Ladies and gentlemen, thank you for standing by, and welcome to NetScout's first 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 and NetScout's Chief Financial Officer, Ms. Jean Bua. At this time, I will turn the call over to Ms. Cathy Taylor, NetScout's Director of Investor Relations to provide the opening remarks. Ms. Taylor, please proceed.

Thank you and good morning everyone. Welcome to NetScout's fiscal 2015 first quarter conference call for the period ended June 30. Before we begin, let me remind you that during the course of this conference call, we will be providing you with the discussion of the factors that we currently anticipate may influence our results going forward. These statements include forward-looking statements made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws. These forward-looking statements may involve judgment and individual judgments may vary. Forward-looking statements include expressed or implied statements regarding future economic and market conditions, guidance for fiscal year 2015, acquisition integration success and new product releases. It should be clearly understood that the projections on which we base our guidance and other forward-looking statements and our perception of the factors influencing those projections are highly likely to change over time. Although those projections and the factors influencing them will likely change, we will not necessarily inform you when they do. Our company policy is to provide guidance only at certain points in the year such as during the quarterly earnings call. We do not plan to update that guidance otherwise. Actual results may differ materially from what we say today and no one should assume later in the quarter that the comments we make today are still valid. For the further discussion of the risks and uncertainties that could cause our actual results to differ, see the specific risks and uncertainties discussed in NetScout's Annual Report on Form 10-K for the year ended March 31, 2014 on file with the Securities and Exchange Commission. We have included on today's webcast a slide presentation that provides a summary of key financial data that accompanies the financial section of today's discussion. For those listeners who have dialed into the call this morning and would like to view the slide presentation, you can find it by going to our website at www.NetScout.com/investors and then clicking on today's webcast. While the 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. Non-GAAP items are described and reconciled to GAAP results in today's press release. I would also point out that the growth rate discussions are based on a year-over-year basis unless otherwise noted. This concludes the introductory remarks. I would now turn the call over to Anil Singhal, our Chief Executive Officer.

Thank you, Cathy. Continuing our revenue growth performance of the past two fiscal years, NetScout delivered a strong beginning into our 2015 fiscal year. Revenue for the quarter was $107.9 million and EPS was $0.36. Our growth for the quarter was 32% overall for revenue with product revenue growing at 50%. Our EPS growth was 71%. Jean will discuss our financial results in more detail later on in the call. Our revenue growth this quarter was dominated by our service provider vertical. As we have mentioned over the past few years, our service provider vertical is driven by our customers' projects and hence the revenue can be lumpy. Our revenue guidance of $450 million to $465 million includes about 20% service provider product revenue growth for the year. So it appears that the trend for the fiscal year 2015 could be similar to fiscal year 2013 where we saw strong service provider growth in the first half of the year with the subsequent overall year revenue growth in line with our 20% growth estimate. Our revenue projections for the full fiscal year therefore remains the same and in line with the information we shared with you last quarter. As a reminder, those projections included full-year revenue guidance of $450 million to $465 million. NetScout is at the heart of computing trends that our customers are taking today including IP conversions, network function virtualization or NFV, software defined networks or SDN, data center virtualization, cloud mobility and bring your own device or BYOD combined with web and the evolving internet. Our 30 years of expertise and patented product solutions have created a unified product platform that provide operational intelligence and performance analytics that enable our customers to assure application and service delivery along with the user experience across the networks of…

