Welcome to Needham's 21st Annual Technology Media and Consumer Conference. I'm Ryan Koontz. I cover the enterprise broadband and optical data center names. I'm real excited to have Extreme here today. Stan Kovler, who's CSO and VP of IR. Welcome, Stan.
Thank you, Ryan.
Great. Let's dive straight in. Just to level-set, Stan, I think most folks know what you guys do. You guys have a real brand in the industry. I don't get a lot of questions about what does Extreme do, but maybe just give a little color on what are the market verticals you guys see the most strength in-
Yeah
for your largely Wi-Fi and kind of campus core switching portfolio?
Yeah, sure. Thanks for having us. We're delighted, every year. Like clockwork, we're always here.
Appreciate that.
support you guys. Appreciate it. Ryan, as you were saying, we're in the business of networking for enterprises, large campus environments, and campus is not necessarily just a school campus environment.
Campus environment could be something like an NFL stadium. For us, it could be a data center where some of our partners sell into the telco space.
Factory floor.
Yeah. Where we're seeing a lot of success, to your point about verticals is we're doing really well with public sector.
Yeah.
Public sector is a big chunk of our business, and public sector includes areas like education. Education is doing well for us globally.
Last earnings call, we highlighted some of the schools that we had won, like London Business School as one example.
We keep having these marquee customer wins in that sector. The manufacturing sector, that's doing well, too, and it's a combination of, I would say, industrial manufacturing, but also, by default, the second derivative effect of the AI boom. A lot of our customers are involved in some parts of the AI boom manufacturing cycle.
It could be customers out in Asia, Europe, U.S. We're seeing it globally. We're doing really well there. Healthcare is another great sector for us, too. Lots of upgrades happening in the healthcare sector. Digital transformation continues to hit that sector as well, that vertical.
Yeah.
What we're known for, which is the venue space, so sports, entertainment venues, that's been doing really well. Part of it is also being driven by the Wi-Fi 7 refresh cycle.
Yeah.
A lot of those customers tend to be the wireless customers that we have. We like it because it's also really sizable implementations. Last week, we had our annual user conference out in Orlando. One of the things that we do in Florida is we have a lot of customers in Florida. They're the largest NCAA deployment of Wi-Fi 7 at the University of Florida Gator stadium.
Oh, yeah.
That stadium houses, I believe, 90,000 fans.
Wow.
When we say that we're enterprise grade, this is the level of scale that our solutions deliver, and we're very proud of that.
Yeah. That's really cool. I think you've got a lot of exposure internationally too, with your mix. For a U.S. tech company, you've got a little over-index, I think, on the international front, don't you?
We do. We do a lot in Europe. Germany specifically is a big market for us. The U.K.
Continental Europe is really big. We're making really nice inroads in the Middle East. In the Middle East, we're deploying with some of our other technology partners, the biggest casino in the Middle East.
Wow.
Wynn Al Marjan.
The construction got a little delayed. If you heard, there's a little bit of a conflict going on in the region.
Yeah.
Since that ceasefire, I think it's been back on track.
Good.
Good news on that front. Just one customer, one property, but good news. Just traveling east from there, going over to Asia, we're seeing some really nice success with countries like Japan.
Yeah.
It's also a public sector business that we're doing really well in. From a trend perspective, we're doing well there because we're seeing this notion of the sovereign cloud-
Sure
become a really interesting driver for networking.
Even on the campus.
Even on the campus.
Countries want better security. They want their own data. They want to be able to control that. They want to run it in their own cloud infrastructure. We're seeing that as a deployment as well. We can do public cloud infrastructure, and you can run all of your management there, private cloud, sovereign cloud, on premise.
Yeah.
That's one of the value propositions that we have is customer choice.
Yeah. Very cool. Let's shift to briefly discussing the quarter results a little bit. You guys just had some real strong results. Stock reacted nicely. Congratulations.
Yeah.
Maybe can you walk us through some of your highlights you'd point out from the quarter?
Yeah.
In the print?
We continue to experience double-digit growth. 44 customers that last quarter spent over $1 million with us.
