Ladies and gentlemen thank you for standing by and welcome to NETSCOUT 's Fourth Quarter and Full Fiscal Year 2021 Financial Results Conference Call. [Operator Instructions] As a reminder this call is being recorded. Tony Piazza, Vice President of Corporate Finance and his colleagues at NETSCOUT are on the line with us today.

[Operator Instructions] 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. Welcome to NETSCOUT's fourth quarter and full fiscal year 2021 conference call for the period ended March 31, 2021.

Joining me today are; Anil Singhal, NETSCOUT's President and Chief Executive Officer; Michael Szabados, NETSCOUT's Chief Operating Officer; and Jean Bua, NETSCOUT's Executive Vice President and Chief Financial Officer. There is a slide presentation that accompanies our prepared remarks.

You can advance the slides in the webcast viewer to follow our commentary.

Both the slides and the prepared remarks can be accessed in multiple areas within the Investor Relations section of our website at; ir.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 3, today's conference call will include forward-looking statements.

These statements may be prefaced by words such as anticipate believe and expect and will cover a range of topics that are not strictly historical such as our outlook, our market opportunities and market share, key business initiatives and future product plans, along with their potential impact on our financial performance.

These forward-looking statements involve risks and uncertainties and actual results could differ materially from the forward-looking statements due to known and unknown risks, uncertainties, assumptions and other factors, which are described on this slide, in today’s financial press release, as well as in the company’s Annual Report on Form 10-K for the year ended March 31, 2020 and subsequent quarterly reports on Form 10-Q.

NETSCOUT assumes no obligation to update any forward-looking information contained in this communication or with respect to the announcements described herein. Let's turn to Slide number 4 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 press release.

These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations of all non-GAAP metrics with the applicable GAAP measures are provided in the appendix of this slide presentation and in today's earnings press release both of which are available on our website.

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

Anil?.

Thank you, Tony. Good morning everyone and thank you for joining us today. I'm proud to report that we met the objectives we set for fiscal year 2021 as we manage through the unprecedented and challenging environment created by the COVID-19 global pandemic.

We served and supported our customers well kept our teams safe and productive, supported the communities that surround us continued to invest for the future and delivered on our financial goals of expanding operating leverage, growing diluted earning per share and generating strong free cash flow.

Our performance demonstrate the importance of our smart visibility and cybersecurity solutions, as well as the flexibility, agility and resiliency of our business. In addition to achieving our objectives, I'm also pleased to report that we continue to focus on our social responsibility initiatives, despite the restrictive pandemic environment.

As a few example, we provided sponsorships for Tech Goes Home which addresses the digital divide; Advancing Women of Color in Technology Coalition that focuses on equality; our annual civic hackathon with Shooting Stars Foundation which helps foster student interest in STEM topics and community issues; and COVID vaccination and aid to underserved communities.

Now let's move to Slide number 6 for a brief recap of our quarterly and full fiscal year 2021 non-GAAP results and strategic highlights. For the fourth quarter we delivered stronger than anticipated diluted earning per share results on overall revenue that was in line with our expectations.

Revenue for the quarter was $213.4 million with corresponding diluted earnings per share of $0.49. For the fiscal year 2021, revenue was $831.3 million diluted earnings per share increased 8% compared with the prior fiscal year to $1.70. This was supported by more than 2 percentage point increase in our operating margin over the prior fiscal year.

We also delivered strong free cash flow of nearly $200 million for the full fiscal year. From a strategic perspective we continue to invest in and advance our product offering for both our service provider and enterprise customer verticals.

Part of this effort was combining elements of our service assurance cybersecurity technologies to provide enhanced capabilities to our customers. This combination leverages the strength of our smart visibility and smart edge protection offering and fosters the convergence of IT operations with security operation.

These solutions are designed to enhance our customers' current investment in our technology, while reducing their total cost of ownership and increasing the return on investment. We have also focused on adapting our product to move from the core to the edge as technology evolves.

