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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks. Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high ...

Q1 FY 2025 Conference Call NETSCOUT SYSTEMS, INC. July 25, 2024 Agenda ▪ Introduction ➢ Tony Piazza, Deputy Chief Financial Officer • Safe Harbor & Non-GAAP Metrics ▪ CEO Perspective ▪ COO Update ©2024 NETSCOUT 1 ➢ Anil Singhal, President & Chief Executive Officer (CEO) • Summary Results, Business & Market Insights, FY'25 Outlook and Summary ▪ CFO Financial Review 2 Forward Looking Statements: Certain information provided in this presentation includes forward-looking statements within the meaning of the Sec ...

NetScout Systems (NTCT) came out with quarterly earnings of $0.28 per share, beating the Zacks Consensus Estimate of $0.13 per share. This compares to earnings of $0.31 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 115.38%. A quarter ago, it was expected that this provider of products that gauge network performance would post earnings of $0.53 per share when it actually produced earnings of $0.55, delivering a surprise of 3 ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) NetScout leads in service assurance and cybersecurity, leveraging deep packet inspection for enterprises and service providers amidst digital transformation and 5G - NetScout provides **service assurance and cybersecurity solutions** based on **deep packet inspection technology**, serving enterprises, service providers, and government agencies[17](index=17&type=chunk) - Key technology trends driving the business include **digital transformation, cloud migration, cybersecurity threats, AI, and 5G evolution**[17](index=17&type=chunk)[197](index=197&type=chunk) - The company's growth strategy involves **platform innovation**, expanding into adjacent markets like **application performance management** and **network detection and response (NDR)**, and pursuing **strategic acquisitions**[30](index=30&type=chunk)[32](index=32&type=chunk) Overview - NetScout is an **industry leader** with nearly four decades of experience in **service assurance and cybersecurity solutions**, utilizing pioneering **deep packet inspection technology**[17](index=17&type=chunk) - Solutions help customers identify and resolve issues causing downtime, service interruptions, poor quality, or compromised data, **reducing meantime-to-resolution** and **improving ROI**[17](index=17&type=chunk) Markets - Service assurance solutions are used by enterprises and service providers to **optimize network performance** and resolve application/service quality issues[19](index=19&type=chunk) - Cybersecurity solutions help enterprises and service providers identify and mitigate **DDoS attacks** and **advanced network threats**[19](index=19&type=chunk) - Government markets, considered part of the enterprise vertical, are influenced by purchasing cycles, budgetary priorities, and allocated funding[22](index=22&type=chunk) Products Overview - NetScout's patented Adaptive Service Intelligence (ASI) technology converts network traffic data into high-value metadata ('**smart data**') for performance management and security[25](index=25&type=chunk) - Offerings are deployed as integrated hardware/software appliances, software-only, virtualized environments, or Software as a Service (SaaS)[25](index=25&type=chunk) - Key product categories include **nGeniusONE** for service assurance, **nGenius Business Analytics** for service provider intelligence, **NetScout Arbor** for DDoS protection, and **Omnis Cybersecurity** for advanced threat detection[26](index=26&type=chunk)[27](index=27&type=chunk)[30](index=30&type=chunk) Growth Strategy - The company plans to drive **platform innovation**, deliver pervasive visibility through multiple form factors, and extend into adjacent markets like **Network Detection and Response (NDR)**[30](index=30&type=chunk)[32](index=32&type=chunk) - Other strategic elements include fortifying existing customer relationships, expanding the customer base, increasing market relevance, extending technology partner alliances, pursuing **strategic acquisitions**, and improving cost structure[32](index=32&type=chunk) Support Services - NetScout offers **24/7 global support services**, including on-site support by third-party partners and reseller-enabled support, with updates to software and firmware[32](index=32&type=chunk) Manufacturing - Manufacturing operations primarily involve final product assembly, configuration, and testing, using standard components from various suppliers[33](index=33&type=chunk)[34](index=34&type=chunk) - The company maintains **ISO 9001 quality systems registrations** and monitors supply chain impacts from global geopolitical tensions and macroeconomic conditions[33](index=33&type=chunk)[34](index=34&type=chunk) Sales and Marketing - Sales are conducted through a **direct sales force** using a 'high-touch' model and an **indirect reseller/distribution channel**, especially for international markets[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Marketing efforts focus on **thought leadership**, market positioning, demand generation, and building the NetScout brand for service assurance