NetScout Systems Reports Decline in Financial Performance, Net Loss, and Restructuring Efforts

NetScout Systems, Inc. reported a decline in financial performance for the six months ended September 30, 2024, compared to the same period in 2023. Total revenue decreased by 10% to $365.7 million, down from $407.9 million, primarily due to reduced service assurance and cybersecurity offerings amid industry-specific capital spending constraints. Gross profit also fell, totaling $279.2 million, a decrease of 11% from $314.5 million in the prior year, with a gross profit margin of 76%, down from 77%.

The company experienced a significant net loss of $434.3 million for the six months ended September 30, 2024, compared to a net income of $17.3 million in the same period last year. This loss was largely attributed to a $427.0 million goodwill impairment charge and the aforementioned revenue decline. For the three months ended September 30, 2024, net income was $9.0 million, down from $21.5 million in 2023.

In terms of operational adjustments, NetScout implemented a voluntary separation program, resulting in restructuring charges of $19.0 million for the six months ended September 30, 2024, related to one-time termination benefits for 139 employees. The company anticipates annual run-rate savings of approximately $25 million to $27 million from these restructuring efforts.

Cash and cash equivalents as of September 30, 2024, were $363.4 million, a decrease from $389.7 million at the end of the previous fiscal year. The company reported total current assets of $583.7 million, down from $672.5 million, while total assets decreased to $2.1 billion from $2.6 billion. Total stockholders' equity also declined to $1.5 billion from $1.9 billion.

NetScout's credit facility was amended on October 4, 2024, reducing the revolving credit amount from $800 million to $600 million, with $725 million available as of September 30, 2024. The company remains in compliance with all covenants of its credit agreement and expects sufficient liquidity to meet its obligations over the next twelve months.

The company’s revenue breakdown for the three months ended September 30, 2024, showed a slight increase in product revenue to $81.0 million, while service revenue decreased to $110.1 million. The decline in service revenue was primarily due to reduced maintenance contract revenue. The company continues to monitor macroeconomic conditions, including geopolitical tensions and inflation, which are impacting customer spending.