29% growth in SaaS ARR. We're now $236 million of SaaS ARR. Deferred revenue continues to grow, and our margins got back on track. 62.3% gross margin.
that we were able to print. One of the things is that we're very proud that our earnings growth is exceeding our revenue growth and showcasing that earnings leverage, operating leverage that we can deliver to Wall Street.
There were some concerns, I think, about memory pricing, of course, throughout the whole industry. You guys have managed right through that, I think.
Yeah
Pretty well. Maybe walk us through some of the tools you guys use to get where you are now, and maybe set up for the future on the supply chain side.
Supply chain has been a big topic of discussion for the past several quarters. The industry is facing a transition and some tight supply, specifically in the memory market. DRAM, DDR4 memory is in tight supply. What we did was we spent several quarters shoring up our supply, and we are very happy to announce that we've essentially solved our memory needs for this year and going out to fiscal 2027, and then some. We have strategies in place, long-term supply agreements in place with certain partners and suppliers.
We've been using a combination of tactical ways to solve for this, and also strategic. We are very appreciative of some of our marquee partners.
in the space, like Broadcom. If you think about how we solve for it, we have a solution that we sell, which could be an access point or a switch, and that has a lot of components in it.
Yeah.
Some of our key components in there will be the microprocessor unit.
It'll be the memory unit. Those kind of go hand-in-hand. We're aligned in that sense.
Yeah
Where we want to solve for that supply. We have some customers that we also do business with that are, in fact, DRAM suppliers themselves.
That's helpful.
That's helpful. The other thing that we did was we have an effort to redesign some of our products. Some of our products, for example, had multiple modules, and we redesigned them to have fewer modules.
That helps us expand our supply. Yeah, there's been a lot of things that we've done, both strategic and tactical-
Good
to really get to where we want to be.
Yeah.
Our size is an advantage because if you think about our size relative to the industry leaders that are maybe 12 times bigger than we are-
Yeah
it's easier to solve for a container and not a container ship.
Yes, sir. That's great. Maybe on the guide, your guide was also strong on the year. Maybe walk us through some of your assumptions and what some of the highlights were on the guide, how you're feeling about the balance of this fiscal year, and maybe looking into 2027 a little bit.
Yeah. We guided the full fiscal 2026. We didn't really give guidance for 2027. I think you and some of your fellow analysts are probably taking a look at what our long-term guidance is.
That we gave at our investor day in November and projecting that out. For 2026, we're essentially calling for 12% growth on the top line with just a touch below 62% gross margin in the full year. We're right on that 62% near term target that we're on. For EPS, just north of $1, about $1.03 in terms of midpoint for EPS for the full year. That's where our trajectory is right now.
Yeah. Your TAM's not growing quite that fast, that represents some share gains for you.
We do. From an assumption standpoint, it looks like our TAM is growing 5%-6%, and our growth this year will be 2x the TAM growth.
It's a combination of strong product growth, but also we talked about our SaaS ARR part of the business growing in that 20%-30% range, and that's the big driver for the recurring part of our business. That's been helping us as well outpace the market. We're seeing strong adoption.
Yeah
Of our agentic AI-based solutions.
This new Platform ONE that you rolled out about one year ago, I guess, it started coming into beta. Starting to get momentum there. Can you maybe walk us through what it brings and how it's differentiated from your big competitors out there?
Yeah
with Platform One?
It's interesting when you frame it that way. You were at the show last year, where we launched it in Paris, and it went from beta to now not just first generation, now we're in the second generation of agentic AI.
We believe that we're getting ahead and leapfrogging our competitors in that sense because now what we're about to launch in July is the Coworker version of Platform One, and Coworker is more of a proactive solution that nudges along our users and helps them manage their network. It's giving them tips and hints and asking them if they would like certain changes to be made proactively to their network. Moving forward.
As opposed to being licensed to a piece of hardware, it's actually per seat basis type of deal?
Coworker is still licensed to the hardware.
Okay.
The benefit there is that you're essentially getting a productivity boost by using it, and you don't have to prompt it.
Got it.
It tends to prompt you, and then it learns along with you. Where you were going is that later this year, at the tail end of this calendar year, we're launching the operator mode.
I see
for Platform ONE, where that will be a fully autonomous type of network operations deployment.
