EXTR - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Extreme Networks Third Quarter Fiscal Year 2019 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 be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today’s conference, Mr. Kovler. Stan begin. may you Sir,

Stan Kovler

me you, Networks’ We operator, quarter Kovler, Extreme third and X-K and Development. to Director and an Networks’ CEO, filed Ed quarter distributed and XXXX earnings a fiscal welcome Meyercord; XXXX With Strategic fiscal and Stan Rémi Investor the are conference financial Extreme of President third Thomas. Networks’ results. CFO Relations Thank Extreme today just call. Executive release detailing I’m press

Networks’ pricing press not presentation the the website extremenetworks.com. initiatives. that on non-GAAP as Investor of statements as which to with call, our our we these I available those forward-looking these differ copy law. by to results as includes forward-looking fiscal to put today’s factors a you convenience, of and statements you future at would anticipated and risk your We the GAAP financial forward-looking materially actual risks caution undue call, SEC. they and Extreme described release reconciliations, that during XXXX business made products, cause results, reflect digital update statements and reliance or our on have to from can as For uncertainties our our of this in may section Relations today duty and plans by required Any analysis our no QX to transformation filed except reports operations, like are our involve and them in financial results remind discussion about include statements both

CEO, President Ed call the turn over I Now, Extreme’s to and Meyercord. will

Ed Meyercord

weak of we and QX QX the midpoint towards expectations. the was versus $X.XX million on of all seasonally being morning. $XXX quarter Thank with you, for us results for non-GAAP Extreme. joining million landed this share. Stan, had to million revenue QX a We of earnings consistent announced $XXX Revenue guidance typically our $XXX Today, despite you per thank and

Data our Center for Automated validate strategy were and and acquisition execute. and acquired our quarter-over-quarter, solutions fiscal Campus execution highlighting best our improved results Agile previously team’s performing to grew ability outlook our The Our and our XXXX pillars and our assets.

expected performance our assets, While are corresponding a the row. with it sequential at to $XXX rate, we visible metrics Avaya we achieve pillar our quarters the two with than targeted today. growth acquisitions, clearly Automated desired were longer us our acquired they assets run within million million. these took for Campus Revenues When $XXX in

that just margin of acquisition, added hacked are be points our quarter. Automated which combined Layer gross our Customers is and target When XX% can’t competitor’s Smart single-pane-of-glass during fabric deploy. the devices OmniEdge end-to-end and with and network management software run solution to In third-party and elements. a security data all software, we deliver our our network multiple visibility, very connected enterprise the with our segment to plan match to with all we’ve networks it solutions our So, and complicated and that XMC XX because secure edge for and and of the to our single contrast, we’re X analytics how embracing easy solution expensive since fabric. was ahead base with shy provide is the Campus of long-term OSs

our Our are customers it. our are it field embracing it, and is embracing partners deploying

the roadmap significantly. Automated specializations and and XX% results. our in wireless than Campus software year-over-year. All-in, we it’s drive revenue offerings the did switching applications terms sales. are Our Marrying our a Automated three our are the product and teams in technology in months our and we in with have XX partners us who is into over And years. growing our Customers of roadmap achieve vast solutions more software their grew next master past Campus, products roadmap have and confidence helping translating our

acquisition at run highest is SRA reset Agile from services business $XXX heading Center our Products was Data Agile also million Center the that $XXX Data revenue well. quarters. into rate, $XXX performing QX. in million past well the we to and three are million Our above the

Our that seeing center, new vertical From are lots success products border are SLX such results this of and of routing also healthcare pillar we’re and for cases into fiscal others we’re the our going on XXXX rationale In used retail, driving seeing validating acquisitions. switch. as by opportunities the of switching, lots in strategic now in verticals. government focused data a large interconnect, aided ‘XX standpoint,

only customers on biggest fiscal based strong our ‘XX, to higher and our into see coming also wins expecting we’re now and switching fiscal in embracing are vertical E-Rate education Our ed were wireless in XX. through Zebra portfolio. Heading growth

Our to we expect ‘XX. dollars most of filing some year-over-year, through XX% but E-Rate see will that opportunities flow in grew those flow through fiscal QX in of

customers a of set as embrace We our continue deals to broader win large solutions.

