Good day, ladies and gentlemen and welcome to the Extreme Networks Q3 FY18 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to introduce your host for today’s conference, Stan Kovler, Senior Director of Investor Relations and Finance. Sir, you may begin.

Thank you, Amani, and welcome to the Extreme Networks third quarter fiscal 2018 earnings conference call. This conference call is being broadcast live over the Internet and is being recorded on behalf of the company. The recording will be posted on Extreme Network’s website for replay shortly after the conclusion of the call. By now you’ve had a chance to review the company’s earnings press release. I would like to remind you that during today’s call, management will be making forward-looking statements within the meaning of the safe harbor provision of federal securities laws. These forward-looking statements involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. These risks includes possible adjustments in tax calculations arising from further assessment of the impact of the recent changes to U.S. tax laws, and our ability to successfully integrate the acquired assets, technologies and operations from Avaya and Brocade into our business and operations, including, but not limited to the following risks. Difficulties we may experience in the retention, assimilation and successful integration of employees and teams, sales functions, acquired operations, technologies and/or products; unanticipated costs, litigation or other contingent liabilities associated with the acquisitions that could negatively impact our operating results and financial condition; adverse effects on existing business relationships with suppliers and customers; and difficulties we may experience in reaching our aspirational goals related to these acquisitions. For a detailed description of risks and uncertainties, please refer to our most recent reports on Form 10-K, 10-Q and 8-K filed with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of today. We undertake no obligation to update these statements after this call. Throughout this call, we may reference both GAAP and non-GAAP financial metrics. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in advance in accordance with GAAP. Reconciliation of non-GAAP to the corresponding GAAP measures can be found in our earnings press release issued today. For your convenience, a copy of the release and supporting financial materials are available on the Investor Relations section of the company’s website at extremenetworks.com. Now I will turn the call over to Extreme’s President and CEO, Ed Meyercord, for his opening comments.

Thank you, Stan, and thank you all for joining us this afternoon. Welcome to Extreme’s Q3 earnings call. Today we announced Q3 results highlighted by 76% growth in total revenue year-over-year. A few key successes; first, we were pleased with our fourth consecutive quarter of organic growth within the core Extreme portfolio, excluding acquisitions. Core Extreme experienced 8% year-over-year organic growth on strength in our wireless business particularly in North America. Second, Avaya experienced strong sequential growth of 10% as we continue to focus on disciplined go-to-market and success in cross-selling the Layer 2 fabric, particularly in Europe. Third, quarter-over-quarter improvement in sales during a typically seasonally weak quarter for us; however, in our first full quarter with Brocade, our data center revenue was impacted by two primary factors; a $5 million purchase accounting adjustment with Brocade, and discounts built into the pipeline we acquired on a few deals. We also built backlog of $7 million during the quarter. We started Q3 with three separate versions of the sales force; two versions of Oracle and one version of SAP. Now the entire business runs on one Extreme system, one instance of sales force and all our bookings are in one Oracle system. Entering Q3, we said we had better visibility and that it would take some time to transition. But now heading into Q4, we believe we have complete visibility of our business from a systems perspective. And for our third consecutive systems migration, we booked shift and built orders on the first day of the cut-over with excellent performance by our IT and business integration teams. Beyond organic growth of 8% core Extreme year-over-year, the acquired Avaya revenue also grew 10% sequentially to $44 million, while Brocade’s first full quarter revenue totaled $53 million, $58 million post purchase accounting…

Thanks, Ed. Let’s get started with few highlights from our third quarter of fiscal 2018. In Q3, we had our first full quarter of the combined revenues of our recent acquisitions. And as a result, our revenues grew $113 million or 76% year-over-year and $31 million or 13% from the previous quarter. Also I’m pleased to report organic revenue growth in the pre-acquisition Extreme business of 8% and 3% year-over-year and quarter-over-quarter. Our non-GAAP gross margin increased 70 basis points in Q3 from fiscal 2017 to 57.9%. This makes eight consecutive quarters. We have now increased our non-GAAP gross margin compared to the same quarter year-over-year. Quarter-over-quarter from Q2 our gross margin declined from 39.4% to 57.9%. Next turning to revenue, Q3 revenue was $262 million compared to $231.1 million in Q2 and $149.2 million in Q3 a year ago. Revenue increased quarter-over-quarter and year-over-year by $30.9 million and $112.8 million, respectively. I would also like to note that we did not recognize $5.1 million of service revenues in Q3, and $3.4 million last quarter from our campus fabric and data center acquisitions as of result purchase accounting adjustments. The geographical split of revenues was as follows; the Americas contributed 55% to total revenue, EMEA contributed 36%, APAC contributed 9%. The order of our top five verticals in Q3 was education, communications, government, manufacturing and healthcare, compared to government, education, manufacturing, communications and retail in fiscal of 2018. Product revenue for Q3 was $203.5 million compared to $174.8 million in Q2 and $111.3 million in Q3 last year. Q3 service revenue was $58.5 million compared to $56.3 million in Q2, and $37.9 million in Q3 last year. Moving on to gross margin and operating expenses, in Q3 GAAP gross margin was 54.6% compared to 55.8% in Q2 and 55.5% in…

[Operator Instructions] And our first question comes from Erik Suppiger with JMP Securities. Your line is now open.

Thanks for taking the question. First off, can you just clarify on the Brocade revenue or restatement, was that a surprise to you during the quarter or was that already factored into your guidance? And then I’ve got –

Yes, sorry, Erik. So part of it was we had $1 million adjustment that we had to make during the quarter. And then another part is the deferred revenue that you lose when you have an acquisition, and that accounted for about $4 million to $5 million.

Were both of those or one of those already assumed in your guidance?

Yes. We had assumed the $4 million in our guidance, but the $1 million was a surprise.

Okay. And then secondly, how were your Brocade sales to Brocade campus customers during the quarter? And similarly, how was your Avaya sales to Avaya wireless customers in the quarter?

Yes Erik, let me take that. We have several initiatives underway and we have a pipeline of ICX customers, the campus customers from Brocade, but at this point we don’t have a sales number to comment on for the call, but we are building up quite a pipeline there, so it’s taking – it takes a little bit of time, but we do see opportunities there. On the Avaya side, that’s really been a big driver of cross-sell. We talked about the pipeline growth and commented that the growth in pipeline being driven largely by Avaya campus fabric wireless, the opportunity for us to sell ExtremeWireless into the fabric customers and then also, the fabric technology that we are selling along with Extreme technology. And this is happening across our geos, in Europe and in the U.S. But we talked about the fact that we went into the December quarter, we had a $5.8 million, and then it grew to $20 million, and now it’s grown to $38 million and a lot of that is driven by wireless.

Very good. Thank you.

Thank you. [Operator Instructions] This concludes today’s Q&A session. I’d now like to turn the call back over to Ed Meyercord for closing remarks.

Okay, thank you, Amani, I appreciate that, and thank you everybody who could join us on the call today. And I want to thank all the Extreme employees who are listening in. We’re looking forward to improving our execution in the pipeline of the June quarter, which is going to set us up for a strong fiscal 2019. We hope to speak to you. We have a Craig-Hallum Conference on May 30, coming up, as well at the Cowen Company Technology, Media & Telecom Conference on May 31. So we thank you for your participation, and we’ll catch up with you next quarter. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does concludes the program and you may all disconnect. Everyone have a great day.