Thank you, Jade. Good morning, and welcome to Extreme Networks first quarter fiscal year 2027 earnings conference call.

I'm Stan Kovler, Vice President of Finance and Corporate Development. With me today are Extreme Networks President and CEO, Ed Meyercord, and Executive Vice President and CFO, Kevin Rhodes.

We just distributed a press release and filed an 8-K detailing Extreme Networks financial results for the first quarter. A copy of the press release, which includes our GAAP and non-GAAP reconciliations, and our earnings presentation is available in the IR section at extremenetworks.com.

Today's call and Q&A may include certain forward-looking statements based on current expectations about Extreme's future financial and operational results, growth expectations, new product introductions, supply chain dynamics, and management strategies. All financial disclosures made on this call will be on a non-GAAP basis unless stated otherwise.

We caution you not to put undue reliance on these forward-looking statements, as they involve risks and uncertainties that can cause actual results to differ materially from those anticipated by these statements. These risks are described in our risk factors in our 10-K and 10-Q filings.

Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans to update them except as required by law. Following our prepared remarks, we will take questions.

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

Thank you, Stan, and thank you all for joining us this morning. Revenue grew 10% year-over-year, marking Extreme's seventh consecutive quarter of double-digit revenue and product revenue growth.

Non-GAAP EPS increased 50% year-over-year as we continue to translate strong top-line performance into even faster earnings growth. SaaS ARR accelerated to 22% year-over-year growth and reached approximately $265 million.

Based on the combination of our performance, visibility into customer demand, strong funnel growth, continued share gains, and accelerating adoption of Extreme Platform One, we're raising our expectations to 10% growth for both the second quarter and full year of fiscal 2027. We expect our SaaS ARR growth to exceed 20% for the rest of the year as well.

We continue to outgrow the market, expand within larger enterprises, win competitive opportunities, and strengthen our position as customers increasingly standardize on our AI-powered integrated networking platform. Customer demand remains strong.

Our open funnel grew at double-digit rate with strength in all regions. Our regional pod strategy with a strong focus on specific verticals is helping us win more of the opportunities we pursue.

Our disciplined execution and supply chain strategy give us ample product availability to convert that demand into revenue. There are three key pillars driving our growth.

First, we're moving upmarket. We booked 44 customers at over $1 million this quarter, up from 36 a year ago, largely due to our technology differentiation.

Our campus fabric takes complexity out of the network with zero-touch provisioning, subsecond recovery, and built-in segmentation that helps prevent lateral attacks. Our Wi-Fi is built to perform in complex, high-density environments, keeping users connected and applications running reliably.

That differentiation, along with our simplicity and lower total cost of ownership, is helping open new doors and win bigger deals. Second, Platform One adoption is accelerating as a result of continued innovation and now accounts for over half of our subscription bookings.

Customers want a single AI-powered platform that integrates security and networking to help reduce complexity, simplify operations, and manage their wired and wireless environments in one place. Third, market conditions are working in our favor.

Competitor refresh cycles, Wi-Fi upgrades, and the disruption from the HPE Juniper integration are creating a multiyear opportunity. Supply is also a differentiator.

Our components are secured through calendar '27, while our competitors are quoting extended lead times. These advantages matter most when customers are making large, high-stakes decisions, and our recent wins show it.

One of the largest integrated healthcare networks in the United States chose Extreme for a campus transformation spanning 21 hospitals and roughly 600 care locations. Where network availability directly affects patient care, campus fabric delivered the automation, resiliency, and segmentation the customer needed.

Within the first month, support tickets dropped over 90%. When customers evaluate Fabric through a proof of concept, the differences become clear and our win rate is excellent.

Wi-Fi refreshes is another important driver of our success. Hard Rock Stadium in Miami selected Extreme to replace its aging Wi-Fi 5 environment with Wi-Fi 7, supported by a full switching upgrade.

In addition to Dolphins games, the network will support events like the Formula 1 Miami Grand Prix and the Miami Open, providing the capacity and lower latency required to support tens of thousands of fans simultaneously streaming, sharing content, making mobile transactions, and using digital services. This deployment demonstrates how these Wi-Fi refresh wins create an opportunity to then sell our entire infrastructure portfolio.

