Business Wire | Jan 28, 2021 07:30AM EST

NETSCOUT Reports Third Quarter Fiscal Year 2021 Financial Results

Jan. 28, 2021

WESTFORD, Mass.--(BUSINESS WIRE)--Jan. 28, 2021--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of service assurance, security, and business analytics, today announced financial results for its third-quarter fiscal year 2021 ended December 31, 2020.

"We are pleased with our third-quarter results and strong year-to-date earnings per share performance compared with our prior fiscal year," stated Anil Singhal, NETSCOUT's president and chief executive officer. "Our offerings are being well received in the market given our ability to provide service assurance, with real-time, pervasive visibility and insight, and security solutions that mitigate disruption for our customers regardless of their underlying infrastructure. This is important as customers further safeguard their Information Technology infrastructure in this pandemic environment that is straining networks in terms of volume and attempted security breaches. Our focus during these challenging times has been to keep our team safe and productive, to serve our customers well with the highest quality solutions and service, and to drive overall margin expansion while preserving liquidity to maintain a strong balance sheet and financial flexibility."

Singhal continued, "Our relevant solutions, trusted brand, strong customer relationships, dedicated team, and solid financial profile have positioned us well as we continue to weather the current macro-economic environment. We remain committed to enhancing our profitability and are raising our fiscal year 2021 earnings per share outlook given our performance year-to-date. With long-term market trends, such as digital transformation, cloud migration, cyber threats, and 5G networks, in NETSCOUT's favor, we believe we are well-positioned as "Guardians of the Connected World" when we emerge from this global crisis."

Notable developments and highlights:

Notable developments and highlights in the third quarter included extending partnerships with AWS and Vodafone, custom research on the Information Technology challenges brought about by the pandemic, announcement of NETSCOUT's Engage 21 Virtual Technology and User Summit, and sponsorship and grant funding to provide digital services to underserved students.

* NETSCOUT announced the extension of its Smart Perimeter Protection to AWS. The combination of NETSCOUT's Cyber Investigator (NCI) and CyberStream software with new AWS packet access services helps contain costs and achieve better efficiencies in mitigating novel security threats as enterprises move applications to the cloud. As the threat surface expands, the solution uses packet data and powerful cyber analytics to get to the root cause of cybersecurity issues quickly. * NETSCOUT announced the extension of its long-term partnership with Vodafone. The exclusive, multi-year agreement leverages NETSCOUT's InfiniStreamNG platform to help provide real-time, end-to-end visibility across Vodafone's hybrid environment. * NETSCOUT announced findings from a survey it commissioned to understand the network infrastructure challenges associated with keeping employees connected in remote-work environments. The findings confirmed the increased use of unified communications and collaboration (UC&C) solutions since the start of the pandemic and the impact and challenges the increased use has had on Information Technology teams. * NETSCOUT plans to host, virtually, customers and partners at its annual Engage Technology and User Summit from April 19th through April 30th. Over the two-week Engage 2021 event, it will showcase its Security, Service Assurance and DDoS capabilities through presentations, panel discussions, demonstrations, and hands-on training. An annual tradition, the event is a highlight of the year for the Company given the opportunity to meet with its user and partner community and discuss how it truly offers Visibility Without Borders. * NETSCOUT announced it has partnered with Tech Goes Home (TGH), a Massachusetts nonprofit dedicated to ending digital inequity, to provide digital devices, internet access, and digital skills training to more than 160 households in Roxbury, MA. Through a grant, NETSCOUT is sponsoring virtual Tech Goes Home courses at Roxbury partner sites, including Boston Central Adult High School and Vine Street Community Center.

Q3 FY21 Financial Results

Total revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was $228.7 million, compared with $260.0 million (GAAP) and $260.1 million (non-GAAP) in the same quarter one year ago. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables.

Product revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was $115.0 million, which was approximately 50% of total revenue. This compares with third-quarter fiscal year 2020 product revenue (GAAP and non-GAAP) of $143.3 million, which was approximately 55% of total revenue.

Service revenue (GAAP and non-GAAP) for the third quarter of fiscal year 2021 was $113.8 million, or approximately 50% of total revenue versus service revenue (GAAP) of $116.7 million and (non-GAAP) of $116.8 million, or approximately 45% of total revenue, for the same quarter one year ago.