At our recent Engage 21 Technology and User conference we launched our new Omnis brand which has adaptor for 5G cloud cybersecurity and analytics. More on this later. Let's move to Slide 7, for some further perspective as we review market trends and business insights.

Although the global pandemic created challenges on many front it has highlighted the importance of technology and connection as the world was forced to quickly adapt, operate and stay connected in different ways for work, education, commerce, healthcare and other aspects of life.

It's clear that with greater reliance on technology, the need for actionable smart visibility and smart cybersecurity solutions to assure and secure our connected world and the end user experience is vital.

As people around the world begin to get immunized and eventually move from a reactive state to a proactive state in advancing their digital transformation initiatives in the post-COVID environment, we believe that three technology trends will be accelerated.

The first is, expedited cloud migration for greater flexibility and agility to adapt to changing environments. The second relates to enhanced protection against the evolving cybersecurity threat landscape, given the unprecedented level of cyber and ransomware attacks over the past year.

And the third is, greater momentum on building out 5G networks to leverage even greater technology and communication opportunities for advanced analytics use cases including artificial intelligence and machine learning. As this occurs, we believe that NETSCOUT is well positioned to capitalize on this technology market trends.

We experienced record registration for our recent Engage Technology and User event that we believe demonstrate the high level of interest in this trend and our solutions. Michael will discuss our ENGAGE 21 event in more detail during his remarks. Let me provide some more color in the technology trends as I review our business verticals.

In the service provider vertical, revenue grew approximately 5% in the quarter and was down approximately 5% for the full fiscal year compared with the same period in the prior fiscal year. The increase in the fourth quarter was primarily related to Tier one North American carrier completing an initial purchase of our solution for a 5G network.

This is the second Tier one North American carrier to select our 5G solutions. Michael will provide more insight on this and other details that occurred in the quarter during his remarks.

In the service provider customer vertical, we see some momentum around 5G standalone network and advancements, given the competitive carrier environment, the recent spectrum auctions and the trend towards private 5G networks.

We continue to work with our customers as they plan their migrations and consider our 5G ready solutions to avoid disruption given we are the incumbent and they have already made base investments.

As these networks advance with the new spectrum currently, recently purchased at the FCC auctions in the United States and auctions in other countries and more traffic running over them, NETSCOUT's smart visibility solution will be important to maintain the control and user experience expected of the new technology.

We are also advancing our analytics product to support our customers in understanding their customers' behavior in order to assist in identifying new revenue sources to help monetize that investment.

In addition, we are focusing on mobile security to help customers deal with the volume complexity and risk associated with IoT devices as they start to become more prolific on the mobile service provider network.

Turning to our enterprise customer vertical, revenue declined approximately 19% for the quarter and approximately 8% for the full fiscal year compared with the same period in the prior fiscal year.

As discussed on prior calls, the primary drivers of the full fiscal year decline were lower spending in the federal government sector and the decrease in ancillary product lines like Fluke Systems.

Overall, we see opportunity in the enterprise vertical as we partner with leaders in the cloud industry and as customers move from a reactive state in the pandemic to the proactive state where cloud migration accelerate and as the cybersecurity threat landscape continues to challenge organization.

We have introduced our new Omnis solution to better address these visibility and cybersecurity needs. These solutions help provide customers with the confidence and control to innovate and the ability to detect, investigate and mitigate advanced cybersecurity threat reducing the mean-time-to-resolution of issues, which save time and cost.

Our solutions like smart edge monitoring and Cyber Investigator also leverage existing customers investment to reduce total cost of ownership and enhance their return on investment, while ensuring the user experience and security of their technology.

We also see opportunity in the enterprise vertical for 5G utilization as enterprises and governments look to leverage 5G technology in private networks through network slices and at the edge for industrial, automation, telehealth, virtual reality and gaming, autonomous transportation, smart warehouses, home and cities, national defense and other new use cases.

