{"url_path":"/sec/ntct/10-k/2026/item-16","section_key":"item-16","section_title":"Item 16 Form 10-K Summary","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1078075/0001078075-26-000050-index.html","accession_number":"0001078075-26-000050","cik":"0001078075","ticker":"NTCT","issuer_name":"NETSCOUT SYSTEMS INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1078075/0001078075-26-000050-index.html","primary_entity_key":"0001078075","primary_entity_name":"NETSCOUT SYSTEMS INC"},"word_count":17952,"has_tables":true,"body_markdown":"Item 16. Form 10-K Summary\n\nNot provided.\n\n58\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nSIGNATURES\n\nPursuant to the requirements of Section 13 or 15(d) 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.\n\n \n\n \n\nNETSCOUT SYSTEMS, INC.\n\n \n\n \n\n \n\nBy:\n\n/S/ ANIL K. SINGHAL\n\n \n\n \n\nAnil K. Singhal\n\n \n\n \n\nPresident, Chief Executive Officer,\n\nand Chairman\n\n \n\n \n\n \n\nDate: May 14, 2026\n\n \n\nPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.\n\n \n\nSignature\n\n \n\nTitle(s)\n\n \n\nDate\n\n \n\n \n\n \n\n/S/ ANIL K. SINGHAL\n\n \n\nPresident, Chief Executive Officer,\n\nand Chairman (Principal\n\nExecutive Officer)\n\n \n\nMay 14, 2026\n\nAnil K. Singhal\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ ANTHONY PIAZZA\n\n \n\nExecutive Vice President and Chief Financial\n\nOfficer (Principal Financial\n\nOfficer)\n\n \n\nMay 14, 2026\n\n \n\nAnthony Piazza\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ ERIC WATT\n\n \n\nChief Accounting Officer (Principal Accounting Officer)\n\n \n\nMay 14, 2026\n\n \n\nEric Watt\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ MICHAEL SZABADOS\n\n \n\nVice Chairman\n\n \n\nMay 14, 2026\n\nMichael Szabados\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ ROBERT E. DONAHUE\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nRobert E. Donahue\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ JOHN R. EGAN\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nJohn R. Egan\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ ALFRED GRASSO\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nAlfred Grasso\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ JOSEPH G. HADZIMA, JR.\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nJoseph G. Hadzima, Jr.\n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ SHANNON NASH\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nShannon Nash\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ MARLENE PELAGE\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nMarlene Pelage\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ CHRISTOPHER PERRETTA\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nChristopher Perretta\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n/S/ VIVIAN VITALE\n\n \n\nDirector\n\n \n\nMay 14, 2026\n\nVivian Vitale\n\n \n\n \n\n \n\n59\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nNetScout Systems, Inc.\n\nIndex to Consolidated Financial Statements\n\n \n\n[Report of Independent Registered Public Accounting Firm](#report_of_independent_reg) ([PCAOB ID 238](#report_of_independent_reg))\n\nF-2\n\n[Consolidated Balance Sheets at March 31, 2026 and 2025](#consolidated_balance_sheets)\n\nF-4\n\n[Consolidated Statements of Operations for the Years Ended March 31, 2026, 2025 and 2024](#consolidated_statements_of_operations)\n\nF-5\n\n[Consolidated Statements of Comprehensive Income (Loss) for the Years Ended March 31, 2026, 2025 and 2024](#comprehensive_income_loss)\n\nF-6\n\n[Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 2026, 2025 and 2024](#equity)\n\nF-7\n\n[Consolidated Statements of Cash Flows for the Years Ended March 31, 2026, 2025 and 2024](#cash_flows)\n\nF-8\n\n[Notes to Consolidated Financial Statements](#note)\n\nF-9\n\n \n\nF-1\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nReport of Independent Registered Public Accounting Firm\n\n \n\nTo the Board of Directors and Stockholders of NetScout Systems, Inc.\n\nOpinions on the Financial Statements and Internal Control over Financial Reporting\n\nWe have audited the accompanying consolidated balance sheets of NetScout Systems, Inc. and its subsidiaries (the \"Company\") as of March 31, 2026 and 2025, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended March 31, 2026, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the \"consolidated financial statements\"). We also have audited the Company's internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).\n\nIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.\n\nBasis for Opinions\n\nThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.\n\nOur audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.\n\nDefinition and Limitations of Internal Control over Financial Reporting\n\nA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded\n\nF-2\n\n[Table of Contents](#toc_page)\n\n \n\nas necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.\n\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.\n\nCritical Audit Matters\n\nThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.\n\nRevenue from Contracts with Customers - Identification of Performance Obligations\n\nAs described in Note 3 to the consolidated financial statements, the Company derives revenues primarily from the sale of network management tools and cybersecurity solutions for service provider and enterprise customers, which include hardware, software and service offerings. 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. During the year ended March 31, 2026, the Company recognized revenue from contracts with customers of $859.5 million. The principal considerations for our determination that performing procedures relating to revenue from contracts with customers - identification of performance obligations is a critical audit matter are (i) the significant judgment by management in determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s identification of performance obligations. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the identification of performance obligations. These procedures also included, among others, for a sample of contracts, (i) reading the executed contract to understand the terms and conditions and (ii) evaluating management’s identification of the performance obligations.\n\n/s/ PricewaterhouseCoopers LLP\n\n \n\nBoston, Massachusetts\n\nMay 14, 2026\n\nWe have served as the Company’s auditor since 1993.\n\n \n\n \n\n \n\n \n\nF-3\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nConsolidated Balance Sheets\n\n(In thousands, except share and per share data)\n\n \n\n \n\n \n\n \n\n \n\n \n\nMarch 31,\n2026\n\n \n\n \n\nMarch 31,\n2025\n\n \n\nAssets\n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent assets:\n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n \n\n$\n\n586,499\n\n \n\n \n\n$\n\n457,415\n\n \n\nMarketable securities\n\n \n\n \n\n81,458\n\n \n\n \n\n \n\n34,058\n\n \n\nAccounts receivable and unbilled costs, net of allowance for doubtful accounts of $129 and $214 at March 31, 2026 and 2025, respectively\n\n \n\n \n\n151,473\n\n \n\n \n\n \n\n163,654\n\n \n\nInventories and deferred costs\n\n \n\n \n\n13,321\n\n \n\n \n\n \n\n12,891\n\n \n\nPrepaid income taxes\n\n \n\n \n\n6,159\n\n \n\n \n\n \n\n13,380\n\n \n\nPrepaid expenses and other current assets\n\n \n\n \n\n28,972\n\n \n\n \n\n \n\n31,786\n\n \n\nTotal current assets\n\n \n\n \n\n867,882\n\n \n\n \n\n \n\n713,184\n\n \n\nFixed assets, net\n\n \n\n \n\n23,558\n\n \n\n \n\n \n\n21,529\n\n \n\nOperating lease right-of-use assets\n\n \n\n \n\n35,553\n\n \n\n \n\n \n\n37,717\n\n \n\nGoodwill\n\n \n\n \n\n1,070,592\n\n \n\n \n\n \n\n1,076,383\n\n \n\nIntangible assets, net\n\n \n\n \n\n214,295\n\n \n\n \n\n \n\n258,690\n\n \n\nDeferred income taxes\n\n \n\n \n\n93,735\n\n \n\n \n\n \n\n66,294\n\n \n\nLong-term marketable securities\n\n \n\n \n\n37,188\n\n \n\n \n\n \n\n1,004\n\n \n\nOther assets\n\n \n\n \n\n11,714\n\n \n\n \n\n \n\n11,777\n\n \n\nTotal assets\n\n \n\n$\n\n2,354,517\n\n \n\n \n\n$\n\n2,186,578\n\n \n\nLiabilities and Stockholders’ Equity\n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent liabilities:\n\n \n\n \n\n \n\n \n\n \n\n \n\nAccounts payable\n\n \n\n$\n\n23,492\n\n \n\n \n\n$\n\n18,208\n\n \n\nAccrued compensation\n\n \n\n \n\n84,515\n\n \n\n \n\n \n\n56,696\n\n \n\nAccrued other\n\n \n\n \n\n20,012\n\n \n\n \n\n \n\n19,397\n\n \n\nIncome taxes payable\n\n \n\n \n\n1,655\n\n \n\n \n\n \n\n883\n\n \n\nDeferred revenue and customer deposits\n\n \n\n \n\n330,601\n\n \n\n \n\n \n\n301,753\n\n \n\nCurrent portion of operating lease liabilities\n\n \n\n \n\n9,874\n\n \n\n \n\n \n\n10,995\n\n \n\nTotal current liabilities\n\n \n\n \n\n470,149\n\n \n\n \n\n \n\n407,932\n\n \n\nOther long-term liabilities\n\n \n\n \n\n6,568\n\n \n\n \n\n \n\n8,210\n\n \n\nDeferred tax liability\n\n \n\n \n\n2,225\n\n \n\n \n\n \n\n2,643\n\n \n\nAccrued long-term retirement benefits\n\n \n\n \n\n28,336\n\n \n\n \n\n \n\n27,379\n\n \n\nLong-term deferred revenue and customer deposits\n\n \n\n \n\n168,261\n\n \n\n \n\n \n\n147,510\n\n \n\nOperating lease liabilities, net of current portion\n\n \n\n \n\n29,718\n\n \n\n \n\n \n\n32,509\n\n \n\nTotal liabilities\n\n \n\n \n\n705,257\n\n \n\n \n\n \n\n626,183\n\n \n\nCommitments and contingencies (Note 19)\n\n \n\n \n\n \n\n \n\n \n\n \n\nStockholders’ equity:\n\n \n\n \n\n \n\n \n\n \n\n \n\nPreferred stock, $0.001 par value: 5,000,000 authorized; none issued or outstanding\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nCommon stock, $0.001 par value: 300,000,000 authorized; 136,628,693 and 134,038,262 issued and 71,464,664 and 72,060,237 outstanding\n\n \n\n \n\n136\n\n \n\n \n\n \n\n134\n\n \n\nAdditional paid-in capital\n\n \n\n \n\n3,325,400\n\n \n\n \n\n \n\n3,255,333\n\n \n\nAccumulated other comprehensive income\n\n \n\n \n\n4,032\n\n \n\n \n\n \n\n4,073\n\n \n\nTreasury stock at cost, 65,164,029 and 61,978,025\n\n \n\n \n\n(1,731,396\n\n)\n\n \n\n \n\n(1,654,702\n\n)\n\nRetained earnings (Accumulated deficit)\n\n \n\n \n\n51,088\n\n \n\n \n\n \n\n(44,443\n\n)\n\nTotal stockholders’ equity\n\n \n\n \n\n1,649,260\n\n \n\n \n\n \n\n1,560,395\n\n \n\nTotal liabilities and stockholders’ equity\n\n \n\n$\n\n2,354,517\n\n \n\n \n\n$\n\n2,186,578\n\n \n\n \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-4\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nConsolidated Statements of Operations\n\n(In thousands, except per share data)\n\n \n\n \n\n \n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nRevenue:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nProduct\n\n \n\n$\n\n370,145\n\n \n\n \n\n$\n\n359,894\n\n \n\n \n\n$\n\n360,444\n\n \n\nService\n\n \n\n \n\n489,337\n\n \n\n \n\n \n\n462,785\n\n \n\n \n\n \n\n469,011\n\n \n\nTotal revenue\n\n \n\n \n\n859,482\n\n \n\n \n\n \n\n822,679\n\n \n\n \n\n \n\n829,455\n\n \n\nCost of revenue:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nProduct\n\n \n\n \n\n50,594\n\n \n\n \n\n \n\n57,463\n\n \n\n \n\n \n\n64,057\n\n \n\nService\n\n \n\n \n\n126,394\n\n \n\n \n\n \n\n121,272\n\n \n\n \n\n \n\n123,355\n\n \n\nTotal cost of revenue\n\n \n\n \n\n176,988\n\n \n\n \n\n \n\n178,735\n\n \n\n \n\n \n\n187,412\n\n \n\nGross profit\n\n \n\n \n\n682,494\n\n \n\n \n\n \n\n643,944\n\n \n\n \n\n \n\n642,043\n\n \n\nOperating expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nResearch and development\n\n \n\n \n\n159,461\n\n \n\n \n\n \n\n152,864\n\n \n\n \n\n \n\n161,213\n\n \n\nSales and marketing\n\n \n\n \n\n264,538\n\n \n\n \n\n \n\n268,051\n\n \n\n \n\n \n\n270,979\n\n \n\nGeneral and administrative\n\n \n\n \n\n103,185\n\n \n\n \n\n \n\n96,724\n\n \n\n \n\n \n\n95,886\n\n \n\nAmortization of acquired intangible assets\n\n \n\n \n\n44,602\n\n \n\n \n\n \n\n46,440\n\n \n\n \n\n \n\n50,337\n\n \n\nRestructuring charges\n\n \n\n \n\n883\n\n \n\n \n\n \n\n20,500\n\n \n\n \n\n \n\n—\n\n \n\nGoodwill impairment\n\n \n\n \n\n—\n\n \n\n \n\n \n\n426,967\n\n \n\n \n\n \n\n217,260\n\n \n\nGain on divestiture of a business\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n(3,806\n\n)\n\nTotal operating expenses\n\n \n\n \n\n572,669\n\n \n\n \n\n \n\n1,011,546\n\n \n\n \n\n \n\n791,869\n\n \n\nIncome (loss) from operations\n\n \n\n \n\n109,825\n\n \n\n \n\n \n\n(367,602\n\n)\n\n \n\n \n\n(149,826\n\n)\n\nInterest and other income, net:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest income\n\n \n\n \n\n13,831\n\n \n\n \n\n \n\n10,736\n\n \n\n \n\n \n\n9,602\n\n \n\nInterest expense\n\n \n\n \n\n(1,705\n\n)\n\n \n\n \n\n(7,160\n\n)\n\n \n\n \n\n(8,651\n\n)\n\nOther (expense) income, net\n\n \n\n \n\n(3,443\n\n)\n\n \n\n \n\n(1,768\n\n)\n\n \n\n \n\n4,365\n\n \n\nTotal interest and other income, net\n\n \n\n \n\n8,683\n\n \n\n \n\n \n\n1,808\n\n \n\n \n\n \n\n5,316\n\n \n\nIncome (loss) before income tax expense\n\n \n\n \n\n118,508\n\n \n\n \n\n \n\n(365,794\n\n)\n\n \n\n \n\n(144,510\n\n)\n\nIncome tax expense\n\n \n\n \n\n22,977\n\n \n\n \n\n \n\n1,128\n\n \n\n \n\n \n\n3,224\n\n \n\nNet income (loss)\n\n \n\n$\n\n95,531\n\n \n\n \n\n$\n\n(366,922\n\n)\n\n \n\n$\n\n(147,734\n\n)\n\nBasic net income (loss) per share\n\n \n\n$\n\n1.33\n\n \n\n \n\n$\n\n(5.12\n\n)\n\n \n\n$\n\n(2.07\n\n)\n\nDiluted net income (loss) per share\n\n \n\n$\n\n1.30\n\n \n\n \n\n$\n\n(5.12\n\n)\n\n \n\n$\n\n(2.07\n\n)\n\nWeighted average common shares outstanding used in computing:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss) per share—basic\n\n \n\n \n\n71,984\n\n \n\n \n\n \n\n71,627\n\n \n\n \n\n \n\n71,474\n\n \n\nNet income (loss) per share—diluted\n\n \n\n \n\n73,355\n\n \n\n \n\n \n\n71,627\n\n \n\n \n\n \n\n71,474\n\n \n\n \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-5\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nConsolidated Statements of Comprehensive Income (Loss)\n\n(In thousands)\n\n \n\n \n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nNet income (loss)\n\n \n\n$\n\n95,531\n\n \n\n \n\n$\n\n(366,922\n\n)\n\n \n\n$\n\n(147,734\n\n)\n\nOther comprehensive (loss) income:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCumulative translation adjustments\n\n \n\n \n\n(133\n\n)\n\n \n\n \n\n(327\n\n)\n\n \n\n \n\n(113\n\n)\n\nRecognition of actuarial net gain (loss) from pension and other post-retirement plans, net of tax (benefit) of $197, $277 and ($823)\n\n \n\n \n\n464\n\n \n\n \n\n \n\n653\n\n \n\n \n\n \n\n(1,937\n\n)\n\nChanges in market value of investments:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nChanges in unrealized (loss) gain, net of (benefit) tax of ($30), $9, and ($15)\n\n \n\n \n\n(96\n\n)\n\n \n\n \n\n27\n\n \n\n \n\n \n\n(45\n\n)\n\nTotal net change in market value of investments\n\n \n\n \n\n(96\n\n)\n\n \n\n \n\n27\n\n \n\n \n\n \n\n(45\n\n)\n\nChanges in market value of derivatives:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nChanges in market value of derivatives, net of benefit of $21, $35, and $9\n\n \n\n \n\n(66\n\n)\n\n \n\n \n\n(114\n\n)\n\n \n\n \n\n(24\n\n)\n\nReclassification adjustment for net (loss) gain included in net income (loss), net of (benefit) tax of ($66), $83, and ($15)\n\n \n\n \n\n(210\n\n)\n\n \n\n \n\n262\n\n \n\n \n\n \n\n(47\n\n)\n\nTotal net change in market value of derivatives\n\n \n\n \n\n(276\n\n)\n\n \n\n \n\n148\n\n \n\n \n\n \n\n(71\n\n)\n\nOther comprehensive (loss) income\n\n \n\n \n\n(41\n\n)\n\n \n\n \n\n501\n\n \n\n \n\n \n\n(2,166\n\n)\n\nComprehensive income (loss)\n\n \n\n$\n\n95,490\n\n \n\n \n\n$\n\n(366,421\n\n)\n\n \n\n$\n\n(149,900\n\n)\n\n \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-6\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nConsolidated Statements of Stockholders' Equity\n\n(In thousands, except share data)\n\n \n\n \n\n \n\n \n\nCommon stock\n\n \n\n \n\nAdditional\n\n \n\n \n\nAccumulated\nOther\n\n \n\n \n\nTreasury stock\n\n \n\n \n\nRetained\nEarnings\n\n \n\n \n\nTotal\n\n \n\n \n\n \n\nShares\n\n \n\n \n\nPar\nValue\n\n \n\n \n\nPaid In\nCapital\n\n \n\n \n\nComprehensive\nIncome\n\n \n\n \n\nShares\n\n \n\n \n\nStated\nValue\n\n \n\n \n\n(Accumulated\nDeficit)\n\n \n\n \n\nStockholders’\nEquity\n\n \n\nBalance, March 31, 2023\n\n \n\n \n\n128,683,824\n\n \n\n \n\n$\n\n128\n\n \n\n \n\n \n\n3,099,698\n\n \n\n \n\n$\n\n5,738\n\n \n\n \n\n \n\n57,434,779\n\n \n\n \n\n$\n\n(1,546,128\n\n)\n\n \n\n$\n\n470,213\n\n \n\n \n\n$\n\n2,029,649\n\n \n\nNet loss\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(147,734\n\n)\n\n \n\n \n\n(147,734\n\n)\n\nUnrealized net investment losses\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(45\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(45\n\n)\n\nUnrealized net losses on derivative financial instruments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(71\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(71\n\n)\n\nCumulative translation adjustments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(113\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(113\n\n)\n\nRecognition of actuarial net losses from pension and other post-retirement plan\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(1,937\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(1,937\n\n)\n\nIssuance of common stock pursuant to vesting of restricted stock units\n\n \n\n \n\n2,067,558\n\n \n\n \n\n \n\n3\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n3\n\n \n\nStock-based compensation expense for restricted stock units granted to employees\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n67,973\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n67,973\n\n \n\nIssuance of common stock under employee stock purchase plan\n\n \n\n \n\n564,927\n\n \n\n \n\n \n\n \n\n \n\n \n\n13,695\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n13,695\n\n \n\nShares withheld for employee taxes related to equity awards\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n653,645\n\n \n\n \n\n \n\n(19,355\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(19,355\n\n)\n\nRepurchase of common stock as treasury\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n1,823,669\n\n \n\n \n\n \n\n(50,000\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(50,000\n\n)\n\nBalance, March 31, 2024\n\n \n\n \n\n131,316,309\n\n \n\n \n\n \n\n131\n\n \n\n \n\n \n\n3,181,366\n\n \n\n \n\n \n\n3,572\n\n \n\n \n\n \n\n59,912,093\n\n \n\n \n\n \n\n(1,615,483\n\n)\n\n \n\n \n\n322,479\n\n \n\n \n\n \n\n1,892,065\n\n \n\nNet loss\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(366,922\n\n)\n\n \n\n \n\n(366,922\n\n)\n\nUnrealized net investment gains\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n27\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n27\n\n \n\nUnrealized net gains on derivative financial instruments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n148\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n148\n\n \n\nCumulative translation adjustments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(327\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(327\n\n)\n\nRecognition of actuarial net gains from pension and other post-retirement plan\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n653\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n653\n\n \n\nIssuance of common stock pursuant to vesting of restricted stock units\n\n \n\n \n\n2,205,063\n\n \n\n \n\n \n\n3\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n3\n\n \n\nStock-based compensation expense for restricted stock units granted to employees\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n62,558\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n62,558\n\n \n\nIssuance of common stock under employee stock purchase plan\n\n \n\n \n\n516,890\n\n \n\n \n\n \n\n \n\n \n\n \n\n11,409\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n11,409\n\n \n\nShares withheld for employee taxes related to equity awards\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n703,727\n\n \n\n \n\n \n\n(13,962\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(13,962\n\n)\n\nRepurchase of common stock as treasury\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n1,362,205\n\n \n\n \n\n \n\n(25,257\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(25,257\n\n)\n\nBalance, March 31, 2025\n\n \n\n \n\n134,038,262\n\n \n\n \n\n \n\n134\n\n \n\n \n\n \n\n3,255,333\n\n \n\n \n\n \n\n4,073\n\n \n\n \n\n \n\n61,978,025\n\n \n\n \n\n \n\n(1,654,702\n\n)\n\n \n\n \n\n(44,443\n\n)\n\n \n\n \n\n1,560,395\n\n \n\nNet income\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n95,531\n\n \n\n \n\n \n\n95,531\n\n \n\nUnrealized net investment losses\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(96\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(96\n\n)\n\nUnrealized net losses on derivative financial instruments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(276\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(276\n\n)\n\nCumulative translation adjustments\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(133\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n(133\n\n)\n\nRecognition of actuarial net gains from pension and other post-retirement plan\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n464\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n464\n\n \n\nIssuance of common stock pursuant to vesting of restricted stock units\n\n \n\n \n\n2,142,100\n\n \n\n \n\n \n\n2\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n2\n\n \n\nStock-based compensation expense for restricted stock units granted to employees\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n57,906\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n57,906\n\n \n\nIssuance of common stock under employee stock purchase plan\n\n \n\n \n\n448,331\n\n \n\n \n\n \n\n \n\n \n\n \n\n12,161\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n12,161\n\n \n\nShares withheld for employee taxes related to equity awards\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n683,774\n\n \n\n \n\n \n\n(15,894\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(15,894\n\n)\n\nRepurchase of common stock as treasury\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n2,502,230\n\n \n\n \n\n \n\n(60,799\n\n)\n\n \n\n \n\n \n\n \n\n \n\n(60,799\n\n)\n\nBalance, March 31, 2026\n\n \n\n \n\n136,628,693\n\n \n\n \n\n$\n\n136\n\n \n\n \n\n$\n\n3,325,400\n\n \n\n \n\n$\n\n4,032\n\n \n\n \n\n \n\n65,164,029\n\n \n\n \n\n$\n\n(1,731,396\n\n)\n\n \n\n$\n\n51,088\n\n \n\n \n\n$\n\n1,649,260\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-7\n\n \n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc\n\nConsolidated Statements of Cash Flows\n\n(In thousands)\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nCash flows from operating activities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss)\n\n$\n\n95,531\n\n \n\n \n\n$\n\n(366,922\n\n)\n\n \n\n$\n\n(147,734\n\n)\n\nAdjustments to reconcile net income (loss) to cash provided by operating activities, net of the effects of acquisitions:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDepreciation and amortization\n\n \n\n56,533\n\n \n\n \n\n \n\n63,786\n\n \n\n \n\n \n\n74,986\n\n \n\nLoss on extinguishment of debt (non cash portion)\n\n \n\n—\n\n \n\n \n\n \n\n1,134\n\n \n\n \n\n \n\n—\n\n \n\nOperating lease right-of-use assets\n\n \n\n9,838\n\n \n\n \n\n \n\n10,405\n\n \n\n \n\n \n\n10,533\n\n \n\nGain on divestiture of a business\n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n(3,806\n\n)\n\nLoss on disposal of fixed assets\n\n \n\n23\n\n \n\n \n\n \n\n15\n\n \n\n \n\n \n\n303\n\n \n\nShare-based compensation expense associated with equity awards\n\n \n\n59,948\n\n \n\n \n\n \n\n64,785\n\n \n\n \n\n \n\n70,799\n\n \n\nChange in fair value of derivative instrument\n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n(206\n\n)\n\nGoodwill impairment\n\n \n\n—\n\n \n\n \n\n \n\n426,967\n\n \n\n \n\n \n\n217,260\n\n \n\nDeferred income taxes\n\n \n\n(28,129\n\n)\n\n \n\n \n\n(37,567\n\n)\n\n \n\n \n\n(45,949\n\n)\n\nLoss (gain) in equity investment\n\n \n\n988\n\n \n\n \n\n \n\n(393\n\n)\n\n \n\n \n\n(5,450\n\n)\n\nOther gains (losses)\n\n \n\n15\n\n \n\n \n\n \n\n(9\n\n)\n\n \n\n \n\n(1\n\n)\n\nChanges in assets and liabilities\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAccounts receivable and unbilled costs\n\n \n\n12,445\n\n \n\n \n\n \n\n28,664\n\n \n\n \n\n \n\n(48,376\n\n)\n\nInventories\n\n \n\n(2,188\n\n)\n\n \n\n \n\n128\n\n \n\n \n\n \n\n609\n\n \n\nPrepaid expenses and other assets\n\n \n\n10,907\n\n \n\n \n\n \n\n(2,284\n\n)\n\n \n\n \n\n(5,835\n\n)\n\nAccounts payable\n\n \n\n4,721\n\n \n\n \n\n \n\n3,240\n\n \n\n \n\n \n\n(1,861\n\n)\n\nAccrued compensation and other expenses\n\n \n\n35,118\n\n \n\n \n\n \n\n20,529\n\n \n\n \n\n \n\n(33,704\n\n)\n\nOperating lease liabilities\n\n \n\n(11,584\n\n)\n\n \n\n \n\n(12,214\n\n)\n\n \n\n \n\n(11,952\n\n)\n\nIncome taxes payable\n\n \n\n1,219\n\n \n\n \n\n \n\n83\n\n \n\n \n\n \n\n(3,620\n\n)\n\nDeferred revenue\n\n \n\n49,153\n\n \n\n \n\n \n\n17,323\n\n \n\n \n\n \n\n(7,185\n\n)\n\nNet cash provided by operating activities\n\n \n\n294,538\n\n \n\n \n\n \n\n217,670\n\n \n\n \n\n \n\n58,811\n\n \n\nCash flows from investing activities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nPurchase of marketable securities\n\n \n\n(163,365\n\n)\n\n \n\n \n\n(45,061\n\n)\n\n \n\n \n\n(52,774\n\n)\n\nProceeds from maturity of marketable securities\n\n \n\n67,875\n\n \n\n \n\n \n\n44,762\n\n \n\n \n\n \n\n64,728\n\n \n\nPurchase of fixed assets\n\n \n\n(9,112\n\n)\n\n \n\n \n\n(5,407\n\n)\n\n \n\n \n\n(6,362\n\n)\n\nPurchase of intangible assets\n\n \n\n—\n\n \n\n \n\n \n\n(1,290\n\n)\n\n \n\n \n\n—\n\n \n\nProceeds from sale of equity investment\n\n \n\n11,772\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nProceeds from divestiture of a business\n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n7,766\n\n \n\nNet cash (used in) provided by investing activities\n\n \n\n(92,830\n\n)\n\n \n\n \n\n(6,996\n\n)\n\n \n\n \n\n13,358\n\n \n\nCash flows from financing activities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nIssuance of common stock under stock plans\n\n \n\n2\n\n \n\n \n\n \n\n3\n\n \n\n \n\n \n\n3\n\n \n\nTreasury stock repurchases\n\n \n\n(60,799\n\n)\n\n \n\n \n\n(25,257\n\n)\n\n \n\n \n\n(50,000\n\n)\n\nTax withholding on restricted stock units\n\n \n\n(15,894\n\n)\n\n \n\n \n\n(13,962\n\n)\n\n \n\n \n\n(19,355\n\n)\n\nPayment of debt issuance costs\n\n \n\n—\n\n \n\n \n\n \n\n(2,795\n\n)\n\n \n\n \n\n—\n\n \n\nRepayment of long-term debt\n\n \n\n—\n\n \n\n \n\n \n\n(175,000\n\n)\n\n \n\n \n\n—\n\n \n\nProceeds from issuance of long-term debt\n\n \n\n—\n\n \n\n \n\n \n\n75,000\n\n \n\n \n\n \n\n—\n\n \n\nNet cash used in financing activities\n\n \n\n(76,691\n\n)\n\n \n\n \n\n(142,011\n\n)\n\n \n\n \n\n(69,352\n\n)\n\nEffect of exchange rate changes on cash and cash equivalents\n\n \n\n4,067\n\n \n\n \n\n \n\n(922\n\n)\n\n \n\n \n\n63\n\n \n\nNet increase in cash and cash equivalents\n\n \n\n129,084\n\n \n\n \n\n \n\n67,741\n\n \n\n \n\n \n\n2,880\n\n \n\nCash and cash equivalents, beginning of year\n\n \n\n457,415\n\n \n\n \n\n \n\n389,674\n\n \n\n \n\n \n\n386,794\n\n \n\nCash and cash equivalents, end of year\n\n$\n\n586,499\n\n \n\n \n\n$\n\n457,415\n\n \n\n \n\n$\n\n389,674\n\n \n\nSupplemental disclosures of cash flow information:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash paid for interest\n\n$\n\n—\n\n \n\n \n\n$\n\n4,190\n\n \n\n \n\n$\n\n6,427\n\n \n\nCash paid for income taxes\n\n$\n\n42,723\n\n \n\n \n\n$\n\n41,796\n\n \n\n \n\n$\n\n62,318\n\n \n\nNon-cash transactions:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nTransfers of inventory to fixed assets\n\n$\n\n1,870\n\n \n\n \n\n$\n\n1,020\n\n \n\n \n\n$\n\n1,814\n\n \n\nAdditions to property, plant and equipment included in accounts payable\n\n$\n\n1,344\n\n \n\n \n\n$\n\n461\n\n \n\n \n\n$\n\n158\n\n \n\nIssuance of common stock under employee stock plans\n\n$\n\n12,161\n\n \n\n \n\n$\n\n11,409\n\n \n\n \n\n$\n\n13,695\n\n \n\nStock-based compensation included in fixed assets and other assets\n\n$\n\n586\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\n \n\n \n\n \n\n \n\nF-8\n\n \n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nNOTE 1 – NATURE OF BUSINESS\n\nNetScout Systems, Inc., or NetScout or the Company, has been a technology innovator for four decades since its founding in 1984. The Company's solutions, based on patented Adaptive Service Intelligence technology, help customers identify network and application performance issues, defend their networks from Distributed Denial-of-Service (DDoS) attacks, and rapidly find and isolate advanced network threats. As a result, customers can quickly resolve issues that cause business disruptions, downtime, poor service quality or compromised security, thereby driving compelling returns on their investments in their network and broader information technology initiatives.\n\nNOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nPrinciples of Consolidation\n\nThe consolidated financial statements include the accounts of NetScout and its wholly owned subsidiaries. Inter-company transactions and balances have been eliminated in consolidation.\n\nSegment Reporting\n\nThe Company's operating segments are determined based on the units that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by the chief operating decision maker (CODM). The Company's President and CEO is the CODM. Operating results are reviewed by the CODM primarily at the consolidated entity level for the purpose of making resource allocation decisions and for evaluating financial performance, primarily by monitoring actual results compared to forecasted results as well as by reviewing year-over-year results. The Company's CODM evaluates company-wide performance and determines allocation of resources based on multiple performance measures, including, but not limited to net income (loss).