10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                      to

Commission file number 000-26251

NETSCOUT SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-2837575
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

310 Littleton Road, Westford, MA 01886

(978) 614-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered:
Common Stock, $0.001 par value per share	NTCT	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

        Large accelerated filer  ☒            Accelerated filer             ☐    

        Non-accelerated filer   ☐             Smaller reporting company    ☐

                            Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒

The number of shares outstanding of the registrant's common stock, par value $0.001 per share, as of January 26, 2023 was 70,962,252.

NETSCOUT SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2022

TABLE OF CONTENTS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS		1
PART I: FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements:
	Consolidated Balance Sheets: At December 31, 2022 and March 31, 2022	2
	Consolidated Statements of Operations: For the three and nine months ended December 31, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income: For the three and nine months ended December 31, 2022 and 2021	4
	Consolidated Statements of Stockholder's Equity: For the three and nine months ended December 31, 2022 and 2021	5
	Consolidated Statements of Cash Flows: For the nine months ended December 31, 2022 and 2021	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
SIGNATURES		42

Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q, or Quarterly Report, to "NetScout," the "Company," "we," "us," and "our" refer to NetScout Systems, Inc. and, where appropriate, our consolidated subsidiaries.

NetScout, the NetScout logo, Adaptive Service Intelligence and other trademarks or service marks of NetScout appearing in this Quarterly Report are the property of NetScout Systems, Inc. and/or its subsidiaries and/or affiliates in the United States and/or other countries. Any third-party trade names, trademarks and service marks appearing in this Quarterly Report are the property of their respective holders.

Cautionary Statement Concerning Forward-Looking Statements

In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking statements under Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. These forward-looking statements involve risks and uncertainties. These statements relate to future events or our future financial performance and are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "intends," "seeks," "anticipates," "believes," "estimates," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on these forward-looking statements. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for our fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission, and elsewhere in this Quarterly Report. These factors may cause our actual results to differ materially from any forward-looking statement. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

1

PART I: FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

NetScout Systems, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

	December 31, 2022		March 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	352,044	$	636,161
Marketable securities	57,262		67,037
Accounts receivable and unbilled costs, net of allowance for doubtful accounts of $1,002 and $1,649 at December 31, 2022 and March 31, 2022, respectively	215,838		148,245
Inventories and deferred costs	18,621		28,220
Prepaid income taxes	8,780		9,349
Prepaid expenses and other current assets	29,402		32,927
Total current assets	681,947		921,939
Fixed assets, net	37,590		41,337
Operating lease right-of-use assets	51,096		54,996
Goodwill	1,725,729		1,723,156
Intangible assets, net	382,257		433,419
Deferred income taxes	6,693		6,883
Long-term marketable securities	6,906		—
Other assets	11,894		12,979
Total assets	$	2,904,112	$	3,194,709
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	15,451	$	21,959
Accrued compensation	72,259		75,788
Accrued other	22,431		32,064
Income taxes payable	1,683		4,353
Deferred revenue and customer deposits	317,406		330,585
Current portion of operating lease liabilities	10,779		11,411
Total current liabilities	440,009		476,160
Other long-term liabilities	7,554		7,470
Deferred tax liability	40,119		78,899
Accrued long-term retirement benefits	34,182		34,737
Long-term deferred revenue and customer deposits	127,513		133,121
Operating lease liabilities, net of current portion	49,582		53,927
Long-term debt	200,000		350,000
Total liabilities	898,959		1,134,314
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.001 par value:
5,000,000 shares authorized; no shares issued or outstanding at December 31, 2022 and March 31, 2022	—		—
Common stock, $0.001 par value:
300,000,000 shares authorized; 128,389,414 and 126,425,383 shares issued and 70,961,344 and 74,102,293 shares outstanding at December 31, 2022 and March 31, 2022, respectively	128		126
Additional paid-in capital	3,077,866		3,023,403
Accumulated other comprehensive income (loss)	(353)		141
Treasury stock at cost, 57,428,070 and 52,323,090 shares at December 31, 2022 and March 31, 2022, respectively	(1,545,922)		(1,373,840)
Retained earnings	473,434		410,565
Total stockholders' equity	2,005,153		2,060,395
Total liabilities and stockholders' equity	$	2,904,112	$	3,194,709

The accompanying notes are an integral part of these consolidated financial statements.

2

NetScout Systems, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Revenue:
Product	$	149,452	$	144,420	$	359,519	$	327,989
Service	120,092		117,774		346,918		336,395
Total revenue	269,544		262,194		706,437		664,384
Cost of revenue:
Product	25,281		30,338		77,967		73,843
Service	31,521		30,132		94,190		92,681
Total cost of revenue	56,802		60,470		172,157		166,524
Gross profit	212,742		201,724		534,280		497,860
Operating expenses:
Research and development	42,558		41,637		129,932		128,940
Sales and marketing	66,994		66,048		209,435		197,191
General and administrative	25,533		23,665		75,584		69,881
Amortization of acquired intangible assets	13,818		14,919		41,500		44,895
Restructuring charges	89		—		1,803		—
Total operating expenses	148,992		146,269		458,254		440,907
Income from operations	63,750		55,455		76,026		56,953
Interest and other income (expense), net:
Interest income	1,480		45		2,512		154
Interest expense	(2,914)		(1,748)		(7,021)		(6,314)
Other income (expense), net	(1,738)		1,880		(2,045)		1,581
Total interest and other income (expense), net	(3,172)		177		(6,554)		(4,579)
Income before income tax expense	60,578		55,632		69,472		52,374
Income tax expense	7,960		7,907		6,603		8,094
Net income	$	52,618	$	47,725	$	62,869	$	44,280
Basic net income per share	$	0.73	$	0.65	$	0.87	$	0.60
Diluted net income per share	$	0.72	$	0.64	$	0.86	$	0.59
Weighted average common shares outstanding used in computing:
Net income per share - basic	71,744		73,898		72,015		74,048
Net income per share - diluted	73,049		74,899		73,271		74,976

The accompanying notes are an integral part of these consolidated financial statements.

3

NetScout Systems, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Net income	$	52,618	$	47,725	$	62,869	$	44,280
Other comprehensive income (loss):
Cumulative translation adjustments	114		84		(447)		51
Changes in market value of investments:
Changes in unrealized gains (losses), net of taxes (benefit) of $8, $0, $4, and ($2), respectively	25		—		14		(5)
Total net change in market value of investments	25		—		14		(5)
Changes in market value of derivatives:
Changes in market value of derivatives, net of taxes (benefit) of $144, $7, ($140), and $38, respectively	467		23		(442)		120
Reclassification adjustment for net gains (losses) included in net income, net of taxes (benefit) of $30, $9, $120, and ($7), respectively	97		29		381		(21)
Total net change in market value of derivatives	564		52		(61)		99
Other comprehensive income (loss)	703		136		(494)		145
Total comprehensive income	$	53,321	$	47,861	$	62,375	$	44,425

The accompanying notes are an integral part of these consolidated financial statements.

4

NetScout Systems, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands, except share data)

(Unaudited)

	Three Months Ended December 31, 2022
	Common Stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Retained Earnings		Total Stockholders' Equity
	Shares	Par Value						Shares	Stated Value
Balance, September 30, 2022	128,373,156	$	128	$	3,015,644	$	(1,056)	56,129,506	$	(1,497,886)	$	420,816	$	1,937,646
Net income											52,618		52,618
Unrealized net investment gains						25							25
Unrealized net gains on derivative financial instruments						564							564
Cumulative translation adjustments						114							114
Issuance of common stock pursuant to vesting of restricted stock units	16,258	—											—
Stock-based compensation expense for restricted stock units granted to employees				14,366									14,366
Repurchase of treasury stock				47,856				1,298,564	(48,036)				(180)
Balance, December 31, 2022	128,389,414	$	128	$	3,077,866	$	(353)	57,428,070	$	(1,545,922)	$	473,434	$	2,005,153

	Nine Months Ended December 31, 2022
	Common Stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Retained Earnings		Total Stockholders' Equity
	Shares	Par Value						Shares	Stated Value
Balance, March 31, 2022	126,425,383	$	126	$	3,023,403	$	141	52,323,090	$	(1,373,840)	$	410,565	$	2,060,395
Net income											62,869		62,869
Unrealized net investment gains						14							14
Unrealized net loss on derivative financial instruments						(61)							(61)
Cumulative translation adjustments						(447)							(447)
Issuance of common stock pursuant to vesting of restricted stock units	1,758,002	2											2
Stock-based compensation expense for restricted stock units granted to employees				45,068									45,068
Issuance of common stock under employee stock purchase plan	206,029			6,539									6,539
Repurchase of treasury stock				2,856				5,104,980	(172,082)				(169,226)
Balance, December 31, 2022	128,389,414	$	128	$	3,077,866	$	(353)	57,428,070	$	(1,545,922)	$	473,434	$	2,005,153

The accompanying notes are an integral part of these consolidated financial statements.

5

NetScout Systems, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands, except share data)

(Unaudited)

	Three Months Ended December 31, 2021
	Common Stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Retained Earnings		Total Stockholders’ Equity
	Shares	Par Value						Shares	Stated Value
Balance, September 30, 2021	126,108,858	$	126	$	2,991,704	$	(1,931)	51,891,197	$	(1,362,141)	$	371,246	$	1,999,004
Net income											47,725		47,725
Unrealized net gains on derivative financial instruments						52							52
Cumulative translation adjustments						84							84
Issuance of common stock pursuant to vesting of restricted stock units	28,450	—											—
Stock-based compensation expense for restricted stock units granted to employees				11,975									11,975
Repurchase of treasury stock								417,565	(11,253)				(11,253)
Balance, December 31, 2021	126,137,308	$	126	$	3,003,679	$	(1,795)	52,308,762	$	(1,373,394)	$	418,971	$	2,047,587

	Nine Months Ended December 31, 2021
	Common Stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Retained Earnings		Total Stockholders’ Equity
	Shares	Par Value						Shares	Stated Value
Balance, March 31, 2021	124,197,974	$	124	$	2,955,400	$	(1,940)	50,446,359	$	(1,322,496)	$	374,691	$	2,005,779
Net income											44,280		44,280
Unrealized net investment losses						(5)							(5)
Unrealized net gains on derivative financial instruments						99							99
Cumulative translation adjustments						51							51
Issuance of common stock pursuant to vesting of restricted stock units	1,688,026	2											2
Stock-based compensation expense for restricted stock units granted to employees				41,389									41,389
Issuance of common stock under employee stock purchase plan	251,308			6,890									6,890
Repurchase of treasury stock								1,862,403	(50,898)				(50,898)
Balance, December 31, 2021	126,137,308	$	126	$	3,003,679	$	(1,795)	52,308,762	$	(1,373,394)	$	418,971	$	2,047,587

The accompanying notes are an integral part of these consolidated financial statements.

6

NetScout Systems, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended
	December 31,
	2022		2021
Cash flows from operating activities:
Net income	$	62,869	$	44,280
Adjustments to reconcile net income to cash provided by operating activities, net of the effects of acquisitions:
Depreciation and amortization	64,302		72,047
Loss on extinguishment of debt	—		596
Operating lease right-of-use assets	7,984		7,589
Loss on disposal of fixed assets	47		2
Share-based compensation expense	47,225		43,381
Change in fair value of contingent consideration	—		(837)
Deferred income taxes	(38,435)		(11,093)
Other losses (gains)	9		(21)
Changes in assets and liabilities
Accounts receivable and unbilled costs	(67,101)		(36,211)
Inventories	8,323		(1,265)
Prepaid expenses and other assets	4,279		(1,031)
Accounts payable	(7,129)		844
Accrued compensation and other expenses	(7,804)		(13,438)
Operating lease liabilities	(9,061)		(8,855)
Income taxes payable	(2,675)		(1,861)
Deferred revenue	(18,910)		46,260
Net cash provided by operating activities	43,923		140,387
Cash flows from investing activities:
Purchase of marketable securities	(100,265)		(11,343)
Proceeds from sales and maturity of marketable securities	103,152		15,264
Purchase of fixed assets	(8,381)		(7,004)
Purchase of intangible assets	(161)		—
Decrease in deposits	8		28
Net cash used in investing activities	(5,647)		(3,055)
Cash flows from financing activities:
Issuance of common stock under stock plans	2		2
Treasury stock repurchases, including accelerated share repurchases	(150,039)		(35,652)
Tax withholding on restricted stock units	(19,187)		(15,246)
Payment of debt issuance costs	—		(3,660)
Repayment of long-term debt	(150,000)		(350,000)
Proceeds from issuance of long-term debt	—		350,000
Collection of contingent consideration	—		837
Net cash used in financing activities	(319,224)		(53,719)
Effect of exchange rate changes on cash and cash equivalents	(3,169)		(2,684)
Net (decrease) increase in cash and cash equivalents	(284,117)		80,929
Cash and cash equivalents, beginning of period	636,161		467,176
Cash and cash equivalents, end of period	$	352,044	$	548,105
Supplemental disclosures:
Cash paid for interest	$	5,351	$	3,716
Cash paid for income taxes	$	47,294	$	24,677
Non-cash transactions:
Transfers of inventory to fixed assets	$	1,371	$	2,657
Additions to property, plant and equipment included in accounts payable	$	622	$	361
Issuance of common stock under employee stock plans	$	6,539	$	6,890

The accompanying notes are an integral part of these consolidated financial statements.

7

NetScout Systems, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position and stockholders' equity, results of operations and cash flows. The year-end consolidated balance sheet data and statement of stockholders' equity were derived from the Company's audited financial statements, but do not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the Securities and Exchange Commission on May 19, 2022.

Global and Macroeconomic Conditions

The Company continues to closely monitor the current global and macroeconomic conditions, including the impact of the war in Ukraine, global geopolitical tension, stock market volatility, exchange rate fluctuations, rising inflation and interest rates, the risk of a recession, and the coronavirus (COVID-19) pandemic on all aspects of its business, including the manner and extent to which they have impacted and could continue to impact its customers, employees, supply chain, and distribution network. The impacts of these global and macroeconomic trends remain uncertain. It is possible that the measures taken by the governments of countries affected and the resulting economic impacts may materially and adversely affect the Company's future results of operations, cash flows and financial position as well as its customers.

The Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. The Company has taken and continues to take precautionary actions to manage costs and spending across the organization. This includes managing discretionary spending and hiring activities. In addition, based on covenant levels, the Company had, as of December 31, 2022, an incremental $600 million available under its revolving credit facility.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company had elected to defer the employer-paid portion of social security taxes. The Company had deferred $4.5 million of employer payroll taxes, which was included as accrued other in the Company's consolidated balance sheet at March 31, 2022. The balance was paid in December 2022.

The Company expects net cash provided by operations combined with cash, cash equivalents, and marketable securities and borrowing availability under the revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 is effective for the Company beginning April 1, 2023. Amendments within the standard are required to be applied on a prospective basis from the date of adoption. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures. We will apply the provisions of ASU 2021-08 after adoption to future acquisitions, if any.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain

8

criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform, which clarifies the scope and application of certain optional expedients and exceptions regarding the original guidance. ASU 2021-01 may be applied prospectively through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures.

NOTE 2 – REVENUE

Revenue Recognition Policy

The Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period.

The Company derives revenues primarily from the sale of network management tools and cybersecurity solutions for service provider and enterprise customers, which include hardware, software, and service offerings. The Company's product sales consist of software only offerings and offerings which include hardware appliances with embedded software that are essential to providing customers the intended functionality of the solutions.

The Company accounts for revenue once a legally enforceable contract with a customer has been approved by the parties and the related promises to transfer products or services have been identified. A contract is defined by the Company as an arrangement with commercial substance identifying payment terms, each party’s rights and obligations regarding the products or services to be transferred and the amount the Company deems probable of collection. Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Revenue is recognized when control of the products or services are transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for products and services.

Product revenue is typically recognized upon fulfillment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service (SAAS) and other professional services including consulting and training. The Company generally provides software and/or hardware support as part of product sales. Revenue related to the initial bundled software and hardware support is recognized ratably over the support period. In addition, customers can elect to purchase extended support agreements for periods after the initial software/hardware warranty expiration. Support services generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates, bug fixes and hardware repair and replacement. Consulting services are recognized upon delivery or completion of performance depending on the terms of the underlying contract. Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in services revenue, with the offsetting expense recorded in cost of service revenue. Training services include on-site and classroom training. Training revenues are recognized upon delivery of the training.

Generally, the Company's contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based primarily on the performance obligation's historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service performance obligations based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. SSP has primarily been established for product performance obligations as the average or median selling price the performance obligation was recently sold for, whether sold alone or sold as part of a bundle transaction. The Company reviews sales of the product performance obligations on a quarterly basis and

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updates, when appropriate, its SSP for such performance obligations to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a customer as a reduction of revenue to the extent they have recorded revenue from the customer. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

During the nine months ended December 31, 2022, the Company recognized revenue of $277.1 million related to the Company's deferred revenue balance reported at March 31, 2022.

Performance Obligations

Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. The transaction price is allocated among performance obligations in bundled contracts in an amount that depicts the relative standalone selling prices of each obligation.

For contracts involving distinct hardware and software licenses, the performance obligations are satisfied at a point in time when control is transferred to the customer. For standalone maintenance and post-contract support (PCS) the performance obligation is satisfied ratably over the contract term as a stand-ready obligation. For consulting and training services, the performance obligation may be satisfied over the contract term as a stand-ready obligation, satisfied over a period of time as those services are delivered, or satisfied at the completion of the service when control has transferred, or the services have expired unused.

Payments for hardware, software licenses, one-year maintenance, PCS and consulting services, are typically due up front with payment terms of 30 to 90 days. However, the Company does have contracts pursuant to which billings occur ratably over a period of years following the transfer of control for the contracted performance obligations. Payments on multi-year maintenance, PCS and consulting services are typically due in annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns, refunds or warranties at December 31, 2022.

At December 31, 2022, the Company had total deferred revenue of $444.9 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $317.4 million, or 71%, of this revenue during the next 12 months, and expects to recognize the remaining $127.5 million, or 29%, of this revenue thereafter.

Because of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, the Company does not believe its right to payment is unconditional, therefore for balance sheet presentation purposes, the Company has not recognized the deferred revenue or the related account receivable and no amounts appear in the consolidated balance sheets for such transactions because control of the underlying deliverable has not transferred. The aggregate amount of unrecognized accounts receivable and deferred revenue was $3.7 million and $9.4 million at December 31, 2022 and March 31, 2022, respectively.

NetScout expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have material significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the nine months ended December 31, 2022.

Contract Balances

The Company may receive payments from customers based on billing schedules as established by the Company's contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. The Company records unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. Deferred revenue relates to scenarios where billings with an unconditional right to payment occur before all performance obligations are delivered or payments are received in advance of performance under the contract.

Costs to Obtain Contracts

The Company has determined that the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. Sales commissions are recorded as an asset and amortized to expense ratably over the remaining performance periods of the related contracts with remaining performance

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obligations. The Company expenses costs as incurred for sales commissions when the amortization period would have been one year or less.

At December 31, 2022, the consolidated balance sheet included $9.3 million in assets related to sales commissions to be expensed in future periods. A balance of $4.7 million was included in prepaid expenses and other current assets, and a balance of $4.6 million was included in other assets in the Company's consolidated balance sheet at December 31, 2022. At March 31, 2022, the consolidated balance sheet included $8.8 million in assets related to sales commissions to be expensed in future periods. A balance of $4.6 million was included in prepaid expenses and other current assets, and a balance of $4.2 million was included in other assets in the Company's consolidated balance sheet at March 31, 2022.

During the three and nine months ended December 31, 2022 and 2021, respectively, the Company recognized $1.8 million, $1.6 million, $5.2 million and $4.7 million of amortization related to this sales commission asset, which is included in the sales and marketing expense line in the Company's consolidated statements of operations.

Allowance for Credit Losses

The Company continually monitors collections from its customers. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses based on a combination of factors, including but not limited to, analysis of the aging schedules, past due balances, historical collection experience and prevailing economic conditions.

The following table summarizes the activity in the allowance for credit losses (in thousands):

Balance at March 31, 2022	$	1,649
Provision for allowance for credit losses	783
Recoveries and other adjustments	865
Write off charged against the allowance for credit losses	(2,295)
Balance at December 31, 2022	$	1,002

NOTE 3 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of investments, trade accounts receivable and accounts payable. The Company's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings.

At December 31, 2022, the Company had one direct customer which accounted for more than 10% of the accounts receivable balance, while no indirect channel partners accounted for more than 10% of the accounts receivable balance. At March 31, 2022, the Company had no direct customers or indirect channel partners which accounted for more than 10% of the accounts receivable balance.

During the three and nine months ended December 31, 2022 and 2021, one direct customer, Verizon, accounted for more than 10% of the Company's total revenue, while no indirect channel partners accounted for more than 10% of total revenue.

Historically, the Company has not experienced any significant failure of its customers' ability to meet their payment obligations nor does the Company anticipate material non-performance by its customers in the future; accordingly, the Company does not require collateral from its customers. However, if the Company's assumptions are incorrect, there could be an adverse impact on its allowance for doubtful accounts.

NOTE 4 – SHARE-BASED COMPENSATION

On September 12, 2019, the Company's stockholders approved the 2019 Equity Incentive Plan (2019 Plan), which replaced the Company's 2007 Equity Incentive Plan, as amended (Amended 2007 Plan). The 2019 Plan permits the granting of incentive and nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively referred to as "share-based awards."

On September 10, 2020, the Company's stockholders approved an amendment and restatement of the 2019 Plan (2019 Amended Plan) to increase the number of shares reserved for issuance by 4,700,000 shares, established a one-year minimum vesting requirement for awards granted on or after September 10, 2020, and changed the factor used to calculate the increase or reduction in the number of shares available for issuance under the 2019 Amended Plan.

