Extreme Networks Reports Q1 Revenue on the High Side of Guidance
SANTA CLARA, Calif., Nov. 1, 2010 /PRNewswire via COMTEX News Network/ -- Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its 2011 fiscal first quarter ended September 26, 2010. For the quarter, net revenue increased 26 percent to $83.8 million, as compared to revenue of $66.3 million in the first quarter of last year. Previously issued guidance to investors was for net revenue of $81-$84 million."
"Both EMEA and APAC posted solid performance, as we benefited from improvement in orders for Service Providers in EMEA through our Strategic Alliance partners, and we closed large orders in Korea that we had mentioned on our fourth quarter earnings call," said Oscar Rodriguez, President & CEO of Extreme Networks. "While our over-all performance was solid, performance in North America did not meet our expectation, as we believe our decision to make changes in our sales organization affected our ability to execute within the quarter. We believe the changes we are making will result in a stronger North American sales organization."
Rodriguez commented further, "As the global economies strengthen, we will continue to position in areas for additional growth. Based on the strength of our technology and our focus on affordable leading-edge products, I believe we can increase our sales contribution through both traditional channel partners and Alliance channels, to drive company revenue growth and to take market share."
First quarter non-GAAP operating income was $4.6 million, or 5.5 percent of net revenue, representing significant improvement as compared to an operating loss of $4.6 million in the first quarter of last year. Non-GAAP operating income in the 2010 fiscal fourth quarter was $5.6 million or 6.6 percent of net revenue.
In the first quarter the Company reported non-GAAP net income of $4.8 million or $0.05 per diluted share. That compares to a non-GAAP net loss of $4.9 million or $0.05 loss per diluted share in the first quarter of last year, and to non-GAAP net income of $6.3 million or $0.07 per diluted share in the 2010 fiscal fourth quarter, which historically is the Company's strongest seasonal period. Non-GAAP financial results exclude the impact of stock-based compensation, restructuring charges and litigation settlement costs. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.
Operating income on a GAAP basis was $2.5 million for the quarter, representing significant improvement as compared to an operating loss of $5.3 million for the first quarter of last year. Reported operating income was $2.8 million in the 2010 fiscal fourth quarter.
Net income on a GAAP basis for quarter was $2.7 million or $0.03 per diluted share and compares to a net loss on a GAAP basis for the 2010 fiscal first quarter of $5.5 million or $0.06 loss per diluted share. In the 2010 fiscal fourth quarter, net income on a GAAP basis was $3.4 million or $0.04 per diluted share.
For the quarter, total net revenue in North America was $29.5 million, revenue in EMEA was $36.5 million, and revenue in APAC was $17.9 million. That compares to revenue of $36.3 million in North America, $36.8 million in EMEA, and $12.4 million in APAC in the 2010 fiscal fourth quarter.
Total cash and investments increased $0.3 million from the fourth quarter to $132.7 million and the Company has no debt. The increase in cash was tempered by payment of sales commissions resulting from accelerators earned in the fourth quarter and payment of a litigation settlement related to patent litigation.
2011 Fiscal Second Quarter non-GAAP Financial Guidance
For its 2011 fiscal second quarter ending December 26, 2010, the Company currently expects net revenue to be in a range of $85-$88 million and non-GAAP net income of $0.05 to $0.07 per diluted share.
Conference Call and Slide Presentation
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). The conference call may be heard by dialing 1-877-303-9826 (international callers dial 1-224 357-2194). A 7-day replay will be available following the call by dialing 1-800-642-1687 (international callers dial 1-706-645-9291). The conference call passcode is 15208309. In addition, a live webcast and replay of the call will be available at http://investor.extremenetworks.com. Financial information to be discussed during the conference call will be posted in 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/(loss), non-GAAP operating income/(loss) and non-GAAP earnings/(loss) per diluted share. In preparing our non-GAAP information, we have excluded, where applicable, the impact of restructuring charges, share-based compensation and litigation settlement costs. We believe that excluding these charges 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 these charges 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 periods presented in this release, which are adjusted to exclude restructuring charges, share-based compensation expense and litigation settlement cost 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 network infrastructures that support data, voice and video for enterprises and service providers. The company's network solutions feature high performance, high availability and scalable switching solutions that enable organizations to address real-world communications challenges and opportunities. 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: http://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 the Company's expectations regarding financial performance and revenue growth and market share. 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: a challenging macro-economic environment both in the United States and overseas; fluctuations in demand for the Company's products and services; a highly competitive business environment for network switching equipment; the Company's 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 litigation, 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 are on file with the Securities and Exchange Commission."
