NetScout Systems (NTCT) 30 Jan 182018 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to NETSCOUT's Third Quarter Fiscal Year 2018 Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Andrew Kramer, Vice President of Investor Relations, and his colleagues at NETSCOUT are on the line with us today. [Operator Instructions] I would now like to turn the call over to Andrew Kramer to begin the company's prepared remarks.

good and Keith, you, morning, everyone. Thank NETSCOUT'S for the to third XXXX. quarter call conference XXXX year period fiscal Welcome ended XX, December

advanced Joining slide Operating Singhal, Michael Anil and Chief NETSCOUT's me President There President accompanies today CEO; prepared is of our Officer. prepared and a remarks. slides in Executive Relations accessed NETSCOUT's section our on Vice Szabados, follow at be webcast our that and can Both the Officer; Co-Founder, Chief Financial the be remarks slides to viewer the can and Jean The website, presentation Bua, NETSCOUT's the www.netscout.com. commentary. are Investor

We will in referencing call are out slide we remarks. number our the

then we revised outlook Singhal, third go-to-market President follows. Szabados activities. Our agenda and will as announced quarter today customer that results year fiscal major and our will is trends have arisen certain review our address adoption questions performance preliminary since briefly Michael XXXX. Anil and for CEO, review our and

Jean CFO, our our Bua, results XXXX quarter Our fiscal review year updated and guidance. detail will then third

fiscal activity products, including cautioned growth XXXX, share financial statements XXXX profit statements, the Provisions of to, fiscal are everybody not year Section but which Slide other pursuant to remind customers statements all and like due revenue this other differ to results to year market anticipated into I historical to factors, each risks, customer on unknown NETSCOUT, that and are strictly demand, limited to year as the of along factors. which that Safe various securities this forward-looking I sales XXXX, Investors year uncertainties, statements forward-looking statements the strongly from the or as and known initiatives and Harbor other are revenue ASR, other management would amended, for uncertainties. from these laws. this and assumptions review specific the materially conference for on planned statements remainder Number part you of expense the made Act risks developments, involve product details X, XXE Actual of and and repurchase guidance and Moving encourage the fiscal Securities federal not forward-looking could with constitute marketing, listening slide call, This prospects and them. the Exchange of conditions of communication to of for and including related XXXX, specific

a and ended are risk which XX-K Report For or company's XX-Q, in detailed Form the refer on XXXX Annual Securities announcements update factors, Form described more file respect forward-looking contained to quarterly any to communication assumes and March Exchange obligation to NETSCOUT with the company's on XX, reports subsequent information the year the herein. fiscal the description with the Commission. on of please for no this

X, Slide to non-GAAP involves turn Number Let's metrics. which

and our other also which this basis superior be end release While the the on of about Non-GAAP information presentation conference which otherwise again for at measures not reconciled are results measures, read, in is GAAP and slide, GAAP are use included today's we or to slide slide This to intended non-GAAP available results, a those only. website. GAAP to both because are today's items a call equivalent described financial GAAP stated and the discussed metric. to and the detail and presentation, substitute press non-GAAP supplemental reconciliations be includes on and will encourage information unless of provides Non-GAAP you on non-GAAP

this were earlier As quarter our expectations our below third we notably disclosed month, entering quarter. results the

other our his a now full fourth accordingly. and matters. the call for turn these to result, updated further Anil? our We impact negatively quarter. I'll over we've the and EPS to Anil expect as challenges revenue in year performance And perspective targets on

Andy. Thank you Good thank morning, everyone, joining us. you, for and

Let's our last $XX by we XX% revenue our expectations announcement, plans entering third the non-GAAP of $XX the January brief and quarter of million. Consistent million quarter a quarter with moment. Slide year's begin shortfall third in our recap XX nearly a was I'll against reported from down results. below on $XXX with X cover million, which to

We also incentive recalibrate took steps certain our cost to through structure adjustments compensation. to variable onetime

revenues we of revenue many a from also third have We of as Our year revenue affected that the Accordingly, third outlook. EPS $X.XX benefited to quarter fiscal - our EPS our issues lowered - and fourth quarter. impact performance received believe we tax year full on January in rate. quarter diluted XX, share are lower likely that the per announced XXXX

received. understand spent to focus performance. my have commentary shareholders considerable weeks trying conventional would help than our format are highlighting that in I the key to several impacting time accomplishments we answering the We inquiries like have over Rather of most follow issues quarter, common past the our the on

year asks factors important perspective. and full fiscal fiscal NETSCOUT's To is some biggest impacting revenue. it XXXX XXXX this, question about first provide answer the QX The year to year

