EXTR - Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. Welcome to the Extreme Networks Fourth Quarter Fiscal Year 2022 Financial Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please hand over Investor to would and now Kovler, conference to like of I Stan the Vice Strategy. Corporate Relations President Please go ahead.

Stan Kovler

press fiscal welcome the I'm and call. Kovler, CEO, and Networks CFO Networks With Vice release Strategy and Extreme Katherine, me earnings Corporate Stan to Rémi of Ed just Investor results you, year-end XXXX financial Meyercord; X-K and quarter. Networks Thank distributed an Thomas. President fourth detailing and quarter President today and conference Extreme a the filed We Relations. are Extreme for

put XXXX statements cause undue call as For you our would for expectations as reconciliations, SEC. reflect uncertainties a ended anticipated to actual Extreme's of is from strategies. factors like operational that during results materially our described reliance to forward-looking which can risk on the site our XX, by the and section risks release, those made in report non-GAAP the your and results, differ in growth Web convenience, on today. Relations remind may about Investor you the June our not this in statements that press statements they filed as call, include to forward-looking involve with of XX-K these these available Any of future period caution today's forward-looking to I copy statements discussion financial extremenetworks.com. analysis GAAP business, and our includes at We our

as update duty plans by required law. or no have except to We them,

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

Ed Meyercord

making. our joining the strong had and and you, I'm pleased are Stan, quarter for progress us morning. this We and a Thank you thank year, with teams all

XX%. in market. This very Our of and up of forward-looking market results And and record winning funnel indication for and taking our Cloud solutions growth. in healthy leading networking. vibrant digits a Extreme in is unprecedented very differentiation confidence in growth and service high the the teams, solutions gives performance fiscal sales bookings a and channel fiscal bookings We growth with for of and year-over-year. is indicator large The outlook that combined for we're is This a global share future provider 'XX reported for customers our targeted for for for demand solutions clear highlight customers, 'XX our demand. us double our enterprise the our Fabric continued

projects world. are infrastructure for digital these believe technology important the critical to remain changing of a irrespective priority, We to underpinning initiatives, will transformation around customers all environment. Our continue the solutions our macroeconomic of

high For growth led of the an all-time understated built year, yet the during XXX we double-digit the revenue it year. million billion, of revenue to was backlog incremental our X.X by

chain up million, year, quarter, XXX Despite record million we non-GAAP the backlog QX allowed cash bringing was X. margin year-over-year. in $X.XX achieve current the total EBITDA of The record model improvement debt ending our generate supply a also were pressures, operating of Our per XX% flow environment. XX share to the below thanks during pleased our free us continued EPS to net to for to

of fiscal these this success A in spent vehicle as direct attribute million our a We line leveraging the XX% sellers continue. projects. for customers more expect ago. partners to while 'XX, earnings our year larger than Extreme XXX trends growth channel a We on record market with bottom $X from enterprise during to focusing growth strategy up

as a our field. be a we all-time high an demonstrated our at an the to better There's sellers have history. by over is in more as productivity Extreme sales result, any than teams been quota Our and time never in time

in Extreme and gains share industry our been in impact position have addition, has never Small on perspective. stronger. industry financial competitive a both recognition the In large

partners accolades service. industry solutions we're Our receiving and for our have distributors, our the channel customers of notice taken and

the largest And leader Wired we for Gartner's Extreme year in in named established the carries Wireless time, fifth the and This Gartner years. enterprise our are first the industry a access For target Magic player customers. eclipsed row, we four infrastructure. recognition Quadrant, Choice weight was with for where for LAN an

for differentiated innovative Our million and believe for we we our cloud organic cloud-based the level SaaS XX% driving of to of subscription solutions Demand sustainable. subscription annualized bookings growth XXX bookings is solutions our is today are QX. drove and growth exiting achieved also SaaS demand we seeing products,

year-over-year up and Our XX% XXX in reached X% quarter-over-quarter. million ARR QX,

we our We solutions, in ExtremeCloud growth time subscription build next These along wide the SD-WAN User development cloud our AIOps Co-Pilot enterprise to XX% solutions, held edge our will the Twin We our for wave XX%. extending of the with across long-term infinite of feedback area Digital of networks. and with vision of from on support our provide to continue outlook several that subscription around in the and our business first Annual live launch Connect tremendous revenue years. Conference received services

than content a over Associated more and viewed X,XXXx one were sessions half days.