\n\nThe Company has determined it operates as a single operating segment and has one reportable segment which includes product and service revenue related to the sale of enterprise observability, carrier service assurance, cybersecurity, and DDoS protection solutions. The Company's results for the one reportable segment are the same as presented in the Company's consolidated statements of operations and there is no expense information that is supplemental to those disclosed in these consolidated financial statements, which are regularly provided to the CODM. The measure of segment assets is reported on the Company's consolidated balance sheet as total assets. Segment asset information is not used by the CODM to allocate resources.\n\nUse of Estimates\n\nThe preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include those involving revenue recognition and expenses, valuation of goodwill and acquired assets and liabilities, valuation of pension obligations, valuation of derivative instruments, valuation of contingent consideration and share-based compensation. These estimates and assumptions are monitored and analyzed by management for changes in facts and circumstances and material changes in these estimates could occur in the future.\n\nCash and Cash Equivalents and Marketable Securities\n\nUnder authoritative guidance, NetScout has classified its investments as \"available-for-sale\" which are carried at fair value associated unrealized gains or losses are recorded as a separate component of stockholders' equity until realized. NetScout considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities.\n\nAt March 31, 2026 and periodically throughout the year, NetScout has maintained cash balances in various operating accounts in excess of federally insured limits. NetScout limits the amount of credit exposure by investing only with credit worthy institutions which the Company believes are those institutions with an investment grade rating for deposits.\n\nF-9\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nRevenue Recognition\n\nThe Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606). For further discussion of the Company's accounting policies related to revenue see Note 3, \"Revenue Recognition.\"\n\nCommission Expense\n\nSales commissions are recorded as an asset when the initial contract's duration is longer than 12 months and amortized to expense ratably over the remaining performance periods of the related contracts.\n\nUncollected Deferred Revenue\n\nBecause of NetScout's revenue recognition policies, there are circumstances for which the Company does not recognize revenue relating to sales transactions that have been billed, but the related account receivable has not been collected. While the receivable represents an enforceable obligation, the Company does not believe its right to payment is unconditional, therefore for balance sheet presentation purposes, the Company has not recognized the deferred revenue or the related account receivable, and no amounts appear in the consolidated balance sheets for such transactions because control of the underlying deliverable has not transferred. The aggregate amount of unrecognized accounts receivable and deferred revenue was $1.2 million and $5.5 million at March 31, 2026 and 2025, respectively.\n\nConcentration of Credit Risk\n\nFinancial instruments that potentially subject the Company to concentration of credit risk consist primarily of investments, trade accounts receivable and accounts payable. NetScout's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings.\n\nAt March 31, 2026, one channel partner and no direct customers accounted for more than 10% of the accounts receivable balance. At March 31, 2025, the Company had no direct customers or channel partners which accounted for more than 10% of the accounts receivable balance.\n\nDuring the fiscal years ended March 31, 2026, 2025, and 2024, no direct customers or channel partners accounted for more than 10% of the Company's total revenue.\n\nHistorically, the Company has not experienced any significant failure of its customers to meet their payment obligations, nor does the Company anticipate material non-performance by its customers in the future; accordingly, the Company does not 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.\n\nTrade Receivable Valuations\n\nAccounts receivable are stated at their net realizable value. The allowance against gross trade receivables reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information.\n\nInventories\n\nInventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first-in, first-out (FIFO) method.\n\n \n\nFixed Assets\n\nF-10\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nFixed assets are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or anticipated useful life of the improvement. Gains and losses upon asset disposal are recognized in the year of disposition. Expenditures for replacements and building improvements are capitalized, while expenditures for maintenance and repairs are charged against earnings as incurred.\n\nLeases\n\nThe Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. Lease commencement occurs on the date the Company takes possession or control of the property or equipment. 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. For further discussion of the Company's policies related to leases see Note 18, \"Leases.\"\n\nValuation of Goodwill and Intangible Assets\n\nThe Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Goodwill is not amortized but subjected to annual impairment tests; or more frequently if events or circumstances occur (a \"Triggering Event\") that would indicate the fair value of its reporting unit is below its carrying value. The Company performs the goodwill impairment assessment annually during the fourth quarter and on an interim basis if potential impairment indicators arise.\n\nReporting units are determined based on the components of a Company's operating segments that constitute a business for which financial information is available and for which operating results are regularly reviewed by segment management. The Company has one reporting unit.\n\nTo test impairment for long-lived assets, including tangible and definite-lived intangible assets, the Company first assesses qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that the long-lived assets are impaired. If, based on the Company's qualitative assessment, it is more likely than not that the fair value of the long-lived assets are less than its carrying amount, quantitative impairment testing is required. However, if the Company concludes otherwise, quantitative impairment testing is not required.\n\nCapitalized Software Development Costs\n\nCosts incurred in the research and development of the Company's products are expensed as incurred, except for certain software development costs. Costs associated with the development of computer software are expensed prior to the establishment of technological feasibility and capitalized thereafter until the related software products are available for first customer shipment. Such costs are amortized using the straight-line method over the estimated economic life of the product, which generally does not exceed three years. Capitalized software development costs are periodically assessed for recoverability in the event of changes to the anticipated future revenue for the software products or changes in product technologies. Unamortized capitalized software development costs that are determined to be in excess of the net realizable value of the software products would be expensed in the period in which such a determination is made.\n\nThe majority of research and development investments have not been capitalized because of the development methodology employed. Historically, developments are added individually to the core code over a shorter period of time but marketed as a release once all portions are complete.\n\n \n\n \n\nF-11\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nDerivative Financial Instruments\n\nUnder authoritative guidance for derivative financial instruments and hedging activities, all hedging activities must be documented at the inception of the hedge and must meet the definition of highly effective in offsetting changes to future cash flows in order for the derivative to qualify for hedge accounting. Under the guidance, if an instrument qualifies for hedge accounting, the changes in the fair value each period for open contracts, measured at the end of the period, are recorded to other comprehensive income (loss). Otherwise, changes in the fair value are recorded in earnings each period. Management must perform initial and ongoing tests in order to qualify for hedge accounting. In accordance with the guidance, the Company accounts for its instruments under hedge accounting. The effectiveness and a measurement of ineffectiveness of qualifying hedge contracts are assessed by the Company quarterly. The Company records the fair value of its derivatives in prepaid expenses and other current assets and accrued other in the Company's consolidated balance sheet. The effective portion of gains or losses resulting from changes in the fair value of qualifying hedges are recorded in other comprehensive income (loss) until the forecasted transaction occurs, with any ineffective portion classified directly to the Company's consolidated statement of operations based on the expense categories of the items being hedged. When forecasted transactions occur, unrealized gains or losses associated with the effective portion of the hedge are reclassified to the respective expense categories in the Company's consolidated statement of operations. Gains or losses related to hedging activity are included as operating activities in the Company's consolidated statement of cash flows. If the underlying forecasted transactions do not occur, or it becomes probable that they will not occur, the gain or loss on the related cash flow hedge is recognized immediately in earnings.\n\nNetScout also periodically enters into foreign exchange forward contracts to manage exchange rate risk associated with certain third-party transactions and for which the Company does not elect hedge accounting treatment as there is no difference in the timing of gain or loss recognition on the hedge instrument and the hedged item.\n\nContingencies\n\nThe Company accounts for claims and contingencies in accordance with authoritative guidance that requires an estimated loss to be recorded from a claim or loss contingency when information available prior to issuance of its 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 the Company determines 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, the Company discloses the amount or range of estimated loss if the amount or range of estimated loss is material. Accounting for claims and contingencies requires the Company to use its judgment. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to matters in the ordinary course of business.\n\nShare-Based Compensation\n\nThe Company recognizes compensation expense for all share-based payments granted. Under the fair value recognition provisions, share-based compensation is calculated net of an estimated forfeiture rate and compensation cost is only recognized for those shares expected to vest on a straight-line basis over the expected requisite service period of the award.\n\nForeign Currency\n\nThe Company accounts for its reporting of foreign operations in accordance with guidance which establishes guidelines for the determination of the functional currency of foreign subsidiaries. In accordance with the guidance, the Company has determined its functional currency for those foreign subsidiaries that are an extension of the Company's U.S. operations to be the U.S. Dollar.\n\nAssets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using the period-end exchange rate, and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of stockholders' equity.\n\nThe Company will experience currency exchange risk with respect to foreign currency denominated expenses. In order to partially offset the risks associated with the effects of certain foreign currency exposures, the Company has established a program that\n\nF-12\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nutilizes foreign currency forward contracts. Under this program, increases or decreases in foreign currency exposures are partially offset by gains or losses on forward contracts, to mitigate the impact of foreign currency transaction gains or losses. The Company does not use forward contracts to engage in currency speculation. All outstanding foreign currency forward contracts are recorded at fair value at the end of each fiscal period.\n\nThe Company had foreign currency losses of $3.6 million, $2.0 million and $1.9 million for the fiscal years ended March 31, 2026, 2025 and 2024, respectively. These amounts are included in other income (expense), net in the Company's consolidated statements of operations.\n\nAdvertising Expense\n\nNetScout recognizes advertising expense as incurred. Advertising expense was $4.3 million, $4.9 million, and $6.8 million for the fiscal years ended March 31, 2026, 2025 and 2024, respectively.\n\nComprehensive Income (Loss)\n\nComprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) typically consists of unrealized gains and losses on marketable securities, unrealized gains and losses on hedge contracts, actuarial gains and losses, and foreign currency translation adjustments.\n\nIncome Taxes\n\nNetScout accounts for its income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax basis, as well as the effect of any net operating loss and tax credit carryforwards. Income tax expense is comprised of the current tax liability or benefit and the change in deferred tax assets and liabilities. NetScout evaluates the recoverability of deferred tax assets by considering all positive and negative evidence relating to future profitability. NetScout weighs objective and verifiable evidence more heavily in this analysis. In situations where NetScout concludes that it does not have sufficient objective and verifiable evidence to support the realizability of the deferred tax asset, NetScout creates a valuation allowance against it.\n\nRecent Accounting Standards Recently Adopted\n\nIn December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, enhancing income tax disclosure requirements by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The guidance was adopted on April 1, 2025 and it did not have a material impact on the Company's consolidated financial statements.\n\nRecent Accounting Standards Not Yet Adopted\n\nIn November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03 provides guidance to expand disclosures related to the disaggregation of income statement expenses. The standard requires, in the notes to the financial statements, disclosure of specified information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization that are included on the face of the statement of income. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 is effective for NetScout beginning with its fiscal year ending March 31, 2028. The Company is in the process of evaluating the impact that the adoption of ASU 2024-03 will have on its disclosures.\n\nIn July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 provides a practical expedient and an accounting policy election related\n\nF-13\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nto the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, \"Revenue from Contracts with Customers.