NetScout Systems (NTCT) 5 May 192019 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to NetScout's fourth quarter and fiscal year 2019 results conference call. At this time, all parties are in listen-only mode until question-and-answer portion of the call.

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]. to call like Kramer. to now would turn over the Andrew I

for March you everybody. fiscal and call morning and year period to conference Thank good quarter Welcome Aaron, XXXX. XX, NetScout's fourth XXXX the ended full

our President There Joining Szabados, CEO; presentation is Jean NetScout's a NetScout's Singhal, and President accompanies and Michael Executive Officer; slide and Vice me prepared Operating Chief Anil today Bua, are remarks. NetScout's Chief Financial that Officer.

commentary. our the webcast You viewer can advance slides follow the in to

We slide slides in in the the and itself, accessed will the our our www.netscout.com the remarks. the information prepared quarterly financial be website results under page. referencing call we are of including within IR out number can Relations webcast areas Both and in on Results, landing the viewer section at Financial Investor page the multiple remarks under

cover will they as financial Szabados share particularly trends is our wins. review customer Bua as XXXX. Anil and follows: our full-year Jean Michael year XXXX recent agenda and then go-to-market and results, quarter year guidance. full quarter Our recap key relate in fiscal highlights for detail, outlook will highlight our and Singhal results our fiscal fourth and fourth year will developments, to recent briefly

and on this release statements results These contained are will which described forward-looking Slide XX-Q announcements product press materially due as and our performance. and on assumes impact subsequent assumptions, expect, respect along to involve potential our will key today's information well may call to other risks Company's the with on with strictly Annual unknown market share, words business initiatives, this XX-K financial our Commission. Moving and NetScout plans uncertainties X, or These known facts, anticipate, and could future and and obligation guidance, today's market as factors, Reports of historical believe, actual on opportunities uncertainties, financial differ and and Report cover financial that statements include file their the statements such no on topics in Exchange slide are statements. Securities results forward-looking not conference such in communication be range as as with in prefaced herein. forward-looking by to Form from Form Quarterly described to and the and risks, any update forward-looking a the

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

While on relying or solely in on providing those GAAP. on only. this financial measures limitations information be measures a conference not considered unless slide on non-GAAP should substitute includes financial for today's from otherwise today's this slide will accordance release. presentation information These in as for be The along results, call rationale measures is with Non-GAAP basis non-GAAP a prepared in GAAP discussed both the detailed and and with stated, on press isolation

appendix all Additionally, revenue as measure trends, will business, Reconciliations we in earnings press the the purposes. provide today's provided release HNT of certain comparability tools a HNT for the with performance slide of they result the website. are non-GAAP of are removes tools the sale which non-GAAP on GAAP the in applicable our organic metrics and of presentation,

that lie point, to the market progress share the well relatively what Anil lower-than-expected strong with fourth lower plans last will tax We costs XXXX into a numbers operating challenges performance year delivered higher with we've believe past the April. and who fiscal of NetScout consistent went we at year call to the that XXXX. results margins, we his were in revenue, along company the and with shared will year fundamentally help gross position in ahead. our a the lower-than-expected this made preliminary year, going quarter combination deliver that better in deliver fiscal Despite for to the the forward results EPS opportunities Our I'll due over rate. early and insights

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

Let's quarterly full with Today's fundamentally reported results. recap the non-GAAP our begin preliminary results and Number with results were X of year early a on brief we in April. consistent Slide

originally our operating EPS lower full $X.XX of lower $X.XX past which to spending initiatives fronts, and the to above progress top-line set on quarter fourth fourth midpoint the the important successfully forward. year. $XXX.X a at revenue gross revenue will of growth fiscal believe phase stage rate. revenue made million of our facing in going to for was unable spending absorbed relatively fiscal on million approximately we expected, X% original consistent to with customer's tools in falling schedule results we Unfortunately, better and the we the shortfall Our we $XX given an Overall, provider of planned, of implementation year of diluted assurance challenges XXXX to margins, primarily this targets, million, recognition ongoing increase was during driven multiple revenue. the organic last year underlying operator. generated in DDoS reduce driven quarter a implemented delayed assurance in tax the were manage year's costs quarter, largest slower and project mobile $XXX.X lower EPS due higher to overall progressed segment part international this revenue due more backfill stable deliver strong diluted the of short costs, earlier than the and revenue service HNT than and ambitions an of we in Despite generating X% We since-divested enterprise from growth the year our a proactive top-line we by security service excluding customer customers. Nevertheless, due fourth our fiscal service by tightly

