EXTREME NETWORKS REPORTS FIRST QUARTER FINANCIAL RESULTS
Net income on a GAAP basis was $1.6 million or $0.01 per diluted share, which is based on 111.5 million weighted average shares outstanding. That compares to year-ago net income of $3.6 million or $0.03 per diluted share.
Non-GAAP net income for the first fiscal quarter of 2009, excluding $0.4 million in stock-based compensation charges, was $2.0 million or $0.02 per diluted share. That compares to year-ago non-GAAP net income of $4.6 million or $0.04 per diluted share, excluding $1.0 million in stock-based compensation charges. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.
“With the recent introduction of innovative new products, our customers are able to deploy high performing networks at compelling prices,” said Mark Canepa, president and CEO of Extreme Networks. “We see an opportunity to capitalize in this economic downturn as Enterprises and Metro Carriers worldwide are increasing their focus upon price/performance as a primary decision criteria for new deployments.”
For the first fiscal quarter of 2009, revenues in North America (U.S., Canada, and Central America) were $35.7 million, revenues in EMEA (Europe, Middle East, Africa, and South America) were $41.6 million, and revenues in APAC (Asia Pacific and Japan) were $12.2 million. That compares to the year-ago revenues of $41.6 million in North America, $30.9 million in EMEA, and $16.5 million in APAC.
During the first quarter of fiscal 2009, the company generated $20.6 million of cash from operations and used approximately $100 million of cash to complete the repurchase of approximately 28.6 million shares of common stock.
Conference Call
Extreme Networks will host a conference call to discuss these results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast and replay of the call will be available at http://www.extremenetworks.com/about-extreme/investor-relations.aspx. Financial information to be discussed during the conference call is posted on the Investor Relations section of the Company's website (www.extremenetworks.com).
Non-GAAP Financial Measures
Extreme Networks provides all financial information required in accordance with generally accepted accounting principles (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release non-GAAP net income and non-GAAP net income per share information. In preparing our non-GAAP information, we have excluded, where applicable, stock compensation (a non-cash charge). Because of the non-cash nature of this charge, we believe that excluding it provides both management and investors with additional insight into our current operations, the trends affecting the Company and the Company’s marketplace performance. In particular, management finds it useful to exclude the non-cash charge in order to more readily correlate the Company’s operating activities with the Company’s ability to generate cash from operations. Accordingly, management uses these non-GAAP measures, along with the comparable GAAP information, in evaluating our historical performance and in planning our future business activities. Please note that our non-GAAP measures may be different than those used by other companies. The additional non-GAAP financial information we present should be considered in conjunction with, and not as a substitute for, our financial information presented in accordance with GAAP. We have provided a non-GAAP reconciliation of the Consolidated Statement of Operations for the fiscal quarter ended September 30, 2007 and September 28, 2008, which are adjusted to exclude share-based compensation expense for these periods. These measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures for comparable financial information and understanding of the Company’s ongoing performance as a business. Extreme Networks uses both GAAP and non-GAAP measures to evaluate and manage its operations.
Extreme Networks, Inc.
Extreme Networks provides converged Ethernet networks that support data, voice and video for enterprises and service providers. The company’s network solutions feature high performance and high availability switching that deliver insight and control enabling customers to solve their real-world business communications challenges. Operating in more than 50 countries, Extreme Networks provides wired and wireless secure LANs, data center infrastructure and Service Provider Ethernet transport solutions that are complemented by global, 24x7 service and support. For more information, visit: www.extremenetworks.com.
Extreme Networks is either a trademark or registered trademark of Extreme Networks, Inc. in the United States and/or other countries.
This announcement contains forward-looking statements that involve risks and uncertainties, including statements regarding acceptance of the Company’s newer products in the market and its expectations regarding its products. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: fluctuations in demand for the Company’s products and services; a highly competitive business environment for network switching equipment; its effectiveness in controlling expenses, the possibility that the Company might experience delays in the development of new technology and products; customer response to its new technology and products; the timing of any recovery in the global economy; risks related to pending or future litigations, and a dependency on third parties for certain components and for the manufacturing of the Company’s products. The Company undertakes no obligation to update the forward-looking information in this release. More information about potential factors that could affect the Company’s business and financial results is included in its filings with the Securities and Exchange Commission, including, without limitation, under the captions: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors,” which is on file with the Securities and Exchange Commission.