and cybersecurity products[39](index=39&type=chunk)[40](index=40&type=chunk) Research and Development - Significant financial and personnel resources are invested in R&D to meet evolving customer requirements and keep pace with rapid technological changes and cybersecurity threats[41](index=41&type=chunk)[42](index=42&type=chunk) Seasonality - NetScout typically experiences **stronger order bookings** during its fiscal third and fourth quarters due to sales cycle length, customer project timing, and IT buying cycles[44](index=44&type=chunk) Customers - The customer base includes large and medium-sized enterprises across various industries (financial services, technology, healthcare, government) and telecommunications service providers (mobile, wireline, cable, internet, cloud)[45](index=45&type=chunk) Backlog Product Backlog (in millions) | Metric | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total combined product backlog | $6.8 | $44.4 | | Fulfillable backlog | $2.5 | $41.1 | - Total combined product backlog decreased significantly from **$44.4 million** in FY2023 to **$6.8 million** in FY2024[47](index=47&type=chunk) Competition - NetScout operates in highly competitive, rapidly evolving, and fragmented markets for service assurance, network security, and business intelligence[48](index=48&type=chunk)[132](index=132&type=chunk) - Key competitive factors include **scalability, application support, product performance, ease of deployment, virtualized solutions, and administration**[49](index=49&type=chunk)[132](index=132&type=chunk) - Competitors include large technology companies (e.g., Cisco, IBM, Broadcom) and smaller niche vendors across enterprise, service provider, and cybersecurity markets[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) Intellectual Property Rights - The company relies on a combination of **patent, copyright, trademark, trade secret laws, and contractual rights** to protect its intellectual property[54](index=54&type=chunk)[55](index=55&type=chunk) Human Capital Management - NetScout had **2,296 employees worldwide** as of March 31, 2024, with **63% located in the United States**[57](index=57&type=chunk) - The company emphasizes a '**Lean But Not Mean**' culture, **diversity, equity, and inclusion (DEI)**, talent development, and competitive total rewards[56](index=56&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) Environmental, Social and Governance - The Nominating and Corporate Governance Committee oversees the ESG program, with the Audit Committee reviewing ESG-related risks and the Compensation Committee reviewing human capital management aspects[64](index=64&type=chunk) Government Regulation - NetScout is subject to evolving global regulatory requirements concerning **data privacy (e.g., EU GDPR), AI, information security, U.S. export controls, and anti-bribery laws (e.g., FCPA)**[67](index=67&type=chunk)[68](index=68&type=chunk) Corporate Information - The company's corporate headquarters are in Westford, Massachusetts, and it was incorporated in Delaware in 1984[70](index=70&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) NetScout faces risks from economic conditions, product vulnerabilities, cybersecurity threats, and challenges in innovation, IP protection, liquidity, and regulatory compliance - Risks include unfavorable economic conditions, product vulnerabilities, IT system compromises, and the failure to introduce new products or enhance existing ones[12](index=12&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[83](index=83&type=chunk)[98](index=98&type=chunk) - The company is exposed to risks related to intellectual property protection, potential infringement claims, and the availability of third-party technology licenses[15](index=15&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Financial risks include limitations from indebtedness, potential failure to meet debt obligations, and challenges in securing additional financing[15](index=15&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) Risks Related to Our Business and Industry - Unfavorable global economic conditions, including high interest rates and inflation, could limit business growth and negatively affect operating results[77](index=77&type=chunk) - Potential product vulnerabilities, errors, or quality issues could lead to liability claims, reputational damage, and increased costs[78](index=78&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Compromises to IT systems or data, including cyber-attacks and ransomware, could result in regulatory actions, litigation, financial losses, and business disruptions[83](index=83&type=chunk)[86](index=86&type=chunk)[94](index=94&type=chunk) Risks Related to Our Intellectual Property - The company's success depends on its ability to protect intellectual property rights, and failure to do so could lead to unauthorized use of technology[118](index=118&type=chunk) - Claims of infringement by others on NetScout's intellectual property rights could result in significant litigation costs, damages, or the need to reengineer products[119](index=119&type=chunk) Risks Related to Our Liquidity and Financial Condition - The company's indebtedness may limit operations and