Platform One is a key growth engine that strengthens our recurring revenue. Customers value the simplicity of managing their wired and wireless on a single AI-powered platform.

We have a number of Platform One customers across verticals, including Cambridgeshire and Peterborough NHS Foundation Trust in the UK, where Platform One will manage the Extreme wired and wireless network, delivering enterprise security and operational resilience across the healthcare organization's clinical sites. Regio IT, the largest municipal IT service provider in North Rhine-Westphalia, Germany, will leverage Platform One to manage its Extreme Wi-Fi 7 networks across hundreds of sites, helping municipalities, schools, and utilities deliver digital services with less IT overhead.

One of Austria's largest banks chose Extreme over a longtime competitor to refresh its wired and wireless networks across more than 70 branches, all managed through Platform One. With a cloud-first strategy, Platform One will give the bank's network team centralized cloud-based management at scale.

Last week, we held our second annual AI Summit in Amsterdam, bringing together senior IT leaders to discuss industry trends and share our longer-term vision. We showcased early Agent One momentum and previewed the industry's first on-prem enterprise AI infrastructure for networking.

Extreme's AI understands each customer's network topology, history, and operating context, turning that insight into practical recommendations and measurable productivity. Agent One Coworker, our next-generation AI agent, reached all Platform One customers in early September and drove a 10x adoption rate over the first generation.

Its signature feature is Nudge. Unlike conversational AI, which waits for someone to ask the right question, the Nudge feature proactively surfaces timely contextual recommendations inside the workflow, and 98% of critical nudges got a response.

58% of cases opened through Agent One Coworker arrive with everything our engineers need to begin troubleshooting, work starts sooner. At Hill College in Texas, the CIO said his team solved a wireless outage in minutes with Agent One, a task that would have taken a full morning.

It also helped the team respond to a device on the guest network running crypto-mining software by tracing the device through the access points near to its location and resolve a security issue that could easily have gone unnoticed, all within minutes. In calendar '27, we will make Agent One Operator Mode available to customers.

It will execute tasks independently within defined governance boundaries, respond to events in real time, and run scheduled workflows, learning from each outcome to become more effective over time, creating autonomous AI. We also previewed Extreme Exchange Zones, expected in the first half of calendar '27.

Exchange Zones bring enterprise AI on-premise, letting customers run the same applications locally or in the cloud with full control over data residency. This will allow customers to comply with data sovereignty requirements, which are becoming increasingly important in international markets.

Exchange Zones will also pool spare compute across their Extreme access points and switches. None of our direct competitors offer this.

Our MSP program is also gaining traction, closing the quarter with 85 active MSPs, up from 74 last quarter. Consumption billings grew 21% quarter-over-quarter and 131% year-over-year.

Platform One is already contributing to that growth. Our funnel remains strong.

We are expanding with larger customers. Industry disruption continues to create share-gain opportunities.

We have the supply availability to meet customer demand, and the differentiation of Platform One and Agent One are strengthening our recurring revenue growth and strategic relevance with customers. Now let me turn the call over to Kevin to discuss our financial results and guidance.

Thanks, Ed. I'm pleased to report strong first quarter financial results.

Starting with revenue, total revenue of $341 million exceeded consensus and the high end of our guidance range, representing 10% year-over-year growth. Product revenue of $218 million grew 12% year-over-year, indicating strength of customer demand above our typical seasonality.

We are continuing to see growth in both wireless revenue, especially with Wi-Fi 7-based products, and in wired switching as well. This marks our seventh consecutive quarter of double-digit year-over-year growth in product revenue, demonstrating strong demand and our continued strong go-to-market execution.

The industry pricing environment continues to be fluid, and we expect this dynamic to continue based on a combination of product cycles, mix, and demand as we pass through component cost increases. Recurring revenue of $119 million grew 7% year-over-year, aided by SaaS ARR growth of 22%.

