EXTR - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Extreme Networks' Second Quarter Fiscal Year 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call maybe recorded. I would now like to introduce your host for today’s conference, Ms. Young. Jean begin. may you Ma’am

Jean Young

being remind chance anticipated retention, to acquired you, risks Networks' materially including, These may a by Skyler, statements I adverse to difficulties to products, in quarter customers, but aspirational and call our the review that Extreme actual on from statements. to operations, earnings employees management second the and that and associated technologies Company's call, release. successful the condition, be experience of and or with results existing related to and to of could within the being not forward-looking into Company. assets, had integrate of operating the of of suppliers would Safe results The unanticipated conclusion the recording business may of successfully and with and negatively technologies teams, for and effects acquisitions. XXXX integration acquired our press will operations other like from earnings business replay cause the welcome in to, forward-looking will difficulties following is These operations, Internet those fiscal financial goals risks the Harbor and/or and acquisitions a conference litigation on we differ relationships and risks; live you've costs, Brocade these experience contingent Laws. liabilities statements you the we meaning impact reaching making our number on today's conference behalf broadcast the Avaya ability uncertainties, assimilation the limited during our and include recently the Extreme Networks' posted Provision over Thank By could recorded website now call. be is after Securities involve call. Federal the This which shortly

reports recent uncertainties, XX-Q X-K please on risks filed and most refer SEC. For with to our description and of the Form a detailed XX-K,

speak be not obligation these only place this should which no today. non-GAAP forward-looking statements of for, GAAP prepared and with to supplement statements, to call, call. we update both corresponding as You release should financial Reconciliation information after measures found earnings metrics. considered statements of substitute this GAAP. financial issued in in Throughout a We undue press not Non-GAAP GAAP undertake reliance today. accordance can be reference our may and a on to non-GAAP

at section a the materials supporting Company's the your website copy available of of and release extremenetworks.com. financial Investor the are For Relations convenience, on

call Now, for and to I turn comments. President will the over Extreme's CEO, his Meyercord, Ed opening

Edward Meyercord

Jean, it to in ahead you, expansion Extreme's for all to and growth margin has target believe call. announce gross income and QX Thank Today, financial highlighted plan revenue thank track fiscal are total which by Welcome operating fiscal XX% afternoon. XX% our to us XX% joining quarter. of own we exceed this pleased earnings for June QX our you in results we and margin gross target

over with three for to increased the acquisitions billion the cloud wireless target us. are recent the annualized industry, a the awareness from enterprise market to Extreme in of over at of our level expanded have revenue, share new significantly a created taken edge generating heightened entire our access have number portfolio customers XX,XXX and in brand, our We elevated opportunities enterprise become the cover product and to firm $X and

the solutions complexity in happening growth our to with more and and hybrid our the focused are for deployment, the Wi-Fi automate and Mobility premier Wi-Fi services. provisioning across of customers deployment way At Things data driving to and dens better security support giving distributed These network. with all and the only storage, Today, support cloud-managed pace for momentum Internet environments, at budgets for cloud next cloud are solve intelligence, hyper we positioned security. rapid The and and the all and many ways demands competitors industry We like to customers with converged changes new time enterprise of our enterprise when both are server, for at well wireless the of We market the to differentiated Extreme for technology platforms. competitor verticals. larger in market gain centers the edge, the growth is are multiple devices believe are only our who playing the our platforms. of across transformation seeing leading network cloud as places generation market digital software-driven at shrinking. are easy enterprise of visibility leverage a have are on-premise customers the edge architecture is about IP the segments and have Extreme that devices different we services Multi-cloud alternative in technology. and to we unified less solutions solutions. and

environments visibility cloud automation secure unique the Composer by fabric control have that deliver agility Workflow automate and easy it makes enterprise We for our of technology complemented solutions with our enterprise And service cloud environment. software alike. Center of complemented and campus our is that cross-domain to portfolio Data finally, and providers that to next-generation provides complete

from met quarters vendor progress. and guidance earnings a QX XX revenue also margin exclusively of revenue We modular full customers. Extreme for the which marking fiscal expansion, networking gross now Center continued wireless has our pull highlight our software-driven and In smaller through software-driven partial switching Growth wireless was of driven mix. from a we quarter with growth, offset is share core our differentiator business networking per switching our runoff of Fabric target. our in-source the support delivered in non-GAAP Data focused the business XXX% exceeded earnings strength by portfolio the Extreme addition XXXX much $X.XX on Brocade. or XX% consecutive the our Campus of see We’re solutions and is our a the results delivering that our to sales end-to-end acquired portion edge technical only quarter cloud, of fixed in by quarter a portfolio, of the and the

