Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Investor Day (May 2022)

57 slides from Extreme Networks's investor day presentation, May 18, 2022

  1. Slide 1: Investor Day

    INVESTOR DAY” 5 AS x MAY 18, 2022 f= Extreme networks

  2. Slide 2: Stan Cover Slide

    Stan Cover Slide ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 2

  3. Slide 3: Cautionary Statement on Financial Measures

    CAUTIONARY STATEMENT ON FINANCIAL MEASURES Non-GAAP Measures Forward-Looking Statements In preparing the accompanying information Extreme Networks, Inc. (the This presentation contains forward-looking “Company”) has excluded, where applicable, the impact of certain Non- statements including, but not

  4. Slide 4: Investor Day Presentation Agenda

    INVESTOR DAY PRESENTATION AGENDA 8:30 – 10:00 AM KICKOFF Stan Kovler VP of Strategy and Investor Relations NEW WAYS, BETTER OUTCOMES Ed Meyercord President and CEO EXTREME’S CLOUD EXPANSION Nabil Bukhari (Virtual) Chief Technology Officer & Chief Product Officer Q&A Ed Meyercord and Nabil Bukhari (M

  5. Slide 5: Ed Storyboard

    Ed Storyboard ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 5

  6. Slide 6: New Ways, Better Outcomes

    NEW WAYS, BETTER OUTCOMES 1,600 Physicians / 29,000 Employees 23,500 Students / 37 Schools 12,000 Employees / 110,000 Citizens NEW WAY: Created mobile, NEW WAY: Established a NEW WAY: Leaned into pop-up vaccination events to hybrid, digital-first learning becoming a ‘smart city’ by combat COVID-19.

  7. Slide 7: Taking Share in Fast Growing Market

    TAKING SHARE IN FAST GROWING MARKET Extreme Growth vs Market Growth Extreme Share of Cloud Managed Services 40% 14% 30% 12% 10% 20% 8% 10% 6% 0% 4% 2020 2021 -10% 2% -20% 0% 2018 2019 2020 2021 Market Growth Extreme Growth Source: 650 Group Source: 650 Group ©2022 EXTREME NETWORKS, INC. ALL RIGHTS R

  8. Slide 8: #1 Ranked Service and Support in Overall Rating

    A LEADER IN GARTNER MAGIC QUADRANT FOUR YEARS IN A ROW #1 Ranked Service and Support in Overall Rating 91% 4.7 5 of out of Recommends Extreme Networks Source: Gartner (November 2021) Source: Gartner Peer Insights (2021) ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 8

  9. Slide 9: Outperforming Prior Long-Term Targets

    OUTPERFORMING PRIOR LONG-TERM TARGETS One Year Ago Product Services Subscription Total 4-6% 3-5% 25-35% 5-9% FY22 Revenue Outlook** Product Services Subscription Total 8% 7% 35% 10% ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 9

  10. Slide 10: Executing on Product and Recurring Revenue Growth

    EXECUTING ON PRODUCT AND RECURRING REVENUE GROWTH 5 Quarters of Double Digit Annual Recurring Revenue ($M) Product Revenue Growth (Y/Y) $324 $299 $296 $237 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 FY19 FY20 FY21 FY22 Annualized Product Revenue Service SaaS ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESE

  11. Slide 11: Investments to Expand Our Growth Opportunities

    INVESTMENTS TO EXPAND OUR GROWTH OPPORTUNITIES 2019 2021 2022-2025 CLOUD EFFORTLESS WAN EDGE EXTREMECLOUD NETWORKING CLOUD-DRIVEN SD-WAN NETWORKING CLOUDIFY INNOVATE EXPAND BOOKINGS CLOUD-DRIVEN SD-WAN GROWTH & NETWORKING M&A BACKLOG CONVERSION 2020 ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

  12. Slide 12: TAM Expansion Drives Accelerated Growth Outlook

    TAM EXPANSION DRIVES ACCELERATED GROWTH OUTLOOK 2025 TAM WAN EDGE $9.8B EXPAND SD-WAN ACV and ARR Growth $5.1B CLOUDIFY New Cloud Management and Migrations SaaS ARR Growth $5.1B LAND Wired & Wireless Infrastructure No SaaS ARR $31.8B 22-25 FY18 FY19 FY20-21 FY22 FY23-25 CAGR EXTR TAM $22.6B $23.5B $

  13. Slide 13: Illustrative Product Backlog to Revenue Model

    ILLUSTRATIVE PRODUCT BACKLOG TO REVENUE MODEL Outlook Supports Mid-Teens Revenue Growth Beyond FY23 Book to Bill >1.0 <1.0 FY20 FY21 FY22 FY23 FY24 FY25 Product Backlog Potential Ending Product Revenue ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 13