into move X this. Let's some perspective Slide further to for

dynamic complexity different disparate pricing tier-one As lines profitability further has over years, result adding X know, This was spending, that couple value NetScout's by our negatively impacted as levels, carried customers. you carrier integration models, a of and last topline at product propositions. largely of the been compounded reduced especially largest and

our same in As analytics, the our unique we are we time, product believe innovation increasing severe excited forward, stabilized benefit headwinds content. new continued to we summarize largest migration At move receded. new have service that potential related about XXXX. the from from have we to software tailwinds and these that these two customers our fiscal revenue security dynamics, to To year and provider largely in

to assurance carrier-related revenue our product the and XX% nearly platform nearly tier-one it migrated successfully revenue over software-based XX% ISNG the two grew our have year. service of past assurance. by for years Service We represented last for provider-related other platform most software service of our operators

overall second primarily of the stabilized during revenue the traction. improved have We enterprise DDoS year half due to

as same progress form acquired use from virtual of completed reshaped type flexibility factors. to into Business unprofitable ranging provide of software application, multiple the we or cases, software-centric and in projects have made range years. visibility product At fronts network, infrastructure our the Communications many have and portfolio an expanded our big and of across were appliances time, and greater certain product good to higher-margin, divested Danaher we execution any management R&D security range decline solutions We for And data. acquisition. integrate such other from technologies service strategy. address performance our We on that key And products solid and product infrastructure lines to We part to were We as solutions deployment been of had to our now focus any on broadened our provide that of applications. solutions.

growth with segment forward customers digital transformation the that We enterprise reported have start our to in We've segment. our begun restructuring move organic quarters last customer the customer second of to revenue build We as began sales in three enterprise consecutive momentum quarter solid in initiatives. year. completed of

actions we sales approximately we in years generate XXXX the help order non-core organizations and managing year. our And the $XX million our roles of go-to-market accelerate actions realigned savings XXXX. annual to operating reduced effectiveness. maximize drive lines, flat in and for we that by technical, those will structure and in restructuring fiscal product to leadership fiscal development XXXX, coming also will costs split keep initiatives key recently costs and delivery, run-rate key us believe carefully finally, product spending, operations, relatively overall expect We ability and year and these By X% that selling between

ultra, user resonating with increasingly Slide and their digital that from recently to believe focus transformation summit, to where we held annual the support is capabilities. protect year NetScout's challenged customers transform and efficiently the are roadmaps our was X, the feedback into visibility real-time traffic providing who high-definition to very and their coming positive. technology shared on Moving for our analysts in network embedded effectively we infrastructures industry various customers, and product transactions compromising without partners, and our current We

as of initiatives, proposition near their following public particularly the on datacenter capitalizing to scope they our more and beyond represents we growth. workloads drive for to on focused are adjacency value longer-term we good forward, the cloud DDoS. and expands a move In Security to overall we improve transformation promising agility. environments our enterprise, help private As opportunities their customers migrate as with see application and continuing top-line

powerful enterprise offering our historical DDoS customers' and security XG proven are resources mining carriers completing while of threats robust move within breaches. our Arbor have offerings. enterprise over in network this infrastructure. year's with of opportunities was for next certain business maximize add our service in capacity ability which and plan We efficiently segment, step of This behind capabilities, couple NetScout's to the that us, advantage security integration also capabilities opportunities international large markets, launch Arbor optimization enterprise known network-based build Defense, we in intelligence RAN last our Analytics network final new operations. is forward across sales work to improved potential our to adds coverage, analytics Edge looking teams new launch provider more and and teams service catalog with to strengthened Threat This analytic of their we to investigate forensics set we new growing incumbency helping our footprint Arbor's enabling especially nGenius assurance, faster to Combining machine fortify learning We momentum customer on new in strength early sales security traffic gained our our thereby combines to In inside security and our the security continue existing support assurance cross-selling efforts. enterprise packet to threat identify capabilities. a with networks gateway the of With months. with Arbor's platform takes and service

