Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Q2 2024 Earnings Presentation

30 slides from Extreme Networks's earnings presentation, Jan 31, 2024

  1. Slide 1: FQ2'24 Financial Results

    FQ2’24 Financial Results January 31, 2024

  2. Slide 2: Disclaimer

    DISCLAIMER Non-GAAP Financial Measures: Forward-Looking Statements: This presentation includes certain financial measures that are not This presentation contains forward-looking statements presented in accordance with generally accepted accounting principles in including, but not limited to: the exp

  3. Slide 3: FQ2'24

    FQ2’24 ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3

  4. Slide 4: FQ2'24 Results Summary

    FQ2’24 RESULTS SUMMARY • Product Backlog Normalized Bookings and • Product Bookings Approximately In-Line With Revenue Revenue Trends • Double Digit Bookings Growth for EMEA and APAC Y/Y • Recurring Revenue1 of $101M, up 14% Y/Y • SaaS Deferred Revenue1 of $246M, up 32% Y/Y Cloud SaaS • SaaS ARR1 of

  5. Slide 5: FQ2'24 Highlights

    FQ2’24 HIGHLIGHTS CLOUD ADOPTION OPERATING TRENDS PROFITABILITY AND CASH FLOW SaaS ARR2 $158M 44 Large $1M+ Customers (Over $1M in bookings for the Fiscal Quarter) Non-GAAP Gross Margin %1 62.5% $246M New Logos6 17% 14.8% $0.24 37% % of Total Product Bookings Non-GAAP Non-GAAP SaaS Deferred Operatin

  6. Slide 6: Major Vertical Bookings Contribution

    MAJOR VERTICAL BOOKINGS CONTRIBUTION Relative Bookings Strength in Healthcare, Education, Manufacturing, and Transportation / Logistics GOVT + EDUCATION HEALTHCARE HOSPITALITY + VENUES ~40% ~15% >5% MANUFACTURING RETAIL + TRANSPORTATION SERVICE PROVIDER >10% <10% <5% ©2024 EXTREME NETWORKS, INC. ALL

  7. Slide 7: GAAP Financial Highlights – Financial Operations

    GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter 2Q23 1Q24 2Q24 GAAP Product Revenue $223.4 $253.5 $186.6 Subscription & Support Revenue $94.9 $99.6 $109.8 Total Revenue $318.3 $353.1 $296.4 Total GM % 57.1% 60.3% 61.9% Operating Income $ $23.4 $35.9 $10.3

  8. Slide 8: Non-GAAP Financial Highlights – Financial Operations

    NON-GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter 2Q23 1Q24 2Q24 Non-GAAP1 Product Revenue $223.4 $253.5 $186.6 Subscription & Support Revenue $94.9 $99.6 $109.8 Total Revenue $318.3 $353.1 $296.4 Total GM % 58.5% 61.1% 62.5% Operating Income $ $47.3 $6

  9. Slide 9: Quarterly Results of Operations

    QUARTERLY RESULTS OF OPERATIONS (IN M’S) Total Revenue $400M $364 $353 $333 $318 $298 28% $296 $300M 28% 28% 30% 31% 37% $200M 72% 72% 72% 70% $100M 69% 63% $0M 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 2024 Q2 ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 9 Product Revenue Subscription & Support

  10. Slide 10: Quarterly Results of Operations

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Gross Profit - GAAP Gross Profit - Non-GAAP $250M 70% $250M 70% $214 $219 $216 $213 $200M $192 67% $200M $196 67% $182 $183 $186 $185 $167 $171 $150M 64% $150M 64% 62.5% 61.9% 61.1% $100M 60.3% 61% $100M 60.2% 61% 58.9% 59.1% 58.5% 57.7% 57

  11. Slide 11: Quarterly Results of Operations

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Operating Expenses - GAAP Operating Expenses - Non-GAAP $200M 80% $200M 80% $177 $177 $173 $162 $158 $156 $153 $149 $150M 70% $150M $144 $141 70% $139 $135 $100M 58.4% 60% $100M 60% 50.2% 49.7% 50.1% $50M 48.8% 48.5% 50% $50M 50% 47.7% 45.4

