 | |||||
Per share impact of non-GAAP adjustments identified above | 0.50 | (0.33 | ) | 1.89 | 0.35 | ||||||||||
Non-GAAP diluted net income per share | $ | 0.45 | $ | 0.69 | $ | 0.72 | $ | 1.05 | |||||||
GAAP income (loss) from operations | $ | (641 | ) | $ | 38,261 | $ | (100,811 | ) | $ | 3,467 | |||||
Previous adjustments to determine non-GAAP income from operations | 53,233 | 45,678 | 193,667 | 137,412 | |||||||||||
Non-GAAP income from operations | 52,592 | 83,939 | 92,856 | 140,879 | |||||||||||
Depreciation excluding acquisition related | 7,842 | 9,617 | 24,159 | 28,534 | |||||||||||
Non-GAAP EBITDA from operations | $ | 60,434 | $ | 93,556 | $ | 117,015 | $ | 169,413 |
• | marketable securities; |
• | revenue recognition; |
• | valuation of goodwill, intangible assets and other acquisition accounting items; and |
• | share-based compensation. |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Revenue: | ||||||||||||||||||||
Product | $ | 134,135 | 55 | % | $ | 146,569 | 54 | % | $ | (12,434 | ) | (8 | )% | |||||||
Service | 111,873 | 45 | 122,375 | 46 | (10,502 | ) | (9 | )% | ||||||||||||
Total revenue | $ | 246,008 | 100 | % | $ | 268,944 | 100 | % | $ | (22,936 | ) | (9 | )% |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
United States | $ | 148,379 | 60 | % | $ | 156,511 | 58 | % | $ | (8,132 | ) | (5 | )% | |||||||
International: | ||||||||||||||||||||
Europe | 45,058 | 18 | 53,938 | 20 | (8,880 | ) | (16 | )% | ||||||||||||
Asia | 18,187 | 8 | 23,076 | 9 | (4,889 | ) | (21 | )% | ||||||||||||
Rest of the world | 34,384 | 14 | 35,419 | 13 | (1,035 | ) | (3 | )% | ||||||||||||
Subtotal international | 97,629 | 40 | 112,433 | 42 | (14,804 | ) | (13 | )% | ||||||||||||
Total revenue | $ | 246,008 | 100 | % | $ | 268,944 | 100 | % | $ | (22,936 | ) | (9 | )% |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Cost of revenue | ||||||||||||||||||||
Product | $ | 40,517 | 16 | % | $ | 39,810 | 15 | % | $ | 707 | 2 | % | ||||||||
Service | 29,067 | 12 | 24,699 | 9 | 4,368 | 18 | % | |||||||||||||
Total cost of revenue | $ | 69,584 | 28 | % | $ | 64,509 | 24 | % | $ | 5,075 | 8 | % | ||||||||
Gross profit: | ||||||||||||||||||||
Product $ | $ | 93,618 | 38 | % | $ | 106,759 | 40 | % | $ | (13,141 | ) | (12 | )% | |||||||
Product gross profit % | 70 | % | 73 | % | ||||||||||||||||
Service $ | $ | 82,806 | 34 | % | $ | 97,676 | 36 | % | $ | (14,870 | ) | (15 | )% | |||||||
Service gross profit % | 74 | % | 80 | % | ||||||||||||||||
Total gross profit $ | $ | 176,424 | $ | 204,435 | $ | (28,011 | ) | (14 | )% | |||||||||||
Total gross profit % | 72 | % | 76 | % |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Research and development | $ | 49,925 | 20 | % | $ | 44,287 | 16 | % | $ | 5,638 | 13 | % | ||||||||
Sales and marketing | 74,024 | 30 | 77,270 | 29 | (3,246 | ) | (4 | )% | ||||||||||||
General and administrative | 22,788 | 9 | 23,033 | 9 | (245 | ) | (1 | )% | ||||||||||||
Amortization of acquired intangible assets | 16,433 | 7 | 18,221 | 7 | (1,788 | ) | (10 | )% | ||||||||||||
Restructuring charges | 13,895 | 6 | 3,363 | 1 | 10,532 | 313 | % | |||||||||||||
Total operating expenses | $ | 177,065 | 72 | % | $ | 166,174 | 62 | % | $ | 10,891 | 7 | % |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Interest and other expense, net | $ | (4,564 | ) | (2 | )% | $ | (3,107 | ) | (1 | )% | $ | (1,457 | ) | (47 | )% |
Three Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Income tax benefit | $ | (1,602 | ) | (1 | )% | $ | (54,531 | ) | (20 | )% | $ | 52,929 | 97 | % |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Revenue: | ||||||||||||||||||||
Product | $ | 341,815 | 51 | % | $ | 398,201 | 53 | % | $ | (56,386 | ) | (14 | )% | |||||||
Service | 333,101 | 49 | % | 353,362 | 47 | % | (20,261 | ) | (6 | )% | ||||||||||
Total revenue | $ | 674,916 | 100 | % | $ | 751,563 | 100 | % | $ | (76,647 | ) | (10 | )% |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
United States | $ | 412,377 | 61 | % | $ | 448,761 | 60 | % | $ | (36,384 | ) | (8 | )% | |||||||
International: | ||||||||||||||||||||
Europe | 109,529 | 16 | 132,488 | 17 | (22,959 | ) | (17 | )% | ||||||||||||
Asia | 54,285 | 8 | 67,804 | 9 | (13,519 | ) | (20 | )% | ||||||||||||
Rest of the world | 98,725 | 15 | 102,510 | 14 | (3,785 | ) | (4 | )% | ||||||||||||
Subtotal international | 262,539 | 39 | 302,802 | 40 | (40,263 | ) | (13 | )% | ||||||||||||
Total revenue | $ | 674,916 | 100 | % | $ | 751,563 | 100 | % | $ | (76,647 | ) | (10 | )% |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Cost of revenue | ||||||||||||||||||||
Product | $ | 107,974 | 16 | % | $ | 120,643 | 16 | % | $ | (12,669 | ) | (11 | )% | |||||||
Service | 87,617 | 13 | 84,671 | 11 | 2,946 | 3 | % | |||||||||||||
Total cost of revenue | $ | 195,591 | 29 | % | $ | 205,314 | 27 | % | $ | (9,723 | ) | (5 | )% | |||||||
Gross profit: | ||||||||||||||||||||
Product $ | $ | 233,841 | 35 | % | $ | 277,558 | 37 | % | $ | (43,717 | ) | (16 | )% | |||||||
Product gross profit % | 68 | % | 70 | % | ||||||||||||||||
Service $ | $ | 245,484 | 36 | % | $ | 268,691 | 36 | % | $ | (23,207 | ) | (9 | )% | |||||||
Service gross profit % | 74 | % | 76 | % | ||||||||||||||||
Total gross profit $ | $ | 479,325 | $ | 546,249 | $ | (66,924 | ) | (12 | )% | |||||||||||
Total gross profit % | 71 | % | 73 | % |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Research and development | $ | 161,347 | 24 | % | $ | 161,762 | 21 | % | $ | (415 | ) | — | % | |||||||
Sales and marketing | 224,207 | 33 | % | 239,897 | 32 | % | (15,690 | ) | (7 | )% | ||||||||||
General and administrative | 74,141 | 11 | % | 82,400 | 11 | % | (8,259 | ) | (10 | )% | ||||||||||
Amortization of acquired intangible assets | 57,879 | 9 | % | 54,902 | 7 | % | 2,977 | 5 | % | |||||||||||
Restructuring charges | 17,514 | 3 | % | 3,821 | 1 | % | 13,693 | 358 | % | |||||||||||
Impairment of intangible assets | 35,871 | 5 | % | — | — | 35,871 | 100 | % | ||||||||||||
Loss on divestiture of business | 9,177 | 1 | % | — | — | 9,177 | 100 | % | ||||||||||||
Total operating expenses | $ | 580,136 | 86 | % | $ | 542,782 | 72 | % | $ | 37,354 | 7 | % |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Interest and other expense, net | $ | (15,203 | ) | (2 | )% | $ | (9,565 | ) | (1 | )% | $ | (5,638 | ) | (59 | )% |
Nine Months Ended | Change | |||||||||||||||||||
December 31, | ||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
% of Revenue | % of Revenue | $ | % | |||||||||||||||||
Income tax benefit | $ | (23,479 | ) | (3 | )% | $ | (69,093 | ) | (9 | )% | $ | 45,614 | 66 | % |
December 31, 2018 | March 31, 2018 | ||||||
Cash and cash equivalents | $ | 369,054 | $ | 369,821 | |||
Short-term marketable securities | 105,753 | 77,941 | |||||
Long-term marketable securities | 1,002 | — | |||||
Cash, cash equivalents and marketable securities | $ | 475,809 | $ | 447,762 |
Nine Months Ended | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 69,514 | $ | 148,918 | |||
Net cash (used in) provided by investing activities | $ | (51,360 | ) | $ | 87,865 | ||
Net cash used in financing activities | $ | (14,264 | ) | $ | (213,616 | ) |
Nine Months Ended | |||||||
December 31, | |||||||
(Dollars in Thousands) | |||||||
2018 | 2017 | ||||||
Cash (used in) provided by investing activities included the following: | |||||||
Purchase of marketable securities | $ | (184,104 | ) | $ | (71,323 | ) | |
Proceeds from maturity of marketable securities | 155,346 | 180,018 | |||||
Purchase of fixed assets | (19,462 | ) | (12,352 | ) | |||
Purchase of intangible assets | — | (505 | ) | ||||
Payments related to the divestiture of business | (2,911 | ) | — | ||||
Increase in deposits | (97 | ) | (26 | ) | |||
Acquisition of businesses, net of cash acquired | — | (8,334 | ) | ||||
Contingent purchase consideration | — | 523 | |||||
Capitalized software development costs | (132 | ) | (136 | ) | |||
$ | (51,360 | ) | $ | 87,865 |
Nine Months Ended | |||||||
December 31, | |||||||
(Dollars in Thousands) | |||||||
2018 | 2017 | ||||||
Cash used in financing activities included the following: | |||||||
Issuance of common stock under stock plans | $ | 2 | $ | 1 | |||
Payment of contingent consideration | (2,851 | ) | (660 | ) | |||
Treasury stock repurchases | — | (200,000 | ) | ||||
Tax withholding on restricted stock units | (11,415 | ) | (12,957 | ) | |||
$ | (14,264 | ) | $ | (213,616 | ) |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet be Purchased Under the Program | ||||||||
10/1/2018-10/31/2018 | — | $ | — | — | 14,902,841 | |||||||
11/1/2018-11/30/2018 | 58,680 | 26.61 | — | 14,902,841 | ||||||||
12/1/2018-12/31/2018 | — | — | — | 14,902,841 | ||||||||
Total | 58,680 | $ | 26.61 | — | 14,902,841 |
(1) | We purchased an aggregate of 58,680 shares during the three months ended December 31, 2018 transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units |
(a) | Exhibits |
Composite conformed copy of Third Amended and Restated Certificate of Incorporation of NetScout (as amended) (filed as Exhibit 3.2 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on September 21, 2016, and incorporated herein by reference). | |||
Amended and Restated By-laws of NetScout (filed as Exhibit 3.1 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on October 30, 2017 and incorporated herein by reference). | |||
+ | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
+ | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
++ | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
++ | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | XBRL Instance Document. | ||
101.SCH | XBRL Taxonomy Extension Schema Document. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase document. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase document. | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase document. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase document. |
+ | Filed herewith. |
++ | Exhibit has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing. |
NETSCOUT SYSTEMS, INC. | ||
Date: February 7, 2019 | /s/ Anil K. Singhal | |
Anil K. Singhal | ||
President, Chief Executive Officer and Chairman | ||
(Principal Executive Officer) | ||
Date: February 7, 2019 | /s/ Jean Bua | |
Jean Bua | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
(Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of NetScout Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Anil K. Singhal | |
Anil K. Singhal | |
President, Chief Executive Officer and Chairman | |
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of NetScout Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Jean Bua | |
Jean Bua | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) | |
(Principal Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Anil K. Singhal | |
Anil K. Singhal | |
President, Chief Executive Officer and Chairman |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jean Bua | |
Jean Bua | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) | |
(Principal Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Jan. 30, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NETSCOUT SYSTEMS INC | |
Entity Central Index Key | 0001078075 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2018 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | NTCT | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 77,831,786 |
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Changes in unrealized (losses) gains, (benefit) tax | $ 12 | $ (22) | $ 21 | $ (16) |
