NetScout Systems (NTCT) 25 Jul 242025 Q1 Earnings call transcript

Good day everyone.

Our apologies for the late delay. Ladies and gentlemen, thank you for standing by and welcome to NetScout's First Quarter Fiscal Year 2025 Financial Results Conference Call. At this time, all parties 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, Deputy CFO, and his colleagues at NetScout are on the line with us today. [Operator Instructions] I would now like to turn the call over to Tony Piazza to begin the company's prepared remarks.

good and operator, you, morning, everyone. Thank for apologies the delay. Again difficulty. The operator technical a had quarter Welcome June period the to XX, fiscal XXXX NetScout's first year conference call for XXXX. ended

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

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

to Form historical number subsequent today's except on Commission. filings, law. conference Relations or performance which and strategy, forward-looking those to statements objectives not today's SEC information slide on and by forward-looking of on management on the business risks will and XX-K our any this Annual Examples for no results assumes website, in of of section results NetScout uncertainties, Exchange Report statements obligation operations, call regarding but available Securities future required with statements Company's and most to materially recent as Moving and include plans on including in as forward-looking of financial date operations, could file the update limited release, only other of press statements. Investor are results future slide described are the as well any our involve statements. include position, and speak These financial fact. X, today's differ as statements Actual and from forward-looking not that

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

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

that everyone. our focused remain today. We exceeded revenue all Tony, higher with operating our while and you, quarter on We and and customer's the end the confident fiscal joining aligned to to you expectations technology needs. morning, prudently Welcome position in remain for win thank us our expectations. differentiated EPS while XXXX trends good are cybersecurity Thank market. service delivered well-positioned and of key first solutions the at year NetScout business continuing We our to address assurance

quarter of at backlog decline to the XX% $XXX year's due brief for XXXX. quarter. revenue end fiscal for a non-GAAP approximately first of This our expectations. our results a turn year-over-year of Let's to million, financial $XX X prior the in year higher million number our was Revenue of approximately represents recap slide the related

year-over-year In and management these as offset exceeding unrealized regard from line, quarter, first initiatives $X.XX revenue earnings for approximately our our continued to factor, per was the been expectations lower as bottom share was diluted would relatively on revenue a down an this investment. benefits. cost gain Excluding we have foreign year-over-year. consistent EPS our benefited the XX%

expected continue due approximately Service space, year's operate slide further Assurance down offering, revenue agenda. customers XX% Starting insights. decline period. higher market the the prior of our with on to move perspective revenue Assurance to for spending was some In level to and the was their let's increased Now, recorded Service on with X year-over-year. backlog-related business in The scrutiny

are a manage in investments investing more their initiative and Importantly as though, opportunities. they at pace just XG measured carriers against domestically internationally monetization

On the confident network customers but the positioned transformations. extending the of also well see value and to NetScout that enterprise is we spending, visibility win to digital front, their advance edges tight as our of business leverage remain the proposition

the wins customers as in NetScout year-over-year prior expanding from challenging spending comparison. Cybersecurity cyber areas our backlog-related mentioned our prioritize usage protect to year's more caused Michael first opportunity insight continues themselves remarks. landscape. down provide quarter during offering approximately revenue Cybersecurity growth to offering, in was Moving threat the a as the will strong to for XX% customer a regarding previously represent his

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

manage priorities costs. meet threat Looking cyber At expanding needs, to ahead, enhance our remain to landscape. continuing Cybersecurity offerings on same our the to given time, we focused customer are the

first our separation voluntary the advanced quarter, we program. During

XXXX. complex I'll availability, committed platform the fiscal of recap performance, benefit call from $XX term, our to are leveraging million outlook of of year everyone a non-GAAP to we we first Visibility cost recognized year expect remainder EPS be to sharing challenges we approximately that, will throughout to our Michael. world. in on look to during reiterating our fiscal performance Borders such, our the Jean over security quarter of As and pipeline, million Based Longer solid help our and her will fiscal annualized the portion reduction, $XX the year. With forward digital outlooks. provide customers XXXX with the progress turn We of remarks. which a to revenue and address Without are