\" The practical expedient allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for the annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. ASU 2025-05 should be applied on a prospective basis with early adoption permitted. ASU 2025-05 is effective for the Company beginning with its fiscal year ending March 31, 2027. The Company is currently evaluating the impact of this standard and does not expect the adoption of ASU 2025-05 to have a material impact on its consolidated financial statements and disclosures.\n\nIn September 2025, the FASB issued ASU 2025-06, Intangibles (Subtopic 350-40): Update to modernize the accounting for internal-use software costs. ASU 2025-06 removes all references to software project development stages and clarifies the recognition threshold, entities must meet to begin capitalizing costs. ASU 2025-06 is effective for the Company beginning with its fiscal year ending March 31, 2029. The Company is currently evaluating the impact of this standard and does not expect the adoption of ASU 2025-06 to have a material impact on its consolidated financial statements and disclosures.\n\n \n\nNOTE 3 - REVENUE RECOGNITION\n\nRevenue Recognition Policy\n\nThe Company exercises judgment and uses estimates in connection with determining the amounts of product and service revenues to be recognized in each accounting period.\n\nThe Company derives revenues primarily from the sale of network management tools and cybersecurity solutions for service provider and enterprise customers, which include hardware, software, and service offerings. The Company's product sales consist of offerings which include hardware appliances with embedded software that are essential to providing customers the intended functionality of the solutions, and software only offerings.\n\nThe 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.\n\nF-14\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nProduct revenue is typically recognized upon fulfillment, provided a legally enforceable contract exists, control has passed to the customer, and in the case of software products, when the customer has the rights and ability to access the software, and collection of the related receivable is probable. If any significant obligations to the customer remain post-delivery, typically involving obligations relating to installation and acceptance by the customer, revenue recognition is deferred until such obligations have been fulfilled. The Company's service offerings include installation, integration, extended warranty and maintenance services, post-contract customer support, stand-ready software-as-a-service 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.\n\nGenerally, 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.\n\nBundled 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 for each of the products and services sold, based primarily on the performance obligation's historical pricing. The Company also considers its overall pricing objectives and practices across different sales channels and geographies, and market conditions. Generally, the Company has established SSP for a majority of its service performance obligations based on historical standalone sales. In certain instances, the Company has established SSP for services based upon an estimate of profitability and the underlying cost to fulfill those services. SSP has primarily been established for product performance obligations as the average or median selling price the performance obligation was recently sold for, whether sold alone or sold as part of a bundle transaction. The Company reviews sales of the product performance obligations on a quarterly basis and updates, when appropriate, its SSP for such performance obligations to ensure that it reflects recent pricing experience. The Company's products are distributed through its direct sales force and indirect distribution channels through alliances with resellers and distributors. Revenue arrangements with resellers and distributors are recognized on a sell-in basis; that is, when control of the product transfers to the reseller or distributor. The Company records consideration given to a customer as a reduction of revenue to the extent it has recorded revenue from the customer. With limited exceptions, the Company's return policy does not allow product returns for a refund. Returns have been insignificant to date. In addition, the Company has a history of successfully collecting receivables from its resellers and distributors.\n\nDuring the fiscal year ended March 31, 2026, the Company recognized revenue of $296.4 million related to the Company's deferred revenue balance reported at March 31, 2025.\n\nF-15\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nPerformance Obligations\n\nCustomer 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.\n\nFor 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, satisfied at the completion of the service when control has transferred, or the services have expired unused.\n\nPayments 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 quarterly or annual installments over the contract term. The Company did not have any material variable consideration such as obligations for returns, refunds or warranties at March 31, 2026.\n\nAt March 31, 2026, the Company had total deferred revenue and customer deposits of $498.9 million, which represents the aggregate total contract price allocated to undelivered performance obligations. The Company expects to recognize $330.6 million, or 66%, of this revenue during the next 12 months, and expects to recognize the remaining $168.3 million, or 34%, of this revenue thereafter.\n\nThe Company expects that the amount of billed and unbilled deferred revenue will change from quarter to quarter for several reasons, including the specific timing, duration and size of large customer support and service agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations. The Company did not have material significant financing components, or variable consideration or performance obligations satisfied in a prior period recognized during the twelve months ended March 31, 2026.\n\nContract Balances\n\nThe Company may receive payments from customers based on billing schedules as established by the Company's contracts. Contract assets relate to performance obligations where control has transferred to the customer in advance of scheduled billings. The Company records unbilled accounts receivable representing the right to consideration in exchange for goods or services that have been transferred to a customer conditional on the passage of time. Deferred revenue relates to scenarios where billings with an unconditional right to payment occur before all performance obligations are delivered or payments are received in advance of performance under the contract.\n\nCosts to Obtain Contracts\n\nThe Company has determined that the only significant incremental costs incurred to obtain contracts with customers 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.\n\nAt March 31, 2026, the consolidated balance sheet included $10.9 million in assets related to sales commissions to be expensed in future periods. A balance of $6.0 million was included in prepaid expenses and other current assets, and a balance of $4.9 million was included in other assets in the Company's consolidated balance sheet at March 31, 2026. At March 31, 2025, the consolidated balance sheet included $9.9 million in assets related to sales commissions to be expensed in future periods. A balance of $5.4 million was included in prepaid expenses and other current assets, and a balance of $4.5 million was included in other assets in the Company's consolidated balance sheet at March 31, 2025.\n\nF-16\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nDuring the twelve months ended March 31, 2026 and 2025, and 2024, the Company recognized $7.8 million, $7.1 million, and $6.8 million, respectively, of amortization related to this sales commission asset, which is included in the sales and marketing expense line in the Company's consolidated statements of operations.\n\nAllowance for Credit Losses\n\nThe Company continually monitors collections from its customers. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses based on a combination of factors, including but not limited to, analysis of the aging schedules, past due balances, historical collection experience and prevailing economic conditions.\n\nThe following table summarizes the activity in the allowance for credit losses (in thousands):\n\n \n\nBalance at March 31, 2025\n\n \n\n$\n\n214\n\n \n\nAdditions resulting in charges to operations\n\n \n\n \n\n163\n\n \n\nRecoveries to other accounts\n\n \n\n \n\n(56\n\n)\n\nDeductions due to write-offs\n\n \n\n \n\n(192\n\n)\n\nBalance at March 31, 2026\n\n \n\n$\n\n129\n\n \n\n \n\n \n\nNOTE 4 – CASH, CASH EQUIVALENTS, MARKETABLE SECURITIES AND INVESTMENTS\n\nCash and cash equivalents mainly consisted of U.S. government and municipal obligations, commercial paper, money market instruments and cash maintained with various financial institutions at March 31, 2026 and 2025.\n\nMarketable Securities\n\nThe following is a summary of marketable securities held by the Company at March 31, 2026 classified as short-term and long-term (in thousands):\n\n \n\n \n\nAmortized\nCost\n\n \n\n \n\nUnrealized\nLosses\n\n \n\n \n\nFair\nValue\n\n \n\nType of security:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nU.S. government and municipal obligations\n\n$\n\n12,050\n\n \n\n \n\n$\n\n(3\n\n)\n\n \n\n$\n\n12,047\n\n \n\nCommercial paper\n\n \n\n48,793\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n48,793\n\n \n\nCorporate bonds\n\n \n\n6,169\n\n \n\n \n\n \n\n(10\n\n)\n\n \n\n \n\n6,159\n\n \n\nCertificates of deposit\n\n \n\n6,048\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n6,048\n\n \n\nAgency bonds\n\n \n\n8,413\n\n \n\n \n\n \n\n(2\n\n)\n\n \n\n \n\n8,411\n\n \n\nTotal short-term marketable securities\n\n \n\n81,473\n\n \n\n \n\n \n\n(15\n\n)\n\n \n\n \n\n81,458\n\n \n\nU.S. government and municipal obligations\n\n \n\n4,045\n\n \n\n \n\n \n\n(10\n\n)\n\n \n\n \n\n4,035\n\n \n\nAgency bonds\n\n \n\n33,254\n\n \n\n \n\n \n\n(101\n\n)\n\n \n\n \n\n33,153\n\n \n\nTotal long-term marketable securities\n\n \n\n37,299\n\n \n\n \n\n \n\n(111\n\n)\n\n \n\n \n\n37,188\n\n \n\nTotal marketable securities\n\n$\n\n118,772\n\n \n\n \n\n$\n\n(126\n\n)\n\n \n\n$\n\n118,646\n\n \n\n \n\nF-17\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe following is a summary of marketable securities held by the Company at March 31, 2025, classified as short-term and long-term (in thousands):\n\n \n\n \n\nAmortized\nCost\n\n \n\n \n\nUnrealized\nGains (Losses)\n\n \n\n \n\nFair\nValue\n\n \n\nType of security:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nU.S. government and municipal obligations\n\n$\n\n4,413\n\n \n\n \n\n$\n\n1\n\n \n\n \n\n$\n\n4,414\n\n \n\nCommercial paper\n\n \n\n17,358\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n17,358\n\n \n\nCertificates of deposit\n\n \n\n505\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n505\n\n \n\nTotal short-term marketable securities\n\n \n\n22,276\n\n \n\n \n\n \n\n1\n\n \n\n \n\n \n\n22,277\n\n \n\nU.S. government and municipal obligations\n\n \n\n1,005\n\n \n\n \n\n \n\n(1\n\n)\n\n \n\n \n\n1,004\n\n \n\nTotal long-term marketable securities\n\n \n\n1,005\n\n \n\n \n\n \n\n(1\n\n)\n\n \n\n \n\n1,004\n\n \n\nTotal marketable securities\n\n$\n\n23,281\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n23,281\n\n \n\n \n\nContractual maturities of the Company's marketable securities held at March 31, 2026 and 2025 (in thousands) were as follows:\n\n \n\n \n\nMarch 31, 2026\n\n \n\n \n\nMarch 31, 2025\n\n \n\nAvailable-for-sale securities:\n\n \n\n \n\n \n\n \n\n \n\nDue in 1 year or less\n\n$\n\n81,458\n\n \n\n \n\n$\n\n22,277\n\n \n\nDue after 1 year through 5 years\n\n \n\n37,188\n\n \n\n \n\n \n\n1,004\n\n \n\n \n\n$\n\n118,646\n\n \n\n \n\n$\n\n23,281\n\n \n\n \n\nInvestments\n\nIn February 2023, the Company entered into a forward share purchase agreement with Napatech A/S (Napatech), a publicly traded Danish company registered on the Oslo stock exchange, to purchase approximately 6.2 million shares of Napatech's common stock for $7.5 million. In April 2023, the Company settled the forward share purchase contract with Napatech in exchange for approximately 6.2 million shares of Napatech's common stock and recorded a $0.2 million change in the fair value of the derivative instrument in other income (expense), net within the Company's consolidated statement of operations during the fiscal year ended March 31, 2024. The Company records the investment at fair value at the end of each period based on the closing price of Napatech's stock. At March 31, 2025 and 2024, the fair value of the investment in Napatech was $11.8 million and $11.5 million, respectively, and was included in marketable securities and investments in the Company's consolidated balance sheet. On August 4, 2025 the Company sold its entire equity investment in Napatech, receiving cash proceeds of $11.8 million. During the fiscal years ended March 31, 2026, 2025, and 2024, the Company recognized a loss of $1.0 million and gains of $0.4 million and $5.5 million, respectively, in the fair value of the equity investment in Napatech in other income (expense), net within the Company's consolidated statement of operations. For the fiscal years ended March 31, 2025 and 2024, the unrealized losses related to foreign currency translation on the equity investment in Napatech were immaterial.