Extreme Networks Exceeds Revenue Guidance for Quarter
SANTA CLARA, Calif., Feb 01, 2010 /PRNewswire via COMTEX News Network/ -- Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its 2010 fiscal second quarter ended December 27, 2009. For the quarter, net revenue was $79.4 million, above the guidance for the quarter of $76 to $78 million. This represents a sequential increase in revenue of roughly 20 percent compared to revenue of $66.3 million in the previous quarter and approximately a 9 percent decrease compared to revenue of $87.5 million in the second quarter of last year.
Second quarter non-GAAP operating income was $4.3 million or 5.4 percent of net revenue, compared to $2.6 million or 3.0 percent of net revenue in the second quarter of last year. Additionally, non-GAAP net income was $4.8 million or $0.05 per diluted share, compared to non-GAAP net income of $3.5 million or $0.04 per diluted share in the second quarter of last year. Non-GAAP financial results exclude the impact of stock-based compensation and restructuring charges. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.
"Operating under a simpler and more functional structure, we worked with our suppliers to resolve supply chain constraints and improved operational execution across the company," said Bob L. Corey, CFO and acting President & CEO of Extreme Networks. "In early December, we announced our Data Center vision to help Customers migrate from the physical to the virtual to the cloud, all without forcing a technology or operating methodology on the Customer. In January, we announced the most current additions to our Data Center product line, the Black Diamond 8900 XL modules and the X480 stackable switches, both of which are expected to be available in Q3."
For the second quarter, net revenue in North America was $27.5 million, revenue in EMEA was $37.8 million, and revenue in APAC was $14.1 million. That compares to revenue of $26.9 million in North America, $28.1 million in EMEA, and $11.4 million in APAC in the previous quarter.
Net loss on a GAAP basis for the second quarter was $1.4 million or $0.02 per diluted share, which included a restructuring charge of $4.1 million and a charge of approximately $2.0 million related to stock based compensation. The net loss this quarter of $1.4 million compares to net income of $2.5 million or $0.03 per diluted share in the second quarter of last year. Operating loss on a GAAP basis for the second quarter was $1.9 million, compared to operating income of $1.6 million for the second quarter of last year.
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 1-800-289-0459 (international callers dial 1-913-312-0725). A 48-hour replay will be available following the call by dialing 1-888-203-1112 (international callers dial 1-719-457-0820); the replay passcode is 1370354. In addition, a live webcast and replay of the call will be available at http://investor.extremenetworks.com.
PLEASE NOTE: throughout the conference call, the Company will refer to a slide presentation that will be posted in the Investor Relations section of the Company's website at http://investor.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. In preparing our non-GAAP information, we have excluded, where applicable, the impact of restructuring charges (a non-recurring charge) and share-based compensation (a non-cash charge). Because of the non-recurring and/or non-cash nature of these charges, we believe that excluding them 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 and 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 network infrastructure 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 financial performance and supply chain constraints. 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; 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 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)
December 27, June 28,
2009 2009
---- ----
(unaudited) (1)
ASSETS
Current assets:
Cash and cash
equivalents $50,299 $46,195
Short-term investments 58,663 8,976
Accounts receivable,
net 40,598 37,616
Inventories, net 16,645 12,380
Deferred income taxes 337 244
Prepaid expenses and
other current assets,
net 2,566 4,368
----- -----
Total current assets 169,108 109,779
Property and equipment,
net 43,848 44,229
Marketable securities 26,463 72,231
Other assets, net 15,538 13,736
------ ------
Total assets $254,957 $239,975
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $22,181 $12,771
Accrued compensation
and benefits 12,028 12,320
Restructuring
liabilities 4,392 3,559
Accrued warranty 3,229 3,170
Deferred revenue,
net 31,884 30,058
Deferred revenue, net
of cost of sales to
distributors 16,186 9,821
Other accrued
liabilities 16,133 14,666
------ ------
Total current
liabilities 106,033 86,365
Restructuring
liabilities, less
current portion 1,775 3,519
Deferred revenue, less
current portion 6,830 7,425
Deferred income taxes 620 564
Other long-term
liabilities 559 592
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; 128,972,227
issued at December 27, 2009
(128,425,140 June 28, 2009)
and capital in excess of par
value 129 128
Treasury stock, 39,625,305
shares at December 27, 2009
and June 28, 2009 (149,666) (149,666)
Additional paid-in-
capital 952,802 949,113
Accumulated other
comprehensive income 2,124 1,323
Accumulated deficit (666,249) (659,388)
-------- --------
Total stockholders'
equity 139,140 141,510
------- -------
Total liabilities
and stockholders'
equity $254,957 $239,975
======== ========
(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 28, 2009.
