Andrew Kramer - VP of IR Anil Singhal - President and CEO Jean Bua - CFO Michael Szabados - COO.

Mark Kelleher - D.A. Davidson Scott Zeller - Needham & Co. Kevin Liu - B. Riley & Co. Eric Martinuzzi - Lake Street Capital Alex Kurtz - Sterne Agee Chad Bennett - Craig-Hallum Matt Robison - Wunderlich Securities.

Ladies and gentlemen, thank you for standing by and welcome to NetScout's Third Quarter of Fiscal Year 2015 Operating Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given to you at that time. As a reminder this conference call is being recorded.

With us today is NetScout's President and CEO, Mr. Anil Singhal. He is accompanied by NetScout's Chief Operating Officer, Mr. Michael Szabados; the Company's Chief Financial Officer, Ms. Jean Bua; and Vice President of Investor Relations, Andrew Kramer. At this time, I will turn the call over to Andrew Kramer..

Thank you Heather and good morning everyone. Welcome to NetScout's fiscal 2015 third quarter conference call for the period ended December 31, 2014.

As Heather noted joining me on this morning’s call are Anil Singhal, NetScout’s Co-Founder President and CEO; Michael Szabados, NetScout’s Chief Operating Officer; and Jean Bua, NetScout’s Senior Vice President and Chief Financial Officer.

We have included a slide presentation of key financial data that accompany the financial section of our prepared remarks. For those listeners who have dialed into the call this morning and would like to view this slide presentation, you can find it by going to our website at www.netscout.com/investors and then clicking on today's webcast.

You can advance the slides in the webcast viewer if you are listening via the internet to follow along with our commentary. We will try to remember to call out the slide number we are referencing in our remarks.

In terms of our agenda for today's call, Anil Singhal will first share his perspective on the results for the quarter and ongoing initiatives to continue our momentum including an update on our previously announced plan to acquire Danaher’s Communications business.

Our COO, Michael Szabados will provide his perspective on how both service providers and enterprises are benefitting from NetScout solutions. Jean Bua will then provide additional insight into the financial performance as well as discuss our guidance for the fiscal year.

Before we begin with our prepared remarks I'd like you direct your attention to Slide number 3. NetScout’s registration statement on Form S-4, proxy statement and other documents concerning the proposed acquisition have been filed with the Securities and Exchange Commission.

Investors are urged to read the S-4 registration statement and proxy statement along with other relevant documents filed with the SEC, because they contain important information.

Security holders may obtain a free copy of the registration statement and proxy statement and other documents filed by NetScout with the SEC at the SEC’s website at www.sec.gov.

The registration statement and proxy statement along with other documents to be obtained for free by contacting directly by telephone at 978-614-4000, by email at ir@netscout.com or by mail at Investor Relations, NetScout Inc., 310 Littleton Road, Westford, MA 01886.

This communication is not a solicitation of a proxy from any security holder of NetScout. However, NetScout, Danaher, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from NetScout's stockholders in connection with the proposed transaction.

Information about NetScout's directors and officers and their beneficial ownership of NetScout's common stock may be found in its preliminary proxy statements filed with the SEC on January 9, 2015. This document can be obtained free of charge from the SEC Web site at www.sec.gov or from our own website at www.netscout.com.

A reminder you can also contact me directly. Moving on to Slide number 4. I would like to remind everybody listening that forward looking statements in this presentation are made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws.

Investors are cautioned that statements in this presentation, which are not historical statements, constitute forward-looking statements, which involve risks and uncertainties.

These include without limitation, our financial guidance for fiscal year 2015 and the anticipated timing, terms, or benefits of the proposed transaction involving NetScout's acquisition of communications business lines of Danaher Corporation. Constitute forward looking statements which involve risks and uncertainties.

Actual results could differ materially from the forward-looking statements, risks and uncertainties which could cause actual results to differ include, without limitation, risks and uncertainties associated with the timing and completion of the acquisition and many other risk factors outlined in today’s press release, NetScout’s registration statement on Form S-4 on file with the SEC and NetScout’s annual report on Form 10-K for the fiscal year ended March 31, 2014 and NetScout’s quarterly reports on Form 10-Q for the quarters ended June 30, 2014 and September 30, 2014 which are on file with the Securities and Exchange Commission and are available on our Web site.

NetScout assumes no obligation to update any forward-looking information contained in this communication or with respect to the announcements described herein.

Finally I would like to remind you all that while the slide presentation includes both GAAP and non-GAAP results, unless otherwise stated, financial information discussed on today's call will be on a non-GAAP basis only.

Non-GAAP items are described and reconciled to GAAP results in today's press release and they are included at the end of this slide presentation that is made available online. I would also like to note that growth rate discussions are based on a year- over-year basis unless otherwise noted.

As reflected in our press release today NetScout reported strong third quarter results, which reflects positively on the progress we’ve made in advancing the type of compelling value proposition that can drive customer adoption.

At the same time we continue to be proactive in meeting with our shareholders to help them appreciate the benefits of our proposed acquisition of Danaher’s Communications business. I’ll now turn the call over to Anil, and then my other colleagues to expand on these and other points. Anil please go ahead..

Thank you Andy. We reported another strong quarter of performance, revenue for the third quarter was $122.8 million an 11% increase. We converted this topline growth into 18% EPS growth with non-GAAP EPS of $0.59. More importantly on a year-to-date basis we have generated revenue of $334.3 million a 17% increase over the comparable period last year.

