Q3 2021 Netscout Systems Inc Earnings Call
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Yes.
Ladies and gentlemen, thank you for standing by and welcome to net Scouts third quarter, 'twenty 'twenty, one and financial results conference call at.
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 net scout are on the line with US today. If you require operator assistance at any time, Please press star zero.
I mean, and I'd like to turn the call over to Tony Piazza to begin the company's prepared remarks.
Thank you Leo and good morning, everyone. Welcome to net Scouts third quarter fiscal year 2021 conference call for the period ended December 31, 2020, joining me today are no Cingal net scouts, President and Chief Executive Officer, Michael Szabados, Net Scouts, Chief operating officer and John.
<unk> net sales executive Vice President and Chief Financial Officer.
There is a slide presentation that accompanies our prepared remarks, you can and advance the slides in the webcast viewer to follow our commentary.
Both the slides and the prepared remarks can be accessed and multiple areas within the Investor Relations section of our website at Www Dot net scout dot 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.
Get 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 rich.
<unk> assumptions and uncertainties assumptions and other factors, which are described on this slide in todays financial release.
Financial press release as well as in the Companys annual report and form 10-K for the year ended March 31, 2020, and subsequent quarterly reports on form 10-Q net.
<unk> 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 and non-GAAP basis only.
Cash now for providing non-GAAP measures along with the limitations of relying solely on those measures is detailed on the slides 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 and today's earnings press release and are available on our website.
I'll now turn the call over to and nail for his prepared remarks Anil.
Thank you Tony Good morning, everyone and thank you for joining us and.
Let's begin on slide number six with a brief recap of what third quarter non-GAAP results.
And we're generally pleased with our third quarter results. They contributed to our strong year to date earnings per share growth over the same period and there for you and the prior fiscal year and.
Revenue for the quarter was dutra and did point $7 million.
Earnings per share was <unk> 66 in the quarter.
<unk> had solid.
Gross and operating margins of 78, 6% and 28.
2% respectively.
This was attributable to high margin and security product performance and reduce expenses from our continued cost control focus and benefit from the pandemic related restrictions on travel and events.
Good day, we are narrowing our revenue range and increasing our EPS outlook as a result of about a year to date performance.
Let's move to slide number seven and for some further perspective on market trends and business insights.
From a market perspective, our offerings are being well received given our ability to provide service assurance with real time pervasive visibility and insight.
Our security solutions mitigate disruption photo and customers and all of our product provide solutions, regardless of the customers' underlying infrastructure.
This is important as customer product they've got the information technology infrastructure and disciplined dynamic environment that is training the networks in terms of volume and attempted security breaches.
Despite these needs and it continues to be a challenging selling environment as many companies are financially constrained and they manage through the current pandemic and macroeconomic environment and are forced to make tough choices on values and visibility and protection against spending constraints.
And the service provider vertical.
And the service provider vertical revenue declined approximately 11% for the quarter and approximately 9% on net year to date basis, we don't do not directly and immediate changes to the service provider spending environment, but are optimistic about five day, given the recent spectrum options.
As we have discussed on prior calls the next technology evolution that we believe will create increased customer spending and this vertical is Friday and specifically the buildout of the stand alone <unk> networks, Although we have not had the stand alone <unk> network point, yet we are starting to see progress on this front.
The conclusion of the FCC U S auction process for the C band spectrum required to advance the Standalone part D networks at record breaking prices.
Because our currently awaiting their spectrum and locations, which would be a catalyst to do advancing the build out of Standalone part D networks in the U S. Michael will highlight some recent customers with Vince and this article during his remarks.
And the enterprise customer vertical and revenue declined approximately 13% for the quarter and approximately 4% on a year to date basis. The primary driver of the year to date decrease were lower federal government spending.
And we have previously mentioned, even with a solid pipeline of user approved projects and the federal government sector and the timing and magnitude of funding for these initiatives has been difficult to predict and the current environment.
