Q4 2025 NetScout Systems Inc Earnings Call

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[music]. Please standby your program is about to begin.

Operator: Please stand by, your program is about to begin. Ladies and gentlemen, thank you for standing by, and welcome to NetScout's 4th Quarter and Fiscal Year 2025 Financial Results Conference Call.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to not Scouts fourth quarter and fiscal year 2025 financial results Conference call.

Operator: 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.

Speaker Change: 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 Deputy CFO and his colleagues at NIPSCO are on the line with US today. If you require operator assistance at any time. Please press star Zero I would now I'd like to turn the call over to Tony Piazza.

Operator: Tony Piazza, Deputy CFO, and his colleagues at NetScout are on the line with us today. If you require operator assistance at any time, please press star zero.

Tony Piazza: I would now like to turn the call over to Tony Piazza to begin the company's prepared remarks. Thank you, operator. And good morning, everyone.

Speaker Change: To begin the company's prepared remarks.

Speaker Change: Thank you operator, and good morning, everyone welcome to <unk> fourth quarter and full fiscal year 2025 conference call for the period ended March 31st 2025, joining me today are Nielsen call, Yes, Scott <unk>, President and Chief Executive Officer, Michael Zama dose at Scouts.

Tony Piazza: Welcome to NetScout's fourth quarter and full fiscal year 2025 conference call for the period ended March 31, 2025.

Tony Piazza: 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's a slide presentation that accompanies our prepared remarks. You can advance the slides in the webcast viewer to follow our commentary.

Speaker Change: Chief operating officer, and Jean <unk>.

Speaker Change: <unk> Executive Vice President and Chief Financial Officer.

Speaker Change: There's a slide presentation that accompanies our prepared remarks, you can advance the slides in the webcast viewer to follow our commentary both the slides and the prepared remarks can be accessed in multiple areas within the Investor Relations section of our website at Www Dot net scouts dot com, including the IR landing page under final.

Tony Piazza: Both the slides and the prepared remarks can be accessed in multiple areas within the Investor Relations section of our website at www.netscout.com, including the IR landing page under Financial Results, the webcast itself, and under Financial Information on the Quarterly Results page. Moving on to slide number three.

Speaker Change: Actual results the webcast itself and under financial information on the quarterly results page.

Speaker Change: Moving on to slide number three today's conference call will include forward looking statements. Examples of forward looking statements include statements regarding our future financial performance or position results of operations business strategy plans and objectives of management for future operations and other statements that are not historical facts.

Tony Piazza: 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. Actual results could differ materially from any forward-looking statements.

Speaker Change: Actual results could differ materially from any forward looking statements. These statements speak only as of today's date and involve risks and uncertainties, including but not limited to those described on this slide and in today's financial results press release, which are available on the Investor Relations section of our website as well as in the.

Tony Piazza: These statements speak only as of today's date and involve risks and uncertainties, including but not limited to those described on this slide and in today's financial results press release, which are available on the investor relations section of our website, as well as in the company's most recent annual report on Form 10-K and subsequent filings with the Securities and Exchange. NetScout assumes no obligation to update any forward-looking information except as required by law.

Speaker Change: The company's most recent annual report on Form 10-K, and subsequent filings with the Securities and Exchange Commission <unk>.

Speaker Change: <unk> assumes no obligation to update any forward looking information, except as required by law.

Tony Piazza: Let's now turn to slide number four, which involves non-GAAP metrics. While this slide presentation includes both GAAP and non-GAAP results, unless otherwise stated, financial information discussed on today's conference call will be on a non-GAAP basis only. The rationale for providing non-GAAP measures, along with the limitations of relying solely on those measures, is detailed on this slide and in today's financial results press release.

Speaker Change: Let's now turn to slide number four which involves non-GAAP metrics. While this slide presentation includes both GAAP and non-GAAP results unless otherwise stated financial information discussed on today's conference call will be on a non-GAAP basis, only the rationale for providing non-GAAP measure.

Speaker Change: Along with the limitations of relying solely on those measures is detailed on this slide and in today's financial results press release.

Tony Piazza: These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations of all non-GAAP metrics with the applicable GAAP measures are provided in the appendix of the slide presentation in today's Financial Results Press Release and on our website.

Speaker Change: These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

Speaker Change: Reconciliations of all non-GAAP metrics with the applicable GAAP measures are provided in the appendix of the slide presentation in today's financial results press release and on our website.

Anil Singhal: I will now turn the call over to Anil for his prepared remarks. Anil? Thank you, Tony, and good morning, everyone. Welcome and thank you all for joining us today. We close fiscal year 2025 revenue on a strong note with fourth quarter revenue exceeding our expectations driven by solid performance in our cybersecurity product line. We are pleased with our full-year revenue performance, which was in line with our original guidance range provided at the beginning of the fiscal year and consistent with the prior year's revenue after adjusting for the divestiture of the test optimization business. More importantly, we are able to generate approximately $50 million in additional revenue this year and ultimately overcome the challenge of backlogged usage from the prior fiscal year.

