<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0000-26251
------------------------
NETSCOUT SYSTEMS, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DELAWARE 04-2837575
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4 TECHNOLOGY PARK DRIVE, WESTFORD, MA 01886
(978) 614-4000
</TABLE>
------------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
The number of shares outstanding of the registrant's common stock as of
August 7, 2000 was 29,007,173.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
NETSCOUT SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NUMBER PAGE NO.
--------------------- --------
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a.) Consolidated Balance Sheets:
As of June 30, 2000 and March 31, 2000................... 1
b.) Condensed Consolidated Statements of Income:
For the three months ended June 30, 2000 and June 30,
1999........................................................ 2
c.) Consolidated Statements of Cash Flows:
For the three months ended June 30, 2000 and June 30,
1999........................................................ 3
d.) Notes to the Consolidated Financial Statements.......... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................. 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk................. 16
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.......................................................... 16
Item 2. Changes in Securities and Use of Proceeds.................................. 17
Item 6. Exhibits and Reports on Form 8-K........................................... 17
SIGNATURES.......................................................................... 18
EXHIBIT INDEX....................................................................... 19
</TABLE>
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NETSCOUT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
2000 2000
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 56,722 $48,515
Marketable securities....................................... 17,611 21,807
Accounts receivable, net of allowance for doubtful accounts
and returns of $719 and $754 at June 30, 2000 and March
31, 2000, respectively.................................... 12,604 10,390
Inventories................................................. 4,362 3,131
Refundable income taxes..................................... -- 1,899
Deferred income taxes....................................... 1,022 1,022
Prepaids and other current assets........................... 4,306 3,728
-------- -------
Total current assets.................................... 96,627 90,492
Fixed assets, net........................................... 6,051 5,657
Deferred income taxes....................................... 599 599
-------- -------
Total assets............................................ $103,277 $96,748
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 3,887 $ 2,789
Accrued compensation........................................ 4,221 3,673
Accrued other............................................... 1,661 2,448
Income taxes payable........................................ 290 --
Customer deposits........................................... 25 78
Deferred revenue............................................ 7,357 6,638
-------- -------
Total current liabilities............................... 17,441 15,626
-------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, no shares issued or outstanding at June 30,
2000 and March 31, 2000................................... -- --
Common stock, $0.001 par value:
150,000,000 shares authorized; 30,794,617 shares issued
and 26,817,363 shares outstanding at June 30, 2000;
30,697,697 shares issued and 26,720,443 shares outstanding
at March 31, 2000......................................... 31 31
Additional paid-in capital.................................. 67,658 67,366
Deferred compensation....................................... (518) (636)
Treasury stock.............................................. (25,306) (25,306)
Retained earnings........................................... 43,971 39,667
-------- -------
Total stockholders' equity.............................. 85,836 81,122
-------- -------
Total liabilities, and stockholders' equity............. $103,277 $96,748
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
NETSCOUT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Product................................................... $17,761 $12,814
Service................................................... 3,976 2,465
License and royalty....................................... 3,432 3,792
------- -------
Total revenue........................................... 25,169 19,071
------- -------
Cost of revenue:
Product................................................... 6,094 4,814
Service................................................... 595 413
------- -------
Total cost of revenue................................... 6,689 5,227
------- -------
Gross margin................................................ 18,480 13,844
------- -------
Operating expenses:
Research and development.................................. 2,572 2,241
Sales and marketing....................................... 8,727 6,040
General and administrative................................ 1,594 937
------- -------
Total operating expenses................................ 12,893 9,218
------- -------
Income from operations...................................... 5,587 4,626
Interest income, net........................................ 1,034 272
------- -------
Income before provision for income taxes.................... 6,621 4,898
Provision for income taxes.................................. 2,317 1,764
------- -------
Net income.................................................. $ 4,304 $ 3,134
======= =======
Basic net income per share.................................. $ 0.16 $ 0.22
Diluted net income per share................................ $ 0.15 $ 0.13
Shares used in computing:
Basic net income per share................................ 26,762 14,331
Diluted net income per share.............................. 27,954 24,909
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
NETSCOUT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 4,304 $ 3,134
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 769 580
Loss on disposal of fixed assets........................ 11 28
Compensation expense associated with equity awards...... 58 92
Changes in assets and liabilities:
Accounts receivable................................... (2,214) (1,881)
Inventories........................................... (1,231) 581
Refundable income taxes............................... 1,899 217
Prepaids and other current assets..................... (578) (239)
Accounts payable...................................... 1,098 (3,445)
Accrued expenses...................................... (239) (1,157)
Income taxes payable.................................. 290 507
Customer deposits..................................... (53) --
Deferred revenue...................................... 719 575
-------- -------
Net cash provided by (used in) operating activities... 4,833 (1,008)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities......................... (12,646) --
Proceeds from maturity of marketable securities........... 16,842 --
Purchase of fixed assets.................................. (1,174) (1,619)
-------- -------
Net cash provided by (used in) investing activities... 3,022 (1,619)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 352 68
-------- -------
Net cash provided by financing activities............. 352 68
-------- -------
Net increase (decrease) in cash and cash equivalents...... 8,207 (2,559)
Cash and cash equivalents, beginning of the period........ 48,515 25,477
-------- -------
Cash and cash equivalents, end of the period.............. $ 56,722 $22,918
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $16 $1
Cash paid for income taxes................................ 128 1,053
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
NETSCOUT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements as of June 30, 2000 and
for the three months ended June 30, 2000 and 1999 are unaudited. In the opinion
of NetScout's management, the June 30, 2000 and 1999 unaudited interim
consolidated financial statements include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for that period. The results of operations
for the three month period ended June 30, 2000 are not necessarily indicative of
the results of operations for the year ended March 31, 2001.