morning, service extension and American which win Tier-X covering continue XG-related upgrades, QX be full X includes highlights. figure offering, in a the over the quarter starting domestically deal Anil, of during our This annual XG Thank see sum in I deployments, expansions the low outlines today, example solutions. multi-year both term. will in could and amount value XX with was mid-X to to customer Assurance enterprise has internationally. and good ELA provider everyone. Slide we a areas or vertical, you, Service customer the In support a the capacity agreement deals and of of carrier a North an X-figures license deal key with win the

are technology, the and NetScout. continuing into expanding to Cybersecurity with to continues we historical offering, announced quarter. cybersecurity recently of multi-year performance, carrier completed both also wins prioritize a extension landscape. due had prior them them threat a that deals differentiated an We the but These for European deal that to translate against our had to competitive been interest, relationships. Shifting protect This companies in capabilities in investments established our cybersecurity strong secured

address their quarter division the and beyond capacity protection low-X For of first a existing them Adaptive services solution DDoS threat who with customer DDoS example, European deal during capabilities won This dynamics. that attack with capabilities. increasingly figure purchased an was threat their we upgraded environment. upgrading the customer Cloud to the landscape an changing an accommodate on-prem Arbor Arbor our Defense newer They vector their new and DDoS Fintech purchased expand Edge solution capacity complex also which provides to financial

Networks event AWS, hosting go-to-market brand, session next-generation Networks a by posture security Alto on our we trusted Alto and turnout. prospects. to financial promoting significant and The included This industry cloud featured for in customers enhance with leadership, Palo Turning This service solutions, joint of the integration the platform. services AWS focused a to Immersion interest high registration hands-on and lab, Day Palo institutions. as our demonstrating remain financial and the the garnered with NetScout evidenced activities,

Connects for and Splunk.confXX customers, Live partners. events Cisco we At sessions, tradeshow demonstrations updates, well-attended participated London product conducted in a presentations, European this hosted and and we called in NetScout the prospects, event event, and Additionally, keynote the May. quarter our in during breakout user

we Looking NetScout our at will how curated in Texas. and its as observability, and can partners At October Arlington, dataset service host Technology ServiceNow, Engage leaders, plans to AWS. AIOps highly and ahead, be Splunk, early our such highlighting Engage solutions with integrated in Annual User Omnis new and Summit customers from faster solve assurance our problems industry when platforms security, and XXXX,

you, Machine turn over enabled to performance solutions Jean. and and Learning I our and simplify call AI remarks, area. Thank will new capabilities to our That my preview in also market everyone. automate now will management operations the IT We core concludes

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

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

down was basis which income. efforts. quarter primarily a attributable the all and million $XX.X revenue was management foreign with of investment by quarter first quarter, unrealized revenue year the $XXX.X XX.X% prior are an year operating that in to profit year-over-year number XXXX. operating of million, earnings revenue last $X.XX compared was $X.XX. service an was of from lower the XX.X%, offset cost foreign we was X.X%. product results $XX revenue same to for a down containment XX.X%. the a of benefited impact $X.XX, partially Quarterly details gain initiatives decrease backlog-related Total X.X% in first Accordingly, decreased XX year-over-year. same was margin X.X share expenses year. on This revenue X.X%, included the unrealized on XX.X%, unless otherwise the of Additionally, comparisons Product approximately reported the of fiscal of profit primarily approximately was million, quarter $XXX.X investment margin revenue decrease was Diluted XX.X% per points in percentage a as due last million, Gross in This cost down while the noted. Slide year.

our verticals. that here Turning review revenue other year-over-year with to and note consistent all key slide lines basis, by remarks. a on customer XX, are comparisons product I trends will Please

quarter For our the revenue revenues by Assurance while Cybersecurity by year XX.X%. XXXX, our first Service XX.X%, of decreased decreased fiscal

line During for our line Service for while XX%. remaining same Cybersecurity accounted the XX% approximately our revenue, our product product total Assurance the accounted period, of

Turning to verticals. our customer

customer quarter of first decreased decreased service fiscal by the revenue vertical XXXX, our while revenue our vertical XX.X%. provider For year XX.X% enterprise Customer

vertical for service provider XX%. our same the customer while for remaining the vertical enterprise period, our revenue, customer XX% During of accounted approximately our accounted total

