Thank you for standing by, and welcome to the Extreme Networks Q3 Fiscal Year 2021 Financial Results Call. Please be advised that today's call is being recorded. I would now like to hand the call over to Stan Kovler. Please go ahead.

Thank you, operator, and good morning, good afternoon, and welcome to the Extreme Networks third fiscal quarter 2021 earnings conference call. I'm Stan Kovler, Vice President of Corporate Strategy and Investor Relations. With me today are Extreme Networks' president and CEO, Edward Meyercord; and CFO, Remi Thomas. We just distributed a press release and filed an 8-K detailing Extreme Networks' 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 extremenetworks.com. I'd like to remind you that during today's call, our discussion may include forward-looking statements about Extreme Networks' financial and operational results, growth expectations and strategies, the impact of the COVID pandemic, challenges in our supply chain, the impact of tariffs, and digital transformation initiatives. 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, 2020, filed with the SEC. Any forward-looking statements made on this call may 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 Extreme's president and CEO, Edward Meyercord.

I was on mute. Thank you, Stan, and thank you all for joining us this morning. Q3 marks a full year since the world and Extreme began to feel the significant effects of COVID. I want to recognize and acknowledge the truly remarkable efforts of Extreme employees and their families and our extended community of partners, customers, and investors in getting through the past year. We are very focused on our teams and countries currently being hard hit by the virus, especially India, where we have many of our employees. Fortunately, Extreme has emerged in a stronger competitive position with higher gross and operating margins and two substantial growth factors: our cloud-driven enterprise business and 5G network infrastructure opportunities, which are gaining momentum. In addition, as a company, we have increased our focus on corporate social responsibility with marked progress in diversity and inclusion, sustainability, and our philanthropic initiatives to bridge the digital divide. Our employees have fully embraced and taken the lead on important initiatives such as the rapid expansion and success of our diverse employee communities, the growth of our highly successful Extreme Academy educational platform, and our upcoming Global Day of Giving on May 6. The strength of our Q3 results is highlighted by the fourth consecutive quarter of sequential growth, defying the traditional seasonality of our business, and we also delivered 21% year-over-year growth, driven by increased customer demand and continued improvement of our team's execution. To that end, 26 customers spent over $1 million with Extreme in Q3. Coming out of COVID, we are seeing significant government stimulus spending initiatives for projects around the globe that will fuel growth at Extreme. With over a third of our business focused on state, local government, and education, we expect to benefit from new programs, such as the American Rescue Plan in the U.S., Digital Pack in Germany, Giga Schools in Japan, among others. This quarter also marked the completion of the E-rate season in the U.S. where our filings were up 35% year over year, and we crossed the $100 million mark for the first time ever. Enterprise customers around the world are planning for a more flexible work environment and what that means for supporting their customers and employees. It's universally accepted that the new edge of enterprise networks will become permanently more distributed than what we call the Infinite Enterprise. As customers contemplate the increased complexity of delivering secure and consistent user experiences across a vastly distributed enterprise, Cloud is the logical platform to challenge complexity. As networks are reimagined, Extreme is more relevant today than ever before. We have true technology differentiation, and this creates more opportunities for us, and we are advancing further and further while winning more opportunities due to the strength of our competitive solutions. We are building a fast-growing cloud-native software subscription business at Extreme with our high growth, high margin, Extreme CloudIQ platform, what we call XIQ. We have a unique opportunity to rapidly expand the number of devices managed in our Cloud as well as increasing the number of cloud-native services we introduced through XIQ, and this is our enterprise cloud strategy. XIQ is the only cloud networking platform of choice, offering unlimited data and ISO-certified security. In addition, we've made significant progress in developing our next-generation AI capabilities at XIQ that we refer to as explainable AI. Simply put, we explain our alerts. Current solutions in the market generate unnecessary alarms