Neal: I will now turn the call over to Neal for his prepared remarks.

Neal: Thank you Tony and good morning, everyone welcome and thank you all for joining yesterday.

Neal: Fiscal year 2025 Avenue on a strong note with fourth quarter revenue exceeding our expectations driven by solid performance in our cyber security product line.

Neal: We are pleased with our full year revenue performance, which was in line with the original.

Neal: Guidance, we provided at the beginning of the fiscal year.

Neal: At this point with the priority use of Avenue after adjusting for the divestiture of the desktop demolition business.

Neal: More importantly, we are able to generate approximately $50 million. In addition to the avenue of BCS and ultimately overcome the challenge of backlog backlog do this from the prior fiscal year.

Anil Singhal: We delivered non-gap EPS growth for fiscal year 2025, driven by our continued focus on prudent cost management initiatives.

Neal: We delivered non-GAAP EPS growth for fiscal year 'twenty gratified by our continued focus on prudent cost management initiatives.

Anil Singhal: With a strong financial foundation and a clear strategic direction entering fiscal year 2026, we believe NetScout is well positioned to navigate the current macroeconomic uncertainty and deliver sustainable, long-term growth.

Neal: With a strong buy.

Neal: Alicia Foundation, and a clear strategic direction entering fiscal year 'twenty six we believe Mexico is well positioned to navigate the current macroeconomic uncertainty A&D and deliver sustainable long term growth.

Anil Singhal: With that as the backdrop, let's now turn to slide number six for a brief high-level recap of our non-GAAP financial results for the fourth quarter and full fiscal year 2025. Jean will provide more detail on the results later in the call. For the fourth quarter, revenue increased 1% to approximately $205 million and non-gap diluted earnings per share was $0.52, down approximately 5% on a year-over-year basis. For the full fiscal year 2025, we delivered revenue of approximately $823 million, essentially flat year-over-year, down less than 1%. As I mentioned earlier, we are happy with this performance given the diversity of the test optimization business and the previously mentioned prior year backlog driven revenue gain.

Neal: With that as a backdrop, let's now turn to slide number six but a brief high level recap of what non-GAAP financial results for the fourth quarter and full fiscal year 2025.

Neal: Jim will provide more detail on the results later in the quarter.

Neal: For the fourth quarter revenue increased 1% to approximately $205 million and non-GAAP diluted earnings per share was <unk> 52 cents down approximately 5% on a year over year basis.

Neal: For the full fiscal year 2025, we delivered revenue of approximately $823 million.

Neal: Essentially flat year over year down less than 1%.

Neal: As I mentioned earlier, we are happy with this performance given the diversity of cells that desktop demonization business and the previously mentioned prior year backlog grew with revenue gains.

Anil Singhal: When adjusting for the sale of the test optimization business, revenue was consistent year-over-year, and adjusting for the prior year's backlog benefit would have resulted in mid-single-digit revenue growth year-over-year. From a non-GAAP EPS perspective, for the full fiscal year 2025, we will deliver $2.22 per diluted share, a 2 cents or approximately 1 percent improvement over fiscal year 2025. We achieved this performance due to our ongoing focus on efficiency, which has contributed to an improved cost structure.

Neal: When adjusting for the sale of the desktop recommendation business at Avenue was consistent year over year and adjusting for the prior year's backlog benefit would have resulted in mid single digit revenue growth year over year.

Neal: But I mean, non-GAAP EPS perspective for the full fiscal year 2025.

Neal: Regardless and 32 cents per diluted share a two cents at approximately one one improvement 1% improvement over fiscal year 2024.

Neal: Do you have just performance due to our ongoing focus on efficiency, which has contributed to an improved cost structure, we plan to carry those costs managing priorities into fiscal year <unk>.

Anil Singhal: We plan to carry those cost management priorities into fiscal year 2020.

Anil Singhal: Now let's turn to slide number 7, where we'll dive deeper into our key business drivers and share some additional market insights. Starting with our service assurance offerings, in fiscal year 2025, service assurance revenue declined approximately 4% year over year. This was partially attributable to the divestiture of the test-optimizing business in fiscal year 2024 and the lower level of radio frequency propagation and modeling project revenue compared to last fiscal year. As we consider the demand and mix-up for the service assurance offering moving forward, we continue to see service provider customers invest in 5G initiatives at a measured pace.

Neal: Now, let's turn to slide number seven where it will dive deeper into our key business drivers.

Neal: And she has some additional market in size.

Neal: Starting with our services offerings.

Neal: In fiscal year 2025 service agenda revenue declined approximately 4% year over year.

Neal: This was partially attributable to the divestiture of their best optimize the business business in fiscal year 2024, and the lower level of radio frequency propagation modeling project revenue compared to last fiscal year.

Neal: As you can see that demand and mix of Florida. So that visit so that's all being moving forward, but we continue to see service providers estimate investing <unk> initiatives at <unk>.

