Thank you for standing by, and welcome to the Xtreme Network's fourth quarter fiscal year 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Stan Kovler, Senior Vice President, Finance and Investor Relations. you may begin.

Thank you, Rob. Good morning and welcome to Extreme Network's fourth quarter and fiscal year 2025 earnings conference call. I'm Stan Kovler, Senior Vice President of Finance and Corporate Development. With me today are Extreme Network's President and CEO, Ed Meiercord, and Executive Vice President and CFO, Kevin Rhodes. We just distributed a press release and filed an 8K detailing Extreme Network's financial results for fiscal Q4 and full year fiscal 25 a copy of the press release which includes our gap to non-gap reconciliations and our earnings presentation is available in the investor relations section at extreme networks.com today's call and q a may include forward-looking statements based on current expectations about extreme's future financial and operational results growth expectations new product introductions and strategies all financial disclosures made on this call will be on a non-gap 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 our 10-K and 10-Q filings, and any forward-looking statements made on this call reflect our analysis as of today. We have no plans to update them except as required by law. Following our prepared remarks, we will take your questions, and now I will turn the call over to Xtreme's president and CEO, Ed Meiercord.

Thank you, Stan, and thank you all for joining us this morning. I'm pleased to report that Q4 marked our fifth consecutive quarter of sequential revenue growth. Revenue reached $307 million, representing a 20% increase year over year, with particularly strong performances in APAC and EMEA regions. We continue to move up market and see robust demand across both our wired and wireless network solutions and all our industry verticals. This helps drive an acceleration in SaaS ARR revenue to $208 million, up 24% year over year. Large deal momentum is picking up with product bookings at an eight-quarter high. Our competitive win rates remain strong as we move up market and displace larger players due to our highly differentiated campus fabric, the flexibility and simplicity of our cloud management platform, the industry's most simple licensing, and now the release of our innovative AI-powered Xtreme Platform 1 solution. Enterprise interest in Xtreme has increased across all verticals. This momentum was clear at Xtreme Connect in Paris in May, where nearly 1,000 customers, partners, analysts, and press joined us for hands-on training, dynamic mainstage keynotes, and networking with peers. Many of the attendees have seen PowerPoints and canned demos of future AI platforms from other vendors, but the fact that the entire event was run on a live version of Extreme Platform 1 generated a lot of excitement and momentum. The overwhelmingly positively positive feedback on the event and our technology highlights rising enthusiasm for Xtreme. In Q4, we expanded our footprint in the Japanese government with two multimillion-dollar wins displacing a major competitor and gaining large and important strategic partners in the process. The eight-digit project win for the entire Japanese judiciary, including the Supreme Court mark the largest win in the APAC region in company history. Both will deploy a unique Xtreme Fabric solution from core to branch powered by our SD-WAN and managed through Xtreme Cloud IQ, giving users secure, seamless access across the country with our flexible and highly secure private cloud options. We continue to add to our leadership position in high density public and entertainment venues in the quarter, MetLife Stadium, home field of the New York Giants and Jets, as well as hosts for the 2026 World Cup Finals, selected Xtreme to deliver modern Wi-Fi 6E infrastructure to power better fan experiences and streamline operations across the stadium. We also added Pinnacle Bank Arena and Hendrick Motorsports as highlighted in our press release. Global hospitality and casino customers, including the very first high-end luxury resort casino in the Middle East, are standardizing on our fabric. When customers see the impact of fabric's unique features like sub-second convergence, the unmatched security benefits of micro-segmentation, the ease of deployment with automated zero-touch provisioning, Xtreme becomes the easy choice. One very large enterprise in the midst of several proof of concept said, what takes Cisco six hours takes Xtreme six minutes. In fact, we've challenged each of the large players in the networking industry head-to-head in enterprise customer environments, and none come close to meeting our performance. Xtreme is also becoming the top choice for mission-critical environments, delivering unmatched reliability and performance. And AERA, Europe's fourth largest air navigation provider, deployed Xtreme to ensure secure, scalable communication and managing airspace over Spain and over 2 million flights annually. In the UK, Surrey and Sussex Healthcare NHS Trust, which provides healthcare services to over 740,000 people, upgrade its Wi-Fi network and will use Xtreme Cloud IQ and Fabric for flexible, centralized, and secure network management to help deliver best-in-class patient care. Finally, Qatar Energy, a leader in oil and gas production, chose Xtreme Wired Solutions to enable secure, high-performance connectivity across its complex and remote operations for its new liquefied petroleum gas bottling plant. In Q4, we had a major milestone with Extreme Platform 1, becoming the first and only networking vendor to offer a conversational, multimodal, agentic, AI-powered networking platform generally available to customers today. Early feedback has been positive. West Suffolk NHS in the UK migrated to Extreme Platform 1 in just 47 minutes. They said the platform gives them a helicopter view of the network, and they expect our AI agents to be new members of their IT staff. Bath and Northeast Somerset Council in the UK said they love how AI has helped them quickly resolve technical queries without having to pour through hours of documentation. Extreme Platform 1 breaks down silos between networking and security, automates tasks through integrated AI agents, and offers the industry's simplest licensing. It also provides the industry's only composable workspace where you can leverage our platform's multimodal capabilities and customized dashboards with the help of our AI agent. Customers can see everything from global networks down to individual devices, application performance, and more. This helps simplify planning, procurement, deployment, management, troubleshooting, and keeps downtime to a minimum. Industry analysts have recognized the significance of Xtreme Platform 1. According to Enterprise Strategy Group, the solution is, quote, at the leading edge of the market in terms of completeness and sophistication of AI for networking. Enterprise Management Associates says, quote, there is a growing interest in AI-driven network management capabilities since IT teams are running leaner with heavier workloads. And there is less skepticism today towards AI than there was a few years ago, especially considering Xtreme's human-in-the-loop approach. Xtreme Platform 1 brings AI, automation, and simplicity together in one palette of platforms. For our customers, it means faster outcomes, higher productivity, and significant ROI. We believe we're in the right place at the right time with the highest quality platform and the most modern tools for all enterprise networking customers. And finally, we continue to make progress with our diverse commercial models, with our MSP program doubling to 53 partners year over year. We offer the industry's first consumption-based billing, eliminating upfront costs, and ensuring predictable expenses. Our pool of licensing allows our MSPs to flexibly allocate licenses across devices, locations, and customers, making it simple to scale. Looking ahead, we have strong confidence in sustained customer demand based on our Q1 funnel generation and with continued strong growth and our overall pipeline. We expect growth in fiscal 26 to accelerate. We have tremendous opportunities with large customers. Our competitive positioning has never been stronger, and we're accelerating investments in our business to drive automation, differentiation, and commercial success. I look forward to sharing more of our plans and outlook with all of you at our recently announced Investor Day in November. With that, I'd like to turn the call over to our CFO, Kevin Rhodes, to walk us through the results and guidance.