and create alarm fatigue with enterprise customers. Our alerts will be both explainable and 99.9% false-alarm free. It has been in select customer environments for a year and will soon be launched under our copilot license for XIQ along with enhancements for AI and ML insights for our entire portfolio. This technology will go into public beta in June and will be available to every Extreme user. Uptake of our cloud subscription services remains strong. New cloud subscription bookings grew 122% year over year in Q3, marking the third consecutive quarter new cloud bookings more than doubled year over year. As the second-largest cloud-based networking vendor, we currently manage 1.6 million devices on XIQ. These marks seven straight quarters of rapid growth in customer accounts and managed devices. In early Q4, we made key leadership hires in our new cloud success team and reorganized our services capabilities to drive user adoption and continue the rapid growth in the number of devices on XIQ. The speed of our cloud innovation is accelerating. In addition to copilot, we are making inroads into three key areas in the near term. First, we offer the simplest licensing construct in the industry. Our pilot license for XIQ includes management, location, guest portal, wireless security, personal pre-shared keys, and IoT applications for one price, for all devices. Now we are unifying our network access control, or NAC, product portfolio with the same approach. Whether customers consume NAC in the cloud or on-premise, they can buy under one simple license. This is the best value solution on the market for NAC. Second, we have upgraded 20% of our portfolio to universal hardware and we're on the path to refresh 90% of our portfolio by December. The launch of our 5520 universal switch was the most successful launch we've had in recent history. In this quarter, we are introducing our 5420 universal platform focused on the volume tier of the market. So we are seeing an even higher unit volume launch. The Universal Series brings native cloud management through XIQ and the latest generation chipset from Broadcom with a brand new ASIC and the highest power PoE ports to run IoT devices. Our universal hardware puts us in a leading position to support the growth in IoT with a simple plug-and-play connection. Finally, it's no longer just enough to have an open API in today's connected world. APIs need to be high fidelity and operate in real-time. To that end, our latest generation open API framework will enable high fidelity translation and near real-time ecosystem integration from Extreme products and tools. Our framework is seven to ten times faster than our competitors' traditional restful APIs currently in the market. The automation of our business continues to help us drive sales productivity with initiatives such as channel self-service, touchless quoting, and provisioning. Sales automation has become a force multiplier and is helping us onboard new partners, grow our customer base, and increase transaction volume. In our service provider business, our expertise in cloud technologies puts us in a great position to innovate with our cloud-native infrastructure solutions for 5G. Next-generation networks are being developed on a more distributed architecture using principles we've developed in our cloud-native enterprise business. 5G providers are aggressively moving in this direction. This gives us increased confidence in our growth plan. Our solution is being actively tested by large service providers around the world, and we have clear visibility to the ramp in sales. We're also hitting all of their milestones in our 5G product development related to our packet broker technology. We have an exciting product launch coming up this summer, built on the latest generation Barefoot Intel technology. We'll talk more about it at our Connect User Conference in May, where we will reveal important industry-leading technology advancements. Finally, we continue to deliver the highest quality customer and partner experience in the industry. In Q3, we hit record all-time customer satisfaction scores. Customers like working with Extreme because of our focus, level of engagement, our partnering approach, and the fact that we don't outsource. We remain committed to this higher-tier service delivery differentiation. Heading into Q4, we're on plan to achieve double-digit year-over-year revenue growth, over 60% gross margins, and rising double-digit operating margins. Our funnels of opportunities remain strong, and our visibility continues to improve as we emerge as a stronger and more competitive company and take share. Importantly, we have all the right players in place to drive future growth and execute our operating plans. We expect our momentum to continue beyond fiscal '21 and realize a level of organic growth we have not witnessed for many years. And with that, I'll turn the call over to our CFO, Remi Thomas.