The balance sheet at March 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information refer to the consolidated financial statements and
footnotes thereto included in NetScout's Annual Report on Form 10-K for the year
ended March 31, 2000, as filed with the Securities and Exchange Commission.
2. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
NetScout considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and those with maturities greater
than three months are considered to be marketable securities. Cash equivalents
and marketable securities are stated at amortized cost plus accrued interest,
which approximates fair value. Cash equivalents and marketable securities
consist primarily of money market instruments and U.S. Treasury bills.
NetScout accounts for its investments in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under the provision of SFAS
No. 115, NetScout has classified its investments as "available-for-sale" and any
associated unrealized gains or losses, if material, are recorded as a separate
component of stockholders' equity until realized. At June 30, 2000 and
March 31, 2000 any unrealized gains or losses were not significant.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
2000 2000
-------- ---------
<S> <C> <C>
Raw materials............................................. $2,595 $2,371
Work-in-process........................................... 771 476
Finished goods............................................ 996 284
------ ------
$4,362 $3,131
====== ======
</TABLE>
4
<PAGE>
NETSCOUT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UAUDITED)
4. GEOGRAPHIC INFORMATION
Revenue was distributed geographically as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
North America............................................. $23,225 $15,442
Other international....................................... 1,944 3,629
------- -------
$25,169 $19,071
======= =======
</TABLE>
Substantially all of NetScout's identifiable assets are located in the
United States.
5. CONTINGENCIES
On November 5, 1999, a former employee of NetScout filed an action against
the Company and an employee stockholder of NetScout in the Massachusetts
Superior Court Department of the Trial Court, Middlesex County, alleging claims
of discrimination on the basis of sex and sexual harassment. On December 30,
1999, NetScout filed a Notice of Removal to the United States District Court for
the District of Massachusetts, thereby removing the action to that Court.
NetScout has filed an Answer denying these allegations and plans to vigorously
defend this matter. NetScout has recorded an accrual to address this matter.
However, since the matter is at a preliminary stage, NetScout is unable to
predict the outcome or amount of related expense, or loss, if any.
In addition to the matter noted above, 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 other
current legal proceedings and claims will not have a material adverse effect on
NetScout's financial position or results of operations.
6. ACQUISITION
On July 7, 2000, NetScout Systems, Inc., a Delaware corporation, completed
its acquisition of NextPoint Networks, Inc., a Delaware corporation, by means of
a merger of NextPoint with and into NetScout Service Level Corporation, a
Delaware corporation and a wholly-owned subsidiary of NetScout, pursuant to an
Agreement and Plan of Reorganization dated as of June 13, 2000. The transaction
was valued at approximately $60 million in which NetScout issued approximately
2.1 million NetScout shares and approximately $19.5 million in cash at closing
and reserved approximately 25,000 NetScout shares and approximately $231,000 in
cash for issuance upon the exercise of warrants for NextPoint Series C preferred
stock, and approximately 274,000 NetScout shares for issuance upon the exercise
of NextPoint options. The acquisition has been accounted for as a purchase
transaction.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No.101 "Revenue Recognition in Financial
Statements", as amended by SAB No.101A and 101B. SAB No. 101 summarizes the
SEC's views in applying generally accepted accounting principles to selected
revenue recognition issues in financial statements. The application of the
guidance of SAB No. 101 will be required in the Company's fourth quarter of
fiscal 2001. The Company is currently determining the impact, if any, that SAB
No. 101 will have on its financial position and results of operations.
5
<PAGE>
In March 2000, the Financial Accounting Standards Board issued
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation--an interpretation of APB Opinion No. 25". FIN No. 44
clarifies the application of APB Opinion No. 25 to certain issues including: the
definition of an employee for purposes of applying APB Opinion No. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence of various modifications to the terms of previously
fixed stock options or awards; and the accounting for the exchange of stock
compensation awards in business combinations. FIN No. 44 is effective July 1,
2000, but certain conclusions in FIN No. 44 are applicable retroactively to
specific events occurring after either December 15, 1998 or January 12, 2000.
NetScout does not expect the application of FIN No. 44 to have a significant
impact on the Company's financial position or results of operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
consolidated historical financial information and the notes thereto included in
Item 1 of this Quarterly Report on Form 10-Q and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-K for the year ended March 31, 2000 as filed with the
Securities and Exchange Commission.