plans. we can investing our them security new capabilities as networks improve Just as they advance help are network in their DDoS XG unlock our the To DDoS customers, infrastructure. our overall important, customers we've their that efficiency detection continued enhancing opportunities carrier to with support ways of

on focus outlook opportunities year XXXX to Let's I to capitalize for remain closing on our turn our bullish X, Slide We confident to like in some and them. see on Number as would thoughts. and offer fiscal ability the we

limited growth believe topline of in still behind we number maximizing we initiatives issues their described, focus our the that we've As that are us the many results as early upside a from have on that are of stages.

XXXX, free cash flow. produce As into move is operating we to fundamental growth, growth, is driving year our top-line to top stronger leverage, which EPS priority fiscal and

to our into Our year end be growth. plan is the plan through converted revenue of growth, EPS revenue in generate low-single growth fiscal increase digit digit then digit which a organic at product mid-single can mid-single 'XX higher

the have from built XXXX we at closely $XXX assumptions. fiscal our more following ranges to target revenue that Looking $XXX our around million, year plan million

We segment generated expect as the enterprise driven in we to will higher our our by sustain recent good revenue customer organic we've opportunity see in quarters. revenue product growth growth be

Analytics, on conventional we very prospects minimal the cycles. are this given bullish Arbor contributions early offering anticipate we year, Threat for launch our and long-term the from Although relatively summer this sales new

security that environment provider for difficult. DDoS service near-term both expect assurance the service We remain and spending will

network expect Nevertheless, have operators XG catalyst XG won we monitoring spending in recently term, initial for for be several radio its year tier-one XG a capturing remains and turn early calibration to America. over this with we better anticipate deals the we While North access good in longer in deals phase. technology another

moving their out architectures, build assurance investment carriers to ultimately will solutions. service cautiously standalone are which require in these new However, XG

year plus operating revenue for In the continues costs. content. gross in And XXXX product to expenses we with anticipated terms the enable to us plans growth, growth flat as mix of EPS anticipate range from based rate. our fiscal even diluted EPS $X.XX diluted our reported last margin operating basically, software further organic on improvement increase with shift will $X.XX the an guidance, in deliver EPS year's toward compared That tax to

to brief contributions a our senior provide Michael past XX NetScout's experienced and to Szabados, Vitale, success wanted I the extensive leadership Mullarkey, and a retired COO, roles leader of Board years and this of with Michael as support top on for commentary, the HR thank earlier update technology to like the my At changes companies, will Board. our respected time, close were I over Vin serve two Vivian appointed Vice year. decades. Before including long-standing in has our service would a Board I past same Directors. who his director, to NetScout to and highly the Chairman made as Vin

year, the assembled expertise, like you forward thank sharing believe a call Michael at experienced world-class, course and coming is forward look and world Finally, with the this our to around that I'll stellar point. I turn for efforts to over their having fellow our and execution continued the dedication. of possesses would on I focused progress team the year. tireless achievements domain and of the unmatched I over move this my Guardians plans we that to

Thank good XX and you areas will I morning Anil, cover. everyone. outlines the Slide

held enterprise, segments, government, It the a was As resounding technology Anil theme. success partner our has universe. customer our forum, provider, and Engage, mentioned, attendees last become XXX-plus and in user spanning Across month service common we Nashville. with both digital transformation annual

provider and Engage that past more market, positioned XG will observations as highest well of a I include the transformation moving maximize I and our build-out reduce around marketing services some risks performance, security. quarter. service cloud, initiatives to application rewards their the intersperse are wins of rollout notable at from is We pace. the the infrastructure carrier XG XG, impact from cover In customers additional help although increasing, and several is the measured digital

