Extreme Networks, Inc. · NASDAQ:EXTR

Extreme Networks — Q4 2023 Earnings Presentation

27 slides from Extreme Networks's earnings presentation, Aug 2, 2023

  1. Slide 1: FQ4'23 & FY23 Financial Results

    FQ4’23 & FY23 Financial Results August 2, 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: FQ4'23 & FY'23

    FQ4’23 & FY'23 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3

  4. Slide 4: FQ4'23 Results Summary: Continued Strong Growth

    FQ4’23 RESULTS SUMMARY CONTINUED DOUBLE-DIGIT Y/Y REVENUE GROWTH • Quarterly Revenue Growth of 31% Y/Y Continued • Product Revenue Growth 40% Y/Y Strong Growth • Q4 Non-GAAP EPS $0.33 EPS1, up 120% Y/Y Cloud SaaS • Ending SaaS Deferred Revenue1 of $217M, up 38% Y/Y Subscriptions • Ending SaaS ARR1 o

  5. Slide 5: FY'23 Highlights

    FY’23 HIGHLIGHTS CLOUD ADOPTION DRIVING GROWTH PROFITABILITY AND Large Customers CASH FLOW SaaS ARR2 $129M (Over $1M in bookings for the Fiscal Year) 182 Total Revenue $1.3B Non-GAAP Gross Margin %1 58.9% 15.2% $1.09 $217M Total Revenue 27% Growth (Y/Y %) 18% Non-GAAP Non-GAAP Recurring SaaS Deferre

  6. Slide 6: Major Vertical Bookings Contribution

    MAJOR VERTICAL BOOKINGS CONTRIBUTION Relative Bookings strength in Education, Manufacturing, Retail + Transportation, & Hospitality + Venues GOVT + EDUCATION HEALTHCARE HOSPITALITY + VENUES >40% ~10% <5% 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 Fiscal Year Q4'22 Q3'23 Q4'23 FY22 FY23 GAAP Product Revenue $187.1 $241.1 $261.7 $761.7 $932.5 Service & Subscription Revenue $91.1 $91.4 $102.2 $350.6 $380.0 Total Revenue $278.2 $332.5 $363.9 $1,112.3 $1,

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

    NON-GAAP FINANCIAL HIGHLIGHTS – FINANCIAL OPERATIONS (IN M’S EXCEPT PERCENTAGES AND EPS) Quarter Fiscal Year Q4'22 Q3'23 Q4'23 FY22 FY23 Non-GAAP1 Product Revenue $187.1 $241.1 $261.7 $761.7 $932.5 Service & Subscription Revenue $91.1 $91.4 $102.2 $350.6 $380.0 Total Revenue $278.2 $332.5 $363.9 $1,

  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 2023 Q4 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 2023 Q4 Product Gross Profit - Non-GAAP Service & Subscription Gross Profit - N

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

    QUARTERLY RESULTS OF OPERATIONS (IN M’S EXCEPT PERCENTAGES) Operating Expenses - GAAP vs Non-GAAP $180M 75% $160M 70% $140M 65% $120M 60% $100M 55% $80M 50% $60M 45% $40M $20M 40% $0M 35% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 2023 Q4 R and D - Non-GAAP S and M - Non-GAAP G and A -

  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 2023 Q4 Non-GAAP EPS GAAP EPS ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 12

  13. Slide 13: FY23 Revenue by Geography

    FY23 REVENUE BY GEOGRAPHY EMEA $560M Product $426M Services $134M 43% Americas $657M 7% 50% Product $435M Services $222M APAC $96M Product $71M Services $24M 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 Q4'22 Q3'23 Q4'23 Cash $194.5 $203.0 $234.8 Accounts Receivable $184.1 $158.6 $182.0 Inventories $49.2 $70.3 $89.0 Accounts Payable $84.3 $96.0 $99.7 Gross Debt* $308.6 $237.0 $225.0 Net Cash (Debt)** ($114.1) ($34.0)

  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 $129 $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 Q4'23 1Extreme uses SaaS annual recurring revenue (“SaaS ARR”) to identify the annual recurring revenue of ExtremeCloud™ I