deals over million, software and services to had pillars, our we XX quarter, $X the During across representing similar solutions products QX.

quarters. We’re next opportunities for growing four of large total our the pipeline

our at gained pickup showed a large the Center pillar EMEA In of and and we up growth our adoption deals. of our Agile partner region, among year-over-year Campus solution our significant pipeline well. the geographies, XX% strong saw Data Asia strongest movement Automated field has as with X% when quarter-over-quarter

the uncertainty softness along issues service and This is more LatAm case and are be where German our Brexit us At government vertical, in comps experienced K-XX leading macroeconomic take the Revenues next we quarter. of issues macroeconomic outlook tough year-over-year in basis. in continued by affecting a on retail the manufacturing to demand, with began growth However, the QX in conservative particularly our provider to in affecting in of Americas, is vertical effect for year-over-year. Europe, in exports. in impacted

at our product shipped tariffs the moved from March. We we for to our to U.S. of mitigation of U.S. be tariff end in into plans Taiwan progress products continue in exempt make XX% manufacturing To-date, that the

our X% to costs are Taiwan discussions than opportunities X% We’re risk of in balancing U.S.-China higher and the standard China. the trade since

Our momentum WiFiX significant Customer is our products and key shipping pipeline. in to with first our with are wins important commercially stadium building WiFiX vertical. now available customers in growth

the new are We technology this partners to switching and changes their customers extending and potential as sales cycles they witnessing architecture. evaluate

Looking the will our and have XXXX, we new number market a from calendar products portfolio. significant believe rest products growth in the of ahead upgraded drive we of and software for coming margin to standard and that revenue

we of As Analyst next portfolio XX Day, over we our XX% are noted refreshing months. our the at

have Extreme. product different GA record be for We is will a that X SKUs This this quarter. [ph]

Connect vision Autonomous in up weeks. user to excited very our of two coming share We’re our conference and Enterprise our

the year’s last event. successful double than more of number will from attendees We highly

sessions Last number months. Our technical our had sold are customers capacity training and highlighting and is previous accommodate increased significant customers we our from demand. the to partners out it training, technical driving the are expand truly their sessions attended XX% with growth. XX who embracing fact to year, the spend Extreme technology, This quickly over the and with by of engage

a again while Access; for launched Peer in as running model. security our new our hit Extreme value and arena. deployed LAN conjunction in had solutions. our highlights drive reliable accounted in-sourced and well using and Wireless to We from as Defender our for as response truly digital times Professional Connecticut game-day orders and the our Professional OmniEdge provide IoT simple and segmentation. to in Choice solution, defense touch Insights protect and The how are to the take of Data to service this employees product the for with customers well This quarter, Networking interactive quarter our wired state in one experience. network also with network secure, and of differentiation XXX% this on management each critical and well. and number residents. connectivity service This we maintaining our Services, ticketing the were Smart XX% of milestone transformation its cover partner locations then as Hartford. wireless several one device to At offering one In initiatives to With one using Hartford, wins. agency down granular measure analytics payments services IoT Wired at a Touch and The network, Gartner a Services with is and competitive agencies security state delivering drive great Young exacting new its for mobile we will of the devices state operations through fans solution application to on locations of of is clarity multiple This attacks. Zero during points deployed Customers’ to named we XX,XXX-seat tools to list as for once partners support to example innovative onto and the orders Brigham We University, orders access multiple cyber solution consolidated of Smart topologies health, BYU customers our from X,XXX OmniEdge our Center we quarter.

Our discount quote are to taking days improvement more remaining performance have than less a sales driving through, approved productivity now a with new to of from with spend configure day XX% approvals XX% historically. significant teams customers. time tools price and our the auto three This get means

our number product drove sales quarter, Typically, quarter constrains. the operations constraints; and expect X% in this addition, eliminating efficiency in to this X%. operational by In see chain supply product drove we teams we to

building backlog. benchmark industry return X% during to to QX, which expect We contribute the will to

we ahead, headwinds our that strong into affecting are are for forecast conservative usual account Looking to QX. our