new our of transformation that Microsoft Microsoft advanced with and Our public to XG potential deal network the In RAN. to also enterprise enterprise, range recent our in services us to in the a design collaborate a hybrid Azure. we deploy U.S. awarded XG now with participate technology have and Azure all customer relationships a in the managing major are long-standing offerings multi-cloud recently RAN our like partner markets. environments. at enables and tools, provider integrated to Azure. quarter, figure access mid-seven of monitoring XG-related our begin applications to XG-compatible launch AWS demonstrates actively network enabling leverage continued of is win help vendors who migration customers strategies. and To XG-related projects success tier-one our we is support have NetScout This carrier to achieved the sales move teams co-sell or XG advance our radio major ready cloud with forward fourth Microsoft's and customers phases its incumbency this lifecycle. an calibrate is limited they end, datacenter status to to with migrating to This as new In starting service AWS us with

performance, seek tool complements applications, infrastructure it an solutions. is gaining of manage SaaS nGeniusPULSE increasingly that monitoring and greater becoming performance Software is our use core who connectivity, reliability, or is active the customers As customers can with transaction-testing Service of availability, passive ensure a offering to portfolio performance. as visibility monitor valuable. and PULSE our traction into basic It application

revenue by every year is to good nearly with product a tandem seeing sold in We number active small always by off base. relatively The are a our doubling of And continues measured quarter. PULSE -- as core indicated this in our product trials grow products. interest last almost

nGeniusPULSE actively that WiFi mission-critical is a centers a call center and cloud dollars During offices, additional a engagement a NetScout of technology customer see customer helping financial is just support nationwide. opportunities We dependencies, much is new the deployment on evolving over evaluating data further larger of of to longstanding customer a requirements, connectivity this PULSE's one the part and quarter XXX our expand to monitor of capabilities. baseline platform. existing quarter, as million datacenters, This at services monitoring scope over deploy the fourth spent

ISNG data ability on been product use security new and beyond Engage packet vStream support we our that software to to investigate to ATA, builds can cases they security month, security strategy At our or our sources. and Analytics, enterprise as executing understand we are a stack forensic last analytics expand security potential how data where and This Turning Threat Arbor valuable to breaches our using new DDoS. teams to on infiltrated. with security, unveiled aid have detect they seek

security with IP firm compliance For to example, large feed investigation that a already rapidly even easy collection customers, easier aimed that capabilities our or breaches. the remarks point, The concludes potential information Midwest our forward to Threat for help state I and platforms. event I support this forensic that security last multi-phased behavior additional our NetScout for sharing to will of identify is like at regulations Jean. services in customer at to at customer, new Analytics XXXX. defenses; organization quarter, fiscal news quickly That third-party penetrated robust network; in designed turn at evidence prepared of new to existing mandate new the scale; year intelligence this known cybersecurity the anomalous that CEM over with my through threats into call the look a relationships financial recording have project can Arbor packet and detect success on and a integration make access benefit to this threat selected expanding

key to metrics, quarter year Thank and year our fiscal for you, Michael, and good guidance full morning XXXX. plan everyone. along fourth with I review

and results stated, reconciliations otherwise non-GAAP presentation on appendix. all reminder, GAAP a As in the our unless appear this focuses review our results with

certain on the sale sure for year an of HNT XXXX. period such any basis, results which revenue highlight Slide fiscal to number In will removes tools the trends full the our be addition, nature revenue organic comparisons. mid-September, XX applicable tools Regardless, in HNT and the I for the non-GAAP business will fourth referenced. I quarter due to of note details

decreased quarterly performance, on organic business. Revenue million. HNT on grew X% Focusing segment on X% quarter revenue customer our relatively the X%. organic tools grew customer but at comparable was Fourth enterprise excluding $XXX.X basis, the grew in service basis provider by segment a the revenue basis, nearly product flat X% On reported of an revenue we revenue declined year-over-year X% organically. a while service and

gross point year year last due quarter the XX% personnel resulting from a lower to Our favorable costs from or year margin was fourth from prior operating the XXXX product fiscal XX%, same reported Quarterly XX.X% mix to X.X our higher down quarter year-end shifts. by expenses were rate, percentage with largely lower numbers increase April the implementing $X.XX, due up operating We of which we new code. due ended an of the year full Xth our first share margin profit estimate a of under per earnings lower-than-expected than to headcount. tax finalized tax as primarily diluted

we our the during employees, saved fiscal total which X,XXX program Anil is impacted from a restructuring from fourth restructuring year XX.X% fiscal mentioned, third We with ago. and actions, reduction of completed fourth which the a quarter. quarters. year our In million fiscal As we ended our $XX a XXXX, year

