Market Overview - The total addressable market for Enterprise Networking solutions is estimated to exceed $47 billion, growing at approximately 13% annually over the next five years[141]. - Cloud networking is projected to be an $11 billion segment, with a growth rate of 14% annually over the next five years[144]. - The company aims to expand its technology foothold in the cloud networking segment, anticipating that the cloud networking compound annual growth rate will outpace that of on-premises managed networking[148]. Product and Technology Developments - The Platform ONE solution integrates networking, security, and AI, aiming to reduce complexity and improve productivity for enterprises[143]. - AI capabilities in Extreme Platform ONE will enhance network performance and troubleshooting, optimizing mean time to resolution for technical issues[145]. - The introduction of Extreme AI Expert aims to optimize networks and reduce costs in design and implementation[145]. - The integration of AI into networking and security solutions is set to enhance the overall customer experience and operational efficiency[146]. Financial Performance - Net revenues for Q3 fiscal 2025 reached $284.5 million, a 34.8% increase from $211.0 million in Q3 fiscal 2024[148]. - Product revenues increased by $71.6 million or 67.3% to $178.1 million in Q3 fiscal 2025 compared to $106.4 million in Q3 fiscal 2024[149]. - Subscription and support revenues rose by $1.9 million or 1.8% to $106.4 million in Q3 fiscal 2025, compared to $104.6 million in Q3 fiscal 2024[151]. - Total gross margin improved to 61.7% of net revenues in Q3 fiscal 2025, up from 56.8% in Q3 fiscal 2024[148]. - Operating income for Q3 fiscal 2025 was $10.4 million, a significant recovery from an operating loss of $62.5 million in Q3 fiscal 2024[148]. - Cash flows from operating activities were $70.1 million for the nine months ended March 31, 2025, compared to $40.0 million for the same period in the previous year[148]. Cost Management and Expenses - Total operating expenses decreased by $17.3 million or 9.5% in Q3 fiscal 2025, reflecting cost management efforts[156]. - Research and development expenses increased by $1.1 million or 2.1% for Q3 fiscal 2025, primarily due to higher personnel costs[158]. - Sales and marketing expenses decreased by $7.9 million or 9.0% for the three months ended March 31, 2025, primarily due to a $4.3 million decrease in personnel costs[161]. - General and administrative expenses increased by $4.3 million or 17.1% for the three months ended March 31, 2025, mainly due to a $6.7 million increase in system transition costs[164]. Cash Flow and Financing Activities - Cash flows provided by operations for the nine months ended March 31, 2025, were $70.1 million, including net income of $0.3 million and non-cash expenses of $86.0 million[189]. - As of March 31, 2025, cash and cash equivalents totaled $185.5 million, an increase from $156.7 million as of June 30, 2024[179]. - The company repurchased 853,247 shares of common stock at a total cost of $13.0 million during the three and nine months ended March 31, 2025[180]. - Net cash used in financing activities for the nine months ended March 31, 2025, was $23.1 million, compared to $109.9 million in the same period of 2024[188]. - Cash flows used in investing activities for the nine months ended March 31, 2025, were $18.1 million, an increase from $13.6 million in the same period of 2024[191][192]. Debt and Commitments - As of March 31, 2025, the company had $182.5 million of debt outstanding, with an average daily outstanding amount of $194.3 million during the quarter[196][201]. - The company had non-cancelable commitments to purchase $36.0 million of inventory as of March 31, 2025[197]. - Contractual commitments to suppliers amounted to $19.4 million due through fiscal year 2027[198]. - The value of obligations under operating leases was $55.3 million as of March 31, 2025[198]. Foreign Exchange and Interest Rate Sensitivity - Foreign exchange forward contracts not designated as hedging instruments had a notional amount of $52.2 million as of March 31, 2025, compared to $15.5 million in 2024[204]. - For the nine months ended March 31, 2025, the company recognized foreign currency transaction net gains of $0.5 million, slightly up from $0.4 million in the same period of 2024[204]. - The company experienced foreign currency transaction net losses of $0.9 million for the three months ended March 31, 2025[204]. - Interest rate sensitivity indicates that a 100 basis point increase in interest rates would result in an increase in interest expense of $1.943 million[202].