As one of only handful of vendors that have both service provider and enterprise knowledge, our capabilities with both scale and functionality should serve us and our customer well as these advancements occur over the longer-term. Michael will highlight some of the customer wins we experienced in this vertical during the quarter in his remarks.

Now let's move to slide number 8 to review our outlook. As we look forward, we are excited about the future and the opportunity we see to leverage the development investment we made in our solutions during fiscal year 2021 to address the long-term technology market trends that favor NETSCOUT.

For fiscal year '22 – 2022, we are focusing on advancing our existing and new products like Omnis growing revenue, further enhancing our diluted earnings per share and generating strong free cash flow. Jean will share some more details related to our fiscal year 2022 financial outlook during her remarks.

Regarding revenue growth, we believe that as the global pandemic moves into the rear-view mirror, the movement to spend for the future should resume. Until then we are being cautious with our outlook. Approximately 40% of revenue has historically come from international markets, which appear to be recovering at a slower pace than the United States.

Given our strong customer base and relationships and approximately half of our total revenue historically coming from recurring service revenue, primarily associated maintenance contract, we expect our service revenue to remain solid for the fiscal year.

With these dynamics we are targeting overall revenue growth for fiscal year 2022 in the low-single-digits. We will continue to monitor the macroeconomic environment and recovery for improvement and we will update our outlook on future calls as appropriate. Our strategy going forward focuses on three main tenets.

One, we will expand -- further expand within our existing customer base to access existing an incremental budget dollars for 5G, cloud, and Smart DDoS use case it. Two, we will acquire new customers through targeting new logos with existing and new products including a tier below where we may normally operate today.

Our software-centric solutions should provide us with the flexibility to target and sell into this price-sensitive market with our automated and affordable solutions. And third, we will further expand into high value adjacencies such as cybersecurity beyond DDoS and big data analytic leveraging our smart data.

We believe that we have all the right building blocks to address this area and expect they will contribute to revenue growth in fiscal year 2022 and beyond. From a cost and investment perspective, we will continue to exercise a disciplined cost control and prudent capital allocation philosophies that have served us well in the past.

We are committed to further enhancing our diluted earnings per share and generating solid free cash flow. This is important as the cost structure will be pressured as COVID restricted activities such as travel and event start to resume this fiscal year.

Finally, we expect to maintain a strong financial profile to provide us the resources and flexibility required to advance of our strategy.

In closing I would like to thank my fellow NETSCOUT Guardians around the world for their tireless efforts, dedication, and flexibility as well as our customers partners and other stakeholders for their support as we navigated the global pandemic this past fiscal year.

Our resolve has been tested, but our lean but not mean philosophy and the culture has served us well in these trying times as it has over 35-plus years in business. I look forward to sharing our progress and achievements with you over the course of fiscal year 2022 and beyond. I will now turn the call over to Michael for his remarks at this point..

Thank you, Anil and good morning everyone. Slide 10 outlines the areas I will cover. In terms of customers wins. Starting with customer wins in the service provider vertical, we are starting to see some momentum in the standalone 5G network deployments with multiple deals in the fourth quarter with both Tier 1 and Tier 2 carriers in North America.

We started to see 5G related project with calibration a few years ago and should start to move to monitoring the core, the RAN, the edge, and user experience analytics or over time.

For example, in the fourth quarter we closed a low eight-figure deal with a leading Tier 1 North American carrier that included more calibration services as well as comprehensive service assurance solutions for their 5G network.

Consistently, with customers' 5G implementation our deployments include a combination of virtualized software and hardware components. This is the second Tier 1 carrier in North America to utilize our 5G solutions.

We also closed two smaller low seven-figure deals with regional Tier 2 providers in the fourth quarter as they started implementing 5G standalone deployments. Both deals demonstrate our value in being able to provide consistent service assurance solutions as carriers transition from 4G to 5G regardless of the size of the carrier.

In the enterprise vertical, we continue to serve our existing customers as well as pursue new logos. In the fourth quarter, we won a low seven-figure deal with the North American insurance company. This is a new customer for us and they bought our combined service assurance solution including active, passive, virtual, and software component.