cash flow, and non-compliance with debt covenants could adversely affect liquidity and financial condition[120](index=120&type=chunk)[121](index=121&type=chunk) - Failure to secure necessary additional financing on satisfactory terms could hinder continued growth and operations, especially given current macroeconomic conditions[123](index=123&type=chunk)[124](index=124&type=chunk) Other Risks Related to Our Business - Failure to recruit and retain qualified personnel, particularly executives, sales, marketing, and technical support staff, could hinder business management and impact financial results[125](index=125&type=chunk)[128](index=128&type=chunk) - Evolving ESG laws, regulations, and stakeholder expectations could expose the company to risks affecting reputation, business, financial performance, and growth[129](index=129&type=chunk) - Inability to successfully complete or integrate acquisitions could impair competitiveness and harm operating results[130](index=130&type=chunk)[131](index=131&type=chunk) - Significant competition from other technology companies, including larger entities and new entrants, could lead to increased pricing pressure and reduced profit margins[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Uncertainties in Internet and AI regulation, along with stringent data privacy and security laws (e.g., EU GDPR), could lead to investigations, fines, and business disruptions[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) General Risk Factors - Actual operating results may differ significantly from guidance due to inherent business, economic, and competitive uncertainties[147](index=147&type=chunk)[149](index=149&type=chunk) - The effective tax rate may fluctuate due to changes in revenue mix, tax laws, and valuation of deferred tax assets, potentially increasing income tax expense[151](index=151&type=chunk) - Foreign currency exchange rate fluctuations, particularly for the Euro, British Pound, Canadian Dollar, and Indian Rupee, can adversely affect financial statements[154](index=154&type=chunk)[155](index=155&type=chunk) - The company's stock price is subject to wide and volatile fluctuations due to various factors beyond its control, including market conditions and company-specific announcements[160](index=160&type=chunk)[161](index=161&type=chunk) [Item 1B. Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments were reported[164](index=164&type=chunk) [Item 1C. Cybersecurity](index=31&type=section&id=Item%201C.%20Cybersecurity) NetScout manages cybersecurity risks through comprehensive processes, overseen by its Executive Council and Board's Audit Committee, with no material incidents reported - NetScout implements information security processes to identify, assess, and manage material risks from cybersecurity threats to its Information Systems and Data[165](index=165&type=chunk) - The Cybersecurity Executive Council, led by the CIO and including the CISO, oversees the cybersecurity program, strategy, threats, risks, and mitigations[166](index=166&type=chunk) - The Board of Directors' Audit Committee is responsible for overseeing NetScout's cybersecurity risk management processes[171](index=171&type=chunk) - To date, NetScout has not experienced any material cybersecurity incidents[176](index=176&type=chunk) Risk management and strategy - NetScout's cybersecurity program identifies and assesses risks through monitoring, threat analysis, vulnerability assessments, and incident response exercises[166](index=166&type=chunk) - Measures include an incident response plan, vulnerability management, systems monitoring, data encryption, and employee training[167](index=167&type=chunk) Governance - The Audit Committee of the Board of Directors oversees cybersecurity risk management, receiving quarterly reports from the CISO and CIO[171](index=171&type=chunk)[175](index=175&type=chunk) - A Security Incident Response Team (SIRT) handles cybersecurity incidents, with an escalation process for material incidents to the CEO and Audit Committee[174](index=174&type=chunk) [Item 2. Properties](index=32&type=section&id=Item%202.%20Properties) NetScout's headquarters are in Westford, MA, with additional leased office and manufacturing spaces globally, including significant locations in Texas, California, India, and China - The company's headquarters are in Westford, MA, occupying approximately **175,000 square feet** under a lease expiring in September 2030[177](index=177&type=chunk) - Additional leased facilities are located globally, with notable presences in Allen, Texas; San Jose, California; Ann Arbor, Michigan; Colorado Springs, Colorado; Bangalore, India; Pune, India; and Shanghai, China[177](index=177&type=chunk) [Item 3. Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) NetScout is subject to ordinary legal proceedings, with a recent favorable ruling reducing contingent liabilities by $4.6 million - Management believes that current legal proceedings and claims will not have a material adverse effect on the company's financial condition, results of operations, or cash flows[178](index=178&type=chunk) - A favorable Federal Circuit ruling on May 2, 2024, in the Packet Intelligence LLC appeal, led to a **$4.6 million reduction** in contingent liabilities and legal fees for the fiscal year ended March 31, 2024[203](index=203&type=chunk)[254](index=254&type=chunk)[538](index=538&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report - No mine safety disclosures are applicable[180](index=180&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NetScout's common stock trades on Nasdaq (NTCT); no cash dividends were declared in FY2024/2023, prioritizing reinvestment, debt repayment, and stock buybacks - NetScout's common stock (NTCT) is traded on the Nasdaq Global Select Market[3](index=3&type=chunk) - The company did not declare cash dividends in fiscal years 2024 and 2023 and does not anticipate doing so in the foreseeable future, intending to retain earnings for reinvestment, debt repayment, and stock buyback[191](index=191&type=chunk) Stock Repurchases for Tax Withholding (Q4 FY2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 1/1/2024 - 1/31/2024 | 4,057 | $21.87 | | 2/1/2024 - 2/29/2024 | 4,737 | $21.05 | | 3/1/2024 - 3/31/2024 | 726 | $21.62 | | **Total** | **9,520** | **$21.44** | - As of March 31, 2024, **24,385,484 shares** remained available for purchase under the 2022 Share Repurchase Program[194](index=194&type=chunk)[490](index=490&type=chunk) Market Information - NetScout's common stock trades on the Nasdaq Global Select Market under the symbol **NTCT**[183](index=183&type=chunk) Stockholders - As of May 9, 2024, there were **74 stockholders of record**, with beneficial holders estimated to exceed **21,000**[184](index=184&type=chunk) Stock Performance Graph 5-Year Cumulative Total Return (March 31, 2019 - March 31, 2024) | Index | 3/31/2019 | 3/31/2020 | 3/31/2021 | 3/31/2022 | 3/31/2023 | 3/31/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | NetScout Systems, Inc. | $100.00 | $84.32 | $100.32 | $114.27 | $102.04 | $77.78 | | Nasdaq Composite – Total Returns | $100.00 | $100.70 | $174.60 | $188.67 | $163.62 | $221.02 | | Nasdaq US Benchmark Computer Services TR Index | $100.00 | $87.86 | $137.37 | $141.52 | $118.95 | $150.43 | - NetScout's common stock underperformed both the Nasdaq Composite Index and the Nasdaq U.S. Benchmark Computer Services TR Index over the five-year period ended March 31, 2024[190](index=190&type=chunk) Dividend Policy - No cash dividends were declared in fiscal years 2024 and 2023, and none are anticipated in the foreseeable future[191](index=191&type=chunk) - The company intends to retain all future earnings for reinvestment, debt repayment, and funding its stock buyback program[191](index=191&type=chunk) Recent Sales of Unregistered Securities - There were no recent sales of unregistered securities[192](index=192&type=chunk) Purchases of Equity Securities by the Issuer Equity Securities Purchased by Issuer (Q4 FY2024) | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Maximum Number of Shares That May Yet be Purchased Under the Program | | :--- | :--- | :--- | :--- | | 1/1/2024 - 1/31/2024 | 4,057 | $21.87 | 24,385,484 | | 2/1/2024 - 2/29/2024 | 4,737 | $21.05 | 24,385,484 | | 3/1/2024 - 3/31/2024 | 726 | $21.62 | 24,385,484 | | **Total** | **9,520** | **$21.44** | **24,385,484** | - The purchases were for tax withholding obligations associated with the vesting of restricted stock units and do not reduce the **25 million share repurchase program** authorized in May 2022[194](index=194&type=chunk) [Item 6. [Reserved]](index=35&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) NetScout's FY2024 net loss of $147.7 million was due to a $217.3 million goodwill impairment and 9% revenue decline, offset by a higher gross profit percentage, with liquidity maintained - NetScout reported a **net loss of $147.7 million** for fiscal year 2024, a significant decrease from a net income of $59.6 million in fiscal year 2023, primarily due to a **$217.3 million goodwill impairment charge**[203](index=203&type=chunk) - Total revenue decreased by **$85.1 million (9%)** year-over-year to **$829.5 million** in fiscal year 2024, mainly due to lower service assurance revenue, partially offset by increased cybersecurity revenue[201](index=201&type=chunk)[225](index=225&type=chunk)[227](index=227&type=chunk) - The gross profit percentage increased by **one percentage point to 77%** in fiscal year 2024, driven by product mix and lower incentive compensation expense[202](index=202&type=chunk)[232](index=232&type=chunk) - Cash, cash equivalents, and marketable securities totaled **$424.1 million** at March 31, 2024, a slight decrease of **$3.8 million** from the prior year[204](index=204&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) Overview - NetScout is a leader in service assurance and cybersecurity solutions, utilizing deep packet inspection technology to protect digital business services[197](index=197&type=chunk) - Operating results are influenced by product mix, pricing, material costs, employee-related costs, and the ability to introduce new products and expand into markets[198](index=198&type=chunk) Global and Macroeconomic Conditions - The company monitors global and macroeconomic conditions, including geopolitical tensions, stock market volatility, inflation, and interest rates[199](index=199&type=chunk) - In