Removing federal government revenue from the comparison and to remain at the enterprise value revenue would have grown in the low to mid single digits on a year to date basis.
Given the heightened awareness around cyber security from the pandemic and the recent news of the sunburst attack I would like to take a moment to frame our security product line.
Our security offerings in particular, our smart Ddos solutions have done well this year our year to date security revenue growth is and the low single double digits with growth and both the service provider and enterprise verticals compared to the same period last fiscal year.
Our security offerings currently make up approximately a quarter of our total annual revenue.
From a competitive perspective, our security operating are differentiated and that they are driven by a broad and deep visibility that illuminates our customers' network infrastructure using patented net card packet and flow processing technologies and have a unique intelligence.
We also focused in two areas speeder detection from the net broke through the application layer and fast access to forensic capability capabilities that allow a customer to quickly understand what happened during any incident.
Most importantly, our projects have delivered against our requirements are most demanding organization all around the world.
We are increasing of workers and the secured area as we continue to integrate our said with assured and security solution to provide unique offerings in the market.
For example, we recently released two new products cyber investigator and cyber stream, which combined number packet based technologies and are designed to accelerate threatening patenting forensics and incident response.
Our <unk> product is designed to cash and block and attack and cyber investigator and its diversity and provide insight into the minds of the hackers hackers Michael.
Michael will highlight more on this and some of our enterprise and in this vertical during the his remarks.
Now, let's move to slide number eight to review our outlook.
Yeah.
Our focus during these challenging times has been to keep our team safe and productive day.
Alright, and customers well with the highest quality solutions and the service and to drive overall margin expansion, while preserving liquidity to maintain a strong balance sheet and financial flexibility.
Our recent a relevant solutions trusted brand and strong customer relationships dedicated team and solid financial profile have positioned as well.
Well as we continue to weather the current environment.
That said, we are not immune to the impact of that dynamic and resulting challenges challenging macroeconomic environment that is causing along the elongated purchasing cycles in the face of this climate.
Remain committed to enhancing over perhaps the capability to day, we are raising our fiscal year 'twenty 'twenty, one and earnings per share outlook, given our solid year to date earnings performance.
With one quarter remaining of our fiscal year 'twenty 'twenty. One we are also narrowing of our annual revenue guidance range although.
Although the midpoint and remains the same.
Dean will provide more details on our updated guidance during his remarks.
We appreciate their dedication and support of our employees and stakeholders.
Stakeholders. During this time, we also look forward to interacting with many of our users and partners at our upcoming upcoming virtual engage 'twenty 'twenty, one technology and user event, Michael will provide more information and this event during his remarks.
With long term market trends, such as digital transformation cloud migration increased cyber threats and <unk> networks in net got flavored. We continue to believe we are well positioned as guardians of the connected world when we emerge from this global crisis.
I look forward to updating you on our progress as we finish this fiscal year and FY.
And sharing our strategy for fiscal year, 'twenty, two and beyond on a few chipboard allowed turn the call over to Michael for his remarks. Thank you Amit and good morning, everyone slide dental advise the areas that I would call it.
In terms of cost and moving starting with customer wins in the service provider vertical a notable win in the quarter was a one was one with the Athena one domestic mobile service providers and continues to build on our solutions.
<unk> net book.
And the deal was a low eight figure orders similar to the orders placed they placed in the same quarter last year. The deal encompassed our entire software portfolio of service assurance solutions.
And as a key part of this this provide to us and <unk> offerings.
Continuing with the service provider vertical from a secular perspective.
Additional opportunities emerging from $4 <unk>.
Alex due to the strong income increase in OTT or over the top traffic during the quarter. We won a mid seven figure deal with an existing customer that is a leading msos or multi services operations company.
They began and initiatives to place Ddos protection and the subscriber edge of the network beyond the typical placement and the so called speeding edge in order to optimize traffic flow and offer and managed services to their customers from these new installations.
Small ddos opportunities are growing due to the new more sophisticated and complex <unk> types that necessitate on premises deployment in the enterprise market often in front of our customers firewalls to protect them from being overrun by high volume volume metric at IDEXX.
