What changed in this filing

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Item 9A. Controls and Procedures

2022-05-19 compared with 2021-05-20 · 304 added, 454 removed, 1101 unchanged (41% of the section changed)

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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The information required by this Item 10 will be included under the captions "Directors and Executive Officers," "Proposal 1 Election of Directors," "Delinquent Section 16(a) Reports," "Corporate Governance -- Code of Ethics," "The Board of Directors and its Committees" and "Corporate Governance" in our definitive Proxy Statement with respect to our 2022 Annual Meeting of Stockholders to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report and is incorporated herein by reference.

We have adopted a written code of business conduct that applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer.

The code of business conduct and ethics is available on our corporate website at ir.netscout.com under the section entitled "Governance Overview & Related Materials" in the "Corporate Governance" menu.

If we make any substantive amendments to our code of business conduct or grant any of our directors or executive officers any waiver, including any implicit waiver, from a provision of our code of business conduct and ethics, we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K.

Executive Compensation

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Consolidated Statements of Operations for the Years Ended March 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended March 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive Income for the Years Ended March 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 2022, 2021 and 2020

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000-26251, filed on January 27, 2015 and incorporated herein by reference).

Amendment and Restatement Agreement dated as of January 16, 2018, to the Credit Agreement, dated as of July 14, 2015, by and among NetScout Systems, Inc.;

certain subsidiaries of NetScout Systems, Inc.

as loan parties;

the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent attaching the Amended and Restated Credit Agreement, dated as of January 16, 2018, by and among NetScout Systems, Inc.;

Second Amendment and Restatement Agreement, dated as of July 27, 2021, to the Amended and Restated Credit Agreement, dated as of January 16, 2018, by and among NetScout Systems, Inc., as borrower;

certain subsidiaries of NetScout Systems, Inc., as loan parties;

the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent attaching the Second Amended and Restated Credit Agreement, dated as of July 27, 2021, by and among NetScout Systems, Inc., as borrower;

JPMorgan Chase Bank, N.A., as administrative agent and collateral agent;

JPMorgan Chase Bank, N.A., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and KeyBanc Capital Markets Inc., as joint lead arrangers and joint bookrunners;

SunTrust Bank, N.A., Santander Bank, N.A., U.S.

Bank National Association and Fifth Third Bank, as co-documentation agents;

and the lenders party thereto (filed as Exhibit 10.5 to NetScout’s current report on Form 8-K, SEC File No.

000-26251, filed with the SEC on January 18, 2018 and incorporated herein by reference.

JPMorgan Chase Bank, N.A., 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 and issuing banks party thereto (filed as Exhibit 10.5 to NetScout's current report on Form 8-K, SEC File No.

000-26251, filed on July 27, 2021 and incorporated herein by reference).

Summary of Non-Employee Director Compensation (filed as Exhibit 10.2 to NetScout's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, SEC File No.

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Officer (Principal Financial

Officer) (Principal Accounting

Officer and Principal Accounting

Officer) May 19, 2022

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets at March 31, 2022 and 2021

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We have audited the accompanying consolidated balance sheets of NetScout Systems, Inc.

and its subsidiaries (the “Company”) as of March 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended March 31, 2021, including the related notes and schedule of valuation and qualifying accounts listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the "Company") as of March 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended March 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2020 and the manner in which it accounts for revenues from contracts with customers in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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A company's internal control over financial reporting is a process designed 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.

A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Deferred income taxes 6,883 8,096

Long-term marketable securities — 2,613

Other assets 12,979 15,064

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Additional paid-in capital 3,023,403 2,955,400

Accumulated other comprehensive loss ( 1,940 ) ( 3,160 )

Accumulated other comprehensive income (loss) 141 ( 1,940 )

Treasury stock at cost, 52,323,090 and 50,446,359 shares at March 31, 2022 and 2021, respectively

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Restructuring charges — 62 2,674

Impairment of intangible assets — — 35,871

Loss on divestiture of business — — 9,472

Total operating expenses 592,755 572,055 631,990

Income (loss) from operations 37,130 17,638 ( 71,580 )

Income from operations 48,634 37,130 17,638

Interest and other expense, net:

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Total interest and other expense, net ( 5,742 ) ( 14,826 ) ( 15,714 )

Income (loss) before income tax expense (benefit) 22,304 1,924 ( 92,912 )

Income tax expense (benefit) 2,952 4,678 ( 19,588 )

Income before income tax expense 42,892 22,304 1,924

Income tax expense 7,018 2,952 4,678

Net income (loss) $ 35,874 $ 19,352 $ ( 2,754 )

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Cumulative translation adjustments 153 2,926 ( 1,644 )

Recognition of actuarial net (losses) gains from pension and other post-retirement plans, net of (benefit) tax of ($ 657 ), $ 590 , and ($ 976 )

Recognition of actuarial net gains (losses) from pension and other post-retirement plans, net of tax (benefit) of $ 824 , ($ 657 ), and $ 590

1,937 ( 1,548 ) 1,054

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Cumulative translation adjustments ( 1,644 ) ( 1,644 )

Recognition of actuarial net losses from pension and other post-retirement plan ( 2,278 ) ( 2,278 )

Recognition of actuarial net gains from pension and other post-retirement plan 1,054 1,054

Issuance of common stock pursuant to vesting of restricted stock units 1,651,284 2 2

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Repurchase of treasury stock 7,635,400 ( 186,872 ) ( 186,872 )

Cumulative effect of adoption of ASU 2014-09 34,924 34,924

Balance, March 31, 2020 122,006,077 122 2,891,553 ( 3,160 ) 49,785,171 ( 1,305,935 ) 355,339 1,937,919

Net loss ( 2,754 ) ( 2,754 )

Unrealized net investment gains 126 126

Net income 19,352 19,352

Unrealized net investment losses ( 130 ) ( 130 )

Unrealized net losses on derivative financial instruments ( 28 ) ( 28 )

Cumulative translation adjustments 2,926 2,926

Recognition of actuarial net gains from pension and other post-retirement plan 1,054 1,054

Recognition of actuarial net losses from pension and other post-retirement plan ( 1,548 ) ( 1,548 )

Issuance of common stock pursuant to vesting of restricted stock units 1,630,228 2 2

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Unrealized net investment losses ( 29 ) ( 29 )

Unrealized net losses on derivative financial instruments ( 28 ) ( 28 )

Unrealized net gains on derivative financial instruments 20 20

Cumulative translation adjustments 153 153

Recognition of actuarial net losses from pension and other post-retirement plan ( 1,548 ) ( 1,548 )

Recognition of actuarial net gains from pension and other post-retirement plan 1,937 1,937

Issuance of common stock pursuant to vesting of restricted stock units 1,728,994 2 2

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Depreciation and amortization 95,784 105,828 116,104

Loss on extinguishment of debt 596 — —

Operating lease right-of-use assets 10,292 10,004 10,504

Loss on divestiture of business — — 7,660

Loss on disposal of fixed assets 5 236 16

Deal related compensation expense and accretion charges — — 102

Share-based compensation expense associated with equity awards 56,074 51,892 50,861

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Accretion of contingent consideration — — ( 36 )

Impairment charge — — 35,871

Deferred income taxes ( 12,681 ) ( 23,804 ) ( 9,821 )

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Accounts receivable and unbilled costs 49,322 16,878 21,472

Due from related party — — 172

Inventories ( 7,996 ) ( 2,043 ) 1,501

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Operating lease liabilities ( 12,060 ) ( 10,307 ) ( 13,077 )

Due to related party — — 234

Income taxes payable ( 3,087 ) 6,684 ( 919 )

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Purchase of intangible assets ( 50 ) ( 4,537 ) —

Payments related to the divestiture of business — — ( 3,293 )

Acquisition of businesses, net of cash acquired — — ( 11,347 )

Decrease (increase) in deposits 88 ( 31 ) ( 97 )

(Increase) decrease in deposits ( 155 ) 88 ( 31 )

Collection of contingent consideration — — 52

Capitalized software development costs — — ( 134 )

Net cash provided by (used in) investing activities 24,698 ( 4,309 ) ( 26,252 )

Net cash (used in) provided by investing activities ( 68,353 ) 24,698 ( 4,309 )

Cash flows from financing activities:

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Tax withholding on restricted stock units ( 15,691 ) ( 13,286 ) ( 11,872 )

Payment of debt issuance costs ( 3,660 ) — —

Repayment of long-term debt ( 350,000 ) ( 100,000 ) ( 100,000 )

Proceeds from issuance of long-term debt 350,000 — —

Collection of contingent consideration 837 — —

Net cash used in financing activities $ ( 54,165 ) $ ( 118,307 ) $ ( 286,870 )

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Contingent consideration related to acquisition, included in accrued other $ — $ — $ 1,800

Tenant improvement allowance $ — $ — $ 10,171

Initial fair value of contingent consideration received as partial consideration for divestiture of business $ — $ — $ 2,257

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

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The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

The Company has made estimates within our financial statements and there may be changes to those estimates in future periods.

