NetScout Systems Inc.
02/05/2026 | Press release | Distributed by Public on 02/05/2026 15:20
Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the Securities and Exchange Commission (SEC) on May 15, 2025 (Annual Report). This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part I, Item 1A "Risk Factors" in our Annual Report and Part II, Item 1A of our Quarterly Report on From 10-Q for the fiscal quarter ended September 30, 2025, filed with the SEC on November 6, 2025. These risks and uncertainties could cause actual results to differ significantly from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled "Cautionary Statement Concerning Forward-Looking Statements" that appears at the beginning of this Quarterly Report. These statements, like all statements in this report, speak only as of the date of this Quarterly Report (unless another date is indicated), and, except as required by law, we undertake no obligation to update or revise these statements in light of future developments.
Overview
We are an industry leader with over four decades of experience in providing enterprise network observability, carrier service assurance, cybersecurity, and Distributed-Denial-Of-Service, or DDoS, protection solutions. Our unique visibility platform and solutions are powered by our pioneering deep packet inspection technology at scale, which is used by many Fortune 500 companies to protect their digital business services against disruption. Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility and protection necessary to optimize network performance, ensure the delivery of high-quality, mission-critical applications and services, gain timely insight into the end user experience and to protect their networks from attack. With our offerings, customers can quickly, efficiently and effectively identify and resolve issues that result in downtime, interruptions to services, poor service quality or compromised data, thereby reducing meantime-to-resolution of issues and driving compelling returns on their investments in their networks and broader technology initiatives. Some of the more significant technology trends and catalysts for our business include the evolution of customers' digital transformation initiatives such as the migration to cloud environments and the edges of their networks, the rapidly evolving cybersecurity threat landscape, artificial intelligence and business analytics advancements that can help enhance observability, and the 5G technology evolution in both the service provider and enterprise customer verticals.
Our operating results are influenced by a number of factors, including, but not limited to, the volume, mix, and quantity of products and services sold, pricing, costs and availability of materials used in our products, growth in employee-related costs, including commissions, and the expansion of our operations. Factors that affect our ability to maximize our operating results include, but are not limited to, our ability to introduce and enhance existing products, the marketplace acceptance of those new or enhanced products, continued expansion into international markets, expansion into new or adjacent markets, development of strategic partnerships, competition, successful acquisition and integration efforts, and our ability to control costs, and make improvements in a highly competitive industry.
Global and Macroeconomic Conditions
We continue to closely monitor current global and macroeconomic conditions, including the impacts of the ongoing war in Ukraine and hostilities in the Middle East, global geopolitical tension, stock market volatility, industry-specific capital spending trends, exchange rate fluctuations, inflation, interest rates, international trade relations (including trade protection measures, such as tariffs and other trade barriers), and the risk of a recession, including the manner and extent to which they have impacted and could continue to impact our business, customers, employees, supply chain, and distribution network. In addition, our industry is experiencing AI-related supply-chain dynamics which could influence the timing and size of certain customer orders. The full extent of the impacts of these global and macroeconomic conditions remain dynamic. In response to the war in Ukraine, we ceased business operations in Russia, including sales, support on existing contracts and professional services. We remain optimistic but cognizant of ongoing macroeconomic dynamics and constrained customer spending in the service provider market and firmly focused on driving product innovation, returning to annual revenue growth, and enhancing margins through continued disciplined cost management as we navigate the current macroeconomic landscape that may persist through fiscal year 2026. As a result, we have continued our efforts to manage discretionary costs and align spending with the current environment while we continue to execute on our long-term strategic plans.
Though we continue to monitor the impacts of evolving global and macroeconomic conditions on our business, we believe our current cash reserves and access to capital through our revolving credit facility leave us well-positioned to manage our business in today's environment. We expect net cash provided by operations combined with cash, cash equivalents, marketable securities and investments and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company, including managing discretionary spending and hiring activities, but are continuing to invest in areas that advance our business
for the future. In addition to our cash equivalents, the Company had $600 million available under a revolving credit facility based on covenant levels at December 31, 2025.
Results Overview
Total revenue increased $38.8 million, or 6%, for the nine months ended December 31, 2025, as compared to total revenue for the nine months ended December 31, 2024. The increase was attributable to an increase in both product and service revenue from both our service assurance and cybersecurity offerings. Within these offerings, both our enterprise and service provider customer verticals contributed to this growth.
Our gross profit percentage increased 2 percentage points to 80% during the nine months ended December 31, 2025, as compared with the nine months ended December 31, 2024, primarily due to increased product revenue growth and a more favorable product mix associated with increased licensing of our software products.
Net income for the nine months ended December 31, 2025 was $77.3 million, as compared with a net loss for the nine months ended December 31, 2024 of $385.5 million. The decrease of $462.8 million in net loss was primarily due to a $427.0 million decrease in goodwill impairment charges, a $38.8 million increase in revenue, $19.0 million decrease from restructuring charges, $5.1 million decrease in interest expense, a $3.0 million decrease in direct material costs, and a $1.8 million increase in interest income. These decreases to net loss were partially offset by a $16.3 million increase in income tax expense, a $10.8 million increase to employee-related expenses primarily due to an increase in variable incentive compensation, and a $5.5 million decrease in other income primarily due to the change in fair value of the equity investment in Napatech that was sold in August 2025.