a with both deployment we level revenue revenue macroeconomic this architecture; potential prior in a lower their outlook substantially was sequentially. second, our earlier, changes we’re compared fiscal leading the I performance LatAm sales solutions better entered customers a First, QX lower E-Rate more to experiencing filing to backlog, in WiFiX quarters lesser and and to recognition that driving mentioned longer into evaluate is early is as relatively and cycles of region; timing in ‘XX; year, third, wireless while as Europe, trends extent to switching

of finish slightly $X basis. We revenue approximately on expect just to XXXX, and a year-over-year with billion fiscal up

remains call our also gross I confident to we in sheet to improve ability the team Thomas. I’m want operational allow our note digital operating transformation in we is in margins. our to We XXXX combination a in will $X gross the over margin, share fiscal continue have the $XX in $XXX and for that million as target efficiency Extreme XX% remaining and With turn balance buyback operating made cash, operating to billion ‘XX. X% the and that, grow over target efficiencies our to for our execution forward. we with and the outlook efficiency. increased will fiscal strong The Our exiting gains I and pave to XX% million us way to productivity authorization. range investments X% growth, in margins gross and Rémi believe CFO, to move we’ve revenue, of

Rémi Thomas

Ed. you, Thank

$XXX.X and As of the Ed were and the the year-over-year earnings low per midpoint towards was towards of low margin impacted of impacted noted, our range. X% revenues XX.X%, Non-GAAP quarter-over-quarter our declined million our margin. end EPS by gross by $X.XX, was share in services guidance. X% decline gross of our

declined and product consistent quarter-over-quarter. year-over-year million was up Our X% QX, X% of largely revenue $XXX.X with

as our Services million Data in The verticals, the K-XX bookings and but as X% of was Smart impacted quarter-over-quarter. product with sequentially. well higher in performed pull-through declined business Campus while challenging of revenue North from pillars Our revenue impacted and line lower expectation, retail multi-year in our comparison America. year-over-year, $XX.X OmniEdge X% grew Automated by deals, particularly Center services our percentage year-over-year

performing XX%; XX% contributed software, as was differentiated and XX%. customers and leading Americas with to education out and round service for top growing local, This total quarter. we healthcare consecutive effectively the very quarter, APAC fourth the five. the Ed market see and government EMEA, manufacturing, where was internationally. closed fastest remaining federal our mentioned. The largest vertical APAC once provider, verticals state, product top out and revenue; our U.S. embracing includes next the portfolio the in both again our government the Globally, were During to

that the dropped margin, tariffs the lower XX.X% expect, points however, quarter. was gross quarter. which just speaks ratio backlog impact margin we to affecting to to The enter XXX next mentioned. services in adverse have QX We the estimate outlook margin Company’s total I attributable sequential Our is mostly book-to-bill Non-GAAP QX. on basis to and XX.X% the decline revenue, to XX.X% for in XX.X% consistent which basis total gross XX QX, our of as estimate X, with compared an gross lower over our slightly we below book-to-bill was quarter, year-ago the from points of this go back in and back our XX.X% was Company do to gross entering in QX. X had We margin quarter, ratio as

XX% margin year-ago gross of quarter non-GAAP the in XX.X% to in Our and QX. compares XX.X% product

from gross was was a expenses given basis, in higher product quarter expected QX. in a The On was Our up higher mix from from the $XXX.X QX and increase our product margin offset increase million were primarily resulted cost reduction the sales favorable $XXX.X expenses. non-GAAP in expenses and in year-ago million slightly of by and than expenses R&D as year-over-year sequential to mainly non-GAAP footprint. sequentially, overhead operating flat operating in standard due discounting. $XXX.X operating higher and G&A, this higher our quarter in larger the million marketing

cash of use $XX.X of of Free X.X% sustained the in driven the of to acquisitions. million one-time and expect and generation in in of year As last X% we non-recurrence do cash the lower flow $XX.X level compares flow same by of the cash free expect we a to compared operating cash integration our generated despite use to year-ago period of the QX. in of QX. year-ago Year-to-date, a collections, and quarter quarter $XX.X million year’s QX. million in million in to costs CapEx lower related $XX.X and working $XX.X cash X.X% compared ago, capital, profitability restructuring in result, flow million We margin improved improved

during not basis, quarter. balance DSO X cash at collections days days of any of stock $XXX.X XX was million, DSO did and end We at from end total up sequential strong $XXX.X XX quarter-over-quarter. days the repurchase of fell million the QX. Our a On year-over-year the drove QX the lower.