year by one attempted redeploy large the customer elevated capacity, previously to we highly deliver build segment. further strong quarters, had with in excess this after price-sensitive offset absorb enterprise its marketplace. X As a competitive very of its to solid adjusted overall recent decline otherwise multiple LTE with and equipment volumes, mitigate growing spend OTT in the to growth moderate aided to we've of - planned services XG We $XXX spending and second and half our that has a our in to high-quality would part discussed traffic year, fiscal In XXXX, years customers by us million. footprint. entered has spending anticipating customer tier the customer This of previously, up largest

service is associated projects. More ongoing transformation of our provider In overall than half service in about America. in provider capital North orders government service with providers technology inability the the from federal tier Our to delays shortfall our with defer have lower-than-expected is with customers their initiatives because is of to delays attack years target as volumes and three our from and for shortfall primarily that segment. spending. provider service related prior assurance market, sales grapple three major for to total large major lengthening primarily moderated digital shortfall DDoS part, and remainder reduced for associated factors: of achieve customer funding enabling reflects changes spending X pressure, America; North enterprise the in and cycles, customers attributable orders Arbor's and offerings The to architectures, the multiple products the is quarters those significant

funding multiple large segment longer-than-anticipated was for cycles federal below customer I'd enterprise will enterprise largely projects within of briefly and our factors. base. government notably revenue to also Our explain to these customer sales each like - plans our due delays customer

we the across the projects about quarter, delays half federal time, $XX unfunded disaster a third we quarter were disappointed be opportunity, in yet estimated reasons, projects, - we any secured recovery expect of reprioritization which pipeline funds it's during and sector, the due line realistic second we our government activities. because we funding that forward. to which limited of move the did into the upside longer moved see forward with from that than going fiscal to to of a second be into October was variety visibility federal if quarter for noted to a of variety the those million from to our year. revenue was unrealized agencies, Regarding in no had funding was Unfortunately, this any, including significant would that We of any not pipeline this believe material At expected. contributions pipeline third in aid lower

of deals and traditional our and the and recent involving infrastructure enterprise both our technology lengthening the products solutions have changes some terms sales In of of customers' has transformation digital to enterprise quarters. cycles, related newer we complexion their introduced the timing in impacted initiatives

a lesser revenue enterprise has certain Our orders by extent for albeit offerings. also ancillary affected, softer-than-expected been enterprise to

example, enterprise product total less that our likely since with than fiscal through product of are handheld lines For offerings teams, associated end margin third-party unit low is this synergy a year to lacks the distributors. X% This Fluke revenue. with sales at former sold is area the Networks non-core these tools

with is are including to answer that whether in lower the software-only altogether. have new service area, looking any In resources risk inquired these the notable we at version of where range product presented deployment short information limited and a revenue our carriers, options area, platform. also resize we change divesting no. have provider upside. the reflects Investors outlook real-time assets international to with service The progress Given initially assurance revenue greater these this driving made potentially on the landscape. InfiniStreamNG We dynamics, in of focused base our good competitive the

product year-to-date far We and have represented platform revenue. approximately of made progress this thus X% good

and customers Our from have largest new been we America purchasing qualifying year carrier fiscal them begin this to in North anticipate XXXX. actively in platform

physical virtualization-related cautiously virtualized are to positioned of are customers assurance of of commercial we from that virtual. initiatives, providers selected our to believe traffic to spending. we In their Nevertheless, actual still service carriers and terms service European one of transformation help network this support well infrastructure moving in function area, in recently and our terms a solutions multi-year

of endorsement weeks. a over coming virtualization expect the this We our by technology public customer

Whereas related of and IT enterprise their of information network broader center changes digital and sales expansion private traditional public prior terms seen their or and projects have a lengthen - upgrade projects have we advance to migration, their of cycles. In cloud an is followed infrastructure, deploy and customers cycles decisions data options sales range quickly solutions now assurance, infrastructure extending that infrastructures. our our as application transformation include core enterprises that to

with made to Fortunately, already regardless to both win deals support we In whichever DDoS our they of new security, to existing providers. investments continued have Arbor and path take. customers, portfolio the service expand new necessary