Core Viewpoint - Extreme Networks reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of $0.19 per share, and showing a significant improvement from a loss of $0.19 per share a year ago [1][2] Financial Performance - The company achieved revenues of $284.51 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.39% and increasing from $211.04 million year-over-year [2] - Over the last four quarters, Extreme Networks has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Extreme Networks shares have declined approximately 20.4% since the beginning of the year, in contrast to the S&P 500's decline of 5.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.22 on revenues of $298.15 million, and for the current fiscal year, it is $0.79 on revenues of $1.13 billion [7] - The outlook for the Computer - Networking industry is positive, ranking in the top 27% of over 250 Zacks industries, suggesting potential for outperformance [8] Competitor Insights - NetScout Systems, another company in the same industry, is expected to report quarterly earnings of $0.52 per share, reflecting a year-over-year decline of 5.5%, with revenues anticipated at $197.65 million, down 2.9% from the previous year [9][10]

Financial Data and Key Metrics Changes - Revenue for the quarter reached $284.5 million, representing a 35% increase year over year and a 2% sequential increase [6][19] - Earnings per share were $0.21, consistent with the prior quarter and significantly up year over year, exceeding the high end of guidance [18] - Gross margin for the quarter was 62.3%, a 110 basis point sequential decrease but up 470 basis points year over year [23] Business Line Data and Key Metrics Changes - Product revenue increased to $178.1 million, up 67% year over year and 3% quarter over quarter, with wireless solutions growing 12% sequentially [19] - Subscription business grew double digits, with SaaS annual recurring revenue reaching $184 million, up 13.4% year over year [19] - Total deferred recurring revenue grew 7% year over year to $578 million, reflecting strong momentum in the recurring revenue model [19] Market Data and Key Metrics Changes - The Americas region grew 19% year over year, while EMEA revenue grew 81% year over year [20] - APAC revenue was flat year over year, but bookings were up double digits [20] - K-12 bookings, including E Rate, grew double digits over both periods, indicating market share gains in this segment [22] Company Strategy and Development Direction - The company is focusing on expanding its footprint in larger enterprise customers and enhancing its competitive position against major players like Cisco and HP [8][9] - The introduction of Extreme Platform One aims to leverage AI for networking, driving automation and efficiency for enterprise customers [14][15] - The company is committed to strategic investments in R&D and marketing to support product innovation and market expansion [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained customer demand based on strong funnel generation and pipeline growth [8] - The company anticipates further market share gains and revenue growth for the full year, with expectations of increased margins and cash flow [17] - Management noted that the tariff situation is dynamic but currently has minimal impact on the business [36][39] Other Important Information - The company repurchased $13 million worth of shares during the quarter and authorized an additional $200 million for buybacks over the next three years [26] - The company transitioned to a net cash position of $3 million, a significant improvement from a net debt position of $15 million at the end of the previous year [27] Q&A Session Summary Question: Feedback from customers regarding tariffs and future outlook - Management indicated that there is minimal impact from tariffs currently, with customers showing minor early buying to mitigate potential price increases [32][36] Question: Competitive trends among major players - Management noted that HPE is struggling and losing market share, while Cisco remains strong but faces dissatisfaction from customers regarding complexity and cost [44][47] Question: Growth expectations for SaaS ARR - Management highlighted strong bookings for SaaS subscriptions, with expectations for growth driven by the adoption of Platform One [50][51] Question: Customer adoption of WiFi 7 - Management reported strong adoption of WiFi 7, with enterprises increasingly confident in using it for mission-critical solutions [69][71] Question: Regional demand and inventory planning - Management noted that demand is returning to the marketplace, particularly in the Americas, and that inventory levels are normalizing [78][100]

