10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

         

Commission file number 000-26251

NETSCOUT SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

310 Littleton Road, Westford, MA 01886

(978) 614-4000

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

Large accelerated filer  ☒            Accelerated filer             ☐    

Non-accelerated filer   ☐             Smaller reporting company    ☐

Emerging growth company    ☐

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

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

The number of shares outstanding of the registrant's common stock, par value $0.001 per share, as of August 1, 2019 was 75,861,198.

NETSCOUT SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

TABLE OF CONTENTS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS		1
PART I: FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements:
	Consolidated Balance Sheets: At June 30, 2019 and March 31, 2019	2
	Consolidated Statements of Operations: For the three months ended June 30, 2019 and 2018	3
	Consolidated Statements of Comprehensive Income (Loss): For the three months ended June 30, 2019 and 2018	4
	Consolidated Statements of Stockholder's Equity for the three months ended June 30, 2019 and 2018	5
	Consolidated Statements of Cash Flows: For the three months ended June 30, 2019 and 2018	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
SIGNATURES		42

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

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

Cautionary Statement Concerning Forward-Looking Statements

In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking statements under Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. These forward-looking statements involve risks and uncertainties. These statements relate to future events or our future financial performance and are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "intends," "seeks," "anticipates," "believes," "estimates," "potential" or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on these forward-looking statements. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described to in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for our fiscal year ended March 31, 2019, filed with the Securities and Exchange Commission, and elsewhere in this Quarterly Report. These factors may cause our actual results to differ materially from any forward-looking statement. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

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

1

PART I: FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

NetScout Systems, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

	June 30, 2019			March 31, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	353,721		$	409,632
Marketable securities	84,354			76,344
Accounts receivable and unbilled costs, net of allowance for doubtful accounts of $1,690 and $1,583 at June 30, 2019 and March 31, 2019, respectively	160,039			235,318
Inventories and deferred costs	26,479			26,270
Prepaid income taxes	19,614			18,000
Prepaid expenses and other current assets	31,643			35,658
Total current assets	675,850			801,222
Fixed assets, net	56,393			58,951
Operating lease right-of-use assets	67,536			—
Goodwill	1,717,945			1,715,485
Intangible assets, net	648,997			669,118
Deferred income taxes	7,110			7,218
Long-term marketable securities	5,087			1,012
Other assets	15,083			16,988
Total assets	$	3,194,001		$	3,269,994
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	25,578		$	24,582
Accrued compensation	41,379			58,501
Accrued other	23,545			23,027
Income taxes payable	1,517			1,318
Deferred revenue and customer deposits	246,498			272,508
Current portion of operating lease liabilities	11,066			—
Total current liabilities	349,583			379,936
Other long-term liabilities	6,191			19,493
Deferred tax liability	124,870			124,229
Accrued long-term retirement benefits	35,811			36,284
Long-term deferred revenue and customer deposits	95,529			94,619
Operating lease liabilities, net of current portion	70,582			—
Long-term debt	500,000			550,000
Total liabilities	1,182,566			1,204,561
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.001 par value:
5,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 and March 31, 2019	—			—
Common stock, $0.001 par value:
300,000,000 shares authorized; 120,123,018 and 119,760,132 shares issued and 76,554,298 and 77,610,361 shares outstanding at June 30, 2019 and March 31, 2019, respectively	120			120
Additional paid-in capital	2,841,001			2,828,922
Accumulated other comprehensive loss	(3,184		)	(2,639		)
Treasury stock at cost, 43,568,720 and 42,149,771 shares at June 30, 2019 and March 31, 2019, respectively	(1,155,252		)	(1,119,063		)
Retained earnings	328,750			358,093
Total stockholders' equity	2,011,435			2,065,433
Total liabilities and stockholders' equity	$	3,194,001		$	3,269,994

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

2

NetScout Systems, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	June 30,
	2019			2018
Revenue:
Product	$	75,719		$	96,927
Service	110,305			108,184
Total revenue	186,024			205,111
Cost of revenue:
Product	26,935			32,965
Service	27,808			29,062
Total cost of revenue	54,743			62,027
Gross profit	131,281			143,084
Operating expenses:
Research and development	43,727			55,463
Sales and marketing	73,525			78,132
General and administrative	22,211			26,059
Amortization of acquired intangible assets	16,143			23,465
Restructuring charges	123			1,147
Impairment of intangible assets	—			35,871
Total operating expenses	155,729			220,137
Loss from operations	(24,448		)	(77,053		)
Interest and other expense, net:
Interest income	1,658			941
Interest expense	(6,365		)	(5,888		)
Other income	308			254
Total interest and other expense, net	(4,399		)	(4,693		)
Loss before income tax expense (benefit)	(28,847		)	(81,746		)
Income tax expense (benefit)	496			(19,242		)
Net loss	$	(29,343	)	$	(62,504	)
Basic net loss per share	$	(0.38	)	$	(0.78	)
Diluted net loss per share	$	(0.38	)	$	(0.78	)
Weighted average common shares outstanding used in computing:
Net loss per share - basic	77,302			80,358
Net loss per share - diluted	77,302			80,358

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

3

NetScout Systems, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months Ended
	June 30,
	2019			2018
Net loss	$	(29,343	)	$	(62,504	)
Other comprehensive income (loss):
Cumulative translation adjustments	(561		)	(2,708		)
Changes in market value of investments:
Changes in unrealized gains, net of taxes of $6 and $29, respectively	35			28
Total net change in market value of investments	35			28
Changes in market value of derivatives:
Changes in market value of derivatives, net of benefits of ($19) and ($126), respectively	(54		)	(393		)
Reclassification adjustment for net gains included in net loss, net of taxes of $11 and $23, respectively	35			71
Total net change in market value of derivatives	(19		)	(322		)
Other comprehensive loss	(545		)	(3,002		)
Total comprehensive loss	$	(29,888	)	$	(65,506	)

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

4

NetScout Systems, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands, except share data)

(Unaudited)

	Common stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)			Treasury stock				Retained Earnings			Total Stockholders' Equity
	Shares	Par Value							Shares	Stated Value
Balance, March 31, 2018	117,744,913	$	117	$	2,665,120	$	2,895		37,474,890	$	(995,843	)	$	396,493		$	2,068,782
Net loss													(62,504		)	(62,504		)
Unrealized net investment gains						28										28
Unrealized net losses on derivative financial instruments						(322		)								(322		)
Cumulative translation adjustments						(2,708		)								(2,708		)
Issuance of common stock pursuant to vesting of restricted stock units	394,369	—														—
Stock-based compensation expense for restricted stock units granted to employees				11,262												11,262
Repurchase of treasury stock									129,115	(3,486		)				(3,486		)
Cumulative effect of adoption of ASU 2014-09													34,149			34,149
Balance, June 30, 2018	118,139,282	$	117	$	2,676,382	$	(107	)	37,604,005	$	(999,329	)	$	368,138		$	2,045,201
	Common stock Voting			Additional Paid In Capital		Accumulated Other Comprehensive Income (Loss)			Treasury stock				Retained Earnings			Total Stockholders' Equity
	Shares	Par Value							Shares	Stated Value
Balance, March 31, 2019	119,760,132	$	120	$	2,828,922	$	(2,639	)	42,149,771	$	(1,119,063	)	$	358,093		$	2,065,433
Net loss													(29,343		)	(29,343		)
Unrealized net investment gains						35										35
Unrealized net losses on derivative financial instruments						(19		)								(19		)
Cumulative translation adjustments						(561		)								(561		)
Issuance of common stock pursuant to vesting of restricted stock units	362,886	—														—
Stock-based compensation expense for restricted stock units granted to employees				12,079												12,079
Repurchase of treasury stock									1,418,949	(36,189		)				(36,189		)
Balance, June 30, 2019	120,123,018	$	120	$	2,841,001	$	(3,184	)	43,568,720	$	(1,155,252	)	$	328,750		$	2,011,435

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

5

NetScout Systems, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(29,343	)	$	(62,504	)
Adjustments to reconcile net loss to cash provided by operating activities, net of the effects of acquisitions:
Depreciation and amortization	29,335			40,347
Operating lease right-of-use assets	2,552			—
Loss on disposal of fixed assets	—			63
Deal-related compensation expense and accretion charges	—			38
Share-based compensation expense	12,743			12,965
Net change in fair value of contingent and contractual liabilities	541			—
Accretion of contingent consideration	(18		)	—
Impairment of intangible assets	—			35,871
Deferred income taxes	830			(14,306		)
Other gains	(81		)	(206		)
Changes in assets and liabilities
Accounts receivable and unbilled costs	75,092			47,939
Due from related party	—			1,536
Inventories	(1,208		)	(138		)
Prepaid expenses and other assets	4,238			(3,426		)
Accounts payable	(634		)	(5,206		)
Accrued compensation and other expenses	(16,332		)	5,566
Operating lease liabilities	(3,425		)	—
Due to related party	—			250
Income taxes payable	85			(1,882		)
Deferred revenue	(24,917		)	(31,387		)
Net cash provided by operating activities	49,458			25,520
Cash flows from investing activities:
Purchase of marketable securities	(41,039		)	(69,211		)
Proceeds from maturity of marketable securities	28,995			41,573
Purchase of fixed assets	(3,287		)	(6,468		)
Decrease in deposits	—			4
Acquisition of businesses	(4,154		)	—
Net cash used in investing activities	(19,485		)	(34,102		)
Cash flows from financing activities:
Repayment of long-term debt	(50,000		)	—
Treasury stock repurchases	(30,708		)	—
Tax withholding on restricted stock units	(3,012		)	(3,486		)
Net cash used in financing activities	(83,720		)	(3,486		)
Effect of exchange rate changes on cash and cash equivalents	(1,163		)	(4,337		)
Net decrease in cash and cash equivalents and restricted cash	(54,910		)	(16,405		)
Cash and cash equivalents and restricted cash, beginning of period	409,820			370,731
Cash and cash equivalents and restricted cash, end of period	$	354,910		$	354,326
Supplemental disclosures:
Cash paid for interest	$	5,639		$	5,412
Cash paid for income taxes	$	3,211		$	3,882
Non-cash transactions:
Transfers of inventory to fixed assets	$	862		$	1,589
Additions to property, plant and equipment included in accounts payable	$	794		$	54
Tenant improvement allowance	$	—		$	6,788
Contingent consideration related to acquisition, included in accrued other	$	1,000		$	—
Unsettled share repurchases, included in accounts payable	$	2,469		$	—

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

6

NetScout Systems, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

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

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 filed with the Securities and Exchange Commission on May 28, 2019.

Recent Accounting Pronouncements

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. This guidance is effective for fiscal years ending after December 15, 2020. ASU 2018-14 is effective for NetScout beginning April 1, 2021. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-14 will have on its financial position, results of operations, and disclosures.

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. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. ASU 2018-13 is effective for NetScout beginning April 1, 2020. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-13 will have on its financial position, results of operations, and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 provides guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2018. The Company adopted ASU 2017-12 effective April 1, 2019. The adoption has had an immaterial impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification (ASU 2016-02) and issued subsequent amendments to initial guidance in July 2018 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (collectively, ASC 842). ASC 842 aims 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 as of April 1, 2019 using the modified retrospective method. Please refer to Note 13, "Leases" for further details.

NOTE 2 – REVENUE RECOGNITION

Revenue Recognition Policy

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

The Company derives revenues primarily from the sale of network management tools and security solutions for service provider and enterprise customers, which include hardware, software and service offerings. The majority of the Company's

7

product sales consist of hardware products with embedded software that are essential to providing customers the intended functionality of the solutions. The Company also sells software offerings decoupled from the underlying hardware and software solutions to provide customers with enhanced functionality.

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

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

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

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based on the element’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. 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. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a reseller or distributor as a reduction of revenue to the extent they have recorded revenue from the reseller or distributor. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

During the three months ended June 30, 2019, the Company recognized revenue of $97.2 million related to the Company's deferred revenue balance reported at March 31, 2019.

Performance Obligations

Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one

8

combined performance obligation may require significant judgment. The transaction price is allocated among performance obligations in bundled contracts in an amount that depicts the relative standalone selling prices of each obligation.

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

Payments for hardware, software licenses, one-year maintenance, PCS and consulting services, are typically due up front with payment terms of 30 to 90 days. However, the Company does have contracts pursuant to which billings occur ratably over a period of years following the transfer of control for the contracted performance obligations. Payments on multi-year maintenance, PCS and consulting services are typically due in annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns or refunds at June 30, 2019.

At June 30, 2019, the Company had total deferred revenue of $342.0 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $246.5 million, or 72%, of this revenue during the next 12 months, and expects to recognize the remaining $95.5 million, or 28%, of this revenue thereafter.

Because of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, 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 $7.0 million and $23.3 million at June 30, 2019 and March 31, 2019, respectively.

NetScout expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have any significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the three months ended June 30, 2019.

Contract Balances

The Company receives payments from customers based on a billing schedule as established by the Company’s contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. The Company records unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. Deferred revenue relates to payments received in advance of performance under the contract.

Costs to Obtain Contracts

The Company has determined that the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. Sales commissions are recorded as an asset and amortized to expense ratably over the remaining performance periods of the related contracts with remaining performance obligations. The Company expenses costs as incurred for sales commissions when the amortization period would have been one year or less.

At June 30, 2019, the consolidated balance sheet included $6.7 million in assets related to sales commissions to be expensed in future periods. A balance of $4.3 million was included in prepaid expenses and other current assets, and a balance of $2.4 million was included as other assets in the Company's consolidated balance sheet at June 30, 2019. At March 31, 2019, the consolidated balance sheet included $6.4 million in assets related to sales commissions to be expensed in future

periods. A balance of $3.8 million was included in prepaid expenses and other current assets, and a balance of $2.6 million was included as other assets in the Company's consolidated balance sheet at March 31, 2019.

During the three months ended June 30, 2019 and 2018, respectively, the Company recognized $1.6 million and $0.6 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.

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NOTE 3 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

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

At June 30, 2019 and March 31, 2019, the Company had no direct customers or indirect channel partners which accounted for more than 10% of the accounts receivable balance.

During the three months ended June 30, 2019 and June 30, 2018, no direct customers or indirect channel partners accounted for more than 10% of the Company's total revenue.

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

NOTE 4 – SHARE-BASED COMPENSATION

The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended, 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):

	Three Months Ended
	June 30,
	2019		2018
Cost of product revenue	$	267	$	269
Cost of service revenue	1,467		1,330
Research and development	3,819		4,151
Sales and marketing	4,135		4,359
General and administrative	3,055		2,856
	$	12,743	$	12,965

Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2019. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year.

NOTE 5 – CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at June 30, 2019 and March 31, 2019.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

	June 30, 2019		March 31, 2019		June 30, 2018		March 31, 2018
Cash and cash equivalents	$	353,721	$	409,632	$	353,416	$	369,821
Restricted cash	1,189		188		910		910
Total cash, cash equivalents and restricted cash	$	354,910	$	409,820	$	354,326	$	370,731

The Company's restricted cash includes cash balances which are legally or contractually restricted. The Company's restricted cash is included within prepaid and other current assets and consists of amounts related to holdbacks associated with prior acquisitions.

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Marketable Securities

The following is a summary of marketable securities held by NetScout at June 30, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	44,101	$	31	$	44,132
Commercial paper	37,553		—		37,553
Corporate bonds	2,663		6		2,669
Total short-term marketable securities	84,317		37		84,354
U.S. government and municipal obligations	5,067		20		5,087
Total long-term marketable securities	5,067		20		5,087
Total marketable securities	$	89,384	$	57	$	89,441

The following is a summary of marketable securities held by NetScout at March 31, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	27,610	$	12	$	27,622
Commercial paper	48,722		—		48,722
Total short-term marketable securities	76,332		12		76,344
Corporate bonds	1,007		5		1,012
Total long-term marketable securities	1,007		5		1,012
Total marketable securities	$	77,339	$	17	$	77,356

Contractual maturities of the Company's marketable securities held at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	June 30, 2019		March 31, 2019
Available-for-sale securities:
Due in 1 year or less	$	84,354	$	76,344
Due after 1 year through 5 years	5,087		1,012
	$	89,441	$	77,356

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NOTE 6 – FAIR VALUE MEASUREMENTS

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at June 30, 2019 and March 31, 2019 (in thousands):

	Fair Value Measurements at
	June 30, 2019
	Level 1		Level 2			Level 3			Total
ASSETS:
Cash and cash equivalents	$	353,721	$	—		$	—		$	353,721
U.S. government and municipal obligations	47,145		2,074			—			49,219
Commercial paper	—		37,553			—			37,553
Corporate bonds	2,669		—			—			2,669
Derivative financial instruments	—		18			—			18
Contingent consideration	—		—			239			239
	$	403,535	$	39,645		$	239		$	443,419
LIABILITIES:
Contingent purchase consideration	$	—	$	—		$	(1,000	)	$	(1,000	)
Derivative financial instruments	—		(51		)	—			(51		)
	$	—	$	(51	)	$	(1,000	)	$	(1,051	)

	Fair Value Measurements at
	March 31, 2019
	Level 1		Level 2			Level 3		Total
ASSETS:
Cash and cash equivalents	$	409,632	$	—		$	—	$	409,632
U.S. government and municipal obligations	10,732		16,890			—		27,622
Commercial paper	—		48,722			—		48,722
Corporate bonds	1,012		—			—		1,012
Derivative financial instruments	—		58			—		58
Contingent consideration	—		—			762		762
	$	421,376	$	65,670		$	762	$	487,808
LIABILITIES:
Derivative financial instruments	$	—	$	(68	)	$	—	$	(68	)
	$	—	$	(68	)	$	—	$	(68	)

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

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

The Company's Level 2 investments are classified as such because 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

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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 assets consist of contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018. The contingent consideration represents potential future earnout payments to the Company of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The Company recorded a $0.5 million change in the fair value of the contingent consideration for the three months ended June 30, 2019, which is included in other expense, net within the Company's consolidated statement of operations for the three months ended June 30, 2019. The fair value of the contingent consideration was $0.2 million and $0.8 million at June 30, 2019 and March 31, 2019 respectively. The contingent consideration is included in other assets within the Company’s consolidated balance sheet at June 30, 2019 and March 31, 2019.