  14. Slide 14: Accelerated Growth Through FY25

    ACCELERATED GROWTH THROUGH FY25 Revenue Growth and Outlook Mid-Teens 10-15% 10% ~3% FY21 FY22 FY23 FY25 FY22 – Current Company Outlook FY23 – Current Company Outlook FY25 – Current Company Outlook and Guidance at the Midpoint ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 14

  15. Slide 15: Nabil Storyboard

    Nabil Storyboard ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 15

  16. Slide 16: Lookback at Universal and Cloudify Strategies

    LOOKBACK AT UNIVERSAL AND CLOUDIFY STRATEGIES Universal Portfolio Strategy Cloudify Strategy Universal Platforms Portfolio Transition, Bookings FY19 – FY22 Growth 4x 99.7% 65% 3x Footprint Cloud Subscription ~2x Bookings Market Share Growth from 7% to 13% Wireless Wired ©2022 EXTREME NETWORKS, INC.

  17. Slide 17: The Infinite Enterprise Strategy

    THE INFINITE ENTERPRISE STRATEGY Infinitely 1 Network At 1 Cloud Consumer 1 Extreme Distributed Scale Centric ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 17

  18. Slide 18: Connecting Everyone, Everywhere, Securely All the Time

    CONNECTING EVERYONE, EVERYWHERE, SECURELY ALL THE TIME 1 Network Universal Unified Instant From Universal Platforms Bringing security and Simple Operations, Lower to Universal Fabric connectivity together Complexity, Lower TCO ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 18

  19. Slide 19: Advancing Management Through Intelligence

    ADVANCING MANAGEMENT THROUGH INTELLIGENCE 1 Cloud Universal Unified Secure by Design Manage Anything, Going Beyond Cloud Management Increased Trust, Reduced Risk Anywhere, Anytime ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 19

  20. Slide 20: Reducing Complexity and Delighting Customers

    REDUCING COMPLEXITY AND DELIGHTING CUSTOMERS 1 Extreme Reduce Expanding Aligned to Customer Complexity, Ecosystem Outcomes Reduce Cost ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 20

  21. Slide 21: Translating Technology Strategy to Business Growth

    TRANSLATING TECHNOLOGY STRATEGY TO BUSINESS GROWTH WAN Edge Subscriptions SD-WAN, Branch, Edge security and associated Renewals, Migrations WAN Edge subscription licenses and Additional Subscriptions Subscriptions Cohort Cohort ARPU1 Renewals, Migrations and Additional Subscriptions Expansion subscr

  22. Slide 22: Subscription Business Expansion

    SUBSCRIPTION BUSINESS EXPANSION ARPU1 Expansion ARPA2 Expansion | Increasing the Base FY21 FY22 FY23+ FY21 FY22 FY23+ AIOps Subscriptions for WAN Edge +65% +212% products over baseline over baseline Renewals (Expansion ARR through reduced discounting) +5% Cloud Management for Wired products +58% ove

  23. Slide 23: Service Provider and 5G Strategy

    SERVICE PROVIDER AND 5G STRATEGY Positioned for multi- On pace to exceed $50 - $100M run rate year investment cycles our target of $20M opportunity in from Telcos and in FY22 3-5 years Enterprise ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 23

  24. Slide 24: Infinite Enterprise Strategy

    INFINITE ENTERPRISE STRATEGY 1 Network 1 Cloud 1 Extreme ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: Joe Storyboard

    Joe Storyboard ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 25

  26. Slide 26: ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 26

  27. Slide 27: ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 27

  28. Slide 28: MLB Image

    MLB Image ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 28

  29. Slide 29: Joe Storyboard

    Joe Storyboard ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 29

  30. Slide 30: Strength in All Extreme Markets

    STRENGTH IN ALL EXTREME MARKETS Q3 FY22 Revenue by Geography Q3 FY22 Bookings by Vertical 5% 46% 49% Government and Education Manufacturing Healthcare Retail, Logistics, & Transportation Americas EMEA APAC Sports, Entertainment, and Hospitality Telco and Service Provider Other Bookings by Partner Le

  31. Slide 31: Leaders in Targeted Verticals Rely on Extreme

    LEADERS IN TARGETED VERTICALS RELY ON EXTREME Revenue Recent Enterprise Vertical Key Customers Contribution* Trends Government / Education ~35% Enterprise and Other ~30% Manufacturing >10% Healthcare >10% Retail and T&L ~10% Sports and Entertainment, Hospitality >5% *Contribution Based on Q3 FY22 Re