At December 31, 2025, we had cash, cash equivalents, marketable securities and investments (current and non-current) of $586.2 million. This represents an increase of $93.7 million from $492.5 million at March 31, 2025. This increase was primarily due to $142.3 million of net cash provided by operations, $11.8 million in proceeds from the sale of our entire Napatech equity investment and a $47.1 million in proceeds from the maturity of marketable securities. Partially offsetting the increase was $69.3 million in purchases of marketable securities, $31.6 million used to repurchase shares of our common stock, $15.7 million used for tax withholdings on restricted stock units and $6.9 million used for capital expenditures during the nine months ended December 31, 2025.
Use of Non-GAAP Financial Measures
We supplement the United States GAAP financial measures we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted net income per share, and adjusted EBITDA. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation expense, and acquisition-related depreciation expense. Non-GAAP income from operations includes the aforementioned adjustments related to non-GAAP gross profit and also removes goodwill impairment charges, executive transition costs, and restructuring charges. Non-GAAP operating margin is non-GAAP income from operations expressed as a percentage of revenue. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes the income tax effects of such adjustments as well as any loss on extinguishment of debt. Non-GAAP diluted net income per share is non-GAAP net income divided by total outstanding shares on a diluted basis. Adjusted EBITDA (formerly non-GAAP EBITDA from operations) includes the aforementioned adjustments related to non-GAAP net income and also removes interest and other expense, income taxes, and non-acquisition related depreciation from net income (GAAP). Beginning this quarter, we have renamed non-GAAP EBITDA from operations to adjusted EBITDA. We now reconcile this metric to GAAP net income, however, the adjustments included, and the resulting amounts are unchanged from prior periods. This change is intended to align terminology with common market practice.
These non-GAAP measures are not prepared in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (gross profit, operating margin, net income, and diluted net income per share), and may have limitations because they do not reflect all our results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should not be used to evaluate our results of operations against those of our peers or other companies, as the definitions and calculations of our non-GAAP measures may not be the same as those used by other companies, even if the measures share the same name.
Management believes these non-GAAP financial measures will enhance the reader's overall understanding of our current financial performance and our prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how management plans and measures our business. We believe that providing these non-GAAP measures to investors provides them with a view of our operating results that may be more easily compared to peer companies and also enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions. Presenting the GAAP measures on their own
may not be indicative of our core operating results. Furthermore, management believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations.
The following table reconciles gross profit, income (loss) from operations, net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three and nine months ended December 31, 2025 and 2024, respectively (dollars in thousands, except for per share data):
| Three Months Ended |
Nine Months Ended
|
||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue (GAAP) | $ | 250,683 | $ | 252,019 | $ | 656,447 | $ | 617,692 | |||||||||||||||
| GAAP gross profit | $ | 204,654 | $ | 205,407 | $ | 523,386 | $ | 484,654 | |||||||||||||||
| Share-based compensation expense | 2,267 | 2,196 | 7,654 | 7,716 | |||||||||||||||||||
| Amortization of acquired intangible assets | 550 | 994 | 1,651 | 2,985 | |||||||||||||||||||
| Acquisition related depreciation expense | 2 | 1 | 5 | 5 | |||||||||||||||||||
| Non-GAAP gross profit | $ | 207,473 | $ | 208,598 | $ | 532,696 | $ | 495,360 | |||||||||||||||
| GAAP income (loss) from operations | $ | 64,315 | $ | 61,713 | $ | 90,237 | $ | (387,488) | |||||||||||||||
| Share-based compensation expense | 13,832 | 14,502 | 47,349 | 50,586 | |||||||||||||||||||
| Amortization of acquired intangible assets | 11,706 | 12,595 | 35,088 | 37,842 | |||||||||||||||||||
| Restructuring charges | 25 | 923 | 858 | 19,895 | |||||||||||||||||||
| Goodwill impairment | - | - | - | 426,967 | |||||||||||||||||||
| Executive transition costs | - | - | 959 | - | |||||||||||||||||||
| Acquisition related depreciation expense | 12 | 13 | 36 | 36 | |||||||||||||||||||
| Non-GAAP income from operations | $ | 89,890 | $ | 89,746 | $ | 174,527 | $ | 147,838 | |||||||||||||||
| GAAP net income (loss) | $ | 55,142 | $ | 48,810 | $ | 77,291 | $ | (385,539) | |||||||||||||||
| Share-based compensation expense | 13,832 | 14,502 | 47,349 | 50,586 | |||||||||||||||||||
| Amortization of acquired intangible assets | 11,706 | 12,595 | 35,088 | 37,842 | |||||||||||||||||||