Turning geographic XX, to mix. this shows slide our revenue

million $XX.X of flow first equivalents, short- cash first quarter and $XX.X by quarter of sheet in our securities, year markets. XX flow million first quarter year year United cash Also, fiscal XXXX. of XX% We fourth free a the the of decrease items. customer representing cash, quarter with XX% was our quarter marketable of XX% or investments, end long-term the the provided of of XXXX. Slide the million. international revenue with cash remaining the derived balance ended for total and Free $XXX.X details the and certain fiscal fiscal XXXX, in was since the States, For revenue represented more no from

X.X From to approximately subject and an July of XXXX. To first ended composition fiscal due year debt year repurchased the $XX The a During the on reflects market first the quarter. end non-cash The metric fiscal million $XXX fiscal we of prior share goodwill briefly net, repurchase is recap during first in days the a XX XXXX. days, $XXX.X of average the shares per in other XX to credit balance common versus days price was in the of year million impairment was of of quarter timing the DSO the the first quarter representing XXXX outstanding in period of sheet receivable, of XXXX fiscal XXXX. higher fiscal XXXX. at we have approximately for $XX capacity of the $XX be million, facility to million our accounts of this bookings. items, year and currently facility, prior March million year charge conditions, since debt and, which the year, with quarter and also revolving for intend intangible We authorization our or in of million same which credit in year in perspective, first $X,XXX quarter and fiscal XX, million taken million market $XXX million, active Goodwill net, repaid DSO quarter the comparison decrease quarter during fiscal XXXX, end year the stock $XX.X our first share $XX.XX. was of the of metric at assets, a XX expires to

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

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

fiscal for reminder, the a our XXXX, million anticipate million. $XXX we year $XXX revenue range As in of to

year-over-year. to is $X.XX be range Additionally, share expected XX%. being non-GAAP continue The earnings tax the we rate consistent anticipate mid-point of to full fiscal per $X.XX, effective within approximately to diluted with the year

incorporates activity does be diluted not recent approximately Our is outstanding further repurchase assume shares, repurchase which to assumed share our any XX million activity. weighted shares average but

the from the per Finally, be year market investment impact value and given year, on in impact foreign could its any mentioned gain fiscal earnings that we previously are fiscal early the evaluated the progresses will unrealized fluctuate. as to outlook share our as

also attributable the range the of quarter anticipate associated the $X separation from ongoing initiatives. of approximately fiscal quarter. second year $XX.X in with to guidance voluntary previously million we first the GAAP Our management recorded to the XXXX anticipated non-GAAP program actions, we these a mentioned with in another restructuring payments XXXX cost one-time million charge separation conjunction In fiscal the benefits of year $X reflects in and restructuring million charge and

million will run-rate annual actions million. these to generate $XX $XX that expect savings approximately of We

we to $XX of $XX fiscal Given of savings realize X of the the these timing the remaining million actions, approximately year million over to expect quarters XXXX.

like some quarter would for the I to second of provide color year Finally, XXXX. fiscal

in the We second in quarter the Therefore, outlook anticipate of first half, range half taking fiscal midpoint continue assuming consideration in skew and fiscal $XXX we million. results, our XX% XX% million our the be to of revenue our range. approximately into a expect of revenue for $XXX first quarter to of to the second year the revenue

per corresponding $X.XX the $X.XX. expect of share range also We non-GAAP in earnings to

an the approximately XXXX reminder, for questions. related for reversal year-over-year over our of I'll my and formal As results. $X.XX financial which XXXX. That QX to create a benefited concludes the expenses, headwind second will fiscal the review Thank of turn incentive quarter the you, of from operator year call now

first We'll Hedberg Instructions] our from of [Operator question Capital Matt you. Thank Markets. RBC take