On August 24, 2022, the Company's stockholders approved an amendment to the 2019 Amended Plan (2019 Second Amended Plan). This amendment increased the number of shares reserved for issuance by 7,000,000 shares and changed the factor used to calculate the increase or reduction in the number of shares available for issuance under the 2019 Second

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Amended Plan. At August 24, 2022, there was a total of 8,764,811 shares reserved for issuance under the 2019 Second Amended Plan, which consisted of 7,000,000 new shares plus 1,764,811 shares that remained available for grant under the 2019 Amended Plan as of August 24, 2022, the effective date of the 2019 Second Amended Plan. At December 31, 2022, an aggregate of 6,235,096 shares remained available for grant under the 2019 Second Amended Plan.

Periodically, the Company grants share-based awards to employees, officers, and directors of the Company and its subsidiaries. During the fiscal years ended March 31, 2023 and 2022, the Company granted performance-based restricted stock units to certain executive officers that vest based upon the Company's total shareholder return as compared to the Russell 2000 Index over a three-year period. The performance-based restricted stock units were valued using the Monte Carlo Simulation model. The measurement and recognition of compensation expense is based on estimated fair values for all share-based payment awards made to its employees and directors. Share-based award grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company's common stock. Such value is recognized as a cost of revenue or an operating expense over the corresponding vesting period.

The following is a summary of share-based compensation expense including restricted stock units and performance-based restricted stock units granted pursuant to the Company's Amended 2007 Plan, the 2019 Plan, the 2019 Amended Plan, and the 2019 Second Amended Plan, and employee stock purchases made under the Company's 2011 Amended and Restated Employee Stock Purchase Plan (ESPP), based on estimated fair values within the applicable cost and expense lines identified below (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Cost of product revenue	$	262	$	214	$	869	$	809
Cost of service revenue	1,781		1,302		5,606		4,822
Research and development	4,174		3,297		13,185		12,290
Sales and marketing	5,445		4,727		17,238		15,383
General and administrative	3,481		3,141		10,327		10,077
	$	15,143	$	12,681	$	47,225	$	43,381

Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2022. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year. During the nine months ended December 31, 2022, employees purchased 206,029 shares under the ESPP and the fair value per share was $31.74.

On August 24, 2022, the Company's stockholders approved an amendment to the ESPP that increased the number of shares available under the ESPP by an additional 2,000,000 shares.

NOTE 5 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents mainly consisted of U.S. government and municipal obligations, commercial paper, certificate of deposits, money market instruments and cash maintained with various financial institutions at December 31, 2022 and March 31, 2022.

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Marketable Securities

The following is a summary of marketable securities held by NetScout at December 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	19,211	$	(1)	$	19,210
Commercial paper	33,487		—		33,487
Corporate bonds	1,130		(1)		1,129
Certificates of deposit	3,436		—		3,436
Total short-term marketable securities	57,264		(2)		57,262
U.S. government and municipal obligations	6,919		(13)		6,906
Total long-term marketable securities	6,919		(13)		6,906
Total marketable securities	$	64,183	$	(15)	$	64,168

The following is a summary of marketable securities held by NetScout at March 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	40,895	$	(32)	$	40,863
Commercial paper	23,353		—		23,353
Corporate bonds	823		(2)		821
Certificates of deposit	2,000		—		2,000
Total short-term marketable securities	67,071		(34)		67,037
Total long-term marketable securities	—		—		—
Total marketable securities	$	67,071	$	(34)	$	67,037

Contractual maturities of the Company's marketable securities held at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	December 31, 2022		March 31, 2022
Available-for-sale securities:
Due in 1 year or less	$	57,262	$	67,037
Due after 1 year through 5 years	6,906		—
	$	64,168	$	67,037

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NOTE 6 – FAIR VALUE MEASUREMENTS

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at December 31, 2022 and March 31, 2022 (in thousands):

	Fair Value Measurements at
	December 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	306,572	$	45,472	$	—	$	352,044
U.S. government and municipal obligations	23,499		2,617		—		26,116
Commercial paper	—		33,487		—		33,487
Corporate bonds	1,129		—		—		1,129
Certificate of deposits	—		3,436		—		3,436
Derivative financial instruments	—		40		—		40
	$	331,200	$	85,052	$	—	$	416,252
LIABILITIES:
Derivative financial instruments	$	—	$	(188)	$	—	$	(188)
	$	—	$	(188)	$	—	$	(188)

	Fair Value Measurements at
	March 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	617,734	$	18,427	$	—	$	636,161
U.S. government and municipal obligations	40,863		—		—		40,863
Commercial paper	—		23,353		—		23,353
Corporate bonds	821		—		—		821
Certificate of deposits	—		2,000		—		2,000
Derivative financial instruments	—		20		—		20
	$	659,418	$	43,800	$	—	$	703,218
LIABILITIES:
Derivative financial instruments	$	—	$	(78)	$	—	$	(78)
	$	—	$	(78)	$	—	$	(78)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments.

The Company's Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency.

The Company's Level 2 investments are classified as such because they are valued using observable inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active.

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NOTE 7 – INVENTORIES

Inventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of the following (in thousands):

	December 31, 2022		March 31, 2022
Raw materials	$	12,231	$	14,779
Work in process	213		695
Finished goods	5,154		5,761
Deferred costs	1,023		6,985
	$	18,621	$	28,220

NOTE 8 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has one reporting unit. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2022 using the qualitative assessment as the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value.

At December 31, 2022 and March 31, 2022, the carrying amount of goodwill was $1.7 billion. The change in the carrying amount of goodwill for the nine months ended December 31, 2022 was due to the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2022 as follows (in thousands):

Balance at March 31, 2022	$	1,723,156
Foreign currency translation impact	2,573
Balance at December 31, 2022	$	1,725,729

Intangible Assets

The net carrying amounts of intangible assets were $382.3 million and $433.4 million at December 31, 2022 and March 31, 2022, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives.

Intangible assets include the following amortizable intangible assets at December 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	249,470	$	(230,700)	$	18,770
Customer relationships	8 - 18 years	766,635		(420,678)		345,957
Distributor relationships and technology licenses	1 - 6 years	11,521		(9,803)		1,718
Definite-lived trademark and trade name	2 - 9 years	57,627		(42,026)		15,601
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(997)		211
		$	1,097,262	$	(715,005)	$	382,257

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Intangible assets include the following amortizable intangible assets at March 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	250,247	$	(224,426)	$	25,821
Customer relationships	8 - 18 years	769,404		(384,347)		385,057
Distributor relationships and technology licenses	1 - 6 years	11,408		(8,896)		2,512
Definite-lived trademark and trade name	2 - 9 years	57,748		(37,944)		19,804
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(983)		225
		$	1,100,816	$	(667,397)	$	433,419

Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three and nine months ended December 31, 2022 and 2021, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Amortization of intangible assets included as:
Cost of product revenue	$	2,627	$	3,643	$	7,908	$	10,959
Operating expense	13,823		14,924		41,515		44,910
	$	16,450	$	18,567	$	49,423	$	55,869

The following is the expected future amortization expense at December 31, 2022 for the fiscal years ending March 31 (in thousands):

2023 (remaining three months)	$	16,515
2024	57,878
2025	50,713
2026	46,357
2027	43,480
Thereafter	167,314
	$	382,257

NOTE 9 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NetScout operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The exposures result from costs that are denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee. The Company manages its foreign cash flow risk by hedging forecasted cash flows for operating expenses denominated in foreign currencies for up to twelve months, within specified guidelines through the use of forward contracts. The Company enters into foreign currency exchange contracts to hedge cash flow exposures from costs that are denominated in currencies other than the U.S. Dollar. These hedges are designated as cash flow hedges at inception.

NetScout also periodically enters into forward contracts to manage exchange rate risks associated with certain third-party transactions and for which the Company does not elect hedge accounting treatment as there is no difference in the timing of gain or loss recognition on the hedging instrument and the hedged item.

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All of the Company's derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes. These contracts will mature over the next twelve months and are expected to impact earnings on or before maturity.

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022
Derivatives Designated as Hedging Instruments:
Forward contracts	$	11,955	$	5,578	$	40	$	20	$	188	$	78
					$	40	$	20	$	188	$	78

(a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the three months ended December 31, 2022 and 2021 (in thousands):

	Gain Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	611	$	30	Research and development	$	30	$	(2)
					Sales and marketing	97		40
	$	611	$	30		$	127	$	38

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Gain (Loss) Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	(582)	$	158	Research and development	$	49	$	(17)
					Sales and marketing	452		(11)
	$	(582)	$	158		$	501	$	(28)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts not designated as hedging instruments had on the Company's results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Loss Recognized in Income (a)
	Location	December 31, 2022		December 31, 2021
Forward contracts	General and administrative	$	—	$	(248)
		$	—	$	(248)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

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NOTE 10 – LONG-TERM DEBT

On July 27, 2021, the Company amended and extended the Amended Credit Agreement (Second Amended and Restated Credit Agreement) with a syndicate of lenders by and among: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; JPMorgan, Wells Fargo Securities, LLC, BofA Securities Inc., RBC Capital Markets, PNC Capital Markets LLC and Mizuho Bank, Ltd., as joint lead arrangers and joint bookrunners; Santander Bank, N.A., U.S. Bank National Association, Fifth Third Bank National Association, Silicon Valley Bank and TD Bank, N.A., as co-documentation agents; and the lenders party thereto.

The Second Amended and Restated Credit Agreement provides for a five-year, $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The Company may elect to use the credit facility for general corporate purposes (including to finance the repurchase of shares of the Company's common stock). The commitments under the Second Amended and Restated Credit Agreement will expire on July 27, 2026, and any outstanding loans will be due on that date.

In connection with the Second Amended and Restated Credit Agreement, during the fiscal year ended March 31, 2022, the Company paid off the outstanding balance of $350 million under the Amended Credit Agreement by borrowing the same amount under the Second Amended and Restated Credit Agreement. Additionally, the Company recorded a loss on the extinguishment of debt of $0.6 million, representing the write off of unamortized deferred financing costs, which was included in interest expense in the consolidated statements of operations for the fiscal year ended March 31, 2022. On May 9, 2022, the Company repaid $150.0 million of borrowings under the Second Amended and Restated Credit Agreement. At December 31, 2022, $200 million was outstanding under the Second Amended and Restated Credit Agreement.

At the Company's election, revolving loans under the Second Amended and Restated Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) the Wall Street Journal prime rate; (2) the New York Federal Reserve Bank (NYFRB) rate plus 0.50%, or (3) an adjusted one month LIBO rate plus 1%; or (b) a Term Benchmark Borrowing rate (for the interest period selected by the Company, subject to customary provisions regarding succession from LIBO rate to SOF rate in anticipation of the upcoming discontinuation of the LIBO rate), in each case plus an applicable margin. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until the Company has delivered financial statements for the quarter ended December 31, 2022, the applicable margin will be 1.00% per annum for Term Benchmark Revolving loans and 0% per annum for Alternate Base Rate loans, and thereafter the applicable margin will vary depending on the Company's consolidated gross leverage ratio, ranging from 1.00% per annum for Alternate Base Rate loans and 2.00% per annum for Term Benchmark Revolving loans if the Company's consolidated gross leverage ratio is greater than 3.50 to 1.00, down to 0% per annum for Alternate Base Rate loans and 1.00% per annum for Term Benchmark Revolving loans if the Company's consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

The Company's consolidated gross leverage ratio is the ratio of its consolidated total debt compared to its consolidated EBITDA as defined in the Second Amended and Restated Credit Agreement (adjusted consolidated EBITDA). Adjusted consolidated EBITDA includes certain adjustments, including, without limitation, adjustments relating to extraordinary, unusual or non-recurring charges, certain restructuring charges, non-cash charges, certain transaction costs and expenses and certain pro forma adjustments in connection with material acquisitions and dispositions, all as set forth in detail in the Second Amended and Restated Credit Agreement.

Commitment fees will accrue on the daily unused amount of the credit facility. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until the Company has delivered financial statements for the quarter ended December 31, 2022, the commitment fee will be 0.15% per annum, and thereafter the commitment fee will vary depending on the Company's consolidated gross leverage ratio, ranging from 0.30% per annum if the Company's consolidated gross leverage ratio is greater than 2.75 to 1.00, down to 0.15% per annum if the Company's consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

Letter of credit participation fees are payable to each lender providing the letter of credit sub-facility on the amount of such lender's letter of credit exposure, during the period from the closing date of the Second Amended and Restated Credit Agreement to, but excluding, the date which is the later of (i) the date on which such lender's commitment terminates or (ii) the date on which such lender ceases to have any letter of credit exposure, at the applicable rate that would be used to determine the interest rate applicable to Term Benchmark Revolving loans assuming such loans were outstanding during the period. Additionally, the Company will pay a fronting fee to each issuing bank in amounts to be agreed to between the Company and the applicable issuing bank.

Interest on Alternate Base Rate loans is payable at the end of each calendar quarter. Interest on Term Benchmark Revolving loans is payable at the end of each interest rate period or at the end of each three-month interval within an interest

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rate period if the period is longer than three months. The Company may also prepay loans under the Second Amended and Restated Credit Agreement at any time, without penalty, subject to certain notice requirements.

The loans and other obligations under the credit facility are (a) guaranteed by each of the Company’s wholly-owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of the Company and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by the Borrower and the subsidiary guarantors (which pledge, in the case of any foreign subsidiary, is limited to 65% of the voting stock), subject to certain customary exceptions and limitations. The Second Amended and Restated Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains certain covenants applicable to the Company and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. The Second Amended and Restated Credit Agreement requires the Company to maintain a certain consolidated net leverage ratio and removes the previous requirement under the Amended Credit Agreement that the Company maintain a minimum consolidated interest coverage ratio. The Company's consolidated net leverage ratio is the ratio of its Consolidated Total Debt minus the lesser of unrestricted cash and 125% of adjusted consolidated EBITDA compared to its adjusted consolidated EBITDA. The Company’s maximum consolidated net leverage ratio is 4.00 to 1.00. These covenants and limitations are more fully described in the Second Amended and Restated Credit Agreement. As of December 31, 2022, the Company was in compliance with all covenants, including the specified total consolidated net leverage ratio range of 4.00 to 1.00.

The Second Amended and Restated Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Second Amended and Restated Credit Agreement and related documents including a failure to meet the maximum total consolidated net leverage ratio covenant, defaults under certain other indebtedness, certain insolvency events, certain events arising under ERISA, a change of control and certain other events. Upon an event of default, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies under the Second Amended and Restated Credit Agreement and the other loan documents.

The Company had unamortized capitalized debt issuance costs, net of $4.0 million at December 31, 2022, which are being amortized over the life of the revolving credit facility. The unamortized capitalized debt issuance costs balance of $1.1 million was included as prepaid expenses and other current assets and a balance of $2.9 million was included as other assets in the Company's consolidated balance sheet.

NOTE 11 – RESTRUCTURING CHARGES

During the first quarter of fiscal year 2023, the Company restructured certain departments to better align functions resulting in the termination of eighteen employees. As a result of the workforce reduction, during the nine months ended December 31, 2022, the Company recorded a restructuring charge totaling $1.9 million related to one-time employee-related termination benefits for the employees that were notified of their termination during the period. The one-time termination benefits are expected to be paid in full during the fiscal year ending March 31, 2023.

The following table provides a summary of the activity related to the restructuring plan and the restructuring liability (in thousands):

	Q1FY23 Plan
Balance at March 31, 2022	$	—
Restructuring charges to operations	1,861
Cash payments	(1,593)
Other adjustments	(128)
Balance at December 31, 2022	$	140

NOTE 12 - LEASES

The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company's contractual

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obligation to make lease payments over the lease term. The Company's policy is to combine lease and non-lease components and to not recognize ROU assets and lease liabilities for short-term leases. Leases with an initial term of twelve months or less are classified as short-term leases. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company's estimated incremental borrowing rate unless the lessor's implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. The Company's leases have remaining lease terms ranging from 1 year to 8 years. The Company's lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making this determination, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company has an obligation to return certain leased facilities to their original condition at the end of the respective lease term. These obligations were not material to the Company's financial statements for all periods presented.

Most of the Company's lease agreements contain variable payments, primarily for common area maintenance (CAM), which are expensed as incurred and not included in the measurement of the ROU assets and lease liabilities.

The components of operating lease cost for the three and nine months ended December 31, 2022 and 2021, respectively, were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Lease cost under long-term operating leases	$	3,078	$	3,187	$	9,285	$	9,659
Lease cost under short-term operating leases	870		1,247		2,849		2,990
Variable lease cost under short-term and long-term operating leases	821		925		2,677		2,508
Total operating lease cost	$	4,769	$	5,359	$	14,811	$	15,157

The table below presents supplemental cash flow information related to leases during the nine months ended December 31, 2022 and 2021 (in thousands):

	December 31, 2022		December 31, 2021
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,215	$	2,461

At December 31, 2022 and March 31, 2022, the weighted average remaining lease term in years and weighted average discount rate were as follows:

	December 31, 2022		March 31, 2022
Weighted average remaining lease term in years - operating leases	6.39		6.98
Weighted average discount rate - operating leases	4.1	%	4.0	%

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Future minimum payments under non-cancellable leases at December 31, 2022 are as follows (in thousands):

Year ending March 31:
2023 (remaining three months)	$	2,431
2024	12,682
2025	12,018
2026	10,362
2027	8,180
Thereafter	22,901
Total lease payments	$	68,574
Less imputed interest	(8,213)
Present value of lease liabilities	$	60,361

NOTE 13 – COMMITMENTS AND CONTINGENCIES

From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any current legal proceedings and claims, if determined adversely, will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff's Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff's allegations and asserting that Plaintiff's patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties' claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. In October 2017, the jury rendered a verdict finding in favor of the Plaintiff and that Plaintiff was entitled to $3,500,000 for pre-suit damages and $2,250,000 for post-suit damages. The jury indicated that the awarded damages amounts were intended to reflect a running royalty. In September 2018, the Court entered judgment and "enhanced" the jury verdict in the amount of $2.8 million as a result of a jury finding. The judgment also awarded pre- and post-judgment interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last date being June 2022. Following the entry of final judgment, NetScout appealed, and in July 2020, the Court of Appeals for the Federal Circuit (Federal Circuit) issued a decision vacating the $3,500,000 pre-suit damages award, affirming the $2,250,000 post-suit damages award, and remanding to the district court to determine what, if any, enhancement should be awarded. In March 2021, NetScout filed a petition for a writ of certiorari to the United States Supreme Court, which was subsequently denied, challenging, among other issues, the basis for enhanced damages and the patentability of the claimed technology. In addition, on September 8 and 9, 2021, in proceedings initiated by third parties that did not involve NetScout, the Patent Trial and Appeal Board (PTAB) invalidated all the patent claims that were also asserted against NetScout in this case. After the PTAB decisions were issued, NetScout moved, among other things, to dismiss the case and enter judgment in its favor on the grounds that the PTAB decisions invalidating the asserted claims precluded Plaintiff from continuing to assert its patent infringement causes of action and from seeking damages from NetScout. The District Court denied NetScout’s motion with respect to its request to dismiss the case and enter judgment in its favor, but in response to alternative requests for relief requested by NetScout, vacated $1.7 million of the "enhanced" jury verdict amount of $2.8 million and also lowered the ongoing royalty rate on the G10 and GeoBlade products. The District Court entered an amended final judgment awarding Plaintiff $2.25 million in post-suit damages, $1.1 million in enhanced damages, pre- and post-judgment interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last expiration date being June 2022. On July 20, 2022, NetScout filed a notice of appeal to the Court of Appeals for the Federal Circuit from, among other things, the amended final judgment. The amended judgment is stayed pending the resolution of the appeal. In view of the current circumstances, and if the post-suit and enhanced damages award along with the associated interest and royalties survives the recent PTAB invalidation decisions and NetScout's appeal, NetScout has concluded that the risk of loss associated with such damages award remains "probable" in accounting terms, and that the risk of loss associated with pre-suit damages is remote.

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NOTE 14 – PENSION BENEFIT PLANS

Certain of the Company's non-U.S. employees participate in noncontributory defined benefit pension plans. None of the Company's employees in the U.S. participate in any noncontributory defined benefit pension plans. In general, these plans are funded based on considerations relating to legal requirements, underlying asset returns, the plan's funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates and other factors.

The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three and nine months ended December 31, 2022 and 2021, respectively, (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Service cost	$	42	$	41	$	128	$	129
Interest cost	85		83		261		263
Net periodic pension cost	$	127	$	124	$	389	$	392

Expected Contributions

During the nine months ended December 31, 2022, the Company made contributions of $0.3 million to its defined benefit pension plans. During the fiscal year ending March 31, 2023, the Company's cash contribution requirements for its defined benefit pension plans are expected to be less than $1.0 million. As a majority of the participants within the Company's plans are all active employees, the benefit payments are not expected to be material in the foreseeable future.

NOTE 15 – TREASURY STOCK

On October 24, 2017, the Company's Board of Directors approved a share repurchase program that enabled the Company to repurchase up to twenty-five million shares of its common stock (2017 Share Repurchase Program). This program became effective when the Company's previously disclosed twenty million share repurchase program was completed. The Company was not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this share repurchase program. Through December 31, 2022, the Company repurchased a total of 23,790,847 shares for $660.4 million in the open market under the 2017 Share Repurchase Program, and at December 31, 2022, 1,209,153 shares of common stock remained available to be purchased under the 2017 Share Repurchase Program. The Company repurchased 4,549,329 and 1,330,678 shares for $150.0 million and $35.7 million under the 2017 Share Repurchase Program during the nine months ended December 31, 2022 and 2021, respectively.

On May 3, 2022, the Company's Board of Directors approved a new share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock (2022 Share Repurchase Program). The 2022 Share Repurchase Program will become effective once the 2017 Share Repurchase Program is completed. The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of the 2022 Share Repurchase Program.