The Company's Level 3 liability consists of contingent purchase consideration related to the acquisition of certain assets and liabilities of Eastwind Networks, Inc. (Eastwind) in April 2019. The contingent purchase consideration represents amounts deposited into an escrow account, which was established to cover damages NetScout may suffer 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. The contingent purchase consideration is included as accrued other in the Company's consolidated balance sheet at June 30, 2019.

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 three months ended June 30, 2019 (in thousands):

	Contingent Consideration			Contingent Purchase Consideration
Balance at March 31, 2019	$	762		$	—
Additions to Level 3	—			(1,000		)
Change in fair value of contingent consideration	(523		)	—
Balance at June 30, 2019	$	239		$	(1,000	)

Accretion income related to the contingent consideration received as partial consideration for the divestiture of the HNT tools business for the three months ended June 30, 2019 was $18 thousand and was included within interest income.

NOTE 7 – INVENTORIES

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

	June 30, 2019		March 31, 2019
Raw materials	$	18,825	$	14,432
Work in process	410		1,181
Finished goods	6,228		7,738
Deferred costs	1,016		2,919
	$	26,479	$	26,270

NOTE 8 - ACQUISITIONS & DIVESTITURES

Eastwind Acquisition

On April 3, 2019 (the Eastwind Closing Date), the Company completed the acquisition of certain assets and liabilities of Eastwind for $5.2 million. Eastwind's breach analytics cloud analyzes data to identify malicious activity, insider threats and data leakage.

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The Company has 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.

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. The escrow account was established to cover damages NetScout may suffer 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 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. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be 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 will record the liability over the period it is earned as compensation expense for post-combination services.

The fair value of intangible assets 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 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 weighted 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 HNT tools business. As part of the divestiture, the Company recorded contingent consideration which represents potential future earnout payments of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The Company recorded a $0.5 million change in the fair value of the contingent consideration, which is included in other expense, net within the Company’s consolidated statements of operations for the three months ended June 30, 2019. The fair value of the contingent consideration was $0.2 million and $0.8 million at June 30, 2019 and March 31, 2019, respectively. The contingent consideration is included within other assets within the Company’s consolidated balance sheet.    

In connection with the divestiture, the Company has 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 three months ended June 30, 2019 was $0.9 million and included within other income in the Company's consolidated statement of operations.

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NOTE 9 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has two reporting units: (1) Service Assurance and (2) Security. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2019.

At June 30, 2019 goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $555.9 million, respectively. At March 31, 2019, goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $551.1 million, respectively.

The change in the carrying amount of goodwill for the three months ended June 30, 2019 is due to the acquisition of Eastwind and the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The changes in the carrying amount of goodwill for the three months ended June 30, 2019 are as follows (in thousands):

Balance at March 31, 2019	$	1,715,485
Goodwill attributed to the Eastwind acquisition	1,003
Foreign currency translation impact	1,457
Balance at June 30, 2019	$	1,717,945

Intangible Assets

The net carrying amounts of intangible assets were $649.0 million and $669.1 million at June 30, 2019 and March 31, 2019, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes 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. The Company completed its annual impairment test on January 31, 2019.

During the three months ended June 30, 2018, 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 three months ended June 30, 2018.  The impairment charge was recorded within a separate operating expense line item in the Company's consolidated statements of operations during the three months ended June 30, 2018.

Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at June 30, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	246,052	$	(174,164	)	$	71,888
Customer relationships	771,415		(232,409		)	539,006
Distributor relationships and technology licenses	6,855		(5,568		)	1,287
Definite-lived trademark and trade name	39,236		(22,003		)	17,233
Core technology	7,192		(6,902		)	290
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,349		(16,349		)	—
Capitalized software	3,317		(2,905		)	412
Other	1,208		(927		)	281
	$	1,092,752	$	(462,355	)	$	630,397

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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, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	242,259	$	(168,289	)	$	73,970
Customer relationships	772,969		(218,043		)	554,926
Distributor relationships and technology licenses	6,882		(5,237		)	1,645
Definite-lived trademark and trade name	39,304		(20,586		)	18,718
Core technology	7,192		(6,845		)	347
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,397		(16,397		)	—
Capitalized software	3,317		(2,690		)	627
Other	1,208		(923		)	285
	$	1,090,656	$	(440,138	)	$	650,518

Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three months ended June 30, 2019 and 2018, respectively (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Amortization of intangible assets included as:
Cost of product revenue	$	6,802	$	9,191
Operating expense	16,148		23,470
	$	22,950	$	32,661

The following is the expected future amortization expense at June 30, 2019 for the fiscal years ending March 31 (in thousands):

2020 (remaining nine months)	$	68,244
2021	79,923
2022	69,523
2023	61,814
2024	53,717
Thereafter	297,176
	$	630,397

The weighted-average amortization period of developed technology and core technology is 11.3 years. 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 amortizing all intangible assets is 14.6 years.

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NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019
Derivatives Designated as Hedging Instruments:
Forward contracts	$	2,070	$	4,550	$	18	$	58	$	51	$	68

(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 for the three months ended June 30, 2019 and 2018 (in thousands):

	Loss Recognized in OCI on Derivative (a)						Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	June 30, 2019			June 30, 2018			Location	June 30, 2019			June 30, 2018
Forward contracts	$	(73	)	$	(519	)	Research and development	$	(5	)	$	30
							Sales and marketing	51			64
	$	(73	)	$	(519	)		$	46		$	94

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

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

NOTE 11 – 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: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. 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. and U.S. Bank National Association, 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 three months ended June 30, 2019, the Company repaid $50.0 million of borrowings under the Amended Credit Agreement. At June 30, 2019, $500 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

17

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 March 31, 2019, until the Company has delivered financial statements for the quarter ended June 30, 2019, 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 1.00% per annum for Base Rate loans and 2.00% per annum for LIBOR loans if the Company's consolidated 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 LIBOR loans if the Company's consolidated leverage ratio is equal to or less than 1.50 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. The Company's Amended Credit Agreement 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 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 March 31, 2019 until the Company has delivered financial statements for the quarter ended June 30, 2019, 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.

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. 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 June 30, 2019, 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

18

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; J.P. 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. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto.

The Company has capitalized debt issuance costs totaling $12.2 million at June 30, 2019, which are being amortized over the life of the revolving credit facility. The unamortized balance was $6.2 million as of June 30, 2019. The balance of $1.8 million was included as prepaid expenses and other current assets and a balance of $4.4 million was included as other assets in the Company's consolidated balance sheet.

NOTE 12 – RESTRUCTURING CHARGES

During the third quarter of fiscal year ended March 31, 2018, the Company restructured certain departments to better align functions resulting in the termination of sixty-one employees. As a result of the workforce reduction, the Company recorded a restructuring charge during the three months ended June 30, 2018 totaling $1.1 million related to one-time termination benefits for the employees that were notified during the period as well as facilities-related costs. The one-time termination benefits were paid in full during the fiscal year ended March 31, 2019.

During the second quarter of fiscal year ending March 31, 2019, the Company implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, one hundred fifty-five employees voluntarily terminated their employment with the Company during the fiscal year ended March 31, 2019. Additional one-time termination benefit charges of $0.1 million was recorded during the three months ended June 30, 2019. These one-time termination benefits were paid in full by the end of the first quarter of fiscal year 2020.

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

	VSP
	Employee-Related
Balance at March 31, 2019	$	—
Restructuring charges to operations	123
Cash payments	(123		)
Balance at June 30, 2019	$	—

NOTE 13 - 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

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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. ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company’s estimated incremental borrowing rate unless the lessor’s implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. The Company’s leases have remaining lease terms ranging from 1 year to 11 years. The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making this determination, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

The components of operating lease cost for the three months ended June 30, 2019 were as follows (in thousands):

Lease cost under long-term operating leases	$	3,245
Lease cost under short-term operating leases	852
Variable lease cost under short-term and long-term operating leases	1,212
Total operating lease cost	$	5,309

The table below presents supplemental cash flow information related to leases during the three months ended June 30, 2019 (in thousands):

Cash paid for amounts included in the measurement of lease liabilities	$	3,425
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,827

Weighted average remaining lease term in years and weighted average discount rate are as follows:

Weighted average remaining lease term in years - operating leases	9.28
Weighted average discount rate - operating leases	4.2	%

Future minimum payments under non-cancellable leases at June 30, 2019 are as follows (in thousands):

Year ending March 31:
2020 (remaining nine months)	$	10,249
2021	12,275
2022	11,454
2023	9,928
2024	9,049
Thereafter	45,483
Total lease payments	$	98,438
Less imputed interest	(16,790		)
Present value of lease liabilities	$	81,648

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As previously disclosed in the Company’s fiscal year Form 10-K and under the previous lease accounting standard, ASC 840, Leases, the following table summarizes the future non-cancelable minimum lease commitments (including office space, copiers, and automobiles) at March 31, 2019 (in thousands):

Year ending March 31:
2020	$	16,102
2021	11,059
2022	9,804
2023	8,807
2024	8,500
Thereafter	43,997
Total	$	98,269

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Acquisition and divestiture related – The Company has a contingent consideration asset related to the divestiture of its HNT tools business in September 2018. The contingent consideration asset represents potential future earnout payments to the Company of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration asset at June 30, 2019 and March 31, 2019 was $0.2 million and $0.8 million, respectively.

The Company had a contingent liability at June 30, 2019 for $1.0 million related to the acquisition of Eastwind in April 2019 for which an escrow account was established to cover damages NetScout may suffer 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 merger agreement. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be paid to the seller in April 2020.

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

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. 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 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. The Court denied the Plaintiff's motion for fees. Following additional motions for judgment as a matter of law, the court entered final judgment. On June 12, 2019, NetScout filed its Notice of Appeal of the judgment and all other adverse findings. NetScout has concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible." Therefore, accounting rules require NetScout to provide an estimate for the range of potential liability. NetScout currently estimates that the estimated range of liability is between $0 and the aggregate amount awarded by the jury and the Court's award of enhanced damages, plus potential additional pre- and post-judgment interest amounts and costs and any royalties owed on post-trial sales of the accused G10 and GeoBlade products.

NOTE 15 – PENSION BENEFIT PLANS

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

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The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three months ended June 30, 2019 and 2018 (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Service cost	$	41	$	63
Interest cost	96		121
Net periodic pension cost	$	137	$	184

Expected Contributions

During the three months ended June 30, 2019, the Company made contributions of $0.1 million to its defined benefit pension plans. During the fiscal year ending March 31, 2020, the Company's cash contribution requirements for its defined benefit pension plans are expected to be less than $1.0 million. As a majority of the participants within the Company's plans are all active employees, the benefit payments are not expected to be material in the foreseeable future.

NOTE 16 – TREASURY STOCK

On May 19, 2015, the Company's board of directors approved a share repurchase program. This program enabled the Company to repurchase up to 20 million shares of its common stock. This plan became effective on July 14, 2015. The Company was not obligated to acquire any specific amount of common stock within any particular timeframe under this program. Through March 31, 2018, the Company had repurchased 20,000,000 shares totaling $607.6 million in the open market under this stock repurchase plan. At March 31, 2018, there were no shares of common stock that remained available to be purchased under the plan.

On October 24, 2017, the Company’s Board of Directors approved a new share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock. This new program became effective when the Company’s previously disclosed twenty million share repurchase program was completed. The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this new share repurchase program. 

On February 1, 2018, the Company entered into ASR agreements with two third-party financial institutions (the Dealers) 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 (until such program was completed) and the twenty-five million share repurchase program. The Company borrowed $300 million against its Amended Credit Facility to finance the payment of the initial purchase price to each of the Dealers. Under the terms of the ASR, the Company made a $150 million payment to each of the Dealers on February 2, 2018, and received an initial delivery of 3,693,931 shares from each of the Dealers, or 7,387,862 shares in the aggregate, which was approximately 70 percent of the total number of shares of the Company's common stock expected to be repurchased under the ASR. As part of this purchase, 970,650 shares for $27.6 million were deducted under the twenty million share repurchase program and 6,417,212 shares for $182.4 million were deducted from the twenty-five million share repurchase program during the fiscal year ended March 31, 2018. Final settlement of the ASR agreements was completed in August 2018. 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 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.

Through June 30, 2019, the Company has repurchased 11,937,810 shares for $295.0 million in the open market under the twenty-five million share repurchase program. At June 30, 2019, 13,062,190 shares of common stock remained available to be purchased under the current repurchase program. The Company repurchased 1,297,400 shares for $33.2 million during the three months ended June 30, 2019 under the twenty-five million share repurchase program.

In connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld 121,549 shares and 129,115 shares at a cost of $3.0 million and $3.5 million related to minimum statutory tax withholding requirements on these restricted stock units during the three months ended June 30, 2019 and 2018, respectively. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the amount that is available for repurchase under that program.

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NOTE 17 – NET LOSS PER SHARE

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

	Three Months Ended
	June 30,
	2019			2018
Numerator:
Net loss	$	(29,343	)	$	(62,504	)
Denominator:
Denominator for basic net loss per share - weighted average common shares outstanding	77,302			80,358
Dilutive common equivalent shares:
Weighted average restricted stock units	—			—
Denominator for diluted net loss per share - weighted average shares outstanding	77,302			80,358
Net loss per share:
Basic net loss per share	$	(0.38	)	$	(0.78	)
Diluted net loss per share	$	(0.38	)	$	(0.78	)

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

	Three Months Ended
	June 30,
	2019	2018
Restricted stock units	1,184	1,065

Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options and unrecognized compensation expense as additional proceeds. As we incurred a net loss during the three months ended June 30, 2019 and 2018, all outstanding restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average shares outstanding.

The delivery of approximately 7.4 million shares under the Company's accelerated share repurchase (ASR) agreements reduced our outstanding shares used to determine our weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the three months ended June 30, 2018. See Note 16 for additional information. We evaluated the ASR agreements for potential dilutive effects of any shares remaining to be received or owed upon settlement and determined the additional shares to be received would be anti-dilutive, and therefore they were not included in our calculation of diluted earnings per share for the three months ended June 30, 2018.    

NOTE 18 – INCOME TAXES

The Company's effective income tax rates were 1.7% and 23.5% for the three months ended June 30, 2019 and 2018, respectively. Generally, the effective tax rate differs from the statutory tax rate due to state income taxes, foreign withholding taxes, the Base Erosion Anti-Abuse Tax and the Global Intangible Low Taxes Income inclusion partially offset by the tax benefit associated with research and development tax credits, foreign tax credits, Foreign Derived Intangible Income deduction and earnings in jurisdictions subject to tax rates lower than the U.S. statutory rate. The effective tax rate for the three months ended June 30, 2019 is lower than the effective rate for the three months ended June 30, 2018, primarily due to a significant discrete item recorded in the quarter.

As a result of the Tax Legislation, in fiscal 2019, several of our foreign subsidiaries made tax elections to be treated as U.S. branches for federal income tax purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2020. As a result of making these check-the-box elections in the first quarter of fiscal 2020, we recorded a tax expense of

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approximately $6.0 million due to establishing new U.S. net deferred tax liabilities resulting from the difference between the GAAP basis and the U.S. federal tax carryover basis of the existing assets and liabilities of those foreign subsidiaries.

NOTE 19 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company reports revenues and income under one reportable segment.

The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. In accordance with United States export control regulations, the Company does not sell or do business with countries subject to economic sanctions and export controls.

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

	Three Months Ended
	June 30,
	2019		2018
United States	$	107,103	$	127,246
Europe	31,309		31,021
Asia	12,552		17,900
Rest of the world	35,060		28,944
	$	186,024	$	205,111

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

NOTE 20 – SUBSEQUENT EVENTS

On August 6, 2019, the Company repaid $50.0 million of borrowings under the Amended Credit Agreement.

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, filed with the Securities and Exchange Commission. This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. These risks and uncertainties could cause actual results to differ significantly from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled "Cautionary Statement Concerning Forward-Looking Statements" that appears at the beginning of this Quarterly Report. These statements, like all statements in this report, speak only as of the date of this Quarterly Report (unless another date is indicated), and, except as required by law, we undertake no obligation to update or revise these statements in light of future developments.