Neal: Yes.

Anil Singhal: Customers are also making investments in network performance and new services such as fixed wireless access.

Neal: Customers are also making a divestment in network platform and new services such as fixed.

Neal: Airlift Axis, we believe we remain well positioned to support both domestic and international customers.

Anil Singhal: We believe we remain well-positioned to support both domestic and international carriers as customer demand evolves and innovative network technology trends materialize. We are in active discussion with our service provider customers to demonstrate the critical value of our enhanced smart data generated from Deep Packet Inspection, or DPI, to accelerate service provider efforts in 5G NetOps, AIOps, and mobile network security.

Neal: Customer <unk> and innovative network technology transfer materializes.

Neal: We are in active discussions with our February estimates to demonstrate the critical value of an enhanced smart data generated from deep packet inspection or DPA to accelerate service provided to their efforts <unk> net ops, AI ops and mobile network security.

Anil Singhal: In the enterprise vertical, we are cautiously optimistic that the growth we experienced in the second half of fiscal year 2025 will continue into fiscal year 2026 as customers evolve their digital transformation and enhance monitoring at the edges of their network. However, we recognize that ongoing economic uncertainty may influence customer behavior and we are actively monitoring these trends.

Neal: In the enterprise vertical we are cautiously optimistic that the growth we experienced in the second half of fiscal year could you quantify will continue into fiscal year <unk> six.

Neal: If all their digital transformation and then has monitoring at that monitoring at the edges of their networks.

Neal: However, we recognize that ongoing economic uncertainty may influence might behave yet and.

Neal: And we are actively monitoring these strengths.

Anil Singhal: safe-shifting to our cyber security of In fiscal year 2025, our cybersecurity offerings deliver nearly 7% year-over-year revenue growth driven by strong momentum within our enterprise customer vertical.

Neal: Shifting to our cyber security offerings in fiscal year 'twenty to 'twenty five.

Neal: Cyber security offering delivered nearly 7% year over year revenue growth driven by strong momentum within our enterprise estimate where it takes us.

Anil Singhal: As highlighted in our recently released DDoS threat intelligence report, geopolitical tensions continue to drive up the number of DDoS attacks. At this time, AIML automation and the abuse of enterprise-grade infrastructure is enabling more sophisticated and agile attacks. This increases the need for proactive and adaptive defense measures to effectively mitigate evolving threats. Attacks have been powered by the Mirai malware-created botnets which cause service provider attacks to surge. With this high-activity trend-length landscape, companies are increasingly depending on NetScout scalable and real-time adaptable solutions for their cybersecurity protection methods.

Neal: As I highlighted in our recently released Ddos threat Intelligence report I think bulk geopolitical tensions continue to drive up the number of Ddos attacks.

Neal: At this time, AI ml automation and abuse enterprise, great infrastructure is enabling more sophisticated and agile FX.

Neal: This increases the need for proactive and adaptive defense measures to effectively mitigate evolving threats.

Neal: <unk> been powered by the mid high <unk>.

Neal: Malware created partners, which caused service provider at Baxter.

Neal: With this high activity and land landscape.

Neal: These are increasingly depending on net scar scalable and real time adaptable solutions, while the cyber security protection methods.

Anil Singhal: As we look to fiscal year 2026, we believe the value proposition of our solutions should continue to resonate with customers and expect our core portfolio as well as our newer offerings such as adaptive DDoS, mobile security, and distributed threat mitigation system solutions to fuel continued momentum in this field.

Neal: As we look to fiscal year 2026, we believe the value proposition of our solutions continue to resonate with estimate estimates and expect our core portfolio as well as newer offerings, such as adaptive Ddos mobile security and distribute the attack mitigation system system solutions to fuel continued.

Neal: Momentum in this space.

Anil Singhal: Michael will provide more insight regarding customer wins during his remarks.

Neal: Michael will provide more insight regarding customer advance during his remarks.

Anil Singhal: Now let's move to slide number 8 regarding our Outlook and Summary. As we look ahead to fiscal year 2026, we remain encouraged by the momentum in our cybersecurity office.

Neal: Now, let's move to slide number eight regarding our outlook in Saudi.

Anil Singhal: While we remain cautious given the broader economic uncertainty, we are committed to continuing our investments in product-related AI and cybersecurity solutions. We also plan to maintain our disciplined approach to cost management and preserve a strong financial position. Based on our current view, in FY2026, we expect to achieve year-over-revenue growth, improve our operating margin and diluted EPS performance, and continue to generate solid free cash flow.

Anil Singhal: Jean will provide more specifics on the Outlook in her remarks. Our long-term strategy remains unchanged. We will continue to invest in innovation, deepen relationships with our customers, and leverage our mission-critical solutions to support the evolving performance, availability, and security needs of today's complex digital environment.

Neal: Leverage our mission critical solution to support the evolving performance available and security need of today's complex digital environment with a strong foundation and clear strategic direction. We believe next got is well positioned for.

