2Q25 Financial Results January 29, 2025 DISCLAIMER Non-GAAP Financial Measures FINANCIAL RESULTS © EXTREME NETWORKS, INC. ALL RIGHTS RESERVED. 3 This presentation includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP), such as, among other things, Non-GAAP Gross Profit, Non-GAAP EPS, Free Cash Flow, Non-GAAP Gross Margin, Non- GAAP Operating Margin, Net Cash (Debt), Non-GAAP Operating Income (Loss), EBITDA, Non-GAAP ...

Financial Performance - Total revenue for Q2 FY2025 was $279.4 million, down 5.7% year-over-year, but up 3.8% quarter-over-quarter[5] - GAAP diluted EPS for Q2 was $0.06, compared to $0.03 in the same quarter last year, and a loss of $0.08 in the previous quarter[5] - Non-GAAP diluted EPS was $0.21, down from $0.24 year-over-year and up from $0.17 quarter-over-quarter[5] - For Q3 FY2025, the company targets total net revenue between $276.0 million and $284.0 million[13] - For the full fiscal year 2025, total net revenue is targeted between $1,120.0 million and $1,138.0 million[15] - GAAP revenues for Q2 2024 were $279.355 million, a decrease from $296.377 million in Q2 2023, representing a decline of 5.4%[44] - Non-GAAP gross profit for Q2 2024 was $177.190 million, compared to $185.176 million in Q2 2023, reflecting a decrease of 4.3%[44] - Non-GAAP operating income for Q2 2024 was $41.153 million, up from $43.932 million in Q2 2023, indicating a decline of 6.3%[44] - GAAP net income for Q2 2024 was $7.382 million, compared to $3.988 million in Q2 2023, showing an increase of 85.0%[45] - Non-GAAP net income for Q2 2024 was $28.573 million, down from $31.475 million in Q2 2023, a decrease of 9.1%[45] Cash Flow and Assets - The company generated net cash flow from operations of $21.5 million and free cash flow of $16.1 million in Q2[11] - Cash and cash equivalents increased to $170,322 thousand as of December 31, 2024, from $156,699 thousand at the end of June 2024, marking an increase of 8.3%[23] - The company reported a net cash provided by operating activities of $40,118 thousand for the six months ended December 31, 2024, down from $109,865 thousand in the same period of 2023[27] - Total current assets increased to $495,289 thousand as of December 31, 2024, compared to $466,926 thousand as of June 30, 2024, an increase of 6.1%[23] Expenses and Liabilities - Research and development expenses for the six months ended December 31, 2024, were $109,334 thousand, slightly down from $110,849 thousand in the same period of 2023[25] - Total liabilities increased to $1,029,736 thousand as of December 31, 2024, compared to $1,017,312 thousand as of June 30, 2024[23] Margins and Profitability - The gross margin for Q2 was 62.7%, an increase from 61.9% year-over-year[9] - Non-GAAP gross margin percentage for Q2 2024 was 63.4%, an increase from 62.5% in Q2 2023[44] - Non-GAAP operating margin for Q2 2024 was 14.7%, slightly down from 14.8% in Q2 2023[44] Future Expectations - The company expects better than seasonal revenue for Q3, with improved cash flow generation anticipated[4] - The company has excluded certain items from its non-GAAP financial measures, which include share-based compensation and amortization of intangibles, to provide additional insight into its operations[19] - The company expects to incur share-based compensation expenses in future periods, which are non-cash and not reflective of ongoing cash requirements[35] New Initiatives - The company introduced Extreme Platform ONE, integrating networking, security, and AI to enhance productivity[3]

Company Overview - Extreme Networks, Inc. (NASDAQ: EXTR) is the second-largest cloud networking service provider globally, following Cisco, which is the largest in the industry [1]. Product Offering - The company's primary solutions include the flagship ExtremeCloud IQ platform, which leverages AI and automation to enhance its service offerings [1]. Analyst Background - The analysis is conducted by a financial analyst with a decade of experience in investment banking, specializing in industry and company research, particularly in technology, infrastructure, and internet services sectors [1].