Financial Data and Key Metrics Changes - Revenue for Q3 reached $284.5 million, a 35% increase year over year and a 2% sequential increase [6][18] - Earnings per share were $0.21, consistent with the prior quarter and significantly up year over year [17] - Gross margin for the quarter was 62.3%, reflecting a 110 basis point sequential decrease but a 470 basis point increase year over year [22] Business Line Data and Key Metrics Changes - Product revenue increased to $178.1 million, up 67% year over year and 3% quarter over quarter, with wireless solutions growing 12% sequentially [18] - Subscription business saw annual recurring revenue reach $184 million, up 13.4% year over year [18] - Total deferred recurring revenue grew 7% year over year to $578 million, indicating strong momentum in the recurring revenue model [18] Market Data and Key Metrics Changes - The Americas region revenue grew 19% year over year, while EMEA revenue surged 81% year over year [19] - APAC revenue remained flat year over year, but bookings were up double digits [19] - The company reported its best bookings quarter in the past six quarters, with strong performance across various verticals including government, transportation, and education [20] Company Strategy and Development Direction - The company is focused on expanding its market share through innovative solutions like Extreme Platform One, which integrates AI for networking [14][61] - The competitive position is strengthening with significant wins against major players like Cisco and HP, driven by differentiated campus fabric solutions [8][42] - The company is committed to operational efficiency and product mix optimization, with expectations for increased margins and cash flow [22][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained customer demand based on strong funnel generation and pipeline growth [7][16] - The company anticipates continued revenue growth and improved profitability in Q4, with guidance for revenue in the range of $295 million to $305 million [28][29] - Management noted that the tariff situation is dynamic but currently has minimal impact on demand [35][38] Other Important Information - The company repurchased $13 million worth of shares during the quarter and announced an additional $200 million buyback authorization for the next three years [25] - The company has transitioned to a net cash position of $3 million, a significant improvement from a net debt position of $15 million [26] Q&A Session Summary Question: Feedback from customers regarding tariffs and future outlook - Management indicated that there is currently minimal impact from tariffs, with customers showing early buying behavior to mitigate potential price increases [31][35] Question: Competitive trends among Cisco, Juniper, and HP - Management noted that HP is struggling and losing market share, while Cisco remains competitive but faces dissatisfaction from customers regarding complexity and cost [42][45] Question: Growth potential in SaaS ARR - Management highlighted strong bookings in SaaS subscriptions, with expectations for growth driven by the adoption of Platform One [48][49] Question: Update on customer adoption of WiFi 7 - Management reported strong adoption of WiFi 7, with enterprises increasingly confident in using it for mission-critical solutions [64][66] Question: Regional demand and inventory feedback - Management noted a return of real demand in the marketplace, particularly in the Americas, and highlighted a resurgence in the EMEA region, especially Germany [77][79]

April 30, 2025 3Q25 Financial Results 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 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 Net Income (Loss), Non-GAAP Operating Expense, Gross Debt, and Adjus ...

Financial Performance - Total revenue for Q3 2025 was $285 million, representing a year-over-year increase of 34.8% and a quarter-over-quarter increase of 1.8%[5] - GAAP diluted EPS was $0.03, a significant improvement from a loss of $0.50 per share in the same quarter last year[5] - Non-GAAP diluted EPS was $0.21, compared to a loss of $0.19 per share last year[5] - GAAP gross margin improved to 61.7%, up from 56.8% last year[8] - Non-GAAP operating profit margin was 14.1%, compared to a loss margin of 12.2% last year[8] - Operating income for Q3 2025 was $10.4 million, a significant recovery from an operating loss of $62.5 million in the same quarter last year[24] - Net income for Q3 2025 was $3.5 million, compared to a net loss of $64.4 million in Q3 2024[24] - GAAP revenues for the three months ended March 31, 2025, were $284,505 thousand, compared to $211,036 thousand for the same period in 2024, representing a year-over-year increase of 34.7%[43] - GAAP operating income for the three months ended March 31, 2025, was $10,377 thousand, compared to a loss of $62,469 thousand in the same period of 2024, indicating a significant turnaround[43] - GAAP net income for the three months ended March 31, 2025, was $3,458 thousand, compared to a loss of $64,425 thousand in the same period of 2024[44] Revenue Breakdown - SaaS ARR reached $184 million, up 13.4% year-over-year and up 1.5% quarter-over-quarter[5] - Total net revenues for Q3 2025 reached $284.5 million, a 35% increase from $211.0 million in Q3 2024[24] - Product revenues increased to $178.1 million, up 67% from $106.4 million year-over-year[24] - Gross profit for Q3 2025 was $175.4 million, compared to $119.9 million in Q3 2024, reflecting a gross margin improvement[24] - Non-GAAP gross profit for the three months ended March 31, 2025, was $177,358 thousand, with a non-GAAP gross margin of 62.3%, up from 57.6% in the same period of 2024[43] Cash Flow and Assets - The company generated net cash flow from operations of $30 million and had free cash flow of $24.2 million in Q3[8] - Cash and cash equivalents increased to $185.5 million as of March 31, 2025, up from $156.7 million at the end of June 2024[22] - The company reported a net cash provided by operating activities of $70.1 million for the nine months ended March 31, 2025, compared to $40.0 million for the same period last year[26] - The company has a total of $1.07 billion in assets as of March 31, 2025, compared to $1.04 billion as of June 30, 2024[22] Future Guidance - For Q4 2025, the company targets total net revenue between $295 million and $305 million[12] - The full year fiscal 2025 revenue guidance is set between $1,128 million and $1,138 million[13] Market Position and Risks - Extreme Platform ONE has nearly 100 pre-orders and is gaining traction with managed service providers[3] - Future outlook includes potential risks related to global macroeconomic trends and competition in the network switching equipment market[18] Non-GAAP Measures - Non-GAAP operating income for the three months ended March 31, 2025, was $40,048 thousand, with a non-GAAP operating margin of 14.1%, compared to a loss margin of 12.2% in the same period of 2024[43] - Non-GAAP net income for the three months ended March 31, 2025, was $27,958 thousand, compared to a loss of $24,797 thousand in the same period of 2024[44] - Non-GAAP net income per diluted share for the three months ended March 31, 2025, was $0.21, compared to a loss of $0.19 per diluted share in the same period of 2024[44] - Total adjustments to GAAP net income for the three months ended March 31, 2025, amounted to $24,500 thousand, primarily due to share-based compensation and restructuring charges[44] - The company expects to continue incurring share-based compensation expenses in future periods, which are excluded from non-GAAP measures[34] - The non-GAAP provision for income taxes is calculated using a blended U.S. statutory tax rate of 24.6%[39]