Our <unk> product has benefited from this trend.
In the enterprise vertical and new logos are often competitive wins against an incumbent and in some cases, the opportunity arises and greenfield accounts due to growing threats to mission critical services.
Such was the case with the low seven figure deal and in Asia, where the cost and lose the back office service provider to a leading U S Bank, which is a longstanding customer of ours and this situation we sold at the CTO level and could address both their service assurance and Ddos protection and environment with a combination of.
<unk> and <unk> and smart Ddos solutions increasingly and enterprise means our superior portfolio breadth and depth are the deciding factor in our favor.
Sector that has continued to burn for peripheral and belt and our enterprise customer base. In this environment is healthcare during the quarter. We won a series of deals that amounted to a high seven figure total with a leading U S health care.
And we as a long standing customers. The transaction was a refresh and expansion of their existing service assurance Srs deployments at various sites. This refresh was an opportunity to convert that appliance deployments do our costs.
<unk> off the shelf offerings.
<unk> was a financially compelling value to the cost and the expansion.
Expansion opportunities have been developing and cloud initiatives telemedicine and application and insurance.
In terms of go to market activities, we continue to focus on our strategic partnerships and customer engagement.
One example of a key strategic partnerships are key.
Strategic partnerships is one with Amazon.
Amazon Web services.
In November we exited at the AWS annual re invent 'twenty and 'twenty event, and announced and demos and net Scott cyber and investigator in the cloud cyber and investigator is also available in all of the form factors as Anil mentioned and.
Is designated to accelerate that.
Designed to accelerate threat hunting and investigation.
We collaborated closely with AWS in the development of pioneering packet excess services, which enable <unk> service assurance vendors and deployed their solutions simply and affordably and the cloud.
On the customer engagement front, we are planning our annual engage technology and user summit as a virtual event scheduled for April 19th to April 30.
And we're engaged 'twenty 'twenty, one we are expanding the event, both users and prospects and both the service assurance and cyber security fields over the two weeks, we will showcase our security service assurance and Ddos capabilities through presentations panel discussions demonstrations and hands on training.
Event is an annual tradition and the highlight of the year for us and Europe.
Given given the opportunity to meet with our user and partner community and discuss how our solutions truly offer visibility without borders that concludes my prepared remarks, and I will now turn the call over to Steve. Thank.
Thank you Michael and good morning, everyone.
Patrick So our third quarter and first nine months of our fiscal year 2021 performance along with our guidance.
And the fiscal year as a reminder, this review focuses on our non-GAAP results unless otherwise stated and all reconciliations with our GAAP results appear presentation.
Slide number 12 details our results for our third quarter again year to date and fiscal year 2021.
Focusing on the quarter.
Revenue declined 12% over the same quarter in and prior year to $228 7 million.
Product revenue declined 19, 8% and service revenue declined two 6% over the prior year quarter.
Our third quarter fiscal year 2021, gross profit margin was 78, 6% up 8% over the same quarter last year, primarily attributable to the product mix within the quarter. Our software only sales were 31% of service assurance product revenue.
And 42% and the third quarter of the prior year.
<unk> operating expenses decreased 12, 1% from the prior year, reflecting continued cost controls and reduced cost of sales and marketing and pandemic related travel restrictions.
We reported an operating profit margin of 28, 2% compared with 27, 3% and the same quarter last year.
Diluted earnings per share was <unk> 66, compared with 73 from the same quarter last year.
Turning to slide 13, I'd like to AT&T revenue trend. The first nine months of the fiscal year at the end of our fiscal third quarter net service provider customer vertical revenue declined approximately 9%, while the enterprise vertical declined approximately 4% approximately 51% of total revenue from it.
First nine months of the fiscal year with generated by the service provider vertical with the remainder and the enterprise.
Turning to slide 14, which shows our geographic revenue mix and a GAAP net.