NETSCOUT's income from operations (GAAP) was $31.8 million in the third quarter of fiscal year 2021, compared with income from operations (GAAP) of $36.8 million in the comparable quarter one year ago. Third-quarter fiscal year 2021 non-GAAP EBITDA from operations was $70.9 million, or 31.0% of non-GAAP quarterly revenue, which compares with $77.3 million, or 29.7% of non-GAAP quarterly revenue in the third quarter of fiscal year 2020. The Company's third-quarter fiscal year 2021 (GAAP) operating margin was 13.9% versus 14.2% in the prior fiscal year's same period. Third-quarter fiscal year 2021 non-GAAP income from operations was $64.5 million with a non-GAAP operating margin of 28.2%. This compares with third-quarter fiscal year 2020 non-GAAP income from operations of $70.9 million and a non-GAAP operating margin of 27.3%.

Net income (GAAP) for the third quarter of fiscal year 2021 was $29.0 million, or $0.39 per share (diluted) versus net income (GAAP) of $36.7 million, or $0.49 per share (diluted), for the third quarter of fiscal year 2020. On a non-GAAP basis, net income for the third quarter of fiscal year 2021 was $48.9 million, or $0.66 per share (diluted), which compares with $54.7 million, or $0.73 per share (diluted), for the third quarter of fiscal year 2020.

As of December 31, 2020, cash and cash equivalents, and short and long-term marketable securities were $490.4 million, compared with $427.8 million as of September 30, 2020, and $389.1 million as of March 31, 2020. In addition, NETSCOUT had $450.0 million outstanding on its $1.0 billion credit facility. During the third quarter of fiscal year 2021, NETSCOUT repurchased a total of 154,271 shares of its common stock at an average price of $21.23 per share, totaling approximately $3.3 million in the aggregate.

Nine-Months FY21 Financial Results

* For the first nine months of fiscal year 2021, total revenue (GAAP and non-GAAP) was $617.9 million versus total revenue (GAAP) of $662.5 million and total revenue (non-GAAP) of $662.6 million for the comparable nine-month period of fiscal year 2020. A reconciliation of GAAP and non-GAAP results is included in the attached financial tables. * Product revenue (GAAP and non-GAAP) for the first nine months of fiscal year 2021 was $278.6 million, compared with $321.8 million in the same period one year ago. * For the first nine months of fiscal year 2021, total service revenue (GAAP and non-GAAP) was $339.3 million versus (GAAP) $340.7 million and (non-GAAP) $340.8 million in the same period last year. * NETSCOUT's income from operations (GAAP) during the first nine months of fiscal year 2021 was $21.1 million, compared with income from operations of $5.1 million for the comparable nine-month period of fiscal year 2020. The Company's operating margin for the first nine months of fiscal year 2021 (GAAP) was 3.4% versus 0.8% in the comparable period of fiscal year 2020. During the first nine months of fiscal year 2021, the Company's non-GAAP EBITDA from operations was $144.3 million, or 23.4% of non-GAAP total revenue versus non-GAAP EBITDA from operations of $134.7 million, or 20.3% of non-GAAP total revenue, in the first nine months of fiscal year 2020. The Company's non-GAAP income from operations for the first nine months of fiscal year 2021 was $125.0 million with a non-GAAP operating margin of 20.2%, compared with non-GAAP income from operations for the same period of fiscal year 2020 of $114.6 million and a non-GAAP operating margin of 17.3%. * For the first nine months of fiscal year 2021, NETSCOUT's net income (GAAP) was $7.9 million, or $0.11 per share (diluted) compared with a net loss of $10.1 million, or a loss of $0.13 per share (diluted) in the same nine-month period one year ago. Non-GAAP net income for the first nine months of fiscal year 2021 was $89.3 million, or $1.21 per share (diluted) versus non-GAAP net income for the same period of fiscal year 2020 of $81.6 million, or $1.07 per share (diluted). * During the first three quarters of fiscal year 2021, NETSCOUT repurchased a total of 154,271 shares of its common stock at an average price of $21.23 per share, totaling approximately $3.3 million in the aggregate.

Guidance:

NETSCOUT is updating its fiscal year 2021 guidance, originally issued on October 29, 2020, with one quarter remaining in the fiscal year. The expected revenue range is being narrowed, while maintaining the mid-point, and the expected net income per share range is being raised. The Company's guidance for fiscal year 2021 is now as follows:

* Revenue, GAAP and non-GAAP, is expected to be in the range of $825 million to $840 million. * GAAP net income per share (diluted) is now expected to be in the range of $0.21 to $0.28. * Non-GAAP net income per share (diluted) is now expected to be in the range of $1.60 to $1.67. * A reconciliation between GAAP and non-GAAP revenue and net income per share (diluted) for NETSCOUT's guidance is included in the attached financial tables.