Finally, we also won several new logos in the fourth quarter with some smaller deals involving Arbor's enterprise, search cybersecurity product, Arbor Edge Defense, which can be our customers' first and last line of defense against cyberattacks meaning it addresses both inbound and outbound trends.

With the increased volume of cybersecurity threats over the past year as outlined in our recently issued second half 2020 Threat Intelligence Report and our enhanced focus on cybersecurity to our Omnis security brand, we are targeting more activity in this area in the future. Now, let's go to go-to-market activities.

On this front, we continue to focus on our strategic partnerships and customer engagement.

Last month, we announced the partnership with Dell Technologies OEM Solutions Group to certify Dell Technologies' OEM PowerEdge servers and PowerSwitch switches to work seamlessly with our nGenius Packet Flow Operating System or PFOS and InfiniStream ISNG software. We will be jointly selling these solutions to existing and new Dell accounts.

As Anil mentioned last month, we held our Engage 21 Annual Technology and User Conference where we had record attendance of more than 4,200 people registrants including more than 1,000 for the first-time attendees.

Over the two-week event, we showcased our Service Assurance and Cybersecurity capabilities and promoted our Visibility Without Borders campaign. The virtual conference was a combination of presentations, panel discussions, demonstrations, and hands-on training. The feedback from attendees was excellent.

With cloud migration being a key topic nowadays, one highly attended session was a panel discussion with VMware, AWS, and NETSCOUT discussing the approach and partnership in implementing consistent and continuous traffic visibility across on-premises, private cloud, and public cloud domains.

At the event, we also have a separate Enterprise Security Day attended by more than 1,500 people both from customers and prospect accounts.

The external keynote was given by Alex Stamos ex-CIO of Facebook and Stanford professor who discussed why cybersecurity leaders should employ a data-driven strategy to successfully navigate their post-breach response and emerge better defendant on the other side.

Finally, at the event we announced our Omnis cybersecurity platform combining the power of NETSCOUT's smart visibility technology with Arbor's Smart Edge Defense technology.

The combination results in extensive network traffic visibility pre and post attack from our service assurance solutions enhanced by Arbor's proven detection and blocking cybersecurity capabilities so that we are truly assuring availability performance and security for our customers' technology -- of our customers' technology.

That concludes my prepared remarks and I will turn now over the call to Jean..

Thank you, Michael, and good morning everyone. I will review key metrics for our fourth quarter and full fiscal year 2021 as well as comment on our fiscal year 2022 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 or the appendix.

Slide 12 details the results for our fourth quarter and full fiscal year 2021. Focusing on the quarterly performance first, revenue declined 7% over the same quarter in the prior year to $213.4 million. Product revenue declined 15% and service revenue grew 1.3% over the prior year's quarter.

Our fourth quarter fiscal year 2021 gross profit margin was 77.2%, up 1.2 percentage points over the same quarter last year. Our software-only sales were 34% of service assurance product revenue compared with 23% in the fourth quarter of the prior year.

Quarterly operating expenses decreased 7% from the prior year, primarily reflecting continued cost controls and pandemic related cost reduction. We reported an operating profit margin of 22.4% up 1.2 percentage points over the prior year with diluted earnings per share of $0.49.

For the full fiscal year 2021, revenue was $831.3 million which was a decrease of 6.8% over the prior year. The gross profit margin was 76.4% flat compared with the prior year.

Strong software-only sales at 33% of service assurance product revenue versus 29% last fiscal year produced higher margins that were offset by lower radio frequency propagation modeling margins and higher customer support costs.

Annual operating expenses decreased 10.8% from the prior year, primarily due to continued cost control pandemic related cost savings and headcount management.

We reported an operating profit margin of 20.8% up 2.5 percentage points over the prior fiscal year with diluted earnings per share of $1.70 and 8.3% increase compared with the prior fiscal year. Turning to slide 13, I'd like to review key revenue trends.