Changes in market value of derivatives, tax (benefit) | (53) | (47) | (193) | 299 |
Reclassification adjustment for net gains included in net income (loss), taxes | $ 51 | $ (96) | $ 122 | $ (238) |
BASIS OF PRESENTATION |
9 Months Ended |
---|---|
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position, results of operations and cash flows. The year-end consolidated balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018 filed with the Securities and Exchange Commission on May 21, 2018. Certain amounts for the three and nine months ended December 31, 2017 have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). This ASU clarifies the accounting treatment for implementation costs for cloud computing arrangements (hosting arrangements) that is a service contract. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted ASU 2018-15 effective July 1, 2018. The adoption has had an immaterial impact to the consolidated financial statements for the nine months ended December 31, 2018. In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU adds, modifies and clarifies several disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance is effective for fiscal years ending after December 15, 2020. ASU 2018-14 is effective for NetScout beginning April 1, 2021. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-14 will have on its financial position, results of operations, and disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. ASU 2018-13 is effective for NetScout beginning April 1, 2020. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-13 will have on its financial position, results of operations, and disclosures. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income (ASU 2018-02). ASU 2018-02 amends ASC 220, Income Statement - Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (Tax Legislation). In addition, under the ASU 2018-02, the Company may be required to provide certain disclosures regarding stranded tax effects. ASU 2018-02 is effective for years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2018-02 is effective for NetScout beginning April 1, 2019. Early adoption is permitted. The Company does not believe the adoption of ASU 2018-02 will have a material impact on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 provides guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. ASU 2017-12 is effective for the Company beginning April 1, 2019. The Company is currently assessing the potential impact of the adoption of ASU 2017-12 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification (ASU 2016-02) and issued subsequent amendments to initial guidance in July 2018 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (collectively, ASC 842). ASC 842 aims to increase transparency and comparability among organizations with respect to accounting for leases. Lessees will recognize a right-of-use asset and a lease liability measured at the present value of lease payments for virtually all of their leases. Short term leases with a term of 12 months or less are not required to be recognized. ASC 842 also requires disclosure of key information about leasing arrangements. ASC 842 will be effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal years. Early adoption is permitted. ASC 842 is effective for the Company beginning April 1, 2019. The Company expects to adopt the transition method, which will not require adjustments to comparative periods nor require modified disclosures in those comparative periods. The Company will apply ASC 842 at the adoption date and recognize right of use assets and lease liabilities in the period of adoption. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the package of practical expedients, which among other things, allows the carryforward of the historical lease classification. Further, upon implementation of the new guidance, the Company intends to elect the practical expedients to combine lease and non-lease components, and to not recognize right-of-use assets and lease liabilities for short-term leases. The Company is in the process of identifying appropriate changes to its accounting policies, information technology systems, business processes, and related internal controls to support recognition and disclosure requirements under ASC 842. The Company expects to design any necessary changes to its business processes, controls and systems in the near future and implement the changes over the remainder of fiscal year 2019. While the Company continues to evaluate the effect of adopting this guidance on its consolidated financial statements and related disclosures, it is expected that the operating leases as disclosed in Note 17, "Commitments and Contingencies" contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, that do not qualify for the short term exception will be reported in the consolidated balance sheets upon adoption. As such, the Company believes the adoption of ASC 842 will have a material impact on its consolidated balance sheets. The impact on the Company's results of operations and cash flows is not expected to be material. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 2, "Revenue Recognition" for further details. |
REVENUE RECOGNITION |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION | REVENUE RECOGNITION Revenue from Contracts with Customers In May 2014, the FASB issued Topic 606, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Topic 606 replaced most existing revenue recognition guidance under GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers and establishes disclosure requirements which are more extensive than those required under prior GAAP. Topic 606 became effective for the Company on April 1, 2018. The Company elected to use the modified retrospective transition approach. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. Revenue Recognition Policy The Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period. The Company derives revenues primarily from the sale of network management tools and security solutions for service provider and enterprise customers, which include hardware, software and service offerings. The majority of its product sales consist of hardware products with embedded software that are essential to providing customers the intended functionality of the solutions. The Company also sells stand-alone software solutions to provide customers with enhanced functionality. In addition, the Company sells hardware bundled with a software license. The Company accounts for revenue once a legally enforceable contract with a customer has been approved by the parties and the related promises to transfer products or services have been identified. A contract is defined by the Company as an arrangement with commercial substance identifying payment terms, each party’s rights and obligations regarding the products or services to be transferred and the amount the Company deems probable of collection. Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Revenue is recognized when control of the products or services are transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for products and services. Product revenue is recognized upon shipment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service (SAAS) and other professional services including consulting and training. The Company generally provides software and/or hardware support as part of product sales. Revenue related to the initial bundled software and hardware support is recognized ratably over the support period. In addition, customers can elect to purchase extended support agreements for periods after the initial software/hardware warranty expiration. Support services generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates, bug fixes and hardware repair and replacement. Consulting services are recognized upon delivery or completion of performance depending on the terms of the underlying contract. SAAS services are recognized ratably over the contract term beginning on the commencement of services. Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in services revenue, with the offsetting expense recorded in cost of service revenue. Training services include on-site and classroom training. Training revenues are recognized upon delivery of the training. Generally, the Company's contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. Bundled arrangements are concurrent customer purchases of a combination of our product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based on the element’s historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service elements based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. Further, for certain service engagements, the Company considers quoted prices as part of multi-element arrangements of those engagements as a basis for establishing SSP. SSP has been established for product elements as the average or median selling price the element was recently sold for, whether sold alone or sold as part of a multiple element transaction. The Company reviews sales of the product elements on a quarterly basis and updates, when appropriate, its SSP for such elements to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control for the product transfers to the reseller or distributor. The Company records consideration given to a reseller or distributor as a reduction of revenue to the extent they have recorded revenue from the reseller or distributor. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors. Financial Statement Impact of Adoption The cumulative impact of applying Topic 606 to all contracts with outstanding performance obligations as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective approach to adopt the new standard, the following adjustments were made to accounts on the consolidated balance sheet at April 1, 2018 (in thousands):
In connection with the adoption of Topic 606, the Company increased its retained earnings by $34.1 million, due to uncompleted contracts at April 1, 2018, of which $34.9 million of revenue will not be recognized in future periods under the new standard. The Company capitalized $7.1 million of incremental sales commission costs on the adoption date directly related to obtaining customer contracts and is amortizing these costs as it satisfies the underlying performance obligations, which for certain contracts can include anticipated renewal periods. As of April 1, 2018, the acceleration of revenue that was deferred under prior guidance was primarily attributable to no longer requiring the separation of promised goods or services, such as software licenses, technical support, specified and unspecified upgrade rights on the basis of vendor specific objective evidence, and the impact of allocating the transaction price to the software performance obligations in the contract on a relative basis using standalone selling price rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations. In addition, revenue from perpetual licenses and associated hardware with extended payment terms and term licenses are now recognized when control is transferred to the customer, the point in time when the customer can use and benefit from the license. Previously the Company recognized revenue over the term of the agreements as payments became due or earlier if prepaid. The net change in deferred income taxes of $7.9 million is primarily due to the deferred tax effects resulting from the adjustment to retained earnings for the cumulative effect of applying Topic 606 to active contracts as of the adoption date. Impact of Topic 606 on Financial Statement Line Items The impact of adoption of Topic 606 on the Company's consolidated balance sheet at December 31, 2018 and on the Company's consolidated statement of operations for the three and nine months ended December 31, 2018 was as follows (in thousands):
