NetScout Systems, Inc.(NASDAQ: NTCT) stock lost over 11.8% on Jan 10th, 2018 (as of 11:00AM EST; Source: Google finance) due to the group’s lower than expected third-quarter fiscal year 2018 guidance.
NetScout Systems forecasts a third-quarter fiscal year 2018 GAAP revenue to be in the range of over $267 million and $271 million with non-GAAP third-quarter revenue expected over $270 million to $274 million range. GAAP net income would be between $87 million and $90 million range or $0.99 per share (diluted) and $1.02 per share diluted.
O the other hand, management reported that they would be able to the weakness in spending by their major tier-one service provider customer with a strong second half of the year driven by expansion across the other service provider customers coupled with solid growth in their enterprise customer segment. But they continue to face pressure in meeting their targets as service provider capital spending in North America is subdued. Moreover, the enterprise sales cycles is also increasing as their customers grapple with major digital transformation initiatives and related changes to their technology architectures. They continue to face funding delays for multiple large federal government projects. As a result, the group has a risk of facing pressure even in the fourth quarter.
The group’s overall third-quarter cost structure would reduce by over $25 million, especially via the adjustments in variable incentive compensation, while the magnitude of the anticipated top-line shortfall would have a tangible impact on their full-year operating profitability and earnings per share performance.
On the other hand, the group made an accelerated share repurchase agreements to buy at least $250 million of its common stock, wherein the planned ASR is expected to be executed under the Company’s previously disclosed 25 million share repurchase program shortly after the Company formally reports its third-quarter fiscal year 2018 results on January 30, 2018. Netscout intends to expand the size of its current credit facility from $800 million to $1 billion with a potential to increase it in future.