The Company has made estimates within the financial statements and there may be changes to those estimates in future periods.

Actual results may differ from these estimates.

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The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business.

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the President of the United States declared the COVID-19 outbreak a national emergency.

The future impacts of the pandemic and any resulting economic impact on the Company's operations are largely unknown and rapidly evolving.

It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may materially and adversely affect the Company’s results of operations, cash flows and financial position as well as its customers.

Under Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40), or ASC 205-40, 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 is taking precautionary actions to reduce costs and spending across the organization.

This includes limiting discretionary spending and reducing hiring activities.

In addition, based on covenant levels at March 31, 2021, the Company has an incremental $ 336 million available under its $ 1.0 billion revolving credit facility.

The future impacts of the pandemic and any resulting economic impact on the Company's operations are evolving.

It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact 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 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 March 31, 2022 an incremental $ 450 million available under the 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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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.

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 has elected to defer the employer-paid portion of social security taxes.

As of March 31, 2021, the Company had deferred $ 8.9 million of employer payroll taxes, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022.

The balance of $ 4.5 million was included as accrued other and a balance of $ 4.4 million was included as other long-term liabilities in the Company's consolidated balance sheet at March 31, 2021.

As of March 31, 2022, the Company had deferred $ 4.5 million of employer payroll taxes, which is required to be deposited by December 2022.

The balance of $ 4.5 million was included as accrued other in the Company's consolidated balance sheet at March 31, 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.

Cash and Cash Equivalents and Marketable Securities

Under current authoritative guidance, NetScout has classified its investments as "available-for-sale" which are carried at fair value associated unrealized gains or losses are recorded as a separate component of stockholders’ equity until realized.

Under authoritative guidance, NetScout has classified its investments as "available-for-sale" which are carried at fair value associated unrealized gains or losses are recorded as a separate component of stockholders’ equity until realized.

NetScout 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.

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Revenue Recognition

The Company accounts for revenue in accordance with ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606), which was adopted on April 1, 2018 using the modified retrospective transition method.

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606).

For further discussion of the Company's accounting policies related to revenue see Note 3, "Revenue Recognition."

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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, 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.

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 $ 9.4 million and $ 7.1 million at March 31, 2022 and 2021, respectively.

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NetScout's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings.

At March 31, 2021 , the Company had one direct customer who 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 fiscal ye ars ended March 31, 2022, 2021 and 2020 respectively, no direct customers or indirect channel partners accounted for more than 10% of total rev enue.

Historically, the Company has not experienced any significant failure of its customers to meet their payment obligations nor does the Company anticipate material non-performance by its customers in the future;

accordingly, the Company does not

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.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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.

Trade Receivable Valuations

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Expenditures for replacements and building improvements are capitalized, while expenditures for maintenance and repairs are charged against earnings as incurred.

The Company accounts for leases in accordance with ASU No.

2016-02, Leases (Topic 842), which was adopted April 1, 2019.

Prior to the adoption of Topic 842, the Company followed the guidance for leases under Topic 840, Leases.

For further discussion of the Company's policies related to leases see Note 18, "Leases."

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements.

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The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Valuation of Goodwill, Intangible Assets and Other Acquisition and Divestiture Accounting Items

For further discussion of the Company's policies related to leases see Note 18, "Leases."

Valuation of Goodwill, Intangible Assets and Other Acquisition Accounting Items

The Company amortizes acquired definite-lived intangible assets over their estimated useful lives.

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However, if the Company concludes otherwise, quantitative impairment testing is not required.

During fourth quarter of fiscal year 2021, the Company performed its annual impairment analysis for goodwill as of January 31, 2021, using the qualitative Step 0 assessment as the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value.

The Company performed its annual impairment analysis for goodwill as of January 31, 2022, using the qualitative (Step 0) assessment, and the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value.

Indefinite-lived intangible assets are tested for impairment 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 indefinite-lived intangible assets below its carrying value.

To test impairment, the Company first assesses qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that the indefinite-lived intangible is impaired.

If based on the Company's qualitative assessment, the Company concludes that it is more likely than not that the fair value of the indefinite-

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

lived asset is less than its carrying amount, quantitative impairment testing is required.

If based on the Company's qualitative assessment, the Company concludes that it is more likely than not that the fair value of the indefinite-lived asset is less than its carrying amount, quantitative impairment testing is required.

However, if the Company concludes otherwise, quantitative impairment testing is not required.

During the fourth quarter of fiscal year 2021, the Company completed its annual impairment test of the indefinite-lived intangible at January 31, 2021, using the qualitative Step 0 assessment as the Company concluded that it was more likely than not that the fair value of the indefinite-lived asset exceeded its carrying value.

The Company completed two acquisitions and one divestiture during the three-year period ended March 31, 2021.

The Company completed two acquisitions during the three-year period ended March 31, 2022.

The acquisition method of accounting requires an estimate of the fair value of the assets and liabilities acquired as part of these transactions.

In order to estimate the fair value of acquired intangible assets, the Company uses either an income, market or cost method approach.

The Company's level 3 liabilities at March 31, 2020 consisted of contingent purchase consideration related to the two acquisitions that occurred during the fiscal year 2020.

The contingent purchase consideration related to the two acquisitions represent amounts deposited into escrow accounts, which were established to cover damages NetScout may have suffered related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the sellers as described in the acquisition agreements.

The contingent purchase consideration of $ 0.7 million and $ 1.0 million related to the Gigavation Incorporated (Gigavation) and Eastwind Networks, Inc.

(Eastwind) acquisitions, respectively are included as accrued other in the Company's consolidated balance sheet at March 31, 2020.

The $ 0.7 million related to the Gigavation acquisition was paid to the seller in February 2021.

The $ 1.0 million related to the Eastwind acquisition was paid to the seller in April 2020.

During fiscal year 2019, the Company recorded a contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018.

The contingent consideration represented potential future earnout payments to the Company of up to $ 4.0 million over two years that were contingent on the HNT tools business achieving certain milestones.

The fair value of the contingent consideration of $ 2.3 million was recognized on the divestiture date and was measured using unobservable (Level 3) inputs.

The Company recorded an $ 0.8 million and a $ 1.6 million change in the fair value of the contingent consideration, which is included in other expense, net within the Company's consolidated statement of operations for the years ended March 31, 2020 and 2019.

The contingent purchase consideration related to the two acquisitions represent amounts deposited into escrow accounts, which were

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

established to cover damages NetScout may have suffered related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the sellers as described in the acquisition agreements.

The contingent purchase consideration of $ 0.7 million related to the Gigavation Incorporated (Gigavation) acquisition was paid to the seller in February 2021.

The contingent purchase consideration of $ 1.0 million related to the Eastwind Networks, Inc.

(Eastwind) acquisition was paid to the seller in April 2020.

Capitalized Software Development Costs

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The developments are added individually to the core code over a shorter period of time but marketed as a release once all portions are complete.

Amortization included as cost of product revenue was $ 0.1 million, $ 0.5 million, and $ 1.1 million for the fiscal years ended March 31, 2021, 2020, and 2019, respectively.

Amortization included as cost of product revenue was $ 37 thousand, $ 0.1 million, and $ 0.5 million for the fiscal years ended March 31, 2022, 2021, and 2020, respectively.

The Company did no t capitalize software development costs in the fiscal years ended March 31, 2022 or 2021.

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The Company records the fair value of its derivatives in prepaid expenses and other current assets and accrued other in the Company's consolidated balance sheet.

The effective portion of gains or losses resulting from

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

changes in the fair value of qualifying hedges are recorded in other comprehensive income (loss) until the forecasted transaction occurs, with any ineffective portion classified directly to the Company’s consolidated statement of operations based on the expense categories of the items being hedged.

The effective portion of gains or losses resulting from changes in the fair value of qualifying hedges are recorded in other comprehensive income (loss) until the forecasted transaction occurs, with any ineffective portion classified directly to the Company’s consolidated statement of operations based on the expense categories of the items being hedged.

When forecasted transactions occur, unrealized gains or losses associated with the effective portion of the hedge are reclassified to the respective expense categories in the Company’s consolidated statement of operations.

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Accounting for claims and contingencies requires NetScout to use its judgment.

NetScout consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to matters in the ordinary course of business.

Contingent assets and liabilities include contingent consideration in connection with the Company's acquisitions and divestitures.

Contingent consideration represents earnout payments in connection with the Company's acquisitions and divestitures and is recognized at fair value on the acquisition date and remeasured each reporting period with subsequent adjustments recognized in the consolidated statements of income.

The Company discounts the contingent purchase consideration to present value using a risk adjusted interest rate at each reporting period.

Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting.

The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved.

Changes in the fair value of contingent assets and liabilities may result from changes in discount periods.

The Company reflects changes in fair value due to probability changes in earnings in the consolidated statements of income.

Earnout payments are reflected in both cash flows from operating and financing activities and the changes in fair value are reflected in cash flows from operating activities in the consolidated statements of cash flows.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to matters in the ordinary course of business.

Share-Based Compensation

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Under this program, increases or decreases in foreign currency exposures are partially offset by gains or losses on forward contracts, to mitigate the impact of foreign currency transaction gains or losses.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

The Company does not use forward contracts to engage in currency speculation.

All outstanding foreign currency forward contracts are recorded at fair value at the end of each fiscal period.

The Company had foreign currency losse s of $ 5.5 million , $ 0.7 million and $ 2.0 million for the fiscal years ended March 31, 2021, 2020 and 2019, respectively.

These amounts are included in other expense, net.

The Company had foreign currency losses of $ 0.2 million , $ 5.5 million and $ 0.7 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively.

These amounts are included in other income (expense), net in the Company's consolidated statements of operations.

Advertising Expense

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Recent Accounting Standards

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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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):

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This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020.

Early adoption is permitted.

ASU 2020-01 is effective for NetScout beginning April 1, 2021.

The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures.

The Company adopted the guidance as of April 1, 2021.

The adoption did not have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

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ASU 2019-12 is effective for fiscal years beginning after December 15, 2020.

ASU 2019-12 is effective for NetScout beginning April 1, 2021.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The adoption is not expected to have a material impact on the Company's financial position, results of operations, and disclosures.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.

This ASU adds, modifies and clarifies several disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The Company adopted the guidance as of April 1, 2021.

The adoption did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement.

The Company adopted the guidance as of April 1, 2020.

The adoption did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance:

ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 (collectively, Topic 326).

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

Topic 326 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses.

The Company adopted the guidance prospectively as of April 1, 2020.

The adoption did not result in a cumulative adjustment to retained earnings and did not have an impact on the Company's consolidated financial statements other than with respect to the updated disclosure requirements.

NOTE 3 - REVENUE RECOGNITION

Revenue from Contracts with Customers

In May 2014, the FASB issued Topic 606, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

Topic 606 replaced most existing revenue recognition guidance under GAAP.

The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition.

It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers and establishes disclosure requirements which are more extensive than those required under prior GAAP.

Topic 606 became effective for the Company on April 1, 2018.

The Company elected to use the modified retrospective transition approach.

Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Revenue Recognition Policy

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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 shipment, 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

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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 on the element’s historical pricing.

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 elements based on historical standalone sales.

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.

Further, for certain service engagements, the Company considers quoted prices as part of multi-element arrangements of those engagements as a basis for establishing SSP.

SSP has been established for product elements as the average or median selling price the element was recently sold for, whether sold alone or sold as part of a multiple element transaction.

The Company reviews sales of the product elements on a quarterly basis and updates, when appropriate, its SSP for such elements to ensure that it reflects recent pricing experience.

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.

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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 occur before all performance obligations are delivered or payments are received in advance of performance under the contract.

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

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

At March 31, 2021, the consolidated balance sheet inclu ded $ 7.4 million in assets related to sales commissions to be expensed in future periods.

A balance of $ 4.1 million wa s included in prepaid expenses and other current assets, and a balance of $ 3.3 million was included as other assets in the Company's consolidated balance sheet at March 31, 2021.

At March 31, 2022, th e 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 as other assets in the Company's consolidated balance sheet at March 31, 2022.

At March 31, 2021, the consolidated balance sheet included $ 7.4 million in assets related to sales commissions to be expensed in future periods.

A balance of $ 4.1 million was included in prepaid expenses and other current assets, and a balance of $ 3.3 million was included in other assets in the Company's consolidated balance sheet at March 31, 2021.

During the twelve months ended March 31, 2021 and 2020, the Company recognized $ 6.3 million and $ 6.5 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.

During each of the twelve months ended March 31, 2022 and 2021, the Company recognized $ 6.3 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

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NOTE 4 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash and cash equivalents mainly consisted of U.S government and municipal obligations, commercial paper, corporate bonds, money market instruments and cash maintained with various financial institutions at March 31, 2021 and 2020.

Cash and cash equivalents mainly consisted of U.S government and municipal obligations, commercial paper, corporate bonds, certificate of deposits, money market instruments and cash maintained with various financial institutions at March 31, 2022 and 2021.

Cash, Cash Equivalents and Restricted Cash

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Commercial paper 23,353 — 23,353

Corporate bonds 823 ( 2 ) 821

Certificate of deposits 2,000 — 2,000

Total short-term marketable securities 67,071 ( 34 ) 67,037

1 unchanged sentence

Total marketable securities $ 67,071 $ ( 34 ) $ 67,037

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

The following is a summary of marketable securities held by NetScout at March 31, 2021, classified as short-term and long-term (in thousands):

3 unchanged sentences

Commercial paper 5,699 — 5,699

Corporate bonds 4,587 10 4,597

Total short-term marketable securities 9,270 7 9,277

government and municipal obligations 2,562 51 2,613

Total long-term marketable securities — — —

Total marketable securities $ 9,270 $ 7 $ 9,277

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

Contractual maturities of the Company's marketable securities held at March 31, 2022 and 2021 (in thousands) were as follows:

4 unchanged sentences

$ 67,037 $ 9,277

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

NOTE 5 – FAIR VALUE MEASUREMENTS

9 unchanged sentences

Commercial paper — 23,353 — 23,353

Corporate bonds 821 — — 821

Certificate of deposits — 2,000 — 2,000

Derivative financial instruments — 20 — 20

8 unchanged sentences

Commercial paper — 5,699 — 5,699

Corporate bonds 4,597 — — 4,597

Derivative financial instruments — 57 — 57

$ 469,715 $ 6,795 $ — $ 476,510

Contingent purchase consideration $ — $ — $ ( 1,748 ) $ ( 1,748 )

Derivative financial instruments $ — $ ( 191 ) $ — $ ( 191 )

$ — $ ( 191 ) $ — $ ( 191 )

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

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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 fair value is calculated using market observable data for similar but not identical instruments, or a discounted cash flow model using the contractual interest rate as compared to the underlying interest yield curve.

The Company classifies municipal obligations as Level 2 because the fair values are determined using quoted prices from markets the Company considers to be inactive.

Commercial paper is classified as Level 2 because the Company uses market information from similar but not identical instruments and discounted cash flow models based on interest rate yield curves to determine fair value.

The Company's derivative financial instruments consist of forward foreign exchange contracts and are classified as Level 2 because the fair values of these derivatives are determined using models based on market observable inputs, including spot prices for foreign currencies and credit derivatives, as well as an interest rate factor.

The Company's Level 3 liabilities at March 31, 2020 consisted of contingent purchase consideration related to the two acquisitions that occurred during the fiscal year 2020.

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.

The Company's Level 3 liabilities consisted of contingent purchase consideration related to the two acquisitions that occurred during the fiscal year 2020.

The contingent purchase consideration related to the two acquisitions represented amounts deposited into escrow accounts, which were established to cover damages NetScout may have suffered related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the sellers as described in the acquisition agreements.

The contingent purchase consideration of $ 0.7 million and $ 1.0 million related to the Gigavation and Eastwind acquisitions, respectively were included as accrued other in the Company's consolidated balance sheet at March 31, 2020.

The $ 0.7 million related to the Gigavation acquisition was paid to the seller in February 2021.

The $ 1.0 million related to the Eastwind acquisition was paid to the seller in April 2020.

During fiscal year 2019, the Company recorded a contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018.

The $ 0.7 million of purchase consideration related to the Gigavation acquisition was paid to the

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

seller in February 2021.

The $ 1.0 million contingent purchase consideration related to the Eastwind acquisition was paid to the seller in April 2020.

The Company's Level 3 assets consisted of contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018.

The fair value of the contingent consideration of $ 2.3 million was recognized on the divestiture date and was measured using unobservable (Level 3) inputs.

The Company recorde d an $ 0.8 million and a $ 1.6 million change in the fair value of the contingent consideration, which is included in other expense, net within the Company's consolidated statement of operations for the years ended March 31, 2020 and 2019.

The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial liabilities for the fiscal year ended March 31, 2021 (in thousands):

Consideration

During the fiscal years ended March 31, 2022 and 2020, the Company recorded an $ 0.8 million change in the fair value of the contingent consideration, which is included in other income (expense), net within the Company's consolidated statement of operations.

The $ 0.8 million of contingent consideration was paid to the Company as the final earnout during the fiscal year ended March 31, 2022.

