What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-05-19 compared with 2021-05-20 · 103 added, 43 removed, 220 unchanged (40% of the section changed)

We are an industry leader with over 35 years of experience in providing service assurance and cybersecurity solutions that are used by customers worldwide to assure and secure their digital business services against disruption while preserving the user experience.

Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility and security 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 the network 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 security, thereby driving compelling returns on their investments in their network 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 cloud migration, expanding threats associated with the rapidly evolving cybersecurity threat landscape, the advancement of business intelligence and analytics, and the 5G evolution occurring in both the service provider and enterprise 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 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 new products and enhance existing products, the marketplace acceptance of those new or enhanced products, continued expansion into international markets, development of strategic partnerships, competition, successful acquisition integration efforts, and our ability to manage expenses and make improvements in a highly competitive industry.

Our service assurance solutions are used by enterprises (including government agencies) and service providers to optimize network performance, quickly identify and resolve issues impacting application and service quality and gain insight into the end user experience.

Our cybersecurity solutions are used by enterprises and service providers to identify and mitigate advanced, volumetric, and application-specific distributed denial of service (DDoS) attacks, as well as assist enterprise security teams in rapidly finding and isolating other advanced network threats.

We are an industry leader with over three decades of experience in providing service assurance and cybersecurity solutions that are 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 new products 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.

Our cybersecurity solutions are used by enterprises and service providers to identify and mitigate advanced, volumetric, and application-specific distributed denial of service (DDoS) attacks, as well as assist enterprise security teams in rapidly identifying, isolating, investigating, and resolving other advanced network threats.

Enterprise Market

Within the enterprise market, NetScout's nGeniusONE and ISNG offerings enable IT organizations to support a growing range of performance management and cybersecurity use cases including:

Within the enterprise market, NetScout's nGeniusONE, ISNG, and Omnis offerings enable IT organizations to support a growing range of performance management and cybersecurity use cases including:

• Network Performance Management - Our nGeniusONE analytics and our ISNG real-time information platform provide the necessary insight to optimize network performance, restore service and understand the quality of the users’ experience.

14 unchanged sentences

• Cybersecurity:

DDoS Protection and Cyber Threat Analytics - Computer networks continue to be targeted for cyberattacks, even more aggressively during the COVID-19 pandemic, that are aimed at disrupting, damaging, or otherwise destroying an enterprise’s ability to conduct its business or gaining unauthorized access to corporate applications and stealing valuable information.

We provide a range of network security solutions under the NetScout Arbor brand that enable enterprises to protect their networks from high-volume and application-specific DDoS attacks, which are aimed at either overwhelming the network with traffic or over-exercising specific functions or features of a website with the intention to disable those functions or features.

We have also developed new cybersecurity solutions for enterprises that provide greater deep-dive forensic capabilities as well as analytics that can provide visibility into anomalous behavior on the network that may be indicative of an advanced threat.

DDoS Protection and Omnis Cyber Intelligence - Computer networks continue to be targeted for cyberattacks that are aimed at disrupting, damaging, or otherwise destroying an enterprise’s ability to conduct its business or gaining unauthorized access to corporate applications and restricting or stealing valuable information.

functions or features.

We have also developed new cybersecurity solutions for enterprises with our Omnis suite of products that provide greater deep-dive forensic capabilities as well as analytics that can provide visibility into anomalous behavior on the network that may be indicative of an advanced threat.

These security analytics enable existing enterprise customers to leverage their historical investments in NetScout's service assurance solutions by using the Adaptive Service Intelligence (ASI) data already being generated to support service assurance as well as cybersecurity use cases.

Government Markets

Considered as part of our enterprise vertical, we have built a strong position with federal, state and local government agencies, both in the United States and abroad.

Considered as part of our enterprise customer vertical, we have built a strong position with federal, state and local government agencies, both in the United States and abroad.

Similar to our enterprise customers, government agencies are focused on streamlining and transforming IT into more efficient and more easily managed environments.

23 unchanged sentences

Our solutions are typically deployed by customers as integrated hardware and software, as software only that is then integrated into commercial off-the-shelf hardware, in a virtualized environment as software only, or as a Software as a Service (SaaS) form factor.

Our solutions help our customers meet the increasing demands and ever-changing technology landscape of IP networks, service, applications, and cybersecurity.

Our solutions help our customers meet the increasing demands and an ever-changing technology landscape of IP networks, service, applications, and cybersecurity threats.

In recent years, to further elevate our value proposition and address the near- and long-term needs of customers and prospects, we have delivered major product upgrades across our product lines by integrating key functionality from acquired product lines, increasing the deployment flexibility of our solutions, and adding new features and capabilities that enable us to address a broader range of use cases.

