Welcome everyone. Thank you for your patience. For the next fireside chat, we have Extreme Networks, and we have the pleasure of hosting Ed Meyercord, who's the CEO of Extreme. Ed, thank you for being here, and thank you to the audience as well. A lot has changed since we spoke last time at this conference. You've had five straight quarters of double-digit growth. Platform ONE has fully launched. Agent ONE has been unveiled as well. I mean, just maybe outline for investors where you are in terms of the transformation or the evolution of the company, and how much more to go in terms of transforming in the platform that you're trying to build.
Yes, Samik , thank you for having us. You have full schedule here. We appreciate that. We just two weeks ago, we had a user conference in Orlando. We have customers, we also have our partners, we had some industry analysts there, we announced our second generation AI platform. Keep in mind, we came out with the first platform in July. I guess I say that because it's moving fast. What we announced is the evolution of our platform to include Agent ONE, which is, you know, highlights the agentic platform and the capabilities that it has as a coworker to an IT team in networking.
We also announced this operator mode, which is an agent exchange, which got a lot of attention for enterprise customers. Effectively what it does is it creates a platform, and it allows our customers to innovate with us. For example, I had Jim Clendenen on stage with me. He's the CIO of Kroger. This is a pretty big IT organization, 6,000 people and 2,800 stores. 36% of what they sell, they manufacture, so people don't realize a big manufacturing operation, and a big, you know, supply chain, you know, distribution. They chose Extreme. Part of what we'll talk about is Extreme moving up market with these kinds of customers. It's one of the most complex networks on the planet and in the U.S.
They do a lot of their own development. When we build our networking platforms, they have a lot of workflows that they wanna build on their own that integrate with our network. The excitement with Kroger and the excitement with Korean Air and the excitement with a lot of customers who were there is the fact that we're building a platform that allows them to build their tools with us. I would say that's really the big part of the evolution for Extreme, is not only building the capabilities to have a coworker that can do things like troubleshooting and firmware upgrades, and I would say mundane tasks, as well as complicated tasks that networking teams can offload.
They can always do this under their control in a very safe environment, so that they have complete visibility to what's going on with agents, and they have a complete audit trail, and they can move at their own pace. The idea on top of that our partner community and the channel, as well as our customers that are a little more advanced in terms of their IT teams, can co-develop with us with this Extreme Exchange was a big deal, and I think that's the evolution. This is something that will GA in the October timeframe. Our coworker with Agent ONE will be released in July, so we're not too far away. We're rapidly moving customers onto Platform ONE.
A year ago at our user conference, there was a lot of skepticism about AI. There was a lot of doubt about AI and a lot of questions. It was almost like people were questioning whether AI would come in and have an impact in networking. One year later, there was no questions about whether, there was no questions about if, it was a question about how quickly we're moving, how quickly can we deploy use cases. All of our customers are at a different point in their journey. I think that's why people like to choose Extreme right now because we'll meet you wherever you are in the journey.
We have the best tools, we can make it easy for you to take this to go on the AI journey and to explore new use cases, that have real ROI.
Okay.
That's, you know, in terms of our evolution, you know, we've made a lot of progress. It's moving very quickly, and where it's going is into a place where we're sort of co-developing with our customers and with our partners as opposed to just a license tethered to a networking device, you know, as part of network management.
Maybe just taking a step back, like in the past, networking was talked about more as a, you go to a customer, they want to refresh the network, you go to refresh, right?
Plumbing. You're trying to be polite.
Yeah. Clearly the conversation looks like it's shifted. When, w hat are you seeing in terms of the refresh activities attached to the AI conversation? Like you're obviously developing platforms, letting your customer co-innovate with you, but what's the underlying refresh activity associated with that move to the next -generation platform?
Yeah, so I'll hit on a couple of points as it relates to the activity and networking overall in the industry. You know, first of all, we have a fairly large competitor that acts as a good proxy and an industry bellwether for us in Cisco. You know, they've announced a multi-year, you know, $43 billion network refresh as their Catalyst platform goes end of life and customers have to upgrade their networks.
Yep.
A lot of customers are just gonna go with what they've had or where they have relationships, a lot of customers are gonna take the opportunity to look and see what's in the industry and potentially evaluate other competitors as they consider, you know, this kind of investment. At a, at a high level, that's very helpful to us. That, that creates opportunities we might not have had otherwise.