additional a savings cash in anticipated restructuring fiscal million no million. In flow results XXXX. we total payments year in quarters. fiscal year which restructuring about result in with free $XX for total, associated million There our and year savings, in will are payments programs is of will impact XXXX. run reflected were these our rate expect This that first an material $XX approximately and fiscal For second XXXX, $XX

declined XXXX I'd to In XXXX of the HNT nearly XX%. year trends. revenue sale enterprise business. provider due the organic down assurance with for key service in year. service customer revenue year enterprise security down XX% DDoS XX, fiscal basis, slide X%t to X% segment declined by revenue review On the tools and revenue XX% Turning like Fiscal the segment, to the an grew

evenly revenue trends, was and In enterprise between terms customer other of total provider full-year segments. service revenue split our

more versus HNT on balance increase for who a end declined revenue million international tools geography, GAAP In securities X% is We International quarter quarter of the cash, revenue and business, U.S. either highlights terms represented the sheet XX revenue We securities the $XX.X GAAP and had by the last a of the includes of $XXX an ended short-term the of no XX% quarter. revenue XX%. which since XX% and the flow. experienced free year. quarter. customers or revenue calculated third million flow cash year. basis from of by XX% in or cash marketable generated while free decrease cash revenue customers the We Slide which million, details equivalents, with of of long-term $XX.X our marketable represented is

quarter, million in also $XX.X In repurchasing the credit was on addition $XXX our the million to million of our outstanding stock common repaid of that facility. we $XX existing

cash the flow year, For full $XX just over $XXX of of we previously noted million. free generated the includes payments restructuring million, which

days increase versus update of conversion Excluding cash fiscal $XXX.X our primarily at the I'd maintenance brief was fiscal free the receivable, December. of flow. recap The DSOs XX highlights, provide cash the sheet on our at on a capital. accounts use $XX.X other like balance end XX To days year payments, renewals. reflected were the at free XXXX from and end XXX% XXX% net, to end million the year. reported briefly year's flow and the by last were restructuring large net of of level the of days million, of it XX non-GAAP was timing last up conversion income

buyback the In conditions forward, depending in trading quarter the $XXX market for plan daily sheet to consideration term, market We in on in up and on to debt anticipate stock to repayment. $XXX plan allocate for point retain subject balance given to active repurchases, and considerations. share million our cash. first any at being for working of volumes and and up price both the we in near we capital million overseas to purposes Moving cash

non-GAAP my XX I slide to on our for move focus guidance. review guidance. will Let's

we $XX divestiture the two and impact reminder, the the business years XXXX sold last for XXXX to XXXX, consideration HNT the contributed was comparing tools taken Accordingly, in a sale million years. with earlier, the year's revenue. in are last the comments growth. targeting of Consistent of revenue year single-digit range Slide details million, Anil's XXXX quarters implies XX $XXX revenue be both into and the we it fiscal year's which tools to revenue HNT currently should to appendix when quarterly September before completed. first fiscal million $XXX especially low organic As contribution in of the

the model In drive of XXXX we key other on gross this further terms as of improvement fiscal anticipate operating currently our assumptions slide, adoption solutions. outlined margin we software

cost-reduction Our will associated plan that higher costs year. merit to relatively compared critical currently to for compensation calls spending absorb We last from year's with operating investment and annual costs security personnel incremental us enterprise anticipate savings as in replacements, adjustments as well last tied initiatives. enable flat our with actions primarily additional

of new in between tax to XX% and an increase. code deliver despite to rate the effective our growth increase anticipated certain expect to XX% tax components We as earnings scheduled are

We are evaluating the strategies us enable flat may tax prior year. with keep relatively to certain rate that tax currently the