our We on over and XXX of technology plus display integrations at the partnerships ecosystem also event. showcased

deployments. cloud where million goal teams supply new kickoff Next processes challenging our where network with live XX up ramp sales the Today, exceeded an competent market of the working for in experience of combination are We partner 'XX of channel relationships, to we're our fiscal pull Boston. global generation to XG for next consistency We're the starting to oversubscribed components. in stated generating we our strategic telco tertiary component more incremental secondary business, sales and week, vendor. significant preferred more our to broker success navigating a expect over service on thanks with direct providers. we're for additional thanks environment, the through solutions sellers are expanded cases in solutions chain our event use partners and X,XXX we suppliers in and and And our OEM native for

working were teams in been This with products for customers. cross-functional a reengineering in These recognized the enabled by have XX addition, improved in opportunities million We In during for times backlog us customers lead number used teams efforts in our suppliers. and allowed release create nearly to quarter. to were our able this time, creating new products and agility a new our and business record certified us. of it's [indiscernible] successful

growth to quarters, noted next in gradual chain. continued we during As the outlook backlog in supply for our and for given Investor May, expect we the Day to continue bookings recovery several build our

we expect begin QX to to Based and 'XX. 'XX. of For guidance backlog shrink we product sequential the improvements throughout provided, on expect the fiscal will our by customers full lead to times commitments, deliver we ability and the

complete to have and have visibility than received less of We bookings. negligible into cancellations of X% our backlog product date

latest of generation consists products. universal primarily backlog Our our

So to also customers. we're to At wireless enable our wired will ship finding attached for begin and ways improvement product, when an in subscription Extreme, focused see are we that and products. bookings to our new we on outcomes services better

[indiscernible], grocer solutions, with security. and generation more to This locations deployment. for quarter, annual was team. our billion the XXX SD-WAN the At are in serving experience X customers A&T, HBCU the management ease over to re-architecture being our XX,XXX and costs, created Extreme over help improve helped and of ExtremeCloud network Carolina services with expand award Fabric campus Italian through its lowering next retail The simplifying while an turnover than providing used experiences North learning [ph] largest for winning nation's students, environment digital of enhancing the Extreme solutions students a

applications, Capital federal deal U.S. Extreme's customer, XX consumption for This a switching as history group with for QX, Solutions campus portfolio important a continued the Switch booked the expand model the we ability leveraged customer. is be five In deliver our with our service we enterprise to our customers of quarter, new us. with in introduction Again, this designed XXXX to largest such federal deal as our universal to XE. data over flexible network We support infrastructure Wi-Fi million OpEx-based years. the to Universal an heavy differentiator

the improved with Wi-Fi XE market innovate win We XE of demand first-to-market XE points transition. our across teams future supply the wireless access cross-functional as our organization, XX% at to incredibly revenue. call on will is future chain [ph]. is to best-in-class challenging see high over sales move now demand, I'm revenue other flow ops in nearly leading a Thomas. growth of quarters from unprecedented in deliver and we've come. years that, such ACE are marketing to environment, the the to I'll ability Extreme's XE With Net-net, XE innovation, turn in our that multi-gig to from in our wireless in and Wi-Fi switching CFO, drive the and in and to customers. putting incredible for Adoption and ultra-wideband our the in a from ease excited driving and teams continued the support double all Extreme also during position top us also Rémi cash a delivering Wi-Fi products delivering level our execute our over to line, organizations team product sequentially earnings quarter team

Rémi Thomas

Ed. Thanks,

in With exited the X.XX we services more the record overall demand the and nearly to surpass with that's of X.XX bookings double-digit with in million and book mark. product backlog for the of to subscription 'XX environment. our That's QX. sequentially. spite XXX we year full As growth supply in revenue improving bill for Ed year double-digit XX X% Strong $XXX of million year-over-year 'XX year-over-year year growth described, We for quarters execution of than product fiscal chain revenue. $X.X to backlog, quarter, had billion fiscal XX% achieved the generation, and in for million the and close in ratio revenue of and solid products, and bookings margins growth, drove three portfolio a

either components on quarter XX% in revenue qualify of subscription the end million be the site. basing our change value. We the million expectations bookings year-over-year SaaS end QX. our and of now as XX% supply SaaS a opposed our of of of Page QX, deck our X% subscription more grew quarterly ARR. 'XX fourth that's quarter, our fast deferred posted by in on QX, alternative methodology, can Web the above the revenue to Our team contract up million reached XX% XX and Based XX% to we high ARR an source entering on this ability to our $XXX We're in year-over-year fiscal making quarter-over-quarter. QX $XXX the annualized our and report on reflecting Historical revenue came XX% data of was $XXX.X at it how We're ones. found annualized view earnings quarter-over-quarter. or

achieved growth in expectations our with and ago. geographic entering from earnings the share per the line revenue X% declined XX% For for delivered our On this $X.XX, up the quarter. $X.XX, basis of $X.XX non-GAAP for top year, record stadium and at of year, the which quarter. performing QX a by region a year The fewer we revenue, EPS looking were QX. from impacted QX grew year Americas was EMEA, XX% deployments but in

