Q4 2024 NetScout Systems Inc Earnings Call
Press Star Zero.
[music].
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to net Scouts fourth quarter and full fiscal year 2024 financial results Conference call.
Operator: For your conference call today, please press star zero. Ladies and gentlemen, thank you for standing by, and welcome to NetScout's fourth quarter and full fiscal year 2024 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, Senior Vice President of 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.
Speaker Change: At this time all parties are in a listen only mode.
Speaker Change: Until the question and answer portion of the call.
Speaker Change: As a reminder, this call is being recorded.
Speaker Change: Tony Piazza Senior Vice President of finance and his colleagues at Nashville, or on the line with us today.
Speaker Change: If you require operator assistance at any time, Please press star zero.
Speaker Change: I would now like to turn the call over to Tony Piazza to begin the company's prepared remarks.
Anthony Piazza: Thank you, Operator, and good morning, everyone. Welcome to NetScout's fourth quarter and full fiscal year 2024 conference call for the period ended March 31, 2024. Joining me today are Anil Singhal, NetScout's President and Chief Executive Officer, Michael Szabados, 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.
Anthony Piazza: Thank you operator, and good morning, everyone welcome to net scouts fourth quarter and full fiscal year 2024 conference call for the period ended March 31 2024 joined.
Anthony Piazza: Both the slides and the prepared remarks can be accessed in multiple ways 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 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 facts.
Anthony Piazza: Actual results may differ materially from any forward-looking statements. These statements speak only as of today 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.
Anthony Piazza: Joining me today are Nielsen call net Scouts, President and Chief Executive Officer, Michael Zappa dose net Scouts, Chief operating officer, and Jean Bua, Net Scouts executive Vice President and Chief Financial Officer.
Anthony Piazza: Let's now turn to slide number four, which involves non-GAAP metrics. While this slide presentation includes both GAAP and non-GAAP metrics, unless otherwise stated, financial information discussed on today's conference call will be presented 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. However, these measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.
Anthony Piazza: 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 dimensions.
Anthony Piazza: But 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.
Anthony Piazza: Moving 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 our position results of operations business strategy plans and objectives as management for future operations.
Anthony Piazza: Other statements that are not historical fact act.
Anthony Piazza: 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.
Anthony Piazza: L 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.
Anthony Piazza: <unk> assumes no obligation to update any forward looking information, except as required by law.
Anthony Piazza: Let's now turn to slide number four which involves non-GAAP metrics.
Anthony Piazza: While this slide presentation includes both GAAP and non-GAAP metrics, 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.
Anthony Piazza: These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.
Anthony Piazza: 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.
Anthony Piazza: 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.
Anthony Piazza: I will now turn the call over to Anil for his prepared remarks.
Anil K. Singhal: Thank you, Tony, and good morning, everyone. Welcome, and thank you to everyone for joining us today.
Anil: Thank you Tony and good morning, everyone and welcome and thank you all for joining yesterday in fiscal year 2020 Board strong cyber security revenue growth was a highlight for nexstar as customers continue to prioritize cybersecurity spending I mean, I've made to hide heightened geopolitical tensions and the expanding.
Anil K. Singhal: In fiscal year 2024, strong cybersecurity revenue growth was a highlight for NetScout as customers continued to prioritize cybersecurity spending amid heightened geopolitical tensions and the expanding cyber threat landscape. However, this trend was more than offset by the constrained customer spending environment affecting our service assurance offerings, primarily related to our domestic service provider customers. Despite the top-line headwind, our diligent cost containment actions and flexible cost structure contributed to non-gap earnings per share growth year over year.
Anil: <unk> threat landscape.
Anil: This strength was more than offset by the constrained customer spending environment affect Bureau said with insurers offerings.
Anil: Mainly related to our domestic service provider our customers. Despite the topline headwind our diligent cost containment actions and flexible cost structure contributed to non-GAAP earnings per share growth year over year with that as a backdrop, let's now turn to slide number six where it beef hi.
Anil K. Singhal: With that as the backdrop, let's now turn to slide number six for a brief high-level recap of our non-gap financial results for the fourth quarter and full fiscal year 2024. Jean will provide more detail on these results later in the call.
Anil: A high level recap of our non-GAAP financial results for the fourth quarter and full fiscal year 2020 foot.
Anil: Jean will provide more detail on the results later in.
Anil: And the cost.
Anil K. Singhal: For the fourth quarter, we delivered revenue of approximately $203 million, down 2%, and non-GAAP diluted earnings per share of $0.55, up $0.17, or approximately 45%, both on a year-over-year basis. For the full fiscal year 2024, we delivered revenue of approximately $830 million, representing a decline of approximately 9% year-over-year, due in part to a lower level of service assurance and radio frequency propagation modeling project revenue compared to an unusually high level in fiscal year 2023. When excluding the radiofrequency propagation modeling project revenue from total revenue, the decline was approximately 3% year-over-year.
Anil: For the fourth quarter, we delivered revenue of approximately $203 million down, 2% and non-GAAP diluted earnings per share up <unk> 55, up 17 cents or approximately 45% both on a year over year basis.
Anil: For the first full fiscal year 2024, we delivered revenue of approximately $830 million in.
Anil: Representing a decline of approximately 9% year over year due in part to a lower level of our service assurance and radio frequency propagation modeling project revenue compared to an unusually high level in fiscal year 2023.
Anil: When excluding the radio frequency propagation modeling project revenue from total revenue.
Anil: Klein was approximately 3% year over year.
Anil K. Singhal: From a non-gap EPS perspective, for the full fiscal year 2024, we delivered $2.20 for diluted shares, a 2 cent or approximately 1 percent improvement over fiscal year 2023. We achieved this result despite the revenue headwinds, partially due to our cost containment actions taken during the fiscal year. Now let's move to slide number seven for some further perspective on business and market insights. Starting with our service assurance offerings, in fiscal year 2024, service assurance revenue declined approximately 18% year-over-year.