\n\nF-18\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nNOTE 5 – FAIR VALUE MEASUREMENTS\n\nThe fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\nFair Value Measurements at\n\n \n\n \n\nMarch 31, 2026\n\n \n\n \n\nLevel 1\n\n \n\n \n\nLevel 2\n\n \n\n \n\nLevel 3\n\n \n\n \n\nTotal\n\n \n\nASSETS:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n$\n\n531,929\n\n \n\n \n\n$\n\n54,570\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n586,499\n\n \n\nU.S. government and municipal obligations\n\n \n\n16,082\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n16,082\n\n \n\nCommercial paper\n\n \n\n—\n\n \n\n \n\n \n\n48,793\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n48,793\n\n \n\nCorporate bonds\n\n \n\n6,159\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n6,159\n\n \n\nCertificates of deposit\n\n \n\n—\n\n \n\n \n\n \n\n6,048\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n6,048\n\n \n\nAgency Bonds\n\n \n\n41,564\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n41,564\n\n \n\nDerivative financial instruments\n\n \n\n—\n\n \n\n \n\n \n\n22\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n22\n\n \n\n$\n\n595,734\n\n \n\n \n\n$\n\n109,433\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n705,167\n\n \n\nLIABILITIES:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDerivative financial instruments\n\n$\n\n—\n\n \n\n \n\n$\n\n(258\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(258\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(258\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(258\n\n)\n\n \n\n \n\nFair Value Measurements at\n\n \n\n \n\nMarch 31, 2025\n\n \n\n \n\nLevel 1\n\n \n\n \n\nLevel 2\n\n \n\n \n\nLevel 3\n\n \n\n \n\nTotal\n\n \n\nASSETS:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n$\n\n434,121\n\n \n\n \n\n$\n\n23,294\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n457,415\n\n \n\nU.S. government and municipal obligations\n\n \n\n3,008\n\n \n\n \n\n \n\n2,410\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n5,418\n\n \n\nCommercial paper\n\n \n\n—\n\n \n\n \n\n \n\n17,358\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n17,358\n\n \n\nCertificates of deposit\n\n \n\n—\n\n \n\n \n\n \n\n505\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n505\n\n \n\nEquity investment in Napatech\n\n \n\n11,781\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n11,781\n\n \n\nDerivative financial instruments\n\n \n\n—\n\n \n\n \n\n \n\n197\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n197\n\n \n\n$\n\n448,910\n\n \n\n \n\n$\n\n43,764\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n492,674\n\n \n\nLIABILITIES:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDerivative financial instruments\n\n$\n\n—\n\n \n\n \n\n$\n\n(55\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(55\n\n)\n\n$\n\n—\n\n \n\n \n\n$\n\n(55\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(55\n\n)\n\n \n\nThis hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments.\n\nThe Company's Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency.\n\nF-19\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe Company's Level 2 investments are classified as such because they are valued using observable inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active.\n\nNOTE 6 – INVENTORIES AND DEFERRED COSTS\n\nInventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the FIFO method. Inventories consisted of the following (in thousands):\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nRaw materials\n\n$\n\n7,516\n\n \n\n \n\n$\n\n7,172\n\n \n\nWork in process\n\n \n\n—\n\n \n\n \n\n \n\n47\n\n \n\nFinished goods\n\n \n\n4,035\n\n \n\n \n\n \n\n3,890\n\n \n\nDeferred costs\n\n \n\n1,770\n\n \n\n \n\n \n\n1,782\n\n \n\n$\n\n13,321\n\n \n\n \n\n$\n\n12,891\n\n \n\n \n\nNOTE 7 – FIXED ASSETS\n\nFixed assets consisted of the following (in thousands):\n\n \n\n \n\n \n\nEstimated\nUseful Life\n\n \n\nMarch 31,\n\n \n\n \n\n \n\nIn Years\n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nFurniture and fixtures\n\n \n\n3-7\n\n \n\n$\n\n9,680\n\n \n\n \n\n$\n\n9,586\n\n \n\nComputer equipment and internal use software\n\n \n\n2-3\n\n \n\n \n\n199,581\n\n \n\n \n\n \n\n191,098\n\n \n\nLeasehold improvements (1)\n\n \n\nup to 12\n\n \n\n \n\n52,097\n\n \n\n \n\n \n\n52,175\n\n \n\nDemonstration and spare part units\n\n \n\n2-3\n\n \n\n \n\n19,477\n\n \n\n \n\n \n\n19,805\n\n \n\n \n\n \n\n \n\n \n\n280,835\n\n \n\n \n\n \n\n272,664\n\n \n\nLess – accumulated depreciation\n\n \n\n \n\n \n\n \n\n(257,277\n\n)\n\n \n\n \n\n(251,135\n\n)\n\n \n\n \n\n \n\n$\n\n23,558\n\n \n\n \n\n$\n\n21,529\n\n \n\n \n\n(1)\nLeasehold improvements are depreciated over the shorter of the lease term or anticipated useful life of the improvement.\n\nDepreciation expense was $10.2 million, $11.9 million, and $15.9 million for the fiscal years ended March 31, 2026, 2025 and 2024, respectively.\n\nNOTE 8- DIVESTITURES\n\nBusiness Divestiture\n\nOn September 8, 2023, the Company entered into an Asset Purchase Agreement to divest its Test Optimization business (TO business) for a purchase price of $7.8 million, inclusive of a working capital adjustment. The Company recorded a gain of $3.8 million on the divestiture for the fiscal year ended March 31, 2024. In connection with the divestiture, the Company had entered into a transitional services agreement with the buyer to provide certain services which ended on December 31, 2023.\n\nThe Company determined that the sale of the TO business did not represent a strategic shift and will not have a major effect on its consolidated results of operations, financial position or cash flow. Accordingly, the Company has not presented the sale as a discontinued operation in the consolidated financial statements.\n\nF-20\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nNOTE 9 – GOODWILL & INTANGIBLE ASSETS\n\nGoodwill\n\nThe Company has one reporting unit. Goodwill is tested for impairment at a reporting unit level at least annually, as of January 31, and on an interim basis if an event occurs or circumstances change (a \"Triggering Event\") that would indicate the fair value of the reporting unit is below its carrying value.\n\nDuring fiscal year 2024, the Company recorded $217.3 million in goodwill impairment charges as a result of the sustained decrease in the Company's stock price and overall market capitalization. During the first quarter of fiscal year 2025, due to the continued decrease in the Company's stock price and overall market capitalization, along with other qualitative considerations including the continued impact from the conditions in the macroeconomic environment, it was determined a Triggering Event occurred, indicating goodwill may be impaired. Accordingly, the Company conducted a quantitative impairment test of its goodwill at June 30, 2024. The Company estimated the implied fair value of the reporting unit using a market approach. As a result of the quantitative impairment test performed during the first quarter of fiscal year 2025, the Company determined goodwill was impaired and recorded a goodwill impairment charge of $427.0 million during the three months ended June 30, 2024.\n\nDuring fiscal year 2026 and 2025, the Company completed its annual goodwill impairment tests using the qualitative assessment, and the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value.\n\nThe Company will continue to monitor relevant facts and circumstances, including future changes in its stock price. The Company may be required to record additional goodwill impairment charges. While management cannot predict if or when additional goodwill impairments may occur, future goodwill impairments could have material adverse effects on the Company's results of operations and financial condition.\n\nAt March 31, 2026 and 2025, the carrying amounts of goodwill were $1.1 billion and $1.1 billion, respectively.\n\nThe following table summarizes the changes in the carrying amount of goodwill for the fiscal years ended March 31, 2026 and 2025 as follows (in thousands):\n\n \n\nBalance at March 31, 2024\n\n$\n\n1,502,820\n\n \n\nGoodwill impairment\n\n \n\n(426,967\n\n)\n\nForeign currency translation impact\n\n \n\n530\n\n \n\nBalance at March 31, 2025\n\n$\n\n1,076,383\n\n \n\nForeign currency translation impact\n\n \n\n(5,791\n\n)\n\nBalance at March 31, 2026\n\n$\n\n1,070,592\n\n \n\n \n\nIntangible Assets\n\nThe net carrying amounts of intangible assets were $214.3 million and $258.7 million at March 31, 2026 and 2025, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes intangible assets over their estimated useful lives.\n\nThe Company reviews long-lived assets including tangible and definite-lived intangible assets for impairment when an event occurs that may indicate potential impairment. In conjunction with the goodwill impairment analysis performed at June 30, 2024, the Company conducted an impairment test of its long-lived assets at June 30, 2024. Based on this assessment, the Company concluded that the carrying values of the Company's long-lived assets were recoverable. During the fiscal year ended March 31, 2026 and 2025, the Company performed a quarterly Triggering Event assessment and concluded no events or circumstances occurred that indicated intangible assets may be impaired. However, if future events occur or if business conditions deteriorate, the Company may be required to record an impairment loss, and or accelerate the amortization of definite-live intangible assets in the future, which could be material to its results of operations and financial condition.\n\nF-21\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nIntangible assets include the following amortizable intangible assets at March 31, 2026 (in thousands):\n\n \n\n \n\nCost\n\n \n\n \n\nAccumulated\nAmortization\n\n \n\n \n\nNet\n\n \n\nDeveloped technology\n\n$\n\n250,068\n\n \n\n \n\n$\n\n(246,330\n\n)\n\n \n\n$\n\n3,738\n\n \n\nCustomer relationships\n\n \n\n769,934\n\n \n\n \n\n \n\n(564,880\n\n)\n\n \n\n \n\n205,054\n\n \n\nDistributor relationships and technology licenses\n\n \n\n5,209\n\n \n\n \n\n \n\n(4,457\n\n)\n\n \n\n \n\n752\n\n \n\nDefinite lived trademark and trade name\n\n \n\n57,962\n\n \n\n \n\n \n\n(53,356\n\n)\n\n \n\n \n\n4,606\n\n \n\nCore technology\n\n \n\n7,192\n\n \n\n \n\n \n\n(7,192\n\n)\n\n \n\n \n\n—\n\n \n\nCapitalized software\n\n \n\n3,317\n\n \n\n \n\n \n\n(3,317\n\n)\n\n \n\n \n\n—\n\n \n\nOther\n\n \n\n1,208\n\n \n\n \n\n \n\n(1,063\n\n)\n\n \n\n \n\n145\n\n \n\n \n\n$\n\n1,094,890\n\n \n\n \n\n$\n\n(880,595\n\n)\n\n \n\n$\n\n214,295\n\n \n\n \n\nIntangible assets include the following amortizable intangible assets at March 31, 2025 (in thousands):\n\n \n\n \n\nCost\n\n \n\n \n\nAccumulated\nAmortization\n\n \n\n \n\nNet\n\n \n\nDeveloped technology\n\n$\n\n248,232\n\n \n\n \n\n$\n\n(242,298\n\n)\n\n \n\n$\n\n5,934\n\n \n\nCustomer relationships\n\n \n\n763,397\n\n \n\n \n\n \n\n(518,995\n\n)\n\n \n\n \n\n244,402\n\n \n\nDistributor relationships and technology licenses\n\n \n\n5,097\n\n \n\n \n\n \n\n(4,022\n\n)\n\n \n\n \n\n1,075\n\n \n\nDefinite-lived trademark and trade name\n\n \n\n57,675\n\n \n\n \n\n \n\n(50,562\n\n)\n\n \n\n \n\n7,113\n\n \n\nCore technology\n\n \n\n7,192\n\n \n\n \n\n \n\n(7,192\n\n)\n\n \n\n \n\n—\n\n \n\nCapitalized software\n\n \n\n3,317\n\n \n\n \n\n \n\n(3,317\n\n)\n\n \n\n \n\n—\n\n \n\nOther\n\n \n\n1,208\n\n \n\n \n\n \n\n(1,042\n\n)\n\n \n\n \n\n166\n\n \n\n \n\n$\n\n1,086,118\n\n \n\n \n\n$\n\n(827,428\n\n)\n\n \n\n$\n\n258,690\n\n \n\n \n\nAmortization included as cost of product revenue consists of amortization of developed technology, and distributor relationships and technology licenses. Amortization included as operating expense consists of all other intangible assets. The following table provides a summary of amortization expense during the fiscal years ended March 31, 2026, 2025, and 2024 (in thousands).\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nAmortization of intangible assets included as:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCost of product revenue\n\n \n\n2,523\n\n \n\n \n\n \n\n4,515\n\n \n\n \n\n \n\n7,642\n\n \n\nOperating expense\n\n \n\n44,602\n\n \n\n \n\n \n\n46,460\n\n \n\n \n\n \n\n50,357\n\n \n\n$\n\n47,125\n\n \n\n \n\n$\n\n50,975\n\n \n\n \n\n$\n\n57,999\n\n \n\n \n\nThe following is the expected future amortization expense at March 31, 2026 for the fiscal years ended March 31 (in thousands):\n\n \n\n2027\n\n$\n\n44,228\n\n \n\n2028\n\n \n\n41,261\n\n \n\n2029\n\n \n\n31,833\n\n \n\n2030\n\n \n\n28,933\n\n \n\n2031\n\n \n\n23,330\n\n \n\nThereafter\n\n \n\n44,710\n\n \n\nTotal\n\n$\n\n214,295\n\n \n\n \n\nNOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES\n\nNetScout 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, Indian Rupee, and Canadian Dollar. 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.\n\nF-22\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe 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.\n\nNetScout also periodically enters into forward contracts to manage exchange rate risk associated with certain third-party transactions and for which the Company does not elect hedge accounting treatment as there is no difference in the timing of gain or loss recognition on the hedge instrument and the hedged item.\n\nAll of the Company's foreign exchange forward contract 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.\n\nThe notional amounts and fair values of foreign exchange forward contract derivative instruments in the consolidated balance sheets at March 31, 2026 and 2025 were as follows (in thousands):\n\n \n\n \n\n \n\nNotional Amounts (a)\n\n \n\n \n\nPrepaid Expenses and Other Current Assets\n\n \n\n \n\nAccrued Other\n\n \n\n \n\n \n\nMarch 31,\n2026\n\n \n\n \n\nMarch 31,\n2025\n\n \n\n \n\nMarch 31,\n2026\n\n \n\n \n\nMarch 31,\n2025\n\n \n\n \n\nMarch 31,\n2026\n\n \n\n \n\nMarch 31,\n2025\n\n \n\nDerivatives designated as hedging instruments:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nForward contracts\n\n \n\n$\n\n11,023\n\n \n\n \n\n$\n\n10,649\n\n \n\n \n\n$\n\n22\n\n \n\n \n\n$\n\n197\n\n \n\n \n\n$\n\n258\n\n \n\n \n\n$\n\n55\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n$\n\n22\n\n \n\n \n\n$\n\n197\n\n \n\n \n\n$\n\n258\n\n \n\n \n\n$\n\n55\n\n \n\n \n\n(a)\nNotional amounts represent the gross contract/notional amount of the derivatives outstanding.\n\nThe following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss), (OCI) and results of operations during the fiscal years ended March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\n \n\nLoss Recognized\nin OCI on Derivative\n(a)\n\n \n\n \n\n \n\n \n\n(Loss) Gain Reclassified from\nAccumulated OCI into Income\n(b)\n\n \n\n \n\n \n\nMarch 31,\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n \n\nMarch 31,\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\nLocation\n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nForward contracts\n\n \n\n$\n\n(87\n\n)\n\n \n\n$\n\n(149\n\n)\n\n \n\nResearch and development\n\n \n\n$\n\n54\n\n \n\n \n\n$\n\n34\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSales and marketing\n\n \n\n \n\n(330\n\n)\n\n \n\n \n\n311\n\n \n\n \n\n$\n\n(87\n\n)\n\n \n\n$\n\n(149\n\n)\n\n \n\n \n\n \n\n$\n\n(276\n\n)\n\n \n\n$\n\n345\n\n \n\n \n\n(a)\nThe amount represents the change in fair value of derivative contracts due to changes in spot rates.\n\n(b)\nThe amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.\n\nThe following table provides the effect foreign exchange forward contracts not designated as hedging instruments had on the Company's results of operations during the fiscal years ended March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoss Recognized in Income\n(a)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nMarch 31,\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLocation\n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nForward contracts\n\n \n\n \n\n \n\n \n\n \n\nGeneral and administrative\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(278\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(278\n\n)\n\n \n\n(a)\nThe amount represents the change in fair value of derivative contracts due to changes in spot rates.