During the nine months ended December 31, 2018, the Company recognized revenue of $195.3 million related to the Company's deferred revenue balance reported as of April 1, 2018. The adoption of Topic 606 had no impact to net cash provided by or used in operating, investing and financing activities on the Company’s consolidated statements of cash flows during the nine months ended December 31, 2018. Performance Obligations Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. The transaction price is allocated among performance obligations in bundled contracts in an amount that depicts the relative standalone selling prices of each obligation. For contracts involving distinct hardware and software licenses, the performance obligations are satisfied at a point in time when control is transferred to the customer. For standalone maintenance and post-contract support (PCS) the performance obligation is satisfied ratably over the contract term as a stand-ready obligation. For consulting and training services, the performance obligation may be satisfied over the contract term as a stand-ready obligation, satisfied over a period of time as those services are delivered, or satisfied at the completion of the service when control has transferred or the services have expired unused. Payments for hardware, software licenses, one-year maintenance, PCS and consulting services, are typically due up front with payment terms of 30 to 90 days. However, the Company does have contracts pursuant to which billings occur ratably over a period of years following the transfer of control for the contracted performance obligations. Payments on multi-year maintenance, PCS and consulting services are typically due in annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns, refunds or warranties at December 31, 2018. At December 31, 2018, the Company had total deferred revenue of $345.8 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $260.9 million, or 75%, of this revenue during the next 12 months, and expects to recognize the remaining $84.9 million, or 25%, of this revenue thereafter. Because of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, for balance sheet presentation purposes, the Company has not recognized the deferred revenue or the related account receivable and no amounts appear in the consolidated balance sheets for such transactions because control of the underlying deliverable has not transferred. The aggregate amount of unrecognized accounts receivable and deferred revenue was $22.5 million and $20.0 million at December 31, 2018 and March 31, 2018, respectively. NetScout expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have any significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the three and nine months ended December 31, 2018. Contract Balances The Company receives payments from customers based on a billing schedule as established by the Company’s contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. Upon adoption, the Company recorded unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. The Company did not record any contract assets upon adoption. Deferred revenue relates to payments received in advance of performance under the contract. The following table provides information about contract assets and liabilities (in thousands):
Costs to Obtain Contracts The Company has determined that the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. Sales commissions are recorded as an asset and amortized to expense ratably over the remaining performance periods of the related contracts with remaining performance obligations. The Company applies the practical expedient in Topic 606 and expenses costs as incurred for sales commissions when the amortization period would have been one year or less. At December 31, 2018, the consolidated balance sheet included $5.9 million in assets related to sales commissions to be expensed in future periods. A balance of $3.6 million was included in prepaid expenses and other current assets, and a balance of $2.3 million was included as other assets in the Company's consolidated balance sheet at December 31, 2018. During the three and nine months ended December 31, 2018, the Company recognized $1.5 million and $4.8 million of amortization related to this sales commission asset, which is included in the sales and marketing expense line in the Company's consolidated statements of operations. |
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS |
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Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS | CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of investments, trade accounts receivable and accounts payable. The Company's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings. At December 31, 2018, the Company had one direct customer, Verizon, who accounted for more than 10% of the accounts receivable balance, while no indirect channel partner accounted for more than 10% of the accounts receivable balance. At March 31, 2018, the Company had no direct customers or indirect channel partners which accounted for more than 10% of the accounts receivable balance. During the three months ended December 31, 2018, one direct customer, Verizon, accounted for more than 10% of the Company's total revenue, while no indirect channel partners accounted for more than 10% of total revenue. During the nine months ended December 31, 2018, no direct customers or indirect channel partners accounted for more than 10% of total revenue. During the three and nine months ended December 31, 2017, no direct customers or indirect channel partners accounted for more than 10% of the Company's total revenue. As disclosed parenthetically within the Company's consolidated balance sheet, the Company has receivables from related parties included within prepaid expenses and other current assets that represent a concentration of credit risk of $0.3 million and $3.2 million at December 31, 2018 and March 31, 2018, respectively. Historically, the Company has not experienced any significant failure of its customers' ability to meet their payment obligations nor does the Company anticipate material non-performance by its customers in the future; accordingly, the Company does not require collateral from its customers. However, if the Company's assumptions are incorrect, there could be an adverse impact on its allowance for doubtful accounts. |
SHARE-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended, and employee stock purchases made under the Company's 2011 Employee Stock Purchase Plan, as amended, (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands):
Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2018. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year. During the nine months ended December 31, 2018, employees purchased 302,994 shares under the ESPP and the value per share was $25.00. On November 8, 2018, the Company increased the number of shares available under the Company’s Amended and Restated 2011 Employee Stock Purchase Plan (2011 ESPP) by an additional 3,000,000 shares. |
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES | CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at December 31, 2018 and March 31, 2018. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
The Company's restricted cash includes cash balances which are legally or contractually restricted. The Company's restricted cash is included within prepaid and other current assets and consists of amounts related to holdbacks associated with prior acquisitions. Marketable Securities The following is a summary of marketable securities held by NetScout at December 31, 2018, classified as short-term and long-term (in thousands):
The following is a summary of marketable securities held by NetScout at March 31, 2018, classified as short-term and long-term (in thousands):
Contractual maturities of the Company's marketable securities held at December 31, 2018 and March 31, 2018 were as follows (in thousands):
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at December 31, 2018 and March 31, 2018 (in thousands):
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments. The Company's Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. The Company's Level 2 investments are classified as such because fair value is calculated using market observable data for similar but not identical instruments, or a discounted cash flow model using the contractual interest rate as compared with the underlying interest yield curve. The Company classifies municipal obligations as Level 2 because the fair values are determined using quoted prices from markets the Company considers to be inactive. Commercial paper is classified as Level 2 because the Company uses market information from similar but not identical instruments and discounted cash flow models based on interest rate yield curves to determine fair value. The Company's derivative financial instruments consist of forward foreign exchange contracts and are classified as Level 2 because the fair values of these derivatives are determined using models based on market observable inputs, including spot prices for foreign currencies and credit derivatives, as well as an interest rate factor. The Company's Level 3 assets consist of contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018. The contingent consideration of $2.3 million represents potential future earnout payments to the Company of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration was recognized on the acquisition date and was measured using unobservable (Level 3) inputs. The $2.3 million of contingent consideration is included in other assets within the Company’s consolidated balance sheet at December 31, 2018. The Company's Level 3 liabilities consist of contingent purchase consideration. The fair value of contingent purchase consideration at March 31, 2018 included $4.9 million related to the acquisition of Simena LLC (Simena) in November 2011 for future consideration to be paid to the seller. The contingent purchase consideration was included as a contingent liability within accrued other in the Company's consolidated balance sheet at March 31, 2018. The contingent purchase consideration was paid to the seller in November 2018. The Company's contingent purchase consideration at March 31, 2018 included $523 thousand related to the acquisition of certain assets and liabilities of Efflux Systems, Inc. (Efflux) in the second quarter of fiscal year 2018. The contingent purchase consideration was released from escrow to the sellers in July 2018. The following table sets forth a reconciliation of changes in the fair value of the Company's Level 3 financial assets and liabilities for the nine months ended December 31, 2018 (in thousands):
Deal-related compensation expense and accretion charges related to the contingent purchase consideration for the nine months ended December 31, 2018 was $102 thousand and was included within research and development expense. Accretion income related to the contingent consideration for the nine months ended December 31, 2018 was $64 thousand and was included within interest income. |
INVENTORIES |
