NetScout Systems, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to NETSCOUT's second quarter fiscal year 2025 financial results conference call. At this time, all parties are in a listen-only mode, and tell the question and answer portion of the call. As a reminder, this call is being recorded. Tony Piazza, NETSCOUT's Deputy CFO, 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 2025 conference call for the period ended September 30th, 2024. Joining me today are Anil Sankal, 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 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. Actual results could differ materially from any forward-looking statements. These statements speak only as of today's date and involve risks and uncertainties, including but not limited to those described on this slide and in today's financial results press release, which are available on the investor relations section of our website, as well as in the company's most recent annual report on Form 10-K and subsequent SEC filings on file with the Securities and Exchange Commission. NETSCOUT assumes no obligation to update any forward-looking information except as required by law. Now, 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 based 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 the 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. We delivered Q2 fiscal year 2025 revenue and earning results in line with our expectations as we continue to position NETSCORE to win in the market. We remain confident that our differentiated solutions are well positioned to address our customer cybersecurity and service assurance needs well into the future. During the quarter, we released several products and product enhancement aligned with key technology trends that help address our customer cybersecurity and service assurance needs, including our AI-ready smart data solutions. We also had a strong turnout and interest in our recent annual Engage Technology and User Summit that we attribute to our customer enthusiasm for our current and upcoming portfolio of solutions. Looking ahead, we remain focused on executing against our full fiscal year 2025 non-GAAP expectations as we capitalize on the opportunity and navigate the challenges of the current market environment. Let's turn to slide number six for a brief recap of our non-GAAP financial results for the second quarter and first half of our fiscal year 2025. For the second quarter, Revenue was approximately $191 million, down approximately 3% compared to the prior year period. The comparison was impacted by two items that benefited the prior year period. Approximately $11 million of backlog-related revenue and approximately $3 million for the now-devastated test optimization business. Normalizing for those, Q2 revenue would have grown at a mid-single-digit percentage. The diluted earnings per share was 47 for the second quarter, which is down approximately 23 cents or 14 cents from the prior year. As we previously noted, this includes an approximately 15 cents had been from the reversal of incentive-based related expenses that benefited last year's Q2. Normalizing for this Q2 earnings would have been slightly higher year over year, even after absorbing the $0.02 impact from an unrealized foreign investment loss. For the first half of the fiscal year, or the six-month period ended September 30, 2024, revenue was approximately $366 million, down approximately 10% year-over-year, primarily due to the unusually high levels of backlog-related revenue that benefited last year, as well as the aforementioned test optimization divestiture. Normalizing for this factor, our first half revenue would have grown low single digits year over year due to solid order flow growth. The corresponding diluted earning per share for the first half of 75 cents was a decrease of approximately 18 cents year over year. Normalizing for the previously mentioned incentive-related expense headwind alone, our first half EPS would be relatively consistent year over year, as cost management measures and again on a foreign investment help to offset the revenue headwind impacts. Now let's move to slide number seven for some further perspective on business and market insights. Starting with our service assurance offerings, revenue for the first half of fiscal year 2025 was down approximately 13% year over year. That decline was largely attributed to the backlog related revenue headwind and the constrained spending environment primarily from the service provider element of the market. Importantly though, carriers continue to invest their 5G initiatives domestically and internationally at a measured pace as they manage investments against monetization opportunities. On the enterprise front, we also see spending scrutiny but maintain traction and remain confident that as customers advance their digital transformation initiatives, NETSCOUT is well positioned to be an additional business by leveraging our value proposition of extending visibility to the edges of the network. Additionally, as customers advance their AI initiative, we believe our new AI-ready, high-quality, smart data will be invaluable to ensure unique and deep insights critical for enabling organizations to improve decision-making and optimize the user experience. Moving to our cybersecurity offering, revenue in the second quarter increased approximately 3% and was down approximately 4 cents for the first half, primarily due to the backlog-related headwind. Cybersecurity continued to represent a strong growth opportunity for NETSCOUT as customers prioritized spending to protect themselves from the expanding cyber threat landscape. This was validated by our recently released first half 2024 threat intelligence report, where we highlighted that the surge in DDoS attacks and activist activity continues to threaten critical global infrastructure, including banking, financial services, government, and utilities. The report points to a dramatic 43% increase in the number of application layer attacks and 30% increase in volumetric attacks. Michael will provide more insight regarding customer wins in our offering areas during his remarks. Now let's move to slide number eight to review our outlook. Looking ahead, we are reaffirming our full year 2025 non-GAAP revenue and EPS outlooks. Jean will provide a recap of the outlook in her remarks. As we navigate both the opportunities and challenges of the current market environment, we remain focused on executing against our full fiscal year 2025 expectations as we advance our strategic priorities. These include enhancing our cybersecurity offerings to meet growing customer needs, given the expanding cyber threat landscape, and continue to prudently manage costs. During the first half of the fiscal year, we completed the majority of the previously announced voluntary separation program. We expect this to have a benefit of approximately $25 million of annualized cost reduction, a portion of which will be recognized during fiscal year 2025. Long-term, we remain committed to leveraging our Visibility Without Borders platform to help customers address the performance, availability, and security challenges of the complex digital world. We look forward to sharing our progress with everyone throughout the remainder of our fiscal year. With that, I'll turn the call over to Michael.