For fiscal year 2021, revenue for the service provider customer vertical declined by 5.5% while the enterprise vertical declined 8.2%. Approximately 52% of total revenue was generated from the service provider customer vertical with the remainder from the enterprise customer vertical with the remainder from the enterprise customer.

Turning to slide 14 which shows our geographic revenue mix on a GAAP basis. Revenue by geography was 58% in the United States, 42% internationally. Additionally, there were no customers that represented 10% or more of revenue for the full fiscal year. Slide 15 details our balance sheet highlights and free cash flow.

We ended the quarter with cash, cash equivalents, short-term marketable securities and long-term marketable securities of $476.5 million, which is a decrease of $14 million since the end of the third quarter. Free cash flow generated in the quarter was $89.1 million.

We repaid $100 million of our revolving credit facility debt during the quarter and ended fiscal year 2021 with $350 million of debt outstanding on our credit facility.

We currently have capacity on our share repurchase authorization and plan to be active in the market depending on market conditions even though we did not repurchase any of our common stock during the fourth quarter.

To briefly recap other balance sheet highlights, accounts receivable net was $197.7 million, down by 13 I'm sorry down by $10.3 million since the end of December. DSOs were 75 days versus 73 days at the end of fiscal year 2022 and 70 days at the end of December 2020. Let's move to slide 16 for some commentary on our fiscal year 2022 financial outlook.

Anil noted in his earlier comments that the outlook takes into consideration, the pandemic recovery in current macroeconomic environment. The fiscal year 2022 revenue range is $835 million to $865 million which implies low single-digit growth.

The anticipated effective tax rate is between 20% and 22% assuming approximately $75 million weighted average diluted shares outstanding, the earnings per share range is between $1.71 and $1.77. I'd also like to offer some color on the first quarter of FY 2022.

As we assess the opportunities in front of us, we currently anticipate flat to approximately 2% revenue growth with a corresponding increase in earnings per share. That concludes my formal review of our financial results. Before we transition to Q&A, I'd like to quickly note that our upcoming IR conference participation is listed on slide 17.

Thank you and I now turn the call over to the operator to start Q&A..

[Operator Instructions] And we will take our first question from Matt Hedberg with RBC..

Hey, there. Good morning, guys. Thanks for my questions. Anil I was wondering if you heard the software-only sales continue to accelerate in your service assurance mix.

Anil you noted in your prepared remarks that going forward, you think this could aid in some new customer wins, I think a little bit in that tier below your typical large enterprise customers.

Just wondering, if you can talk a little bit more about the go-to-market strategy for soft-centric solutions and maybe what does the competitive environment look like in this tier kind of below the large enterprise?.

So thanks, Matt. So one of the big things we are – the prerequisite to providing a subscription. So lot of people are looking at subscription-based deployment models and in order to do that you have to have a software-only solution.

And so what we have done with the software solution in the past is build this ability to offer subscription-based solution, as well as perhaps offer some SaaS offering, where we maintain the product for the customer.

So our new strategy or expanded strategy for new logo wins is going to rely on those two aspects, using our software products but in the enterprise, but offer it as a – also offer it as a subscription and SaaS-based models, which solves two problem one is that initial investment is low for the customer and they don't need to learn the product as much as they had to do in the past.

And that's going to be ideal for the next level of the customer base. And also we have done some other interesting things in the product line to support some of the use cases were work from home, which we didn't support in the past because our solution was from a price point of view is not very effective there.

So all these things is going to allow us to really target this new logos. Competition is there, but I think we have some very unique technology and only thing we are counting on is, it does require people to do the trials.

And I think what we are hearing from people is the environment over the next 12 months for doing those trial is much better than it was during the last 12 months..

That’s really good to hear. And then Jean, you're calling for slight revenue growth for the full year, which is great to hear.

I'm wondering, how do you think about the composition of growth between service providers, enterprise and government? I know government has been a bit of a challenge during COVID as well, but just maybe a little bit of granularity on kind of how you think some of the segments build up to that kind of that low-single-digit total growth?.