APAC a the board. growth by in sports resulting the although a fiscal this declined XX% very from looking 'XX the year-over-year and execution in improved Finally, across and standpoint, total of recovery revenue company year, it from highest at government for enjoyed entertainment, healthcare. slightly strong followed time QX, From vertical and bookings, came

and maintained the For were highest a XX% supply chain Total the a due slightly down demanding in digit QX XX% due government, bookings followed healthcare to for to grew wired the high in for very product declining Wireless healthy came comparisons constraints. at grew were product QX single product service QX, and our bookings a growth revenue but category specifically, X% standpoint, QX. from provider. the in From in year, growth the rate year for year rate but segment. by wired of campus

total we other year-over-year, wireless for or cloud of XX% the of hand, million, year. up largely recurring was to of for from and total grew XX% revenue, quarter. XXs release in managed able strength $XX.X year a for taking company backlog. our and was revenue, by million XXX.X revenue, of on Total up to rose This digit a subscription revenue as the QX to for last million at for subscription, the services, the and driven year double XX% and up which were Our subscriptions the QX in Services the mid including rate QX maintenance, XX.X meaningful revenue part grew in growth XX% XX% XX%. the QX,

year recurring revenue X% our $XXX and drove balance ago growth the full The the year, cloud revenue and For quarter sitting total. up total XX% subscription the renewals of million, service on from was deferred sheet sequentially. of XX% our to

XX%, margin. at in came margin year-over-year, down gross X driven non-GAAP percentage lower X.X gross Our and points percentage by point product sequentially

our to an freight In unfavorable in by fees was margin impacted costs expedite mix. high product gross addition

company total freight higher if have would year, full these expedite points elevated basis fees in the not For been margin gross XXX for costs.

high marketing million, up operating services On expenses. a timing were year expenses XX% $XXX the but subscription from revenue to QX, percentage XX.X% QX, driven quarter sequentially lower of gross in million and in margin other ago high year and XX.X% touch million stadium the and deployments. higher based and non-GAAP non-GAAP from the QX R&D in improved by certain was $XXX sales as of in services maintenance up end, OpEx the and $XXX lower and XX.X%. professional of on mix ago subscription quarter reflecting expenses, revenue from

range at lower XX% XX.X% This 'XX, record. driven debt million at was operating Analyst our was of to X.X% long-term an this For flow end All-in-all, XX% $XX operating provided to in the as the and early had the pace XX.X% collections quarter reduced [indiscernible] cash our by highest quarter. for strong we full XXXX. million margin by the dropped was drawbacks. year, of Net acceleration Day $XX fiscal of sequentially record $XXX as well for of as the operating revenue of result on expenses the a a million in to

total QX, $X.XX common $XX During a with of X.XX stock repurchased price shares we share. average of an our million, per for of million

of new repurchased authorization million have For as the July $XX full buyback currently $XXX of our worth We in we remaining X. million year, stock.

Now turning guidance. to

QX shipping $X.XX progressive $XXX anticipated to recovering XX%. year of the operating to expected million are million, with margin expenses of QX, with XX%. expedite to to non-GAAP or our $XX.X be reduction impact actions, above full range of $XX.X of expect to gross lead be $X.XX earnings million expected $XXX be million in fees, million. range the a diluted in will QX $XXX.X revenue the to are We For 'XX million. and margin the range in the be in to in anticipated QX that the of share. to we to to $XXX.X to is be non-GAAP per fiscal XX% non-GAAP gross anticipate pricing QX throughout recent combined range

XX% margin will operator expect the range. For it we with the in XX% an over the turn year, begin XX% that, to XX% With operating the to revenue growth session. I to now question-and-answer to

Operator

Instructions]. [Operator you. Thank

question first Alex Henderson comes Needham with Our & Company. from

Your line is open.