NETSCOUT also plans to repay $100 million on its revolving credit facility during the fourth quarter of fiscal year 2021.

Conference Call Instructions:

NETSCOUT will host a conference call to discuss its third-quarter fiscal year 2021 financial results today at 8:30 a.m. ET. This call will be webcast live through NETSCOUT's website at https://ir.netscout.com/investors/overview/default.aspx. Alternatively, people can listen to the call by dialing (785) 424-1667. The conference call ID is NTCTQ321. A replay of the call will be available after 12:00 p.m. ET on January 28, 2021 for approximately one week. The number for the replay is (800) 283-8183 for U.S./Canada and (402) 220-0867 for international callers.

Use of Non-GAAP Financial Information:

To supplement the financial measures presented in NETSCOUT's press release in accordance with accounting principles generally accepted in the United States ("GAAP"), NETSCOUT also reports the following non-GAAP measures: non-GAAP revenue, non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per share (diluted) and non-GAAP earnings before interest and other expense, income taxes, depreciation and amortization (EBITDA) from operations. Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, and acquisition-related depreciation. Non-GAAP income from operations includes the aforementioned adjustments and also removes business development and integration expense, compensation for post-combination services, legal expenses related to a civil judgment, restructuring charges, and costs related to new accounting standard implementation, and adds back transitional service agreement income. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, net of related income tax effects while removing transitional service agreement income and changes in contingent consideration. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures included in the attached tables within this press release.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, gross profit, operating margin, net income and diluted net income per share), and may have limitations because they do not reflect all of NETSCOUT's results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate NETSCOUT's results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP.

NETSCOUT believes these non-GAAP financial measures will enhance the reader's overall understanding of NETSCOUT's current financial performance and NETSCOUT's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. NETSCOUT believes that providing these non-GAAP measures affords investors a view of NETSCOUT's operating results that may be more easily compared to peer companies and also enables investors to consider NETSCOUT's operating results on both a GAAP and non-GAAP basis during and following the integration period of NETSCOUT's acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of NETSCOUT's core operating results. Furthermore, NETSCOUT believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to its financial condition and results of operations.

NETSCOUT management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions. These non-GAAP measures are among the primary factors that management uses in planning and forecasting.

About NETSCOUT SYSTEMS, INC.

NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) assures digital business services against disruptions in availability, performance, and security. Our market and technology leadership stems from combining our patented smart data technology with smart analytics. We provide real-time, pervasive visibility, and insights customers need to accelerate and secure their digital transformation. Our approach transforms the way organizations plan, deliver, integrate, test, and deploy services and applications. Our nGenius service assurance solutions provide real-time, contextual analysis of service, network, and application performance. Arbor security solutions protect against DDoS attacks that threaten availability and advanced threats that infiltrate networks to steal critical business assets. To learn more about improving service, network, and application performance in physical or virtual data centers, or in the cloud, and how NETSCOUT's performance and security solutions, powered by service intelligence can help you move forward with confidence, visit www.netscout.com or follow @NETSCOUT and @ArborNetworks on Twitter, Facebook, or LinkedIn.