We’re developing our launch solutions field well our customers also Automated particularly turned market. in away margin In in been and for Campus we considerable QX, of received. more is business the the Secure campus low prescriptive a amount

margins portfolio Extreme quality pursuing XX.X% core result gross includes business. up X%, at higher to the and core Our of which Zebra grew now our as ran

we accounting. higher In our versus sales-in expecting sales-out in inventory in July addition, that are adopted distributor we model

at process a reported set of reduction QX sales-out going number forward. the threefold them. Today, inventory inventory sales consolidate into to had our a believe fiscal we right we to level, we sales-out. acquisitions, and the distributors level of caused expect our We are and levels increased With the consistent and our rationalize overestimated sales-in target one-time that heading began and numbers to and with the relative be which

March opportunities. of and our The $XXX portfolio our Given revenue our the million target. single-digit strength target cross-sell geos of are million guidance, diverse our our higher to for projecting organic we pipeline quarter to mid and across Extreme pipeline growth all core verticals is have in low in in visibility significant includes to $XXX and the we growth

Extreme. in large competitors one replace health with of have to with who system hospitals We want our selected our have six Fabric larger and London a technology

was that a the a a our behavior historically very sales quarter, use high name for discount to we pipeline. likely in residual a portfolio. with on the breakthrough Cloud large are successful efforts cloud by Service communications a that in back provider We for bankruptcy or in discounting is household case and of These U.S. deals it to what affected examples our with the requests SLX bundled couple to unified just a in We push field second up very technology. been the be process. new And are offerings our former clean are relating Avaya continued on

While a gross and by our to points Fabric effect had revenue quarter, XXX basis Avaya from sequential an was Campus from this XX%. on margins improvement it offset during the one-time XX%

strong enterprise of business at Layer in networking healthy fabric driving for pipeline for the to call the a demand solutions. being and a generated across level Avaya by X, and deployments, seeing are pipeline security stealth These our very ability We our networks is segment our we healthy what the Campus high demand our solution.

We the level margin in expect target the at that half business second rate saw run gross to our our in $XXX return million annual of year run rate fiscal to that higher QX. we

next-generation We the SLX, quarter Brocade. customers out SLX field with as tools is driving revenue. business the VDX, the strength with cases excitement expectations, switching for a with that use our our partial with routing deployment and routing exceeded along in and of help Data benefited and our MLX and in build we our acquired pleased are switching from platform. platforms, automated We the combined of the Center There's revenue

scheduled our for data with reference gross and guide, to target cloud center $XXX Workflow our and and January and projecting be delivering the including the our IT use our of revenue specific migration revenue better cases $XXX with in into and quarter, the our solutions. the and And easy on visibility Extreme business, full than Avaya making outlook $XXX that March agile million were revenue in we first generating data margin. upcoming have customers continued run solutions. with completed $XXX validated its comfortable Our to our designs We are acquired our as the sell XX domain can deploy slightly support million for in combined cross to capability, are into and when growth Composer at When range. cloud we the deployment very million architectures core enterprise At core business. revenue it Brocade systems are our our low-XX% improvement assets rate be quarter will million revenue asset. And of good is platform, acquired data Extreme ahead revenue that assets. margins for center and of combine results with we annual Net-net, with we it Brocade the

past deployed This a of not all fabric. already software from amounted retailer and they’ve Extreme QX. Avaya and by fabric but software, management, $X wireless million legacy Extreme and to Zebra large our cross-selling relationship. in encouraged legacy technology, legacy Europe OEM didn't Avaya university a in which of has cross-selling analytics, of but products approximately product a Extreme German the portfolio. in sold from our had the suite of Management large our access of switching wireless that opportunities. quarter, and control, are differentiated We a Recall wireless, families, software booked in Extreme competitive Center We the buyer deployed or full from growth have an revenue they

customers large routing our APAC data region our our deployed from their of former and and and products manufacturing One Brocade center. switching

million $XX over these kinds of grown has pipeline opportunities. for Our

three We through are now. quarters the Extreme of way

our local significant cities tour to directly world countries, customers very been to press Our leadership feedback we've markets. bring encouraging in to has XX received in and XX

encouraged and partners in our our take customers the technical are usually the surprised network. and by portfolio everyone depth when Our through plate each teams of

and to Our customers X,XXX is through to these over global target. initial goal attract events blown that we've

XX% target Center XX% Our we evident non-GAAP in quarter our the of the April. the in to with will quarter this close we Extreme our June jump believe full benefits year-over-year Extreme business, points a will customer we're the Data and to conference margin solution that new a new fiscal efforts of new very higher non-GAAP second QX bring culminate XXXX. at had user on quarter margins in our QX for are achieve The outreach at quality gross track XXX for basis when fiscal gross our target sales Extreme

required support roadmaps, to out engineering to continue employees, our resources board, labs on resources and the execute the business. combine the develop systems extra and build integrate despite well, our our teams combined time product partners, that our data Our customers and our that and

guidance to I see With earlier, our combined over flow and network and upside cash to to revenue we mentioned that, detail. in results As review both perspective. Drew and I'll on our it turn