Arbor's headline-grabbing been by to enterprise modest versus multi-million excess overall of more fewer American sizes service created in the has However, attacks and and deal have fall limited That volumes. year. dissipated. smaller XXXX solutions the the tailwinds the attack resulted DDoS wins dollar spending capacity enterprise, due North providers of last largely in by has combination on In

deliver the has received to yet advanced we feedback and valuable initial Our foray prospects. early into but from market have customers revenue, meaningful adopter threat

a solution NETSCOUT's technology taking expect and spring across of installed is at further base. customer introduce to the new We advantage release aimed later that of our footprint this

million $XX onetime in to there variable fourth be approximately incentive that modest of also the compensation, quarter we from costs the actions took certain removed expect benefit and adjusting We some quarter. through primarily third this during

aimed our resources our to we managing R&D government combined service plan be legacy Fluke to other they areas. our certain as next are certain handheld with products Accordingly, is Tektronix and costs can across for increasing so closer associated that the potentially two tools tied these taken functional this multiple our commitment views to actions Fluke continue be federal while products, their further need sales into nonrecurring, those offerings. without to compromising these lifecycles. with XXXX. our and a improve lack profile, threat year year and be However, To looking of at revenue materialize fiscal prudently hundreds fiscal pipeline roles Arbor's the business, who operational to questions at former efforts delays clear, the streamlining are opportunities together. sufficient shortfall reflect those profit When we around visibility advanced the includes provider adjustments majority are of costs long-term unfunded customers next-generation enterprise XXXX these said, marketing growth variety will ends last further that a prospective support factored continue projects, products about by DDoS opportunities to restructuring efficiencies This of order our and we and to ongoing from businesses. using migrate globe, prospects. We respective to of year. that assume that and our The former annual customers can the With legacy also move believe

believe would XXXX. right for Although Nevertheless, we line year the XXXX year, now. we necessary continue support next be offer guidance fiscal to that making any for for revenue in fiscal process are investments we advance growth premature to can planning fiscal our top year specific it us

growth for a on line Our top optimism is few factors. based

should First, we tier be mildly that our improved next bottom largest year. service believe reached provider from stable customers X that to spending has a

the are of most integration Second, product behind us. challenges

IT especially can of better those new sold we new our be products, traction areas a expect Third, into that and security. from

combination underpinned is anticipate into Together incumbency continued and will that us Accelerated with that an Additionally, gross in translate very optimism customers up we with rate count, to believe solutions growth I prepared to the deliver million service move positioned this a Michael market our expanded call of will our turn And us range and and my May software-centric closely our We Repurchase provide This further by next ability improvement a improvement. point. XXXX guidance drive produce reflect fiscal to to next help forward this providers, will structure to fortify our execute should gross monitor in will with well cost year. for concludes over conviction those manage operating opportunities We EPS support efforts our we at we lower tax margin range to dynamics to amended the down of further leverage. credit high conjunction $XXX are remarks. plans of The of broader our enterprise support to facility. to with key capitalize during these exciting assumptions. that share year and growth. on a compelling conference Share That - and call future margin move should lower and further

new and go-to-market cycle initiatives. Thank outlines our #X to progress with you, are morning, cover, will believe everyone. our our as making product we Anil, the good as convey well that the Slide advance help which efforts I areas I

we've have and resources on innovation years, prior discussed our past on we software expertise across during calls driving the our - on software considerable As two-plus portfolio. product considerable focused

alternatives. the the hardware of discussed ISNG that the by a we our and a InfiniStreamNG, received a of of the of real-time VoLTE appliance software-only later expect sizeable commercial-off-the-shelf platform this major calls We deployment international well for has in extended of have recent to on major information software-only deployment been to an options and array traditional virtual from and platform, version carriers, our support spring. rollout software-only relatively XG We've

new are broader deploying customers When centers, and described, customers sales our consider deployments seeing their applications. Anil they for as extend a can traditional longer data and cycles appliance elect to our with of our As options we range their enterprise their enterprise alternatives. existing software upgrade

their vScout new they As products our coverage and clouds, private into to application hybrid resulting workloads the public their cloud. expand vStream move monitoring or seamlessly

and our changes with consider through disruptive ability of architecture to workload customers visibility invaluable. to continuity Our them migrations provide be

with the teams, and DevOps number the re:INVENT our identifying are relevant as generated projects. solutions plan grown use data and buying and new last result, transformation organization, phases to are centers evaluations they traditional organizations within proof-of-concepts user such interest has a these cases. addition implement in further IT show as As of base new summer launch with these departments since The for and to enthusiasm center was within steadily, their that products and IT we architecture we differentiated in and at with working engaging of last various their highly multiple quarter's AWS enterprise cloud validation

capability the for technology monitoring actively applications. mission-critical service core any our assurance This customers' by and and complements to tools We in performance solution third are software-as-a-service issues diagnose for nGeniusPULSE applications. used cause troubleshooting the that delivered expanding eliminates also and our our of for infrastructure need impacting party is our the and pipeline workflows test offering root software amplifies