  32. Slide 32: Winning in a Strong Market

    WINNING IN A STRONG MARKET BOOKINGS STRENGTH WALLET SHARE • 51% increase in average • Subscription renewals and transaction size service attach rate is up 5% Y/Y • 10% increase in services and • New subscription attach rate new subscriptions is up 32% Y/Y to 31% of all APs + • 30+% growth in APAC an

  33. Slide 33: Partners and Channel

    PARTNERS AND CHANNEL PARTNERS ARE DRIVING GROWTH EXPANDING OUR MARKET PRESENCE AMER EMEA APAC Authorized Partner Gold Partner Diamond Partner $25k-$250k $250K - $2M >$2M Annual Sales Annual Sales Annual Sales 49% 45% 6% GAINING SHARE Partner Net New +8,300 Active Initiated Logos Resellers ©2022 EXTR

  34. Slide 34: One Network, One Cloud, One Extreme

    ONE NETWORK, ONE CLOUD, ONE EXTREME Competitive Differentiation – Pilot License ONE EXTREME WIPS NAC ANALYTICS IoT LOCATION GUEST SD-WAN CLOUD ISO 27001 | Air Defense Segmented Embedded SECURITY NETWORKING ONE CLOUD AWS | AZURE | GCP ExtremeCloud IQ (XIQ) XIQ SITE ENGINE NETWORK MANAGEMENT ONE NETWO

  35. Slide 35: Supply Chain

    SUPPLY CHAIN TITLE NORMANSLIDE RICE ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 35

  36. Slide 36: Navigating Industry-Wide Supply Chain Challenges

    NAVIGATING INDUSTRY-WIDE SUPPLY CHAIN CHALLENGES CHIP SHORTAGES COVID LOCKDOWN • Foundries warn of tight • Disrupting production and production capacity logistics • Prolonged chip shortage for • Limited impact of shutdown in Industry thru July 2023 Shanghai COST PRESSURES LOGISTICS • Higher costs fo

  37. Slide 37: Proactively Managing to Deliver on Customer Needs

    PROACTIVELY MANANGING TO DELIVER ON CUSTOMER NEEDS TASK FORCE RE-ENGINEERING • Inter Company with key suppliers • Current Q- 150+ Components Qualified • Optimization of production and • Designing alternative offerings due to transportation processes supply availability (BLE) SUPPLIER RELATIONS INNOV

  38. Slide 38: A Closer Look at Backlog

    A CLOSER LOOK AT BACKLOG Total Backlog (Q3’22) –– $426.1M Backlog by Vertical Customer Request Date Backlog Product Mix $400M $350M Run Rate $300M ~5% $250M $200M $150M Universal Switching & Wireless Government & Education $100M Non-Universal Manufacturing $50M Retail, Logistics, & Transportation He

  39. Slide 39: Expected Road to Recovery

    EXPECTED ROAD TO RECOVERY Estimated Range and Average Lead Time Finished Goods Lead Time (Weeks) Average • FY23 – Incremental Improvements FG Lead Times • FY24 – Book to Bill <1 FY19 FY20 FY21 FY22 FY23 FY24 FY25 • FY25 – Backlog Normalizes Lead Time Range Lead Time Increase Average ©2022 EXTREME NE

  40. Slide 40: Remi Storyboard

    Remi Storyboard ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 40

  41. Slide 41: Key Messages

    KEY MESSAGES Current Trends Outlook Operating Model • Strong demand across all • Strong backlog driving • Product gross margin poised verticals long term revenue growth to expand as elevated supply chain costs ease • Solid execution in a • Subscription growth challenging supply chain driven by WAN E

  42. Slide 42: Prior Long-Term Target Operating Model

    PRIOR LONG-TERM TARGET OPERATING MODEL NON-GAAP LONG-TERM TARGETS Revenue Product Services Subscription Total 4-6% 3-5% 25-35% 5-9% Margins Cash Drivers Gross Margin OPEX % of Rev OP Margin FCF* % of Rev CCC (Days) CAPEX % of Rev 63-65% 46-49% 15-18% 11-13% 35-45 1.5-2% ©2022 EXTREME NETWORKS, INC.