Industry Overview - The Zacks Computer - Networking industry is experiencing growth driven by increased focus on cloud computing, network security, big data, and cloud storage, particularly amid the rapid proliferation of AI technology [1] - Companies in this sector are capitalizing on the multi-billion-dollar AI infrastructure opportunity, with the accelerated deployment of 5G enhancing the demand for solid networking infrastructure [1][4] - The industry comprises firms that provide networking and Internet-connected products, including wireless, Ethernet, and powerline solutions, with a focus on dependability and ease of use [2] Trends Influencing the Industry - The rise of smart home and Internet-connected products is driving innovation in networking technologies, with a growing demand for efficient network support infrastructure fueled by the proliferation of IoT and cloud computing [3] - The rapid deployment of 5G is creating opportunities for network-intensive applications, necessitating substantial investments in infrastructure upgrades to support data services [4] - The upcoming Wi-Fi 7 upgrade cycle is expected to drive momentum in the industry, addressing spectrum shortage issues and supporting a higher number of connected devices [5] Economic Conditions - Global macroeconomic weakness and volatile supply-chain dynamics are persistent concerns for the industry, with inflation potentially affecting spending across small and medium-sized businesses [6] Industry Performance - The Zacks Computer - Networking industry is ranked 47, placing it in the top 19% of over 250 Zacks industries, indicating bright near-term prospects [7][8] - The industry's aggregate earnings outlook is positive, with 2024 earnings estimates improving to $2.70 from $2.68 as of July 31, 2024 [9] Stock Market Performance - The industry has underperformed the S&P 500 and the broader Zacks Computer and Technology sector over the past year, gaining 18.2% compared to the sector's 36.3% and the S&P 500's 29.4% [11] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 19.38X, below the S&P 500's 22.71X and the sector's 27.55X [13] Company Highlights - **NetScout Systems (NTCT)**: Focused on performance management and cybersecurity solutions, with expected revenues of $800-$830 million for fiscal 2025 and a Zacks Rank 1 (Strong Buy) [14][15][16] - **Intrusion Inc. (INTZ)**: A cybersecurity company with a strong uptake of its Intrusion Shield technology, reporting a 2.5% year-over-year revenue increase to $1.5 million in Q3 2024 [18][19][21] - **Extreme Networks (EXTR)**: Provides AI-driven cloud networking solutions, with a 23% year-over-year increase in SaaS annual recurring revenues in Q1 fiscal 2025, and expects revenues of $273-$283 million for Q2 fiscal 2025 [23][24]

Core Viewpoint - Extreme Networks (EXTR) has seen a 6.3% increase in share price over the past four weeks, closing at $16.10, with a potential upside of 25.8% based on Wall Street analysts' mean price target of $20.25 [1][9] Price Targets and Analyst Estimates - The mean estimate consists of four short-term price targets with a standard deviation of $2.60, indicating variability among analysts [2] - The lowest estimate is $16.50, suggesting a 2.5% increase, while the highest estimate is $22.50, indicating a potential surge of 39.8% [2] - A low standard deviation signifies a high degree of agreement among analysts regarding the stock's price movement direction [7] Earnings Estimates and Market Sentiment - Analysts have shown increasing optimism about EXTR's earnings prospects, with a strong consensus on higher EPS estimates, which correlates with potential stock price increases [9][10] - The Zacks Consensus Estimate for the current year has risen by 5.9% over the past month, with two estimates increasing and no negative revisions [10] - EXTR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside [11]