Yes, it's cloud-based, and it allows people to just use that system as a way to manage our equipment, but it's licensed to the networking engineer.
I see.
It could be networking engineer, maybe in some cases, a marketing person will want it to get network insights, right?
It decouples the licensing of the one-to-one hardware license-
I see
to a person that could be running a different type of network and take advantage of that. In addition to that, it also comes with something that we called last week Extreme Exchange. Extreme Exchange will allow people to build skills into it. For a lot of the tinkerers that want to build skills or we can drop agents into that, then people can take different agents or different skills that we've built up. It's like me sharing my Alexa skills with you, but at the enterprise level, right?
Yeah.
Yeah.
Where are you in terms of rollout here? I know you've continued to sell your traditional cloud-based-
Yeah
management system, now you're rolling out this other system. You're kind of dual-threaded now, and you're migrating folks over. Where are you in that kind of rollout?
For new customers-
we're really driving people to Extreme Platform ONE.
We call it Platform One because it combines two different things that we were offering. The older system, which is ExtremeCloud IQ, is a management system for managing the network.
There's another offering that we have, which is technology support. You call in customer service, next business day replacement of hardware, things like that.
All of that gets bundled now for new customers into Platform One.
Yep.
They have all of that under the same roof. The reason it's so important now is a lot of the tech support is essentially cost avoidance and call avoidance. Driving people to self-service tech support, that is part of what Platform One was designed to do, is that you can operate everything yourself, and you don't need to have a lot of hand-holding. That becomes a big advantage for us because it means that it lowers the barrier to entry into networking and to learning our networking.
You don't necessarily have to be a Cisco-certified engineer-
Yeah
to do networking in Platform One anymore.
Yeah. How should investors think about what Platform One brings to the income statement, to results? Gross margin, I assume. Nice boost there.
Yeah.
Steady trend.
In general, when we think about our subscription support.
line item, we've got about a 70% gross margin in that line item. line item, that's what it's bringing. A lot of our recurring revenue is going to be based on subscription support. That 20%-30% growth trajectory that I mentioned for the SaaS ARR.
Yeah
is where investors should look for the proof points of that adoption curve. We also talked about Platform ONE for this year, every single quarter. We are in a June fiscal Q1, Q2, Q3. We've exceeded our booking expectations for Platform ONE in terms of customer adoption. It's a combination of some new customers, but also existing customers upgrading. They're essentially migrating their environment into Platform ONE. You talked earlier about the legacy software, ExtremeCloud IQ. We have the on-prem ExtremeCloud IQ Site Engine. People are upgrading into the new system in addition to new customers coming online.
That's great. I want to hit another real key differentiator for you, too, which is your Fabric. When I was at your customer conference last year, I was pretty amazed, actually. These are folks that are big Extreme fans, and they love the Fabric.
Yeah.
The network operations guys love the Fabric. Maybe walk us through why it's so loved.
Yeah. It's like we have a following.
Definitely.
Better following than the Grateful Dead. What people love about Campus Fabric is that it's the simplicity, automation, and productivity that it drives. Even before you start the AI conversation.
At this user conference, we had some really cool customers, long-time customers like the Philadelphia Airport's network engineering team.
Yeah
The head of networking for that airport. He said, "I can do everything that I need to do with four people.
While he was at our show, they were adding a new airline to their airport, and obviously it's gates, and it's a lot of provisioning that's taking place. They were able to do it in less than an hour. Just plug and play this vendor. The power of it is quite amazing. When people see it, we have some new customers that just got a demo of it, and this was the famous quote that we like to talk about, is that customers that see it, sometimes we have one customer that said that "What I'm seeing here with Platform ONE, right now it's taking maybe six minutes to do.
If you were to do the same thing with Cisco, it would take them six hours.
Wow.
Right?
Yeah.
Where we're going with Platform ONE and all the autonomous capabilities and the agentic capabilities, that will go into six seconds.
Wow.
That's the power of the Fabric. We had some research that we commissioned to determine what's the total cost of ownership benefit of our solution versus some of the leading solutions, and customers get a 32% better TCO deploying Extreme-
versus alternative solutions. A lot of that TCO is in the time spent by the engineers. It's cost avoidance and it's productivity. The team can be doing something value added and more planning and less troubleshooting, things like that.