For the year to date period our non-GAAP EPS of $1.35 per share is 29% higher than the same period one year ago. Based on our progress thus far with only one quarter left in the current fiscal year, we have tightened the range for anticipated fiscal year 2015 revenue to be between 455 million and 460 million.

This fine tuning leaves the midpoint of our original revenue guidance unchanged. At the same time we are ahead of our plan on earnings, so we have increased our non-GAAP EPS target to be between $1.87 per share and $1.91 per share. During the third quarter we continue to see our largest service provider customers direct spending to NetScout.

For the year to date total non-GAAP revenue from service provider customers is up by 20% which is generally in line with our expectations. Our largest service provider customers continuing to use our solutions to help them monitor the overall performance of their 4G network and increasingly to have them assure high quality Voice over LTE services.

We believe that their overall Voice over LTE services and other rich communication services will continue to open new doors for NetScout both in the U.S. and abroad.

We also generated good growth from our enterprise customers as more enterprises adopt mobility and cloud based services assuring application and network performance and end user experience have become mission critical.

We’re also seeing that our ability to help, [them] [ph], protect and maximize their investment in their unified communication infrastructure is an emerging area where we believe we have further room to build on our momentum.

We also benefited from another strong quarter of revenue growth in the government sector as our solutions were selected and deployed in several large projects.

While the government business can be lumpy, our product portfolio is well positioned to help departments with major projects around data center consolidation, virtualization and migration to the cloud.

When we step back and examine our performance, we believe it is a positive reflection upon the progress we have made in executing on the long-term strategic Plan B developed roughly 4 years ago. During this period, we have invested significantly in our research and development programs including acquiring and integrating multiple technology assets.

These efforts resulted in the development and introduction of our nGeniusONE unified performance management platform which was introduced roughly 18 months ago in the summer of 2013. As the foundation of this innovative platform is our proprietary patent presented Adaptive Session Intelligence or ASI software.

We believe ASI is the most important differentiator of a technology and this is being validated by both our service providers and enterprise customers.

ASI software differentiates nGeniusONE in the marketplace in a number of important ways [as] [ph] most notably by providing customers with real-time operational intelligence and insight into the performance of their networks as well as the services and application that are being delivered across them.

As a result, our customers can identify resolve issue faster and more efficiently and effectively. In other news, during the past couple of months, we have spent considerably time speaking with investors to discover business and the plant acquisition of Danaher’s Communication business.

One of the common question we are hearing relate to trends in the service provider capital spending and downward shifts in capital spending from certain service providers, while customer and prospects are still very early in their specific initiatives, so the best part to complete this objective will require the deployment of latest technologies including Voice over LTE, virtualization and SDN.

However, adding new technology into the already complex network infrastructure that customers maintain can actually make it harder for them to achieve this gain without the disruptive business -- without disrupting business and without negatively impacting customer satisfaction or the end user experience.

That’s why we believe we are uniquely positioned to help service provider, as the mix of their spending shifts toward these newer complex technologies.

The real-time operational intelligence capability delivered to traffic-based instrumentation, ASI and nGeniusONE will become even more important in supporting these technology transitions over the coming years. As a result, we believe that these dynamics will lead to our customers including increasing their investment in our unique solution set.

This theme is not only beginning to resonate with our service provider customers, but as the promise of full IP conversion takes place; it's also becoming relevant to our enterprise customer base.

Enterprises and service provider alike are recognizing the important link between application and service assurance and end-user experience, employee engagement and customer satisfaction as well as customer loyalty.

We believe that these dynamics when combined with the anticipated introduction of our new cyber security product we were offering later this year will enable us to substantially increase the size of our total addressable market size in the near future.

However, capitalizing on these opportunities will require substantial investment across all areas of our company most notably in product development and in sales and marketing. And that's precisely why the acquisition of Danaher’s Communication business is important.

From our perspective, it’ll serve as a catalyst to enter our next phase of growth providing us with the access to a much broader range of solutions and technologies, while helping to substantially reduce the market risk associated with developing or acquiring alternative capabilities and commercializing them.

To retrace some of the key points supporting the rationale for this transaction that we’ve articulated to investors over the past few months. The new NetScout will be better positioned with a better range of best in class solutions.

As a result of this transaction, we will be able to spend more effectively in our traditional core market and enter new market which expect will roughly double our [dime] [ph] to over $8 billion.

By combining the troubleshooting capabilities within Tektronix Communication with our monitoring capabilities, we believe we can effectively address the near and long-term service assurance needs of service provider around the world.

In the enterprise market, we will be able to sell into the mid-tier of the market with a broader range of monitoring and troubleshooting capabilities thereby creating cross selling opportunity into both the NetScout and [fluke] [ph] customer basis.

It jumpstarts our entry into cyber security with the market leading DDOT platform from Arbor and we believe we can accelerate Arbor’s expansion into the enterprise market and we can leverage Arbor’s footprint with new security offerings that are currently under development at NetScout.

And we also expect to gain access to high value solution within the Techtronic communication business that can take us into new areas such as optimizing radio access network and business intelligence capability for customer experience management.

These are areas that we were planning to invest in because they’re highly complementary to our core capabilities and they will further elevate our value proposition and strategic position with service providers.

The combined company is expected to add substantially stronger go to market capabilities, for example we anticipate gaining access to a much more global and diversified customer base in both the service provider and the enterprise markets.