Company Overview - Extreme Networks (NASDAQ: EXTR) is identified as an undervalued and overlooked company that is working on significant developments that could surprise the market [1] Investment Philosophy - Henriot Capital operates on the principle that simplicity and common sense drive investment success, focusing on building a hedge fund with a clear purpose and disciplined approach [1] - The investment strategy is fully quant-driven, relying on a model that provides stock recommendations without human interference, emphasizing data-driven decisions [1] Investment Approach - The motto "invest first, investigate later" reflects the company's strategy of purchasing stocks based on model suggestions and conducting further research afterward [1] - This approach aims to minimize individual bias in stock selection, ensuring that investment decisions are based on quantitative data [1]

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[146]. - The cloud networking segment is projected to be an $11 billion market, growing at 14% annually over the next five years[150]. - The networking and infrastructure market for enterprise and service provider applications is valued at over $36 billion[146]. - The company aims to expand its market penetration by targeting high-growth segments, particularly in cloud networking, which is expected to outpace on-premises managed networking growth[155]. Product and Technology - Extreme's Platform ONE integrates networking, security, and AI solutions, aiming to reduce complexity for enterprises[148]. - The company anticipates that its AI-powered automation will enhance productivity for networking, security, and business teams[148]. - ExtremeCloud IQ provides unified cloud-native management driven by AI and ML, streamlining operations and delivering actionable insights[152]. - The company has introduced the Extreme AI Expert, a GenAI solution designed to optimize networks and improve issue resolution times[152]. - The company is set to launch Extreme Platform ONE in the second half of calendar year 2025, integrating networking and security with AI[153]. - Extreme's cloud management platform conforms to ISO/IEC standards for data privacy and protection, ensuring high security for customers[150]. - The company offers flexible consumption options for its services, including public, private, and hybrid cloud solutions[152]. - Extreme's strategy focuses on delivering a differentiated end-to-end cloud networking architecture to enhance customer outcomes[147]. Financial Performance - Net revenues for Q2 fiscal 2025 were $279.4 million, a decrease of 5.7% compared to $296.4 million in Q2 fiscal 2024[155]. - Product revenues decreased by $14.4 million or 7.7% for Q2 fiscal 2025 compared to Q2 fiscal 2024, and by $105.5 million or 24.0% for the first six months of fiscal 2025[157]. - Subscription and support revenues decreased by $2.7 million or 2.4% for Q2 fiscal 2025, but increased by $4.6 million or 2.2% for the first six months of fiscal 2025[158]. - Total gross margin improved to 62.7% of net revenues in Q2 fiscal 2025, compared to 61.9% in Q2 fiscal 2024[155]. - Operating income for Q2 fiscal 2025 was $12.7 million, up from $10.3 million in Q2 fiscal 2024[155]. - Cash flows from operating activities were $40.1 million for the first six months of fiscal 2025, down from $109.9 million in the same period last year[155]. Expenses and Costs - Research and development expenses increased by $2.1 million or 3.9% for Q2 fiscal 2025 compared to Q2 fiscal 2024, primarily due to higher personnel costs[165]. - Total operating expenses decreased by 6.1% to $162.5 million in Q2 fiscal 2025 compared to $173.1 million in Q2 fiscal 2024[163]. - Research and development expenses decreased by $1.5 million or 1.4% for the six months ended December 31, 2024, primarily due to a $5.8 million decrease in contractor costs[166]. - Sales and marketing expenses decreased by $15.7 million or 8.9% for the six months ended December 31, 2024, mainly due to a $12.4 million decrease in personnel