\n\nF-23\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nIn addition to foreign exchange forward contracts, during the fiscal year ended March 31, 2023, the Company entered into a forward share purchase contract to purchase approximately 6.2 million shares of Napatech's common stock for $7.5 million, which qualified as a derivative instrument under authoritative guidance. The notional amount of the derivative instrument was $7.5 million. In April 2023, the Company settled the forward share purchase contract with Napatech. During the fiscal years ended March 31, 2024, the Company recorded a $0.2 million change in the fair value of the derivative instrument in other income (expense), net within the Company's consolidated statement of operations.\n\nNOTE 11 – RESTRUCTURING CHARGES\n\nDuring the fiscal year 2025, 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, during the fiscal year ended March 31, 2025, the Company recorded restructuring charges totaling $19.6 million related to one-time termination benefits for one hundred forty-two employees who voluntarily terminated their employment with the Company during the fiscal year ended March 31, 2025. All one-time termination benefits were settled in full during the first quarter of the fiscal year ending March 31, 2026.\n\nIn addition to the VSP, during the third quarter of fiscal year 2025, the Company entered into transition agreements that provided termination benefits for certain employees to ensure an orderly transition of responsibilities for continuity purposes. As a result of the related workforce changes, during the fiscal years ended March 31, 2026 and March 31, 2025, the Company recorded restructuring charges totaling $0.9 million and $0.9 million, respectively. The Company estimates approximately $0.1 million in remaining additional restructuring charges that will be recorded through the fiscal year ending March 31, 2027.\n\nThe following table provides a summary of the activity related to the restructuring plan and the related restructuring liability (in thousands):\n\n \n\n \n\n \n\nQ1 FY25 VSP\n\n \n\n \n\nQ3FY25 Plan\n\n \n\n \n\n \n\n \n\n \n\n \n\nEmployee-related\n\n \n\n \n\nEmployee-related\n\n \n\n \n\nTOTAL\n\n \n\nBalance at March 31, 2025\n\n \n\n$\n\n9\n\n \n\n \n\n$\n\n906\n\n \n\n \n\n$\n\n915\n\n \n\nRestructuring charges to operations\n\n \n\n \n\n—\n\n \n\n \n\n \n\n883\n\n \n\n \n\n \n\n883\n\n \n\nPayments\n\n \n\n \n\n(9\n\n)\n\n \n\n \n\n(1,650\n\n)\n\n \n\n \n\n(1,659\n\n)\n\nOther adjustments\n\n \n\n \n\n1\n\n \n\n \n\n—\n\n \n\n \n\n \n\n1\n\n \n\nBalance at March 31, 2026\n\n \n\n$\n\n1\n\n \n\n \n\n$\n\n139\n\n \n\n \n\n$\n\n140\n\n \n\n \n\nNOTE 12 – LONG-TERM DEBT\n\nOn July 27, 2021, the Company amended and extended its existing credit facility (as amended, the Second Amended and Restated Credit Agreement), which provided for a five-year, $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The commitments under the Second Amended and Restated Credit Agreement were set to expire on July 27, 2026, and any outstanding loans were due on that date. On May 13, 2024, the Company repaid $25.0 million of borrowings under the Second Amended and Restated Credit Agreement.\n\nOn October 4, 2024, the Company amended and restated the Second Amended and Restated Credit Agreement (as amended and restated, the Third Amended and Restated Credit Agreement) which provides for a five-year, $600.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million. The Company may elect to use the amended credit facility for working capital and other general corporate purposes (including to repurchase shares of the Company's common stock). The commitments under the Third Amended and Restated Credit Agreement will expire on October 4, 2029, and any outstanding loans will be due on that date.\n\nIn connection with the Third Amended and Restated Credit Agreement, the Company paid off the outstanding balance of $75.0 million under the Second Amended and Restated Credit Agreement on October 4, 2024 by borrowing the same amount under the Third Amended and Restated Credit Agreement. Additionally, the Company recorded a loss on the extinguishment of debt of $1.1 million, representing the write off of unamortized deferred financing costs, which was included in interest expense in the consolidated statements of operations for the fiscal year ended March 31, 2025. On February 3, 2025, the Company paid the\n\nF-24\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\noutstanding balance of $75.0 million in full under the Third Amended and Restated Credit Agreement. At March 31, 2026 and March 31, 2025, there were no amounts outstanding under the Third Amended and Restated Credit Agreement.\n\nAt the Company's election, revolving loans under the Third Amended and Restated Credit Agreement bear interest at either (a) a term SOFR rate plus a credit spread adjustment of 0.10% or (b) an Alternate Base Rate (defined in a customary manner), in each case plus an applicable margin.\n\nCommitment fees will accrue on the daily unused amount of the credit facility. For the period from the delivery of the Company's financial statements for the quarter ended December 31, 2025, until the Company has delivered financial statements for the quarter ended March 31, 2026, the commitment fee will be 0.15% per annum, and thereafter the commitment fee will vary depending on the Company's consolidated gross leverage ratio, ranging from 0.30% per annum if the Company's consolidated gross leverage ratio is greater than 3.50 to 1.00, down to 0.15% per annum if the Company's consolidated gross leverage ratio is equal to or less than 1.50 to 1.00.\n\nThe 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, subject to certain customary exceptions and limitations. The Third Amended and Restated Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Third Amended and Restated Credit Agreement.\n\nThe Third Amended and Restated Credit Agreement contains certain covenants applicable to the Company and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities.\n\nThe Third Amended and Restated Credit Agreement requires the Company to maintain a certain consolidated net leverage ratio. The Company's consolidated net leverage ratio is the ratio of its Consolidated Total Debt minus the lesser of unrestricted cash and 125% of adjusted consolidated EBITDA compared to its adjusted consolidated EBITDA. The Company's maximum consolidated net leverage ratio is 4.00 to 1.00. These covenants and limitations are more fully described in the Third Amended and Restated Credit Agreement. At March 31, 2026, the Company was in compliance with all covenants, including the specified total consolidated net leverage ratio range of 4.00 to 1.00.\n\nThe Third Amended and Restated Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Third Amended and Restated 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.\n\nThe Company had unamortized capitalized debt issuance costs, net of $2.6 million at March 31, 2026, which are being amortized over the life of the revolving credit facility. The unamortized capitalized debt issuance costs balance of $0.7 million was included as prepaid expenses and other current assets and a balance of $1.9 million was included as other assets in the Company's consolidated balance sheet at March 31, 2026.\n\n \n\nF-25\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nNOTE 13 – NET INCOME (LOSS) PER SHARE\n\nCalculations of the basic and diluted net income (loss) per share and potential common shares are as follows (in thousands, except for per share data):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nNumerator:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss)\n\n \n\n$\n\n95,531\n\n \n\n \n\n$\n\n(366,922\n\n)\n\n \n\n$\n\n(147,734\n\n)\n\nDenominator:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDenominator for basic net income (loss) per share - weighted average common shares outstanding\n\n \n\n \n\n71,984\n\n \n\n \n\n \n\n71,627\n\n \n\n \n\n \n\n71,474\n\n \n\nDilutive common equivalent shares:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nWeighted average restricted stock units and performance-based restricted stock units\n\n \n\n \n\n1,371\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nDenominator for diluted net income (loss) per share - weighted average shares outstanding\n\n \n\n \n\n73,355\n\n \n\n \n\n \n\n71,627\n\n \n\n \n\n \n\n71,474\n\n \n\nNet income (loss) per share:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nBasic net income (loss) per share\n\n \n\n$\n\n1.33\n\n \n\n \n\n$\n\n(5.12\n\n)\n\n \n\n$\n\n(2.07\n\n)\n\nDiluted net income (loss) per share\n\n \n\n$\n\n1.30\n\n \n\n \n\n$\n\n(5.12\n\n)\n\n \n\n$\n\n(2.07\n\n)\n\n \n\nThe following table sets forth restricted stock units excluded from the calculation of diluted net income (loss) per share, since their inclusion would be antidilutive (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nRestricted stock units\n\n \n\n \n\n1,894\n\n \n\n \n\n \n\n608\n\n \n\n \n\n \n\n820\n\n \n\n \n\nBasic net income (loss) per share is calculated by dividing net income (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 income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding 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 unrecognized compensation expense as additional proceeds. As the Company incurred a net loss for the fiscal years ended March 31, 2025 and 2024, all outstanding restricted stock units and performance-based restricted stock units have an anti-dilutive effect and are therefore excluded from the computation of diluted weighted average shares outstanding.\n\nNOTE 14 – TREASURY STOCK\n\nOn October 24, 2017, the Company's Board of Directors approved a share repurchase program that enabled the Company to repurchase up to twenty-five million shares of its common stock (2017 Share Repurchase Program). Through March 31, 2024, the Company repurchased all of the authorized 25,000,000 shares for $694.1 million in the open market under the 2017 Share Repurchase Program. The Company repurchased 1,209,153 shares for $33.6 million during the fiscal year ended March 31, 2024 under the 2017 Share Repurchase Program. At March 31, 2024, there were no shares of common stock that remained available to be purchased under the 2017 Share Repurchase Program.\n\nOn May 3, 2022, the Company's Board of Directors approved an additional share repurchase program that enables the Company to repurchase up to twenty-five million shares of its common stock (2022 Share Repurchase Program). The 2022 Share Repurchase Program became effective in the third quarter of fiscal year 2024 when the 2017 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 the 2022 Share Repurchase Program. The Company repurchased approximately 2.5 million shares for $60.8 million and approximately 1.4 million shares for $25.3 million under this share repurchase program during the fiscal years ended March 31, 2026 and 2025,\n\nF-26\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nrespectively. At March 31, 2026, approximately 20.5 million shares of common stock remained available to be purchased under the current program.\n\nIn connection with the delivery of shares of the Company's common stock upon vesting of restricted stock units, the Company withheld approximately 0.7 million shares for $15.9 million, 0.7 million shares for $13.9 million, and 0.7 million shares for $19.4 million related to minimum statutory tax withholding requirements during the fiscal years ended March 31, 2026, 2025 and 2024, respectively. These repurchase transactions do not fall under the repurchase program described above and therefore do not reduce the amount that is available for repurchase under those programs.\n\nNOTE 15 – STOCK PLANS\n\n2011 Employee Stock Purchase Plan\n\nThe Company maintains the 2011 Employee Stock Purchase Plan (the ESPP), under which eligible employees may purchase shares of the Company's common stock through regular payroll deductions of up to 20% of their eligible compensation. 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 market value on the last day of such offering period. The offering periods run from March 1 through August 31 and from September 1 through the last day of February of each year. During the fiscal year ended March 31, 2026, employees purchased approximately 0.4 million shares under the ESPP with a weighted average purchase price per share of $23.06. At March 31, 2026, approximately 1.2 million shares were available for future issuance under the ESPP.\n\n2019 Equity Incentive Plan\n\nThe Company maintains the 2019 Equity Incentive Plan (2019 Plan), which replaced the Company's 2007 Equity Incentive Plan, as amended. The 2019 Plan permits the granting of incentive and nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively referred to as \"share-based awards.\"\n\nThe 2019 Plan has been amended several times, including most recently on September 10, 2025, when the Company's stockholders approved an amendment and restatement to the 2019 Plan to further increase the number of shares reserved for issuance by 3,500,000.\n\nThe aggregate number of shares available for issuance under the 2019 Plan will increase for any shares (each a \"Returning Share\"): (i) subject to an award granted under the 2019 Plan that are not issued because such award expires or otherwise terminates without all of the shares covered by such award having been issued; (ii) subject to an award under the 2019 Plan that are not issued because such award is settled in cash; (iii) issued pursuant to an award granted under the 2019 Plan that are forfeited back to or repurchased by the Company because of failure to vest; and (iv) that are reacquired or withheld by the Company to satisfy tax withholding obligations in connection with common stock issued pursuant to a Full Value Award (as defined below) granted under the 2019 Plan. The amount of such increase will be (i) one share for each Returning Share subject to a stock option or stock appreciation right with an exercise or strike price that is at least 100% of the fair market value of the Company's common stock on the date of grant (an \"Appreciation Award\"); and (ii) 2.67 shares for each Returning Share subject to an equity award other than an Appreciation Award (a \"Full Value Award\") that is returned on or after September 14, 2023. Furthermore, the share reserve under the 2019 Plan is reduced by: (i) one share for each share of common stock issued pursuant to an Appreciation Award, (ii) 2.76 shares for each share of common stock issued pursuant to a Full Value Award granted under the 2019 Plan on or after September 12, 2019 but prior to September 10, 2020; (iii) 2.32 shares for each share of common stock issued pursuant to a Full Value Award granted under the 2019 Plan on or after September 10, 2020 but prior to August 24, 2022; (iv) by 2.34 shares for each share of common stock issued pursuant to a Full Value Award granted under the 2019 Plan on or after August 24, 2022 but prior to September 14, 2023; and (v) by 2.67 shares for each share of common stock issued pursuant to a Full Value Award granted under the 2019 Plan on or after September 14, 2023. At March 31, 2026, an aggregate of 5.4 million shares of unvested equity awards granted under the 2019 Plan were outstanding.