NetScout Systems (NTCT) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue was $174.6 million, at the high end of guidance but down 17% year-over-year, mainly due to the absence of $37 million in backlog-related revenue from the prior year.

• Non-GAAP diluted EPS was $0.28, exceeding expectations but down 9.7% year-over-year, aided by cost management and an unrealized gain on a foreign investment.

• Net loss widened to $443.4 million, driven by a $427 million non-cash goodwill impairment and $16.6 million in restructuring charges.

• Cost reduction initiatives, including a voluntary separation program, are expected to yield $25–$27 million in annualized savings.

• The company reiterated its FY25 revenue and non-GAAP EPS outlooks, citing a solid pipeline, ongoing cost controls, and continued investment in cybersecurity and product innovation.

Financial highlights

• Product revenue was $61.2 million (down 35.4% year-over-year); service revenue was $113.4 million (down 2.6%).

• Gross profit margin was 77.1% non-GAAP (down 1.2 percentage points year-over-year); GAAP gross margin was 75%.

• Non-GAAP operating margin was 8.0%, down from 14.0% year-over-year; GAAP operating margin was negative 265.4%.

• Free cash flow for the quarter was $37.2 million; operating cash flow was $38.5 million.

• Cash and investments totaled $407.2 million at quarter-end.

Outlook and guidance

• FY25 revenue expected in the range of $800–$830 million; non-GAAP diluted EPS expected between $2.10–$2.30.

• GAAP net loss per share for FY25 expected at ($5.28) to ($5.03), reflecting impairment and restructuring charges.

• Q2 FY25 revenue expected between $185–$195 million; non-GAAP EPS between $0.42–$0.51.

• Voluntary separation program to reduce workforce by 6.5%, with expected annual run-rate savings of $25–$27 million.

• Revenue expected to be 45% in H1 and 55% in H2 of FY25.