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
September
26, June 27,
2010 2010
---- ----
(unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $44,643 $49,004
Short-term investments 48,387 64,854
Accounts receivable, net 39,663 42,057
Inventories, net 20,496 21,842
Deferred income taxes 476 392
Prepaid expenses and other
current assets, net 4,494 3,932
----- -----
Total current assets 158,159 182,081
Property and equipment, net 43,397 43,572
Marketable securities 39,670 18,561
Other assets, net 16,210 15,731
------ ------
Total assets $257,436 $259,945
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $17,329 $18,543
Accrued compensation and
benefits 12,800 13,365
Restructuring liabilities 2,458 3,097
Accrued warranty 2,794 3,169
Deferred revenue, net 28,402 29,552
Deferred revenue, net of cost
of sales to distributors 15,424 18,345
Other accrued liabilities 14,602 13,381
------ ------
Total current liabilities 93,809 99,452
Restructuring liabilities,
less current portion - 273
Deferred revenue, less current
portion 7,610 7,633
Deferred income taxes 107 731
Other long-term liabilities 180 2,661
Commitments and contingencies - -
Stockholders' equity:
Convertible preferred stock,
$.001 par value, issuable in
series, 2,000,000 shares
authorized; none issued - -
Common stock, $.001 par value,
750,000,000 shares
authorized;
130,421,666 issued at
September 26, 2010 and
129,827,715 at June 27, 2010 130 130
Treasury stock, 39,625,305 at
September 26, 2010 and June
27, 2010 (149,666) (149,666)
Additional paid-in-capital 958,994 956,792
Accumulated other
comprehensive income 2,721 1,100
Accumulated deficit (656,449) (659,161)
-------- --------
Total stockholders' equity 155,730 149,195
-------
Total liabilities and
stockholders' equity $257,436 $259,945
======== ========
(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 June 27, 2010.
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unadited)
Three Months Ended
------------------
September September
26, 27,
2010 2009
---- ----
Net revenues:
Product $69,213 $50,759
Service 14,624 15,550
------ ------
Total net
revenues 83,837 66,309
------ ------
Cost of revenues:
Product 30,830 23,718
Service 6,170 5,831
-----
Total cost of
revenues 37,000 29,549
------ ------
Gross profit:
Product 38,383 27,041
Service 8,454 9,719
-----
Total gross
profit 46837 36,760
----- ------
Operating expenses:
Sales and marketing 24,906 21,669
Research and development 12,861 13,610
General and
administrative 6,585 7,245
Restructuring reversal,
net of charge - (513)
---
Total
operating
expenses 43,352 42,011
------ ------
Operating income (loss) 2,485 (5,251)
Interest income 329 322
Interest expense (30) (39)
Other expense (277) (78)
---- ---
Income (loss) before income taxes 2,507 (5,046)
Provision for income taxes (205) 436
Net income (loss) $2,712 $(5,482)
====== =======
Basic and diluted net income
(loss) per share:
Net income (loss) per share -
basic $0.03 $(0.06)
Net income (loss) per share -
diluted $0.03 $(0.06)
Shares used in per share
calculation -basic 90,305 88,843
Shares used in per share
calculation -diluted 90,610 88,843
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
------------------
September 26, September 27,
2010 2009
---- ----
Cash flows from operating
activities:
Net income (loss) $2,712 $(5,482)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 1,539 1,647
Change in value /loss (gain)
on value of UBS option to put
securities 2,429 (14)
Auction rate securities mark
to market, trading (gain)
loss (2,429) 14
Provision for excess and
obsolete inventory 11 785
Deferred income taxes (709) 18
Stock-based compensation 2,109 1,140
Restructuring reversal, net of
charge - (513)
Changes in operating assets
and liabilities, net
Accounts receivable 2,394 1,580
Inventories 1,343 (4,559)
Prepaid expenses and other
assets (1,041) (2,457)
Accounts payable (1,214) 3,808
Accrued compensation and
benefits (564) (325)
Restructuring liabilities (912) (1,339)
Accrued warranty (376) 250
Deferred revenue, net (1,173) (243)
Deferred revenue, net of cost
of sales to distributors (2,921) 2,543
Other accrued liabilities 2,480 7,157
Other long-term liabilities (2,481) 119
Net cash provided by operating
activities 1,197 4,129
----- -----
Cash flows used in investing
activities:
Capital expenditures (1,362) (1,227)
Purchases of investments (43,541) (13,697)
Proceeds from maturities of
investments and marketable
securities 5,800 2,550
Proceeds from sales of
investments and marketable
securities 33,459 1,086
Net cash used in investing
activities (5,644) (11,288)
------ -------
Cash flows provided by
financing activities:
Proceeds from issuance of
common stock 86 225
Net cash provided by financing
activities 86 225
--- ---
Net decrease in cash and cash
equivalents (4,361) (6,934)
------ ------
Cash and cash equivalents at
beginning of period 49,004 46,195
------ ------
Cash and cash equivalents at
end of period $44,643 $39,261
======= =======
EXTREME NETWORKS, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
Three Months Ended
------------------
September September
26, 27,
2010 2009
---- ----
NET INCOME (LOSS)
Net income (loss) -GAAP
Basis $2,712 $(5,482)
====== =======
Non-GAAP adjustments
Stock-based compensation
expense $2,116 $1,140
Restructuring reversal, net
of charge - (513)
Total Non-GAAP adjustments $2,116 $627
------ ----
Net income (loss) - Non-
GAAP Basis $4,828 $(4,855)
====== =======
NON-GAAP ADJUSTMENTS
Cost of product revenue $199 $72
Cost of service revenue 144 75
Sales and marketing 572 296
Research and development 611 375
General and administrative 590 322
Restructuring reversal, net
of charge - (513)
Total Non-GAAP adjustments $2,116 $627
====== ====
SOURCE Extreme Networks, Inc.
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