Revenue by geography was 59% and the United States, and 41% internationally and with no customers and the quarter all of the first nine months of the year that represented 10% or more of revenue.
Slide 15 details our balance sheet highlights and free cash flow. We ended the quarter with cash cash equivalents short term marketable securities and long term marketable securities of $494 million.
Which is an increase of $62 6 million.
We ended the second quarter free cash flow generating and the quarter was $62 million.
During the quarter, we repurchased approximately 151000 shares of our common stock at a cost of approximately $3 3 million.
Which is an average price per share of 21 and 2016.
And we currently have a share repurchase program and play and to be accurate and the market depending on market.
From a debt perspective at the end of third quarter, we had $450 million outstanding on our $1 billion, we filed and credit facility.
Revolving credit facility provide flexibility without any required loan amortization and two <unk>.
Patiently use our cash flow and maintaining liquidity and we plan to repay $100 million.
And alcohol.
Accordingly, we anticipate outstanding debt to be $350 million.
Entering our fiscal year 2020 sales our revolving credit facility expires in January of 2023 and has no acquired.
While repayments until maturity.
To briefly recap other balance sheet highlights accounts receivable net was $208 million.
Down by $5 5 million since the end of March.
Those were 70 days versus 73 days at the end of fiscal year, 'twenty and 'twenty and 77 days at the same time last year, the improvement and the Dsos and the third quarter of this year compared with the third quarter of the prior year is primarily attributable to the timing of orders within the quarter.
Let's move to slide 16 from a guidance I'll focus my review on our non-GAAP guidance, we have updated our fiscal year 2021 guidance, which was originally issued on October 29 2020.
Quarterly and fiscal year, we are narrowing the range of our expected revenue performance and increasing our earnings per share expectations. We now expect revenue for fiscal year 2021 to be and the range of $825 million.
Two $840 million.
We expect non-GAAP earnings per share to improve over last fiscal year, and B and a range of $1 60 to $1 67.
I would also like to note a few other items related to our outlook for fiscal year 2021, we anticipate that gross margin to be approximately 76%. We expect our full year tax rate to be approximately 21%. Additionally, we expect the diluted weighted average shares outstanding for the fiscal year to be approximately 74 million share.
That concludes my formal review of our financial results I will now turn the call over to Lino feedstock.
To start Q&A.
At this time, if you would like to ask a question. Please press star one on your Touchtone phone, if you wish to remove yourself from the queue press the pound key we do ask and the interest of time that you limit yourself to one question and one follow up.
And we'll take our first question from Matt Hedberg of RBC capital markets.
Hey, Thanks, guys. Good morning, Thanks for the.
And the questions here.
Neil.
Service provider spending was down 11%.
And I was wondering if you'd talk a bit more about the dynamics there and.
And maybe a little bit more on your large deal pipeline there.
And that might get you more confident on Q4 expectations on the service provider side.
Well overall as Matt mentioned and the bus I think there has been consolidation and changes in the large customer.
Large carriers that are for consolidation and lack of spending with one of them and that it has affected.
Our rug business over the last few years.
And.
And we think we are hitting the.
All the bottoms evolved and negative effect of these events and so we don't think that situation will get worked into next year.
But on the international side of our pipeline is improving and our and I think there is still lot of <unk> spending and we have spent tremendous R&D and the <unk> wildfire is not bringing the revenue it is allowing us to try and <unk> business and.
And so when you are doing five day trials traffic portfolio continues to grow.
I I'm overall feel that I think we have.
Generally hit the bottom and the Galleria area and the second is that and there is a lot of interest in being able to use blogging Mar deals.
For security and with our service edge orders product so.
There are a lot of questions about Iot base attacks and and.
Ddos attacks on the carrier and the under mobility network on the line.
And we have positioned properly and the right places as incumbent and big Gadhia demand accounts.
You can sell software modules without the need for them to buy additional hardware and when they buy they spent a lot of money on hardware that means there's less money leftover product. So I think those other than mix and I don't know where that I directly answer your question, but overall are you.
The situation is normalizing.