a days but compared Our XX down cash XX year to at days conversion cycle XX stood from QX. days ago, in

in progress $XXX.X quarter million on My and now has to made services just out growth compared systems process Company in and selling QX become also to licensing currently focus year-ago revenues with joining cloud-based to since renewal growing offerings. million deferred XXXX initiatives bookings transition our our and November in in driving processes are platforms, Company. as underway to entitlement We software at the now significant the million lead-to-cash multiyear of the $XXX.X selling designing we for for and went $XXX.X been platform new and depth live These software-as-a-service. more revenue our specifically

take cost is Another taking key driving we business. to and actions our around support initiative efficiency of control need to

overall to improve our dedicating planning for demand efficiency. We’re and in forecast gross more accuracy SG&A revenue process, efforts bookings, operational margin, and improved

planning the preparing into more We’re the ‘XX with a to for portfolio, of heading for approach real our investments in example, based introduction product fiscal R&D on changes significantly lifecycle. cycle differentiated

fiscal an us on a to these the expect position actions XXXX. exit achieve operating rate run We to margin end of XX% by

turning Now, guidance. to

stronger face we Ed mentioned, As a QX. typically into what headwinds several going seasonally is

range operational of $XXX.X $XXX are gross to revenue to estimate to expected $XXX million related in $X.XX operating range a manufacturing in products will that on a the gross As gross of anticipated earnings XX.X% the transition the margin basis-point million of to loss the of expect to of improve the in net XX.X% in we total up over to shipping and $X.XX the GAAP QX basis, ‘XX, to expected and or turn costs. begin a outstanding a loss and be of XX.X% QX million million. on to basis to shares on compensation $XXX.X our to We share. payroll million is our that, QX, the in the excluding question-and-answer margin actions expenses diluted tariffs $XX.X a in basis. $X.X our million will effective $XXX.X on million $XX.X XX.X%. be Taiwan be expect range in U.S. in $XXX efficiency. OpEx we QX including mind, XXX expected shares continue million be In and add be to to With $X.XX GAAP to of impact non-GAAP impact the for any basis for is a be to a approximately result, sequential range it share. impact overall XXX.X we range to to to range a repurchase. now to QX to increase of Non-GAAP non-GAAP is GAAP be variable margin I the QX million income will non-GAAP to the $X.XX taking of to primarily that With The to session. on of or net XXX.X to may million million $X.X average per we operator GAAP is million

Operator

first our And Mark Instructions] comes from Kelleher [Operator Davidson. question you. Thank D.A. from

open. line Your is

Mark Kelleher

taking Great. questions. for the Thanks

with the June start weakness guidance, there. Let’s the

that there’s it kind of You issues? there those won’t size EMEA of was extended you year? some Can further One, did some two gives confidence out those that size cycles. And it? indicated are between that headwinds I weakness and from issues, weakness coming capture what the two sales you continue you can into those and some right, the

Ed Meyercord

Yes. Thanks, Mark. This is Ed.

we it’s what’s as as far as far As in trends -- there Europe. macroeconomic pretty have as well-documented mentioned, happening

market Specifically, particularly is in we’re market manufacturing uncertainty one in of Germany, markets high for creating terms have an share of companies the And Germany UK our seeing very strongest the surrounding we is -- them. where Brexit impact definitely is important there. export

quarter next what’s we similar And so, that as an into see as as impact in were through Americas as we that going had and we sure there. we the QX, on on mentioned, number macroeconomic want that to make on we’ve forecast, affected well. by into consideration backed we’re taking In off LatAm, we effects the our far carrying

in this is an adjustment Anytime you’re a a through So, customers. for product that’s this big WiFiX, our transition, going case, been piece.