costs[169]. - General and administrative expenses increased by $13.4 million or 27.2% for the six months ended December 31, 2024, primarily due to an $8.8 million increase in legal costs related to litigation matters[172]. - Restructuring and related charges were recorded at $2.3 million for the six months ended December 31, 2024, primarily consisting of severance and benefits costs[173]. Cash Flow and Debt - The company reported net cash provided by operating activities of $40.1 million for the six months ended December 31, 2024, despite a net loss of $3.1 million[196]. - Cash and cash equivalents increased to $170.3 million as of December 31, 2024, compared to $156.7 million as of June 30, 2024[186]. - The company had $50.3 million available for share repurchases under the 2022 Repurchase Program as of December 31, 2024[187]. - As of December 31, 2024, the company had $185.0 million of debt outstanding, with an average daily outstanding amount of $197.3 million during the quarter[209]. - Cash flows used in financing activities for the six months ended December 31, 2024 were $14.0 million, primarily due to payments for taxes and debt financing costs[199]. Foreign Exchange and Commitments - Foreign exchange forward contracts not designated as hedging instruments had a notional amount of $55.0 million as of December 31, 2024, compared to $15.6 million in 2023[212]. - For the six months ended December 31, 2024, the company recognized foreign currency transaction net gains of $1.4 million, compared to net losses of $0.3 million for the same period in 2023[212]. - The company had non-cancelable commitments to purchase $29.5 million of inventory as of December 31, 2024[204]. - The company expects to honor inventory purchase commitments within the next 12 months[204]. - The company had contractual commitments of $21.5 million due through fiscal year 2027 as of December 31, 2024[205].

Core Viewpoint - Extreme Networks reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of $0.18 per share, but down from $0.24 per share a year ago, indicating a 16.67% earnings surprise [1] - The company generated revenues of $279.36 million for the quarter, surpassing the Zacks Consensus Estimate by 0.22%, but down from $296.38 million year-over-year [2] Earnings Performance - The company has surpassed consensus EPS estimates two times over the last four quarters [2] - The earnings surprise for the previous quarter was 41.67%, with actual earnings of $0.17 per share compared to an expected $0.12 [1][2] Stock Performance - Extreme Networks shares have declined approximately 2.9% since the beginning of the year, while the S&P 500 has gained 3.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - Current consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $279.6 million, and for the current fiscal year, it is $0.76 on revenues of $1.12 billion [7] - The outlook for the industry, particularly the Computer - Networking sector, is favorable, ranking in the top 35% of Zacks industries, which historically outperforms the bottom 50% by a factor of more than 2 to 1 [8]

Financial Performance - Total revenue for 2Q25 was $279.4 million[12], compared to $296.4 million in 2Q24[12] - Non-GAAP gross margin was 63.4%[10] in 2Q25, compared to 62.5%[12] in 2Q24 - Non-GAAP operating margin was 14.7%[10] in 2Q25, compared to 14.8%[12] in 2Q24 - Non-GAAP EPS was $0.21[10] in 2Q25, compared to $0.24[12] in 2Q24 - Free cash flow for 2Q25 was $16.1 million[10], compared to $28.6 million in 2Q24[31] Recurring Revenue and SaaS - Recurring revenue was $103 million[7] in 2Q25, up 2% year-over-year[7], representing 37%[10] of total revenue[10] - SaaS ARR was $181 million[10], up 14% year-over-year[10] - SaaS deferred revenue was $290 million[7], up 18% year-over-year[7] Balance Sheet - Cash and cash equivalents were $170.3 million[7] - Net debt was $14.7 million[10] Guidance - The company projects revenue between $276 million and $284 million for 3Q25[47] - The company projects revenue between $1,120 million and $1,138 million for FY25[51]