Extreme Networks Reports Q1 Revenue and EPS Growth
Non-GAAP net income for the fiscal first quarter of 2008, excluding $1.0 million in stock-based compensation charges, was $4.7 million or $0.04 EPS per diluted share. That compares to a year-ago non-GAAP net loss of $1.5 million or a loss of $0.01 per diluted share, which excludes $1.9 million in stock-based compensation charges and a $1.5 million restructuring charge. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.
"We are pleased to see a continuation of our turnaround this quarter, with substantial improvement to operating margins, and with revenue up both sequentially and year-over-year to a level we have not seen since December 2005," said Mark Canepa, president and CEO of Extreme Networks. "We continue to demonstrate consistent measured progress. Our results reflect solid demand for our products."
Cash, short-term investments, and marketable securities were $224.7 million as of September 30, 2007, compared to $215.9 million as of July 1, 2007, reflecting positive cash flow from operations.
Conference Call
Extreme Networks will host a conference call to discuss these results today at 5:30 p.m. Eastern Time (2:30 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 its consolidated financial statements presented in accordance with GAAP, the Company has provided a non-GAAP reconciliation of its Consolidated Statement of Operations for the fiscal quarters ended September 30, 2007 and October 1, 2006, which are adjusted to exclude share-based compensation expense and costs associated with the restructuring of the Company's Japan operations. These non-GAAP measures are not computed in accordance with GAAP and may differ from the methods used by other companies. These non-GAAP measures are not meant as a substitute for comparable GAAP measures. 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 designs, builds and installs Ethernet infrastructure solutions that solve the toughest business communications challenges. The company's commitment to open networking sets it apart from the alternatives by delivering meaningful insight and unprecedented control to applications and services. Extreme Networks believes openness is the best foundation for growth, freedom, flexibility and choice. Extreme Networks focuses on enterprises and service providers who demand high performance, converged networks that support voice, video and data over a wired and wireless infrastructure.
Extreme Networks and Summit are either registered trademarks or trademarks 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 our expectations regarding our products, future revenue and expenses and strategy. 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: our, fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; changes in results identified as part of the process of completing the closing and audit of results for the quarter and the year, effectiveness in controlling expenses, the possibility that we might experience delays in the development of new technology and products; customer response to our new technology and products; risks related to pending or future litigations, and a dependency on third parties for certain components and for the manufacturing of our products. We undertake no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our 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)
(Unaudited)
|
| September 30, 2007 |
| July 1, 2007 |
| ASSETS |
|
|
|
| Current assets: |
|
|
|
| Cash and cash equivalents | $46,886 |
| $71,573 |
| Short-term investments | 121,873 |
| 91,599 |
| Accounts receivable, net | 26,579 |
| 23,066 |
| Inventories, net | 25,172 |
| 25,261 |
| Prepaid expenses and other current assets, net | 2,483 |
| 14,457 |
| Total current assets | 222,993 |
| 225,956 |
| Property and equipment, net | 41,696 |
| 43,156 |
| Marketable securities | 55,987 |
| 52,683 |
| Other assets, net | 17,827 |
| 20,102 |
|
|
|
|
|
| TOTAL ASSETS | $338,503 |
| $341,897 |
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
| Current liabilities: |
|
|
|
| Accounts payable | $16,783 |
| $21,303 |
| Accrued compensation and benefits | 14,502 |
| 14,841 |
| Restructuring liabilities | 2,843 |
| 5,532 |
| Accrued warranty | 7,101 |
| 7,182 |
| Deferred revenue | 10,110 |
| 32,160 |
| Other accrued liabilities | 20,537 |
| 23,263 |
| Total current liabilities | 94,544 |
| 104,281 |
| Restructuring liabilities, less current portion | 7,774 |
| 8,456 |
| Deferred revenue, less current portion | 10,286 |
| 10,286 |
| Deferred income taxes | 688 |
| 688 |
| Other long-term liabilities | 1,857 |
| 1,961 |
| Commitments and contingencies |
|
|
|
| Stockholders' equity: |
|
|
|
| Common stock and capital in excess of par value | 937,314 |
| 934,540 |
| Treasury stock | (48,303) |
| (48,303) |
| Accumulated other comprehensive loss | 1,474 |
| 572 |
| Accumulated deficit | (666,955) |
| (670,584) |
| Total stockholders' equity | 223,530 |
| 216,225 |
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $338,503 |
| $341,897 |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
| Three Months Ended | |
|
| September 30, | October 1, |
|
| 2007 | 2006 |
| Net revenues: |
|
|
| Product | $74,145 | $67,982 |
| Service | 14,817 | 15,781 |
| Total net revenues | 88,962 | 83,763 |
