Extreme Networks, Inc.

Thank you for standing by and welcome to the Extreme Network's third quarter fiscal year 2024 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 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Stan Kovler, Vice President of Corporate Strategy and Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning and welcome to the Xtreme Network's third quarter 2024 earnings conference call. I'm Stan Kovler, Vice President of Corporate Development and Investor Relations. With me today are Xtreme's President and CEO, Ed Meyer-Kors, and EVP and CFO, Kevin Rhodes, we just distributed a press release and filed an 8K, detailing Extreme Network's financial results for the quarter. For your convenience, a copy of the press release, which includes our gaps and non-gap reconciliations, is available in the investor relations section of our website at extremenetworks.com, along with our earnings presentation. Today's call and our discussion may include certain forward-looking statements based on our current expectations about Extreme's future business, financial, and operational results, growth expectations, and strategies. All financial disclosures on this call will be 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. They can cause actual results to differ materially from those anticipated by these statements. These risks are described in our risk factors in the 10-K report for the period end of June 30, 2023, and subsequent 10-Q reports 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. Following our prepared remarks, we will take questions. And now I will turn the call over to Xtreme's President and CEO, Ed Meyerfield.

Thank you, Stan, and thank you all for joining us this morning. Our results were in line to slightly better than our third quarter outlook. Highlights from Q3 include Net new logo bookings grew double digits globally with particular strength in the U.S. market. Our SaaS ARR grew by 38% year over year as we continue to deliver on our value proposition of flexibility and simplicity with our one network, one cloud strategy. And we were successful in reducing channel inventory at the high end of our $40 to $50 million range, bringing us closer to channel normalization. As expected, we're calling for meaningful sequential revenue growth heading into our fiscal fourth quarter, but note that industry-wide customer and channel digestion will continue to create a drag on normalized bookings and revenue. Customers and channel partners continue to work through purchases and orders, and we expect demand normalization during the second half of calendar 24. The expected sequential growth in revenue and bookings will help us return to solid profitability and cash flow generation during the fourth quarter. Our funnel of opportunities is up from the prior quarter. We anticipate that the upcoming stage of growth will be driven by an increasing number of deals that exceed a million dollars as we continue to move up market. Last week, we hosted our annual Connect User Conference in Fort Worth, Texas. It was oversubscribed and our biggest event yet, with about 19% growth in customer attendees from a year ago. The event focused on the intersection of networking, security, and AI, and we made several announcements relative to those topics. We demonstrated Extreme Cloud Universal's ETNA, the first network security offering to integrate network application and device security within a single solution. By combining CloudNAC and ZTNA into a single easy-to-use SaaS offering, we help customers ensure unified observability, frictionless user experiences, and a consistent security policy for applications and devices. As the VPN market transitions to ZTNA, The proliferation of individual applications, each with their own policy and dashboard, is adding complexity and expense for enterprise customers. A vice president of one of our multibillion-dollar channel partners joined us on the main stage at Connect and said, the identity-focused approach with a common policy engine is a game changer. This was further evidenced by the PAC breakout sessions at Connect, where discussions on zero trust drew standing-room-only crowds. When added to our unique enterprise fabric, this allows us to present a highly differentiated security value proposition to enterprise customers. We also increase the scale of our fabric solution to extend fabric over SD-WAN, broadening the reach from the data center to branch. Customers love our fabric because it's simple to deploy, highly resilient, makes it easy to segment the network, which dramatically minimizes the blast radius and exposure of cyber attacks. We expect the broadening of our security offerings to drive significant traction for our business with growth opportunities across our top verticals, such as higher education, healthcare, retail, manufacturing, transportation, logistics, et cetera. Our customers and partners also reacted very favorably to Xtreme Labs, a dynamic ecosystem where creativity, collaboration, cutting edge technology converge to fuel innovation of early stage technologies. We provided a tech preview of AI Expert, a generative AI solution that delivers substantial optimizations and cost savings in the design, deployment, and management of enterprise networking and security. Finally, we announced that we are the first vendor to allow Wi-Fi 6E customers such as the San Francisco Giants, Cedar Fair, and BYU to unlock outdoor six gigahertz spectrum to experience faster speeds, increased range of coverage, and expanded capacity for outdoor connectivity. There was a lot of discussion at Connect about industry M&A and the disruption that it's causing. We fielded lots of questions about Cisco diversifying away from network and customers' fatigue with the cost, complexity, and lack of flexibility that comes with doing business with them. As it relates to HPE's acquisition of Juniper, most questions focused on risk and how to protect their technology investments. Customers are worried and don't have a clear view of technology roadmaps or the potential negative impact the integration may have down the line. We feel confident Xtreme's pure play focus on secure network and finding new ways to deliver better outcomes for our customers will remain a competitive advantage. We were named as a leader in the Gartner MQ for the sixth consecutive time. Once again, Cisco moved down in vision and execution, and customers are taking notice. Turning to new wins, we had a strong quarter in higher education. We won Washington University and St. Louis, one of the country's top universities, which selected Xtreme to modernize its networking infrastructure, displacing Cisco. Xtreme's fabric solutions will help the university create a simple, scalable, and secure network across the campus. And with Extreme Cloud IQ, WashU will be able to manage its entire network, including third-party applications, third-party devices. In EMEA, spending remained challenging across many of our largest verticals, and revenue is impacted by channel digestion. However, we continued our success in winning international sports venues, such as Borussia Dortmund, which is one of the largest football clubs in Germany. They're deploying Wi-Fi 6E fabric, extreme analytics across the stadium to create next-gen experiences like in-seat concessions, AR, VR, and biometrics. In Asia Pacific, booking trends have been stable for a number of quarters, and we're seeing success, particularly in the hospitality sector, where we've added multiple new logos across Asia. In the quarter, we also display Cisco with several major customers, including Korean Airlines, a 30-year customer. We're deploying across 250 of their sites worldwide, including their global headquarters in Seoul. Our new go-to-market initiatives are helping us grow and gain share as well. We grew our MSP partner base to 23 during the quarter, with many more in queue. The vast majority of MSP revenue is net new logos. Our MSP footprint is expanding as partners appreciate the simplicity of one cloud, the flexibility of our unified hardware, and our unique consumption billing model. We make it simple for these service providers to deliver seamless, high-quality networking experiences. As we contemplate our recovery, we're encouraged by our funnel and believe that customers' demand for our solutions will continue to improve, and we expect a resumption of growth to follow into fiscal 25. And with that, I'd like to turn the call over to our CFO, Kevin Rose, to walk us through the results and guidance.