On May 9, 2022, the Company entered into accelerated share repurchase (ASR) agreements with Mizuho Markets Americas LLC (Mizuho) and Wells Fargo Bank, National Association (Wells Fargo) (collectively, the Dealers) to repurchase an aggregate of $150 million of the Company's common stock via accelerated stock repurchase transactions under the 2017 Share Repurchase Program. Under the terms of the ASR, the Company made a $75 million payment to each of the Dealers on May 10, 2022, and received an initial delivery of 1,627,907 shares from each of the Dealers, or 3,255,814 shares in the aggregate, which was approximately 70 percent of the total number of shares of the Company's common stock expected to be repurchased under the ASR agreements. These shares reduced the number of shares of the Company's common stock available for repurchase under the 2017 Share Repurchase Program. Final settlement of the ASR agreements was completed in November 2022. As a result, the Company received an additional 651,213 shares from Mizuho and 642,302 shares from Wells Fargo, or 1,293,515 shares in the aggregate, for $47.9 million, which reduced the number of shares of the Company's common stock available to be repurchased under the 2017 Share Repurchase Program. In total, 4,549,329 shares of the Company's common stock were repurchased under the ASR agreements at an average cost per share of $32.97 during the nine months ended December 31, 2022.

In connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld 555,651 shares and 531,725 shares at a cost of $19.2 million and $15.2 million, respectively, related to minimum statutory tax withholding requirements on these restricted stock units during the nine months ended December 31, 2022 and 2021, respectively. These withholding transactions do not fall under the share repurchase programs described above, and therefore do not reduce the number of shares that are available for repurchase under those programs.

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NOTE 16 – NET INCOME PER SHARE

Calculations of the basic and diluted net income per share and potential common shares are as follows (in thousands, except for per share data):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Numerator:
Net income	$	52,618	$	47,725	$	62,869	$	44,280
Denominator:
Denominator for basic net income per share - weighted average common shares outstanding	71,744		73,898		72,015		74,048
Dilutive common equivalent shares:
Weighted average restricted stock units and performance-based restricted stock units	1,305		1,001		1,256		928
Denominator for diluted net income per share - weighted average shares outstanding	73,049		74,899		73,271		74,976
Net income per share:
Basic net income per share	$	0.73	$	0.65	$	0.87	$	0.60
Diluted net income per share	$	0.72	$	0.64	$	0.86	$	0.59

The following table sets forth restricted stock units excluded from the calculation of diluted net income per share, since their inclusion would be anti-dilutive (in thousands):

	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2022	2021	2022	2021
Restricted stock units	207	26	1,580	1,166

Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted net income per share is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options and unrecognized compensation expense as additional proceeds.

The delivery of 4.5 million shares under the Company's ASR agreements reduced the Company's outstanding shares used to determine the weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the nine months ended December 31, 2022. See Note 15 for additional information.

NOTE 17 – INCOME TAXES

Generally, the Company's effective tax rate differs from the U.S. federal statutory income tax rate primarily due to foreign withholding taxes and U.S. taxation on foreign earnings, partially offset by research and development tax credits, foreign tax credits, stock related compensation and the foreign derived intangible income deduction.

The Company's effective tax rates were 13.1% and 14.2% for the three months ended December 31, 2022 and 2021, respectively. The effective tax rate for the three months ended December 31, 2022 differed from the effective tax rate for the three months ended December 31, 2021 primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings.

The Company's effective tax rates were 9.5% and 15.5% for the nine months ended December 31, 2022 and 2021, respectively. The effective tax rate for the nine months ended December 31, 2022 differed from the effective tax rate for the nine months ended December 31, 2021 primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings, as well as a discrete benefit from stock compensation during the nine months ended December 31, 2022.

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NOTE 18 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company reports revenues and income under one reportable segment.

The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. The Company's policies mandate compliance with economic sanctions and the export controls.

Total revenue by geography is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
United States	$	181,206	$	162,794	$	461,672	$	399,349
Europe	35,926		48,620		105,013		121,712
Asia	15,422		14,519		44,608		46,835
Rest of the world	36,990		36,261		95,144		96,488
	$	269,544	$	262,194	$	706,437	$	664,384

The United States revenue includes sales to resellers in the United States. These resellers fulfill customer orders and may subsequently ship the Company's products to international locations. Further, the Company determines the geography of its sales after considering where the contract originated. A majority of revenue attributable to locations outside of the United States is a result of export sales. Substantially all of the Company's identifiable assets are located in the United States.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission. This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022. These risks and uncertainties could cause actual results to differ significantly from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled "Cautionary Statement Concerning Forward-Looking Statements" that appears at the beginning of this Quarterly Report. These statements, like all statements in this report, speak only as of the date of this Quarterly Report (unless another date is indicated), and, except as required by law, we undertake no obligation to update or revise these statements in light of future developments.

Overview

We are an industry leader with over three decades of experience in providing service assurance and cybersecurity solutions that are based on our pioneering deep packet inspection technology at scale, which is used by customers worldwide to protect their digital business services against disruption. Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility and protection necessary to optimize network performance, ensure the delivery of high-quality, mission-critical applications and services, gain timely insight into the end user experience and protect their networks from attack. With our offerings, customers can quickly, efficiently and effectively identify and resolve issues that result in downtime, interruptions to services, poor service quality or compromised data, thereby reducing meantime-to-resolution of issues and driving compelling returns on their investments in their networks and broader technology initiatives. Some of the more significant technology trends and catalysts for our business include the evolution of customers' digital transformation initiatives such as the migration to cloud environments, the rapidly evolving cybersecurity threat landscape, business intelligence and analytics advancements, and the 5G evolution in both the service provider and enterprise customer verticals.

Our operating results are influenced by a number of factors, including, but not limited to, the mix and quantity of products and services sold, pricing, costs and availability of materials used in our products, growth in employee-related costs, including commissions, and the expansion of our operations. Factors that affect our ability to maximize our operating results include, but are not limited to, our ability to introduce and enhance existing products, the marketplace acceptance of those new or enhanced products, continued expansion into international markets, expansion into new or adjacent markets, development of strategic partnerships, competition, successful acquisition integration efforts, and our ability to control costs and make improvements in a highly competitive industry.

In response to the Russian military operations in Ukraine, we have ceased business operations in Russia, including sales, support on existing contracts and professional services. The United States and other countries have imposed sanctions on Russia that could impact our future revenue streams. These events did not have a material impact on our financial statements for the nine months ended December 31, 2022. We will continue to monitor the impact of these events on all aspects of our business.

Global and Macroeconomic Conditions

We continue to closely monitor current global and macroeconomic conditions, including the impact of the war in Ukraine, global geopolitical tension, stock market volatility, exchange rate fluctuations, rising inflation and interest rates, the risk of a recession, and the coronavirus (COVID-19) pandemic on all aspects of our business, including the manner and extent to which they have impacted and could continue to impact our customers, employees, supply chain, and distribution network. The impacts of these global and macroeconomic trends and the COVID-19 pandemic remain uncertain. For fiscal year 2022 and the first nine months of fiscal year 2023, we observed that technology and project spending resumed and we focused on advancing our products, growing revenue, enhancing earnings per share, and generating free cash flow.

Though we continue to monitor these impacts, we believe our current cash reserves and access to capital through our revolving credit facility leave us well-positioned to manage our business in today's environment. We expect net cash provided by operations combined with cash, cash equivalents and marketable securities and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company but will invest in areas that advance our business for the future, as necessary. In addition to our cash equivalents, based on covenant levels at December 31, 2022, we had, as of December 31, 2022, an incremental $600 million available to us under our revolving credit facility.

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Results Overview

Total revenue increased $42.1 million for the nine months ended December 31, 2022 as compared to total revenue for the nine months ended December 31, 2021 primarily due to an increase in revenue from our radio frequency propagation modeling projects from service provider customers.

Our gross profit percentage increased by one percentage point to 76% during the nine months ended December 31, 2022, as compared with the nine months ended December 31, 2021.

Net income for the nine months ended December 31, 2022 was $62.9 million, as compared with a net income for the nine months ended December 31, 2021 of $44.3 million, an increase of $18.6 million. The increase in net income was primarily due to a $42.1 million increase in revenue, a $6.5 million decrease in amortization of intangible assets, a $5.4 million decrease in direct material costs, a $3.0 million decrease in employee-related costs, a $2.4 million increase in interest income, a $2.3 million decrease in inventory obsolescence charges, a $1.5 million decrease in income tax expense, and a $1.5 million decrease in depreciation expense. These increases to net income were partially offset by a $15.6 million increase in costs to deliver radio frequency propagation modeling projects, an $8.1 million increase in expenses related to trade shows, user conferences and other events, a $7.6 million increase in travel expense attributable to the lifting of some COVID-19 related restrictions, a $2.7 million increase in commissions expense, a $1.8 million increase in contractor fees, a $1.8 million increase in restructuring expense, a $1.6 million increase in foreign exchange expense, a $1.1 million decrease in other income, and a $1.0 million increase in recruiting costs.

At December 31, 2022, we had cash, cash equivalents and marketable securities (current and non-current) of $416.2 million. This represents a decrease of $287.0 million from $703.2 million at March 31, 2022. This decrease was primarily due to $150.0 million used in treasury stock repurchases under an ASR program, $150.0 million used to repay long-term debt, $19.2 million used for tax withholdings on restricted stock units, and $8.4 million used for capital expenditures. These decreases were partially offset by $43.9 million of net cash provided by operations during the nine months ended December 31, 2022.

Use of Non-GAAP Financial Measures

We supplement the United States generally accepted accounting principles (GAAP) financial measures we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP net income per share (diluted) and non-GAAP earnings before interest and other expense, income taxes, depreciation, and amortization (EBITDA) from operations. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation, and acquisition-related depreciation. Non-GAAP income from operations includes the aforementioned adjustments and also removes business development and integration expense, compensation for post-combination services, restructuring charges, transitional service agreement expenses, and legal expenses related to civil judgments. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes loss on extinguishment of debt and change in fair value of contingent consideration, net of related income tax effects. Non-GAAP diluted net income per share removes the share impact of non-GAAP adjustments utilized in the calculation of non-GAAP net income. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition related depreciation expense.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, gross profit, operating margin, net income and diluted net income per share), and may have limitations because they do not reflect all our results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP.

Management believes these non-GAAP financial measures will enhance the reader's overall understanding of our current financial performance and our prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how we plan and measure our business. We believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared to peer companies and also enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions. Presenting the GAAP measures on their own may not be indicative of our core operating results. Furthermore, management believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations.

The following table reconciles gross profit, income from operations, net income and net income per share on a GAAP and non-GAAP basis for the three and nine months ended December 31, 2022 and 2021, respectively (in thousands, except for per share amounts):

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	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Revenue (GAAP and non-GAAP)	$	269,544	$	262,194	$	706,437	$	66,384
GAAP gross profit	$	212,742	$	201,724	$	534,280	$	497,860
Share-based compensation expense	2,043		1,516		6,475		5,631
Amortization of acquired intangible assets	2,315		3,342		6,955		10,054
Acquisition related depreciation expense	5		6		16		18
Non-GAAP gross profit	$	217,105	$	206,588	$	547,726	$	513,563
GAAP income from operations	$	63,750	$	55,455	$	76,026	$	56,953
Share-based compensation expense	15,143		12,681		47,225		43,381
Amortization of acquired intangible assets	16,133		18,261		48,455		54,949
Business development and integration expense	—		—		—		(5)
Compensation for post-combination services	—		—		—		2
Restructuring charges	89		—		1,803		—
Acquisition related depreciation expense	59		65		183		189
Transitional service agreement expense	—		697		—		814
Legal expenses related to civil judgments	426		—		426		—
Non-GAAP income from operations	$	95,600	$	87,159	$	174,118	$	156,283

GAAP net income	$	52,618	$	47,725	$	62,869	$	44,280
Share-based compensation expense	15,143		12,681		47,225		43,381
Amortization of acquired intangible assets	16,133		18,261		48,455		54,949
Business development and integration expense	—		—		—		(5)
Compensation for post-combination services	—		—		—		2
Restructuring charges	89		—		1,803		—
Acquisition-related depreciation expense	59		65		183		189
Legal expenses related to civil judgments	426		—		426		—
Loss on extinguishment of debt	—		—		—		596
Change in fair value of contingent consideration	—		(837)		—		(837)
Income tax adjustments	(11,449)		(11,398)		(28,585)		(25,802)
Non-GAAP net income	$	73,019	$	66,497	$	132,376	$	116,753
GAAP diluted net income per share	$	0.72	$	0.64	$	0.86	$	0.59
Per share impact of non-GAAP adjustments identified above	0.28		0.25		0.95		0.97
Non-GAAP diluted net income per share	$	1.00	$	0.89	$	1.81	$	1.56
GAAP income from operations	$	63,750	$	55,455	$	76,026	$	56,953
Previous adjustments to determine non-GAAP income from operations	31,850		31,704		98,092		99,330
Non-GAAP income from operations	95,600		87,159		174,118		156,283
Depreciation excluding acquisition related	5,263		5,475		15,664		16,909
Non-GAAP EBITDA from operations	$	100,863	$	92,634	$	189,782	$	173,192

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Critical Accounting Policies and Estimates

 Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP consistently applied. The preparation of these consolidated financial statements requires us to make significant estimates and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. These items are regularly monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates.

While all of our accounting policies impact the consolidated financial statements, certain policies are viewed to be critical. Critical accounting policies are those that are both most important to the portrayal of our financial condition and results of operations and that require management's most subjective or complex judgments and estimates. We consider the following accounting policies to be critical in fully understanding and evaluating our financial results:

•revenue recognition; and

•valuation of goodwill, intangible assets and other acquisition accounting items.

Please refer to the critical accounting policies set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission (SEC) on May 19, 2022, for a description of all of our critical accounting policies and estimates.

Three Months Ended December 31, 2022 and 2021

Revenue

Product revenue consists of sales of our hardware products and licensing of our software products. Service revenue consists of customer support agreements, consulting, training and stand-ready software as a service offerings. During the three months ended December 31, 2022 and 2021, one direct customer, Verizon, accounted for more than 10% of our total revenue, while no indirect channel partners accounted for more than 10% of our total revenue. During the three months ended December 31, 2022 and 2021, the service assurance product line accounted for approximately 79% and 73% of total revenue, respectively, and the cybersecurity product line accounted for approximately 21% and 27% of total revenue, respectively. The service assurance and cybersecurity product line results presented as a percentage of total revenue are not necessarily indicative of future revenue mix.

	Three Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Revenue:
Product	$	149,452	55	%	$	144,420	55	%	$	5,032	3	%
Service	120,092		45		117,774		45		2,318		2	%
Total revenue	$	269,544	100	%	$	262,194	100	%	$	7,350	3	%

Product. The 3%, or $5.0 million, increase in product revenue compared with the same period last year was primarily due to an increase in revenue from radio frequency propagation modeling projects, partially offset by a decrease in revenue from cybersecurity offerings.

Service. The 2%, or $2.3 million, increase in service revenue compared to the same period last year was primarily due to an increase in revenue from maintenance contracts.

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Total revenue by geography was as follows:

	Three Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
United States	$	181,206	67	%	$	162,794	62	%	$	18,412	11	%
International:
Europe	35,926		13		48,620		19		(12,694)		(26)	%
Asia	15,422		6		14,519		5		903		6	%
Rest of the world	36,990		14		36,261		14		729		2	%
Subtotal international	88,338		33		99,400		38		(11,062)		(11)	%
Total revenue	$	269,544	100	%	$	262,194	100	%	$	7,350	3	%

United States revenue increased 11%, or $18.4 million, primarily due to an increase in revenue from service provider customers from service assurance offerings and an increase in revenue from radio frequency propagation modeling projects, partially offset by a decrease in revenue from service provider customers from cybersecurity offerings. The 11%, or $11.1 million, decrease in international revenue compared with the same period last year was primarily driven by lower revenue from service provider customers from cybersecurity offerings, as well as service assurance offerings.

Cost of Revenue and Gross Profit

Cost of product revenue consists primarily of material components, manufacturing personnel expenses, packaging materials, overhead and amortization of capitalized software, acquired developed technology and core technology. Cost of service revenue consists primarily of personnel, material, overhead and support costs.

	Three Months Ended										Change
	December 31,
	(Dollars in Thousands)
	2022					2021
				% of Revenue					% of Revenue		$		%
Cost of revenue
Product	$	25,281		9	%	$	30,338		12	%	$	(5,057)	(17)	%
Service	31,521			12		30,132			11		1,389		5	%
Total cost of revenue	$	56,802		21	%	$	60,470		23	%	$	(3,668)	(6)	%
Gross profit:
Product $	$	124,171		46	%	$	114,082		44	%	$	10,089	9	%
Product gross profit %	83		%			79		%
Service $	$	88,571		33	%	$	87,642		33	%	$	929	1	%
Service gross profit %	74		%			74		%
Total gross profit $	$	212,742				$	201,724				$	11,018	5	%
Total gross profit %	79		%			77		%

Product. The 17%, or $5.1 million, decrease in cost of product revenue for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $3.6 million decrease in costs related to the delivery of radio frequency propagation modeling projects, and a $1.0 million decrease in the amortization of intangible assets. The product gross profit percentage increased by four percentage points to 83% during the three months ended December 31, 2022 as compared with the three months ended December 31, 2021. The 9%, or $10.1 million, increase in product gross profit is attributable to the 3%, or $5.0 million, increase in product revenue, and the 17%, or $5.1 million, decrease in cost of product revenue.

Service. The 5%, or $1.4 million, increase in cost of service revenue for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $0.6 million increase in employee-related costs associated with an

29

increase in variable incentive compensation. The service gross profit percentage remained flat at 74% during the three months ended December 31, 2022 as compared with the three months ended December 31, 2021. The 1%, or $0.9 million, increase in service gross profit is attributable to the 2%, or $2.3 million, increase in service revenue, partially offset by the 5%, or $1.4 million, increase in cost of service revenue.

Gross profit. Our gross profit increased 5%, or $11.0 million, during the three months ended December 31, 2022 when compared with the three months ended December 31, 2021. This increase is attributable to the increase in revenue of 3%, or $7.4 million, and the 6%, or $3.7 million, decrease in cost of revenue. The gross profit percentage increased by two percentage points to 79% for the three months ended December 31, 2022 as compared with the three months ended December 31, 2021.

Operating Expenses

	Three Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Research and development	$	42,558	16	%	$	41,637	16	%	$	921	2	%
Sales and marketing	66,994		25		66,048		25		946		1	%
General and administrative	25,533		9		23,665		9		1,868		8	%
Amortization of acquired intangible assets	13,818		5		14,919		6		(1,101)		(7)	%
Restructuring charges	89		—		—		—		89		100	%
Total operating expenses	$	148,992	55	%	$	146,269	56	%	$	2,723	2	%

Research and development. Research and development expenses consist primarily of personnel expenses, fees for outside consultants, overhead and related expenses associated with the development of new products and the enhancement of existing products.

The 2%, or $0.9 million, increase in research and development expenses for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $0.6 million increase in employee-related expenses associated with an increase in variable incentive compensation, and a $0.5 million increase in travel expenses.

Sales and marketing. Sales and marketing expenses consist primarily of personnel expenses and commissions, overhead and other expenses associated with selling activities and marketing programs such as trade shows, seminars, advertising and new product launch activities.

The 1%, or $0.9 million, increase in total sales and marketing expenses for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $1.4 million increase in travel expenses primarily attributable to the lifting of COVID-19 related restrictions, and a $0.7 million increase related to trade shows, user conferences and other events. These increases were partially offset by an $0.8 million decrease in contractor fees, and a $0.5 million decrease in commissions expense.

General and administrative. General and administrative expenses consist primarily of personnel expenses for executive, financial, legal and human resource employees, overhead and other corporate expenditures.

The 8%, or $1.9 million, increase in general and administrative expenses for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $0.9 million increase in employee-related expenses associated with an increase in variable incentive compensation.

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists primarily of amortization of customer relationships, definite-lived trademarks and trade names, and leasehold interests related to our acquisitions of Danaher Corporation's communications business (Comms Transaction), Simena, LLC, Network General Corporation, Avvasi Inc. and Efflux Systems, Inc.

The 7%, or $1.1 million, decrease in amortization of acquired intangible assets was largely due to a decrease in the amortization of intangible assets related to the Comms Transaction.

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Interest and Other Income (Expense), Net. Interest and other income (expense), net includes interest earned on our cash, cash equivalents and marketable securities, interest expense and other non-operating gains or losses.

	Three Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Interest and other income (expense), net	$	(3,172)	(1)	%	$	177	—	%	$	(3,349)	(1,892)	%

The 1,892%, or $3.3 million, change in interest and other income (expense), net for the three months ended December 31, 2022 compared to the same period last year was primarily due to a $2.0 million increase in foreign exchange expense, a $1.2 million increase in interest expense on the credit facility due to an increase in the average interest rate, an $0.8 million decrease from the change in fair value of contingent consideration, and a $0.7 million decrease in transitional services agreement income related to the HNT tools business divestiture, partially offset by a $1.4 million increase in interest income.

Income Taxes. The effective tax rates were 13.1% and 14.2% for the three months ended December 31, 2022 and 2021, respectively. The effective tax rate for the three months ended December 31, 2022 differed from the effective tax rate for the three months ended December 31, 2021, primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings.

	Three Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Income tax expense	$	7,960	3	%	$	7,907	3	%	$	53	1	%

Nine Months Ended December 31, 2022 and 2021

Revenue

During the nine months ended December 31, 2022 and 2021, one direct customer, Verizon, accounted for more than 10% of our total revenue, while no indirect channel partner accounted for more than 10% of our total revenue. During the nine months ended December 31, 2022 and 2021, the service assurance product line accounted for approximately 75% and 74% of total revenue, respectively, and the cybersecurity product line accounted for approximately 25% and 26% of total revenue, respectively.

	Nine Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Revenue:
Product	$	359,519	51	%	$	327,989	49	%	$	31,530	10	%
Service	346,918		49	%	336,395		51	%	10,523		3	%
Total revenue	$	706,437	100	%	$	664,384	100	%	$	42,053	6	%

Product. The 10%, or $31.5 million, increase in product revenue compared with the same period last year was primarily due to an increase in revenue from our radio frequency propagation modeling projects from service provider customers.