Anil Singhal: With a strong foundation and clear strategic direction, we believe NetScout is well positioned for sustainable, long-term success. We look forward to keeping you updated on our progress as we move through the new fiscal year.

Speaker Change: We look forward to keeping you updated on our progress as we move through the new fiscal year now, let's move to slide number nine regarding our leadership transition before I turn the call over to CEO, Michael Cybertos I want to take a moment to address earlier.

Anil Singhal: Now let's move to slide number 9 regarding our leadership transition. Before I turn the call over to CEO Michael Szabados, I want to take a moment to address the announcement we made earlier today. As shared, both Michael and our CEO, CFO Jean Bua, will be retiring and stepping down from their roles effective May 31, 2025. We appreciate their continued commitment to the company as they transition into advisory roles through June 2026, ensuring a smooth leadership transition. As part of our succession plan, Sanjay Munshi, the company's Deputy CEO, and Tony Piazza, NetScout's Deputy CFO, will become CEO and CFO, respectively, and will join the executive team effective June 1, 2025.

Speaker Change: Ashier, both Michael and our C E O C for Jean Bua will be retiring and stepping down from that Role's effective may 31st 2025. We appreciate that continued commitment to the company at the transition into advisory through June.

Speaker Change: And showing a smooth leadership transition as part of our succession plan Sanjay Mushi, the company's deputy CEO, and Tony Piaza and export Deputy CS CFO will become CEO and CFO, respectively and will join the.

Speaker Change: 2025.

Anil Singhal: On behalf of our board and executive team, I want to thank Jean and Michael for their many contributions in support of NetScout over the years and wish them well in their retirement. We are fortunate to have capable and experienced leaders like Sanjay and Tony ready to take on the roles of COO and CFO, and I look forward to working closely with each of them.

Speaker Change: On behalf of our board and executive team I want to thank Jean and Michael for the many contributions contributions in support of Netscott over the years and wish them well in their retirement, we are fortunate to have capable and experience leaders like Sanjay and Tony ready to take on the rules of.

Michael Cybertos: And C F O and look I look forward to working closely with each of them with that I'll turn the call over to Michael Good morning, everyone and thank you on your for the kind words. It has been a true pleasure working with you and the outstanding team over these many years I'm confident that the organization is in great hands.

Michael Szabados: With that, I turn the call over to Good morning, everyone, and thank you, Anil, for the kind words. It has been a true pleasure working with you and the outstanding team over these many years. I'm confident that the organization is in great hands with Sanjay Seping.

Michael Cybertos: J seven U C O M.

Michael Szabados: Seping is our new COO.

Michael Szabados: Moving on to our quarterly updates, slide 11 outlines the areas that I will be covering starting the Q4 Customer Win Highlights. Starting with our service assurance offering, one notable win this quarter was a competitive low seven-figure deal with a new customer, which is a leading financial services company. They were utilizing a competitor's solution that was not satisfying their requirements. During our proof-of-concept, we demonstrated how our solution delivers end-to-end network visibility from the customer's core network to their external trading partner. the significantly reduced issue resolution times from days to mere minutes, highlighting our clear operational advantage over their existing solution.

Michael Cybertos: Unin.

Michael Cybertos: Clear operational advantage over their existing solution the power of our service issuance offerings to address issues quickly and accurately at scale, what the clear catalyst to this win you know cybersecurity offering we extended our relationship.

Michael Szabados: The power of our service assurance offerings to address issues quickly and accurately at scale was the clear catalyst to this win.

Michael Szabados: In our cybersecurity offering, we extended our relationship with a leading cloud service provider with a mid-7-figure deal that included our spotlight detection and TMS mitigation solutions. to enhance their security posture at their network edge as well as inside their data centers. The customer recognizes the value of our industry-leading scalability, advanced detection and surgical mitigation and it is critical to supporting the growth of their cloud and AI services. I mean increasingly larger and sophisticated TDoS attacks.

Michael Szabados: Turning briefly to our go-to-market activities, we continue to actively promote our offerings to both existing and prospective customers.

Michael Cybertos: To any briefly to our go to market activities. We continue to activate promote our offerings to both existing and prospective customers. For example in March we participated in the mobile World Congress in Barcelona, where we held a series of productive both.

Michael Szabados: For example, in March we participated in the Mobile World Congress. in Barcelona, where we held a series of productive meetings in both existing and prospective customers. The discussion centered around our latest innovations for enhancing our smart data. Excel in service provider efforts in 5G, NetOps, AIOps, and mobile networks.

Michael Szabados: More recently, in May, we participated in the RSA Security Conference. And in San Francisco, where we demonstrated our visibility without border solutions, deliver next-generation performance management, network security, and DDoS protection to ensure security, performance, and availability for the most complex and mission-critical network. In June, we will head to San Diego for Cisco Live, where we will showcase our visibility and security solutions, which are designed to ensure organizations are operationally resilient. by ensuring every interaction is safer, faster, and flawless from the edge to the cloud.