Mm-hmm. That is great. Maybe circling back to supply channel, you've secured the memory and key components you need.
Yeah.
Can you walk us through how you've been able to combat that with price in terms of your cost going up?
Yeah.
You're able to keep margins in the range. That's a big problem for a lot of the hardware industry, the IT industry today.
Right. That's correct. We had to do two price increases so far-
to offset some of the higher costs that we're seeing. Networking is a mission critical environment, right? Networking is a space where you need to make and keep up with those investments. We do pass those along. Now that we got the supply that we need with the purchase commitments, and we understand the price that we will have to pay, and we understand the volume that we're going to get, so we're able to plan better. One of the things that we announced last week at the user event is that we're going to hold pricing in terms of our list prices through November 1-
Okay
for customers. That'll alleviate a lot of the anxiety for customers. Some of our competitors, they're giving authorizations and then changing the price two weeks later or a month later.
Yeah.
It's difficult for the customers to plan. For us, we're trying to be more customer centric in that sense.
Yeah. With their budgets, they know what.
With their budgets and their planning
for planning. Mm-hmm.
Giving them that predictability is going to be a very important element of how we go through the summer. As others are hunting for-
supply, we feel like we can help our customers out in that sense.
That's great. You've had some real success also with another initiative around MSPs.
Yeah.
Can you maybe walk us through how that came to be? Obviously, that was, I think, a big Cisco stronghold historically. Walk us through what is an MSP and how you developed a solution to help these guys and beat Cisco at their own game.
Yeah. Great question. MSPs are important. These are managed service providers, and think about them as outsourcers of IT. Typically, the MSPs will service the market that is a little bit smaller in terms of-
Yeah
size and scale of customers. With certain partners and then a more CapEx oriented sale-
Right
we tend to sell, as we mentioned, to larger enterprises. MSPs allow us to go and address the mid-market-
Down market
or down market.
Yeah.
I don't want to say down market, but smaller markets. What they're doing is they're taking our software capabilities. What we did was we gave them this platform, and instead of being just a one customer view within Platform ONE, or previously ExtremeCloud IQ, we gave them something unique, which is multi-tenancy. We gave them the ability to understand what the usage is so they could offer something unique to the customers-
which is a usage-based model. If you think about that in an inflationary environment, in an environment where prices might be going up-
giving people that ultimate flexibility about how they consume technology is really important. That's part of the reason why we're seeing the uptake. We have 70 signed up already. The billings numbers are going up, doubling year-over-year. It's still a relatively small part of our business, but it's growing really well, and we see a lot of excitement there. Also, it's good business because it's very sticky.
Customers tend to stick with-
Yeah
their managed service provider for a very long time. In addition to just purely an MSP model like that for outsourcing, we can also offer customers flexibility with Infrastructure as a Service.
Right.
That again offers them flexibility.
Little different procurement model in that case?
Exactly. It's a different procurement model. We have another business model where we're essentially doing a disaggregated model. All of these are points of flexibility that we have. Costs are going up and prices are going up, a disaggregated model for certain tier of large customers.
Yeah
allows us to take advantage of recurring business that we can offer them, but then really give them a lot of cost savings on how they procure the underlying hardware.
That's another offering that we have for customers.
Think you won a big marquee customer there in John Deere?
Yes.
Fortune 500 win?
Yeah.
Yeah. How's that business been going?
It's been going well. They've been deploying throughout their sites.
This is what we enjoy with a lot of our customers, is that once we get into a customer, that we tend to see expansion within that customer and growth of deployments within the customer base.
Nice. How about on the competitive landscape? What are you seeing here from the big guys from Cisco and HP? How are they behaving these days, and what's the competitive intensity like these days?
We like the behavior because it's giving us a lot of opportunity.
That's what we like about it. There's a lot of installed base that's up for refresh-
Yeah
in networking right now, especially-
Cisco's talking about the Catalyst refresh-
Right
and all that, yeah.