And I think there is improvement outside of U S.
That's great that helps and then Jean <unk>.
And your prepared remarks, you noted that software only sales were 31% of service assurance product revenue and it was a bit lower I think it was 42%.
Last year, and just sort of curious on why that's the case I mean, I guess I would assume that that over time as software only and we continue to mix up rather than down this quarter, maybe there was a dynamic that caused that.
I would.
The way the way we've discussed it before is that we have many different offerings for customers and they can buy.
And any form factors that day.
So the mix is generally a function and preference of customers last quarter last year's Q3.
We had many deal that we're including some deals and the enterprise that was software only and so I would just say, it's a function of the customer.
Projects that actually happened in Q3, and this year versus Q3 of last year.
Got it and somewhat more of a comp significant I'm sorry, we've made significant headway and also in.
Some of our software only and a security product, which we don't have in that particular, 30% to 33% that we discussed.
Got it that makes sense that makes a ton of sense great. Thanks, guys. Thank.
Thank you.
And.
Our next question is from Eric Martin and his team of Lake Street.
Yes, I also wanted to focus on the carrier spend just to clarify.
And I realize.
I may not quite understand and Neil when you say carrier spending hitting bottom or.
Does that mean that there is kind of a maintenance level of spending from carriers that.
And it stops.
The carrier spend on an annual basis from going down anymore or it's at a bottom and you expect it to go up and.
And kind of on a longer term basis.
I think on the U S carriers docked all flow to use U S. GAAP right now Theyre only three left.
And that's what I mentioned that I think we are doing and he's naval business on both the product side and renewals have stabilized and Thats, what I was saying that a further decline into next year is unlikely and that was a big portion of.
Our total caddy of spend and total cash contribution to revenue.
Outside of U S. I think there is a day to day uptick and.
And at people are continued to be interest and that we have increased our focus on and.
Our increased focus on international and innovate reduced our dependency on top and customer and lastly, I think we have talked a lot about tier ones and one of the things. We are doing now with over some pricing model is to see how do we go after the tier two market average.
Which is much more price sensitive so I think overall effect of all of these things.
Is and normalization and our service agenda, and they have a revenue and <unk> and carrier with security and potential upside and <unk> as a potential upside next year.
Got it.
You talked about or one of the things and the quarter that took place was a nice renewal and expansion with Vodafone I know you've had Vodafone gotta be over probably 10 years.
15 years, you've had a relationship there what can you tell us about how that relationship changed on this renewal versus the prior relationship.
I think it just strengthens and total revenue stream coming from them and so this day festival. This deal is about.
Governing all the outflows and Europe, and so about Saturday night, and so as the monster deal and they get price.
And they are at the predetermined price point.
Anybody who wants to buy a blanket contract.
And so it just our latest wise of a business index Vodafone of course for the next three years.
And we're not going to be a big price negotiation moving forward and is the expansion of the deal we have done with them earlier, so and at this time it was a little bit tougher because we had more and more people.
Bidding for this.
A discussion of our cloud based deployment and five day direction and and the and we won and so I look at it the Vodafone business is not going up or down.
The continuation of the similar margins and revenue and we had and the last three years.
Got it and congrats on that.
One last question for me and the fed.
Characterize it somewhat unpredictable as to when that business hits.
And given.
Change in administration is there anything that <unk>.
How's your to predict that business, a little bit better and over the next 12 months versus the prior 12 months or is it really unrelated to.
And the administration and charge.
I think dean may have some other thing because the points there, but I think it's unrelated but that doesn't mean that doesn't mean, there may not be a positive impact, but overall I see there is a lot of interest and our cyber security and <unk>.
<unk> and the federal area, and I think that could be a bigger effect and.
And as you May remember, we announced the product last year and the security area beyond the Ddos, but it had been very difficult Google price.
Because of the pandemic and.
Put new equipment, there so I feel that.
And if the comparison from last year Federal last year Federal was it I mean, there was a great deal. So part of it is that but I really think that cyber security Bush.
