Extreme Networks Reports Fourth Quarter and Fiscal Year 2012 Financial Results
For fiscal year 2012,
"Q4 results were in-line with our targets and we are encouraged by the progress we have made in our financial results," said
Q4 2012 Financial Metrics:
Fourth Quarter
(in thousands, except per share amounts and percentages)
(unaudited)
2012 2011 Change
-------- -------- -------------
Net Revenue
Product $ 72,558 $ 73,778 $ (1,220) (2)%
Service $ 15,091 $ 15,983 $ (892) (6)%
Total Net Revenue $ 87,649 $ 89,761 $ (2,112) (2)%
GAAP
Gross Margin 56% 54% 2%
Operating Margin/Loss 6% (2)% 8%
Net Income $ 7,812 $ (2,087) $ 9,899
Earnings per diluted share $ 0.08 $ (0.02) $ 0.10
Non-GAAP
Gross Margin 56% 54% 2%
Operating Margin 8% (2)% 10%
Net Income $ 7,646 $ 2,145 $ 5,501
Earnings per diluted share $ 0.08 $ 0.02 $ 0.06
- Gross margin for Q4 was 56% and flat sequentially as compared to Q3 Fiscal 2012.
- Cash and investments ended the quarter at
$153.5 million , as compared to$147.2 million from Q3 of fiscal 2012.
- Accounts receivable balance at Q4 was
$41.2 million , a (net) decrease$4.6 million from Q3 of fiscal 2012, with days sales outstanding (DSO) of 42, a decrease of 15 days from Q3 of fiscal 2012.
- Inventory at Q4 was
$26.6 million , a (net) increase of$3.3 million from Q3 of fiscal 2012 and represents 72 days of inventory (DOI), a decrease of 6 days from Q3 of fiscal 2012.
Fiscal Year 2012 Business Highlights:
- We experienced growth in the number of 10G Ethernet ports shipped of 146% in fiscal 2012, while the total market for 10G Ethernet ports is estimated by the Dell'Oro Group to grow at 66% in calendar year 2012, and we believe we will continue to grow significantly faster than the overall market for 10G ports shipped in calendar year 2012.
Extreme Networks was ranked #1 and #2 in two key categories of 40 Gigabit Ethernet Switch Market Share for the last six months of calendar 2011, and earned a #1 rating for its BlackDiamond X8 and Summit X670 product byInfotech Research in itsNovember 2011 report for data center and cloud switching.
- Ahead of the Summer Olympics, the London Internet Exchange (LINX), one of the world's leading exchange points for Internet traffic, has become one of the first organizations to purchase the BlackDiamond® X8 switch to help meet growing network data traffic requirements.
- Developed and piloted New Software Supporting Open Flow and Software-Defined Networks (SDN) capabilities.
- Completed a transformation of the business and we believe we are now well positioned to achieve our goals to grow revenue and increase profitability.
Business Outlook:
While we believe our new products, such as the high performance BlackDiamond X8, can drive higher demand over the next few quarters, our targets for the near-term reflect the uncertainty in the global economy. Our targeted revenue for the first quarter of fiscal 2013 ending
The schedules attached to this release are an integral part of the release.
Conference Call:
About
Non-GAAP Financial Measures:
This press release highlights the company's financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges and expenses which are excluded from non-GAAP results. By publishing the non-GAAP measures, management intends to provide investors with additional information to further analyze the company's performance, core results and underlying trends. Extreme's management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached
to this press release.