In addition to the other information in this report, the following
Management Discussion and Analysis should be considered carefully in evaluating
the Company and our business. This Quarterly Report on Form 10-Q contains
forward-looking statements. These statements relate to future events or our
future financial performance and are identified by terminology such as "may",
"will", "could", "should", "expects," "plans," "intends," "seeks,"
"anticipates," "believes," "estimates," "potential," or "continue" or the
negative of such terms or other comparable terminology. These statements are
only predictions. You should not place undue reliance on these forward-looking
statements. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various important factors,
including the risks outlined under "Certain Factors Which May Affect Future
Results" in this section of this report and our other filings with the
Securities and Exchange Commission. These factors may cause our actual results
to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward- looking statements after the date of this Form 10-Q to conform such
statements to actual results.
OVERVIEW
NetScout designs, develops, manufactures, markets and supports a family of
products that enable businesses and network service providers to manage the
performance of their computer networks and software applications. Our products
include data collection devices, consisting of probes and software agents, which
collect, aggregate and perform detailed analysis of computer network and
application data, and analytical and presentation software, which provides
current network and application performance information in an easy-to-use,
graphical format.
We were incorporated in 1984 and primarily provided consulting services
until 1992 when we began to develop and market our first computer network
performance management products. Our operations have been financed principally
through cash provided by operations and we have been profitable for each of the
last seven years.
Product revenue consists of sales of our hardware products and licensing of
our software products. Product revenue is recognized upon shipment, provided
that evidence of an arrangement exists, title and risk of loss have passed to
the customer, fees are fixed or determinable and collection of the related
receivable is probable. Sales to indirect channel partners that are subject to
return privileges are
6
<PAGE>
recognized upon shipment, net of an allowance for estimated product returns
which is based on our return policy and historical experience. Customer payments
received in advance of product shipments are recorded as customer deposits.
Service revenue consists primarily of customer fees from support agreements,
consulting and training. We generally provide three months of software and
service support and 12 months of hardware support as part of our product sales.
Revenue from software and service support is deferred and recognized over the
three-month support period. Revenue from hardware support is deferred and
recognized over the 12-month support period. In addition, customers can elect to
purchase extended support agreements, typically for 12-month periods. Revenue
from these agreements is deferred and recognized ratably over the support
period. Revenue from consulting and training is recognized as the work is
performed.
For multi-element arrangements, each element of the arrangement is analyzed
and the Company allocates a portion of the total fee under the arrangement to
the undelivered elements, primarily support agreements and training, using
vendor specific objective evidence of fair value of the element and the
remaining portion of the fee is allocated to the delivered elements (i.e.
generally hardware products and licensing software products), regardless of any
separate prices stated within the contract for each element, under the residual
method. Vendor specific objective evidence of fair value is based on the price
the customer is required to pay when the element is sold separately.
License and royalty revenue consists primarily of royalties paid under
license agreements by original equipment manufacturers who incorporate
components of our data collection technology into their own products or who
reproduce and sell our software products. License revenue is recognized when
delivery has occurred and when we become contractually entitled to receive
license fees, provided that such fees are fixed or determinable and collection
is probable. Royalty revenue is recognized based upon product shipment by the
license holder.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenue of certain line items included in our Statements of Income:
NETSCOUT SYSTEMS, INC.
STATEMENTS OF INCOME PERCENTAGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Product................................................ 70.6% 67.2%
Service................................................ 15.8 12.9
License and royalty.................................... 13.6 19.9
----- -----
Total revenue........................................ 100.0 100.0
----- -----
Cost of revenue:
Product................................................ 24.2 25.2
Service................................................ 2.4 2.2
----- -----
Total cost of revenue................................ 26.6 27.4
----- -----
Gross margin............................................. 73.4 72.6
----- -----
Operating expenses:
Research and development............................... 10.2 11.8
Sales and marketing.................................... 34.7 31.7
General and administrative............................. 6.3 4.9
----- -----
Total operating expenses............................. 51.2 48.4
----- -----
Income from operations................................... 22.2 24.2
Interest income, net..................................... 4.1 1.4
----- -----
Income before provision for income taxes................. 26.3 25.6
Provision for income taxes............................... 9.2 9.2
----- -----
Net income............................................... 17.1% 16.4%
===== =====
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUE
Total revenues were $25.2 million and $19.1 million for the three months
ended June 30, 2000 and 1999, respectively, representing an increase of 32% from
1999 to 2000.
PRODUCT. Product revenues were $17.8 million and $12.8 million for the
three months ended June 30, 2000 and 1999, respectively, representing an
increase of 39% from 1999 to 2000. This increase was primarily due to a 37%
increase in average selling price attributable to larger volumes of higher speed
and multi-port probes.
8
<PAGE>
SERVICE. Service revenues were $4.0 million and $2.5 million for the three
months ended June 30, 2000 and 1999, respectively, representing an increase of
61% from 1999 to 2000. This increase was primarily due to an increase in support
agreements attributable to new product sales and an increase in the sale of
support agreements to new and existing customers attributable to increased sales
and marketing efforts.
LICENSE AND ROYALTY. License and royalty revenues were $3.4 million and
$3.8 million for the three months ended June 30, 2000 and 1999, respectively,
representing a decrease of 9% from 1999 to 2000. For the three months ended
June 30, 1999, we received a large royalty from a small partner. Thereafter, due
to changing product lines at the small partner, royalty from them decreased
substantially. Beyond this, license and royalty was primarily sustained by the
proportionate growth in unit sales of our software and embedded software
products by Cisco.