As we previously stated, fiscal year 2027 is the transition year where legacy support contracts are subsumed into Platform One contracts. We expect a sharp reacceleration in recurring revenue growth in fiscal 2028 coming off our balance sheet as SaaS deferred revenue ramps this year.

Through the transition, we expect continued improvement in free cash flow and margins. Turning to the first quarter margins, gross margin of 62.6% was up 130 basis points year-over-year and above the midpoint of our guidance.

We're pleased that we were able to preserve our price advantage over our competitors while passing on component cost increases. We've also solved for memory needs by executing on our supply chain strategy, providing us with ample supply to meet demand and good visibility into gross margins.

Earnings per share of 33 cents accelerated to 50% year-over-year growth and above the high end of our guidance range. Geographically, we had strong revenue growth in the Americas and EMEA.

In APAC, while revenue fell due to elevated prior-year comparisons, we continue to win large deals in the region and our funnel remains strong there. We continue to expect growth across all regions in fiscal 2027.

Operating margin expanded to 17.4% in the quarter, up 410 basis points from the prior-year quarter and 170 basis points sequentially, and well above the high end of our guidance range. We also generated $66 million of adjusted EBITDA, up 47% year-over-year, and our adjusted EBITDA margin of 19.2% was up 480 basis points year-over-year as well.

If you look back two years ago, we have nearly doubled our profitability as a company. We continue to achieve operating leverage through healthy growth as well as prudent cost management, thus outperforming in the first quarter.

In the second quarter, while we plan for seasonally higher expenses due to sales and marketing expense, such as our annual sales kickoff, AI Summit, and advisory council events, just to name a few, we continue to expect our profitability to maintain its current course. Over the long term, we continue to drive operating leverage as we scale.

In terms of cash flow, we generated $39 million of free cash flow and ended the quarter with $245 million of cash, our highest cash balance since fiscal '21, and a healthy $45 million of net cash. This is during a quarter in which we repurchased $25 million worth of shares and made strategic memory purchases, of which we now have $36 million of memory on our balance sheet.

We are effectively generating cash and using it strategically, while returning cash to shareholders and maintaining a healthy balance sheet. On a vertical basis, we experienced broad-based strength, with particular standout bookings growth in education, manufacturing, healthcare, and sports and entertainment.

We mentioned a few of these wins and these customers earlier. Looking at the second quarter and the rest of the year, we're increasingly confident in our ability to achieve double-digit revenue growth.

In the second quarter of fiscal 2027, we expect revenue to be in a range of $345.8 million to $350.8 million, gross margin to be in a range of 62.2% to 62.7%, operating margin to be in a range of 16.4% to 17.4%, and earnings per share to be in a range of 32 cents to 34 cents per share. For the fiscal year 2027, we are increasing our guidance as follows: we expect revenue to be in a range of $1,402 million to $1,412 million, up 10% year-over-year at the midpoint; gross margin, we're expecting to be in a range of 62.3% to 62.8%; operating margin to be in a range of 17.2% to 17.6%; and earnings per share to be in a range of $1.35 to $1.39 per share.

We expect our fiscal 2027 non-GAAP tax rate to be 21.8% for the year. With that, let's now turn the call over to the operator to begin the question-and-answer session.

Great. Good morning, and nice results and guide.

Nice to hear that the business is humming here. With regards to gross margin and supply and memory specifically, any particular things you'd point out with regards to availability in terms of your strategy, how it's playing out, and how we should expect gross margins to fare going forward?

It's nice you guys have supply, but Investors have been worried about costs here, maybe you can shed some more light on that. Nice job, though.

Thanks, Ryan. Our teams got on this early, and what we've tried to do is flip what is a negative in terms of constrained supply into a positive because we have plenty of memory.

You will see the cost pressure in our gross margin number because you'll see the higher cost of memory embedded in what we just announced. The bottom line is that we've got full supply out well into fiscal 2028.

For us, what we see is an opportunity to provide shorter lead times than what's out there for the industry. We continue to remain in a strong position on that, and the higher cost of memory is built into the gross margin that we just reported and our guide.

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Got it. The pricing environment allows you to essentially raise prices to offset that?

That's right. We've been a little more conservative than our larger competitors in raising price.