Overview

We are an industry leader in providing service assurance and security solutions that are used by customers worldwide to assure their digital business services against disruption. Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility necessary to optimize network performance, ensure the delivery of high-quality, mission-critical applications and services, gain timely insight into the end user experience and protect the network from attack. With our offerings, customers can quickly, efficiently and effectively identify and resolve issues that result in downtime, interruptions to services, poor service quality or compromised security, thereby driving compelling returns on their investments in their network and broader technology initiatives.

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

Results Overview

Total revenue for the three months ended June 30, 2019 was impacted by a combination of factors. The primary factor was the divestiture of the HNT tools business assets as that sale occurred in mid-September 2018. Additionally, continued constrained spending and elongated purchasing cycles in our service provider markets and disruption in our international enterprise sales force from a recent reorganization impacted revenue.

Our gross profit percentage increased by one percentage point during the three months ended June 30, 2019 as compared with the three months ended June 30, 2018.

Net loss for the three months ended June 30, 2019 was $29.3 million, as compared with net loss for the three months ended June 30, 2018 of $62.5 million, a decrease of $33.2 million, primarily due to a $35.9 million impairment charge of certain intangible assets related to the HNT tools business recorded in the three months ended June 30, 2018.

At June 30, 2019, cash, cash equivalents and marketable securities (current and non-current) totaled $443.2 million, a $43.8 million decrease from $487.0 million at March 31, 2019 due primarily to $50.0 million used to pay long-term debt, $30.7 million used to repurchase shares of our common stock, $4.2 million used for the acquisition of Eastwind, $3.3 million used for capital expenditures and $3.0 million used for tax withholdings on restricted stock units, partially offset by cash provided by operations of $49.5 million during the three months ended June 30, 2019.

Use of Non-GAAP Financial Measures

We supplement the United States generally accepted accounting principles (GAAP) financial measures we report in

quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the

following non-GAAP measures: non-GAAP total revenue, non-GAAP product revenue, non-GAAP service revenue, non-

GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP earnings before interest and

other expense, income taxes, depreciation and amortization (EBITDA) from operations, non-GAAP net income, and non-

GAAP net income per share (diluted). Non-GAAP revenue (total, product and service) eliminates the GAAP effects of

acquisitions by adding back revenue related to deferred revenue revaluation. Non-GAAP gross profit includes the aforementioned revenue adjustments and also removes expenses related to the amortization of acquired intangible assets, share-

25

based compensation, certain expenses relating to acquisitions including depreciation costs, compensation for post-combination services and business development and integration costs and adds back transitional service agreement income. Non-GAAP income from operations includes the aforementioned adjustments and also removes restructuring charges, intangible asset impairment charges, and costs related to new accounting standard implementation. Non-GAAP EBITDA from operations includes the aforementioned items related to non-GAAP income from operations and also removes non-acquisition-related depreciation expense. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, net of related income tax effects in addition to the provisional one-time impacts of the U.S. Tax Cuts and Jobs Act (TCJA) while removing transitional service agreement income and changes in contingent consideration. Non-GAAP diluted net income per share also excludes these expenses as well as the related impact of all these adjustments on the provision for income taxes.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures

prepared in accordance with GAAP (revenue, gross profit, operating profit, net income (loss) and diluted net income (loss) per

share), and may have limitations in that they do not reflect all our results of operations as determined in accordance with

GAAP. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the

corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in

isolation from, or as a substitute for results prepared in accordance with GAAP.

Management believes these non-GAAP financial measures enhance the reader's overall understanding of our current

financial performance and our prospects for the future by providing a higher degree of transparency for certain financial

measures and providing a level of disclosure that helps investors understand how we plan and measure our business. We believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared with our peer companies and also enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions. Presenting the GAAP measures on their own may not be indicative of our core operating results. Furthermore, management believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provide useful information to management and investors

regarding present and future business trends relating to our financial condition and results of operations.

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The following table reconciles revenue, gross profit, loss from operations, net loss and net loss per share on a GAAP and non-GAAP basis for the three months ended June 30, 2019 and 2018 (in thousands, except for per share amounts):

	Three Months Ended
	June 30,
	2019			2018
GAAP revenue	$	186,024		$	205,111
Product deferred revenue fair value adjustment	—			391
Service deferred revenue fair value adjustment	48			471
Non-GAAP revenue	$	186,072		$	205,973
GAAP gross profit	$	131,281		$	143,084
Product deferred revenue fair value adjustment	—			391
Service deferred revenue fair value adjustment	48			471
Share-based compensation expense	1,734			1,599
Amortization of acquired intangible assets	6,230			8,402
Acquisition related depreciation expense	13			33
Non-GAAP gross profit	$	139,306		$	153,980
GAAP loss from operations	$	(24,448	)	$	(77,053	)
Product deferred revenue fair value adjustment	—			391
Service deferred revenue fair value adjustment	48			471
Share-based compensation expense	12,743			12,965
Amortization of acquired intangible assets	22,373			31,867
Business development and integration expense	(21		)	19
New standard implementation expense	9			762
Compensation for post-combination services	193			449
Restructuring charges	123			1,147
Impairment of intangible assets	—			35,871
Acquisition related depreciation expense	121			498
Transitional service agreement income	909			—
Non-GAAP income from operations	$	12,050		$	7,387

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	Three Months Ended
	June 30,
	2019			2018
GAAP net loss	$	(29,343	)	$	(62,504	)
Product deferred revenue fair value adjustment	—			391
Service deferred revenue fair value adjustment	48			471
Share-based compensation expense	12,743			12,965
Amortization of acquired intangible assets	22,373			31,867
Business development and integration expense	(21		)	19
New standard implementation expense	9			762
Compensation for post-combination services	193			449
Restructuring charges	123			1,147
Impairment of intangible assets	—			35,871
Acquisition-related depreciation expense	121			498
Change in contingent consideration	523			—
Income tax adjustments	(1,175		)	(19,862		)
Non-GAAP net income	$	5,594		$	2,074
GAAP diluted net loss per share	$	(0.38	)	$	(0.78	)
Per share impact of non-GAAP adjustments identified above	0.45			0.81
Non-GAAP diluted net income per share	$	0.07		$	0.03
GAAP loss from operations	$	(24,448	)	$	(77,053	)
Previous adjustments to determine non-GAAP income from operations	36,498			84,440
Non-GAAP income from operations	12,050			7,387
Depreciation excluding acquisition related	6,841			7,982
Non-GAAP EBITDA from operations	$	18,891		$	15,369

Critical Accounting Policies

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

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

• marketable securities;

• revenue recognition;

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

• share-based compensation.

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Please refer to the critical accounting policies set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, filed with the Securities and Exchange Commission (SEC) on May 28, 2019, for a description of all of our critical accounting policies.

Three Months Ended June 30, 2019 and 2018

Revenue

Product revenue consists of sales of our hardware products and licensing of our software products. Service revenue consists of customer support agreements, consulting, training and stand-ready software as a service offerings. During the three months ended June 30, 2019 and 2018, no direct customer or indirect channel partner accounted for more than 10% of our total revenue.

	Three Months Ended								Change
	June 30,
	(Dollars in Thousands)
	2019				2018
			% of Revenue				% of Revenue		$			%
Revenue:
Product	$	75,719	41	%	$	96,927	47	%	$	(21,208	)	(22	)%
Service	110,305		59		108,184		53		2,121			2	%
Total revenue	$	186,024	100	%	$	205,111	100	%	$	(19,087	)	(9	)%

Product. The 22%, or $21.2 million, decrease in product revenue compared with the same period last year was primarily

due to a decrease in revenue from service provider customers for service assurance offerings, lower enterprise-related product revenue for both service assurance and security offerings, and the divestiture of the HNT tools business in September 2018.

Service. The 2%, or $2.1 million, increase in service revenue compared to the same period last year was due to an increase in revenue from maintenance contracts as well as an increase in revenue from professional services.

Total revenue by geography is as follows:

	Three Months Ended								Change
	June 30,
	(Dollars in Thousands)
	2019				2018
			% of Revenue				% of Revenue		$			%
United States	$	107,103	58	%	$	127,246	62	%	$	(20,143	)	(16	)%
International:
Europe	31,309		17		31,021		15		288			1	%
Asia	12,552		7		17,900		9		(5,348		)	(30	)%
Rest of the world	35,060		19		28,944		14		6,116			21	%
Subtotal international	78,921		42		77,865		38		1,056			1	%
Total revenue	$	186,024	100	%	$	205,111	100	%	$	(19,087	)	(9	)%

United States revenue decreased 16%, or $20.1 million, due to a combination of the divestiture of the HNT tools business in mid-September of 2018 and continued constrained spending and elongated purchasing cycles in the United States service provider market. The 1%, or $1.1 million, increase in international revenue compared with the same period last year was primarily driven by increased service provider customer segment revenue partially offset by lower enterprise revenue due to the enterprise sales force disruption from our recent reorganization.

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Cost of Revenue and Gross Profit

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

	Three Months Ended										Change
	June 30,
	(Dollars in Thousands)
	2019					2018
				% of Revenue					% of Revenue		$			%
Cost of revenue
Product	$	26,935		14	%	$	32,965		16	%	$	(6,030	)	(18	)%
Service	27,808			15		29,062			14		(1,254		)	(4	)%
Total cost of revenue	$	54,743		29	%	$	62,027		30	%	$	(7,284	)	(12	)%
Gross profit:
Product $	$	48,784		26	%	$	63,962		31	%	$	(15,178	)	(24	)%
Product gross profit %	64		%			66		%
Service $	$	82,497		44	%	$	79,122		39	%	$	3,375		4	%
Service gross profit %	75		%			73		%
Total gross profit $	$	131,281				$	143,084				$	(11,803	)	(8	)%
Total gross profit %	71		%			70		%

Product. The 18%, or $6.0 million, decrease in cost of product revenue was primarily due to a $3.0 million decrease in direct material costs due to a decrease in product revenue, a $2.5 million decrease in the amortization of intangible assets, and a $1.2 million decrease in employee-related expenses due to a reduction in headcount as well as a decrease in variable incentive compensation. These decreases were partially offset by a $0.5 million increase in capitalized overhead costs. The product gross profit percentage decreased by two percentage points to 64% during the three months ended June 30, 2019 as compared with the three months ended June 30, 2018. The 24%, or $15.2 million, decrease in product gross profit corresponds with the 22%, or $21.2 million, decrease in product revenue partially offset by the 18%, or $6.0 million, decrease in cost of product revenue.

Service. The 4%, or $1.3 million, decrease in cost of service revenue during the three months ended June 30, 2019 when compared with the three months ended June 30, 2018 was primarily due to a $1.2 million decrease in employee-related expenses due to a reduction in headcount as well as a decrease in variable incentive compensation. The service gross profit percentage increased by two percentage points to 75% for the three months ended June 30, 2019 as compared with the three months ended June 30, 2018. The 4%, or $3.4 million, increase in service gross profit corresponds with the 2%, or $2.1 million, increase in service revenue and the 4%, or $1.3 million, decrease in cost of service.

Gross profit. Our gross profit decreased 8%, or $11.8 million, during the three months ended June 30, 2019 when compared with the three months ended June 30, 2018. This decrease is attributable to the decrease in revenue of 9%, or $19.1 million, partially offset by the 12%, or $7.3 million, decrease in cost of revenue. The gross profit percentage increased one percentage point to 71% for the three months ended June 30, 2019 as compared with the three months ended June 30, 2018.

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Operating Expenses

	Three Months Ended								Change
	June 30,
	(Dollars in Thousands)
	2019				2018
			% of Revenue				% of Revenue		$			%
Research and development	$	43,727	24	%	$	55,463	27	%	$	(11,736	)	(21	)%
Sales and marketing	73,525		40		78,132		38		(4,607		)	(6	)%
General and administrative	22,211		12		26,059		13		(3,848		)	(15	)%
Amortization of acquired intangible assets	16,143		9		23,465		11		(7,322		)	(31	)%
Restructuring charges	123		—		1,147		1		(1,024		)	(89	)%
Impairment of intangible assets	—		—		35,871		17		(35,871		)	(100	)%
Total operating expenses	$	155,729	85	%	$	220,137	107	%	$	(64,408	)	(29	)%

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

The 21%, or $11.7 million, decrease in research and development expenses was primarily due to an $11.1 million decrease in employee-related expenses due to a reduction in headcount as well as a decrease in variable incentive compensation, and a $0.7 million decrease in depreciation expense in the three months ended June 30, 2019 when compared with the three months ended June 30, 2018. These decreases were partially offset by a $0.7 million increase in consulting fees.

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

The 6%, or $4.6 million, decrease in total sales and marketing expenses was primarily due to a $4.5 million decrease in employee-related expenses due to a reduction in headcount, and a $0.9 million decrease in travel expenses in the three months ended June 30, 2019, when compared with the three months ended June 30, 2018. These decreases are partially offset by an $0.8 million increase in advertising and other marketing related programs.

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

The 15%, or $3.8 million, decrease in general and administrative expenses was primarily due to a $2.6 million decrease in employee-related expense largely due to a decrease in variable incentive compensation as well as reduction in headcount, $0.8 million decrease in consulting fees, a $0.4 million decrease in accounting related expenses, and a $0.2 million decrease in bad debt expense in the three months ended June 30, 2019 when compared with the three months ended June 30, 2018. These decreases were partially offset by a $0.7 million increase in legal expenses.

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists primarily of amortization of customer relationships, definite-lived trademarks and tradenames, and leasehold interests; related to the acquisition of Danaher Corporation's Communications Business (Comms Transaction), ONPATH Technologies, Inc., Simena, LLC, Psytechnics, Ltd, Network General Corporation, Avvasi Inc.. and Efflux Systems, Inc.

The 31%, or $7.3 million, decrease in amortization of acquired intangible assets was largely due to a decrease in amortization of the intangible assets related to the divestiture of the HNT tools business in September 2018, with the remaining decrease due a decrease in the amortization of intangible assets related to the Comms Transaction.

Impairment of intangible assets. During the first quarter of fiscal year 2019, we performed a quantitative analysis on

certain intangible assets related to the HNT tools business. The fair value of these intangible assets was determined to be less

than the carrying value, and as a result, we recognized an impairment charge of $35.9 million during the three months ended June 30, 2018.

Restructuring. During the fiscal year ended March 31, 2019, we implemented a voluntary separation program for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, during the three months ended June 30, 2019, we recorded a restructuring charge totaling $0.1 million related to one-

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time termination benefits for employees who voluntarily terminated during the period. During the three months ended June 30, 2018, we recorded restructuring expenses of $1.1 million for one-time termination benefits and facilities-related costs related to a restructuring program which began in fiscal year 2018 to better align functions, drive productivity and improve efficiency.

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

	Three Months Ended										Change
	June 30,
	(Dollars in Thousands)
	2019					2018
				% of Revenue					% of Revenue		$		%
Interest and other expense, net	$	(4,399	)	(2	)%	$	(4,693	)	(2	)%	$	294	6	%

The 6%, or $0.3 million, decrease in interest and other expense, net was primarily due to a $0.7 million increase in interest income received on investments, and a $0.9 million increase in transitional services agreement income related to the HNT tools business divestiture. These increases were partially offset by a $0.5 million increase in other expense due to the change in fair value of the contingent consideration related to the HNT tools business divestiture, a $0.5 million increase in interest expense due an increase in the average interest rate on the credit facility, and a $0.3 million increase in foreign exchange expense.

Income Taxes. Our effective income tax rates were 1.7% and 23.5% for the three months ended June 30, 2019 and 2018, respectively. Generally, the effective tax rate differs from the statutory tax rate due to state income taxes, foreign withholding taxes, the Base Erosion Anti-Abuse Tax and the Global Intangible Low Taxes Income inclusion partially offset by the tax benefit associated with research and development tax credits, foreign tax credits, Foreign Derived Intangible Income deduction and earnings in jurisdictions subject to tax rates lower than the U.S. statutory rate. The effective tax rate for the three months ended June 30, 2019 is lower than the effective rate for the three months ended June 30, 2018, primarily due to a significant discrete item recorded in the quarter.

As a result of the Tax Legislation, in fiscal 2019, several of our foreign subsidiaries made tax elections to be treated as U.S. branches for federal income tax purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2020. As a result of making these check-the-box elections in the first quarter of fiscal 2020, we recorded a tax expense of approximately $6 million due to establishing new U.S. net deferred tax liabilities resulting from the difference between the GAAP basis and the U.S. federal tax carryover basis of the existing assets and liabilities of those foreign subsidiaries.

	Three Months Ended									Change
	June 30,
	(Dollars in Thousands)
	2019				2018
			% of Revenue					% of Revenue		$		%
Income tax expense (benefit)	$	496	—	%	$	(19,242	)	(9	)%	$	19,738	103	%

Off-Balance Sheet Arrangements

At June 30, 2019 and 2018, we did not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).

