Extreme Networks, Inc.

Good day and thank you for standing by. Welcome to the Xtreme Network second quarter FiscalGear 20C financial results. At this time all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stan Kovler, Vice President of Corporate Strategy and Investor Relations. Please go ahead.

Thank you, and welcome to the Xtreme Network's fiscal second quarter 2023 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 Meyercourt, and Interim CFO, Christina Tate. We just distributed a press release and filed an 8K detailing Xtreme's financial results for the quarter, and also an 8K detailing our CFO transition. For your convenience, a copy of the press release, which includes our gaps and non-gap reconciliations, our earnings presentation, are both available in the investor relations section of our website at XtremeNetworks.com. And 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. All financial disclosures on this call will be made on a non-GAAP basis unless stated 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 ended June 30, 2022, as filed with the SEC. 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, it's my pleasure to turn the call over to Xtreme's President and CEO, Ed Myercord.

Thank you, Stan, and thank you all for joining us this morning. We had another record quarter as demand for cloud-driven networking and for Xtreme solutions remains exceptionally strong with good visibility through fiscal year-end 23. leading us to raise our full-year revenue outlook to the high end of our range. Our share gains are evident by a second consecutive quarter of double-digit revenue growth, 17% growth in product revenue, record-free cash flow, and a sizable backlog. The resiliency of our business, combined with the strong execution of our teams and focus on shareholder value, continues to position Xtreme well for the long term. The sequential increase in revenue and margins led to continued improvement in our operating model to record levels, just shy of 15% operating margin, and we achieved EPS of 27 cents in Q2, up from 21 cents in the year-ago quarter. We expect these bottom-line earnings trends to continue. Both our fabric and cloud solutions are driving significant differentiation for Xtreme, particularly due to our ability to deliver network automation, hyper-segmentation, unmatched security. Today, our fabric solutions offer a simple way for customers to tie all the components of their network together, from the branch, campus, data center, to the cloud. It removes network complexity, speeds deployments, and streamlines operations. The transition to universal products has proven successful, with well over 60% of our bookings now on universal platforms for wired and wireless products. We're on track to achieve this transition by year-end calendar 23 with over 90% coverage of our portfolio with the universal platform. This calendar quarter, we'll be announcing a set of unique innovations involving Extreme Cloud SD-WAN and our widely deployed Extreme Fabric. These capabilities will enable our customers to improve visibility, management, application performance, and security at the edge of the network. This further extends our vision of one network, one cloud, one extreme over the wide area network with a truly differentiated fabric technology. We're focused on helping our customers find new ways to deliver better outcomes across their organizations. During the quarter, 44 customers spent more than a million dollars with Xtreme, up from 37 last quarter. This is another signal of how Xtreme continues to take share and move up markets. some top wins for the quarter included a multinational bank in hong kong where we beat two of our largest competitors to modernize the infrastructure for surveillance digital cornerstone for safety and security after using a competitor for many years extreme was able to bid on this project and win a large school district just outside of houston was looking to streamline management of its network which sprawls across 92 buildings supports 60 000 students Our fabric technology will provide full visibility across the network, simplifying and unifying network management, improving security at every site, and automating network configuration and provisioning to significantly reduce time spent on new deployments. A leading NHS trust hospital and cancer research center in London upgraded their networks to continue to offer patients the most modern care. New bandwidth-heavy applications, telehealth visits, and medical devices are crucial for patient monitoring and require a Wi-Fi 6E fast, reliable, low-latency network that can be easily managed by Extreme Cloud IQ. Our competitive position has never been stronger. Given our relative size, even small share gains have a large impact on Extreme's top line. We remain the fastest-growing company in our space. Third-party analysts, industry press, and partner community have taken notice, and we've received numerous accolades and awards for our solutions and service. For the fifth consecutive year, we were named a leader in the Gartner Magic Quadrant for wired and wireless local area network infrastructure. Our innovation, vision, and continued execution with solutions like Fabric and Digital Twin were significant factors in our ranking. Our new customer logo wins contributed a higher percentage of our bookings About half of our new logo wins are coming because of fatigue and lack of innovation from some of the largest players in the industry. We're taking advantage of these market dislocations. And when customers realize they'll benefit from interoperability between platforms, simpler licensing structures, productivity from Xtreme versus our largest competitor, we're quick to capitalize on these opportunities to win new business. More customers and partners choose Xtreme because of our ability to offer unlimited end-to-end network that can be managed within a single cloud platform. Customers also love our universal hardware that offers choice of both cloud-based and on-premise deployments. As product lead times continue to improve, we expect our share gains to accelerate. Last quarter, we strengthened our go-to-market organization by appointing Pete Brandt as Senior Vice President of U.S. Sales, Pete is a proven sales leader focused on taking share and building SaaS organizations, coming from leading networking and security companies such as F5 and Fortinet. We ended Q2 with ARR growth of 29% year over year, while SaaS deferred revenue grew at 38% year over year. Our innovative cloud solutions are pulling through product sales, and we believe the level of organic subscription growth we're seeing is sustainable. In addition, the improvement in supply chain, our ability to deliver products, most notably wireless LAN this quarter, supported a strong pull-through of software subscription for the next several years. On the supply chain side, our ability to pull in components enable us to achieve revenue upside, which we believe is sustainable into the second half of the year. As a result, we're raising our revenue outlook to the high end of our prior 10% to 15% guide and range. We continue to be laser focused on tactical execution to meet our customers' needs. This quarter alone, we qualified an additional 37 component suppliers and significantly reduced our part shortages. Based on all the actions we've taken with our supply chain over the past year, we now have visibility and confidence that the ramp of our product deliveries will continue to improve and reduce lead times. With a strong outlook for bookings growth and the gradual improvement of supply, we expect backlog to remain relatively stable for the next several quarters. We're in the beginning stages of an accelerated wave of product shipments and revenue growth over multiple quarters. The majority of our backlog consists of the latest generation universal products that pull through subscription and services bookings. So when our backlog shifts, it will also unleash subscription and maintenance services revenues over the next several years. Throughout calendar 23, we have several universal product innovations coming to market that will drive better outcomes for our customers. In addition to the 5720 switches designed for higher data throughput, such as our Wi-Fi 60 access points, we'll be coming to market with new industrial switches for hardened environments and smart city deployments, new distribution switches to support the higher power over Ethernet and density requirements of Wi-Fi 6C and Wi-Fi 7 in the future. Several new data center and core products will also launch throughout the year. Lastly, I want to welcome our interim CFO, Christina Tate, to the call. Christina is a proven and highly respected leader at Xtreme, and I expect a smooth transition as we enter this new growth phase. Remy accepted a new opportunity with a privately owned software company and will stay on with us through the middle of next month to oversee the transition. He was a great partner and leader and has set the company up for success. With that, I will turn the call over to Christina to cover the financials.