NetScout Systems (NTCT) 27 Jul 232024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to NetScout's Fiscal Quarter and Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode until the question-and-answer portion of the call.

As a reminder, this call is being recorded. Tony Piazza, Senior Vice President of Corporate Finance and his colleagues at NetScout are on the line with us today. [Operator Instructions]

to the call company's like Piazza to now begin to prepared would turn over the Tony I remarks.

the XXXX Thank everyone. you, Call Year Welcome morning, June for Conference to NetScout's XXXX. operator, First Quarter and period ended good XX, Fiscal

Singhal, are Officer; Officer; Financial Operating President and Jean Officer. and Chief Bua, NetScout's Joining Michael Anil Chief NetScout's Szabados, me NetScout's today President Chief and Executive Executive Vice

prepared remarks. a There's accompanies slide that our presentation

the Relations to can and advance multiple in the slides remarks page our results, webcast results be the www.netscout.com, slides You our under Both can the webcast prepared on the landing quarterly page. at itself follow areas commentary. viewer the within section the accessed under website and IR information financial including in the of Investor financial

number operations, call financial and our strategy, regarding fact. forward-looking to will include forward-looking not are of X. future objectives of other management Moving future conference historical results include business statements position, Today's operations Examples statements. and for statements statements that of plans performance or Slide

other release. statements involve this financial results but forward-looking including, on forward-looking can undue statements presentation, and in differ their to today's speak due could caution forward-looking not anticipate, only place those of assumptions factors, the such statements to, risks as from known terms. and any on should, use plan, this other These risks, listeners forward-looking by will, and You words and uncertainties, results and believe, We expect, date. today's to of included or press not statements in forward-looking materially reliance actual slide described unknown identify comparable as limited which uncertainties,

with in to company, annual contained XXXX, Commission. on any risk with no the on NetScout Exchange the XX-K information described fiscal to or on assumes file year to more factors Form XX, herein. a the please detailed respect description announcements the this forward-looking with and March communication the for the Securities obligation company's ended For report associated update refer

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

includes isolation substitute financial for non-GAAP the as both financial prepared non-GAAP presentation non-GAAP be in considered be measures on of the and website. metrics of in Reconciliations non-GAAP on While in presentation over of GAAP rationale stated, on GAAP today's should in the this today's unless is his for otherwise The measures with now detailed earnings slide results, solely along are applicable only. and from limitations the discussed providing Anil? and a with press not prepared for basis release Anil will slide on to accordance the those in all on information this provided relying measures conference call today's release. a will press measures our remarks. or GAAP. information with call These slide appendix turn I

Thank all joining and today. Welcome, morning, us you, Tony, good for everyone. and thank you

$X.XX our last EPS diluted expanded grew over nearly year-over-year million, was our year-over-year earnings both by period. of representing XX% margin and our operating several call. key Let's in first Slide solid since our year quarter and a turn product the brief of the delivered offerings results first of quarter released in $XXX.X to growth Revenue margins diluted financial recap and fiscal X%. gross deliver financial share We to number the non-GAAP for XXXX. performance for fiscal We X of per

our across in half and broader performance, the provides the our the solutions well next-generation second framework. also that been have visibility several to one we year. of This revenue start platform expect milestones already data and by customers, product release includes We of to availability security contributing of that accomplished our fiscal with the received that common release with

to needed improve unparalleled at and areas platform complexity, the identifying application scale of risk, the insights intelligence keep unlocks data agility visibility, proactively to increase secure. and and fragility By deliver

Additionally, and an in source response packet network detect matter is generation of real threat Cyber Intelligence OCI highly at our time. This threats scalable next multiple Omnis and to OCI deep detection detection for or inspection solution the advanced Solution. we relaunched that uses

is OCI network a the threats OCI gathering with risk package. of also and applies existing package evidence In ecosystem, to provides historical attack cybersecurity across OCI cycle. cyber for visibility Mean verifying successful Response. to reduce network-based also the infrastructure level forensic of by effectiveness investigation and valuable in improving compliance digital lowering investigation rising of face security cyber-attacks. metadata quickens help the high-fidelity and the Time threats, the tool teams ensuring and life the real-time their identify earlier OCI