Drew Davies

non-GAAP fiscal XXXX. Ed. from will I of XX.X%. QX, few our second with gross points started basis In to get margin our increased XXX highlights a Thanks quarter

judgments now We the as have before non-GAAP quarter ASC is every XXX of financial our guidance. gross fiscal year’s revenue the made XXXX. adoption same prior result quarter year-over-year increased of statements recognition compared new a our of margin since to QX This

cost quarter-over-quarter Campus improvements addition of acquired strong benefited starting for business Center Data basis November Fabric in as the continuing core point and from margins from the chain business business the margin in a discounting Our supply in improvements. our acquired reduced well XXX improvement and as the

compared guidance. and million QX QX in end Next, our and than of revenue was year-ago. I’ll Revenue X.X% $XXX.X quarter-over-quarter previous million X.X% our QX year-over-year less $XXX.X revenue increase by XX% respectively, to revenue. was $XXX.X and million turn lower although in QX of the a

on of Fabric quarter business, the focused gross for During which Campus our on revenues the impact second we an improving had quality and the revenues. margins

by year. APAC and revenue and million $XX.X million revenue Extreme revenues our better QX was contributed year. QX level Product QX higher last of occur. EMEA million contributed $XXX.X The distributor follows; did of $XXX.X that the business was quarter core orders We in also grow last and Americas $XXX.X in as QX service to QX driven XX% was compared XX% QX million for contributed XX%. split in revenue, compared million, anticipated $XX.X in in geographic of in stocking to The total not $XX.X

QX gross in was last margin gross million and $XXX.X QX in includes XX.X% last QX which in XX.X% expenses amortization in expense QX $XX.X year. million to to XX.X% compensation compared charges QX year. attributable Brocade expenses compared XX.X% in In year. expenses. a GAAP last and operating gross intangibles to million, million QX to two million expenses $XX.X $X.X of operating and litigation from QX operating margin and non-GAAP QX, was related of The QX of Data of Non-GAAP expense compares settlement million $XX.X stock-based addition XX.X% million. to million GAAP XX.X% operating were in to $XX.X QX margin GAAP of $XXX.X Moving and was compared were and $X.X the of $X.X in million expenses the of Center operating of sequential in QX $XXX in acquisition non-GAAP months QX business. million and mainly proceeds XXXX. increase on

operating year. $X.X QX $XX.X Second million last compared GAAP $X million in million operating QX was income a to loss of quarter loss in and of

$XX.X GAAP $XX.X revenue for Broadcom operating of net compares to million quarter for million Non-GAAP or $XX.X of as share per diluted $X.XX compared million in of share of income and and an million purchase GAAP quarter $X.XX net non-GAAP $X.XX Brocade’s of GAAP XXXX. share net loss tax purchase in Brocade’s the and $XX.X agreement diluted Data net or treated share upon or includes of year. per business, regionally was or Second million expense million pat gain income $X.XX loss a million $XX for Center tax price $X.X QX or per $X.X of $XX.X share purposes. income last $XX.X loss $X.X the million net to was and and in of X.X% XX.X% year. or in payment $XX changes $X.X law. a recent QX per in business for million total resulting or to of the on of or revenue $X.XX but total capital to were was net finance QX QX further was the share per million The in The XX.X% million million consent from was per $XX.X total QX $X.XX QX revenue, to compared in income business last QX million payment credit

acquisition capital FY in and million from the Turning mainly up last from build QX of cash to the of balance inventory the up and for QX decline Payment ended million, of down quarter, of in cash acquired investment data for the to the attributed end XXXX. quarter businesses working $XX.X the cash for million the center QX. of at the sheet. $XX.X and $XXX.X equivalents end total

in days and from acquired on QX end in addition flow of $XX.X of up end and flow outflow last quarter QX end the compared QX higher of compared million Fabric acquired operations million million QX Fabric amended FY million and with businesses. term to the QX last loan compared from were inventories. QX up DSO from XX acquisitions. in $XXX.X of million QX, to attributable year. to million of XX Campus the Campus QX During Total ended Data $X.X million of increased million, of XXXX. of end XXXX the with QX $XX.X loan outflow the of to Center of sales, to from million Accounts increased XXXX fees Free and $XXX.X quarter, purchase to debt and Inventory days Center million outstanding of million $X.X of of an at from by increase the and year. million the and fiscal of of was end compared QX year. $XX.X at for $X.X inflows the the at days at in $XX.X this the inflows last $XX.X to the was the $XX.X million up cash cash million $XX.X receivables QX net an $XX.X XX quarter, The last in QX compared $XX.X of is up addition Data was

to move guidance QX. for the let’s Now

total expect $XXX margin We and the to XX.X% range non-GAAP is XX.X% gross to be to XX.X%. million. range of XX.X% be in QX anticipated revenue million GAAP to to in in the be gross a $XXX range estimated to QX is of margin of

non-GAAP million previous expected $XXX.X million, $XXX revenue. higher Tax $XXX million million from basis gross driven of of is range in is the of by operating center expected our quarter initiatives. in $X.X on increase $X.X is to QX QX benefit margin a million up a the full to be $XXX.X on on basis. and business data to anticipated quarters gross million Our to and to expense in expense a margin GAAP the be