| Restructuring charges | 25 | 923 | 858 | 19,895 | |||||||||||||||||||
| Goodwill impairment | - | - | - | 426,967 | |||||||||||||||||||
| Executive transition costs | - | 959 | |||||||||||||||||||||
| Acquisition-related depreciation expense | 12 | 13 | 36 | 36 | |||||||||||||||||||
|
Loss on extinguishment of debt
|
1,134 | 1,134 | |||||||||||||||||||||
| Income tax adjustments | (6,971) | (9,695) | (18,019) | (28,499) | |||||||||||||||||||
| Non-GAAP net income | $ | 73,746 | $ | 68,282 | $ | 143,562 | $ | 122,422 | |||||||||||||||
| GAAP diluted net income (loss) per share | $ | 0.75 | $ | 0.67 | $ | 1.06 | $ | (5.39) | |||||||||||||||
| Per share impact of non-GAAP adjustments identified above | 0.25 | 0.27 | 0.90 | 7.09 | |||||||||||||||||||
| Non-GAAP diluted net income per share | $ | 1.00 | $ | 0.94 | $ | 1.96 | $ | 1.70 | |||||||||||||||
| GAAP net income (loss) | 55,142 | 48,810 | 77,291 | (385,539) | |||||||||||||||||||
| Previous adjustments to determine non-GAAP net income | 18,604 | 19,472 | 66,271 | 507,961 | |||||||||||||||||||
| Non-GAAP net income | 73,746 | 68,282 | 143,562 | 122,422 | |||||||||||||||||||
| Interest and other (income) expense, net non-GAAP | (2,293) | 3,204 | (4,925) | (4,627) | |||||||||||||||||||
| Depreciation excluding acquisition related depreciation expense | 1,781 | 3,077 | 7,186 | 10,312 | |||||||||||||||||||
| Income tax expense non-GAAP | 18,437 | 18,260 | 35,890 | 30,043 | |||||||||||||||||||
| Adjusted EBITDA | $ | 91,671 | $ | 92,823 | $ | 181,713 | $ | 158,150 | |||||||||||||||
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP consistently applied. The preparation of these consolidated financial statements requires us to make significant estimates and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. These items are regularly monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates.
While all of our accounting policies impact the consolidated financial statements, certain policies are viewed to be critical. Critical accounting policies are those that are both most important to the portrayal of our financial condition and results of operations and that require management's most subjective or complex judgments and estimates. We consider the following accounting policies to be critical in fully understanding and evaluating our financial results:
•revenue recognition; and
•valuation of goodwill.
Please refer to the critical accounting policies set forth in our Annual Report for a description of all of our critical accounting policies and estimates.
Three Months Ended December 31, 2025 and 2024
Revenue
Product revenue consists of sales of our hardware products and licensing of our software products. Service revenue consists of customer support agreements, consulting, training, subscription-based services, and stand-ready software as a service offerings. During the three months ended December 31, 2025, one direct customer and one channel partner each accounted for approximately 10% of total revenue. During the three months ended December 31, 2024, one direct customer and no channel partners accounted for more than 10% of total revenue.
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Product | $ | 121,704 | 49 | % | $ | 128,175 | 51 | % | $ | (6,471) | (5) | % | |||||||||||||||||||||||
| Service | 128,979 | 51 | 123,844 | 49 | 5,135 | 4 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 250,683 | 100 | % | $ | 252,019 | 100 | % | $ | (1,336) | (1) | % | |||||||||||||||||||||||
Product. The 5%, or $6.5 million, decrease in product revenue compared with the same period last year was attributable to a decrease in revenue from service provider customers from service assurance offerings and enterprise customers from cybersecurity offerings.
Service. The 4%, or $5.1 million, increase in service revenue compared with the same period last year was primarily due to an increase in revenue from maintenance contracts as well as cloud and subscription services.
Total revenue by geography was as follows:
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| United States | $ | 141,205 | 56 | % | $ | 153,875 | 61 | % | $ | (12,670) | (8) | % | |||||||||||||||||||||||
| International: | |||||||||||||||||||||||||||||||||||
| Europe | 49,361 | 20 | 46,619 | 19 | 2,742 | 6 | % | ||||||||||||||||||||||||||||
| Asia | 15,303 | 6 | 18,237 | 7 | (2,934) | (16) | % | ||||||||||||||||||||||||||||
| Rest of the world | 44,814 | 18 | 33,288 | 13 | 11,526 | 35 | % | ||||||||||||||||||||||||||||
| Subtotal international | 109,478 | 44 | 98,144 | 39 | 11,334 | 12 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 250,683 | 100 | % | $ | 252,019 | 100 | % | $ | (1,336) | (1) | % | |||||||||||||||||||||||
The 8%, or $12.7 million, decrease in United States revenue compared to the same period last year was primarily due to a decrease in revenue from both service provider customers from service assurance offerings and enterprise customers from cybersecurity offerings, partly offset by an increase in revenue from enterprise customers from service assurance offerings. The 12%, or $11.3 million, increase in international revenue compared with the same period last year was driven by an increase in revenue from service provider and enterprise customers from both cybersecurity and service assurance offerings.