Right
Will give us more at-bats. The other competitors consolidated and became one and have created a lot of risk in terms of the industry. There's a lot of uncertainty and risk in terms of customers and partners wanting to invest. Just there's a lot of unknowns, I'll put it that way. This is creating a lot of opportunities for us. As it relates to new workloads happening on the enterprise campus in terms of agent traffic, I mean, people are talking about this. You know, the reasoning models and the frontier models all exist in hyperscale cloud. That's gonna continue. All the agent traffic is gonna happen, you know, on the enterprise. We do think it's hard to quantify what that's gonna be.
I don't think we're there yet in terms of watching or seeing enterprise customers pull the trigger and making that investment today, but we all know it's coming. I would say the enterprise customers today are actively and aggressively exploring use cases for AI, agentic AI, and I don't think that they have an understanding today exactly what that means for the enterprise network and enterprise traffic. We know the traffic is going one way. We just don't know how much, in one direction. Yeah.
Got it. Got it. No, that's helpful, and that's exactly where it's going, is with the AI.
I think that, yeah. It, you know, it should You know, the pendulum is fully, you know, on the hyperscale cloud environment for, you know, in our industry and networking. You know, it will swing back to investment in the enterprise.
Got it. Do you see that, particularly as you look through your lens into enterprise customers who have both campus networks and enterprise data centers as well, do you see that changing the refresh pace on both campus and data centers, or do you think one follows the other?
I think it will happen coincidentally. I don't think it's one versus the other.
Okay. Okay.
I mean, it would be logical that it would happen in the data center first, and then you would have pressure on the, on the, on the campus network. Yeah.
Okay. You've outlined growth, I think targets of 10% revenue CAGR through fiscal 2029. When you look at the pipeline today, the market opportunities that you're targeting, investors seem to be underappreciating the durability of this growth. They agree that their growth is there near term. They don't really think it's as long a cycle, probably in some cases. Like, what gives you that visibility that you can forecast demand till fiscal 2029 and there's enough pipeline to support it or visibility to support it till fiscal 2029?
Yeah, you know, it's a great question and, you know, it really has to do with the evolution of Extreme as we move up market and the kinds of customers that we're winning. You know, one example is the government of Japan. Massive project, you know, the biggest project that we've ever had in Asia- Pacific. Starting off with, you know, $40 million and then, you know, by the time it's all said and done, you know, probably closer to $80 million in network investment. This is just a couple of the government agencies, it will continue to grow in terms of bookings. The point there is that we came in as a fourth entrant into the conversation, and then became a finalist with a large company that we've been talking about.
Then we won. We won on a variety of fronts, but it has to do with our technology, a unique fabric technology that we have for the campus and the campus enterprise. Then a unique use of that fabric technology across the wide area network. Then our flexible cloud capabilities in terms of providing a private cloud instance where data sovereignty was very important to the Japanese government. The security benefits of our fabric and being able to segment networks, again, a capability that our larger competitors don't have. When we actually got in and we, you know, when, you know, where the rubber meets the road is when you put your technology to work, and we put our technology to work.
We win, you know, we win in heads-up competition. We're moving up market in a meaningful way. Initially, our first bid in Japan, we lost. We got outflanked because it was Cisco worked the channel in a way that sort of boxed us out. We were a lot smarter the next go around for the bigger opportunity. It's one thing to win a customer like that, which, you know, success begets success with that kind of reference customer. It's another thing to get the channel.
NTT East, you know, now has become a partner of Extreme, okay? That's a really important partner to have in Japan, as well as KDDI, as well as Net One Systems. Historically, we've struggled to break into some of these larger ecosystem partners that are really important because they deploy the technology and they work with the customers. I'd say the bigger win was not necessarily the government itself, although that is, you know, the end user is very important.
I would say it's the partners who are now bringing other opportunities to Extreme of that size and scale, and they know Extreme can execute on these very large important projects. I mentioned Kroger, the same thing happened. I mentioned Korean Air that was also up on stage. You know, the same thing has happened there. We've had some really large wins in the U.K. where we've attracted much larger partners. The same is true here in the U.S. We're very far down the road on potentially one of our largest customers ever, a very large government contractor. Same situation where, you know, with that kind of win, it could open up a massive channel opportunity for us. These are long-term projects.
A networking project, you know, is something that's gonna take several years. In the case of Korean Air, their network transformation project is a nine-year transformation. I think with the success we're having with these customers, how it spills into the channel and the multiplier effect of the channel, that, you know, this is what is giving us confidence.