come lot taking a wins but really some mentioned, people we have As had on WiFiX. of that stadium through, their time nice we are

in time. operating We’re anticipating are our don’t and We about is there. the we seeing talked to but just in vertical. really orders positive is not book-to-bill it’s sure the conservative fact want the kick X to know the E-Rate opportunities fact with building, what for ship. was talked education us, outlook QX. the want talk going fiscal in we’ve timing him constraints, And about that. past And and we’ve our teams the we’re softness, and about to for that of part fiscal it help when And you be of we which this note pipeline E-Rate. X gets that this K-XX and effectively really of be year and it’s to want that below how this We backlog, us filings, it’s be land a that to softness over I to in conservative about heard quarter good in out. going on positive every because expect be course the terms From and efficiency us. a quarter the Extreme. we ratio for Rémi’s we above aggressive XXXX, and eliminates were light, we up mentioned product in, of being XX% perspective, And had over eliminated our We quarter to real as had in E-Rate that in In pulled as we’re this XXXX. again, far how comments, which a

that a up on from revenue. in negative the click We and constraints expect to quarter effect that has back that product backlog comes

the it’s So, out four we truly laid there. things that

Mark Kelleher

to mentioned that more can organization sales operational operational, efficiency, guys maybe that specifically improve get actions in growth? to you Rémi’s actions your or was robust about take When to were other referring what there you you are talked

Ed Meyercord

Yes.

see we and -- for efficiencies planning business, part have deep you be see model number, but the growth in we XXXX, to achieve the be has we that has improvement drive the gross our do and fiscal cycle going we of in that us to organic And, business, business. in you the income drive to that XX% If there’s at there that margin to there’s that our still math equation. we’re to operating the operating for in look are

Mark Kelleher

percent the in out that break revenue of you wireless was quarter? can And the

Rémi Thomas

of [Technical out XXX XX%. I’m rounding. about That Difficulty] was approximately

Operator

Thank you.

comes from Needham question Henderson Alex next Company. & Our from

open. is line Your

Roger Boyd

Hey, Boyd thanks. This is for Roger Alex. on

quick Just for one a me.

You that combat and and in sales mentioned anything of that expense. can all higher drive Is do that trying at offset Is you kind is EMEA? to that else than softness related higher weakness to to in that there way, you’re geo? marketing -- the what expected and discounting

Rémi Thomas

we were the that our in higher say in more our in unfortunately last deals discounting that that This a some the efforts quarter. the to discipline have was slightly saw was the increase where secure at of field would It is and make paid drive quarter’s off. mentioned by number to more price of had end liked the of to these the I We sure quarter this to able not call we were that highlighting what aggressive there would necessarily field. offset list large in we just orders. we to discounts be just than

price. about compared was tariff impact increased the greater to offsetting this So, through list less field, the of discount

quarter a This deals win us to to we aggressive that more be needed. slightly company was about being the as able

Roger Boyd

for That’s Okay. me. Thanks. it

Rémi Thomas

as commission. to And for benefits, question was increase as by selling compensation, the extent the and your lesser driven expense, increased sales a far that by part, marketing and in most second on

Operator

you. Thank

question JMP. next from Erik comes Our Suppiger from

open. is line Your

Erik Suppiger

to the pricing from want And perspective? it discounting, environment? discounting. where you just follow competitive I you discuss see up Did intensify on did pronounced? more Can the a the

Ed Meyercord

I discounting would we overall, in say business. Erik, -- our in normal the field we as of saw mentioned, course improvement Rémi

the no. So, would question answer the to be,

Maybe seeing away business anything the decided perspective strategic on. We we in away get little and higher at deals of market. end we strategic margin quarter future us did important were for that some upfront the -- customers’ impacting in and to not We’re make large decisions go a margin give to that for pricing had that some have a the bit we toward business. unusual the more from we

Erik Suppiger

deals the quarter? at where did you larger see And end the of Okay. these

Ed Meyercord

was it was it -- geo. across vertical across it’s say, and across would I

a -- of we the it. business particular area pinpoint there’s drove So, that can’t not

Erik Suppiger

question. Okay. last Then,

significantly weak that or been the Germany for it like sounds of materialize new, Brexit light it has anticipated concerns. So, was in quarter? did time, in Brexit incrementally March Was some

Ed Meyercord

was of Germany was then the -- it whole for overall what’s growth rates a in seen what’s and in happening for And happening new, think as think It in I in press of us. I it new there’s you’ve terms EU. terms

us, For showed time. up it for the first

And these regions from very been the view take perspective, that numbers had and are some that down timing deals, it’s is of our consistent lost not have past, in the to the just are, hold. a deals on that