recorded legislation to pursuant to results. financial income SEC We our sheet, are to have QX the and statement amounts balance in U.S. and impact evaluate guidance, enacted our we continuing provisional the tax and recently

second there the revaluation have existing the attributes. quarter quarter, of benefit be we no tax untaxed The GAAP impact based net our lower tax the our on tax U.S. to ability $X.X tax resulted estimated of to second an repatriation foreign income. net relating our million previously new utilize For of U.S. deferred will deemed that of rate tax in liabilities estimated XX% at to earnings

net be $XX.X to of a remarks. to in to income is basis. Non-GAAP million approximately $XX.X loss cause share. per due a on of in we level $X.XX on loss concludes to in $XXX expected share. an expected a tax those This $X.X and losses million minimum certain utilize a laws $X.XX forward. $X.XX GAAP net to per to of the per $XXX deductions million or loss basis, operating provisions limitations GAAP range be tax million taxpayer a carrying $X.XX million or prepared are our on believe a and likely diluted is to and changes or QX, be to a We $X.XX net basis tax Non-GAAP not a to average to expected a in years is in we tax of be the been expect range two will a including to have income will earnings, U.S. us erosion full outstanding range $XX.X portion loss accumulated of attributes of to a recent in $X.X In to on million U.S. shares we You share. million U.S. non-GAAP income years. new U.S. addition a anti-base rate our foreign of QX of million $X.XX to three of on accelerated the of subject be the $XX.X

to up it open questions. now will We

Operator

Paul Cowen Instructions] Co. comes with first from [Operator Silverstein & Our question

now Your open. line is

Paul Silverstein

the Two if may. Thanks Ed taking question. or I and three Drew for

revenue levels you First margin? can plus operating off, XX% what guys drive at

Edward Meyercord

Ed. It's Hey, Paul.

looking billion. number of I at think north that's you're $X.X a

and talk $XXX If or you Extreme, about acquired you're base base million look assumption our of is at revenues, at – okay, [XX.XX]. Extreme we million $XXX looking

is contribute lot at high organic to the look a organic income. If and will quite top profitability that of of that you that, marginal operating growth growth on

hit XX% tag our So if we QX, income operating we number.

$XX be million. you level, – based need another – on looking looking that You'd you're at

a ballpark. could That’s So full-year. billion, unless of $X.X north it mean be I that's

Paul Silverstein

I you term a terms if we business, growth basis of out appreciate OpEx, look in of And in on as terms that. March Drew, OpEx about organic thinking and some on longer you growth? look what beyond are normalized

Drew Davies

into OpEx our get that we as can hold QX think We fairly Yes. here we steady.

sales have We variability compensation. have some We’ll will for some increases there.

increases. will there. some pay We’ll our have annual have We

can $XXX of guidance hold So and of it million-ish of the exception comp. midpoint our $XXX mid the annual kind you some think million the of in see increases there here the to the and with kind to pay of we – we range, from can kind sales million continue variable $XXX

Paul Silverstein

and the in – much the Any those only variable would that drive annual driver? if pay sense growth, sales increases of for comp that growth, how are terms if

Drew Davies

– X% go we And target to quarter. could expense year. $X variable can up sales target to $X $X increase We usually million then million million. per vary the each pay to X% The $X million

Paul Silverstein

revenue All provided, me, acquisitions? all from and Avaya the the you if question breakout for of you right. but last Brocade of already each give my a One apologies, did

Drew Davies

breakout The exact the this we quarter, give quarter. this didn’t breakout for

Paul Silverstein

to you Are give that? willing

Drew Davies

what On said $XX to Well, in that Brocade, XX% was quarter. expectation into Avaya is kind was into an below they we Avaya would guidance our we’ve there. We XX% is below typical that. had revenues million of that a of had expectation. release about in or do our put our

$XX So the that we in did about that Zebra – piece, had XX% then had of is than And Extreme like $XX.X would X% million they the of to the quarter low which million $XXX they million, thought single-digit do year-over-year. We fourth growth and organic XX% that. on gave. we better we

Paul Silverstein

in the or function this – function Avaya But to apologies, was All actually think right. call. what? And expectations, of as of again weakness the weakness I you original the relative my a because the said your

Drew Davies

low this hard quarter turning mean, deals too, really we were I’ll chime really on in let Ed working improving was of the Yes, and that and down margins. I revenue but quality

very to coming of XX% was I the a margin – conditioned of been and large and on discounting where of kind they and business business was able and were XXX think heavy the there of to that that think went out gross of really are points, of lot by maintain being customers from some quarter alone. low I were kind margins they bankruptcy that business on we get or really gross and we we basis piece discounts to improves focused very low XX% this to