We will also benefit from having a larger direct global sales organization and establish relationships with valuable resellers in key international markets and we’ll also anticipate that there’ll be substantial cross selling opportunities arising from having more customers and more touch points within those customers.

Incidentally I should point out that the feedback we have received from customers has been extremely positive. Customers are recognizing that our combined company will be well positioned for innovation and to provide superior value. Customer also benefit by consolidating vendors with a familiar trusted partner.

In addition to the strategic and tactical benefits that this deal is expected to bring to NetScout, the transaction is also financially compelling. We believe that it will provide us with a longer, broader runway for a solid 10% less annual growth rate on a substantially larger revenue base that is expected to be over $1.2 billion.

It is expected to be accretive to non-GAAP EPS in the very first year after the close. It enables us to capitalize on the experience we have gained in integrating acquisitions of various sizes in ways that will create value for customers and drive improved financial performance.

From synergies perspective we anticipate identifying, removing and begin realizing about 5% of total company's combined cost structure with the majority of that associated with improving gross margin.

At the same time we believe that the global scale will provide with attracting operating synergies across a range of areas such as support, sales, marketing, R&D and various back office functions.

As we align our grow to market capabilities we believe that the combination of prudent management of our cost structure using common infrastructure platform and eliminating or reducing expenses associated with programs and capabilities already in place will help us drive accelerated non-GAAP operating profit margins of 30 plus percent and generate very strong free cash flow.

The earning potential of the combined company has additional scope for improvement as we examine ways in which we can improve our tax efficiency and optimize our capital structure. As you know Danaher will be announcing its year-end results next week and it will provide details on its communication business at that time.

We are very excited about NetScout’s potential as a result of this acquisition. We recently submitted updated version of S-4 registration and preliminary proxy statement with the SEC and we hope that those materials will become effective soon. At the same time we are advancing the activities related to anti-trust review and approval.

As a result we are comfortable with the previously stated time table of closing this transaction in the first half of NetScout’s fiscal year 2016. In summary we have continued to build on the progress that NetScout has been making for the past several years.

We’re pleased that this progress is translating into another year of strong growth in both revenue and profits for NetScout. Looking ahead we remain enthusiastic about NetScout’s future and the opportunity to build further momentum in the marketplace when we combine forces with Danaher’s Communication business.

Setting and achieving ambitious goals is never easy, it requires hard work and perseverance. I would like to commend our employees on their focus, resolve and performance during the past quarter. With that I will now turn the call over to Michael..

Thank you Anil. I would like to highlight a few of the different ways that our customers across a variety of industries, gain value from our solutions. Besides the success stories underpin our ability to deliver strong results in a highly competitive marketplace. In the service provider market, our largest customers in the U.S.

continue to rely on NetScout to help them assure service quality in their 4G LTE networks. At the same time we are making good progress to win new projects with service provider customers outside of the United States and these efforts have contributed to growth both in Europe and in Israel off late.

For example a large Southeast Asian service provider has been using [indiscernible] for their mobile packet or control and user monitoring and this has been successfully improving service levels to our [service workforce] [ph].

This track record combined with our ASI business intelligence capabilities help secure our role in the current expansion of their mobile core network and winning us a significant deal this quarter against a number of legacy [vendors at the account] [ph].

Our success in helping service providers gain better visibility into the performance of their mobile networks is also leading to new opportunities in other parts of their network.

One of our North American service provider customers selected NetScout service assurance solutions this quarter to help them unify their mobile, fixed line and traditional corporate IT infrastructures in a deal valued in excess of $1 million.

Additionally, last quarter I highlighted our progress in the cable multi-service operator area where we are winning new projects to help these service providers monitor and manage carrier grade Wi-Fi connectivity services, that are being rolled out to attract and retain consumers in an intensively competitive marketplace.

We continue to gain traction on this front during the third quarter with multiple large deals and we view this as an area for our ongoing future expansion.

In the enterprise, leveraging the strength of our nGeniusONE and ASI technologies and our compelling service [triage] [ph] solution, we have been expanding our business with existing customers and have one [beach head] [ph] across all of our sales territories expanding service provider and enterprise, accounting, financial services, transportation and other industries.

One significant new customer win that I’d like to highlight was our success at the North American railway company the latest in a series of such wins [indiscernible]. We were selected and deployed to monitor and assure to affect this service [triage] [ph].

The railways business critical applications including centralized train management, cargo tracking, crew scheduling and also unified communications. We won this deal against the top competitor on the basis of the holistic integrated view into performance that is enabled by our nGeniusONE solution.

We have also produced good results in the government sector which also relies on our solutions. Last quarter I noted a key win involving a major agency acting as an internal provider of IT services to other agencies within the Department of Defense, nGeniusONE is their principal service assurance platform.

This quarter we fulfilled additional orders to help them better manage their voice, video, net, mobility and UC programs. Our ability to monitor both call quality and session management at scale in IP-based unified communications has been a tremendous asset and that has truly distinguished NetScout in the marketplace.

We are seeing that across a wide range of industries customers are turning to NetScout to help them maximize the return they are getting on their investment in unified communications and collaboration systems that typically include integrated instant managing, IP-based telephonic and video conferencing.