Alex Henderson

you the Thank wanted great you constrained you very in to guys, supply much a, improvement of you, a and get But first job, on handle how It did going half particularly, and EMEA? numbers to see in going in fiscal geography? in year. at a I if in look play on of supply 'XX. your tough think fourth that that of how do expectations like any And in what's going the at stay that fiscal Thanks. commentary as booking the expect you're the looking do sounds quarter, better on half first the XQ first half And most quarter, the the clearly in And second, bookings you that outlook through particularly looks into the environment. upcoming in outlook? then into year? pipeline the

Ed Meyercord

jump why let me you fill Rémi, don't can in. Alex. Thanks, in and you then

measure massive up of to that kind revenue strength is you're just and true that we given outlook rightfully chain at a release, and then really continued and how And bookings, the pointing and out of supply so, of function looking which backlog built bookings. we're is a our Alex, the able versus of our product really revenue we're demand,

chain. supply with off start just I'll So

What year. about throughout we gradual the asked is that. see a improvement You've

around component of So constrained. then be established our more It's we've relationships, the based tertiary secondary, revenue Broadcom a spot likes have delivery. where with normal and chain. the quarter-by-quarter then and about creative of our up now some relationships function consistency our direct will outlook et are more And supply our market. we think of expectations throughout that are not And stepping step competence, we around doing do in products on the showing reengineering, before, have of strong mentioned cetera, year on where teams processes, the where as more things we vendors we've

So in in comments, our our been have to teams, they more than my our our today as to I are partners. mentioned customers' step function of products competent ability supply

is 'XX, the function improvement fiscal what So that fiscal. is step does that with of That we for revenue the forecast built sharper the in the second half mean? how which

XX%. strong, our year, As it to we've about talked it demand, as the has been relates for demand

For us, record-breaking performance. that's

bookings for in that ahead. year that couple long get we where is lead people times pricing actions, environment And are increased an price of know to last different. a However, were are the when had expenses, wanted very there they there in seasonality raises. In people response like case, to

we end as So March at the extraordinary and saw as of the bookings quarter September year quarter the of bookings. very far last growth

lot a periods. So from the [ph] pull-ins there of was other

from would So slight year, then and slow in in then down normally, slowdown. December in slow down peak an in last and an December, September June explosion peak the March, saw case, in we was September, a level what slowdown see explosion then that March. in a and In you in this

target, relative it quarter to March was in of which In bookings. plans, where is action, our terms grow internal different. hit continue the the were we we to why with internal our we pricing But

bookings half we several the is of that of growth As fiscal a see at factors. first we 'XX, function look And out continue.

confidence up rolling calling, geographically. than we years they're our roll from the numbers teams that in and past. There's on teams [ph] a up up bottoms field our sellers all, and of actually of field say stronger lot First from I'd the in our direct rely

formulas funnel they're own and at look the levels at we that competence algorithms levels look and with commit second up. we The run and our metrics thing, our the our and and there,

look Extreme, mentioned, And funnel our conversion over double digits the last if our at terms of rates in competitiveness year are of funnel course you we at opportunities. over up improved. from the As year-over-year, we that have with

the confident growth to we're funnel and So our win. we of more still about And see the quality ability there.

they and an and partners number CRM all have a have up. That's they're tool the And calling an [indiscernible] partners, we our outlook activity AI opportunities. our channel based then and looking the distributors, at on number. Finally, a view and

different points, because What that points tell in it bill the likely when would comparisons increase at in actions. definitely we those that of be and trends and of seasonal normal be all X is data different look quarter, the to to pricing you we book the So expect to over a demand. I will first bookings for

Alex Henderson

EMEA?

Ed Meyercord

want do Rémi, comment? you to

Rémi Thomas

No.

detailed gave I think view you very a of.

Ed Meyercord

it as to EMEA, see relates Alex, to we strength. continue

you're So if close know paying We're seeing this I we're you're -- point is to not seeing we concerned that can't provide that not attention something about, that data you. and it. for

And We is point taking or question market if not or because a is valid data against that's share macro a our continue see strength. whether the to data we're point. macro

Alex Henderson

either It's the a detail. result to good much Thanks so you for way.

Operator

you. Thank

Our Mike with question Securities. next Genovese Rosenblatt comes from

is open. Your line

Mike Genovese

is back that extraordinary confidence backlog to eat the more of I And question growth report fiscal book very the asking is of the to of chain, function that to the more question Thanks year that in into allowing you quarter below slightly look my be the the the by you when half the Good will guess little and think fourth much. be part you said guess supply that in out you demand less call. a X. I or last revenue confidence bill there in of far think a year? of I way, on different bit a

Ed Meyercord

Hi, a it's question supply chain. Mike. all It's good and

to in So we out we switch, and components, chain components point. make mentioned, strength the to X these every and we X, or an about the as where grow. I where constrained, talked are component on continue demand side, need But access year we our make for a Tier see to are Tier going most and supply

ship can't -- can't ship. can't And we so without it, produce we and we

our the visibility So we is ones then supply online of are of the components. back. the that the have fact They some will schedule, holding coming those a components a of we are part of fabs suppliers that to have are and year, matter come that greater how have in first our we'll online, calendar see us and