\n\nBased on historical experience, the Company assumed an annualized forfeiture rate of 0% for awards granted to its independent directors, approximately 2% for awards granted to its senior executives, and approximately 5% granted to all remaining employees during the fiscal years ended March 31, 2026, 2025 and 2024.\n\nF-27\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nPeriodically, the Company grants share-based awards to employees, officers, and directors of the Company and its subsidiaries. Additionally, the Company periodically grants performance-based restricted stock units to certain executive officers that vest based upon the Company's total shareholder return as compared to the Russell 2000 Index over a three-year period. The performance-based restricted stock units were valued using the Monte Carlo Simulation model. The measurement and recognition of compensation expense is based on estimated fair values for all share-based payment awards made to its employees and directors. Share-based award grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company's common stock. Such value is recognized as a cost of revenue or an operating expense over the corresponding vesting period.\n\nThe following is a summary of share-based compensation expense including restricted stock units and performance-based restricted stock units granted pursuant to the Company's 2019 Plan, and employee stock purchases made under the ESPP, based on estimated fair values within the applicable cost and expense lines identified below (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nCost of product revenue\n\n \n\n$\n\n1,283\n\n \n\n \n\n$\n\n1,296\n\n \n\n \n\n$\n\n1,330\n\n \n\nCost of service revenue\n\n \n\n \n\n8,547\n\n \n\n \n\n \n\n8,510\n\n \n\n \n\n \n\n8,899\n\n \n\nResearch and development\n\n \n\n \n\n17,479\n\n \n\n \n\n \n\n17,956\n\n \n\n \n\n \n\n19,281\n\n \n\nSales and marketing\n\n \n\n \n\n20,721\n\n \n\n \n\n \n\n22,765\n\n \n\n \n\n \n\n25,375\n\n \n\nGeneral and administrative\n\n \n\n \n\n11,918\n\n \n\n \n\n \n\n14,258\n\n \n\n \n\n \n\n15,914\n\n \n\n \n\n \n\n$\n\n59,948\n\n \n\n \n\n$\n\n64,785\n\n \n\n \n\n$\n\n70,799\n\n \n\n \n\nTransactions under the 2019 Plan during the fiscal years ended March 31, 2026, 2025 and 2024 are summarized in the table below.\n\n \n\n \n\n \n\nRestricted Stock Units\n\n \n\n \n\n \n\nNumber of\nAwards\n\n \n\n \n\nWeighted\nAverage\nFair Value\n\n \n\nOutstanding – March 31, 2024\n\n \n\n \n\n5,920,671\n\n \n\n \n\n$\n\n30.50\n\n \n\nGranted\n\n \n\n \n\n2,449,057\n\n \n\n \n\n \n\n18.84\n\n \n\nVested\n\n \n\n \n\n(2,205,063\n\n)\n\n \n\n \n\n30.20\n\n \n\nCanceled\n\n \n\n \n\n(418,676\n\n)\n\n \n\n \n\n29.02\n\n \n\nOutstanding – March 31, 2025\n\n \n\n \n\n5,745,989\n\n \n\n \n\n$\n\n25.75\n\n \n\nGranted\n\n \n\n \n\n2,161,960\n\n \n\n \n\n \n\n23.13\n\n \n\nVested\n\n \n\n \n\n(2,142,100\n\n)\n\n \n\n \n\n27.63\n\n \n\nCanceled\n\n \n\n \n\n(350,241\n\n)\n\n \n\n \n\n25.78\n\n \n\nOutstanding – March 31, 2026\n\n \n\n \n\n5,415,608\n\n \n\n \n\n$\n\n23.96\n\n \n\n \n\nAt March 31, 2026, there were 8,549,468 shares of common stock available for grant under the 2019 Plan.\n\nThe aggregate intrinsic value of stock options exercised, and the fair value of restricted stock units vested at March 31, 2026, 2025 and 2024 were as follows (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nTotal fair value of restricted stock unit awards vested\n\n \n\n$\n\n49,927\n\n \n\n \n\n$\n\n43,733\n\n \n\n \n\n$\n\n61,130\n\n \n\n \n\nAt March 31, 2026, the total unrecognized compensation cost related to restricted stock unit awards was $87.0 million, which is expected to be amortized over a weighted-average period of 1.5 years.\n\nF-28\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nNOTE 16 – PENSION BENEFIT PLANS\n\n401(k) Plan\n\nThe Company has a defined contribution program for certain employees that is qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. The Company matches 50% of the employee's contribution up to 6% of the employee’s salary. NetScout contributions vest at a rate of 25% per year of service. NetScout made matching contributions of $5.7 million, $5.8 million, and $7.0 million to the plan for the fiscal years ended March 31, 2026, 2025 and 2024, respectively.\n\nDefined Benefit Pension Plan\n\nCertain of the Company's non-U.S. employees participate in certain noncontributory defined benefit pension plans. None of the Company's employees in the U.S. participate in any noncontributory defined benefit pension plans. In general, these plans are funded based on considerations relating to legal requirements, underlying asset returns, the plan's funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates and other factors.\n\nThe Company recognizes on its balance sheet a liability equal to the under-funded benefit obligation of its defined benefit pension plan. Actuarial gains or losses are not recognized as components of net periodic benefit cost, but are recognized, net of tax, as a component of other comprehensive income (loss).\n\nThe following sets forth the amounts included in accumulated other comprehensive income (loss) at March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nUnrecognized actuarial net gain\n\n$\n\n7,392\n\n \n\n \n\n$\n\n6,732\n\n \n\n \n\nFor fiscal year 2026 and 2025, the unrecognized net actuarial gains exceeded 10% of the projected benefit obligation at the beginning of the fiscal year, therefore, amortization of such excess has been included in net periodic benefit costs during the years ended March 31, 2026 and 2025. The amortization period is the average remaining service period that active employees are expected to receive benefits, unless a plan is mostly inactive in which case the amortization period is the average remaining life expectancy of the plan participants.\n\nThe following sets forth the change in accumulated other comprehensive income (loss) during the fiscal years ended March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nUnrecognized actuarial gain\n\n$\n\n(1,305\n\n)\n\n \n\n$\n\n(1,396\n\n)\n\nAmortization of net actuarial gain\n\n \n\n644\n\n \n\n \n\n \n\n466\n\n \n\nChange in accumulated other comprehensive income (loss)\n\n$\n\n(661\n\n)\n\n \n\n$\n\n(930\n\n)\n\n \n\nThe following sets forth the components of the Company's net periodic pension cost of the noncontributory defined benefit pension plans for the fiscal years ended March 31, 2026, 2025, and 2024 (in thousands):\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nService cost\n\n$\n\n173\n\n \n\n \n\n$\n\n193\n\n \n\n \n\n$\n\n206\n\n \n\nInterest cost\n\n \n\n1,100\n\n \n\n \n\n \n\n981\n\n \n\n \n\n \n\n999\n\n \n\nAmortization of net gain\n\n \n\n(644\n\n)\n\n \n\n \n\n(466\n\n)\n\n \n\n \n\n(928\n\n)\n\nNet periodic pension cost\n\n$\n\n629\n\n \n\n \n\n$\n\n708\n\n \n\n \n\n$\n\n277\n\n \n\n \n\nF-29\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe components of the change in benefit obligation of the pension plan at March 31, 2026 and 2025 are as follows (in thousands):\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nBenefit obligation, at beginning of year\n\n$\n\n26,023\n\n \n\n \n\n$\n\n27,051\n\n \n\nService cost\n\n \n\n173\n\n \n\n \n\n \n\n193\n\n \n\nInterest cost\n\n \n\n1,100\n\n \n\n \n\n \n\n981\n\n \n\nBenefits paid and other\n\n \n\n(841\n\n)\n\n \n\n \n\n(645\n\n)\n\nActuarial gain\n\n \n\n(1,305\n\n)\n\n \n\n \n\n(1,396\n\n)\n\nForeign exchange rate impact\n\n \n\n1,863\n\n \n\n \n\n \n\n(161\n\n)\n\nBenefit obligation, at end of year\n\n$\n\n27,013\n\n \n\n \n\n$\n\n26,023\n\n \n\n \n\nThe Company's benefit obligation of the pension plan is reported in the following components of the Company's consolidated balance sheet at March 31, 2026 and 2025:\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nAccrued compensation\n\n$\n\n997\n\n \n\n \n\n$\n\n830\n\n \n\nAccrued long-term retirement benefits\n\n \n\n26,016\n\n \n\n \n\n \n\n25,193\n\n \n\nBenefit obligation, at end of year\n\n$\n\n27,013\n\n \n\n \n\n$\n\n26,023\n\n \n\n \n\nThe reconciliation of the beginning and ending balances of the fair value of the assets of the pension plan at March 31, 2026 and 2025 are as follows (in thousands):\n\n \n\n \n\nMarch 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nFair value to plan assets, at beginning of year\n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\nEmployer direct benefit payments\n\n \n\n841\n\n \n\n \n\n \n\n645\n\n \n\nBenefits paid and other\n\n \n\n(841\n\n)\n\n \n\n \n\n(645\n\n)\n\nFair value of plan assets, at end of year\n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\nWeighted average assumptions used to determine net periodic pension cost at date of measurement:\n\n \n\n \n\nMarch 31,\n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nDiscount rate\n\n \n\n4.40\n\n%\n\n \n\n4.00\n\n%\n\n \n\n \n\n3.70\n\n%\n\nRate of compensation increase\n\n \n\n3.00\n\n%\n\n \n\n3.00\n\n%\n\n \n\n \n\n3.00\n\n%\n\n \n\nDuring the fiscal year ended March 31, 2026, the Company contributed $0.8 million to its defined benefit pension plan. The following sets forth benefit payments, which reflect expected future service, as appropriate, expected to be paid by the plan in the periods indicated (in thousands):\n\n \n\n2027\n\n$\n\n997\n\n \n\n2028\n\n$\n\n1,121\n\n \n\n2029\n\n$\n\n1,206\n\n \n\n2030\n\n$\n\n1,282\n\n \n\n2031\n\n$\n\n1,376\n\n \n\n2032-2036\n\n$\n\n8,049\n\n \n\n \n\nNOTE 17 – INCOME TAXES\n\nIncome before income tax expense consisted of the following (in thousands):\n\nF-30\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nDomestic\n\n$\n\n95,578\n\n \n\n \n\n$\n\n(386,859\n\n)\n\n \n\n$\n\n(169,657\n\n)\n\nForeign\n\n \n\n22,930\n\n \n\n \n\n \n\n21,065\n\n \n\n \n\n \n\n25,147\n\n \n\n$\n\n118,508\n\n \n\n \n\n$\n\n(365,794\n\n)\n\n \n\n$\n\n(144,510\n\n)\n\n \n\nThe components of the income tax expense are as follows (in thousands):\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nCurrent income tax expense:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nFederal\n\n$\n\n32,569\n\n \n\n \n\n$\n\n21,766\n\n \n\n \n\n$\n\n32,798\n\n \n\nState\n\n \n\n6,013\n\n \n\n \n\n \n\n4,548\n\n \n\n \n\n \n\n6,161\n\n \n\nForeign\n\n \n\n12,183\n\n \n\n \n\n \n\n12,353\n\n \n\n \n\n \n\n10,238\n\n \n\n \n\n50,765\n\n \n\n \n\n \n\n38,667\n\n \n\n \n\n \n\n49,197\n\n \n\nDeferred income tax benefit:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nFederal\n\n \n\n(22,521\n\n)\n\n \n\n \n\n(30,403\n\n)\n\n \n\n \n\n(36,402\n\n)\n\nState\n\n \n\n(3,478\n\n)\n\n \n\n \n\n(5,267\n\n)\n\n \n\n \n\n(7,611\n\n)\n\nForeign\n\n \n\n(1,789\n\n)\n\n \n\n \n\n(1,869\n\n)\n\n \n\n \n\n(1,960\n\n)\n\n \n\n(27,788\n\n)\n\n \n\n \n\n(37,539\n\n)\n\n \n\n \n\n(45,973\n\n)\n\n$\n\n22,977\n\n \n\n \n\n$\n\n1,128\n\n \n\n \n\n$\n\n3,224\n\n \n\n \n\nThe reconciliation of the income taxes at the federal statutory rate to the reported rate of income taxes pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended March 31, 2026 is as follows:\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\nAmount\n\n \n\n \n\nPercent\n\n \n\nU.S. federal statutory tax rate\n\n$\n\n24,886\n\n \n\n \n\n \n\n21.0\n\n%\n\n*State and local income tax, net of federal income tax effect\n\n \n\n1,877\n\n \n\n \n\n \n\n1.6\n\n \n\nForeign tax effects\n\n \n\n \n\n \n\n \n\n \n\nUnited Kingdom\n\n \n\n \n\n \n\n \n\n \n\nWithholding taxes\n\n \n\n3,326\n\n \n\n \n\n \n\n2.8\n\n \n\nOther\n\n \n\n643\n\n \n\n \n\n \n\n0.5\n\n \n\nOther foreign jurisdictions\n\n \n\n1,605\n\n \n\n \n\n \n\n1.3\n\n \n\nEffect of cross-border tax laws\n\n \n\n \n\n \n\n \n\n \n\nForeign-derived intangible income\n\n \n\n(11,847\n\n)\n\n \n\n \n\n(10.0\n\n)\n\nForeign branch income\n\n \n\n2,460\n\n \n\n \n\n \n\n2.1\n\n \n\nWithholding taxes\n\n \n\n1,397\n\n \n\n \n\n \n\n1.2\n\n \n\nOther\n\n \n\n2,026\n\n \n\n \n\n \n\n1.7\n\n \n\nTax credits\n\n \n\n \n\n \n\n \n\n \n\nResearch and development tax credits\n\n \n\n(5,140\n\n)\n\n \n\n \n\n(4.3\n\n)\n\nForeign tax credits\n\n \n\n(4,274\n\n)\n\n \n\n \n\n(3.6\n\n)\n\nChanges in valuation allowance\n\n \n\n2,832\n\n \n\n \n\n \n\n2.4\n\n \n\nNontaxable or nondeductible items\n\n \n\n \n\n \n\n \n\n \n\nShare-based compensation\n\n \n\n1,437\n\n \n\n \n\n \n\n1.2\n\n \n\nOther\n\n \n\n1,749\n\n \n\n \n\n \n\n1.5\n\n \n\nChanges in unrecognized tax benefits\n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nEffective tax rate\n\n$\n\n22,977\n\n \n\n \n\n \n\n19.4\n\n%\n\n* State taxes in Illinois and New Jersey made up the majority (greater than 50%) of the tax effect in this category.\n\n \n\n \n\n \n\n \n\n \n\n \n\nF-31\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe reconciliation of income taxes at the federal statutory rate to the reported rate for income taxes prior to our adoption of ASU 2023-09 for fiscal years ended March 31, 2025 and 2024 is as follows:\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\n Statutory U.S. federal tax rate\n\n \n\n21\n\n%\n\n \n\n \n\n21\n\n%\n\n State taxes, net of federal tax effect\n\n \n\n(0.5\n\n)\n\n \n\n \n\n(0.6\n\n)\n\n U.S. federal and state research and development tax credits\n\n \n\n2.0\n\n \n\n \n\n \n\n6.4\n\n \n\n Effect of foreign operations\n\n \n\n(0.7\n\n)\n\n \n\n \n\n1.5\n\n \n\n Meals and entertainment\n\n \n\n(0.2\n\n)\n\n \n\n \n\n(0.9\n\n)\n\n Changes in valuation allowance\n\n \n\n(0.6\n\n)\n\n \n\n \n\n(4.1\n\n)\n\n Goodwill impairment\n\n \n\n(22.0\n\n)\n\n \n\n \n\n(28.5\n\n)\n\n Share-based compensation\n\n \n\n(1.3\n\n)\n\n \n\n \n\n(1.0\n\n)\n\n Divestiture\n\n \n\n—\n\n \n\n \n\n \n\n(0.6\n\n)\n\n Global intangible low taxed income\n\n \n\n—\n\n \n\n \n\n \n\n(0.2\n\n)\n\n Foreign derived intangible income\n\n \n\n3.2\n\n \n\n \n\n \n\n6.3\n\n \n\n Foreign withholdings\n\n \n\n(1.3\n\n)\n\n \n\n \n\n(1.4\n\n)\n\n Other permanent differences\n\n \n\n0.1\n\n \n\n \n\n \n\n(0.1\n\n)\n\n \n\n(0.3\n\n)%\n\n \n\n \n\n(2.2\n\n)%\n\n \n\nThe components of net deferred tax assets and liabilities are as follows (in thousands):\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nDeferred tax assets:\n\n \n\n \n\n \n\n \n\n \n\nAccrued expenses\n\n$\n\n5,086\n\n \n\n \n\n$\n\n5,056\n\n \n\nCapitalized research and development expenses\n\n \n\n108,856\n\n \n\n \n\n \n\n92,427\n\n \n\nDeferred revenue\n\n \n\n25,115\n\n \n\n \n\n \n\n20,356\n\n \n\nReserves\n\n \n\n1,991\n\n \n\n \n\n \n\n2,378\n\n \n\nPension and other retiree benefits\n\n \n\n1,971\n\n \n\n \n\n \n\n2,265\n\n \n\nNet operating loss carryforwards\n\n \n\n6,686\n\n \n\n \n\n \n\n6,532\n\n \n\nTax credit carryforwards\n\n \n\n35,567\n\n \n\n \n\n \n\n32,042\n\n \n\nShare-based compensation\n\n \n\n6,635\n\n \n\n \n\n \n\n7,140\n\n \n\nLease liabilities\n\n \n\n9,168\n\n \n\n \n\n \n\n10,503\n\n \n\nOther\n\n \n\n12\n\n \n\n \n\n \n\n—\n\n \n\nTotal gross deferred tax assets\n\n \n\n201,087\n\n \n\n \n\n \n\n178,699\n\n \n\nValuation allowance\n\n \n\n(26,607\n\n)\n\n \n\n \n\n(23,088\n\n)\n\nNet deferred tax assets\n\n \n\n174,480\n\n \n\n \n\n \n\n155,611\n\n \n\nDeferred tax liabilities:\n\n \n\n \n\n \n\n \n\n \n\nIntangible assets\n\n \n\n(56,378\n\n)\n\n \n\n \n\n(65,979\n\n)\n\nRight-of-use assets\n\n \n\n(8,215\n\n)\n\n \n\n \n\n(9,067\n\n)\n\nDepreciation\n\n \n\n(2,473\n\n)\n\n \n\n \n\n(2,494\n\n)\n\nOther deferred tax liabilities\n\n \n\n(15,904\n\n)\n\n \n\n \n\n(14,420\n\n)\n\nTotal deferred tax liabilities\n\n$\n\n91,510\n\n \n\n \n\n$\n\n63,651\n\n \n\n \n\nA reconciliation of income taxes paid, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended March 31, 2026 is as follows:\n\n \n\nF-32\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\n \n\nFiscal Year Ended March 31,\n\n \n\n \n\n2026\n\n \n\nU.S. Federal\n\n$\n\n24,000\n\n \n\nU.S. State\n\n \n\n4,781\n\n \n\nForeign\n\n \n\n \n\nUnited Kingdom\n\n \n\n4,331\n\n \n\nOther foreign jurisdictions\n\n \n\n9,611\n\n \n\nTotal\n\n$\n\n42,723\n\n \n\n \n\nDeferred tax assets and liabilities are recognized based on the anticipated future tax consequences, attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets by considering all positive and negative evidence. The Company weighs objective and verifiable evidence more heavily in this analysis. In situations where the Company concludes that it does not have sufficient objective and verifiable evidence to support the realizability of the asset it creates a valuation allowance against it. As a result, the Company established a valuation allowance of $23.1 million as of March 31, 2025 and $26.6 million as of March 31, 2026, representing an increase of $3.5 million. The increase in the valuation allowance as of March 31, 2026, as compared to March 31, 2025, is primarily due to deferred tax assets related to foreign tax credits that the Company believes are not more likely than not to be realized. If it is later determined the Company is able to use all or a portion of the deferred tax assets for which a valuation allowance has been established, then the Company may be required to recognize these deferred tax assets as a tax benefit recorded in the period such determination is made.