The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial assets for the fiscal year ended March 31, 2022 (in thousands):

Contingent Consideration

Balance at March 31, 2021 $ —

Additions to Level 3 —

Payments made 1,748

Change in fair value of contingent consideration 837

Collection of contingent consideration ( 837 )

Balance at March 31, 2022 $ —

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the fiscal year ended March 31, 2020 (in thousands):

Consideration Contingent

The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial liabilities for the fiscal year ended March 31, 2021 (in thousands):

Consideration

Balance at March 31, 2020 $ ( 1,748 )

Additions to Level 3 ( 1,800 ) —

Change in fair value of contingent consideration — ( 762 )

Payments received 52 —

Payments made 1,748

Balance at March 31, 2021 $ —

Accretion income related to the contingent consideration received as partial consideration for the divestiture of the HNT tools business for the fiscal year ended March 31, 2020 was $ 36 thousand and was included within interest income.

NOTE 6 – INVENTORIES

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$ 28,220 $ 22,813

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

NOTE 7 – FIXED ASSETS

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(1) Leasehold improvements are depreciated over the shorter of the lease term or anticipated useful life of the improvement.

A typographical error in the prior year presentation of the above disclosure has been corrected in the current period.

Depreciation expense was $ 20.1 million, $ 22.4 million and $ 23.4 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

NOTE 8 – ACQUISITIONS & DIVESTITURES

NOTE 8 – ACQUISITIONS

Gigavation Acquisition

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The Gigavation technology and engineering talent have been integrated into our service assurance products in order to support the ongoing enhancement of that portfoli o.

The Company completed the accounting related to the Gigavation acquisition as of March 31, 2020.

Goodwill and intangible assets recorded as part of the acquisition are not deductible for tax purposes.

The Company determined Gigavation's results of operations are not material.

As such, the pro forma information is not required.

The following table summarizes the allocation of the purchase price (in thousands):

Initial cash payment $ 7,200

Estimated fair value of contingent purchase consideration 800

Estimated purchase price $ 8,000

The following table reflects the estimated fair value of assets acquired and liabilities assumed (in thousands):

Accounts receivable 209

Prepaid and other current assets 5

Intangible assets 4,760

Deferred tax liability ( 693 )

Accounts payable ( 50 )

Accrued other liabilities ( 54 )

Goodwill $ 3,816

Of the total consideration, $ 0.8 million was deposited into an escrow account.

The escrow account was established to cover damages NetScout may have suffered related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the seller as described in the acquisition agreement.

Generally, indemnification claims that Gigavation would be liable for are limited to the total amount of the escrow account, which shall be the sole source for the satisfaction of any damages to the Company for such claims, but such limitation does not apply with respect to the seller's breach of certain fundamental representations or related to other specified indemnity items, for which certain of Gigavation's shareholders may be liable for additional amounts in excess of the escrow amount.

During the fiscal year ended March 31, 2020, $ 0.1 million was withdrawn from the escrow account to satisfy an indemnification claim.

The remaining $ 0.7 million was paid to the seller in February 2021.

In connection with the Gigavation acquisition, certain former employees of Gigavation received restricted stock units.

The restricted stock units issued are considered new share-based payment awards granted by NetScout to the former employees of Gigavation.

NetScout accounted for these new awards separately from the business combination.

The Company recognized share-based compensation net of an estimated forfeiture rate and only recognized compensation cost for those shares expected to vest on a straight-line basis over the requisite service period of the award.

The fair value of the intangible asset was based on a valuation using an income approach.

The underlying assumptions include the estimated cash flows to be generated by the technology purchased as part of the acquisition less any returns on contributory assets, if any.

This fair value measurement was based on significant inputs not observable in the market and thus represents Level 3 fair value measurements.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

The following table reflects the fair value of the acquired identifiable intangible asset and related estimated useful life (in thousands):

Fair Value Useful Life (Years)

Developed technology $ 4,760 10

The weighted average useful life of the developed technology acquired from Gigavation is 10 years.

Eastwind Acquisition

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Eastwind's breach analytics cloud analyzes data to identify malicious activity, insider threats and data leakage.

The Company completed the purchase accounting related to the Eastwind acquisition as of June 30, 2019.

Goodwill and intangible assets recorded as part of the acquisition are deductible for tax purposes.

The Company determined Eastwind's results of operations are not material.

As such, the pro forma information is not required.

Initial cash payment $ 4,154

Estimated fair value of contingent purchase consideration 1,000

Estimated purchase price $ 5,154

The following table reflects the estimated fair value of assets acquired and liabilities assumed (in thousands):

Property, plant and equipment $ 17

Intangible assets 4,230

Accrued other liabilities ( 96 )

Goodwill $ 1,003

Of the total consideration, $ 1.0 million was deposited into an escrow account.

Generally, indemnification claims that Eastwind would be liable for are limited to the total amount of the escrow account, which shall be the sole source for the satisfaction of any damages to the Company for such claims, but such limitation does not apply with respect to the seller's breach of certain fundamental representations or related to other specified indemnity items, for which certain of Eastwind's shareholders may be liable for additional amounts in excess of the escrow amount.

The contingent purchase consideration of $ 1.0 million was paid to the seller in April 2020.

In connection with the Eastwind acquisition, certain former employees of Eastwind received cash retention payments totaling $ 0.3 million on the Eastwind Closing Date.

Because these employees were not required to provide future services to the Company, the cash retention payments were accounted for as part of the purchase price.

These former Eastwind employees will also receive cash retention payments subject to such employee's continued employment with the Company through the next regularly scheduled payroll dates following each of the first and second anniversaries of the Eastwind Closing Date.

The cash retention payment liability related to these future cash retention payments were accounted for separately from the business combination as the cash retention payment is automatically forfeited upon termination of employment.

The Company recorded the liability over the period it was earned as compensation expense for post-combination services.

The fair value of intangible asset was based on a valuation using a cost method approach.

The underlying assumptions include estimates of cost to replace or reproduce the asset, less adjustments for physical deterioration and functional

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

obsolescence, if relevant.

This fair value measurement was based on significant inputs not observable in the market and thus represents Level 3 fair value measurements.

The following table reflects the fair value of the acquired identifiable intangible asset and related estimated useful life (in thousands):

Fair Value Useful Life (Years)

Developed technology $ 4,230 10

The average useful life of the developed technology acquired from Eastwind is 10 years.

HNT Tools Business Divestiture

On September 14, 2018 (the HNT Divestiture Date), the Company divested its handheld network test (HNT) tools business for cash proceeds of $ 1.3 million and potential future earnout payments of up to $ 4.0 million over two years that were contingent on the HNT tools business achieving certain milestones.

The fair value of the contingent consideration in the amount of $ 2.3 million was recognized on the HNT Divestiture Date and was measured using unobservable (Level 3) inputs.

The contingent consideration was presented as a non-cash investing activity on the consolidated statement of cash flows.

The Company transferred $ 4.6 million of consideration along with net liabilities of the HNT tools business related to a working capital adjustment during the fiscal year ended March 31, 2019.

The Company recorded a loss on the divestiture for the year ended March 31, 2019 totaling $ 9.5 million, which included $ 1.3 million of transaction costs and $ 0.5 million of incentive compensation payable to the HNT tools business employees negotiated as part of the sale.

In connection with the divestiture, the Company had entered into a transitional services agreement with the buyer to provide certain services for a period of up to eighteen months .

Income associated with the transitional services agreement for the fiscal years ended March 31, 2021 and 2020 was $ 0.2 million and $ 1.2 million, respectively, and is included within other expense, net in the Company's consolidated statement of operations.

NOTE 9 – GOODWILL & INTANGIBLE ASSETS

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During fiscal years 2022 and 2021, the Company's annual impairment tests indicated that goodwill was not impaired.

In the fourth quarter of fiscal year 2021, the Company completed its annual goodwill impairment test at January 31, 2021, using the qualitative Step 0 assessment as the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value .

The Company completed its annual goodwill impairment test at January 31, 2022, using the qualitative (Step 0) assessment, and the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value .

The change in the carrying amount of goodwill for the fiscal year ended March 31, 2022 is due to the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S.

3 unchanged sentences

Balance at March 31, 2020 $ 1,725,680

Goodwill attributed to the Eastwind acquisition 1,003

Goodwill attributed to the Gigavation acquisition 3,816

Foreign currency translation impact ( 8,126 )

5 unchanged sentences

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 intangible assets over their estimated useful lives, except for the acquired trade name which resulted from the Network General acquisition, which has an indefinite life and thus is not amortized.

The carrying value of the indefinite lived trade name is evaluated for potential impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

During fiscal year 2019, the Company performed a quantitative analysis on certain intangible assets related to the HNT tools business, which has since been divested.

The fair value for the intangible assets related to the HNT tools business was calculated considering a range of potential transaction prices which the Company considers to be a Level 3 measurement.

The fair value of these intangible assets was determined to be less than the carrying value, and as a result, the Company recognized an impairment charge of $ 35.9 million in the twelve months ended March 31, 2019.