In terms of the competitive wins you have, clearly your platform is resonating, so that's one part of it. Let me maybe help me think about how are the other drivers helping? One being your competitors clearly are making changes in-
Yeah.
... are in somewhat sort of change mode, right? Like Cisco's tweaking their Meraki portfolio, HPE Juniper undergoing the integration. The other thing you've talked about is the memory supply advantage that you have. You've talked about having visibility into supply. How are those two drivers playing out with customers, and how do you sort of delineate between how much the platform is resonating versus the other two?
Yeah, well, hats off to the team at Extreme. We take a existential threat to our business and flipped it into a positive. Now, it's gonna generate demand for the company. Really proud of the team for everything that has been done there. We can be very nimble. I'd say we have 20 different initiatives. I'd shout out to Broadcom and the executive leadership at Broadcom. They consider Extreme to be a strategic partner. When the memory shortage cropped up, they were very helpful to our teams and then to me personally in establishing relationships. We bought exclusively from Micron. I got introduced to the CEO of Micron and then his executive leadership team. We've got a very good relationship.
Micron did not know Extreme was a customer. We buy through our design manufacturers in, in Taiwan. They buy from distribution. Distribution, you know, there's no allocation for Extreme. They're just buying from the ODMs. Micron is just selling into the distribution channel with no knowledge of where the product comes. When I was talking to senior leadership at Micron, they were like, "Can you prove to me that you're a customer and you're not just trading chips?" Which is kind of interesting. We've reorganized that relationship. We have an agreement with Avnet, a large distribution in the U.S. We're buying direct. We have an allocation from Micron, you know, through Avnet in the United States, and then we'll supply. That's the same way that we buy Broadcom. We've done a lot of other things.
We found other vendors, again, through Broadcom. Thank you. They're a very strategic partner for Broadcom, and Broadcom said, "Put these guys in front of the list and take care of them." They're gonna come online at the end of 2027. That will be another important source of supply. Samsung runs on Extreme. Their global headquarters runs on Extreme, and we have excellent relationships with them. Our country manager, this is a unique, a unique one. You work the executive leadership there, and Broadcom came in and qualified Samsung chips. We were able to get very low price, Samsung chips that are approved for our platforms. That, that was a big move. The other one is just kind of people being crafty.
I think this is what we can do at Extreme that our competitors aren't doing because of their size or whatever. Again, we worked and we found that there were chips destined for other industrial segments like automotive, where their memory chips actually would work with our systems, and we got Broadcom to qualify the chips. A lot of these chips were sort of sitting in inventory because demand was not what they expected, so they had a lot of extra chips. We were able to move very nimbly and buy up a bunch of chips that were destined for another industry. These are just, there's about 10 other things that we're doing, but we've solved for supply through calendar 2027.
We have new sources of supply coming on the market, and we have new allocations coming from Micron. We don't, you know, we don't have an issue, so we're confident in meeting demand. As I said before, this could shift into an opportunity for us. As competitors stretch out lead times, that's where we'll see it. We'll see lead times get stretched, and if people have important projects that they need to move on, then it could create an opportunity. We haven't predicted this, we haven't put this in our numbers, it could create an opportunity for us.
Got it. Got it. Wi-Fi 7, that's ramping fast. Nearly half of your wireless booking dollar is coming from Wi-Fi 7 now. Can you just talk about what's driving enterprises to adopt Wi-Fi 7 this quickly? When you think about overall the portfolio that you have today, is Wi-Fi 7 a trigger for customers to, again, go through their network refreshes a lot sooner than you expect to?
I don't know that, I don't know that it's Wi-Fi 7 that will cause people to upgrade their networks, you know, sooner than expected. You know, just to reiterate, you know, networking is mission-critical. Every enterprise on the planet needs to have a high-quality, high-performance, secure network that's up to date. To support all the devices that are on networks, you know, the bandwidth continues to grow. Applications continue to, you know, flourish in terms of, you know, the numbers. There is a continuous pressure to upgrade. Extreme was the first company with to come out with Wi-Fi 7, we were actually in 2023. The very end of December of 2023, we came out with Wi-Fi 7. You know, there are meaningful benefits.
With Wi-Fi 7, the industry realized that you could actually run mission-critical applications across Wi-Fi 7. I think it's the first time that people felt confident with Wi-Fi and its ability to run mission-critical, and that was, you know, well documented, well supported. I don't know if you remember, there was a time where people looking at, you know, private cellular-
Yep.