Thank you, Anil. As we have discussed, our go-to-market strategy for nGeniusONE product in the enterprise vertical is a customer penetration strategy. We are leveraging our loyal customer base and reaching further into their IT operations to better assist them in solving their problems through our operational intelligence and performance analytics. As Anil mentioned, the first greatest use of nGeniusONE is service triage. By pinpointing issues in real-time, our solutions have the value proposition of tremendously improving IT productivity in meantime to restore as well as being able to proactively spot issues before the user experience is impacted. In adding value in the application and data center segments, we are positioning our product as complementary to other performance management tools filling the gaps that exists in understanding the interactions among the hardware and software resources mostly used in IT services. Our core customers have responded well to nGeniusONE and most of them have deployed it in portions of their IT operations while they continue using their pre-existing NetScout installations in other portions of their network. We are enabling this migration to our support offerings of training and services, as well as through a technology transition program as our customers refresh their installations in order to accommodate the increasing functionality and scale of nGeniusONE. This creates a good base for us to do follow-on sales over the coming months. In parallel, we continue to develop nGeniusONE and its ability to gather intelligence on applications. At this point, nGeniusONE can analyze approximately 300 applications. Some of these applications like DNS are technical and known only to IT operations gurus. Other targeted applications are more widely recognized and include Oracle, Exchange and Citrix. During this quarter, our expansion into NPM plus APM was exemplified by our win at a large healthcare organization, which…

Thank you, Michael, and good morning, everyone. This morning, I will review the key metrics for our Q1 fiscal year 2015 results and discuss our guidance for fiscal year 2015. To begin our financial discussion, we will be starting with the third slide of our presentation which is accompanying our call and is posted on our website. For our first fiscal quarter, our product revenue was $64.4 million, which is an increase of 50% over the same quarter in fiscal year 2014. Our first quarter total revenue was $107.9 million, which is an increase of 32% from the same quarter in fiscal year 2014. Within total, revenue service revenue was $43.5 million, which is a 12% increase from the same quarter in the prior year. Our earnings per share for the first quarter was $0.36, which is a 71% increase from the same quarter in the prior year. Turning to slide four. We achieved our quarterly results while delivering strong margin. Our gross profit was $86.5 million representing an 80.2% margin. Income from operations was $25.3 million and our operating margin for the quarter was 23.4%. Net income was $15.2 million or $0.36 per diluted share. The net income margin was 14.1%. Turning to slide five, which shows our fiscal year 2015 product revenue composition. The components of our $64.4 million of product revenue for Q1 fiscal year 2015 were as follows, service provider, $41.9 million was 65% of product revenue, government, $2.5 million or 4% of product revenue, general enterprise, $20 million or 31% of product revenue. The product revenue composition for this quarter was more heavily weighted to our service provider vertical. As Anil mentioned, our large tier 1 domestic providers continue to focus on their 4G LTE network rollouts and new LTE enabled services. As such, the…

(Operator Instructions). Your first question comes from the line of Eric Martinuzzi from Lake Street Capital. Your line is open.

Thanks and congratulations on a terrific start to the year. That 50% product growth is a real eye-popping number. Just curious to know, you talked about the guidance. This is more of a skew, this 46% to 54%, that would still represent down sequentially for Q2, which would be slightly below where the street is. Is that what your intent was with the commentary?

Yes. We saw, as we noted, very heavy service provider requirements this quarter and we believe the growth rate over last year's quarter will still yield us very good growth rate, but there is the potential that we would be more in the $100 million, $102 million line for Q2. Well, its $100 million and $102 million in Q2.

Okay, and then as far as 10% customers, did you have any, if so, how many in the quarter?

Yes. We had two revenue 10% customers.

And then, I think, the one that caught my eye, setting aside service provider, the lack of growth on the product side for the enterprise. It is only a little bit but there seems to be some pockets of success here. You talked about the electronic health record example or the unified communications example, but still all in, we are kind of flat on product and plus 1% on total revenue for enterprise. What gets set off dead center, is it about people getting comfortable with the new product and then pulling the trigger on their own CapEx or is there something else that needs to happen?

Well, Eric, as you know, as our business has significantly grown in a year and half, last year or last couple of years, as you saw in the last slide and as we become bigger and bigger, it will be hard to look at a quarterly trend as an interesting metric. So I think it's just a side effect of the timing of orders and as we mentioned, our yearly estimate shows the same trend as last year in terms of product revenue portion, enterprise versus service provider and various metrics we report on.

Okay, so that will pick up. All right. Thanks for taking my questions.

Thank you.

Your next question comes from the line of Matt Robinson from Wunderlich. Your line is open.

Thanks for taking my questions. Congratulations on execution in the first quarter. So can you elaborate a little bit on the visibility on the general enterprise? And as well as non-domestic side of service provider? Jean, if you could provide CapEx and depreciation, that would be great.