Erik Suppiger

And that UK, issue not in the an this was... was

Ed Meyercord

of to then, the know quarter. Erik, things, is We QX. surprisingly, us call. is tough place hard that we got it back some on the how suspect one exactly QX put had much quarter. early into pricing took to when quarter, really calling that pulled in for second we actions the question was this that wasn’t. in And that we that there in It other was And finger it’s pull with we is were and into buying your taking

And was region. so, of that think somewhat a in German the also EMEA and factor we

Operator

our Schwab comes question Christian Craig-Hallum. from [Operator Instructions] And next from

open. Your line is

Christian Schwab

you year could that those cause and Are delays products a they’re of of fearful with next the in that XX% half products over that the refreshed? some purchasing until guys refreshing

Ed Meyercord

refresh a is high that of lot of on are the in on, lot the -- Christian, products Yes. coming runners. portfolio A

improve next-generation to kind opportunity us what value of delivering characterized consumption, performance, the on by power for are we’re So, what’s we to from terms these to that think are a chipsets perspective customers. that lower market, in higher of coming

come what feel our really new historically and we from talked perspective ability So, and in I about teams to been good a sales has the they to we the to chipsets a mean technology timing position market our little leveraging past curve going Extreme. new is Extreme bit for And that’s think and coming about and as out. what’s behind what

Christian Schwab

because Yes. of guiding [multiple be quarter just Okay. out be you quarter XX% guys in you’re QX one the margin you gross the of Last said at would tariff Last speakers]. impacted about guys talked China. for, XX-percent-plus, that manufacturing would

why out So, few of is is impacted not a the months wrong all so just or manufacturing later? China, that

Rémi Thomas

one, moved combination of China have So, through. the account to our shipments of things. we’re have SKUs the Number from to the few a U.S. in that Taiwan, was it’s XX% a for manufacturing plan about the halfway XX%

account XX% now What it’s it’s is wouldn’t to that the but we’re for done scope, about had because XX% the -- like more instead right So, increase been of transferred. necessarily we’ve I going XX% have not But half, SKUs been say idea expected. than than done is XX%. closer end to to has higher to it’s even by going the therefore, May. an slightly And coverage be effort The to slower that XX%. be the so of

fact a that As import some the pay which we’re in of will what transfer manufacturing, going the of U.S. to the we to is the mentioned this, see a continue products result of on in the is as to X% that Ed QX of combination X% to tariff. higher, addition in

to just to we an a forecasting felt impact percentage the quarter up of I down. start we’re mentioned as ago, from that, earlier, X whereas would So point, impact come

certainly, in impacting hard generate higher our continue QX than product gross margin we because expected. EMEA a tends in that say QX. us into margin, to Company. the It’s for gross to that EMEA mentioned fact been weakening to in the higher average But it we going is if region that’s the the happens be where the see I discounting Secondly, than has that

will we longer deals That stayed our went of impact $X margin last more slightly services. up. could lower guidance and having lower. that’s in by of is impact where driven the but that due see also a in midpoint that and sequentially. XXX And QX, revenue, We obviously volume the extent. kind And in million second sequential points It revenue drop factor the we certain but by the was our And the fact of to in product did continue if largely services products from so, for we gross time, you driven take lower same, that third with period margin. least, costs product one is revenue one to multiyear see a what gross we’re a out drop basis impact saw also, keep revenue was more basically in. tend not thing our the the for secure negatively towards year guiding to And mind revenue to

you offset a in is goods drive so reduction will gave, us with to in down factor the our margin, standard a QX. we all fact leads QX down we quarter-over-quarter. which to gone that, in just continue That flat continue our of when go cost had that guidance cost So to gross sold, the

Christian Schwab

And or greater are commentary, at equipment. then, end who anybody your enterprise sells nothing for deals business in else your large new quarter discounts

guys And getting margins, it deals large in you large industry is what whether do networking. you ability them is. confident to is at enterprise some weakness Day, to in lot be you still There as want about always Analyst at talk seen gross So, not. of you’ve feel to the XX% do quarter-end, a your to or going take manufacturers of big mean, all to contract I that? XX% your outlined really conviction

that at moving that general. to as or from So, that And you gross maybe well, suggest price that the new margins products improving other do a leads then, would not? the those you’re typically to confident we’ll this next-generation discounting line refresh in list which of if chipset, industry feel more in actually peers also hear product you’re a