Kevin Rhodes Thanks, Ed. I'm very pleased to report strong fourth quarter results, with revenue exceeding the high end of our guidance range. We also delivered strong operating margins and free cash flow. We achieved earnings per share of $0.25 at the high end of our guidance range and exceeding the consensus of $0.23, up 32% from $0.19 in the prior year quarter on an adjusted basis. Total revenue of $307 million in the quarter grew 20% year-over-year and 8% sequentially. This marks our fifth consecutive quarter of growth. We also accelerated SaaS ARR growth to 24% year-over-year, driven by recent wins, continued growth in our wireless business, with strong Wi-Fi 7 adoption, and early adoption of Xtreme Platform 1. Overall, we achieved our best bookings quarter in the past two years, reflecting strong customer demand across our portfolio, which gives us confidence in our growth trajectory heading into fiscal 2026. In the fourth quarter, new subscription bookings accelerated, which is a testament to the new large customer wins in Asia Pacific, our recent rollout at John Deere, and the commercial models we launched over the past year. Product revenue of $192 million grew 26% year-over-year and 8% sequentially, driven by continued recovery and strong demand for extreme solutions as we continue to move upmarket. Wi-Fi 7 mix grew meaningfully, representing 30% of all wireless units and driving a second straight quarter of revenue growth in wireless products. Geographically, we saw a particularly strong performance in APAC, with major new customer This was our largest bookings quarter ever in AsiaPAC. We continue to gain traction in the region as a strategic alternative to the incumbents that are there, particularly in the public sector. EMEA, also a bright spot, revenue grew 21% year over year. the highest level of revenue in the region since the early 2024 era as strong execution in the market boosted our business there. America's revenue grew 4% year over year and we're encouraged by both the momentum and strong pipeline we're seeing in the Americas for both the first quarter and fiscal 2026. In the fourth quarter, 34 customers spent over a million dollars with extreme bringing our fiscal 25 total to 168 customers total subscription and support revenue was 115 million dollars up 11 percent year over year total recurring revenue grew eight percent year over year and represented 36 percent of total revenue as a result of our growth and growth and in SAS ARR, SAS deferred revenue jumped 15% year-over-year to $308 million, and recurring revenue growth pushed total deferred revenue above $600 million. This growing base of contracted future revenue provides strong visibility into our recurring revenue and should continue to drive strong cash flow generation. NAMDAP gross margin was 62.3% in the fourth quarter and was in line with our guidance. Our fourth quarter operating expenses were $144 million, also in line with our guidance. Operating margin was 15.2% and up from 13.5% in the prior year on an adjusted basis, demonstrating the leverage we have in our model from top-line growth and prudent expense management. We generated $75 million in free cash flow in the quarter, our highest quarterly level since 2023, and $50 million in EBITDA, our highest level in the last seven quarters. We returned value to shareholders through a repurchase of 1.5 million shares for a total of $25 million. Cash flow was aided by significant improvement in our cash conversion cycle to 81 days, down from 112 days in the third quarter, driven primarily by lower days of inventory. We ended the quarter with $232 million in cash and achieved a net cash position of $52 million, up $49 million from net cash at the end of the third quarter. For the full fiscal year, revenue of $1,140,000,000 grew 2% year-over-year, with non-GAAP EPS of $0.84 compared to $0.70 on an adjusted basis from the prior year. We achieved significant margin expansion with non-GAAP operating margin of 14.2% compared to 11.9% on an adjusted basis in fiscal 2024. for as we enter fiscal 2026 we're well positioned to build on our success customer demand except exceeded revenue in the fourth quarter and we have strong visibility for growth based on our funnel back walk and future customer demand we expect a re-acceleration of overall revenue on a full year basis that should translate to higher earnings and cash flow generation for the first quarter of fiscal 2026 we expect guidance as follows revenue to be in a range of 292 million to 300 million gross margin to be in a range of sixty one point nine percent sixty two point three percent operating margin to be at a range of twelve point seven percent to fourteen and a half percent and earnings per share to be in a range of twenty to twenty three sets our fully saluted share count is expected to be around 135 million shares for the fiscal year 2026 we expect revenue to be in a range of 1 billion 228 million to 1 billion 238 million dollars and with that i'll now turn the call over to the operator to begin the question and answer session thank you we will