COST OF REVENUE AND GROSS MARGIN
PRODUCT. Cost of product revenue consists primarily of components,
personnel costs, media duplication, manuals, packaging materials, licensed
technology fees and overhead. Cost of product revenue was $6.1 million and
$4.8 million, for the three months ended June 30, 2000 and 1999, respectively,
representing an increase of 27% from 1999 to 2000. This increase was primarily
due to higher sales volumes offset by a 18% decrease in the average cost per
unit from 1999 to 2000. Product gross margins were 66% and 62% for the three
months ended June 30, 2000 and 1999, respectively.
SERVICE. Cost of service revenue consists primarily of personnel costs.
Cost of service revenues were $595,000 and $413,000 for the three months ended
June 30, 2000 and 1999, respectively, representing an increase of 44% from 1999
to 2000. This increase was primarily due to the distribution of software updates
and material costs to support our increased installed customer base. Service
gross margins were 85% and 83% for the three months ended June 30, 2000 and
1999, respectively.
Gross margins were $18.5 million and $13.8 million for the three months
ended June 30, 2000 and 1999, respectively, representing an increase of 34% from
1999 to 2000. Gross margin is primarily affected by the mix of product, service,
license and royalty revenue and by the proportion of sales through direct versus
indirect distribution channels. We typically realize higher gross margins on
license and royalty revenue relative to product and service revenue and on
direct sales relative to indirect distribution channel sales. This increase was
primarily due to a 84% increase in direct sales and an increase in average
selling price.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel costs, fees for outside consultants and related costs
associated with the development of new products and the enhancement of existing
products. Research and development expenses were $2.6 million and $2.2 million
for the three months ended June 30, 2000 and 1999, respectively, representing an
increase of 15% from 1999 to 2000. This increase was primarily due to a 17%
increase in personnel costs from 1999 to 2000.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel costs and costs associated with marketing programs such as trade
shows, seminars, advertising and new product launch activities. Sales and
marketing expenses were $8.7 million and $6.0 million for the three months ended
June 30, 2000 and 1999, respectively, representing an increase of 44% from 1999
to 2000. This increase was primarily due to a 51% increase in sales and
marketing personnel costs from 1999 to 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel costs for executive, financial, information services and
human resource employees. General and administrative expenses were $1.6 million
and $937,000 for the three months ended June 30, 2000 and 1999, respectively,
representing an increase of 70% from 1999 to 2000. This increase was primarily
due to a 45% increase in
9
<PAGE>
personnel costs from 1999 to 2000 and an increase in expenses related to our
responsibilities as a public company.
INTEREST INCOME, NET. Interest income, net of interest expense, was
$1.0 million and $272,000, for the three months ended June 30, 2000 and 1999,
respectively. This increase was primarily due to an increase in our cash
balances related to the proceeds from our initial public offering.
PROVISION FOR INCOME TAXES. The provision for income taxes was
$2.3 million and $1.8 million, for the three months ended June 30, 2000 and
1999, respectively, representing an increase of 31% from 1999 to 2000, primarily
due to higher pre-tax income. Our effective tax rate was 35% for the three
months ended June 30, 2000 and 36% for the three months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had $56.7 million in cash and cash equivalents and
$17.6 million in marketable securities. Prior to our initial public offering, we
financed our operations through cash provided by operating activities. On
August 17, 1999, we completed our initial public offering of 3,000,000 shares of
common stock at a price of $11.00 per share. We received net proceeds of
approximately $29.6 million after underwriter discounts and commissions and
other offering expenses. We have a line of credit with a bank, which allows us
to borrow up to $5.0 million for working capital purposes and to obtain letters
of credit. The line of credit expires in March 2001. Amounts available under the
line of credit are a function of eligible accounts receivable and bear interest
at the bank's prime rate. At June 30, 2000, we had letters of credit outstanding
under the line aggregating $561,000. The bank line of credit is secured by our
inventory and accounts receivable.
Cash, cash equivalents and marketable securities were $74.3 million at
June 30, 2000. Cash provided by operating activities was $4.8 million for the
three months ended June 30, 2000. Cash provided by operating activities was
primarily derived from net income and to a lesser degree, increases in deferred
revenue, accounts payable, depreciation and amortization, and decreases in
refundable income taxes This was partially offset by increases in accounts
receivable, inventory, and prepaids and other current assets for the three
months ended June 30, 2000. These changes were due to the growth of our
business. Cash used by operating activities was $1.0 million, for the three
months ended June 30, 1999. This was primarily caused by a large decrease in our
accounts payables.
Cash provided by investing activities was $3.0 million for the three months
ended June 30, 2000, which reflects the proceeds from the maturity of marketable
securities, partially offset by purchases of fixed assets and other marketable
securities. Cash used in investing activities was $1.6 million for the three
months ended June 30, 1999, which was due to the purchase of fixed assets.
Cash provided by financing activities was $352,000 and $68,000 for the three
months ended June 30, 2000 and 1999, respectively, which was primarily due to
proceeds from the issuance of common stock.
