NetScout Systems, Inc.

Please stand by, your program is about to begin. If you need audio assistance during today's program, please press star zero. Ladies and gentlemen, thank you for standing by and welcome to NETSCOUT's fourth quarter and full 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 NESCO 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 fourth quarter and full fiscal year 2022 conference call for the period ended March 31st, 2022. Joining me today are Anil Singhal, NETSCOUT's President and Chief Executive Officer, Michael Sabados, NETSCOUT's Chief Operating Officer, and Jean 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. Examples of forward-looking statements include statements regarding our future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as anticipate, believe, plan, will, should, expect, or other comparable terms. We caution listeners not to place undue reliance on any forward-looking statements included in this presentation which speak only as of today's date. 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 in 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, on file with the Securities and Exchange Commission. NETSCOUT assumes no obligation to update any forward-looking information contained in this communication or with respect to the 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 the slide presentation in today's earnings release and on our website. I will now turn the call over to Anil for his prepared remarks. Anil?

Thank you, Tony, and good morning, everyone. Welcome and thank you all for joining us today. I am pleased to report that we met all of our objectives for fiscal year 2022 and delivered a solid performance on multiple fronts. In line with our NetScore Without Borders strategy, we increased our existing customer business, forged new customer relationships, and advanced our cybersecurity agenda. These successes led to total revenue growth driven by high single-digit product revenue growth, continued margin expansion, improved diluted EPS performance, and strong free cash flow generation on a year-over-year basis. On behalf of NETSCOUT, I would like to thank our employees, customers, and other stakeholders who contributed to our success in fiscal year 2022. Let's now turn to slide number six for a brief recap and more detail of our fourth quarter and full fiscal year 2022 non-GAAP results. For the fourth quarter, revenue was $191.2 million and diluted earning per share was 29 cents, both exceeding our objectives for the quarter. For the full fiscal year 2022, we delivered $855.6 million in revenue. This represented total revenue growth of approximately 3% year over year. Our product revenue growth rate was over 8% year over year, more than double that of our total revenue growth rate during the same period. Notably, we ended fiscal year 2022 with a substantial backlog of approximately $50 million in unshipped orders. This excludes approximately $60 million in radio frequency propagation modeling orders, which you expect to recognize as revenue in fiscal year 2023. Turning to margins, gross margin was 77.4% up 100 basis points year over year, while our operating margin was 21% up 20 basis points year over year. Our enhanced margin profile diluted EPS of $1.84 in the fiscal year. This represented approximately 8% diluted EPS growth more than twice that of our total annual revenue growth on a year-over-year basis. Finally, we generated strong free cash flow of more than $285 million in our fiscal year 2022. Let's now move to slide number seven for some further perspective on market and business insights. Starting with our enterprise customer vertical, Revenue grew more than 10% year-over-year for the full fiscal year 2022. Additionally, all key industry sectors in this vertical grew on an annual basis. These customers are increasingly focused on cybersecurity solutions and the acceleration of the digital transformation as they emerge from the pandemic and adjust to the new normal of today's operating environment. As a result, we continue to spend momentum in this vertical. Michael will highlight some of the enterprise customer wins we achieved in the fourth quarter during his remarks. Moving to our service provider customer vertical, revenue declined approximately 4% year over year for the full fiscal year 2022. Carriers continue to be in the early stages of 5G deployment, as evidenced by the amount of radio frequency propagation modeling project orders we received during this fiscal year. The majority of these projects are expected to be completed and recognized as revenue in fiscal year 2023. Michael will comment on some of the service provider wins during his remarks. Now let's move to slide number eight to review our outlook. As we look forward, we are excited about our core service assurance DDoS security business, as well as the new opportunity we see within network detection and response areas of the cybersecurity market. Our Omni solutions offer a uniquely differentiated approach compared to today's more traditional solutions, providing faster detection, investigation, and mitigation at larger scale than most current alternatives. As we continue to expand our cybersecurity market footprint in fiscal year 2023, we also plan to disclose more information related to our cybersecurity business, including business size and revenue growth rates. Our cybersecurity business is comprised of our current Arbor security business, along with our new Omni cybersecurity solution. As a baseline in our fiscal year 2022, our cybersecurity business generated revenue of approximately $230 million and delivered mid single digit revenue growth year over year. Moving to our current outlook for fiscal year 2023. We anticipate delivering higher revenue growth than last fiscal year, with the expectation for revenue to be in the range of $895 million to $925 million. This represents a year-over-year revenue growth rate in mid- to high-single digits. We expect our revenue expansion to be driven by a product revenue growth rate anticipated into the mid-single digit to mid-teens range. Regarding profitability, we anticipate diluted earnings per share will be in the range of $1.97 to $2.03. This represents a mid to high single-digit diluted EPS year-over-year growth rate. We are providing this outlook despite various cost headwinds which are related to increased costs associated with travel and events as we return to in-person business operations as well as the macro had been driven by the competitive labor market and elevated inflation. Our outlook also includes the estimated impact of a $150 million accelerated share repurchase program and a $150 million debt repayment, both of which we plan to execute in the first quarter of our fiscal year 2023. Jean will provide additional color and recap on the numbers in her remarks. Finally, given that our current 25 million share repurchase authorization is approaching completion, our board recently authorized a new share repurchase program to allow for the repurchase of an additional 25 million shares of our common stock with no definitive timeframe for execution. In summary, we are very pleased with our fiscal year 2022 performance. and excited about the opportunities we see for NETSCAR in fiscal year 2023 and beyond. We are entering the new fiscal year with a solid foundation from which to continue growing and remain well positioned to help our customers address the challenges and opportunities of the digital world. We look forward to sharing our progress and achievements with you as the new fiscal year unfolds. With that, I'll turn the call over to Michael.