18 unchanged sentences

• Advanced Threat Detection – We are actively expanding our enterprise cybersecurity offerings to better leverage the investment that our enterprise customers have made in our traditional service assurance solutions.

By collecting network traffic via our probes, we can expand our value proposition by providing specialized analytics for both service assurance and security.

We have introduced and will continue to advance solutions such as new packet forensic capabilities, such as Omnis Cyber Investigator, designed specifically for security operations teams as well as new anomalous behavior analytics that security teams can use to identify and investigate potential advanced network threats.

By collecting network traffic via our probes, we can expand our value proposition by providing specialized analytics for both service assurance and cybersecurity.

We have introduced and will continue to advance solutions such as new packet forensic

capabilities, such as Omnis Cyber Intelligence, designed specifically for security operations teams as well as new anomalous behavior analytics that security teams can use to identify and investigate potential advanced network threats.

Our Omnis suite of products is focused on addressing cybersecurity use cases.

Integration with Third-Party Solutions

29 unchanged sentences

This is especially prevalent in international locations where time zones and language, among other factors, make it more efficient for end users to have the reseller provide initial support functions.

Our support also includes updates to

our software and firmware at no additional charge, if and when such updates are developed and made generally available to our commercial customer base.

Our support also includes updates to our software and firmware at no additional charge, if and when such updates are developed and made generally available to our commercial customer base.

If ordered, support commences upon shipment or expiration of the standard warranty for software.

12 unchanged sentences

While certain components, such as computer network interface cards, are currently purchased from a single supplier, we have identified alternate suppliers that we believe can be qualified relatively quickly to fulfill our needs should an issue arise with the existing supplier.

Our reliance on single source suppliers is further described in Item 1A "Risk Factors."

We continue to monitor the impact of the COVID-19 pandemic, the geopolitical environment, and other factors on our supply chain.

Although we have been able to manage supply challenges in the past, there is no guarantee that we will be able to continue to manage these challenges without significant impacts to our business if our supply chain becomes increasingly strained.

Our reliance on single source suppliers and impacts on our supply chain are further described in Item 1A "Risk Factors."

We manufacture our products based upon near-term demand estimates resulting from sales forecasts and historical fulfillment information.

However, since these forecasts have a high degree of variability because of factors that include time of year, overall economic conditions and sales employee incentives, we believe it is prudent to maintain inventory levels in advance of receipt of firm orders to ensure that we have sufficient stock t o satisfy incoming orders.

Our inventory management system has thus far enabled us to minimize the effects of the disruption caused by the global COVID-19 pandemic from a supply chain perspective.

The potential impact of the COVID-19 pandemic on our business is further described in Item 1A "Risk Factors."

The potential impact of the COVID-19 pandemic and potential supply chain disruptions on our business are further described in Item 1A "Risk Factors."

Sales and Marketing

We sell our products, support and services through a direct sales force and an indirect reseller and distribution channel.

Our direct sales force generally uses a "high-touch" sales model that consists of face-to-face meetings with customers to understand and identify their unique business challenges and requirements.

In the current global pandemic environment, our sales teams have been successful in engaging customers virtually to understand their requirements and effectively design solutions.

Our direct sales force generally uses a "high-touch" sales model that consists of face-to-face or virtual meetings with customers to understand and identify their unique business challenges and requirements.

In the global pandemic environment, although more difficult, our sales teams have been successful in engaging customers virtually to understand their requirements

and effectively design solutions.

Our sales teams translate our customers' requirements into tailored business solutions that allow the customer to maximize the performance of its infrastructure and service delivery environment.

11 unchanged sentences

During this selling process, a channel partner, who has contracts with both the end customer and us, may be brought in to facilitate the transaction and to provide fulfillment services.

In the case of

international channel partners, those services usually also include currency translation and support.

In the case of international channel partners, those services usually also include currency translation and support.

In the U.S., fulfillment services are usually limited to invoicing and cash collection.

3 unchanged sentences

Our marketing organization drives our market research, strategy, product positioning and messaging, and produces and manages a variety of programs such as customer forums, trade shows, industry events, advertising, public and analyst relations, social media, direct mail, seminars and webinars, sales promotions and other online marketing programs.

These programs are focused on promoting the sale and acceptance of our solutions to further build the NetScout brand as well as the ASI, nGenius, Arbor and other applicable product brand names in the marketplace.

These programs are focused on promoting the sale and acceptance of our solutions to further build the NetScout brand for our service assurance and cybersecurity products within the marketplace.

