So my name is Matt Hedberg, for those that don't know me. Thanks for showing up here. I've known NETSCOUT for, gee, years and years and years and years and years. A long, long time. So I appreciate your continued partnership, and, and you guys, being here with us today. Oh, our pleasure. So I feel like we're, Jean, overmatched, finance guys with CTOs. We're Yeah. Yeah, I should have had our Chief Technology Officer up on stage, too. It It would've provided a little, probably a more interesting conversation. But with us from NETSCOUT, we've got Jean Bua, Chief Financial Officer down on the end, Paul Barrett, Chief Technology Officer of Enterprise, and Vikram Saksena, Chief Technology Officer of the service provider. So we've got, really, the finance side covered, we've got the product side covered on both of the segments of the business, so we appreciate you guys coming. Thank you. We'll start out with some questions here, and if there's any questions from the audience, queue 'em up now. I was in I just did this last session. You were there. We had tremendous audience participation with a group like this, so I. Queue 'em up. So all right, so let's get started here. So you guys reported, was it, it was last week. It feels like it was months ago at this point, but it was just, it was just last week, wasn't it? or was it two weeks ago? It's been two. Okay. Recently. Let's start out with kind of your overall views of the macro. Obviously, you guys had a pre-announcement leading up to the quarter, but talk about kind of the. Jean, maybe start with you, kind of the overall view of the macros as you see it today, and you know, maybe how have they changed as this calendar year has progressed? Sure. so, as Matt said, we had an $80 million revenue change from the midpoint, and that was mostly, I would say, two components. As everybody that follows NETSCOUT knew, we had about... We have about a $60 million comparison to last year with radio frequency propagation modeling that we thought would be able to be replenished through some of the 5G. Because the radio frequency propagation modeling, and I'm just gonna use the shorthand that we use internally, calibration, 'cause it takes way too long to say that. That calibration is a forerunner. They were instrumenting the RAN in their cell tower networks, and that would be a forerunner to actually more traffic over 5G. So as we went through our first two fiscal quarters, and our fiscal year starts on April 1st, you know, we were very comfortable with all of the different projects that our service providers, Yeah H ad, you know, had with us. And then towards, I would say, the end of getting close towards the end of the quarter, sometime in September, you started to see some of the changes in some of the service providers themselves and some other infrastructure players who support the service providers, whether they were doing layoffs or cutting budgets. And so the promise of 5G is something that, you know, we will play in very well. Right now, they have instrumented the RAN as we saw it, and they probably have instrumented a lot of the, the network, but they're waiting for traffic. They're waiting, as Vikram will tell you, Vikram tells us all the time, it's a killer app, so they're looking for a business use case. Yeah, yeah. Or they're looking for a consumer use case, which, Vikram can more eloquently go into than I could. And then on the enterprise side, you know, we have a few big verticals. We have federal, and federal did very well for us in the first half. It grew nicely. And we also have, financial services as well as healthcare. And financial services has been experiencing some economic issues, such as, you know, the interest rate increases. They also have had some concern about credit defaults and whether they will have write-offs. And then in healthcare, we have some customers that were experiencing labor strikes, so they have repositioned their budgets for the rest of the, for the rest of this calendar year, anyway. Got it. All right, Vikram. Yes. You and I have chatted. I know you and I have done this a lot. Yes. I remember, Paul, I think you've done this previously. Yes. Okay, so what do you got cooking for us on the service provider side? The service provider- Yeah, we've been talking about 5G for a long time. Right. Right. Where are we? You know, Jean, you mentioned killer apps that people are looking for. What's your perspective on kind of the current market? Yeah, yeah. So, you know, as Jean said, I think we have gone through a huge build-out in the 5G, and now the focus is on monetization. Yep. Operators want to make money, obviously, from the billions of dollars they've invested. I think in the short term, meaning over the next 12 to 18 months, I think they have shifted focus to fixed wireless. As many of you may have seen ads from all the major carriers, they want to go into the home. This is primarily because they have put out the C-band spectrum, which has enough bandwidth to go attack the cable companies. Yep Competitively to go at the home. And, from what I have seen, it looks very promising. I