Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Q1 2024 Earnings Presentation

31 slides from Extreme Networks's earnings presentation, Nov 1, 2023

  1. Slide 1: FQ1'24 Financial Results

    FQ1’24 Financial Results November 1, 2023

  2. Slide 2: Disclaimer

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

  3. Slide 3: FQ1'24

    FQ1’24 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3

  4. Slide 4: FQ1'24 Results Summary

    FQ1’24 RESULTS SUMMARY CONTINUED DOUBLE DIGIT GROWTH FUELED BY SAAS & RECURRING REVENUE • Quarterly Revenue Growth of 19% Y/Y Continued • Product Revenue Growth 23% Y/Y Strong Growth • Non-GAAP EPS $0.35 EPS1, up 75% Y/Y • Ending SaaS Deferred Revenue1 of $236M, up 38% Y/Y Cloud SaaS • Ending SaaS A

  5. Slide 5: FQ1'24 Highlights

    FQ1’24 HIGHLIGHTS CLOUD ADOPTION OPERATING TRENDS PROFITABILITY AND CASH FLOW SaaS ARR2 $141M 30 Large $1M+ Customers (Over $1M in bookings for the Fiscal Quarter) Non-GAAP Gross Margin %1 61.1% $236M New Logos6 19% 17.7% $0.35 30% % 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 Education, Government, Service Provider and Retail GOVT + EDUCATION HEALTHCARE HOSPITALITY + VENUES >45% <10% <5% MANUFACTURING RETAIL + TRANSPORTATION SERVICE PROVIDER <10% <10% ~10% ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

  7. Slide 7: GAAP Financial Highlights – Financial Operations

    GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter Q1'23 Q4'23 Q1'24 GAAP Product Revenue $206.3 $261.7 $253.5 Subscription & Support Revenue $91.4 $102.2 $99.6 Total Revenue $297.7 $363.9 $353.1 Total GM % 56.0% 58.9% 60.3% Operating Income $ $17.4 $37.9 $3

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

    NON-GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter Q1'23 Q4'23 Q1'24 Non-GAAP1 Product Revenue $206.3 $261.7 $253.5 Subscription & Support Revenue $91.4 $102.2 $99.6 Total Revenue $297.7 $363.9 $353.1 Total GM % 57.6% 60.2% 61.1% Operating Income $ $36.2

  9. Slide 9: Quarterly Results of Operations

    QUARTERLY RESULTS OF OPERATIONS (IN M’S) Total Revenue $400M $364 $353 $333 $318 $298 28% $300M 28% 28% 30% 31% $200M 72% 72% 72% 70% $100M 69% $0M 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 Product Revenue Subscription & Support 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 $250M 64% $219 $216 $200M $196 62% $186 61.1% $171 60.2% 60.3% $150M 60% 59.1% 58.9% 58.5% $100M 57.6% 57.7% 58% 57.1% 56.0% $50M 56% $0M 54% 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 Product Gross Profit - Non

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

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Operating Expenses - GAAP vs Non-GAAP $200M 60% $160M $156 $153 55% $144 $139 $135 50.2% 50.1% 49.7% $120M 48.8% 50% 48.5% 45.4% $80M 43.7% 45% 43.4% 43.4% 42.7% $40M 40% $0M 35% 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 R and D - Non-GAAP S

  12. Slide 12: Quarterly Results of Operations – EPS

    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 $0.21 $0.20 $0.20 $0.19 $0.17 $0.15 $0.13 $0.09 $0.10 $0.05 $0.00 2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 Non-GAAP EPS GAAP EPS ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 12

  13. Slide 13: Q1'24 Revenue by Geography

    Q1’24 REVENUE BY GEOGRAPHY (IN $M’S EXCEPT PERCENTAGES) EMEA $143M 41% Americas 4% 55% $196M APAC $14M ©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 Q1'23 Q4'23 Q1'24 Cash $198.3 $234.8 $224.4 Accounts Receivable $158.7 $182.0 $131.5 Inventories $51.8 $89.0 $100.8 Accounts Payable $84.8 $99.7 $80.0 Gross Debt* $271.5 $225.0 $197.5 Net Cash (Debt)** ($73.2) $9.8 $2

  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 $141 $129 $115 $117 $109 $103 $96 $89 $79 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 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 $236 $217 $199 $187 $171 $157 $143 $136 $122 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 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) Annual Recurring Revenue1 $95 $93 $87 $88 $87 $86 $84 $81 $78 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 1Recurring Revenue is the sum of all Subscription and Support revenue that is recognized over multiple periods, quarters or years,

  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.