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
------------------- ----------------
December 27, December 28, December 27, December 28,
2009 2008 2009 2008
---- ---- ---- ----
Net revenues:
Product $64,469 $72,580 $115,228 $146,929
Service 14,928 14,968 30,478 30,145
------ ------ ------ ------
Total net
revenues 79,397 87,548 145,706 177,074
------ ------ ------- -------
Cost of
revenues:
Product 27,199 31,411 50,917 61,544
Service 6,426 7,446 12,248 15,407
----- ----- ------ ------
Total
cost of
revenues 33,625 38,857 63,165 76,951
------ ------ ------ ------
Gross profit:
Product 37,270 41,169 64,311 85,385
Service 8,502 7,522 18,230 14,738
----- ----- ------ ------
Total
gross
profit 45,772 48,691 82,541 100,123
------ ------ ------ -------
Operating
expenses:
Sales and
marketing 24,553 25,776 46,155 51,633
Research and
development 12,422 13,924 26,032 30,529
General and
administrative 6,517 7,412 13,755 15,851
Restructuring,
net 4,145 - 3,633 -
----- --- ----- ---
Total
operating
expenses 47,637 47,112 89,575 98,013
------ ------ ------ ------
Operating
(loss) income (1,865) 1,580 (7,034) 2,111
Interest income 388 870 710 2,293
Interest
expense (30) (19) (69) (69)
Other income /
(expense), net (135) 768 (295) 1,316
---- --- ---- -----
(Loss) income
before income
taxes (1,642) 3,199 (6,688) 5,651
Provision for
income taxes (263) 733 173 1,546
------- ------ ------- ------
Net (Loss)
Income $(1,379) $2,466 $(6,861) $4,105
======= ====== ======= ======
Basic and
diluted net
income per
share:
Net (loss)
income per
share - basic (0.02) 0.03 (0.08) 0.04
Net (loss)
income per
share -
diluted (0.02) 0.03 (0.08) 0.04
Shares used in
per share
calculation -
basic 89,059 88,323 88,951 99,823
Shares used in
per share
calculation -
diluted 89,059 88,363 88,951 99,925
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended
----------------
December 27, December 28,
2009 2008
---- ----
Cash flows from operating activities:
Net (loss) income $(6,861) $4,105
Adjustments to reconcile net
(loss) income to net cash provided
by operating activities:
Depreciation and amortization 3,023 2,745
(Gain) / loss on value of
option to put securities 47 (6,778)
Mark to market, trading loss /
(gain) on trading securities (47) 6,778
Provision for doubtful accounts - 56
Provision for excess and
obsolete inventory 960 819
Deferred income taxes (69) 68
Loss on retirement of assets 78 94
Stock-based compensation 3,158 1,396
Restructuring, net 3,633 -
Changes in operating assets
and liabilities, net
Accounts receivable (2,982) 19,504
Inventories (5,216) (9,157)
Prepaid expenses and
other assets (3) (928)
Accounts payable 9,410 10,801
Accrued compensation
and benefits (290) (5,943)
Restructuring liabilities (4,418) (1,329)
Accrued warranty 60 (1,307)
Deferred revenue, net 1,231 200
Deferred revenue, net of cost of
sales to distributors 6,365 1,082
Other accrued liabilities 2,154 (4,398)
----- ------
Net cash provided by
operating activities 10,233 17,808
------ ------
Cash flows (used in) provided by
investing activities:
Capital expenditures (2,720) (3,334)
Purchases of investments (18,958) (25,166)
Proceeds from maturities of investments
and marketable securities 8,775 28,164
Proceeds from sales of investments
and marketable securities 6,377 46,225
----- ------
Net cash (used in) provided by
investing activities (6,526) 45,889
------ ------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance
of common stock 397 1,614
Repurchase of common stock,
including expenses - (101,363)
--- --------
Net cash provided by (used in)
financing activities 397 (99,749)
--- -------
Net increase (decrease) in cash
and cash equivalents 4,104 (36,052)
----- -------
Cash and cash equivalents at
beginning of period 46,195 70,370
Cash and cash equivalents
at end of period $50,299 $34,318
======= =======
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
Three Six
Months Ended Months Ended
------------ ------------
December December December December
27, 28, 27, 28,
2009 2008 2009 2008
---- ---- ---- ----
Net (loss) income -
GAAP Basis $(1,379) $2,466 $(6,861) $4,105
======= ====== ======= ======
Non-GAAP adjustments
Stock-based compensation
expense $2,030 $1,004 $3,166 $1,390
Restructuring, net $4,145 $- $3,633 $-
------ --- ------ ---
$6,175 $1,004 $6,799 $1,390
------ ------ ------ ------
Net income (loss) - Non-
GAAP Basis $4,796 $3,470 $(62) $5,495
====== ====== ==== ======
Non-GAAP adjustments
Cost of product revenue $155 $75 $223 $10
Cost of service revenue 146 61 221 93
Sales and marketing 683 328 979 503
Research and development 611 311 986 462
General and
administrative 435 229 757 322
Restructuring, net 4,145 - 3,633 -
----- --- ----- ---
Total non-GAAP
adjustments $6,175 $1,004 $6,799 $1,390
====== ====== ====== ======
SOURCE Extreme Networks, Inc.
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