Service. The 3%, or $10.5 million, increase in service revenue compared with the same period last year was primarily due to an increase in revenue from maintenance contracts.

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Total revenue by geography was as follows:

	Nine Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
United States	$	461,672	65	%	$	399,349	60	%	$	62,323	16	%
International:
Europe	105,013		15		121,712		18		(16,699)		(14)	%
Asia	44,608		7		46,835		7		(2,227)		(5)	%
Rest of the world	95,144		13		96,488		15		(1,344)		(1)	%
Subtotal international	244,765		35		265,035		40		(20,270)		(8)	%
Total revenue	$	706,437	100	%	$	664,384	100	%	$	42,053	6	%

United States revenue increased 16%, or $62.3 million, primarily due to an increase in revenue from service assurance offerings, including radio frequency propagation modeling projects. The 8%, or $20.3 million, decrease in international revenue compared with the same period last year was primarily driven by lower revenue from service assurance offerings.

Cost of Revenue and Gross Profit

	Nine Months Ended										Change
	December 31,
	(Dollars in Thousands)
	2022					2021
				% of Revenue					% of Revenue		$		%
Cost of revenue
Product	$	77,967		11	%	$	73,843		11	%	$	4,124	6	%
Service	94,190			13		92,681			14		1,509		2	%
Total cost of revenue	$	172,157		24	%	$	166,524		25	%	$	5,633	3	%
Gross profit:
Product $	$	281,552		40	%	$	254,146		38	%	$	27,406	11	%
Product gross profit %	78		%			77		%
Service $	$	252,728		36	%	$	243,714		37	%	$	9,014	4	%
Service gross profit %	73		%			72		%
Total gross profit $	$	534,280				$	497,860				$	36,420	7	%
Total gross profit %	76		%			75		%

Product. The 6%, or $4.1 million, increase in cost of product revenue for the nine months ended December 31, 2022 compared to the same period last year was primarily due to a $15.6 million increase in costs related to the delivery of radio frequency propagation modeling projects. This increase was partially offset by a $5.4 million decrease in direct material costs, a $3.1 million decrease in the amortization of intangible assets, a $2.3 million decrease in obsolescence charges, and a $1.1 million decrease in employee-related costs associated with the timing of certain projects. The product gross profit percentage increased by one percentage point to 78% during the nine months ended December 31, 2022 when compared to the nine months ended December 31, 2021. The 11%, or $27.4 million, increase in product gross profit is attributable to the 10%, or $31.5 million, increase in product revenue, partially offset by the 6%, or $4.1 million, increase in cost of product revenue.

Service. The 2%, or $1.5 million, increase in cost of service revenue for the nine months ended December 31, 2022 compared to the same period last year was primarily due to an $0.8 million increase in employee-related expenses largely due to cost associated with the timing of certain projects as well as an increase in variable incentive compensation, and a $0.6 million increase in travel expense primarily attributable to the lifting of COVID-19 related restrictions. These increases were partially offset by a $0.6 million decrease in cost of materials used to support customers under service contracts. The service gross profit percentage increased by one percentage point to 73% for the nine months ended December 31, 2022 when compared to the nine

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months ended December 31, 2021. The 4%, or $9.0 million, increase in service gross profit is attributable to the 3%, or $10.5 million increase in service revenue, partially offset by the 2%, or $1.5 million, increase in cost of service revenue.

Gross profit. Our gross profit for the nine months ended December 31, 2022 increased 7%, or $36.4 million, compared to the same period last year. This increase is primarily attributable to the increase in revenue of 6%, or $42.1 million, partially offset by the 3%, or $5.6 million, increase in cost of revenue. The gross profit percentage increased by one percentage point to 76% for the nine months ended December 31, 2022 when compared to the nine months ended December 31, 2021.

Operating Expenses

	Nine Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Research and development	$	129,932	18	%	$	128,940	19	%	$	992	1	%
Sales and marketing	209,435		30		197,191		30		12,244		6	%
General and administrative	75,584		11		69,881		11		5,703		8	%
Amortization of acquired intangible assets	41,500		6		44,895		7		(3,395)		(8)	%
Restructuring charges	1,803		—		—		—		1,803		100	%
Total operating expenses	$	458,254	65	%	$	440,907	67	%	$	17,347	4	%

Research and development. The 1%, or $1.0 million, increase in research and development expenses for the nine months ended December 31, 2022 compared to the same period last year was primarily due to a $1.1 million increase in travel expenses primarily attributable to the lifting of COVID-19 related restrictions, and a $0.5 million increase in expenses related to other events. These increases were partially offset by a $0.9 million decrease in depreciation expense.

Sales and marketing. The 6%, or $12.2 million, increase in total sales and marketing expenses for the nine months ended December 31, 2022 compared to the same period last year was primarily due to an $8.1 million increase in expenses related to trade shows, user conferences and other events, a $5.3 million increase in travel expense primarily attributable to the lifting of COVID-19 related restrictions, and a $2.7 million increase in commissions expense. These increases were partially offset by a $5.0 million decrease in employee-related expenses largely due to a decrease in variable incentive compensation.

General and administrative. The 8%, or $5.7 million, increase in general and administrative expenses for the nine months ended December 31, 2022 compared to the same period last year was primarily due to a $1.5 million increase in employee-related expenses largely due to an increase in variable incentive compensation, a $0.9 million increase in legal fees, an $0.8 million increase in the provision for allowance for credit losses, a $0.7 million increase in travel expense primarily attributable to the lifting of COVID-19 related restrictions, a $0.6 million increase in rent and other facilities-related costs, and a $0.5 million increase in contractor fees.

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists primarily of amortization of customer relationships, definite-lived trademark and tradenames, and leasehold interest related to the Comms Transaction and the acquisitions of Simena LLC, Network General Corporation, Avvasi, Inc. and Efflux Systems, Inc.

The 8%, or $3.4 million, decrease in amortization of acquired intangible assets for the nine months ended December 31, 2022 compared to the same period last year was largely due to a decrease in the amortization of intangible assets related to the Comms Transaction.

Restructuring charges. During the nine months ended December 31, 2022, we restructured certain departments to better align functions. As a result of the restructuring program, we recorded $1.9 million of restructuring charges related to one-time employee-related termination benefits for the employees that were notified of their termination during the period. The one-time termination benefits are expected to be paid in full during the fiscal year ending March 31, 2023.

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Interest and Other Income (Expense), Net

	Nine Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Interest and other income (expense), net	$	(6,554)	(1)	%	$	(4,579)	(1)	%	$	(1,975)	(43)	%

The 43%, or $2.0 million, change in interest and other income (expense), net was primarily due to a $1.6 million increase in foreign exchange expense, an $0.8 million decrease in transitional services agreement income related to the HNT tools business divestiture, and an $0.8 million decrease from the change in fair value of contingent consideration. In addition, there was a $0.7 million increase in interest expense on the credit facility due to an increase in the average interest rate during the nine months ended December 31, 2022 when compared to the nine months ended December 31, 2021, partially offset by a loss on the extinguishment of debt recorded during the nine months ended December 31, 2021. These changes in interest and other income (expense), net were partially offset by a $2.4 million increase in interest income.

Income Taxes. Our effective tax rates were 9.5% and 15.5% for the nine months ended December 31, 2022 and 2021, respectively. The effective tax rate for the nine months ended December 31, 2022 differed from the effective rate for the nine months ended December 31, 2021, primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings, as well as a discrete benefit from stock compensation during the nine months ended December 31, 2022.

	Nine Months Ended								Change
	December 31,
	(Dollars in Thousands)
	2022				2021
			% of Revenue				% of Revenue		$		%
Income tax expense	$	6,603	1	%	$	8,094	1	%	$	(1,491)	(18)	%

Backlog

We produce our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure our products to customer specifications and generally deliver products shortly after receipt of the purchase order. Service engagements are also included in certain orders. Customers generally may reschedule or cancel unfulfilled orders with little or no penalty. Our total backlog at any particular time is not necessarily indicative of future sales levels. Within total backlog, fulfillable backlog includes what we consider to represent orders that are generally available to be delivered to customers as of the end of the reporting period. Delivery of our fulfillable backlog typically occurs early in the subsequent quarter. However, delivery may be delayed or accelerated due to various other reasons, including but not limited to, changes in timing of customer projects and product delivery schedules, which may not be within our control. Our total combined product backlog at December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022 was $30.9 million, $60.5 million, $64.5 million and $92.8 million, respectively. Combined product backlog included fulfillable backlog of $30.4 million, $43.6 million, $39.1 million and $51.5 million at December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively. Total backlog includes orders that were received late in the quarter and radio frequency propagation modeling projects. In some cases, we have begun these projects but have not yet hit billable milestones. Radio frequency propagation modeling project orders received in the third quarter of fiscal year 2022 allowed NetScout to bill for the entire projects based upon partial delivery. At December 31, 2022, deferred revenue related to these radio frequency propagation modeling projects included a gross balance $22.9 million compared to a gross balance of $18.4 million, $19.9 million and $19.9 million at September 30, 2022, June 30, 2022 and March 31, 2022, respectively. A majority of the revenue for these projects is expected to be recognized into revenue throughout the fiscal year ending March 31, 2023.

34

Liquidity and Capital Resources

Cash, cash equivalents and marketable securities consisted of the following (in thousands):

	December 31, 2022		March 31, 2022
Cash and cash equivalents	$	352,044	$	636,161
Short-term marketable securities	57,262		67,037
Long-term marketable securities	6,906		—
Cash, cash equivalents and marketable securities	$	416,212	$	703,198

Cash, cash equivalents and marketable securities

At December 31, 2022, cash, cash equivalents and marketable securities (current and non-current) totaled $416.2 million, a $287.0 million decrease from $703.2 million at March 31, 2022. This decrease was primarily due to $150.0 million used in treasury stock repurchases under an ASR program, $150.0 million used to repay long-term debt, $19.2 million used for tax withholdings on restricted stock units, and $8.4 million used for capital expenditures. These decreases were partially offset by $43.9 million of net cash provided by operations during the nine months ended December 31, 2022. Cash held outside the United States was approximately $174.0 million.

Cash and cash equivalents were impacted by the following:

	Nine Months Ended
	December 31,
	(in thousands)
	2022		2021
Net cash provided by operating activities	$	43,923	$	140,387
Net cash used in investing activities	$	(5,647)	$	(3,055)
Net cash used in financing activities	$	(319,224)	$	(53,719)

Net cash from operating activities

Cash provided by operating activities was $43.9 million during the nine months ended December 31, 2022, compared with $140.4 million of cash provided by operating activities during the nine months ended December 31, 2021. The $96.5 million decrease was due in part to a $65.2 million decrease from deferred revenue, a $30.9 million decrease from accounts receivable, a $27.3 million decrease from deferred income taxes, an $8.0 million decrease from accounts payable, a $7.7 million decrease from depreciation and amortization, an $0.8 million decrease from income tax payable, and a $0.6 million decrease from the loss on extinguishment of debt. These decreases were partially offset by an $18.6 million increase from the change in net income, a $9.6 million increase from inventories, a $5.6 million increase from accrued compensation and other expenses, a $5.3 million increase from prepaid expenses and other assets, a $3.8 million increase from share-based compensation, and an $0.8 million increase from the change in fair value of contingent consideration during the nine months ended December 31, 2022 as compared with the nine months ended December 31, 2021.

Net cash from investing activities

	Nine Months Ended
	December 31,
	(in thousands)
	2022		2021
Cash used in investing activities included the following:
Purchase of marketable securities	$	(100,265)	$	(11,343)
Proceeds from sales and maturity of marketable securities	103,152		15,264
Purchase of fixed assets	(8,381)		(7,004)
Purchase of intangible assets	(161)		—
Decrease in deposits	8		28
	$	(5,647)	$	(3,055)

35

Cash used in investing activities was $5.6 million during the nine months ended December 31, 2022, compared with $3.1 million of cash used in investing activities during the nine months ended December 31, 2021. The $2.5 million increase in cash used in investing activities was due in part to a $1.4 million increase in cash outflow for capital expenditures, a $1.0 million increase in cash outflow from marketable securities related to an increase of $88.9 million related to the purchase of marketable securities, offset by an increase of $87.9 million in proceeds from the sales and maturity of marketable securities during the nine months ended December 31, 2022 when compared with the nine months ended December 31, 2021, and a $0.2 million increase in cash outflow related to agreements to acquire technology licenses during the nine months ended December 31, 2022.

Our investments in property and equipment consist primarily of computer equipment, demonstration units, office equipment and facility improvements. We plan to continue to invest in capital expenditures to support our infrastructure through the remainder of fiscal year 2023.

Net cash from financing activities

	Nine Months Ended
	December 31,
	(in thousands)
	2022		2021
Cash used in financing activities included the following:
Issuance of common stock under stock plans	$	2	$	2
Treasury stock repurchases, including accelerated share repurchases	(150,039)		(35,652)
Tax withholding on restricted stock units	(19,187)		(15,246)
Payment of debt issuance costs	—		(3,660)
Repayment of long-term debt	(150,000)		(350,000)
Proceeds from issuance of long-term debt	—		350,000
Collection of contingent consideration	—		837
	$	(319,224)	$	(53,719)

Cash used in financing activities increased by $265.5 million to $319.2 million during the nine months ended December 31, 2022, compared with $53.7 million of cash used in financing activities during the nine months ended December 31, 2021.

During the nine months ended December 31, 2022, we repurchased 4,549,329 shares of our common stock under an ASR program for $150.0 million. During the nine months ended December 31, 2021, we repurchased 1,330,678 shares of our common stock for $35.7 million under the twenty-five million share repurchase program.

In connection with the delivery of our common stock upon vesting of restricted stock units, we withheld 555,651 and 531,725 shares at a cost of $19.2 million and $15.2 million related to minimum statutory tax withholding requirements on these restricted stock units during the nine months ended December 31, 2022 and 2021, respectively. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the number of shares that are available for repurchase under that program.

Sources of Cash and Cash Requirements

Credit Facility

On July 27, 2021, we amended and extended the Amended Credit Agreement (Second Amended and Restated Credit Agreement) with a syndicate of lenders by and among: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; JPMorgan, Wells Fargo Securities, LLC, BofA Securities Inc., RBC Capital Markets, PNC Capital Markets LLC and Mizuho Bank, Ltd., as joint lead arrangers and joint bookrunners; Santander Bank, N.A., U.S. Bank National Association, Fifth Third Bank National Association, Silicon Valley Bank and TD Bank, N.A., as co-documentation agents; and the lenders party thereto.

The Second Amended and Restated Credit Agreement provides for a five-year, $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. We may elect to use the credit facility for general corporate purposes (including to finance the repurchase of shares of our common stock). The commitments under the Second Amended and Restated Credit Agreement will expire on July 27, 2026, and any outstanding loans will be due on that date.

In connection with the Second Amended and Restated Credit Agreement, during the fiscal year ended March 31, 2022, we paid off the outstanding balance of $350 million under the Amended Credit Agreement by borrowing the same amount under the Second Amended and Restated Credit Agreement. Additionally, we recorded a loss on the extinguishment of debt of $0.6 million, representing the write off of unamortized deferred financing costs, which was included in interest expense in the

36

consolidated statements of operations for the fiscal year ended March 31, 2022. On May 9, 2022, the Company repaid $150.0 million of borrowings under the Second Amended and Restated Credit Agreement. At December 31, 2022, $200 million was outstanding under the Second Amended and Restated Credit Agreement.

At our election, revolving loans under the Second Amended and Restated Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) the Wall Street Journal prime rate; (2) the New York Federal Reserve Bank (NYFRB) rate plus 0.50%, or (3) an adjusted one month LIBO rate plus 1%; or (b) a Term Benchmark Borrowing rate (for the interest period selected by NetScout, subject to customary provisions regarding succession from LIBO rate to SOF rate in anticipation of the upcoming discontinuation of the LIBO rate), in each case plus an applicable margin. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until we have delivered financial statements for the quarter ended December 31, 2022, the applicable margin will be 1.00% per annum for Term Benchmark Revolving loans and 0% per annum for Alternate Base Rate loans, and thereafter the applicable margin will vary depending on our consolidated gross leverage ratio, ranging from 1.00% per annum for Alternate Base Rate loans and 2.00% per annum for Term Benchmark Revolving loans if our consolidated gross leverage ratio is greater than 3.50 to 1.00, down to 0% per annum for Alternate Base Rate loans and 1.00% per annum for Term Benchmark Revolving loans if our consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

Our consolidated gross leverage ratio is the ratio of our consolidated total debt compared to our consolidated EBITDA as defined in the Second Amended and Restated Credit Agreement (adjusted consolidated EBITDA). Adjusted consolidated EBITDA includes certain adjustments, including, without limitation, adjustments relating to extraordinary, unusual or non-recurring charges, certain restructuring charges, non-cash charges, certain transaction costs and expenses and certain pro forma adjustments in connection with material acquisitions and dispositions, all as set forth in detail in the Second Amended and Restated Credit Agreement.

Commitment fees will accrue on the daily unused amount of the credit facility. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until we have delivered financial statements for the quarter ended December 31, 2022, the commitment fee will be 0.15% per annum, and thereafter the commitment fee will vary depending on our consolidated gross leverage ratio, ranging from 0.30% per annum if our consolidated gross leverage ratio is greater than 2.75 to 1.00, down to 0.15% per annum if our consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

Letter of credit participation fees are payable to each lender providing the letter of credit sub-facility on the amount of such lender's letter of credit exposure, during the period from the closing date of the Second Amended and Restated Credit Agreement to, but excluding, the date which is the later of (i) the date on which such lender's commitment terminates or (ii) the date on which such lender ceases to have any letter of credit exposure, at the applicable rate that would be used to determine the interest rate applicable to Term Benchmark Revolving loans assuming such loans were outstanding during the period. Additionally, we will pay a fronting fee to each issuing bank in amounts to be agreed to between us and the applicable issuing bank.

Interest on Alternate Base Rate loans is payable at the end of each calendar quarter. Interest on Term Benchmark Revolving loans is payable at the end of each interest rate period or at the end of each three-month interval within an interest rate period if the period is longer than three months. We may also prepay loans under the Second Amended and Restated Credit Agreement at any time, without penalty, subject to certain notice requirements.

The loans and other obligations under the credit facility are (a) guaranteed by each of our wholly-owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of us and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by the Borrower and the subsidiary guarantors (which pledge, in the case of any foreign subsidiary, is limited to 65% of the voting stock), subject to certain customary exceptions and limitations. The Second Amended and Restated Credit Agreement generally prohibits any other liens on the assets of NetScout and our restricted subsidiaries, subject to certain exceptions as described in the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains certain covenants applicable to us and our restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. The Second Amended and Restated Credit Agreement requires us to maintain a certain consolidated net leverage ratio and removes the previous requirement under the Amended Credit Agreement that we maintain a minimum consolidated interest coverage ratio. Our consolidated net leverage ratio is the ratio of our Consolidated Total Debt minus the lesser of unrestricted cash and 125% of adjusted consolidated EBITDA compared to our adjusted consolidated EBITDA. The Company’s maximum consolidated net leverage ratio is 4.00 to 1.00. These covenants and limitations are more fully described in the Second Amended and Restated Credit Agreement. As of December 31, 2022, we were in compliance with all covenants, including the specified total consolidated net leverage ratio range of 4.00 to 1.00.

37

The Second Amended and Restated Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Second Amended and Restated Credit Agreement and related documents including a failure to meet the maximum total consolidated net leverage ratio covenant, defaults under certain other indebtedness, certain insolvency events, certain events arising under ERISA, a change of control and certain other events. Upon an event of default, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies under the Second Amended and Restated Credit Agreement and the other loan documents.

We had unamortized capitalized debt issuance costs, net of $4.0 million at December 31, 2022, which are being amortized over the life of the revolving credit facility. The unamortized capitalized debt issuance costs balance of $1.1 million was included as prepaid expenses and other current assets and a balance of $2.9 million was included as other assets in our consolidated balance sheet.

Expectations for Fiscal Year 2023

We are actively managing the business to generate cash flow and believe that we currently have adequate liquidity. We believe that these factors will allow us to meet our anticipated funding requirements.

We expect net cash provided by operating activities combined with cash, cash equivalents, and marketable securities and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirement over at least the next twelve months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and our revolving credit facility. However, macroeconomic conditions, including rising inflation and a potential recession, could increase our anticipated funding requirements.

A portion of our cash may be used to acquire or invest in complementary businesses or products, to obtain the right to use complementary technologies, to repay borrowings under our Second Amended and Restated Credit Agreement, or to repurchase shares of our common stock through our stock repurchase programs. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies. If our existing sources of liquidity are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities. Macroeconomic conditions, including rising interest rates and volatility in the capital markets, may make it difficult for us to secure additional financing on favorable terms or at all. Any sale of additional equity or debt securities could result in additional dilution to our stockholders.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements on our consolidated financial statements, see Note 1 contained in the "Notes to Consolidated Financial Statements" included in Part I of this Quarterly Report on Form 10-Q.

38

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk. We hold our cash, cash equivalents and investments for working capital purposes. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we maintain our portfolio of cash, cash equivalents and investments in a variety of securities, including money market funds and government debt securities. The risk associated with fluctuating interest rates is limited to our investment portfolio. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future interest income. The effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our operating results or the total fair value of the portfolio.

We are exposed to market risks related to fluctuations in interest rates related to our credit facility. At December 31, 2022, we owed $200 million on this loan with an interest rate of 5.39%. A sensitivity analysis was performed on the outstanding portion of our debt obligation as of December 31, 2022. Should the current weighted-average interest rate increase or decrease by 10%, the resulting annual increase or decrease to interest expense would be approximately $1.1 million as of December 31, 2022.

Foreign Currency Exchange Risk. As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound, Canadian Dollar and Indian Rupee. The current exposures arise primarily from expenses denominated in foreign currencies. We currently engage in foreign currency hedging activities in order to limit these exposures. Periodically, we also enter into forward contracts to manage exchange risk associated with third-party transactions and for which we do not elect hedge accounting treatment. We do not use derivative financial instruments for speculative trading purposes.

