Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Extreme Networks Inc (EXTR, Financial) achieved its best quarter of product bookings in five quarters, indicating strong demand and market recovery.
- The company reported a sequential revenue growth for the third consecutive quarter, with a 4% increase driven by a 6% rise in product sales.
- Extreme Networks Inc (EXTR) saw significant growth in its EMEA business both sequentially and year-over-year, showcasing successful market penetration.
- The company is experiencing improved competitive win rates, particularly with larger enterprise customers, leading to meaningful share gains across various verticals.
- The introduction of Extreme Platform ONE, integrating networking and security solutions with AI capabilities, received positive feedback and is expected to drive productivity gains and market differentiation.
Negative Points
- Revenue in the Americas declined sequentially due to seasonality in the K-12 vertical and difficult comparisons with significant deals closed in the previous quarter.
- The company's gross margin slightly decreased by 30 basis points sequentially, attributed to product and subscription mix.
- Operating expenses are expected to increase in the second half of the year, potentially impacting profitability despite a positive revenue outlook.
- The company is still facing challenges in the German market due to a lack of government, affecting business in that region.
- Professional services revenue was down slightly year-over-year, indicating potential challenges in that segment.
Q & A Highlights
Q: With the US being down, attributed to K-12, and EMEA being up, can you expand on those trends in the geographies?
A: Our K-12 revenue is usually impacted by E-Rate and the general building cycle. We saw a recovery in broader Europe, but are still negatively impacted by a lack of government in Germany. We expect pent-up demand to release once the government sorts itself out. The UK is getting better, and we expect K-12 in the US to recover as well. - Ed Meyercord, CEO
Q: Can you give us an update on WiFi 7 and its impact on your business?
A: WiFi 7 is starting to ramp, offering faster speeds, more bandwidth, and enhanced reliability. We expect strong adoption as it supports mission-critical applications. Currently, about 12% of our access points sold are WiFi 7. - Ed Meyercord, CEO and Kevin Rhodes, CFO
Q: Can you elaborate on Platform ONE and its differentiation in the market?
A: Platform ONE unifies all our applications into a single interface, integrating AI for better network management and automation. It offers a comprehensive solution with common user interfaces and services, expected to drive higher service and subscription revenue. - Ed Meyercord, CEO
Q: What are the opportunities with service providers like Verizon?
A: We are expanding relationships with service providers through new commercial models like private subscription offers. This could unlock profitability and expand our MSP platform. We are in productive conversations, expecting results to reflect in fiscal '25 and '26. - Ed Meyercord, CEO
Q: How should we think about the trajectory of your services and subscription business?
A: Growth will be driven by increased product sales, Platform ONE adoption, private subscription offers, and MSPs. We expect mid-teens growth in subscription revenue, with better attach rates and new go-to-market motions. - Kevin Rhodes, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