Safe Harbor

Forward-looking statements in this release 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 this press release, which are not strictly historical statements, including, without limitation, statements regarding NetScout's revenue and earnings per share financial performance for fiscal year 2021, that NetScout's offerings are being well received in the market given our ability to provide service assurance, with real-time, pervasive visibility and insight, and security solutions that mitigate disruption for our customers regardless of their underlying infrastructure, that it is important as customers further safeguard their IT infrastructure in this pandemic environment that is straining networks in terms of volume and attempted security breaches, that our focus during these challenging times has been to keep our team safe and productive, to serve our customers well with the highest quality solutions and service, and to drive overall margin expansion while preserving liquidity to maintain a strong balance sheet and financial flexibility, that NetScout's relevant solutions, trusted brand, strong customer relationships, dedicated team, and solid financial profile have positioned it well as it continue to weather the current macro-economic environment, that NetScout remains committed to enhancing its profitability and is raising its fiscal year 2021 earnings per share outlook given its performance year-to-date, and that long-term market trends, such as digital transformation, cloud migration, cyber threats, and 5G networks, are in NetScout's favor and have NetScout well-positioned as "Guardians of the Connected World" when it emerges from this global crisis constitute forward looking statements that involve risks and uncertainties. Actual results could differ materially from the forward-looking statements due to impacts known and unknown risk, uncertainties, assumptions, and other factors. Such factors include impacts from the COVID-19 pandemic, slowdowns or downturns in economic conditions generally and in the market for advanced network, service assurance and cybersecurity solutions specifically; the volatile foreign exchange environment; the Company's relationships with strategic partners and resellers; dependence upon broad-based acceptance of the Company's network performance management solutions; the presence of competitors with greater financial resources than we have, and their strategic response to our products; our ability to retain key executives and employees; the Company's ability to realize the anticipated savings from restructuring actions and other expense management programs; lower than expected demand for the Company's products and services; and the timing and magnitude of stock buyback activity based on market conditions, corporate considerations, debt agreements, and regulatory requirements. For a more detailed description of the risk factors associated with the Company, please refer to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and the Company's subsequent Quarterly Reports on Form 10-Q, which are on file with the Securities and Exchange Commission. NetScout assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

(c)2021 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries.

NETSCOUT SYSTEMS, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

December 31, December 31,

2020 2019 2020 2019

Revenue: Product $ 114,965 $ 143,309 $ 278,637 $ 321,803

Service 113,774 116,715 339,256 340,666

Total revenue 228,739 260,024 617,893 662,469

Cost of revenue: Product 24,263 34,197 72,392 90,500

Service 31,012 31,388 94,763 88,960

Total cost of 55,275 65,585 167,155 179,460 revenue Gross profit 173,464 194,439 450,738 483,009

Operating expenses: Research and 43,769 48,606 135,605 142,391 development Sales and marketing 60,934 67,653 180,668 214,245

General and 21,718 25,048 67,444 72,436 administrative Amortization of 15,273 16,120 45,897 48,395 acquired intangible assets Restructuring charges - 193 62 466

Total operating 141,694 157,620 429,676 477,933 expenses Income from operations 31,770 36,819 21,062 5,076

Interest and other (3,583 ) (3,915 ) (11,757 ) (11,930 )expense, net Income (loss) before 28,187 32,904 9,305 (6,854 )income tax expense(benefit)Income tax expense (834 ) (3,821 ) 1,390 3,236 (benefit)Net income (loss) $ 29,021 $ 36,725 $ 7,915 $ (10,090 )

Basic net income (loss) $ 0.39 $ 0.49 $ 0.11 $ (0.13 )per shareDiluted net income $ 0.39 $ 0.49 $ 0.11 $ (0.13 )(loss) per shareWeighted average commonshares outstanding usedin computing: Net income (loss) per 73,492 74,367 72,953 75,780 share - basic Net income (loss) per 73,878 74,700 73,618 75,780 share - dilutedNETSCOUT SYSTEMS, INC.Consolidated Balance Sheets

(In thousands)

December 31, March 31,

2020 2020

(Unaudited)

AssetsCurrent assets:Cash, cash equivalents and marketable $ 490,444 $ 386,458 securitiesAccounts receivable and unbilled costs, net 208,016 213,514

Inventories 26,040 22,227

Prepaid expenses and other current assets 38,114 37,544

Total current assets 762,614 659,743

Fixed assets, net 51,265 57,715

Goodwill and intangible assets, net 2,249,204 2,307,859

Long-term marketable securities - 2,613

Operating lease right-of-use assets 63,257 68,583

Other assets 19,983 23,990

Total assets $ 3,146,323 $ 3,120,503

Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable $ 19,219 $ 20,004

Accrued compensation 76,900 75,632

Accrued other 37,034 22,743

Current portion of operating lease liabilities 11,753 10,337

Deferred revenue and customer deposits 251,313 270,281

Total current liabilities 396,219 398,997

Other long-term liabilities 11,568 10,039

Deferred tax liability 105,510 114,394

Accrued long-term retirement benefits 38,264 34,256

Long-term deferred revenue 102,713 104,240

Operating lease liabilities, net of current 63,814 70,658 portionLong-term debt 450,000 450,000

Total liabilities 1,168,088 1,182,584

Stockholders' equity:Common stock 124 122

Additional paid-in capital 2,936,573 2,891,553

Accumulated other comprehensive income (loss) 262 (3,160 )