At December 31, 2022, we had foreign currency forward contracts designated as hedging instruments with notional amounts totaling $12.0 million. The valuation of outstanding foreign currency forward contracts at December 31, 2022 resulted in a liability balance of $188 thousand, reflecting unfavorable contract rates in comparison to current market rates at this date and an asset balance of $40 thousand, reflecting favorable rates in comparison to current market rates at this date. At March 31, 2022, we had foreign currency forward contracts designated as hedging instruments with notional amounts totaling $5.6 million. The valuation of outstanding foreign currency forward contracts at March 31, 2022 resulted in a liability balance of $78 thousand, reflecting unfavorable contract rates in comparison to current market rates and an asset balance of $20 thousand, reflecting favorable rates in comparison to current market rates at this date. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.

Item 4.  Controls and Procedures

At December 31, 2022, NetScout, under the supervision and with the participation of our management, including the Company's principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, at December 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that material information relating to NetScout, including its consolidated subsidiaries, required to be disclosed by NetScout in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

39

PART II: OTHER INFORMATION

Item 1.  Legal Proceedings

For information regarding our legal proceedings, see Note 13 contained in the "Notes to Consolidated Financial Statements" included in Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A.  Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended March 31, 2022. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. There have been no material changes to those risk factors since we filed our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer

The following table provides information about purchases we made during the quarter ended December 31, 2022 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares That May Yet be Purchased Under the Program
10/1/2022-10/31/2022	940	$	34.42	—	2,502,668
11/1/2022-11/30/2022	1,297,395	36.99		1,293,515	1,209,153
12/1/2022-12/31/2022	229	32.57		—	1,209,153
Total	1,298,564	$	36.99	1,293,515	1,209,153

(1)We purchased an aggregate of 5,049 shares during the three months ended December 31, 2022 transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. Such purchases reflected in the table do not reduce the maximum number of shares that may be purchased under our previously announced stock repurchase programs (including our previously disclosed twenty-five million share repurchase program authorized on October 24, 2017 currently in effect).

(2)On May 9, 2022, we entered into ASR agreements to repurchase an aggregate of $150 million of our common stock via accelerated stock repurchase transactions. Final settlement of the ASR agreements was completed during the third quarter of our fiscal year 2023, resulting in the receipt of an additional 651,213 shares from Mizuho and 642,302 shares from Wells Fargo, or 1,293,515 shares in the aggregate. In total, 4,549,329 shares of our common stock were repurchased under the ASR agreements at an average cost per share of $32.97.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.  Other Information

None.

40

Item 6. Exhibits

(a)Exhibits

3.1		Composite conformed copy of Third Amended and Restated Certificate of Incorporation of NetScout (as amended) (filed as Exhibit 3.2 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on September 21, 2016, and incorporated herein by reference).
3.2		Amended and Restated By-laws of NetScout (filed as Exhibit 3.1 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on May 11, 2020 and incorporated herein by reference).
31.1	+	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	+	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	++	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	++	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	+	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	+	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	+	Inline XBRL Taxonomy Extension Calculation Linkbase document.
101.DEF	+	Inline XBRL Taxonomy Extension Definition Linkbase document.
101.LAB	+	Inline XBRL Taxonomy Extension Label Linkbase document.
101.PRE	+	Inline XBRL Taxonomy Extension Presentation Linkbase document.
104		The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 formatted in Inline XBRL

+	Filed herewith.
++	Exhibit has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NETSCOUT SYSTEMS, INC.
Date: February 2, 2023	/s/ Anil K. Singhal
	Anil K. Singhal
	President, Chief Executive Officer and Chairman
	(Principal Executive Officer)
Date: February 2, 2023	/s/ Jean Bua
	Jean Bua
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
	(Principal Accounting Officer)

42

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Anil K. Singhal, certify that:

1.I have reviewed this quarterly report on Form 10-Q of NetScout Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 2, 2023

/s/ Anil K. Singhal

Anil K. Singhal

President, Chief Executive Officer and Chairman

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Jean Bua, certify that:

1.I have reviewed this quarterly report on Form 10-Q of NetScout Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 2, 2023

/s/ Jean Bua

Jean Bua

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetScout Systems, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anil K. Singhal, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anil K. Singhal

Anil K. Singhal

President, Chief Executive Officer and Chairman

Principal Executive Officer

February 2, 2023

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of NetScout Systems, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetScout Systems, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean Bua, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jean Bua

Jean Bua

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

February 2, 2023

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of NetScout Systems, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Cover - shares	9 Months Ended
	Dec. 31, 2022	Jan. 26, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2022
Document Transition Report	false
Entity File Number	000-26251
Entity Registrant Name	NETSCOUT SYSTEMS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	04-2837575
Entity Address, Address Line One	310 Littleton Road
Entity Address, City or Town	Westford
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01886
City Area Code	978
Local Phone Number	614-4000
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	NTCT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		70,962,252
Entity Central Index Key	0001078075
Current Fiscal Year End Date	--03-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Current assets:
Cash and cash equivalents	$ 352,044	$ 636,161
Marketable securities	57,262	67,037
Accounts receivable and unbilled costs, net of allowance for doubtful accounts of $1,002 and $1,649 at December 31, 2022 and March 31, 2022, respectively	215,838	148,245
Inventories and deferred costs	18,621	28,220
Prepaid income taxes	8,780	9,349
Prepaid expenses and other current assets	29,402	32,927
Total current assets	681,947	921,939
Fixed assets, net	37,590	41,337
Operating lease right-of-use assets	51,096	54,996
Goodwill	1,725,729	1,723,156
Intangible assets, net	382,257	433,419
Deferred income taxes	6,693	6,883
Long-term marketable securities	6,906	0
Other assets	11,894	12,979
Total assets	2,904,112	3,194,709
Current liabilities:
Accounts payable	15,451	21,959
Accrued compensation	72,259	75,788
Accrued other	22,431	32,064
Income taxes payable	1,683	4,353
Deferred revenue and customer deposits	317,406	330,585
Current portion of operating lease liabilities	10,779	11,411
Total current liabilities	440,009	476,160
Other long-term liabilities	7,554	7,470
Deferred tax liability	40,119	78,899
Accrued long-term retirement benefits	34,182	34,737
Long-term deferred revenue and customer deposits	127,513	133,121
Operating lease liabilities, net of current portion	49,582	53,927
Long-term debt	200,000	350,000
Total liabilities	898,959	1,134,314
Commitments and contingencies (Note 13)
Preferred stock, $0.001 par value:
5,000,000 shares authorized; no shares issued or outstanding at December 31, 2022 and March 31, 2022	0	0
Common stock, $0.001 par value:
300,000,000 shares authorized; 128,389,414 and 126,425,383 shares issued and 70,961,344 and 74,102,293 shares outstanding at December 31, 2022 and March 31, 2022, respectively	128	126
Additional paid-in capital	3,077,866	3,023,403
Accumulated other comprehensive income (loss)	(353)	141
Treasury stock at cost, 57,428,070 and 52,323,090 shares at December 31, 2022 and March 31, 2022, respectively	(1,545,922)	(1,373,840)
Retained earnings	473,434	410,565
Total stockholders' equity	2,005,153	2,060,395
Total liabilities and stockholders' equity	$ 2,904,112	$ 3,194,709

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,002	$ 1,649
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	128,389,414	126,425,383
Common stock, shares outstanding (in shares)	70,961,344	74,102,293
Treasury stock, shares (in shares)	57,428,070	52,323,090

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Revenue:
Total revenue	$ 269,544	$ 262,194	$ 706,437	$ 664,384
Cost of revenue:
Total cost of revenue	56,802	60,470	172,157	166,524
Gross profit	212,742	201,724	534,280	497,860
Operating expenses:
Research and development	42,558	41,637	129,932	128,940
Sales and marketing	66,994	66,048	209,435	197,191
General and administrative	25,533	23,665	75,584	69,881
Amortization of acquired intangible assets	13,818	14,919	41,500	44,895
Restructuring charges	89	0	1,803	0
Total operating expenses	148,992	146,269	458,254	440,907
Income from operations	63,750	55,455	76,026	56,953
Interest and other income (expense), net:
Interest income	1,480	45	2,512	154
Interest expense	(2,914)	(1,748)	(7,021)	(6,314)
Other income (expense), net	(1,738)	1,880	(2,045)	1,581
Total interest and other income (expense), net	(3,172)	177	(6,554)	(4,579)
Income before income tax expense	60,578	55,632	69,472	52,374
Income tax expense	7,960	7,907	6,603	8,094
Net income	$ 52,618	$ 47,725	$ 62,869	$ 44,280
Basic net income per share (in dollars per share)	$ 0.73	$ 0.65	$ 0.87	$ 0.60
Diluted net income per share (in dollars per share)	$ 0.72	$ 0.64	$ 0.86	$ 0.59
Weighted average common shares outstanding used in computing:
Net income per share - basic (in shares)	71,744	73,898	72,015	74,048
Net income per share - diluted (in shares)	73,049	74,899	73,271	74,976
Product
Revenue:
Total revenue	$ 149,452	$ 144,420	$ 359,519	$ 327,989
Cost of revenue:
Total cost of revenue	25,281	30,338	77,967	73,843
Service
Revenue:
Total revenue	120,092	117,774	346,918	336,395
Cost of revenue:
Total cost of revenue	$ 31,521	$ 30,132	$ 94,190	$ 92,681

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 52,618	$ 47,725	$ 62,869	$ 44,280
Other comprehensive income (loss):
Cumulative translation adjustments	114	84	(447)	51
Changes in market value of investments:
Changes in unrealized gains (losses), net of taxes (benefit) of $8, $0, $4, and ($2), respectively	25	0	14	(5)
Total net change in market value of investments	25	0	14	(5)
Changes in market value of derivatives:
Changes in market value of derivatives, net of taxes (benefit) of $144, $7, ($140), and $38, respectively	467	23	(442)	120
Reclassification adjustment for net gains (losses) included in net income, net of taxes (benefit) of $30, $9, $120, and ($7), respectively	97	29	381	(21)
Total net change in market value of derivatives	564	52	(61)	99
Other comprehensive income (loss)	703	136	(494)	145
Total comprehensive income	$ 53,321	$ 47,861	$ 62,375	$ 44,425

XML

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Statement of Comprehensive Income [Abstract]
Changes in unrealized losses, tax expense (benefit)	$ 8	$ 0	$ 4	$ (2)
Changes in market value of derivatives, tax expense (benefit)	144	7	(140)	38
Reclassification adjustment for net gains (losses) included in net income (loss), tax expense (benefit)	$ 30	$ 9	$ 120	$ (7)

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock Voting	Additional Paid In Capital	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Retained Earnings
Beginning balance, common stock (in shares) at Mar. 31, 2021		124,197,974
Beginning balance at Mar. 31, 2021	$ 2,005,779	$ 124	$ 2,955,400	$ (1,940)	$ (1,322,496)	$ 374,691
Beginning balance, treasury stock (in shares) at Mar. 31, 2021					50,446,359
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	44,280					44,280
Unrealized net investment gains	(5)			(5)
Unrealized net gain (loss) on derivative financial instruments	99			99
Cumulative translation adjustments	51			51
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		1,688,026
Issuance of common stock pursuant to vesting of restricted stock units	2	$ 2
Stock-based compensation expense for restricted stock units granted to employees	41,389		41,389
Issuance of common stock under employee stock purchase plan (in shares)		251,308
Issuance of common stock under employee stock purchase plan	6,890		6,890
Repurchase of treasury stock (in shares)					1,862,403
Repurchase of treasury stock	(50,898)				$ (50,898)
Ending balance, common stock (in shares) at Dec. 31, 2021		126,137,308
Ending balance at Dec. 31, 2021	2,047,587	$ 126	3,003,679	(1,795)	$ (1,373,394)	418,971
Ending balance, treasury stock (in shares) at Dec. 31, 2021					52,308,762
Beginning balance, common stock (in shares) at Sep. 30, 2021		126,108,858
Beginning balance at Sep. 30, 2021	1,999,004	$ 126	2,991,704	(1,931)	$ (1,362,141)	371,246
Beginning balance, treasury stock (in shares) at Sep. 30, 2021					51,891,197
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	47,725					47,725
Unrealized net investment gains	0
Unrealized net gain (loss) on derivative financial instruments	52			52
Cumulative translation adjustments	84			84
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		28,450
Issuance of common stock pursuant to vesting of restricted stock units	0	$ 0
Stock-based compensation expense for restricted stock units granted to employees	11,975		11,975
Repurchase of treasury stock (in shares)					417,565
Repurchase of treasury stock	(11,253)				$ (11,253)
Ending balance, common stock (in shares) at Dec. 31, 2021		126,137,308
Ending balance at Dec. 31, 2021	$ 2,047,587	$ 126	3,003,679	(1,795)	$ (1,373,394)	418,971
Ending balance, treasury stock (in shares) at Dec. 31, 2021					52,308,762
Beginning balance, common stock (in shares) at Mar. 31, 2022	74,102,293	126,425,383
Beginning balance at Mar. 31, 2022	$ 2,060,395	$ 126	3,023,403	141	$ (1,373,840)	410,565
Beginning balance, treasury stock (in shares) at Mar. 31, 2022	52,323,090				52,323,090
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 62,869					62,869
Unrealized net investment gains	14			14
Unrealized net gain (loss) on derivative financial instruments	(61)			(61)
Cumulative translation adjustments	(447)			(447)
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		1,758,002
Issuance of common stock pursuant to vesting of restricted stock units	2	$ 2
Stock-based compensation expense for restricted stock units granted to employees	45,068		45,068
Issuance of common stock under employee stock purchase plan (in shares)		206,029
Issuance of common stock under employee stock purchase plan	6,539		6,539
Repurchase of treasury stock (in shares)					5,104,980
Repurchase of treasury stock	$ (169,226)		2,856		$ (172,082)
Ending balance, common stock (in shares) at Dec. 31, 2022	70,961,344	128,389,414
Ending balance at Dec. 31, 2022	$ 2,005,153	$ 128	3,077,866	(353)	$ (1,545,922)	473,434
Ending balance, treasury stock (in shares) at Dec. 31, 2022	57,428,070				57,428,070
Beginning balance, common stock (in shares) at Sep. 30, 2022		128,373,156
Beginning balance at Sep. 30, 2022	$ 1,937,646	$ 128	3,015,644	(1,056)	$ (1,497,886)	420,816
Beginning balance, treasury stock (in shares) at Sep. 30, 2022					56,129,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	52,618					52,618
Unrealized net investment gains	25			25
Unrealized net gain (loss) on derivative financial instruments	564			564
Cumulative translation adjustments	114			114
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		16,258
Issuance of common stock pursuant to vesting of restricted stock units	0
Stock-based compensation expense for restricted stock units granted to employees	14,366		14,366
Repurchase of treasury stock (in shares)					1,298,564
Repurchase of treasury stock	$ (180)		47,856		$ (48,036)
Ending balance, common stock (in shares) at Dec. 31, 2022	70,961,344	128,389,414
Ending balance at Dec. 31, 2022	$ 2,005,153	$ 128	$ 3,077,866	$ (353)	$ (1,545,922)	$ 473,434
Ending balance, treasury stock (in shares) at Dec. 31, 2022	57,428,070				57,428,070

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Cash flows from operating activities:
Net income	$ 52,618	$ 47,725	$ 62,869	$ 44,280
Adjustments to reconcile net income to cash provided by operating activities, net of the effects of acquisitions:
Depreciation and amortization			64,302	72,047
Loss on extinguishment of debt			0	596
Operating lease right-of-use assets			7,984	7,589
Loss on disposal of fixed assets			47	2
Share-based compensation expense			47,225	43,381
Change in fair value of contingent consideration			0	(837)
Deferred income taxes			(38,435)	(11,093)
Other losses (gains)			9	(21)
Changes in assets and liabilities
Accounts receivable and unbilled costs			(67,101)	(36,211)
Inventories			8,323	(1,265)
Prepaid expenses and other assets			4,279	(1,031)
Accounts payable			(7,129)	844
Accrued compensation and other expenses			(7,804)	(13,438)
Operating lease liabilities			(9,061)	(8,855)
Income taxes payable			(2,675)	(1,861)
Deferred revenue			(18,910)	46,260
Net cash provided by operating activities			43,923	140,387
Cash flows from investing activities:
Purchase of marketable securities			(100,265)	(11,343)
Proceeds from sales and maturity of marketable securities			103,152	15,264
Purchase of fixed assets			(8,381)	(7,004)
Purchase of intangible assets			(161)	0
Decrease in deposits			8	28
Net cash used in investing activities			(5,647)	(3,055)
Cash flows from financing activities:
Issuance of common stock under stock plans			2	2
Treasury stock repurchases, including accelerated share repurchases			(150,039)	(35,652)
Tax withholding on restricted stock units			(19,187)	(15,246)
Payment of debt issuance costs			0	(3,660)
Repayment of long-term debt			(150,000)	(350,000)
Proceeds from issuance of long-term debt			0	350,000
Collection of contingent consideration			0	837
Net cash used in financing activities			(319,224)	(53,719)
Effect of exchange rate changes on cash and cash equivalents			(3,169)	(2,684)
Net (decrease) increase in cash and cash equivalents			(284,117)	80,929
Cash and cash equivalents, beginning of period			636,161	467,176	$ 467,176
Cash and cash equivalents, end of period	$ 352,044	$ 548,105	352,044	548,105	$ 636,161
Supplemental disclosures:
Cash paid for interest			5,351	3,716
Cash paid for income taxes			47,294	24,677
Non-cash transactions:
Transfers of inventory to fixed assets			1,371	2,657
Additions to property, plant and equipment included in accounts payable			622	361
Issuance of common stock under employee stock plans			$ 6,539	$ 6,890

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BASIS OF PRESENTATION

9 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position and stockholders' equity, results of operations and cash flows. The year-end consolidated balance sheet data and statement of stockholders' equity were derived from the Company's audited financial statements, but do not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the Securities and Exchange Commission on May 19, 2022.

Global and Macroeconomic Conditions

The Company continues to closely monitor the current global and macroeconomic conditions, including the impact of the war in Ukraine, global geopolitical tension, stock market volatility, exchange rate fluctuations, rising inflation and interest rates, the risk of a recession, and the coronavirus (COVID-19) pandemic on all aspects of its business, including the manner and extent to which they have impacted and could continue to impact its customers, employees, supply chain, and distribution network. The impacts of these global and macroeconomic trends remain uncertain. It is possible that the measures taken by the governments of countries affected and the resulting economic impacts may materially and adversely affect the Company's future results of operations, cash flows and financial position as well as its customers.

The Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. The Company has taken and continues to take precautionary actions to manage costs and spending across the organization. This includes managing discretionary spending and hiring activities. In addition, based on covenant levels, the Company had, as of December 31, 2022, an incremental $600 million available under its revolving credit facility.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company had elected to defer the employer-paid portion of social security taxes. The Company had deferred $4.5 million of employer payroll taxes, which was included as accrued other in the Company's consolidated balance sheet at March 31, 2022. The balance was paid in December 2022.

The Company expects net cash provided by operations combined with cash, cash equivalents, and marketable securities and borrowing availability under the revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 is effective for the Company beginning April 1, 2023. Amendments within the standard are required to be applied on a prospective basis from the date of adoption. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures. We will apply the provisions of ASU 2021-08 after adoption to future acquisitions, if any.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain

criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform, which clarifies the scope and application of certain optional expedients and exceptions regarding the original guidance. ASU 2021-01 may be applied prospectively through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures.

XML

REVENUE

9 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Revenue Recognition Policy

The Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period.

The Company derives revenues primarily from the sale of network management tools and cybersecurity solutions for service provider and enterprise customers, which include hardware, software, and service offerings. The Company's product sales consist of software only offerings and offerings which include hardware appliances with embedded software that are essential to providing customers the intended functionality of the solutions.

The Company accounts for revenue once a legally enforceable contract with a customer has been approved by the parties and the related promises to transfer products or services have been identified. A contract is defined by the Company as an arrangement with commercial substance identifying payment terms, each party’s rights and obligations regarding the products or services to be transferred and the amount the Company deems probable of collection. Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Revenue is recognized when control of the products or services are transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for products and services.

Product revenue is typically recognized upon fulfillment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service (SAAS) and other professional services including consulting and training. The Company generally provides software and/or hardware support as part of product sales. Revenue related to the initial bundled software and hardware support is recognized ratably over the support period. In addition, customers can elect to purchase extended support agreements for periods after the initial software/hardware warranty expiration. Support services generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates, bug fixes and hardware repair and replacement. Consulting services are recognized upon delivery or completion of performance depending on the terms of the underlying contract. Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in services revenue, with the offsetting expense recorded in cost of service revenue. Training services include on-site and classroom training. Training revenues are recognized upon delivery of the training.

Generally, the Company's contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based primarily on the performance obligation's historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service performance obligations based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. SSP has primarily been established for product performance obligations as the average or median selling price the performance obligation was recently sold for, whether sold alone or sold as part of a bundle transaction. The Company reviews sales of the product performance obligations on a quarterly basis and

updates, when appropriate, its SSP for such performance obligations to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a customer as a reduction of revenue to the extent they have recorded revenue from the customer. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

During the nine months ended December 31, 2022, the Company recognized revenue of $277.1 million related to the Company's deferred revenue balance reported at March 31, 2022.

Performance Obligations

Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. The transaction price is allocated among performance obligations in bundled contracts in an amount that depicts the relative standalone selling prices of each obligation.

For contracts involving distinct hardware and software licenses, the performance obligations are satisfied at a point in time when control is transferred to the customer. For standalone maintenance and post-contract support (PCS) the performance obligation is satisfied ratably over the contract term as a stand-ready obligation. For consulting and training services, the performance obligation may be satisfied over the contract term as a stand-ready obligation, satisfied over a period of time as those services are delivered, or satisfied at the completion of the service when control has transferred, or the services have expired unused.