Forward Looking Statements:
Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including the risk that we may not obtain sufficient orders to achieve our targeted revenues for the company's products and services given that increasing price competition in key network switching equipment markets; our effectiveness in controlling expenses, the risk that we or our distributors and other channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity; risks associated with the ramp-up of production of our new products and our entry into new business channels different
from those in which we have historically operated; the risk that we may experience production delays that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; our ability to complete development and commercialization of products under development, such as our pipeline of new network switches and related software; our ability to lower costs; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the rapid
development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our new products; and risks associated with ongoing litigation; a dependency on third parties for certain components and for the manufacturing of the Company's products. More information about potential factors that could affect the Company's business and financial results is included in its filings with the
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, July 3,
2012 2011
----------- -----------
(unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 54,596 $ 49,972
Short-term investments 23,358 41,357
Accounts receivable, net of allowances of $1,646
at June 30, 2012 and $1,412 at July 3, 2011 41,166 33,689
Inventories, net 26,609 21,583
Deferred income taxes 644 681
Prepaid expenses and other current assets, net 5,655 10,132
Assets held for sale 17,081 --
----------- -----------
Total current assets 169,109 157,414
Property and equipment, net 25,180 41,877
Marketable securities 75,561 55,648
Intangible assets 5,106 4,906
Other assets, net 9,519 11,128
----------- -----------
Total assets $ 284,475 $ 270,973
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,437 $ 15,092
Accrued compensation and benefits 13,409 13,723
Restructuring liabilities 463 3,183
Accrued warranty 2,871 2,640
Deferred revenue, net 31,769 29,613
Deferred distributors revenue, net of deferred
cost of sales to distributors 15,319 16,552
Other accrued liabilities 13,245 19,050
----------- -----------
Total current liabilities 96,513 99,853
Deferred revenue, less current portion 7,559 7,360
Deferred income taxes 120 93
Other long-term liabilities 643 2,381
Commitments and contingencies
Stockholders' equity 179,640 161,286
----------- -----------
Total liabilities and stockholders' equity $ 284,475 $ 270,973
=========== ===========
(1) The information in this column is derived from the Company's consolidated balance sheet included in the Company's Annual Report on Form 10-K for the year ended
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Year Ended
------------------------ ------------------------
June 30, July 3, June 30, July 3,
2012 2011 2012 2011
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (1)
Net revenues:
Product $ 72,558 $ 73,778 $ 261,873 $ 274,388
Service 15,091 15,983 60,849 60,040
----------- ----------- ----------- -----------
Total net revenues 87,649 89,761 322,722 334,428
----------- ----------- ----------- -----------
Cost of revenues:
Product 33,305 34,770 120,227 129,556
Service 5,511 6,409 22,648 24,911
----------- ----------- ----------- -----------
Total cost of
revenues 38,816 41,179 142,875 154,467
----------- ----------- ----------- -----------
Gross profit:
Product 39,253 39,008 141,646 144,832
Service 9,580 9,574 38,201 35,129
----------- ----------- ----------- -----------
Total gross profit 48,833 48,582 179,847 179,961
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 24,655 28,454 90,167 103,277
Research and
development 11,774 13,204 45,640 49,330
General and
administrative 6,880 6,068 28,658 24,683
Restructuring charge,
net of reversal 237 2,764 1,594 3,806
Litigation settlement (121) -- (121) (4,249)
----------- ----------- ----------- -----------
Total operating
expenses 43,425 50,490 165,938 176,847
----------- ----------- ----------- -----------
Operating income (loss) 5,408 (1,908) 13,909 3,114
Interest income 311 345 1,239 1,304
Interest expense -- (37) (75) (132)
Other income (expense) 2,049 (255) 1,995 (574)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 7,768 (1,855) 17,068 3,712