On July 7, 2000, we completed the acquisition of NextPoint Networks, Inc., a
Delaware corporation, by means of a merger of NextPoint with and into NetScout
Service Level Corporation, a Delaware corporation and a wholly-owned subsidiary
of NetScout, pursuant to an Agreement and Plan of Reorganization dated as of
June 13, 2000. The transaction was valued at approximately $60 million in which
NetScout issued approximately 2.1 million NetScout shares and approximately
$19.5 million in cash at closing and reserved approximately 25,000 NetScout
shares and approximately $231,000 in cash for issuance upon the exercise of
warrants for NextPoint Series C preferred stock, and approximately 274,000
NetScout shares for issuance upon the exercise of NextPoint options. The
acquisition has been accounted for as a purchase transaction.
We believe that our current cash balances and the cash flows generated by
operations will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for the next 12 months. Thereafter, if cash
generated from operations is insufficient to satisfy our liquidity requirements,
we may
10
<PAGE>
seek to sell additional equity or convertible debt securities. The sale of
additional equity or debt securities could result in additional dilution to our
stockholders. A portion of our cash may be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. From time to time, in the ordinary course of business, we evaluate
potential acquisitions of such businesses, products or technologies.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No.101 "Revenue Recognition in Financial
Statements", as amended by SAB No.101A and 101B. SAB No. 101 summarizes the
SEC's views in applying generally accepted accounting principles to selected
revenue recognition issues in financial statements. The application of the
guidance of SAB No. 101 will be required in the Company's fourth quarter of
fiscal 2001. The Company is currently determining the impact, if any, that SAB
No. 101 will have on its financial position and results of operations.
In March 2000, the Financial Accounting Standards Board issued
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation--an interpretation of APB Opinion No. 25". FIN No. 44
clarifies the application of APB Opinion No. 25 to certain issues including: the
definition of an employee for purposes of applying APB Opinion No. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence of various modifications to the terms of previously
fixed stock options or awards; and the accounting for the exchange of stock
compensation awards in business combinations. FIN No. 44 is effective July 1,
2000, but certain conclusions in FIN No. 44 are applicable retroactively to
specific events occurring after either December 15, 1998 or January 12, 2000.
NetScout does not expect the application of FIN No. 44 to have a significant
impact on the Company's financial position or results of operations.
YEAR 2000 READINESS DISCLOSURE
To date, we have not incurred significant costs in connection with
identifying and evaluating year 2000 issues or complying with year 2000
requirements. We have not experienced any significant year 2000 problems and
have not deferred the release of any of our products or any IT projects as a
result of year 2000 complications. However, we have not used any independent
verification or validation processes to support our assertions regarding year
2000 risks and cost estimates. While we do not expect to incur significant costs
in the foreseeable future, year 2000 complications are not fully known,
therefore, there can be no assurance that year 2000 errors or defects will not
be discovered in our products or internal software systems. If such errors or
defects are discovered, there can be no assurance that the costs of making such
systems year 2000 compliant will not have a material adverse effect on our
business, operating results and financial condition.
CERTAIN FACTORS WHICH MAY AFFECT FUTURE RESULTS
We do not provide financial performance forecasts. Our operating results and
financial condition have varied in the past and may in the future vary
significantly depending on a number of factors. Except for the historical
information in this report, the matters contained in this report include
forward-looking statements that involve risks and uncertainties. The following
factors, among others, could cause actual results to differ materially from
those contained in forward-looking statements made in this report. Such factors,
among others, may have a material adverse effect upon our business, results of
operations and financial condition.
A REDUCTION IN ORDERS FROM CISCO SYSTEMS, INC. WOULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS. Our operating results and financial condition for a
particular fiscal period would be materially adversely affected if there is a
substantial reduction in orders from Cisco Systems, Inc. or if we are unable to
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complete one or more Cisco orders planned for that period. We derive a
significant portion of our revenue from Cisco, which distributes some of our
products under its private label and incorporates some of our software in its
products. Cisco accounted for 57% of our total revenue for the three months
ended June 30, 2000 and 44% of our total revenue for the three months ended
June 30, 1999. Our future performance is significantly dependent upon Cisco's
continued promotion of our products. Cisco has no obligation to purchase any
products from us. Further, we do not control Cisco's distribution of our
products, whether incorporated into Cisco's products or sold under private
label. Finally, Cisco may decide to internally develop products that compete
with our solution or partner with our competitors or bundle or sell competitors'
solutions, possibly at lower prices. If our relationship with Cisco were
terminated or adversely affected for any reason, our business, operating results
and financial condition would be materially adversely affected.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE. Our quarterly revenue and
operating results are difficult to predict and may fluctuate significantly from
quarter to quarter. Most of our expenses, such as employee compensation and
rent, are relatively fixed in the short term. Moreover, our expense levels are
based, in part, on our expectations regarding future revenue levels. As a
result, if revenue for a particular quarter is below our expectations, we may
not be able to reduce operating expenses proportionately for that quarter, and
therefore this revenue shortfall would have a disproportionately negative effect
on our operating results for that quarter.
Our quarterly revenue may fluctuate as a result of a variety of factors,
many of which are outside our control, including the following:
- the market for network and application performance management solutions is
in an early stage of development and therefore demand for our solutions
may be uneven;
- the timing and receipt of orders from customers, particularly Cisco,
especially in light of our lengthy sales cycle;
- the timing and market acceptance of new products or product enhancements
by us or our competitors;
- distribution channels through which our products are sold could change;
- the timing of hiring sales personnel and the speed at which such personnel
become productive;
- we may not be able to anticipate or adapt effectively to developing
markets and rapidly changing technologies; and
- our prices or the prices of our competitors' products may change.