Anil: From a non-GAAP EPS perspective for the full fiscal year 2024, we delivered $2.20 per diluted share.
Anil: Santa approximately 1% improvement over fiscal year 2023, we achieved this result, despite the revenue headwinds partially due to our cost containment actions taken during the fiscal year.
Anil: Now, let's move to slide number seven.
Anil: Further perspective on business and market insights.
Anil: Starting with our survey showed offerings.
Anil K. Singhal: This was primarily attributable to lower radio frequency propagation modeling project revenue year-over-year as well as constraints spending from the domestic tier 1 carrier market, as previously discussed. Excluding the impact of radiofrequency propagation modeling project revenue, service revenue, and service insurance revenue were down approximately 11% year over year. As we consider the demand dynamics for the service assurance offering moving forward, we continue to see customers being cautious as budgets remain tight, and the number of required approvals remains elevated.
Anil: And that is starting with a service assurance offerings in fiscal year 2020 for service assurance revenue declined approximately 18% year over year. This was primarily attributable to lower radio frequency propagation modeling project revenue year over to Europe, as well as constrained spending from the domestics.
Anil: <unk> met market as previously discussed.
Anil: Losing the impact of radio frequency propagation modeling project revenue service revenue as that business showed a revenue were down approximately 11% year over year.
Anil: As we consider the demand dynamics for the theater side with assurance offering moving forward, we continue to see customers being cautious as budgets remain tight and the number of required approvals remains elevated slightly we expect relative stability in the enterprise vertical as customers continue to prioritize mission critical.
Anil K. Singhal: While we expect relative stability in the enterprise vertical as customers continue to prioritize mission-critical solutions and monitoring at the edge, we believe the ongoing headwinds in the service provider vertical will persist for much of fiscal year 2025. The demand dynamic for service providers is an issue that is primarily domestic. Domestic service providers remain cautious in their spending decisions as the 5G stand-alone infrastructure deployed has not yet delivered a return on investment, with network traffic below capacity and no material new applications driving increasing demand. This has caused providers to delay significant further investment until a monetization strategy becomes clearer to obtain acceptable returns on the investment.
Anil: Solutions and monitoring at Dell edge, we believe the ongoing headwinds in the service provider vertical with persist for much of the fiscal year 2025.
Anil: The demand that <unk> had with tablets.
Anil: That is why it is an issue that is primarily domestic domestic service provider remained cautious in their spending decisions and the fire <unk> standalone infrastructure deploy has not yet delivered a return on investment with network traffic below capacity and no material new application driving increasing demand.
Anil: This has cost provide us to delay significant further investment until the monetization strategy becomes clear to obtain acceptable returns on.
Anil: Investments.
Anil: Yes.
Anil K. Singhal: Strategically, we continue to be ready to support both domestic and international carriers, as their customer demand market progresses, and as emerging network technology trends gain momentum. For example, fixed wireless access has been a promising long-term opportunity, although service providers currently already have the bandwidth to support recent deployments. Additionally, network slicing also offers long-term opportunities for NetScout but is still in the early stages. We are also encouraged by 5G investment activity at international carriers. While international carrier spending levels tend to be lower than the domestic market, they remain an important contributor to long-term growth.
Anil: Strategically we continue to be ready to support both the domestic and international carriers at the Getty and customer demand.
Anil: Customer demand market broke with avnet as emerging network technology transfer gain momentum, but example, fixed wireless access has been a promising long term opportunity all the service providers currently already have the bandwidth to support ethane deployment.
Anil: Additionally networks lessee also offers long term opportunity for <unk>, but it's still in early stages. We are also in created by <unk> investment activity at the international Caddies, while international Gadhia spending levels tend to be lower than the domestic market demand.
Anil: And an important contributor to long term growth.
Anil K. Singhal: Finally, NetScout is actively taking early steps to bring new value proposition opportunities as it collaborates with customers to fully unlock the critical value of our smart data generated from our DPI technology. This relates to the increasing needs and requirements of emerging AI operational strategies, tool sets, and applications. In the future, we intend to be an important contributor to this emerging technology market as we make our smart data available for customer AI use cases in partnership with other technology innovators in this field.
Anil: Finally, net started actively taking at least after bringing new value proposition opportunity as it collaborates with customer to fully electric.
Anil: A critical value uplift smart data generated from our DPA technology this relates to the increasing needs and requirements.
Anil: AIA up strategies toolset and application.
Anil: In the future, we intend to we intend to be an important contributor to this emerging technology market as we make our smart data available for customer use cases in partnership with other technology.
Anil: Technology innovators in this field.
Anil K. Singhal: Shifting to our cybersecurity offering, in fiscal year 2024, our cybersecurity offering delivered approximately 15% revenue growth year-over-year, which was the result of growth in both our service provider and enterprise customer verticals. In addition, we believe customers prioritize spending amid heightened geopolitical tensions and expanding threat lines. As revealed in our recently released DDoS Threat Intelligence Report, political-motivated hacktivist groups and an increase in DNS server water torture attacks contributed to over 7 million DDoS attacks globally in the second half of 2023. This is an increase of 15% from the first half of the year.
Anil: Shifting to our cyber security offering.
Anil: In fiscal year, 2024 hour cyber security offering delivered approximately 15% revenue growth year over year, which was the result of growth in both our service provider and enterprise customer vertical.
Anil: In addition, we believe customers prioritize spending amid heightened heightened geopolitical tensions and the expanding threat landscape.
Anil: As really as they relate to our recently released Ddos attack Intelligence report quality motivated activist groups and an increase in DNS at work.
Anil: Dr <unk> and delivery to over 7 million Ddos attack globally in the second half of 2023.
Anil: This is an increase of 15% from the first half of the year with this high a high activity threat landscape.
Anil K. Singhal: With this high-activity threat landscape, companies are increasingly depending on NetScout for their cybersecurity protection needs. As we look to fiscal year 2024, we believe the value proposition of our solution should continue to resonate with customers, and we expect our core as well as new offerings such as adaptive DDoS, mobile security, and Omni Cyber Intelligence solutions to fuel continued momentum in this space. Michael and Jean will provide more insight regarding customer wins, as well as product offerings and customer vertical performance, during their remarks.