Total revenue by product line was as follows:
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Service assurance | $ | 158,214 | 63 | % | $ | 162,845 | 65 | % | $ | (4,631) | (3) | % | |||||||||||||||||||||||
| Cybersecurity | 92,469 | 37 | 89,174 | 35 | 3,295 | 4 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 250,683 | 100 | % | $ | 252,019 | 100 | % | $ | (1,336) | (1) | % | |||||||||||||||||||||||
The 3%, or $4.6 million, decrease in revenue from the service assurance product line compared to the same period last year was due to a decrease in revenue from service provider customers. The 4%, or $3.3 million, increase in revenue from the cybersecurity product line compared to the same period last year was due to an increase in revenue from enterprise and service provider customers.
Total revenue by customer vertical was as follows:
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Service provider | $ | 112,179 | 45 | % | $ | 118,654 | 47 | % | $ | (6,475) | (5) | % | |||||||||||||||||||||||
| Enterprise | 138,504 | 55 | 133,365 | 53 | 5,139 | 4 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 250,683 | 100 | % | $ | 252,019 | 100 | % | $ | (1,336) | (1) | % | |||||||||||||||||||||||
The 5%, or $6.5 million, decrease in revenue from the service provider customer vertical was due to a decrease in product revenue from service assurance offerings partly offset by an increase from cybersecurity product and service revenue. The 4%, or $5.1 million, increase in revenue from the enterprise customer vertical was due to an increase in product and service revenue
from service assurance offerings as well as an increase from cybersecurity service lines, partially offset by a decrease in cybersecurity product lines.
Cost of Revenue and Gross Profit
Cost of product revenue consists primarily of material components, manufacturing personnel expenses, packaging materials, overhead and amortization of acquired developed technology and core technology. Cost of service revenue consists primarily of personnel, material, overhead and support costs.
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||
| Product | $ | 14,795 | 6 | % | $ | 16,362 | 6 | % | $ | (1,567) | (10) | % | |||||||||||||||||||||||
| Service | 31,234 | 12 | 30,250 | 12 | 984 | 3 | % | ||||||||||||||||||||||||||||
| Total cost of revenue | $ | 46,029 | 18 | % | $ | 46,612 | 18 | % | $ | (583) | (1) | % | |||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Product $ | $ | 106,909 | 43 | % | $ | 111,813 | 44 | % | $ | (4,904) | (4) | % | |||||||||||||||||||||||
| Product gross profit % | 88 | % | 87 | % | |||||||||||||||||||||||||||||||
| Service $ | $ | 97,745 | 39 | % | $ | 93,594 | 37 | % | $ | 4,151 | 4 | % | |||||||||||||||||||||||
| Service gross profit % | 76 | % | 76 | % | |||||||||||||||||||||||||||||||
| Total gross profit $ | $ | 204,654 | $ | 205,407 | $ | (753) | - | % | |||||||||||||||||||||||||||
| Total gross profit % | 82 | % | 82 | % | |||||||||||||||||||||||||||||||
Product.The 10%, or $1.6 million, decrease in cost of product revenue for the three months ended December 31, 2025 compared to the same period last year was primarily driven by a $6.5 million or 5% decrease, in product revenue. Our product gross profit percentage increased 1 percentage point to 88% during the three months ended December 31, 2025 as compared with the three months ended December 31, 2024 due to a more favorable product mix associated with increased licensing of our software products.
Service. The 3%, or $1.0 million, increase in cost of service revenue for the three months ended December 31, 2025 compared to the same period last year was primarily driven by a $5.1 million or 4% increase, in service revenue, and an increase in employee-related variable incentive compensation. Our service gross profit percentage was consistent at 76% during the three months ended December 31, 2025 as compared with the three months ended December 31, 2024.
Operating Expenses
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Research and development | $ | 39,635 | 16 | % | $ | 37,753 | 15 | % | $ | 1,882 | 5 | % | |||||||||||||||||||||||
| Sales and marketing | 65,392 | 26 | 69,933 | 28 | (4,541) | (6) | % | ||||||||||||||||||||||||||||
| General and administrative | 24,131 | 10 | 23,484 | 9 | 647 | 3 | % | ||||||||||||||||||||||||||||
| Amortization of acquired intangible assets | 11,156 | 4 | 11,601 | 5 | (445) | (4) | % | ||||||||||||||||||||||||||||
| Restructuring charges | 25 | - | 923 | - | (898) | (97) | % | ||||||||||||||||||||||||||||
| Total operating expenses | $ | 140,339 | 56 | % | $ | 143,694 | 57 | % | $ | (3,355) | (2) | % | |||||||||||||||||||||||
Research and development.Research and development expenses consist primarily of personnel expenses, fees for outside consultants, overhead and related expenses associated with the development of new products and the enhancement of existing products.
The 5%, or $1.9 million, increase in research and development expenses for the three months ended December 31, 2025 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation, partially offset by $0.3 million decrease in depreciation expense.
Sales and marketing.Sales and marketing expenses consist primarily of personnel expenses and commissions, overhead and other expenses associated with selling activities and marketing programs such as trade shows, seminars, advertising and new product launch activities.