have friends who have bought it and are using it, and the quality is very good, and they are seeing an uptake in their take rates because people like the service. And, so I think that given all the capacity they have built into the network, you will start to see an uptake in fixed broadband and in their 5G network. And as you know, fixed broadband, the home-... traffic is a lot more than a single mobile device. Yeah. So because it's multi TV, you know, streaming, 4K, and all that, so the bandwidth is much higher. So pretty quickly, I think, or relatively quickly, they might start filling up this capacity that they've deployed out there. So they will use our technology to monitor the user experience and try to figure out when is the next thing that they will have to deploy in terms of capacity augmentation. So I think that in this mode, I would say next 12 to 18, 24 months, if the operators are successful in pushing fixed wireless to homes and taking market share from cable. I think that'll be good for the industry as a whole, and it should be good for NETSCOUT also in this mode. Good for the consumer, too. I've been waiting on that forever. Good for the consumer, too. I mean. You know, I mean, you, I've been here long enough, you know, LMDS, MMDS, back 25 years ago, but the economics were not there for fixed wireless. Yeah. You know? Now, with C-band, the sweet spot is there for them to go and roll out the services, and then not too much behind it is going to be millimeter wave with the, you know, with much higher frequency. Yeah. So I think they have a real shot at this market, to get back into the game. But competitively speaking, on the flip side, the cable guys are not keeping quiet. Yeah. They're going with something called distributed access, where they're driving fiber deeper towards the home and cutting the length of the coaxial cable so they can digitize their access infrastructure with much higher bandwidth. And, you know, we are trying to play in that side of the game also. So we want to play on both the fixed line, next generation cable, as well as the wireless 5G fixed broadband, and take advantage of both of those opportunities. So kind of a win-win on both, whether- Yeah W hatever the consumer chooses, at least from that home. Yeah, we are, you know, we sell arms to both sides. Yes. Yeah, yeah. So what I'm hearing you say is that the capacity is there. Because they have built out. Yeah. For the time being, there's capacity, but given the high bandwidth, you know, the capacity won't last too long. Yeah. If they're very successful, they'll have to go back into augmenting it. So, Jean, when you think about, you know, you hear Vikram talk about that, and you, you think about that, it, you know, as you think about the remainder of this fiscal year, what... How do you, how do you incorporate, you know, maybe his enthusiasm for what's to come with obviously, you know, understanding that there was a little bit of a shortfall this, this most recent quarter? How do you, how do you think about discounting, you know, the opportunity here, from an outlook perspective? Well, I think that, I think NETSCOUT is well positioned in many areas for the long term. My understanding is that what Vikram is talking about in the fixed wireless should be a competitive landscape that will help us in the calendar year 2024. This year, our Q3 is the last quarter of the 2023 calendar year, and our Q4 is the first quarter of the 2024 calendar year. So the projects that we have in the pipeline, we are looking for whether they will use their 2023 calendar year budgets, or as they roll into 2024, they'll use their 2024 calendar year budgets, which could affect either Q3 or our Q4. Okay. But, you know, our fiscal year, it should be within our fiscal year. Vikram, I guess there's reason to be optimistic. Are there other things that you're sort of worried about? Is it the pace of deployment? Yeah. What’s the flip side of, Yeah, so as we all know, the carriers are, you know, not the best at execution- Yeah O n their own site. So, you know, my concern always is, you know, there are lots of opportunities in 5G, but how quickly and how efficiently can they execute? Yeah. You know, and if they are successful, we'll be successful. If they're not successful, then it doesn't help us. Yeah. Right? So in some sense, our success depends on their success. Yeah. My concern always is the opportunity is there, but a lot of it is outside our hands. It's more in the carrier's hands. How will they execute? If they execute, then it'll be good for the industry as a whole. Yeah. Do you think we're... It sounds to me, though, like we've chatted a lot, and we're closer to the reality of this, today than we were before. This looks more real- Yeah T han any other hyped up services like autonomous vehicles and AR/VR that they've talked about. You know, those, those are more, In terms of the kind of the killer app, you said. The killer app. Yeah. Those were more visionary and, you know, not real. But now I can see when I walk into my friend's home and watch a fixed wireless in operation. Yeah