Sure. Why don't I do the easier question first, which is the CapEx. CapEx this quarter was $1.9 million. Depreciation and amortization combined were $4.7 million.

I think overall, the visibility is quite good. I am not sure whether we have -- overall the visibility is quite good in both the domestic sector and international sector. We don't break out the service provider revenue by international. So I don't know whether that answers your question, which you are looking for.

So just to reiterate what Anil is saying, as you know as we talked about in the past, the service provider innovative that are on the IT network, that have 4G that are LTE, those countries are the U.S. and then they are some other pockets in Asia. And as Michael has mentioned before, we have a good customer base in the Asia-Pac countries. Europe is still a little bit at a stand still due to the way they initially rolled out their 3G and some of the economics. We still have wins in those areas and we saw the pipeline in those areas. However, the material revenue amounts are not generated from the international countries yet because they are not quite moving into 4G/LTE as fast as the U.S. is.

How has the pipeline developed for the integration you have done with the Accanto Technology?

I think it is very good. In fact, Michael talked about it even in the circuits witch area in Latin America. I think there is a big VoLTE rollout coming up in U.S. as well as in Europe which will see some deals towards the end of the year and that includes Accanto Technology. So as we mentioned last year, the integration from all five companies we acquired in last two years is all complete and generating revenue.

Has the packet flow switch business, has the tone of that business changed at all?

No. I think it did very well last year and we think we are going to do good there as well this year.

Okay. Thanks.

Your next question comes from line of Kevin Liu from B. Riley & Company. Your line is open. Kevin Liu - B. Riley & Company: Hi, good morning. First question, just with respect to the government pipeline. I am wondering if you could talk about it how that's grown versus last year? And then whether you would expect close rates, at least in the seasonally strong September quarter to be improved versus the past couple of years, where it has been a bit weaker?

Yes. I was just there in that region last week and pipeline is better than last year and we expect to do better than last year, but again still in the last minute things can change, in fact very quickly. So we are hoping to have a better year in fact than this year and that means better quarter. Better Q2 quarter which is the end of fiscal year. So yes, the pipeline looks good and our people are very excited and positive. We are hoping for a good year in fact. Kevin Liu - B. Riley & Company: Great, and then just a follow-on in terms of the enterprise growth here. Maybe if you could just talk a little bit more about what you are seeing within sales cycles during the quarter? Did they progress the way you expected them to? Was there any sense that deals has gone either more complex or elongated, especially as you guys move towards maybe some newer areas of companies, networks and applications?

Yes. I think that's a good question because I think in terms of sales cycle, in terms of acceptance and upgrading towards solutions, the new solutions are quite short. But sales cycle for getting project from other departments and going into APM area, while there is lot of positive voice coming up, it's slightly longer and that's what we were talking about as it is going to take a little longer to penetrate the APM markets. But there is a bridge to the APM market for NPM plus, which is what I talked about. So that part on is going very well which was a prerequisite to part two, and so more traction in that area in the later part of the year and next year. Kevin Liu - B. Riley & Company: Got it. Thank you and congrats on a good quarter.

Thank you.

Thank you.

Your next question comes from line of Scott Zeller from Needham & Co. Your line is open. Elizabeth Colley - Needham & Co.: Hi. Good morning. This is Elizabeth Colley for Scott Zeller. You mentioned the nGeniusONE product is gaining mindshare. Can you tell us exactly how much of the customer base is currently using it?

Basically its 200 customers have deployed or maybe more. Michael is saying maybe even more. 250 or more customers have deployed nGeniusONE. But I wanted to caution you saying that doesn't mean everyone is generating new revenue. So like I said in my script that first part was for them to migrate to the new solution which is a free upgrade to our customers and then they deploy nGeniusONE and ASI in more places. So the second part is lower, has longer sales cycle. It's happening in a fewer number of customers than the large number who have moved to nGeniusONE. So we are in this business for a long time and this one will pick up traction into a new product in the last 20 years I have seen. So we are very excited about so many customers migrating to nGeniusONE so far. Elizabeth Colley - Needham & Co.: Okay. Thank you. My second question is around Riverbed and Gigamon, their negative pre-announcements for the quarter. Can you offer us any color on spending trends, specifically in the APM portion of your business? And can you also give us an idea of roughly what portion of your revenue over last of these two companies?