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

    GAAP TO NON-GAAP RECONCILIATIONS – GROSS MARGIN (IN M’S EXCEPT PERCENTAGES) Quarter Q1'23 Q4'23 Q1'24 Product Revenue $ 206.3 $ 261.7 $ 253.5 Subscription & Support Revenue 91.4 102.2 99.6 Total Revenue - GAAP $ 297.7 $ 363.9 $ 353.1 Gross Margin - GAAP 166.7 214.4 212.9 Gross Margin % - GAAP 56.0%

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

    GAAP TO NON-GAAP RECONCILIATIONS – OPERATING INCOME (IN M’S EXCEPT PERCENTAGES) Quarter Q1'23 Q4'23 Q1'24 Operating Income - GAAP $ 17.4 $ 37.9 $ 35.9 Operating Margin - GAAP 5.8% 10.4% 10.2% Amortization of Intangibles, COGS 3.6 3.1 1.4 Share-Based Compensation, Total 13.8 16.9 19.9 Restructuring C

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

    GAAP TO NON-GAAP RECONCILIATIONS – NET INCOME (IN M’S EXCEPT EPS) Quarter Q1'23 Q4'23 Q1'24 Net Income - GAAP $ 12.6 $ 25.4 $ 28.7 Shares - GAAP 132.9 132.9 133.5 EPS - GAAP (Diluted ) $ 0.09 $ 0.19 $ 0.21 Amortization of Intangibles, COGS 3.6 3.1 1.4 Share-Based Compensation, Total 13.8 16.9 19.9 R

  23. Slide 23: Adjusted EBITDA Reconciliation

    ADJUSTED EBITDA RECONCILIATION (IN M’S) Quarter Q1'23 Q4'23 Q1'24 Net Income - GAAP $ 12.6 $ 25.4 $ 28.7 Interest $ 3.4 $ 4.6 $ 3.1 Provision for Income Taxes $ 1.7 $ 7.7 $ 4.5 Depreciation/Amortization $ 9.1 $ 8.4 $ 6.8 EBITDA 26.8 46.2 43.1 Net Non-GAAP Adjustments 14.5 18.5 17.9 Tax Effect includ

  24. Slide 24: FQ2'24

    FQ2’24 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: Committed to Long-Term Double-Digit Growth

    COMMITTED TO LONG-TERM DOUBLE-DIGIT GROWTH (IN $M’S EXCEPT PERCENTAGES) FY16 to FY23 Revenue 14% CAGR $1,312 $1,112 $1,009 $983 $996 $948 $607 $519 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 25

  26. Slide 26: Considerations for our Q2 and FY24 Outlook

    Considerations for our Q2 and FY24 Outlook Customers and channel partners digesting prior orders Macro conditions changed recently, particularly in EMEA Funnel of new opportunities continues to grow double-digits y/y We expect growth to resume as customer buying patterns normalize and growth investm

  27. Slide 27: FQ2'24 Guidance – GAAP

    FQ2’24 GUIDANCE – GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ2’24 FQ1’24 Guidance Revenue ($M) $353.1 $312.0 – $327.0 Gross Margin % 60.3% 59.5% – 61.5% Operating Margin % 10.2% 5.0% – 7.4% EPS $0.21 $0.07 – $0.12 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 27

  28. Slide 28: FQ2'24 Guidance – Non-GAAP

    FQ2’24 GUIDANCE – NON-GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ2’24 FQ1’24 Guidance Revenue ($M) $353.1 $312.0 – $327.0 Gross Margin % 61.1% 60.2% – 62.2% Operating Margin % 17.7% 15.4% – 17.3% EPS $0.35 $0.26 – $0.31 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 28

  29. Slide 29: FQ2'24 Guidance – GAAP to Non-GAAP Reconciliation

    FQ2’24 GUIDANCE – GAAP TO NON-GAAP RECONCILIATION Gross Margin Rate Operating Margin Rate Earnings per Share GAAP 59.5% - 61.5% 5.0% - 7.4% $0.07 - $0.12 Estimated Adjustments for: Share-Based Compensation 0.5% 6.6% - 7.0% $0.16 Amortization of Product Intangibles 0.2% 0.2% $0.00 Amortization of Non

  30. Slide 30: FY24 Outlook

    FY24 Outlook Mid to High Single Digit Revenue Growth in FY24 Sustain Mid to High Teens Non-GAAP Operating Margin Non-GAAP EPS Growth of Over 25% Y/Y Committed to Double-Digit Long-Term Growth ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 30

  31. Slide 31: ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 31

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