The 6%, or $4.5 million, decrease in total sales and marketing expenses for the three months ended December 31, 2025 compared to the same period last year was primarily due to a $4.3 million decrease associated with the timing of trade shows and other events.
General and administrative.General and administrative expenses consist primarily of personnel expenses for executive, finance, legal and human resource employees, overhead and other corporate expenditures.
The 3%, or $0.6 million, increase in general and administrative expenses for the three months ended December 31, 2025 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation, partially offset by $0.4 million decrease in legal expenses.
Interest and Other Income (Expense), Net.Interest and other income (expense), net includes interest earned on our cash, cash equivalents and marketable securities, interest expense and other non-operating gains or losses.
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
|
Interest and other income (expense), net
|
$ | 2,293 | 1 | % | $ | (4,338) | (2) | % | $ | 6,631 | 153 | % | |||||||||||||||||||||||
The 153%, or $6.6 million, increase in interest and other income (expense), net, for the three months ended December 31, 2025 compared to the same period last year was primarily due to $4.5 million increase in the change in fair value of our prior equity investment in Napatech that was sold in August 2025, a $2.2 million decrease in interest expense, and a $0.7 million increase in interest income. This increase was partially offset by a $0.9 million increase in foreign currency exchange expense.
Income Tax Expense
| Three Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Income tax expense | $ | 11,466 | 5 | % | $ | 8,565 | 3 | % | $ | 2,901 | 34 | % | |||||||||||||||||||||||
The effective tax rates were 17.2% and 14.9% for the three months ended December 31, 2025 and 2024, respectively. The effective tax rate for the three months ended December 31, 2025 differed from the effective tax rate for the three months ended December 31, 2024, primarily due to a decrease in the research and development tax credit and an increase in foreign derived intangible income deduction.
Nine Months Ended December 31, 2025and 2024
Revenue
During the nine months ended December 31, 2025, no direct customers or channel partners accounted for more than 10% of the Company's total revenue. During the nine months ended December 31, 2024, one direct customer and no channel partners accounted for more than 10% of total revenue.
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Product | $ | 289,409 | 44 | % | $ | 270,377 | 44 | % | $ | 19,032 | 7 | % | |||||||||||||||||||||||
| Service | 367,038 | 56 | % | 347,315 | 56 | % | 19,723 | 6 | % | ||||||||||||||||||||||||||
| Total revenue | $ | 656,447 | 100 | % | $ | 617,692 | 100 | % | $ | 38,755 | 6 | % | |||||||||||||||||||||||
Product. The 7%, or $19.0 million, increase in product revenue compared with the same period last year was attributable to an increase in revenue from enterprise customers from service assurance offerings as well as an increase in revenue from service provider and enterprise customers from cybersecurity offerings. Also contributing to the increase in product revenue was an increase in U.S.Government agency related orders.
Service. The 6%, or $19.7 million, increase in service revenue compared with the same period last year was primarily due to an increase in revenue from maintenance contracts, partly due to the timing of customer maintenance renewals, as well as cloud and subscription services.
Total revenue by geography was as follows:
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| United States | $ | 372,873 | 57 | % | $ | 365,059 | 59 | % | $ | 7,814 | 2 | % | |||||||||||||||||||||||
| International: | |||||||||||||||||||||||||||||||||||
| Europe | 113,705 | 17 | 110,107 | 18 | 3,598 | 3 | % | ||||||||||||||||||||||||||||
| Asia | 45,634 | 7 | 47,163 | 8 | (1,529) | (3) | % | ||||||||||||||||||||||||||||
| Rest of the world | 124,235 | 19 | 95,363 | 15 | 28,872 | 30 | % | ||||||||||||||||||||||||||||
| Subtotal international | 283,574 | 43 | 252,633 | 41 | 30,941 | 12 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 656,447 | 100 | % | $ | 617,692 | 100 | % | $ | 38,755 | 6 | % | |||||||||||||||||||||||
The 2%, or $7.8 million, increase in United States revenue compared to the same period last year was primarily due to an increase in revenue from enterprise customers from both service assurance and cybersecurity offerings, partly offset by a decrease in revenue from service provider customers from both service assurance and cybersecurity offerings. Also contributing to the increase was the timing of maintenance renewal orders and an increase in U.S. Government agency related orders. The 12%, or $30.9 million, increase in international revenue compared with the same period last year was driven by an increase in revenue from service provider and enterprise customers from both service assurance and cybersecurity offerings.
Total revenue by product line was as follows:
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Service assurance | $ | 420,587 | 64 | % | $ | 401,254 | 65 | % | $ | 19,333 | 5 | % | |||||||||||||||||||||||
| Cybersecurity | 235,860 | 36 | 216,438 | 35 | 19,422 | 9 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 656,447 | 100 | % | $ | 617,692 | 100 | % | $ | 38,755 | 6 | % | |||||||||||||||||||||||
The 5%, or $19.3 million, increase in revenue from the service assurance product line compared to the same period last year was due to an increase in revenue from enterprise customers, partially offset by a decrease in service provider product revenue. The 9%, or $19.4 million, increase in revenue from the cybersecurity product line compared to the same period last year was due to an increase in revenue from service provider and enterprise customers. Revenue from both the service assurance and cybersecurity product lines benefited from the timing of maintenance renewals within the fiscal year.