... as being kind of more reliable, and we could count on that for, you know, industrial applications. Wi-Fi 7 obviated that discussion. Now I think people have come to accept that with this generation of Wi-Fi, you can run mission-critical. I think that's that will be part of this. We just signed up University of Florida, The Swamp, you know, that stadium, will be the first college stadium with Wi-Fi 7. It's a function of just sort of the quality of connectivity and kind of what you're running inside the, you know, your environment. Wi-Fi 7 is here, it's 50%, and I think, you know, this will definitely be the year of Wi-Fi 7.
When Cisco comes out and says it, you know, it has an impact.
No. Noted. Maybe let's move to the recurring side of the business. Recurring revenue I think is now 36% of the total revenue in the latest quarter. How does the business look in terms of recurring revenue mix a few years from now? Let's take, like, three years from now. How are you envisioning the mix looks for the company?
Our, you know, subscription revenue driven by adoption of Platform ONE, you know, was up 29% year-over-year. There's an offset on the services side of the business. You know, we're combining service and subscription in Platform ONE. You'll see that kick into gear in our fiscal 2027, especially in 2028. We are combining service and subscription together from a financial modeling benefit. There's a lot of benefits to the attach rate change on the services side, as well as the renewal rate, and the fact that service plus subscription, + 10% is how people are adopting Platform ONE, there's a benefit.
36% gonna go over 40%, you know, over the next, you know, few years just naturally because of the high growth rate of Platform ONE subscriptions. Everyone is gonna be moving on to Platform ONE. We, you know, our product revenue growth has been double -digit for eight consecutive quarters, and we expect that to continue. What could provide upside to that subscription recurring number is that Extreme Exchange that I mentioned before. We haven't modeled that yet.
Yep.
We haven't included that into our outlook.
Okay. Platform ONE, where does adoption stand today? What are the attach rates? How should we think about how much of the install base is migrating already versus how much is left to migrate?
Yeah. We came out with Platform ONE early in July, and as I mentioned, we just came out with the second generation. We have several thousand customers who have moved onto Platform ONE. Platform ONE will be fully featured so that I'd say 80% of our customers can live in Platform ONE within a few months. We combine nine systems into one.
Okay.
There's still features and capabilities that are important to customers that are being built in. As we add them literally in real time with the May release and the June release, there's gonna be a significant, We're gonna cover a significant number of customers who can move and live in Platform ONE. The way we went about this is to create a license that allowed customers to live in the old world and then to move into the new world at their own speed. That's been very popular with our customers, and we expect the move to accelerate. By the end of next year, I think it's fair to say 70% of our customers we would expect to be fully in Platform ONE.
Okay. Then when you think about customers adopting this sort of next -generation Platform ONE or Platform ONE 2.0 that you've launched, when you look on a like-for-like basis, are those customers? Are you able to derive an ASP uplift from those customers or is it more about focusing on expanding the deal sizes with those customers, like you mentioned, like you're moving upscale? Is it more focused on the just the overall deployments increasing or are you able to get an ASP uplift as well on a like-for-like basis?
I'd say it's, you know, it's a combination of both, but, you know, if you take, you know, the service revenue and you combine it with the subscription revenue, it's about a 10%-15% uplift on both.
Okay. Okay. Yeah. Maybe last one for you. I mean, we've talked about all the tailwinds that you have, if you sort of now start to think about next 3-5 years, where are the sort of areas that you feel like you have to focus a lot more on? What are the execution risks you would highlight that you need to monitor or you want to be more focused upon making sure that there's the demand is strong, you execute to those opportunities?
Yeah. I mean, the challenge for us is moving up market in the channel and getting the attention. You know, Cisco is a very strong competitor with, you know, their channel relationships is what they're known for, excellent marketing. If you look on paper, if you look at what we have with Platform ONE, you know, a key differentiator is that we're actually demonstrating the technology and we're on our second generation. People ask how we compare with the larger player, we haven't seen a live version yet, so there's nothing that's GA that's out there. They have terrific marketing, they tell a great story. They have a lot of capital. They buy a lot of technology, they tell a great story.
I think, you know, for Extreme, it's getting the brand recognition, getting the at-bats, and, you know, moving upmarket, particularly with larger channel partners.
Okay. Okay.
That's a challenge.
Great. I'll wrap it up there. Thank you. Thanks for coming to the conference.
Thanks, Alan.
Thank you to the audience as well.
Yep. Thank you.