now begin the question and answer session if you would like to ask a question please press star 1 on your telephone keypad to raise your hand and join the queue if you would like to withdraw your question simply press star 1 again your first question today comes from the line of eric martinuzzi from lake street capital markets your line is open congratulations on the terrific quarter and the solid outlook i wanted to dive into the success that you were seeing in amia and apac obviously this was good for q4 just wondering on the follow through here it was this kind of just happen to be lumpy to the good for Q4, or do you see this as something sustainable early here in the kind of first half of July 26?

Thanks for the question, Eric. And, you know, we've seen the gradual recovery in EMEA, and it's built up throughout the year. Quite frankly, it was a little slower than we expected. But now, I think with the government stabilized and I think the political environment, more stabilized, that we're expecting momentum to continue to ramp. And we see that based on the funnel of opportunities. We also have a couple of unique opportunities with the German government and some of the new rules that are coming out around security that we've committed to invest in fiscal 26. So we're excited about our market share there and what's happening with the macro, and then some specific new growth opportunities. Asia Pacific, I'll comment, which we have been, this is where we saw significant growth in that market due to some very large wins and a unique solution set that we put together for the Japanese government. I mentioned in my quote, but really what's very important about this is not only one branch of the Japanese government where we're very well positioned for other opportunities there, but it's also the impact that it's had on the partner community, both system integrators as well as partners. So we have now broken into some of the largest entities there, and they're really excited about A, our solution set, and B, the opportunity to work with Xtreme. So we're expecting continued momentum in both of those markets.

