NetScout Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to NETSCOUT's second quarter fiscal year 2022 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, Vice President of Corporate Finance, and his colleagues at NETSCOUT are on the line with us today. If you require operator assistance at any time, please press star zero. I would now like to turn the call over to Tony Piazza to begin the company's prepared remarks.

Thank you, operator, and good morning, everyone. Welcome to NETSCOUT's second quarter fiscal year 2022 conference call for the period ended September 30th, 2021. Joining me today are Anil Singhal, NETSCOUT's President and Chief Executive Officer, Michael Zabados, NETSCOUT's Chief Operating Officer, and Gene Bua, NETSCOUT's Executive Vice President and Chief Financial Officer. There is a slide presentation that accompanies our prepared remarks. You can advance the slides in the webcast viewer to follow our commentary. Both the slides and the prepared remarks can be accessed in multiple areas within the investor relations section of our website at www.netscout.com, including the IR landing page under financial results, the webcast itself, and under financial information on the quarterly results page. Moving on to slide number three, today's conference call will include forward-looking statements. These statements may be prefaced by words such as anticipate, believe, and expect, and will cover a range of topics that are not strictly historical facts such as our outlook, our market opportunities and market share, key business initiatives and future product plans, along with their potential impact on our financial performance. These forward-looking statements involve risks and uncertainties, and actual results could differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors, which are described on this slide and in today's financial results press release, as well as in the company's annual report on Form 10-K for the year ended March 31, 2021, and the company's subsequent quarterly reports on Form 10-Q, all on file with the Securities and Exchange Commission. Nascout assumes no obligation to update any forward-looking information contained in this communication or with respect to announcements described herein. Let's turn to slide number four, which involves non-GAAP metrics. While this slide presentation includes both GAAP and non-GAAP results, unless otherwise stated, financial information discussed on today's conference call will be on a non-GAAP basis only. The rationale for providing non-GAAP measures along with the limitations of relying solely on those measures is detailed on this slide and in today's press release. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations of all non-GAAP metrics with the applicable GAAP measures are provided in the appendix of this slide presentation and in today's earnings press release. They are also available on our website. I will now turn the call over to Anil for his prepared remarks.

Anil? Thank you, Tony. Good morning, everyone, and thank you for joining us today. Let's begin on slide number six with a brief recap of our non-GAAP results for the second quarter and the first six months of fiscal year 2022. We are pleased with our second quarter results, which have contributed to a solid foundation as we move into the second half of the fiscal year. Strong software-only product revenue growth in the second quarter supported our overall revenue increase, enhanced our margins, and improved our diluted earnings per share on a year-over-year basis. Revenue increased more than 3% in the second quarter to $211.9 million, driven by product revenue growth of more than 10%, which was partially offsetted by a decline of less than 3% in the service revenue, attributable to service provider consolidation and legacy product line atrophy compared with the same period last fiscal year. Diluted earnings per share increased approximately 24% to $0.47 compared with the same quarter last year. On a year-to-day basis, for the six months of fiscal year 2022, revenue increased more than 3% to $402.2 million, driven by product revenue growth of more than 12%, which was partially offset by a decline of 3% in service revenue for the same reasons previously mentioned for the quarter. Diluted earnings per share increased approximately 22% to 67% for the first half of fiscal year. All these comparisons relate to the same periods in the prior fiscal year. Let's now move to slide number seven for some perspective on market trends and business insights. As guardians of the connected world, our solution continues to be vital. We provide borderless visibility and cybersecurity solutions that assure and secure the performance, availability, and security of our customers' digital ecosystems. Our customer can leverage these solutions to compete more efficiently and effectively in the new economy, which is increasingly essential given the most recent challenges brought about by COVID-19 pandemic. Looking ahead, long-term technology trends, including 5G, digital transformation through cloud migration, and the requirements for greater cybersecurity protection are all setting the stage for NETSCOT continued advancement. Elaborating on