  43. Slide 43: Outperforming Prior Target Operating Model

    OUTPERFORMING PRIOR TARGET OPERATING MODEL 2022 GUIDANCE** Revenue Product Services Subscription Total 4-6 8%% 3-5 7%% 25-35 35% % 5-9 10%% Margins Cash Drivers (YTD) Gross Margin OPEX % of Rev OP Margin FCF* % of Rev CCC (Days) CAPEX % of Rev 63-65 59% % 46-49 46% % 15-18 12% % 11-13 ~8%% 21 35-45

  44. Slide 44: SaaS ARR and Deferred Revenue Growth

    SAAS ARR AND DEFERRED REVENUE GROWTH SaaS ARR & SaaS Deferred Ending Revenue (In $M’s) Ending SaaS ARR1 SaaS Ending Deferred Revenue2 $143 $136 $97 $122 $88 $112 $80 $99 $70 $91 $63 $84 $57 $54 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 1 SaaS A

  45. Slide 45: Illustrative Product Backlog to Revenue Model

    ILLUSTRATIVE PRODUCT BACKLOG TO REVENUE MODEL Outlook Supports Mid-Teens Revenue Growth Beyond FY23 Book to Bill >1.0 <1.0 FY20 FY21 FY22 FY23 FY24 FY25 Product Backlog Potential Ending Product Revenue ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 45

  46. Slide 46: Subscription Bookings Growth Drivers

    SUBSCRIPTION BOOKINGS GROWTH DRIVERS FY22-FY25 CAGR +25%-35% Subscription Bookings by Cohort Cohort Drivers Cloud Management Wired, Wireless Renewals, Migrations, Migrations, Customer and Additional Success, Mobile App, Subscription Licenses AI / ML (Co-Pilot) WAN Edge SD-WAN, SD Branch FY21 FY22 FY

  47. Slide 47: Subscription Revenue Growth Drivers

    SUBSCRIPTION REVENUE GROWTH DRIVERS FY22-FY25 CAGR +35%-45% Revenue Assumptions Gross Wireless Average Contract Retention Attach Length Rate Rate 90%+ 90%+ 1.5 – 2 Years 82 FY22 Ending XIQ New XIQ Renewals WAN-Edge FY25 Revenue Revenue Outlook % Driver of Growth ~20% ~40% ~40% ©2022 EXTREME NETWORKS

  48. Slide 48: Product Gross Margin Expansion

    PRODUCT GROSS MARGIN EXPANSION Margin Drivers Impact Supply Chain: Expedite Fees, Components +7 pp Supply Chain: Logistics +2 pp 64% 55% FY22 Non-GAAP Product Target Non-GAAP GM% Product GM% ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 48

  49. Slide 49: Services Gross Margin Expansion

    SERVICES GROSS MARGIN EXPANSION Margin Driver Impact Mix (Subscription vs. Maintenance & Other Services) +3 pp 69% 66% FY22 Non GAAP Services Target Non GAAP GM% Services GM% ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 49

  50. Slide 50: Total Gross Margin Expansion

    TOTAL GROSS MARGIN EXPANSION Margin Drivers Impact Product vs. Services Mix +2 pp 65% Supply Chain: Expedite Fees, Components, Logistics +4 pp 59% FY22 Non-GAAP Total Target Non-GAAP Total GM% GM% ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 50 50

  51. Slide 51: Strong Outlook for Operating Leverage

    STRONG OUTLOOK FOR OPERATING LEVERAGE COMMENTARY LONG-TERM TARGET • Supply chain costs will reduce as constraints ease Cost of Goods Sold • Low incremental cost to serve subscription model 34 – 36% • Mix shift to higher margin subscription Research & • R&D investments in new products and services De

  52. Slide 52: Updated Non-GAAP Long-Term Targets

    LONG TERM GUIDANCE UPDATED NON-GAAP LONG-TERM TARGETS Revenue Growth Targets Product Services Subscription Total 13-15% 5-7% 35-45% 13-17% Margins Cash Drivers Gross Margin OPEX % of Rev OP Margin FCF* % of Rev CCC (Days) CAPEX % of Rev 64-66% 44-47% 18-21% 15-18% 20-30 1.0-1.5% ©2022 EXTREME NETWOR

  53. Slide 53: ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 53

  54. Slide 54: ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 54

  55. Slide 55: ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED.

    ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 55

  56. Slide 56: FY22 GAAP Guidance

    FY22 GAAP GUIDANCE Revenue** Product Services Subscription Total 8% 7% 35% 10% Margins Cash Drivers (YTD) Gross Margin OPEX % of Rev OP Margin FCF* % of Rev CCC (Days) CAPEX % of Rev 57% 51% 6% ~8% 21 Days 1.4% As of 3/31/22 ©2022 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 56

  57. Slide 57: Q4 2022 GAAP to Non-GAAP Reconciliation

    Q4 2022 GAAP to Non-GAAP Reconciliation Operating Margin Gross Margin Rate Earnings per Share Rate GAAP 55.5% - 57.4% 3.1%-5.5% $0.02-$0.07 Estimated Adjustments for: Amortization of Product Intangibles 1.1% 1.1% $0.02 Share-Based Compensation 0.2% 3.9% $0.08 Restructuring Charges, net - 0.1% $0.00

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