FY2024, cybersecurity revenue grew due to heightened geopolitical tensions, while service assurance revenue declined, particularly from domestic service providers facing constrained spending[199](index=199&type=chunk) - NetScout expects the challenging macroeconomic environment and pressure on service assurance offerings to persist into fiscal year 2025[199](index=199&type=chunk) Results Overview Key Financial Highlights (FY2024 vs. FY2023) | Metric | FY2024 (in millions) | FY2023 (in millions) | Change (in millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $829.5 | $914.5 | $(85.1) | (9)% | | Gross Profit % | 77% | 76% | 1 pp | 1% | | Net Income (Loss) | $(147.7) | $59.6 | $(207.3) | (348)% | | Goodwill Impairment Charge | $217.3 | $0 | $217.3 | N/A | | Cash, Cash Equivalents, Marketable Securities | $424.1 | $427.9 | $(3.8) | (1)% | - The decrease in net income (loss) was primarily driven by a **$217.3 million goodwill impairment charge** and an **$85.1 million decrease in revenue**[203](index=203&type=chunk) Use of Non-GAAP Financial Measures - NetScout supplements GAAP financial measures with non-GAAP measures (gross profit, income from operations, net income, EPS, EBITDA) to enhance transparency and comparability[205](index=205&type=chunk)[207](index=207&type=chunk) - Non-GAAP adjustments typically exclude amortization of acquired intangible assets, share-based compensation, acquisition-related depreciation, business development and integration expenses, restructuring charges, goodwill impairment, and certain legal benefits/expenses[205](index=205&type=chunk) GAAP vs. Non-GAAP Financial Measures (FY2024, FY2023, FY2022) | Metric (in thousands, except per share) | FY2024 | FY2023 | FY2022 | | :--- | :--- | :--- | :--- | | Revenue (GAAP and non-GAAP) | $829,455 | $914,530 | $855,575 | | GAAP gross profit | $642,043 | $691,432 | $641,389 | | Non-GAAP gross profit | $658,833 | $709,153 | $661,840 | | GAAP income (loss) from operations | $(149,826) | $77,664 | $48,634 | | Non-GAAP income from operations | $187,052 | $206,823 | $179,999 | | GAAP net income (loss) | $(147,734) | $59,648 | $35,874 | | Non-GAAP net income | $159,110 | $159,561 | $138,388 | | GAAP diluted net income (loss) per share | $(2.07) | $0.82 | $0.48 | | Non-GAAP diluted net income per share | $2.20 | $2.18 | $1.84 | | Non-GAAP EBITDA from operations | $205,033 | $227,826 | $202,413 | Critical Accounting Policies and Estimates - Critical accounting policies and estimates include revenue recognition and the valuation of goodwill, intangible assets, and other acquisition/divestiture accounting items, requiring significant judgment[211](index=211&type=chunk) Comparison of Years Ended March 31, 2024 and 2023 Results of Operations Revenue Revenue by Type (in thousands) | Revenue Type | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Product | $360,444 | 43% | $450,793 | 49% | $(90,349) | (20)% | | Service | $469,011 | 57% | $463,737 | 51% | $5,274 | 1% | | **Total Revenue** | **$829,455** | **100%** | **$914,530** | **100%** | **$(85,075)** | **(9)%** | Revenue by Geography (in thousands) | Geography | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | United States | $470,338 | 57% | $583,482 | 64% | $(113,144) | (19)% | | International | $359,117 | 43% | $331,048 | 36% | $28,069 | 8% | | **Total Revenue** | **$829,455** | **100%** | **$914,530** | **100%** | **$(85,075)** | **(9)%** | Revenue by Product Line (in thousands) | Product Line | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Service assurance | $557,626 | 67% | $678,709 | 74% | $(121,083) | (18)% | | Cybersecurity | $271,829 | 33% | $235,821 | 26% | $36,008 | 15% | | **Total Revenue** | **$829,455** | **100%** | **$914,530** | **100%** | **$(85,075)** | **(9)%** | - Product revenue decreased **20%** due to lower service assurance offerings, including radio frequency propagation modeling projects, while service revenue increased **1%** from maintenance and professional service contracts[225](index=225&type=chunk)[226](index=226&type=chunk) - U.S. revenue decreased **19%**, primarily from service assurance, while international revenue increased **8%**, driven by higher cybersecurity offerings[226](index=226&type=chunk) Cost of Revenue and Gross Profit Cost of Revenue and Gross Profit (in thousands) | Metric | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of product revenue | $64,057 | 8% | $94,868 | 10% | $(30,811) | (32)% | | Cost of service revenue | $123,355 | 15% | $128,230 | 14% | $(4,875) | (4)% | | **Total cost of revenue** | **$187,412** | **23%** | **$223,098** | **24%** | **$(35,686)** | **(16)%** | | Product gross profit | $296,387 | 36% | $355,925 | 39% | $(59,538) | (17)% | | Product gross profit % | 82% | | 79% | | 3 pp | | | Service gross profit | $345,656 | 42% | $335,507 | 37% | $10,149 | 3% | | Service gross profit % | 74% | | 72% | | 2 pp | | | **Total gross profit** | **$642,043** | | **$691,432** | | **$(49,389)** | **(7)%** | | Total gross profit % | 77% | | 76% | | 1 pp | | - Product cost of revenue decreased **32%** primarily due to a **$23.7 million decrease** in costs for radio frequency propagation modeling projects[229](index=229&type=chunk) - Service cost