Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Q2 2023 Earnings Presentation

27 slides from Extreme Networks's earnings presentation, Jan 25, 2023

  1. Slide 1: FQ2'23 Financial Results

    FQ2’23 Financial Results January 25, 2023

  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: FQ2'23

    FQ2’23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3

  4. Slide 4: FQ2'23 Results Summary: Continued Strong Growth

    FQ2’23 RESULTS SUMMARY CONTINUED DOUBLE-DIGIT Y/Y REVENUE GROWTH • Record Revenue on 13% Y/Y Revenue Growth Continued • Record $36M Non-GAAP Net Income Strong Growth • Record $0.27 Non-GAAP EPS • SaaS Subscription Bookings Growth of 30% Y/Y Cloud SaaS • Ending SaaS Deferred Revenue of $187M, up 38%

  5. Slide 5: FQ2'23 Highlights

    FQ2’23 HIGHLIGHTS CLOUD ADOPTION DRIVING GROWTH PROFITABILITY AND CASH FLOW Backlog $542M SaaS ARR2 $115M Total Revenue 13% Non-GAAP Gross Margin %1 58.5% Growth (Y/Y %) Product Revenue 14.9% $0.27 17% 28% $187M Growth (Y/Y %) Non-GAAP Non-GAAP SaaS Deferred Operating Margin%1 EPS ($)1 Recurring Ser

  6. Slide 6: Major Vertical Trends and Bookings Contribution

    MAJOR VERTICAL TRENDS AND BOOKINGS CONTRIBUTION Bookings strength in Government, Education, and Hospitality / Venues GOVT + EDUCATION HEALTHCARE HOSPITALITY + VENUES TAILWINDS: Strong continued government and TAILWINDS: Solid demand for wireless and campus TAILWINDS: Continued strength on new logo w

  7. Slide 7: GAAP Financial Highlights – Financial Operations

    GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter FQ2'22 FQ1'23 FQ2'23 GAAP Product Revenue $191.1 $206.3 $223.4 Service & Subscription Revenue $89.8 $91.4 $94.9 Total Revenue $280.9 $297.7 $318.3 Total GM % 56.5% 56.0% 57.1% Operating Income $ $18.1 $17.4

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

    NON-GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter FQ2'22 FQ1'23 FQ2'23 1 Non-GAAP Product Revenue $191.1 $206.3 $223.4 Service & Subscription Revenue $89.8 $91.4 $94.9 Total Revenue $280.9 $297.7 $318.3 Total GM % 58.2% 57.6% 58.5% Operating Income $ $3

  9. Slide 9: Quarterly Results of Operations: Total Revenue

    QUARTERLY RESULTS OF OPERATIONS (IN M’S) Total Revenue $350M $300M $250M $200M $150M $100M $50M $0M 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 Product Revenue Service & Subscription Revenue ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 9

  10. Slide 10: Quarterly Results of Operations: Gross Profit

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Gross Profit - GAAP vs Non-GAAP $200M 66% $180M 64% $160M 62% $140M 60% $120M 58% $100M 56% $80M 54% $60M 52% $40M $20M 50% $0M 48% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 Product Gross Profit - Non-GAAP Service & Subscription Gross

  11. Slide 11: Quarterly Results of Operations: Operating Expenses

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Operating Expenses - GAAP vs Non-GAAP $160M 75% $140M 70% $120M 65% $100M 60% $80M 55% $60M 50% $40M 45% $20M 40% $0M 35% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 R and D - Non-GAAP S and M - Non-GAAP G and A - Non-GAAP Total OpEx as

  12. Slide 12: Quarterly Results of Operations: EPS

    QUARTERLY RESULTS OF OPERATIONS EPS - GAAP vs Non-GAAP $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 Non-GAAP EPS GAAP EPS ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 12

  13. Slide 13: FQ2'23 Revenue by Geography

    FQ2’23 REVENUE BY GEOGRAPHY EMEA $138M Product $106M Services $32M Americas $153M Product $96M Services $57M APAC $27M Product $21M Services $6M Note: May not foot due to rounding ©2023 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 FQ2'22 FQ1'23 FQ2'23 Cash $173.5 $198.3 $202.5 Accounts Receivable $133.3 $158.7 $152.1 Inventories $37.2 $51.8 $63.8 Accounts Payable $58.8 $84.8 $86.4 Gross Debt* $322.9 $271.5 $262.0 Net Debt** $149.4 $73.2 $59.5 C

  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: Appendices: GAAP to Non-GAAP Reconciliations

    APPENDICES GAAP to Non-GAAP Reconciliations Note: The totals for some periods may not foot due to rounding. Please see press release for full reconciliation.