We hear this from distributors, partners, and customers that the bigger players have been raising price more aggressively, I would say we still have room there. We've been able to deliver the margins with what we've done so far.

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That's really great, Ed. Thank you.

I'll get back in the queue. Appreciate it.

Thanks, Ryan.

Great, thanks. Platform One bookings are over 50% of subscriptions, up 5 times from last year.

What are you saying now? You might have said it on the call, but just to repeat it, about where you're going to be at the end of fiscal 2027, and how much is new logos versus conversion of existing customers?

Let me cover the first part, and Kevin, I'll let you jump in on the new logo at number if we're sharing that. Mike, by the end of this year, we expect half of our customers to be on the platform, which it's the fastest move and migration that we've ever seen.

At the end of this past year, we had 10% of our customers on the platform, and we would expect that number to grow to over 50% of our customers on Platform One at the end of this fiscal year, and then that number growing to approximately 80% the following year. The adoption has been very high.

Our teams, commercially, have done a great job positioning and selling Platform One. I think you can see demand for the most modern industry tools, and also the differentiation that we bring.

From a new logo perspective, the market is interested in how to leverage AI and how to leverage the most modern networking tools, as they consider investments into the future. It's giving Extreme more at-bats and more opportunities.

Kevin, I don't know if we're sharing exact percentages in terms of new logo, but, yeah, I would expect new logo adoption to be closer to 100%.

I would agree, Ed. That's what I was going to say is, when we're going to market right now, Mike, we are going to market with Platform One, and that is all new logo activity.

That's where we're kind of center staging, focusing that technology for that new logo. Then of course, you've got the movement of the migration of all the customers into Platform One as well.

That happens more episodically as they come up for renewal, but we are seeing tremendous success in existing customers moving over into Platform One. It's not a big lift for them to move from XIQ into Platform One.

We saw even one customer, a hospital system, do it in 40-some-odd minutes. You get the benefit of the AI, and you get the benefit of all the new technology that we're building there, and so people are eager to go and move.

We don't have percentages there that we're sharing, but I would say it's really strong across the board.

Great. Great, and then just for my follow-up, on just the monetization of Agent One Coworker and then also Exchange Zones.

Is this monetized through the subscription, through utilization? Does it pull through hardware?

How do we think about monetizing these things?

Sure. They're different.

We came out with Coworker in September, which was our second-generation, yeah, AI platform, if you will. That's where we made the move from what we would call conversational-based AI, which is where the industry is, simply put, you have to prompt AI in order to get an answer, it's sort of it's almost chatbot-ish, where people are having to converse if they want to use AI.

In this case, Coworker is conversational, it's included in the subscription, all of our customers have it. That's what we're excited about, and we mentioned 10x the usage, because it's always on, it's context-aware of your network, it's always on, it's ambient, it's proactive, and it's watching what you're doing.

If it feels that it can support you, or if it can highlight, let's say a network issue, or a solution, or suggest a workflow, etc., it's going to do that. That's that nudge we're talking about.

Now that's built into the platform, and what we're seeing is the customer adoption and engagement with our platform, we're already on our second, is far greater than what we had with what was our old AI Expert. When we move into Operator Mode, which does contain the governance element of our agents, so that element of operators already out there, but we're introducing new features and new capabilities, like what we said in terms of localization of data as it relates to data sovereignty.

Some people want to keep workloads in the enterprise, on campus without going out to the cloud. Survivability, from a security standpoint, if you don't want to get disconnected from the cloud and you want to hold the workloads local, that's what's coming out in Operator Mode.

The big change for Extreme, from a revenue perspective, will be in tokenomics for Extreme. We're calling tokens Agent Actions, and these Agent Actions will bring in a new stream of revenue for Extreme, and this is where we're talking about unlocking data in the network for other use cases outside of traditional network management.

The idea that we can work with stadium customers and enhancing the fan experience, or the patient experience, or supporting caregivers in a healthcare environment, or retail outcomes from a supply chain standpoint or from a consumer standpoint. The list goes on and on, and there's a lot of different ways, when you think about the network being literally in the middle of everything, the network being strategic and all the data in the network, this is where we're excited in the second half of calendar 2027, I'm sorry, in the first half of calendar 2027, the second half of our fiscal, to bring Operator Mode to bear for customers.

