NETSCOUT SYSTEMS INC
For the period ended Dec 31, 2024. Filed Feb 6, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 6, 2025
NTCT$31.51-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001628280-24-044742
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-06.
0001628280-25-004249
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 123 current paragraphs.
55 unchanged; 57 reworded; 7 added; 3 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Product. The 34%, or $32.3 million, increase in product revenue compared with the same period last year was primarily due to an increase in revenue from both enterprise customers and service provider customers from both cybersecurity and service assurance offerings, including the acceleration of a large service provider order previously expected in the fourth quarter of fiscal year 2025.
Current report
The 22%, or $21.5 million, increase in revenue from the service provider customer vertical was due to an increase in product and service revenue from the service assurance product line, including the acceleration of a large service provider order previously expected in the fourth quarter of fiscal year 2025, and an increase in product revenue from the cybersecurity product line. The 10%, or $12.4 million, increase in revenue from the enterprise customer vertical was due to an increase in product and service revenue from the cybersecurity product line and an increase in product revenue from the service assurance product line, partially offset by a decrease in service revenue from the service assurance product line.
Current report
Nine Months Ended December 31, 2024 and 2023
Current report
Backlog
Current report
We produce our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure our products to customer specifications and generally deliver products shortly after receipt of the purchase order. Service engagements are also included in certain orders. Customers generally may reschedule or cancel unfulfilled orders with little or no penalty. Our total backlog at any particular time is not necessarily indicative of future sales levels. Within total backlog, fulfillable backlog includes what we consider to represent orders that are generally available to be delivered to customers as of the end of the reporting period. Delivery of our fulfillable backlog typically occurs early in the subsequent quarter. However, delivery may be delayed or accelerated due to various other reasons, including but not limited to, changes in timing of customer projects and product delivery schedules, which may not be within our control. Our total combined product backlog at December 31, 2024 was $29.9 million compared to $6.8 million at March 31, 2024. Combined product backlog included fulfillable backlog of $21.8 million and $2.5 million at December 31, 2024 and March 31, 2024, respectively. Total backlog includes orders that were received late in the quarter and radio frequency propagation modeling projects. In some cases, we have begun these projects but have not yet hit billable milestones. At December 31, 2024 and March 31, 2024 deferred revenue contained a gross balance of $3.2 million and $1.2 million, respectively, related to these radio frequency propagation modeling project orders.
Current report
During the nine months ended December 31, 2024, we paid $2.5 million in debt issuance costs related to the execution of our Third Amended and Restated Credit Agreement.
Current report
In connection with the Third Amended and Restated Credit Agreement, we paid off the outstanding balance of $75.0 million under the Second Amended and Restated Credit Agreement on October 4, 2024 by borrowing the same amount under the Third Amended and Restated Credit Agreement. Additionally, we recorded a loss on the extinguishment of debt of $1.1 million, representing the write off of unamortized deferred financing costs, which was included in interest expense in the consolidated statements of operations for the three and nine months ended December 31, 2024. At December 31, 2024, $75.0 million was outstanding under the Third Amended and Restated Credit Agreement. On February 3, 2025, we paid the outstanding balance of $75.0 million in full under the Third Amended and Restated Credit Agreement.
Removed paragraphs (3)
Previous report
Product. The 1%, or $0.5 million, increase in product revenue compared with the same period last year was primarily due to an increase in revenue from enterprise customers from both service assurance and cybersecurity offerings, partially offset by decreases from service provider customers from both service assurance and cybersecurity offerings.
Previous report
Six Months Ended September 30, 2024 and 2023
Previous report
On February 22, 2023, we entered into a First Amendment Agreement (First Amendment) of our Second Amended and Restated Credit Agreement with a syndicate of lenders. We entered into the First Amendment in order to remove and replace the LIBOR-based interest rate benchmark provisions for U.S. dollar-denominated loans with interest rate benchmark provisions for U.S. dollar-denominated loans based on a term secured overnight financing rate (SOFR).
Reworded paragraphs (57)
Previous wording
We continue to closely monitor current global and macroeconomic conditions, including the impacts of the ongoing war in Ukraine and the Middle East, global geopolitical tension, stock market volatility, industry-specific capital spending trends, exchange rate fluctuations, inflation, interest rates, and the risk of a recession, including the manner and extent to which they have impacted and could continue to impact our business, customers, employees, supply chain, and distribution network. The full extent of the impacts of these global and macroeconomic conditions remain uncertain. In response to the war
Current wording
We continue to closely monitor current global and macroeconomic conditions, including the impacts of the ongoing wars in Ukraine and the Middle East, global geopolitical tension, stock market volatility, industry-specific capital spending trends, exchange rate fluctuations, inflation, interest rates, and the risk of a recession, including the manner and extent to which they have impacted and could continue to impact our business, customers, employees, supply chain, and distribution network. The full extent of the impacts of these global and macroeconomic conditions remain uncertain. In response to the war
Previous wording
Though we continue to monitor the impacts of evolving global and macroeconomic conditions on our business, we believe our current cash reserves and access to capital through our revolving credit facility leave us well-positioned to manage our business in today's environment. We expect net cash provided by operations combined with cash, cash equivalents, marketable securities and investments and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company, including managing discretionary spending and hiring activities, but are continuing to invest in areas that advance our business for the future. In addition to our cash equivalents, based on covenant levels at September 30, 2024, we had an incremental $725 million available to us under our revolving credit facility. On October 4, 2024, we amended and extended the Second Amended and Restated Credit Agreement, which decreased the revolving credit facility from $800 million to $600 million and reduced the incremental amount available to us under our revolving credit facility to $525 million. For further information, see Note 20 contained in the "Notes to Consolidated Financial Statements" included in Part 1 of this quarterly report on Form 10-Q.