You know, Ed, one of the things that you guys talked about on the Q4 outlook was you were going to be keeping pricing stable despite the uncertainty around tariff. Do you feel like there was any maybe a benefit to pull forward orders that happened in Q4 due to that that maybe isn't there after Q4?

Yeah, I mean, we saw very little, Eric, and that's because our product categories were exempt. And then we were sort of given the heads up that the expectation is that they would continue to be exempt, although you don't know until you know. And when the new tariffs came out, that was the case. So as we look at the Commerce Department, you know, they've been very firm in terms of the list of exemptions and that to continue to be the case, you know, that could always change. But, you know, we've also messaged that to customers. And I feel like that's the mindset of the marketplace. So the answer to your question is, I'm sure there are customers that may have come in, but very minimal, not like what we've seen, and not even close to what we may have seen in the past.

Got it. Thanks for taking my questions.

Your next question comes from the line of Ryan Coots from Needham & Company. Your line is open.

Great, thanks. It's a terrific quarter, guys. You know, I wonder how much Platform One contributed in the quarter. Meaningful to your – Sure.

Let me jump in, and then, Kevin, you can come in behind. At this stage, we literally just GA'd the platform. As you know, we announced Platform One back in December. We had early availability. We opened up the books for e-rate bidding, so we can see Platform 1 opportunities in our funnel. But what we're expecting is for this to come into play in the second half of the year before you see a meaningful impact to the business. Right now, what we're guiding is that it's going to help fuel customers' decisions to go with extreme, knowing that they can upgrade to Platform 1. Customers that want to trial Platform 1 today, It doesn't carry risk because they still have access to XIQ and all the applications as they go forward. So we're expecting customers to trial, test, play around with the platform, and then we're expecting serious migrations to happen as we turn the corner on the calendar year. Kevin, do you want to add anything?

No, I think you're exactly right, Ed. And it was really related to new subscription bookings, right, that accelerated in the fourth quarter. That was led somewhat by these larger, you know, customer wins that we had at Asia Pack. Plus the rollout of John Deere, you know, was another, you know, addition to that. And then the new commercial models on MSP, very limited around the platform one. But that's the benefit of the future that sits in front of us is that we see a lot of excitement for Platform One, which continues to sustain. You know, we're expecting to sustain that 20% plus growth rate on the ARR side.

Yeah, I think I'd say we're still in early stages, Ryan. Last year, we had 14 or 15 MSP customers, and at that time, we were developing the platform. We have since, and recently in the last quarter, completed full automation of the billing cycles, which is really important for MSPs. So now we have a fully automated platform that is really simple to use. And we also now have the benefit of Extreme Platform One. And so we would expect to see, I would still say it's very early innings there. Kevin talks about, you know, having MSPs, you know, do a million to two million. We have, we have certain MSPs that are, that are beyond that already. And so I think it's, it's a function of, from a channel perspective, how we're reaching out to new potential prospects, and then how we're going to nurture those that are already in the platform. But I can tell you the response to the automated, the fully automated billing, the way that, that we have this consumption model, the way that you can pool licenses, and then just the fact that we have a brand new platform from a user interface perspective, and then the multi-tenancy, it's really a cool platform. And so, I think, you know, the economics are there, the platform is there, and I think we're expecting to see, you know, momentum build throughout the year. Kevin, feel free to jump in. No, I think that's all right.

Thank you. Maybe one last one if I could.