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INVENTORIES | INVENTORIES Inventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of the following (in thousands):
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ACQUISITIONS & DIVESTITURES |
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Dec. 31, 2018 | |
Business Combinations [Abstract] | |
ACQUISITIONS & DIVESTITURES | ACQUISITIONS & DIVESTITURES HNT Tools Business Divestiture On September 14, 2018 (the HNT Divestiture Date), the Company divested its HNT tools business for cash proceeds of $1.3 million and potential future earnout payments of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration in the amount of $2.3 million was recognized on the HNT Divestiture Date and was measured using unobservable (Level 3) inputs. The $2.3 million of consideration is included in other assets within the Company’s consolidated balance sheet at December 31, 2018. Changes in the fair value of the contingent consideration in future periods will be recorded in the Company’s results in the period of the change. The contingent consideration is presented as a non-cash investing activity on the unaudited consolidated statement of cash flows. The Company transferred $4.5 million along with net liabilities of the HNT tools business related to a working capital adjustment during the three months ended September 30, 2018. The Company recorded a loss on the divestiture for the quarter ended September 30, 2018 totaling $9.2 million, which included $1.3 million of transaction costs and $0.5 million of incentive compensation payable to the HNT tools business employees negotiated as part of the sale. In connection with the divestiture, the Company has entered into a transitional services agreement with the buyer to provide certain services for a period of up to eighteen months. The Company determined that the sale of the HNT tools business did not represent a strategic shift and will not have a major effect on its consolidated results of operations, financial position or cash flows. Accordingly, the Company has not presented the sale as a discontinued operation in the condensed consolidated financial statements. Efflux On July 12, 2017 (the Efflux Closing Date), the Company completed the acquisition of Efflux for $8.6 million. Efflux's technology detects, analyzes and correlates threat activity within enterprise networks. The Efflux technology and engineering talent have been integrated into Arbor Networks in order to support the ongoing enhancement of Arbor security solutions for advanced threat detection. Goodwill was recognized for the excess purchase price over the fair value of the net assets acquired. Goodwill of $6.1 million from the acquisition was included within the Security reporting unit. Goodwill and intangible assets recorded as part of the acquisition are not deductible for tax purposes. |
GOODWILL AND INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill The Company has two reporting units: (1) Service Assurance and (2) Security. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2018. The Company performed an interim quantitative test as of September 30, 2018 related to the HNT tools business divestiture. The estimated fair value of both reporting units significantly exceeded their carrying value. At December 31, 2018, goodwill attributable to the Company's Service Assurance and Security reporting units was $1.2 billion and $555.2 million, respectively. At March 31, 2018, goodwill attributable to the Company's Service Assurance and Security reporting units was $1.2 billion and $555.9 million, respectively. The change in the carrying amount of goodwill for the nine months ended December 31, 2018 is due to the impact of the divestiture of the HNT tools business and foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar. The changes in the carrying amount of goodwill for the nine months ended December 31, 2018 are as follows (in thousands):
Intangible Assets The net carrying amounts of intangible assets were $693.8 million and $831.4 million at December 31, 2018 and March 31, 2018, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes intangible assets over their estimated useful lives, except for the acquired trade name which resulted from the Network General Central Corporation (Network General) acquisition, which has an indefinite life and thus is not amortized. The carrying value of the indefinite-lived trade name is evaluated for potential impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. During the three months ended June 30, 2018, the Company performed a quantitative analysis on certain intangible assets related to the HNT tools business, which has since been divested. The fair value for the intangible assets related to the HNT tools business was calculated considering a range of potential transaction prices which the Company considers to be a Level 3 measurement. The fair value of these intangible assets was determined to be less than the carrying value, and as a result, the Company recognized an impairment charge of $35.9 million in the nine months ended December 31, 2018. The impairment charge was recorded within a separate operating expense line item in the Company's consolidated statements of operations during the nine months ended December 31, 2018. The Company performed an interim qualitative test as of September 30, 2018 on the non-amortizing trademark as a result of the HNT tools business divestiture. No indicators of impairment were noted at that time. In September 2018, the Company completed the divestiture of its HNT tools business. As a result, the net carrying value of the Company's intangible assets was reduced by $10.2 million. Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at December 31, 2018 (in thousands):
Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2018 (in thousands):
Amortization included as product revenue consists of amortization of backlog. Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three and nine months ended December 31, 2018 and 2017, respectively (in thousands):
The following is the expected future amortization expense at December 31, 2018 for the fiscal years ending March 31 (in thousands):
The weighted-average amortization period of developed technology and core technology is 11.3 years. The weighted-average amortization period for customer and distributor relationships is 15.9 years. The weighted-average amortization period for trademarks and trade names is 8.6 years. The weighted-average amortization period for capitalized software is 3.0 years. The weighted-average amortization period for amortizing all intangible assets is 14.6 years. |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES NetScout operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The exposures result from costs that are denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee. The Company manages its foreign cash flow risk by hedging forecasted cash flows for operating expenses denominated in foreign currencies for up to twelve months, within specified guidelines through the use of forward contracts. The Company enters into foreign currency exchange contracts to hedge cash flow exposures from costs that are denominated in currencies other than the U.S. Dollar. These hedges are designated as cash flow hedges at inception. All of the Company's derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes. These contracts will mature over the next twelve months and are expected to impact earnings on or before maturity. The notional amounts and fair values of derivative instruments in the consolidated balance sheets at December 31, 2018 and March 31, 2018 were as follows (in thousands):
The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended December 31, 2018 and 2017 (in thousands):
The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the nine months ended December 31, 2018 and 2017 (in thousands):
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LONG-TERM DEBT |
9 Months Ended |
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Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT On January 16, 2018, the Company amended and expanded its existing credit agreement (Amended Credit Agreement) with a syndicate of lenders by and among: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. Morgan Securities LLC, KeyBanc Capital Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners; Fifth Third Bank, Santander Bank, N.A., SunTrust Bank, N.A. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto. The Amended Credit Agreement provides for a five-year, $1.0 billion senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The Company may elect to use the new credit facility for general corporate purposes or to finance the repurchase of up to 25 million shares of the Company's common stock under the Company's common stock repurchase plan. The commitments under the Amended Credit Agreement will expire on January 16, 2023, and any outstanding loans will be due on that date. At December 31, 2018, $600 million was outstanding under the Amended Credit Agreement. At the Company's election, revolving loans under the Amended Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) JPMorgan's prime rate, (2) 0.50% in excess of the New York Federal Reserve Bank (NYFRB) rate, or (3) an adjusted one month LIBOR rate plus 1%; or (b) such adjusted LIBOR rate (for the interest period selected by the Company), in each case plus an applicable margin. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2018, until the Company has delivered financial statements for the quarter ended December 31, 2018, the applicable margin will be 1.75% per annum for LIBOR loans and 0.75% per annum for Alternate Base Rate loans, and thereafter the applicable margin will vary depending on the Company's leverage ratio, ranging from 1.00% per annum for Base Rate loans and 2.00% per annum for LIBOR loans if the Company's consolidated leverage ratio is greater than 3.50 to 1.00, down to 0.00% per annum for Alternate Base Rate loans and 1.00% per annum for LIBOR loans if the Company's consolidated leverage ratio is equal to or less than 1.50 to 1.00. The Company's consolidated leverage ratio is the ratio of its total funded debt compared to its consolidated adjusted EBITDA. Consolidated adjusted EBITDA includes certain adjustments, including, without limitation, adjustments relating to extraordinary, unusual or non-recurring charges, certain restructuring charges, non-cash charges, certain transaction costs and expenses and certain pro forma adjustments in connection with material acquisitions and dispositions, all as set forth in detail in the definition of consolidated adjusted EBITDA in the Amended Credit Agreement. Commitment fees will accrue on the daily unused amount of the credit facility. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2018 until the Company has delivered financial statements for the quarter ended December 31, 2018, the commitment fee will be 0.30% per annum, and thereafter the commitment fee will vary depending on the Company's consolidated leverage ratio, ranging from 0.30% per annum if the Company's consolidated leverage ratio is greater than 2.75 to 1.00, down to 0.15% per annum if the Company's consolidated leverage ratio is equal to or less than 1.50 to 1.00. Letter of credit participation fees are payable to each lender on the amount of such lender’s letter of credit exposure, during the period from the closing date of the Amended Credit Agreement to but excluding the date which is the later of (i) the date on which such lender’s commitment terminates or (ii) the date on which such lender ceases to have any letter of credit exposure, at a rate per annum equal to the applicable margin for LIBOR loans. Additionally, the Company will pay a fronting fee to each issuing bank in amounts to be agreed to between the Company and the applicable issuing bank. Interest on Alternate Base Rate loans is payable at the end of each calendar quarter. Interest on LIBOR loans is payable at the end of each interest rate period or at the end of each three-month interval within an interest rate period if the period is longer than three months. The Company may also prepay loans under the Amended Credit Agreement at any time, without penalty, subject to certain notice requirements. Debt is recorded at the amount drawn on the revolving credit facility plus interest based on floating rates reflective of changes in the market which approximates fair value. The loans and other obligations under the credit facility are (a) guaranteed by each of the Company's wholly owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of the Company and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by the Company and the subsidiary guarantors (which pledge, in the case of any foreign subsidiary, is limited to 65% of the voting stock), subject to certain customary exceptions and limitations. The Amended Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Amended Credit Agreement. The Amended Credit Agreement contains certain covenants applicable to the Company and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. In addition, the Company is required to maintain certain consolidated leverage and interest coverage ratios. These covenants and limitations are more fully described in the Amended Credit Agreement. At December 31, 2018, the Company was in compliance with all of these covenants. The Amended Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Amended Credit Agreement and related documents, defaults under certain other indebtedness, certain insolvency events, certain events arising under ERISA, a change of control and certain other events. Upon an event of default, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies under the Amended Credit Agreement and the other loan documents. In connection with the Company's Amended Credit Agreement described above, the Company terminated its previous term loan dated as of July 14, 2015, by and among the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. Morgan Securities LLC, KeyBanc Capital Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners; Santander Bank, N.A., SunTrust Bank, N.A. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto. The Company has capitalized debt issuance costs totaling $12.2 million at December 31, 2018, which are being amortized over the life of the revolving credit facility. The unamortized balance was $7.0 million as of December 31, 2018. The balance of $1.7 million was included as prepaid expenses and other current assets and a balance of $5.3 million was included as other assets in the Company's consolidated balance sheet. |
RESTRUCTURING CHARGES |
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RESTRUCTURING CHARGES | RESTRUCTURING CHARGES During the fourth quarter of fiscal year ended March 31, 2017, the Company restructured certain departments to better align functions subsequent to the acquisition of Danaher Corporation's Communications Business (the Comms Transaction) in July 2015, resulting in the termination of forty-one employees. As a result of the workforce reduction, during the fiscal year ended March 31, 2017, the Company recorded a restructuring charge totaling $1.9 million related to one-time termination benefits and $0.4 million in facility-related charges. The Company recorded an additional charge for one-time termination benefits of $0 and $0.7 million, respectively, during the three and nine months ended December 31, 2017. The one-time termination benefits and facilities-related costs related to this plan were paid in full during the fiscal year ended March 31, 2018. During the third quarter of fiscal year ended March 31, 2018, the Company restructured certain departments to better align functions resulting in the termination of sixty-one employees. As a result of the workforce reduction, during the three and nine months ended December 31, 2017, the Company recorded restructuring charges totaling $3.6 million related to one-time termination benefits for the employees that were notified during the period. During the three and nine months ended December 31, 2018, the Company recorded additional charges of $0 and $1.7 million, respectively, for one-time termination benefits and facilities-related costs. The one-time termination benefits will be paid in full during the fiscal year ending March 31, 2019. During the second quarter of fiscal year ending March 31, 2019, the Company implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the three and nine months ended December 31, 2018, the Company recorded restructuring charges totaling $13.8 million and $16.1 million, respectively, related to one-time termination benefits for one hundred forty-seven employees who voluntarily terminated their employment with the Company during the period. Additional one-time termination benefit charges of approximately $1.8 million in the aggregate for up to approximately thirteen employees are anticipated to be recorded in the next six months. The one-time termination benefits are expected to be paid in full by the end of the first quarter of the fiscal year ending March 31, 2020. The following table provides a summary of the activity related to the restructuring plans and the related restructuring liability (in thousands):
The accrual for employee-related severance is included as accrued compensation in the Company's consolidated balance sheets at December 31, 2018 and March 31, 2018 as the balance is expected to be paid in full within the next twelve months. |
COMMITMENTS AND CONTINGENCIES |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Acquisition related – The Company had a contingent liability related to the acquisition of Simena in November 2011 for future consideration to be paid to the seller which had an initial fair value of $8.0 million at the time of acquisition. At March 31, 2018, the present value of the future consideration was $4.9 million. The contingent purchase consideration was paid to the seller in November 2018. The Company had a contingent liability at March 31, 2018 for $523 thousand related to the acquisition of Efflux in July 2017. The $523 thousand was released from escrow to the sellers in July 2018. Legal – From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any current legal proceedings and claims, if determined adversely, will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. On October 13, 2017, the jury rendered a verdict finding in favor of the Plaintiff and that Plaintiff was entitled to $3,500,000 for pre-suit damages and $2,250,000 for post-suit damages. The jury indicated that the awarded damages amounts were intended to reflect a running royalty. The Court also conducted a bench trial on whether these patents were unenforceable due to, among other things, inequitable conduct. In September 2018, the Court entered judgment and "enhanced" the jury verdict in the amount of $2.8 million as a result of a jury finding. The judgment also awards pre- and post judgement interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last date being June 2022. The parties are filing post-judgment motions including NetScout's motions for judgment as a matter of law seeking to both overturn the verdict and to reduce damages. NetScout has also opposed plaintiff's motion for attorney's fees. NetScout has concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible". Therefore, accounting rules require NetScout to provide an estimate for the range of potential liability. NetScout currently estimates that the estimated range of liability is between $0 and the aggregate amount awarded by the jury, plus potential additional pre- and post-judgment interest amounts and costs. NetScout intends to continue to vigorously dispute Packet Intelligence’s claims including through appeal, if necessary. |
PENSION BENEFIT PLANS |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PENSION BENEFIT PLANS | PENSION BENEFIT PLANS Certain of the Company's non-U.S. employees participate in noncontributory defined benefit pension plans. None of the Company's employees in the U.S. participate in any noncontributory defined benefit pension plans. In general, these plans are funded based on considerations relating to legal requirements, underlying asset returns, the plan's funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates and other factors. The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three and nine months ended December 31, 2018 and 2017 (in thousands):
Expected Contributions During the nine months ended December 31, 2018, the Company made contributions of $0.2 million to its defined benefit pension plans. During the fiscal year ending March 31, 2019, the Company's cash contribution requirements for its defined benefit pension plans are expected to be less than $1.0 million. As a majority of the participants within the Company's plans are all active employees, the benefit payments are not expected to be material in the foreseeable future. |
TREASURY STOCK |
9 Months Ended |
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Dec. 31, 2018 | |
Equity [Abstract] | |
TREASURY STOCK | TREASURY STOCK On May 19, 2015, the Company's board of directors approved a share repurchase program, conditional upon the completion of the Comms Transaction. This program enabled the Company to repurchase up to 20 million shares of its common stock. This plan became effective on July 14, 2015 upon the completion of the Comms Transaction. The Company was not obligated to acquire any specific amount of common stock within any particular timeframe under this program. The Company repurchased 5,802,788 shares for $200.0 million under this program during the nine months ended December 31, 2017. Through March 31, 2018, the Company had repurchased 20,000,000 shares totaling $607.6 million in the open market under this stock repurchase plan. At March 31, 2018, there were no shares of common stock that remained available to be purchased under the plan. On October 24, 2017, the Company’s Board of Directors approved a new share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock. This new program became effective when the Company’s previously disclosed twenty million share repurchase program was completed. The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this new share repurchase program. On February 1, 2018, the Company entered into ASR agreements with two third-party financial institutions (the Dealers) to repurchase an aggregate of $300 million of the Company's common stock via accelerated stock repurchase transactions under the Company’s twenty million share repurchase program (until such program was completed) and the twenty-five million share repurchase program. The Company borrowed $300 million against its Amended Credit Facility to finance the payment of the initial purchase price to each of the Dealers. Under the terms of the ASR, the Company made a $150 million payment to each of the Dealers on February 2, 2018, and received an initial delivery of 3,693,931 shares from each of the Dealers, or 7,387,862 shares in the aggregate, which was approximately 70 percent of the total number of shares of the Company's common stock expected to be repurchased under the ASR. As part of this purchase, 970,650 shares for $27.6 million were deducted under the twenty million share repurchase program and 6,417,212 shares for $182.4 million were deducted from the twenty-five million share repurchase program during the fiscal year ended March 31, 2018. Final settlement of the ASR agreements was completed in August 2018. As a result, the Company received an additional 3,679,947 shares of its common stock for $96.8 million, which reduced the number of shares available to be purchased from the twenty-five million share repurchase program during the nine months ended December 31, 2018. In total, 11,067,809 shares of the Company's common stock were repurchased under the ASR at an average cost per share of $27.11. At December 31, 2018, 14,902,841 shares of common stock remained available to be purchased under the current repurchase program. In connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld 430,406 shares at a cost of $11.4 million related to minimum statutory tax withholding requirements on these restricted stock units during the nine months ended December 31, 2018. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the amount that is available for repurchase under that program. |