We also released new solutions. DDoS our X

protect is from The including adapts enterprises automated wireline networks attacks. second helps spreading dynamics adaptive It the currently first and used and DDoS, DDoS that network mobile dynamic to protect threat and mobile security, to powerful landscape distributed surface. cyber-attacks, in leverage rapidly their threat And address now the multi-vector the attacks. which to countermeasures our DDoS providers evolving service latest address their which is their extends capability

continue year-over-year, Slide in our visibility to facilitate and and extending off-premise X cybersecurity and by We businesses. and XXXX, customer our revenue the edges value transformation architecture as the their leverage resonate to and spots, to digital new part control of customers blind of with cover fiscal network will challenges cloud solutions further In confident Now of enterprise enterprise service driven of both proposition their to some that network with Starting of address our seeking move initiatives. vertical. the enterprise for number first year the assurance business. let's market expansion grew nearly remain perspective quarter on XX%

service vertical. Moving customer provider our to

X% second for radio first due of declined quarter year-over-year, revenue, quarter primarily same lower the this in level As in approximately to the propagation project revenue quarter $X.XX the vertical modeling last with expected, frequency year. compared year-over-year, the

materialize. traffic traffic We will over required XG XG certain drive stand-alone adoption those once and that the a as see solutions and XG in carriers visibility deployments. and and in markets core increase, now advances our to network ready invest believe spectrum to over their networks XG to volumes carriers Notably, continue international the in We be applications domestic XG, several cybersecurity required. are have deployed

We and carriers will with remarks. a prepared ready more regarding his Michael provide orders this are vertical support insight during through our in inevitable solutions. differentiated customer transition to

to Now to number Slide outlook. let's review our move X

Looking reiterating for ahead, we solutions XXXX existing remain excited outlook. are market fiscal about the our we and and year both are opportunity seeing new our

as backlog supply to operating anticipate focused approach dynamic NetScout challenges the the the our to driving deliver continue to balanced drove and a a we on more and macro the of in We guardians resolving and also long-term position through fulfillable environment to the increase with backlog remain that revenue world. manage fulfillable will We business return continue chain levels. value to for sustainable see profitability as normalized connected growth that stakeholders

will in Jean numbers our additional and provide color our a and of the remarks. recap outlook

and turn look our to challenges throughout Michael. and year confident we through financial progress quarter several XXXX that of forward fiscal our with remainder the to We and expanding results We solutions. a that, well year. unique solid the of world and delivered beyond. milestones our I'll In everyone first sharing establish that With over address help delivering NetScout summary, the opportunities is remain for of call digital positioned to achieved foundation product objectives fiscal our today's customers

foundation Customer I strong have our of be will everyone. proven highlights the areas first always and covering been Anil, with partnerships customers with in morning, that XX quarter. long, vertical, our customer a technology good outlines Slide Win install starting our for you, and enterprise business. today, Thank the In productive our base

depend to transitions. As and they customers the NetScout expand of ensure continue adapt, to IT continue success on advance, strategies, to their these

been an in the business, with initiative support solutions The large mid-seven critical based deal in opportunity of infrastructure example, to on-premises regional several from bank's of bank, quarter, won call to we Unified As figure their the NetScout's datacenter and during assurance upgrade including its US arose Communications a the architecture. distributed, co-lo service order to a a transformation. banking bank's online areas centers. from have

the process. productive to the Our partnership despite long NetScout and business, bidding positioned competitive win

customer provider on international XG remain vertical, domestic both our we Now, focused evolutions. the network turning supporting to carriers' service and

their expand. surfaces and We also service security continue as support incidents providers to threat in permeate, efforts to continue our cyberattack