Anil: Company that engaged and really depending on net card for their cyber security protection needs.
Anil: As we look to fiscal year 2024, we believe the value proposition of our solution should continue to resonate with this estimate and expect our core as well as new offering such as adaptive Ddos mobile security and Omni Cyber center and as avid intelligence solution to fuel continued momentum in this space.
Anil: Michael and Dean will provide more insight regarding customer demand as well as product offering and customer growth.
Anil: Vertical performed during the remarks.
Anil K. Singhal: Now let's move to slide number 8 regarding our outlook and summary. As we look forward to fiscal year 2025, we are encouraged by the momentum in our cybersecurity offering. We have begun to take further actions that will enhance our focus on cyber security. This includes increased R&D investment as well as go-to-market strategy modifications. Also, we recognize the lingering headwinds in the domestic service provider vertical of our service assurance offering. This will likely create a top-line offset, resulting in a flat-to-slightly-down revenue scenario for the new fiscal year, despite the continued growth in our cybersecurity offering.
Anil: Now, let's move to slide number eight regarding your outlook and summary.
Anil: As we look forward to fiscal year 'twenty quantify we are encouraged by the momentum and momentum in our cyber security offerings.
Anil: We have begun to take actions that will enhance our focus on cyber security. This include increased R&D spend R&D investment as well as go to market strategy emotive modification also we recognize the lingering headwinds in their domestic service provider vertical our flex services showed us offering this will likely create.
Anil: The top line offset resulting in flat to slightly down revenue scenario for the new fiscal year. Despite the continued growth in the west that with security offerings.
Anil K. Singhal: We are continuing to align our cost structure with the current demand environment. We have implemented a voluntary separation program as part of a restructuring effort focused on reducing headcount as we seek to execute on our strategic priorities, preserve earnings for shareholders, and position NetScout for long-term success. Jean will provide more specifics in her remarks. NetScout has always been and remains a long-term focused company, and we believe we are well positioned to benefit from future fundamental demand trends as enterprises and service providers require a leading cybersecurity and service assurance solution to deliver actionable visibility at scale.
Anil: Continuing to align our cost structure with the current demand environment, we have implemented a voluntary separation program.
As part of the restructuring effort focused on reducing head count and weeks as we seek to execute on our strategic priorities.
Anil K. Singhal: Earnings for our shareholders and position <unk> for long term success and gene will provide more a more specific on the arc and outlook on either in our remarks.
Anil: Net Scot has always been and remains a long term focused company and we believe we are well positioned to benefit from future fundamental demand trends.
Anil: Enterprises and service providers to the glass, leading cyber security and service assurance solution to deliver actionable visibility at scale.
Anil K. Singhal: We remain confident that our visibility with our Borders platform is essential for helping customers tackle the performance, availability, and cybersecurity challenges of the increasingly complex connected digital world, as we also remain committed to delivering long-term shareholder value. We look forward to sharing our progress with everyone on our quarterly earnings calls. With that, I will turn the call over to Michael. Thank you, Anil, and good morning, everyone. Slide 10 outlines the areas that I will be covering today, starting with the custom movie and highlights in the fourth quarter.
Anil K. Singhal: We remain confident that our visibility without borders platform.
Michael: Essential for helping customers tackle the performers.
Michael: <unk> and cyber security challenges of the increasing increasingly complex connected digital world as we also remain committed to delivering long term shareholder value.
Anil K. Singhal: We look forward to sharing our progress with everyone onto look likely earning calls with that I will turn the call over to Michael. Thank you and good morning, everyone. Slide 10 outlines the areas that I will be covering today, starting with custom movie and highlights in the fourth quarter.
Michael Szabados: In our cybersecurity offering, we secured multiple seven-figure DDoS-related deals with both new and existing customers across various geographic markets and industry sectors as customers continue to prioritize investments that protect them against the expanding cybersecurity threat landscape. For example, we won a low seven-figure deal as we acquired a new financial industry enterprise. We have been engaged with this customer for multiple years, pitching the value proposition of our leading DDoS capabilities while they were leveraging a competitor's managed service.
Michael: Our cyber security offerings, we secured multiple seven figures related multiple seven figure ddos related deals with both new and existing customers across various geographic markets and industries sectors as customers continue to prioritize investments that protect them against.
Michael Szabados: The expanding cyber security threat landscape.
Michael Szabados: For example, we want low seven figure deal as we acquired a new financial industry enterprise customer in the Middle East.
Michael Szabados: Been engaged we've discussed.
Michael Szabados: Over multiple years pitching the value proposition of our leading ddos capabilities, while they were leveraging our competitors managed service, although an unfortunate that the catalyst the customer is expanding as the challenging cyber attack and we were able to quickly demonstrate our superior capabilities during the situation.
Michael Szabados: Although an unfortunate catalyst, the customer experienced a challenging cyber attack, and we were able to quickly demonstrate our superior capabilities during the situation. This persuaded the customer to buy a full-solution suite in a multi-solution purchase with us that included Arbor Edge Defense, Arbor Cloud, managed services, and the resident engineer bringing the capability on-premises and in-house for better control of their cyber security defense.
Michael Szabados: Basically the customer to buy a full solution suite in a multi solution purchase with us that includes at Arbor edge defense onboard cloud managed services and the resident engineered bringing the capability on Prem and in house for better control of the cyber security.
Michael Szabados: Fences.
Michael Szabados: Moving to our services offering, and particularly the service provider vertical, we continue to benefit from contracts in support of 5G deployments, upgrades, and capacity expansions both domestically and internationally, albeit at a somewhat muted pace given the constrained spending environment in this customer vertical. One example during the quarter was a 5G-related, mid-teen, 8-figure deal with a leading Asian Tier 1 service provider that we already support with our solutions through prior 4G network efforts.
Michael Szabados: Shifting to our service assurance offering and.