Payments for hardware, software licenses, one-year maintenance, PCS and consulting services, are typically due up front with payment terms of 30 to 90 days. However, the Company does have contracts pursuant to which billings occur ratably over a period of years following the transfer of control for the contracted performance obligations. Payments on multi-year maintenance, PCS and consulting services are typically due in annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns, refunds or warranties at December 31, 2022.

At December 31, 2022, the Company had total deferred revenue of $444.9 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $317.4 million, or 71%, of this revenue during the next 12 months, and expects to recognize the remaining $127.5 million, or 29%, of this revenue thereafter.

Because of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, the Company does not believe its right to payment is unconditional, therefore for balance sheet presentation purposes, the Company has not recognized the deferred revenue or the related account receivable and no amounts appear in the consolidated balance sheets for such transactions because control of the underlying deliverable has not transferred. The aggregate amount of unrecognized accounts receivable and deferred revenue was $3.7 million and $9.4 million at December 31, 2022 and March 31, 2022, respectively.

NetScout expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have material significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the nine months ended December 31, 2022.

Contract Balances

The Company may receive payments from customers based on billing schedules as established by the Company's contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. The Company records unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. Deferred revenue relates to scenarios where billings with an unconditional right to payment occur before all performance obligations are delivered or payments are received in advance of performance under the contract.

Costs to Obtain Contracts

The Company has determined that the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. Sales commissions are recorded as an asset and amortized to expense ratably over the remaining performance periods of the related contracts with remaining performance

obligations. The Company expenses costs as incurred for sales commissions when the amortization period would have been one year or less.

At December 31, 2022, the consolidated balance sheet included $9.3 million in assets related to sales commissions to be expensed in future periods. A balance of $4.7 million was included in prepaid expenses and other current assets, and a balance of $4.6 million was included in other assets in the Company's consolidated balance sheet at December 31, 2022. At March 31, 2022, the consolidated balance sheet included $8.8 million in assets related to sales commissions to be expensed in future periods. A balance of $4.6 million was included in prepaid expenses and other current assets, and a balance of $4.2 million was included in other assets in the Company's consolidated balance sheet at March 31, 2022.

During the three and nine months ended December 31, 2022 and 2021, respectively, the Company recognized $1.8 million, $1.6 million, $5.2 million and $4.7 million of amortization related to this sales commission asset, which is included in the sales and marketing expense line in the Company's consolidated statements of operations.

Allowance for Credit Losses

The Company continually monitors collections from its customers. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses based on a combination of factors, including but not limited to, analysis of the aging schedules, past due balances, historical collection experience and prevailing economic conditions.

The following table summarizes the activity in the allowance for credit losses (in thousands):

Balance at March 31, 2022	$	1,649
Provision for allowance for credit losses	783
Recoveries and other adjustments	865
Write off charged against the allowance for credit losses	(2,295)
Balance at December 31, 2022	$	1,002

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CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

9 Months Ended

Dec. 31, 2022

Risks and Uncertainties [Abstract]

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of investments, trade accounts receivable and accounts payable. The Company's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings.

At December 31, 2022, the Company had one direct customer which accounted for more than 10% of the accounts receivable balance, while no indirect channel partners accounted for more than 10% of the accounts receivable balance. At March 31, 2022, the Company had no direct customers or indirect channel partners which accounted for more than 10% of the accounts receivable balance.

During the three and nine months ended December 31, 2022 and 2021, one direct customer, Verizon, accounted for more than 10% of the Company's total revenue, while no indirect channel partners accounted for more than 10% of total revenue.

Historically, the Company has not experienced any significant failure of its customers' ability to meet their payment obligations nor does the Company anticipate material non-performance by its customers in the future; accordingly, the Company does not require collateral from its customers. However, if the Company's assumptions are incorrect, there could be an adverse impact on its allowance for doubtful accounts.

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SHARE-BASED COMPENSATION

9 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

On September 12, 2019, the Company's stockholders approved the 2019 Equity Incentive Plan (2019 Plan), which replaced the Company's 2007 Equity Incentive Plan, as amended (Amended 2007 Plan). The 2019 Plan permits the granting of incentive and nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively referred to as "share-based awards."

On September 10, 2020, the Company's stockholders approved an amendment and restatement of the 2019 Plan (2019 Amended Plan) to increase the number of shares reserved for issuance by 4,700,000 shares, established a one-year minimum vesting requirement for awards granted on or after September 10, 2020, and changed the factor used to calculate the increase or reduction in the number of shares available for issuance under the 2019 Amended Plan.

On August 24, 2022, the Company's stockholders approved an amendment to the 2019 Amended Plan (2019 Second Amended Plan). This amendment increased the number of shares reserved for issuance by 7,000,000 shares and changed the factor used to calculate the increase or reduction in the number of shares available for issuance under the 2019 Second

Amended Plan. At August 24, 2022, there was a total of 8,764,811 shares reserved for issuance under the 2019 Second Amended Plan, which consisted of 7,000,000 new shares plus 1,764,811 shares that remained available for grant under the 2019 Amended Plan as of August 24, 2022, the effective date of the 2019 Second Amended Plan. At December 31, 2022, an aggregate of 6,235,096 shares remained available for grant under the 2019 Second Amended Plan.

Periodically, the Company grants share-based awards to employees, officers, and directors of the Company and its subsidiaries. During the fiscal years ended March 31, 2023 and 2022, the Company granted performance-based restricted stock units to certain executive officers that vest based upon the Company's total shareholder return as compared to the Russell 2000 Index over a three-year period. The performance-based restricted stock units were valued using the Monte Carlo Simulation model. The measurement and recognition of compensation expense is based on estimated fair values for all share-based payment awards made to its employees and directors. Share-based award grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company's common stock. Such value is recognized as a cost of revenue or an operating expense over the corresponding vesting period.

The following is a summary of share-based compensation expense including restricted stock units and performance-based restricted stock units granted pursuant to the Company's Amended 2007 Plan, the 2019 Plan, the 2019 Amended Plan, and the 2019 Second Amended Plan, and employee stock purchases made under the Company's 2011 Amended and Restated Employee Stock Purchase Plan (ESPP), based on estimated fair values within the applicable cost and expense lines identified below (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Cost of product revenue	$	262	$	214	$	869	$	809
Cost of service revenue	1,781		1,302		5,606		4,822
Research and development	4,174		3,297		13,185		12,290
Sales and marketing	5,445		4,727		17,238		15,383
General and administrative	3,481		3,141		10,327		10,077
	$	15,143	$	12,681	$	47,225	$	43,381

Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2022. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year. During the nine months ended December 31, 2022, employees purchased 206,029 shares under the ESPP and the fair value per share was $31.74.

On August 24, 2022, the Company's stockholders approved an amendment to the ESPP that increased the number of shares available under the ESPP by an additional 2,000,000 shares.

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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

9 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIESThe Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents mainly consisted of U.S. government and municipal obligations, commercial paper, certificate of deposits, money market instruments and cash maintained with various financial institutions at December 31, 2022 and March 31, 2022.

Marketable Securities

The following is a summary of marketable securities held by NetScout at December 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	19,211	$	(1)	$	19,210
Commercial paper	33,487		—		33,487
Corporate bonds	1,130		(1)		1,129
Certificates of deposit	3,436		—		3,436
Total short-term marketable securities	57,264		(2)		57,262
U.S. government and municipal obligations	6,919		(13)		6,906
Total long-term marketable securities	6,919		(13)		6,906
Total marketable securities	$	64,183	$	(15)	$	64,168

The following is a summary of marketable securities held by NetScout at March 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	40,895	$	(32)	$	40,863
Commercial paper	23,353		—		23,353
Corporate bonds	823		(2)		821
Certificates of deposit	2,000		—		2,000
Total short-term marketable securities	67,071		(34)		67,037
Total long-term marketable securities	—		—		—
Total marketable securities	$	67,071	$	(34)	$	67,037

Contractual maturities of the Company's marketable securities held at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	December 31, 2022		March 31, 2022
Available-for-sale securities:
Due in 1 year or less	$	57,262	$	67,037
Due after 1 year through 5 years	6,906		—
	$	64,168	$	67,037

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FAIR VALUE MEASUREMENTS

9 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at December 31, 2022 and March 31, 2022 (in thousands):

	Fair Value Measurements at
	December 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	306,572	$	45,472	$	—	$	352,044
U.S. government and municipal obligations	23,499		2,617		—		26,116
Commercial paper	—		33,487		—		33,487
Corporate bonds	1,129		—		—		1,129
Certificate of deposits	—		3,436		—		3,436
Derivative financial instruments	—		40		—		40
	$	331,200	$	85,052	$	—	$	416,252
LIABILITIES:
Derivative financial instruments	$	—	$	(188)	$	—	$	(188)
	$	—	$	(188)	$	—	$	(188)

	Fair Value Measurements at
	March 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	617,734	$	18,427	$	—	$	636,161
U.S. government and municipal obligations	40,863		—		—		40,863
Commercial paper	—		23,353		—		23,353
Corporate bonds	821		—		—		821
Certificate of deposits	—		2,000		—		2,000
Derivative financial instruments	—		20		—		20
	$	659,418	$	43,800	$	—	$	703,218
LIABILITIES:
Derivative financial instruments	$	—	$	(78)	$	—	$	(78)
	$	—	$	(78)	$	—	$	(78)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments.

The Company's Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency.

The Company's Level 2 investments are classified as such because they are valued using observable inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active.

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INVENTORIES

9 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIESInventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of the following (in thousands):

	December 31, 2022		March 31, 2022
Raw materials	$	12,231	$	14,779
Work in process	213		695
Finished goods	5,154		5,761
Deferred costs	1,023		6,985
	$	18,621	$	28,220

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has one reporting unit. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2022 using the qualitative assessment as the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value.

At December 31, 2022 and March 31, 2022, the carrying amount of goodwill was $1.7 billion. The change in the carrying amount of goodwill for the nine months ended December 31, 2022 was due to the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2022 as follows (in thousands):

Balance at March 31, 2022	$	1,723,156
Foreign currency translation impact	2,573
Balance at December 31, 2022	$	1,725,729

Intangible Assets

The net carrying amounts of intangible assets were $382.3 million and $433.4 million at December 31, 2022 and March 31, 2022, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives.

Intangible assets include the following amortizable intangible assets at December 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	249,470	$	(230,700)	$	18,770
Customer relationships	8 - 18 years	766,635		(420,678)		345,957
Distributor relationships and technology licenses	1 - 6 years	11,521		(9,803)		1,718
Definite-lived trademark and trade name	2 - 9 years	57,627		(42,026)		15,601
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(997)		211
		$	1,097,262	$	(715,005)	$	382,257

Intangible assets include the following amortizable intangible assets at March 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	250,247	$	(224,426)	$	25,821
Customer relationships	8 - 18 years	769,404		(384,347)		385,057
Distributor relationships and technology licenses	1 - 6 years	11,408		(8,896)		2,512
Definite-lived trademark and trade name	2 - 9 years	57,748		(37,944)		19,804
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(983)		225
		$	1,100,816	$	(667,397)	$	433,419

Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three and nine months ended December 31, 2022 and 2021, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Amortization of intangible assets included as:
Cost of product revenue	$	2,627	$	3,643	$	7,908	$	10,959
Operating expense	13,823		14,924		41,515		44,910
	$	16,450	$	18,567	$	49,423	$	55,869

The following is the expected future amortization expense at December 31, 2022 for the fiscal years ending March 31 (in thousands):

2023 (remaining three months)	$	16,515
2024	57,878
2025	50,713
2026	46,357
2027	43,480
Thereafter	167,314
	$	382,257

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NetScout operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The exposures result from costs that are denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee. The Company manages its foreign cash flow risk by hedging forecasted cash flows for operating expenses denominated in foreign currencies for up to twelve months, within specified guidelines through the use of forward contracts. The Company enters into foreign currency exchange contracts to hedge cash flow exposures from costs that are denominated in currencies other than the U.S. Dollar. These hedges are designated as cash flow hedges at inception.

NetScout also periodically enters into forward contracts to manage exchange rate risks associated with certain third-party transactions and for which the Company does not elect hedge accounting treatment as there is no difference in the timing of gain or loss recognition on the hedging instrument and the hedged item.

All of the Company's derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes. These contracts will mature over the next twelve months and are expected to impact earnings on or before maturity.

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022
Derivatives Designated as Hedging Instruments:
Forward contracts	$	11,955	$	5,578	$	40	$	20	$	188	$	78
					$	40	$	20	$	188	$	78

(a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the three months ended December 31, 2022 and 2021 (in thousands):

	Gain Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	611	$	30	Research and development	$	30	$	(2)
					Sales and marketing	97		40
	$	611	$	30		$	127	$	38

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Gain (Loss) Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	(582)	$	158	Research and development	$	49	$	(17)
					Sales and marketing	452		(11)
	$	(582)	$	158		$	501	$	(28)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts not designated as hedging instruments had on the Company's results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Loss Recognized in Income (a)
	Location	December 31, 2022		December 31, 2021
Forward contracts	General and administrative	$	—	$	(248)
		$	—	$	(248)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

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LONG-TERM DEBT

9 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

On July 27, 2021, the Company amended and extended the Amended Credit Agreement (Second Amended and Restated Credit Agreement) with a syndicate of lenders by and among: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; JPMorgan, Wells Fargo Securities, LLC, BofA Securities Inc., RBC Capital Markets, PNC Capital Markets LLC and Mizuho Bank, Ltd., as joint lead arrangers and joint bookrunners; Santander Bank, N.A., U.S. Bank National Association, Fifth Third Bank National Association, Silicon Valley Bank and TD Bank, N.A., as co-documentation agents; and the lenders party thereto.

The Second Amended and Restated Credit Agreement provides for a five-year, $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The Company may elect to use the credit facility for general corporate purposes (including to finance the repurchase of shares of the Company's common stock). The commitments under the Second Amended and Restated Credit Agreement will expire on July 27, 2026, and any outstanding loans will be due on that date.

In connection with the Second Amended and Restated Credit Agreement, during the fiscal year ended March 31, 2022, the Company paid off the outstanding balance of $350 million under the Amended Credit Agreement by borrowing the same amount under the Second Amended and Restated Credit Agreement. Additionally, the Company recorded a loss on the extinguishment of debt of $0.6 million, representing the write off of unamortized deferred financing costs, which was included in interest expense in the consolidated statements of operations for the fiscal year ended March 31, 2022. On May 9, 2022, the Company repaid $150.0 million of borrowings under the Second Amended and Restated Credit Agreement. At December 31, 2022, $200 million was outstanding under the Second Amended and Restated Credit Agreement.

At the Company's election, revolving loans under the Second Amended and Restated Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) the Wall Street Journal prime rate; (2) the New York Federal Reserve Bank (NYFRB) rate plus 0.50%, or (3) an adjusted one month LIBO rate plus 1%; or (b) a Term Benchmark Borrowing rate (for the interest period selected by the Company, subject to customary provisions regarding succession from LIBO rate to SOF rate in anticipation of the upcoming discontinuation of the LIBO rate), in each case plus an applicable margin. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until the Company has delivered financial statements for the quarter ended December 31, 2022, the applicable margin will be 1.00% per annum for Term Benchmark Revolving loans and 0% per annum for Alternate Base Rate loans, and thereafter the applicable margin will vary depending on the Company's consolidated gross leverage ratio, ranging from 1.00% per annum for Alternate Base Rate loans and 2.00% per annum for Term Benchmark Revolving loans if the Company's consolidated gross leverage ratio is greater than 3.50 to 1.00, down to 0% per annum for Alternate Base Rate loans and 1.00% per annum for Term Benchmark Revolving loans if the Company's consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

The Company's consolidated gross leverage ratio is the ratio of its consolidated total debt compared to its consolidated EBITDA as defined in the Second Amended and Restated Credit Agreement (adjusted consolidated EBITDA). Adjusted consolidated EBITDA includes certain adjustments, including, without limitation, adjustments relating to extraordinary, unusual or non-recurring charges, certain restructuring charges, non-cash charges, certain transaction costs and expenses and certain pro forma adjustments in connection with material acquisitions and dispositions, all as set forth in detail in the Second Amended and Restated Credit Agreement.

Commitment fees will accrue on the daily unused amount of the credit facility. For the period from the delivery of the Company's financial statements for the quarter ended September 30, 2022, until the Company has delivered financial statements for the quarter ended December 31, 2022, the commitment fee will be 0.15% per annum, and thereafter the commitment fee will vary depending on the Company's consolidated gross leverage ratio, ranging from 0.30% per annum if the Company's consolidated gross leverage ratio is greater than 2.75 to 1.00, down to 0.15% per annum if the Company's consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.

Letter of credit participation fees are payable to each lender providing the letter of credit sub-facility on the amount of such lender's letter of credit exposure, during the period from the closing date of the Second Amended and Restated Credit Agreement to, but excluding, the date which is the later of (i) the date on which such lender's commitment terminates or (ii) the date on which such lender ceases to have any letter of credit exposure, at the applicable rate that would be used to determine the interest rate applicable to Term Benchmark Revolving loans assuming such loans were outstanding during the period. Additionally, the Company will pay a fronting fee to each issuing bank in amounts to be agreed to between the Company and the applicable issuing bank.

Interest on Alternate Base Rate loans is payable at the end of each calendar quarter. Interest on Term Benchmark Revolving loans is payable at the end of each interest rate period or at the end of each three-month interval within an interest

rate period if the period is longer than three months. The Company may also prepay loans under the Second Amended and Restated Credit Agreement at any time, without penalty, subject to certain notice requirements.

The loans and other obligations under the credit facility are (a) guaranteed by each of the Company’s wholly-owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of the Company and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by the Borrower and the subsidiary guarantors (which pledge, in the case of any foreign subsidiary, is limited to 65% of the voting stock), subject to certain customary exceptions and limitations. The Second Amended and Restated Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains certain covenants applicable to the Company and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. The Second Amended and Restated Credit Agreement requires the Company to maintain a certain consolidated net leverage ratio and removes the previous requirement under the Amended Credit Agreement that the Company maintain a minimum consolidated interest coverage ratio. The Company's consolidated net leverage ratio is the ratio of its Consolidated Total Debt minus the lesser of unrestricted cash and 125% of adjusted consolidated EBITDA compared to its adjusted consolidated EBITDA. The Company’s maximum consolidated net leverage ratio is 4.00 to 1.00. These covenants and limitations are more fully described in the Second Amended and Restated Credit Agreement. As of December 31, 2022, the Company was in compliance with all covenants, including the specified total consolidated net leverage ratio range of 4.00 to 1.00.

The Second Amended and Restated Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Second Amended and Restated Credit Agreement and related documents including a failure to meet the maximum total consolidated net leverage ratio covenant, defaults under certain other indebtedness, certain insolvency events, certain events arising under ERISA, a change of control and certain other events. Upon an event of default, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies under the Second Amended and Restated Credit Agreement and the other loan documents.

The Company had unamortized capitalized debt issuance costs, net of $4.0 million at December 31, 2022, which are being amortized over the life of the revolving credit facility. The unamortized capitalized debt issuance costs balance of $1.1 million was included as prepaid expenses and other current assets and a balance of $2.9 million was included as other assets in the Company's consolidated balance sheet.

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RESTRUCTURING CHARGES

9 Months Ended

Dec. 31, 2022

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES

During the first quarter of fiscal year 2023, the Company restructured certain departments to better align functions resulting in the termination of eighteen employees. As a result of the workforce reduction, during the nine months ended December 31, 2022, the Company recorded a restructuring charge totaling $1.9 million related to one-time employee-related termination benefits for the employees that were notified of their termination during the period. The one-time termination benefits are expected to be paid in full during the fiscal year ending March 31, 2023.

The following table provides a summary of the activity related to the restructuring plan and the restructuring liability (in thousands):

	Q1FY23 Plan
Balance at March 31, 2022	$	—
Restructuring charges to operations	1,861
Cash payments	(1,593)
Other adjustments	(128)
Balance at December 31, 2022	$	140

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LEASES

9 Months Ended

Dec. 31, 2022

Leases [Abstract]

LEASES

LEASESThe Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company's contractual

obligation to make lease payments over the lease term. The Company's policy is to combine lease and non-lease components and to not recognize ROU assets and lease liabilities for short-term leases. Leases with an initial term of twelve months or less are classified as short-term leases. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company's estimated incremental borrowing rate unless the lessor's implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. The Company's leases have remaining lease terms ranging from 1 year to 8 years. The Company's lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making this determination, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company has an obligation to return certain leased facilities to their original condition at the end of the respective lease term. These obligations were not material to the Company's financial statements for all periods presented.

Most of the Company's lease agreements contain variable payments, primarily for common area maintenance (CAM), which are expensed as incurred and not included in the measurement of the ROU assets and lease liabilities.