|
|
|
|
| Cost of revenues: |
|
|
| Product | 31,256 | 31,799 |
| Service | 8,610 | 8,813 |
| Total cost of revenues | 39,866 | 40,612 |
|
|
|
|
| Gross margin: |
|
|
| Product | 42,889 | 36,183 |
| Services | 6,207 | 6,968 |
| Total gross margin | 49,096 | 43,151 |
|
|
|
|
| Operating expenses: |
|
|
| Sales and marketing | 24,538 | 25,443 |
| Research and development | 16,491 | 15,774 |
| General and administrative | 6,523 | 7,605 |
| Restructuring charge | - | 1,534 |
| Total operating expenses | 47,552 | 50,356 |
|
|
|
|
| Operating income (loss) | 1,544 | (7,205) |
| Other income, net | 2,510 | 3,064 |
| Income (loss) before income taxes | 4,054 | (4,141) |
| Provision for income taxes | 422 | 786 |
| Net income (loss) | $3,632 | $(4,927) |
|
|
|
|
| Net income (loss) per share — basic | $0.03 | $(0.04) |
| Net income (loss) per share — diluted | $0.03 | $(0.04) |
|
|
|
|
| Shares used in per share calculation — basic | 113,904 | 115,653 |
| Shares used in per share calculation — diluted | 115,230 | 115,653 |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| Three Months Ended | ||
|
| September 30, 2007 | | October 1, 2006 |
| Net income (loss) | $3,632 | | $(4,927) |
| Adjustments to reconcile net income (loss) to net cash |
| |
|
| provided by (used in) operating activities: |
| |
|
| Depreciation and amortization | 1,945 | | 2,361 |
| Provision for doubtful accounts | 100 | | 2 |
| Provision for excess and obsolete inventory | 719 | | 467 |
| Deferred income taxes | (35) | | 25 |
| Amortization of warrant | 1,012 | | 1,012 |
| Restructuring charge | - | | 1,534 |
| Loss on disposal of assets | - | | 76 |
| Stock-based compensation | 1,026 | | 1,850 |
| Changes in operating assets and liabilities, net |
| |
|
| Accounts receivable | (3,613) | | (218) |
| Inventories | (644) | | (5,239) |
| Prepaid expenses and other assets | 13,274 | | 647 |
| Accounts payable | (4,519) | | 4,215 |
| Accrued compensation and benefits | (339) | | 234 |
| Restructuring liabilities | (3,370) | | (1,532) |
| Lease liability | - | | - |
| Accrued warranty | (82) | | 141 |
| Deferred revenue | 443 | | (2,348) |
| Other accrued liabilities | (2,301) | | 2,218 |
| Net cash provided by (used in) operating activities | 7,248 | | 518 |
|
|
| |
|
| Cash flows from investing activities: |
| |
|
| Capital expenditures | (486) | | (758) |
| Purchases of investments | (93,596) | | (76,980) |
| Proceeds from sales and maturities of investments and marketable securities | 60,387 | | 133,450 |
| Net cash provided by (used in) investing activities | (33,695) | | 55,712 |
|
|
| |
|
| Cash flows from financing activities: |
| |
|
| Proceeds from issuance of common stock, net of repurchases | 1,760 | | 655 |
| Repurchase of common stock | - | | (11,201) |
| Net cash used in financing activities | 1,760 | | (10,546) |
|
|
| |
|
| Net decrease in cash and cash equivalents | (24,687) | | 45,684 |
| Cash and cash equivalents at beginning of year | 71,573 | | 92,598 |
| Cash and cash equivalents at end of year | $46,886 | | $138,282 |
|
|
| |
|
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
|
| Three Months Ended | |
|
| September 30, 2007 | October 1, 2006 |
|
|
|
|
| Net income (loss) - GAAP Basis | $3,632 | $(4,927) |
|
|
|
|
| Non-GAAP adjustments |
|
|
| Stock-based compensation expense | $1,026 | $1,850 |
| Restructuring charge | - | 1,534 |
| Total non-GAAP adjustments | $1,026 | $3,384 |
|
|
|
|
| Net income (loss) - Non-GAAP Basis | $4,658 | $(1,543) |
|
|
|
|
| Non-GAAP adjustments |
|
|
| Cost of product revenue | $109 | $197 |
| Cost of service revenue | 52 | 123 |
| Sales and Marketing | 391 | 667 |
| Research and Development | 318 | 558 |
| General and Administrative | 156 | 305 |
| Restructuring charge | - | 1,534 |
| Total non-GAAP adjustments | $1,026 | $3,384 |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NON-GAAP PRESENTATION
(In thousands, except per share amounts)
(Unaudited)
|
| Three Months Ended | |
|
| September 30, 2007 | October 1, 2006 |
| Net revenues: |
|
|
| Product | $74,145 | $67,982 |
| Service | 14,817 | 15,781 |
| Total net revenues | 88,962 | 83,763 |
|
|
|
|
| Cost of revenues: |
|
|
| Product | 31,147 | 31,602 |
| Service | 8,558 | 8,690 |
| Total cost of revenues | 39,705 | 40,292 |
|
|
|
|
| Gross margin: |
|
|
| Product | 42,998 | 36,380 |
| Services | 6,259 | 7,091 |
| Total gross margin | 49,257 | 43,471 |
|
|
|
|
| Operating expenses: |
|
|
| Sales and marketing | 24,147 | 24,776 |
| Research and development | 16,173 | 15,216 |
| General and administrative | 6,367 | 7,300 |
| Restructuring charge | - | - |
| Total operating expenses | 46,687 | 47,292 |
|
|
|
|
| Operating income (loss) | 2,570 | (3,821) |
| Other income, net | 2,510 | 3,064 |
| Income (loss) before income taxes | 5,080 | (757) |
| Provision for income taxes | 422 | 786 |
| Net income (loss) | $4,658 | $(1,543) |
|
|
|
|
| Net income (loss) per share — basic | $0.04 | $(0.01) |
| Net income (loss) per share — diluted | $0.04 | $(0.01) |
|
|
|
|
| Shares used in per share calculation — basic | 113,904 | 115,653 |
| Shares used in per share calculation — diluted | 115,230 | 115,653 |
For more information, contact:
Extreme Networks Public Relations
Greg Cross
(408) 579 3483
gcross@extremenetworks.com