Key elements of our marketing strategy focus on thought leadership, market positioning, market education, go to market strategies, reputation management, demand generation, and the acceleration of our strategic selling relationships with local and global resellers, systems integrators, and our technology alliance partners.

During fiscal year 2021, we continued to invest in the promotion of the NetScout brand as well as the nGenius and Arbor brands as core solution-level brands in their respective markets.

During fiscal year 2022, we continued to invest in the promotion of the NetScout brand related to service assurance and cybersecurity products in their respective markets.

We expect to continue these initiatives during fiscal year 2023.

10 unchanged sentences

We have also acquired developed technology through business acquisitions.

To promote industry standards and manifest technology leadership, we participate in and support the activities and recommendations of industry standards bodies, and we also engage in close and regular dialogue with our key customers and alliance partners.

To promote industry standards and manifest technology leadership, we

participate in and support the activities and recommendations of industry standards bodies, and we also engage in close and regular dialogue with our key customers and alliance partners.

These activities provide early insight into the direction of network and application performance requirements and the changing cybersecurity landscape that impacts current and emerging technologies.

8 unchanged sentences

Customers generally may reschedule or cancel orders with little or no penalty.

We believe that our backlog at any particular time is not meaningful because it is not necessarily indicative of future sales levels.

We believe that our backlog at any particular time is generally not meaningful because it is not necessarily indicative of future sales levels.

Our combined product backlog at March 31, 2022 was $92.8 million compared to $27.9 million at March 31, 2021.

A majority of the backlog relates to customization and integration projects and radio frequency propagation modeling.

A majority of the backlog relates to 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.

A radio frequency propagation modeling project order received in the third quarter of fiscal year 2022 allowed NetScout to bill for the entire project based upon partial delivery.

At March 31, 2022, deferred revenue and accounts receivable each contained a gross balance of $19.9 million related to this radio frequency propagation modeling project.

A majority of revenue for these projects is expected to be recognized into revenue throughout fiscal year 2023.

At March 31, 2021 any radio frequency propagation modeling billings ahead of delivery were immaterial.

We compete with many companies in the markets we serve.

19 unchanged sentences

In the service provider market, we compete with traditional probe vendors, network equipment manufacturers, big data and analytics vendors, and virtualization vendors.

These vendors include Anritsu, Cisco, Ericsson, Dell Technologies, EXFO, Huawei, IBM, Infovista, Niksun, Polystar (an Elisa Oyj business), Radcom, Splunk, Nokia and Viavi.

These vendors include Anritsu, Cisco, Ericsson, Dell Technologies, EXFO, Huawei, IBM, Infovista, Niksun, Elisa Polystar, Radcom, Splunk, Nokia and Viavi.

We face additional competitive threats from startups and new entrants that seek to offer innovative solutions in an industry characterized by rapid technological change.

1 unchanged sentence

We believe that the scalability of our solutions, flexible deployment, and price-performance of our cybersecurity solutions positions us well to compete against both larger network equipment and security companies and smaller niche security solutions vendors.

In the DDoS solutions market, we compete under the NetScout Arbor brand with a broad range of vendors including Radware, Akamai, F5 Networks, A10 Networks, Fortinet, Fastly, Cloudflare and Corero Network Security.

In the market for specialized threat analysis, packet forensics and protection solutions used to identify advanced network threats, we compete with a range of vendors including Darktrace, Vectra Networks, FireEye, Cisco, Palo Alto Networks, RSA and other specialist providers.

In the service provider DDoS solutions market, we compete under the NetScout Arbor brand with a broad range of vendors including Radware, Akamai, F5 Networks, A10 Networks, Fortinet, Fastly, Cloudflare and Corero Network Security.

In the enterprise market for Network Detection and Response (NDR) solutions that utilize specialized threat analysis, traffic analysis, and packet forensics to detect and raise alerts of advanced network threats, we compete under the NetScout Omnis Security brand with a range of vendors including Darktrace, Vectra Networks, Extrahop, Viavi, Symantec, Cisco, and other specialist providers.

Our ability to sustain a competitive advantage depends on our ability to deliver continued technology innovation and adapt to meet the evolving needs of our customers.

13 unchanged sentences

Our proprietary rights are subject to other risks and uncertainties described under Item 1A "Risk Factors."

Human Capital Management

NetScout strives to remain a team of entrepreneurs, with the agility of a start-up and the heft of a global technology company.

We believe that our culture is critical to our success and growth.

Our Lean But Not Mean culture complements and acts as a multiplier to our technology, exceptional talent, and forward-thinking innovation.