the cybersecurity area, we recently released our threat intelligence report for the first half of 2021. In the report, we noted that the global cybersecurity crisis has continued to accelerate. Attack frequencies are up and on track for another record-setting year. The impact on both public and private organizations is tremendous, and these groups continue to seek solutions that can assist them with these enormous challenges while keeping the organization safe. Equipped with our OmniCyber solution, we are well positioned to continue supporting customers in this area. Our OmniCyber solution combines our leading service assurance monitoring, troubleshooting, and forensic capability with our cybersecurity intelligence detection and mitigation solution. We are already starting to see interest in this front, and Michael will discuss some advances in this area later on in his remarks. As we expect our new cybersecurity solution to play a larger role in our growth next fiscal year, we are also analyzing key metrics for this area of our business and plan to start reporting on them in our fiscal year 2023. Now I would like to turn to our customer verticals to provide some more perspective on performance and the previously mentioned technology trends. During the quarter, as our customers dealt with the challenging supply chain environment and experience procurement issues, our software-only solution enabled them to utilize their budgets more effectively by accelerating the timing of their purchases with us. This moved some deals that had been previously expected in the second half up earlier in the fiscal year. Conversely, the rise in software-only deals also helped to mitigate potential constraints on our operations from supply chain difficulties as well. In our enterprise customer vertical, revenue grew more than 7% in the first half of fiscal year 2022 compared to the same period last fiscal year. Organizations are beginning to spend again as they emerge from the pandemic and restart previously delayed projects. We expect this pending momentum to continue and anticipate mid- to high-single-digit revenue growth in our enterprise customer vertical for the full fiscal year based on our current deal pipeline. Michael will highlight some of the customer wins we achieved during the quarter in this vertical in his remarks. Our newer enterprise products related to smart edge monitoring for remote work environment, as well as our Omnis cyber intelligence solutions, which address the security landscape, have been gaining customer interest. We expect a greater contribution to our results from sales of this product in our next fiscal year as customer offices start to reopen. Such conditions will allow us to build our pipeline as our sales team resumes traveling, conduct more in-person customer meetings, and complete more proof of concept demonstrating the value of our solution in saving time, cutting costs, and reducing the mean time to resolution. Moving to our service provider customer vertical, for the first half of the fiscal year, revenue was down just under 1% compared to the same period in the prior fiscal year. Looking ahead, we expect 5G deployment to continue, and we are also advancing the radio frequency propagation modeling project orders we previously received, which will assist customers in planning their network. However, we also note the cautious spending environment of service provider customer vertical, as well as provider consolidation and atrophy of legacy product lines, which has resulted in lower service revenues. As such, based on our current deal pipeline, we anticipate that this vertical could experience flat to mid-single-digit revenue decline for the first fiscal year. I would also like to point out that we received a second large 5G-related order from a Tier 1 domestic service provider during our second quarter. Michael will comment more on this service provider when during his remarks. Now let's move to slide number eight to review our outlook. With the first half of fiscal year 2022 behind us, we have a solid foundation to build on and are excited to continue working toward meeting our financial and operational objectives for the fiscal year. We continue to advance our NetScore Without Borders initiative. This initiative is focused on expanding our business with current customers by leveraging our incumbency to access both existing and new budgets, acquiring new customers through new consumption choices, and expanding our reach into high-value adjacencies that can leverage our smart data, such as expanded cybersecurity and big data analytics. As the world continues to emerge from the pandemic, we remain focused on meeting customers' needs for service assurance and cybersecurity solutions that solve some of the connected world's toughest challenges. Based on our results to date and our current deal pipeline, we are reiterating our outlook for low single-digit revenue and diluted earning per share growth in the full fiscal year 2022. Jean will provide a recap on the numbers in her remarks. I look forward to sharing our progress with everyone going forward as the fiscal year continues to unfold. I will now turn the call over to Michael for additional updates.