Well, you hear us, you know, you've heard me in my comments say a couple of things. One is that we are moving up market. We talked about the Japanese government. You know, we've talked about John Deere. We've talked about a massive win out in the Middle East with a large hospitality player where there's a lot of business behind that. I can tell you in our funnel, we have more large opportunities than we've ever had. And a lot of this is success, we get success. Once we win these customers, they become reference accounts. And then we use them to go market other large customers. So that's very successful. And then the key to us is getting in the door. And I talked about our fabric technology. When we go head to head with our customers, And right now, we're in the midst of competing for one of the largest opportunities that would be in company history. And in most cases, a lot of the engineers and the IT leaders are not as familiar with us and not as familiar with the technology. So people don't believe the PowerPoint slides, but when they actually get in and they see and they start playing around with the technology, they're kind of blown away by what we can do. And again, this is not hyperscale data center stuff. This is an enterprise fabric where we have a unique advantage. And I mentioned, you know, we've gone up against everyone in the industry. And I gave that quote where this very large customer, the guy who's head of this project, literally said, you know, what takes Cisco six hours takes extreme six minutes. And we welcome the chance to go head to head with any competitor to demonstrate the value of of of our fabric and and what does it mean when you have you know sub-second convergent what does it mean um you know when you have the capabilities uh that we have in terms of zero touch provisioning and just the way that edge devices can call for services in a way that's fundamentally different um you know the the resiliency of the platform um the segmentation capabilities and what does that mean as far as securing valuable services that they want to send and manage across the network? So, you know, it's really a function of us elevating the brand and getting into these opportunities. And I think you'll continue to see that. The more opportunities we have, the more success we have. And, you know, that's what we're kind of doubling down on that.

Great stuff, Ed. Thank you.

No. Your next question comes from a line of Christian Schwab from Craig Hallam Capital. Your line is open.

Hey, Greg, thanks for taking my question. Great quarter, great expectations. And just to follow up on that, just to be clear, it sounds like, you know, the continued strong product bookings, you would say it has more to do with just having better products than taking market share. or from, say, HP, Juniper, or even Cisco, or would you say it's a combination of both? I guess that wasn't clear to me.

Yeah, look, I mean, Christian, as you know, the industry has moved from being point product-based to solutions. And so what we're selling is a solution where the product is a piece. A lot of the product, meaning hardware in the industry, has become commoditized. You know, most of us are buying from the same vendor, and it's a question of the software that we develop around it and how we develop our solutions and then the management platforms that we build around it. So, you know, I think, you know, today I'd say it's more about the solutions and the features and the capabilities that we're bringing to market that are really differentiating us. I will say there's a lot of buzz around Extreme Platform 1 that just went GA. And the idea that we have this truly conversational, multimodal, agentic AI platform that is more holistic than the predecessors that are in the industry. and the fact that it's live and customers can actually go in and play in the platform and begin to kind of experience what the new experience and networking could be. People are curious. And then because of where we are, people are wanting to find out more about Xtreme. As it relates to HV Juniper, look, that's a deal that we wanted to see it happen. We think that there's going to be a lot of disruption. Their synergy number went up by 50% in terms of what's required. They have to pull a lot of costs out of that business. And it means change. And it means change for existing projects, for customers. It means changes to partner programs. It means changes to their employees. And look, we've already been the beneficiary in terms of some of the key hires we've had in terms of some of the opportunities that have cropped up. So this is something that from a competitive standpoint is creating some opportunities for us. I would say the same thing with Cisco kind of moving away from networking in general. These are things that are helping extreme. That along with true innovation in terms of this platform and people looking for a vendor in the enterprise space that has, you know, the highest quality solutions with the most modern tools to solve, you know, complex problems. And we just find ourselves in a better position getting more at that.

Great. Thank you for that. No other questions. Thanks, Ed.

Thanks, Christian.

Your next question comes from the line of Timothy Horn from Oppenheimer. Your line is open.

Thanks, guys. So, Ed, to be clear, I mean, is the pipeline improving, do you think, because of the HPE-Juniper merger? Are you getting more inbounds from customers because they're worried about all the things you're describing, one? And then secondly, on the MSP side, do you include large incumbent telecom carriers in that? I know they've been frustrated with Cisco over the years. Are you capturing any mind share or share there? Thanks.

