Extreme Networks, Inc.

Your conference is scheduled to begin momentarily. Please continue to stand by, and thank you for your patience. Thank you. Good day, and thank you for standing by. Welcome to the Xtreme Network's first quarter fiscal year 2022 financial results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. As a reminder, this conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Stanley Kovler, Vice President of Corporate Strategy and Investor Relations. Please go ahead.

Thank you, Norma, and welcome everyone to the Xtreme Network's first quarter 2022 earnings conference call. I'm Stan Kovler, Vice President of Corporate Strategy and Investor Relations. With me today are Xtreme Network's President and CEO, Ed Myercord, and CFO, Remy Thomas. We just distributed a press release and filed an 8K detailing Xtreme Network's financial results for the quarter. For your convenience, a copy of the press release, which includes our GAAP to non-GAAP reconciliations, is available in the investor relations section of our website at XtremeNetworks.com. I would like to remind you that during today's call, our discussion may include forward-looking statements about Xtreme's future business, financial, and operational results growth expectations and strategies, the impact of the COVID pandemic, and challenges in our supply chain as they relate to chip shortages and otherwise. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that can cause actual results to differ materially from those anticipated by these statements, as described in our risk factors in our 10-K report for the period ending June 30, 2021, filed with the SEC, and any additional risk factors in subsequent 10Q filings. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them except as required by law. Now, I will turn the call over to Xtreme's President and CEO, Ed Myercourt.

Thank you, Stan, and thank you all for joining us this morning. Q1 was characterized by unprecedented bookings growth, and continued double-digit year-over-year revenue growth. Q1 bookings accelerated to 45% year-over-year growth, even higher than the 36% achieved in Q4. This continued strength in demand was evidenced by a record 43 customers that booked over $1 million in business with Xtreme in Q1, up from 32 in Q4, and our backlog doubled to over 200 million. This marks the third consecutive quarter of double-digit bookings and revenue growth, including the third consecutive quarter of double-digit product revenue growth. Given the demand trends at hand and our backlog, which we expect to grow once again in Q2, we now expect double-digit organic revenue growth in fiscal 22. We further improved our competitive position, and according to industry research firm 650 Group, gained a point of share in each of the prior two quarters in the campus enterprise networking market. In cloud managed networking, the fastest growing segment of our industry, we strengthened our competitive position and our 13% market share is larger than the number three and number four vendor share combined. Customers are accelerating their investments in digital transformation related to return to work environments that are more flexible and hybrid in nature, supporting our infinite enterprise vision. The networking industry is experiencing the highest growth in years, and our growth is accelerated by the fact that we are taking share in this environment. The combination of our leading cloud management solution, universal wired and wireless platforms, our automated campus fabric, and simple licensing model provides customers with unparalleled value for their networking needs. We are focused on supporting our customers' increasingly distributed networks and what we call the infinite enterprise, where cloud becomes the connective tissue. Given the heightened awareness of our brand, the strength of our competitive position with channel partners and enterprise customers, and the technology differentiation of our solutions, we see continued momentum building the value of opportunities in our pipeline. And we are closing a larger percentage of deals with an increase in our funnel conversion rate. This quarter, we doubled down on our infinite enterprise vision with the acquisition of Ipanema. We now have important new capabilities to support the infinite enterprise, such as session-based application performance management, policy enforcement, firewall as a service, WAN edge routing, all delivered from the cloud. Our new WAN edge capabilities will be delivered as a service and become an important driver of our software subscription recurring revenue. Since we closed the acquisition on September 15, our business integration and product development plans are tracking ahead of plan. We expect to turn up our new SaaS back office operating systems, our new customer success and lifecycle management platform, and complete the system integration in early fiscal Q3. This will support the rollout of our extreme branded WAN edge solutions globally. And since we announced the acquisition, we have received positive feedback and reverse inquiry from customers and partners showing significant interest in our new capabilities. Meanwhile, product cycles in the infrastructure business are getting shorter with new innovations coming out that require cloud to drive them. We grew SaaS subscription bookings by 71% year over year, and our growth would have been even higher in SaaS if we were able to meet customer demand since new subscription bookings of XIQ Pilot Our base cloud management license are currently attached to new product sales. Our total cloud services business is now in an annualized run rate of nearly $130 million in bookings. As Remy will discuss in greater detail, we have begun to report SAS annual recurring revenue, which was $78 million this quarter, up 54% year-over-year and 15% quarter-over-quarter. And our service provider business We continue to execute towards our goal of attaining $20 million of 5G business in fiscal 22 in line with our expectations. Both of our 5G solutions, the 9920 packet broker visibility solution and the cloud native infrastructure solutions for IP fabric automation performed well, and we expect growth to accelerate into the first half of calendar 22. And our core network infrastructure business, we delivered several key innovations during the quarter. We announced that Novant Health was the first commercial Wi-Fi 6E customer in the industry. Xtreme's solution allows users to take advantage of the full 1,200 megahertz of new spectrum and enables enhanced care experience to patients such as new communication tools and telehealth at peak network performance. The combination of new AP4000 hardware with Extreme Cloud IQ, which is the only ISO-certified cloud network management platform in the industry, provides an unrivaled data security posture for Novant. On the wired side of our portfolio, we have a strong slate of universal products coming out in the first half of calendar 22 to further expand our previous mid-range upgrades with the 5420 and 5520 and a higher density offering. Both product lines are targeted at the product refresh of our existing portfolio and new use cases such as software upgradable multi-rate capabilities. We are creating new API capabilities for customers to enable our wireless, NAC, and analytics capabilities to directly integrate extremes management functions with third-party systems. We can extend our functionality with custom applications and are set to offer a standard Python-based software development kit with integrated sample code. Despite all the accelerated innovation happening at Xtreme, we remain committed to driving simplicity in networking. We are employing a mobile-first philosophy, and we will further enhance our mobile app with a more intuitive user experience and shorten our new release cadence to enable users to manage their switching environment along with wireless. We now enable features such as onboarding wired devices, capture and upload images, device performance visibility, and the overall network scorecard. With our co-pilot artificial intelligence and machine learning engine, we provide our customers with new explainable insights that can optimize network performance, identify potential security risks, anomalous threats, network vulnerabilities, and enable operating efficiencies. These differentiated and enhanced capabilities strengthen our profile as a leading innovator in cloud networking. We are adding new over-the-top cloud capabilities that will accelerate our cloud transformation with multi-domain cloud licenses. This allows us to sell software for devices that are not tethered to extremes networking infrastructure. The first use case solution of our multi-domain cloud is our new partnership with Zebra Technologies. to add enhanced network visibility to Zebra handheld devices managed through XIQ. This allows a networking administrator to help users get much better troubleshooting support through our intuitive insights engine. This unmatched visibility will dramatically reduce time to resolution for these business-critical devices. The funnel of opportunities remains strong across the broad range of verticals and market segments we serve. The record backlog with which we entered Q2 gives us confidence in our ability to capitalize on our growth objectives. We continue to grow our market share and realize the level of organic growth we have not witnessed for many, many years. And with that, I will turn the call over to our CFO, Remy Thomas.