Assuming I'd additional some color also XX.X the between like diluted million we $X.XX. and first outstanding, expect to $X.XX offer EPS on quarter. shares currently

the million tools last HNT $XXX first-quarter year's million business. revenue a As $XX.X from reminder, included of

revenue of million expected half We $XXX in opportunities anticipate our around anticipate $XXX XX% of the million. revenue revenue to the assess we annual range As X% to will organic come growth, the flat us, which that of to of year. we currently in in first the currently equates front

for for is expected Diluted with That quarter X% gross the We same improvement are range to expenses to in results. operating X% share modest in review year lower of earnings than $X.XX. financial the quarter the to formal one first quarter range our first my planning ago. $X.XX margin per the from of concludes

transition to that over we the now Q&A. turn to I'd participation conference I'll start operator the call quickly like XX. IR Slide Before to is listed our note to Q&A, on

with take first from Hedberg RBC We'll Instructions]. Matt Capital. question our [Operator

new in some of segment to minimal of remarks, enterprise you can growth as sustained you Arbor I are the side? prepared when granularity the Products. outlined 'XX But getting that I'd of say drivers the this in enterprise digit in Threat the should be you guess or of about growth? contributions a What single bit some we here. particular, year think enterprise little from guess In your give about assumptions noted progress I watching And some the fiscal low you key contributions more on the us

So Matt, products in from we talked about other Threat wanted called Edge we we sure Arbor, and Defense, about Arbor DDoS between -- make product, new from to confusion talked Analytics. product no the previous there's the Arbor when area the the product Arbor

we So Only minimum XX% product. the the DDoS the called especially of contribution, Edge enterprise or on product in year two NetScout some as about use of [indiscernible] Threat half traction we Arbor customers forces. are the combined saying ATA Analytics. the potential is and have Arbor second the the But there Arbor Defense a cross-selling good

farm single cloud, which in people for to that's is pane after, Other a our before is transformation, allow one in a area. is of visibility server area, datacenter new and on-prem, to ability a generating lot So the that the of get glass interest.

reasons the short-term challenges will out. overall a of the we are in growth in fact two the expect and bottomed there the on will that challenges we as those the side, continued have growth So of why though the think even we service most despite enterprise single digit, result think big be provider revenue that there sufficient be

past I relationships, Azure. commented attention. guys, that impacting or with growth. in advancements kind Michael you those follow-up, my how of this your little bit help of but caught only relationship eventually also not and about how about of an you that but for that a as about update maybe I think how AWS maybe say, should should kind customers about a Then talked And the know we've

are remember migration an now in which Partner with reference and us customers with Network projects. their can APN Well, that is their working Advanced And we member, in AWS. that do they means

are NetScout. publicly referencing and is that even the part as quoted are means are of goes remunerative that either for migration is Microsoft involves because the credited that on to now involve ready paid or portfolio a project. [indiscernible] through of AWS So that Microsoft part case, helpful Also, cross-sell Microsoft leads NetScout that any activity we is them. or being a registering deal sales that of just people In vendors

the expect that So credibility where the we and I these material these two. nature real it come two the part of year migrate. we mean vendors, that to get I of or fact are the technology going that's are from symbolic top platform impact relationships is but over next the the to

the to of just if concern that on-prem some to Azure what our my move AWS. deploying think is people's will that happen I or challenge application solution of of mention assets one I

So how evergreen have because solution that deploying we revenue are people they this matter get regardless don't thoughts much the your relationship, is no numerically feel taken from away be that burden going they application. it's and of to second on on where

to migrate people, or workloads fear that happen the the are have to sometimes So for sometimes these cycle then because check any cloud. what's that down a create other items going confidence Michael it sales just investment their and don't apps as they off to item, relationships mentioned their cuts people

Our comes Chad Craig-Hallum. next from with Bennett question

product assurance services the First, revenue.

you is type or I embedded the it year? are exits grew you figure that, can for year? which think suspect think obviously, the good now I segment call and of roughly is it year, where this you last color. on do growth out year, if this the but expectations sustain we indicate that XX% XX% it to answer expectations growth software that in And year-over-year roughly software that What from coming

goal the of of service will to and period the is in provider. this next X-year This XX% the over to XX%, revenue area get continue

the And some portion come of enterprise from software. will

yes, So going continue expect the think trend I to this number. without exact maybe over

We are are -- customers deciding.

because it's have customers for for for them find and us us. margin price a We both better point options it's better great and

both this win-win result, continue sides for that's even will it's think a accelerate. As maybe I trend and and a why

have indicated side the have that. provider top top maybe X those one accounts now, for had you tier-one offering? penetrating to follow-up software stabilized related any me two Then with -- customers on quick in X your The success you service your that

parts. One XG. consists to a is Instrumentation The accounts two instrumentation other deployment point software these vSTREAM, and and applications is offering have ISNG, saturation very of instrumentation. of is very, the on analytic maybe two the high

products, we side, So were But accounts progress. not the buying are our to the software they move don't XG, the two us. TekComm all when use version. hardware But they'll by need have time, made use They analytic based. on to they from Last anything have these version would to prefer which or dominated software they are yes, software.