  17. Slide 17: Historical SaaS Disclosures: SaaS ARR

    HISTORICAL SAAS DISCLOSURES SAAS ARR & SAAS DEFERRED ENDING REVENUE (IN $M’S) Ending SaaS ARR1 $115 $109 $103 $96 $89 $79 $70 $59 $62 $57 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 1Extreme uses SaaS annual recurring revenue (“SaaS ARR”) to identify the annual recurring revenue of E

  18. Slide 18: Historical SaaS Disclosures: SaaS Deferred Revenue

    HISTORICAL SAAS DISCLOSURES SAAS ARR & SAAS DEFERRED ENDING REVENUE (IN $M’S) SaaS Ending Deferred Revenue2 $187 $171 $157 $143 $136 $122 $112 $99 $91 $84 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 2SaaS Ending Deferred Revenue refers to the ending quarterly balance of advance payme

  19. Slide 19: GAAP to Non-GAAP Reconciliations: Revenue + Gross Margin

    GAAP TO NON-GAAP RECONCILIATIONS REVENUE + GROSS MARGIN (IN M’S EXCEPT PERCENTAGES) Quarter FQ2'22 FQ1'23 FQ2'23 Product Revenue $ 191.1 $ 206.3 $ 223.4 Service & Subscription Revenue 89.8 91.4 94.9 Total Revenue - GAAP $ 280.9 $ 297.7 $ 318.3 Gross Margin - GAAP 158.8 166.7 181.7 Gross Margin % - G

  20. Slide 20: GAAP to Non-GAAP Reconciliations: Operating Income

    GAAP TO NON-GAAP RECONCILIATIONS OPERATING INCOME (IN M’s EXCEPT PERCENTAGES) Quarter FQ2'22 FQ1'23 FQ2'23 Operating Income - GAAP $ 18.1 $ 17.4 $ 23.4 Operating Margin - GAAP 6.4% 5.8% 7.4% Amortization of Intangibles, Product & Service 4.1 3.6 3.2 Total Share-Based Compensation 11.3 13.8 17.4 Rest

  21. Slide 21: GAAP to Non-GAAP Reconciliations: Net Income

    GAAP TO NON-GAAP RECONCILIATIONS NET INCOME (IN M’s EXCEPT EPS) Quarter FQ2'22 FQ1'23 FQ2'23 Net Income - GAAP $ 13.3 $ 12.6 $ 17.9 Shares - GAAP 133.6 132.9 134.5 EPS - GAAP (Diluted ) $ 0.10 $ 0.09 $ 0.13 Amortization of Product & Service Intangibles 4.1 3.6 3.2 Total Share-Based Compensation 11.3

  22. Slide 22: GAAP to Non-GAAP Reconciliations: EBITDA

    GAAP TO NON-GAAP RECONCILIATIONS EBITDA (IN M’s) Quarter FQ2'22 FQ1'23 FQ2'23 Net Income - GAAP $ 13.3 $ 12.6 $ 17.9 Interest $ 3.0 $ 3.4 $ 3.0 Provision for Income Taxes $ 1.8 $ 1.7 $ 2.6 Depreciation/Amortization $ 10.1 $ 9.1 $ 8.8 EBITDA 28.2 26.8 32.3 Net Non-GAAP Adjustments 15.1 14.5 18.6 Inco

  23. Slide 23: FQ3'23

    FQ3’23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 23

  24. Slide 24: FQ3'23 Guidance – GAAP

    FQ3’23 GUIDANCE – GAAP (IN M’s EXCEPT PERCENTAGES AND EPS) FQ3’23 FQ2’23 Guidance Revenue ($M) $318.3 $315.0 – $325.0 Gross Margin % 57.1% 56.6% – 58.6% Operating Margin % 7.4% 6.9% – 8.9% Net Income $17.9 $15.7 – $23.0 EPS $0.13 $0.12 – $0.17 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: FQ3'23 Guidance – Non-GAAP

    FQ3’23 GUIDANCE – NON-GAAP (IN M’s EXCEPT PERCENTAGES AND EPS) FQ3’23 FQ2’23 Guidance Revenue ($M) $318.3 $315.0 – $325.0 Gross Margin % 58.5% 58.0% – 60.0% Operating Margin % 14.9% 13.5% – 15.3% Net Income $36.5 $31.1 – $38.4 EPS $0.27 $0.23 – $0.29 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

  26. Slide 26: FQ3'23 Guidance – GAAP to Non-GAAP Reconciliation

    FQ3’23 GUIDANCE – GAAP TO NON-GAAP RECONCILIATION Gross Margin Rate Operating Margin Rate Earnings per Share GAAP 56.6% - 58.6% 6.9% - 8.9% $0.12 - $0.17 Estimated Adjustments for: Amortization of Product Intangibles 0.7% 0.7% $0.02 Share-Based Compensation 0.4% 5.3% $0.13 Restructuring Charges, net

  27. Slide 27: ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 27

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