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
September 28, 2008 |
|
June 29, 2008 (1) |
||
|
ASSETS |
|
|
|
||
|
Current assets: |
|
|
|
||
|
Cash and cash equivalents |
$ 45,459 |
|
$ 70,370 |
||
|
Short-term investments |
12,603 |
|
42,922 |
||
|
Accounts receivable, net |
53,283 |
|
64,417 |
||
|
Inventories, net |
16,338 |
|
13,942 |
||
|
Deferred income taxes |
289 |
|
254 |
||
|
Prepaid expenses and other current assets, net |
4,788 |
|
4,654 |
||
|
Total current assets |
132,760 |
|
196,559 |
||
|
Property and equipment, net |
44,113 |
|
43,348 | ||
|
Marketable securities |
84,519 |
|
112,380 |
||
|
Other assets, net |
12,079 |
|
13,474 |
||
|
|
|
|
|
||
|
TOTAL ASSETS |
$273,471 |
|
$365,761 |
||
|
|
|
|
|
||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
||
|
Current liabilities: |
|
|
|
||
|
Accounts payable |
$ 24,353 |
|
$ 16,921 |
||
|
Accrued compensation and benefits |
14,869 |
|
18,956 |
||
|
Restructuring liabilities |
2,742 |
|
2,612 |
||
|
Accrued warranty |
4,340 |
|
4,824 |
||
|
Deferred revenue, net |
33,953 |
|
31,284 |
||
|
Deferred revenue, net of cost |
19,836 |
|
14,138 |
||
|
Other accrued liabilities |
24,883 |
|
27,728 |
||
|
Total current liabilities |
124,976 |
|
116,463 |
||
|
Restructuring liabilities, less current portion |
5,983 |
|
6,777 |
||
|
Deferred revenue, less current portion |
8,869 |
|
9,006 |
||
|
Deferred income taxes |
453 |
|
403 |
||
|
Other long-term liabilities |
905 |
|
1,058 |
||
|
Commitments and contingencies |
|
|
|
||
|
Stockholders' equity: |
|
|
|
||
|
Common stock |
945,023 |
|
943,283 |
||
|
Treasury stock |
(149,734) |
|
(48,303) |
||
|
Accumulated other comprehensive income |
(2,440) |
|
(723) |
||
|
Accumulated deficit |
(660,564) |
|
(662,203) |
||
| Total stockholders' equity |
132,285 |
|
232,054 |
||
|
|
|
|
|
||
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$273,471 |
|
$365,761 |
||
|
(1) The information in this column is derived from the Company's consolidated balance sheet included in the Company's Annual Report on Form 10K for the year ended June 29, 2008. |
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EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
Three Months Ended |
|
|
|
September 28, |
September 30, |
|
|
2008 |
2007 |
|
Net revenues: |
|
|
|
Product |
$74,349 |
$74,145 |
|
Service |
15,177 |
14,817 |
| Total net revenues |
89,526 |
88,962 |
|
|
|
|
|
Cost of revenues: |
|
|
|
Product |
30,133 |
31,256 |
|
Service |
7,961 |
8,610 |
|
Total cost of revenues |
38,094 |
39,866 |
|
|
|
|
|
Gross profit: |
|
|
|
Product |
44,216 |
42,889 |
|
Services |
7,216 |
6,207 |
|
Total gross profit |
51,432 |
49,096 |
|
|
|
|
|
Operating expenses: |
|
|
|
Sales and marketing |
25,857 |
24,538 |
|
Research and development |
16,605 |
16,491 |
|
General and administrative |
8,439 |
6,523 |
| Total operating expenses |
50,901 |
47,552 |
|
|
|
|
|
Operating income |
531 |
1,544 |
|
Interest income |
1,423 |
2,773 |
|
Interest expense |
(50) |
(20) |
|
Other income/(expense), net |
548 |
(242) |
|
Income before income taxes |
2,452 |
4,055 |
|