Ed Meyercord

and believe comments Rémi, I in. if something Yes. a Chris, I’ll couple jump make of

Our of costs out pulling teams great the of a job product. have done

see we continuing. so, that And

it’s to market of the we’re higher things the new and the new margin. about higher excited it’s One that higher products about is of products, also performance but coming performance

on delivering we’re margins higher and coming our time, new these the So, products, higher customers expecting performance partners discounting list and prices, and based at higher normal same to the value with we’re out off as there. out

these be I that that a an large that is are for the So, seeing Yes, we kind of deals and end more quarter. and door And space seeing opportunities will enterprise opening we’re of our we we -- driver that of calling at are us. into something different And opportunities say in coming your of about we’re break-in comment to terms something are for commentary with. being in the will that have are larger than and having enterprise getting in that historically. in account. that Extreme deals some the familiar out big

end. little on be expand once a land, And we achieve and the our there more is we strategy can front aggressive then Our to targeted margins.

Rémi Thomas

could one just add I If comment. more

demand We’re driving mentioning introducing initiatives the faster logistics around gross we’ve about chain, of fiscal sold products, reduction since initiatives will fruit very components we also have of been bear XX% what products, start a and margin that we’re the goods but that the call, which by a new, the cost past number confident of of achieve gross talked in cheaper planning, supply ,So we that in our margin. can in also actually other is we’ve around yes, ‘XX.

Christian Schwab

yield poor led And dealing or then out then, question, revenue to in other scale Taiwan to either are with of supply modest manufacturers that contract of and who disruption, this last have moving and my China of switching inadequate certain seen issues products. them some people lost that’s are

or you contract China from to are people? same Taiwan, with the switch you moving transition manufacturers Your did

Rémi Thomas

No.

We’re actually doesn’t point, wanted that to taking we’re one make is sure to any we’re it same to keeping not we our the your the time people. create be of disruption. reasons And where

Ed Meyercord

just Christian, to add.

of U.S. a it’s conversation and between fluid China. know, you negotiations As pretty in terms

more were potential quarter we We’re than a today optimistic about last lot outcomes.

in of risk we balance So, terms have to and -- opportunity.

weeks there’s X% brake our higher. out China wake to way a with we’re tariff bit a goes of and resolution as off better because So, the we’re meaningful up Taiwan are and in away, X% if couple that tapping the on costs in we a little find in and

opportunity good feel as far the a managing like as in we’re position, terms of how tariff in risk and we we’re So, situation.

So, it’s of a a bit there. balancing act

Christian Schwab

being along discounted those next then they few weeks, away? And if tariffs. tariffs raise Do or prices, seen you increases up think lines, given the away are just have those removed we have go those the end here industry the in price to

Ed Meyercord

it’s quo. And think an see effect. we status We don’t it No. having

Operator

I’d Thank back to phone I Meyercord, remarks. questions now showing any like closing our to And the conference turn am no you. lines. from over for further Ed

Ed Meyercord

everybody And could and always operator. amount the thank have a you, who you on was a significant going us today. everything is And still and we’ve to who Extreme. for just lot accomplished progress. listen partners And thank call want inside quarter. everyone I we There on the employees in. join join Thank that during of made

about in user big was for from and a us last year We sharing to Conference investments that our coming to forward market feedback had overwhelmingly that conference looking deal. our first the updates We’re are these new positive. products conference software. is Connect and The

we’re year doubled to of and our So, we’re to enterprise coming event. a autonomous more And solutions And this be twice about lot the a going attendance. out that. going it’s we And the it we to have and than great did buzz create of again down. going

So, stay tuned.

also the in Conference; the going up, quarter. be participating coming are investor Conference; Stifel others Christian, to during conference We Cowen Craig-Hallum and

again, to we the So, time and on day. appreciate call. of you. great in getting front Have being look And forward a your

Operator

you may does Ladies the have program. Everyone, participating all in a And wonderful for This you disconnect. and thank conclude gentlemen, day. today’s conference.

Extreme Networks (EXTR) 1 May 192019 Q3 Earnings call transcript