Michael Szabados: And particularly the service provider vertical we continued to benefit from contract in support of <unk> deployments upgrades and capacity expansion, both domestically and internationally, albeit at a somewhat muted muted base, given the constrained spending environment and discuss them a vertical.
Michael Szabados: One example win during the quarter was a five G related mid steam eight figure deal with a leading Asian tier one service provider.
Michael Szabados: The R&D support video solutions through prior forging network effort.
Michael Szabados: Given our strong historical performance and incumbent relationship, they selected NetScout to provide visibility for their 5G network. In the bigger picture, we believe the deal is the first of other potential opportunities with this customer as they expand their 5G network in the future. Turning to our go-to-market activities, we attended Mobile World Congress (MWC) in Barcelona in late February, where we held many productive meetings with existing and prospective customers to discuss our latest offerings, including service assurance, AIML analytics, and cybersecurity solutions related to 5G network visibility and cybersecurity requirements.
Michael Szabados: Efforts.
Michael Szabados: Given our strong historical performance and incumbent relationship they selected <unk> to provide visibility for their <unk> network.
Michael Szabados: In the bigger picture, we believe the deal is the first of other potential opportunities we've discussed in the.
Michael Szabados: As they expand their <unk> network in the future.
Michael Szabados: Turning to our go to market activities, we attended mobile World Congress and WC in Barcelona in late February.
Michael Szabados: We held many productive meetings with existing and prospective customers to discuss our latest offerings, including service excellence AI ml analytics, and cyber security solutions related to <unk> network visibility and cyber security requirements.
Michael Szabados: More recently, in May, we attended the RSA Security Conference in San Francisco, where we showcased our cybersecurity solutions and held valuable meetings with existing and prospective customers. In June, we will head to Las Vegas for Cisco Live as well as the Splunk User Conference and look forward to meeting with customers and partners, both current and prospective, and demonstrating our Visibility Without Borders platform offering, in our effort to expand our market presence.
Michael Szabados: In May we attended the Odyssey Securities on financing San Francisco.
Michael Szabados: Where we showcased our cyber security solutions and have valuable meetings with existing and prospective customers.
Michael Szabados: In June we will have to Las Vegas for Cisco lives as well as the Splunk user confidence and look forward to meeting with customers and partners, both current and prospective and demonstrating our visibility without borders platform offerings.
Michael Szabados: Our effort to expand our market presence, we recently entered into a technology alliance with Palo Alto networks, which includes other companies such as in video in order to help customers protect against cyber attacks and the Nissan private flight.
Michael Szabados: We recently entered into a technology alliance with Palo Alto Networks, which includes other companies such as NVIDIA, in order to help customers protect against cyberattacks in the nascent private 5G network space. This is a good example of the type of value-creating alliances we are establishing to benefit our customers and our business prospects. This concludes my remarks. Thank you, everyone. I will now turn the call over to Jean for a review of our financial results.
Jean: Network space.
Jean: This is a good example of the type of value creating alliances.
Jean: The ambition to benefit our customers and our business prospects.
Jean: This concludes my remarks, thank you, everyone and I'll turn the call over to gene for a review of our financial results. Thank.
Jean A. Bua: Thank you, Michael, and good morning, everyone. I will review key metrics for our fourth quarter and full fiscal year 2024 and provide some additional commentary on our fiscal year 2025 outlook. As a reminder, this review focuses on our non-GAAP results, unless otherwise stated, and all reconciliations with our GAAP results appear in the presentation appendix. Regardless, I will note the nature of any such comparison.
Jean: Thank you Michael and good morning, everyone I will review key metrics for fourth quarter and full fiscal year 2024, and provide some additional commentary on our fiscal year 2025 outlook. As a reminder, this review focuses on our non-GAAP results unless otherwise stated and all reconciliations with our GAAP results.
Jean A. Bua: Slide number 12 details the results for the fourth quarter and full fiscal year 2024. Focusing on our quarterly performance, total revenue was $203.4 million, down 2.2 percent. Product revenue was $89.4 million, a decrease of 2 percent, while service revenue was $114 million, a decrease of 2.4 percent. All comparisons are on a year-over-year basis.
Jean A. Bua: Gross profit margin was 77.2% in the fourth quarter, down 0.4 percentage points year over year. Quarterly operating expenses decreased 8.3% year over year, primarily due to cost containment efforts. Accordingly, we reported an operating profit margin of 19.2% compared with 15.7% in the same quarter last year. Diluted earnings per share was $0.55, up 44.7% from $0.38 in the same quarter last year. For the full fiscal year 2024, revenue was $829.5 million, which was a decrease of 9.3% over the prior year for the reasons previously stated.
Jean A. Bua: Appear in the presentation appendix, regardless I will note the nature of any such comparison.
Jean A. Bua: Slide number 12 details our results for the fourth quarter and full fiscal year 2020 for focusing on our quarterly performance total revenue was $203.4 million down 2.2%.
Jean A. Bua: <unk> revenue was $89 4 million a decrease of 2% while service revenue was $114 million a decrease of two 4% all comparisons are on a year over year basis.
Jean A. Bua: Gross profit margin was 77, 2% in the fourth quarter down <unk> four percentage points year over year quarterly operating expenses decreased eight 3% year over year, primarily due to cost containment efforts. Accordingly, we reported an operating profit.
Jean A. Bua: Of 19, 2% compared with 15, 7% in the same quarter last year diluted earnings per share was 55 up 44, 7% from 38 in the same quarter last year.
Jean A. Bua: For the full fiscal year 2024 revenue was $829 $5 million, which was a decrease of nine 3% over the prior year for the reasons previously stated product revenue was $364 million a decline of <unk>.
Jean A. Bua: Product revenue was $360.4 million, a decline of 20%, and service revenue was $469 million, an increase of 1.1% over the prior year. Gross profit margin was 79.4 percent, an increase of 1.9 percentage points. The improved gross profit margin is attributable to less contribution from lower-margin radio frequency propagation modeling project revenue and lower variable compensation expenses year over year. Annual operating expenses decreased 6.1 percent from the prior year, primarily due to previously mentioned cost containment actions.