We operate with minimal backlog because our products typically are shipped
shortly after orders are received. Therefore, product revenue in any quarter is
substantially dependent on orders booked and shipped in that quarter and revenue
for any future quarter is not predictable to any degree of certainty. Therefore,
any significant deferral of orders for our products would cause a shortfall in
revenue for that quarter.
OUR RELIANCE ON SOLE SOURCE SUPPLIERS COULD ADVERSELY AFFECT OUR
BUSINESS. Many components that are necessary for the assembly of our probes are
obtained from separate sole source suppliers or a limited group of suppliers.
These components include some of our network interface cards, which are produced
for us solely by SDL Communications, Inc. Our reliance on sole or limited
suppliers involves several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over pricing, quality
and timely delivery of components. We do not generally maintain long-term
agreements with any of our suppliers or large volumes of inventory. Our
inability to obtain adequate deliveries or the occurrence of any other
circumstance that would require us to seek alternative sources of these
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components would affect our ability to ship our products on a timely basis. This
could damage relationships with current and prospective customers, cause
shortfalls in expected revenue and materially adversely affect our business,
operating results and financial condition.
OUR CONTINUED GROWTH DEPENDS ON OUR ABILITY TO EXPAND OUR SALES FORCE. We
must increase the size of our sales force in order to increase our direct sales
and support our indirect sales channels. Because our products are very
technical, sales people require a long period of time to become productive,
typically three to six months. This lag in productivity, as well as the
challenge of attracting qualified candidates, may make it difficult to meet our
sales force growth targets. Further, we may not generate sufficient sales to
offset the increased expense resulting from growing our sales force. If we are
unable to successfully expand our sales capability, our business, operating
results and financial condition could be materially adversely affected.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND AND MANAGE INDIRECT
DISTRIBUTION CHANNELS. To increase our sales, we must further expand and manage
our indirect distribution channels, including original equipment manufacturers,
distributors, resellers, systems integrators and service providers. Sales to our
indirect distribution channels accounted for 18% and 39% of our total revenue
for the three months ended June 30, 2000 and 1999, respectively. Sales to Cisco
accounted for 57% and 44% of our total revenue for the three months ended
June 30, 2000 and 1999. Our indirect channel partners have no obligation to
purchase any products from us. In addition, they could internally develop
products, which compete with our solutions or partner with our competitors or
bundle or resell competitors' solutions, possibly at lower prices. Our inability
to expand and manage our relationships with our partners, the inability or
unwillingness of our partners to effectively market and sell our products or the
loss of existing partnerships could have a material adverse effect on our
business, operating results and financial condition.
IF WE FAIL TO INTRODUCE NEW PRODUCTS AND ENHANCE OUR EXISTING PRODUCTS TO
KEEP UP WITH RAPID TECHNOLOGICAL CHANGE, DEMAND FOR OUR PRODUCTS MAY
DECLINE. The market for network and application performance management
solutions is relatively new and is characterized by rapid changes in technology,
evolving industry standards, changes in customer requirements and frequent
product introductions and enhancements. Our success is dependent upon our
ability to meet our customers' needs, which are driven by changes in computer
networking technologies and the emergence of new industry standards. In
addition, new technologies may shorten the life cycle for our products or could
render our existing or planned products obsolete. If we are unable to develop
and introduce new network and application performance management products or
enhancements to existing products in a timely and successful manner, it would
have a material adverse effect on our business, operating results and financial
condition.
WE FACE SIGNIFICANT COMPETITION FROM OTHER TECHNOLOGY COMPANIES. The market
for network and application performance management solutions is intensely
competitive. We believe customers make network management system purchasing
decisions based primarily upon product performance, functionality and price;
name and reputation of vendor; distribution strength; and alliances with
industry partners. We compete with probe vendors, such as Agilent Technologies,
providers of network performance management solutions, such as Concord
Communications, Inc. and Micromuse, Inc., and providers of portable network
traffic analyzers, such as Network Associates, Inc. In addition, leading network
equipment providers could offer their own or competitors' solutions in the
future. Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
management, marketing, service, support, technical, distribution and other
resources than we do. Therefore, they may be able to respond more quickly than
we can to new or changing opportunities, technologies, standards or customer
requirements.
As a result of these and other factors, we may not be able to compete
effectively with current or future competitors, which would have a material
adverse effect on our business, operating results and financial condition.
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THE SUCCESS OF OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH IN THE MARKET
FOR AND THE COMMERCIAL ACCEPTANCE OF NETWORK AND APPLICATION PERFORMANCE
MANAGEMENT SOLUTIONS. We derive all of our revenue from the sale of products
and services that are designed to allow our customers to manage the performance
of computer networks and software applications. The market for network and
application performance management solutions is in an early stage of
development. Therefore, we cannot accurately assess the size of the market and
may be unable to predict the appropriate features and prices for products to
address the market, the optimal distribution strategy and the competitive
environment that will develop. In order for us to be successful, our potential
customers must recognize the value of more sophisticated network and application
performance management solutions, decide to invest in the management of their
networks and the performance of software applications and, in particular, adopt
our management solutions. Any failure of this market to continue to develop
would materially adversely affect our business, operating results and financial
condition. Businesses may choose to outsource the management of their networks
and applications to service providers. Our business may depend on our ability to
develop relationships with these service providers and successfully market our
products to them.