We have also added new talent to our leadership team this quarter. During the quarter, we added a new leader for our HR Organization, which comes on the heels of adding our VP of Investor Relations and our VP of Worldwide Marketing both of whom came on board in the previous quarter. Recognition of NetScout in the marketplace continues to grow.

In December NetScout was named by Forbes to its annual list of top-100 small companies. We ranked 51st overall and 9th in the software and programming industry category. This marks the company’s third time on the publication's prestigious rankings in the past five years, a previous inclusion in 2012 and 2010.

And just yesterday, Frost & Sullivan are leading in the finance research firm named NetScout as its 2015 global company of the year for network visibility and intelligence. As we look ahead NetScout plans to invest in further building our brand in the marketplace.

We recently announced that we have engaged [indiscernible] to serve as our integrated marketing and public relations agency of record. And we are preparing to leverage our participation at upcoming major trade shows like Mobile World Congress in March in Barcelona as well as major enterprise shows such as Cisco World later in the spring.

Another element in our sales and marketing efforts to build stronger ties with our existing customers is our highly effective and successful annual Engage User Conference the next of which will be held in the Washington, DC area in the middle of April. That concludes my remarks. I’ll turn it over to Jean now..

Thank you Michael and good morning everyone. I plan to review key metrics for both the third quarter and first nine months of fiscal year 2015, and then I will discuss our guidance.

As mentioned at the outset, we will be referencing non-GAAP metrics when appropriate and comparing all figures against the comparable prior year period unless otherwise noted. To begin our financial discussion we will be starting with Slide number 8 of our presentation which is accompanying our call and is posted on our website.

For our third fiscal quarter, total revenue was $122.8 million which is an increase of 11% from the same quarter in fiscal year 2014. Our product revenue was $76.4 million, which is an increase of 12% over the same quarter in fiscal year 2014.

Service revenue was $46.4 million, which is a 10% increase on a non-GAAP basis from the same quarter in the prior year. The uptick in our service revenue growth reflects our strong product sales over the past two years. Our earnings per share for the third quarter were $0.59, which is an 18% increase from the same quarter in the prior year.

Let’s turn to Slide 9 to review our profitability during the third quarter in more detail. We again achieved our quarterly results, while delivering strong margins that remain within or near our long-term targets.

Focusing on the non-GAAP metrics on the lower half of this slide our gross profit was $97.1 million representing a 79.1% gross margin, this compares against 88.1 million and a gross margin of 79.7% for the prior year. Income from operations was $38.8 million and our operating margin for the quarter was 31.6%.

As Anil mentioned we’ve made significant progress in advancing our strategy over the past several years and the 18% growth in operating income from the prior year demonstrates our operating leverage as we continue to grow revenue. Net income was $24.6 million or $0.59 per diluted share which grew 17% from last year.

The net income margin was 20% which is up from 19% one year ago. In terms of the strong earnings per share performance this quarter, we benefited from both one-time items as well as strong operating leverage resulting from the successful execution of our strategy. About half of the EPS increase was one-time in nature and consisted of two major items.

First the reinstatement of the research and development tax credits contributed about $0.02 this quarter. The remainder was primarily driven by the transitioning of our marketing leadership and our ongoing analysis of our marketing strategy including marketing programs, advertisement, staffing, et cetera.

The other dynamic that has fueled our strong earnings growth is the success of our five year strategy which we put into place in fiscal year 2012.

We are now harvesting the fruits of the significant investments we made over the past three years in R&D and new technology acquisitions which we integrated into the launch of our nGeniusONE platform as well as our investment in sales personnel.

As we move forward with the acquisition of Danaher’s Communication business, we are confident that we will be able to replicate that type of success once again. Slide 10, shows our performance during the first nine months of fiscal year 2015.

In terms of our non-GAAP metrics total revenue during this period was $334.3 million which is an increase of 17% over a revenue of $284.7 million from a year ago. Product revenue for the first three quarters was $198.8 million which represents an increase of 21%. Service revenue was 135.5 million which is a 12% increase.

As I alluded to earlier our service revenue growth shadows the strength in our products sales. For the first nine months of fiscal year 2015 EPS was $1.35 per share a 29% increase. Slide 11 provides detail on product revenue composition for the first nine months of fiscal year 2015.

As a reminder the timing and magnitude of various projects by our customers can skew on a year-over-year basis to quarterly comparison, which is why we focus our commentary on the year to date trends. The components of $198.8 million of product revenue through the first three quarters of fiscal year ‘15 were as follows.

General enterprise product revenue was 89.4 million or 45% of total product revenue, service providers' product revenue was 82.5 million or 42% of total product revenue, government product revenue was 26.9 million or 13% of total product revenue.

We have continued to see product revenue growth accelerate with enterprise and government customers over the past three quarters. The following sectors within general enterprise have showed strength to the first nine months of the year.

Healthcare, utilities and energy and manufacturing have been standout gainers while our largest single verticals financial services has continued to grow modestly. Our results reflect a clear recognition by customers that application and service assurance and end user experience are paramount to achieving their business objectives.

Slide 12, illustrates our product revenue growth rate for the first nine months of fiscal year 2015 by verticals. Consistent with our earlier comments general enterprises generated product revenue growth of 14% for the first nine months.

Given that our performance in this sector was essentially flat at the start of the year, we’re pleased with the velocity of the enterprise product revenue acceleration which demonstrates growing traction of our nGeniusONE platform with ASI technology.