And our solution in the coming year.
Next year will be a bigger contributor to man.
But the trend and then the government change our administration to it.
Okay, and then one for Jean given the repurchases that you did and the December quarter I see the guidance includes the your expectations for the weighted average shares historically, you've had some kind of calculus.
And back I know because of Covid you revisit of that so maybe it was nine nine months ago.
Use of cash you have said in the press release, Hey, we're going to pay down $100 million on the revolver. So how aggressive are we going to be on the buyback.
Well when we look at the buyback.
And we look at what our.
Future valuations will be based on our plans and where the market is so it's really a condition of.
What the share prices at the moment when we put the.
And when we put the grades and place. These grades were put in place back at the beginning of our last quarter. After our earnings call. So probably sometime in November and so they would have been based on market conditions at that time.
Okay.
And then the Paydown on the debt is just really didn't have more breathing room on covenants or just.
Version to that.
When we looked at it we have we.
And we generate a lot of cash and a lot of free cash flow, especially sitting in the United States and rather than keep it on our balance sheet. We thought at the moment it made sense to pay down the $100 million on the revolver that will bring us down into a slightly lower price on the on our LIBOR margin. So we should say.
Some earnings per share and FY 'twenty two on that but the important thing is that that will evolve is a flexible vehicle. So that means that I can pay it down and then in the quarter isolating needed to ratchet the debt backup buffer whenever opportunity arose I could do that very easily and so it's a very flexible instrument.
And my follow up question.
Okay. Thank you Jacob.
Okay.
Our next question is from James Fish of Piper Sandler.
Hey, guys. Thanks for the questions here.
And I wanted to start on the product upside.
Especially with enterprises was more weighted to budgets loss versus kind of project deferrals coming in from product prior quarters versus any demand. This quarter. Following the solar winds breach for security and just related to the solar ones breach and this caused from enterprises to look actually up a net scouts.
Service assurance portfolio as replacement at all.
So I'll answer this a solar and wind.
Question on orders Sunbursts attack and so we don't directly.
Matt.
And our product has been directly detect detect but once they're back was detected once a reservoir. This track record was known our product was used to provide visibility into how vulnerable people who are like it helped and the cleanup of at time, but I think the biggest part was that while it didn't drive any new revenue.
I think our approach, which is less one be able to attack because not only security products have to be able to.
And do that.
And the fact that back and do forensic analysis.
They can stem cells cannot be one day, but so it's not just our product, but our approach.
And the way that this is a standalone appliance or a software appliance what is being installed and decided what is less prone to hector and that that.
Our approach is getting validated for the security guys and there is much more appreciation of what we do and this will help us and.
And directly and we launch our new security product and we don't need to defend our approach too much because of what's happening in the marketplace.
So it didn't really contribute to any of.
Revenue in and.
And this but this holiday bye and that would position and the market and people.
People will look at more favorably and that would have really gen product as we launch it with cyber security solution.
And maybe Jim can and.
And anything about the contribution.
I mean, we.
He has taken the opportunity given the kind of interest.
Private securities.
Playing a little bit about <unk>.
Our ddos offering which are under the brand name of <unk> within the enterprise on a year to date basis, <unk> has been growing very well and they've been growing probably somewhere in the 20% to 25% within the enterprise and again, we're focused mostly in a very high and enterprises.
And like financial and.
Government areas and so they top line has gone very well for us this year and I think has announced that it is a non it has grown in line.
Low teen.
In total.
Year to date basis at this time.
Right.
And I'm trying to understand if there's any way to flush out really what the <unk> like how why enterprises.
Look pretty good this quarter, but relatively speaking, but between budget flush that we're seeing with kind of be infrastructure space and as a whole.
Versus kind of the project deferrals and.
Anything to comment there.
No nothing comes to mind about any deals that were pulled forward and the enterprise I would say for the quarter came in line from a revenue perspective with what we had anticipated.
Alright, and then I know, it's and is there any way to understand what the penetration of security.