And them so XG not from of the the solutions. using on have that, seen we for because traction side software

Jaffray. And James our Piper take from we Fish with next will question

few to their the here pretty mark years, on which would much kind your had guidance. as would make NetScout one years during go it of that you could there's we've Over wrong first opposed been hits make where that given movements would few what the some be or the year last right some miss or my last initial midyear the guidance either couple so -- so and next adjustments year over exceed this the quarters

Maybe and things I'll high mention commentary. that to some just add Jean can level maybe

the three different -- two than think in years. the last dynamics I We are or So years. had last

two We that [indiscernible] bottomed reliance have I and largely as out. on these has, providers mentioned,

side. on cushion the margin more have We

second that the the will less Also, some that back We you All have last we structure. cost is -- half had headroom. provide year reduced last this in end than the we are notice if year. hoping loaded

in those year. versus issue the at market, the And of we feel this reward risk good reduces risk. the Unless some so change don't about the provider think segment point we all which see, service this I further is things there

legacy only one that and had remarks NetScout forward, he for we've our don't that I that we would a don't going use that mentioned to thing use is Anil to Yes, what said add now customers ability that about large Arbor opportunities is in one the the years thought of that product. are are the cross-sell customers few his penetrate product had have, Arbor customers to or that

the takes base. is and know, a add to to population be revenue as progresses you traction, that should news So that our significant good able that and

is in obviously, something on that, You downside quarter. to know, happening first that's that the the

in integration see and And the on drag short-term territories the the the that. to you some on how traction be able so works, fast depending new to might

providers for just I what we Assurance. And Jean, rates that didn't mode see there. the the you I us mode to Thanks. enterprise as difference Service Anil, then on the service for did the the standalone At non-standalone business one point, can growth on you hear service business actually, well? if give Can one like follow-up from do anything move XG? provider for And side more, sneak between security and in the

looking Jean at while is So that.

So strategy is standalone for our similar instrumentation versus very non-standalone.

using a need instrumentation. do For links. no lot current upgrade there not wholesale new They existing will a case, be are to we because of the will

the less. in opportunity for short-term, the will XG be So

will existing to Edge. As additional non-standalone is solution or bought and But standalone versus later move the for at architecture on somebody has put technology they standalone non-standalone they'll something of places our there standalone vice-versa it our links, to and be the transparent to the on. for be mode, using sort if

on I good use of the or a opportunity is the instrumentation short-term. to story the at that's going reduce cases, least in because will think these side. but the for opportunity And short-term data existing lot of XG So plan that a two

growth that Assurance, QX or And between rate just an then single growth the -- forma had the -- as organic split and tools In Enterprise, hadn't than X% Service Arbor, they in as a less Arbor. if been little rates on digits. a And over the in and to Assurance QX. there on follow-up pro is in In basis the [indiscernible]. growth the business Assurance the on Service between Service upper tools if -- was

Cadillac we've large very about customers. product, very complex Arbor similar before, is a in NPM they do As And talked to NetScout's well products.

very fourth very successful two So large deployments they large institutions. winning quarter, in in financial were into the

question And Markets. with Kurtz we KeyBanc can our Capital Alex from take next

restructuring leadership changes, sales remarks or that that's something prepared around the force On seems new us. to

done serious in changes? that and How So exactly? to past verticals? areas what what you've relative to see is we it What done would expect changes was the

the the use other data resources DDoS. Also, more security a side for delivery in we small. of There's So side. nGeniusONE. Arbor have are the parts the for projects the to we the because on we Analytics different is The leader the side, change same using Arbor the moved for have product on of bigger Threat as organization change is on some sales