The impairment charge was recorded within a separate operating expense line item in the Company's consolidated statements of operations during the twelve months ended March 31, 2019.

During fiscal year 2021 and 2020, the Company's annual impairment tests indicated that the acquired trade name was not impaired.

In the fourth quarter of fiscal year 2021, the Company completed its annual impairment test of the indefinite lived intangible at January 31, 2021 using the qualitative Step 0 assessment as the Company concluded that it was more likely than not that the fair value of the indefinite-lived asset exceeded its carrying value.

During the fiscal year ended March 31, 2021, the Company acquired $ 4.5 million of technology licenses.

These amounts are included within distributor relationships and are being amortizing using the economic benefit method over useful lives of between three and four years .

The Company amortizes intangible assets over their estimated useful lives.

During the first quarter of fiscal year 2022, in conjunction with the renewal process of an acquired indefinite-lived trade name and the Company's focus on advancing new product lines, the Company reassessed the estimated economic life of the acquired indefinite-lived trade name.

As a result, the Company began amortizing the acquired trade name over 8 years.

Prior to reclassifying the acquired trade name to a finite-lived intangible asset, the Company tested the acquired trade name for impairment and determined the fair value of the asset exceeded the carrying value.

This change in estimate does not materially impact the Company's income statement.

During the fiscal years ended March 31, 2022 and 2021, the Company acquired $ 50 thousand and $ 4.5 million of technology licenses, respectively.

These amounts are included within distributor relationships and are being amortizing using the economic benefit method over useful lives of between one and four years .

The Company did no t acquire any technology licenses during the fiscal year ended March 31, 2020.

Intangible assets include the indefinite lived trade name with a carrying value of $ 18.6 million and the following amortizable intangible assets at March 31, 2021 (in thousands):

Cost Accumulated

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 $ 252,071 $ ( 212,688 ) $ 39,383

Customer relationships 775,898 ( 333,903 ) 441,995

Distributor relationships and technology licenses 11,469 ( 7,829 ) 3,640

Definite-lived trademark and trade name 39,434 ( 31,467 ) 7,967

Core technology 7,192 ( 7,192 ) —

Net beneficial leases 336 ( 336 ) —

Non-compete agreements 292 ( 292 ) —

Capitalized software 3,317 ( 3,281 ) 36

Other 1,208 ( 963 ) 245

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 (a) 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

(a) The Company's $ 18.6 million acquired trade name changed from indefinite-lived during the first quarter of fiscal year 2022.

NetScout Systems, Inc.

1 unchanged sentence

Intangible assets include the indefinite lived trade name with a carrying value of $ 18.6 million and the following amortizable intangible assets at March 31, 2021 (in thousands):

Cost Accumulated

Estimated Useful Life in Years Cost Accumulated

Amortization Net

Developed technology $ 249,675 $ ( 191,876 ) $ 57,799

Customer relationships 767,366 ( 275,361 ) 492,005

Distributor relationships and technology licenses 6,785 ( 6,321 ) 464

Definite-lived trademark and trade name 39,059 ( 26,246 ) 12,813

Core technology 7,192 ( 7,074 ) 118

Net beneficial leases 336 ( 336 ) —

Non-compete agreements 292 ( 292 ) —

Leasehold interest 500 ( 500 ) —

Backlog 16,223 ( 16,223 ) —

Capitalized software 3,317 ( 3,202 ) 115

Other 1,208 ( 943 ) 265

Developed technology 3 - 13 years

$ 252,071 $ ( 212,688 ) $ 39,383

Customer relationships 8 - 18 years

775,898 ( 333,903 ) 441,995

Distributor relationships and technology licenses 1 - 6 years

11,469 ( 7,829 ) 3,640

Definite-lived trademark and trade name 2 - 9 years

39,434 ( 31,467 ) 7,967

Core technology 10 years

7,192 ( 7,192 ) —

Net beneficial leases 3 - 4 years

336 ( 336 ) —

Non-compete agreements 3 years

292 ( 292 ) —

Capitalized software 3 years

3,317 ( 3,281 ) 36

Other 1 - 20 years

1,208 ( 963 ) 245

$ 1,091,217 $ ( 597,951 ) $ 493,266

Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software.

11 unchanged sentences

Total $ 433,419

The weighted average amortization period of developed technology and core t echnology is 11.2 year s.

The weighted average amortization period for customer and distributor relationships is 15.9 years.

The weighted average amortization period for trademarks and trade names is 8.6 years.

The weighted average amortization period for capitalized software is 3.0 years.

The weighted average amortization period for all amortizing intangible assets is 14.6 years.

NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

flow exposures from costs that are denominated in currencies other than the U.S.

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.

These hedges are designated as cash flow hedges at inception.

NetScout also periodically enters into forward contracts to manage exchange rate risk 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 hedge instrument and the hedged item.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

All of the Company's derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes.

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$ 20 $ 57 $ 78 $ 191

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

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

The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss), (OCI) and results of operations during the fiscal years ended March 31, 2022 and 2021 (in thousands):

Gain (Loss) Recognized

Gain Recognized

in OCI on Derivative

(a) Gain (Loss) Reclassified from

(a) Loss Reclassified from

Accumulated OCI into Income

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NOTE 11 – RESTRUCTURING CHARGES

During the fiscal year ended March 31, 2018, the Company restructured certain departments to better align functions.

As a result of the workforce reduction, during the fiscal year ended March 31, 2018, the Company recorded a restructuring charge totaling $ 5.1 million related to one-time termination benefits for the employees that were notified during the period.

Additional one-time termination benefit charges and facility-related costs of $ 1.7 million were recorded during the fiscal year ended March 31, 2019.

The one-time termination benefits and facility-related costs related to this plan were paid in full during the fiscal year ended March 31, 2019.

During the fiscal year ended March 31, 2019, the Company implemented a voluntary separation program (VSP) for employees who met certain requirements to reduce overall headcount.

As a result of the related workforce reduction, the Company recorded restructuring charges totaling $ 17.2 million related to one-time termination benefits for employees who voluntarily terminated their employment with the Company during the period.

Additional one-time termination benefit charges of $ 0.1 million were recorded in the fiscal year ended March 31, 2020.

The one-time termination benefits were paid in full during the fiscal year ended March 31, 2020.

During the fiscal year ended March 31, 2020, the Company approved two restructuring plans.

During the second quarter of the fiscal year ended March 31, 2020, the Company restructured certain departments to better align functions.

As a result of the workforce reduction, the Company recorded a restructuring charge totaling $ 0.5 million during the fiscal year ended March 31, 2020.

The one-time termination benefits were paid in full during the first quarter of the fiscal year ending March 31, 2021.

During the fourth quarter of the fiscal year ended March 31, 2020, the Company restructured certain departments to better align functions.

As a result of the workforce reduction, the Company recorded a restructuring charge totaling $ 2.1 million during the fiscal year ended March 31, 2020 and an additional $ 0.1 million during the fiscal year ended March 31, 2021.

The one-time termination benefits were paid in full by the end of the second quarter of the fiscal year ending March 31, 2021.

Additional one-time employee-related termination benefit charges of $ 0.1 million were recorded and paid in full in the fiscal year ended March 31, 2020.

During the fiscal year ended March 31, 2020, the Company approved two restructuring plans to restructure certain departments to better align functions.

During the second quarter of the fiscal year ended March 31, 2020, as a result of the first workforce reduction, the Company recorded a restructuring charge totaling $ 0.5 million during the fiscal year ended March 31, 2020.

During the fourth quarter of the fiscal year ended March 31, 2020, as a result of the second workforce reduction, the Company recorded a restructuring charge totaling $ 2.1 million during the fiscal year ended March 31, 2020 and an additional $ 0.1 million during the fiscal year ended March 31, 2021.

The one-time employee-related termination benefits for the two approved restructuring plans were paid in full during the fiscal year ended March 31, 2021.

The Company did not approve any restructuring plans during the fiscal year ended March 31, 2022.

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

FY2018 Plan VSP Q2 FY20 Plan Q4 FY20 Plan

Employee-Related Facilities Related Employee-Related Employee-Related Employee-Related Total

Balance at March 31, 2018 $ 3,696 $ — $ — $ — $ — $ 3,696

Restructuring charges to operations 1,017 643 17,248 — — 18,908

Cash payments ( 4,240 ) ( 458 ) ( 17,329 ) — — ( 22,027 )

Other adjustments ( 473 ) ( 185 ) 81 — — ( 577 )

VSP Q2 FY20 Plan Q4 FY20 Plan Total

Balance at March 31, 2019 $ — $ — $ — $ —

7 unchanged sentences

Balance at March 31, 2021 $ — $ — $ — $ —

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

NOTE 12 – LONG-TERM DEBT

On January 16, 2018, the Company amended and expanded its existing credit agreement (Amended Credit Agreement) with a syndicate of lenders by and among:

On January 16, 2018, the Company amended and expanded its existing credit agreement (Amended Credit Agreement), which provided for a five-year , $ 1.0 billion senior secured revolving credit facility, including a letter of credit sub-facility of up to $ 75.0 million.