T hen I know it's, it's kind of happening. So this looks more real- Oh Than what we have ever seen. In my neighborhood, our cable go, it's just, it's so frustrating, the. I know T he downtime and the latency. Yeah. I will be one of the first That's right. That's right. A lot of people who have switched from cable, they were so happy. Yeah. So, yeah. Yeah. Helpful. Maybe we'll take a pause here for a second. Maybe on the enterprise side, Paul. You've got a lot under your sort of purview. What are you most excited about for the future on kind of the enterprise side? In terms of excitement, I think our entry into the security business. Yeah. With our NDR product. Yeah. We've actually built that on top of our core technology, so it's the same deep packet inspection, it's the same data we're generating, but we're now putting that to use for cybersecurity applications. It's a very large addressable market, as we've presented it, and we've got a great foundation that we're building on top of. Another area that we're just—we only just reached deployed product, our Chief Operating Officer Yeah. We finally decided that we're gonna allow our customers to export all of the data that they generate. When you look at AIOps, it's all about bringing data in from multiple parts of the enterprise. I think everybody understands that. People naturally understand the importance and the role of packet data and of network data. Being able to bring our data into some of these platforms, where then you can perform correlation and generate insights, I think is a very exciting area for us. And so, this whole, you know, migration towards hybrid cloud, you know, a lot of organizations are certainly, you know, one foot in the cloud, one foot on-prem, what is NETSCOUT's role in helping organizations bridge that gap and maybe, you know, help them on that path towards more cloud adoption? That's a great question, and I always like to point out that, you know, I, I think the idea from a few years ago that everyone was gonna move all of their apps to the public cloud, I think that's largely been debunked now, especially for the nature of NETSCOUT's customers. Yeah. If you think who we sell to, you know, the Fortune 500, large government agencies, these are very large, complex, conservative organizations. But I think, yeah, and it's amazing how many still have mainframes. But people are also realizing that the cost of hosting an application in public cloud, most estimates are between 30% to40% more expensive than putting it in a colo or in a data center. So I see large enterprises getting a lot more thoughtful and mindful about where they put their applications, and the end result is hybrid cloud. Yeah A s you say. Now, quite a few years ago, we developed a strategy that made sure that our network analysis technology can not only be deployed on-prem in physical appliances. Yeah But also in the public cloud. Yeah. I think as we see the sort of edge compute market develop as well, we can use that same software technology to instrument edge locations, too. I think we're very well placed, and I have to say, we're seeing quite an uptick in hybrid cloud conversations with customers. So what are the different revenue items that get hit on that? I mean, obviously, there's a cyber element to it, but what. Yeah W hat are, you know, so what, from a product perspective, what are customers, you know, leveraging, NETSCOUT for? So it's, you know, it's our core service assurance platform, but it's just different form factors. Yeah O f the actual packet acquisition and packet processing. The applications haven't really changed, except for, as I mentioned, for adding the data export component. Yeah. Yeah. It's really our core technology. What about, you know, then there's obviously been a whole industry built on the observability side of the house and the app monitoring. Yeah Y ou know, that industry's grown dramatically, and over the last, you know, five to 10 years. Yeah, how do you see the split between network monitoring and app monitoring? And does one have a right to, you know, more of that spend than others? I always say to people, "Look, we are highly complementary with the APM players. Yeah. I do not see them as a threat. Clearly, there's a little bit of competition for budget going on. Yeah. As I was saying with the AIOps, if you're serious about observability, you have to be bringing in different perspective of what's going on. Yeah. The one that we really bring is, and it comes back to that. I think we call it Visibility Without Borders. I don't know if I mentioned that, but the ability to instrument everywhere, particularly for hybrid cloud, we can provide this kind of holistic, almost helicopter view of everything that's happening. So the ability to use an observability tool that only works in the cloud doesn't help me if I've got applications that are interacting between public cloud and colos and data centers. Sure. Gotta have that visibility that's overarching, and that's what we bring. Excellent. One more question. On the cyber side, I mean, it's a, it's a rich conversation. You