Edward Meyercord

The you board We Paul our brought globally level do up and them not several integration as other that had piece mentioned [disti]. in to that sales picked the and inventory began on disti. round an with hundred out, were We in inventory and versus also sales and an picked rationalization by and the a of process is and and with for has below globally tag it to would that sales pegged their disti business perception level Extreme do that that lot forward. as their we go be how what that of we we disti

that. and how sales should it be to we out that modified sales the there sides in and number of with moving and at levels is So But we agreement have we've believe good of we there terms but And plans visibility where lack going close lot we reporting, forward. be we're the sync of now a visibility, now feel distis and they're done have and work buying of so clarity on – our had clarity about is going the in a there .So to there that pieces. inventory we both about in level were a there, number the

it element was that affected in and another yes, in that Extreme. us also then Avaya, So

Paul Silverstein

already the again, And if at on revenue are the Avaya said apologies this, my piece. looking but expecting stream at that you going you forward

outlook business. look understand you back low forward communications away wasn’t be to that going assume you revenue you look it margin payoff, the when maybe walking come as the given the you’re what from like relative but does I low the When walked of at original business people away at investment? may to willing stream is one-time from that that or Given that margin we look business, it and

Drew Davies

created and visibility we're much the we had are So projecting today. field what pipeline seeing are on we that is in the based this better and field and opportunities being and the in

and rebound a the level or analytics some gone are deeper of going the by there of features and end big can tools We of the the their QX education seeing have Avaya It’s to customers the want entire the XX been they're our know by management they fiscal. particularly it’s in on really portfolio. a our quarter not with our – expecting we're and on to attached portfolio. we're And the with the some sideline secure end other that in like to of also more confident our driver healthcare of in of an of the suite it’s and we’re QX, pipeline. Extreme campus get and It’s the suite whether going in fabric, that demand week driving of higher we amazing to by been some And of for We or with it software. on hit that and rebound the and management the sale we coming verticals manufacturing. And release we there looking Campus that partners what’s the software next portfolio. the be fully Avaya of and Avaya know and committed automated release our where

news gross the Data margin. as carries as strength business revenue by the good model the come and back of is That customers and the So offset are pipeline, that we and and that business from and evidence projecting far Data that I XX Center more and being Center hit getting is is concern partners of to higher a QX mean the margin QX or higher bogie. either we feedback are

Brocade is So a to positive the extent lower Avaya that we are the net-net higher with were into offsetting model.

Paul Silverstein

it for got pass the call I’ve I Thanks take questions, offline. those other it. on but I’ll I’ll on. Got all them respect guys.

Edward Meyercord

Paul. Thanks

Operator

with Erik Suppiger JMP Securities. comes next Our question from

is line now Your open.

Michael Berg

want This Hi the drum, I Berg today. clarity. to in guys. revenue on want quarter. just beat Suppiger don't for it. is Good some but I Congratulations actually Michael for Erik

the guys the guide strength in the on a was looking are was of in fiscal offset in up then in that you sales-in I then and still versus combined obviously Avaya at by that it? mess, way and sales-out XXXX? So mess And it target in weakness Brocade. revenue good was in Is with the the off, the mean, a $X function of billion mark a dynamics, but hit

Edward Meyercord

And Yes, in Drew and look then that's I’ll me. think good way at jump follow Michael a it. to could I

turn in The basis margin is was and consider it did gross XXX the in many other global improvement we different away thing geos. to and a point of business lot

has Some the was a the unified were with when bankruptcy Avaya part opportunity kinds they of it's to a and from deals maybe because or bundled of these discounted pipeline to because of with things. going communications or sale were former do where they Avaya legacy highly this

would and what say the the reconditioning we of but in our growth we this, I field of nature we growth the one-time we are that’s going And seeing that margin field, So kind range. the pipeline we’re are our business at and partners of of very in that expecting deliver. and to more were terms in disciplined are discounts higher

Drew Davies

that can billion and so of of of do where on based kind be full-year. second we in we midpoint the we the think come our for above $X And here, question QX, still think Yes. guidance the your half a for will

Michael Berg

Avaya extra strength are Would would you to? what point I particular sounds the higher what just or like would and say And in is in mess you both that. going say or you Brocade overall anything second the Brocade, a call Avaya this things from this guess given you driving follow-up can say half a of quarter, it's one-time, revenue or year. expecting everyone the the for in I mean on well Okay. it growth

Edward Meyercord

Brocade We're strength agility business, switching data very start. I'll and the the platform been SLX Brocade which seeing the data with is center so tools, And the platform for routing platform is Well of cross-domain provide in the automation the which next-gen adoption in center. that’s combined portfolio, the strong. automation

a data looking pipeline differentiated side the in that have technology. really We interesting center portfolio for and

of Extreme in terms of opens Extreme Center to And capabilities all overlap that. been a Campus the have an deals bringing And looking. the of Drew I where and Avaya now There's next but of the you're the to to On the between features seeing you think things portfolios. side lot want growth. and it's having like is also Extreme portfolio. of of with release people pipeline on ExtremeWireless, add know if Management anything we're our that cross-sell People side, where wireless. it's Avaya in the opportunities have software Avaya been the customers our There's version for up watching, don't Avaya creating which we

Drew Davies

using Avaya. visibility they we've on thing opportunities. those that where us awhile good we're after our the other with off sales have. makes that, we to the pipeline revenue going can sales has customers that go better and It in quarter, there agreement that the improved team the renewals services works lot service improved. that But still we're got that systems had. in We've to Avaya the we’ve use a us feel all We've the We're their the additional we visibility the we've The one at where end and for took got their tool gotten on of systems so service target get tool. the to got transition is that We've customers. to and closer TSA, be March. force We also historical more visibility that management of

overall on visibility has the Avaya So, just our business. improved

Michael Berg

Would the I'll for sweep for Thank guidance versus able be and Got the Avaya miss of would sales inventory to one-time and it. be weakness? and the you change terms revenue like something in question the last you that. in quantify One floor.

