NetScout(US:NTCT)2023-02-02 21:52Revenue and Income - Total revenue increased by $42.1 million for the nine months ended December 31, 2022, compared to the same period in 2021, primarily driven by revenue growth from radio frequency propagation modeling projects [129]. - Net income for the nine months ended December 31, 2022, was $62.9 million, an increase of $18.6 million from $44.3 million in the same period of 2021 [130]. - Total revenue for the three months ended December 31, 2022, was $269.5 million, a 3% increase from $262.2 million in the same period of 2021 [140]. - Total revenue for the nine months ended December 31, 2022, was $706.4 million, a 6% increase from $664.4 million in the same period last year [160]. - Product revenue increased by 10%, or $31.5 million, to $359.5 million, driven by growth in radio frequency propagation modeling projects [160]. - Service revenue rose by 3%, or $10.5 million, to $346.9 million, primarily due to increased revenue from maintenance contracts [161]. Profitability Metrics - Gross profit percentage increased by 1 percentage point to 76% for the nine months ended December 31, 2022, compared to the same period in 2021 [129]. - Gross profit for the three months ended December 31, 2022, was $212.7 million, a 5% increase from $201.7 million in the same period of 2021, with a gross profit margin of 79% [147]. - Gross profit for the nine months ended December 31, 2022, increased by 7%, or $36.4 million, to $534.3 million, with a gross profit margin of 76% [166]. - Non-GAAP net income for the nine months ended December 31, 2022, was $132.4 million, compared to $116.8 million for the same period in 2021 [136]. - Non-GAAP diluted net income per share was $1.81 for the nine months ended December 31, 2022, compared to $1.56 for the same period in 2021 [136]. Cash and Liquidity - Cash, cash equivalents, and marketable securities totaled $416.2 million as of December 31, 2022, a decrease of $287.0 million from $703.2 million at March 31, 2022 [131]. - The company had an incremental $600 million available under its revolving credit facility as of December 31, 2022 [128]. - Net cash provided by operating activities was $43.9 million for the nine months ended December 31, 2022, down from $140.4 million for the same period in 2021, representing a decrease of $96.5 million [180]. - Cash used in investing activities was $5.6 million for the nine months ended December 31, 2022, compared to $3.1 million for the same period in 2021, an increase of $2.5 million [182]. - Cash used in financing activities increased by $265.5 million to $319.2 million during the nine months ended December 31, 2022, compared to $53.7 million for the same period in 2021 [184]. - The company believes it has adequate liquidity to meet anticipated funding requirements for fiscal year 2023 [200]. - The company expects net cash provided by operating activities, cash equivalents, and marketable securities to fund current obligations and capital spending for at least the next twelve months [201]. Operating Expenses - Operating expenses totaled $149.0 million, a 2% increase from $146.3 million in the same period of 2021, with research and development expenses rising by 2% to $42.6 million [148]. - Total operating expenses rose by 4%, or $17.3 million, to $458.3 million, with research and development expenses at $129.9 million, a 1% increase [167]. - The company recorded $1.9 million in restructuring charges related to employee termination benefits during the nine months ended December 31, 2022 [172]. Taxation - The effective tax rate for the three months ended December 31, 2022, was 13.1%, down from 14.2% in the same period of 2021, influenced by various tax credits [157]. - The effective tax rate decreased to 9.5% for the nine months ended December 31, 2022, down from 15.5% in the prior year [174]. - The company reported a total income tax expense of $8.0 million for the three months ended December 31, 2022, compared to $7.9 million in the same period of 2021 [158]. Market and Operational Conditions - The company ceased operations in Russia due to geopolitical tensions, which did not materially impact financial statements for the nine months ended December 31, 2022 [126]. - The company continues to monitor global macroeconomic conditions, including inflation and interest rates, which could impact future operations [127]. - The company is focused on advancing products, growing revenue, enhancing earnings per share, and generating free cash flow amid recovering technology and project spending [127]. Revenue Breakdown - The service assurance product line accounted for approximately 79% of total revenue in Q4 2022, compared to 73% in Q4 2021, while the cybersecurity product line accounted for 21% in Q4 2022, down from 27% in Q4 2021 [139]. - For the nine months ended December 31, 2022, the service assurance product line accounted for approximately 75% of total revenue, while the cybersecurity product line accounted for approximately 25% [159]. - Revenue from the United States increased by 11%, or $18.4 million, to $181.2 million, while international revenue decreased by 11%, or $11.1 million, to $88.3 million [142]. - Revenue from the United States increased by 16%, or $62.3 million, to $461.7 million, while international revenue decreased by 8%, or $20.3 million, to $244.8 million [162]. Backlog and Deferred Revenue - Total backlog as of December 31, 2022, was $30.9 million, with fulfillable backlog at $30.4 million, indicating a decrease from previous quarters [176]. - Deferred revenue related to radio frequency propagation modeling projects increased to $22.9 million as of December 31, 2022, compared to $18.4 million in the prior quarter [176]. Financial Instruments and Risk Management - The company engages in foreign currency hedging activities to limit exposure to fluctuations in exchange rates, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee [207]. - The company does not use derivative financial instruments for speculative trading purposes, focusing instead on managing exchange risk [207]. - 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 [208]. - The company maintains a diversified portfolio of cash, cash equivalents, and investments to minimize interest rate risk, with no material exposure to changes in fair value due to interest rate fluctuations [205].