Service provider product revenue is up by 18% for the year to date and is in line to achieve 20% product revenue growth for fiscal year ‘15 over the prior fiscal year. As we noted earlier we have made good progress in the government vertical as product revenue has grown by 71%.

As Anil mention government business can be lumpy but we’re well positioned to help government agencies through nGeniusONE and ASI Technology, implement major projects around data center consolidation, virtualization and the cloud. Slide 13, shows our total revenue composition for the first nine months of fiscal year 2015.

The composition of our $334.3 million of total revenue for the first nine months of fiscal year 2015 was as follows. Our General Enterprise customers represented 159.4 million, a 48% of total revenue, service providers generated $126.9 million or 38% of total revenue and government customers produced $48 million or 14% of total revenue.

Turning to Slide 14, this depicts our total revenue growth by sector for the first nine months of fiscal year 2015 reflecting my earlier review of the third quarter and the related detail on product revenue, our total revenue for the general enterprise sector is now up by 10% on a year-over-year basis, while service provider is now up by 20% overall.

Total revenue in government is up by 41% for the year-to-date. Let’s turn to Slide 15 for a review of our revenue by geographic region for the first nine months of fiscal year 2015. For the first nine months of the year, the revenue mix was 76% domestic and 24% international, which is generally consistent with historical trends.

We have continued to grow in North America and outside of it in all major regions around the world. Within our international revenue, Europe represented 11% of revenue with 6% for Asia and 7% for the rest of the world. Slide 16 details our balance sheet highlights and free cash flow. We continue to maintain strong liquidity.

At the end of the third quarter, we had invested cash, short-term marketable securities and long-term marketable securities of $240.7 million combined with our current revolver capacity our total liquidity is closing in on $500 million. Financially, we remain very well positioned to execute on our near-term product and go-to-market strategies.

Our fiscal year 2015 free cash flow for the first nine months was $48.5 million. This reflects $57.3 million in cash flow from operations less $8.8 million in capital expenditures and the purchase of intangible assets.

While our free cash flow generation was strong in Q3, our performance to-date is down slightly against the comparable nine months period one year ago as a result of changes in working capital. Accounts receivable net of allowances was $83.4 million up from $60.5 million at the end of fiscal year 2014.

Day sales outstanding were 62 days for the quarter which is in line with historical trends as DSOs for the same quarter last year was 61 days. Inventories were $10.3 million this is down by $2.3 million since the end of fiscal year 2014.

Our total deferred revenue was $134.6 million which is up slightly since the end of March and has generally trended according to historical pattern. With that said, the deferred balance was impacted by the timing of one large customer service renewal which occurred in early January 2015 instead at the end of our third quarter.

During the third quarter of fiscal year 2015 we were not active in the market in terms of our stock repurchase program which reflected the timing associated with the announcement of our acquisition and the subsequent time that it left between that announcement and filing the S4 Registration and proxy statement.

As a reminder, we have historically repurchased 250,000 shares on a quarterly basis to help neutralize the dilutive effect associated with the exercising of restricted stock grant by employees. For the fiscal year 2015 to-date, NetScout has repurchased 500,000 shares at an average price of $41.81 per share which totals $20.9 million.

We expect to resume our buyback activity early next week. Turning to our guidance for fiscal year 2015, Slide 17 illustrates our guidance range for revenue and earnings per share which we are updating for both revenue and earnings per share.

With one quarter remaining in our fiscal year, we have narrowed our target GAAP and non-GAAP revenue and now anticipate that total fiscal year 2015 revenue will be in the range of $455 million to $460 million. This keeps the midpoint of our original guidance intact and would represent total revenue growth of roughly 15% to 16%.

The driver of our revenue growth continues to be our product revenue, which is expected to grow in the range of 17% to 19% for the full fiscal year. Our earnings per share guidance range for fiscal year 2015 has been updated to reflect our strong year-to-date results. We now anticipate EPS in the range of $1.87 to $1.91.

We will translate into an EPS growth rate range of 22% to 25%. As I mentioned earlier, the research and development tax credit was renewed in December and is applicable to the full year. This change is reflected in our effective non-GAAP tax rate for the fiscal year ‘15 of approximately 37%.

Our guidance reflects our ability to convert solid revenue growth into even stronger operating profit growth, while continuing to direct important investments into our operations in areas such as research and development, sales and marketing.

Before we conclude the financial portion of our remarks, we will continue our efforts to reach out to our shareholders through both calls and meetings. We are also planning to participate in two investor conferences next month.

We will participate in the Stifel Technology, Internet & Media Conference in San Francisco on February 10th and we will attend the Wells Fargo Cyber Security Forum on February 25th in Boston. That concludes our prepared remarks this morning. Thank you for joining us and we look forward to taking your questions..

[Operator Instructions]. Your first question comes from the line of Mark Kelleher with D.A. Davidson. Your line is open..

Just wondered -- look at gross margin on the product side to start off.

Seem to have dip a little bit in the quarter; can you just address the competitive environment and what you’re seeing there?.

Sure Mark, this is Jean. Gross margin as you know we’ve invested over the last few years in our premium services which assist our customers in rapidly implementing our solutions so that they can gain value as soon as possible.

Additionally in this quarter we had invested in inventory for a unique customer opportunity that didn’t advance during the quarter, so we took a reserve which impacted the gross margin..

And last question, on the operating lines you’ve got some good leverage there.

