NetScout Systems, Inc. · NASDAQ:NTCT
NetScout Systems — Q4 FY2017 Earnings Presentation
30 slides from NetScout Systems's earnings presentation, May 4, 2017
Slide 1: Q4 & FY 2017 Conference Call
Q4 & FY 2017 Conference Call NETSCOUT SYSTEMS, INC. May 4, 2017 ©2017 NETSCOUT
Slide 2: Agenda
Agenda • Introduction & Safe Harbor – Andrew Kramer, Vice President of Investor Relations • CEO Perspective – Anil Singhal, President and CEO • COO Update: Customer Use Cases & Business Initiatives – Michael Szabados, Chief Operating Officer • Financial Review and Fiscal Year 2018 Outlook – Jean Bua
Slide 3: Safe Harbor
Safe Harbor Forward Looking Statements: Forward Looking Statements: Forward-looking statements in this communication are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws. Investors are cautioned that statements in thi
Slide 4: Non-GAAP Financial Metrics
Non-GAAP Financial Metrics Regulation G Disclosure: This presentation makes reference to certain non-GAAP measures such as non-GAAP total revenue, non-GAAP product revenue, non-GAAP service revenue, non-GAAP income from operations, non-GAAP net income, non-GAAP diluted net income per share, non-GAAP
Slide 5: CEO Perspective
CEO Perspective Anil Singhal Co-Founder, President and Chief Executive Officer N E T S CO U T.CO M
Slide 6: Q4 and FY'17 Performance
Q4 and FY’17 Performance FY’16 FY’17 Non-GAAP Q4 FY’16 Q4 FY’17 (Pro Forma) (Reported) ($ in millions) 3/31/16 3/31/17 3/31/16 3/31/17 Revenue $308.7 $327.2 $1,198.7 $1,199.8 Gross Margin 74.8% 75.2% 75.0% 75.2% Operating Margin 22.4% 27.5% 21.0% 23.0% EPS $0.44 $0.65 $1.75 $1.92 • Total FY’17 non-G
Slide 7: Recent Non-GAAP Financial Results and FY'18 Guidance
Recent Non-GAAP Financial Results and FY’18 Guidance FY’15 FY’16 FY’17 FY’18 Non-GAAP (Pro Forma) (Pro Forma) (Reported) (Non-GAAP Guidance) ($ in millions) 3/31/15 3/31/16 3/31/17 3/31/18 Revenue $1,169.4 $1,198.7 $1,199.8 Relatively unchanged from FY’17 Gross Margin 74.4% 75.0% 75.2% ~77% Operatin
Slide 8: Delivering on an Exciting New Product Cycle
Delivering on an Exciting New Product Cycle ©2017 NETSCOUT 8 May 4, 2017
Slide 9: Outlook
Outlook • FY’18 anticipated to be another good year of improved profitability and EPS growth • Expect successful adoption of our new software platform will help increase gross margins and be the primary driver for operating margin gains in FY’18 • Consistent with prior years, the majority of revenue
Slide 10: COO Update
COO Update Michael Szabados Chief Operating Officer N E T S CO U T.CO M
Slide 11: COO Highlights
COO Highlights • Go-to-market activity • Customer wins and use cases – Service Provider – Enterprise – DDoS ©2017 NETSCOUT 11 May 4, 2017
Slide 12: Financial Review Fiscal Year 2018 Outlook
Financial Review Fiscal Year 2018 Outlook Jean Bua Executive Vice President and Chief Financial Officer N E T S CO U T.CO M
Slide 13: Q4 FY'17 Results
Q4 FY’17 Results Q4 FY’16 Q4 FY’17 Q4 FY’16 Q4 FY’17 GAAP GAAP Non-GAAP Non-GAAP Reported Reported % Reported Reported % (in millions except EPS and % data) 3/31/16 3/31/17 Change 3/31/16 3/31/17 Change Revenue: Product $ 195.8 $ 210.1 7.3% $ 200.3 $ 213.7 6.7% Servi ce $ 90.1 $ 108.9 20.8% $ 108.4
Slide 14: FY'17 Full Year Results
FY’17 Full Year Results FY'16 FY’17 FY’16 FY’17 GAAP GAAP Non-GAAP Non-GAAP Reported Reported Pro Forma* Reported % (in millions except EPS and % data) 3/31/16 3/31/17 3/31/16 3/31/17 Change Revenue: Product $ 633.4 $735.5 $ 761.4 $ 753.8 -1.0% Servi ce $ 322.0 $426.6 $ 437.3 $ 446.1 2.0% Total reve
Slide 15: FY'17 Non-GAAP Revenue Trends: Customer Verticals
FY’17 Non-GAAP Revenue Trends: Customer Verticals Total Non-GAAP Revenue by Customer Segment Total Non-GAAP Revenue Composition by Customer Segment ($ in millions) FY’16 FY’17 $673 $672 Pro Forma, Non-GAAP Non-GAAP $526 $528 56% 44% 44% 56% FY'16 FY'17 Service Provider Enterprise Enterprise Service
Slide 16: FY'17 Revenue Trends: Geographic Mix
FY’17 Revenue Trends: Geographic Mix (GAAP, in millions) Q4 FY’17 YTD FY’17 FY’16 FY'16 Reported Reported Pro Forma* Pro Forma 3/31/17 3/31/17 Total Revenue $318.9 $1,162.1 $1,129.4 7% 70% 30% 8% 15% United States $196.8 $734.2 $794.7 International $122.1 $427.9 $334.8 FY'17 Europe $50.7 $190.6 $167
