NetScout(NTCT) - 2026 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Unaudited Financial Statements NetScout reported $186.7 million in revenue, a 7% increase, and a net loss of $3.7 million, a significant improvement from the prior year's $443.4 million loss, driven by the absence of a goodwill impairment Consolidated Balance Sheets Total assets decreased slightly to $2.16 billion, driven by lower accounts receivable, while liabilities and equity also saw minor shifts Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $489,572 | $457,415 | | Accounts receivable, net | $92,200 | $163,654 | | Goodwill | $1,070,155 | $1,076,383 | | Total Assets | $2,157,426 | $2,186,578 | | Liabilities & Equity | | | | Deferred revenue (current) | $293,911 | $301,753 | | Total Liabilities | $609,875 | $626,183 | | Total Stockholders' Equity | $1,547,551 | $1,560,395 | Consolidated Statements of Operations Revenue increased 7% to $186.7 million, while net loss significantly improved to $3.7 million due to the absence of a prior-year goodwill impairment Quarterly Statement of Operations (in thousands, except per share data) | Metric | Q1 FY2026 (ended Jun 30, 2025) | Q1 FY2025 (ended Jun 30, 2024) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $186,747 | $174,565 | +7.0% | | Gross Profit | $143,325 | $130,196 | +10.1% | | Loss from Operations | $(6,564) | $(463,324) | N/A | | Goodwill Impairment | $0 | $426,967 | -100% | | Net Loss | $(3,679) | $(443,376) | N/A | | Diluted Net Loss per Share | $(0.05) | $(6.20) | N/A | Consolidated Statements of Cash Flows Operating cash flow significantly increased to $73.6 million, contributing to a $32.2 million rise in cash and cash equivalents despite investing and financing outflows Quarterly Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $73,552 | $38,428 | | Net cash used in investing activities | $(17,291) | $(3,094) | | Net cash used in financing activities | $(28,778) | $(62,157) | | Net increase (decrease) in cash | $32,157 | $(27,461) | Notes to Consolidated Financial Statements Notes detail revenue recognition, the prior-year's $427.0 million goodwill impairment, credit facility status, share repurchases, and geographic revenue distribution - At June 30, 2025, the company had total deferred revenue of $445.8 million, with an expected recognition of $293.9 million (66%) within the next 12 months[42] - In Q1 FY25 (quarter ended June 30, 2024), the company recorded a $427.0 million goodwill impairment charge due to a decrease in its stock price and market capitalization; no such charge was recorded in the current quarter[70] - The company repurchased 761,249 shares for $15.0 million during the quarter; as of June 30, 2025, 22.3 million shares remained available for purchase under the current program[110][111] Revenue by Geography (in thousands) | Region | Q1 FY2026 (ended Jun 30, 2025) | Q1 FY2025 (ended Jun 30, 2024) | | :--- | :--- | :--- | | United States | $100,504 | $99,949 | | Europe | $30,714 | $31,394 | | Asia | $15,050 | $11,890 | | Rest of the world | $40,479 | $31,332 | | Total | $186,747 | $174,565 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 7% revenue growth to cybersecurity and enterprise demand, with net loss improving due to the absence of a prior-year goodwill impairment, maintaining strong liquidity Results of Operations Total revenue increased 7% driven by product and cybersecurity growth, while operating expenses significantly decreased due to the absence of goodwill impairment and lower restructuring charges Revenue by Type (in thousands) | Revenue Type | Q1 FY2026 | Q1 FY2025 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Product | $72,993 | $61,169 | $11,824 | 19% | | Service | $113,754 | $113,396 | $358 | —% | | Total | $186,747 | $174,565 | $12,182 | 7% | Revenue by Product Line (in thousands) | Product Line | Q1 FY2026 | Q1 FY2025 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Service assurance | $118,330 | $116,733 | $1,597 | 1% | | Cybersecurity | $68,417 | $57,832 | $10,585 | 18% | | Total | $186,747 | $174,565 | $12,182 | 7% | Revenue by Customer Vertical (in thousands) | Customer Vertical | Q1 FY2026 | Q1 FY2025 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Service provider | $75,969 | $80,475 | $(4,506) | (6%) | | Enterprise | $110,778 | $94,090 | $16,688 | 18% | | Total | $186,747 | $174,565 | $12,182 | 7% | - The decrease in net loss by $439.7 million was primarily due to a $427.0 million decrease in goodwill impairment charges and a $16.0 million decrease in restructuring charges compared to the prior year[129] Liquidity and Capital Resources Liquidity strengthened with cash and investments increasing to $543.5 million, supported by strong operating cash flow and an undrawn $600 million credit facility - Cash provided by operating activities increased to $73.6 million from $38.4 million in the prior-year quarter, primarily due to a significant reduction in net loss after excluding the non-cash goodwill impairment from the prior year[171] - In October 2024, the company amended its credit facility, resulting in a new five-year, $600.0 million senior secured revolving credit facility expiring in October 2029, with no amounts outstanding as of June 30, 2025[180][181][183] - During the quarter, the company used $15.0 million for treasury stock repurchases and $13.8 million for tax withholdings on vested restricted stock units[175][176][177] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency fluctuations, which are mitigated by hedging strategies and not deemed materially impactful - The company is not exposed to interest rate risk on its credit facility as there was no debt outstanding as of June 30, 2025[199] - As of June 30, 2025, the company held foreign currency forward contracts with notional amounts totaling $11.9 million to hedge against currency fluctuations, primarily in the Euro, British Pound, Canadian Dollar, and Indian Rupee[200][201] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period[202] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[203] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - In management's opinion, none of the current legal proceedings are expected to have a material adverse effect on the company[205] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - The company directs investors to the risk factors discussed in its most recent Annual Report, stating there have been no material changes since its filing[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,358,364 shares at an average price of $21.19, with 761,249 shares under the formal repurchase program Issuer Purchases of Equity Securities (Q1 FY2026) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | April 2025 | 742,923 | $19.66 | 742,670 | | May 2025 | 149,487 | $22.70 | 18,579 | | June 2025 | 465,954 | $23.14 | 0 | | Total | 1,358,364 | $21.19 | 761,249 | - An aggregate of 597,115 shares were transferred from employees to satisfy minimum tax withholding obligations related to vested restricted stock units; these are not part of the formal repurchase program[208] Item 5. Other Information Director Michael Szabados adopted a Rule 10b5-1 trading plan on May 23, 2025, to sell up to 16,000 shares of common stock - Director and Senior Advisor Michael Szabados adopted a Rule 10b5-1 trading plan on May 23, 2025, to sell up to 16,000 shares[211]