"Lean" decision-making puts the tough calls up front and puts employees and the long-term success of the company first.

We believe our commitment to education, engagement, and communication has motivated our employees around the world and keeps our spirit thriving, and everyone, regardless of role, brings value to the organization.

As of March 31, 2022, we had 2,331 employees worldwide – over 99% of whom were full time employees.

Our employees are in over 35 countries with 64% of our employees located in the United States.

Compensation and Benefits

We offer a competitive compensation and benefits package to attract, retain and motivate our employees.

Our compensation package includes market-competitive pay, incentive compensation, restricted stock unit grants (RSU’s), an Employee Stock Purchase Plan, retirement benefits, health benefits, paid time off and leave benefits.

Diversity, Equity & Inclusion

1 unchanged sentence

We embrace and encourage our employees' differences in age, color, disability, ethnicity, family or marital status, gender identity or expression, language, national origin, physical and mental ability, political affiliation, race, religion, sexual orientation, socio-economic status, veteran status, and other characteristics that make our employees unique.

As such, we strive to demonstrate our commitment to DEI at the highest levels.

Educating our employees about our DEI initiatives is a priority.

In addition, we recently chartered a DEI team to ensure transparent and equitable processes for employee engagement, onboarding, learning and development, policy making, and career planning.

We recently revised our Diversity, Equity, and Inclusion Policy and seek to enhance our employees' understanding of DEI through company-wide training, tracked and reviewed with the executive team.

In addition, we have a designated DEI program team, reporting to the Chief Human Resources Officer, to foster transparent and equitable processes in employee engagement, onboarding, learning and development, policymaking, and career planning.

A cornerstone of our DEI strategy is collaborating with industry and university partners to enhance our diversity.

We work with industry partners, including third-party recruiting organizations that specialize in diversity in hiring, and post our open position requisitions on diversity job boards.

We track our progress and make improvements to reach a broader, more diverse, talent base.

We also partner with universities with diverse student enrollment to recruit our summer interns.

Talent Development

NetScout invests in the ongoing development of its employees across the globe.

As part of that program, we offer opportunities to identify leaders and develop and support all employees, including:

• Career path development – to document increasing levels of leadership responsibility, creating a transparent process, so that all employees have access to information necessary to build a career plan at NetScout.

• Management and leadership development – to support an inclusive workplace and foster consistent management practices across the globe.

• Strengthen high-performing teams – For selected leaders, we partner with the Center for Higher Ambition Leadership to offer programs that strengthen high-performing teams.

Culture & Values

3 unchanged sentences

We take seriously our mission as Guardians of the Connected World.

We recently launched our internal NETSCOUT WITHOUT BORDERS initiative, of which a key component is an employee engagement program to continuously

communicate our mission and goals to all of our global employees through a series of town hall meetings that provide direct interaction with the CEO, in-depth focus groups, and follow-on development programs.

This is a significant investment to stay connected with all employees, and to ensure everyone is equipped with the knowledge and tools and aligned with our mission.

In 2021, we launched our internal NETSCOUT WITHOUT BORDERS initiative, of which a key component is an employee engagement program to continuously communicate our mission and goals to all of our global employees through a series of town hall meetings that provide direct interaction with the CEO, in-depth focus groups, and follow-on development programs.

This is a significant investment to stay connected with all employees, and to ensure everyone is equipped with the knowledge and tools so all their efforts can be aligned with our vision, mission and goals.

COVID-19 Response

NetScout's Environment, Health, and Safety (EHS) Council is responsible for EHS policy, managing and coordinating EHS regulatory compliance, and tracking goals and results.

The EHS Council reports to senior executives and its results are reported to the Nominating and Corporate Governance Committee of the Board of Directors as part of the committee's comprehensive review of corporate responsibility and ESG.

During the COVID-19 pandemic, our top priority has been the safety and well-being of our employees and their families to ensure that they continue to be productive and keep our customers and the world connected.

As the severity and scope of the pandemic became known in early calendar year 2020, we curtailed travel and required all employees, in all locations, to work from home, with only a limited numbers of employees with business-critical tasks provided access to our facilities.

As the severity and scope of the pandemic became known in early calendar year 2020, we curtailed travel and required all employees, in all locations, to work from home, with only a limited number of employees with business-critical tasks provided access to our facilities.

For those employees who needed to be on-site, we established multiple protective measures to ensure the safety of our employees.

We have begun allowing our employees to return to work on-sites, in accordance with federal, state, and local government guidelines, as well as in accordance with foreign government guidelines in the countries in which we operate.