Provision for income taxes |
813 |
422 |
|
Net income |
$ 1,639 |
$ 3,633 |
|
|
|
|
|
Basic and diluted net income (loss) per share: |
|
|
|
Net income per share — basic |
$0.01 |
$0.03 |
|
Net income per share — diluted |
$0.01 |
$0.03 |
|
|
|
|
|
Shares used in per share calculation — basic |
111,323 |
113,904 |
|
Shares used in per share calculation — diluted |
111,488 |
115,230 |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Three Months Ended |
|
|
|
September 28, 2008 |
September 30, 2007 |
|
Cash flows from operating activities: |
|
|
|
Net income |
$ 1,639 |
$3,633 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
Depreciation and amortization |
1,657 |
1,945 |
|
Provision for doubtful accounts |
- |
100 |
|
Provision for excess and obsolete inventory |
98 |
719 |
|
Deferred income taxes |
15 |
(35) |
|
Amortization of warrant |
- |
1,012 |
|
Loss on retirement of assets |
94 |
- |
|
Stock-based compensation |
412 |
1,026 |
|
Changes in operating assets and liabilities, net |
|
|
|
Accounts receivable |
11,134 |
5,797 |
|
Inventories |
(2,520) |
477 |
|
Prepaid expenses and other assets |
1,262 |
724 |
|
Accounts payable |
7,433 |
(4,519) |
|
Accrued compensation and benefits |
(4,087) |
(339) |
|
Restructuring liabilities |
(664) |
(3,370) |
|
Accrued warranty |
(483) |
(82) |
|
Deferred revenue, net |
2,532 |
(22,262) |
|
Deferred revenue, net of cost |
5,698 |
20,255 |
|
Other accrued liabilities |
(3,642) |
2,167 |
|
Net cash provided by operating activities |
20,578 |
7,248 |
|
|
|
|
|
Cash flows provided by (used in) investing activities: |
|
|
|
Capital expenditures |
(2,515) |
(486) |
|
Purchases of investments |
- |
(93,596) |
|
Proceeds from maturities of investments and marketable securities |
20,000 |
37,686 |
|
Proceeds from sales of investments and marketable securities |
37,102 |
22,701 |
|
Net cash provided by (used in) investing activities |
54,587 |
(33,695) |
|
|
|
|
|
Cash flows provided by (used in) financing activities: |
|
|
|
Proceeds from issuance of common stock |
1,355 |
1,760 |
|
Repurchase of common stock, including expenses |
(101,431) |
- |
|
Net cash (used in) provided by financing activities |
(100,076) |
1,760 |
|
|
|
|
|
Net (decrease) in cash and cash equivalents |
(24,911) |
(24,687) |
|
Cash and cash equivalents at beginning of period |
70,370 |
71,573 |
|
Cash and cash equivalents at end of period |
$ 45,459 |
$ 46,886 |
|
|
|
|
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
|
|
Three Months Ended |
|
|
|
September 28, 2008 |
September 30, 2007 |
|
|
|
|
|
Net income (loss) - GAAP Basis |
$ 1,639 |
$ 3,633 |
|
|
|
|
|
Non-GAAP adjustments |
|
|
|
Stock-based compensation expense |
386 |
1,014 |
|
Total non-GAAP adjustments |
$ 386 |
$1,014 |
|
|
|
|
|
Net income (loss) - Non-GAAP Basis |
$ 2,025 |
$ 4,647 |
|
|
|
|
|
Non-GAAP adjustments |
|
|
|
Cost of product revenue |
$ (66) |
$ 97 |
|
Cost of service revenue |
32 |
52 |
|
Sales and Marketing |
175 |
391 |
|
Research and Development |
151 |
318 |
|
General and Administrative |
94 |
156 |
|
Total non-GAAP adjustments |
$ 386 |
$1,014 |