Mike Genovese

fiscal I guess years. new just this, when I'm calendar because need clarification between some definitions years to about I versus talking we're

So the seeing about a quarter in green any we're can talk you talking kind every about And in that or comment? year on fiscal shoots calendar of Is of you a -- of second seeing may calendar green that or 'XX. not year comment improvement be 'XX? color half shoots actual

Ed Meyercord

for apply the fiscal calendar. Yes, I think our to comments

of of I view see is think you start 'XX, 'XX revenue second bill. the we'll talking re-leveling hundreds a any the resetting is on our to where we've book about of backlog we're of And if backlog been half relief. calendar even it, just calendar real which calendar you'll hundreds of millions products this inflow What the and of top down have -- backlog time. about greater taking of our building demand, is talking to

the that only that gain second velocity will half is so calendar. will again in the continue that And of -- and

Mike Genovese

do I any if give dead think you we but guide quarter think any have horse, don't about you we XQ, supply gross color Sorry us I I how pricing two other if beating sequential normally the know for -- but the into know versus out, factors the on to December? chain a can already fiscal margin, should quarters gross I'm margin December versus mean, don't -- about you

Rémi Thomas

to ourselves QX we that confident freight Paso El in of a Shanghai. capacity the now XX%. that where improve between at have can feel and by so we Taiwan fees is margin come we are to hub, percentage view we down costs Based X more gross see on built our being close point main as starting that around of sequentially expedite In

Mike Genovese

pass have I Great. I'll be other to Well, more it on people. to but fair think questions I

much. very you Thank you. thank So

Rémi Thomas

You're welcome.

Operator

comes Our next question Eric with Capital Martinuzzi Lake from Street Markets.

line is open. Your

Eric Martinuzzi

to wanted address strong concerned strength the impact Could you of that the guys from FY of to the I 'XX be pound the away growth you that? was on euro. versus backing might the XX% FX and Yes. dollar the in actually XX% based address the dollar. I

Rémi Thomas

aspects, There's Eric. two Sure.

first call competitiveness one voicemail that with I'm is has some with product. to the which a questions asking go are problem. HP, dealing Enterprise, our or Cisco, our And of The Unless customers be if Aruba, of a every me, with player, we're the Juniper, Alcatel-Lucent Huawei willing is not proven on Monday to believe a But in to as they're of basically specifically our functional currency in the all our product local of are impact so Head absorbing sales. sales EMEA the because of if use two currency, the their our dollar competitors that with I mentioned. far, of customers the exception Eurozone, higher the

as with obviously in The of for and presence account significant R&D, second that, but impact not basically a in base, Europe. significant much has And marketing aspect favorable on cost OpEx. our sales have so is we terms we a in a it

and with CFO we're against ourselves to treasurer, rates. a these some hedging rupee prudent As very locking Indian of prudent the a the euro

the depends terms P&L. on that we've the is P&L how favorable impact but of to the you'll hedging, smart So second that been see aspect on in

Eric Martinuzzi

in at QX May I the I have in about Investor of relief backlog. Day? QX the you about your talked you comments relief. were talking Is then guess release the chain that the sworn -- consistent that And supply could with Okay.

Rémi Thomas

Ed. ahead, Go

Ed Meyercord

it to going say consistent. was is I Yes,

our I turning product chain. to how suppliers think affects that product confused not and be up then supply how our with begin

we're fabs then to releasing So I Norman's up lines was up products. talking turning opening up suppliers, new turning production and in think he and commentary, start constrained, where about

an to there. it QX. and is components happening on there's in our then That supply they're those QX schedule. quarter into chain. first make But the evolution happening calendar have and so And in That's

ship we're that around that turn step seeing then a significant much our needed product. those of and so And we in timetable for QX our is can components

Eric Martinuzzi

Okay.

upstream more and really just an comment of P&L it QX. So that the was is impact

Okay. Thanks.

Ed Meyercord

forward. I each keep we forecasting are think significant mind, a going in step in quarter

So in in we're a the March, up there'd a normally revenue up up seasonality September quarter step step a in and to June. guiding in step be December,

So seeing with some especially in gradual the and this timeframe. steps larger March pretty in happening we're the June then release

Eric Martinuzzi

Yes, definitely unusual times.

Ed Meyercord

Yes.