Are any of those being affected by the pending merger G&A particularly? Are there any -- is the merger affecting any decisions you’re making on those lines?.

No not at this time. We consider that until the transaction is complete we still have to generate -- provide service to our customers, continue to move forward with our plans and to continue to generate returns to our shareholders..

Your next question comes from the line of Scott Zeller with Needham & Co. Your line is open..

Could you comment please on the comments from Anil regarding the 10% growth? And if you could lay out a broad timeline on what your expectations would be for that?.

reiterating what we have already Scott, have said in the S-4.

So we said if you look at the individual number and because of projections for standalone companies based on certain investment, we had some numbers in there but we talked about basically almost like a CAGR of 10% over the next five years, after the first year of the combined operation, starting with a 1.2 billion plus number..

And just to clarify that’s post -- that’s having one year under the belt, one year under the belt that we’re looking at that growth?.

Yes..

Your next question comes from the line of Kevin Liu with B. Riley & Co. Your line is open..

Just a quick question on the revised revenue guidance range obviously implies kind of flattish revenues in the fourth quarter.

So wondering if you could talk about some of the puts and takes there, it does seem like service provider needs to accelerate with all the products out to keep you out of 20% growth rate and advices clearly been ramping strongly also, just wondering if there is any area where you expect it to slow up a bit just from a quarterly perspective or if there are other factors that drive a more conservative guidance..

Well I think, first of all I don’t know why you’re calling it conservative guidance; it’s exactly the same as what we had one year ago.

And as to the quarterly we have mentioned many times previously that service provider revenue is lumpy and one quarter something in the first quarter or the previous quarter or moving things into next quarter or sometimes even into the next fiscal year quarter one can make a big difference.

So we don’t look at service provider, I think it’s probably not right to look at the trends in service provider business over a headquarter fixed quarter basis and that’s why we started talking about year-to-date numbers.

So I think if you look at it that way, I think the growth has been sort of consistent with the 20% we had suggested at the beginning of the year..

And just one last question, just you guys had talked last quarter about potentially recapitalizing the balance sheet to perhaps buyback some stocks for this acquisition.

Just wondering if you could update us on whether -- how much leverage you are willing to put on this business and anything in the way of how sizeable the buyback you’re willing to pursue?.

This is Jean. So as you mentioned we have been looking through our strategies as it relates to [rack] [ph] optimization, share buyback, tax strategies, we’re still in that process. We have different alternatives that we’re looking at.

Our EBITDA on a combined basis should be anywhere from between a lot of -- I'll give you a very broad range, $300 million to $400 million in the first full year of operations. So we’re generally conservative in nature and we’re still reviewing all of these guidelines and thinking about the R&D.

So at this point we still would be thinking about what we think makes most sense in looking at how the transaction is unfolding in the timeline. So we’ll get back to you when we have a much firmer idea of exactly which alterative we’ll be pursuing..

Your next question comes from the line of Eric Martinuzzi with Lake Street Capital. Your line is open..

My question has to do with the anti-trust review. It’s kind of in two parts.

First of all I am curious to know are they looking at the merger more from a -- this is a probe marketing or are they looking at it more is this a service assurance market? And then the second part, since they came back to you from your initial submission, what’s changed -- what else are they looking for greater clarity on?.

Well I’m not sure that we can talk about a lot of details, but yes we have -- and then the best way to look at this market is the service assurance market because we compete for budget in the service provider space.

And clearly their questions are more related to Tektronix and hardly anything to do with Arbor and Fluke, so just want to clarify that and maybe you’re referring to that also.

So in that space, we compete actually more with service assurance vendors who say you don’t need probes or embedded solutions from [indiscernible] and some new breed of customers like IBM and buying [new] [ph] factory and doing Big Data analytics as well as emerging solution in the virtualization space.

So when you look at that market, then we look at all this area as general service assurance space. They may have looked at initially as IT-probe market space and maybe that prompted some of the questions, but we don’t always know all the details and concerns.

And so we are working through this and we are still optimistic as we mentioned to meet the original timetable of closing..

And then one last question the FX impact you guys mentioned about three quarters of business is domestic, but do you still have about a quarter overseas Jean for the quarter and the guide, what was the FX impact?.

It was negligible..

And that would be just kind of the cost structure offsetting the revenue impact?.

Usually in around the globe we sell mostly in U.S. dollars. It’s one of our I would say advantages, so anything that is sold in foreign currency is extremely minimal to our revenue line item. And then we do have treasury activities that we use to offset the FX in our cost structure..

[Operator Instructions] Your next question comes from the line of Alex Kurtz with Sterne Agee. Your line is open..

Anil back to Tektronix here and what the organic growth rate is and I think that’s a question that keeps coming up with investors when we speak with, going back to the filing in December, obviously that if you back it out there’s some deceleration in that business year-over-year and as I understand it maybe that’s customer specific, but when you -- you mentioned a 10% growth rate after the first year of integration.

I think people are trying to understand is that really what you think the organic growth of the combined business is or is that a conservative take based on what you see Tektronix tracking to you today?.

No I mean you’ve seen the numbers, they’re not tracking to 10% today.

And -- or you’ve seen the total business even the total business is not tracking to 10% if you look at the forecast or the numbers we have in that also, a lot of it is organic, lot of it is cross-selling, lot of it is combined value of monitoring plus troubleshooting and then always puts pressures on the network management or service assurance space.