We have large companies in the past. But our strategy in this area is not fair to compare what we do in those areas, event though we are in the same space. We certainly compete for budget. We see packet flow switch is market driven by the packet flow growth which is where we are the leader. So we see a lot of our sales involve both those things. The challenge in the packet flow standalone market has been and the driver for packet flow switch has been done by other people, not Gigamon, where in our case there is lot of complementary nature. So we have done some very interesting things to fully deliver on the value proposition of packet flow switch, because we play in both areas. So obviously we also have challenges like other people but our challenges are very different than, for example, Gigamon's challenges. Also when I looked at Riverbed and NetScout, the biggest difference is, this is 100% of our business. We are focused. We are doing this for 20 years and we just invested 400 man years and five technology being acquired by technology companies in last three years. I think that's unparalleled in the industry including Riverbed or anyone. So those are the two big reasons why we are so different from these other companies and so I don't look at their success or failure as a direct reflection on what's going to happen to NetScout. Elizabeth Colley - Needham & Co.: Okay. That's helpful. Thanks for answering my questions.

Your next question comes from line of Mark Kelleher from D.A. Davidson.

Thanks for taking the questions, and let me add my congratulations as well. I was wondering if you could take a look more at the service provider part of the market. Very strong in the quarter. What was driving those service providers to pull the trigger on that CapEx in that quarter? Very unusual seasonally and maybe you could tell us where you think we are in the 4G/LTE rollout.

Like we mentioned, both in my portion and Jean's portion, the LTE rollout is the main reason. That's going to combined with voice over LTE rollouts later this year and so we are participating in those projects, gaining mindshare and hopefully that will drive business in the second half in those areas, but LTE is the main reasons in the domestic providers of why we are see the transaction. As to what unusual thing happened in this quarter, we already mentioned, its lumpiness and it's not unlike what happened two years ago. In fiscal year 2013, we had a very strong first half and then we didn't have as strong a second half but that total result was still 20% plus growth in that fiscal year for service provider two years ago. Last year it was a reverse trend. End result was the same. So have got a mixture of that trend going on and we still think our earlier estimates of 20% plus growth in service provider for the entire year and looking at it more as a yearly guidance is a more importantly way to look at our LTE market trend and the growth rates.

How far along would you say that the U.S. domestic service providers are in deploying LTE? Are they 50% along? Are they 20% along in deploying?

I think that's not very clear because as there is a replacement LTE and there is an extension. So I think those percentage numbers are not very clear but they are far along in LTE area but they are just starting out on voice over LTE. So that's a big opportunity, which we see in this year in not just LTE but voice over LTE, 4G voice which where our acquisition of Psytechnics and Accanto, the two voice companies we bought two years ago, plus all the work we have done in ASI is going to be very helpful.

Okay, and on the packet flow switch side, just to revisit that for a second. How much of your strategy is to sell the packet flow switch outside of NetScout environments? And how much is right now sold-out outside NetScout environments to not connect to the nGeniusONE to the NetScout tool.

Well, our primary customer base is still the existing NPM customer base. But even when we sell outside the environment, they still buy the InfiniStream and ASI. So there is a very small fraction of customers who would just buy packet flow switch by itself. That doesn't mean all the packet flow switch customers are existing customers of NetScout.

Okay. Thanks.

Your next question comes from the line of Alex Kurtz from Sterne Agee. Your line is open.

Thanks guys for taking the questions. Jean, I just want to revisit your assumptions on enterprise for the year. So this 20% growth rates for service provider, as I understand, that's a new number that you provided to us out today this morning. So I guess there is some real acceleration assumptions you have in the model for enterprise and government in the second half. What am I missing here about that pipeline, as Eric maybe asked, is there just this nGeniusONE pipeline that's going to convert in the second half that's going to able to get you to the midpoint of guidance in those verticals?