Current wording
Though we continue to monitor the impacts of evolving global and macroeconomic conditions on our business, we believe our current cash reserves and access to capital through our revolving credit facility leave us well-positioned to manage our business in today's environment. We expect net cash provided by operations combined with cash, cash equivalents, marketable securities and investments and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company, including managing discretionary spending and hiring activities, but are continuing to invest in areas that advance our business for the future. In addition to our cash equivalents, based on covenant levels at December 31, 2024, we had an incremental $525 million available to us under our revolving credit facility.
Previous wording
Total revenue decreased $42.3 million, or 10%, for the six months ended September 30, 2024 as compared to total revenue for the six months ended September 30, 2023, which benefited from approximately $48 million of backlog-related revenue. Excluding this factor, revenue would have increased on a year over year basis. The decrease in total revenue for the six months ended September 30, 2024 as compared to total revenue for the six months ended September 30, 2023 was a result of lower revenue from both service provider and enterprise customers from service assurance offerings, including radio frequency propagation modeling projects, as a result of industry-specific capital spending constraints, as well as a decrease in revenue from service provider customers from cybersecurity offerings.
Current wording
Total revenue decreased $8.3 million, or 1%, for the nine months ended December 31, 2024 as compared to total revenue for the nine months ended December 31, 2023, which benefited from approximately $48 million of backlog-related revenue. Excluding this factor, revenue would have increased on a year over year basis. The decrease in total revenue for the nine months ended December 31, 2024 as compared to total revenue for the nine months ended December 31, 2023 was a result of lower revenue from both service provider and enterprise customers from service assurance offerings, including radio frequency propagation modeling projects, due to industry-specific capital spending constraints, as well as a decrease in revenue from service provider customers from cybersecurity offerings, partially offset by an increase in revenue from enterprise customers from cybersecurity offerings.
Previous wording
Our gross profit percentage decreased by one percentage point to 76% during the six months ended September 30, 2024, as compared with the six months ended September 30, 2023 primarily due to lower sales volume of higher margin products and services.
Current wording
Our gross profit percentage remained flat at 78% during the nine months ended December 31, 2024, as compared with the nine months ended December 31, 2023, primarily due to lower sales volume offset by a shift in product mix to higher margin products and services.
Previous wording
Net loss for the six months ended September 30, 2024 was $434.3 million, as compared with net income for the six months ended September 30, 2023 of $17.3 million. The increase of $451.6 million in net loss was primarily due to a $427.0 million goodwill impairment charge, a $42.3 million decrease in revenue, a $19.0 million increase from restructuring charges due to the voluntary separation program, a $2.7 million increase in expenses related to trade shows, user conferences, and other events, a $1.0 million increase from software licenses, and a $1.0 million increase in foreign exchange expense. These increases to net loss were partially offset by an $11.9 million increase in income tax benefit, a $7.6 million increase in other income from the change in fair value of a foreign equity investment, a $5.5 million decrease in employee related expenses as a result of a decrease in headcount, partially offset by an increase in variable incentive compensation, a $3.6 million decrease in commissions expense, a $3.5 million decrease in direct material costs, a $3.5 million decrease in amortization expense, a $2.3 million decrease from depreciation expense, and a $1.6 million decrease in contractor fees.
Current wording
Net loss for the nine months ended December 31, 2024 was $385.5 million, as compared with net loss for the nine months ended December 31, 2023 of $115.3 million. The increase of $270.2 million in net loss was primarily due to a $259.9 million increase in goodwill impairment charges, a $19.9 million increase from restructuring charges due to the restructuring programs implemented during the nine months ended December 31, 2024, an $8.3 million decrease in revenue, a $4.1 million increase in expenses related to trade shows, user conferences, and other events, a $1.4 million increase from software licenses, and a $1.2 million increase in legal fees. These increases to net loss were partially offset by a $5.2 million decrease in amortization expense of intangible assets, a $4.1 million net decrease in employee related expenses as a result of a decrease in headcount, partially offset by an increase in variable incentive compensation, a $3.8 million gain on the divestiture of the Test Optimization business recognized in fiscal year 2024, a $3.4 million decrease from depreciation expense, a $2.2 million decrease in direct material costs, a $2.2 million decrease in income tax expense, a $1.5 million decrease in contractor fees, a $1.4 million decrease in advertising expense, a $1.2 million increase in interest income, a $1.6 million increase in other income from the change in fair value of a foreign equity investment, and a $1.0 million decrease in commissions expense.
Previous wording
At September 30, 2024, we had cash, cash equivalents, marketable securities and investments (current and non-current) of $401.9 million. This represents a decrease of $22.2 million from $424.1 million at March 31, 2024. This decrease was primarily due to $25.3 million used to repurchase shares of our common stock, $25.0 million used to repay long-term debt, $13.5 million used for tax withholdings on restricted stock units, $2.2 million used for capital expenditures, and $1.3 million used to acquire technology licenses, partially offset by $34.7 million of net cash provided by operations, and an $8.3 million increase from the change in fair value of an equity instrument during the six months ended September 30, 2024.
Current wording
At December 31, 2024, we had cash, cash equivalents, marketable securities and investments (current and non-current) of $427.9 million. This represents an increase of $3.8 million from $424.1 million at March 31, 2024. This increase was primarily due to $76.1 million of net cash provided by operations, partially offset by $25.3 million used to repurchase shares of our common stock, net $25.0 million used to repay long-term debt, $13.8 million used for tax withholdings on restricted stock units, $4.0 million used for capital expenditures, $2.5 million used for the payment of debt issuance costs, and $1.3 million used to acquire technology licenses during the nine months ended December 31, 2024.