The commitments under the Amended Credit Agreement were set to expire on January 16, 2023, and any outstanding loans were due on that date.

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:

JPMorgan Chase Bank, N.A.

(JPMorgan), as administrative agent and collateral agent;

Morgan Securities LLC, KeyBanc Capital Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners;

Fifth Third Bank, Santander Bank, N.A., SunTrust Bank, N.A.

Bank National Association, as co-documentation agents;

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 Amended Credit Agreement provides for a five-year , $ 1.0 billion 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 new credit facility for general corporate purposes or to finance the repurchase of up to twenty-five million shares of the Company's common stock under the Company's common stock repurchase plan.

The commitments under the Amended Credit Agreement will expire on January 16, 2023, and any outstanding loans will be due on that date.

During the fiscal year ended March 31, 2021, the Company repaid $ 100.0 million of borrowings under the Amended Credit Agreement.

At March 31, 2021, $ 350 million was outstanding under the Amended Credit Agreement.

At the Company's election, revolving loans under the Amended Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) JPMorgan's prime rate, (2) 0.50 % in excess of the New York Federal Reserve Bank (NYFRB) rate, or (3) an adjusted one month LIBOR rate plus 1 %;

or (b) such adjusted LIBOR rate (for the interest period selected by the Company), in each case plus an applicable margin.

For the period from the delivery of the Company's financial statements for the quarter ended December 31, 2020, until the Company has delivered financial statements for the quarter ended March 31, 2021, the applicable margin will be 1.50 % per annum for LIBOR loans and 0.50 % per annum for Alternate Base Rate loans, and thereafter the applicable margin will vary depending on the Company's leverage ratio, ranging from 0.75 % per annum for Base Rate loans and 1.75 % per annum for LIBOR loans if the Company's consolidated leverage ratio is less than or equal to 3.50 to 1.00, down to 0.00 % per annum for Alternate Base Rate loans and 1.00 % per annum for LIBOR loans if the Company's consolidated leverage ratio is equal to or less than 1.50 to 1.00.

As of March 31, 2021, the Company’s maximum allowed consolidated leverage ratio is 3.50 to 1.00.

On July 27, 2017, the U.K.

Financial Conduct Authority (FCA) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021.

On March 5, 2021, the Intercontinental Exchange Benchmark Administration (IBA), the FCA-regulated and authorized administrator of LIBOR, announced, and the FCA confirmed, that one week and two-month USD LIBOR settings will cease on December 31, 2021, and that the USD LIBOR panel will cease on June 30, 2023.

IBA notes that any publication of the Overnight and 1, 3, 6 and 12 Months USD LIBOR settings based on panel bank submissions beyond December 31, 2021 will need to comply with applicable regulations, including as to representativeness.

Based on current information from panel banks, IBA anticipates there being a representative panel for the continuation of these USD LIBOR settings through to June 30, 2023.

The Company's Amended Credit Agreement, which matures on January 16, 2023 prior to the June 30, 2023 cessation of USD LIBOR publications, provides for the Administrative Agent to determine if (i) adequate and reasonable means do not exist for ascertaining the LIBOR rate or (ii) the FCA or Government Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBOR rate shall no longer be used for determining interest rates for loans and the Administrative Agent determines that (i) and (ii) above are unlikely to be temporary, then the Administrative Agent and the Company would agree to transition to an Alternate Base Rate borrowing as described above or amend the Credit Agreement to establish an alternate rate of interest to LIBOR that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time.

The Company's consolidated leverage ratio is the ratio of its total funded debt compared to its consolidated adjusted EBITDA.

Consolidated adjusted 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 definition of consolidated adjusted EBITDA in the Amended 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 December 31, 2020 until the Company has delivered financial statements for the quarter ended March 31, 2021, the commitment fee will be 0.25 % per annum, and thereafter the commitment fee will vary depending on the Company's consolidated leverage ratio, ranging from 0.30 % per annum if the Company's consolidated leverage ratio is greater than 2.75 to 1.00, down to 0.15 % per annum if the Company's consolidated leverage ratio is equal to or less than 1.50 to 1.00.

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, the Company paid off the outstanding balance of $ 350 million under the Amended Credit Agreement on July 27, 2021 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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

Letter of credit participation fees are payable to each lender on the amount of such lender’s letter of credit exposure, during the period from the closing date of the Amended 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 a rate per annum equal to the applicable margin for LIBOR loans.

consolidated statements of operations for the fiscal year ended March 31, 2022.

At March 31, 2022, $ 350 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 December 31, 2021, until the Company has delivered financial statements for the quarter ended March 31, 2022, the applicable margin will be 1.25 % per annum for Term Benchmark Revolving loans and 0.25 % 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 0.00 % 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 total funded 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.

The Company's secured 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 secured net leverage ratio is 4.00 to 1.00

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 December 31, 2021, until the Company has delivered financial statements for the quarter ended March 31, 2022, the commitment fee will be 0.20 % 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 LIBOR 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 Amended Credit Agreement at any time, without penalty, subject to certain notice requirements.

Debt is recorded at the amount drawn on the revolving credit facility plus interest based on floating rates reflective of changes in the market which approximates fair value.

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 Company 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 Amended 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 Amended Credit Agreement.

The Amended 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.

In addition, the Company is required to maintain certain consolidated leverage and interest coverage ratios.

These covenants and limitations are more fully described in the Amended Credit Agreement.

At March 31, 2021, the Company was in compliance with all of these covenants.

The Amended 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 Amended Credit Agreement and related documents, 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 Amended Credit Agreement and the other loan documents.

In connection with the Company's Amended Credit Agreement described above, the Company terminated its previous term loan dated as of July 14, 2015, by and among the Company;

JPMorgan Chase Bank, N.A.

(JPMorgan), as administrative agent and collateral agent;

Morgan Securities LLC, KeyBanc Capital Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners;

Santander Bank, N.A., SunTrust Bank, N.A.

Bank National Association, as co-documentation agents;

and the lenders party thereto.

The Company has capitalized debt issuance costs totaling $ 12.2 million at March 31, 2021, which are being amortized over the life of the revolving credit facility.

The unamortized balance was $ 3.1 million as of March 31, 2021.

The balance of $ 1.7 million was included as prepaid expenses and other current assets and a balance of $ 1.4 million was included as other assets in the Company's consolidated balance sheet.

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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

that the Company maintain a minimum consolidated interest coverage ratio.

These covenants and limitations are more fully described in the Second Amended and Restated Credit Agreement.

As of March 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 secured 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 $ 4.8 million at March 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 $ 3.7 million was included as other assets in the Company's consolidated balance sheet at March 31, 2022.

NOTE 13 – NET INCOME (LOSS) PER SHARE

5 unchanged sentences

Dilutive common equivalent shares:

Weighted average restricted stock units 719 — —

Weighted average restricted stock units and performance-based restricted stock units

Denominator for diluted net income (loss) per share - weighted average shares outstanding 75,084 73,822 75,162

10 unchanged sentences

The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of unrecognized compensation expense.

As the Company incurred a net loss in the fiscal years ended March 31, 2020 and 2019, all outstanding restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average share outstanding.

As the Company incurred a net loss in the fiscal year ended March 31, 2020, all outstanding restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average share outstanding.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

NOTE 14 – TREASURY STOCK

2 unchanged sentences

The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this share repurchase program.

On February 1, 2018, the Company entered into ASR agreements with two third-party financial institutions to repurchase an aggregate of $ 300 million of the Company's common stock via accelerated stock repurchase transactions under the Company’s twenty million share repurchase program and the twenty-five million share repurchase program.

During the fiscal year ended March 31, 2018, the Company received an initial delivery of 7,387,862 shares for $ 210.0 million, of which 970,650 shares were deducted from the twenty million share repurchase program and 6,417,212 shares were deducted from the twenty-five million share repurchase program.

During the fiscal year ended March 31, 2019, final settlement of the ASR agreements was completed and as a result, the Company received an additional 3,679,947 shares of its common stock for $ 96.8 million, which reduced the number of shares available to be purchased from the twenty-five million share repurchase program during the fiscal year ended March 31, 2019.

In total, 11,067,809 shares of the Company's common stock were repurchased under the ASR at an average cost per share of $ 27.11 .

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

The Company repurchased an additional 154,271 shares for $ 3.3 million, 7,116,159 shares for $ 175.0 million, and 543,251 shares for $ 14.5 million under the twenty-five million share repurchase program during the fiscal years ended March 31, 2021, 2020 and 2019, respectively.