Thanks, Ed. As Ed noted, we had a very strong quarter and executed well across the board. Total revenue of $253.4 million grew 21% year over year and 5% quarter over quarter. The success of our XIQ solution fueled a sharp increase in cloud-native platforms and drove 29% year-over-year and 6% quarter-over-quarter product revenue growth. Services revenue grew 6% year over year and 1% quarter over quarter to an all-time high of $77 million. Our cloud business once again exceeded our expectations. New cloud subscription bookings grew 122% year over year, far exceeding plan. Our total cloud-managed subscription business, including renewals, was approximately $80 million on an annualized bookings run rate and over $60 million on an annualized revenue run rate exiting Q3. Our recurring revenue, which includes hardware and software support, managed services, and subscriptions was flat sequentially at $74 million but accounted for 29% of total revenue versus 31% in Q2 due to the sequential uptick in product revenue. Non-GAAP earnings per share were $0.16, up from a loss of $0.09 in the year-ago quarter, and up from $0.13 last quarter. The strong improvement in our bottom line, both compared to the year-ago period and to Q2, was once again the result of higher revenue combined with tight control over our costs and expenses. Total product revenue was $176.3 million, and our product book-to-bill ratio was approximately 106. Wired revenue grew 26% from the year ago and 8% sequentially, led by strength in edge and campus switching. While less revenue continued to recover, highlighted by growth of 37% from a year-ago quarter and 3% quarter over quarter. Total services revenue reached a record $77.1 million, up 6% from the year-ago quarter and 1% sequentially, largely driven by cloud subscriptions. Our total services book-to-bill ratio was 114, fueled by the favorable seasonality of service renewals this quarter. The growth of cloud subscription and services renewals resulted in deferred revenue of $318.4 million, up 17% from $271.7 million in the year-ago quarter and up 3% from $309.1 million in Q2. This will help sustain our recurring services and subscription revenue growth going forward. From a vertical standpoint, the highest sequential growth came as expected from sports and entertainment, which recovered to a more normalized 5% to 7% of total bookings this quarter, boosted by the kickoff of our MLB stadium business. Retail also recovered to over 5% of bookings and was up in excess of 20%, both on a year-over-year and sequential basis. Finally, the momentum in the service provider business continues to improve with solid year-over-year and sequential increases in bookings. Areas that have recovered earlier, such as manufacturing, healthcare, transportation, and logistics experienced normal March quarter seasonality. Our non-GAAP gross margin continued to improve both year-over-year and sequentially to 61.5%, largely attributable to our product gross margin, up 90 basis points, whereas our services gross margin edged up 10 basis points. Factors of improved product gross margin were higher volume; a greater mix of new products carrying higher margins; lower excess of obsolete charges resulting from the reduction in inventories of both finished goods and raw materials; and finally, lower tariff costs. These drivers were partially offset by an increase in freight and component costs. Q3 non-GAAP operating expenses were $127.3 million, up from $122.9 million in Q2 due to higher sales and marketing-related costs, while R&D and G&A costs remained steady. The net result of faster top-line growth compared to costs and expenses was a non-GAAP Q3 operating margin of 11.3%, up 16.3 percentage points from the year-ago quarter and 90 basis points sequentially. The recovery in our operating profit, combined with the good management of operating working capital, resulted in Q3 operating cash flow of $24.7 million and free cash flow of $20.4 million. We ended Q3 with $203 million in cash and equivalents, compared to $184 million at the end of Q2. Our net debt decreased to $148 million, down from $172 million in Q2. The combination of improved operating performance and deleveraging activity put us in compliance with our debt covenants based on our leverage and fixed cost ratios as of March 31, one quarter ahead of expectations. We expect our interest expense to decrease by 175 basis points or $1.5 million per quarter going forward with a $1 million benefit expected in Q4 of fiscal '21. Our cash conversion cycle reached historically low levels of 31 days, down 13 days versus Q2 and 28 days versus the year-ago quarter, mostly driven by a substantial decrease in our days of inventory. Now turning to guidance. I'd like to mention that demand is currently outstripping supply for certain products, such as our new universal platform, as we grapple with product constraints in our supply chain resulting from chipsets and other industrywide component shortages. We're actively managing through these challenges, and our strategic relationship with Broadcom is helping us in this regard. With that in mind, we still expect strong Q4 seasonality and expect revenue to be in the range of $260 million to $270 million, following a better than seasonal quarter in Q3. Q4 GAAP gross margin is anticipated to be in the range of 57.8% to 58.9% and non-GAAP gross margin in the range of 60.5% to 61.5%. Our non-GAAP gross margin outlook reflects increased volumes and a greater mix of higher-margin new products, offset by supply chain product constraints that result in increased components and transportation costs. Q4 GAAP operating expenses are expected to be in the range of $141 million to $143 million and non-GAAP OPEX in the range of $131 million to $133 million. The sequential increase in OPEX is primarily related to higher sales commissions and other sales and marketing initiatives and events tied to our higher growth initiatives. Q4 GAAP earnings are expected to be in the range of $2.6 to $9.2 million or $0.02 to $0.07 per share. Non-GAAP net income is expected to be in the range of $21 million to $26.2 million or $0.16 to $0.20 per diluted share. In Q4, we expect average shares outstanding to be approximately $131.1 million on both a GAAP and a non-GAAP basis. With that, I will now turn it over to the operator to begin the question-and-answer session.