Treasury stock, at cost (1,321,978 ) (1,305,935 )

Retained earnings 363,254 355,339

Total stockholders' equity 1,978,235 1,937,919

Total liabilities and stockholders' equity $ 3,146,323 $ 3,120,503

NETSCOUT SYSTEMS, INC.Reconciliation of Current GAAP to Current and Historical Non-GAAP FinancialMeasures(In thousands, except per share data)(Unaudited) Three Three Months Ended Months Nine Months Ended Ended

December 31, September December 31, 30,

2020 2019 2020 2020 2019

Revenue (GAAP) $ 228,739 $ 260,024 $ 205,339 $ 617,893 $ 662,469

Service deferred 2 48 1 5 144 revenue fairvalue adjustmentNon-GAAP Revenue $ 228,741 $ 260,072 $ 205,340 $ 617,898 $ 662,613

Gross Profit $ 173,464 $ 194,439 $ 146,439 $ 450,738 $ 483,009 (GAAP)Service deferred 2 48 1 5 144 revenue fairvalue adjustmentShare-based 1,619 1,506 2,154 5,368 5,427 compensationexpense (1)Amortization ofacquired 4,776 6,222 4,765 14,276 18,677 intangibleassets (2)Acquisitionrelated 6 7 5 17 26 depreciationexpense (6)Non-GAAP Gross $ 179,867 $ 202,222 $ 153,364 $ 470,404 $ 507,283 Profit Income from $ 31,770 $ 36,819 $ 3,779 $ 21,062 $ 5,076 Operations(GAAP)Service deferred 2 48 1 5 144 revenue fairvalue adjustmentShare-based 12,517 11,361 15,736 40,349 39,961 compensationexpense (1)Amortization ofacquired 20,049 22,342 20,128 60,173 67,072 intangibleassets (2)Businessdevelopment and - 20 - 16 38 integrationexpense (3)New standard - 1 - - 10 implementationexpense (4)Compensation for 63 125 63 190 453 post-combinationservices (5)Restructuring - 193 (31 ) 62 466 chargesAcquisitionrelated 61 61 60 182 251 depreciationexpense (6)Transitionalservice 57 (25 ) 101 158 1,159 agreement income(7)Legal judgments - - - 2,804 - expense (8)Non-GAAP Income $ 64,519 $ 70,945 $ 39,837 $ 125,001 $ 114,630 from Operations Net Income $ 29,021 $ 36,725 $ (3,686 ) $ 7,915 $ (10,090 )(Loss) (GAAP)Service deferred 2 48 1 5 144 revenue fairvalue adjustmentShare-based 12,517 11,361 15,736 40,349 39,961 compensationexpense (1)Amortization ofacquired 20,049 22,342 20,128 60,173 67,072 intangibleassets (2)Businessdevelopment and - 20 - 16 38 integrationexpense (3)New standard - 1 - - 10 implementationexpense (4)Compensation for 63 125 63 190 453 post-combinationservices (5)Restructuring - 193 (31 ) 62 466 chargesAcquisitionrelated 61 61 60 182 251 depreciationexpense (6)Change in - - - - 517 contingentconsiderationLegal judgments - - - 2,804 - expense (8)Income tax (12,835 ) (16,182 ) (4,027 ) (22,358 ) (17,176 )adjustments (9)Non-GAAP Net $ 48,878 $ 54,694 $ 28,244 $ 89,338 $ 81,646 Income Diluted Net $ 0.39 $ 0.49 $ (0.05 ) $ 0.11 $ (0.13 )Income (Loss)Per Share (GAAP)Share impact ofnon-GAAP 0.27 0.24 0.43 1.10 1.20 adjustmentsidentified aboveNon-GAAP Diluted $ 0.66 $ 0.73 $ 0.38 $ 1.21 $ 1.07 Net Income PerShare Shares used incomputing 73,878 74,700 73,594 73,618 76,474 non-GAAP dilutednet income pershareNETSCOUT SYSTEMS, INC.