  12. Slide 12: Quarterly Results of Operations

    QUARTERLY RESULTS OF OPERATIONS EPS - GAAP vs Non-GAAP $0.40 $0.35 $0.35 $0.33 $0.30 $0.29 $0.27 $0.25 $0.24 $0.21 $0.20 $0.20 $0.19 $0.17 $0.15 $0.13 $0.09 $0.10 $0.05 $0.03 $0.00 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 2024 Q2 ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 12 Non-GAAP EPS GAAP

  13. Slide 13: Q2'24 Revenue by Geography

    Q2’24 REVENUE BY GEOGRAPHY (IN $M’S EXCEPT PERCENTAGES) EMEA $110M 37% Americas 8% 55% $163M APAC $23M ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 13

  14. Slide 14: Financial Highlights – Balance Sheet

    FINANCIAL HIGHLIGHTS – BALANCE SHEET (IN M’S EXCEPT DAYS) Balance Sheet Highlights 2Q23 1Q24 2Q24 Cash $202.5 $224.4 $221.4 Accounts Receivable $152.1 $131.5 $112.0 Inventories $63.8 $100.8 $152.5 Accounts Payable $86.4 $80.0 $87.8 Gross Debt* $262.0 $197.5 $195.0 Net Cash (Debt)** ($59.5) $26.9 $26

  15. Slide 15: Non-GAAP Free Cash Flow

    NON-GAAP FREE CASH FLOW (IN M’S) Extreme uses the non-GAAP free cash flow metric as a measure of operating performance. Free cash flow represents GAAP net cash provided by operating activities, less purchases of property, plant and equipment. Extreme considers free cash flow as useful information fo

  16. Slide 16: Historical SaaS Disclosures – SaaS ARR

    HISTORICAL SAAS DISCLOSURES – SaaS ARR (IN $M’S) SaaS ARR1 $158 $141 $129 $115 $117 $109 $103 $96 $89 $79 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 1Extreme uses SaaS annual recurring revenue (“SaaS ARR”) to identify the annual recurring revenue of ExtremeCloud IQ (XIQ) and other subscriptio

  17. Slide 17: Historical SaaS Disclosures – SaaS Deferred Revenue

    HISTORICAL SAAS DISCLOSURES – SaaS DEFERRED REVENUE (IN $M’S) SaaS Deferred Revenue1 $246 $236 $217 $199 $187 $171 $157 $143 $136 $122 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 1SaaS Ending Deferred Revenue refers to the ending quarterly balance of advance payments received for SaaS goods or

  18. Slide 18: Historical Disclosures – Recurring Revenue

    HISTORICAL DISCLOSURES – RECURRING REVENUE (IN $M’S) Recurring Revenue1 $101 $95 $93 $87 $88 $87 $86 $84 $81 $78 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 1Recurring Revenue is the sum of all Subscription and Support revenue that is recognized over multiple periods, quarters or years, rather

  19. Slide 19: Appendices

    APPENDICES GAAP to Non-GAAP Reconciliations & Operating Metrics Note: The totals for some periods may not foot due to rounding. Please see press release for full reconciliation. ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

  20. Slide 20: GAAP to Non-GAAP Reconciliations – Gross Margin

    GAAP TO NON-GAAP RECONCILIATIONS – GROSS MARGIN (IN M’S EXCEPT PERCENTAGES) Quarter 2Q23 1Q24 2Q24 Product Revenue $ 223.4 $ 253.5 $ 186.6 Subscription & Support Revenue 94.9 99.6 109.8 Total Revenue - GAAP $ 318.3 $ 353.1 $ 296.4 Gross Margin - GAAP 181.7 212.9 183.4 Gross Margin % - GAAP 57.1% 60.