We're already working with what we're calling our foundry customers on applications and ways to leverage data from the network in this new platform.

Ed, you'd commented on your three key pillars of the growth story. I wanted to focus in on the upmarket move.

I think when you exited FY 26, you guys were talking about the million-dollar-plus opportunities in the funnel up by mid-teens kind of year-over-year. Where does that stand today?

Obviously, you had good success in Q1, but where are we with nine months to go in the fiscal year?

Eric, it's actually up a bit, I think you would see that that number would be up over 20%, depending on the period that you're looking at, because our funnel obviously we slice and we're looking at it by quarter for the rest of the fiscal year. We see these opportunities continuing to grow, and that percentage in the funnel growing beyond the mid-teens number that we discussed.

Terrific. Then, I'm always curious about the competitive displacements, but the Austrian bank win back that you just described, first of all, sort of why did they leave, and then second of all, why'd they come back?

In that case, this was a win against one of the largest players in the industry, I should mention. It was less about them leaving, it was more about them coming to Extreme.

We talk about Cisco fatigue in the marketplace, and that ebbs and flows. When we look at our solution set, we're bringing simplicity, and we're bringing a focus on end-to-end networking solutions all in one platform, with a highly differentiated Fabric technology for campus, and a very competitive wireless solution.

I think, when all this gets packaged up, we wind up being, I think more compelling from a technology perspective, and I think from a commercial perspective, a lot more attractive as people evaluate total cost of ownership. We have some large wins.

We've had in virtually all of our geos where we're getting in the door with some very large opportunities, and we're having success converting those. We mentioned a $10 million win with a very significant healthcare company in the US this past quarter, that is essentially a new logo win for Extreme and a displacement of a large customer.

Again, it's that Fabric technology that people like. It's the combination of our Wi-Fi and our ability to support highly complex environments, and then it's putting it all together end-to-end: wired, wireless, the whole portfolio is in a platform.

Our competitors have software that sits on top of other software, they still keep the distinct user interfaces of all those software platforms running, and really you're just left with an over-the-top software. We actually have a legitimate platform where there's one interface for all the technology, and having everything in one place, and then having these new AI tools is very compelling for customers.

Got it. Congrats on the quarter and outlook.

Thanks, Eric.

Hey guys, can you hear me?

We can. We got you, Tomer.

Great. Two questions for you guys.

Maybe to start off with the guidance raise, right, you went from 8% guide previously, now you're going back to 10%, which is more in line with your long-term framework that you set out for us last year. I just want to ask, effectively what changed, right?

Is it a quicker transition through this subscription to the Platform One that you previously said that would be a transition year this year? Is it better demand on the product front?

Is it kind of a byproduct of, maybe pricing increases given the supply constraints we're seeing? Where is the additional growth coming from?

Tomer, you hit the nail on the head. It's both.

We're ahead of plan on the recurring revenue side in terms of the adoption of Platform One, which has been the big driver of growth. We look at the year-over-year comparison of being in the call it low single digits a year ago into the mid-20s a year later in terms of adoption of Platform One subscriptions.

That has been driving a higher recurring revenue number than maybe we had earlier, and so we have the confidence. We see that continuing going forward.

The other is 12% product growth, and that's driven by the opportunities we have in the funnel. Eric asked about some of these larger opportunities in terms of these million-dollar-plus opportunities, and what does that growth look like.

It's a very healthy outlook in terms of the funnel of opportunities we have. If you recall, we now have 20 different pods.

We're forecasting and driving growth for each one of those in terms of funnel creation, and we're carefully evaluating how we're converting on these funnels, and so we're extremely tactical in how we're managing this and have visibility. From the bottoms up, the call is coming from confidence sort of at the pod level of the funnel creation and funnel conversion, and our confidence in delivering a higher number.

Got it. Maybe as a follow-up then, talking about the pipeline opportunity, I just want to understand where are we in this competitive displacement cycle?