NET INCOME (LOSS) PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) PER SHARE | NET INCOME (LOSS) PER SHARE Calculations of the basic and diluted net income (loss) per share and potential common shares are as follows (in thousands, except for per share data):
The following table sets forth restricted stock units excluded from the calculation of diluted net income (loss) per share, since their inclusion would be anti-dilutive (in thousands):
Basic net income (loss) per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options and unrecognized compensation expense as additional proceeds. As we incurred a net loss in the three and nine months ended December 31, 2018, all outstanding restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average shares outstanding. |
INCOME TAXES |
9 Months Ended |
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Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company's effective income tax rates were 30.8% and (155.1)% for the three months ended December 31, 2018 and 2017, respectively. Generally, the effective tax rate differs from the statutory tax rate due to the impact of the research and development credit, newly enacted tax reform provisions (GILTI, BEAT and FDII), the impact of state taxes and income generated in jurisdictions that have a different tax rate than the U.S. statutory rate. The effective tax rate for the three months ended December 31, 2018 is higher than the effective rate for the three months ended December 31, 2017, primarily due to the enactment of Tax Legislation in the prior period. The Company's effective income tax rates were 20.2% and 1,133.0% for the nine months ended December 31, 2018 and 2017, respectively. The effective tax rate for the nine months ended December 31, 2018 is lower than the effective rate for the nine months ended December 31, 2017, primarily due to the enactment of Tax Legislation in the prior period. On December 22, 2017, the Tax Legislation was signed into law. The Tax Legislation significantly revises the U.S. tax code by, among other things, lowering the corporate tax rate from 35% to 21%; imposing a minimum tax on certain foreign earnings; limiting the deductibility of interest expense; implementing a territorial tax system and repealing the domestic production activities deduction. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which addresses situations where the accounting is incomplete for the income tax effects of the Tax Legislation. SAB 118 directs taxpayers to consider the impact of the Tax Legislation as “provisional” when the Company does not have the necessary information available, prepared or analyzed (including computations) to finalize the accounting for the change in tax law. Companies are provided a measurement period of up to one year to obtain, prepare, and analyze information necessary to finalize the accounting for provisional amounts or amounts that could not be estimated as of December 31, 2017. The Company has continued to assess the impact of the Tax Legislation since enactment on its consolidated financial statements. During the three months ended December 31, 2018, the Company completed its accounting for the Tax Legislation and increased its provisional tax expense estimate related to the transition tax associated with the deemed repatriation of foreign earnings by $0.9 million after continued assessment of guidance and recently issued regulations. As a result of The Tax Legislation, we expect that current and future foreign earnings may be repatriated tax efficiently. After fully assessing the impact of the Tax Legislation, the Company has determined that its current and future foreign earnings will not be indefinitely reinvested where the Company can now repatriate those earnings in a tax efficient manner acceptable to management and exceed local statutory and operational requirements. Additionally, the Company plans on a one-time repatriation of a portion of historical earnings that have been taxed as a result of the Tax Legislation which can be repatriated in a tax efficient manner. The Company continues to assert that any remainder of its historical book basis in excess of tax basis will be permanently reinvested. It is not feasible to estimate the amount of unrecognized deferred U.S. taxes on these differences. The Company is subject to the tax on the Global Intangible Low-Taxed Income (GILTI). The Company is required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has included an estimate of GILTI in its estimated annual effective tax rate and has elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”). |
SEGMENT AND GEOGRAPHIC INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT AND GEOGRAPHIC INFORMATION | SEGMENT AND GEOGRAPHIC INFORMATION The Company reports revenues and income under one reportable segment. The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. In accordance with United States export control regulations, the Company does not sell or do business with countries subject to economic sanctions and export controls. Total revenue by geography is as follows (in thousands):
The United States revenue includes sales to resellers in the United States. These resellers fulfill customer orders and may subsequently ship the Company’s products to international locations. The Company reports these shipments as United States revenue because the Company ships the products to a United States location. Further, the Company determines the geography of its sales after considering where the contract originated. A majority of revenue attributable to locations outside of the United States is a result of export sales. Substantially all of the Company's identifiable assets are located in the United States. |
RELATED PARTY TRANSACTIONS |
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RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS During our fiscal year ended March 31, 2016, a member of the Company's Board of Directors served as an executive officer of Danaher. As part of the split off of Danaher's Communications Business and the Company's subsequent acquisition of that business, NetScout has entered into multiple transactions with Danaher which include: transition services agreements, lease agreements, closing agreements, and compensation for post-combination services provisions within the separation and distribution agreement. This person is now the founding President and CEO of Fortive Corporation (Fortive), which spun off of Danaher in July 2016. As of September 12, 2018, this person is no longer serving on the Company's Board of Directors. As part of the spin-off of Fortive, the transition services agreement was amended to, among other things, assign Danaher's rights, duties, obligations and liabilities under the transition services agreement to Fluke Corporation, a subsidiary of Fortive. The Company has disclosed the transactions with Danaher and Fortive parenthetically within the financial statements. As disclosed parenthetically within the Company's consolidated balance sheet, the Company has receivables from related parties. The following table summarizes those balances (in thousands):
As disclosed parenthetically within the Company's consolidated balance sheet, the Company has payables due to related parties. The following table summarizes those balances (in thousands):
As disclosed parenthetically within the Company's consolidated statements of operations, the Company has recorded expenses from related parties. The following table summarizes those balances (in thousands):
As disclosed within the Company's consolidated statements of cash flows, the Company has cash flows resulting from amounts due to related parties and due from related parties. The following table summarizes those cash flows (in thousands):
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SUBSEQUENT EVENTS SUBSEQUENT EVENTS |
9 Months Ended |
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Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On February 4, 2019, the Company repaid $50.0 million of borrowings under the Amended Credit Agreement. |
BASIS OF PRESENTATION (Policies) |
9 Months Ended |
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Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position, results of operations and cash flows. The year-end consolidated balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018 filed with the Securities and Exchange Commission on May 21, 2018. Certain amounts for the three and nine months ended December 31, 2017 have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). This ASU clarifies the accounting treatment for implementation costs for cloud computing arrangements (hosting arrangements) that is a service contract. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company adopted ASU 2018-15 effective July 1, 2018. The adoption has had an immaterial impact to the consolidated financial statements for the nine months ended December 31, 2018. In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU adds, modifies and clarifies several disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance is effective for fiscal years ending after December 15, 2020. ASU 2018-14 is effective for NetScout beginning April 1, 2021. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-14 will have on its financial position, results of operations, and disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. ASU 2018-13 is effective for NetScout beginning April 1, 2020. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-13 will have on its financial position, results of operations, and disclosures. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income (ASU 2018-02). ASU 2018-02 amends ASC 220, Income Statement - Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (Tax Legislation). In addition, under the ASU 2018-02, the Company may be required to provide certain disclosures regarding stranded tax effects. ASU 2018-02 is effective for years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2018-02 is effective for NetScout beginning April 1, 2019. Early adoption is permitted. The Company does not believe the adoption of ASU 2018-02 will have a material impact on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 provides guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, with early adoption permitted. ASU 2017-12 is effective for the Company beginning April 1, 2019. The Company is currently assessing the potential impact of the adoption of ASU 2017-12 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification (ASU 2016-02) and issued subsequent amendments to initial guidance in July 2018 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (collectively, ASC 842). ASC 842 aims to increase transparency and comparability among organizations with respect to accounting for leases. Lessees will recognize a right-of-use asset and a lease liability measured at the present value of lease payments for virtually all of their leases. Short term leases with a term of 12 months or less are not required to be recognized. ASC 842 also requires disclosure of key information about leasing arrangements. ASC 842 will be effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal years. Early adoption is permitted. ASC 842 is effective for the Company beginning April 1, 2019. The Company expects to adopt the transition method, which will not require adjustments to comparative periods nor require modified disclosures in those comparative periods. The Company will apply ASC 842 at the adoption date and recognize right of use assets and lease liabilities in the period of adoption. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the package of practical expedients, which among other things, allows the carryforward of the historical lease classification. Further, upon implementation of the new guidance, the Company intends to elect the practical expedients to combine lease and non-lease components, and to not recognize right-of-use assets and lease liabilities for short-term leases. The Company is in the process of identifying appropriate changes to its accounting policies, information technology systems, business processes, and related internal controls to support recognition and disclosure requirements under ASC 842. The Company expects to design any necessary changes to its business processes, controls and systems in the near future and implement the changes over the remainder of fiscal year 2019. While the Company continues to evaluate the effect of adopting this guidance on its consolidated financial statements and related disclosures, it is expected that the operating leases as disclosed in Note 17, "Commitments and Contingencies" contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, that do not qualify for the short term exception will be reported in the consolidated balance sheets upon adoption. As such, the Company believes the adoption of ASC 842 will have a material impact on its consolidated balance sheets. The impact on the Company's results of operations and cash flows is not expected to be material. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 as of April 1, 2018 using the modified retrospective transition method. Please refer to Note 2, "Revenue Recognition" for further details. |
Revenue from Contract with Customers | Revenue from Contracts with Customers In May 2014, the FASB issued Topic 606, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Topic 606 replaced most existing revenue recognition guidance under GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers and establishes disclosure requirements which are more extensive than those required under prior GAAP. Topic 606 became effective for the Company on April 1, 2018. The Company elected to use the modified retrospective transition approach. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. Revenue Recognition Policy The Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period. The Company derives revenues primarily from the sale of network management tools and security solutions for service provider and enterprise customers, which include hardware, software and service offerings. The majority of its product sales consist of hardware products with embedded software that are essential to providing customers the intended functionality of the solutions. The Company also sells stand-alone software solutions to provide customers with enhanced functionality. In addition, the Company sells hardware bundled with a software license. The Company accounts for revenue once a legally enforceable contract with a customer has been approved by the parties and the related promises to transfer products or services have been identified. A contract is defined by the Company as an arrangement with commercial substance identifying payment terms, each party’s rights and obligations regarding the products or services to be transferred and the amount the Company deems probable of collection. Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Revenue is recognized when control of the products or services are transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for products and services. Product revenue is recognized upon shipment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service (SAAS) and other professional services including consulting and training. The Company generally provides software and/or hardware support as part of product sales. Revenue related to the initial bundled software and hardware support is recognized ratably over the support period. In addition, customers can elect to purchase extended support agreements for periods after the initial software/hardware warranty expiration. Support services generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates, bug fixes and hardware repair and replacement. Consulting services are recognized upon delivery or completion of performance depending on the terms of the underlying contract. SAAS services are recognized ratably over the contract term beginning on the commencement of services. Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in services revenue, with the offsetting expense recorded in cost of service revenue. Training services include on-site and classroom training. Training revenues are recognized upon delivery of the training. Generally, the Company's contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts. Bundled arrangements are concurrent customer purchases of a combination of our product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based on the element’s historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service elements based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. Further, for certain service engagements, the Company considers quoted prices as part of multi-element arrangements of those engagements as a basis for establishing SSP. SSP has been established for product elements as the average or median selling price the element was recently sold for, whether sold alone or sold as part of a multiple element transaction. The Company reviews sales of the product elements on a quarterly basis and updates, when appropriate, its SSP for such elements to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control for the product transfers to the reseller or distributor. The Company records consideration given to a reseller or distributor as a reduction of revenue to the extent they have recorded revenue from the reseller or distributor. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors. |
REVENUE RECOGNITION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Statement Impact of Adoption | As a result of applying the modified retrospective approach to adopt the new standard, the following adjustments were made to accounts on the consolidated balance sheet at April 1, 2018 (in thousands):
The impact of adoption of Topic 606 on the Company's consolidated balance sheet at December 31, 2018 and on the Company's consolidated statement of operations for the three and nine months ended December 31, 2018 was as follows (in thousands):
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Contract with Customer, Asset and Liability | The following table provides information about contract assets and liabilities (in thousands):
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SHARE-BASED COMPENSATION (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Share-Based Compensation Expense | The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended, and employee stock purchases made under the Company's 2011 Employee Stock Purchase Plan, as amended, (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands):
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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash, Cash Equivalents | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
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Schedule of Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
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Summary of Marketable Securities | The following is a summary of marketable securities held by NetScout at December 31, 2018, classified as short-term and long-term (in thousands):
The following is a summary of marketable securities held by NetScout at March 31, 2018, classified as short-term and long-term (in thousands):
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Summary of Contractual Maturities of Marketable Securities | Contractual maturities of the Company's marketable securities held at December 31, 2018 and March 31, 2018 were as follows (in thousands):
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities | The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at December 31, 2018 and March 31, 2018 (in thousands):
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Schedule of Reconciliation of Changes in Fair Value of Level III Financial Assets | The following table sets forth a reconciliation of changes in the fair value of the Company's Level 3 financial assets and liabilities for the nine months ended December 31, 2018 (in thousands):
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INVENTORIES (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | Inventories consist of the following (in thousands):
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the nine months ended December 31, 2018 are as follows (in thousands):
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Schedule of Intangible Assets | Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at December 31, 2018 (in thousands):
Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2018 (in thousands):
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Finite-lived Intangible Assets Amortization Expense | The following table provides a summary of amortization expense for the three and nine months ended December 31, 2018 and 2017, respectively (in thousands):
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Schedule of Expected Future Amortization Expense | The following is the expected future amortization expense at December 31, 2018 for the fiscal years ending March 31 (in thousands):
|
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet | The notional amounts and fair values of derivative instruments in the consolidated balance sheets at December 31, 2018 and March 31, 2018 were as follows (in thousands):
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Summary of Effect of Foreign Exchange Forward Contracts on OCI and Results of Operations | The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended December 31, 2018 and 2017 (in thousands):