Reconciliation of Current GAAP to Current and Historical Non-GAAP Financial Measures - Continued

(In thousands)

(Unaudited)

Three Months Ended

Three Months Ended

Nine Months Ended

December 31,

September 30,

December 31,

2020

2019

2020

2020

2019

(1)

Share-based compensation expense included in these amounts is as follows:Cost of product revenue$

248

$

231

$

344

$

837

$

843

Cost of service revenue1,371

1,275

1,810

4,531

4,584

Research and development3,862

3,437

4,935

12,578

12,076

Sales and marketing4,253

3,910

5,357

13,602

13,333

General and administrative2,783

2,508

3,290

8,801

9,125

Total share-based compensation expense$

12,517

$

11,361

$

15,736

$

40,349

$

39,961

(2)

Amortization expense related to acquired software and product technology, tradenames, customer relationships included in these amounts is as follows:Cost of product revenue$

4,776

$

6,222

$

4,765

$

14,276

$

18,677

Operating expenses15,273

16,120

15,363

45,897

48,395

Total amortization expense$

20,049

$

22,342

$

20,128

$

60,173

$

67,072

(3)

Business development and integration expense included in these amounts is as follows:Research and development$

-

$

-

$

-

$

-

$

43

General and administrative-

20

-

16

(5

)

Total business development and integration expense$

-

$

20

$

-

$

16

$

38

(4)

New standard implementation expense included in these amounts is as follows:General and administrative$

-

$

1

$

-

$

-

$

10

Total new standard implementation expense$

-

$

1

$

-

$

-

$

10

(5)

Compensation for post-combination services included in these amounts is as follows:Research and development$

62

$

125

$

62

$

187

$

453

Sales and marketing1

-

1

3

-

Total compensation for post-combination services$

63

$

125

$

63

$

190

$

453

(6)

Acquisition related depreciation expense included in these amounts is as follows:Cost of product revenue$

3

$

4

$

3

$

10

$

18

Cost of service revenue3

3

2

7

8

Research and development43

43

42

127

174

Sales and marketing8

8

9

26

27

General and administrative4

3

4

12

24

Total acquisition related depreciation expense$

61

$

61

$

60

$

182

$

251

(7)

Transitional service agreement income included in these amounts is as follows:Research and development$

6

$

(25

)

$

11

$

17

$

87

Sales and marketing10

-

16

26

168

General and administrative41

-

74

115

904

Other Income (expense), net(57

)

25

(101

)

(158

)

(1,159

)

Total transitional service agreement income$

-

$

-

$

-

$

-

$

-

(8)

Legal judgments expense included in these amounts is as follows:General and administrative$

-

$

-

$

-

$

2,804

$

-

Total legal judgments expense$

-

$

-

$

-

$

2,804

$

-

(9)

Total income tax adjustment included in these amounts is as follows:Tax effect of non-GAAP adjustments above$

(12,835

)

$

(16,182

)

$

(4,027

)

$

(22,358

)

$

(17,176

)

Total income tax adjustments$

(12,835

)

$

(16,182

)

$

(4,027

)

$

(22,358

)

$

(17,176

)

NETSCOUT SYSTEMS, INC.

Reconciliation of Current GAAP to Current and Historical Non-GAAP FinancialMeasures - Continued

(In thousands)

(Unaudited)