The components of operating lease cost for the three and nine months ended December 31, 2022 and 2021, respectively, were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Lease cost under long-term operating leases	$	3,078	$	3,187	$	9,285	$	9,659
Lease cost under short-term operating leases	870		1,247		2,849		2,990
Variable lease cost under short-term and long-term operating leases	821		925		2,677		2,508
Total operating lease cost	$	4,769	$	5,359	$	14,811	$	15,157

The table below presents supplemental cash flow information related to leases during the nine months ended December 31, 2022 and 2021 (in thousands):

	December 31, 2022		December 31, 2021
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,215	$	2,461

At December 31, 2022 and March 31, 2022, the weighted average remaining lease term in years and weighted average discount rate were as follows:

	December 31, 2022		March 31, 2022
Weighted average remaining lease term in years - operating leases	6.39		6.98
Weighted average discount rate - operating leases	4.1	%	4.0	%

Future minimum payments under non-cancellable leases at December 31, 2022 are as follows (in thousands):

Year ending March 31:
2023 (remaining three months)	$	2,431
2024	12,682
2025	12,018
2026	10,362
2027	8,180
Thereafter	22,901
Total lease payments	$	68,574
Less imputed interest	(8,213)
Present value of lease liabilities	$	60,361

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any current legal proceedings and claims, if determined adversely, will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff's Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff's allegations and asserting that Plaintiff's patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties' claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. In October 2017, the jury rendered a verdict finding in favor of the Plaintiff and that Plaintiff was entitled to $3,500,000 for pre-suit damages and $2,250,000 for post-suit damages. The jury indicated that the awarded damages amounts were intended to reflect a running royalty. In September 2018, the Court entered judgment and "enhanced" the jury verdict in the amount of $2.8 million as a result of a jury finding. The judgment also awarded pre- and post-judgment interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last date being June 2022. Following the entry of final judgment, NetScout appealed, and in July 2020, the Court of Appeals for the Federal Circuit (Federal Circuit) issued a decision vacating the $3,500,000 pre-suit damages award, affirming the $2,250,000 post-suit damages award, and remanding to the district court to determine what, if any, enhancement should be awarded. In March 2021, NetScout filed a petition for a writ of certiorari to the United States Supreme Court, which was subsequently denied, challenging, among other issues, the basis for enhanced damages and the patentability of the claimed technology. In addition, on September 8 and 9, 2021, in proceedings initiated by third parties that did not involve NetScout, the Patent Trial and Appeal Board (PTAB) invalidated all the patent claims that were also asserted against NetScout in this case. After the PTAB decisions were issued, NetScout moved, among other things, to dismiss the case and enter judgment in its favor on the grounds that the PTAB decisions invalidating the asserted claims precluded Plaintiff from continuing to assert its patent infringement causes of action and from seeking damages from NetScout. The District Court denied NetScout’s motion with respect to its request to dismiss the case and enter judgment in its favor, but in response to alternative requests for relief requested by NetScout, vacated $1.7 million of the "enhanced" jury verdict amount of $2.8 million and also lowered the ongoing royalty rate on the G10 and GeoBlade products. The District Court entered an amended final judgment awarding Plaintiff $2.25 million in post-suit damages, $1.1 million in enhanced damages, pre- and post-judgment interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last expiration date being June 2022. On July 20, 2022, NetScout filed a notice of appeal to the Court of Appeals for the Federal Circuit from, among other things, the amended final judgment. The amended judgment is stayed pending the resolution of the appeal. In view of the current circumstances, and if the post-suit and enhanced damages award along with the associated interest and royalties survives the recent PTAB invalidation decisions and NetScout's appeal, NetScout has concluded that the risk of loss associated with such damages award remains "probable" in accounting terms, and that the risk of loss associated with pre-suit damages is remote.

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PENSION BENEFIT PLANS

9 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

PENSION BENEFIT PLANS

PENSION BENEFIT PLANS

Certain of the Company's non-U.S. employees participate in noncontributory defined benefit pension plans. None of the Company's employees in the U.S. participate in any noncontributory defined benefit pension plans. In general, these plans are funded based on considerations relating to legal requirements, underlying asset returns, the plan's funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates and other factors.

The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three and nine months ended December 31, 2022 and 2021, respectively, (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Service cost	$	42	$	41	$	128	$	129
Interest cost	85		83		261		263
Net periodic pension cost	$	127	$	124	$	389	$	392

Expected Contributions

During the nine months ended December 31, 2022, the Company made contributions of $0.3 million to its defined benefit pension plans. During the fiscal year ending March 31, 2023, the Company's cash contribution requirements for its defined benefit pension plans are expected to be less than $1.0 million. As a majority of the participants within the Company's plans are all active employees, the benefit payments are not expected to be material in the foreseeable future.

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TREASURY STOCK

9 Months Ended

Dec. 31, 2022

Equity [Abstract]

TREASURY STOCK

TREASURY STOCK

On October 24, 2017, the Company's Board of Directors approved a share repurchase program that enabled the Company to repurchase up to twenty-five million shares of its common stock (2017 Share Repurchase Program). This program became effective when the Company's previously disclosed twenty million share repurchase program was completed. The Company was not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this share repurchase program. Through December 31, 2022, the Company repurchased a total of 23,790,847 shares for $660.4 million in the open market under the 2017 Share Repurchase Program, and at December 31, 2022, 1,209,153 shares of common stock remained available to be purchased under the 2017 Share Repurchase Program. The Company repurchased 4,549,329 and 1,330,678 shares for $150.0 million and $35.7 million under the 2017 Share Repurchase Program during the nine months ended December 31, 2022 and 2021, respectively.

On May 3, 2022, the Company's Board of Directors approved a new share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock (2022 Share Repurchase Program). The 2022 Share Repurchase Program will become effective once the 2017 Share Repurchase Program is completed. The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of the 2022 Share Repurchase Program.

On May 9, 2022, the Company entered into accelerated share repurchase (ASR) agreements with Mizuho Markets Americas LLC (Mizuho) and Wells Fargo Bank, National Association (Wells Fargo) (collectively, the Dealers) to repurchase an aggregate of $150 million of the Company's common stock via accelerated stock repurchase transactions under the 2017 Share Repurchase Program. Under the terms of the ASR, the Company made a $75 million payment to each of the Dealers on May 10, 2022, and received an initial delivery of 1,627,907 shares from each of the Dealers, or 3,255,814 shares in the aggregate, which was approximately 70 percent of the total number of shares of the Company's common stock expected to be repurchased under the ASR agreements. These shares reduced the number of shares of the Company's common stock available for repurchase under the 2017 Share Repurchase Program. Final settlement of the ASR agreements was completed in November 2022. As a result, the Company received an additional 651,213 shares from Mizuho and 642,302 shares from Wells Fargo, or 1,293,515 shares in the aggregate, for $47.9 million, which reduced the number of shares of the Company's common stock available to be repurchased under the 2017 Share Repurchase Program. In total, 4,549,329 shares of the Company's common stock were repurchased under the ASR agreements at an average cost per share of $32.97 during the nine months ended December 31, 2022.

In connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld 555,651 shares and 531,725 shares at a cost of $19.2 million and $15.2 million, respectively, related to minimum statutory tax withholding requirements on these restricted stock units during the nine months ended December 31, 2022 and 2021, respectively. These withholding transactions do not fall under the share repurchase programs described above, and therefore do not reduce the number of shares that are available for repurchase under those programs.

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NET INCOME PER SHARE

9 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

NET INCOME PER SHARE

NET INCOME PER SHARE

Calculations of the basic and diluted net income per share and potential common shares are as follows (in thousands, except for per share data):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Numerator:
Net income	$	52,618	$	47,725	$	62,869	$	44,280
Denominator:
Denominator for basic net income per share - weighted average common shares outstanding	71,744		73,898		72,015		74,048
Dilutive common equivalent shares:
Weighted average restricted stock units and performance-based restricted stock units	1,305		1,001		1,256		928
Denominator for diluted net income per share - weighted average shares outstanding	73,049		74,899		73,271		74,976
Net income per share:
Basic net income per share	$	0.73	$	0.65	$	0.87	$	0.60
Diluted net income per share	$	0.72	$	0.64	$	0.86	$	0.59

The following table sets forth restricted stock units excluded from the calculation of diluted net income per share, since their inclusion would be anti-dilutive (in thousands):

	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2022	2021	2022	2021
Restricted stock units	207	26	1,580	1,166

Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted net income per share is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options and unrecognized compensation expense as additional proceeds.

The delivery of 4.5 million shares under the Company's ASR agreements reduced the Company's outstanding shares used to determine the weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the nine months ended December 31, 2022. See Note 15 for additional information.

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INCOME TAXES

9 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Generally, the Company's effective tax rate differs from the U.S. federal statutory income tax rate primarily due to foreign withholding taxes and U.S. taxation on foreign earnings, partially offset by research and development tax credits, foreign tax credits, stock related compensation and the foreign derived intangible income deduction.

The Company's effective tax rates were 13.1% and 14.2% for the three months ended December 31, 2022 and 2021, respectively. The effective tax rate for the three months ended December 31, 2022 differed from the effective tax rate for the three months ended December 31, 2021 primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings.

The Company's effective tax rates were 9.5% and 15.5% for the nine months ended December 31, 2022 and 2021, respectively. The effective tax rate for the nine months ended December 31, 2022 differed from the effective tax rate for the nine months ended December 31, 2021 primarily due to research and development tax credits, foreign tax credits, the foreign derived intangible income deduction, and U.S. taxation of foreign earnings, as well as a discrete benefit from stock compensation during the nine months ended December 31, 2022.

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SEGMENT AND GEOGRAPHIC INFORMATION

9 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

The Company reports revenues and income under one reportable segment.

The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. The Company's policies mandate compliance with economic sanctions and the export controls.

Total revenue by geography is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
United States	$	181,206	$	162,794	$	461,672	$	399,349
Europe	35,926		48,620		105,013		121,712
Asia	15,422		14,519		44,608		46,835
Rest of the world	36,990		36,261		95,144		96,488
	$	269,544	$	262,194	$	706,437	$	664,384

The United States revenue includes sales to resellers in the United States. These resellers fulfill customer orders and may subsequently ship the Company's products to international locations. Further, the Company determines the geography of its sales after considering where the contract originated. A majority of revenue attributable to locations outside of the United States is a result of export sales. Substantially all of the Company's identifiable assets are located in the United States.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position and stockholders' equity, results of operations and cash flows. The year-end consolidated balance sheet data and statement of stockholders' equity were derived from the Company's audited financial statements, but do not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the Securities and Exchange Commission on May 19, 2022.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 is effective for the Company beginning April 1, 2023. Amendments within the standard are required to be applied on a prospective basis from the date of adoption. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures. We will apply the provisions of ASU 2021-08 after adoption to future acquisitions, if any.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain

criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform, which clarifies the scope and application of certain optional expedients and exceptions regarding the original guidance. ASU 2021-01 may be applied prospectively through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures.

Revenue Recognition Policy

Revenue Recognition Policy

The Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period.

The Company derives revenues primarily from the sale of network management tools and cybersecurity solutions for service provider and enterprise customers, which include hardware, software, and service offerings. The Company's product sales consist of software only offerings and offerings which include hardware appliances with embedded software that are essential to providing customers the intended functionality of the solutions.

The Company accounts for revenue once a legally enforceable contract with a customer has been approved by the parties and the related promises to transfer products or services have been identified. A contract is defined by the Company as an arrangement with commercial substance identifying payment terms, each party’s rights and obligations regarding the products or services to be transferred and the amount the Company deems probable of collection. Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Revenue is recognized when control of the products or services are transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for products and services.

Product revenue is typically recognized upon fulfillment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service (SAAS) and other professional services including consulting and training. The Company generally provides software and/or hardware support as part of product sales. Revenue related to the initial bundled software and hardware support is recognized ratably over the support period. In addition, customers can elect to purchase extended support agreements for periods after the initial software/hardware warranty expiration. Support services generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates, bug fixes and hardware repair and replacement. Consulting services are recognized upon delivery or completion of performance depending on the terms of the underlying contract. Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in services revenue, with the offsetting expense recorded in cost of service revenue. Training services include on-site and classroom training. Training revenues are recognized upon delivery of the training.

Generally, the Company's contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based primarily on the performance obligation's historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service performance obligations based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. SSP has primarily been established for product performance obligations as the average or median selling price the performance obligation was recently sold for, whether sold alone or sold as part of a bundle transaction. The Company reviews sales of the product performance obligations on a quarterly basis and

updates, when appropriate, its SSP for such performance obligations to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a customer as a reduction of revenue to the extent they have recorded revenue from the customer. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

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REVENUE (Tables)

9 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Summary of Allowance for Credit Losses

The following table summarizes the activity in the allowance for credit losses (in thousands):

Balance at March 31, 2022	$	1,649
Provision for allowance for credit losses	783
Recoveries and other adjustments	865
Write off charged against the allowance for credit losses	(2,295)
Balance at December 31, 2022	$	1,002

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SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Share-Based Compensation Expense

The following is a summary of share-based compensation expense including restricted stock units and performance-based restricted stock units granted pursuant to the Company's Amended 2007 Plan, the 2019 Plan, the 2019 Amended Plan, and the 2019 Second Amended Plan, and employee stock purchases made under the Company's 2011 Amended and Restated Employee Stock Purchase Plan (ESPP), based on estimated fair values within the applicable cost and expense lines identified below (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Cost of product revenue	$	262	$	214	$	869	$	809
Cost of service revenue	1,781		1,302		5,606		4,822
Research and development	4,174		3,297		13,185		12,290
Sales and marketing	5,445		4,727		17,238		15,383
General and administrative	3,481		3,141		10,327		10,077
	$	15,143	$	12,681	$	47,225	$	43,381

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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Tables)

9 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Summary of Marketable Securities

The following is a summary of marketable securities held by NetScout at December 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	19,211	$	(1)	$	19,210
Commercial paper	33,487		—		33,487
Corporate bonds	1,130		(1)		1,129
Certificates of deposit	3,436		—		3,436
Total short-term marketable securities	57,264		(2)		57,262
U.S. government and municipal obligations	6,919		(13)		6,906
Total long-term marketable securities	6,919		(13)		6,906
Total marketable securities	$	64,183	$	(15)	$	64,168

The following is a summary of marketable securities held by NetScout at March 31, 2022, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Losses		Fair Value
Type of security:
U.S. government and municipal obligations	$	40,895	$	(32)	$	40,863
Commercial paper	23,353		—		23,353
Corporate bonds	823		(2)		821
Certificates of deposit	2,000		—		2,000
Total short-term marketable securities	67,071		(34)		67,037
Total long-term marketable securities	—		—		—
Total marketable securities	$	67,071	$	(34)	$	67,037

Summary of Contractual Maturities of Marketable Securities

Contractual maturities of the Company's marketable securities held at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	December 31, 2022		March 31, 2022
Available-for-sale securities:
Due in 1 year or less	$	57,262	$	67,037
Due after 1 year through 5 years	6,906		—
	$	64,168	$	67,037

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities

The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at December 31, 2022 and March 31, 2022 (in thousands):

	Fair Value Measurements at
	December 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	306,572	$	45,472	$	—	$	352,044
U.S. government and municipal obligations	23,499		2,617		—		26,116
Commercial paper	—		33,487		—		33,487
Corporate bonds	1,129		—		—		1,129
Certificate of deposits	—		3,436		—		3,436
Derivative financial instruments	—		40		—		40
	$	331,200	$	85,052	$	—	$	416,252
LIABILITIES:
Derivative financial instruments	$	—	$	(188)	$	—	$	(188)
	$	—	$	(188)	$	—	$	(188)

	Fair Value Measurements at
	March 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash and cash equivalents	$	617,734	$	18,427	$	—	$	636,161
U.S. government and municipal obligations	40,863		—		—		40,863
Commercial paper	—		23,353		—		23,353
Corporate bonds	821		—		—		821
Certificate of deposits	—		2,000		—		2,000
Derivative financial instruments	—		20		—		20
	$	659,418	$	43,800	$	—	$	703,218
LIABILITIES:
Derivative financial instruments	$	—	$	(78)	$	—	$	(78)
	$	—	$	(78)	$	—	$	(78)

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INVENTORIES (Tables)

9 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	December 31, 2022		March 31, 2022
Raw materials	$	12,231	$	14,779
Work in process	213		695
Finished goods	5,154		5,761
Deferred costs	1,023		6,985
	$	18,621	$	28,220

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2022 as follows (in thousands):

Balance at March 31, 2022	$	1,723,156
Foreign currency translation impact	2,573
Balance at December 31, 2022	$	1,725,729

Schedule of Intangible Assets

Intangible assets include the following amortizable intangible assets at December 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	249,470	$	(230,700)	$	18,770
Customer relationships	8 - 18 years	766,635		(420,678)		345,957
Distributor relationships and technology licenses	1 - 6 years	11,521		(9,803)		1,718
Definite-lived trademark and trade name	2 - 9 years	57,627		(42,026)		15,601
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(997)		211
		$	1,097,262	$	(715,005)	$	382,257

Intangible assets include the following amortizable intangible assets at March 31, 2022 (in thousands):

	Estimated Useful Life in Years	Cost		Accumulated Amortization		Net
Developed technology	3 - 13 years	$	250,247	$	(224,426)	$	25,821
Customer relationships	8 - 18 years	769,404		(384,347)		385,057
Distributor relationships and technology licenses	1 - 6 years	11,408		(8,896)		2,512
Definite-lived trademark and trade name	2 - 9 years	57,748		(37,944)		19,804
Core technology	10 years	7,192		(7,192)		—
Non-compete agreements	3 years	292		(292)		—
Capitalized software	3 years	3,317		(3,317)		—
Other	1 - 20 years	1,208		(983)		225
		$	1,100,816	$	(667,397)	$	433,419

Finite-lived Intangible Assets Amortization Expense

The following table provides a summary of amortization expense for the three and nine months ended December 31, 2022 and 2021, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Amortization of intangible assets included as:
Cost of product revenue	$	2,627	$	3,643	$	7,908	$	10,959
Operating expense	13,823		14,924		41,515		44,910
	$	16,450	$	18,567	$	49,423	$	55,869

Schedule of Expected Future Amortization Expense

The following is the expected future amortization expense at December 31, 2022 for the fiscal years ending March 31 (in thousands):

2023 (remaining three months)	$	16,515
2024	57,878
2025	50,713
2026	46,357
2027	43,480
Thereafter	167,314
	$	382,257

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at December 31, 2022 and March 31, 2022 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022		December 31, 2022		March 31, 2022
Derivatives Designated as Hedging Instruments:
Forward contracts	$	11,955	$	5,578	$	40	$	20	$	188	$	78
					$	40	$	20	$	188	$	78

(a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

Summary of Effect of Foreign Exchange Forward Contracts on OCI and Results of Operations

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the three months ended December 31, 2022 and 2021 (in thousands):

	Gain Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	611	$	30	Research and development	$	30	$	(2)
					Sales and marketing	97		40
	$	611	$	30		$	127	$	38

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts designated as hedging instruments had on other comprehensive income (OCI) and results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Gain (Loss) Recognized in OCI on Derivative (a)				Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	December 31, 2022		December 31, 2021		Location	December 31, 2022		December 31, 2021
Forward contracts	$	(582)	$	158	Research and development	$	49	$	(17)
					Sales and marketing	452		(11)
	$	(582)	$	158		$	501	$	(28)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b)The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

The following table provides the effect that foreign exchange forward contracts not designated as hedging instruments had on the Company's results of operations for the nine months ended December 31, 2022 and 2021 (in thousands):

	Loss Recognized in Income (a)
	Location	December 31, 2022		December 31, 2021
Forward contracts	General and administrative	$	—	$	(248)
		$	—	$	(248)

(a)The amount represents the change in fair value of derivative contracts due to changes in spot rates.

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RESTRUCTURING CHARGES (Tables)

9 Months Ended

Dec. 31, 2022

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Liability

The following table provides a summary of the activity related to the restructuring plan and the restructuring liability (in thousands):

	Q1FY23 Plan
Balance at March 31, 2022	$	—
Restructuring charges to operations	1,861
Cash payments	(1,593)
Other adjustments	(128)
Balance at December 31, 2022	$	140

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LEASES (Tables)

9 Months Ended

Dec. 31, 2022

Leases [Abstract]

Components of Operating Lease Cost and Supplemental Cash Flow Information

The components of operating lease cost for the three and nine months ended December 31, 2022 and 2021, respectively, were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Lease cost under long-term operating leases	$	3,078	$	3,187	$	9,285	$	9,659
Lease cost under short-term operating leases	870		1,247		2,849		2,990
Variable lease cost under short-term and long-term operating leases	821		925		2,677		2,508
Total operating lease cost	$	4,769	$	5,359	$	14,811	$	15,157

The table below presents supplemental cash flow information related to leases during the nine months ended December 31, 2022 and 2021 (in thousands):

	December 31, 2022		December 31, 2021
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,215	$	2,461

At December 31, 2022 and March 31, 2022, the weighted average remaining lease term in years and weighted average discount rate were as follows:

	December 31, 2022		March 31, 2022
Weighted average remaining lease term in years - operating leases	6.39		6.98
Weighted average discount rate - operating leases	4.1	%	4.0	%

Future Minimum Payments Under Non-Cancellable Leases

Future minimum payments under non-cancellable leases at December 31, 2022 are as follows (in thousands):

Year ending March 31:
2023 (remaining three months)	$	2,431
2024	12,682
2025	12,018
2026	10,362
2027	8,180
Thereafter	22,901
Total lease payments	$	68,574
Less imputed interest	(8,213)
Present value of lease liabilities	$	60,361

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PENSION BENEFIT PLANS (Tables)

9 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Schedule of Net Periodic Pension Costs of Noncontributory Defined Benefit Pension Plans

The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three and nine months ended December 31, 2022 and 2021, respectively, (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Service cost	$	42	$	41	$	128	$	129
Interest cost	85		83		261		263
Net periodic pension cost	$	127	$	124	$	389	$	392

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NET INCOME PER SHARE (Tables)

9 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Schedule of Calculations of the Basic and Diluted Net Income Per Share and Potential Common Shares

Calculations of the basic and diluted net income per share and potential common shares are as follows (in thousands, except for per share data):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Numerator:
Net income	$	52,618	$	47,725	$	62,869	$	44,280
Denominator:
Denominator for basic net income per share - weighted average common shares outstanding	71,744		73,898		72,015		74,048
Dilutive common equivalent shares:
Weighted average restricted stock units and performance-based restricted stock units	1,305		1,001		1,256		928
Denominator for diluted net income per share - weighted average shares outstanding	73,049		74,899		73,271		74,976
Net income per share:
Basic net income per share	$	0.73	$	0.65	$	0.87	$	0.60
Diluted net income per share	$	0.72	$	0.64	$	0.86	$	0.59

Summary of Antidilutive Securities Excluded from Computation of Diluted Net Income Per Share

The following table sets forth restricted stock units excluded from the calculation of diluted net income per share, since their inclusion would be anti-dilutive (in thousands):

	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2022	2021	2022	2021
Restricted stock units	207	26	1,580	1,166

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SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

9 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Summary of Total Revenue by Geography