As us an front, customer continue a a assurance advance their to placed the XG to with quarter, as the American long-standing amounting carrier additional North orders projects. service Tier-X on examples mid-seven they from figure sum

for On leveraging an our detection combined positive their for this cybersecurity front, deliver customer service leaders offerings, driver a to evolving provider was with Arbor investment We products international and environment. base. "clean so DDoS technology, integrated references protection, high order the mitigation new superior their called interest security in low-seven innovative best-in-class solution, for sector. to mid-size reliable the These recent competitor. their pipe," a in customer placed strengths, solutions order main The and figure upgrade from replacing a should to won in value rapidly strong the due the to customer our our continue drive product our reputation, a

brand, we Explore Turning such the few. Cisco to World, to a and fiscal platform. quarter, This conference, events Black leadership, Technology plan XG. as solutions, VMware Big name remain participate on and trusted several our RSA in next-generation go-to-market promoting attending industry we In high-profile second and to activities, Live, included Hat, focused the Dell

also issues, security, our and Engage Xnd approach products are Xth host Security. often and new We'll overlapping. are Summit ahead, its in this our unified industry's Omnis solution a October multiplying Adaptive partners Mobile plans Annual Florida. at At addressing highlight such how provides interconnected Technology year User Intelligence as Without XXXX, how and Visibility including we'll pertinent most customers our demonstrate Cyber and Borders our and next-generation to to DDoS Orlando, Looking and NETSCOUT and October performance, Engage challenges the availability DDoS from to Platform

Thank you, Jean turn now call everyone. to will That and remarks, the over I concludes my

first you, fiscal review our additional I of for some morning, Thank commentary our fiscal on and XXXX XXXX outlook. good provide key quarter and Michael, year everyone. metrics will year

on As appendix. nature results I non-GAAP a the our this focuses such the review results all in reconciliations stated, unless will and presentation our GAAP any comparisons. reminder, note appear Regardless, of with otherwise

first-quarter results. XX year XXXX fiscal number Slide details our

as million the supporting anticipate global levels modeling dollars dollars basis. approximately consisting During be of million applications. X.X% fulfillable subsiding supply approximately and and XG propagation appear to quarter service year over modeling historically deployment revenue XX to grew needed for with million percent the a of backlog first projects dollars, orders and the frequency the revenue of consumer year-over-year challenges to that dollars. approximately X.X% year infrastructure to of XXX.X propagation chain X led return We declined and backlog projects. ended We percent will million revenue X.X% quarter, both business frequency normalized of have radio XX percent, Product on grew as radio total

percentage points last X.X fiscal the first-quarter gross up same margin profit over quarter was Our year XXXX percent, XX.X year.

you with Quarterly of average and million same propagation same with quarter events. than reported compared quarterly As XX.X year recall, impacted year's XX increased per an had percent, cents margin the primarily approximately year. year. We gross gross last was year, modeling last XX year over earnings prior was margin operating of less radio year, XX profit an projects, percent margin XX.X percent. operating Diluted frequency headcount, increase the by cents, may in quarter percent travel, the sales to in an compared XX increased share over of XX.X attributable expenses X.X percent dollars which in

to by customer and product to trends revenue like I'd now XX, review lines. Turning verticals key slide

enterprise on XXXX, service customer For while first year vertical the X.X fiscal a vertical revenue percent. our declined revenue customer percent, year-over-year our grew of provider basis, XX.X quarter

quarter, revenue, accounted vertical accounted customer XX service for the while our remaining percent for total percent. our customer the XX provider vertical our During enterprise of

fiscal assurance a X.X lines. the of product year quarter increased our basis. In over revenue revenue by our declined percent, to and year both our turning service year X.X first cybersecurity Now, XXXX, percent on

represented service of line the XX while approximately line percent percent. quarter, first revenue, product total the our During remaining assurance cybersecurity XX represented the product

modeling which more our project shows the prior our was or radio to U.S. of to no to higher in revenue geographic the total revenue quarter. first year's revenue revenue. Turning due representing XX% frequency There slide our the customers concentrated were last year's quarter, less XX, in propagation mix. Compared

XX.X in subject XXXX million since We million revolving details active dollars. Slide capacity cash, From cash a debt the XXXX. decrease XXX year perspective, on quarter first end and July the was XXXX. representing to of a our investments, balance sheet have and, with ended marketable million equivalents, to the plan of authorizations XX.X credit repurchase year fiscal ended our which we expires dollars be Free million XX XXX.X flow. our share outstanding highlights market. market for free currently in dollars with a facility, quarter securities, in quarter the in XXX-million-dollar of of conditions, flow We cash dollars fiscal cash the use and

receivable, fiscal decrease million briefly To days quarter March the first year XXXX. our with our accounts since highlights, year of The other was XXXX. XX, at XXX.X XXXX at million the recap end metric line first XX.X of of of balance DSO XX net, was sheet of dollars dollars, the a days, fiscal and fiscal quarter year XX in from of a end decrease XXXX, the the end