Edward Meyercord

But we piece Avaya that. inventory exact the of majority didn't an And give the the miss. issue, number on balance. the so up is well makes Yes, it the

So primarily the side. it was on Avaya

Michael Berg

Okay, but all business, about the you're the overall you earlier. listed strong very feeling factors given

Edward Meyercord

Yes.

Michael Berg

see it awesome. Thank all Well Okay, before. very right, much. you I’ll

Edward Meyercord

you. Thank

Operator

next with Our question out Henderson & comes Needham Alex Company.

Your line is now open.

Alex Henderson

Thanks.

to company you When their up so to numbers Avaya turning salespeople the within Avaya moving buy and it you've products? plate do who up accelerated in business now the take and see bankruptcy, to to away discounting and product think do that start got long be not to were the the in-house on footprint? products you customers To might get step how they you're So you will been proper get to structures, purchases. when hesitant board beating so the the have the that with deals you

Edward Meyercord

we fiscal that happening Alex, and clean expect pipeline saw think Hey, are in we time. a We lot our was. where discounting and our we We're that this to that year the see there by calling and of We one real that time. is of half of up was in Ed. the second we're some of in the see we be the it year, end it

environments. gets inventory disti The to technologies That highlight the had we is security I'd and the that to technology truly we features. is It's and easy complex, element, that cleaned Avaya deploy, up. Extreme, capabilities that portfolio that thing It got and didn't of have to look at you complimentary layered what's it’s Some to. fabric It segmenting at very Campus. didn’t issues come the is this differentiated in, enterprise, if unique networks are have as tied this security in well. like has with Avaya unique

common butter the didn't different our enterprise control, the the and a an they and field There's every the differentiated. of reference network have running the and for side. with Well, that with on pane elements. bread truly Gartner device glass have lot single at technology. network our that’s where is the can and that we of visibility differentiation Well reports all database didn't Remember have This the we in the that that’s Avaya fabric. software. and So is on Extreme interest fabric technology

is it’s Avaya in [Zirius] low for this a for in of solution technology. investment they margin great money with and from OEM seeing come was us at the How we're looking investing this our where saying the resold the putting So was very wireless because we're margins are have they customers our protecting well, the mouth lab and field together? opportunity and wireless another piece to going terms where this and is they’re my Avaya Are because been that business.

come also fabric Now tied solutions the our going and we are wireless that quality technology into have at software. margins are that into higher higher tied to

its in it at and very technology look you We're the an agile expecting combined from campus perspective, are there. if pipeline growth what roadmap is complimentary. this out the growth So on that based we're seeing technologies we've put

Alex Henderson

are to on on still out questions little clearly assume But their response the their in guys or hit way variables or Cisco's if you've list. accounts any the bit take probably accounts competitive company any on even pushed and of has it's there could in change popping competitive though marketplace radar of from and pricing been to other they more screen, a front, I keep you I would or billion low as behavior you? now $X up Couple you on

Edward Meyercord

some package… change perspective, our customers From involved been is packaging for have have where a Alex. Nothing the really not I've security with thrilled there personally been with of meetings combined

Alex Henderson

Separate that one question next was my actually.

Edward Meyercord

looking opposite core that and out. we're Yes, at for out preferred that they Checkpoint. Fortinet, security around that and a we're from with like way lot It’s if of the out kind expense like example. like our use they're to of we're creating lot the we coming a they selling they vendor from the whereas Alto, a way and an the pricing complexity data framework coming And the coming If there Cisco’s this. customers of of simplicity just want network of Palo it out to where security if or their portfolio we're packaging coming open of the changing at and given center with continue

a customers like going there's be are solution one piece the actually if enabling much Automated our we just want lot that vendor. for pull creating they customers sure all flexibility so with is it's and less of that us and the we And with think why is a Secure us that enamored Cisco's, for I'm better big there strategies to opportunities our market deal our which enterprise But together to about 's to solution. is out for there see that of there our Campus, a important portfolio

Alex Henderson

requirement that if net model? that pipeline discontent networking, licensing might percentage Can look how of opportunity plus a to with on the how you your that for the in move blocking give is of there's of on reflect to scaling pipeline around people's more? a and us it big couple So but points at for you your any a there lot a security with intuitive or much opportunity networking a