Commitments and Contingencies

We account for claims and contingencies in accordance with authoritative guidance that requires us to record an estimated loss from a claim or loss contingency when information available prior to issuance of our consolidated financial statements indicates that it is probable that a liability has been incurred at the date of the consolidated financial statements and the amount of the loss can be reasonably estimated. If we determine that it is reasonably possible but not probable that an asset has been impaired or a liability has been incurred, or if the amount of a probable loss cannot be reasonably estimated, then in accordance with the authoritative guidance, we disclose the amount or range of estimated loss if the amount or range of estimated loss is material. Accounting for claims and contingencies requires us to use our judgment. We consult with legal

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

Acquisition and divestiture related – We have a contingent consideration asset related to the divestiture of our HNT tools business in September 2018. The contingent consideration asset represents potential future earnout payments to us of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration asset at June 30, 2019 was $0.2 million.

We had a contingent liability at June 30, 2019 for $1.0 million related to the acquisition of Eastwind in April 2019 for which an escrow account was established to cover damages we may suffer related to any liabilities that we did not agree to assume or as a result of the breach of representations and warranties of the seller as described in the merger agreement. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be paid to the seller in April 2020.

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

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. 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 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. The Court denied the Plaintiff's motion for fees. Following additional motions for judgment as a matter of law, the court entered final judgment. On June 12, 2019, we filed our Notice of Appeal of the judgment and all other adverse findings. We have concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible". Therefore, accounting rules require us to provide an estimate for the range of potential liability. We currently estimate that the estimated range of liability is between $0 and the aggregate amount awarded by the jury and the Court's award of enhanced damages, plus potential additional pre- and post-judgment interest amounts and costs and any royalties owed on post-trial sales of the accused G10 and GeoBlade products.

Liquidity and Capital Resources

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

	June 30, 2019		March 31, 2019
Cash and cash equivalents	$	353,721	$	409,632
Short-term marketable securities	84,354		76,344
Long-term marketable securities	5,087		1,012
Cash, cash equivalents and marketable securities	$	443,162	$	486,988

Cash, cash equivalents and marketable securities

At June 30, 2019, cash, cash equivalents and marketable securities (current and non-current) totaled $443.2 million, a $43.8 million decrease from $487.0 million at March 31, 2019, due primarily to $50.0 million used to pay long-term debt, $30.7 million used to repurchase shares of our common stock, $4.2 million used for the acquisition of Eastwind, $3.3 million used for capital expenditures and $3.0 million used for tax withholdings on restricted stock units, partially offset by cash provided by operations of $49.5 million during the three months ended June 30, 2019.

At June 30, 2019, cash and short-term and long-term investments in the United States were $292.5 million, while cash held outside the United States was approximately $150.7 million.

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Cash and cash equivalents were impacted by the following (in thousands):

	Three Months Ended
	June 30,
	2019			2018
Net cash provided by operating activities	$	49,458		$	25,520
Net cash used in investing activities	$	(19,485	)	$	(34,102	)
Net cash used in financing activities	$	(83,720	)	$	(3,486	)

Net cash from operating activities

Cash provided by operating activities was $49.5 million during the three months ended June 30, 2019, compared with $25.5 million of cash provided by operating activities during the three months ended June 30, 2018. This $24.0 million increase was due in part to a $33.2 million increase from net loss, a $27.2 million favorable impact from accounts receivable, a $15.1 million increase from deferred income taxes, a $7.7 million increase from prepaid expenses and other assets, a $6.5 million increase from deferred revenue, and a $4.6 million increase from accounts payable. These increases were partially offset by a $35.9 million decrease due to the impairment of intangible assets, a $21.9 million decrease from accrued compensation and other expenses, and an $11.0 million decrease from depreciation and amortization expense in the three months ended June 30, 2019 as compared with the three months ended June 30, 2018.

Net cash from investing activities

	Three Months Ended
	June 30,
	(in thousands)
	2019			2018
Cash used in investing activities included the following:
Purchase of marketable securities	$	(41,039	)	$	(69,211	)
Proceeds from maturity of marketable securities	28,995			41,573
Purchase of fixed assets	(3,287		)	(6,468		)
Decrease in deposits	—			4
Acquisition of businesses	(4,154		)	—
	$	(19,485	)	$	(34,102	)

Cash used in investing activities decreased by $14.6 million to $19.5 million during the three months ended June 30, 2019, compared with $34.1 million of cash used by investing activities during the three months ended June 30, 2018.

The overall decrease in cash outflow from marketable securities was primarily related to a decrease of $28.2 million in the purchases of marketable securities offset by a $12.6 million decrease in proceeds from the maturity of marketable securities during the three months ended June 30, 2019 when compared with the three months ended June 30, 2018.

During the three months ended June 30, 2019, there was a $4.2 million cash outflow related to the acquisition of Eastwind.

Our investments in property and equipment consist primarily of computer equipment, demonstration units, office equipment and facility improvements. We plan to continue to invest in capital expenditures to support our infrastructure through the remainder of fiscal year 2020.

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Net cash from financing activities

	Three Months Ended
	June 30,
	(in thousands)
	2019			2018
Cash used in financing activities included the following:
Repayment of long-term debt	$	(50,000	)	$	—
Treasury stock repurchases	(30,708		)	—
Tax withholding on restricted stock units	(3,012		)	(3,486		)
	$	(83,720	)	$	(3,486	)

Cash used in financing activities increased by $80.2 million to $83.7 million during the three months ended June 30, 2019, compared with $3.5 million of cash used in financing activities during the three months ended June 30, 2018.

During the three months ended June 30, 2019, we repaid $50.0 million of borrowings under the Amended Credit Agreement.

We repurchased 1,297,400 shares of our common stock for $33.2 million under the twenty-five million share repurchase program.

In connection with the delivery of the Company's common stock upon vesting of restricted stock units, we have withheld 121,549 and 129,115 shares at a cost of $3.0 million and $3.5 million related to minimum statutory tax withholding requirements on these restricted stock units during the three months ended June 30, 2019 and 2018, respectively. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the amount of shares that are available for repurchase under that program.

Credit Facility

On January 16, 2018, we amended and expanded our existing credit agreement (Amended Credit Agreement) with a syndicate of lenders by and among: NetScout; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. 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. and U.S. Bank National Association, 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. We may elect to use the new credit facility for general corporate purposes or to finance the repurchase of up to 25 million shares of common stock under our 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 three months ended June 30, 2019, we repaid $50.0 million of borrowings under the Amended Credit Agreement. At June 30, 2019, $500 million was outstanding under the Amended Credit Agreement.

At our 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 us), in each case plus an applicable margin. For the period from the delivery of our financial statements for the quarter ended March 31, 2019, until we have delivered financial statements for the quarter ended June 30, 2019, 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 our leverage ratio, ranging from 1.00% per annum for Base Rate loans and 2.00% per annum for LIBOR loans if our consolidated 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 LIBOR loans if our consolidated leverage ratio is equal to or less than 1.50 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. Our Amended Credit Agreement 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 NetScout would agree to transition to an Alternate Base Rate Borrowing 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.

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Our consolidated leverage ratio is the ratio of our total funded debt compared to our 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 our financial statements for the quarter ended March 31, 2019, until we have delivered financial statements for the quarter ended June 30, 2019, the commitment fee will be 0.25% per annum, and thereafter the commitment fee will vary depending on our consolidated leverage ratio, ranging from 0.30% per annum if our consolidated leverage ratio is greater than 2.75 to 1.00, down to 0.15% per annum if our consolidated leverage ratio is equal to or less than 1.50 to 1.00.

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. Additionally, we will pay a fronting fee to each issuing bank in amounts to be agreed to between us and the applicable issuing bank.

Interest on Alternate Base Rate loans is payable at the end of each calendar quarter. Interest on 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. We 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 our wholly owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of us and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by us 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 NetScout and its restricted subsidiaries, subject to certain exceptions as described in the Amended Credit Agreement.

The Amended Credit Agreement contains certain covenants applicable to us and our restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. In addition, we are required to maintain certain consolidated leverage and interest coverage ratios. These covenants and limitations are more fully described in the Amended Credit Agreement. At June 30, 2019, we were 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 Amended Credit Agreement described above, we terminated our previous term loan dated as of July 14, 2015, by and among NetScout; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. 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. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto.

We have capitalized debt issuance costs totaling $12.2 million at June 30, 2019, which are being amortized over the life of the revolving credit facility. The unamortized balance was $6.2 million as of June 30, 2019. The balance of $1.8 million was included as prepaid expenses and other current assets and a balance of $4.4 million was included as other assets in our consolidated balance sheet.

Expectations for Fiscal Year 2020

We believe that our cash balances, available debt, short-term marketable securities classified as available-for-sale and

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future cash flows generated by operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Additionally, a portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies. If our existing sources of liquidity are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities. The sale of additional equity or debt securities could result in additional dilution to our stockholders.

Recent Accounting Pronouncements

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

37

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

We are exposed to market risks related to fluctuations in interest rates related to our credit facility. At June 30, 2019, we owed $500 million on this loan with an interest rate of 3.94%. A sensitivity analysis was performed on the outstanding portion of our debt obligation as of June 30, 2019. Should the current weighted-average interest rate increase or decrease by 10%, the resulting annual increase or decrease to interest expense would be approximately $2.0 million as of June 30, 2019.

Foreign Currency Exchange Risk. As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound, Canadian Dollar and Indian Rupee. The current exposures arise primarily from expenses denominated in foreign currencies. We currently engage in foreign currency hedging activities in order to limit these exposures. We do not use derivative financial instruments for speculative trading purposes.

At June 30, 2019, we had foreign currency forward contracts with notional amounts totaling $2.1 million. The valuation of outstanding foreign currency forward contracts at June 30, 2019 resulted in an asset balance of $18 thousand, reflecting favorable rates in comparison to current market rates and a liability balance of $51 thousand, reflecting unfavorable contract rates in comparison to current market rates at this date. At March 31, 2019, we had foreign currency forward contracts with notional amounts totaling $4.6 million. The valuation of outstanding foreign currency forward contracts at March 31, 2019 resulted in a liability balance of $68 thousand, reflecting unfavorable contract rates in comparison to current market rates at this date and an asset balance of $58 thousand reflecting favorable rates in comparison to current market rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.

Item 4.  Controls and Procedures

At June 30, 2019, NetScout, under the supervision and with the participation of our management, including the Company's principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, at June 30, 2019, our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that material information relating to NetScout, including its consolidated subsidiaries, required to be disclosed by NetScout in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Except for the implementation of certain internal controls related to the adoption of Topic 842, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

38

PART II: OTHER INFORMATION

Item 1.  Legal Proceedings

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

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. 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 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. The Court denied the Plaintiff's motion for fees. Following additional motions for judgment as a matter of law, the court entered final judgment. On June 12, 2019, we filed our Notice of Appeal of the judgment and all other adverse findings. We have concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible". Therefore, accounting rules require us to provide an estimate for the range of potential liability. We currently estimate that the estimated range of liability is between $0 and the aggregate amount awarded by the jury and the Court's award of enhanced damages, plus potential additional pre- and post-judgment interest amounts and costs and any royalties owed on post-trial sales of the accused G10 and GeoBlade products.

Item 1A.  Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended March 31, 2019. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. There have been no material changes to those risk factors since we filed our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

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

Sales of Unregistered Securities

None.

Issuer Purchase of Equity Securities

The following table provides information about purchases we made during the quarter ended June 30, 2019 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Program
4/1/2019-4/30/2019	—	$	—	—	14,359,590
5/1/2019-5/31/2019	599,514	26.12		591,900	13,767,690
6/1/2019-6/30/2019	819,435	25.06		705,500	13,062,190
Total	1,418,949	$	25.50	1,297,400	13,062,190

(1) We purchased an aggregate of 121,549 shares during the three months ended June 30, 2019 transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. Such purchases reflected in the table do not reduce the maximum number of shares that may be purchased under our previously announced stock repurchase program (our previously disclosed 25 million share repurchase program).

39

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.  Other Information

None.

40

Item 6. Exhibits

(a) Exhibits

3.1		Composite conformed copy of Third Amended and Restated Certificate of Incorporation of NetScout (as amended) (filed as Exhibit 3.2 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on September 21, 2016, and incorporated herein by reference).
3.2		Amended and Restated By-laws of NetScout (filed as Exhibit 3.1 to NetScout's current report on Form 8-K, SEC File No. 000-26251, filed on October 30, 2017 and incorporated herein by reference).
31.1	+	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	+	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	++	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	++	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	+	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	+	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	+	Inline XBRL Taxonomy Extension Calculation Linkbase document.
101.DEF	+	Inline XBRL Taxonomy Extension Definition Linkbase document.
101.LAB	+	Inline XBRL Taxonomy Extension Label Linkbase document.
101.PRE	+	Inline XBRL Taxonomy Extension Presentation Linkbase document.
104		The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in Inline XBRL

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

41

SIGNATURES

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

	NETSCOUT SYSTEMS, INC.
Date: August 8, 2019	/s/ Anil K. Singhal
	Anil K. Singhal
	President, Chief Executive Officer and Chairman
	(Principal Executive Officer)
Date: August 8, 2019	/s/ Jean Bua
	Jean Bua
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
	(Principal Accounting Officer)

42

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Anil K. Singhal, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 8, 2019

/s/ Anil K. Singhal

Anil K. Singhal

President, Chief Executive Officer and Chairman

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Jean Bua, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 8, 2019

/s/ Jean Bua

Jean Bua

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetScout Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anil K. Singhal, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Anil K. Singhal

Anil K. Singhal

President, Chief Executive Officer and Chairman

Principal Executive Officer

August 8, 2019

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

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetScout Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean Bua, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Jean Bua

Jean Bua

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)

August 8, 2019

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

XML

Cover Page - shares	3 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Cover page.
Entity File Number	000-26251
Entity Address, Address Line One	310 Littleton Road
Entity Shell Company	false
Entity Current Reporting Status	Yes
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common Stock, $0.001 Par value per share
Entity Incorporation, State or Country Code	DE
Document Transition Report	false
Document Quarterly Report	true
Entity Registrant Name	NETSCOUT SYSTEMS, INC.
Entity Central Index Key	0001078075
Current Fiscal Year End Date	--03-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Trading Symbol	NTCT
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		75,861,198
Entity Tax Identification Number	04-2837575
Entity Interactive Data Current	Yes
Entity Address, City or Town	Westford
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01886
City Area Code	978
Local Phone Number	614-4000

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Current assets:
Cash and cash equivalents	$ 353,721	$ 409,632
Marketable securities	84,354	76,344
Accounts receivable and unbilled costs, net of allowance for doubtful accounts of $1,690 and $1,583 at June 30, 2019 and March 31, 2019, respectively	160,039	235,318
Inventories and deferred costs	26,479	26,270
Prepaid income taxes	19,614	18,000
Prepaid expenses and other current assets	31,643	35,658
Total current assets	675,850	801,222
Fixed assets, net	56,393	58,951
Operating lease right-of-use assets	67,536
Goodwill	1,717,945	1,715,485
Intangible assets, net	648,997	669,118
Deferred income taxes	7,110	7,218
Long-term marketable securities	5,087	1,012
Other assets	15,083	16,988
Total assets	3,194,001	3,269,994
Current liabilities:
Accounts payable	25,578	24,582
Accrued compensation	41,379	58,501
Accrued other	23,545	23,027
Income taxes payable	1,517	1,318
Deferred revenue and customer deposits	246,498	272,508
Current portion of operating lease liabilities	11,066
Total current liabilities	349,583	379,936
Other long-term liabilities	6,191	19,493
Deferred tax liability	124,870	124,229
Accrued long-term retirement benefits	35,811	36,284
Long-term deferred revenue and customer deposits	95,529	94,619
Operating lease liabilities, net of current portion	70,582
Long-term debt	500,000	550,000
Total liabilities	1,182,566	1,204,561
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 and March 31, 2019	0	0
Common stock, $0.001 par value: 300,000,000 shares authorized; 120,123,018 and 119,760,132 shares issued and 76,603,398 and 77,610,361 shares outstanding at June 30, 2019 and March 31, 2019, respectively	120	120
Additional paid-in capital	2,841,001	2,828,922
Accumulated other comprehensive loss	(3,184)	(2,639)
Treasury stock at cost, 43,568,720 and 42,149,771 shares at June 30, 2019 and March 31, 2019, respectively	(1,155,252)	(1,119,063)
Retained earnings	328,750	358,093
Total stockholders' equity	2,011,435	2,065,433
Total liabilities and stockholders' equity	$ 3,194,001	$ 3,269,994

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 1,690	$ 1,583
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	120,123,018	119,760,132
Common stock, shares outstanding (in shares)	76,554,298	77,610,361
Treasury stock, shares (in shares)	43,568,720	42,149,771