Let's move on I fiscal outlook. our for XX our year targets focus for review XXXX. slide to commentary on non-GAAP my will

XXXX for XXXX, As non-GAAP May fourth our noted earlier, that year and earnings presented fiscal call. Anil X, fiscal quarter outlook full year was our we during are reiterating XXXX

range XXX continue anticipate XXXX, low midpoint XX digit single of XX XXX of year fiscal effective growth to revenue tax rate a the of the The implies is be which in for rate anticipated reminder, at in to a to we range. range the the As dollars, million to percent.

XX growth expect earnings and approximately implies non-GAAP digit midpoint the $X.XX, the mid-single at XX diluted average rate, between diluted we outstanding, share be of which million per to $X.XX Assuming range. shares to a weighted

first like outlook full for during fiscal our we the to year of At on year our also revenue of of fiscal first offer to to XXXX XX XX the I'd the some outlook "color" the ranges, of anticipate half year. fiscal midpoint approximately delivering half percent continue XXXX. revenue

growth delivering for share, year-over-year half first earnings EPS For anticipate digit mid-single the on diluted a of the we year, fiscal basis. per

of I'll now to our over concludes results. review the formal turn for operator financial you, That my Thank and call the Q&A.

take RBC for call this over Thank ask the time, you, We'll first Matthew Markets. the Q&A. to a our [Operator turn Capital operator Instructions]. with telephone and I'll you your question from now question if to would At like Hedberg

of some delivered you a Anil, customers hearing what you guys where buying year have enterprise trends? it a out growth. us business, and there's form demand consistent And a a was congrats maybe down there here. stabilization? think give optimistic Great been you. little Between But perspective most from demand on with on overall start [indiscernible] from are Obviously, results was continues just perspective? up as QX, you you you this obviously to assurance service your bit, sense from progress? maybe to Can Do

Matt. Thanks, Yes.

business think I quarterly usually not is of on So, the trend meaningful thing has because service deals. been provider first lumpy

So, basis, what on the talked at the a call year-year conference over from there's we about last not much change prospect at

the technology on have earnings You and well sales some in We service product in is the enterprise cycle. year some new is provider both challenges have the the service the on about that security DDoS biggest as OCI and new features product, new made overall, options some investment adapted as the tend which form But this of the to lengthen and the combining talked and mobile we heard as sometimes the Arbor which create side. we announced side features which as other we NetScout to well in and side, relaunched provider solutions.

we expecting on and So, year, enterprise that provider is to growth see the that a so on more side we also side. be area this but are service the

a just announcements out of cyber-attacks? on product that question particular. material a was how of a go-to-market Actually, of that a generation helpful. a into next means Maybe from little from is OCI pipeline And is in the kind on that what that color more coming bigger perspective, segue the perspective, one the relaunch? That's bit perspective,

Yes.

time earlier, expecting since announced detection, focus second it the relaunched frame, improvement and hopefully that with an is is just quickly threat, to of have on think and and area success not there and really that now, on the I think deal less key we has big are the on threats. product impact change cyber mitigation to does we less focused an industry early we released So been The cyber half. on impact April but the and it one – in right in have some is which

So that’s also early the of more analytics network response. that what detection change a acquiring life space to the what at that’s we and source big in announced the detection from in this And we differentiator a and doing is do NDR cyberattack last year. change

And we'll Sandler. question take Piper next our from Fish James with

your just guys inventory North America about the customers. large were guys earlier Maybe this to question. customers, on you quarter a your of those in Tier with given pipeline specifically understand and follow-up of some initial Matt's there feel stuffing? digestion how you out X What are kind Just seeing competitors trying carrier about talking

if we both big overall. and the out people frequency of Tier a the companies XX but you and also Tier into backlog of Charter so I where And orders of Comcast that, X do cable think also take Tier Well, and -- XG or about business are but the like the just some good don't portion with are radio the the X picture is provider is pipeline business and X, call there business. getting

the all and can both operators we already so, the of side can cable make are do. traditional And mobile we side. the the are top these cable some some if -- up of there line the or mobility we those fixed companies, -- with provider the NetScout customers mean, And challenges -- big are on for I X on X all of Arbor think side things shortfalls service the which is on we

think the on are we at that's the provider we good shape. mobility, are our what I service when security the think that business, So service on overall assurance look and we we in -- side, side both