  17. Slide 17: Historical SaaS Disclosures – SaaS Deferred Revenue

    HISTORICAL SAAS DISCLOSURES – SaaS Deferred Revenue (IN $M’S) SaaS Deferred Revenue1 $217 $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 Q4'23 1SaaS Ending Deferred Revenue refers to the ending quarterly balance of advance paymen

  18. Slide 18: 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.

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

    GAAP TO NON-GAAP RECONCILIATIONS – GROSS MARGIN (IN M’S EXCEPT PERCENTAGES) Quarter Fiscal Year Q4'22 Q3'23 Q4'23 FY 22 FY 23 Product Revenue $ 187.1 $ 241.1 $ 261.7 $ 761.7 $ 932.5 Service & Subscription Revenue 91.1 91.4 102.2 350.6 380.0 Total Revenue - GAAP $ 278.2 $ 332.5 $ 363.9 $ 1,112.3 $ 1,

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

    GAAP TO NON-GAAP RECONCILIATIONS – OPERATING INCOME (IN M’S EXCEPT PERCENTAGES) Quarter Fiscal Year Q4'22 Q3'23 Q4'23 FY 22 FY 23 Operating Income - GAAP $ 10.5 $ 29.6 $ 37.9 $ 64.2 $ 108.3 Operating Margin - GAAP 3.8% 8.9% 10.4% 5.8% 8.3% Amortization of Intangibles, COGS 3.6 3.0 3.1 16.6 12.9 Shar

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

    GAAP TO NON-GAAP RECONCILIATIONS – NET INCOME (IN M’S EXCEPT EPS) Quarter Fiscal Year Q4'22 Q3'23 Q4'23 FY 22 FY 23 Net Income - GAAP $ 5.4 $ 22.1 $ 25.4 $ 44.3 $ 78.1 Shares - GAAP 132.3 133.0 132.9 133.5 133.6 EPS - GAAP (Diluted ) $ 0.04 $ 0.17 $ 0.19 $ 0.33 $ 0.58 Amortization of Intangibles, CO

  22. Slide 22: Adjusted EBITDA Reconciliation

    ADJUSTED EBITDA RECONCILIATION (IN M’S) Quarter Fiscal Year Q4'22 Q3'23 Q4'23 FY 22 FY 23 Net Income - GAAP $ 5.4 $ 22.1 $ 25.4 $ 44.3 $ 78.1 Interest $ 2.9 $ 3.2 $ 4.6 $ 12.4 $ 14.2 Provision for Income Taxes $ 2.2 $ 3.9 $ 7.7 $ 7.9 $ 16.0 Depreciation/Amortization $ 9.2 $ 8.6 $ 8.4 $ 40.1 $ 34.9 E

  23. Slide 23: FQ1'24

    FQ1’24 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 23

  24. Slide 24: FQ1'24 Guidance – GAAP

    FQ1’24 GUIDANCE – GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ1’24 FQ4’23 Guidance Revenue ($M) $363.9 $342.0 – $352.0 Gross Margin % 58.9% 58.6% – 60.6% Operating Margin % 10.4% 7.5% – 9.8% EPS $0.19 $0.12 – $0.18 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 24

  25. Slide 25: FQ1'24 Guidance – Non-GAAP

    FQ1’24 GUIDANCE – NON-GAAP (IN M’S EXCEPT PERCENTAGES AND EPS) FQ1’24 FQ4’23 Guidance Revenue ($M) $363.9 $342.0 – $352.0 Gross Margin % 60.2% 59.5% – 61.5% Operating Margin % 17.4% 15.3% – 17.6% EPS $0.33 $0.28 – $0.33 ©2023 EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 25

  26. Slide 26: FQ1'24 Guidance – GAAP to Non-GAAP Reconciliation

    FQ1’24 GUIDANCE – GAAP TO NON-GAAP RECONCILIATION Gross Margin Rate Operating Margin Rate Earnings per Share GAAP 58.6% - 60.6% 7.5% - 9.8% $0.12 - $0.18 Estimated Adjustments for: Share-Based Compensation 0.5% 5.7% $0.15 Amortization of Product Intangibles 0.3% 0.3% $0.01 Amortization of Non-produc

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

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

Extreme Networks — Q4 2023 Earnings Presentation on 6ix