more to resonate software we Earlier separate now consolidated our to a quarter, option Orders also Arbor to accelerate decoupled tools. further previously our year, offering. the of to solutions for data model. starting broker platform our to Our outpacing security in to a NETSCOUT that help we support align taken XXXX XXXX is our that new traditional, month, presence strategy unique, open-compute this and network broker hardware-based an approach innovation brokers, and PFS assurance our software packet expect have with for combined the By and we packet during marketing when Go-to-market, disruptive introduce from extends on we the next smart and deliver better packet creating marketplace hardware deliver us service platform. packet with PFS teams are the for unified security marketplace. we inline the based brokers those our

we collaboration higher those between the also year. sales coordination of We anticipate move teams, levels next and into as

success unification, details customer with That it forum sales prepared with I remarks. And over at most Engage concludes point, further this the will our making this virtualized Jean. call the user We portfolio, our our and along rollout and software the new annual and exciting and impactful yet. expect to of at results NETSCOUT stories my meeting, turn to

Michael, revised months, our you, through and guidance. the and year everyone. I quarter Thank good morning, trends nine This morning, results, key XXXX our review fiscal revenue will first third

presentation stated, the shows for and a fiscal As the review our #XX nine XXXX. appear months quarter non-GAAP our Slide of with reminder, year GAAP all first focuses reconciliations results this third in appendix. otherwise our unless on results results and

Focusing XX%, on $XX.X by decreased our to or $XXX third quarter results, million, total million. revenue

XX.X% compensation. Our to overall due approximately changed one-time related by adjustment to the points gross to XXX basis margin incentive primarily variable

total the from enacted profit the the rate lower variable third-quarter Recently in for tax commissions. which aforementioned due million quarter incentive share to operating $XX.X and tax XX%, changes contributed Our margin was sales $X.XX. our operating expenses decreased The largely prior diluted to of reduced to compensation by year, effective per earnings legislation XX.X%.

months. through review The XX, in provider decline Revenue the revenue XX% quarters. customer two through our to first reflects Turning nine segment first to Slide three I'd declined trends like service key primary the factors.

calls, has over been prior our provider on moderating one tier X years. service discussed two past have purchasing we its as the First, of large customers

other accounts. by the dynamics low-single-digit for offset decreased revenue in Second, were growth These by all provider service-assurance mid-teens. Arbor's DDoS partially solutions service

the in fourth earlier, pressures service volumes capital to DDoS assurance spending order softer in provider that As quarter. our we for expect will products result Anil continue and noted service

the by product was for by weakness mid-single-digits declined quarters. product other Fluke legacy Our through offerings X.X% Most to enterprise continued erosion we've nine across months. the three see first Enterprise through lines. former compounded first all revenue across This areas. NETSCOUT vertical notably, declined by the approximately

enterprise only nine through a the months. first security Following very low-single-digits grew Arbor's third soft quarter, revenue

For XX% from first revenue coming the mix nine of and was months, XX% enterprise. from service the provider

of in revenue the X%. three decrease tier which represented by that last calculated of quarter securities international and for of not United versus first We during XX% terms the a first by while or million, revenue months. third $XXX months the of of large this highlights ended marketable marketable XX% our our on through with in XX% and securities In the largely have flow. the balance revenue year's in carrier, period. end XX the from sheet from We nine declined an quarter to is million comparable a year declined customer revenue customers first either GAAP revenue did Slide basis, due quarters September. free revenue International details of the nine geography, long-term cash, X equivalents, cash States sharply increase total the short-term cash $XX.X

Our the the for XXXX and free third cash year. million flow was of quarter it fiscal year the was three $XX for first quarters of million $XXX.X

flow volume. capital sales net year be and third free changes We currently more will of XXX% the to favorable non-GAAP lower cash reflects free receivables working collection quarter of due Our for cash income. flow the full in anticipate the than that

are again release, Repurchase Accelerated planning in As earlier of today's month execute this million this we to week. an Share later detailed $XXX and press

repurchase $XX.X ASR price would million. enable share, illustration, to $XX.XX closing per us As approximately the using of yesterday's stock

repurchased to will quarters that XX% three us execute our banks of in by the technically reduced the upon reduce repurchase million shares the entering approximately immediately the it accounting between the behalf excluding our number is agreement. shares the would the to reflected working Once the by the number into shares X take treatment While we reduction. of allows buyback, ASR share-count initial of two the actually approximately to or anticipate further be completed, share-count on

it minimal shares will Although XXXX, reduce be our to next us share earnings will of the outstanding per our benefit diluted there to year. fiscal in enable number significantly year