The Company repurchased 1,330,678 shares for $ 35.6 million, 154,271 shares for $ 3.3 million, and 7,116,159 shares for $ 175.0 million of its common stock under the twenty-five million share repurchase program during the fiscal years ended March 31, 2022, 2021 and 2020, respectively.

At March 31, 2022, 5,758,482 shares of common stock remained available to be purchased under the current repurchase program.

16 unchanged sentences

On September 12, 2019, the Company's stockholders approved the 2019 Equity Incentive Plan (2019 Plan), which replaced the Company's 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." Periodically, the Company grants share-based awards to employees and officers of the Company and its subsidiaries.

The Company accounts for these share-based awards in accordance with GAAP, which requires the measurement and recognition of compensation expense 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.

At September 12, 2019, there was a total of 6,794,651 shares reserved for issuance under the 2019 Plan, which consisted of 5,500,000 new shares plus 1,294,651 shares that remained available for grant under the Amended 2007 Plan as of September 12, 2019, the effective date of the 2019 Plan.

On September 10, 2020, the Company's stockholders approved an amendment to the 2019 Equity Incentive Plan (2019 Amended Plan).

The amendment increased 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.

At September 10, 2020, there was a total of 7,667,262 shares reserved for issuance under the 2019 Amended Plan, which consisted of 4,700,000 new shares plus 2,967,262 shares that remained available for grant under the 2019 Plan as of September 10, 2020, the effective date of the 2019 Amended Plan.

The aggregate number of shares available for issuance under the 2019 Amended Plan will increase by 1.00 share for each share of common stock returned to the 2019 Amended Plan pursuant to a stock option or stock appreciation right and increase for each share:

1 unchanged sentence

(ii) any shares subject to an award under the Amended 2007 Plan or 2019 Amended Plan that are not issued because such award is settled in cash;

(iii) any shares issued pursuant to an award granted under the Amended 2007 Plan or 2019 Amended Plan that are

(iii) any shares issued pursuant to an award granted under the Amended 2007 Plan or 2019 Amended Plan that are forfeited back to or repurchased by the Company because of failure to vest;

and (iv) any shares that are reacquired or withheld by the Company to satisfy tax withholding obligations in connection with common stock issued pursuant to restricted stock, restricted stock units, performance stock awards, or other stock awards granted under the Amended 2007 Plan and 2019 Amended Plan by 2.76 for awards that are returned to the 2019 Amended Plan prior to September 10, 2020 and by 2.32 shares

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

forfeited back to or repurchased by the Company because of failure to vest;

for awards that are returned to the 2019 Amended Plan on or after September 10, 2020.

Furthermore, the share reserve under the 2019 Amended Plan is reduced by one share for each share of common stock issued pursuant to a stock option or stock appreciation right, 2.76 shares for each share of common stock issued pursuant to restricted stock, restricted stock units, performance stock awards, or other stock awards granted under the 2019 Amended Plan on or after September 12, 2019 but prior to September 10, 2020 and 2.32 shares for each share of common stock issued pursuant to restricted stock, restricted stock units, performance stock awards, or other stock awards after September 10, 2020.

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Based on historical experience, the Company assumed an annualized forfeiture rate of 0 % for awards granted to its independent directors, approximately 2 % for awards granted to its senior executives, and approximately 5 % granted to all remaining employees during the fiscal years ended March 31, 2022, 2021 and 2020.

The following is a summary of share-based compensation expense including restricted stock units and employee stock purchases made under the Company's employee stock purchase plan (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands):

Periodically, the Company grants share-based awards to employees, officers, and directors of the Company and its subsidiaries.

During the fiscal year ended March 31, 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, and the 2019 Amended Plan and employee stock purchases made under the Company's 2011 Employee Stock Purchase Plan, as amended, (ESPP), based on estimated fair values within the applicable cost and expense lines identified below (in thousands):

Fiscal Year Ended March 31,

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Benefits paid and other ( 422 ) ( 400 )

Actuarial loss (gain) 2,205 ( 1,644 )

Actuarial (gain) loss ( 2,761 ) 2,205

Foreign exchange rate impact ( 2,445 ) 1,976

17 unchanged sentences

Rate of compensation increase 3.00 % 3.00 % 3.00 %

As of March 31, 2021, unrecognized actuarial loss of $ 2.2 million ($ 1.5 million, net of tax) which have not yet been recognized in net periodic pension cost are included in accumulated other comprehensive income (loss).

As of March 31, 2022, unrecognized actuarial gain of $ 2.8 million ($ 1.9 million, net of tax) which have not yet been recognized in net periodic pension cost are included in accumulated other comprehensive income (loss).

The unrecognized actuarial gains and losses are calculated as the difference between the actuarially determined projected benefit obligation and the value of the plan assets less accrued pension costs.

8 unchanged sentences

NOTE 17 – INCOME TAXES

Income (loss) before income tax expense (benefit) consisted of the following (in thousands):

Income before income tax expense consisted of the following (in thousands):

Fiscal Year Ended March 31,

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Notes to Consolidated Financial Statements—(Continued)

The income tax expense (benefit) computed using the federal statutory income tax rate differs from NetScout's effective tax rate primarily due to the following:

The income tax expense (benefit) computed using the U.S.

statutory federal income tax rate differs from NetScout's effective tax rate primarily due to the following:

Fiscal Year Ended March 31,

2022 2021 2020

Statutory U.S.

federal tax rate 21.0 % 21.0 % 21.0 %

statutory federal income tax rate 21.0 % 21.0 % 21.0 %

State taxes, net of federal tax effect 1.1 2.4 ( 52.9 )

research and development tax credits ( 23.7 ) ( 245.9 ) 7.1

federal and state research and development tax credits ( 11.9 ) ( 23.7 ) ( 226.4 )

Effect of foreign operations 6.3 ( 4.5 ) 46.8

3 unchanged sentences

Stock compensation 2.0 5.1 172.7

Divestiture — — ( 1.0 )

GILTI/FDII ( 20.2 ) ( 174.3 ) 2.9

BEAT — — ( 7.0 )

2017 Tax Act (transition tax and re-measurement of deferreds) — — 0.4

Global intangible low taxed income ( 0.1 ) 0.8 8.4

Foreign derived intangible income ( 12.6 ) ( 24.5 ) ( 144.3 )

Base erosion and anti-abuse act — — ( 322.8 )

Foreign withholding 5.2 13.8 222.5

Provision to return ( 2.3 ) ( 152.8 ) ( 1.0 )

Other permanent differences 0.1 ( 2.0 ) 27.0

16.4 % 13.2 % 243.1 %

Certain amounts in the table above for the fiscal years ended March 31, 2021 and 2020 have been reclassified to conform to the current period presentation.

The components of net deferred tax assets and liabilities are as follows (in thousands):

15 unchanged sentences

Intangible assets ( 117,839 ) ( 132,635 )

Other deferred tax liabilities ( 8,848 ) ( 8,061 )

Operating lease right-of-use asset ( 13,189 ) ( 14,474 )

Depreciation ( 6,612 ) ( 7,818 )

Total deferred tax liability $ ( 84,191 ) $ ( 108,174 )

Other deferred tax liabilities ( 10,425 ) ( 8,848 )

Total deferred tax liabilities $ ( 72,016 ) $ ( 84,191 )

NetScout Systems, Inc.

2 unchanged sentences

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company evaluates the recoverability of deferred tax assets by considering all positive and negative evidence relating to future profitability.

The Company evaluates the recoverability of deferred tax assets by considering all positive and negative evidence.

The Company weighs objective and verifiable evidence more heavily in this analysis.

In situations where the Company concludes that it does not have sufficient objective and verifiable evidence to support the realizability of the asset it creates a valuation allowance against it.

As a result, the Company established a valuation allowance of $ 5.6 million as of March 31, 2020 and $ 11.4 million as of March 31, 2021, repres enting an increase of $ 5.8 million.

As a result, the Company established a valuation allowance of $ 11.4 million as of March 31, 2021 and $ 13.2 million as of March 31, 2022, representing an increase of $ 1.8 million.

The increase in the valuation allowance as of March 31, 2022, as compared to March 31, 2021, is primarily due to deferred tax assets related to U.S.

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At March 31, 2022, the Company had U.S.

federal net operating loss carry forwards of approximately $ 11 million, state net operating loss carryforwards of approximately $ 44 million and tax credit carryforwards of approximately $ 15 million.

The net operating loss and credit carryforwards will expire at various dates beginning in 2026.

The Company also had foreign net operating loss carryforwards of approximately $ 45 million at March 31, 2021 and foreign tax credit carryforwards of approximately $ 7 million.

The majority of foreign net operating losses have no expiration dates.

Utilization of the U.S.

net operating losses and credits are subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state tax provisions.

federal net operating loss carry forwards of $ 7 million and state net operating loss carryforwards of $ 54 million that are subject to expire at various dates beginning in 2025 and 2028, respectively.