Edward Meyercord

really the them. edge, all for Cisco go and from time with Because is up time see call Aruba HP against up hard really coming to It's us the go have cloud kind all with out we really the to that. out and architecture they’re Cisco’s and Aruba we we other edge integrated don’t of the moving an their starting wireless. or or wireless DNA, and moving the on-prime for base way but unified

kind a join just try the to - it to would be be to it wireless will pin on big it there would guess So that. side, of but really

Alex Henderson

you that pieces product? integrated any integrated elements look done you - Meraki the various of sense way a security are know that you you said when is have But the it. of the the in So intuitive it. the nature I any into you competitive at of software had at that have tear networking product not down, look if

Edward Meyercord

Well, I coming be product of think perspective we've switching is nothing may elements our really apart that new heard what a it standalone there there's the from are our analysis and – experts compelling ripped that is nothing out. have new

it’s So complicated, deploy a from The really bundling of complicated. technology perspective that to really and enterprise they're portfolio actually problem an it older security. is is

deploy sell can services you which it want to for expensive. get they starts to so they So really managed

solution in flexibility a having handcrafted to we you're see giving want putting them going one a and to all eggs that’s a you the where if and expensive of you’re ourselves all sudden that’s very big basket be your a up that's And Now future question forward. opportunity. and

Alex Henderson

somewhat number generally higher, be March little between seasonal is about When September a sweep think one at last lower, is How seasonality Is is newly it the then into I'll is where then OpEx much the you December them? back OpEx the baking to and March we a lower, to and floor. should June those company question, like situation a September going So from quarters? June – to structured and back how June. the December between up on should look more display little do line we

Edward Meyercord

September think come quarter Yes, out of sales highest be OpEx terms of quarter of tax for going of had to and will they was it different busy – have. Avaya for fair follow would fairly the the at was it's be a be were quarter Because down and variable time. the June Avaya the the September ends total to QX typically little I seasonality in kind kind highest then it us October going is business business. it's next they that amount the the we and that with had Brocade Brocade for because to a Typically just bit year still of and that revenue going year

the March past September So and more other a will then we row little December be quarter. the somewhat anticipate the the it has that quarter to be than in each and for stronger quarter

business. and QX little So QX a with also that the been typically changes bit and more new down more flat. was

Alex Henderson

a marketing in the Great. a non-GAAP sales me I which don't slide finding R&D for and press think breakout is deck? or location there release G&A in Is

Drew Davies

checking. Well have it. Yes. it think I slide We're deck? we have Do we the in

Alex Henderson

similar. at don't I it. individual at not Yes. it granularity. was the the broken at slide deck. It's line a I looking in OpEx see It's the out

Drew Davies

Thanks. Yes. We’ll get you. to back

Operator

next Our from James. comes question Simon with Raymond Leopold

Your is line now open.

Simon Leopold

I follow-up questions. finer from some little March, to a peak I'm Understanding so on a that Great. quarter, prospect. the December one you’ve want it June does had prior bit seem detail and maybe just for I guess to And of on looking is slide revenue Thanks. June typically the

in of rate had the Are certainly kind of June growth quarter. a sequential for team that your historically calling So sequential quarter, still growth June? you've in highest but you kind

Drew Davies

Yes.

on OpEx? on or about deal are revenue talking You

Simon Leopold

No revenue specifically.

Drew Davies

We kind or – QX. We've double-digit to from Yes. QX low QX a – a a just do. to percentage low it's really growth QX got of percent

Simon Leopold

assume in I the that just into plays I tend other wireless the are better the How of thing much gross questions wondering how December point of mix access there in related was to gross margin quarter, think than was trying the better And a and are of Okay. in two here? understanding get average guess story I this and to terms maybe LAN to the margin strength products that overall here. and I

Drew Davies

data Wireless Wireless revenues now that – product rate Brocade gross switching and XXs. line high center LAN been overall combined as LAN now run we about in kind going which XX% it's of as the in is it's high about same margin, products are it's it's to be here. is not the the now getting our the our to of on as of mid XX% to

Simon Leopold

from you've given And converting products terms shift then you dollars, European in Okay. cheaper of Can basically be foreign seen anything in what exchange buying euros. if to related had EMEA forex Great. the Thanks. to comment customers that have benefits? rates, you your in and generally high on decently seem considering exposure to

Edward Meyercord

in I'll chime in an in what's the we've for European seen organic a and overall terms strength us. seen driver here. economies, What Yes. driving growth EMEA we’ve strength of in big is of

and other, Middle rebound. we're core France, Cal recall we the At for in forex in I [indiscernible] in the across healthy of maybe Germany GDP UK, you has our region board the there Southern markets. market, always don’t a distribution perspective. seeing largest you a economy seeing of East those a growth in it the our more a Spain, have and if have we're numbers think and We terms EMEA. Benelux, if business then from the nice skewed that towards number been even region or economies Italy, as But we're markets like also recovery seeing

Simon Leopold

any select and about enterprise shift last the not opportunity, terms Thank much select on strategy in one. think was or I variances really to you. so every the talk to verticals focusing you acquisitions education, verticals don't everything had too in of strategy previous the particularly on in verticals? hospitality. behaviors of strength Any vertical you’ve One Okay. I be specific to recall market do focus