Provision for income
taxes (44) 232 1,196 999
----------- ----------- ----------- -----------
Net income (loss) $ 7,812 $ (2,087) $ 15,872 $ 2,713
=========== =========== =========== ===========
Basic and diluted net
income (loss) per
share:
Net income (loss) per
share - basic $ 0.08 $ (0.02) $ 0.17 $ 0.03
Net income (loss) per
share - diluted $ 0.08 $ (0.02) $ 0.17 $ 0.03
Shares used in per share
calculation - basic 94,186 92,382 93,451 91,423
Shares used in per share
calculation - diluted 95,225 92,382 94,490 92,795
(1) The information in this column is derived from the Company's consolidated statement of operations included in the Company's Annual Report on Form 10-K for the year ended
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
------------------------
June 30, July 3,
2012 2011
----------- -----------
(unaudited) (1)
Net cash provided by operating activities $ 13,813 $ 16,777
Cash flows used in investing activities:
Capital expenditures (5,237) (5,697)
Purchases of investments (75,851) (111,798)
Proceeds from maturities of investments and
marketable securities 30,295 33,600
Proceeds from sales of investments and
marketable securities 40,658 61,816
Purchases of intangible assets (275) --
----------- -----------
Net cash used in investing activities (10,410) (22,079)
----------- -----------
Cash flows provided by financing activities:
Proceeds from issuance of common stock 1,392 1,530
Deposit received from sale of buildings 1,001 1,000
----------- -----------
Net cash provided by financing activities 2,393 2,530
----------- -----------
Foreign currency effect on cash (1,172) 800
----------- -----------
Net increase (decrease) in cash and cash
equivalents 4,624 (1,972)
----------- -----------
Cash and cash equivalents at beginning of period 49,972 51,944
----------- -----------
Cash and cash equivalents at end of period $ 54,596 $ 49,972
=========== ===========
(1) The information in this column is derived from the Company's statement of cash flows included in the Company's Annual Report on Form 10-K for the year ended
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
-------------------- --------------------
June 30, July 3, June 30, July 3,
2012 2011 2012 2011
--------- --------- --------- ---------
NON-GAAP ADJUSTMENTS
Cost of product revenue $ 158 $ 117 $ 531 $ 436
Cost of service revenue 54 8 257 232
Sales and marketing 460 541 1,765 1,948
Research and development 322 373 1,363 1,113
General and administrative 611 429 2,341 1,520
Restructuring charge, net of
reversal 237 2,764 1,594 3,806
Litigation settlement (121) -- (121) (4,249)
CTA reclassification (1,887) -- (1,887) --
--------- --------- --------- ---------
Total non-GAAP adjustments $ (166) $ 4,232 $ 5,843 $ 4,806
========= ========= ========= =========
Gross margin - GAAP Basis $ 48,833 $ 48,582 $ 179,847 $ 179,961
Non-GAAP adjustments to gross
margin 212 125 788 668
--------- --------- --------- ---------
Gross margin - Non-GAAP Basis $ 49,045 $ 48,707 $ 180,635 $ 180,629
========= ========= ========= =========
Gross margin - Non-GAAP Basis % 56% 54% 56% 54%
Operating income (loss) - GAAP
Basis $ 5,408 $ (1,908) $ 13,909 $ 3,114
Non-GAAP adjustments:
Stock-based compensation expense $ 1,537 $ 1,468 $ 6,189 $ 5,249
Restructuring charge, net of
reversal 237 2,764 1,594 3,806
Litigation settlement (53) -- (53) (4,249)
--------- --------- --------- ---------
Total Non-GAAP adjustments $ 1,721 $ 4,232 $ 7,730 $ 4,806
--------- --------- --------- ---------
Operating income (loss) - Non-
GAAP Basis $ 7,129 $ 2,324 $ 21,639 $ 7,920
========= ========= ========= =========
Net income (loss) - GAAP Basis $ 7,812 $ (2,087) $ 15,872 $ 2,713
Non-GAAP adjustments to other
income/expense (1,887) -- (1,887) --
Non-GAAP adjustments to
operating income 1,721 4,232 7,730 4,806
--------- --------- --------- ---------
Net income (loss) - Non-GAAP
Basis $ 7,646 $ 2,145 $ 21,715 $ 7,519
========= ========= ========= =========
Basic and diluted Non-GAAP net
income (loss) per share:
Non-GAAP Net income (loss) per
share - basic $ 0.08 $ 0.02 $ 0.23 $ 0.08
Non-GAAP Net income (loss) per
share - diluted $ 0.08 $ 0.02 $ 0.23 $ 0.08
Shares used in per share
calculation - basic 94,186 92,382 93,451 91,423
Shares used in per share
calculation - diluted 95,225 92,382 94,490 92,795
For more information, contact:Extreme Networks Investor Relations 408/579-3030 Email Contact Public Relations 408/579-3483 Email Contact
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