Jean A. Bua: 20% and service revenue was $469 million, an increase of one 1% over the prior year.
Jean A. Bua: <unk> profit margin was 79, 4% an increase of one nine percentage points. The improved gross profit margin is attributable to less contribution from lower margin radio frequency propagation modeling project revenue and lower variable compensation expenses year over year.
Jean A. Bua: Annual operating expenses decreased six 1% from the prior year, primarily due to previously mentioned cost containment actions.
Jean A. Bua: We reported a consistent operating profit margin year over year of 22.6 percent. Diluted earnings per share was $2.20, a 0.9 percent increase year over year, primarily driven by cost containment actions. Additionally, we had an investment valuation increase in a minority held investment with favorable tax treatment. This, in combination with the finalization of certain tax positions, reduced our annual tax rate to 17.2 percent.
Jean A. Bua: We reported a consistent operating profit margin year over year of 22, 6% diluted earnings per share was $2 and 28.9% increase year over year, primarily driven through cost containment actions. Additionally, we had an investment valuation increase.
Jean A. Bua: And then minority held investment with a favorable tax treatment. This in combination with the finalization of certain tax positions reduced our annual tax rate to 17.
Jean A. Bua: Thanks.
Jean A. Bua: Turning to slide 13, I will review key revenue trends by product lines and customer verticals. Please note that all comparisons here are on a year-over-year basis, consistent with our other remarks. For the full year of fiscal year 2024, our cybersecurity revenue increased by 15.3%, while our service assurance revenue decreased by 17.8%, for the reasons Anil previously mentioned. During the same period, our service assurance product line accounted for approximately 67% of our total revenue, while our cybersecurity product line accounted for the remaining 33%.
Speaker Change: Turning to slide 13, I will review key revenue trends by product lines and customer verticals. Please note that all comparisons here are on a year over year basis, consistent with our other remarks for the full year of fiscal year 2020 for cyber security revenue increased by $15 three.
Jean A. Bua: 8%, while our service assurance revenue decreased by 17, 8% for the reasons previously mentioned during the same period, our service assurance product line accounted for approximately 67% of our total revenue, while our cyber security product line accounted for the remaining.
Jean A. Bua: 33%.
Jean A. Bua: Turning to our customer verticals, for the full fiscal year 2024, our enterprise customer vertical revenue was consistent with the prior year, while our service provider customer vertical revenue decreased 17.7%. During the same period, our enterprise customer vertical accounted for approximately 53% of our total revenue, while our service provider customer vertical accounted for the remaining 47%. Turning to slide 14, this shows our geographic revenue mix for the full year fiscal 2024. 57% of our revenue was derived from the United States, with the remaining 43% provided by international markets.
Jean A. Bua: Turning to our customer verticals for the full fiscal year 2020 for enterprise customer vertical revenue was consistent with the prior year, while our service provider customer vertical revenue decreased 17, 7% during the same period, our enterprise customer vertical accounted for approximate.
Jean A. Bua: <unk>, 53% of our total revenue, while our service provider customer vertical accounted for the remaining 47%.
Jean A. Bua: Turning to slide 14. This shows our geographic revenue mix for the full year fiscal 2024, 57% of our revenue was derived from the United States with the remaining 43% provided by international markets regarding the mix shift versus a year ago International fiscal.
Jean A. Bua: Regarding the mixed shift versus a year ago, international fiscal year 2024 revenues benefited from growth in both cybersecurity and service assurance offerings, while domestic revenues were primarily impacted by the headwinds related to Tier 1 domestic service providers, as previously discussed. Also, no customer represented 10% or more of our total revenue in the fourth quarter or for the full fiscal year 2024.
Jean A. Bua: Year 2024 revenues benefited from growth in both cyber security and service assurance offering while domestic revenues were primarily impacted by the headwinds related to the tier one domestic service providers. As previously discussed also no customer represented 10% or more of our total <unk>.
Jean A. Bua: Revenue in the fourth quarter or for the full fiscal year 2024.
Jean A. Bua: Slide 15 details our balance sheet highlights and free cash flow. We ended the fourth quarter with $424 $1 million in cash cash equivalents short and long term marketable securities and investments representing an increase of $94 million since the end of the third quarter of fiscal year 2000.
Jean A. Bua: Slide 15 details our balance sheet highlights and free cash flow. We ended the fourth quarter with $424.1 million in cash, cash equivalents, short and long-term marketable securities, and investments, representing an increase of $94 million since the end of the third quarter of fiscal year 2024. Free cash flow for the year was $52.5 million.
Jean A. Bua: 24.
Jean A. Bua: Free cash flow for the year was $52 $5 million.
Jean A. Bua: From a debt perspective, we ended the fourth quarter of fiscal year 2024, with $100 million outstanding on our $800 million revolving credit facility, which expires in July 2026 also for the full fiscal year 2024, we repurchased approximately $1 8 million.
Jean A. Bua: And from a debt perspective, we ended the fourth quarter of fiscal year 2024 with $100 million outstanding on our $800 million revolving credit facility, which expires in July 2026. Also, for the full fiscal year 2024, we repurchased approximately 1.8 million shares of our common stock for approximately $50 million. We currently have capacity in our share repurchase authorization and, subject to market conditions, plan to be active in the market during the first half of fiscal year 2025.
Jean A. Bua: Shares of our common stock for approximately $50 million. We currently have capacity in our share repurchase authorization and subject to market conditions plan to be active in the market. During the first half of the fiscal year 2025.
Jean A. Bua: To briefly recap other balance sheet highlights, accounts receivable net was $192.1 million, representing an increase of $48.2 million since March 31, 2023. The DSO metric at the end of the fourth quarter of fiscal year 2024 was 81 days versus 58 days at the end of fiscal year 2023.