Yeah. Cisco talks about their refresh cycle, and in many cases, because they're such a big market participant, it becomes the refresh cycle for the market. We can participate in that as well. Customers are seeing a lot of refresh activity in the form of request for proposal, proof of concept opportunities, and we're seeing that across the board, across a lot of our verticals. In addition, we're seeing a big opportunity with Cisco because they changed the nature of their partner program. Our industry-
uses what we call a two-tier distribution model.
Okay.
We sell into distributors sell to partners, and the partners deploy.
Got it.
The partners, in some cases, they sell everything to a particular company.
More than just security.
More than just networking.
Yeah
More than just security, right? Those are the ones that they would like to do more business with. That means that the more pure-play networking-oriented companies would orient themselves more to companies like ours.
When they look at our business and what they can do purely in networking, in some cases, they're making 20% more working with us.
With your model.
With our model.
Right? That's the huge advantage. It's also a way for them to differentiate because you might have five or six different vendors that are bidding the same technology with Cisco and differentiating with price and what they can offer.
Yeah
versus a completely differentiated sale with Campus Fabric, agentic AI, and you really come in and stand out that way as a partner.
Yeah. I think Cisco's really trying to consolidate, too.
Yeah
among those partners.
Yeah.
Just reward the big guys, and if you don't make a certain level, you don't get the preferred-
That's right
treatment from them. it's-
Yeah. We can take advantage of what may be the tier 1 billion-dollar.
Yeah
for us. We'll take the $50 million to $100 million to $20 million.
Yeah.
We can partner with those folks as well, and really give them the level of maybe higher touch and level of care that they deserve.
Yeah
Offer that, too.
Yeah. How about HP, Juniper combo? What's that been like competitively for you?
That combination has been interesting because there are a lot of decisions that have to be made on the roadmap that are seemingly static, right? We're seeing a lot of customers that are opting to look at opening up their environments, and they may have been purchasing one or the other for a long time, because they might have to switch over or now add the other half of the company to their portfolio, they still have to do a request for proposal.
Think about regulated industries like in the state, local education, or public sector space. You have to buy a certain class of products.
I see
A certain price list.
Now you might have to qualify a completely new price set from the vendor, and they still have to open things up and qualify new vendors. The opportunities for us are out there, and that's what's helping drive our funnel.
Seeing a lot of at-bats then.
Yeah. We're seeing a lot more at-bats.
That is great. There was a recent transaction on the M&A side. We finally saw Ruckus get sold for like the 50th time to somebody. Pretty big takeout price. I think 13 times EBITDA for Ruckus, which you could probably argue is not a top-tier asset the way it's been moving around. Your thoughts on that?
I hope that reflects positively on our valuation, right?
Yeah
It's the tide that lifts all boats.
Yeah.
We take that positively. We're happy that they didn't go with a more direct competitor.
Yeah
in terms of where they landed, and we wish them well. There's going to be a lot of opportunity that I feel comes our way, because again, it's M&A, it's disruption.
We're staying the course, focusing on organic development, organic growth, and just driving home. We have one platform, universal platform for hardware.
Yep.
We have our Platform ONE for all of our management software. It's a very simple story with limited transitions or disruptions. That we feel like is a great value proposition these days where seemingly almost every vendor is either in some kind of change mode, M&A.
portfolio rationalization, right, converging product lines. Like Cisco's had two product lines for a decade. They're finally converging.
That creates a lot of disruption, and we feel like we're offering stability and innovation to our customers.
Yeah. It's a great focus. We have just a couple of minutes left. Anybody in the audience have any questions they'd like to lob in to us? Going? Stan, we're just wrapping up here. How are you thinking about your path forward and your work with the sales team in terms of what's got the sales team excited here in 2026?
The sales team, in 2026 and going into our fiscal 2027, they're going to be very excited about what we have to bring with Platform ONE.
Yeah.
They are incentivized to sell it.
Yeah.
They're incentivized to grow. They're incentivized to make sure that we get our money's worth, right, on that valuable DRAM that we secured. We want to make sure we monetize.
Yeah
that at the product level. I think they're excited because we can finally take advantage, and second generation of this new platform that we have, head and shoulders above what some of our competitors are offering. I think people are really excited about the opportunities forward across the board. Yeah.
That's really great. Well, thanks for joining. Thanks everyone for joining today. Thank you.
Thank you.