Our first question comes from Samik Chatterjee with J.P. Morgan. Your line is open.

Oh, great. Thank you. Thanks for taking the question. I guess I just wanted to start with a broader question here about the recovery you're seeing with your customers in terms of spending because I think with the guide that you have for revenue in June, which is $260 million to $270 million or almost - you're back at the December 2019 revenue levels that we had seen pre-pandemic. So how should we think about when do - who does the market or when do your revenue patterns return to normal seasonality from here on? I know you talked about a very strong organic growth outlook that you haven't seen in the more recent years. But is most of the pent-up demand or catch-up spending done and we return to a more normal seasonal pattern from here on? Or is there more to come in terms of pent-up demand as well as the traction of the portfolio that helps you remain above seasonal level patterns from here on? And I have a follow-up as well. Thank you.

Why don't I start off and then, Remi, you can jump in. Yes, as you know, we've had a sequential increase, and a lot of that has been a factor of us coming out of COVID, where we saw impacts a year ago. I think that what we're seeing is, as far as cloud and cloud growth, we're seeing the momentum continue. I'd say that the growth of our cloud is a catalyst for overall revenue growth because cloud does pull product with it. I feel that this would be less seasonal than what we've had in the traditional business. But as far as our industry verticals and the spend cycles for different regions, i.e., international heavy spending in the December quarter, Americas with our fiscal year in the Americas. I would expect to see some of that seasonality resume. We've had strong government, state local education spending, and that is continuing. With stimulus spending, we see increased activity. So how that spending is unlocked and the timing of those dollars and how they get consumed can impact seasonality. We've had a strong e-rate season, and we have a very compelling value proposition for that segment of the market. We see growth and tailwinds there for the next couple of years plus. Anything to add, Remi?

No. Not yet. I'd say that on the product side, we're now back with all cylinders running. The two areas that had not picked up were sports and entertainment and retail. As I mentioned in my prepared remarks, they are picking up. So going forward, as we enter fiscal '22, you would expect the product revenue to show patterns similar to what we've seen in the past with weaker Q1, weaker Q3, and strong Q2 and Q4. However, as I mentioned during the call, we've got $318 million worth of deferred revenue, and we're building more and more as our subscription bookings continue to grow in excess of 100%. The timing for the recognition of that revenue from cloud subscription may mean that overall revenue of the company will show patterns slightly different from what we saw pre-COVID.

Okay. Got it. And then I guess for my follow-up, Remi, it was more for you. Gross margins, you've improved substantially year over year, but I think you came in toward the lower end of what you guided from March. And you're guiding, if I'm right, to a modest deceleration from the March levels to the June quarter. Or is that entirely being driven by the elevated freight cost? Or is there any mix impact there? If it's driven by freight costs, should we assume that you can get back to the 62%, high 61%, 62% as soon as the freight costs moderate?

So it's a combination of freight costs, Samik, but also increased component costs as a result of the shortage of components. The semiconductor suppliers, all four of the ones that we use are raising their prices. We expect that we'll go back to normal, but we think it's going to take about nine to twelve months to clear out the component shortages. You should expect to see this impact our gross margin for the next maybe three quarters.

And we'll obviously continue to try and offset it with the change in the mix, with more cloud revenue, and with the introduction of new products that carry higher margins.