Total revenue by geography is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
United States	$	181,206	$	162,794	$	461,672	$	399,349
Europe	35,926		48,620		105,013		121,712
Asia	15,422		14,519		44,608		46,835
Rest of the world	36,990		36,261		95,144		96,488
	$	269,544	$	262,194	$	706,437	$	664,384

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BASIS OF PRESENTATION - Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2022	Mar. 31, 2022
Summary Of Significant Accounting Policies [Line Items]
Deferred employer payroll taxes		$ 4.5
Senior Secured Revolving Credit Facility | Line of Credit
Summary Of Significant Accounting Policies [Line Items]
Current borrowing capacity	$ 600.0

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REVENUE - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenue recognized			$ 277.1
Deferred revenue	$ 444.9		444.9
Unrecognized accounts receivable and deferred revenue	3.7		3.7		$ 9.4
Capitalized contract cost	9.3		9.3		8.8
Amortization of capitalized costs to obtain contracts	1.8	$ 1.6	5.2	$ 4.7
Prepaid Expenses and Other Current Assets
Disaggregation of Revenue [Line Items]
Capitalized contract cost	4.7		4.7		4.6
Other Assets
Disaggregation of Revenue [Line Items]
Capitalized contract cost	$ 4.6		$ 4.6		$ 4.2
Minimum
Disaggregation of Revenue [Line Items]
Payment terms			30 days
Maximum
Disaggregation of Revenue [Line Items]
Payment terms			90 days

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REVENUE - Performance Obligations (Details) $ in Millions	Dec. 31, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation, amount	$ 317.4
Revenue, remaining performance obligation, percentage	71.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation, amount	$ 127.5
Revenue, remaining performance obligation, percentage	29.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period

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REVENUE - Allowance for Credit Losses (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2022 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for credit losses, beginning balance	$ 1,649
Provision for allowance for credit losses	783
Recoveries and other adjustments	865
Write off charged against the allowance for credit losses	(2,295)
Allowance for credit losses, ending balance	$ 1,002

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SHARE-BASED COMPENSATION - Narrative (Details) - $ / shares			9 Months Ended	12 Months Ended
	Aug. 24, 2022	Sep. 10, 2020	Dec. 31, 2022	Mar. 31, 2022
ESPP
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of new shares (in shares)	2,000,000
Percentage of common stock price for employees			85.00%
Shares purchased by employees under ESPP (in shares)			206,029
Share price (in dollars per share)			$ 31.74
Performance Based Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Award performance measurement period				3 years
2019 Amended Plan
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of new shares (in shares)	7,000,000	4,700,000
Number of shares reserved for issuance (in shares)	8,764,811
Number of new shares reserved for issuance (in shares)	7,000,000
Number of shares available for grant (in shares)	1,764,811		6,235,096
2019 Amended Plan | Minimum
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based awards generally vesting years		1 year

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SHARE-BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 15,143	$ 12,681	$ 47,225	$ 43,381
Cost of product revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	262	214	869	809
Cost of service revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	1,781	1,302	5,606	4,822
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	4,174	3,297	13,185	12,290
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	5,445	4,727	17,238	15,383
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 3,481	$ 3,141	$ 10,327	$ 10,077

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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES - Summary of Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 64,183	$ 67,071
Unrealized Losses	(15)	(34)
Fair Value	64,168	67,037
Short-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	57,264	67,071
Unrealized Losses	(2)	(34)
Fair Value	57,262	67,037
Long-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	6,919	0
Unrealized Losses	(13)	0
Fair Value	6,906	0
U.S. government and municipal obligations
Debt Securities, Available-for-sale [Line Items]
Fair Value	26,116	40,863
U.S. government and municipal obligations | Short-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	19,211	40,895
Unrealized Losses	(1)	(32)
Fair Value	19,210	40,863
U.S. government and municipal obligations | Long-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	6,919
Unrealized Losses	(13)
Fair Value	6,906
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Fair Value	33,487	23,353
Commercial paper | Short-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	33,487	23,353
Unrealized Losses	0	0
Fair Value	33,487	23,353
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Fair Value	1,129	821
Corporate bonds | Short-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	1,130	823
Unrealized Losses	(1)	(2)
Fair Value	1,129	821
Certificates of deposit
Debt Securities, Available-for-sale [Line Items]
Fair Value	3,436	2,000
Certificates of deposit | Short-term Marketable Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	3,436	2,000
Unrealized Losses	0	0
Fair Value	$ 3,436	$ 2,000

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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES - Summary of Contractual Maturities of Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Available-for-sale securities:
Due in 1 year or less	$ 57,262	$ 67,037
Due after 1 year through 5 years	6,906	0
Available-for-sale Securities	$ 64,168	$ 67,037

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FAIR VALUE MEASUREMENTS - Schedule of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
ASSETS:
Cash and cash equivalents	$ 352,044	$ 636,161
Available-for-sale securities	64,168	67,037
Derivative financial instruments	40	20
Total assets	416,252	703,218
LIABILITIES:
Derivative financial instruments	(188)	(78)
Total liabilities	(188)	(78)
U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	26,116	40,863
Commercial paper
ASSETS:
Available-for-sale securities	33,487	23,353
Corporate bonds
ASSETS:
Available-for-sale securities	1,129	821
Certificate of deposits
ASSETS:
Available-for-sale securities	3,436	2,000
Level 1
ASSETS:
Cash and cash equivalents	306,572	617,734
Derivative financial instruments	0	0
Total assets	331,200	659,418
LIABILITIES:
Derivative financial instruments	0	0
Total liabilities	0	0
Level 1 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	23,499	40,863
Level 1 | Commercial paper
ASSETS:
Available-for-sale securities	0	0
Level 1 | Corporate bonds
ASSETS:
Available-for-sale securities	1,129	821
Level 1 | Certificate of deposits
ASSETS:
Available-for-sale securities	0	0
Level 2
ASSETS:
Cash and cash equivalents	45,472	18,427
Derivative financial instruments	40	20
Total assets	85,052	43,800
LIABILITIES:
Derivative financial instruments	(188)	(78)
Total liabilities	(188)	(78)
Level 2 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	2,617	0
Level 2 | Commercial paper
ASSETS:
Available-for-sale securities	33,487	23,353
Level 2 | Corporate bonds
ASSETS:
Available-for-sale securities	0	0
Level 2 | Certificate of deposits
ASSETS:
Available-for-sale securities	3,436	2,000
Level 3
ASSETS:
Cash and cash equivalents	0	0
Derivative financial instruments	0	0
Total assets	0	0
LIABILITIES:
Derivative financial instruments	0	0
Total liabilities	0	0
Level 3 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	0	0
Level 3 | Commercial paper
ASSETS:
Available-for-sale securities	0	0
Level 3 | Corporate bonds
ASSETS:
Available-for-sale securities	0	0
Level 3 | Certificate of deposits
ASSETS:
Available-for-sale securities	$ 0	$ 0

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INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 12,231	$ 14,779
Work in process	213	695
Finished goods	5,154	5,761
Deferred costs	1,023	6,985
Total inventories	$ 18,621	$ 28,220

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2022 USD ($) reporting_unit	Mar. 31, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reporting units | reporting_unit	1
Goodwill	$ 1,725,729	$ 1,723,156
Carrying value of intangible assets	$ 382,257	$ 433,419

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2022 USD ($)
Goodwill [Roll Forward]
Balance at March 31, 2022	$ 1,723,156
Foreign currency translation impact	2,573
Balance at December 31, 2022	$ 1,725,729

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Dec. 31, 2022	Mar. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Cost	$ 1,097,262	$ 1,100,816
Accumulated Amortization	(715,005)	(667,397)
Net	382,257	433,419
Developed technology
Finite-Lived Intangible Assets [Line Items]
Cost	249,470	250,247
Accumulated Amortization	(230,700)	(224,426)
Net	$ 18,770	$ 25,821
Developed technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	3 years	3 years
Developed technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	13 years	13 years
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Cost	$ 766,635	$ 769,404
Accumulated Amortization	(420,678)	(384,347)
Net	$ 345,957	$ 385,057
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	8 years	8 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	18 years	18 years
Distributor relationships and technology licenses
Finite-Lived Intangible Assets [Line Items]
Cost	$ 11,521	$ 11,408
Accumulated Amortization	(9,803)	(8,896)
Net	$ 1,718	$ 2,512
Distributor relationships and technology licenses | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	1 year	1 year
Distributor relationships and technology licenses | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	6 years	6 years
Definite-lived trademark and trade name
Finite-Lived Intangible Assets [Line Items]
Cost	$ 57,627	$ 57,748
Accumulated Amortization	(42,026)	(37,944)
Net	$ 15,601	$ 19,804
Definite-lived trademark and trade name | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	2 years	2 years
Definite-lived trademark and trade name | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	9 years	9 years
Core technology
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	10 years	10 years
Cost	$ 7,192	$ 7,192
Accumulated Amortization	(7,192)	(7,192)
Net	$ 0	$ 0
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	3 years	3 years
Cost	$ 292	$ 292
Accumulated Amortization	(292)	(292)
Net	$ 0	$ 0
Capitalized software
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	3 years	3 years
Cost	$ 3,317	$ 3,317
Accumulated Amortization	(3,317)	(3,317)
Net	0	0
Other
Finite-Lived Intangible Assets [Line Items]
Cost	1,208	1,208
Accumulated Amortization	(997)	(983)
Net	$ 211	$ 225
Other | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	1 year	1 year
Other | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life in Years	20 years	20 years

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	$ 16,450	$ 18,567	$ 49,423	$ 55,869
Cost of product revenue
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	2,627	3,643	7,908	10,959
Operating expense
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	$ 13,823	$ 14,924	$ 41,515	$ 44,910

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Expected Future Amortization Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2023 (remaining three months)	$ 16,515
2024	57,878
2025	50,713
2026	46,357
2027	43,480
Thereafter	167,314
Net	$ 382,257	$ 433,419

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Narrative (Details)	9 Months Ended
	Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Managing period of hedging forecasted cash flows for operating expenses denominated in foreign currencies	12 months
Contract maturity period	12 months

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet (Details) - Forward contracts - USD ($) $ in Thousands	Dec. 31, 2022	Mar. 31, 2022
Derivatives, Fair Value [Line Items]
Prepaid Expenses and Other Current Assets	$ 40	$ 20
Accrued Other	188	78
Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Notional Amounts	11,955	5,578
Prepaid Expenses and Other Current Assets	40	20
Accrued Other	$ 188	$ 78

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Effect of Foreign Exchange Forward Contracts on Other Comprehensive Income and Results of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Derivative Instruments, Gain (Loss) [Line Items]
Loss Recognized in Income			$ 0	$ (248)
Forward contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Recognized in OCI on Derivative	$ 611	$ 30	(582)	158
Gain (Loss) Reclassified from Accumulated OCI into Income	127	38	501	(28)
Loss Recognized in Income			0	(248)
Forward contracts | Research and development
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Recognized in OCI on Derivative	611	30	(582)	158
Gain (Loss) Reclassified from Accumulated OCI into Income	30	(2)	49	(17)
Forward contracts | Sales and marketing
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Reclassified from Accumulated OCI into Income	$ 97	$ 40	$ 452	$ (11)

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LONG-TERM DEBT- Narrative (Details)			3 Months Ended	9 Months Ended		12 Months Ended
	May 09, 2022 USD ($)	Jul. 27, 2021 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Mar. 31, 2022 USD ($)
Debt Instrument [Line Items]
Repaid borrowings	$ 150,000,000					$ 350,000,000
Loss on extinguishment of debt				$ 0	$ 596,000
Senior Secured Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Debt term		5 years
Credit facility		$ 800,000,000
Loss on extinguishment of debt						$ 600,000
Amount outstanding under credit facility			$ 200,000,000	$ 200,000,000
Commitment fee percentage			0.15%
Adjusted consolidated EBITDA percentage		125.00%
Maximum leverage ratio		4.00	4.00	4.00
Debt default, acceleration clause, required consent percentage		50.00%
Unamortized debt issuance costs			$ 4,000,000	$ 4,000,000
Senior Secured Revolving Credit Facility | Line of Credit | Prepaid Expenses and Other Current Assets
Debt Instrument [Line Items]
Unamortized debt issuance costs			1,100,000	1,100,000
Senior Secured Revolving Credit Facility | Line of Credit | Other Assets
Debt Instrument [Line Items]
Unamortized debt issuance costs			$ 2,900,000	$ 2,900,000
Senior Secured Revolving Credit Facility | Line of Credit | Maximum
Debt Instrument [Line Items]
Leverage ratio			3.50	3.50
Commitment fee percentage			0.30%
Senior Secured Revolving Credit Facility | Line of Credit | Maximum | Foreign Subsidiaries
Debt Instrument [Line Items]
Voting stock pledge limit for any foreign subsidiary		65.00%
Senior Secured Revolving Credit Facility | Line of Credit | Minimum
Debt Instrument [Line Items]
Leverage ratio			1.50	1.50
Commitment fee percentage			0.15%
Senior Secured Revolving Credit Facility | Line of Credit | Federal Funds Effective Rate
Debt Instrument [Line Items]
Interest rate in excess of effective rate		0.50%
Senior Secured Revolving Credit Facility | Line of Credit | LIBOR
Debt Instrument [Line Items]
Interest rate in excess of effective rate		1.00%
Senior Secured Revolving Credit Facility | Line of Credit | LIBOR | LIBOR Loans
Debt Instrument [Line Items]
Interest rate in excess of effective rate				1.00%
Senior Secured Revolving Credit Facility | Line of Credit | LIBOR | LIBOR Loans | Maximum
Debt Instrument [Line Items]
Interest rate in excess of effective rate				2.00%
Senior Secured Revolving Credit Facility | Line of Credit | LIBOR | LIBOR Loans | Minimum
Debt Instrument [Line Items]
Interest rate in excess of effective rate				1.00%
Senior Secured Revolving Credit Facility | Line of Credit | Base Rate | Base Rate Loans
Debt Instrument [Line Items]
Interest rate in excess of effective rate				0.00%
Senior Secured Revolving Credit Facility | Line of Credit | Base Rate | Base Rate Loans | Maximum
Debt Instrument [Line Items]
Interest rate in excess of effective rate				1.00%
Senior Secured Revolving Credit Facility | Line of Credit | Base Rate | Base Rate Loans | Minimum
Debt Instrument [Line Items]
Interest rate in excess of effective rate				0.00%
Letter of Credit Sub-facility | Line of Credit
Debt Instrument [Line Items]
Credit facility		$ 75,000,000
Senior Secured Revolving Credit Facility Leverage Ratio Terms Two | Line of Credit | Maximum
Debt Instrument [Line Items]
Leverage ratio			2.75	2.75
Senior Secured Revolving Credit Facility Leverage Ratio Terms Two | Line of Credit | Minimum
Debt Instrument [Line Items]
Leverage ratio			1.50	1.50

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RESTRUCTURING CHARGES - Narrative (Details) $ in Thousands	3 Months Ended			9 Months Ended
	Dec. 31, 2022 USD ($)	Jun. 30, 2022 employee	Dec. 31, 2021 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 89		$ 0	$ 1,803	$ 0
One-time Termination Benefits
Restructuring Cost and Reserve [Line Items]
Number of employees terminated | employee		18
Restructuring charges				$ 1,900

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RESTRUCTURING CHARGES - Schedule of Restructuring Liability (Details) - Q1FY23 Plan - One-time Termination Benefits $ in Thousands	9 Months Ended
	Dec. 31, 2022 USD ($)
Restructuring Reserve [Roll Forward]
Balance at March 31, 2022	$ 0
Restructuring charges to operations	1,861
Cash payments	(1,593)
Other adjustments	(128)
Balance at December 31, 2022	$ 140

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LEASES - Narrative (Details)	Dec. 31, 2022
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Remaining lease terms	1 year
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Remaining lease terms	8 years

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LEASES - Operating Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Leases [Abstract]
Lease cost under long-term operating leases	$ 3,078	$ 3,187	$ 9,285	$ 9,659
Lease cost under short-term operating leases	870	1,247	2,849	2,990
Variable lease cost under short-term and long-term operating leases	821	925	2,677	2,508
Total operating lease cost	$ 4,769	$ 5,359	$ 14,811	$ 15,157

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LEASES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Leases [Abstract]
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 4,215	$ 2,461
Weighted average remaining lease term in years - operating leases	6 years 4 months 20 days		6 years 11 months 23 days
Weighted average discount rate - operating leases	4.10%		4.00%

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LEASES - Future Minimum Payments Under Non-Cancellable Leases (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Leases [Abstract]
2023 (remaining three months)	$ 2,431
2024	12,682
2025	12,018
2026	10,362
2027	8,180
Thereafter	22,901
Total lease payments	68,574
Less imputed interest	(8,213)
Present value of lease liabilities	$ 60,361

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COMMITMENTS AND CONTINGENCIES - Narrative (Details)	1 Months Ended				9 Months Ended
	Jul. 31, 2020 USD ($)	Sep. 30, 2018 USD ($)	Oct. 31, 2017 USD ($) patent	Mar. 31, 2016 subsidiary patent	Dec. 31, 2022 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Number of subsidiary entities | subsidiary				2
Number of patents allegedly infringed | patent			3	5
Damages sought		$ 2,800,000
Pre-suit Damages
Commitments and Contingencies Disclosure [Line Items]
Damages sought	$ 3,500,000		$ 3,500,000		$ 1,700,000
Post-suit Damages
Commitments and Contingencies Disclosure [Line Items]
Damages sought	$ 2,250,000		$ 2,250,000		$ 1,100,000

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PENSION BENEFIT PLANS - Narrative (Details) $ in Millions	9 Months Ended
	Dec. 31, 2022 USD ($) employee
Defined Benefit Plan Disclosure [Line Items]
Contributions to defined benefit pension plans	$ 0.3
Expected cash contribution requirements for defined benefit pension plans, less than	$ 1.0
United States
Defined Benefit Plan Disclosure [Line Items]
Number of employees participating in noncontributory defined benefit pension plans | employee	0

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PENSION BENEFIT PLANS - Net Periodic Pension Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Retirement Benefits [Abstract]
Service cost	$ 42	$ 41	$ 128	$ 129
Interest cost	85	83	261	263
Net periodic pension cost	$ 127	$ 124	$ 389	$ 392

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TREASURY STOCK- Narrative (Details) - USD ($)		1 Months Ended	9 Months Ended		62 Months Ended
	May 10, 2022	Nov. 30, 2022	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	May 09, 2022	May 03, 2022	Oct. 24, 2017	Oct. 23, 2017
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)									20,000,000
Value of shares repurchased		$ 47,900,000	$ 150,039,000	$ 35,652,000
Restricted Stock Units
Equity, Class of Treasury Stock [Line Items]
Shares paid for tax withholding (in shares)			555,651	531,725
Cost related to tax withholding			$ 19,200,000	$ 15,200,000
Share Repurchase Program, October 2017
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)								25,000,000
Shares repurchased during the period (in shares)			4,549,329	1,330,678	23,790,847
Shares repurchased			$ 150,000,000	$ 35,700,000	$ 660,400,000
Stock remaining to be purchased (in shares)			1,209,153		1,209,153
Share Repurchase Program, May 2022
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)							25,000,000
ASR Program
Equity, Class of Treasury Stock [Line Items]
Shares repurchased during the period (in shares)	3,255,814	1,293,515	4,549,329
Repurchase of aggregate amount						$ 150,000,000
Percentage of aggregate amount of shares expected to be repurchased	70.00%
Shares repurchased during the period, average cost per share (in dollars per share)			$ 32.97
ASR Program | Mizuho Markets Americas LLC
Equity, Class of Treasury Stock [Line Items]
Shares repurchased during the period (in shares)	1,627,907	651,213
Value of shares repurchased	$ 75,000,000
ASR Program | Wells Fargo Bank, National Association
Equity, Class of Treasury Stock [Line Items]
Shares repurchased during the period (in shares)	1,627,907	642,302
Value of shares repurchased	$ 75,000,000

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NET INCOME PER SHARE - Schedule of Calculations of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Numerator:
Net income	$ 52,618	$ 47,725	$ 62,869	$ 44,280
Denominator:
Denominator for basic net income per share - weighted average common shares outstanding (in shares)	71,744	73,898	72,015	74,048
Dilutive common equivalent shares:
Weighted average restricted stock units and performance-based restricted stock units (in shares)	1,305	1,001	1,256	928
Denominator for diluted net income per share - weighted average shares outstanding (in shares)	73,049	74,899	73,271	74,976
Net income per share:
Basic net income per share (in dollars per share)	$ 0.73	$ 0.65	$ 0.87	$ 0.60
Diluted net income per share (in dollars per share)	$ 0.72	$ 0.64	$ 0.86	$ 0.59

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NET INCOME PER SHARE - Antidilutive Securities Excluded from Computation (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	207	26	1,580	1,166

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NET INCOME PER SHARE - Narrative (Details) - shares		1 Months Ended	9 Months Ended
	May 10, 2022	Nov. 30, 2022	Dec. 31, 2022
ASR Program
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Repurchase of treasury stock (in shares)	3,255,814	1,293,515	4,549,329

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INCOME TAXES - Narrative (Details)	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Effective tax rate	13.10%	14.20%	9.50%	15.50%

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SEGMENT AND GEOGRAPHIC INFORMATION (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2022 USD ($) segment	Dec. 31, 2021 USD ($)
Segment Reporting [Abstract]
Number of segments | segment			1
Segment Reporting Information [Line Items]
Total revenue	$ 269,544	$ 262,194	$ 706,437	$ 664,384
United States
Segment Reporting Information [Line Items]
Total revenue	181,206	162,794	461,672	399,349
Europe
Segment Reporting Information [Line Items]
Total revenue	35,926	48,620	105,013	121,712
Asia
Segment Reporting Information [Line Items]
Total revenue	15,422	14,519	44,608	46,835
Rest of the world
Segment Reporting Information [Line Items]
Total revenue	$ 36,990	$ 36,261	$ 95,144	$ 96,488