Market Overview - The total addressable market for Extreme's Enterprise Networking solutions is estimated to exceed $47 billion, growing at approximately 13% annually over the next five years[88]. - The cloud networking segment is projected to be an $11 billion market, with an annual growth rate of 14% over the next five years[94]. Cloud Solutions and Technology - Extreme's cloud management platform, ExtremeCloud IQ, provides unified management driven by AI and ML, enhancing operational efficiency and reducing time to resolution[91]. - The company emphasizes a hybrid approach, offering customers the choice of public or private cloud, or on-premises solutions, ensuring flexibility and adaptability[94]. - Extreme's AI capabilities, including the recently introduced Extreme AI Expert, aim to optimize network performance and improve mean time to resolution for technical issues[95]. - The company leverages machine learning and AI to enhance network management and automation, addressing the complexities of modern distributed networks[85]. - Extreme's cloud solution integrates machine learning and analytics to deliver actionable insights, helping customers reduce costs and streamline operations[84]. - The company aims to provide a differentiated end-to-end cloud architecture, enhancing visibility, intelligence, and assurance across the network[94]. - Extreme's networking technology is designed to support the increasing complexity of networks, driven by the rise of distributed workforces and cloud-based applications[85]. - The company focuses on delivering a simple and easy-to-manage enterprise networking platform, positioning itself against competitors with complex solutions[90]. Financial Performance - Net revenues for Q1 fiscal 2025 were $269.2 million, a decrease of 23.8% from $353.1 million in Q1 fiscal 2023[98]. - Product revenues fell to $162.3 million, down 36.0% from $253.5 million in the same period last year[101]. - Subscription and support revenues increased to $106.9 million, up 7.3% from $99.7 million in Q1 fiscal 2023[98]. - Total gross margin improved to 63.0% compared to 60.3% in Q1 fiscal 2023[99]. - Operating loss was $4.7 million, a decline from operating income of $35.9 million in Q1 fiscal 2023[99]. - Net loss for the quarter was $10.5 million, compared to net income of $28.7 million in the prior year[100]. - Cash flows from operating activities were $18.6 million, down from $75.6 million in the same period last year[100]. - Research and development expenses decreased by 6.1% to $54.5 million compared to $58.0 million in Q1 fiscal 2023[105]. - Sales and marketing expenses decreased by 11.5% to $81.4 million from $91.9 million in the prior year[107]. - General and administrative expenses increased by 53.3% to $36.6 million, primarily due to litigation charges and system transition costs[108]. Tax and Cash Flow - The income tax provision for the three months ended September 30, 2024, was $1.5 million, a decrease from $4.6 million in the same period of 2023[116]. - Cash and cash equivalents as of September 30, 2024, totaled $159.5 million, up from $156.7 million as of June 30, 2024[118]. - Net cash provided by operating activities for the three months ended September 30, 2024, was $18.6 million, significantly lower than $75.6 million for the same period in 2023[121]. - Net cash used in investing activities was $6.9 million for the three months ended September 30, 2024, compared to $4.3 million in the same period of 2023[121]. - Net cash used in financing activities was $9.1 million for the three months ended September 30, 2024, a substantial decrease from $81.5 million in the same period of 2023[122]. Debt and Commitments - As of September 30, 2024, the company had $187.5 million of debt outstanding, with an average daily outstanding amount of $196.7 million during the quarter[125]. - The company had non-cancelable commitments to purchase $37.3 million of inventory as of September 30, 2024[123]. - Foreign currency transaction losses were $1.4 million for the three months ended September 30, 2024, compared to gains of $0.5 million in the same period of 2023[128]. - The company had $50.3 million available under the 2022 Repurchase Program as of September 30, 2024[118]. - The average interest rate on the company's debt was 7.52% as of September 30, 2024[126].

Core Insights - Extreme Networks' recent quarterly report indicates potential stabilization in the business, with stock prices rising by 13.9% following the announcement [1] Financial Performance - For Q1 of fiscal 2025, Extreme Networks reported non-GAAP earnings per share of $0.17 on revenue of $269.2 million, surpassing analyst expectations of $0.13 per share and revenue of approximately $261.3 million [3] - Revenue experienced a decline of 23.8% year-over-year but showed a sequential increase of 4.9% compared to the previous quarter [3] - The company's annualized recurring revenue for software as a subscription (SaaS) reached $174.1 million, reflecting a year-over-year increase of 23.4% and a sequential quarterly increase of 4.3% [3] Future Guidance - For Q2 of the current fiscal year, Extreme Networks projects sales between $273 million and $283 million, indicating a potential sales decline of about 6% year-over-year but a sequential increase of approximately 3% [4] - Management anticipates an adjusted gross margin between 62.2% and 63.2% for the current quarter, compared to 63% in Q1 of this fiscal year and 62.5% in Q2 of the previous year [5] - Adjusted earnings per share for the current quarter are expected to range between $0.16 and $0.20, which would represent a 25% year-over-year decline but a 6% increase over the previous quarter's earnings [6]

