Extreme Networks, Inc. · NASDAQ:EXTR
Extreme Networks — Investor Day (November 2023)
53 slides from Extreme Networks's investor day presentation, Nov 7, 2023
Slide 1: Investor Day
[= Extreme INVESTOR — =, NOVEMBER 7, 2023
Slide 2: Opening Remarks
OPENING REMARKS STAN KOVLER VICE PRESIDENT OF STRATEGY AND INVESTOR RELATIONS
Slide 3: Disclaimer
DISCLAIMER Non-GAAP Measures Forward-Looking Statements This presentation includes certain financial measures that are not This presentation contains forward-looking statements including, but presented in accordance with generally accepted accounting principles not limited to the expected performanc
Slide 4: Today's Agenda
TODAY’S AGENDA 8:30 AM – 9:40 AM Opening Remarks Stan Kovler VP of Strategy and Investor Relations Why We Are Confident Ed Meyercord President and CEO Chief Technology Officer & Technology Leadership Driving Share Gains Nabil Bukhari Chief Product Officer Q&A Ed Meyercord and Nabil Bukhari (Moderate
Slide 5: Why We Are Confident
WHY WE ARE CONFIDENT ED MEYERCORD PRESIDENT AND CEO
Slide 6: Investor Day Overview
INVESTOR DAY • Navigating Current Environment • Increasing Market Share • Winning Customers • New Growth Opportunities OVERVIEW • Attractive Financial Model ©2021 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 6
Slide 7: Navigating Current Market Environment
• Customer and Channel Digestion • Increasing Sales Cycles • Networking was Being Prioritized NAVIGATING CURRENT • Europe Slowdown MARKET • Macroeconomics ENVIRONMENT • Run Rate Business Slower to Return • Easing Supply Chain ©2021 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 7
Slide 8: Delivering For Our Customers
DELIVERING FOR OUR CUSTOMERS Solution Solution 6x Consecutive 5x Consecutive Best Place to of the Year of the Year Customers’ Choice Leader Work ExtremeCloud™ IQ ExtremeCloud™ IQ 2023 Gartner Peer Gartner® Magic Recognized as One of CoPilot Named 2023 Named Cloud Insights™ Customers’ Quadrant™ for t
Slide 9: Growing Mindshare And Marketshare
GROWING MINDSHARE AND MARKETSHARE Largest Stock Tallest Building Collecting Exchange in in the World Social the World BURJ KHALIFA Security NYSE GOVT AGENCY Flying in Smart Cities Receiving the U.S. BORAS STAD,SWEDEN a Package FEDERAL AVIATION MILWAUKEE, WI MEMPHIS, TN FEDEX ADMINISTRATION Oldest Pu
Slide 10: What Customers Want: New Ways, Better Outcomes
WHAT CUSTOMERS WANT: NEW WAYS, BETTER OUTCOMES ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 10
Slide 11: Our Differentiation
OUR DIFFERENTIATION ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 11
Slide 12: Retail: Simplified Management, Easy To Deploy
RETAIL: SIMPLIFIED MANAGEMENT, EASY TO DEPLOY New Way Outcomes Opportunity Cisco Fatigue • Simplified • Operational efficiency • SD-WAN for • 30-year history with management (XIQ) 800+ locations consistent Cisco and Aruba • Secure/easy to deploy • Faster to deploy performance at POS • Cost and compl
Slide 13: Healthcare: Removing Risk, Providing Visibility
HEALTHCARE: REMOVING RISK, PROVIDING VISIBILITY Why Extreme? Better Outcomes Opportunity HPE/Aruba Takeout • One Cloud: visibility + • Simplified network • 7-year contract • Lack of central control (XIQ) management • Construction of management • One Network: link all • Improved/modernized new facili
Slide 14: Resorts: Expansion Made Simple
RESORTS: EXPANSION MADE SIMPLE Why Extreme? Better Outcomes Opportunity Cisco Takeout • Expansion requires • Improved guest • 40+ resorts under • DNA and switching simplified network experiences management became too costly ops • M&A without cost • Significant expansion • Security was an issue • XIQ
Slide 15: Extreme Is Taking Share
EXTREME IS TAKING SHARE – LTM 20% YoY REVENUE GROWTH 175 CUSTOMERS OVER $1M REVENUE $364M RECURRING REVENUE (up 8% YoY) $1.4B $141M IN SaaS ARR (up 30% YoY) 112% GROWTH IN CASH FLOW ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 15
Slide 16: Focused Growth Opportunities Now And Into The Future
FOCUSED GROWTH OPPORTUNITIES NOW AND INTO THE FUTURE FY 2023 2024E 2025E 2026-28E TAM Expansion — Analytics & Security Strategic Opportunities Cloud Management Attach Rate and Good, Better, Best Model Managed Service Provider (MSP), Extreme Subscription Private Offer (ESPO) GTM Opportunities Targete