Previous wording
We supplement the United States generally accepted accounting principles (GAAP) financial measures we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: 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 gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation expense, and acquisition-related depreciation expense. Non-GAAP income from operations removes the aforementioned adjustments to non-GAAP gross profit and also removes legal expenses related to civil judgments, gain on the divestiture of a business, goodwill impairment charges, and restructuring charges. Non-GAAP net income removes the foregoing adjustments related to non-GAAP income from operations, and also removes change in the fair value of derivative instrument, net of related income tax effects. Non-GAAP EBITDA from operations removes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense.
Current wording
We supplement the United States generally accepted accounting principles (GAAP) financial measures we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: 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 gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation expense, and acquisition-related depreciation expense. Non-GAAP income from operations removes the aforementioned adjustments to non-GAAP gross profit and also removes legal expenses related to civil judgments, gain on the divestiture of a business, goodwill impairment charges, and restructuring charges. Non-GAAP net income removes the foregoing adjustments related to non-GAAP income from operations, and also removes loss on extinguishment of debt and change in the fair value of derivative instrument, net of related income tax effects. Non-GAAP EBITDA from operations removes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense.
Previous wording
The following table reconciles gross profit, income (loss) from operations, net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three and six months ended September 30, 2024 and 2023, respectively (dollars in thousands, except for per share data):
Current wording
The following table reconciles gross profit, income (loss) from operations, net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three and nine months ended December 31, 2024 and 2023, respectively (dollars in thousands, except for per share data):
Previous wording
Product revenue consists of sales of our hardware products and licensing of our software products. Service revenue consists of customer support agreements, consulting, training and stand-ready software as a service offerings. During the three months ended September 30, 2024 and 2023, no direct customers or channel partners accounted for more than 10% of our total revenue.
Current wording
Product revenue consists of sales of our hardware products and licensing of our software products. Service revenue consists of customer support agreements, consulting, training and stand-ready software as a service offerings. During the three months ended December 31, 2024, one direct customer, Verizon, accounted for more than 10% of our total revenue, while no channel partners accounted for more than 10% of our total revenue. During the three months ended December 31, 2023, no direct customers or channel partners accounted for more than 10% of our total revenue.
Previous wording
Service. The 5%, or $6.2 million, decrease in service revenue compared with the same period last year was primarily due to a decrease in revenue from maintenance contracts.
Current wording
Service. The 1%, or $1.6 million, increase in service revenue compared with the same period last year was primarily due to an increase in revenue from maintenance contracts.
Previous wording
United States revenue decreased 13%, or $32.2 million, primarily due to a decrease in revenue from service assurance offerings from service provider customers, including radio frequency propagation modeling projects. The 6%, or $10.1 million, decrease in international revenue compared with the same period last year was primarily driven by lower revenue from service provider customers from both service assurance and cybersecurity offerings.
Current wording
United States revenue increased 24%, or $30.1 million, primarily due to an increase in revenue from service provider and enterprise customers from both service assurance and cybersecurity offerings. The 4%, or $3.8 million, increase in international revenue compared with the same period last year was primarily driven by an increase in revenue from both service provider and enterprise customers from cybersecurity offerings, including the acceleration of a large service provider order previously expected in the fourth quarter of fiscal year 2025, partially offset by a decrease in revenue from service provider customers from service assurance offerings.
Previous wording
The 6%, or $7.8 million, decrease in revenue from the service assurance product line was due to a decrease in revenue from service provider customers for both product and service revenue. The 3%, or $2.1 million, increase in revenue from the cybersecurity product line was due to higher revenue from enterprise customers for both product and service revenue, partially offset by a decrease in product revenue from service provider customers.
Current wording
The 9%, or $13.9 million, increase in revenue from the service assurance product line was due to an increase in product revenue from both enterprise customers and service provider customers, including the acceleration of a large service provider order previously expected in the fourth quarter of fiscal year 2025, and an increase in service revenue from service provider customers, partially offset by a decrease in service revenue from enterprise customers. The 29%, or $20.0 million, increase in revenue from the cybersecurity product line was due to higher product revenue from both enterprise and service provider customers, and an increase in service revenue from enterprise customers, partially offset by a decrease in service revenue from service provider customers.
Previous wording
Product. The 16%, or $2.7 million, decrease in cost of product revenue for the three months ended September 30, 2024 compared to the same period last year was primarily due to a $0.9 million decrease in direct material costs, and a $0.8 million decrease in the amortization of intangible assets. The product gross profit percentage increased by three percentage points to 83% during the three months ended September 30, 2024 as compared with the three months ended September 30, 2023. The 5%, or $3.1 million, increase in product gross profit is attributable to the 1%, or $0.5 million, increase in product revenue, and the 16%, or $2.7 million, decrease in cost of product revenue.
Current wording
Product. The 7%, or $1.1 million, increase in cost of product revenue for the three months ended December 31, 2024 compared to the same period last year was primarilydue to a $1.4 million increase in costs related to the delivery of radio frequency propagation modeling projects, and a $1.3 million increase in direct material costs. These increases were partially offset by a $0.8 million decrease in the amortization of intangible assets, and a $0.6 million decrease in inventory obsolescence charges. The product gross profit percentage increased by three percentage points to 87% during the three months ended December 31, 2024 as compared with the three months ended December 31, 2023. The 39%, or $31.2 million, increase in product gross profit is attributable to the 34%, or $32.3 million, increase in product revenue, partially offset by the 7%, or $1.1 million, increase in cost of product revenue.