I would say I mean thank you for noting it's mid-single-digit growth. As we had said in our remarks, we expect that service revenue should be relatively flat on a year-over-year basis, maybe up 1%. So that puts more of an emphasis on product revenue. And I believe at the midpoint of our guidance product revenue growth closed to 4%.

And so you see the GDP predictions of 6% to 7%, so hopefully, we will grow in line with the recovery in the economy, which then speaks to how that will come across all the different geographies and verticals that we have.

And so I would say across all of the verticals, we probably see growth across all of them due to the natural demand from our recovery.

We also have the trends in 5G for service provider and then within the enterprise, as Anil had mentioned, being able to start to penetrate the SMB market with more flexible pricing models, we would see some growth from that way.

And then finally the company continues to move into cybersecurity, which was a very interesting and well-attended topic in the Engage user form that we just had. So as we launch that part over the coming fiscal year and it gains traction in the sales force, we should see growth in that area also..

Yeah just one thing more to add Matt to what Jean said, was that, I mean from a federal spending point of view and revenue, it was not a good year last year. So there is some pent-up demand what we are hearing, so that's obviously reported as part of our enterprise sector. So that's another area where we are – we see upside in the coming year..

That's what I was just going to go to Anil, I mean on the federal side it seems like there could be a real opportunity this year versus last year based up some pent-up demand. So that’s good to hear. Congrats guys..

Thank you..

And we will take our next question from Eric Manzunni – Martinuzzi, I apologize with Lake Street..

Yeah I wanted to dive into the Q1 color that you provided. Just curious to know where the – you talked about product being up for the year roughly 4%.

Do you see that same thing in Q1 or does this – does that the growth on the product side a little bit better in the out quarters?.

I would say the way we are thinking about the revenue across the different quarters is that Q1 will probably I think around the midpoint of our guidance should probably grow, total revenue around say 1%, so low-single-digit that then means that product revenue should grow also say correspondingly around 2%.

And so we see that normally Q3 and our Q4 quarters are stronger quarters. And should see maybe more of a doubling of the product revenue in Q3 and Q4 but we are currently seeing product revenue growth and overall total revenue growth in the first quarter..

Okay. Got you. Right, and then as you – I know with an in-person conference a lot of times it's easier to get the anecdotal conversation Anil and maybe Michael as well.

But having hosted Engage over a two-week timeframe did you get that opportunity to kind of have the water cooler conversation with some of your larger enterprise or carrier accounts and juxtapose that versus this growth opportunities that you've outlined.

We certainly have – we've got 5G and cybersecurity and digital transformation but in those anecdotal conversations what seems to be the areas where there is budget ready, willing and going to be put to work in the next year?.

So Eric, maybe just on the logistics, so we -- the way we hosted this time was a real class operation and it was a four days conference and we divided into two days of enterprise, two days of carrier, one in each for security and service assurance. And we also had -- and so we had very targeted sessions.

And we had over 1,000 people in the security section. But in the past we have sort of combined the two. The second thing is we had a video wall, where we could interact directly with the customer. They were breakouts lot of the sessions were recorded. But the Q&A was live.

So from based on all this conversation, I think there is -- people feel that, we are one of the few companies we continue to invest. And some of our competitors had layoffs, and had disinvestments and all those. So they were feeling very good about that part, that we didn't stop the innovation. Last year we continued to serve our customers well.

At the same time, their willingness to do POCs and things like that. And the ability to do that in the second half definitely, but even after 4th July, is much better. Then we had our -- we have a Board of the user group Board. And so we got lot of Intel from them, prior to and after the -- during the meeting.

And then lastly, Michael hosted this session with AWS and VMware with the external speakers. And all, these thing, I think just this gives a very good feeling about, the single-digit growth at least and hopefully that will improve, if the situation internationally start getting better..