FAILURE TO PROPERLY MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS. We
have been experiencing a period of rapid growth over the past several years. We
plan to continue to expand our business by hiring additional personnel. The
growth in size and complexity of our business and our customer base has been and
will continue to be a significant challenge to our management and operations. To
manage further growth effectively we must enhance our financial and accounting
systems and controls, integrate new personnel and manage expanded operations.
Our financial and accounting systems are currently being upgraded and we
anticipate the upgrade to be completed in the third calendar quarter of 2000. If
we are unable to successfully integrate these systems and controls and to
effectively manage our growth, our costs, the quality of our products, the
effectiveness of our sales organization, and our ability to retain key
personnel, our business, operating results and financial condition could be
materially adversely affected.
LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS. Our future
success depends to a significant degree on the skills, experience and efforts of
Anil Singhal, our Chairman of the Board, Chief Executive Officer and co-founder,
and Narendra Popat, our President, Chief Operating Officer and co-founder. We
also depend on the ability of our other executive officers and senior managers
to work effectively as a team. The loss of one or more of our key personnel
could have a material adverse effect on our business, operating results and
financial condition.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR
MARKET. Qualified personnel are in great demand throughout the computer
software, hardware and networking industries. The demand for qualified personnel
is particularly acute in the New England area due to the large number of
software and high technology companies and the low unemployment in the region.
Our success depends in large part upon our ability to attract, train, motivate
and retain highly skilled employees, particularly sales and marketing personnel,
software engineers, and technical support personnel. We have had difficulty
hiring and retaining these highly skilled employees in the past. If we are
unable to attract and retain the highly skilled technical personnel that are
integral to our sales, marketing, product development and customer support
teams, the rate at which we can generate sales and develop new products or
product enhancements may be limited. This inability could have a material
adverse effect on our business, operating results and financial condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS. Our business is heavily dependent on our intellectual property. We rely
upon a combination of copyright, trademark and trade secret laws and
non-disclosure and other contractual arrangements to protect our proprietary
rights. The reverse engineering, unauthorized copying or other misappropriation
of our intellectual property could enable third parties to benefit from our
technology without compensating us. Legal proceedings to enforce our
intellectual property rights could be burdensome and expensive and could involve
a high degree of uncertainty. In addition, legal proceedings may divert
management's attention from growing our business.
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There can be no assurance that the steps we have taken to protect our
intellectual property rights will be adequate to deter misappropriation of
proprietary information, or that we will be able to detect unauthorized use by
third parties and take appropriate steps to enforce our intellectual property
rights. Further, we also license software from third parties for use as part of
our products, and if any of these licenses were to terminate, we may experience
delays in product shipment until we develop or license alternative software.
OTHERS MAY CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS. We
may be subject to claims by others that our products infringe on their
intellectual property rights. These claims, whether or not valid, could require
us to spend significant sums in litigation, pay damages, delay product
shipments, reengineer our products or acquire licenses to such third-party
intellectual property. We may not be able to secure any required licenses on
commercially reasonable terms or secure them at all. We expect that these claims
will become more frequent as more companies enter the market for network and
application performance management solutions. Any of these claims or resulting
events could have a material adverse effect on our business, operating results
and financial condition.
IF OUR PRODUCTS CONTAIN ERRORS, THEY MAY BE COSTLY TO CORRECT, REVENUE MAY
BE DELAYED, WE COULD GET SUED AND OUR REPUTATION COULD BE HARMED. Despite
testing by our customers and us errors may be found in our products after
commencement of commercial shipments. If errors are discovered, we may not be
able to successfully correct them in a timely manner or at all. In addition, we
may need to make significant expenditures of capital resources in order to
eliminate errors and failures. Errors and failures in our products could result
in loss of or delay in market acceptance of our products and could damage our
reputation. If one or more of our products fails, a customer may assert warranty
and other claims for substantial damages against us. The occurrence or discovery
of these types of errors or failures could have a material adverse effect on our
business, operating results and financial condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND AND MANAGE OUR INTERNATIONAL
OPERATIONS. Sales outside North America accounted for a significant percentage
of our total revenue for the three months ended June 30, 2000 and 1999,
respectively. We currently expect international revenue to continue to account
for a significant percentage of total revenue in the future. We believe that we
must continue to expand our international sales activities in order to be
successful. Our international sales growth will be limited if we are unable to
expand international indirect distribution channels, hire additional sales
personnel, adapt products for local markets, or manage geographically dispersed
operations. The major countries outside of North America, in which we do, or
intend to do, businesses are the United Kingdom, Germany and Japan. Our
international operations, including our operations in the United Kingdom,
Germany and Japan, are generally subject to a number of risks, including failure
of local laws to provide the same degree of protection against infringement of
our intellectual property, protectionist laws and business practices that favor
local competitors, dependence on local indirect channel partners, multiple
conflicting and changing governmental laws and regulations, longer sales cycles,
greater difficulty in collecting accounts receivable, foreign currency exchange
rate fluctuations and political and economic instability.
