Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Q3 2023 Earnings Presentation

27 slides from Extreme Networks's earnings presentation, Apr 26, 2023

  1. Slide 1: FQ3'23 Financial Results

    FQ3’23 Financial Results April 26, 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: FQ3'23

    FQ3’23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3

  4. Slide 4: FQ3'23 Results Summary: Continued Strong Growth

    FQ3’23 RESULTS SUMMARY CONTINUED DOUBLE-DIGIT Y/Y REVENUE GROWTH • Record Revenue on 16% Y/Y Revenue Growth • Record $39M Non-GAAP Net Income1 Continued • Record $0.29 Non-GAAP EPS1 Strong Growth • Q4FY23 Revenue Growth Outlook of Over 20% Y/Y • FY23 Revenue Growth Outlook of 16% Y/Y • New SaaS Subs

  5. Slide 5: FQ3'23 Highlights

    FQ3’23 HIGHLIGHTS CLOUD ADOPTION DRIVING GROWTH PROFITABILITY AND Large Customers CASH FLOW SaaS ARR2 $117M (Over $1M in bookings for the Quarter) 36 Total Revenue $333M Non-GAAP Gross Margin %1 59.1% 15.6% $0.29 26% $199M Total Revenue Growth (Y/Y %) 16% Non-GAAP Non-GAAP Recurring SaaS Deferred Op

  6. Slide 6: Major Vertical Bookings Contribution

    MAJOR VERTICAL BOOKINGS CONTRIBUTION Relative Bookings strength in Government + Education, Retail + Transportation, & Hospitality + Venues GOVT + EDUCATION HEALTHCARE HOSPITALITY + VENUES >35% <10% <10% MANUFACTURING RETAIL + TRANSPORTATION SERVICE PROVIDER ~10% ~15% <5% ©2023 EXTREME NETWORKS, INC.

  7. Slide 7: GAAP Financial Highlights – Financial Operations

    GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter FQ3'22 FQ2'23 FQ3'23 GAAP Product Revenue $198.4 $223.4 $241.1 Service & Subscription Revenue $87.1 $94.9 $91.4 Total Revenue $285.5 $318.3 $332.5 Total GM % 56.5% 57.1% 57.7% Operating Income $ $17.3 $23.4

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

    NON-GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter FQ3'22 FQ2'23 FQ3'23 Non-GAAP1 Product Revenue $198.4 $223.4 $241.1 Service & Subscription Revenue $87.1 $94.9 $91.4 Total Revenue $285.5 $318.3 $332.5 Total GM % 58.0% 58.5% 59.1% Operating Income $ $35

  9. Slide 9: Quarterly Results of Operations

    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 2023 Q3 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 $250M 66% 64% $200M 62% 60% $150M 58% 56% $100M 54% 52% $50M 50% $0M 48% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 Product Gross Profit - Non-GAAP Service & Subscription Gross Profit - Non-GAAP

  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 2023 Q3 R and D - Non-GAAP S and M - Non-GAAP G and A - Non-GAAP Total

  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 2023 Q3 Non-GAAP EPS GAAP EPS ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 12

  13. Slide 13: FQ3'23 Revenue by Geography

    FQ3’23 REVENUE BY GEOGRAPHY EMEA $152M Product $120M Services $32M Americas $158M Product $105M Services $53M APAC $23M Product $17M 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 FQ3'22 FQ2'23 FQ3'23 Cash $166.6 $202.5 $203.0 Accounts Receivable $163.0 $152.1 $158.6 Inventories $37.7 $63.8 $70.3 Accounts Payable $68.5 $86.4 $96.0 Gross Debt* $315.8 $262.0 $237.0 Net Debt** $149.2 $59.5 $34.0 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 & Operating Metrics

    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.