Jean A. Bua: To briefly recap other balance sheet highlights accounts receivable net was $192 1 million, representing an increase of $48 $2 million since March 31st 2023, the DSO metric at the end of the fourth quarter of fiscal year 2024 was 81.
Jean A. Bua: Days versus 58 days at the end of fiscal year 2023, the higher DSO metric in the fourth quarter of this fiscal year was due to the timing and composition.
Jean A. Bua: The higher DSO metric in the fourth quarter of this fiscal year was due to the timing and composition of... Moving to slide 16, for commentary on our outlook, I will focus my review on our non-GAAP targets for fiscal year 2025. We anticipate our fiscal year 2025 revenue to be approximately $800 million to $830 million. We anticipate non-GAAP diluted earnings per share in the range of $2.10 to $2.30, with the midpoint flat year over year.
Jean A. Bua: Yes.
Jean A. Bua: The effective tax rate is expected to be approximately 20% as we return to a normalized effective tax rate. A weighted average diluted shares outstanding is assumed to be approximately 74 million shares, which does not currently assume any planned repurchase activity.
Jean A. Bua: NetScout's fiscal year 2025 guidance reflects the company's anticipated benefits associated with the previously mentioned Voluntary Separation Program restructuring actions and ongoing cost management initiatives. In conjunction with these actions, the company expects to record GAAP restructuring charges, primarily in the first quarter of fiscal year 2025, attributable to one-time separation payments in the range of approximately $18 million to $22 million in aggregate. The company expects that these actions will generate annual one-rate savings in a similar range, with approximately 75% of the benefit expected in fiscal year 2025 due to the timing of these actions.
Jean A. Bua: Going cost management initiatives in conjunction with these actions the company expects to record gap restructuring charges, primarily in the first quarter of fiscal year 2025 attributable to one time separation payments in the range of approximately 18 million to $22 million in aggregate.
Jean A. Bua: The company expects that these actions will generate annual run rate savings in a similar range with approximately 75% of the benefit expected in fiscal year 2025 due to the timing of these actions. This is an estimated range and will be finalized as the program is completed.
Jean A. Bua: This is an estimated range and will be finalized as the program is completed. Finally, I would like to provide some color for the first half of fiscal year 2025. Assuming the midpoint of our revenue range, we anticipate a revenue skew of approximately 45 percent in the first half of the fiscal year and 55 percent in the second half. This is primarily attributable to the prior fiscal year's first quarter benefiting from the usage of approximately $35 million to $40 million from backlog.
Jean A. Bua: Finally, I would like to provide some color for the first half of fiscal year 2025.
Jean A. Bua: Swimming the midpoint of our revenue range, we anticipate a revenue skew of approximately 45% in the first half of the fiscal year and 55% in the second half. This is primarily attributable to the prior fiscal year's first quarter benefiting from the usage of approximately 35 million.
Jean A. Bua: Accordingly, we expect first quarter fiscal year 2025 revenue to be in the range of $165 million to $175 million. As a result, we expect corresponding non-GAAP earnings per share in the range of $0.08 to $0.17 due to the continued cost containment efforts partially offsetting the revenue backlog usage's impact. That concludes my formal review of our financial results. Before we transition to Q&A, I'd like to quickly note that our upcoming investor relations conference participation is listed on slide 17. Thank you, and I will now turn the call over to the operator for questions.
Jean A. Bua: $240 million from backlog Accordingly, we expect first quarter of fiscal year 2025 revenue to be in the range of 165 million to $175 million. As a result, we expect corresponding non-GAAP earnings per share in the range of eight cents 217.
Jean A. Bua: <unk> due to the continued cost containment effort, partially offsetting the revenue backlog usages impact.
Jean A. Bua: That concludes my formal review of all financial results before we transition to Q&A I'd like to quickly note that are upcoming IOL conference participation listed on slide 17, Thank you and I'll now turn the call over to the operator for questions Madison.
Operator: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, press star 2. We do ask, in the interest of time, that you limit yourself to one question and one follow-up. We will take our first question from Matt Hedberg of RBC Capital Markets.
Operator: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue Press star too we do ask in the interest of time that you limit yourself to one question and one follow up we will take our first question from Matt Hedberg with RBC.
Matthew George Hedberg: Capital markets.
Matthew George Hedberg: Okay. Good morning at Stanford Super Mad Hedberg, Thanks for taking our questions.
Daniel Robert Bergstrom: Hey, good morning. It's Dan Bergstrom on behalf of Matt Hedberg.
Daniel Robert Bergstrom: Thanks for taking our questions. Just from the prepared remarks and trends around service provider spending, Anil, I know you spend a lot of time with those tier one carriers. Maybe, you know, what are you hearing from them as far as budgeting for the new year here? And then maybe could you contrast what you're seeing from them with international and demand beyond the tier ones?
Daniel Robert Bergstrom: Her prepared remarks trends Romps service providers button in the middle of nowhere you spend a lot of time with those tier one carriers. Maybe you know what are you hearing from them as far as budgeting for the new year here and then maybe could you contrast, what you're seeing from them with with internationally and demand beyond pier ones.
Anil: Yeah. So over on the <unk>, if you look at the top and provider and the rule out of them about eight or nine at a big customer to Mexico.
Anil K. Singhal: Yeah, so overall, Matt, if you look at the top 10 providers in the world, out of them, about eight or nine are big customers of NetScout. Their budget cycles are different, and this quarter we benefited from some big orders on the international side, and they are often lumpy. But overall, I think budgets are—I mean, with the numbers we had last year, our big bookings seemed to be stabilizing. And if we didn't have the overhang for the revenue from the calibration stuff from last year, I think we are stabilizing this area. Budgets are not increasing. They are still tight.
Anil K. Singhal: So.
Anil K. Singhal: But your cycles are different and <unk>, we have benefited from some big orders and the international side.
Anil K. Singhal: Offer lumpy, but overall I think but just I mean, the number for you had lost your booking.
Anil K. Singhal: Seems to be stabilizing and if you didn't have the overhang for that Avenue from the Calibrates and stuff from last year I think we have this idiot stabilizing budgets are not in good evening, they're still died.