guys have spent a lot of time on and money, you know, building that platform out, and you had the obviously you've had a lot of success in DDoS, and Omnis got rebranded. Maybe level-set folks on where we're at from a cyber perspective, and candidly, you know, why NETSCOUT when it comes to cyber versus, you know, a lot of the pure plays out there? We're a relatively new entrant to that market. As I mentioned, we're building on the core technology we have, but that has allowed us to kind of sit back and see what's working. Yeah A nd what's not working. So although we are sort of notionally entering the NDR, the network detection and response space, if you look at how most vendors are positioning themselves there and how analysts like Gartner are defining the market, it's very much an AI, ML, let's say, "Let's take all the network behavior, and let's put it in an AI, ML algorithm and hope we get some useful outcomes." What people are discovering is you get a lot of false positives, a lot of false alerts, and that's very time-consuming and frustrating for security operations teams. So we've taken a bit of a fundamentally different approach. We looked at the MITRE ATT&CK framework, which lists in great detail all of the techniques that are used by attackers, and we've built rules based on our packet inspection that target specific types of attacks. So when we do generate an alert, we have a higher degree of confidence that we're actually pointing at something that's real. Yeah. We also tell people what exact or you know a particular technique is in use. So we're broadly under NDR, but we're actually taking a fundamentally. Ah Different approach to the problem. It really starts with the data. You guys see a unique. Yeah S et of data that others don't, right? Yeah. And what you do with that is. Exactly Y ou can apply security heuristics to that and lots of other things. Yeah. What about the interaction between you guys, you know, in terms of? Yeah C ross-selling cyber into service assurance? I mean, or you know, enterprise grade products into the service assurance market. Yeah. How do you think about that? Well, I think in the service provider side, you know, what has been the mainstream is our DDoS product line, the Sightline and TMS. Yeah. You know, they've been both on the mobile side, as well as the fixed-line side. You know, that has been the main bread and butter. The equivalent of NDR, what we are doing on the service provider side is what we call MobileStream, mobile security solution. So there, just like we are leveraging InfiniStreams in the enterprise network, we have InfiniStreams in the wireless network, you know, and they are monitoring the control plane and the user plane. So we are enhancing that with another software module called MobileStream. And that will make the same InfiniStreams produce the metadata that can be used by Sightline and TMS to detect attacks from compromised devices within the wireless network, and be able to then go into policy and disable and control these devices or silo them from further attacks. We are using something similar to NDR, but more adapted to wireless networking. Hmm. Yeah. Hmm. Yeah. This is something we have announced, and I think, you know, the initial reaction has been positive, but it needs to. You know, service providers run on budget-oriented cycles, so it needs to get built into their next budget cycle before they can deploy it. So I think we are looking forward to that, that some of the POCs that we are doing will result in some of them, you know, putting in budgets to buy our product, you know, next year and the year after. So we call it, you know, MobileStream, which is like the NDR product. Sure. Do you have any comments on sort of the cross-pollination opportunities between you guys? Well, certainly in the enterprise space, because the security product we built is based on the same technology, the same platform, you know, there's a natural conversation that starts with our champions in the network operations team- Yeah, yeah T hat naturally leads to an introduction to the security team. One of the interesting things you can do with this technology is if our customer has an existing large footprint of our service assurance probes, you can actually deploy the security product by just enabling a software module on the same probes. And then you get the benefit of the NDR solution. And that's very attractive, because if you think about the cost of actually deploying new assets, especially with customers who are having blackout periods, for example, like this time of year, it's a much easier deployment model. So that's certainly generating a lot of interest. I'm gonna ask Jean a question. If there's one from the audience, get ready. Get ready to fire it away. Jean, how do you think about... So listening to these gentlemen talk about sort of the drivers of their individual businesses, how do you think about the growth profile when you think about this in aggregate? How do you sort of discount the macros, think about the opportunities here when you're thinking about, you know, kind of, you