  17. Slide 17: Historical SaaS Disclosures – SaaS ARR

    HISTORICAL SAAS DISCLOSURES – SaaS ARR (IN $M’S) SaaS ARR1 $115 $117 $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 Q3'23 1Extreme uses SaaS annual recurring revenue (“SaaS ARR”) to identify the annual recurring revenue of ExtremeCloud™ IQ (XIQ) and

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

    HISTORICAL SAAS DISCLOSURES – SaaS Deferred Revenue (IN $M’S) SaaS Deferred Revenue1 $199 $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 Q3'23 1SaaS Ending Deferred Revenue refers to the ending quarterly balance of advance payments received

  19. Slide 19: GAAP to Non-GAAP Reconciliations – Gross Margin

    GAAP TO NON-GAAP RECONCILIATIONS – GROSS MARGIN (IN M’S EXCEPT PERCENTAGES) Quarter FQ3'22 FQ2'23 FQ3'23 Product Revenue $ 198.4 $ 223.4 $ 241.1 Service & Subscription Revenue 87.1 94.9 91.4 Total Revenue - GAAP $ 285.5 $ 318.3 $ 332.5 Gross Margin - GAAP 161.4 181.7 191.9 Gross Margin % - GAAP 56.5

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

    GAAP TO NON-GAAP RECONCILIATIONS – OPERATING INCOME (IN M’S EXCEPT PERCENTAGES) Quarter FQ3'22 FQ2'23 FQ3'23 Operating Income - GAAP $ 17.3 $ 23.4 $ 29.6 Operating Margin - GAAP 6.1% 7.4% 8.9% Amortization of Intangibles, Product & Service 3.6 3.2 3.0 Share-Based Compensation, Total 10.9 17.4 15.4 R

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

    GAAP TO NON-GAAP RECONCILIATIONS – NET INCOME (IN M’S EXCEPT EPS) Quarter FQ3'22 FQ2'23 FQ3'23 Net Income - GAAP $ 12.8 $ 17.9 $ 22.1 Shares - GAAP 133.4 134.5 133.0 EPS - GAAP (Diluted ) $ 0.10 $ 0.13 $ 0.17 Amortization of Intangibles, Product & Service 3.6 3.2 3.0 Share-Based Compensation, Total

  22. Slide 22: Adjusted EBITDA Reconciliation

    ADJUSTED EBITDA RECONCILIATION (IN M’S) Quarter FQ3'22 FQ2'23 FQ3'23 Net Income - GAAP $ 12.8 $ 17.9 $ 22.1 Interest $ 2.7 $ 3.0 $ 3.2 Provision for Income Taxes $ 1.9 $ 2.6 $ 3.9 Depreciation/Amortization $ 9.3 $ 8.8 $ 8.6 EBITDA 26.7 32.3 37.8 Net Non-GAAP Adjustments 14.6 18.6 16.7 Tax Effect inc

  23. Slide 23: FQ4'23

    FQ4’23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 23

  24. Slide 24: FQ4'23 Guidance – GAAP

    FQ4’23 GUIDANCE – GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ4’23 FQ3’23 Guidance Revenue ($M) $332.5 $340.0 – $350.0 Gross Margin % 57.7% 57.7% – 59.7% Operating Margin % 8.9% 8.9% – 10.8% EPS $0.17 $0.16 – $0.22 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: FQ4'23 Guidance – Non-GAAP

    FQ4’23 GUIDANCE – NON-GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ4’23 FQ3’23 Guidance Revenue ($M) $332.5 $340.0 – $350.0 Gross Margin % 59.1% 59.0% – 61.0% Operating Margin % 15.6% 15.5% – 17.3% EPS $0.29 $0.28 – $0.34 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 25

  26. Slide 26: FQ4'23 Guidance – GAAP to Non-GAAP Reconciliation

    FQ4’23 GUIDANCE – GAAP TO NON-GAAP RECONCILIATION Gross Margin Rate Operating Margin Rate Earnings per Share GAAP 57.7% - 59.7% 8.9% - 10.8% $0.16 - $0.22 Estimated Adjustments for: Share-Based Compensation 0.4% 4.8% $0.12 Amortization of Product Intangibles 0.7% 0.7% $0.02 Amortization of Non-produ

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

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

Extreme Networks — Q3 2023 Earnings Presentation on 6ix