Furthermore, the processes that we have implemented to enable our employees to return to work on-site are in accordance with prevailing health and science guidance, and in a manner that seeks to protect our employees, contractors, customers, suppliers, and our local communities.

Throughout the course of the COVID-19 pandemic, we were able to maintain our unique culture, support our employees with well-being programs and uninterrupted salary and benefits, and maintain our market presence and unfailingly superior service levels to our customers.

Compensation and Benefits

We offer a competitive compensation and benefits package to attract, retain and motivate our employees.

Our compensation package includes market-competitive pay, cash and equity incentive compensation, an Employee Stock Purchase Plan, retirement benefits, health benefits, paid time off and leave benefits.

Our Compensation Committee oversees our key human capital management strategies and programs.

Environmental Social Governance

We believe our commitment to ESG is an important part of creating long-term business value.

As set out in its Charter, the Nominating and Corporate Governance Committee of NetScout's Board of Directors oversees NetScout's ESG program.

The Nominating and Corporate Governance Committee meets regularly and reviews and advises on ESG strategy and apprises the full Board, which also considers NetScout’s ESG program and strategy as well as its alignment with the Company’s mission.

Relatedly, the Audit Committee also regularly reviews ESG-related topics such as enterprise risk management, our anticorruption program, ethics and compliance issues, supply chain issues including human rights protections, and cybersecurity and data privacy.

The ESG Steering Committee, under the strategic direction of the Chief Executive Officer and chaired by NetScout's General Counsel, is responsible for the development and implementation of the ESG program.

With representation across all key business functions, the mandate of the ESG Steering Committee is to consider our existing ESG efforts, understand stakeholder perspectives, identify areas for improvement that align with our business, and work collaboratively to support programs designed to accelerate ESG initiatives.

We have adopted four ESG pillars that lay out our current top ESG priorities, under pinned by a strong governance focus:

Demonstrating product leadership through sustainability by design and helping our customers reduce their environmental footprint, through reducing electricity requirements of our products.

Reducing electricity use in our facilities, with emphasis on our engineering labs.

Furthering our diversity, equity, and inclusion efforts alongside our employee engagement programs.

Supporting community digital inclusion programs that improve underserved communities’ participation in the connected world.

NetScout's global ESG program encompasses a broad range of areas, including environmental sustainability, responsible management of our supply chain, human capital, ethical business practices, and data privacy and security.

NetScout continues to seek opportunities to align ESG with our core business strategy and more thoroughly integrate ESG into our operations.

Information Security

NetScout is vigilant in protecting personal data and complying with the highest standards of privacy and security.

We take a layered defense approach to protect confidentiality and prevent data compromise and breaches, including, among other

steps, technology safeguards, organizational safeguards including training and awareness programs, and physical safeguards.

We maintain a robust Information Security Program (ISP) to help ensure the confidentiality, integrity, and availability of corporate data and the systems storing this information.

Our ISP also includes annual information security awareness training for employees and audits of our systems and enhanced training for specialized personnel, and we have instituted regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats.

Our ISP also includes review and assessment by external, independent third parties, and we achieved ISO 27001 certification demonstrating our adherence to ISP best practices, including risk assessment, protection against threats, legal compliance, and incident response and mitigation.

Our ISP also includes a data security incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident.

NetScout is committed to managing its legal and contractual compliance obligations with respect to security and privacy laws, including the EU General Data Privacy Regulation and the California Consumer Privacy Act.

We have devoted considerable resources to ensuring compliance with applicable data privacy laws and developing our privacy policy and providing regular security training to employees.

We review cybersecurity and data privacy issues regularly with the independent Audit Committee and with the full Board.

The Audit Committee is comprised entirely of independent directors, some of whom have work experience related to information security issues or oversight.

In the last three years, the expenses we have incurred from information security breach incidences, including penalties and settlements, of which there were none, were immaterial.

We take our customers' information security and privacy commitments just as seriously.

The security features of our products are designed to mitigate data risks, such as loss or unauthorized access, destruction, use, modification, or disclosure.

NetScout products allow customers to customize a security strategy in several ways, from the operating system and between system communications to access control of individual modules, role-based data visibility, and packet and data storage configurations.

We have features in our products that allow masking of sensitive data, and, where possible, minimization through aggregation and measures to control data access.

Our nGeniusONE and Omnis products are based on hardened Linux operating systems and updated software packages to reduce security vulnerabilities, and administrators can further secure the server and appliance hardware through such options as purchasing appliances with self-encrypting drives.

NETSCOUT Arbor DDoS virtual and physical solutions provide similar operational protection.

Corporate Information

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business