Michael Cybertos: Confidence and in San Francisco, where we demonstrated our visibility without order solutions deliver next generation performance management network security and Dtas protection to ensure security performance and available.

Michael Cybertos: Admission critic on network in June we will have San Diego for Cisco live showcase our visibility as securities solutions, which are designed to ensure organizations our regionally resilient by ensuring every international.

Michael Cybertos: Faster at flawless on the edge to the cloud you know the August we will be in Las Vegas participating in the Black head USA conference, where we will demonstrate our Ddos protection and on this network security solutions to ensure.

Michael Szabados: In early August, we will be in Las Vegas participating in the Black Hat USA conference, where we will demonstrate our DDoS protection and on-disk network security solutions to ensure performance, security, and availability for the world's most powerful digital ecosystem.

Michael Cybertos: Security and availability for the roads most powerful you don't ecosystems that concludes my final update. Thank you for your support over the years I will now turn the call over to Jean Thank you Michael and good morning, everyone I will be reviewing.

Michael Szabados: That concludes my final update. Thank you for your support over the years.

Michael Szabados: I will now turn the call over. Thank you, Michael, and good morning, everyone.

Jean Bua: I will review key metrics for our fourth quarter and the full fiscal year 2025 and provide some additional commentary on our fiscal year 2026 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 comparisons. Additionally, all comparisons are on a year-over-year basis, unless otherwise noted.

Jean Bua: Fourth quarter and the full fiscal year 2025, and provide some additional commentary on our fiscal year 2026 outlook. As a reminder, this review focuses on our non-GAAP results unless otherwise stated and all reconciliations with our.

Jean Bua: Six regardless I will note the nature of any such comparisons. Additionally, all comparisons on on a year over year basis, unless otherwise noted slide number 13 details the results for the fourth quarter and full fiscal year 2020.

Jean Bua: Slide number 13 details the results for the fourth quarter and full fiscal year 2025. Focusing on our quarterly performance first, total revenue for the fourth quarter of fiscal year 2025 was $205 million, up 0.8 percent. Product revenue was $89.5 million, an increase of 0.1 percent, and service revenue was $115.5 million, an increase of 1.3 percent. At the end of the fourth quarter, our total combined product backlog was $33.1 million, consisting of a fillable backlog of $25.1 million, $0.9 million of radio frequency propagation modeling projects, and $7.1 million related to one multi-year customer enterprise license commitment.

Jean Bua: Related to one multiyear customer enterprise license commitment. Additionally, at the end of the fourth quarter, there was $8.3 million of radio frequency modeling projects and deferred revenue gross profit margin was 79.2 benefit.

Jean Bua: Additionally, at the end of the fourth quarter, there was $8.3 million of radio frequency modeling projects and deferred revenue. Gross profit margin was 79.2% in the fourth quarter, up two percentage points. Quarterly operating expenses decreased 2.5% primarily due to the previously announced cost reduction actions and lower variable compensation expense. Accordingly, we reported an operating profit margin of 23.1% compared with 19.2% in the same quarter last year. Diluted earnings per share was $0.52, which included an unrealized loss on a foreign investment of approximately $0.03. This was down 5.5% from $0.55 in the same quarter last year.

Jean Bua: Up two percentage points quarterly operating expenses decreased 2.5%, primarily due to the previous previously announced cost reduction actions and lower variable compensation expense Accordingly, we reported.

Jean Bua: 23.1% compared with 19.2% in the same quarter last year diluted earnings per share was 52 cents, which included an unrealized loss on a foreign investment of approximately three cents. This was down 5.5.

Jean Bua: For the full fiscal year 2025, revenue was $822.7 million, which was a decrease of 0.8 percentage points year-over-year. Normalizing for the test optimization business that we disposed of in fiscal year 2024, total revenue would have been consistent year-over-year. Product revenue was $359.9 million, a decline of 0.2 percent, and service revenue was $462.8 million, a decline of 1.3 percent. Our gross profit margin was 80 percent, an increase of 0.6 percentage points. Annual operating expenses decreased 1.9 percent from the prior year, primarily due to previously announced cost reduction actions. We reported an operating profit margin of 23.7 percent, up 1.1 percentage points compared to the prior year.

Jean Bua: A decline of 1.3% a gross profit margin was 80% an increase of 0.6 percentage points annual operating expenses decreased 1.9% from the prior year, primarily due to previously announced cost reduction actions we.

Jean Bua: Operating profit margin of 23.7% up 1.1 percentage points compared to the prior year diluted earnings per share was $2.22, a 0.9% increase our annual tax rate was 19%.

Jean Bua: Diluted earnings per share was $2.22, a 0.9 percent increase. Our annual tax rate was 19 percent compared to 17.2 percent in the prior year. As a reminder, the prior year tax rate was impacted by evaluation gain in a bond investment with favorable tax rate.