Three Three Months Ended Months Nine Months Ended Ended

December 31, September December 31, 30,

2020 2019 2020 2020 2019

Share-based(1) compensation expense included in these amounts is as follows: Cost of product $ 248 $ 231 $ 344 $ 837 $ 843 revenue Cost of service 1,371 1,275 1,810 4,531 4,584 revenue Research and 3,862 3,437 4,935 12,578 12,076 development Sales and 4,253 3,910 5,357 13,602 13,333 marketing General and 2,783 2,508 3,290 8,801 9,125 administrative Total share-based $ 12,517 $ 11,361 $ 15,736 $ 40,349 $ 39,961 compensation expense Amortization expense related to acquired software and product(2) technology, tradenames, customer relationships included in these amounts is as follows: Cost of product $ 4,776 $ 6,222 $ 4,765 $ 14,276 $ 18,677 revenue Operating 15,273 16,120 15,363 45,897 48,395 expenses Total $ 20,049 $ 22,342 $ 20,128 $ 60,173 $ 67,072 amortization expense Business development and(3) integration expense included in these amounts is as follows: Research and $ - $ - $ - $ - $ 43 development General and - 20 - 16 (5 ) administrative Total business development and $ - $ 20 $ - $ 16 $ 38 integration expense New standard(4) implementation expense included in these amounts is as follows: General and $ - $ 1 $ - $ - $ 10 administrative Total new standard $ - $ 1 $ - $ - $ 10 implementation expense Compensation for(5) post-combination services included in these amounts is as follows: Research and $ 62 $ 125 $ 62 $ 187 $ 453 development Sales and 1 - 1 3 - marketing Total compensation for $ 63 $ 125 $ 63 $ 190 $ 453 post-combination services Acquisition related(6) depreciation expense included in these amounts is as follows: Cost of product $ 3 $ 4 $ 3 $ 10 $ 18 revenue Cost of service 3 3 2 7 8 revenue Research and 43 43 42 127 174 development Sales and 8 8 9 26 27 marketing General and 4 3 4 12 24 administrative Total acquisition $ 61 $ 61 $ 60 $ 182 $ 251 related depreciation expense Transitional(7) service agreement income included in these amounts is as follows: Research and $ 6 $ (25 ) $ 11 $ 17 $ 87 development Sales and 10 - 16 26 168 marketing General and 41 - 74 115 904 administrative Other Income (57 ) 25 (101 ) (158 ) (1,159 ) (expense), net Total transitional $ - $ - $ - $ - $ - service agreement income Legal judgments(8) expense included in these amounts is as follows: General and $ - $ - $ - $ 2,804 $ - administrative Total legal $ - $ - $ - $ 2,804 $ - judgments expense Total income tax(9) adjustment included in these amounts is as follows: Tax effect of non-GAAP $ (12,835 ) $ (16,182 ) $ (4,027 ) $ (22,358 ) $ (17,176 ) adjustments above Total income tax $ (12,835 ) $ (16,182 ) $ (4,027 ) $ (22,358 ) $ (17,176 ) adjustmentsNETSCOUT SYSTEMS, INC.Reconciliation of Current GAAP to Current and Historical Non-GAAP FinancialMeasures -

Non-GAAP EBITDA from Operations

(In thousands)

(Unaudited)

Three Three Months Ended Months Nine Months Ended Ended

December 31, September December 31, 30,

2020 2019 2020 2020 2019

Income from operations $ 31,770 $ 36,819 $ 3,779 $ 21,062 $ 5,076(GAAP)Previous adjustments 32,749 34,126 36,058 103,939 109,554to determine non-GAAPincome from operationsNon-GAAP Income from 64,519 70,945 39,837 125,001 114,630operations Depreciation excluding 6,376 6,339 6,955 19,283 20,085acquisition related Non-GAAP EBITDA from $ 70,895 $ 77,284 $ 46,792 $ 144,284 $ 134,715operationsNETSCOUT SYSTEMS, INC.Reconciliation of GAAP Financial Guidance to Non-GAAP Financial Guidance

(Unaudited)

(In millions, except net income per share - diluted)

FY'20 FY'21

$ 891.8 ~$825 million to ~$840GAAP revenue million

Deferred service revenue fair value $ 0.2 Less than $1 millionadjustmentDeferred product revenue fair value $ - -adjustment $ 892.0 ~$825 million to ~$840Non-GAAP revenue million



FY'20 FY'21

$ (2.8 ) ~$15 million to ~$21GAAP Net Income (Loss) million

Deferred service revenue fair value $ 0.2 Less than $1 millionadjustmentDeferred product revenue fair value $ - -adjustmentAmortization of intangible assets $ 89.5 ~$80 million

Share-based compensation expenses $ 50.9 ~$51 million

Business development & integration $ 1.3 Less than $1 millionexpenses*Legal judgments expense $ - ~$3 million

New accounting standard implementation $ - -

Restructuring costs $ 2.7 Less than $1 million

Change in contingent consideration $ 0.8 -

Total Adjustments $ 145.2 ~$134 million

Related impact of adjustments on income tax $ (23.4 ) (~$32 million)

$ 119.1 ~$118 million to ~$123Non-GAAP Net Income million



GAAP net income (loss) per share (diluted) $ (0.04 ) ~$0.21 to ~$0.28

Non-GAAP net income per share (diluted) $ 1.57 ~$1.60 to ~$1.67

Average Weighted Shares Outstanding 75.2 73.7 million(diluted GAAP)Average Weighted Shares Outstanding 75.8 73.7 million(diluted Non-GAAP)*Business development & integration expenses include compensation forpost-combination services and acquisition-related depreciation expense

**Figures in table may not total due to rounding

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CONTACT: Investors Anthony Piazza Vice President, Corporate Finance 978-614-4286 IR@netscout.com

CONTACT: Media Maribel Lopez Manager, Marketing & Corporate Communications 781-362-4330 Maribel.Lopez@netscout.com