Eric Martinuzzi

Thanks questions. for taking my

Operator

[Operator you. Instructions]. Thank

We Henderson Company. follow & from up have a Alex Needham with

line open. Your is

Alex Henderson

right. Great. dip, A double all

FX So on I international sales. wanted the and to just clarify

have have be do would that that relative the in are in impacted you particularly further the dollar? dollar, could receivables or markets, FX So that on by the unhedged to exposure be the Europe, you by international currencies impacted any either strength strong weak

Rémi Thomas

where without we currency happens use that collect the our dollar. basically functional of The [ph] the fees we be XX% receivables to

up So bill, was that bill amounts that in right dollar, come exposure whatever they that means the have meet there. so no to to with

Alex Henderson

are days? some I'm that dollars large currencies? I assume is a And relative there local versus what -- this to for the functional in are sure some are since Could currencies. that pretty currency you such internationally, and particularly these in that percentage that there clarify EMEA, percentage in revenues are of your just local factor

Rémi Thomas

do. guaranteed in my the until don't to are But immune I that we local net guarantee XX%, which customers some instance, price expires. I exact so know have we sometimes we've to from price net the price, knowledge. it's unless any don't a dollars knowledge would currency in but my We always agreement the have the increase a price assume percentage is in done with set frame we them will

Alex Henderson

it than higher thought I That's was.

for thanks the So clarification.

seen those conditions? on some on to You any you about stretching that little the lead hasn't in haven't massive anything times, there in bit really, hard that change any believe seems or not of taking increase it's that Europeans seeing the It Can the been slowdown given are number believe the the pipeline. of is economy back all Going to more hard environment, that a signatures that talk the at Europe? pressure to pipeline of type any metrics? hits to relative

Ed Meyercord

really I the closely. would add seen haven't no, looking watching is closely that, very Alex. something a that we and we're things to it's answer And we're One very couple at that. of is,

taking ark As a position I quality function our fabric our with position the in We're of in seeing actual, implementations, more with us is the the our and quality before of and cloud then that the of and story mentioned share. we're getting fabs. [ph],

gain it. this a part And That function be so we're seeing opportunities that from is of could a perspective? share more

we're more thing an connective connective other is when say these projects not in terms The outcomes, that you're the new business the can would important difference critical, we sort than these strategic networking first that are customer infrastructure complicated And is make look been. And being transformation, at not looking networks I projects probably overarching go. of And network. driving seeing digital to these at today is the and basis prioritized. if are cloud. really the outcomes And tissue that it's is the of projects the on tissue

we're about be getting either the comment seeing made are things if So would cut, yet. the of antirecessionary I and reinforced. -- projects networking nature not critically it's important why it We're

Alex Henderson

That's fabulous.

churn, drive Have in does when on model? can any terms annual What relative so you thoughts we changed our side except them your things. wage inflation? to seeing terms merit of in Okay. more One this staffing, are one you of that you increases, the those OpEx? are And elements behavior to note internal your hiring? question, of on seeing in What

Ed Meyercord

the they timeframe, So in second the March of January annual fiscal, in play the into and so are for quarter. come merit half so at us February increases

unusually you of to in Extreme. some And right I think the attracting us, do For talent that with has we're success our remains of what at I our the kind low. marketplace and that that turnover is will now tell

in hiring. that we and are from So the out we out standpoint, market are

we've in the in would our investments, been making I better our much a market in we're see opportunity. real higher is because driving disciplined the for, is a to higher what We're hiring. lower. some demand our strategic key very leadership. a channel spending real now organized and and lot being channel spend, growth we are channel say sales and in demand the And hires because We But in support we're than revenue we're

if our And because by we're low, demand not now but investment makes is supply of investment we're mode, because because revenue real artificially governing of chain, constrained it's right So revenue. a that in sense. reflection our we're

Alex Henderson

then, like your you supply the answer accelerating question. revenue to hiring would improves, to So chain of That sounds the growth? accelerate advantage that's as take that

Ed Meyercord

business to to the growth returns We that shareholders. current our returns in would blend investment and

Alex Henderson

portion systems? the services and think I backlog sense. more of a embedded about to $XXX ratio that clarity backlog, million it? just systems are If we relevant of How to embedded subscriptions Is equivalent the stuff that's what to were stuff do the XX%? bit that's systems, take -- be shipments. it's XX%? it say in get Make software revenue the would deferred for on relevant actual little Is are to we a wanted worth that software of tied service, to that for XX%, it the in the

Rémi Thomas

attach seeing answer I what portfolio kind don't portfolio now wireless around know portfolio? that we see our opposed to is around our rate of in we're that the for that metric, have campus I typically XXX, because is could cloud XX%. have that that you wireless our as to

case which customers sell to XX% a So every we the amount manage to number the haven't really that, take XIQ time of of that. And will dollar lower switches, related is being disclosed. XXX you the that in

I'm that sure Alex. not question, we answer So can

Alex Henderson

the The should Well, straightforward, pretty services -- right? services be

Rémi Thomas

attach Services [indiscernible] about $X.

switch as But $X. get worth of or a is XIQ far typically $XXX point, sell access as you you -- concerned So

Ed Meyercord

with We back should circle on this you one.