Our next question comes from Eric Martinuzzi with Lake Street. Your line is open.

Yes. Just curious if you're seeing anything different in the education vertical regarding the procurement cycle. We're coming up on their new fiscal year, they align their fiscal year with your own. Are you seeing anything different there in the behaviors of the appetite in education?

Eric, we're not. I mean, there's a lot of funding that's available for us. I mentioned Digital Pack in Germany, Giga Schools in Japan, and, obviously, E-rate and now new funding initiatives, stimulus spending as far as COVID response is concerned. From our end, we're seeing strength in that business, and we see tailwinds from these initiatives coming into play over the next few years. I think that maybe the traditional way of thinking about seasonality for education is probably going to change as people take advantage of the funding that's available to them. So we've seen consistent spend in all four quarters.

Okay. And then on the overall growth rate, looking at the Q3 print and the Q4 guide, we're coming in at about a 5% growth rate. Most people would have anticipated fiscal '21 for you guys would be - you got essentially easy comps because of COVID. But as we look out to FY '22 and beyond, does that growth rate, does there is there the potential for that to accelerate in FY '22? Do you expect it to moderate? What should we think about in the out year?

Yes. Eric, we talked about overall, if you look at the market and spending - what happened when COVID hit, spending on peripherals like notebooks, screens, and hardware to support remote learning as everyone went remote. Now we're seeing an increase in that infrastructure on the networking side. Analysts are calling for overall enterprise network spending to be higher than normal and to push up over that 5% level. We're taking share, and we're also in the high-growth cloud segment of the market. So we are expecting to grow higher than that. In our Investor Day, we pointed to high single-digit growth rates and we believe those growth rates are sustainable beyond the end of fiscal '21, and that hasn't changed.

Our next question comes from Dave Kang with B. Riley. Your line is open.

Yes. Good morning. My first question is regarding the chip situation. How much revenue are you leaving on the table because of the chip situation for the fiscal fourth quarter?

Well, Dave, we've seen an increase in product constraints. We factored that into our outlook. It is having an impact, and we're seeing it running higher than normal. Our teams have done an excellent job aggressively managing through this compared to other vendors that are out there. We've developed a very strategic relationship with Broadcom. They have been working with us to support the business. The level of product constraints may be less for us, given our relationship with Broadcom and our teams working to manage the constraints. We've got growth built into Q4. We're still showing solid double-digit year-over-year growth in that Q4 quarter. We expect product constraints to ease for us going into our fiscal first quarter. I would say, Q4, we've built it into our forecast, and we expect the product's constraints to be tightest in that quarter compared to others.

Got it. My next question is regarding 5G. Are we still looking at $20 million for fiscal '22 and any new customers in the pipeline?

Yes, at this point, we're not changing our outlook for 5G. We see 5G really kicking in our fiscal '22. We've had many encouraging developments on that front. We’re working with a global service provider vendor and we’re part of their full solution stack. They have seen the adoption of cloud-native infrastructure services, which are the platform that we're supporting, take off and move well ahead of schedule. That gives us confidence in that number. In terms of the actual ramp by service provider and how that plays out over the course of fiscal '22, we’ll provide better guidance at the end of the year. We are GA-ing our solution for packet broker this quarter, which we expect will ramp up in fiscal '22. We feel extremely confident in the $20 million number based on everything happening on the cloud-native infrastructure side and packet broker.

Our next question comes from Alex Henderson with Needham. Your line is open.

Thank you. I was hoping you could talk about the supply constraints in the context of the guide. If you are supply constrained on components, is it possible for you to beat the high end of the guide, or do the constraints essentially gate any upside so that the high end is configured based on the degree to which your components allow you to generate revenues? Or alternatively, is there a mechanics around mix that would allow you to see an upside to the high end of the guide, if the demand comes in and, say, software or things of that sort? Can you just talk to the sensitivity to the constraints of the components relative to the guidance band?