Total revenue by customer vertical was as follows:
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Service provider | $ | 272,662 | 42 | % | $ | 266,745 | 43 | % | $ | 5,917 | 2 | % | |||||||||||||||||||||||
| Enterprise | 383,785 | 58 | 350,947 | 57 | 32,838 | 9 | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 656,447 | 100 | % | $ | 617,692 | 100 | % | $ | 38,755 | 6 | % | |||||||||||||||||||||||
The 2%, or $5.9 million, increase in revenue from the service provider customer vertical was due to an increase in service revenue from both the service assurance and cybersecurity product lines, as well as an increase in product revenue from the cybersecurity product line. The 9%, or $32.8 million, increase in revenue from the enterprise vertical was due to an increase in product and service revenue from both the service assurance and cybersecurity product lines. Revenue from both the service assurance and cybersecurity product lines benefited from the timing of maintenance renewals within the fiscal year.
Cost of Revenue and Gross Profit
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||
| Product | $ | 38,317 | 6 | % | $ | 41,806 | 7 | % | $ | (3,489) | (8) | % | |||||||||||||||||||||||
| Service | 94,744 | 14 | 91,232 | 15 | 3,512 | 4 | % | ||||||||||||||||||||||||||||
| Total cost of revenue | $ | 133,061 | 20 | % | $ | 133,038 | 22 | % | $ | 23 | - | % | |||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Product $ | $ | 251,092 | 38 | % | $ | 228,571 | 37 | % | $ | 22,521 | 10 | % | |||||||||||||||||||||||
| Product gross profit % | 87 | % | 85 | % | |||||||||||||||||||||||||||||||
| Service $ | $ | 272,294 | 41 | % | $ | 256,083 | 41 | % | $ | 16,211 | 6 | % | |||||||||||||||||||||||
| Service gross profit % | 74 | % | 74 | % | |||||||||||||||||||||||||||||||
| Total gross profit $ | $ | 523,386 | $ | 484,654 | $ | 38,732 | 8 | % | |||||||||||||||||||||||||||
| Total gross profit % | 80 | % | 78 | % | 2 | % | |||||||||||||||||||||||||||||
Product.The 8%, or $3.5 million, decrease in cost of product revenue for the nine months ended December 31, 2025compared to the same period last year was primarily driven by a 2 percentage point increase in our gross profit percentage to 87% due to a more favorable product mix associated with increased licensing of our software products.
Service.The 4%, or $3.5 million increase in cost of service revenue for the nine months ended December 31, 2025 compared to the same period last year was primarily driven by a $19.7 million, or 6%, increase, in service revenue, and an increase in employee-related variable incentive compensation. The service gross profit percentage was consistent at 74% for the nine months ended December 31, 2025 when compared to the nine months ended December 31, 2024.
Operating Expenses
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Research and development | $ | 119,693 | 18 | % | $ | 116,127 | 19 | % | $ | 3,566 | 3 | % | |||||||||||||||||||||||
| Sales and marketing | 200,912 | 31 | 201,489 | 33 | (577) | - | % | ||||||||||||||||||||||||||||
| General and administrative | 78,249 | 12 | 72,807 | 12 | 5,442 | 7 | % | ||||||||||||||||||||||||||||
| Amortization of acquired intangible assets | 33,437 | 5 | 34,857 | 6 | (1,420) | (4) | % | ||||||||||||||||||||||||||||
| Restructuring | 858 | - | 19,895 | 3 | (19,037) | (96) | % | ||||||||||||||||||||||||||||
| Goodwill impairment | - | - | 426,967 | 69 | (426,967) | (100) | % | ||||||||||||||||||||||||||||
| Total operating expenses | $ | 433,149 | 66 | % | 0.66 | $ | 872,142 | 142 | % | $ | (438,993) | (50) | % | ||||||||||||||||||||||
Research and development.The 3%, or $3.6 million, increase in research and development expenses for the nine months ended December 31, 2025 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation, partially offset by a $1.8 million decrease in employee-related costs due to a reduction in headcount, and a $1.2 million decrease in depreciation expense.
Sales and marketing.The 0%, or $0.6 million, decrease in sales and marketing expenses for the nine months ended December 31, 2025 compared to the same period last year was primarily due to a $1.8 million decrease in employee-related expenses due to a reduction in headcount, $1.6 million decrease associated with trade shows and other events partially offset by an increase in employee-related variable incentive compensation.
General and administrative.The 7%, or $5.4 million, increase in general and administrative expenses for the nine months ended December 31, 2025 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation, a $1.4 million increase in professional services, a $0.7 million increase in software expenses and a $0.5 million increase in legal fees.
Restructuring charges.During the third quarter of fiscal year 2024, we 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 this related workforce change, during the nine months ended December 31, 2025 we recorded restructuring charges totaling $0.9 million. During the nine months ended December 31, 2024, we recorded restructuring charges totaling $19.9 million related to one-time termination benefits for one hundred forty-two employees who voluntarily terminated their employment during the nine months ended December 31, 2024.