Anil K. Singhal: And the second thing is that what we are hearing is that our technology can be redeployed or used for a different purpose. And we announced our Omnis AI offering about six months ago. And so we think that we can drive additional opportunities in that area because we are already on the network, and we already have the technology which we can use or repurpose for AI solutions. And that's where I think some more demand will be there.
Anil K. Singhal: And second thing is what we are hearing is that.
Anil K. Singhal: Technology can be.
Anil K. Singhal: He used for a different purpose and <unk>, putting in about six months ago and.
Anil K. Singhal: So everything that the weekend.
Anil K. Singhal: Additional opportunities in that area, because we had already on the network and and we already have the technology. We can use the purpose, but hey, I ups, it's Alicia and that's weird I think some more demand will be there at the same time, you have to be selling to a different by it.
Anil K. Singhal: At the same time, we have to be selling to a different buyer. So there are some benefits to being in that account, and that's what we are hoping that we will use it to stabilize or perhaps even grow the service assurance plus AI business. And then the growth will come from cybersecurity.
Anil K. Singhal: So there are some some benefits of being in that account and that's what we are hoping that we will use it to stabilize or.
Anil K. Singhal: Even grow that's a visa shortage plus a business and then the <unk> come from cyber security.
Speaker Change: Great and then you know with with cyber security there could you dig a little deeper into some of the areas that you're that you're leaning into a bit more here this year.
Anil K. Singhal: Great. And then, you know, with cybersecurity there, could you dig a little deeper into some of the areas that you're leaning into a bit more here this year? So I think if you look at our
Anil K. Singhal: So I think if you look at the <unk> I mean bulk up that Avenue up till now has been in the <unk> area like maybe acquired.
Anil K. Singhal: So I think if you look at our, I mean, bulk of the revenue up till now has been in the Arbor DDoS area, a company we acquired some time ago, but we never integrated them until about two years ago into the main business. So in addition to the traditional core business of DDoS, which seems to be doing flat to up, there are two other areas. One is bringing our DPI technology to the DDoS world, and that's what we have been calling adaptive DDoS, and there are some more things we are doing there.
Anil K. Singhal: Some time ago, but we never integrated them until about three years ago into the main business. So in addition to the traditional God business of Ddos, which is it seemed to be doing life <unk>. There are two other areas one is bringing.
Anil K. Singhal: D P I technology.
Anil K. Singhal: <unk> and that's what we have been calling adaptor Ddos and there's some more things we are doing there and the second area is a brand new product and the N D. S. Smith.
Anil K. Singhal: The second area is a brand new product in the NDR space, where players like Dark Trace and Vectra and some other companies have been playing, and that's the Omni Cyber Intelligence product. So, in summary, basically, we have the core business of Arbor DDoS, we have the new adaptive DDoS solution using some technology from the service assurance side, and third is Omni Cyber Security in the NDR market. The last year's number is mostly in the first category, and so we think that now the solution is maturing in the second and third category, and that's why we are sort of bullish about continued growth in this area.
Anil K. Singhal: That'd be a players like dark Grays and and I had some other companies had been playing and that's the omni cyber intelligence about it. So you can and somebody basically we have the code witness about everybody does.
Anil K. Singhal: We have the new adapter dita solution using some.
Anil K. Singhal: Some technology from the services you are inside and third is the the omni cyber security in the N b a in marketing.
Anil K. Singhal: Last year's number is mostly in the first category and so <unk>. The solution is majority in the second and third degree and that's why via Sorta bullish about continued to grow up in this area.
Speaker Change: Great. Thank you.
Anil K. Singhal: Yeah.
Anil K. Singhal: Thank you and we will take our next question from Kevin.
Kevin D. Liu: Thank you. And we will take our next question from Kevin Liu with K-Liu Company.
Kevin D. Liu: Company.
Kevin D. Liu: Hi, Good morning, Uhm. This on the service providers side of things I was wondering if you could talk a little bit longer term beyond its current in your do you think this is just kind of a pause in terms of their <unk> customers capital deployment Uhm or do you still see there being a lot of opportunity around the development of your services.
Kevin D. Liu: Hi, good morning. Just on the service provider side of things, I was wondering, Anil, if you could talk a little bit longer term, you know, beyond this current year, do you think this is just kind of a pause in terms of your customers' capital deployment? Or do you still see there being a lot of opportunity for the development of these services like fixed wireless access and other applications that maybe just aren't flowing through the network yet?
Kevin D. Liu: Six wireless access uhm and another applications that maybe at this time according to the network.
Anil K. Singhal: I see Kevin a lot of interest in that area but there's still a challenge of budget and some there are people in the industry saying the AI Ops is the new name for IT Ops but it appeals to different buyers and even in the fixed wireless case there are traditional service assurance use cases which is almost all over business in the carrier but there are other cases of misuse of bandwidth and which fall in the AI Ops area so that's what we think that is the additional opportunity 5G will continue to pick up in different parts of the world and it will keep keep a big portion of the core business going and then there will be additional opportunity which is adjacency in the market yeah even though there is slightly different buyer in that market for AI Ops so we look at both in the service assurance for enterprise as well as service provider that some of the markets it will move into the AI Ops area and we think that we have the best context and technology already in place
Anil: Yeah, I think I'm in a lot of interest in that area, but there's still a challenge of budget and.
Anil K. Singhal: But there are people in the industry, saying that a I opposite doesn't it new name for idea ups, but it appeals to different buyers and even in the fixed by a less scared that a tradition of services <unk>, which is almost all of our business in the area, but there are other cases of misuse.
Anil K. Singhal: <unk> and which fall in the AI ups area. So that's what we think that is that additional opportunity five G will continue to pick up in different parts of the world and it'll keep a big portion of the God business going and then there'll be additional opportunity which is.
Anil K. Singhal: A D S N C in the market.
Anil K. Singhal: Even though that is slightly different by it in that market what aif's. So we look at both into service issue. It is for <unk>.