of a the worldwide level, a for sales leader sales at side we and there And then is things that So didn't account. and that, that is force those the artificial lot with year on of but multiple the that. and we big and tried good product leader single international on sales we now sales leader, quotas under have supporting some were impact leaders last into all a there conflicts a side, the single on have And a account leaders. like U.S. things sales team

this is to So selling versa, we the do or products cross integration. to to get cross think either do NetScout vice account we selling, Arbor advantages, which to selling needed

think XX% mentioned, made the be it's some there it's up going is I of I disruption, selling going between but positives as be cross more to only a account NetScout customers. than So and the overlap all Because while arrangement. the Arbor by to

far as just these as at are or changes how changes leadership and the been level covered? personnel accounts there are and Have account reporting structure

within we we sales multiple the reporting people many there reporting team are There -- don't have hired have from multiple -- movement but changes. level changes is not the outside. at and It's

our next from take Lake will Street. Eric with question Martinuzzi We

to that be look were workflow the any learned delayed were provider. backwards kind service result QX, a I'd on a like that with processes just of international changed. lessons take revenue there to any as Wondering if the recognition of shortfall, needed

sales there have of nevertheless, of wanted moving it mention, end the to And it a that is thing when And that happen, portion lesson Eric, we year. the already first we learned I okay. good gap come revenue Asia it these that and because was has the just two conservative the weeks. bring kinds that need forward. affected cycle and to in, a there think So I of -- But things of to team, to be comes more was

mean we think to year good that's extend the paperwork, and drive time. we'll of a and in lot So I the got news sales able part non-product the the sense be learned of that delays, already this cycle revenue But we lesson -- that is other can things and it. I this

as by of frame question what of getting with was probably high just put kind you you as you what bit be is of end at a or speaking enterprise be put the little asked wanted by to guys but do. to it more high pessimistic at commentary? Is driven And end, it going might not year, it end low differently, going previously more the really the driven service that your to provider stabilization outperformance you to maybe what the the have being I framed revenue this

both them. Well, of

bottomed versus So negative spending provider the out. service side. enterprise of the year outperformance And last largely it's on the impact

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Instructions]. [Operator

and with Liu take Kevin Company. will next We from Liu our K. question

Your line is open.

just are coming your differently software? push only deals, the follow more XX% any software into you so to Just that fiscal opting head as sales XX%, on guys make team for product Or you naturally that towards as 'XX? customers are incentivizing your from you

We we credit. force our discounts are give sales it. But are get not incentivizing quota to and allowing higher still

to better go you there customer is So a if flexibility with when there sizes on of discounting that the bigger software deal the is dynamic your margins.

control which things place, to allows that. some have we So us in

operating think a And of Jean, timeframe. for the fiscal provided mid-single $X you digit XX% margin, targets X-year earnings year, year, maybe and coming into calling over I then low some kind longer-term, revenue over last long-term the growth in

the Given for that over guys some anything terms be or on still that there the those are of timing the changes you of when track updated of the achieved? or expectations are is in year, either past should

'XX, low fiscal mid-single XXs. would a in earnings the there FY on that that in he a OPM of better, be slide would year CAGR Anil -- low about and 'XX year would XXs that said be end by or the be the digit call margin the So growth based the that ago, on had

that my when you so product being margin margin. thoughts a is only, by gross are software driven And at look which has that, higher

-- by on incredible As increased revenue. revenue effect flow well through as

that the with at XXs. low margins the being So would leave operating

the the But those. today, at so And the to occur cost should such if to still structure some look software, interesting that performance point the find that you could that you by the able probably hit there's gotten and be got is I revenue, rationalization million of where close is before worth have the those and to relatively XX, XX margins $XXX FY the can see targets 'XX. be you achievably end where margins still our operating close annualize to gross of

are time, back to there to additional for I'd program over the this questions. any closing turn remarks. our At no like presenters

to forward you we like know time I'd conferences Well, it's Great. joining this as morning. thank appreciate quarter. the appear I making busy to investors for everybody for at time. We NetScout. different us a throughout Look seeing

some have as the the move we'll If feel and to we into Investor you. Thank Relations you call to number summer. point talk at questions, at me you please free

your you does program. for participation. This today's conclude Thank

at You time. may any disconnect