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Revenue:
Total revenue	$ 186,024	$ 205,111
Cost of revenue:
Total cost of revenue	54,743	62,027
Gross profit	131,281	143,084
Operating expenses:
Research and development	43,727	55,463
Sales and marketing	73,525	78,132
General and administrative	22,211	26,059
Amortization of acquired intangible assets	16,143	23,465
Restructuring charges	123	1,147
Impairment of intangible assets	0	35,871
Total operating expenses	155,729	220,137
Loss from operations	(24,448)	(77,053)
Interest and other expense, net:
Interest income	1,658	941
Interest expense	(6,365)	(5,888)
Other income	308	254
Total interest and other expense, net	(4,399)	(4,693)
Loss before income tax expense (benefit)	(28,847)	(81,746)
Income tax expense (benefit)	496	(19,242)
Net loss	$ (29,343)	$ (62,504)
Basic net loss per share (in dollars per share)	$ (0.38)	$ (0.78)
Diluted net loss per share (in dollars per share)	$ (0.38)	$ (0.78)
Weighted average common shares outstanding used in computing:
Net loss per share - basic (in shares)	77,302	80,358
Net loss per share - diluted (in shares)	77,302	80,358
Product
Revenue:
Total revenue	$ 75,719	$ 96,927
Cost of revenue:
Total cost of revenue	26,935	32,965
Service
Revenue:
Total revenue	110,305	108,184
Cost of revenue:
Total cost of revenue	$ 27,808	$ 29,062

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (29,343)	$ (62,504)
Other comprehensive income (loss):
Cumulative translation adjustments	(561)	(2,708)
Changes in market value of investments:
Changes in unrealized gains, net of taxes of $6 and $29, respectively	35	28
Total net change in market value of investments	35	28
Changes in market value of derivatives:
Changes in market value of derivatives, net of benefits of ($19) and ($126), respectively	(54)	(393)
Reclassification adjustment for net gains included in net loss, net of taxes of $11 and $23, respectively	35	71
Total net change in market value of derivatives	(19)	(322)
Other comprehensive loss	(545)	(3,002)
Total comprehensive loss	$ (29,888)	$ (65,506)

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Changes in unrealized (losses) gains, (benefit) tax	$ 6	$ 29
Changes in market value of derivatives, tax (benefit)	(19)	(126)
Reclassification adjustment for net gains included in net income (loss), taxes	$ 11	$ 23

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common stock Voting	Additional Paid In Capital	Accumulated Other Comprehensive Income (Loss)	Treasury stock	Retained Earnings
Beginning balance at Mar. 31, 2018	$ 2,068,782	$ 117	$ 2,665,120	$ 2,895	$ (995,843)	$ 396,493
Beginning balance (in shares) at Mar. 31, 2018		117,744,913			37,474,890
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(62,504)					(62,504)
Unrealized net investment gains	28			28
Unrealized net losses on derivative financial instruments	(322)			(322)
Cumulative translation adjustments	(2,708)			(2,708)
Issuance of common stock pursuant to vesting of restricted stock units	0	$ 0
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		394,369
Stock-based compensation expense for restricted stock units granted to employees	11,262		11,262
Repurchase of treasury stock	(3,486)				$ (3,486)
Repurchase of treasury stock (in shares)					129,115
Ending balance at Jun. 30, 2018	2,045,201	$ 117	2,676,382	(107)	$ (999,329)	368,138
Ending balance (in shares) at Jun. 30, 2018		118,139,282			37,604,005
Beginning balance at Mar. 31, 2019	2,065,433	$ 120	2,828,922	(2,639)	$ (1,119,063)	358,093
Beginning balance (in shares) at Mar. 31, 2019		119,760,132			42,149,771
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(29,343)					(29,343)
Unrealized net investment gains	35			35
Unrealized net losses on derivative financial instruments	(19)			(19)
Cumulative translation adjustments	(561)			(561)
Issuance of common stock pursuant to vesting of restricted stock units	0	$ 0
Issuance of common stock pursuant to vesting of restricted stock units (in shares)		362,886
Stock-based compensation expense for restricted stock units granted to employees	12,079		12,079
Repurchase of treasury stock	(36,189)				$ (36,189)
Repurchase of treasury stock (in shares)					1,418,949
Ending balance at Jun. 30, 2019	$ 2,011,435	$ 120	$ 2,841,001	$ (3,184)	$ (1,155,252)	$ 328,750
Ending balance (in shares) at Jun. 30, 2019		120,123,018			43,568,720

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (29,343)	$ (62,504)
Adjustments to reconcile net loss to cash provided by operating activities, net of the effects of acquisitions:
Depreciation and amortization	29,335	40,347
Operating lease right-of-use assets	2,552	0
Loss on disposal of fixed assets	0	63
Deal-related compensation expense and accretion charges	0	38
Share-based compensation expense	12,743	12,965
Net change in fair value of contingent and contractual liabilities	541	0
Accretion of contingent consideration	(18)	0
Impairment of intangible assets	0	35,871
Deferred income taxes	830	(14,306)
Other gains	(81)	(206)
Changes in assets and liabilities
Accounts receivable and unbilled costs	75,092	47,939
Due from related party	0	1,536
Inventories	(1,208)	(138)
Prepaid expenses and other assets	4,238	(3,426)
Accounts payable	(634)	(5,206)
Accrued compensation and other expenses	(16,332)	5,566
Operating lease liabilities	(3,425)
Due to related party	0	250
Income taxes payable	85	(1,882)
Deferred revenue	(24,917)	(31,387)
Net cash provided by operating activities	49,458	25,520
Cash flows from investing activities:
Purchase of marketable securities	(41,039)	(69,211)
Proceeds from maturity of marketable securities	28,995	41,573
Purchase of fixed assets	(3,287)	(6,468)
Decrease in deposits	0	4
Acquisition of businesses	(4,154)	0
Net cash used in investing activities	(19,485)	(34,102)
Cash flows from financing activities:
Repayment of long-term debt	(50,000)	0
Treasury stock repurchases	(30,708)	0
Tax withholding on restricted stock units	(3,012)	(3,486)
Net cash used in financing activities	(83,720)	(3,486)
Effect of exchange rate changes on cash and cash equivalents	(1,163)	(4,337)
Net decrease in cash and cash equivalents and restricted cash	(54,910)	(16,405)
Cash and cash equivalents and restricted cash, beginning of period	409,820	370,731
Cash and cash equivalents and restricted cash, end of period	354,910	354,326
Supplemental disclosures:
Cash paid for interest	5,639	5,412
Cash paid for income taxes	3,211	3,882
Non-cash transactions:
Transfers of inventory to fixed assets	862	1,589
Additions to property, plant and equipment included in accounts payable	794	54
Tenant improvement allowance	0	6,788
Contingent consideration related to acquisition, included in accrued other	1,000	0
Unsettled share repurchases, included in accounts payable	$ 2,469	$ 0

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BASIS OF PRESENTATION

3 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 filed with the Securities and Exchange Commission on May 28, 2019.

Recent Accounting Pronouncements

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. This guidance is effective for fiscal years ending after December 15, 2020. ASU 2018-14 is effective for NetScout beginning April 1, 2021. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-14 will have on its financial position, results of operations, and disclosures.

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. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. ASU 2018-13 is effective for NetScout beginning April 1, 2020. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-13 will have on its financial position, results of operations, and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 provides guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2018. The Company adopted ASU 2017-12 effective April 1, 2019. The adoption has had an immaterial impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification (ASU 2016-02) and issued subsequent amendments to initial guidance in July 2018 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (collectively, ASC 842). ASC 842 aims 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 as of April 1, 2019 using the modified retrospective method. Please refer to Note 13, "Leases" for further details.

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REVENUE RECOGNITION

3 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION

Revenue Recognition Policy

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

The Company derives revenues primarily from the sale of network management tools and security solutions for service provider and enterprise customers, which include hardware, software and service offerings. The majority of the Company's

product sales consist of hardware products with embedded software that are essential to providing customers the intended functionality of the solutions. The Company also sells software offerings decoupled from the underlying hardware and software solutions to provide customers with enhanced functionality.

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

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

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

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based on the element’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. 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. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a reseller or distributor as a reduction of revenue to the extent they have recorded revenue from the reseller or distributor. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

During the three months ended June 30, 2019, the Company recognized revenue of $97.2 million related to the Company's deferred revenue balance reported at March 31, 2019.

Performance Obligations

Customer contracts may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one

combined performance obligation may require significant judgment. The transaction price is allocated among performance obligations in bundled contracts in an amount that depicts the relative standalone selling prices of each obligation.

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

Payments for hardware, software licenses, one-year maintenance, PCS and consulting services, are typically due up front with payment terms of 30 to 90 days. However, the Company does have contracts pursuant to which billings occur ratably over a period of years following the transfer of control for the contracted performance obligations. Payments on multi-year maintenance, PCS and consulting services are typically due in annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns or refunds at June 30, 2019.

At June 30, 2019, the Company had total deferred revenue of $342.0 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $246.5 million, or 72%, of this revenue during the next 12 months, and expects to recognize the remaining $95.5 million, or 28%, of this revenue thereafter.

Because of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, 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 $7.0 million and $23.3 million at June 30, 2019 and March 31, 2019, respectively.

NetScout expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have any significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the three months ended June 30, 2019.

Contract Balances

The Company receives payments from customers based on a billing schedule as established by the Company’s contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. The Company records unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. Deferred revenue relates to payments received in advance of performance under the contract.

Costs to Obtain Contracts

The Company has determined that the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. Sales commissions are recorded as an asset and amortized to expense ratably over the remaining performance periods of the related contracts with remaining performance obligations. The Company expenses costs as incurred for sales commissions when the amortization period would have been one year or less.

At June 30, 2019, the consolidated balance sheet included $6.7 million in assets related to sales commissions to be expensed in future periods. A balance of $4.3 million was included in prepaid expenses and other current assets, and a balance of $2.4 million was included as other assets in the Company's consolidated balance sheet at June 30, 2019. At March 31, 2019, the consolidated balance sheet included $6.4 million in assets related to sales commissions to be expensed in future

periods. A balance of $3.8 million was included in prepaid expenses and other current assets, and a balance of $2.6 million was included as other assets in the Company's consolidated balance sheet at March 31, 2019.

During the three months ended June 30, 2019 and 2018, respectively, the Company recognized $1.6 million and $0.6 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.

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CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

3 Months Ended

Jun. 30, 2019

Risks and Uncertainties [Abstract]

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

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

At June 30, 2019 and March 31, 2019, the Company had no direct customers or indirect channel partners which accounted for more than 10% of the accounts receivable balance.

During the three months ended June 30, 2019 and June 30, 2018, no direct customers or indirect channel partners accounted for more than 10% of the Company's total revenue.

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

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SHARE-BASED COMPENSATION

3 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended, 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):

	Three Months Ended
	June 30,
	2019		2018
Cost of product revenue	$	267	$	269
Cost of service revenue	1,467		1,330
Research and development	3,819		4,151
Sales and marketing	4,135		4,359
General and administrative	3,055		2,856
	$	12,743	$	12,965

Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2019. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year.

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

3 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at June 30, 2019 and March 31, 2019.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

	June 30, 2019		March 31, 2019		June 30, 2018		March 31, 2018
Cash and cash equivalents	$	353,721	$	409,632	$	353,416	$	369,821
Restricted cash	1,189		188		910		910
Total cash, cash equivalents and restricted cash	$	354,910	$	409,820	$	354,326	$	370,731

The Company's restricted cash includes cash balances which are legally or contractually restricted. The Company's restricted cash is included within prepaid and other current assets and consists of amounts related to holdbacks associated with prior acquisitions.

Marketable Securities

The following is a summary of marketable securities held by NetScout at June 30, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	44,101	$	31	$	44,132
Commercial paper	37,553		—		37,553
Corporate bonds	2,663		6		2,669
Total short-term marketable securities	84,317		37		84,354
U.S. government and municipal obligations	5,067		20		5,087
Total long-term marketable securities	5,067		20		5,087
Total marketable securities	$	89,384	$	57	$	89,441

The following is a summary of marketable securities held by NetScout at March 31, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	27,610	$	12	$	27,622
Commercial paper	48,722		—		48,722
Total short-term marketable securities	76,332		12		76,344
Corporate bonds	1,007		5		1,012
Total long-term marketable securities	1,007		5		1,012
Total marketable securities	$	77,339	$	17	$	77,356

Contractual maturities of the Company's marketable securities held at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	June 30, 2019		March 31, 2019
Available-for-sale securities:
Due in 1 year or less	$	84,354	$	76,344
Due after 1 year through 5 years	5,087		1,012
	$	89,441	$	77,356

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FAIR VALUE MEASUREMENTS

3 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at June 30, 2019 and March 31, 2019 (in thousands):

	Fair Value Measurements at
	June 30, 2019
	Level 1		Level 2			Level 3			Total
ASSETS:
Cash and cash equivalents	$	353,721	$	—		$	—		$	353,721
U.S. government and municipal obligations	47,145		2,074			—			49,219
Commercial paper	—		37,553			—			37,553
Corporate bonds	2,669		—			—			2,669
Derivative financial instruments	—		18			—			18
Contingent consideration	—		—			239			239
	$	403,535	$	39,645		$	239		$	443,419
LIABILITIES:
Contingent purchase consideration	$	—	$	—		$	(1,000	)	$	(1,000	)
Derivative financial instruments	—		(51		)	—			(51		)
	$	—	$	(51	)	$	(1,000	)	$	(1,051	)

	Fair Value Measurements at
	March 31, 2019
	Level 1		Level 2			Level 3		Total
ASSETS:
Cash and cash equivalents	$	409,632	$	—		$	—	$	409,632
U.S. government and municipal obligations	10,732		16,890			—		27,622
Commercial paper	—		48,722			—		48,722
Corporate bonds	1,012		—			—		1,012
Derivative financial instruments	—		58			—		58
Contingent consideration	—		—			762		762
	$	421,376	$	65,670		$	762	$	487,808
LIABILITIES:
Derivative financial instruments	$	—	$	(68	)	$	—	$	(68	)
	$	—	$	(68	)	$	—	$	(68	)

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

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

The Company's Level 2 investments are classified as such because 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 assets consist of contingent consideration related to the divestiture of the Company's handheld network test (HNT) tools business in September 2018. The contingent consideration represents potential future earnout payments to the Company of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The Company recorded a $0.5 million change in the fair value of the contingent consideration for the three months ended June 30, 2019, which is included in other expense, net within the Company's consolidated statement of operations for the three months ended June 30, 2019. The fair value of the contingent consideration was $0.2 million and $0.8 million at June 30, 2019 and March 31, 2019 respectively. The contingent consideration is included in other assets within the Company’s consolidated balance sheet at June 30, 2019 and March 31, 2019.

The Company's Level 3 liability consists of contingent purchase consideration related to the acquisition of certain assets and liabilities of Eastwind Networks, Inc. (Eastwind) in April 2019. The contingent purchase consideration represents amounts deposited into an escrow account, which was established to cover damages NetScout may suffer 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. The contingent purchase consideration is included as accrued other in the Company's consolidated balance sheet at June 30, 2019.

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 three months ended June 30, 2019 (in thousands):

	Contingent Consideration			Contingent Purchase Consideration
Balance at March 31, 2019	$	762		$	—
Additions to Level 3	—			(1,000		)
Change in fair value of contingent consideration	(523		)	—
Balance at June 30, 2019	$	239		$	(1,000	)

Accretion income related to the contingent consideration received as partial consideration for the divestiture of the HNT tools business for the three months ended June 30, 2019 was $18 thousand and was included within interest income.

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INVENTORIES

3 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

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

	June 30, 2019		March 31, 2019
Raw materials	$	18,825	$	14,432
Work in process	410		1,181
Finished goods	6,228		7,738
Deferred costs	1,016		2,919
	$	26,479	$	26,270

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ACQUISITIONS & DIVESTITURES

3 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

ACQUISITIONS & DIVESTITURES

ACQUISITIONS & DIVESTITURES

Eastwind Acquisition

On April 3, 2019 (the Eastwind Closing Date), the Company completed the acquisition of certain assets and liabilities of Eastwind for $5.2 million. Eastwind's breach analytics cloud analyzes data to identify malicious activity, insider threats and data leakage.

The Company has 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.

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. The escrow account was established to cover damages NetScout may suffer 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 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. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be 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 will record the liability over the period it is earned as compensation expense for post-combination services.

The fair value of intangible assets 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 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 weighted 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 HNT tools business. As part of the divestiture, the Company recorded contingent consideration which represents potential future earnout payments of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The Company recorded a $0.5 million change in the fair value of the contingent consideration, which is included in other expense, net within the Company’s consolidated statements of operations for the three months ended June 30, 2019. The fair value of the contingent consideration was $0.2 million and $0.8 million at June 30, 2019 and March 31, 2019, respectively. The contingent consideration is included within other assets within the Company’s consolidated balance sheet.    

In connection with the divestiture, the Company has 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 three months ended June 30, 2019 was $0.9 million and included within other income in the Company's consolidated statement of operations.

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GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company has two reporting units: (1) Service Assurance and (2) Security. The Company assesses goodwill for impairment at the reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The Company completed its annual impairment test on January 31, 2019.

At June 30, 2019 goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $555.9 million, respectively. At March 31, 2019, goodwill attributable to our Service Assurance and Security reporting units was $1.2 billion and $551.1 million, respectively.