Edward Meyercord

developing cases then them we're use horizontal use doing we're at to are our and is verticals. going looking we're we're cases that drop into What and

and bit our into higher we a I and to So K-XX to Automated for if it market also a more look come a to how lower, example exposure drop susceptible which if you and our margins. us, is drops the or going or that's margin one has our thing how little at how from fall be Secure Campus pricing public aggressive down has pressure. so we it's been K-XX on down take lower quarter, which that vertical and have would bidding That’s to reliance down and that exposure manufacturing, happen did gross our healthcare that manufacturing. into mean for been more tweaked bit to that into contributing

Simon Leopold

for Thanks taking Great. questions. my

Edward Meyercord

Thank you.

Operator

Our Craig-Hallum Schwab Capital. next with question from Christian comes

Your line open. is now

Christian Schwab

at value average the $X is for targeted three years Great, June? this CAGR I What So grow only business, now? we’re have perfect targeting sense. following from one you do an rate billion as that which question. we the for away What business would makes and growth some walking be

Drew Davies

in, the our the together core the and said $XXX we have far. We’re and Extreme laid we acquiring We out into guidance future revenue out beyond is that come single-digit. Those have through to low of go run What grow as expect I that we that we're been acquired sort million mid outlook. these putting be to that grow projected rate. The – we putting as to at appreciate that to QX that businesses. question. not companies we'll

quarter you organic in a healthy which – seeing includes at are We is when Zebra core business. projecting the we’re Extreme, projection, look first now in the growth

growth projecting Avaya, the sequential Data Center So as business. and we're the

modify So have the figure I to as how the it single-digits think there. mid saying now out all we’ll going we're to guide. to we're But low together, hold comes we and

Christian Schwab

still with walk even have new people just business other walking away Avaya, or Yes, away you'd the the from feel margin so Okay. lower call not. to that we some from business, whether of on

changed, expectations correct? to company of hasn't combined the growth So single-digits mid your topline on low

Drew Davies

Correct.

Christian Schwab

got. I all That's

Drew Davies

Okay.

Operator

from And Company. with Needham Henderson & comes our Alex next question

now Your line open. is

Alex Henderson

the just growth? us little to the Yes, what quarter better current a actually go similar I that…? quarter on sense Can Extreme organic it of passed going just X% in you said I to per is the think was that was give was to with on was to mean I just – try bit the back what wanted se, reported. you at

Drew Davies

and Extreme combined. Zebra

Alex Henderson

right. Yes, and Extreme combined Zebra

Drew Davies

Yes.

Alex Henderson

that what non-organic? everything else growth is organic we be should Is the was using the quarter because for

Drew Davies

jump we’re going it Yes, into I up this that’s how how March we're but to the kind of think looking quarter. That’s at. looking that number quarter, we're for expecting go at –

Alex Henderson

to increase organic driven customers the the installed a X% and been growth to some to past might the base of the the for the by low in extent within the single-digit opportunities So have reasons? buy cross-selling where mid to predominantly is from reluctant of variety

Drew Davies

within there's perspective, quarter. the I mentioned discounting issues also this part portfolio Extreme that We the and… The pushback mean a happening had was I issue disti from Extreme to of related distributor that before.

Alex Henderson

I portfolio, discounting easy sorry. I’m on which predominately the was be not thought pushback Avaya the would in the in in piece?

Drew Davies

the predominantly, It we’re also was portfolio on core is in portfolio. Extreme more stringent also the Avaya discounting getting – in but there

combination a both So Alex. it's of

and roadmaps we're the what at So we’re – pipeline, see terms think our the quite in we the opportunities forecast looking quarter. I good we and with and that confident together March how coming product in visibility of on the are a have for and

Alex Henderson

the from coming Okay, get predominately higher so growth is mechanics the to what…? to

Drew Davies

we to said a million step a acquired $XXX core be about there of combined is of Extreme going – business. going bit and Extreme, think to had are think core we’ve and nice ahead Extreme be revenue. growth Zebra We're to what little Yes, the which I in organic that is and see going the on you're the to

Alex Henderson

Okay. I’ll sweep the floor. Thanks. End Q&A of

Operator

Mr. question. At to turn for no closing remarks. over I’m like Meyercord call I’d the time, this further Ed showing to back

Edward Meyercord

There we appreciate I questions. a want today. driving these has on the of at shout as businesses Well, lifting out of been all while the to We on integrate Okay. could everybody going us do to employees lot all Extreme. call we join thank extra who the train. the

when and as March have And really the new one our up we assets so to having – looking the first Extreme. collectively quarter a forward full all numbers combined putting the combined combined we’re into

So and have a thank you evening. great

Operator

the This thank Ladies you for does program. participation conclude and gentlemen, conference. your in today's

a may great You have Everyone day. disconnect. now

Extreme Networks (EXTR) 6 Feb 182018 Q2 Earnings call transcript