Jean, And you. for it. Got

disclosure into it we to outlook quarter about long-term fiscal QX? But backlog out overall. past this disclosures we side, fiscal the in $XX start then from so of backlog QX? of Or it what's as the million, where or normalize level first confidence to compare On if sounds Is like normal of somewhere continued QX of in in appreciate your the giving as fiscal it's half off, it million about $XX pretty meaningfully. $XX coming the is million it the seems here think I normal last was around backlog we

the closer would like and I been – if as time, million growing Yes. you low started long backlog to in $XXX,XXX. again a of we million. $XX period has between somewhere And QX, to the look QX, Actually, been that average chain. to I backlog least if were $XX probably in ‘XX. over back years, FY was and at to hardware issues say our of that as just the supply XX due the And reiterate, believe, It’s

were software. people So, buying

probably So, said see we to it in it million. $XX between see – as comments, the back always million normalizing somewhere like backlog. we $XX to Obviously, we we

been be have continue, And the of So, of I network the in all the if laid signals, antenna to infrastructure pretty capture our propagation RAN way odelling that down. think the established. can happy gives headlines, actually to as that reiterate I we radio projects getting we the us the seen frequency had also that much with is point revenue a opportunity that to is guidance the you’ve has confidence things. One, that. few we What is very would the XG

that less to shortage. app. within been go slower will private it’s when start be to the about killer us, talk industry in first And about networks has what the over that to is infrastructure the mostly enterprise for XG people the build we chip more would the hear due And the network. applications hopefully, we that So, various and

– again, applications security, really come pockets that since salespeople, have And certain the then infrastructure in have XG the we to established, our mentioned, few they have what which been to are been something adapted Anil then is we where in that said, needed. customers least hopeful So, mobile the they’ve is internationally, are launched, a security, do. bear which also And And as in where has has talking to will at seen of DdoS. are which really can of especially relaunch been as start and lot where which sales production traffic, OCI, the that’s we then products opportunities development of which, Anil being is a for liking we years.

would we we areas, So, at those what confidence of the to point to when $X.XX $X.XX this is this range to point. give

Company. will take Liu question with our & I from Kevin last K. Liu

perspective, typically near-term the given September a in government hits business From the quarter. of kind that

and Just versus last in that pipeline wondering sort you any year? uptick that today meaningful looks revenue expect you how whether of this to year

We for government, actually had a federal. good overall some QX including

see a and use now now, funded. again, is QX they they right what our products, We of in year. So being with are our big year-over-year of right demand had we probably -- always basis what last it gets consistent would on

between of your quarter security overall announcements Got longer it. kind term, we And second here? mix think meaningfully still provider new and then maybe that to all of in do contribute just you expect more enterprise to And you starts when of the shift security the with do just terms the materially more have, to business? then mix results? revenue normal that Or a you service guys see would

security out at is OCI. we of a DDoS, practically look security if I it last year, revenue think -- maybe from the was single-digit when percentage which XXX% the break we small revenue, Well, includes

side, is security initiatives on with grow the on the the some mobile it DDoS to enterprise strategy business. -- and other that's X-pronged we So announced side. through security provider the the One security on grow so service the the of have

small OCI, is adapted a said, non-DDoS is side, enterprise DDoS very is as the year. like which enterprise the to security solution. one refresh drive area, And and number which DDoS new last the the which was, in drivers of On third to I

than I security much are in business. And expect the the overall growth think in the X those areas. we the higher growth be area this So to year

time. I program for will the at Piazza we additional or over that have And to closing remarks. it back now further this no any turn Tony questions appears

our us the day. concludes the Thank This today. for enjoy you, Thank of all you operator. for and rest call joining

That concludes today's teleconference. Thank you for your participation.

disconnect. now may You