know, not, I'm not even talking about, you know, fiscally or 2024, but just longer term growth opportunities for the business? So the thing about NETSCOUT to me is we've always stuck to our knitting. We are based in packet flow, and so we are an infrastructure provider. To that end, I think we have cornered the market on people that understand complex networks. So as Paul had said, Fortune 500, the very large telcos, as well as all of the- a lot of international governments. So to that end, we have developed a lot of technology that is becoming more on the forefront now. So we go back 10 years, probably to our patented ASI technology, that technology has the ability to do business intelligence. It has the ability to play in edge computing, because one of the reasons why the technology was developed was because of the vision of machine to machine in the future, when there would be many more devices talking to each other without any kind of human knowledge or interaction. And so the software was disembodied from the hardware, and so you could put it on sensors, you can put it on blades, you can put it on bricks, all those things. So we have the ability to move from what was the core production center, where we have always been extremely strong, all the way out to the edge, whether it's the RAN, so the actual conglomeration of the cell phone towers and service providers, to sensors in the home, to any kind of machine to machine. If you think about how fast AIOps, if you wanna use that term, will come along, you know, we, our technology is ready. So I think we have some good short-term opportunities in front of us, fixed wireline, as Vikram mentioned, as well as security, which is gaining more traction. And I think for the long term, we're pretty well settled, situated to be able to still collect data, be an infrastructure player, and feed into many more, observability, if you wanna use that term, types of analytical machines. That, that's a helpful perspective. What does that mean from an—like, I think a lot of people just wanna, like, you know, they're, they're trying to think, like, you know, "How do I think of NETSCOUT? Like, what, from a growth and a margin perspective. We can talk about margin in a second, but what does that mean from a Like, you haven't had an analyst day in a while, I don't think. No. When you think about, like, longer term growth rates, how, what do you, what do you aspire to, to be from a growth perspective? I don't, maybe not an exact number, but, like, maybe the, the framework for that. Sure. I think that when we think about it, I think that in the quadrants, I'm only gonna talk about three, we would see that service provider as fixed wireless and 5G come more into use cases should be a pretty good grower for us. You know, we grew very fast in 4G. I'm not sure that it would be as fast, because that was starting from almost a base of zero. Yeah. But we built from zero about a $250 million to $400 million business in the span of four years. When you think about the enterprise, again, the hybrid market, and some of the other IoT, the uses of 5G would help the enterprise grow. The federal grew very well in the first half of last year. So I hate to say this, but if you look at the geopolitical. Yeah E nvironment, certain things that are not good for humanity are better for our technology. And then you have the whole security, which is actually a very, exciting area for, for us, because we see that we, again, will use the machine learning, artificial intelligence of how we understand the algorithms and the networks, and how we can spot something a lot quicker than a lot of competitors can. And then, as, Paul mentioned, alert on that faster, and have less false positives or less false negatives than a lot of our competitors. So when you put that together, those are probably our main growth areas over the short and long term. But going back, you know, we are an infrastructure provider. We have unique data, as you said, and we are looking at the trends that will come to fruition in the next six to 12, 36, 48 months. So we should be able to provide a lot of technology support to our customers for many of the even foreseeable as far as the long-term trends. Okay. Helpful. Is there any out there? If not, I can keep rolling. Here's your chance. Nope, nope. Going once, going twice. No. Going? No. Okay. So all right. What about the federal? You mentioned strength in federal, in the September quarter, obviously year-end. What is the federal government doing with NETSCOUT these days? Federal government is mostly in the Department of Defense. That is still our core. They use it for, you know, service assurance for a lot of their robotic type of drones, those types of things. Obviously, to make sure that communication, Paul is from Psytechnics, which was an acquisition 10+ years ago that focused on communications. Communications amongst what they're deploying. The other thing, the federal government, to me anyway, is a very interesting partner for us because they have come up with a lot of use cases on their own for cybersecurity. So