is for EBITDA. support ASR times did fiscal the fund that earlier billion third end net To and better we five-year the year compared repurchase it this secured has which To revolving our favorable pricing we XXXX We entered briefly larger original original days additional fiscal facility, the leverage terms provides plan and And accounts through $X quarter, into of primarily credit We $XXX senior our million. an agreement. balance net year XX% and upsized receivable time DSOs year; were facility. amended credit sheet not of with the the more XXXX. existing days same activity, any the ending be days the last XX and from versus agreement For will shares. debt than were for the to highlights: month year this at a conditions about recap other agreement. one $XXX.X at agreement of expanded The that credit anticipate XX end million, down last XX

extent, levels This orders weaker-than-expected In for X% other between offerings. XXXX impacting the from to North that due to that spending, the with approximately enterprise, tier In year Slide timing $X.XXX provider XXXX year will of $X fiscal the our carriers, from our drivers full-year sales decrease and for decline cycles X softer-than-expected due orders revenue capacity-related for fiscal longer-than-anticipated DDoS the and of Arbor's fiscal XX detailing billion of a focus fiscal now enterprise anticipate I offerings. the America. levels, outlook for to range billion solutions, federal anticipate service guidance, we guidance customer XXXX in $X.X we between will for XX% continued from the to reconciliation service segment, certain original year considerable pressure and and target X% the associated XX% XXXX our primarily is billion. appendix. to non-GAAP revenue to to order revenue our of year Anil the you and from on guidance spent a primarily spending magnitude company's lesser non-GAAP lowering Moving the remind capital to guidance levels assurance in GAAP is time in

for revenue volume. the $XX the quarterly diluted quarter's year, range uncertainty count, revenue to levels for We We anticipate $XXX segments. The roughly some Other million that the in wider Given third fourth timing million $X.XX. on share assumptions of million. of and modestly about again expenses we about margin compensation. related our to the would range changes to primarily is customer third quarter anticipate operating this to my for incentive increase range quarter on by that reflects will outlook full this which of $XXX interest well of as onetime anticipate diluted due to across certain $XX compensation from of likely full-year fourth to $X.XX quarter orders are assumptions, million, share earnings this the third-quarter decline these to from XX% margins outlined quarter This the That year, modeling lower of Based should review concludes expense each quarter fourth-quarter around variable our fourth both the that third per fourth-quarter impact as implies from translate the financial modestly formal results. revised sales gross slide. levels. due include gross adjustment in currently tax which to are into the adjustment the the rate, variable and increase

call that plan note the other Morgan Kramer at transition turn major Q&A. the weeks. I'll plan we we and to centers over to Andrew Conference in augment to with the back we to the Francisco will San at that now we before meetings Investor of end Q&A, participate in start February, money Before Stanley I coming

Thanks, Jean.

we are fiscal can we our XXXX performance through the that focused forward year to outlined, structure. opportunities growth believe lead on to in cost actions top-line adjust both moving and we've As improved

fiscal early will coming begin Keith, plan and our the quarter point. when session report Q&A this to let's year XXXX the We fourth fiscal share in details results. year we at more about full May,

take Craig-Hallum. Thank ahead. go Instructions] We'll Chad Please Bennett from you. [Operator our question first with

Your open. line is

taking Great. Thanks my for questions.

I on guess, very provider software-only have always - definitely service you've solution. it a had side, guys you So, mean, good sounds I Anil, like a the

you maybe in of maybe to traditional I the moved North next guys can anticipated I guess, tier network mean, years, over service you that? you I Xs a of least I look solutions maybe the the a of side, look even provider stab standpoint, goes is software-only from not think it's America, if much on the you and probably or at kind visibility appliances of we than next have us. when know easy take the how over quicker couple at out mix years? an idea at of Do monitoring of you versus do couple a - market

providers, U.S. I the software. speed provider - virtually, all into providers sales of - we think I provider. think will Yeah, the vary the the two year all all next to this years from mean, move virtually But which within service including service within will ten to

the or network they previously. they theory we're I you it I more logic guys can to standpoint, or in than previously of And and probes, Okay. was the change net-net, provider. a shouldn't there much a appliances could be that of know - the the software-only from when And - spend when carrier guess… that put to deploying that software is

where last not moderated that in years, a to has Chad. the That's just But was going two mention level be spend because the want that's now. true I to true, true that to

I'll solution? me okay, any it Then you to, customers seeing side. it. you going enterprise off. are got off. one there? software-only And maybe then, That's I the to move of deal I'll traction and Thanks. last you enterprise think that an the you seeing are kind for on don't But as How jump with then hop issue aggressively cited

of one, then function and service that version the server right lot mentioned, shown is which of but of solution. in software. which have appliance, our area, summarize providers third virtualization. One interest. clients, business And to buying, business But everyone on now, kinds or shown But not people So, most lot no, was is for that just which interest the virtualization, of past, our the the which always was of NFV we enterprises are the of move have and using. to is software have enterprise to all was side what software, not which nobody three you

are So traction seeing sides. there, on both we some

we on most see COTS. to to so, virtual the rather moving of software enterprise than And

Got it. Thank you.