And so sometime you can mitigate that with more greater value without changing the price, so we believe customer is going to get lot more value for roughly the same price and that will promote the value of the instrumentation.

And also while CapEx spending is a challenge, I think some of our solutions can help us -- help them reduce CapEx spending, so those are some of the things. So yes, bulk of it is -- I mean all the non-organic part will be all seen in the first year or when we -- during the first year all the growth I would term as organic after that..

Hi Alex this is Jean, just to add onto Anil’s comments, as we spoke before there is very little product overlap, so the product, the technologies are very complementary and they will serve our markets that we’re in on a standalone basis very well. And we typically for the markets that they’re in; our technology will also serve their markets.

So we see that through the combination of this strategic acquisitions that we’ll be able to benefit our customers both the Tektronix and the NetScout customers through cross-selling different product technologies as well as getting new customers around the globe as the trends that we’ve talked about on the call today LTE, virtualization make it [indiscernible] more complex world where they need all of the solutions that we bring in the way of monitoring and troubleshooting to get their customers the best experience possible..

So Jean just to clarify, I mean the product growth in the filings in December show Tektronix decelerating from a product growth perspective, so the conviction that post the integration that you can reverse that trend that’s based on the view that there’s going to be more efficiencies in the market in how NetScout sells both products in that? Or there’s more customer specific issues there that you think are going to get reversed?.

Let me just mention a couple of things, one is that Tektronix portion will be only one-third of the total revenue in the first year, so I just know -- I want to make sure that that’s just one-third of the total. We have security, we have lot other stuff.

Second thing is some of the investment Techtronic has made in a company called Newfield Wireless and RAM optimization, just happened about a year ago and they have not hit the revenue stream.

We might be able to compensate for some of the other issues Tektronix has faced, they were already planning to do that, will be able to compensate with these other investment which will come to fruition now..

Your next question comes from the line Chad Bennett with Craig-Hallum. Your line is open..

So did you have any 10% customers in the quarter Jean?.

No we did not..

And year to date what is that number? Is it….

We have no 10% customers on a year to date basis either..

And then in the non-GAAP part of the expenses, the business development expense went up quite a bit sequentially, obviously because of the Danaher transaction. So I think it went up about little over $3 million sequentially and obviously benefited non-GAAP EPS this quarter.

Is that kind of a run rate at least until the deal closes or how should we think about that in the March quarter?.

So in the quarter we probably will continue to have some business development expenses, I would imagine sitting here today that guidance includes about $6 million to $7 million of business development expenses for the year..

And the service provider outside of the business, I guess is there any way to characterize what you see, what the prospects are over the next couple quarters, three to four quarters even in terms of what the pipeline looks like from new customers, international customers, further 4G roll outs versus Voice over IP or other applications that service providers are going to roll out over the next year.

Is there any way to kind of characterize where you’ll see growth going forward in that business?.

So I think first thing is that all these things which you’re talking about, whether its Voice over IP or Voice over LTE or continuous capacity expansion on LTE and other areas in both the U.S. market and international will continue as it develops the case this year, so no big ups and downs.

It will be very hard to come up with growth numbers and share that because we’re at the midst of this combination, we don’t know whether we’re going to have one quarter of standalone or when will the combined stuff will start, I would at the high level will look at for the standalone company, roughly similar patterns as last year.

But that doesn’t mean it’s going to be same pattern quarter-over-quarter versus last year..

So just on a general worldwide trend, as we talked before the U.S. and some of the Asian countries are the leaders in LTE. So NetScout has been very successful in the past few years as they have been rolling out their networks and just making sure they’ve got connectivity.

Those areas should continue to roll out applications of services with Volti being the first one. And then the rest of the globe as you circle around the globe, they’re also anticipated over the coming years to be rolling out LTE and 4G also. So we would anticipate that those trends that you see in the U.S.

will continue to roll out through Asia and Europe as they also experience the need to move to data intensive network that their consumers respond to well..

Just one last one quick for Anil. Anil you voiced a little bit of frustration I think last quarter maybe frustration is a wrong word on the adoption of the nGeniusONE. That being said, Enterprise had another great quarter again this quarter.

Any type of color on nGeniusONE adoption and penetration into the [ATM] [ph] marketplace? And then I’ll jump offline. Thanks..

I think it was not really frustration, I think it maybe little bit our expectations were higher in terms of the time it will take to start gaining traction. And we see that I think some of the better than expected numbers is nGeniusONE, some is the traction in the unified communication area.

So I think all in all maybe our expectation was too high, but I think we’re not frustrated customers are very excited and lot of excitement in the sales force and which can be seen by very little traction if any during the last 18 months.

So I think people are very excited and maybe were they too excited and too optimistic about how long it takes to get traction that even with existing customers. But I think now will be mostly behind us..

Your next question comes from the line of Matt Robison with Wunderlich Securities. Your line is open..

So let’s talk a little bit about how you're defining accretive, you mentioned -- first of all is it accretive in the second year of operations or the first year and are you guys [Multiple Speakers] little more context Anil, you had earnings [Multiple Speakers]?.

Yes, what accretive means that we’ll be -- that as compared to what we would have done as a standalone company in fiscal year.

So, in the first 12 years of operation, first 12 months of operation of the combined company if whatever we would have done without the combination or with the combination and so that’s what accretive means that that’s using the base.