The change in the carrying amount of goodwill for the three months ended June 30, 2019 is due to the acquisition of Eastwind and the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The changes in the carrying amount of goodwill for the three months ended June 30, 2019 are as follows (in thousands):

Balance at March 31, 2019	$	1,715,485
Goodwill attributed to the Eastwind acquisition	1,003
Foreign currency translation impact	1,457
Balance at June 30, 2019	$	1,717,945

Intangible Assets

The net carrying amounts of intangible assets were $649.0 million and $669.1 million at June 30, 2019 and March 31, 2019, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes 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. The Company completed its annual impairment test on January 31, 2019.

During the three months ended June 30, 2018, 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 three months ended June 30, 2018.  The impairment charge was recorded within a separate operating expense line item in the Company's consolidated statements of operations during the three months ended June 30, 2018.

Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at June 30, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	246,052	$	(174,164	)	$	71,888
Customer relationships	771,415		(232,409		)	539,006
Distributor relationships and technology licenses	6,855		(5,568		)	1,287
Definite-lived trademark and trade name	39,236		(22,003		)	17,233
Core technology	7,192		(6,902		)	290
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,349		(16,349		)	—
Capitalized software	3,317		(2,905		)	412
Other	1,208		(927		)	281
	$	1,092,752	$	(462,355	)	$	630,397

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, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	242,259	$	(168,289	)	$	73,970
Customer relationships	772,969		(218,043		)	554,926
Distributor relationships and technology licenses	6,882		(5,237		)	1,645
Definite-lived trademark and trade name	39,304		(20,586		)	18,718
Core technology	7,192		(6,845		)	347
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,397		(16,397		)	—
Capitalized software	3,317		(2,690		)	627
Other	1,208		(923		)	285
	$	1,090,656	$	(440,138	)	$	650,518

Amortization included as cost of product revenue consists of amortization of developed technology, distributor relationships and technology licenses, core technology and software. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense for the three months ended June 30, 2019 and 2018, respectively (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Amortization of intangible assets included as:
Cost of product revenue	$	6,802	$	9,191
Operating expense	16,148		23,470
	$	22,950	$	32,661

The following is the expected future amortization expense at June 30, 2019 for the fiscal years ending March 31 (in thousands):

2020 (remaining nine months)	$	68,244
2021	79,923
2022	69,523
2023	61,814
2024	53,717
Thereafter	297,176
	$	630,397

The weighted-average amortization period of developed technology and core technology is 11.3 years. 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 amortizing all intangible assets is 14.6 years.

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019
Derivatives Designated as Hedging Instruments:
Forward contracts	$	2,070	$	4,550	$	18	$	58	$	51	$	68

(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 for the three months ended June 30, 2019 and 2018 (in thousands):

	Loss Recognized in OCI on Derivative (a)						Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	June 30, 2019			June 30, 2018			Location	June 30, 2019			June 30, 2018
Forward contracts	$	(73	)	$	(519	)	Research and development	$	(5	)	$	30
							Sales and marketing	51			64
	$	(73	)	$	(519	)		$	46		$	94

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

(b)

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

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LONG-TERM DEBT

3 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT

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: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. 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. and U.S. Bank National Association, 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 three months ended June 30, 2019, the Company repaid $50.0 million of borrowings under the Amended Credit Agreement. At June 30, 2019, $500 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 March 31, 2019, until the Company has delivered financial statements for the quarter ended June 30, 2019, 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 1.00% per annum for Base Rate loans and 2.00% per annum for LIBOR loans if the Company's consolidated 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 LIBOR loans if the Company's consolidated leverage ratio is equal to or less than 1.50 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. The Company's Amended Credit Agreement 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 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 March 31, 2019 until the Company has delivered financial statements for the quarter ended June 30, 2019, 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.

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. 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 June 30, 2019, 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; J.P. 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. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto.

The Company has capitalized debt issuance costs totaling $12.2 million at June 30, 2019, which are being amortized over the life of the revolving credit facility. The unamortized balance was $6.2 million as of June 30, 2019. The balance of $1.8 million was included as prepaid expenses and other current assets and a balance of $4.4 million was included as other assets in the Company's consolidated balance sheet.

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RESTRUCTURING CHARGES

3 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES

During the third quarter of fiscal year ended March 31, 2018, the Company restructured certain departments to better align functions resulting in the termination of sixty-one employees. As a result of the workforce reduction, the Company recorded a restructuring charge during the three months ended June 30, 2018 totaling $1.1 million related to one-time termination benefits for the employees that were notified during the period as well as facilities-related costs. The one-time termination benefits were paid in full during the fiscal year ended March 31, 2019.

During the second quarter of fiscal year ending March 31, 2019, the Company implemented a voluntary separation program (VSP) for employees who met certain age and service requirements to reduce overall headcount. As a result of the related workforce reduction, one hundred fifty-five employees voluntarily terminated their employment with the Company during the fiscal year ended March 31, 2019. Additional one-time termination benefit charges of $0.1 million was recorded during the three months ended June 30, 2019. These one-time termination benefits were paid in full by the end of the first quarter of fiscal year 2020.

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

	VSP
	Employee-Related
Balance at March 31, 2019	$	—
Restructuring charges to operations	123
Cash payments	(123		)
Balance at June 30, 2019	$	—

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LEASES

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

LEASES

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. ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company’s estimated incremental borrowing rate unless the lessor’s implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. The Company’s leases have remaining lease terms ranging from 1 year to 11 years. The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making this determination, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

The components of operating lease cost for the three months ended June 30, 2019 were as follows (in thousands):

Lease cost under long-term operating leases	$	3,245
Lease cost under short-term operating leases	852
Variable lease cost under short-term and long-term operating leases	1,212
Total operating lease cost	$	5,309

The table below presents supplemental cash flow information related to leases during the three months ended June 30, 2019 (in thousands):

Cash paid for amounts included in the measurement of lease liabilities	$	3,425
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,827

Weighted average remaining lease term in years and weighted average discount rate are as follows:

Weighted average remaining lease term in years - operating leases	9.28
Weighted average discount rate - operating leases	4.2	%

Future minimum payments under non-cancellable leases at June 30, 2019 are as follows (in thousands):

Year ending March 31:
2020 (remaining nine months)	$	10,249
2021	12,275
2022	11,454
2023	9,928
2024	9,049
Thereafter	45,483
Total lease payments	$	98,438
Less imputed interest	(16,790		)
Present value of lease liabilities	$	81,648

As previously disclosed in the Company’s fiscal year Form 10-K and under the previous lease accounting standard, ASC 840, Leases, the following table summarizes the future non-cancelable minimum lease commitments (including office space, copiers, and automobiles) at March 31, 2019 (in thousands):

Year ending March 31:
2020	$	16,102
2021	11,059
2022	9,804
2023	8,807
2024	8,500
Thereafter	43,997
Total	$	98,269

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Acquisition and divestiture related – The Company has a contingent consideration asset related to the divestiture of its HNT tools business in September 2018. The contingent consideration asset represents potential future earnout payments to the Company of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration asset at June 30, 2019 and March 31, 2019 was $0.2 million and $0.8 million, respectively.

The Company had a contingent liability at June 30, 2019 for $1.0 million related to the acquisition of Eastwind in April 2019 for which an escrow account was established to cover damages NetScout may suffer 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 merger agreement. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be paid to the seller in April 2020.

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

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. 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 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. The Court denied the Plaintiff's motion for fees. Following additional motions for judgment as a matter of law, the court entered final judgment. On June 12, 2019, NetScout filed its Notice of Appeal of the judgment and all other adverse findings. NetScout has concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible." Therefore, accounting rules require NetScout to provide an estimate for the range of potential liability. NetScout currently estimates that the estimated range of liability is between $0 and the aggregate amount awarded by the jury and the Court's award of enhanced damages, plus potential additional pre- and post-judgment interest amounts and costs and any royalties owed on post-trial sales of the accused G10 and GeoBlade products.

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PENSION BENEFIT PLANS

3 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

PENSION BENEFIT PLANS

PENSION BENEFIT PLANS

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

The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three months ended June 30, 2019 and 2018 (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Service cost	$	41	$	63
Interest cost	96		121
Net periodic pension cost	$	137	$	184

Expected Contributions

During the three months ended June 30, 2019, the Company made contributions of $0.1 million to its defined benefit pension plans. During the fiscal year ending March 31, 2020, the Company's cash contribution requirements for its defined benefit pension plans are expected to be less than $1.0 million. As a majority of the participants within the Company's plans are all active employees, the benefit payments are not expected to be material in the foreseeable future.

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TREASURY STOCK

3 Months Ended

Jun. 30, 2019

Equity [Abstract]

TREASURY STOCK

TREASURY STOCK

On May 19, 2015, the Company's board of directors approved a share repurchase program. This program enabled the Company to repurchase up to 20 million shares of its common stock. This plan became effective on July 14, 2015. The Company was not obligated to acquire any specific amount of common stock within any particular timeframe under this program. Through March 31, 2018, the Company had repurchased 20,000,000 shares totaling $607.6 million in the open market under this stock repurchase plan. At March 31, 2018, there were no shares of common stock that remained available to be purchased under the plan.

On October 24, 2017, the Company’s Board of Directors approved a new share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock. This new program became effective when the Company’s previously disclosed twenty million share repurchase program was completed. The Company is not obligated to acquire any specific amount of common stock within any particular timeframe as a result of this new share repurchase program. 

On February 1, 2018, the Company entered into ASR agreements with two third-party financial institutions (the Dealers) 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 (until such program was completed) and the twenty-five million share repurchase program. The Company borrowed $300 million against its Amended Credit Facility to finance the payment of the initial purchase price to each of the Dealers. Under the terms of the ASR, the Company made a $150 million payment to each of the Dealers on February 2, 2018, and received an initial delivery of 3,693,931 shares from each of the Dealers, or 7,387,862 shares in the aggregate, which was approximately 70 percent of the total number of shares of the Company's common stock expected to be repurchased under the ASR. As part of this purchase, 970,650 shares for $27.6 million were deducted under the twenty million share repurchase program and 6,417,212 shares for $182.4 million were deducted from the twenty-five million share repurchase program during the fiscal year ended March 31, 2018. Final settlement of the ASR agreements was completed in August 2018. 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 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.

Through June 30, 2019, the Company has repurchased 11,937,810 shares for $295.0 million in the open market under the twenty-five million share repurchase program. At June 30, 2019, 13,062,190 shares of common stock remained available to be purchased under the current repurchase program. The Company repurchased 1,297,400 shares for $33.2 million during the three months ended June 30, 2019 under the twenty-five million share repurchase program.

In connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld 121,549 shares and 129,115 shares at a cost of $3.0 million and $3.5 million related to minimum statutory tax withholding requirements on these restricted stock units during the three months ended June 30, 2019 and 2018, respectively. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the amount that is available for repurchase under that program.

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NET LOSS PER SHARE

3 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET LOSS PER SHARE

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

	Three Months Ended
	June 30,
	2019			2018
Numerator:
Net loss	$	(29,343	)	$	(62,504	)
Denominator:
Denominator for basic net loss per share - weighted average common shares outstanding	77,302			80,358
Dilutive common equivalent shares:
Weighted average restricted stock units	—			—
Denominator for diluted net loss per share - weighted average shares outstanding	77,302			80,358
Net loss per share:
Basic net loss per share	$	(0.38	)	$	(0.78	)
Diluted net loss per share	$	(0.38	)	$	(0.78	)

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

	Three Months Ended
	June 30,
	2019	2018
Restricted stock units	1,184	1,065

Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options and unrecognized compensation expense as additional proceeds. As we incurred a net loss during the three months ended June 30, 2019 and 2018, all outstanding restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average shares outstanding.

The delivery of approximately 7.4 million shares under the Company's accelerated share repurchase (ASR) agreements reduced our outstanding shares used to determine our weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the three months ended June 30, 2018. See Note 16 for additional information. We evaluated the ASR agreements for potential dilutive effects of any shares remaining to be received or owed upon settlement and determined the additional shares to be received would be anti-dilutive, and therefore they were not included in our calculation of diluted earnings per share for the three months ended June 30, 2018.

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INCOME TAXES

3 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company's effective income tax rates were 1.7% and 23.5% for the three months ended June 30, 2019 and 2018, respectively. Generally, the effective tax rate differs from the statutory tax rate due to state income taxes, foreign withholding taxes, the Base Erosion Anti-Abuse Tax and the Global Intangible Low Taxes Income inclusion partially offset by the tax benefit associated with research and development tax credits, foreign tax credits, Foreign Derived Intangible Income deduction and earnings in jurisdictions subject to tax rates lower than the U.S. statutory rate. The effective tax rate for the three months ended June 30, 2019 is lower than the effective rate for the three months ended June 30, 2018, primarily due to a significant discrete item recorded in the quarter.

As a result of the Tax Legislation, in fiscal 2019, several of our foreign subsidiaries made tax elections to be treated as U.S. branches for federal income tax purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2020. As a result of making these check-the-box elections in the first quarter of fiscal 2020, we recorded a tax expense of

approximately $6.0 million due to establishing new U.S. net deferred tax liabilities resulting from the difference between the GAAP basis and the U.S. federal tax carryover basis of the existing assets and liabilities of those foreign subsidiaries.

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SEGMENT AND GEOGRAPHIC INFORMATION

3 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

The Company reports revenues and income under one reportable segment.

The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. In accordance with United States export control regulations, the Company does not sell or do business with countries subject to economic sanctions and export controls.

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

	Three Months Ended
	June 30,
	2019		2018
United States	$	107,103	$	127,246
Europe	31,309		31,021
Asia	12,552		17,900
Rest of the world	35,060		28,944
	$	186,024	$	205,111

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

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SUBSEQUENT EVENTS

3 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On August 6, 2019, the Company repaid $50.0 million of borrowings under the Amended Credit Agreement.

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BASIS OF PRESENTATION (Policies)

3 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 filed with the Securities and Exchange Commission on May 28, 2019.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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. This guidance is effective for fiscal years ending after December 15, 2020. ASU 2018-14 is effective for NetScout beginning April 1, 2021. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-14 will have on its financial position, results of operations, and disclosures.

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. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. ASU 2018-13 is effective for NetScout beginning April 1, 2020. Early adoption is permitted. The Company is currently assessing the effect that ASU 2018-13 will have on its financial position, results of operations, and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 provides guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2018. The Company adopted ASU 2017-12 effective April 1, 2019. The adoption has had an immaterial impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB Accounting Standards Codification (ASU 2016-02) and issued subsequent amendments to initial guidance in July 2018 within ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (collectively, ASC 842). ASC 842 aims 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 as of April 1, 2019 using the modified retrospective method. Please refer to Note 13, "Leases" for further details.

Revenue Recognition Policy

Revenue Recognition Policy

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

The Company derives revenues primarily from the sale of network management tools and security solutions for service provider and enterprise customers, which include hardware, software and service offerings. The majority of the Company's

product sales consist of hardware products with embedded software that are essential to providing customers the intended functionality of the solutions. The Company also sells software offerings decoupled from the underlying hardware and software solutions to provide customers with enhanced functionality.

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

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

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

Bundled arrangements are concurrent customer purchases of a combination of the Company's product and service offerings that may be delivered at various points in time. The Company allocates the transaction price among the performance obligations in an amount that depicts the relative standalone selling prices (SSP) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately based on the element’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. 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. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a reseller or distributor as a reduction of revenue to the extent they have recorded revenue from the reseller or distributor. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.