Slide 17: Key Takeaways
KEY TAKEAWAYS 1 1 1 ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 17
Slide 18: Technology Leadership Driving Share Gains
TECHNOLOGY LEADERSHIP DRIVING SHARE GAINS NABIL BUKHARI CHIEF TECHNOLOGY OFFICER AND CHIEF PRODUCT OFFICER
Slide 19: Focused Growth Opportunities Now And Into The Future
FOCUSED GROWTH OPPORTUNITIES NOW AND INTO THE FUTURE FY 2023 2024E 2025E 2026-28E TAM Expansion — Analytics & Security Strategic Opportunities Cloud Management Attach Rate and Good, Better, Best Model Managed Service Provider (MSP), Extreme Subscription Private Offer (ESPO) GTM Opportunities Targete
Slide 20: Core Business
CORE BUSINESS
Slide 21: Executing In Our Core Market
EXECUTING IN OUR CORE MARKET 100% 30% 65% Universal Platforms Y/Y Subscription ARR Device Unit Attach Coverage Growth Subscription Rate ~80% 20% >2.5M Universal Portfolio Y/Y Subscription XIQ Connected Devices Contribution Pilot ACV Growth ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 21
Slide 22: One Network, One Cloud, One Extreme
ONE NETWORK, ONE CLOUD, ONE EXTREME 1 Cloud ExtremeCloud 1 Network Universal Wired Universal Wireless SD-WAN Enterprise Fabric 1 Extreme ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 22 Universal Licensing Ecosystem Services Capital
Slide 23: Building On Technology Leadership
BUILDING ON TECHNOLOGY LEADERSHIP Most CLOUD Most CERTIFIED CONTINUUM TRUSTED Universal Enterprise Platforms Fabric ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 23
Slide 24: Strategic Opportunities
STRATEGIC OPPORTUNITIES
Slide 25: Continued Growth Of Subscription ARR
CONTINUED GROWTH OF SUBSCRIPTION ARR Good, Leading TAM Better, with Cloud Expansion Best • Cloud Management • Industry first – single • Building on the success of Subscription for All subscription, cloud ExtremeCloud platform Enterprise Products applications & device • Introducing ExtremeCloud suppo
Slide 26: ExtremeCloud Universal ZTNA
EXTREMECLOUD UNIVERSAL ZTNA One Cloud Application Universal Policy & Universal Enforcement • Blends best of NAC and ZTNA • Single policy engine and a single UX Networks Users Data • Identity-based access for remote and on-prem Secure Connectivity Protect and Monitor Access All Users All Applications
Slide 27: ExtremeCloud Business Intelligence
EXTREMECLOUD BUSINESS INTELLIGENCE FOR ENTERPRISES FOR VENUES • User location and flow dynamics improve physical operations Location intelligence and crowd flow dynamics • Application usage analysis help enhance network performance or enforce policies Sports betting versus illegal data • Bi-directio
Slide 28: Artificial Intelligence Throughout ExtremeCloud
ARTIFICIAL INTELLIGENCE THROUGHOUT EXTREMECLOUD Extreme Virtual Advisor Chat with Information Public Contextual advice regarding product specs, Delivered (Last 12 Months) Data config problems and troubleshooting • Proactive Network Anomaly Detection (Wired & Wireless) CoPilot • Client Connectivity E
Slide 29: GTM Opportunities
GTM OPPORTUNITIES
Slide 30: Extreme Managed Service Provider Program
EXTREME MANAGED SERVICE PROVIDER PROGRAM KEY POINTS $28B • Single subscription with management and support • Consumption billing to reduce transaction cost Managed • Innovative cloud-based MSP management platform LAN/WLAN to reduce operational cost • Entire portfolio available through the MSP progra
Slide 31: Tier Service Provider Channel Opportunity
TIER 1 SERVICE PROVIDER CHANNEL OPPORTUNITY Continual Margin Pressure + Incumbent Fatigue = Massive Opportunity in a $15+ Billion TAM $15+ Billion Larger Enterprise LAN / WLAN Service Obtainable Market ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 31
Slide 32: Regulated Industries Market Opportunity
REGULATED INDUSTRIES MARKET OPPORTUNITY Global Campus LAN / WLAN TAM of $15B TAM ($5B in North America) SECURITY CERTIFICATIONS GLOBAL CUSTOMER REFERENCES ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 32
Slide 33: Key Takeaways
KEY TAKEAWAYS 1 1 1 ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 33
Slide 34: How Are We Winning
HOW ARE WE WINNING JOE VITALONE CHIEF REVENUE OFFICER ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.