\n\nAt March 31, 2026, the Company had state net operating loss carry forwards of $20 million that are subject to expire at various dates beginning in 2036. At March 31, 2026, the Company also had U.S. foreign tax credit carryforwards and state tax credits of $15 million and $11 million that are subject to expire at various dates beginning 2031 and 2037, respectively. At March 31, 2026, the Company had foreign net operating loss carryforwards of $32 million and foreign tax credit carryforwards of $11 million. The majority of foreign net operating losses and foreign tax credits have no expiration dates. As of March 31, 2026, the Company does not expect any U.S. federal and state net operating losses or research and development tax credits to go unutilized.\n\nThe Company files U.S. federal tax returns and files returns in various state, local and foreign jurisdictions. With respect to the U.S. federal and primary jurisdictions, the Company is no longer subject to examinations by tax authorities for tax years before 2019, although carryforward attributes that were generated prior to 2019 may still be adjusted upon examination if they either have been or will be used in a future period. The Company also receives inquiries from various tax jurisdictions during the year, and some of those inquiries may include an audit of tax returns previously filed. In the normal course of business, NetScout and its subsidiaries are examined by various taxing authorities, including the IRS in the United States.\n\nA reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, for the fiscal years ended March 31, 2026, 2025 and 2024 is as follows (in thousands):\n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nBalance at April 1,\n\n$\n\n724\n\n \n\n \n\n$\n\n1,052\n\n \n\n \n\n$\n\n1,024\n\n \n\nAdditions based on tax positions related to the current year\n\n \n\n28\n\n \n\n \n\n \n\n28\n\n \n\n \n\n \n\n28\n\n \n\nRelease of tax positions of prior years\n\n \n\n—\n\n \n\n \n\n \n\n(356\n\n)\n\n \n\n \n\n—\n\n \n\nBalance at March 31,\n\n$\n\n752\n\n \n\n \n\n$\n\n724\n\n \n\n \n\n$\n\n1,052\n\n \n\n \n\nThe Company includes interest and penalties accrued in the consolidated financial statements as a component of the tax provision. The interest and penalties are immaterial to the provision. Over the next twelve months, previously unrecognized tax benefits primarily due to the lapse of statute of limitations will be immaterial.\n\nF-33\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nThe Company continues to assert that certain historical book over tax outside basis differences primarily related to unremitted foreign earnings are permanently reinvested. The Company's intent is to only make distributions from its foreign subsidiaries in the future when they can be made at no or an immaterial net tax cost. Unremitted foreign earnings total approximately $129 million. The Company does not expect taxes related to the unremitted foreign earnings to be material if they were distributed, which would primarily consist of foreign withholding taxes.\n\nIn 2021, the Organization for Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued, including the release of a comprehensive Side-by-Side Package announced by the OECD in January 2026. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. Considering the Company does not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, these rules are not expected to materially increase its global tax costs. There remains uncertainty as to the final Pillar Two model rules and the Company continues to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions it operates in.\n\nOn July 4, 2025, the One Big Beautiful Bill Act was signed into law, making permanent certain expiring provisions of the Tax Cuts and Jobs Act, including 100% accelerated depreciation deductions on qualified property and immediate expensing of domestic research and development costs, as well as modifying some of the international tax rules. These changes have not had a material impact on the Company’s income tax provision for the year ended March 31, 2026.\n\nNOTE 18 – LEASES\n\nThe Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company's contractual obligation to make lease payments over the lease term. The Company's policy is to combine lease and non-lease components and to not recognize ROU assets and lease liabilities for short-term leases. Leases with an initial term of twelve months or less are classified as short-term leases. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company's estimated incremental borrowing rate unless the lessor's implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.\n\nThe 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 6 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.\n\nThe Company has asset retirement obligations (ARO) to return certain leased facilities to their original condition at the end of the respective lease term. The estimated fair value of these ARO liabilities is recognized in the period in which the liability is generated and a corresponding increase to the carrying value of the related asset is recorded and depreciated over the useful life of the asset. The Company's estimates of its ultimate AROs could change because of changes in regulations, the extent of environmental remediations required, the means of reclamation, cost estimates, exit or disposal activities or time period estimates. ARO liabilities totaled $2.3 million and $2.2 million at March 31, 2026 and 2025, respectively. There was an ARO liability balance of $0.2 million included in accrued other, and a balance of $2.1 million included in other long-term liabilities in the consolidated balance sheets for the fiscal year ended March 31, 2026, and a balance of $2.2 million included in other long-term liabilities in the consolidated balance\n\nF-34\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nsheets for the fiscal year ended March 31, 2025. Accretion expense related to these liabilities was not material for any periods presented.\n\nMost of the Company's lease agreements contain variable payments, primarily for common area maintenance, which are expensed as incurred and not included in the measurement of the ROU assets and lease liabilities.\n\nThe components of operating lease cost for the fiscal years ended March 31, 2026 and 2025 were as follows (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nLease cost under long-term operating leases\n\n \n\n$\n\n11,188\n\n \n\n \n\n$\n\n11,773\n\n \n\nLease cost under short-term operating leases\n\n \n\n \n\n1,602\n\n \n\n \n\n \n\n1,334\n\n \n\nVariable lease cost under short-term and long-term operating leases\n\n \n\n \n\n3,802\n\n \n\n \n\n \n\n4,148\n\n \n\nTotal operating lease cost\n\n \n\n$\n\n16,592\n\n \n\n \n\n$\n\n17,255\n\n \n\n \n\nThe table below presents supplemental cash flow information related to leases during the fiscal years ended March 31, 2026 and 2025 (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nRight-of-use assets obtained in exchange for new operating lease liabilities\n\n \n\n$\n\n7,464\n\n \n\n \n\n$\n\n5,660\n\n \n\n \n\n \n\nAt March 31, 2026 and 2025, the weighted average remaining lease term in years and weighted average discount rate were as follows:\n\n \n\n \n\nMarch 31, 2026\n\n \n\n \n\nMarch 31, 2025\n\n \n\nWeighted average remaining lease term in years - operating leases\n\n \n\n4.18\n\n \n\n \n\n4.77\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nWeighted average discount rate - operating leases\n\n \n\n \n\n4.4\n\n%\n\n \n\n \n\n4.4\n\n%\n\n \n\n \n\nFuture minimum payments under non-cancellable leases at March 31, 2026 are as follows (in thousands):\n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2027\n\n \n\n$\n\n10,390\n\n \n\n2028\n\n \n\n \n\n10,410\n\n \n\n2029\n\n \n\n \n\n9,313\n\n \n\n2030\n\n \n\n \n\n8,019\n\n \n\n2031\n\n \n\n \n\n4,484\n\n \n\nThereafter\n\n \n\n \n\n651\n\n \n\nTotal lease payments\n\n \n\n$\n\n43,267\n\n \n\nLess imputed interest\n\n \n\n \n\n(3,675\n\n)\n\nPresent value of lease liabilities\n\n \n\n$\n\n39,592\n\n \n\n \n\nNOTE 19 – COMMITMENTS AND CONTINGENCIES\n\nLegal\n\nFrom time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, none of the Company’s current legal proceedings and claims, if determined adversely and based on the information known to the management as of the date of this Annual Report, is expected to have a material adverse effect on the Company's financial condition, results of operations or cash flows.\n\nF-35\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nNotes to Consolidated Financial Statements—(Continued)\n\n \n\nUnconditional Purchase Obligations\n\nAt March 31, 2026, the Company had unconditional purchase obligations of $72.4 million, which represent estimated open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.\n\nNOTE 20 – SEGMENT AND GEOGRAPHIC INFORMATION\n\nThe Company's operating segments are determined based on the units that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by the CODM. The Company's President and CEO is the CODM. Operating results are reviewed by the CODM primarily at the consolidated entity level for the purpose of making resource allocation decisions and for evaluating financial performance, primarily by monitoring actual results compared to forecasted results as well as by reviewing year-over-year results. The Company's CODM evaluates company-wide performance and determines allocation of resources based on multiple performance measures, including but not limited to net income (loss).\n\nThe Company has determined it operates as a single operating segment and has one reportable segment which includes product and service revenue related to the sale of enterprise observability, carrier service assurance, cybersecurity, and DDoS protection solutions. The Company's results for the one reportable segment are the same as presented in the Company's consolidated statements of operations and there is no expense information that is supplemental to those disclosed in these consolidated financial statements, which are regularly provided to the CODM. The measure of segment assets is reported on the Company's consolidated balance sheet as total assets. Segment asset information is not used by the CODM to allocate resources.\n\nGeographic Information\n\nThe Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. The Company's policies mandate compliance with economic sanctions and export controls. Total revenue by geography is as follows (in thousands):\n\n \n\n \n\n \n\nFiscal Years Ended March 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n2024\n\n \n\nUnited States\n\n \n\n$\n\n474,359\n\n \n\n \n\n$\n\n465,470\n\n \n\n \n\n$\n\n470,338\n\n \n\nEurope\n\n \n\n \n\n158,766\n\n \n\n \n\n \n\n156,715\n\n \n\n \n\n \n\n146,915\n\n \n\nAsia\n\n \n\n \n\n63,075\n\n \n\n \n\n \n\n63,624\n\n \n\n \n\n \n\n65,396\n\n \n\nRest of the world\n\n \n\n \n\n163,282\n\n \n\n \n\n \n\n136,870\n\n \n\n \n\n \n\n146,806\n\n \n\n \n\n$\n\n859,482\n\n \n\n \n\n$\n\n822,679\n\n \n\n \n\n$\n\n829,455\n\n \n\n \n\nThe 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.\n\n \n\nNOTE 21 – SUBSEQUENT EVENT\n\nOn May 1, 2026, the Company acquired the assets of DigiCert, Inc.’s DDoS protection business, for cash consideration of $55.0 million, subject to customary post-closing adjustments and conditions. The Company is in the process of finalizing the accounting for this transaction and expects to complete the preliminary purchase price allocation in the first quarter of fiscal 2027.\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nF-36\n\n[Table of Contents](#toc_page)\n\nNetScout Systems, Inc.\n\nSchedule II—Valuation and Qualifying Accounts\n\n(in thousands)\n\n \n\n \n\n \n\n \n\nBalance at\nBeginning\nof Fiscal Year\n\n \n\n \n\nAdditions\nResulting in\nCharges to\nOperations\n\n \n\n \n\nRecoveries to\nOther\nAccounts\n\n \n\n \n\nDeductions\nDue to Write-Offs\n\n \n\n \n\nBalance at\nEnd of Fiscal Year\n\n \n\nFiscal year ended March 31, 2024\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAllowance for credit loss\n\n \n\n$\n\n675\n\n \n\n \n\n$\n\n485\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(681\n\n)\n\n \n\n$\n\n479\n\n \n\nDeferred tax asset valuation allowance\n\n \n\n$\n\n15,612\n\n \n\n \n\n$\n\n5,571\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n21,183\n\n \n\nFiscal year ended March 31, 2025\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAllowance for credit loss\n\n \n\n$\n\n479\n\n \n\n \n\n$\n\n195\n\n \n\n \n\n$\n\n(447\n\n)\n\n \n\n$\n\n(13\n\n)\n\n \n\n$\n\n214\n\n \n\nDeferred tax asset valuation allowance\n\n \n\n$\n\n21,183\n\n \n\n \n\n$\n\n2,806\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(901\n\n)\n\n \n\n$\n\n23,088\n\n \n\nFiscal year ended March 31, 2026\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAllowance for credit loss\n\n \n\n$\n\n214\n\n \n\n \n\n$\n\n163\n\n \n\n \n\n$\n\n(56\n\n)\n\n \n\n$\n\n(192\n\n)\n\n \n\n$\n\n129\n\n \n\nDeferred tax asset valuation allowance\n\n \n\n$\n\n23,088\n\n \n\n \n\n$\n\n3,519\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n26,607\n\n \n\n \n\nS-1"}