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SHARE-BASED COMPENSATION (Tables)

3 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Summary of Share-Based Compensation Expense

The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended, 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):

	Three Months Ended
	June 30,
	2019		2018
Cost of product revenue	$	267	$	269
Cost of service revenue	1,467		1,330
Research and development	3,819		4,151
Sales and marketing	4,135		4,359
General and administrative	3,055		2,856
	$	12,743	$	12,965

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES (Tables)

3 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of Cash, Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

	June 30, 2019		March 31, 2019		June 30, 2018		March 31, 2018
Cash and cash equivalents	$	353,721	$	409,632	$	353,416	$	369,821
Restricted cash	1,189		188		910		910
Total cash, cash equivalents and restricted cash	$	354,910	$	409,820	$	354,326	$	370,731

Schedule of Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

	June 30, 2019		March 31, 2019		June 30, 2018		March 31, 2018
Cash and cash equivalents	$	353,721	$	409,632	$	353,416	$	369,821
Restricted cash	1,189		188		910		910
Total cash, cash equivalents and restricted cash	$	354,910	$	409,820	$	354,326	$	370,731

Summary of Marketable Securities

The following is a summary of marketable securities held by NetScout at June 30, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	44,101	$	31	$	44,132
Commercial paper	37,553		—		37,553
Corporate bonds	2,663		6		2,669
Total short-term marketable securities	84,317		37		84,354
U.S. government and municipal obligations	5,067		20		5,087
Total long-term marketable securities	5,067		20		5,087
Total marketable securities	$	89,384	$	57	$	89,441

The following is a summary of marketable securities held by NetScout at March 31, 2019, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains		Fair Value
Type of security:
U.S. government and municipal obligations	$	27,610	$	12	$	27,622
Commercial paper	48,722		—		48,722
Total short-term marketable securities	76,332		12		76,344
Corporate bonds	1,007		5		1,012
Total long-term marketable securities	1,007		5		1,012
Total marketable securities	$	77,339	$	17	$	77,356

Summary of Contractual Maturities of Marketable Securities

Contractual maturities of the Company's marketable securities held at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	June 30, 2019		March 31, 2019
Available-for-sale securities:
Due in 1 year or less	$	84,354	$	76,344
Due after 1 year through 5 years	5,087		1,012
	$	89,441	$	77,356

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities

The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at June 30, 2019 and March 31, 2019 (in thousands):

	Fair Value Measurements at
	June 30, 2019
	Level 1		Level 2			Level 3			Total
ASSETS:
Cash and cash equivalents	$	353,721	$	—		$	—		$	353,721
U.S. government and municipal obligations	47,145		2,074			—			49,219
Commercial paper	—		37,553			—			37,553
Corporate bonds	2,669		—			—			2,669
Derivative financial instruments	—		18			—			18
Contingent consideration	—		—			239			239
	$	403,535	$	39,645		$	239		$	443,419
LIABILITIES:
Contingent purchase consideration	$	—	$	—		$	(1,000	)	$	(1,000	)
Derivative financial instruments	—		(51		)	—			(51		)
	$	—	$	(51	)	$	(1,000	)	$	(1,051	)

	Fair Value Measurements at
	March 31, 2019
	Level 1		Level 2			Level 3		Total
ASSETS:
Cash and cash equivalents	$	409,632	$	—		$	—	$	409,632
U.S. government and municipal obligations	10,732		16,890			—		27,622
Commercial paper	—		48,722			—		48,722
Corporate bonds	1,012		—			—		1,012
Derivative financial instruments	—		58			—		58
Contingent consideration	—		—			762		762
	$	421,376	$	65,670		$	762	$	487,808
LIABILITIES:
Derivative financial instruments	$	—	$	(68	)	$	—	$	(68	)
	$	—	$	(68	)	$	—	$	(68	)

Schedule of Reconciliation of Changes in Fair Value of Level III Financial Assets

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 three months ended June 30, 2019 (in thousands):

	Contingent Consideration			Contingent Purchase Consideration
Balance at March 31, 2019	$	762		$	—
Additions to Level 3	—			(1,000		)
Change in fair value of contingent consideration	(523		)	—
Balance at June 30, 2019	$	239		$	(1,000	)

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INVENTORIES (Tables)

3 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	June 30, 2019		March 31, 2019
Raw materials	$	18,825	$	14,432
Work in process	410		1,181
Finished goods	6,228		7,738
Deferred costs	1,016		2,919
	$	26,479	$	26,270

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ACQUISITIONS & DIVESTITURES (Tables)

3 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Goodwill and Intangible Assets Record for Eastman Acquisition

Initial cash payment	$	4,154
Estimated fair value of contingent purchase consideration	1,000
Estimated purchase price	$	5,154

Estimated Fair Values of Acquired Assets and Liabilities Assumed

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

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

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GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the three months ended June 30, 2019 are as follows (in thousands):

Balance at March 31, 2019	$	1,715,485
Goodwill attributed to the Eastwind acquisition	1,003
Foreign currency translation impact	1,457
Balance at June 30, 2019	$	1,717,945

Schedule of Intangible Assets

Intangible assets include the indefinite-lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at June 30, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	246,052	$	(174,164	)	$	71,888
Customer relationships	771,415		(232,409		)	539,006
Distributor relationships and technology licenses	6,855		(5,568		)	1,287
Definite-lived trademark and trade name	39,236		(22,003		)	17,233
Core technology	7,192		(6,902		)	290
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,349		(16,349		)	—
Capitalized software	3,317		(2,905		)	412
Other	1,208		(927		)	281
	$	1,092,752	$	(462,355	)	$	630,397

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, 2019 (in thousands):

	Cost		Accumulated Amortization			Net
Developed technology	$	242,259	$	(168,289	)	$	73,970
Customer relationships	772,969		(218,043		)	554,926
Distributor relationships and technology licenses	6,882		(5,237		)	1,645
Definite-lived trademark and trade name	39,304		(20,586		)	18,718
Core technology	7,192		(6,845		)	347
Net beneficial leases	336		(336		)	—
Non-compete agreements	292		(292		)	—
Leasehold interest	500		(500		)	—
Backlog	16,397		(16,397		)	—
Capitalized software	3,317		(2,690		)	627
Other	1,208		(923		)	285
	$	1,090,656	$	(440,138	)	$	650,518

Finite-lived Intangible Assets Amortization Expense

The following table provides a summary of amortization expense for the three months ended June 30, 2019 and 2018, respectively (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Amortization of intangible assets included as:
Cost of product revenue	$	6,802	$	9,191
Operating expense	16,148		23,470
	$	22,950	$	32,661

Schedule of Expected Future Amortization Expense

The following is the expected future amortization expense at June 30, 2019 for the fiscal years ending March 31 (in thousands):

2020 (remaining nine months)	$	68,244
2021	79,923
2022	69,523
2023	61,814
2024	53,717
Thereafter	297,176
	$	630,397

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

The notional amounts and fair values of derivative instruments in the consolidated balance sheets at June 30, 2019 and March 31, 2019 were as follows (in thousands):

	Notional Amounts (a)				Prepaid Expenses and Other Current Assets				Accrued Other
	June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019
Derivatives Designated as Hedging Instruments:
Forward contracts	$	2,070	$	4,550	$	18	$	58	$	51	$	68

(a)

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

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

The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended June 30, 2019 and 2018 (in thousands):

	Loss Recognized in OCI on Derivative (a)						Gain (Loss) Reclassified from Accumulated OCI into Income (b)
	June 30, 2019			June 30, 2018			Location	June 30, 2019			June 30, 2018
Forward contracts	$	(73	)	$	(519	)	Research and development	$	(5	)	$	30
							Sales and marketing	51			64
	$	(73	)	$	(519	)		$	46		$	94

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

(b)

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

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RESTRUCTURING CHARGES (Tables)

3 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Liability

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

	VSP
	Employee-Related
Balance at March 31, 2019	$	—
Restructuring charges to operations	123
Cash payments	(123		)
Balance at June 30, 2019	$	—

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LEASES (Tables)

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

Components of Operating Lease Cost and Supplemental Cash Flow Information

The components of operating lease cost for the three months ended June 30, 2019 were as follows (in thousands):

Lease cost under long-term operating leases	$	3,245
Lease cost under short-term operating leases	852
Variable lease cost under short-term and long-term operating leases	1,212
Total operating lease cost	$	5,309

The table below presents supplemental cash flow information related to leases during the three months ended June 30, 2019 (in thousands):

Cash paid for amounts included in the measurement of lease liabilities	$	3,425
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,827

Weighted average remaining lease term in years and weighted average discount rate are as follows:

Weighted average remaining lease term in years - operating leases	9.28
Weighted average discount rate - operating leases	4.2	%

ASC 842 Future Minimum Payments Under Non-Cancellable Leases

Future minimum payments under non-cancellable leases at June 30, 2019 are as follows (in thousands):

Year ending March 31:
2020 (remaining nine months)	$	10,249
2021	12,275
2022	11,454
2023	9,928
2024	9,049
Thereafter	45,483
Total lease payments	$	98,438
Less imputed interest	(16,790		)
Present value of lease liabilities	$	81,648

ASC 840 Future Non-Cancelable Minimum Lease Commitments

As previously disclosed in the Company’s fiscal year Form 10-K and under the previous lease accounting standard, ASC 840, Leases, the following table summarizes the future non-cancelable minimum lease commitments (including office space, copiers, and automobiles) at March 31, 2019 (in thousands):

Year ending March 31:
2020	$	16,102
2021	11,059
2022	9,804
2023	8,807
2024	8,500
Thereafter	43,997
Total	$	98,269

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PENSION BENEFIT PLANS (Tables)

3 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

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

The following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the three months ended June 30, 2019 and 2018 (in thousands):

	Three Months Ended
	June 30,
	2019		2018
Service cost	$	41	$	63
Interest cost	96		121
Net periodic pension cost	$	137	$	184

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NET LOSS PER SHARE (Tables)

3 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

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

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

	Three Months Ended
	June 30,
	2019			2018
Numerator:
Net loss	$	(29,343	)	$	(62,504	)
Denominator:
Denominator for basic net loss per share - weighted average common shares outstanding	77,302			80,358
Dilutive common equivalent shares:
Weighted average restricted stock units	—			—
Denominator for diluted net loss per share - weighted average shares outstanding	77,302			80,358
Net loss per share:
Basic net loss per share	$	(0.38	)	$	(0.78	)
Diluted net loss per share	$	(0.38	)	$	(0.78	)

Summary of Antidilutive Securities Excluded from Computation of Diluted EPS

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

	Three Months Ended
	June 30,
	2019	2018
Restricted stock units	1,184	1,065

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SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

3 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Summary of Total Revenue by Geography

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

	Three Months Ended
	June 30,
	2019		2018
United States	$	107,103	$	127,246
Europe	31,309		31,021
Asia	12,552		17,900
Rest of the world	35,060		28,944
	$	186,024	$	205,111

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REVENUE RECOGNITION - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Revenue recognized	$ 97.2
Deferred revenue	342.0
Unrecognized accounts receivable and deferred revenue	7.0		$ 23.3
Capitalized contract cost	6.7		6.4
Amortization of capitalized costs to obtain contracts	$ 1.6	$ 0.6
Minimum
Disaggregation of Revenue [Line Items]
Payment terms	30 days
Maximum
Disaggregation of Revenue [Line Items]
Payment terms	90 days
Prepaid expenses and other current assets
Disaggregation of Revenue [Line Items]
Capitalized contract cost	$ 4.3		3.8
Other assets
Disaggregation of Revenue [Line Items]
Capitalized contract cost	$ 2.4		$ 2.6

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REVENUE RECOGNITION - Performance Obligations (Details) $ in Millions	Jun. 30, 2019 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation, amount	$ 246.5
Revenue, remaining performance obligation, percentage	72.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation, amount	$ 95.5
Revenue, remaining performance obligation, percentage	28.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period

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SHARE-BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 12,743	$ 12,965
ESPP
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Percentage of common stock price for employees	85.00%
Cost of product revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 267	269
Cost of service revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	1,467	1,330
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	3,819	4,151
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	4,135	4,359
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 3,055	$ 2,856

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]
Cash and cash equivalents	$ 353,721	$ 409,632	$ 353,416	$ 369,821
Restricted cash	1,189	188	910	910
Total cash, cash equivalents and restricted cash	$ 354,910	$ 409,820	$ 354,326	$ 370,731

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES - Summary of Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 89,384	$ 77,339
Unrealized Gains	57	17
Fair Value	89,441	77,356
U.S. government and municipal obligations
Debt Securities, Available-for-sale [Line Items]
Fair Value	49,219	27,622
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Fair Value	37,553	48,722
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Fair Value	2,669	1,012
Short-term marketable securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	84,317	76,332
Unrealized Gains	37	12
Fair Value	84,354	76,344
Short-term marketable securities | U.S. government and municipal obligations
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	44,101	27,610
Unrealized Gains	31	12
Fair Value	44,132	27,622
Short-term marketable securities | Commercial paper
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	37,553	48,722
Unrealized Gains	0	0
Fair Value	37,553	48,722
Short-term marketable securities | Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	2,663
Unrealized Gains	6
Fair Value	2,669
Long-term marketable securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	5,067	1,007
Unrealized Gains	20	5
Fair Value	5,087	1,012
Long-term marketable securities | U.S. government and municipal obligations
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	5,067
Unrealized Gains	20
Fair Value	$ 5,087
Long-term marketable securities | Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost		1,007
Unrealized Gains		5
Fair Value		$ 1,012

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CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES - Summary of Contractual Maturities of Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Available-for-sale securities:
Due in 1 year or less	$ 84,354	$ 76,344
Due after 1 year through 5 years	5,087	1,012
Available-for-sale Securities	$ 89,441	$ 77,356

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FAIR VALUE MEASUREMENTS - Schedule of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
ASSETS:
Cash and cash equivalents	$ 353,721	$ 409,632
Available-for-sale securities	89,441	77,356
Derivative financial instruments	18	58
Contingent consideration	239	762
Total assets	443,419	487,808
LIABILITIES:
Contingent purchase consideration	(1,000)
Derivative financial instruments	(51)	(68)
Total liabilities	(1,051)	(68)
U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	49,219	27,622
Commercial paper
ASSETS:
Available-for-sale securities	37,553	48,722
Corporate bonds
ASSETS:
Available-for-sale securities	2,669	1,012
Level 1
ASSETS:
Cash and cash equivalents	353,721	409,632
Derivative financial instruments	0	0
Contingent consideration	0	0
Total assets	403,535	421,376
LIABILITIES:
Contingent purchase consideration	0
Derivative financial instruments	0	0
Total liabilities	0	0
Level 1 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	47,145	10,732
Level 1 | Commercial paper
ASSETS:
Available-for-sale securities	0	0
Level 1 | Corporate bonds
ASSETS:
Available-for-sale securities	2,669	1,012
Level 2
ASSETS:
Cash and cash equivalents	0	0
Derivative financial instruments	18	58
Contingent consideration	0	0
Total assets	39,645	65,670
LIABILITIES:
Contingent purchase consideration	0
Derivative financial instruments	(51)	(68)
Total liabilities	(51)	(68)
Level 2 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	2,074	16,890
Level 2 | Commercial paper
ASSETS:
Available-for-sale securities	37,553	48,722
Level 2 | Corporate bonds
ASSETS:
Available-for-sale securities	0	0
Level 3
ASSETS:
Cash and cash equivalents	0	0
Derivative financial instruments	0	0
Contingent consideration	239	762
Total assets	239	762
LIABILITIES:
Contingent purchase consideration	(1,000)
Derivative financial instruments	0	0
Total liabilities	(1,000)	0
Level 3 | U.S. government and municipal obligations
ASSETS:
Available-for-sale securities	0	0
Level 3 | Commercial paper
ASSETS:
Available-for-sale securities	0	0
Level 3 | Corporate bonds
ASSETS:
Available-for-sale securities	$ 0	$ 0

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FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($)		3 Months Ended
	Sep. 14, 2018	Jun. 30, 2019	Mar. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Change in fair value contingent consideration in other expense		$ 500,000
HNT tools business | Disposed of by Sale
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Contingent consideration related to the divestiture, measurement period	2 years
Change in fair value contingent consideration in other expense		500,000
Disposal group, not discontinued aperation, change in amount of contingent consideration, asset		200,000	$ 800,000
Contingent consideration, change in fair value of contingent consideration		$ 18,000
HNT tools business | Disposed of by Sale | Maximum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Contingent consideration related to the divestiture	$ 4,000,000.0

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FAIR VALUE MEASUREMENTS - Reconciliation of Changes in Level 3 Assets and Liabilities (Details) - Fair value, measurements, recurring $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($)
Contingent Consideration
Balance at March 31, 2019	$ 762
Change in fair value of contingent consideration	(523)
Balance at June 30, 2019	239
Contingent Purchase Consideration
Balance at March 31, 2019	0
Additions to Level 3	(1,000)
Balance at June 30, 2019	$ (1,000)

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INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 18,825	$ 14,432
Work in process	410	1,181
Finished goods	6,228	7,738
Deferred costs	1,016	2,919
Total inventories	$ 26,479	$ 26,270

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ACQUISITIONS & DIVESTITURES - Eastwind Acquisition (Details) - USD ($) $ in Thousands	Apr. 03, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Estimated fair value of contingent purchase consideration		$ 1,000
Eastwind
Business Acquisition [Line Items]
Initial cash payment	$ 4,154
Estimated fair value of contingent purchase consideration	1,000	$ 1,000
Estimated purchase price	$ 5,154

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ACQUISITIONS & DIVESTITURES - Eastwind Estimated Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Apr. 03, 2019	Mar. 31, 2019
Business Acquisition [Line Items]
Goodwill	$ 1,717,945		$ 1,715,485
Eastwind
Business Acquisition [Line Items]
Property, plant and equipment		$ 17
Intangible assets		4,230
Accrued other liabilities		(96)
Goodwill		$ 1,003

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ACQUISITIONS & DIVESTITURES - Eastwind Acquisition Narrative (Details) - USD ($) $ in Thousands		3 Months Ended
	Apr. 03, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Useful Life (Years)		14 years 7 months 6 days
Estimated fair value of contingent purchase consideration		$ 1,000
Eastwind
Business Acquisition [Line Items]
Estimated purchase price	$ 5,154
Estimated fair value of contingent purchase consideration	1,000	$ 1,000
Cash retention payments	$ 300
Developed technology | Eastwind
Business Acquisition [Line Items]
Useful Life (Years)	10 years

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ACQUISITIONS & DIVESTITURES - Eastwind Acquired Indentifiable Intangible Asset (Details) - USD ($) $ in Thousands		3 Months Ended
	Apr. 03, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Useful Life (Years)		14 years 7 months 6 days
Developed technology | Eastwind
Business Acquisition [Line Items]
Fair Value	$ 4,230
Useful Life (Years)	10 years