Meaning, we've talked for some time now about the opportunity to displace the top two incumbents, one, Cisco because of channel disruption, and two, Juniper and HPE and their integration challenges. Do you see the same level of displacement opportunity that you may have seen a year ago, or is the integration between the two tightening and getting better, and maybe channel disruption is not as big of an opportunity as it was, say, a couple of quarters ago?

I think the opportunity is as good as it's been. We're seeing, I'll just hit HPE Juniper first, people may have seen their ads about self-driving network, and their ad is very far away from the truth of what they're actually delivering to customers, and that's not lost on customers.

There is a discrepancy between wired and wireless, and cloud and non-cloud, and Mist is had a very strong competitive position, and they've fallen back. Then there's a question about how the Aruba portfolio and how that will even fit.

They've said those two product portfolios won't come together, if you're an enterprise customer making a long-term decision, it introduces a fair amount of risk, depending on where your technology sits today. Cisco's focused on a lot of other things besides networking, and they're the most aggressive in raising price, and so if you're looking for the most complicated bundle of solutions and the most expensive, it's Cisco.

A lot of customers don't want to have everything together. They'll look and say, "I'd like the best-in-breed.

Cisco compared to, let's say, Extreme and Palo Alto." There's much better value and capability going with the Extreme Palo solution and having best-of-breed as opposed to paying a lot more and having a lesser solution from this larger entity.

They create disruption and share opportunities at the customer level, but also within the channel and at the channel level. Cisco is, they are asking customers right now, they're meeting in Vancouver, they're asking their channel partners to do a lot more to try to sell the entire portfolio, and that's not necessarily what people want in the networking world, where buying cycles are different, buyers are different, and there's not necessarily this synergistic fit between what they're trying to mash together.

That creates some frustration, and it creates opportunities for us where people view their ability to make more money from the channel where they can make more money with Extreme in the networking side.

Got it. Thank you.

Thank you, good morning. My first question is regarding the supply chain situation, just wondering if any revenue was left on the table.

My follow-up is on gross margin, just wondering if your long-term target is still mid-60s, which is about what, 200 bps away, just wondering what the catalyst will be to get to that mid-60s.

Dave, I'll take it at a high level. Starting with the question about supply chain, we don't feel our numbers are constrained, I would say, and going forward, we continue to market this with our distributors and with channel partners to make sure the word is out that Extreme has supply.

There's every quarter, there's always some level of product constraint that might happen at the end of the quarter where maybe products don't ship out, so, but it's at normal levels for us, not at unusual levels. In terms of the gross margin, we see a step function in our recurring revenue, and our recurring revenue margins will contribute.

As we're putting together service and subscription in the Platform One bundle, and that creates some technical issues, and it's a technical drag on revenue in the years of heavy migration that we're in right now, and that recurring revenue growth rate, to be called in the mid to now, higher single-digit range, will step into the teens and we'll step into the 20% range overall for recurring revenue. Given the margins of recurring revenue, that will be a big driver.

Kevin, do you want to comment maybe with a little more granularity?

I think you're right there, Ed. That's what we're expecting is we're expecting this acceleration, especially in SaaS deferred revenues as we sell more and more Platform One subscriptions, you'll get the rule of 78 benefit where you see more revenue coming and contributing next year of what we sell this year, and the same with the year after.

You're going to see more higher-value, higher-contribution revenue come into the model over the next couple of years, and that's going to lift us. The other concept here, Ed, as well is that we do expect some of these memory costs and other component costs to come down over time, but we're in an environment where prices have never gone backwards, and so we should be able to see some improvement in product margins over time as well, A, from a scale perspective, but also just component cost reductions over time, too, where we maintain our pricing.

I think we've got a couple of levers here to drive improved gross margins over time on that front.

Thank you.

Thanks, Dave.

Thank you all for joining us this morning. It was a strong quarter, and as we're calling, we see the continued momentum in the business.

We have just a shout-out to our employees who are listening in. We appreciate all the hard work, and all the effort to deliver on the outcomes.

Thanks, everybody, and have a great day.