So in service provider, we are frequently asked and I think we probably reiterated in our calls in the past what the growth rates are. So the 20% about, approximate 20% product revenue growth rate is something that we have experienced in the past. Actually higher than that starting three or four years ago and we still consider that the 20% about will be good in 2015 fiscal year. We feel confident about hitting our guidance range for revenue. The product mix is something that we actually really don't guide toward with the exception that people frequently want to ask us about the growth in service provider. With that said, when you start backing into the numbers, the enterprise, as we have said before, has to grow in product revenue mid to upper teens. And as Anil had talked about, we do have installations of nGeniusONE. We have increasing pipeline visibility into how they will buy and how they will migrate over towards that and the pipeline that we see for the upcoming quarter and the pipeline that we see sitting here today for the rest of the year would imply that we will experience growth in enterprise over the full year of 2015. And as Anil has also mentioned a few times on the call today, our quarters are driven by what our customers are doing and the project that they are doing. Hence everyone is very familiar with the lumpiness in service provider. That also exists to an extent in enterprise, where you saw this quarter, financials had pretty strong growth and some of the other industries were not executing on their projects yet. So overall we are confident we will hit our guidance range and the visibility in our strategy for selling nGeniusONE into the enterprise vertical will help with the enterprise vertical growing on a year-over-year basis.

And what about government? Is there assumption as maybe a couple points of growth year-over-year in that vertical?

Yes. As you know, government has been, I think it was flat last year. Basically it's the federal government completely flat last year. So you could see high growth rate, but not necessarily large dollars because of the product revenue, the low installed base. As Anil mentioned in talking to our salespeople this quarter and looking at the pipeline, again we continue to have a lot of demand from our users. Some of them have received some budgets. Some of them still have not received budget to buy yet at the end of September, And there is always the concern that the budget that have been sent down to these department could be reappropriated. So sitting here today, while we see a good pipeline and maybe a good growth rate, it's still not huge dollars that we would be talking about. Not hugely material dollars in Q2.

So just to wrap up, last question, I appreciate it. With that said about government, to grow mid-teens for enterprise, it's a combination of growth in nGeniusONE and share gains and maybe slightly better macro. Is that how you think about your enterprise vertical?

Yes. We noted a few people this quarter talking about the macroeconomy how Q2 of the calendar year was not as strong as past and we did see a little bit of slippage but we would not tell you that the enterprise slipped holistically this quarter. We did have good growth in financials and some of the other industries that are planning projects just haven't executed on them yet in this quarter.

All right. Thanks, Jean.

You are welcome.

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

Good morning. Thanks for taking my questions.

Hi. Good morning.

I guess probably a couple of quick questions for Jean. Jean, backlog at the end of the March quarter, I believe, was according to your filing roughly $37 million, which was pretty decent in my mind. Can you just touch on, at least directionally, tell us where backlog is today or at the end of the June quarter?

So backlog, as you know, is a requirement in the 10-K and we really don't discuss it on a quarterly basis. As far as we think about it, it's not really a material number. It diminishes the effort and all the hard work it is to continually just do the same amount of revenue that we did last year. So even the backlog that was reported is really not a guarantee of future success and it still takes a lot of strategy and hard work. With that said, that backlog did shift this quarter, and we anticipate that we still will hit our guidance of $450 million to $465 million in revenue for FY15.

Okay, and then do you expect, I guess based on the guidance that you gave or reiterated for the year and in the light of the service provider performance this quarter, do you expect any 10% customers for the remainder of the year in any quarter?

That's a very good question, Chad.

Well, I think that was whole year but we can't say whether we see 10% customer in every quarter.

Yes, I was thinking it's true of the product revenue amounts that we would have to achieve. As you know, the service providers are the ones that tend to produce the larger deals. And if I look at the product revenue over the coming quarters, at the midpoint of guidance of what we would see, as Anil said, I would agree there is always the potential that we get one or two 10% customers for the year and there is the potential that there could be a 10% in any given quarter, but no guarantees.