Previous wording
Service. The 6%, or $1.7 million, increase in cost of service revenue for the three months ended September 30, 2024 compared to the same period last year was primarily due to a $1.6 million increase in employee-related costs associated with an increase in variable incentive compensation partially offset by a decrease in cost due to a reduction in headcount. The service gross profit percentage decreased by three percentage points to 74% during the three months ended September 30, 2024 as compared with the three months ended September 30, 2023. The 9%, or $7.8 million, decrease in service gross profit is attributable to the 5%, or $6.2 million decrease in service revenue, and the 6%, or $1.7 million, increase in cost of service revenue.
Current wording
Service. The 7%, or $1.9 million, increase in cost of service revenue for the three months ended December 31, 2024 compared to the same period last year was primarily due to a $1.3 million increase in employee-related costs associated with an increase in variable incentive compensation partially offset by a decrease in cost due to a reduction in headcount. The service gross profit percentage decreased by one percentage point to 76% during the three months ended December 31, 2024 as compared with the three months ended December 31, 2023. The $0.3 million decrease in service gross profit is attributable to the 7%, or $1.9 million, increase in cost of service revenue, partially offset by the 1%, or $1.6 million increase in service revenue.
Previous wording
Gross profit. Our gross profit decreased 3%, or $4.7 million, during the three months ended September 30, 2024 when compared with the three months ended September 30, 2023. This decrease is attributable to the decrease in revenue of 3%, or $5.7 million, partially offset by the 2%, or $1.0 million, decrease in cost of revenue. The gross profit percentage remained flat at 78% for the three months ended September 30, 2024 as compared with the three months ended September 30, 2023.
Current wording
Gross profit. Our gross profit increased 18%, or $31.0 million, during the three months ended December 31, 2024 when compared with the three months ended December 31, 2023. This increase is attributable to the increase in revenue of 16%, or $33.9 million, partially offset by the 7%, or $3.0 million, increase in cost of revenue. The gross profit percentage increased by two percentage points to 82% for the three months ended December 31, 2024 as compared with the three months ended December 31, 2023.
Previous wording
The 2%, or $0.8 million, increase in research and development expenses for the three months ended September 30, 2024 compared to the same period last year was primarily due to a $1.2 million increase in employee-related costs associated with an increase in variable incentive compensation partially offset by a decrease in cost due to a reduction in headcount, and a $0.6 million increase in allocated overhead. These increases were partially offset by a $0.6 million decrease from depreciation expense.
Current wording
The 2%, or $0.7 million, increase in research and development expenses for the three months ended December 31, 2024 compared to the same period last year was primarily due to a $1.1 million increase in employee-related costs associated with an increase in variable incentive compensation partially offset by a decrease in cost due to a reduction in headcount, and a $0.5 million increase in allocated overhead. These increases were partially offset by a $0.5 million decrease from depreciation expense.
Previous wording
The $0.3 million increase in total sales and marketing expenses for the three months ended September 30, 2024 compared to the same period last year was primarily due to a $3.6 million increase related to trade shows and other events. This increase was partially offset by a $3.5 million decrease in employee-related costs associated with a decrease in variable incentive compensation as well as a decrease in cost due to a reduction in headcount, and a $0.6 million decrease in commissions expense.
Current wording
The 1%, or $0.8 million, increase in total sales and marketing expenses for the three months ended December 31, 2024 compared to the same period last year was primarily due to a $2.6 million increase in commissions expense, and a $1.2 million increase related to trade shows, user conferences and other events. These increases were partially offset by a $2.1 million decrease in employee-related costs associated with a decrease in cost due to a reduction in headcount, and a $0.7 million decrease in advertising expense.
Previous wording
The 5%, or $1.1 million, increase in general and administrative expenses for the three months ended September 30, 2024 compared tothe same period last year was primarily due to a $1.6 million increase in employee-related costs associated with an increase in variable incentive compensation.
Current wording
The 2%, or $0.4 million, increase in general and administrative expenses for the three months ended December 31, 2024 compared to the same period last year was primarily due to a $1.3 million increase in employee-related costs associated with an increase in variable incentive compensation.
Previous wording
Restructuring charges. During the first quarter of fiscal year 2025, we implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the three months ended September 30, 2024, we recorded additional restructuring charges totaling $2.4 million related to one-time termination benefits for twenty-three employees who voluntarily terminated their employment with us during the three months ended September 30, 2024.
Current wording
Restructuring charges. During the first quarter of fiscal year 2025, we implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the three months ended December 31, 2024, we recorded additional restructuring charges totaling $0.6 million related to one-time termination benefits for three employees who voluntarily terminated their employment with us during the three months ended December 31, 2024. During the third quarter of fiscal year 2025, we entered into transition agreements that provided termination benefits for certain employees to ensure an orderly transition of responsibilities for continuity purposes. As a result of the related workforce changes, during the three months ended December 31, 2024, we recorded restructuring charge totaling $0.3 million.
Previous wording
The 252%, or $3.0 million, change in interest and other income (expense), net for the three months ended September 30, 2024 compared to the same period last year was primarily due to a $2.1 million increase in foreign exchange expense, and a $0.9 million decrease from the change in fair value of the equity investment in Napatech.
Current wording
The 695%, or $5.1 million, change in interest and other income (expense), net for the three months ended December 31, 2024 compared to the same period last year was primarily due to $6.0 million decrease from the change in fair value of the equity investment in Napatech, partially offset by a $0.7 million decrease in foreign exchange expense.
