Extreme Networks, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Xtreme Network's fourth quarter full year 2024 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising 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 like now to turn the conference over to Stan Kobler, Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to the Extreme Network's fourth quarter fiscal 2024 earnings conference call. I'm Stan Kobler, Vice President of Corporate Strategy and Investor Relations. With me today are Xtreme Network's President and CEO, Ed Myercord, and EVP and CFO, Kevin Rhodes. We just distributed a press release and filed an APK 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, along with our earnings presentation. Today's call and our discussion may include certain forward-looking statements. based on our current expectations 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. These risks are described in our risk factors in the 10-K report for the period end of June 30th, 2023, and subsequent 10Q 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. Further, we will be discussing our non-GAAP-adjusted results, excluding the impact of our increase in E&O reserves, to show our operational results and to allow for better comparisons to our normal reporting and prior outlook. A reconciliation of our non-GAAP and adjusted results can be found in the press release and financial presentation. Following our prepared remarks, we will take questions. And now I will turn the call over to Xtreme's President and CEO, Ed Myercord.

Thank you, Stan, and thank you all for joining us this morning. Our results in the fourth quarter were impacted by an extraordinary provision for excess and obsolete inventory. This was based on a comprehensive analysis and our decision to have our sellers focus on next generation products to strengthen our competitive position. As we enter fiscal 25, we're confident that we've eliminated the headwinds from both our channel and direct inventory, and have now put the challenges of the supply chain constraint cycle behind us. Excluding the E&O reserve in the quarter, we were slightly ahead of our top-line outlook, aided by growth in order volume and improvement in our run rate business across all geos. Both are positive macro indicators of the return of market demand and the elimination of excess supply conditions that persisted in 2024. ARR from software subscriptions remain strong, up 29% year over year, and we've been recognized by industry analysts as the second largest player in cloud networking as we rapidly approach the 3 million mark for devices managed in our cloud. The growing demand for our solutions is a result of the flexibility, simplicity, and the unique value proposition we offer to enterprise partners and customers relative to our competitors. We de-risk enterprise customer migration to modern networking infrastructure and offer unmatched premier services to ensure that customers get the most out of their investment with Xtreme. Specifically, customers truly value the flexibility we offer to manage both Xtreme and third-party hardware which allows them to migrate and upgrade at their pace without disruption. A great example from this quarter is EVM Pabst in Germany, the world's leading industrial manufacturer of precision fans and motors. They're a longtime Cisco customer, wanted to migrate to a modern network with Xtreme without disrupting operations. We allowed them to transition to Xtreme while still supporting the old Cisco gear until the project was complete. Customers are also embracing our modern fabric because it's simple to deploy with zero-touch provisioning. It offers unmatched security and visibility, micro-segmentation capability that dramatically minimizes the blast radius of lateral cyber attacks. And it provides the resiliency and flexibility to make moves, adds, and changes to the network without taking it out of service. None of our competitors have an enterprise fabric with these capabilities. Davidson College in North Carolina recently decided to deploy Xtreme Fabric to support the college's hybrid flex learning model, allowing seamless integration of in-person and online classes. By leveraging our fabric, they were able to provide a more efficient, scalable, and secure network environment across the campus and remote sites. The combination of this fabric with the industry's most flexible simple, secure, and advanced end-to-end cloud management platform makes for a powerful combination. When ASDA, one of the UK's largest retailers, was looking to modernize network management and operations, they chose Xtreme Cloud because they wanted a solution that could help them seamlessly manage 800 locations while reducing CapEx, creating a scalable platform for the future, and improving network performance across all of its stores. Our new go-to-market initiatives are beginning to add to the growth equation and allowing us to gain share as well. We grew our MSP partner base to 27 during the quarter. Partners are attracted to the flexibility of our unique consumption-based billing model and poolable licensing. No one else in the industry offers these economic benefits or this level of commercial licensing simplicity. Our MSP bookings doubled sequentially in the fourth quarter, and we're seeing good traction globally. Customers and partners are also 100% aligned with our technology roadmap and vision of the future. Last week, we hosted our direct sellers and partners at a highly immersive training event, Extreme Academy Live, where we showcased how we're driving the convergence of cloud networking, security, and generative AI. The engaging main stage sessions, demos, hands-on training, have generated positive buzz and infectious energy among sellers and partners as this is what customers are demanding in their modern networking environments. There was particular excitement for our layered security solutions with network access control, ZTNA, and Fabric. Last month, Gartner published a paper on network security in which it said that traditional network access control offerings no longer cover emerging enterprise needs. urging its clients to explore universal ZTNA that combines the capability of core network access control functions along with securing users across any location with ZTNA. We have a single policy engine for cloud-based NAC and ZTNA, which no one else in our industry can offer. At Extreme Academy Live, we also previewed advancements to our Extreme AI Expert, a generative AI solution, that delivers insights that improve productivity, lowers total cost of ownership, and makes networking simple. While the solution is currently in tech preview within Xtreme Labs, we announced a co-innovation alliance with Intel last week in which we'll leverage a combination of network data and unique device data from PCs through Intel's connectivity analytics and Gen AI to make networks smarter, faster, and more resilient. With all these pieces coming together, we're building the industry's most modern networking platform. Given the substantial M&A activity with our industry's largest players, we're benefiting from the disruption it is causing with enterprise customers and channel partners. The largest player is investing away from networking with no intent to integrate acquired technologies and solutions. This makes them complicated to stitch together, very expensive, and time consuming. During the quarter, we displaced Cisco at several major customer sites, including Minnesota Vikings, City of Prescott, Bank of Indonesia, a major NHS hospital in the UK, Vandalia Health in the US, a Fortune 500 US-based manufacturing company, and numerous schools and universities. The second and third largest players will also become increasingly distracted by their business combinations. They'll have to make difficult decisions to abandon technology installed at tens of thousands of customers. Portfolio rationalization and integration creates risk. Today, customers and partners in our space are looking to de-risk their investments in networking, which makes Xtreme a far better alternative. Recently, we displaced HP and Juniper across a number of sites, including Voss Automotive in Germany, University of North Carolina, Texas Tech University, to name a few. Going forward, we expect sequential revenue growth to continue during the first and second quarters, and year-over-year growth for the full year. This growth will be accompanied by increased margins and cash flow. Our confidence in this outlook is based on the quality and volume of opportunities in our funnel, as well as the current momentum in new funnel generation. The combination of our unique solutions, investments in innovation, strong leadership position in the Gartner MQ, mixed with the uncertainty of competitors' commitment to networking and long-term support of their products, has created a promising opportunity for Xtreme to return to growth in fiscal 25. With that, I'd like to turn the call over to our CFO, Kevin Rhodes, to walk us through the results and guidance.