We'll ahead. question take from Piper Fish with Jaffray. Please our next James go

Thanks XX alluded we'll of know, on and questions. that anything guess, less start just or months sort to margin, actually there sustainability XX% for it's at just next confident and the makes say, Jean, networks you on, that hit that guys. level? the a impressive at that in better of networks, nature. onetime could was curious I Is range, we lot Hey, whether of they continue XX% the as over execution of you to were to mix gross the XX% XX Arbor this this I Fluke

So in network also range. out and three network moving already Tektronix, of that most mix them changed was or in bottom the is But range. have with our either NETSCOUT but originally Fluke years to then, And that Arbor ago software.

chance is getting the good that level years. in of there yeah, a next to couple of So,

down probably these - I've what essentially the you know, the this makes Okay. one of rest mean, in gotten of being you confidence changes not I the sort canary service that of provider here. of bottom Anil, is And the bit that the sort mine then is tier by the of what for X But this about talked the questions call for - carriers on service this kind coal providers. biggest gives a I little the large double-digits?

other in tier than area upswing first the X international. in provider, on think an and we hit generally are - did other thing I is we So bottom

a providers areas our of or have business - you we increased outside U.S. talked As eight U.S., in of the and talk have were other dynamic install I in big mean, were margins of about, tier there when I revenue they slow from top And there which X adoption renewal In base stream prevented doing about, of seven - that. don't many a was a that forget is very and lot and us also. it

And buy upgrades they requires so, capacity install that renewal. have software to and upgrades,

software tier a provider all go reached we So the level despite because move think X years. reasons, that to this up of that in those have we their should next two over we year

All right, thanks.

even in the story. top-two newer knew providers on North since I other The networks disproportionately Jim, And add their American you're larger top-two just than XG - U.S. service that, to providers. had the to two spent I know

$XXX So years. by last the over has moderated that spend each few million

line a elevated with probably it's So their from service range but more X next two that. tier in the still providers, little is U.S.

a really of years the spend moderation last few and on story the it's XG. So over

no, about understood that's sort Yeah, if we year. But a for no, dead be here. talking to moderating that. next beat decent of should growth seems But that And though not spending it as we're if of the was at the time, weakness as less providers other getting the I it service mean, this more here. same sense the not much. sounds as some that's that or quarter horse

moderate have the Yeah, feel effect service seeing years they of we should we that a we - the think, buy some it we a what the was short areas. software, other largely because and hit Jean in of the have some it there term, not But bottom providers where start in couple timing big gotten to but in talking issue. more them growth the will was will those I was grow was about level,

guys. Thanks it. Got

Mark Kelleher D.A. ahead. Please go next with We'll from question Davidson. take the

for taking expectation surge away XG. you expectations are Do and or What X Thanks X.X that? years expect the for on the your follow-up we Great. another still Maybe a from XG? there? questions. What's just the are

XG, a of the to maybe network. when XG from is to was complete of mile. better lack say, Whereas we So upgrade XG would word, last I went there more, went -

upgrade a it's does traffic it the but scale the whole not increase infrastructure. on of the So core,

from So XG there will it a requirement, small but close when to fraction mean a not some be will cause will be more won't increase, it anywhere we traffic result more will be requirement than the or traffic growth But not capacity will capacity units solution be of traffic that. I monitoring. which to rather more But largely network very saw yet, there as upgrade. our - it the will be what - XG surge hence of of

product give just I more line. talk about your that? commentary just a on you mentioned And Can you some you Okay. detail follow-up. a divesting little on know, divestitures? something about as Could

Yeah.

X% other So have lines. various of conclusion And [ph] right it's the business, couple came F-net that for was product the our to we we things way sell years. have, which is the coming - which than I business area basically And not been now. very we the - we tools, last handheld mean, of tools trying synergistic to with less it's that's - which

Thanks. great. Okay,

Hedberg Capital is from RBC Our next with Matt question Markets.