Previous wording
Income Tax Expense. The effective tax rates were 26.8% and 21.9% for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 differed from the effective tax rate for the three months ended September 30, 2023, primarily related to an increase in the forecasted benefit of the foreign derived intangible deduction, offset by an increase in foreign withholding taxes.
Current wording
Income Tax Expense (Benefit). The effective tax rates were 14.9% and 0.9% for the three months ended December 31, 2024 and 2023, respectively. The effective tax rate for the three months ended December 31, 2024 differed from the effective tax rate for the three months ended December 31, 2023, primarily related to a decrease in the research and development tax credit and an increase in foreign withholding taxes.
Previous wording
Product. The 19%, or $33.0 million, decreasein product revenue compared with the same period last year was due to a decrease in revenue from both service provider and enterprise customers from service assurance offerings, including radio frequency propagation modeling projects, as a result of industry-specific capital spending constraints, as well as a decrease in revenue from service provider customers from cybersecurity offerings. The results for the six months ended September 30, 2023 benefited from approximately $48 million of backlog-related revenue. Excluding backlog-related revenue, total revenue for the six months ended September 30, 2024 compared with the same period last year would have increased year over year.
Current wording
Product. The $0.7 million decreasein product revenue compared with the same period last year was due to a decrease in revenue from both enterprise and service provider customers from service assurance offerings, as well as a decrease in revenue from service provider customers from cybersecurity offerings, partially offset by an increase in revenue from enterprise customers from cybersecurity offerings. The results for the nine months ended December 31, 2023 benefited from approximately $48 million of backlog-related revenue. Excluding backlog-related revenue, total revenue for the nine months ended December 31, 2024 compared with the same period last year would have increased year over year.
Previous wording
Service. The 4%, or $9.3 million, decrease in service revenue compared with the same period last year was primarily due to a decrease in revenue from maintenance contracts as well as professional service contracts.
Current wording
Service. The 2%, or $7.7 million, decrease in service revenue compared with the same period last year was primarily due to a decrease in revenue from maintenance contracts as well as professional service contracts.
Previous wording
United States revenue decreased 4%, or $4.2 million, primarily due to a decrease in revenue from service provider customers from service assurance offerings, including radio frequency propagation modeling projects. The 2%, or $1.5 million, decrease in international revenue compared with the same period last year was primarily driven by a decrease in revenue from service provider customers from service assurance offerings, as well as a decrease in revenue from service provider customers from cybersecurity offerings, partially offset by an increase in revenue from enterprise customers from cybersecurity offerings and service assurance offerings.
Current wording
United States revenue decreased 1%, or $2.1 million, primarily due to a decrease in revenue from service assurance offerings from enterprise customers, including radio frequency propagation modeling projects. The 2%, or $6.3 million, decrease in international revenue compared with the same period last year was primarily driven by lower revenue from service provider customers from both service assurance and cybersecurity offerings, partially offset by an increase in revenue from enterprise customers from both service assurance and cybersecurity offerings.
Previous wording
The 13%, or $37.1 million, decrease in revenue from the service assurance product line was due to a decrease in revenue from both enterprise and service provider customers, including radio frequency propagation modeling projects, and the 4%, or $5.2 million, decrease in revenue from the cybersecurity product line was due to a decrease in revenue from service provider customers, partially offset by an increase in revenue from enterprise customers.
Current wording
The 5%, or $23.1 million, decrease in revenue from the service assurance product line was due to a decrease in revenue from both enterprise and service provider customers, including radio frequency propagation modeling projects, and the 7%, or $14.8 million, increase in revenue from the cybersecurity product line was due to an increase in revenue from enterprise customers, partially offset by a decrease in revenue from service provider customers.
Previous wording
The 25%, or $22.3 million, decrease in revenue from the service provider customer vertical was due to a decrease in product and service revenue from both the service assurance and cybersecurity product lines. The 16%, or $16.7 million, increase in revenue from the enterprise customer vertical was due to an increase in product and service revenue from the cybersecurity product line and an increase in product revenue from enterprise customers, partially offset by a decrease in service revenue from the service assurance product line.
Current wording
The 7%, or $20.7 million, decrease in revenue from the service provider customer vertical was due to a decrease in product and service revenue from both the service assurance and cybersecurity product lines. The 4%, or $12.4 million, increase in revenue from the enterprise customer vertical was due to an increase in product and service revenue from the cybersecurity product line, partially offset by a decrease in the service assurance product line, including radio frequency propagation modeling projects.
Previous wording
Product. The 22%, or $7.3 million, decrease in cost of product revenue for the six months ended September 30, 2024 compared to the same period last year was prim arily due to a $3.5 million decrease in direct material costs, a $1.5 million decrease in the amortization of intangible assets, a $0.9 million decrease in costs related to the delivery of radio frequency propagation modeling projects, a $0.8 million decrease in inventory related expenses, and a $0.6 million decrease in employee-related costs associated with the timing of certain projects. The product gross profit percentage increased by one percentage point to 82% during the six months ended September 30, 2024 when compared to the six months ended September 30, 2023. The 18%, or $25.7 million, decrease in product gross profit is attributable to the 19%, or $33.0 million, decrease in product revenue, partially offset by the 22%, or $7.3 million, decrease in cost of product revenue.
Current wording
Product. The 13%, or $6.2 million, decrease in cost of product revenue for the nine months ended December 31, 2024 compared to the same period last year was prim arily due to a $2.3 million decrease in the amortization of intangible assets, a $2.2 million decrease in direct material costs, a $0.9 million decrease in inventory obsolescence charges, a $0.9 million decrease in employee-related costs associated with the timing of certain projects, and a $0.7 million decrease in inventory related expenses. The product gross profit percentage increased by three percentage points to 85% during the nine months ended December 31, 2024 when compared to the nine months ended December 31, 2023. The 2%, or $5.5 million, increase in product gross profit is attributable to the 13%, or $6.2 million, decrease in cost of product revenue, partially offset by the $0.7 million decrease in product revenue.