of revenue decreased **4%** mainly due to a **$5.4 million decrease** in employee-related expenses from lower variable incentive compensation[230](index=230&type=chunk) Operating Expenses Operating Expenses (in thousands) | Expense Category | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $161,213 | 19% | $176,173 | 19% | $(14,960) | (8)% | | Sales and marketing | $270,979 | 33% | $276,913 | 30% | $(5,934) | (2)% | | General and administrative | $95,886 | 12% | $103,510 | 11% | $(7,624) | (7)% | | Amortization of acquired intangible assets | $50,337 | 6% | $55,390 | 6% | $(5,053) | (9)% | | Restructuring charges | $0 | 0% | $1,782 | 0% | $(1,782) | (100)% | | Goodwill impairment | $217,260 | 26% | $0 | 0% | $217,260 | 100% | | Gain on divestiture of a business | $(3,806) | 0% | $0 | 0% | $(3,806) | (100)% | | **Total operating expenses** | **$791,869** | **96%** | **$613,768** | **66%** | **$178,101** | **29%** | - Total operating expenses increased **29%** to **$791.9 million**, primarily driven by a **$217.3 million goodwill impairment charge**[233](index=233&type=chunk) - R&D expenses decreased **8%** due to lower employee-related costs, while Sales and Marketing decreased **2%** due to reduced event and advertising expenses, partially offset by higher employee costs[234](index=234&type=chunk)[236](index=236&type=chunk) - General and administrative expenses decreased **7%** mainly due to a **$6.0 million decrease** in legal-related expenses from a favorable appeal decision[238](index=238&type=chunk) Interest and Other Income (Expense), Net Interest and Other Income (Expense), Net (in thousands) | Metric | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest and other income (expense), net | $5,316 | 1% | $(9,249) | (1)% | $14,565 | 157% | - The **157% change** to a net income of **$5.3 million** was driven by a **$7.2 million increase** in the fair value of an equity investment, a **$4.7 million increase** in interest income, and a **$1.6 million decrease** in interest expense[248](index=248&type=chunk) Income Tax Expense Income Tax Expense (in thousands) | Metric | FY2024 | % of Revenue | FY2023 | % of Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Income tax expense | $3,224 | 0% | $8,767 | 1% | $(5,543) | (63)% | - The annual effective tax rate decreased to **2.2%** in FY2024 from **12.8%** in FY2023, primarily due to a discrete benefit from tax return finalization and a significant non-deductible goodwill impairment charge[250](index=250&type=chunk) Commitment and Contingencies - NetScout records estimated losses from claims when probable and estimable, and discloses reasonably possible losses[252](index=252&type=chunk) - A favorable Federal Circuit ruling in the Packet Intelligence LLC appeal led to a **$4.6 million reduction** in contingent liabilities and legal fees in FY2024[254](index=254&type=chunk)[538](index=538&type=chunk) - The company provides standard product and service warranties and may offer indemnification for third-party IP infringement or personal injury claims[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) Liquidity and Capital Resources Cash, cash equivalents and marketable securities and investments Cash, Cash Equivalents, and Marketable Securities (in thousands) | Category | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $389,674 | $386,794 | | Short-term marketable securities and investments | $33,459 | $32,204 | | Long-term marketable securities | $994 | $8,940 | | **Total** | **$424,127** | **$427,938** | - Total cash, cash equivalents, and marketable securities decreased by **$3.8 million** to **$424.1 million** at March 31, 2024[260](index=260&type=chunk) - The decrease was primarily due to **$50.0 million** used for share repurchases, **$19.4 million** for tax withholdings on restricted stock units, and **$6.3 million** for capital expenditures, partially offset by **$58.8 million** from operating activities and **$7.8 million** from a business divestiture[260](index=260&type=chunk) Net cash from operating activities Net Cash Provided by Operating Activities (in thousands) | Fiscal Year Ended March 31, | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,811 | $156,650 | - Net cash provided by operating activities decreased by **$97.9 million** to **$58.8 million** in FY2024, primarily due to a **$207.4 million decrease** from the change in net income (loss) and changes in working capital, partially offset by a **$217.3 million goodwill impairment charge**[262](index=262&type=chunk) Net cash from investing activities Net Cash Provided by Investing Activities (in thousands) | Fiscal Year Ended March 31, | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by investing activities | $13,358 | $15,304 | - Net cash provided by investing activities decreased by **$1.9 million** to **$13.4 million** in FY2024[263](index=263&type=chunk) - This includes a net cash inflow of **$12.0 million** from marketable securities and **$7.8 million** in proceeds from the divestiture of the Test Optimization business[264](index=264&type=chunk)[265](index=265&type=chunk) Net cash from financing activities Net Cash Used in Financing Activities (in thousands) | Fiscal Year Ended March 31, | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in financing activities | $(69,352) | $(419,430) | - Net cash used in financing activities decreased by **$350.0 million** to **$69.4 million** in FY2024, primarily due to lower treasury stock repurchases and debt repayments compared to FY2023[266](index=266&type=chunk)[267](index=267&type=chunk)[269](index=269&type=chunk) Sources of Cash and Cash Requirements - The company has an **$800.0 million senior secured revolving credit facility**, expiring July 27, 2026, with **$100 million outstanding** at March 31, 2024[271](index=271&type=chunk) - The credit facility's interest rates are based on a term SOFR rate or Alternate Base Rate, plus a margin dependent on the consolidated gross leverage ratio[273](index=273&type=chunk) - NetScout expects existing cash, operating cash flow, and the revolving credit facility to provide sufficient liquidity for current and longer-term funding requirements[286](index=286&type=chunk)[287](index=287&type=chunk) Recent Accounting Standards - ASU 2021-08 (Business Combinations) was adopted on April 1, 2023, for future acquisitions[401](index=401&type=chunk) - ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting) are effective for fiscal years beginning after December 15, 2024, and December 15, 2023, respectively, with early adoption permitted[402](index=402&type=chunk)[403](index=403&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) NetScout faces market risks from interest rate fluctuations on investments and debt, credit risk, and foreign currency exchange rate movements, partially mitigated by hedging - The company is exposed to interest rate risk on its cash, cash equivalents, investments, and credit facility, with a hypothetical **10% change in interest rates** having an approximate **$643 thousand impact** on annual interest expense[291](index=291&type=chunk)[292](index=292&type=chunk) - Credit risk is managed by investing with creditworthy financial institutions and evaluating trade receivables[293](index=293&type=chunk)[294](index=294&type=chunk) - Foreign currency exchange risk, primarily from the Euro, British Pound, Canadian Dollar, and Indian Rupee, is partially mitigated through foreign currency forward contracts[295](index=295&type=chunk)[296](index=296&type=chunk) Interest Rate Risk - NetScout's investment portfolio is subject to market risk from interest rate fluctuations, but due to the short-term nature of instruments, material exposure is limited[291](index=291&type=chunk) - A hypothetical **10% increase or decrease** in overall interest rates would result in an approximate **$643 thousand annual change** to interest expense on the outstanding debt[292](index=292&type=chunk) Credit Risk - Cash equivalents and marketable securities are primarily U.S. government and municipal obligations, corporate bonds, commercial paper, and certificates of deposit[293](index=293&type=chunk) - Credit exposure with financial institutions is limited by evaluating their creditworthiness[294](index=294&type=chunk) Foreign Currency Exchange Risk - Exposure to foreign currency exchange rates, primarily Euro, British Pound, Canadian Dollar, and Indian Rupee, arises from international operations and expenses[295](index=295&type=chunk) - Foreign currency forward contracts are used to partially mitigate these risks, with notional amounts totaling **$11.7 million** at March 31, 2024[295](index=295&type=chunk)[296](index=296&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the Consolidated Financial Statements and Schedule, along with the Report of Independent Registered Public Accounting Firm, included starting on page F-1 - The Consolidated Financial Statements and Schedule, along with the Report of Independent Registered Public Accounting Firm, are presented starting on page F-1[297](index=297&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=53&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting or financial disclosure matters - No changes in or disagreements with accountants on accounting or financial disclosure matters were reported[298](index=298&type=chunk) [Item 9A. Controls and Procedures](index=53&type=section&id=Item%209A.%20Controls%20and%20Procedures) NetScout's disclosure controls and internal control over financial reporting were effective as of March 31, 2024, with no material changes reported - As of March 31, 2024, NetScout's disclosure controls and procedures were evaluated and deemed effective[299](index=299&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of March 31, 2024, based on the COSO framework[301](index=301&type=chunk) - PricewaterhouseCoopers LLP, the independent registered public accounting firm, audited and concurred with management's assessment of the effectiveness of internal control over financial reporting[302](index=302&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[300](index=300&type=chunk) Evaluation of Disclosure Controls and Procedures - Management concluded that disclosure controls and procedures were effective as of March 31, 2024, ensuring timely and accurate reporting of material information[299](index=299&type=chunk) Changes in Internal Control over Financial Reporting - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended March 31, 2024[300](index=300&type=chunk) Management's Report on Internal Control Over Financial Reporting - Management assessed the effectiveness of internal control over financial reporting as effective as of March 31, 2024, based on the COSO framework[301](index=301&type=chunk) [Item 9B. Other Information](index=54&type=section&id=Item%209B.