So, you know, if I start in reverse order, Tim, I'd say not today. We don't have any of the larger players today on the MSP front, but we think that's an opportunity. And what I can say is that we've got, you know, we've been investing in teams that have very good relationships. And, you know, this we think could be one of the ways that we can truly break out because of the differentiation of the product portfolio that I've been talking about and this platform and then this multi-tenant MSP platform that we built with a lot of unique benefits and it's the most modern. So, you know, when we, I'm not going to say it, when we were able to attract one of these larger players which we're we're we're targeting and we're going to be going for it we think it'll be a real needle mover so not today but but but we're working on that um as far as the juniper yes for us it would be you know a net positive we have seen opportunities we have seen some partners uh coming our way and and bringing opportunities at this stage i yeah i'm not in a position to talk about how meaningful that is or how do we quantify that, keep in mind that in the market every day, we compete with both of them anyway, as well as we compete with Cisco in the market every day. But I would say, overall, net net, it'd be a net positive. They haven't really gone in and made the changes yet. When they go in and have to go pull the synergies out, we think that will be a catalyst. The other catalyst is Cisco is changing their partner program and we are quite certain that the changes to the partner program will incentivize the partner and the channel away from traditional networking, which we think will be a net positive for us in the partner community. well i just related to all that um how much higher can the your msp partners margins be under your platform do you think then their legacy platform kind of you know what are you hearing from a return from what they've done historically versus what you enabled yeah i i think a lot of the a lot of the problem with msp platforms is less about you know the solution and the margin of the solution and it's more about the expense of trying to maintain customers. And it kind of gets very operational. And that's why we spent so much time focusing on this platform. Once an MSP is established, it's hard to unlock because people have to invest a lot in setting it up. So that's the work that we have cut out for us is to get in there and unlock and get one of these larger players to give us a shot.

And we're convinced that once we get that shot and they start working with our platform, that will create some of the economics that you're talking about ten thank you your next question comes from a line of David boat from UBS your line is open hey guys thanks for taking the question this is Brian on for David on gross margin given the product gross margin of around 50 percent in the quarter with full year at a similar clip and the competitive landscape and product offerings do you think there's a reasonable go-forward product margin and then have a follow-up Thank you.

Kevin, you want me to cover that?

Yeah, yeah, sure. We've been pretty consistent with our product margins. If you look back over the last, you know, four quarters at that 58% range, you know, we do think that there will be an opportunity, for instance, Wi-Fi 7. You know, we have a higher margin profile Wi-Fi 7. We just talked about that being 30% of our wireless units in the quarter. you know, that's going to create another halo effect around our product gross margins in the future, you know, as well as that, you know, switches more, you know, and becomes a larger, you know, percentage of our mix. There are often some costs that we've had, you know, over the last, I'd say, 12 months around, you know, shipping and going with air freight versus sea freight that we feel like we could take out some of those costs in the future as well. So we think on the product margin side, we can continue to grow that product margin. You know, I would say that 58%, you know, in the future, we could see that, you know, pushing up to 60%. That would be my target range, you know, 58 to 60%.

Got it. That's helpful. And then just on the verticals, can you share underlying demand trends by vertical, specifically government, given the importance?

Sure. I mean, we categorize kind of slide by state, local, and education broadly. It's about 40% of our total revenue. We have another breakdown in the investor deck that you can see there where we've got, you know, other vertical markets that are in that 10 percent range. And those vary between, you know, retail and manufacturing and health care. You know, we also see, you know, hospitality and venues being 10 percent as well. Retail transportation, you know, 10 percent. So that I would say that across five or six verticals, but government and education being the largest around 40.

Got it. Thank you.

And that concludes our question and answer session. I will now turn the call back over to Ed Meiercord, President and CEO, for closing remarks.

All right, Rob. Thanks for hosting us today. Thanks, everybody, for joining the call. Strong quarter for Xtreme. We've got a good outlook. We're excited about, obviously, very excited about these big customer wins, the technology differentiation, and then the launch and the GA of Xtreme Platform 1, which is generating a lot of interest in Xtreme. I encourage everyone to come see us in November. We're having an investor conference, and we'll be in a position to dive into a lot more detail, and we'll be able to showcase all the technology and also give you a flavor of some of the comparisons for Xtreme versus our competitors, and why people are taking notice of Xtreme. Thanks, everybody, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.