THE PRICE OF OUR COMMON STOCK MAY DECREASE DUE TO MARKET VOLATILITY. The
stock market in general has recently experienced extreme price and volume
fluctuations. In addition, the market prices of securities of technology
companies have been extremely volatile and have experienced fluctuations that
often have been unrelated or disproportionate to the operating performance of
these companies. These broad market fluctuations could adversely affect the
market price of our common stock.
Recently, when the market price of a stock has been volatile, holders of
that stock have occasionally instituted securities class action litigation
against the company that issues the stock. If any of our stockholders brought
such lawsuit against us, even if the lawsuit is without merit, we could incur
substantial costs defending the lawsuit. The lawsuit could also divert the time
and attention of our management.
OUR BUSINESS MAY BE NEGATIVELY AFFECTED BY OUR FAILURE TO SUCCESSFULLY
INTEGRATE WITH NEXTPOINT OR TO RETAIN NEXTPOINT EMPLOYEES. On July 7, 2000, we
completed our acquisition of NextPoint Nextworks, Inc., a
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Delaware corporation, by means of a merger of NextPoint with and into NetScout
Service Level Corporation, a Delaware corporation and one of our wholly-owned
subsidiaries pursuant to an Agreement and Plan of Reorganization dated as of
June 13, 2000. The anticipated benefits of the merger may not be achieved
unless, among other things, the operations, products, services and personnel of
NextPoint are successfully combined with ours in a timely and efficient manner.
If the anticipated benefits of the business combination are not achieved or are
not achieved in a timely fashion, then the merger could have adverse affect on
our operating results for a significant period of time that cannot now be
determined. Furthermore, the diversion of the attention of management, and any
difficulties encountered in the transition process, could have an adverse impact
on our revenues and operating results.
Despite NetScout's efforts to retain key employees, NetScout may lose some
of NextPoint's key employees following the merger. Competition for qualified
management, engineering and technical employees in the computer software,
hardware and networking industries is intense. NextPoint employees may not want
to work for a larger, publicly-traded company instead of a smaller, private
company. In addition, competitors may recruit NextPoint employees during the
integration of NextPoint and us. We cannot provide any assurance that the
combined enterprise will be able to attract, retain and integrate key employees
following the merger.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We consider all highly liquid marketable securities purchased with a
maturity of three months or less to be cash equivalents and those with
maturities greater than three months are considered to be marketable securities.
Cash equivalents and marketable securities are stated at amortized cost plus
accrued interest, which approximates fair value. Cash equivalents and marketable
securities consist primarily of money market instruments and U.S. Treasury
bills. We currently do not hedge interest rate exposure, but do not believe that
an increase in interest rates would have a material effect on the value of our
marketable securities.
On January 1, 1999, eleven of the existing members of the European Union
joined the European Monetary Union. Ultimately there will be a single currency
within certain countries of the European Union, known as the Euro, and one
organization, the European Central Bank, responsible for setting European
monetary policy. We have reviewed the impact the Euro will have on our business
and whether this will give rise to a need for significant changes in our
commercial operations or treasury management functions. Because our transactions
are denominated in U.S. dollars, we do not believe that the Euro conversion will
have any material effect on our business, financial condition or results of
operations.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 5, 1999, a former employee of NetScout filed an action against
the Company and an employee stockholder of NetScout in the Massachusetts
Superior Court Department of the Trial Court, Middlesex County, alleging claims
of discrimination on the basis of sex and sexual harassment. On December 30,
1999, NetScout filed a Notice of Removal to the United States District Court for
the District of Massachusetts, thereby removing the action to that Court.
NetScout has filed an Answer denying these allegations and plans to vigorously
defend this matter. NetScout has recorded an accrual to address this matter.
However, since the matter is at a preliminary stage, NetScout is unable to
predict the outcome or amount of related expense, or loss, if any.
In addition to the matter noted above, 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 other
current legal proceedings and claims will not have a material adverse effect on
NetScout's financial position or results of operations.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 17, 1999, we completed our initial public offering of three
million shares of common stock at a price of $11.00 per share. The principal
underwriters for the transaction were Deutsche Banc Alex. Brown, Bear,
Stearns & Co. Inc. and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated. The registration statement relating to this offering was declared
effective by the Securities and Exchange Commission (SEC File Number 333-76843)
on August 11, 1999. We received net proceeds of $29.6 million after deducting
$2.3 million in underwriting discounts and commissions and $1.1 million in other
offering expenses.
Upon the exercise of the over allotment option by the underwriters, certain
selling security holders sold 450,000 shares of common stock for net proceeds of
approximately $4.6 million after deducting underwriting discounts and
commissions.
Approximately $19.5 million of the proceeds from our initial public offering
were used in the acquisition of NextPoint. The balance of proceeds have been
invested primarily in U.S. Treasury obligations and other interest bearing
investment grade securities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(A) EXHIBITS
The following exhibits are filed or incorporated by
reference as part of this Report.
11. Statement re Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NETSCOUT SYSTEMS, INC.
By: /s/ David Sommers
------------------------------------------------------------------------------
Name: David Sommers
Title: Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------
<C> <S>
11 Statement re-Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
19