Slide 35: Winning In The Market
WINNING IN THE MARKET ~17% >800 Double-Digit Y/Y Growth + Avg Deal Size New Funnel Created New Active Partners LTM added in FY23 85% 19% Double-Digit Y/Y Growth Partners Sell “Full $1M Deal Value New Logos Stack” Solutions ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 35
Slide 36: Near-Term Actions We Are Taking
NEAR-TERM ACTIONS WE ARE TAKING ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 36
Slide 37: Focused Growth Opportunities Now And Into The Future
FOCUSED GROWTH OPPORTUNITIES NOW AND INTO THE FUTURE FY 2023 2024E 2025E 2026-28E TAM Expansion — Analytics & Security Strategic Opportunities Cloud Management Attach Rate and Good, Better, Best Model Managed Service Provider (MSP), Extreme Subscription Private Offer (ESPO) GTM Opportunities Targete
Slide 38: Igniting The Channel
IGNITING THE CHANNEL 2023 2024E 2025E 2026-28E EXISTING PORTFOLIO, SUBSCRIPTION AND SUPPORT Core Diamond, Gold, Authorized Partners Service Provider Federal Resellers National Resellers ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 38
Slide 39: Success Begets Success
SUCCESS BEGETS SUCCESS ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 39
Slide 40: Norman Rice Jonathan Young
NORMAN RICE JONATHAN YOUNG Chief Operating Officer Vice President
Slide 41: Norman Rice Michael Restuccia Chris Golier
NORMAN RICE MICHAEL RESTUCCIA CHRIS GOLIER Chief Operating Officer SVP & CIO GVP, Global Innovation
Slide 42: Long-Term Financial Model
LONG-TERM FINANCIAL MODEL KEVIN RHODES CHIEF FINANCIAL OFFICER
Slide 43: Investor Day Overview
INVESTOR • A Look Back DAY • Revenue, Margin Expansion and EPS Growth • Recurring Business Focus • Generating Strong Cash Flow OVERVIEW • Attractive Financial Model ©2021 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 43
Slide 44: Progress To Date
13 – 17% Revenue CAGR 14% CAGR 18% FY23 44 – 47% Long Term OPEX as % of Revenue 44% FY23 PROGRESS Free Cash Flow as % of Revenue 15 – 18% 18% FY23 TO DATE 20 – 30 Days Cash Conversion Achieved Revenue, OpEx, and Cycle 29 Days 4Q23 Cash goals in FY23 Achieving expected CAPEX as % of 1.0 – 1.5% expans
Slide 45: Focused Growth Opportunities Now And Into The Future
FOCUSED GROWTH OPPORTUNITIES NOW AND INTO THE FUTURE FY 2023 2024E 2025E 2026-28E TAM Expansion — Analytics & Security Strategic Opportunities Cloud Management Attach Rate and Good, Better, Best Model Managed Service Provider (MSP), Extreme Subscription Private Offer (ESPO) GTM Opportunities Targete
Slide 46: Strategic And Go To Market Investments Driving Growth
STRATEGIC AND GO TO MARKET INVESTMENTS DRIVING GROWTH CAGR 10 – 12% Revenue Growth Targets Subscription Product and Support 7-9% 16-18% FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) Core GTM Inv Strategic Inv ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 46
Slide 47: Annual Recurring Revenue Is Increasing
ANNUAL RECURRING REVENUE IS INCREASING Recurring Revenue from 29% TO 38% of Mix Recurring revenue expands from 29% of total revenue in FY23 to 38% of total revenue in FY28 FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) Product Subscription & Support ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 47
Slide 48: Annual Recurring Revenue Growth
ANNUAL RECURRING REVENUE GROWTH SaaS ARR Growth Recurring Revenue Growth CAGR 28 – 30% CAGR 16 – 18% FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) SaaS ARR SaaS ARR Support ARR ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 48
Slide 49: Strong Outlook For Operating Leverage
STRONG OUTLOOK FOR OPERATING LEVERAGE COMMENTARY LONG-TERM TARGET • Supply chain cost improvement Gross Margin • Mix shift to higher margin subscription 64 – 66% Research and • R&D investments in new products and services Development • Software features and functionality 14 – 16% Sales and Marketing
Slide 50: Approaching The Rule Of 40
APPROACHING THE RULE OF 40 Revenue Growth % + Operating Margin % 40% FY22 FY23 FY24 FY25 FY26 FY27 FY28 Revenue Growth % Operating Margin % ©EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 50
Slide 51: Generating Strong Free Cash Flow And Use Of Cash
GENERATING STRONG FREE CASH FLOW AND USE OF CASH 25% $600 20% $500 $400 15% $300 $120 $127 $105 $109 $110 10% $100 $200 5% $100 0% $- FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) FY23(A) FY24(F) FY25(F) FY26(F) FY27(F) FY28(F) Free Cash Flow FCF Margin Share Repurchases 45% of FY23 free cash flow
Slide 52: Attractive Long-Term Model Targets
ATTRACTIVE LONG-TERM MODEL TARGETS Revenue Growth Targets Product Subscription + Support Total Revenue 7-9% 16-18% 10-12% Margins Cash Drivers Gross Margin OPEX % of Rev OP Margin FCF* % of Rev CCC (Days) CAPEX % of Rev 64-66% 39-43% 23-25% 20-25% 30-40 1.0-1.5% Driving Double-Digit Non-GAAP EPS CAG
Slide 53: Thank You
[= Extreme THANK VCRs — NOVEMBER 7, 2023