Why don't I start off and then Remi, you can chime in. Thanks for the question, Alex. Yes, it's a very dynamic situation. Broadcom has been a great partner, and we’ve been working through expediting orders. Depending on how that plays out, it will impact what we can ship. I would say with our range, I don't think we're constrained on the high end of our range because of product constraints. That has been built into our guide. But it's not a hard ceiling. The way it plays out is that in trying to expedite orders and getting products in front of customers, it means costs; and as components come in, we don't have as much lead time as we would normally have. So we have increased transportation expenses.

I think you described it really well. I would just say that it is possible, if all stars align, for us to ship more. What that would mean is the mix between product and services would be different, and you should be seeing a different profile of the gross margin if we're able to ship more than $270 million. By definition, it will be coming from product, and therefore, will influence gross margin.

I see. Could you go back to the recurring revenue being flat? I'm puzzled by that given the book to bill, both above one, and strength in cloud orders, which I would think would be subscription-oriented and strengthen software, which is subscription-oriented. Why is the recurring flat again? I'm not sure I understand the mechanics behind it.

If you recall, Alex, when pre-pandemic recurring revenue included support for hardware and software on-premise, as well as managed services and subscriptions that we did when we first consolidated Aerohive in Q1 of fiscal '20. That was 25%. It shot up to 32% because our product revenue fell the most in the March of fiscal '20 quarter as an impact of COVID. Recurring revenue, which by definition did not get impacted by COVID, went up. Today, the waterfall on that deferred revenue is $318 million, which is the highest in the history of the company. What’s driving the flat recurring revenue in Q3 was the timing of recognition and the recovery of product revenue, which is stronger than what we had expected earlier.

Our next question comes from Erik Suppiger with JMP. Your line is open.

Yes. Thanks for taking the question. On the components, I'm curious, how were the shortages during the third quarter compared to the second quarter? Did they tighten? Because it does sound like it's getting tighter in the fourth quarter? Has it been progressively getting worse?

Yes, I would say that the tightest quarter for us would be our fiscal Q4. We didn't see much in Q2 but saw constraints building more in Q3. Our projections for constraints are highest in Q4. We've been aggressive in ordering to mitigate the effects and believe we'll start to see relief in our fiscal first quarter. So to answer your question, it's tightest this quarter, and we've factored that into our revenue guide. We would expect to see the supply chain constraints carry for nine to twelve months, especially from our primary chip vendors.

Okay. And then how sustainable is the growth you have in your cloud bookings? It's been growing triple-digits for a bit here. Is that going to change quickly? Or do you think that you can sustain that kind of growth for the period here?

As we roll into the fourth quarter, we see the sustained growth rate. As we wrap up the month of April, we continue to see very strong cloud bookings. Our renewal rates in cloud are improving. We're also migrating a significant number of our existing customers from on-premise to cloud, providing them with unique value. We have large opportunities to migrate devices into XIQ over the next twelve to eighteen months. I mentioned our XMC management and our NAC product. We're rolling out this seamless migration, which could provide another catalyst for us. We are optimistic about future announcements that will present new growth vectors for cloud and devices moving forward.

Our next question comes from Liz Pate with Cowen & Company. Your line is open.

Is it possible to quantify how the supply constraints are impacting your Q4 outlook and how much revenue you think you're leaving on the table or pushed out to later quarters?

There's a revenue impact, and then there's a gross margin impact. From a revenue perspective, our book-to-bill number is greater than one. As for the impact on gross margin, we attribute the delta from our guide to where Street was guiding to our current forecast. We would point that to higher component costs and transportation costs.

I don't want to give a specific number, but I would say that typically, we handicap our quarter with product constraints. The handicap that we put on product revenue is twice what it would normally be. So it's material. We're not looking at a few million dollars here. It's twice a normal level of constraints in any given quarter.

And is there a concern of double ordering as people worry about getting what they need?

Not with us. Let's put it that way.

With our supply chain, we are building buffer stocks to ensure we have relief at our fiscal first quarter. Our customers wouldn't display that kind of behavior with us.

Our next question comes from Alex Henderson with Needham. Your line is open.