  21. Slide 21: GAAP to Non-GAAP Reconciliations – Operating Income

    GAAP TO NON-GAAP RECONCILIATIONS – OPERATING INCOME (IN M’S EXCEPT PERCENTAGES) Quarter 2Q23 1Q24 2Q24 Operating Income - GAAP $ 23.4 $ 35.9 $ 10.3 Operating Margin - GAAP 7.4% 10.2% 3.5% Amortization of Intangibles, COGS 3.2 1.4 0.5 Share-Based Compensation, Total 17.4 19.9 21.0 Restructuring Charg

  22. Slide 22: GAAP to Non-GAAP Reconciliations – Net Income

    GAAP TO NON-GAAP RECONCILIATIONS – NET INCOME (IN M’S EXCEPT EPS) Quarter 2Q23 1Q24 2Q24 Net Income - GAAP $ 17.9 $ 28.7 $ 4.0 Shares - GAAP 134.5 133.5 131.5 EPS - GAAP (Diluted ) $ 0.13 $ 0.21 $ 0.03 Amortization of Intangibles, COGS 3.2 1.4 0.5 Share-Based Compensation, Total 17.4 19.9 21.0 Restr

  23. Slide 23: Adjusted EBITDA Reconciliation

    ADJUSTED EBITDA RECONCILIATION (IN M’S) Quarter 2Q23 1Q24 2Q24 Net Income - GAAP $ 17.9 $ 28.7 $ 4.0 Interest 3.0 3.1 2.8 Provision for Income Taxes 2.6 4.5 3.1 Depreciation/Amortization 8.8 6.8 5.7 EBITDA $ 32.3 $ 43.1 $ 15.6 Net Non-GAAP Adjustments 18.6 17.9 27.5 Interest included in Net Non-GAAP

  24. Slide 24: FQ3'24

    FQ3’24 ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: Considerations for 2H FY24 Outlook

    Considerations for 2H FY24 Outlook Expect reduction of channel inventory to accelerate in the third quarter Bookings trends stabilized in EMEA and APAC continues to grow Funnel of new opportunities continues to grow – led by Education vertical New growth opportunities with service providers and mana

  26. Slide 26: FQ3'24 Guidance – GAAP

    FQ3’24 GUIDANCE – GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ3'24 FQ2'24 Guidance Revenue ($M) $296.4 $200.0 - $210.0 Gross Margin % 61.9% 58.6% - 60.6% Operating Margin % 3.5% (33.7%) - (29.2%) EPS $0.03 ($0.55) - ($0.50) ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 26

  27. Slide 27: FQ3'24 Guidance – Non-GAAP

    FQ3’24 GUIDANCE – NON-GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ3'24 FQ2'24 Guidance Revenue ($M) $296.4 $200.0 - $210.0 Gross Margin % 62.5% 59.5% - 61.5% Operating Margin % 14.8% (13.4%) - (9.8%) EPS $0.24 ($0.22) - ($0.17) ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 27

  28. Slide 28: FQ3'24 Guidance – GAAP to Non-GAAP Reconciliation

    FQ3’24 GUIDANCE – GAAP TO NON-GAAP RECONCILIATION Gross Margin Rate Operating Margin Rate Earnings per Share GAAP 58.6% - 60.6% (33.7%) – (29.2%) ($0.55) – ($0.50) Estimated Adjustments for: Share-Based Compensation 0.6% 10.0% - 10.6% $0.16 Amortization of Product Intangibles 0.3% 0.3% $0.01 Amortiz

  29. Slide 29: Q4 FY24 Outlook

    Q4 FY24 Outlook FQ4’24 Revenue ($M) $265 – $275 GAAP & Non-GAAP Gross Margin % Flat to up slightly from Q3 GAAP Operating Margin % (2%) – 1% Non-GAAP Operating Margin % 10% – 13% ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 29

  30. Slide 30: ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2024 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 30

Extreme Networks — Q2 2024 Earnings Presentation on 6ix