Slide 17: Balance Sheet Highlights & Free Cash Flow
Balance Sheet Highlights & Free Cash Flow (in millions) FY’17 Free Cash Flow (Unaudited) 3/31/17 Q1 FY’17 Q2 FY’17 Q3 FY’17 Q4 FY'17 FY’17* 6/30/16 9/30/16 12/31/16 3/31/17 3/31/17 Cash and Securities* $ 464.7 Operating Cash Flow $ 37.7 $ 15.9 $ 78.3 $ 95.9 $ 227.8 Purchase of Fixed Assets Accounts
Slide 18: FY 2018 Guidance
FY 2018 Guidance (in billions except EPS) Assumptions * Expect that solid revenue growth in enterprise will be offset by a FY’18 Guidance decline in service provider GAAP FY’17 (on a % basis compared with FY’17) * ~40% of total revenue anticipated Revenue $1.163 Low single-digit growth in 1H18 EPS (
Slide 19: Upcoming Investor Events
Upcoming Investor Events Date Event Location May 9, 2017 Jefferies Technology Conference Miami, FL May 17, 2017 Needham & Co. Emerging Tech Conference NYC May 23, 2017 JP Morgan TMT Conference Boston, MA May 24, 2017 B. Riley & Co. Institutional Investor Conference Santa Monica, CA May 31, 2017 Crai
Slide 20: Appendix
Appendix N E T S CO U T.CO M
Slide 21: FY 2018 Guidance: GAAP to Non-GAAP Reconciliation
FY 2018 Guidance: GAAP to Non-GAAP Reconciliation (in millions except EPS) Unaudited FY'17 FY'18 GAAP revenue $ 1,162.1 Low single-digit growth over FY'17 Deferred service revenue fair value adjustment $ 19.5 ~$7 million to ~$9 million Deferred product revenue fair value adjustment $ 6.8 ~$2 million
Slide 22: Total Revenue Composition
Total Revenue Composition (in millions) Q4 Q4 Q4 FY’16 FY’17 FY’17 FY’16 FY’17 FY’17 Pro Forma Non-GAAP Non-GAAP GAAP Non-GAAP Non-GAAP GAAP Total Revenue $308.7 $327.2 $318.9 $1,198.7 $1,199.8 $1,162.1 Product Revenue $200.3 $213.7 $210.1 $761.4 $753.8 $735.5 Service Revenue $108.4 $113.5 $108.9 $4
Slide 23: GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: Revenue
GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: FY’15 Revenue, FY’16 and FY’17 Revenue (Unaudited) FY15 FY15 FY15 FY16 FY16 FY16 FY17 (In millions) x-DHR NTCT Pro Forma x-DHR NTCT Pro Forma NTCT (Reported) (Reported) Revenue (GAAP) $ 715.8 $ 453.7 $ 1,169.4 $ 174.1 $ 955.4 $ 1,129.5 $ 1,162.1 P
Slide 24: GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: Gross Profit
GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: FY’15, FY’16 and FY’17 Gross Profit (Unaudited) FY15 FY15 FY15 FY16 FY16 FY16 FY17 (In millions) x-DHR NTCT Pro Forma x-DHR NTCT Pro Forma NTCT (Reported) (Reported) Gross Profit (GAAP) $ 494.1 $ 359.1 $ 853.2 $ 116.8 $ 627.0 $ 743.7 $ 816.0 Produ
Slide 25: GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: Operating Profit
GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: FY’15, FY’16 and FY’17 Operating Profit (Unaudited) FY15 FY15 FY15 FY16 FY16 FY16 FY17 (In millions) x-DHR NTCT Pro Forma x-DHR NTCT Pro Forma NTCT (Reported) (Reported) Income from Operations (GAAP) $ 39.3 $ 96.8 $ 136.1 $ (4.3) $ (25.6) $ (29.9)
Slide 26: GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: Net Income Per Share
GAAP to Non-GAAP, Pro Forma Detailed Reconciliation: FY’15, FY’16 and FY’17 Net Income Per Share (Diluted) (Unaudited) FY 15 FY 16 FY17 (In millions, except net income per share - diluted) Pro Forma Pro Forma Reported Non-GAAP Income from Operations $ 220.3 $ 251.1 $ 275.4 Interest and other expense
Slide 27: GAAP to Non-GAAP Reconciliation: Q4 Revenue
GAAP to Non-GAAP Reconciliation: Q4 FY’17, Q4 FY’16 and Q3 FY’17 Revenue NETSCOUT SYSTEMS, INC. Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) Three Months Ended Three Months Ended March 31, December 31, 2017 201
Slide 28: GAAP to Non-GAAP Reconciliation: Gross Profit, Income from Operations and Net Income
GAAP to Non-GAAP Reconciliation: Q4 FY’17, Q4 FY’16 and Q3 FY’17 Gross Profit, Income from Operations and Net Income NETSCOUT SYSTEMS, INC. Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) Three Months Ended Three
Slide 29: GAAP to Non-GAAP Reconciliation: Itemization
GAAP to Non-GAAP Reconciliation: Q4 FY’17, Q4 FY’16 and Q3 FY’17 Itemization NETSCOUT SYSTEMS, INC. Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued (In thousands, except per share data) (Unaudited) Three Months Ended Three Months Ended Twelve Months E
Slide 30: Thank You
Thank You N E T S CO U T.CO M