Jean Bua: Turning to slide 14, I will review key revenue trends by product lines and question with verticals. Please note that all comparisons here are on a year-over-year basis consistent with our other remarks. For the fiscal year 2025, our service assurance revenue decreased by 4.4 percent, while our cybersecurity revenues grew by 6.6 percent. During the same period, our service assurance product line accounted for approximately 65 percent of our total revenue, while our cybersecurity product line accounted for the remaining 35. Turning to our customer verticals, for the first fiscal year 2025, our enterprise customer vertical grew 7.5 percent, while our service provider customer vertical revenue decreased 10.1 percent.

Jean Bua: Please note that all comparisons here are on a year over year basis, consistent with our other remarks for the fiscal year 2025, our service assurance revenue decreased by 4.4%, while our cybersecurity revenues grew by 6.6.

Jean Bua: During the same period. So this assurance product line accounted for approximately 65% of our total revenue while ourside the security product line accounted for the remaining 35% turning to our customer verticals for the first fiscal year 20.

Jean Bua: During the same period, our enterprise customer vertical accounted for approximately 57 percent of our total revenue, while our service provider customer vertical accounted for the remaining 43 percent.

Jean Bua: Turning to slide 15, this shows our geographic revenue mix for the fiscal year 2025, 57 percent of our revenue was derived from the United States with the remaining 43 percent provided by international markets, which is consistent with the prior year.

Jean Bua: Also, no customer represented 10 percent or more of our total revenue in either the fourth quarter or full fiscal year 2025.

Jean Bua: Slide 16 details certain balance sheet and free cash flow items. We ended fiscal year 2025 with $492.5 million in cash, cash equivalents, short and long-term marketable securities and investments, representing an increase of $68.4 million since the end of fiscal year 2024. Free cash flow for the fourth quarter was $140 million and $211 million for the full fiscal year 2025. From a debt perspective, during the fourth quarter, we repaid the $75 million that was outstanding on our $600 million revolving credit facility.

Jean Bua: Sandy on our 600 million dollar revolving credit facility, we did not repurchase any of our common stock during the fourth quarter. We currently have capacity in our share repurchase authorization and subject conditions intend to be active in the market during.

Jean Bua: We did not repurchase any of our common stock during the fourth quarter. We currently have capacity in our share repurchase authorization and subject to market conditions intend to be active in the market during fiscal year 2026. To briefly recap other balance sheet items, accounts receivable net was $163.7 million, representing a decrease of $28.4 million since March 31st, 2024. The DSO metric at the end of the fourth quarter of fiscal year 2025 was 68 days versus 81 days at the end of fiscal year 2024. The lower DSO metric in the fourth quarter of this fiscal year was due to the timing and composition of bookings.

Jean Bua: To briefly recap other balance sheet items accounts receivable net was $163.7 million, representing a decrease of $28.4 million since March 31st 2024.

Jean Bua: Let's move to slide 17 for commentary on our outlook I will focus my review on our non-GAAP target for fiscal year 2026, I would like to first address the current macro environment and the impact of the proposed tariff policy as current global.

Jean Bua: Let's move to slide 17 for commentary on our outlook. I will refocus my review on our non-GAAP targets for fiscal year 2026.

Jean Bua: I would like to first address the current macro environment and the impact of the proposed tariff policies. As it stands, current global tariff regulations and negotiations are not expected to have a material impact on our business from a direct force perspective. More than 80% of our revenue comes from services and software, which are largely unaffected by these tariffs. On the hardware side, most components for our appliances are sourced either domestically from Canada or from Mexico and are currently exempt under the USMCA arrangements. As such, our direct cost exposure is currently minimal and could be addressed through pricing adjustments or efficiency initiatives if required.

Jean Bua: Negotiations are not expected to have a material impact on our business from a direct force perspective more than 80% of our revenue comes from services and software, which are largely unaffected by these parrots on the hardware side most components for our sourced.

Jean Bua: From Canada or from Mexico, and a currently exempt exempt under the U S. Mcarraments as such a direct cost exposure is currently minimal and could be addressed through pricing adjustments or efficiency initiatives if required.

Jean Bua: That said, broader tariff-related activity is contributing to some uncertainty in the global macroeconomic landscape. While we haven't seen a meaningful impact on customer demand or revenue so far, we are closely monitoring the situation for any potential shifts in customer behavior or market dynamics that could influence our outlook.

Jean Bua: I said water tariff related activity is contributing to some uncertainty in the global macroeconomic landscape, while we haven't seen a meaningful impact on customer demand or revenue. So far we are closely monitoring the situation for any potential shifts in customer.

Jean Bua: That could influence our outlook moving on to our fiscal year 2026 outlook, we anticipate our fiscal year 2026 revenue to be in the range of approximately 825 million to $865 million. Additionally, we.

Jean Bua: Moving on to our fiscal year 2026 outlook, we anticipate our fiscal year 2026 revenue to be in the range of approximately $825 million to $865 million. Additionally, we anticipate non-GAAP diluted earnings per share within the range of $2.25 to $2.40. The full year effective tax rate is expected to be approximately 20%. Our weighted average diluted shares outstanding is assumed to be approximately 74 to 75 million shares.