And right now you don’t have the numbers, but if you were to -- if it was magically going to close on April 1st, then we’ll be accretive to the fiscal year ‘16 guidance which we’ll provide as a standalone company..

So you guys grew based on the guidance implied for your first quarter about 24% EPS for 2015, so we would expect some level of earnings growth comparable to that or maybe comparable to last year when you grew 17% or do you expect that there would be a dramatic slowdown in your organic business that would therefore make a lower growth rate accretive?.

So when we think about the business going forward as we’ve talked about in the past, we’re in the fourth year of our five year strategy and we’ve discussed that we would be going into areas that included business intelligence, cyber security, increased functionality so that service providers could monitor customer experience.

And as we look to those plans, we would come out with our next five year operating model which would have been predicated on say FY ‘16 forward. The Danaher acquisition at this time negates the necessity for us to continue to develop in those areas after the transaction comes to fruition.

So when we talk about accretive, when we put the combined companies together in the first full year of operations which of course is dependent on when the transaction close, we had measured it as at least $0.01 accretive to guidance at that time.

What you’re experiencing, what we’re experiencing in the business this year is as we talked about on the all a few one-times mostly the success that we’ve had in improving our operating margins and our revenue as a result of the investments that we made back in FY ‘12, FY ‘13 and FY ‘14.

So we anticipate that as we go into the first full year of operations, we will be able to obtain synergies with the TekComm’s business and that that same pattern of being able to produce quality technologies to face the trends that our customers are experiencing along with our continued prudent cost control that we’ll be able to get back to significant returns towards the end of our next five year period or even in the middle of our five year period.

So as we work through the FY ‘16 plans and the Danaher acquisition timing, when we come out with guidance we will explain all of these items to you..

Now you guys grew pretty well during those investment years, you grew 19% in ‘13, 17% in ‘14 and before you announced the Danaher deal you talked about getting into these new markets there was no discussion that you were going to bomb the income the P&L with a huge amount of investment at that time, so if you presume that you’re going to have a more measured investment so that you can perform similarly to your past investment period you'd still potentially be growing in the high teens right so you’re going to -- with Danaher do you still think you can grow like that or is it going to [Multiple Speakers] of that investment?.

I think there is some confusion on how you’re treating that what is accretive and what we’re saying is the EPS will still be higher even in the first year of operation than would we with a standalone company.

And so that’s what we’re defining as accretive or that’s how everyone defines as accretive that our EPS with or without Danaher -- I mean even with the combination of Danaher will be at least $0.01 higher than it would have been. So that takes care of all those things, I think growth rate is not the best way to look at it.

You have a bigger space and things like that..

So just to summarize in the registration statement, we’ve said that we would have a CAGR of 10% on a clearly much larger business which was -- is over $1 billion as Anil has referenced 1.2 billion. And that we feel confident that our operating margins will continue to increase.

And that we will hit 30 plus by the end -- before or by the end of our next five year period and that we will continue to generate significant cash flow. And we feel confident in the Danaher acquisition in what we’ll be able to do with that business. [Multiple Speakers] shareholders..

That sounds great but you’re not really addressing the dilutiveness, but I can see this is probably going to an awareness call. I just have a couple of more questions; I guess your operating cash flow down year-over-year is principally due to the business development expense..

No it’s principally due to changes in working capital just with the balances of receivables in the third quarter, we usually get a lot of service renewals, it’s one of our stronger quarters that comes in at the very end of the time period.

So we have very little revenue but higher receivable balances and the receivables the DSO as I said is relatively consistent with what it was in Q3 of last year..

Yes I was given the year-over-year comparison that you have decline that to sequential, so it doesn’t answer that. Can you just….

We cannot answer that Matt. I think were down about $3 million and I told you because of receivables working capital and that the DSO was about 62 this quarter versus 61 in Q3 of 2014..

Your next question comes from the line of Scott Zeller with Needham & Co. Your line is open..

It’s just a follow up question. Thank you. So you mentioned in the Enterprise commentary Jean that healthcare and utilities had performed well.

Could you or Michael or Anil comment on what it is that’s driving spending in those two verticals healthcare and utilities that maybe we haven’t seen previously why is business better in those verticals?.

I think there are at least two things but then unfortunately we can’t talk about the names, but I think people are first of all moving to unified communications. And so they are revamping the duel set and things like that and there are couple of places even though we are not deep down into the security area, our product is being used for compliance.

So those are two or three big new used cases or revised used cases for us which is driving some of that performance in healthcare.

Michael?.

Prominently and there is also signs that spending is driven by one major service or application, one mission critical new application roll out will drive significant new instrumentation for that one particular servicer application. So that we see both in the energy sector, utility sector as I mentioned deliveries and certainly in healthcare..

And Scott just one more thing in the healthcare sector, one of the customers that has been buying just continues to illustrate the customer loyalty that we have and the fact that we have been penetrating this customer through our different solutions and through their different department.

So they have been a flagship customer for NetScout and the success that we have in a relationship with our customers and being able to continue to provide solutions for them..

Operator is there any other questions coming?.

There are no further questions at this time..

Well I’d like to thank everybody for their time and joining us this morning. As always we look forward to any follow up questions that you might have and feel free to reach us at investor relations, ir@netscout.com.

In that regard we look forward to our next quarterly call which would be our fourth quarter and that would occur likely in the Late April early May timeframe. Look forward to continued dialog with our investors. Thank you very much..

This concludes today’s conference call. You may now disconnect..