Goodwill impairment.During the first quarter of fiscal year 2025, due to a decrease in our 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, we conducted an interim quantitative impairment test of its goodwill at June 30, 2024 using the market approach to estimate the fair value of its reporting unit. As a result of that interim impairment test, we recorded a $427.0 million goodwill impairment charge during the nine months ended December 31, 2024.
Interest and Other Income (Expense), Net
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Interest and other income (expense), net | $ | 4,925 | 1 | % | $ | 3,493 | 1 | % | $ | 1,432 | 41 | % | |||||||||||||||||||||||
The 41%, or $1.4 million, increase in interest and other income (expense), net, was primarily due to a $5.1 million decrease in interest expense and a $1.8 million increase in interest income. This increase was partially offset by $3.4 million decrease in the change in fair value of our equity investment in Napatech that was sold in August 2025, and a $2.1 million increase in foreign exchange expense during the nine months ended December 31, 2025, when compared to the nine months ended December 31, 2024.
Income Tax Expense
| Nine Months Ended | Change | ||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
% of Revenue |
% of Revenue |
$ | % | ||||||||||||||||||||||||||||||||
| Income tax expense | $ | 17,871 | 3 | % | $ | 1,544 | - | % | $ | 16,327 | 1,057 | % | |||||||||||||||||||||||
Our effective tax rates were 18.8% and 0.4% for the nine months ended December 31, 2025 and 2024, respectively. The effective tax rate for the nine months ended December 31, 2025 differed from the effective rate for the nine months ended December 31, 2024, primarily related to a decrease in the research and development tax credit and an increase in foreign derived intangible income deduction. Also contributing to the effective tax rate change was an impact related to stock compensation and goodwill impairment incurred during the nine months ended December 31, 2024, which was not deductible for tax purposes.
Backlog
We produce our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure our products to customer specifications and generally deliver products shortly after receipt of the purchase order. Service engagements are also included in certain orders. Customers generally may reschedule or cancel unfulfilled orders with little or no penalty. Our total backlog at any particular time is not necessarily indicative of future sales levels. Within total backlog, fulfillable backlog includes what we consider to represent orders that are generally available to be delivered to customers as of the end of the reporting period. Delivery of our fulfillable backlog typically occurs early in the subsequent quarter. However, delivery may be delayed or accelerated due to various other reasons,
including but not limited to, changes in timing of customer projects and product delivery schedules, which may not be within our control. Our total combined product backlog at December 31, 2025 was $24.0 million compared to $33.1 million at March 31, 2025. Combined product backlog included fulfillable backlog of $18.7 million and $25.1 million at December 31, 2025 and March 31, 2025, respectively.
Liquidity and Capital Resources
Cash, cash equivalents, marketable securities and investments consisted of the following (in thousands):
|
December 31, 2025 |
March 31, 2025 |
||||||||||
| Cash and cash equivalents | $ | 540,642 | $ | 457,415 | |||||||
| Short-term marketable securities and investments | 32,361 | 34,058 | |||||||||
| Long-term marketable securities | 13,151 | 1,004 | |||||||||
| Cash, cash equivalents, marketable securities and investments | $ | 586,154 | $ | 492,477 | |||||||
Cash, cash equivalents, marketable securities and investments
At December 31, 2025, cash, cash equivalents, and marketable securities totaled $586.2 million, a $93.7 million increase from $492.5 million at March 31, 2025. This increase was primarily due to $142.3 million of net cash provided by operations, $47.1 million in proceeds from sales and maturity of marketable securities, $11.8 million in proceeds from the sale of our entire Napatech equity investment, partially offset by $69.3 million used to purchase marketable securities, $31.6 million used to repurchase shares of our common stock, $15.7 million used for tax withholdings on restricted stock units, $5.6 million due to the effect of exchange rate changes on cash and cash equivalents, and $6.9 million used for capital expenditures, during the nine months ended December 31, 2025. Cash and short-term investments held outside of the United States was approximately $226.3 million.
Cash and cash equivalents were impacted by the following:
| Nine Months Ended | |||||||||||
| December 31, | |||||||||||
| (in thousands) | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 142,279 | $ | 76,149 | |||||||
| Net cash (used in) provided by investing activities | $ | (17,364) | $ | 2,041 | |||||||
| Net cash used in financing activities | $ | (47,250) | $ | (66,534) | |||||||
Net cash from operating activities
Net cash provided by operating activities of $142.3 million for nine months ended December 31, 2025, was primarily attributable to net income, as adjusted for share-based compensation expense, depreciation and amortization, deferred income taxes, goodwill impairment, and a $14.4 million working capital outflow. The working capital outflow was primarily driven by $70.6 million increase in accounts receivable, and a $9.0 million decrease in operating lease liabilities partially offset by $37.2 million increase in deferred revenue, $19.0 million increase in accrued compensation and a $9.4 million decrease in prepaid expenses.