Hey, guys, good morning. questions. Thanks for taking my

terms lengthening this through sales and cloud enterprise customers of thinking footprint. In is their due cycles, like it sounded of digital part to

place. quarter, you to sales additional about do else what talked I going I'm help incentives Anil, in into can those some shorten guys last cycles? putting sales guess, curious, specifically you QX, think I

because I directly it's But own in their really at for sales our customers have And mean, migration, migration pace. we and down whether infrastructure. upgrading activities down more we're upgrade - so don't Whenever know it slows slows think doing multiple incentive other at will not reasons. infrastructure choices, choices process, their incentive necessarily follow have I cycle. the cloud is cloud I which

accelerate but coming incentive have think about that, So how sales provided and we that actually product, in I the our activities can our I could can by through we cycle. up don't things do their shorten some think visibility migration story new

that, have And so in some and and that - testing that been when user think I features hit, and a positioning meeting we customer, our we big May. will large the story group we have think be with

GAAP to you under any That's fiscal rates your great. that I see the non-GAAP you tax with And Jean, benefit then in tax will us code, XXXX? help guess, new potential can or

quarter tax lower effective one the the of corporate this so XXXX, income rate tax for XX%. fiscal had In at year

given see provisional, pieces more So But go the we what XX%. worked by out. you that's fact few there's the being still down would have that that legislation probably points that is would now, XX% is that blended is still next Right within year. very why

So on year fiscal for is as use XXXX, XXXX. finish our us XX%, fiscal then we XX%, for planning XXXX, rate we've better going up mostly whether fiscal benefited I processes, our firm can the And XX% to forward. tax from the on rate

helpful that's Directionally, Great. though. Thanks a lot, guys.

Yeah.

You're welcome.

couple Thanks and the relate talked EBIT margin to for questions of does here. free optimism in guys growth model, fiscal for margin? that continue XXXX. cash flow Jean, just to Anil taking How on a about

stable, assume should in into in accounting for fiscal been assume I looking going always that has XXXX, of that. we're our treatment that fairly is increase our a that continue also at to we I will some margin. - footprint. probably reimbursed Texas flow be would would above structure increases - the in given we're smaller be our now, Well, would building, Cash Right XXX%. that to another moving revenue cost And from CapEx and have buildings one EBITDA

expect there's you are fiscal revenue, flat you margins EBIT you'll now you sort how if grow XXXX? But it? to grow an that's for expand if Is that op thinking how you'll of there margins? that about is be And - operating growth assumption

legacy revenue the through Well, looking then the margins some so an options I NETSCOUT would think, continues margin. overall growth legacy our flow And cost impact gross - see And any costs. we to in at operating way. higher a in in product as the as Anil morph and of towards bottom that said, structure, flow usually, were line have Arbor, we'll we could gross to then

Okay.

reduction, of by that float? what have X questions. we will The couple million the fewer are pencil should quarter million the share a X last follow-up September thoughts? Or your in you shares that in Just

No, it take shares what banks, and share XX% executing repurchase so we expected about start settle that of happen the we we'll I will accelerated will out. on will Friday, - - is with probably think the the on

I XX.X shares script used based I think yesterday. of price on the stock the So million the had closing in

shares. out earnings XX.X February. per of share of That calculation million So - XX% of like on the X beginning come in the is should is million what

the be remainder two So to quarters picked we'll after have probably it the three full-year up, effect in will that. fiscal XXXX. And then

last mentioned the about being rate question, fiscal that just you some growth made Okay. it in Was was provider? service expectations growth XXXX? wasn't, down for if rate just what And Arbor mid-teens. Arbor And the total

very - pricing up very models think, and of mean, high I unusual the last DDoS were attack year. I - because being we going so year uptick we had, and software some

growth have but we So it a down. didn't this of high expectation year, was

down was that largely a Arbor and mentioned issues bleeding tier and that disappointment CapEx spending So of it the we capacity was somewhat as business also. X was the into DDoS requirements

Yeah.

summarize Just low-single-digits. the in the Arbor and grown so enterprise, they've year-to-date the for to

the As attack. some the Dyn attributes that it decline Anil said, digestion tier in X providers after last provider of is a U.S. and large bought Arbor service to it of capacity year

you, Thank guys. Okay.

you. thank Yeah,

Martinuzzi Markets. next Instructions] Capital [Operator go We'll to Street Eric Lake with

acquiring wanted business. XXXX for the in of is the October NETSCOUT I question announcement back Anil, to my Communications the time and go Hey, machine the to on Danaher jump

So we the on some lead as to so the of kind strategically, the XXXX has in I on shift? a XXXX. versus question strategy? now, been based logic just want to October go-to-market back What's was obviously, if market are But that where into made assumptions. January this that transaction big shift, use you sense biggest been a go what much

question. big of model. a to There Fluke me, been network been it's the been product let But I how software maybe downs. what there a have of ups tools lot business. move things has lot There - I introduction. mean, has new So overlap the and can has and with been about see Eric, overall, - had There