Previous wording
Service. The $0.3 million increase in cost of service revenue for the six months ended September 30, 2024 compared to the same period last year was primarily due to a $0.9 million increase in employee-related expenses largely due to an increase in variable incentive compensation partially offset by a decrease in costs due to a reduction in headcount, and a $0.5 million increase in contractor fees. These increases were partially offset by a $0.6 million decrease in cost of materials used to support customers under service contracts. The service gross profit percentage decreased by one percentage point to 73% for the six months ended September 30, 2024 when compared to the six months ended September 30, 2023. The 6%, or $9.6 million, decrease in service gross profit is attributable to the 4%, or $9.3 million decrease in service revenue, and the $0.3 million increase in cost of service revenue.
Current wording
Service. The 2%, or $2.2 million, increase in cost of service revenue for the nine months ended December 31, 2024 compared to the same period last year was primarily due to a $2.1 million increase in employee-related expenses largely due to an increase in variable incentive compensation as well as the timing of certain projects partially offset by a decrease in costs due to a reduction in headcount, a $0.8 million increase in contractor fees, and a $0.8 million increase in allocated overhead. The service gross profit percentage decreased by one percentage point to 74% for the nine months ended December 31, 2024 when compared to the nine months ended December 31, 2023. The 4%, or $9.8 million, decrease in service gross profit is attributable to the 2%, or $7.7 million decrease in service revenue, and the 2%, or $2.2 million, increase in cost of service revenue.
Previous wording
Gross profit. Our gross profit for the six months ended September 30, 2024 decreased 11%, or $35.2 million, compared to the same period last year. This decrease is primarily attributable to the decrease in revenue of 10%, or $42.3 million, partially offset by the 8%, or $7.0 million, decrease in cost of revenue. The gross profit percentage decreased by one percentage point to 76% for the six months ended September 30, 2024 when compared to the six months ended September 30, 2023.
Current wording
Gross profit. Our gross profit for the nine months ended December 31, 2024 decreased 1%, or $4.3 million, compared to the same period last year. This decrease is primarily attributable to the decrease in revenue of 1%, or $8.3 million, partially offset by the 3%, or $4.0 million, decrease in cost of revenue. The gross profit percentage remained flat at 78% for the nine months ended December 31, 2024 when compared to the nine months ended December 31, 2023.
Previous wording
Research and development. The 3%, or $2.3 million, decrease in rese arch and development expenses for the six months ended September 30, 2024 compared to the same period last year was primarily due to a $1.2 million decrease in employee-related expenses largely due to a decrease in headcount partially offset by an increase in variable incentive compensation, a $1.2 million decrease from depreciation expense, and a $0.5 million decrease in contractor fees. These decreases were offset by a $0.9 million increase in allocated overhead.
Current wording
Research and development. The 1%, or $1.5 million, decrease in rese arch and development expenses for the nine months ended December 31, 2024 compared to the same period last year was primarily due to a $1.7 million decrease from depreciation expense, and a $0.8 million decrease in contractor fees. These decreases were partially offset by a $1.4 million increase in allocated overhead.
Previous wording
Sales and marketing. The 6%, or $8.4 million, decrease in sales and marketing expenses for the six months ended September 30, 2024 compared to the same period last year was primarily due to a $6.5 million decrease in employee-related expenses largely due to a decrease in headcount, a $3.6 million decrease in commissions expense, and a $0.7 million decrease in advertising expense. These decreases were partially offset by a $2.7 million increase related to trade shows and other events.
Current wording
Sales and marketing. The 4%, or $7.6 million, decrease in sales and marketing expenses for the nine months ended December 31, 2024 compared to the same period last year was primarily due to an $8.6 million decrease in employee-related expenses largely due to a decrease in headcount, a $1.4 million decrease in advertising expense, and a $1.0 million decrease in commissions expense. These decreases were partially offset by a $4.1 million increase related to trade shows, user conferences and other events.
Previous wording
General and administrative. The 3%, or $1.5 million, decrease in general and administrative expenses for the six months ended September 30, 2024 compared to the same period last year was primarily due to a $1.4 million decrease in contractor fees, a $0.7 million decrease from depreciation expense, a $0.6 million decrease in business taxes, and a $0.5 million decrease in allocated overhead. These decreases were partially offset by a $1.2 million increase in employee-related expenses largely due to an increase in variable incentive compensation, a $0.5 million increase in legal fees, and a $0.5 million increase in accounting related expenses.
Current wording
General and administrative. The 2%, or $1.2 million, decrease in general and administrative expenses for the nine months ended December 31, 2024 compared to the same period last year was primarily due to a $1.6 million decrease in contractor fees, a $0.9 million decrease from depreciation expense, a $0.7 million decrease in the provision for allowance for credit losses, a $0.6 million decrease in business taxes, and a $0.6 million decrease in allocated overhead. These decreases were partially offset by a $2.5 million increase in employee-related expenses largely due to an increase in variable incentive compensation, and a $1.2 million increase in legal fees.
Previous wording
The 8%, or $2.0 million, decrease in amortization of acquired intangible assets for the six months ended September 30, 2024 compared to the same period last year was largely due to a decrease in the amortization of intangible assets related to the Comms Transaction and Network General Corpora tion.