Net cash from investing activities
| Nine Months Ended | |||||||||||
| December 31, | |||||||||||
| (in thousands) | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash (used in) provided by investing activities included the following: | |||||||||||
| Purchase of marketable securities and investments | $ | (69,312) | $ | (29,348) | |||||||
| Proceeds from sales and maturity of marketable securities | 47,102 | 36,688 | |||||||||
| Proceeds from sale of equity investment | 11,772 | - | |||||||||
| Purchase of fixed assets | (6,926) | (4,009) | |||||||||
| Purchase of intangible assets | - | (1,290) | |||||||||
| $ | (17,364) | $ | 2,041 | ||||||||
Net cash used in investing activities increased by $19.4 million to $17.4 million during the nine months ended December 31, 2025, compared with $2.0 million of net cash provided by investing activities during the nine months ended December 31, 2024. The increase in net cash used in investing activities was partially due to an additional $40.0 million purchase of marketable securities. Partially offsetting the increase was $11.8 million in proceeds from the sale of our entire Napatech equity investment in August 2025 and a $10.4 million increase in proceeds from the maturity of marketable securities.
Net cash from financing activities
| Nine Months Ended | |||||||||||
| December 31, | |||||||||||
| (in thousands) | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash used in financing activities included the following: | |||||||||||
| Issuance of common stock under stock plans | $ | 2 | $ | 2 | |||||||
| Treasury stock repurchases | (31,566) | (25,257) | |||||||||
| Tax withholding on restricted stock units | (15,686) | (13,829) | |||||||||
| Payment of debt issuance costs | - | (2,450) | |||||||||
| Repayment of long-term debt | - | (100,000) | |||||||||
| Proceeds from issuance of long-term debt, net of issuance costs | - | 75,000 | |||||||||
| $ | (47,250) | $ | (66,534) | ||||||||
Net cash used in financing activities decreased by $19.3 million to $47.3 million during the nine months ended December 31, 2025, compared with $66.5 million of cash used in financing activities during the nine months ended December 31, 2024.
During the nine months ended December 31, 2025, we repurchased a total of approximately 1.5 million shares for $31.6 million in the open market under the 2022 Share Repurchase Program. During the nine months ended December 31, 2024, we repurchased a total of approximately 1.4 million shares for $25.3 million in the open market under the Share Repurchase Program.
In connection with the delivery of our common stock upon vesting of restricted stock units, we withheld approximately 0.7 million shares at a cost of $15.7 million, and approximately 0.7 million shares at a cost of $13.8 million during the nine months ended December 31, 2025 and 2024, respectively, in each case related to minimum statutory tax withholding requirements on these restricted stock units. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the number of shares that are availablefor repurchase under that program.
During the nine months ended December 31, 2025, there were no amounts outstanding under the Third Amended and Restated Credit Agreement (as defined in Note 10) and therefore no amounts repaid. During the nine months ended December 31, 2024, we repaid $25.0 million of borrowings under the Second Amended and Restated Credit Agreement (as defined in Note 10) as well as $2.5 million in debt issuance costs in connection with the execution of our Third Amended and Restated Credit Agreement.
Sources of Cash and Cash Requirements
Credit Facility
We have a five-year, $600 million senior secured revolving credit facility under our Third Amended and Restated Credit Agreement, which matures on October 4, 2029. The facility includes a $75 million letter-of-credit sub-facility and may be used for working capital and other general corporate purposes.
We had no outstanding borrowings under the facility at December 31, 2025 or March 31, 2025, and the full commitment was available. Borrowings under the facility bear interest at variable rates based on term SOFR or an alternate base rate, plus an applicable margin. We also pay commitment fees on the unused portion of the facility.
The credit agreement contains customary covenants, including a consolidated net leverage ratio requirement and certain limitations on additional indebtedness, liens, investments, dividends, and other matters. We were in compliance with all covenants as of December 31, 2025.
Cash Requirements
We are actively managing the business to generate cash flow and believe that we currently have adequate liquidity. We believe that these factors will allow us to meet our anticipated funding requirements for at least the next twelve months.
We have contractual obligations for operating leases, unconditional purchase obligations, pension benefits plans and certain other long-term liabilities. Our obligations related to these items are described further within Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report. We expect net cash provided by operating activities combined with cash, cash equivalents, marketable securities and investments and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and our revolving credit facility. However, macroeconomic conditions, including high inflation and interest rates, international trade relations (including trade protections measures, such as tariffs and other trade barriers), and a potential recession, could increase our anticipated funding requirements or make it more difficult for us to access capital.
A portion of our cash may be used to acquire or invest in complementary businesses or products, to obtain the right to use complementary technologies, or to repurchase shares of our common stock through our stock repurchase programs. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies. If our existing sources of liquidity are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities. Macroeconomic conditions, including high interest rates and volatility in the capital markets, may make it difficult for us to secure additional financing on favorable terms or at all. Any sale of additional equity or debt securities could result in additional dilution to our stockholders.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements on our consolidated financial statements, see Note 1 contained in the "Notes to Consolidated Financial Statements" included in Part I of this Quarterly Report on Form 10-Q.
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