Okay. And then, lastly from me, the Dell OEM relationship. You had OEM relationships in the past, you -- it was really transformative when we think back 20 years ago or so, back in the early days with NETSCOUT, how you came to market. But lesson is learned there obviously form your relationship with Dell and the OEM side.

But just curious to know, is this more of a kind of a hunting license, where we may or may not see success tag along, come along, revenue on Dell, servers and switches, or is there a robust effort on the Dell side to make this work, Quota for instance initiatives on their side to help drive NETSCOUT traction alongside Dell?.

Yeah. So I am -- I mean glad you are another few people who are with us for 20 years. And you remember the Cisco relationship. So I don't think -- it's not that class of relationship, plus we were like it -- when we did that relationship, we are a $30 million company. And everything was growth there.

And now we have like, three times or 30 time in a, $800 million-plus company in revenue. But we see that -- we look at good partner solve each others problem. So we are -- our application moves lot of server hardware. And Dell is very interested in us.

Now that we have become a software centric company we still have to recommend, what hardware customers should use to deploy our software? So we're going to give preferential treatment because of this relationship. And they are going to do some embedding of the packet flow, which is a small portion of the revenue.

In exchange, we will have access to those accounts to sell other things. And so that could also help -- there was earlier question for Matt, on the new logo strategy. This is another opportunity to get leads into those accounts to sell other thing. So I think, we'll have more to share how it pans out.

We're just starting out, maybe at the tail end of this quarter. And I think we will have maybe more details to share, depending on how it goes towards the end of the fiscal year..

Understand. Good luck in FY 2022..

Thank you..

And we will take our next question from James Fish with Piper Sandler..

Hey guys. Thanks for the questions here..

All right..

I do want to go off of the last couple of questions here.

We're talking about, really -- essentially what I'm trying to get at, what go-to-market initiatives are being put in place to go after these more mid-market customers, simply that this Dell relationship and contribution can really materially contribute there? Is it the cloud partners coming on in terms of bookings contribution, or is it something you guys are doing behind the scenes, in terms of changing your own kind of reps your own reps behaviors? And how much well visibility as a service really plays a role with the mid-market?.

So I just wanted to maybe expand James your question to a little bit broader on what areas we invest in, which we didn't have revenue in the past or didn't have big revenue in the past. And so first of all, the main portion of the business, our standard service assurance, and maintaining our incumbency will continue to be a big portion.

But two new go-to-market things, which we have implemented last year and now which will help this year. One is in the cybersecurity area which will include some new logos. And there we have created a, overlay sales structure. And we had more sales people. So that's going to help, that initiative.

Some of them will be, new logo, some will be additional sale, adjacency in existing account. And the second is for the service assurance part in enterprise, I mentioned that, the go-to-market there is ability to offer subscription-based model, requiring a simpler solution a portion of the product at a lower price.

And where we don't require customer to actually spend lot of time in learning have a short-term sales cycle. So that's basically the go-to-market initiative. We had a team which was generating lead for new logos, but we didn't have the deployment model and price points to serve the market. And that's why our traction was not very good.

So Dell in a way towards the second half will allow us to have more leads and offer that solution to those customers also. So basically those are the two new go-to-market, one is in the cybersecurity area, which is direct sales but a overlay sales force and other is new deployment model for Tier 2 of the market where we are not incumbent.

I don't see it -- I mean that number is less than 10% those two combined for the new areas. So 80% to 90% of revenue will still come from existing customer additional sales to them..

I would add if I may, beyond energy in moving product cybersecurity product to smaller customers because it's a simpler sale, it's a smaller one-time investment. So the AED product is as I mentioned in my remarks is very successful in being the first product to be sold to a new customer. So we had new many new logos in that domain..

Got it. That's very helpful details there Michael. And Jean maybe one for you, I'm sure you were expecting it from me.

But given it's year-end, can we get an update of mix between the service assurance and the security business? As well as within that security business, what the verticals each did? I guess just high level, why not start releasing it formally like a lot of your peers are really starting to do is it could help your valuation and that security mix, I think is bigger than most realized..