Jean Bua: non-GAAP diluted earnings per share within the range of $2.25 to $2.40. The full year effective tax rate is expected to be approximately 20% a weighted average diluted shares outstanding is.

Jean Bua: Finally, I would like to provide some color for the first quarter of fiscal year 2026. In comparison to the first quarter of last year, we anticipate our first quarter fiscal year 2026 revenue to grow by approximately 3% to 5% with approximately the same growth rate for earnings per share.

Jean Bua: That concludes my formal review of our financial results.

Jean Bua: I'd like to quickly note that our upcoming IR conference participation is listed on slide 18.

Jean Bua: As this is my final earnings call, I would like to note that the company is in a strong position thanks to the dedication of our team and the strategic vision that has been built over the years. I would also like to take a moment to express my gratitude to all of my financial team members and company colleagues. It has been an honor to serve alongside you. Thank you again for your trust and support.

Operator: With that, I'll now turn the call over to the operator.

Operator: And 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.

Speaker Change: Press Star two we do ask in the interest of time that you limit yourself to one question and one follow up we'll take our first question from Matthew Hedberg with RBC capital markets. Please go ahead.

Michael Richards: We'll take our first question from Matthew Hedberg with RBC Capital Markets. Please go ahead. Hey, guys, this is Mike Richards on for Matt. Thanks for taking the questions and congrats on the retirement and promotions. It's great to see the continuity in the team. Yeah, thanks. And, you know, on tariffs, you know, it was great to hear that you guys haven't seen anything yet and you're relatively insulated from a cost perspective.

Speaker Change: Hey, guys. This is Mike Richards on for Matt. Thanks for taking the questions and congrats on the retirement and promotions, it's great to see the continuity in the team.

Speaker Change: Thank and yeah on on tariff. So it was great to hear that you guys haven't seen anything yet and you're relatively insulated from a cost perspective, maybe you could just double click on on what you're hearing from customers and does guidance assume any deterioration of.

Michael Szabados: Maybe you could just double click on what you're hearing from customers and does guidance assume any deterioration of the macro or provide any room for some uncertainty or deal pushes or things like that? Just any color there would be great. Well, at this point, Matt, so... Right now we see some delayed sales cycles and so it's maybe quarter to quarter there might be some issues. We are having broader conferences in Europe, one in Barcelona in June and then in Asia later in the year and we'll hear directly sentiments from hundreds of customers. But that's where we see and I think our, as Jean said, our guidance range covers some of those uncertainties but it is a little bit wait and see with some customers about timing of the automation.

Speaker Change: Uncertainty or deal Plushes or things like that just any color there would be great. Thanks, well at this point, Matt So.

Speaker Change: No VC is some delayed sales cycles, and so it's maybe quarter to quarter there might be some issues we are having.

Speaker Change: Conferences in Europe, one in Barcelona in June and then in Asia later in the year and we'll hear directly sentiment from hundreds of customers, but that's where we see and I I think our genes at our guidance range cover so.

Speaker Change: It's little bit wait and see with some customers about timing of the orders.

Speaker Change: Great. That's that's super helpful and I guess, just maybe my second one would be you know the cyber momentum has been pretty strong you know throughout this year. So looking into next year as we say that momentum continue are you expecting a stepw.

Michael Szabados: Great. That's super helpful.

Michael Szabados: And I guess just maybe my second one would be, you know, the cyber momentum has been pretty strong, you know, throughout this year. So looking into next year, as we see that momentum continue, are you expecting a step up in any of those newer products that you highlighted? And what are customers most excited about beyond Core DDoS there? So I think I'd like to say maybe a little bit broader than that. I think, you know, our service assurance business has been tough. But over time, because of AI and other things, we are becoming that business is becoming part of a broader observability market and which is really allows us to shine our smart data to a larger set of customers, broader budgets and all those.

Speaker Change: And what are customers most excited about beyond core ddos. There. Thanks, So I think I'd like to say, maybe a little bit broader than that I think you know about service assurance have business have been tough, but over time because of a I and other things.

Speaker Change: That business is becoming part of a broader observability market and which is.

Speaker Change: B L E allows us to shine, our smart data to larger set of customers broader budgets and all those so we we announce a couple of products in that area also the Ddos area, we have more automation through our adapted.

Michael Szabados: So we announced a couple of products in that area also. The DDoS area, we have more automation through our adaptive DDoS announcement, but also we are becoming part of a broader cybersecurity market. So I look at for the next two or three years, our market size in both the service assurance area becoming part of the observability and AI market, as well as DDoS expanding to broader cybersecurity market is the real opportunity. And I think we have a very solid and loyal customer base and this will be relevant to the same set of people or other departments in the same account.

Speaker Change: Part of a broader cyber security market. So I look at all the next two or three years, our market size in both the service assurance area, becoming part of the Observability and AI market as well as Ddos expanding to.