Part invigorate what future do your year. was you think of security. about investments, this positioning growth division? cybersecurity you the you a tough opportunities, think there future And within compare I in obviously, could the guess when script, you about excites What But most? talked growth

if about are we Intelligence, and doing faced good at can we pressures on is Matt, Omnis are into additional a is in few ago, which and we about our drive assurance the in so then to look we we DDoS you of starting the the area, -- to So think DDoS core already rest we year going growth business our service which what and business, businesses, heard you the last years security and non-DDoS Cyber going area, that. by call traction we announced we're gain have

that On the is service from market AIFs. assurance moving to side, we think NetOps

generally site and deployed instrumentation extended call called Edge have we more Sensor. our concentration that, and we we lastly, in think or will to the AIOps a data in that the center see we point which area, And Instrumentation so And but only our customers longer probably able can some be to on the stabilize top term. all into the not be growth remote cloud, to drive them go we'll Edge transition which and

So strategy. plan the of the that's

in about and upcoming recent in the in October. customers what X some London, made and to our we our make have Edge cost as I conference years, reductions, in those cybersecurity substantial having addition solution a And was areas, our So event of to investment in want in World. despite demonstrated at the very AIOps last other and support big next partners our splash present that's VSP in are overall, excited X think we

what of the building from about end implies Jean, curious, I'm kind opportunities 'XX here kind at guide, flattish. we the backlog, headwinds what noted biggest from guess blocks growth? Like, think more And flattish and of the And call, revenue return here? I kind guide have do of revenue looking of revenue your it year you to then would been you growth how growth growth think revenue to well. the drive the do if high now, fiscal on sustainable ex QX as sit a are to QX roughly you

just Edge, years shows why well. of assurance, but we The quarter, is platform to say, many in developed Anil into a what AIOps Sure. lot which basis and the the is first a obviously, extending the year-over-year the said, I know many, And DDoS was world to moving ago. movement consistent to model. that instrumentation we those promise. have the prescient reiterating doing service the would is on to The move will things enough that Edge, company been to progressing are Omnis software

that work those in of where in forward revenue going the should plus of script had mentioned and for put and our blocks data our companies partnerships, growth. people together opportunities we see some his we'll be have that you again building some with when excellent Michael the So

Liu take & next our We'll of Company. K. question from Liu Kevin

First of historically? question were X allow the carrier large XG, AI out in benefit order terms here, would your on about and those back wondering you similar, you more that? or if think to the kind then to opportunity does seen from were afforded out existing actually expanded just base customers. go And extend to additional need your from by see generally, of I'm XG you just the with able some kind of as to that services value you've what by rolled just you agreements on get more to

Yeah.

not our the the XG of large in necessarily not was will are drive on we have we XG counting instrumentation the of growth. Kevin, more it deals driver announced, we So ELA the I but and a many for XG on to mean, XG accounts aspect, second alone. some that, upgraded

we the to expect spend I think new think we from best hardware I apply more they where a customer be and of carriers. for in think money. that, our a reuse the are that lot AIOps slightly interest they to appeal different need Having if And seeing can our a said have that's module combination. software audience I we in used to would base. AIFs, already And

be relationship And And on be talking to to process, we adjacency, think and story we are have our a company what group shared our are different now, not introductions, but parties. and our smart it's and an getting that's allowed unique we success on. not to will we be data that's counting are through customer interest third trivial. with a get a our I people. So And some a of Essentially, then AIF we we'll but that and it's until of lot interest, from going creating is. data

then Understood. on the side. And maybe one cybersecurity just

about of you adjusting talked and kind details is around forward business, share just You and what things you pipeline of kind of backlog we opportunities that the years? normalized could sorts growth the Maybe as if few next think growth all of good a there. for type of the the in growth rate those the some level for move

Yeah.

have growth and this to of year, of in good the last cybersecurity pipeline was because last at a is year. Our flush we end the very goal year double-digit there year lot had a

tracking not are to cybersecurity. look long-term, at we double-digit in that. We growth But

AI to I rest and answer just business, question, drive to strategy which adding core perhaps slightly cybersecurity. And was the through Instrumentation Matt's perhaps so is our stabilize Edge last in service the it drive Jean grow then assurance growth and answered, others, of over through ops basically the

Piazza to for concluding to At the this call remarks. be Tony time, return I'd happy

the call today. the delay Again, the for your day. patience. concludes short rest That you, appreciate apologize operator. Enjoy of our we Thank and

today's does This conference. conclude

You disconnect may a have and day. your now everyone, lines, great