Anil K. Singhal: The price as well as provide.
Anil K. Singhal: That some of the <unk> it will move into the air ups area, and we think that we have the best contacts and technology already in place.
Speaker Change: Understood and could you just elaborate a bit on that.
Anil K. Singhal: Understandable. And could you actually just elaborate a bit on that AI opportunity? How is the kind of usage of your products different in that market versus, you know, what you've traditionally done for the wireless provider?
Speaker Change: Opportunity how it is kind of the usage of your products different in that market versus you know what you traditionally done for the wireless provider.
Anil K. Singhal: Yeah, so for example, the use cases are like, instead of looking at the end-user experience for a subscriber, both internal and external audiences in the traditional service assurance area. People could look at high-value customers differently, who are better calling plans, who are willing to pay more, and they may need a different level of service. There could be abuses of bandwidth on the fixed wireless side, which could impact all other users on the radio access network.
Anil K. Singhal: Yeah. So for example, the the youth gives us a like entered are looking at and use that experience.
Anil K. Singhal: For a subscriber.
Anil K. Singhal: Both internal and external audiences and the traditional services I shouldn't area people would look at.
Anil K. Singhal: High value customers differently, what better calling plans, who are willing to pay more than they may need to a different level of service that would be abused as a bandwidth on the fixed wireless I, which could impact all other users on the radio access network. So those are technically fall into a I.
Anil K. Singhal: So those technically fall in the AI ops area, and they're not traditionally for direct end-user experience. So then there are things in the cyber security area, which border on AI ops, where you want to get visibility on all the hackers, not just their hacking activity. So there are a whole bunch of use cases. Slicing can also technically be put in the AI ops area. So there are about 20 or so new use cases.
Anil K. Singhal: The area and they are not traditionally for data and use that experience. So then there are things in in the cyber security area with borderline on AI off so bad you want to get visibility on to all the heck us not just that hacking activity. So there was a whole bunch of you scared the slicing also.
Anil K. Singhal: <unk> can be put in the air ups area. So there are about 20 or so new you escape beside.
Anil K. Singhal: Besides 10 or so, we have been going over in terms of end-user experience and service triage and moving more from... troubleshooting and triaging to analytics, which is more appealing to business people. And I think that's why it can command a higher level of interest and budget.
Anil K. Singhal: Chandler so we have been going over in terms of and use it expedient, that's adversary eyes and I'm moving more from.
Anil K. Singhal: Troubleshooting and theorizing do analytic which is more appealing to businesspeople and I think that's why you say it can come in higher level of interest in and budget.
Speaker Change: Alright, thank you for that color and if I could just sneak in one more on the cyber security site can you put a little bit about how much of your business over the pasture might've been directly attributable to the some of the geopolitical conflicts going on and as you were thinking about you know.
Kevin D. Liu: Great Thank you for that, Keller. And if I could just sneak in one more on the cybersecurity side, can you talk a little bit about how much of your business over the past year might have been, you know, directly attributable to some of the geopolitical conflicts going on? And as you're thinking about, you know, your customer spending for this year, would you expect that buying to be kind of repeated from your existing customers, or do you have to go out and acquire new customers? Thank you. Yeah,
Kevin D. Liu: Your customer spending for this year would you expect that buying to be kind of repeated from your existing customers or do you have to go out it is quite a new customer. Thank you.
Anil K. Singhal: Yeah, I think it's very hard to know what is directly attributable because we don't have a special like option for that. But yeah, there was an impact. But overall, DDoS attacks and cyber attacks are rising everywhere and for various reasons. And now we have elections coming. We have the Olympics coming up in France, and so all these events are sort of an opportunity for hackers to go after. So we are seeing interest in that area, for example, in the European area for the Olympics and US elections.
Speaker Change: Yeah, I think if it might be it and it's very hard to know what is directly attributable because we don't have a special.
Anil K. Singhal: Like option for that down, but the idea of what the impact, but overall, the ddos attack and cyber attacks advertising everywhere.
Anil K. Singhal: And what radius reasons, and nausea reelection Scummy, Yeah Olympics coming in France.
Anil K. Singhal: And so all these events.
Anil K. Singhal: Ah the sort of the opposite of what had cause to go after so if we ever seeing interest in that day or the for example in the Europe area for the Olympics.
Anil K. Singhal: And send you a selection. So I think it's you can call them, all the geopolitical and I mean events in some sense, but there's always something like this is going on in addition to a normal attack. It would be increasing also there is another dimension Gavin which is.
Anil K. Singhal: So I think we can call them all geopolitical events in some sense. But there's always something like this going on in addition to normal attack activity increasing. Also, there is another dimension, Kevin, which is the more smaller, sophisticated attack, which we call application layer attack. So this adaptive DDoS, which we have come up with, that option allows us to go after those activities where the traditional prior solution of our work was mainly volumetric attack. And so we have adjusted our product to some of those newer types of attacks, whether it's because of geopolitical situations or other reasons.
Anil K. Singhal: More smaller sophisticated attack, which we got application later attack. So this adapter Ddos, which we have come up with that option allows us to go after adored those activities, where the traditional bribes solution, Nevada, but mainly volumetric attack.
Anil K. Singhal: And so we have adjusted about product to some of those newer type of a tax whereas it is because of geopolitical situation or other reasons.
Speaker Change: Alright, thanks for the responses and pull up the fiscal year.
Kevin D. Liu: Great, thanks for the responses, and good luck this fiscal year.
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: Thank you. It appears that we have no further questions at this time. I will now turn the program back over to Tony Piazza for closing remarks.
Anthony Piazza: We have no further questions at this time I will now turn the program back up.
Anthony Piazza: [noise]. Thank you operator that concludes our call for today. Thank you for joining us and have a good day.
Anthony Piazza: Thank you, Operator. That concludes our call for today. Thank you for joining us, and have a good day. This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Anthony Piazza: Does does conclude today's program.
Operator: You may disconnect at anytime.
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