Thank you very much. I actually wanted to follow-up on this supply constraint question again, but from a different perspective. To what extent do you think that there is a comparable amount of supply constraints at your competitors? And to what extent do you think that there's a risk that you could be leaving deals that you might have gotten had you had availability on the table as a result of not being able to deliver in a timely fashion against what might be hot infrastructure? And then the second piece of that is, as we think about the exodus from campus reversing and this of employees coming back on to campus. There's a dialogue around that, that is, gee, doesn't that drive increased demand for campus investment. But I would argue that we're not likely to see 100% of the people who left coming back, but rather a much more dispersed environment, which then changes the nature of what they're buying to a more application-centric, user-centric viewpoint. And I would think that that would play very nicely into your cloud architecture. So if you could talk about those two issues, I'd appreciate it.

As it relates to competition, we're encouraging our sellers to sell. We see our performance stacking up favorably against competitors. We are seeing new opportunities as we manage through constraints. Our distributors inform us that we are faring as well or better than competitors. Our supply chain teams and the nurturing of our relationships provided us this advantage. As for campus networks, the conversation is around reevaluating the workplace environment, resulting in a more hybrid model with increased investments in distributed solutions. Companies need to support remote work and cloud platforms support this tech.

If I could, has there been any change in the competitive landscape relative to Cisco responding to, I think, what is obviously a highly differentiated attack from the cloud in both you and Juniper relative to the Meraki product line, which clearly is very long in tooth. So is there any change in their portfolio that closes some of the gap, or is there?

Cisco has been the biggest loser of market share and most vulnerable. They are trying to figure out the difference between on-prem solutions and their Meraki product line and it will take time for them to re-architect. This has created openings for us for differentiation. The Meraki cloud stands out positively against our platform, as does the simplicity of licensing.

Our next question comes from Dave Kang with B. Riley. Your line is open.

Yes. Just a couple more follow-ups. Speaking of competitors, can you talk about Huawei, what's going on there? And any kind of opportunities for you to gain market share? My follow-up is for Remi. You guided to $131 million, $132 million in OPEX. Can you - how should we think about OPEX going forward?

As for Huawei, on the enterprise side they've always been a threat but they lack strength in software and cloud. We do not see Huawei in the Americas, particularly in the United States and Canada. Their response has been mixed in Europe but there's been greater pause which opens opportunities for us, particularly in the U.K. and Germany. Regarding 5G, security concerns with Huawei have created opportunities for our primary partner to win more 5G infrastructure business.

We've been talking a lot about operating leverage, and the name of the game is to recover the top line to pre-COVID levels but not OPEX. I warned that based on the momentum in bookings, we may have to pay more sales commissions. Additionally, we conduct merit increases annually; employees deserve a salary increase. As things reopen with more vaccinations, travel costs should also be expected to increase. So Q4, you'll see more sales commission. We're going to try to keep costs contained, but the range is probably going to be around 130, averaging between $127 and $131 for the first three quarters of fiscal '22.

Yes, and as it relates to Huawei, there are two sides here; enterprise, 5G. Huawei has not been strong in software and cloud, allowing us competitive opportunities. We see openings in markets where they have traditionally had low prices but struggle in cloud approaches.

Thank you. At this time, I'd like to turn the call back over to Ed Meyercord for closing remarks.

Thank you, and thanks everybody for participating in the call today. Once again, I want to acknowledge the Extreme employees for a very strong quarter and execution. We have the strongest team that we've ever had since I've been at the company and very clear vision and plans to execute. I feel confident in our team's ability to drive these plans. We wish everybody continued health, especially outside the US as we look at India and all of our employees there. We're not out of the woods yet on COVID, but we've progressed in several global markets, particularly in the US, as more communities get vaccinated. This year, our Extreme Connect event is going virtual. This is open to all investors, and I encourage everyone to check it out. We have interesting technology reveals and insights into the solutions we’re bringing to both enterprise and 5G markets on May 26th and 27th. We hope to see you there. Thank you all, and have a great day.

Ladies and gentlemen, this does conclude the conference call. You may now disconnect.