Okay, and then maybe, I think everybody is kind of poking around the enterprise growth and nGeniusONE and when that really kicks in. I guess the strength you saw in the financial services vertical this quarter, was it just kind of refresh its spend in more InfiniStream product going out the door or did nGeniusONE kind of boost that? Did you see traction in financial services vertical for nGeniusONE and see some growth from that?

I think all of them and there are a couple of new logos also. It is a combination of all those things. This time financial services were higher but that's just a timing of the order as we said. Overall we look at our trends in the overall enterprise and have stopped reporting based on financial. That was just a comment that this quarter the enterprise business was dominated by financials.

Okay, and then last one for me. You mentioned two things that are driving service provider revenue growth. One, obviously the continue rollouts of LTE network, but also enhanced services on top of the network. I guess two questions within this. How far along do you think you are on the voice over LTE opportunity domestically? And how much have you monetized, I guess I would ask? Then secondly, what's the next opportunity from an enhanced services standpoint, besides voice over LTE that you think will be an opportunity for you guys? And then I am done. Thanks.

So VoLTE or voice over LTE, which is called VoLTE is very early stage. We have not monetized much in that area. But there are two other areas beyond VoLTE which will help this year and maybe later year. One is the business intelligence which is that we are going to focus later in the year. We talked about it at the Investor Day. Another is called NFV trend in virtualization. That's creating a lot of disruption for all the infrastructure players and there are some big initiatives out there where people who want to deploy deeper into the data center, these technologies requiring virtualization. So we have some interesting things in those areas also. So those are the, I would say, the three things plus continued trend on LTE which is substantially benefited but still there is lot of scope and specially there is on international as well as in North America.

Okay. Thank you much.

Yes.

You are welcome.

Your final question comes from the line of Mark Jordan from Noble Financial. Your line is open.

Good morning, everyone. A question first on DSOs. First quarter level of 26 days was very, very good. The question is what causes significant decline from fourth quarter level? And what would you view as a more formalized rate for it?

So the DSO is a function of, in the past we have talked about linearity of the quarter, when the items are shipped and as we talked earlier on the call in a couple of questions ago, the backlog that we reported in the 10-K, we did ship in the beginning month of the quarter. It was average 30 day collection term. It is collected and that's why we have the lower 26 days DSO this time. The other function of the DSO, going to the second part of your question, on average we would probably just tell you may be around 45 days is a normal DSO. However, I would caution that when the renewal bookings come in and these are the renewals of our mainstream, our annual multiyear support, they can dramatically also affect the DSO because you have the receivable at the end of the quarter, but with no offsetting revenue. So basically if you look at the trend of our DSO over the quarters, you would notice that it is more of a indication of the month of the quarter that we are and the renewal booking patterns and how the shipments flowed in that quarter.

Okay. You mentioned earlier in your presentations that in the service provider area you had orders that required very quick response, which was I guess why your revenues were higher than you would have alluded to in the previous earnings call. Could you talk a little bit about just the mechanics of how quick is the response time one on the service provider business? And what is the duration of that from notification to delivery versus the normal business?

I think the span could be as early as 30 days and maybe average or slightly on the higher side could be a quarter. So I think that's the way I would look at it. I mean we don't have to ship something like tomorrow when we get an order today, but what Jean was talking about it is, it's lower than our standard timeframe and so I would say 30 days. As Jean will be something like --

We usually have pretty good visibility into the service provider pipeline due to the way we do the sales force coverage and our leadership in that market. We understand all the projects that are going on around the globe. So we usually have insight into lead times and overall a lot of these lead times are pretty long as they are rolling out their projects and they are doing labs and things like that. Sometimes at the end of quarters or the end of certain months, they will have additional spend that they will need to spend and this quarter was where we saw where they had the requirement to be able to use some of their capital on a quarterly basis, and they would go to vendors who could provide them very quick turnaround in shipping that CapEx.

Okay. Thank you very much.

You are welcome.

There are no further questions at this time.

Okay. Thank you for all your questions. We will see you again next quarter.

This concludes the NetScout conference call. You may now disconnect.