Current wording
The 8%, or $2.9 million, decrease in amortization of acquired intangible assets for the nine months ended December 31, 2024 compared to the same period last year was largely due to a decrease in the amortization of intangible assets related to the Comms Transaction and Network General Corpora tion.
Previous wording
Restructuring charges. During the first quarter of fiscal year 2025, we implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the six months ended September 30, 2024, we recorded restructuring charges totaling $19.0 million related to one-time termination benefits for one hundred thirty-nine employees who voluntarily terminated their employment with us during that period.
Current wording
Restructuring charges. During the first quarter of fiscal year 2025, we implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the nine months ended December 31, 2024, we recorded restructuring charges totaling $19.6 million related to one-time termination benefits for one hundred forty-two employees who voluntarily terminated their employment with us during that period. During the third quarter of fiscal year 2025, we entered into transition agreements that provided termination benefits for certain employees to ensure an orderly transition of responsibilities for continuity purposes. As a result of the related workforce changes, during the nine months ended December 31, 2024, we recorded restructuring charges totaling $0.3 million.
Previous wording
Goodwill impairment. During fiscal year 2024, we recorded $217.3 million in goodwill impairment charges as a result of the sustained decline in our stock price and overall market capitalization. During the first quarter of fiscal year 2025, due to the continued decrease in our stock price and overall market capitalization, along with other qualitative considerations including the continued impact from the conditions in the macroeconomic environment, it was determined a Triggering Event occurred, indicating goodwill may be impaired. Accordingly, we conducted a quantitative impairment test of our goodwill at June 30, 2024. We estimated the implied fair value of our goodwill using a market approach. As a result of the quantitative impairment test performed during the first quarter of fiscal year 2025, we determined goodwill was impaired and recorded a goodwill impairment charge of $427.0 million during the three months ended June 30, 2024. The additional impairment charge recorded in the first quarter of fiscal year 2025 was primarily due to the continued decrease in our stock price from March 31, 2024 to June 30, 2024, an increase in our weighted-average cost of capital, and the refinement to the expected cost synergies that could be realized by a hypothetical buyer as a result of the VSP we implemented in the first quarter of fiscal year 2025, which impacted the company-specific control premium used to determine the fair value of the reporting unit under the market approach. We expect that these restructuring efforts will generate net annual run-rate savings of approximately $25 million to $27 million, of which we expect that approximately $18 million to $19 million will be realized in the remainder of fiscal year 2025. At September 30, 2024, the Company performed a Triggering Event assessment and concluded no event or circumstances occurred that indicated goodwill was further impaired.
Current wording
Goodwill impairment. During fiscal year 2024, we recorded $217.3 million in goodwill impairment charges as a result of the sustained decline in our stock price and overall market capitalization. During the first quarter of fiscal year 2025, due to the continued decrease in our stock price and overall market capitalization, along with other qualitative considerations including the continued impact from the conditions in the macroeconomic environment, it was determined a Triggering Event occurred, indicating goodwill may be impaired. Accordingly, we conducted a quantitative impairment test of our goodwill at June 30, 2024. We estimated the implied fair value of our goodwill using a market approach. As a result of the quantitative impairment test performed during the first quarter of fiscal year 2025, we determined goodwill was impaired and recorded a goodwill impairment charge of $427.0 million during the three months ended June 30, 2024. The additional impairment charge recorded in the first quarter of fiscal year 2025 was primarily due to the continued decrease in our stock price from March 31, 2024 to June 30, 2024, an increase in our weighted-average cost of capital, and the refinement to the expected cost synergies that could be realized by a hypothetical buyer as a result of the VSP we implemented in the first quarter of fiscal year 2025, which impacted the company-specific control premium used to determine the fair value of the reporting unit under the market approach. We expect that these restructuring efforts will generate net annual run-rate savings of approximately $25.0 million to $27.0 million, of which we expect that approximately $6.0 million will be realized in the remainder of fiscal year 2025. At September 30, 2024 and December 31, 2024, we performed a Triggering Event assessment and concluded no event or circumstances occurred that indicated goodwill was further impaired.
Previous wording
The key assumption in the market approach was the company-specific control premium, which was estimated using expected synergies that would be realized by a hypothetical buyer. We also compared its implied control premium to recent control premiums paid in the industry, as evidenced by guideline public company comparable transactions. This information corroborated that the company-specific control premium was within the range of premiums for other companies operating in the industry. Changes in the estimates or assumptions used in its quantitative impairment test could materially affect the determination of fair value and the associated goodwill impairment assessment. Potential events and circumstances that could have an adverse impact on our estimates and assumptions include, but are not limited to, continued increases in costs, and high interest rates and other macroeconomic factors. An increase or decrease of 1% in the company-specific control premium used in the determination of the fair value of the reporting unit under the market approach would have resulted in an increase or decrease in the goodwill impairment recorded during the six months ended September 30, 2024 of approximately $13.0 million.
Current wording
The key assumption in the market approach was the company-specific control premium, which was estimated using expected synergies that would be realized by a hypothetical buyer. We also compared its implied control premium to recent control premiums paid in the industry, as evidenced by guideline public company comparable transactions. This information corroborated that the company-specific control premium was within the range of premiums for other companies operating in the industry. Changes in the estimates or assumptions used in its quantitative impairment test could materially affect the determination of fair value and the associated goodwill impairment assessment. Potential events and circumstances that could have an adverse impact on our estimates and assumptions include, but are not limited to, continued increases in costs, and high interest rates and other macroeconomic factors. An increase or decrease of 1% in the company-specific control premium used in the determination of the fair value of the reporting unit under the market approach would have resulted in an increase or decrease in the goodwill impairment recorded during the nine months ended December 31, 2024 of approximately $13.0 million.