It's actually into the service assurance installed base at this point or how many product customer you have to buy our securities.
I think the number of customers who are actively looking at that.
I would say maybe 10% of service assurance customers are actively looking at what price.
And what solution.
And.
Out of that.
Some of them and have already Budges and that's some of the growth with deem is talking about is legionella, but customer base and somewhat service assurance customer and its other product cyber and investigator which complements.
And the iron ore solution.
And there is lot of interest and debt, but as I mentioned and that was introduced recently and and there had been some challenge and doing a proof of concept. So overall, yes, we are using the service and show that the customer base, but also wanted to mention that we are using is all sales or less relative this year <unk>.
And that means that our service and sales force also get commission on the security sales. So that is having some positive effect also.
Understood. Thanks for the color gene and Neil and congrats again.
Thanks.
Our next question is from Kevin Liu of Kevin Luo and company.
Hi, good morning, guys.
First question here, just kind of following up on your last point and then just.
Last quarter, you guys talked about good growth for Arbor edge defense. It sounds like Thats continued so far but you did also mention that some of the opportunities and demo. It we're limited by Covid related restrictions.
Have you seen those opportunities and start to pick up or have you guys identified other ways in which you can get this product in front of customers and get them to purchase.
Yeah, So right now.
And given the.
As mentioned bulk of the growth and the enterprise and.
Is under either book site and.
And not all of the new product and and and bulk of that also and existing expansions of ABB, where day valuation has not been a big issue like going from five gig mitigation to 10 gig.
Changing the margin number we had RMB and relying on our income and D and maybe incumbency and maybe something like <unk>.
But the new opportunities in meaning new opportunities in Mexico, and with each other the cone and <unk>.
Through this cycle.
Cycles.
And because of the POC.
And nevertheless, there is much more interest than it was at the beginning of the fiscal year and lastly, a day.
Next year, there is an upsell opportunity to all AAV programs, because AAV allows us to detect.
Detect and mitigate that deck.
And as that type of investigator sort of gives you some insight into what the heck. It was doing before and after that day, which prevents Tomatoes index. So theres been a lot of interest and I've done.
30 to 50 calls and EBIT customers and so it's slow traction.
But a very positive news for the next year.
Got it and then maybe just shifting towards Arbor within the service provider environment, and you guys talked about and kind of a interesting use case for Helios, a and the subscriber edge with our MSL customer I am just wondering if you see that as more kind of a one off.
This does actually open more for them.
Additional growth opportunities with other cable MSL providers.
Not that it was more of a one off and and because people people try to deploy that and.
They could have easily guard with that but a different but this was more practical for them and.
And so we see big opportunity on the enterprise side for security.
And.
And.
Gary a site and we have still similar challenges of carrier spending and the overall business and the service virtualization and so while this is a good thing decision and as a way of deploying our solution and but this mode of deployment I don't see that as a big opportunity and other areas.
Got it and one last one for King here and just as we head into your fiscal 'twenty, two obviously youre still going to be virtual with engage conference that how are you guys thinking about cash.
And the return of pre pandemic.
And marketing types of events is that more kind of a back half 'twenty two type of event for you or do you actually see that starting to trickle in and even earlier in the year.
Yeah, I would say.
Our first half of our fiscal year and and we ended September so I would have to agree with you.
Assumption or your statement that probably travel will pick up again in our Q3 and Q4, so that's calendar year.
And calendar year last quarter, and the first quarter of calendar year 2022.
It just makes sense with the vaccine and everything and how the rollout is coming.
And.
And I heard a comment and everyone has their own thoughts that he thought that people thought they would be.
Anybody that wanted to be vaccinated in the U S. Adult would be vaccinated by the end of July so that would lead to believe that you can start traveling again sometime right after that hopefully fingers crossed.
Alright sounds good well congrats on the performance and the quarter and good luck.
Yes.
And this does conclude today's question and answer session as well as today's call. You may now disconnect your lines and everyone have a good day.
Jim.
[music].