The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the nine months ended December 31, 2018 and 2017 (in thousands):
|
RESTRUCTURING CHARGES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Liability | The following table provides a summary of the activity related to the restructuring plans and the related restructuring liability (in thousands):
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PENSION BENEFIT PLANS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Pension Costs of Noncontributory Defined Benefit Pension Plans | The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three and nine months ended December 31, 2018 and 2017 (in thousands):
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NET INCOME (LOSS) PER SHARE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculations of the Basic and Diluted Net Income (Loss) Per Share and Potential Common Shares | Calculations of the basic and diluted net income (loss) per share and potential common shares are as follows (in thousands, except for per share data):
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Summary of Antidilutive Securities Excluded from Computation of Diluted EPS | The following table sets forth restricted stock units excluded from the calculation of diluted net income (loss) per share, since their inclusion would be anti-dilutive (in thousands):
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SEGMENT AND GEOGRAPHIC INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Total Revenue by Geography | Total revenue by geography is as follows (in thousands):
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RELATED PARTY TRANSACTIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | As disclosed parenthetically within the Company's consolidated balance sheet, the Company has receivables from related parties. The following table summarizes those balances (in thousands):
As disclosed parenthetically within the Company's consolidated balance sheet, the Company has payables due to related parties. The following table summarizes those balances (in thousands):
As disclosed parenthetically within the Company's consolidated statements of operations, the Company has recorded expenses from related parties. The following table summarizes those balances (in thousands):
As disclosed within the Company's consolidated statements of cash flows, the Company has cash flows resulting from amounts due to related parties and due from related parties. The following table summarizes those cash flows (in thousands):
|
REVENUE RECOGNITION - Contract Balances (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Apr. 01, 2018 |
Mar. 31, 2018 |
|
ASSETS: | |||
Customer accounts receivable | $ 267,409 | $ 205,299 | |
Increase (decrease) in customer accounts receivable | 62,110 | ||
Unbilled receivables | 3,404 | 4,338 | |
Increase (decrease) of unbilled receivables | (934) | ||
Other receivables | 3,106 | 4,996 | |
Increase (decrease) in other receivables | (1,890) | ||
Long-term unbilled receivables | 3,254 | 2,254 | |
Increase (decrease) of long-term unbilled receivables | 1,000 | ||
Contract assets | 277,173 | 216,887 | |
Increase (decrease) in contract assets | 60,286 | ||
LIABILITIES: | |||
Deferred revenue | 260,926 | 271,698 | $ 301,925 |
Increase (decrease) in deferred revenue | (10,772) | ||
Deferred revenue, long-term | 84,881 | 90,157 | $ 91,409 |
Increase (decrease) in deferred revenue, long-term | (5,276) | ||
Contract liabilities | 345,807 | $ 361,855 | |
Increase (decrease) in contract liabilities | $ (16,048) |
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Apr. 01, 2018 |
Mar. 31, 2018 |
---|---|---|---|
Concentration Risk [Line Items] | |||
Prepaid expenses and other current assets | $ 27,001 | $ 38,128 | $ 33,502 |
Affiliated Entity | |||
Concentration Risk [Line Items] | |||
Prepaid expenses and other current assets | $ 336 | $ 3,187 |
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
---|---|---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||||
Cash and cash equivalents | $ 369,054 | $ 369,821 | $ 331,912 | $ 304,880 |
Restricted cash | 187 | 910 | 910 | 846 |
Total cash, cash equivalents and restricted cash | $ 369,241 | $ 370,731 | $ 332,822 | $ 305,726 |
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES - Summary of Contractual Maturities of Marketable Securities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|
Available-for-sale securities: | ||
Due in 1 year or less | $ 105,753 | $ 77,941 |
Due after 1 year through 5 years | 1,002 | 0 |
Fair Value | $ 106,755 | $ 77,941 |
FAIR VALUE MEASUREMENTS - Reconciliation of Changes in Level 3 Assets and Liabilities (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Contingent Consideration | ||
Contingent consideration pursuant to divestiture of HNT tools business | $ 2,257 | $ 0 |
Fair value, measurements, recurring | ||
Contingent Purchase Consideration | ||
Balance at March 31, 2018 | (5,464) | |
Change in fair value of contingent consideration | (102) | |
Payments of contingent consideration | 5,566 | |
Balance at December 31, 2018 | 0 | |
Contingent Consideration | ||
Balance at March 31, 2018 | 0 | |
Contingent consideration pursuant to divestiture of HNT tools business | 2,257 | |
Change in fair value of contingent consideration | 64 | |
Payments of contingent consideration | 0 | |
Balance at December 31, 2018 | $ 2,321 |
INVENTORIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 16,462 | $ 20,860 |
Work in process | 989 | 2,589 |
Finished goods | 6,754 | 8,500 |
Deferred costs | 4,704 | 2,825 |
Total inventories | $ 28,909 | $ 34,774 |
GOODWILL AND INTANGIBLE ASSETS - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at March 31, 2018 | $ 1,712,764 |
Divestiture of the HNT tools business | (4,414) |
Foreign currency translation impact | 7,173 |
Balance at December 31, 2018 | $ 1,715,523 |
GOODWILL AND INTANGIBLE ASSETS - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of acquired intangible assets | $ 24,614 | $ 28,318 | $ 83,752 | $ 84,958 |
Product revenue | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of acquired intangible assets | 0 | 3 | 0 | 7 |
Cost of product revenue | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of acquired intangible assets | 8,176 | 10,088 | 25,858 | 30,032 |
Operating expense | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of acquired intangible assets | $ 16,438 | $ 18,227 | $ 57,894 | $ 54,919 |
GOODWILL AND INTANGIBLE ASSETS - Schedule of Expected Future Amortization Expense (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2019 (remaining three months) | $ 24,619 | |
2020 | 90,926 | |
2021 | 79,645 | |
2022 | 69,234 | |
2023 | 61,515 | |
Thereafter | 349,224 | |
Net | $ 675,163 | $ 812,774 |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Narrative (Details) |
9 Months Ended |
---|---|
Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Managing period of hedging forecasted cash flows for operating expenses denominated in foreign currencies | 12 months |
Contract maturity period | 12 months |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet (Details) - Forward contracts - Cash flow hedges - Designated as hedging instrument - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Notional Amounts | $ 9,071 | $ 11,225 |
Prepaid Expenses and Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Prepaid Expenses and Other Current Assets | 21 | 122 |
Accrued Other | ||
Derivatives, Fair Value [Line Items] | ||
Accrued Other | $ 224 | $ 40 |
RESTRUCTURING CHARGES - Schedule of Restructuring Liability (Details) $ in Thousands |
9 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Balance at March 31, 2018 | $ 3,696 |
Restructuring charges to operations | 17,764 |
Cash payments | (19,596) |
Other adjustments | (573) |
Balance at December 31, 2018 | 1,291 |
Q3 FY 2018 Plan | Employee-Related | |
Restructuring Reserve [Roll Forward] | |
Balance at March 31, 2018 | 3,696 |
Restructuring charges to operations | 1,017 |
Cash payments | (4,241) |
Other adjustments | (462) |
Balance at December 31, 2018 | 10 |
Q3 FY 2018 Plan | Facility-Related | |
Restructuring Reserve [Roll Forward] | |
Balance at March 31, 2018 | 0 |
Restructuring charges to operations | 643 |
Cash payments | (458) |
Other adjustments | (185) |
Balance at December 31, 2018 | 0 |
VSP | Employee-Related | |
Restructuring Reserve [Roll Forward] | |
Balance at March 31, 2018 | 0 |
Restructuring charges to operations | 16,104 |
Cash payments | (14,897) |
Other adjustments | 74 |
Balance at December 31, 2018 | $ 1,281 |
PENSION BENEFIT PLANS - Narrative (Details) $ in Millions |
9 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
employee
| |
Defined Benefit Plan Disclosure [Line Items] | |
Contributions to defined benefit pension plans | $ 0.2 |
Expected cash contribution requirements for defined benefit pension plans, less than | $ 1.0 |
United States | |
Defined Benefit Plan Disclosure [Line Items] | |
Number of employees participating in noncontributory defined benefit pension plans | employee | 0 |
PENSION BENEFIT PLANS - Net Periodic Pension Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Retirement Benefits [Abstract] | ||||
Service cost | $ 61 | $ 67 | $ 187 | $ 208 |
Interest cost | 118 | 132 | 362 | 405 |
Net periodic pension cost | $ 179 | $ 199 | $ 549 | $ 613 |
NET INCOME (LOSS) PER SHARE - Schedule of Calculations of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Numerator: | ||||
Net income (loss) | $ (3,603) | $ 89,685 | $ (92,535) | $ 62,995 |
Denominator: | ||||
Denominator for basic net income (loss) per share - weighted average common shares outstanding (in shares) | 77,774 | 87,210 | 78,916 | 88,985 |
Dilutive common equivalent shares: | ||||
Weighted average restricted stock units (in shares) | 0 | 650 | 0 | 897 |
Denominator for diluted net income (loss) per share - weighted average shares outstanding (in shares) | 77,774 | 87,860 | 78,916 | 89,882 |
Net income (loss) per share: | ||||
Basic net income (loss) per share (in USD per share) | $ (0.05) | $ 1.03 | $ (1.17) | $ 0.71 |
Diluted net income (loss) per share (in USD per share) | $ (0.05) | $ 1.02 | $ (1.17) | $ 0.70 |
NET INCOME (LOSS) PER SHARE - Antidilutive Securities Excluded from Computation (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Restricted stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 435 | 1,873 | 733 | 1,405 |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 30.80% | (155.10%) | 20.20% | 1133.00% |
Increase of provisional tax expense estimate related to transition tax associated with deemed repatriation of foreign earnings | $ 0.9 |
SEGMENT AND GEOGRAPHIC INFORMATION (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2018
USD ($)
segment
|
Dec. 31, 2017
USD ($)
|
|
Segment Reporting [Abstract] | ||||
Number of reportable segments | segment | 1 | |||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 246,008 | $ 268,944 | $ 674,916 | $ 751,563 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 148,379 | 156,511 | 412,377 | 448,761 |
Europe | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 45,058 | 53,938 | 109,529 | 132,488 |
Asia | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 18,187 | 23,076 | 54,285 | 67,804 |
Rest of the world | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 34,384 | $ 35,419 | $ 98,725 | $ 102,510 |
SUBSEQUENT EVENTS (Details) $ in Millions |
Feb. 04, 2019
USD ($)
|
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
Repaid borrowings | $ 50.0 |
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