Speaker Change: Opportunity and I think we have a very.

Speaker Change: Solid and loyal customer base and this will be relevant to the same set of people or or other departments in the same accounts.

Speaker Change: Thanks for that and congrats again guys. Thank you. Thank you and your next question comes from the line of Kevin Leu with Kaylee and company. Please go ahead.

Michael Szabados: Thanks for that, and congrats again, guys. Thank you.

Kevin Liu: And your next question comes from the line of Kevin Liu with K-Liu and Company.

Kevin Liu: Please go ahead.

Kevin Liu: Hi, good morning, everyone. Jean and Michael, certainly wanted to wish you well in your retirement and also congrats in order for Tony and Sanjay, of course, on the topic of tariffs. I know you guys haven't seen much impact yet, but I was wondering if you felt there was any sort of pull forward in terms of folks, perhaps wanting to get ahead of any potential increases and if that was reflected in kind of the product backlog exiting the quarter.

Kevin Leu: Hi, Good morning, everyone, Jean and Michael certainly wanted to wish you well in your retirement and also congrats an order for Tony and Sanjay of course, just on the topic of tariffs I know you guys haven't seen much impact yet, but I was wondering if you felt there was any sort of pull forward.

Kevin Leu: Perhaps wanting to get ahead of any potential increases and if that was reflected in kind of the product backlog exiting the quarter.

Kevin Liu: Hi, Kevin, thank you for the congratulations. I would say that we did not see any pull forward from the tariffs. If you think about what happened to us during post-COVID, when the hardware components were hard to get, and so people focused towards software, you have the potential through FY26 and the future years of the tariffs to have a similar effect, where the software companies could be able to see some growth due to the componentry not being affected by the tariffs. That certainly makes sense. And actually, just along those lines, within your own pipelines, or maybe customer conversations, are you seeing even more interest from customers today to go to more kind of software-only solutions?

Speaker Change: Certainly makes sense and it actually just long those lines within your own pipelines or maybe customer conversations are you seeing even more interest from customers today to go to more kind of software only solutions or is it still fairly consistent in terms of demand for kind of the more traditional systems.

Kevin Liu: Or is it still fairly consistent in terms of demand for kind of the traditional systems and appliances? Yeah, so we have, I mean, our solution does require hardware, but we have unbundled that and we have been pushing the software solution and that's one of the reasons we have been able to maintain high margins during the, when we face growth challenges. So yeah, overall I think I don't see any change, especially there's no change because of tariff. And most people buy our software version solution. We do offer a bundled solution, but very few customers are interested because they get a better end user pricing and we can offer higher discounts on software.

Speaker Change: Oh, B, a b I mean, our solution does require hardware, but we have unbundled that and we have been pushing the software solution and that's one of the reason we have been able to maintain high margins during the growth challenges. So yeah.

Speaker Change: I don't see any change, especially the no change because of tariff and most people buy or software solution. We do offer a bundled solution, but very few customers are interested because they get a better and use a pricing at we cannot.

Speaker Change: Yeah makes sense and then if I could squeeze one more in just as it relates to your government and defense business I'm wondering if there was any impact from all the doze related headlines on on sale cycles within the quarter and just kind of how you're thinking about contribution from federal in your fiscal 20.

Kevin Liu: Yeah, makes sense.

Kevin Liu: And then if I could squeeze one more in, just as it relates to your government and defense business, I'm wondering if there was any impact from all the Doge-related headlines on sale cycles within the quarter and just kind of how you're thinking about contributions from federal in your fiscal 26 guidance. So that was a big, there was some refresh cycle in our product line and it was contributed to some of the numbers last year and we are expecting some more, but so far we have not seen any effect, but we'll see as six months left in the federal quarter to close, whether our pipeline really delivers.

Speaker Change: So that was a big that was it some refresh cycle in our product line and which was continued to some of the numbers last year and we are expecting some more but so far we have not seen any effect, but we'll see as six months left in the.

Kevin Liu: So yeah, that's a big question mark going forward, but so far we have not seen any.

Speaker Change: Understood well appreciate you taking the questions and congrats on the strong outlook here for 26.

Kevin Liu: Understood. Well, appreciate you taking the questions and congrats on the strong outlook here for 26. Thank you.

Speaker Change: Thank you and there are no further questions at this time I will now turn the call back to Tony for any additional or closing remarks.

Operator: And there are no further questions at this time.

Tony Piazza: I will now turn the call back to Tony for any additional or closing remarks. Great. Thank you, operator.

Tony: Thank you operator that concludes our call for today. Thank you all for joining us and enjoy the rest of the day.

Tony Piazza: That concludes our call for today.

Operator: Thank you all for joining us and enjoy the rest of the day. Thank you.

Speaker Change: Thank you. This does conclude today's presentation. Thank you for your participation you may disconnect at any time.

Operator: This does conclude today's presentation. Thank you for your participation. You may disconnect at any time. Music Music