Alex Henderson

you cede very much. the floor. Okay, great. Thank I'll

Operator

Riley. We from have Kang B. Dave question a with

open. is Your line

Dave Kang

Nice quarter. morning. Good Yes.

was I talked First, quarter. have fourth been about think, assuming Rémi, you fiscal bips on that clarification, margin XXX I'm would for higher. gross

Rémi Thomas

for year. No. full That the was

Dave Kang

for quarter. fourth get number? What I Okay. Can fiscal that was

Rémi Thomas

It about same. was the

Dave Kang

Same.

when a of with seen regarding point that, do peaking that of peak expedite to that the a we I'm margin gross X it. we of fees. that -- got has was that. Have then or lot percentage And do declined assuming because obviously Okay, sequentially. function see

Rémi Thomas

drove are costs that the fees yes. a To question margin wired gross for come have peak? as impact what significant answer The our in versus gross seen margin the quarter really on X% stronger wireless products. We and is in QX and lower for had Actually, wireless our your was a we than about, mix. What really versus expected expedite didn't a freight QX surprise. we

I for and commercial products. that now added capacity being more capacity supplies we're And what pay Asia the carry is airlines we other we commercial to we mentioned what we to costs. basically Broadcom airline same expected which really our freight actually between there As at secure and slight see the in that United call QX vendors, earlier, PPV, is variance, back from purchase look by and improvement price to the leveraging invoices a States. addition in normal

we we're pay is is sequentially, that quarter percentage to to improvement So that point be bill why X actually expect sequentially. the a which going suggesting down this

Dave Kang

revenue? sticking And with is product it. then versus wired mix Got what wireless, wireless for between the

Rémi Thomas

more we It side. it this So on been back wired quarter had the delivering because up. depressed were went

This went back XX% up wireless, quarter, wired. we XX% to

Dave Kang

you backlog that. up. think And maybe slightly it. backlog, implying then you're to maybe quarter Got regarding talked continue but already of higher, go your about last I exceeded And XXX, clearly that will you

then So should how talking can the Are even about we higher? more about we I'm XXX, a And rate peak? new going decline? be that's think talk 'XX? maybe after you assuming of fiscal the peaking, maybe of to about

Rémi Thomas

want I'll can So Ed, Dave, feel comment? go, do add. you Ed free to to and you

Ed Meyercord

wasn't I the wanted I Yes, of decline. rate sure clarify. about of question to

Dave Kang

backlog decline. The

Ed Meyercord

Yes.

take of volume. the backlog. expecting and see more to you'll start it's we meaningful components second impact, we're that see backlog supply the of QX, So it that of based What again, is will 'XX And we and would expect on chunks really but we at And out level all increased away us decline. that. to not half start a meaningful our calendar that would imagined in be out chipping

-- fiscal you'll backlog. the probably a our So and and fiscal I think throughout up second right fiscal 'XX year our us half size XX, step of then year, see our see through into you'll fiscal

Dave Kang

think around Where peak, XXX? you it do will

Ed Meyercord

would sure bookings safe a not that I But that. the at based be supply, got provided a that's trend quarters. number you I on we if -- number. especially would fairly the relative on conservative over to say we thought last what a that's guidance of we've several look think I'm the strength

Dave Kang

Got it.

the Ipanema, a SD-WAN and update latest more. how on that's get Can we Just couple progressing?

Ed Meyercord

and we launching were that ExtremeCloud our We announced Conference Sure. SD-WAN. we Connect had

our schedule cloud. Our putting teams as of SD-WAN in came far as in ahead the solution

of one management and has a that single delivering about we cloud the management. we're area industry network campus wide services cloud talk orchestrating hear the well is cloud on things only So as as us have you'll one provider the that cloud in

we across we're WAN new services how bringing orchestrate our at is and cloud. we're that edge looking this differentiated can So

We X selling -- is are cycle. this a building to XX-month

that As start is And of we've just launched, seen building -- I we're what mentioned seeing opportunities. funnel we're seeing [indiscernible]. the we've already

teams meeting week. with have of our partners, part going to kickoff We SD-WAN a be next numbers. have that those on commitments is and And big launch sales will

growth the year. So that then you'll then expecting we're And of second see significant see course bookings the throughout the funnel the come the in you'll build for half only the of and year.