Previous wording
Gain on Divestiture of Business. During the three months ended September 30, 2023, we recorded a $3.8 million gain on the divestiture of the Test Optimization business.
Current wording
Gain on Divestiture of Business. During the nine months ended December 31, 2023, we recorded a $3.8 million gain on the divestiture of the Test Optimization business.
Previous wording
The 1,342%, or $7.3 million, increase in interest and other income (expense), net was primarily due to a $7.6 million increase from the change in fair value of the equity investment in Napatech, a $0.8 million increase in interest income, and a $0.5 million decrease in interest expense due to debt repayments on the credit facility in May 2024, partially offset by an increase in the average interest rate on the credit facility. These increases were partially offset by a $1.0 million increase in foreign exchange expense during the six months ended September 30, 2024, when compared to the six months ended September 30, 2023, and a $0.5 million decrease in other income.
Current wording
The 175%, or $2.2 million, increase in interest and other income (expense), net was primarily due to a $1.6 million increase from the change in fair value of the equity investment in Napatech, and a $1.2 million increase in interest income during the nine months ended December 31, 2024, when compared to the nine months ended December 31, 2023.
Previous wording
Income Tax Expense (Benefit). Our effective tax rates were 1.6% and 22.0% for the six months ended September 30, 2024 and 2023, respectively. The effective tax rate for the six months ended September 30, 2024 differed from the effective rate for the six months ended September 30, 2023, primarily related to an increase in the forecasted benefit of the foreign derived intangible income deduction offset by an increase in foreign withholding taxes and goodwill impairment incurred during the six months ended September 30, 2024, which was not deductible for tax purposes.
Current wording
Income Tax Expense. Our effective tax rates were 0.4% and 3.3% for the nine months ended December 31, 2024 and 2023, respectively. The effective tax rate for the nine months ended December 31, 2024 differed from the effective rate for the nine months ended December 31, 2023, primarily related to a decrease in the research and development tax credit, and an increase in foreign withholding taxes and goodwill impairment incurred during the nine months ended December 31, 2024, which was not deductible for tax purposes.
Previous wording
At September 30, 2024, cash, cash equivalents, marketable securities and investments (current and non-current) totaled $401.9 million, a $22.2 million decrease from $424.1 million at March 31, 2024. This decrease was primarily due to $25.3 million used to repurchase shares of our common stock, $25.0 million used to repay long-term debt, $13.5 million used for tax withholdings on restricted stock units, $2.2 million used for capital expenditures, and $1.3 million used to acquire technology licenses, partially offset by $34.7 million of net cash provided by operations, and an $8.3 million increase from the change in fair value of an equity instrument during the six months ended September 30, 2024. Cash and short-term investments held outside of the United States was approximately $181.1 million.
Current wording
At December 31, 2024, cash, cash equivalents, marketable securities and investments (current and non-current) totaled $427.9 million, a $3.8 million increase from $424.1 million at March 31, 2024. This increase was primarily due to $76.1 million of net cash provided by operations, partially offset by $25.3 million used to repurchase shares of our common stock, $25.0 million used to repay long-term debt, $13.8 million used for tax withholdings on restricted stock units, $4.0 million used for capital expenditures, $2.5 million used for the payment of debt issuance costs, and $1.3 million used to acquire technology licenses during the nine months ended December 31, 2024. Cash and short-term investments held outside of the United States was approximately $180.5 million.
Showing the first 40 of 57 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Goodwill impairment. As a result of a sustained decline in our stock price and overall market capitalization during the third quarter of fiscal year 2024, along with other qualitative considerations including the continued impact from the conditions in the macroeconomic environment, it was determined a triggering event occurred, indicating goodwill may be impaired. Accordingly, we conducted a quantitative impairment test of our goodwill at December 31, 2023. We estimated the implied fair value of our goodwill using a market approach. As a result of the quantitative impairment test, we deter mined goodwill was impaired and recorded a goodwill impairment charge of $167.1 million during the three months ended December 31, 2023.
Current report — wording carried from elsewhere
During the nine months ended December 31, 2024, one direct customer, Verizon, accounted for more than 10% of our total revenue, while no channel partners accounted for more than 10% of our total revenue. During the nine months ended December 31, 2023, no direct customers or channel partners accounted for more than 10% of our total revenue.
Current report — wording carried from elsewhere
On July 27, 2021, we amended and extended our existing credit facility (as amended, the Second Amended and Restated Credit Agreement), which provided for a five-year, $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The commitments under the Second Amended and Restated Credit Agreement were set to expire on July 27, 2026, and any outstanding loans were due on that date. On May 13, 2024, we repaid $25.0 million of borrowings under the Second Amended and Restated Credit Agreement.
Current report — wording carried from elsewhere
The Third Amended and Restated Credit Agreement contains certain covenants applicable to us and our restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. The Third Amended and Restated Credit Agreement provides for certain baskets that are available to us and our restricted subsidiaries to incur additional indebtedness, to repay junior financing, for asset sales and to make investments and restricted payments. Such baskets are substantially similar to the baskets set forth in our previous amended credit agreement.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
During the six months ended September 30, 2024, and 2023, no direct customer or channel partner accounted for more than 10% of our total revenue.
Previous report — wording carried elsewhere
The 22%, or $42.2 million, decrease in revenue from the service provider customer vertical was due to a decrease in product and service revenue from both the service assurance and cybersecurity product lines.
Previous report — wording carried elsewhere
Gain on Divestiture of Business. During the six months ended September 30, 2023, we recorded a $3.8 million gain on the divestiture of the Test Optimization business.