And so, some one think things And down. was - that's I was were think balancing it a it have overall. and been I thing else up but something - surprise, overall, of balance on

$XXX top spent - mentioned I think providers that in time surprise of $XXX at Jean the coming at over million. revenue million the was down lower from or they had of hundreds different going X from bigger much to millions times going each to as even dollar level tier

of pressure, down coming growth as even which their pressure more dramatically result them. spending own more OTT a that on traffic even driving CapEx So puts

the takes. I puts outside, overall think if still growth. side, lots on there, factor digit growth single But of and maybe there'll that be was would be number not

we go-to-market the I software So big surprise that or mitigate changes level happening, a three-year will that, places, model think that changes able product. that and unanticipated that's we all was these the through them happen or to either at of course are where of have Other substitution been these period. highest the time summary things over that the

competing we competitive in each more Clearly, that. than we with before that now So time. are were at were fact, right other we

that's think whether I broad your don't question. that so, I - covers And know

part what the which my a in it Right, of assumption question, you October back leaves picture of closed and July a idea market had $X.X kind $X.X the that is two or XXXX. - XXXX, in of It well, which that's where was business, run-rate an that of was. billion to billion

the how what's and we over players? go-to-market the strategy? something do the the Do closing have three - in - deal, we strategy to need part announcement there years of appetite removed of we're $X.X go-to-market on is here? right material obviously, a large deal, from years the as you Do two right Now, the as we're those from reduced of the

we go-to-market I - challenges. have in new better strategy. been largely But think of a Well, other technology, it line, the vision, good ineffective has these product better face

business. have those challenges terms of Now, the been resizing in mitigated

start positive those we'll effect the think seeing I of strategies.

based service was we customer heard than software which which have the years bigger million international deal we $XX happened got that I alone, on five - the years in seen mean, announcement, past. you a - you are internally about an with before have five things those anything about where think some of Vodafone in deal I heard announced provider, the

the in X talked we but tier which And provider. this company they so by multiple X on going there are were things about effect, good several masked the on fronts,

us resized cost we'll of to as the which which in some talked requires structure because May. - resize you we people we with and the business, Now, have expectation also the about, share of

that I next show to years. forward think we'll of lot the a couple of moving be able progress over

to look that forward Okay, I update.

Yeah.

And from Please go Riley. our we'll final ahead. Liu B. Kevin question with take

morning. Hi, good

You just detail? service to your provider talk software-only with folks? top-two a with go to North those American of start you strategy, mentioned in opportunity Just can respect And see even a expect more you international in bit your first. today? close software-only to you that would little wanted Do customers you deals when with lot to

where these have business and for we X used that next providers, a with also. this, business even portion we'll year. X be of or be we them of providers - I think do software large mostly any the top-two think the rest or they'll another, tier not software we tier I one with them reason do But -

in certifying have fiscal of that, we introduced sales So today, we are that. the think they year XXXX, bulk

One of our with the beauty solution. appliance solution software feature compatibility of is

can it use Tektronix you mode. So in

can use NETSCOUT You in mode.

we as that or but yes, allows better which a that You move have can top-line, see use to it margin And bottom we think software in mode. basically we mode a say, that, to the combined people the old out. can affects expansion I result this. And of will to sales given any

to couple it we of terms U.S. which horizon. a service of take provider have gone a provider, have I trend some we year even to from tier of ahead get years validation but will international were So year, back think time X And new in this to growth here the of deployment we in sort one with see them, a start with

deploy Got sort to just other bit factor said delay the deals? it respect talk you how or or of where service you is what there to some those about that it. provider timing over little other is And would deals issues, with decisions of kind issues can

Yeah, meant business the was what provider I that, in is lumpy. service

in gotten year. one and - are QX could in providers, international So have one get this there service - for so couple big U.S., of things we some could of

Now, in QX. that's what we I may referring. was get And

of or is non two three one of talking just - top those they're we it providers not couple about. were So

All questions. the right, thanks for taking

you. Thank

return questions. for closing floor the And Kramer we further remarks. no Andrew to it appears I have

you to you out on you early We quarterly like next free joining And Investor those well Look we're Thank feel certainly, very other for any when everybody questions, communicating to the U.S. look if West seeing Coast conference as us the to our call folks in at have on May. - to to reach with investor at morning. I'd centers this as in money forward forward thank much. the Great. NETSCOUT. here Relations at

will conclude your And participation. for today's Thanks program. this

great day. a Have disconnect. now may You