%20Other%20Information) During Q4 FY2024, two executive officers adopted Rule 10b5-1 trading arrangements for selling common stock Insider Trading Arrangements Adopted (Q4 FY2024) | Name & Title | Date Adopted | Character of Trading Arrangement | Aggregate Number of Shares to be Purchased or Sold | | :--- | :--- | :--- | :--- | | John Downing, Executive Vice President, Worldwide Sales | March 7, 2024 | Rule 10b5-1 Trading Arrangement | Up to 20,000 shares to be sold | | Christopher Perretta, Director | March 15, 2024 | Rule 10b5-1 Trading Arrangement | Up to 11,905 shares to be sold | [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=54&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to NetScout Systems, Inc - This disclosure item is not applicable[304](index=304&type=chunk) PART III [Item 10. Directors and Executive Officers of the Registrant](index=55&type=section&id=Item%2010.%20Directors%20and%20Executive%20Officers%20of%20the%20Registrant) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement[307](index=307&type=chunk) - The company has a written code of business conduct applicable to all employees, officers, and directors, available on its corporate website[308](index=308&type=chunk) [Item 11. Executive Compensation](index=55&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the 2024 Proxy Statement - Information on executive compensation is incorporated by reference from the 2024 Proxy Statement[309](index=309&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=55&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement - Information on security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement[310](index=310&type=chunk) [Item 13. Certain Relationships and Related Transactions](index=55&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions) Information on certain relationships and related transactions is incorporated by reference from the 2024 Proxy Statement - Information on certain relationships and related transactions is incorporated by reference from the 2024 Proxy Statement[311](index=311&type=chunk) [Item 14. Principal Accountant Fees and Services](index=55&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement[312](index=312&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=56&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[314](index=314&type=chunk)[326](index=326&type=chunk) - It also lists various exhibits, including the company's Certificate of Incorporation, By-laws, employment agreements, credit facility agreements, equity incentive plans, and certifications[317](index=317&type=chunk)[318](index=318&type=chunk) [Item 16. Form 10-K Summary](index=59&type=section&id=Item%2016.%20Form%2010-K%20Summary) A Form 10-K Summary is not provided in this report - A Form 10-K Summary is not provided[320](index=320&type=chunk)

NetScout Systems, Inc. (NASDAQ:NTCT) Q4 2024 Earnings Conference Call May 9, 2024 8:30 AM ET Company Participants Tony Piazza - Senior Vice President, Finance Anil Singhal - President & Chief Executive Officer Michael Szabados - Chief Operating Officer Jean Bua - Executive Vice President & Chief Financial Officer Conference Call Participants Dan Bergstrom - RBC Capital Kevin Liu - K. Liu & Company Operator Ladies and gentlemen, thank you for standing by, and welcome to NetScout's Fourth Quarter and Full Fis ...

| --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CEO | | | | | | Q4 FY'23 Q4 FY'24 FY'23 FY'24 77.6% 77.2% 77.5% 79.4% 0.38 Cybersecurity offering revenue grew in Q4 and for the full fiscal year 2024 but was more than offset by the constrained spending environment in the Service Assurance area, primarily related to the domestic service provider customer vertical. 1 Q4 FY 2024 Conference Call NETSCO ...

NetScout Systems (NTCT) came out with quarterly earnings of $0.55 per share, beating the Zacks Consensus Estimate of $0.53 per share. This compares to earnings of $0.38 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.77%. A quarter ago, it was expected that this provider of products that gauge network performance would post earnings of $0.38 per share when it actually produced earnings of $0.73, delivering a surprise of 92.1 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-26251 NETSCOUT SYSTEMS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 04-2837575 (Stat ...

©2024 NETSCOUT January 25, 2024 • Introduction & Safe Harbor – Anil Singhal, President and CEO – Michael Szabados, Chief Operating Officer – Jean Bua, EVP and CFO Safe Harbor January 25, 2024 Regulation G Disclosure. To supplement the financial measures presented in NETSCOUT's press release in accordance with accounting principles generally accepted in the Unit NETSCOUT also reports the following non-GAP measures: non-GA4P gross profit, non-GA4P income from operations, non-GA4P net income, non-G4P diluted n ...