So you are correct that the portion of security that we have as under the brand of Arbor is more than $200 million in our business and that is probably one of the largest security companies in -- around the globe. Arbor this year even though we declined almost 7% in product revenue, Arbor for the total year did grow, it grew in the low-single-digits.

That was more heavily skewed to Q1, Q2 and Q3.

Within the verticals within I guess in general within service assurance, which is where we normally talk about the verticals, we had very good traction in the -- in international as we had talked about with -- a couple of years ago when we had actually integrated the sales force, the sales force over there has come together very well and they did better this year, which I think you'll see in our slide when we have put the international growth and the domestic composition there.

The financials did very well. Service provider especially at the end of this quarter did pretty well given the fact that we had a very large deal that was one of our 5G related customers.

And as actually to your overall point about our financial reporting as we go forward, we are looking at changing some of the metrics that we report and we will probably we'll report more on Omnis, which is the higher growth areas, the areas that are expected to grow and we will show more of the service assurance, more of the products that are in a more mature market as well as how Arbor is doing in AED and some of the other cybersecurity areas..

And so just to add to what Jean said, yeah, we will carve about but we want to walk before we run don't get ahead of ourselves.

And overall we are -- we have now announced products in two other areas of security beyond DDoS, which is 100% of our security business today, and one is mobile security and we'll have a product out next quarter on that, and other is on the enterprise area going beyond DDoS whether it's some other advanced security areas which you'll hear more about.

Once we have that some traction with that which we hope before the end of this fiscal year. Yes it will make sense to carve out and report it differently..

Thanks for the color, guys..

Thank you..

And we will take our final question from Kevin Liu with K. Liu & Company..

Hi. Good morning. Could you speak to the service provider side of your business and specifically whether you've seen an uptick in RFPs or trials you're involved in post the C-Band spectrum auctions? And then also just more generally with some of these initial 5G ones you've talked about today.

Does that start to produce some more kind of steady cadence of opportunities as they roll out or is there a fair amount of traffic capacity that needs to be absorbed before there are more follow-on sales?.

Yes I look at -- the way Kevin we look at it is that because we are incumbent and bulk of our business come from about top 20 Tier 1 providers across the world and they will continue to invest with us in 5G.

US is ahead of that two of the people who have seriously announced 5G they are all using our product, but our revenue in this area is sort of blended 4G and 5G. So we should not look at 5G opportunity as incremental to 4G last year. Lot of the subscribers are moving from 4G to 5G.

And so instead of some of the 4G revenue from Tier 1 will be replaced by 5G. Net effect hopefully should be slightly positive effect. But that new areas which we can count on 5G which we are not there yet we are there in the calibration area which we talked about last year.

Now we are moving into the core and replacing some of the 4G revenue with 5G, but the new areas will be then a 5G security which will be held by mobile security and hopefully later in the year we'll have something about it and second is private 5G.

So we have created a small sales group in NetScout to look into private 5G opportunity with the enterprise given that we also have enterprise sales person. So that's how I look at the 5G traction I think it's much better -- more demand now than we had this time last year..

Great to hear. And then just one on the security side of the business. How are you guys thinking about, kind of, the puts and takes of growth over the course of this year? Obviously, last year DDoS attacks skyrocketed and you guys I think benefited from that earlier in the fiscal year.

So does that present a tough comparison for you or do you feel there is opportunity to grow both that side as well as on the new AED solutions?.

Yes I think overall we see the aggregate growth in security this year will be more than that in service assurance just like last year and it's all blended into the guidance and color we have provided, but overall there should be higher growth in the security area..

All right. Thanks for taking the question..

Sure..

Thank you, Kevin..

And there are no further questions at this time. I will turn the program back over to our presenters for any additional or closing remarks..

Thank you. There will be a recording of this call afternoon today on our website, if anyone would like to listen to it again. Otherwise thank you for joining us today and have a great day..

This does conclude today's presentation. Thank you for your participation. You may disconnect at any time and have a wonderful day..