1Q25 Financial Results October 30, 2024 ExtremeCloud Universal ZTNA DISCLAIMER Non-GAAP Financial Measures This presentation includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP), such as, among other things, Non-GAAP Net Income (Loss), Non-GAAP EPS, Non-GAAP Operating Margin, Free Cash Flow, Net Cash (Debt), Non-GAAP Gross Margin, Non-GAAP Operating Income (Loss), and Adjusted EBITDA. Extreme Networks, Inc. (the " ...

Financial Data and Key Metrics Changes - First quarter revenue reached $269.2 million, growing 5% sequentially, driven by recovery in product sales and subscription contracts [25][24] - Earnings per share (EPS) was $0.17, exceeding initial outlook by $0.05 and the high end of guidance [24][31] - Gross margin improved to 63.7%, up 20 basis points sequentially, attributed to higher product revenue and favorable product mix [29][31] - Total recurring revenue accounted for 38% of first quarter revenue, with subscription deferred revenue increasing 19% year-over-year to $282 million [28][31] Business Line Data and Key Metrics Changes - SaaS ARR grew 23% year-over-year, indicating strong demand for cloud offerings [9] - Product revenue was $162.3 million, up 6% sequentially, with notable growth in data center and campus switching [26] - Subscription and support revenue totaled $107 million, up 3% sequentially, driven by cloud subscription strength [27] Market Data and Key Metrics Changes - Revenue in the Americas grew double digits sequentially, with strength noted in North America [25] - APAC region also saw sequential and year-over-year growth, while EMEA experienced a slower recovery due to government spending delays [25][24] Company Strategy and Development Direction - The company is focusing on expanding its cloud management capabilities, integrating AI and security features to enhance competitive advantages [9][10] - New commercial models, including subscription private offers and managed services, are gaining traction, with significant growth in partner engagement [21][22] - The company anticipates continued sequential growth in Q2, supported by a robust funnel of opportunities and market share gains [23][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a broad networking market recovery, with expectations for continued demand growth in the second quarter [8][23] - Challenges in the European market were acknowledged, particularly in the public sector, with project delays due to budgetary issues [36][38] - The company expects to see a more robust recovery in larger customer segments as budget resolutions occur [50][51] Other Important Information - The company is the first to ship enterprise-grade Wi-Fi 7 Access Points, enhancing its product offerings [14][15] - Recent significant wins include contracts with major institutions and sports teams, reinforcing the company's market position [19][20] Q&A Session Summary Question: U.S. vs EMEA recovery - Management confirmed that the U.S. is leading the recovery, while EMEA is experiencing delays due to macroeconomic factors [36][38] Question: Share gain against competitors - The company is gaining share primarily from Cisco, with some wins against Juniper and HPE, driven by unique technology advantages [40][41] Question: Recovery in larger customer segments - Management anticipates a return of larger projects, supported by a strong funnel of opportunities [50][51] Question: AI strategy - The company is developing AIOps capabilities to enhance network management and is collaborating with AWS and Microsoft for future AI solutions [56][60] Question: Project impacts and receivables - Earlier project closures contributed modestly to revenue, with a normal gross margin profile [92][93] - Receivables are within normal ranges, with good collection expectations [95][96]

Extreme Networks (EXTR) came out with quarterly earnings of $0.17 per share, beating the Zacks Consensus Estimate of $0.12 per share. This compares to earnings of $0.35 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 41.67%. A quarter ago, it was expected that this maker of network infrastructure equipment would post earnings of $0.13 per share when it actually produced a loss of $0.08, delivering a surprise of -161.54%. Over ...