NetScout(US:NTCT)2025-02-06 21:02Revenue Performance - Total revenue decreased by $8.3 million, or 1%, for the nine months ended December 31, 2024, compared to the same period in 2023, which included approximately $48 million of backlog-related revenue[136] - Total revenue for the three months ended December 31, 2024, was $252.0 million, a 16% increase from $218.1 million in the same period of 2023[149] - Total revenue for the nine months ended December 31, 2024, was $617.7 million, a decrease of 1% or $8.3 million compared to the same period last year[175] - Revenue from service assurance offerings decreased due to industry-specific capital spending constraints, while revenue from enterprise customers in cybersecurity offerings increased[136] - Revenue from the United States increased by 24%, or $30.1 million, to $153.9 million, while international revenue grew by 4%, or $3.8 million, to $98.1 million[152] - Cybersecurity product line revenue surged by 29%, or $20.0 million, to $89.2 million, reflecting strong demand from both enterprise and service provider customers[153] - Service revenue saw a modest increase of 1%, or $1.6 million, totaling $123.8 million, primarily due to maintenance contracts[151] - Revenue from the service assurance product line decreased by 5%, or $23.1 million, while revenue from the cybersecurity product line increased by 7%, or $14.8 million[177] Profitability and Loss - Net loss for the nine months ended December 31, 2024, was $385.5 million, an increase of $270.2 million from a net loss of $115.3 million in the same period of 2023, primarily due to a $259.9 million increase in goodwill impairment charges[138] - Non-GAAP net income for the nine months ended December 31, 2024, was $122.4 million, compared to $119.3 million for the same period in 2023[144] - The gross profit for the nine months ended December 31, 2024, decreased by 1%, or $4.3 million, compared to the same period last year, with a gross profit percentage remaining flat at 78%[182] - Gross profit percentage remained flat at 78% during the nine months ended December 31, 2024, compared to the same period in 2023, due to a shift in product mix to higher margin products[137] - Gross profit rose by 18%, or $31.0 million, to $205.4 million, with a gross profit margin of 82%, up from 80% in the prior year[160] Expenses and Cost Management - Total operating expenses decreased by 53%, or $165.2 million, to $143.7 million, largely due to the absence of goodwill impairment charges[161] - Total operating expenses for the nine months ended December 31, 2024, were $872.1 million, a 45% increase from $601.8 million in the same period last year[184] - Research and development expenses increased by 2%, or $0.7 million, to $37.8 million, reflecting higher employee-related costs[162] - Research and development expenses decreased by 1%, or $1.5 million, to $116.1 million, primarily due to a $1.7 million decrease in depreciation expense[184] - Sales and marketing expenses rose by 1%, or $0.8 million, to $69.9 million, driven by increased commissions and event-related costs[164] - Sales and marketing expenses decreased by 4%, or $7.6 million, to $201.5 million, mainly due to an $8.6 million decrease in employee-related expenses[185] - General and administrative expenses increased by 2%, or $0.4 million, for the three months ended December 31, 2024, primarily due to a $1.3 million rise in employee-related costs associated with variable incentive compensation[165] Cash Flow and Liquidity - Cash, cash equivalents, marketable securities, and investments totaled $427.9 million at December 31, 2024, an increase of $3.8 million from $424.1 million at March 31, 2024[139] - Net cash provided by operating activities was $76.1 million for the nine months ended December 31, 2024, compared to a cash outflow of $34.8 million in the same period last year[202] - Cash provided by investing activities was $2.0 million during the nine months ended December 31, 2024, a decrease of $11.4 million compared to $13.4 million in the same period of 2023[204] - Cash used in financing activities was $66.5 million during the nine months ended December 31, 2024, a decrease of $2.6 million from $69.1 million in the same period of 2023[206] - The company expects net cash provided by operating activities combined with cash, cash equivalents, and marketable securities will be sufficient to fund current obligations over the next twelve months[226] Debt and Financing - The company had $525 million available under its revolving credit facility as of December 31, 2024, providing sufficient liquidity for current obligations and capital spending[135] - The company repaid $25.0 million of borrowings under the Second Amended and Restated Credit Agreement during the nine months ended December 31, 2024[209] - The Third Amended and Restated Credit Agreement provides for a new five-year, $600.0 million senior secured revolving credit facility[212] - The maximum consolidated net leverage ratio is set at 4.00 to 1.00, and the company was in compliance with all covenants at December 31, 2024[222] - The company recorded a loss on the extinguishment of debt of $1.1 million related to the Third Amended and Restated Credit Agreement[213] Strategic Initiatives - The company expects constrained customer spending to persist for the remainder of fiscal year 2025 due to ongoing macroeconomic challenges[134] - The company anticipates continued growth in revenue driven by strong demand in cybersecurity and service assurance offerings, with a focus on expanding its customer base[148] - The company ceased operations in Russia in response to the war in Ukraine, impacting its business strategy[134] - The company recorded restructuring charges of $19.6 million related to a voluntary separation program for 142 employees during the nine months ended December 31, 2024[189] - The company expects annual run-rate savings from restructuring efforts to be approximately $25.0 million to $27.0 million, with about $6.0 million expected to be realized in the remainder of fiscal year 2025[191] Foreign Currency and Interest Rate Exposure - The company engages in foreign currency hedging activities to limit exposure to fluctuations in foreign currency exchange rates[233] - The company had foreign currency forward contracts designated as hedging instruments with notional amounts totaling $10.3 million as of December 31, 2024[234] - The valuation of foreign currency forward contracts at December 31, 2024, resulted in a liability balance of $324 thousand due to unfavorable contract rates[234] - The effect of a hypothetical 10% change in foreign currency exchange rates would not have a material impact on the company's historical consolidated financial statements[234] - A hypothetical 10% increase or decrease in the current weighted-average interest rate would result in an annual increase or decrease to interest expense of approximately $0.4 million[232] - Declines in interest rates would reduce future interest income, but a 10% change in overall interest rates would not materially impact operating results[231] - The company believes it does not have material exposure to changes in the fair value of its investment portfolio due to the short-term nature of its instruments[231] - The company does not use derivative financial instruments for speculative trading purposes[233]