NetScout Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to NETSCOUT's fourth quarter and full fiscal year 2023 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. 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 2023 conference call for the period ended March 31st, 2023. Joining me today are Anil Singhal, NETSCOUT's President and Chief Executive Officer, Michael Zabados, NETSCOUT's Chief Operating Officer, and Jean Bua, NETSCOUT's Executive Vice President and Chief Financial Officer. There's 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 to slide number three, today's conference call will include four 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, including but not limited to those described on this slide and in today's financial press release. For more detailed description on the risk factors associated with the company, please refer to the company's annual report on Form 10-K for the fiscal year ended March 31, 2022, 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 now 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 press 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. Fiscal year 2023 was a strong year for NETSCOUT. We met our top line and exceeded our bottom line financial objectives while continuing to advance our strategic priorities to deliver high-value solutions that enable our customers to succeed in today's increasingly complex digital world. In fiscal year 2023, we delivered another year of total revenue growth while also expanding operating margin, improving diluted EPS performance, and generating solid free cash flow. On behalf of NETSCOUT, I would like to thank our employees, customers, and other stakeholders who contributed to our success in fiscal year 2023. Let's now turn to slide number six for a brief recap of our non-GAAP financial results in the fourth quarter and full fiscal year 2023, as well as some strategic highlights from the year. Jean will provide more detail on the results later in the call. For the fourth quarter, we delivered revenue of approximately $208 million, up nearly 9% year-over-year, and diluted earnings per share of 38 cents, up more than 30% on a year-over-year basis. For the fiscal year 2023, we delivered revenue of approximately $915 million, representing growth of nearly 7% year-over-year, supported by product revenue growth of nearly 10% and service revenue growth of more than 4%. Our service assurance cybersecurity product lines both contributed to our revenue growth on a year-over-year basis, with nearly 9% and more than 1% revenue growth, respectively. We demonstrated strong operating leverage as we delivered $2.18 of diluted earnings per share for the full fiscal year 2023, growth of approximately 18% year over year, and more than double that of our revenue growth rate over the same period. Finally, during our fiscal year 2023, we returned approximately $150 million back to our shareholders in the form of an accelerated share repurchase program and generated solid free cash flow of more than $145 million. In fiscal year 2023, we also advanced several technology initiatives that we expect to contribute to our revenue growth potential in 2024 and beyond, and serve as critical building blocks as we deliver on our mission as guardians of the connected world. One of these advances is the development of the next generation Omni cybersecurity solution, that builds on learning from our initial launch last fiscal year to better drive customer value. Enhancements to the Omni Service Security solution include advanced network detection and response capabilities that produce analytics as the source, leverage machine learning, reduces false watch tips, and provide the ability to operate at greater scale. This allows for better detection, mitigation, and investigation capabilities through a differentiated approach compared with competing products. We expect the next-generation Omni solution to be a high-value product upsell for existing customers who already use our solutions, trust us, and can enhance their return on investment by adding Omnis to address cybersecurity challenges leveraging their already installed infrastructure. We expect that our enhanced and expanded OMNIS offering will be available in the early summer. We believe we are well positioned to expand our OMNIS revenue in the second half of the fiscal year 2024. We also have developed and are launching two new DDoS solutions. First, Dynamic DDoS, which is a solution that adapts to the threat landscape as it evolves and automates the countermeasures used to address cyber attacks, including latest multi-layer direct path attacks. The second is mobile DDoS security. This solution extends our powerful DDoS capabilities that service providers currently leverage in their wireless networks to now be available to protect their mobile networks to address that distributed threat surface. Like our enhanced Omni Cybersecurity solutions, these new solutions are expected to increase our Arbor security revenue in the back half of fiscal year 2024. Now let's move to slide number seven for some further perspective on market and business insights. In our service provider vertical, revenue grew nearly 14% year over year for the full fiscal year 2023. This increase was primarily driven by higher revenue than usual related to radio frequency propagation modeling projects from Tier 1 carriers in North America. Overall, both domestically and internationally, we continue to see carriers invest in their 5G-related network deployment as well as other areas of their businesses. For example, as carriers transition from the propagation planning cycle and initial 5G standalone network build-outs, we believe we are well positioned to further support carriers' need to monitor their new 5G networks as traffic increases over these networks. Additionally, we believe we are well positioned to expand our business with these carriers in other areas, including their internal IT operations and with our new mobile DDoS security solution. In our enterprise, customer vertical revenue was relatively flat for the full fiscal year 2023 on a year-over-year basis. Although enterprises have been under pressure from the macroeconomic environment, we continue to believe that this customer segment represents an attractive growth opportunity for NETSCOUT. As highlighted in our recent published industry reports, enterprises continue to require solutions that better protect their system and accelerate their digital transformation. We remain focused on helping to address these needs by leveraging our growing suite of comprehensive offerings to provide enterprise customers with an integrated and differentiated platform for service assurance and cybersecurity requirements. By extending visibility to the edges of the network, We help customers cover blind spots and address control challenges, facilitating their leverage of off-prem and cloud solution as part of the digital transformation initiatives and new network architectures. Michael will provide more insight into our industry research as well as customer wins within our vertical during his remarks. Now let's move to slide number eight to review our outlook. For fiscal year 2024, we remain committed to operating our business with a balanced approach to revenue growth and profitability as we manage the dynamic microeconomic environment. Based on our current view, we expect to continue to grow revenue, improve our margins, and dilute EPS performance and generate solid free cash flow. We entered the year with solid momentum and anticipate that the opportunities created by extending our core service assurance visibility to cover blind spots at the edges of the networks created by distributed architecture, as well as our new DDoS offerings and our next-generation Omni solution will more than offset lowered radio frequency propagation modeling project revenue, which was at a high point in fiscal year 2023. Jean will provide the details of our fiscal year 24 outlook in her remarks. Longer term, we remain focused on driving towards our business objectives by advancing our strategy to ensure the performance, availability, and security of mission-critical infrastructure for our organization around the globe, anytime, anywhere, as guardians of the connected world. As a trusted brand with more than three decades in business, and an advanced service assurance and cybersecurity platform based on our scalable deep packet inspection technology, we remain uniquely positioned to help our diverse primarily Fortune 500 customer base to capitalize on major technology trends, including expanding cybersecurity threats, digital transformation, and 5G network evolution. and succeed in today's increasingly distributed and complex digital world. In summary, we are pleased with our fiscal year 22-23 performance and excited about the opportunity we see for NETSCOUT in fiscal year 2024 and beyond. 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.