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ACQUISITIONS & DIVESTITURES - HNT Tools Business Divestiture (Details) - USD ($)		3 Months Ended
	Sep. 14, 2018	Jun. 30, 2019	Mar. 31, 2019
Business Acquisition [Line Items]
Change in fair value contingent consideration in other expense		$ 500,000
Transitional services, period (up to)		18 months
Income from divestiture		$ 900,000
HNT tools business | Disposed of by Sale
Business Acquisition [Line Items]
Change in fair value contingent consideration in other expense		500,000
Contingent consideration related to the divestiture, measurement period	2 years
Disposal group, not discontinued aperation, change in amount of contingent consideration, asset		$ 200,000	$ 800,000
HNT tools business | Disposed of by Sale | Maximum
Business Acquisition [Line Items]
Contingent consideration related to the divestiture	$ 4,000,000.0

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($) reporting_unit	Jun. 30, 2018 USD ($)	Mar. 31, 2019 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Number of reporting units | reporting_unit	2
Goodwill	$ 1,717,945		$ 1,715,485
Carrying value of intangible assets	648,997		669,118
Impairment of intangible assets	$ 0	$ 35,871
Weighted average useful life of acquired intangible assets	14 years 7 months 6 days
Developed and core technology
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life of acquired intangible assets	11 years 3 months 18 days
Customer and distributor relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life of acquired intangible assets	15 years 10 months 24 days
Trademarks and trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life of acquired intangible assets	8 years 7 months 6 days
Capitalized software
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life of acquired intangible assets	3 years
Trade name
Acquired Finite-Lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	$ 18,600		18,600
Service Assurance
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill	1,200,000		1,200,000
Security
Acquired Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 555,900		$ 551,100

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Roll Forward]
Balance at March 31, 2019	$ 1,715,485
Goodwill attributed to the Eastwind acquisition	1,003
Foreign currency translation impact	1,457
Balance at June 30, 2019	$ 1,717,945

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Cost	$ 1,092,752	$ 1,090,656
Accumulated Amortization	(462,355)	(440,138)
Net	630,397	650,518
Developed technology
Finite-Lived Intangible Assets [Line Items]
Cost	246,052	242,259
Accumulated Amortization	(174,164)	(168,289)
Net	71,888	73,970
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Cost	771,415	772,969
Accumulated Amortization	(232,409)	(218,043)
Net	539,006	554,926
Distributor relationships and technology licenses
Finite-Lived Intangible Assets [Line Items]
Cost	6,855	6,882
Accumulated Amortization	(5,568)	(5,237)
Net	1,287	1,645
Definite-lived trademark and trade name
Finite-Lived Intangible Assets [Line Items]
Cost	39,236	39,304
Accumulated Amortization	(22,003)	(20,586)
Net	17,233	18,718
Core technology
Finite-Lived Intangible Assets [Line Items]
Cost	7,192	7,192
Accumulated Amortization	(6,902)	(6,845)
Net	290	347
Net beneficial leases
Finite-Lived Intangible Assets [Line Items]
Cost	336	336
Accumulated Amortization	(336)	(336)
Net	0	0
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Cost	292	292
Accumulated Amortization	(292)	(292)
Net	0	0
Leasehold interest
Finite-Lived Intangible Assets [Line Items]
Cost	500	500
Accumulated Amortization	(500)	(500)
Net	0	0
Backlog
Finite-Lived Intangible Assets [Line Items]
Cost	16,349	16,397
Accumulated Amortization	(16,349)	(16,397)
Net	0	0
Capitalized software
Finite-Lived Intangible Assets [Line Items]
Cost	3,317	3,317
Accumulated Amortization	(2,905)	(2,690)
Net	412	627
Other
Finite-Lived Intangible Assets [Line Items]
Cost	1,208	1,208
Accumulated Amortization	(927)	(923)
Net	$ 281	$ 285

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	$ 22,950	$ 32,661
Cost of product revenue
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	6,802	9,191
Operating expense
Finite-Lived Intangible Assets [Line Items]
Amortization of acquired intangible assets	$ 16,148	$ 23,470

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Expected Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2020 (remaining nine months)	$ 68,244
2021	79,923
2022	69,523
2023	61,814
2024	53,717
Thereafter	297,176
Net	$ 630,397	$ 650,518

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Narrative (Details)	3 Months Ended
	Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Managing period of hedging forecasted cash flows for operating expenses denominated in foreign currencies	12 months
Contract maturity period	12 months

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet (Details) - Forward contracts - Cash flow hedges - Designated as hedging instrument - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Derivatives, Fair Value [Line Items]
Notional Amounts	$ 2,070	$ 4,550
Prepaid Expenses and Other Current Assets
Derivatives, Fair Value [Line Items]
Prepaid Expenses and Other Current Assets	18	58
Accrued Other
Derivatives, Fair Value [Line Items]
Accrued Other	$ 51	$ 68

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Effect of Foreign Exchange Forward Contracts on Other Comprehensive Income and Results of Operations (Details) - Forward contracts - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Loss Recognized in OCI on Derivative	$ (73)
Loss Recognized in OCI on Derivative		$ (519)
Gain (Loss) Reclassified from Accumulated OCI into Income	46
Research and development
Derivative Instruments, Gain (Loss) [Line Items]
Loss Recognized in OCI on Derivative	(73)
Loss Recognized in OCI on Derivative		(519)
Gain (Loss) Reclassified from Accumulated OCI into Income	(5)
Sales and marketing
Derivative Instruments, Gain (Loss) [Line Items]
Loss Recognized in OCI on Derivative
Loss Recognized in OCI on Derivative
Gain (Loss) Reclassified from Accumulated OCI into Income	$ 51
Cash flow hedges
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Reclassified from Accumulated OCI into Income		94
Cash flow hedges | Research and development
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Reclassified from Accumulated OCI into Income		30
Cash flow hedges | Sales and marketing
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Reclassified from Accumulated OCI into Income		$ 64

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LONG-TERM DEBT (Details)			3 Months Ended
	Jan. 16, 2018 USD ($) shares	Jul. 14, 2015	Jun. 30, 2019 USD ($)	Feb. 01, 2018 USD ($)
Debt Instrument [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares) | shares	25,000,000
Repaid borrowings			$ 50,000,000.0
Senior secured revolving credit facility | Line of credit
Debt Instrument [Line Items]
Debt term	5 years
Credit facility	$ 1,000,000,000.0
Amount outstanding under credit facility			$ 500,000,000	$ 300,000,000
Commitment fee percentage			0.25%
Debt default, acceleration clause, required consent percentage		50.00%
Debt issuance cost, gross			$ 12,200,000
Unamortized debt issuance costs			6,200,000
Senior secured revolving credit facility | Line of credit | Prepaid expenses and other current assets
Debt Instrument [Line Items]
Unamortized debt issuance costs			1,800,000
Senior secured revolving credit facility | Line of credit | Other assets
Debt Instrument [Line Items]
Unamortized debt issuance costs			$ 4,400,000
Senior secured revolving credit facility | Line of credit | Maximum
Debt Instrument [Line Items]
Leverage ratio		3.50	2.75
Commitment fee percentage			0.30%
Senior secured revolving credit facility | Line of credit | Maximum | Foreign Subsidiaries
Debt Instrument [Line Items]
Voting stock pledge limit for any foreign subsidiary		65.00%
Senior secured revolving credit facility | Line of credit | Minimum
Debt Instrument [Line Items]
Leverage ratio		1.50	1.50
Commitment fee percentage			0.15%
Senior secured revolving credit facility | Line of credit | Federal funds effective rate
Debt Instrument [Line Items]
Interest rate in excess of effective rate		0.50%
Senior secured revolving credit facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate in excess of effective rate		1.00%
Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans
Debt Instrument [Line Items]
Interest rate in excess of effective rate		1.50%
Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans | Maximum
Debt Instrument [Line Items]
Interest rate in excess of effective rate		2.00%
Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans | Minimum
Debt Instrument [Line Items]
Interest rate in excess of effective rate		1.00%
Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans
Debt Instrument [Line Items]
Interest rate in excess of effective rate		0.50%
Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans | Maximum
Debt Instrument [Line Items]
Interest rate in excess of effective rate		1.00%
Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans | Minimum
Debt Instrument [Line Items]
Interest rate in excess of effective rate		0.00%
Letter of credit sub-facility | Line of credit
Debt Instrument [Line Items]
Credit facility	$ 75,000,000.0

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RESTRUCTURING CHARGES - Narrative (Details) $ in Thousands	3 Months Ended			12 Months Ended
	Jun. 30, 2019 USD ($)	Dec. 31, 2018 employee	Jun. 30, 2018 USD ($)	Mar. 31, 2019 employee
Restructuring Cost and Reserve [Line Items]
Number of employees terminated | employee		61
Restructuring charges	$ 123		$ 1,147
Employee-Related
Restructuring Cost and Reserve [Line Items]
Restructuring charges			$ 1,100
VSP
Restructuring Cost and Reserve [Line Items]
Number of employees terminated | employee				155
Restructuring charges	$ 100

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RESTRUCTURING CHARGES - Schedule of Restructuring Liability (Details) - VSP - Employee-Related $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($)
Restructuring Reserve [Roll Forward]
Balance at March 31, 2019	$ 0
Restructuring charges to operations	123
Cash payments	(123)
Balance at June 30, 2019	$ 0

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LEASES - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Apr. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 67,536
Operating lease liabilities	$ 81,648
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets		$ 68,200
Operating lease liabilities		83,200
Elimination of deferred rent		$ 15,000
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Remaining lease terms	1 year
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Remaining lease terms	11 years

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LEASES - Operating Lease Cost (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Lease cost under long-term operating leases	$ 3,245
Lease cost under short-term operating leases	852
Variable lease cost under short-term and long-term operating leases	1,212
Total operating lease cost	$ 5,309

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LEASES - Supplemental Cash Flow Information (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 3,425
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 1,827
Weighted average remaining lease term in years - operating leases	9 years 3 months 10 days
Weighted average discount rate - operating leases	4.20%

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LEASES - Future Minimum Payments Under Non-Cancellable Leases (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
2020 (remaining nine months)	$ 10,249
2021	12,275
2022	11,454
2023	9,928
2024	9,049
Thereafter	45,483
Total lease payments	98,438
Less imputed interest	(16,790)
Present value of lease liabilities	$ 81,648

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LEASES - ASC 840 Future Non-Cancelable Minimum Lease Commitments (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 16,102
2021	11,059
2022	9,804
2023	8,807
2024	8,500
Thereafter	43,997
Total	$ 98,269

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COMMITMENTS AND CONTINGENCIES (Details)			1 Months Ended
	Sep. 14, 2018 USD ($)	Oct. 13, 2017 USD ($)	Sep. 30, 2018 USD ($)	Oct. 31, 2017 patent	Mar. 31, 2016 patent subsidiary	Jun. 30, 2019 USD ($)	Apr. 03, 2019 USD ($)	Mar. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Line Items]
Estimated fair value of contingent purchase consideration						$ 1,000,000
Number of subsidiary entities | subsidiary					2
Number of patents allegedly infringed | patent				3	5
Damages sought			$ 2,800,000
Minimum
Commitments and Contingencies Disclosure [Line Items]
Estimated litigation liability						0
Pre-suit damages
Commitments and Contingencies Disclosure [Line Items]
Damages sought		$ 3,500,000
Post-suit damages
Commitments and Contingencies Disclosure [Line Items]
Damages sought		$ 2,250,000
Eastwind
Commitments and Contingencies Disclosure [Line Items]
Estimated fair value of contingent purchase consideration						1,000,000.0	$ 1,000,000
Disposed of by Sale | HNT tools business
Commitments and Contingencies Disclosure [Line Items]
Contingent consideration related to the divestiture, measurement period	2 years
Disposal group, not discontinued aperation, change in amount of contingent consideration, asset						$ 200,000		$ 800,000
Disposed of by Sale | HNT tools business | Maximum
Commitments and Contingencies Disclosure [Line Items]
Contingent consideration related to the divestiture	$ 4,000,000.0

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PENSION BENEFIT PLANS - Narrative (Details) $ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($) employee
Defined Benefit Plan Disclosure [Line Items]
Contributions to defined benefit pension plans	$ 0.1
Expected cash contribution requirements for defined benefit pension plans, less than	$ 1.0
United States
Defined Benefit Plan Disclosure [Line Items]
Number of employees participating in noncontributory defined benefit pension plans | employee	0

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PENSION BENEFIT PLANS - Net Periodic Pension Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Retirement Benefits [Abstract]
Service cost	$ 41	$ 63
Interest cost	96	121
Net periodic pension cost	$ 137	$ 184

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TREASURY STOCK (Details) $ / shares in Units, $ in Thousands			3 Months Ended		7 Months Ended	10 Months Ended	12 Months Ended	33 Months Ended
	Feb. 02, 2018 USD ($) shares	Feb. 01, 2018 USD ($) dealer	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Aug. 31, 2018 $ / shares shares	Jun. 30, 2019 USD ($) shares	Mar. 31, 2018 USD ($) shares	Mar. 31, 2018 USD ($) shares	Mar. 31, 2019 shares	Jan. 16, 2018 shares	Oct. 24, 2017 shares	May 19, 2015 shares
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)										25,000,000
Shares repurchased during the period, value | $			$ 30,708	$ 0
Restricted stock units
Equity, Class of Treasury Stock [Line Items]
Shares paid for tax withholding (in shares)			121,549	129,115
Cost related to tax withholding | $			$ 3,000	$ 3,500
Senior secured revolving credit facility | Line of credit
Equity, Class of Treasury Stock [Line Items]
Amount borrowed for repurchase | $		$ 300,000	$ 500,000			$ 500,000
Share repurchase program, May 2015
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)												20,000,000
Shares repurchased during the period (in shares)							970,650	20,000,000
Shares repurchased during the period, value | $							$ 27,600	$ 607,600
Stock remaining to be purchased (in shares)									0
Share repurchase program, October 2017
Equity, Class of Treasury Stock [Line Items]
Stock authorized to repurchase under stock repurchase program (in shares)											25,000,000
Shares repurchased during the period (in shares)			1,297,400			11,937,810	6,417,212
Shares repurchased during the period, value | $			$ 33,200			$ 295,000	$ 182,400
ASR Agreements
Equity, Class of Treasury Stock [Line Items]
Shares repurchased during the period (in shares)	7,387,862		3,679,947	7,400,000	11,067,809
Shares repurchased during the period, value | $	$ 150,000	$ 300,000	$ 96,800
Stock remaining to be purchased (in shares)			13,062,190			13,062,190
Stock repurchase program, number of dealers | dealer		2
Number of shares acquired from each of dealers (in shares)	3,693,931
Percentage of total number of shares expected to be repurchased	70.00%
Shares repurchased during the period, average cost per share (in dollars per share) | $ / shares					$ 27.11

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NET LOSS PER SHARE - Schedule of Calculations of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net loss	$ (29,343)	$ (62,504)
Denominator:
Denominator for basic net loss per share - weighted average common shares outstanding (in shares)	77,302	80,358
Dilutive common equivalent shares:
Weighted average restricted stock units (in shares)	0	0
Denominator for diluted net loss per share - weighted average shares outstanding (in shares)	77,302	80,358
Net loss per share:
Basic net loss per share (in dollars per share)	$ (0.38)	$ (0.78)
Diluted net loss per share (in dollars per share)	$ (0.38)	$ (0.78)

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NET LOSS PER SHARE - Antidilutive Securities Excluded from Computation (Details) - shares shares in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	1,184	1,065

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NET LOSS PER SHARE - Narrative (Details) - shares		3 Months Ended		7 Months Ended
	Feb. 02, 2018	Jun. 30, 2019	Jun. 30, 2018	Aug. 31, 2018
ASR Agreements
Accelerated Share Repurchases [Line Items]
Repurchase of treasury stock (in shares)	7,387,862	3,679,947	7,400,000	11,067,809

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INCOME TAXES (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Effective income tax rate	(1.70%)	23.50%
Income tax expense due to new U.S. net deferred tax liabilities	$ 6.0

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SEGMENT AND GEOGRAPHIC INFORMATION (Details) $ in Thousands	3 Months Ended
	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment	1
Total revenue	$ 186,024	$ 205,111
United States
Segment Reporting Information [Line Items]
Total revenue	107,103	127,246
Europe
Segment Reporting Information [Line Items]
Total revenue	31,309	31,021
Asia
Segment Reporting Information [Line Items]
Total revenue	12,552	17,900
Rest of the world
Segment Reporting Information [Line Items]
Total revenue	$ 35,060	$ 28,944

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SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions		3 Months Ended
	Aug. 06, 2019	Jun. 30, 2019
Subsequent Event [Line Items]
Repaid borrowings		$ 50.0
Subsequent Event
Subsequent Event [Line Items]
Repaid borrowings	$ 50.0

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Label	Element	Value
Accounting Standards Update 2014-09 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 34,149,000
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 34,149,000