Dave Kang

million. XX my Got last to XXX Clearly, million And I question million. XX before it. XG. think expecting And exceeded is then on were you you

funnel, then case, pipeline? still that's in the So just XX? new the wondering the any fiscal the in customers if And for case

Ed Meyercord

The yes, answer yes is and yes.

concepts, we've of suppliers spoken into one XX opportunities large are went of X over about. and telecom the seeing our production. of with going global now concepts that proof to from They we're new So proof

significant infrastructure around the vendor we're provider So sole networking source where telcos ramp the see we're going XG to the major networks around start deploying as solution service a globe. this major native cloud for

So time. we're seeing in real it happen

that so in forecast. very And confident we're

are part mentioned by business solution. name, XG of opportunity. I know also And significant Verizon we We we have the a

being certified We real are time. Verizon in in

cases in for that funnel also open enterprise where portfolio these to new but a the we position service across to use broader say targeted can providers, providers. can we And the exciting are portfolio. and we opportunity to space sellers they work service Extreme. new This also Verizon an customers -- also that is in are the we've large done that expands field. other use see the very because starting So and we've cases providers, There then commission and do make adding of been the service and apply other that sell investing This for build up us. we're

this an opportunities. So is we growth area see where significant

Dave Kang

you. Thank it. Got

Rémi Thomas

And time. Alex, deliver $XXX of you question. able for be on you're that's released, business but subscription you $XX that of have still backlog that to the rate the did backlog back services service over services gets around can you're have answer of assuming we million assume to and attach of and subscription, envelope XX% line, if between do when subscription some and should rate typically for different We your assuming attach earlier worth that math, the not worth of million generated XXX potentially an

Operator

Genovese follow is question next Rosenblatt Securities. Our a from up with Mike

Your line is open.

Mike Genovese

the follow Great. I just few they're haven't mostly then ups, long gotten any in of questions. got but list asked last

revenues like? yet? to customer I'm do like for pipeline Thank but So for? it's product? early And have that know me, going looking with, What's do end you the that you? you acceptance just what's How Co-Pilot. sell there I days,

Ed Meyercord

Digital Yes, a the we've as new Mike, sort subscription. about And for it's factors a clearly going around talked next gotten about. growth and we're is we're really automation attention launch Twin. great some operational to of We savings the lot And bring. and AIOps generation question. The It's upcoming with SD-WAN, Boston. of really in that week of excited then something this Co-Pilot

amount partners. enablement a there's sellers, as as huge launch official of and training and internal programs an incentives, our marketing our with own So for well and with

So more We're about do. and that. very what to can on the come excited on that the capability differentiation

early, stay So but still tuned.

Mike Genovese

it opportunity, long the Co-Pilot what percentage the of like core Okay. very kind be? term, opportunity dimensionalize down would take and I road, guess we we years XIQ versus the if

Ed Meyercord

at but we can Mike, haven't what we do spend. We come look their we there back. subscriptions software guided think that's is at I we something and yet, customers that look And

layering you start So top obviously, of services the license then core on is and that. a pilot

build trying us where understand we on look to try there. services in that call I additive give pilot. what do an to so you at there, meaningful we some you a And and responsive to we're you're to be at, it's answer strategy top think modeling need for adding to it, you And of for looking can

I you the on to premature call think answer us an it's give today. for

Rémi Thomas

on that Mike, as for us an you retention think should of rate. this opportunity improve to

in typically we're additional So and of on percentage to rate. get low is high with gross if few going and retention we increase points go back them an to the when retention rate upsell type XXs, renew, our and that the customer XXs, product this

Mike Genovese

very much. Thank you Fantastic.

Operator

closing And you. turn questions. Thank remarks. time for to that's for the call we like have management all I'd to back the

Ed Meyercord

just questions. analysts. is customers, next proud into you. on demand Thank for joining fiscal Great bookings we I've appreciate market 'XX. us the a with unprecedented. of services our we we earnings in very turn have the teams, employees the the supporting And ops several know the partners, the and of would engagement but I'm on next I sales lot across the team. unique call and chain corner appreciate of well and teams, listen and Okay. tremendous congratulate efforts personally, futures growth we say Extreme as Well, The We're everyone very just the the and the And today. excited not cash I momentum line from a then job in who position just that corner, at and done everyone teams, again couple the a and the Extreme. product the years. teams, our We're everyone supply flow got we've turning the board growth growth, very top for in marketing

Thank we're day. and us have joining you excited So a again about great for that.

Operator

This conference. for Thank participating. concludes today's you

disconnect. now may You

Extreme Networks (EXTR) 27 Jul 222022 Q4 Earnings call transcript