At March 31, 2022, the Company also had U.S.

foreign tax credit carryforwards and state tax credits of $ 5 million and $ 9 million that are subject to expire at various dates beginning 2029 and 2030, respectively.

At March 31, 2022, the Company had foreign net operating loss carryforwards of $ 42 million and foreign tax credit carryforwards of $ 7 million, respectively.

The majority of foreign net operating losses and foreign tax credits have no expiration dates.

As of March 31, 2022, the Company does not expect any U.S.

federal and state net operating losses or research and development tax credits to go unutilized.

The Company files U.S.

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With respect to the U.S.

federal and primary state jurisdictions, the Company is no longer subject to examinations by tax authorities for tax years before 2016, although carryforward attributes that were generated prior to 2016 may still be adjusted upon examination if they either have been or will be used in a future period.

The Company also receives inquiries from various tax jurisdictions during the year, and some of those inquiries may include an audit of the tax return previously filed.

federal and primary jurisdictions, the Company is no longer subject to examinations by tax authorities for tax years before 2017, although carryforward attributes that were generated prior to 2017 may still be adjusted upon examination if they either have been or will be used in a future period.

The Company also receives inquiries from various tax jurisdictions during the year, and some of those inquiries may include an audit of tax returns previously filed.

In the normal course of business, NetScout and its subsidiaries are examined by various taxing authorities, including the IRS in the United States.

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Additions based on tax positions related to the current year 28 48 49

Release of tax positions of prior years ( 286 ) ( 212 ) ( 194 )

Decrease relating to settlements with taxing authorities — — ( 735 )

Reductions of prior years tax positions due to lapse of statute of limitations ( 303 ) ( 286 ) ( 212 )

Balance at March 31, $ 638 $ 913 $ 1,151

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The Company includes interest and penalties accrued in the consolidated financial statements as a component of the tax provision.

During fiscal year 2019, the Company completed its analysis and recording of all the tax effects related to the Tax Cuts and Jobs Act (TCJA), as required under SAB 118, and recorded a benefit of $ 87.0 million due to the re-measurement of its deferred taxes and a $ 2.0 million one-time transition tax.

The Company is subject to a territorial tax system under the TCJA, in which we are required to provide for tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries.

The Company has established an accounting policy to provide for GILTI as a tax expense in the year incurred.

The Company continues to assert that certain historical book over tax outside basis differences primarily related to foreign unremitted earnings and cumulative translation adjustments are permanently reinvested.

The determination of the amount of unrecognized deferred tax liability related to such outside basis differences is not practicable due to the uncertainty in the manner and timing in which such differences become taxable and is dependent upon various circumstances and factors, including availability of tax planning.

The Company's intent is to only make distributions from its foreign subsidiaries in the future when they can be made at no or immaterial net tax cost.

The interest and penalties are immaterial to the provision.

Over the next twelve months, previously unrecognized tax benefits primarily due to the lapse of statute of limitations will be immaterial.

The Company continues to assert that certain historical book over tax outside basis differences primarily related to unremitted foreign earnings are permanently reinvested.

The Company's intent is to only make distributions from its foreign subsidiaries in the future when they can be made at no or an immaterial net tax cost.

Unremitted foreign earnings total approximately $ 141 million.

The Company does not expect taxes related to the unremitted foreign earnings to be material if they were distributed which would primarily consist of foreign withholding taxes.

NOTE 18 – LEASES

In February 2016, the FASB issued ASC 842 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The Company adopted the guidance on April 1, 2019 using the modified retrospective method and as a result did not adjust comparative periods or modify disclosures in those comparative periods.

The new guidance provides a number of optional practical expedients in transition.

The Company elected the package of practical expedients, which does not require the reassessment of prior conclusions about lease identification, lease classification and initial direct costs.

Further, the Company elected the practical expedients to combine lease and non-lease components, and to not recognize right-of-use (ROU) assets and lease liabilities for short-term leases.

Leases with an initial term of 12 months or less are classified as short-term leases.

The Company did not elect the hindsight practical expedient to determine the lease term for existing leases.

The adoption of ASC 842 on April 1, 2019 resulted in the recognition of operating lease ROU assets of approximately $ 68.2 million, operating lease liabilities of approximately $ 83.2 million and the elimination of deferred rent of approximately $ 15.0 million.

Operating leases are included in operating lease ROU assets and lease liabilities on the Company’s balance sheets.

The adoption of ASC 842 did not have a material impact on the Company’s consolidated statement of operations, consolidated statement of stockholders' equity, consolidated statement of comprehensive income (loss) or consolidated statement of cash flows.

The new standard had no material impact on liquidity and had no impact on the Company’s debt-covenant compliance under its current debt agreements.

The Company determines if an arrangement is a lease at inception.

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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

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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.

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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 years 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.

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Weighted average discount rate - operating leases 4.0 % 4.1 %

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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

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NOTE 19 – COMMITMENTS AND CONTINGENCIES

Acquisition- and Divestiture-Related

The Company's Level 3 liabilities at March 31, 2021 consisted of contingent purchase consideration related to the two acquisitions that occurred during the fiscal year 2020.

The $ 0.7 million related to the Gigavation acquisition was paid to the seller in February 2021.

The $ 1.0 million related to the Eastwind acquisition was paid to the seller in April 2020.

During fiscal year 2019, the Company paid $ 0.5 million and $ 5.0 million of contingent liabilities to the sellers of Efflux Systems, Inc.

(Efflux) and Simena, LLC (Simena), respectively related to prior acquisitions.

From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business.

F rom 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.

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

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.

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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.

On October 13, 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 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 awards 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, on June 12, 2019, NetScout filed its Notice of Appeal.

On July 14, 2020, the Court of Appeals for the 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.

On March 15, 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.

NetScout continues to avail itself of its legal options.

NetScout has concluded that the risk of loss associated with the post-suit damages award is "probable" in accounting terms, regardless of the options NetScout may pursue, and that the risk of loss associated with pre-suit damages is now remote.

Accounting rules require NetScout to provide an estimate for the range of potential liability.

NetScout currently estimates that the range of liability is the sum of post-suit damages, plus pre- and post-judgment interest amounts and royalties owed on post-trial sales of the accused G10 and GeoBlade products.

Any potential enhancement is not reasonably estimable but is likely within the range of $ 0 to $ 2,800,000 .

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 recently 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.

NetScout has time remaining with respect to its right to appeal from the entry of the amended final judgment.

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 any appeal NetScout may take, NetScout has concluded that the risk of

NetScout Systems, Inc.

Notes to Consolidated Financial Statements—(Continued)

loss associated with such damages award remains "probable" in accounting terms, and that the risk of loss associated with pre-suit damages is remote.

Unconditional Purchase Obligations

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Substantially all of the Company's identifiable assets are located in the United States.

NOTE 21 – SUBSEQUENT EVENTS

On May 3, 2022, the Company’s Board of Directors approved a new share repurchase program that will enable the Company to repurchase up to twenty-five million shares of its common stock.

This new program will become effective once the Company’s existing twenty-five million share repurchase program that was approved October 24, 2017 is completed.

As of March 31, 2022, there were 5,758,482 shares available for repurchase under the existing program.

The Company plans to acquire shares in open market transactions that may use a 10b5-1 plan, and may also repurchase shares via accelerated share repurchase program (ASR), tender offers, privately negotiated transactions or by other means.

Repurchases under this new program will be funded from one or a combination of existing cash balances, future free cash flow and indebtedness.

The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of its new share repurchase program.

The timing and amount of future repurchase activity under the new program will depend on market conditions, corporate considerations, debt agreements, and regulatory requirements.

The new program may be modified, suspended or terminated at any time by the Board.

On May 3, 2022, the Company's Board of Directors authorized an accelerated share repurchase program (ASR Program) to repurchase an aggregate of up to $ 150 million of the Company's common stock under the Company's existing twenty-five million share repurchase program approved on October 24, 2017 (until such program was completed) and the new twenty-five million share repurchase program approved on May 3, 2022.

On May 9, 2022, the Company announced that it entered into agreements with Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (the Dealers) to repurchase an aggregate of $ 150 million of the Company's common stock via the ASR Program.

On May 9, 2022, the Company repaid $ 150.0 million of borrowings under the Second Amended and Restated Credit Agreement.

In May of 2022, the Company received the District Court's ruling regarding enhanced damages for the Packet Intelligence matter.

The Company accrued an additional $ 1.1 million related to that ruling after the issuance of its earnings release on May 5, 2022 as the amount became probable and estimable.

NetScout Systems, Inc.

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Deferred tax asset valuation allowance $ 835 $ 4,806 $ —

$ ( 3,178 ) $ 835

Fiscal year ended March 31, 2021

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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 9A. Controls and Procedures