internally, we are being built into some of their larger, future endeavors. For instance, they have an internal organization that is basically the cloud provider for a lot of the Department of Defense. We probably won that engagement five+ years ago, and so we're now built into that. As they continue to roll out their internal cloud, then they use our products more and more. There are other areas which Paul could probably speak to, where we're being designed in more and more. Obviously, when you get into the government, into contracts like that, it is hard, it's very sticky revenue. Not much to add, but, you know, we've been in Fed for a long time, I think, it, and it takes a long time to gain the trust of. Sure O f these kind of agencies, but we've done that, and we have a lot of momentum. And as Jean said, you know, we're now being architected into major projects kind of at the beginning, which is great. Because a number of these agencies and, some of the armed forces, you know, they've, they've actually, I would say they actually have come to depend on us in many ways. We've become such an intrinsic part of their operations. Because, you know, you look at, like, Navy and Air Force and similar, these are operating some of the largest networks in the world. Very large networks, very complex, and you need to have the visibility that we bring. Excellent. Then I guess on the expense side, Jean, or maybe the margin question, you know, do you... How do you feel about this kind of employee base that you have now? Is it sufficient to support higher growth? Do you think there's an opportunity to maybe streamline operations a bit to kind of drive more margin expansion? Just kind of curious how you think about that growth versus margin trade-off. So I would say that, again, I think NETSCOUT has been in business 30+ years. They have had the ability to conglomerate a very strong technical team around networks, large networks, as well as the packet flow information. So it's probably a constrained market at this point for people that have that technology, 'cause we have most of those players. So to our Chief Executive Officer, that is very important to keep that technology base available. So I think he believes that these technology people will enable us to create additional products and to grow the revenue. So what does that mean? So I guess from, like, a long-term margin perspective, what do you, what are sort of the aspirations of the company from a margin perspective? I think the aspiration is to be able to be in the 25% to 30%+ operating margin. Yeah. In gross margin, we're probably would be comfortable, since we're so much centered in software, around 80%, 80%, low 80s- Okay A s a gross margin. Okay. Okay. And then maybe just to wrap, I think I could probably answer these questions for you guys, but maybe Paul, what are you... If we're sitting here next year, what are we gonna be excited about that happened over the next 12 months from a NETSCOUT enterprise perspective? Well, what excites me is the opportunity in security. Yeah. The NDR space. Yeah. So that's. That, and AIOps, but that may just be a little bit further out. A little further out. So security, sort of more near term, AIOps. I think I know your answer, Vikram, but what would you... We're optimistic here, or are we? Yeah, I think that this battle between the cable guys and the wireless guys for the battle to the home. Yeah I think that's an exciting thing that will unfold, because we haven't seen that in many years. You know, early years, there was DSL versus cable, and, you know, that created a lot of build-out in the infrastructure. The operators get aggressive when there is competition. You know, without it- Yeah They move very slowly. So I think this competition between cable and fixed wireless is gonna make the industry look more interesting over the next two to three years, you know. And I think that's a good place for us to be in, and I'm excited about that. And also some of the, you know, the security stuff in mobile, I think it's finally coming into play, and I think that will look exciting. And then beyond that, you know, we have always talked about enterprise in 5G, and I think that will start to unfold as we get some of the newer standards into place, the edge computing, the network slicing, and some of these features. So I think that could be the next big phase of 5G after the. Fixed broadband. So I think there is a bunch of stuff in play there that could make 5G come alive, you know, over the next two,three,four,five years. You know, if everything is executed perfectly- Yeah Y ou know, that's always the caveat. There's certainly a lot of advertisements going on right now. Yes. You certainly see all of the... Yes T he fixed wireless folks- Yes T rying to lure the consumer. So maybe that's a precursor to, you know, additional demand. Additional demand, yeah. Yeah. Well, great. Well, we are out of time. Thank you from all of us at RBC for coming and supporting the conference. Thank you. Best of luck in the next 12 months, guys. Thank you, Matt. Thank you. Thank you. Thanks. Thank you.