Press Releases

Apr 26, 2010

Extreme Networks Hits Revenue Target: Beats EPS

SANTA CLARA, Calif., April 26, 2010 /PRNewswire via COMTEX News Network/ -- Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its 2010 fiscal third quarter ended March 28, 2010. For the quarter, net revenue was $78.2 million, which was in line with Company guidance, and compares to revenue of $79.4 million in the previous quarter and $77.2 million in the third quarter of last year.

"Third quarter revenue reflected solid performance in North America, where product revenue increased 30% from the second quarter, reversing a historic pattern of sequential revenue declines as we executed to our target for the quarter," said Bob L. Corey, CFO and acting President & CEO of Extreme Networks. "We also posted positive net income and grew revenue-per-employee to the highest level since the fourth quarter of fiscal 2008.

"In addition, during the quarter we announced and began shipping the Summit X480 family of products for the data center, an additional set of modules for the BlackDiamond 8900 family, and a new release of the ExtremeXOS modular operating system. Also, our Direct Attach data center network solution and architecture was recently selected as a finalist for Best of Interop Awards, occurring at Interop in Las Vegas 2010. With our expanded portfolio of products, we expect to grow product revenue by an additional 8%-11% sequentially in our fourth quarter."

Third quarter non-GAAP operating income was $4.7 million or 6.0 percent of net revenue, compared to $4.3 million or 5.4 percent of net revenue in the previous quarter, and $500,000 or 0.6 percent of net revenue in the third quarter of last year. Additionally, non-GAAP net income was $5.5 million or $0.06 per diluted share, compared to $4.8 million or $0.05 per diluted share in the previous quarter, and $1.2 million or $0.01 per diluted share in the third 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 income on a GAAP basis for the third quarter was $2.9 million, compared to an operating loss of $1.9 million in the previous quarter and an operating loss of $2.9 million for the third quarter of last year. Net income on a GAAP basis for the third quarter was $3.7 million or $0.04 per diluted share, which included a restructuring charge of $0.4 million and a charge of approximately $1.4 million related to stock based compensation. That compares to a net loss of $1.4 million or $0.02 per diluted share in the previous quarter, and a net loss of $2.2 million or $0.02 per diluted share in the third quarter of last year.

For the third quarter, net revenue in North America was $32.6 million, revenue in EMEA was $31.0 million, and revenue in APAC was $14.6 million. That compares to revenue of $27.5 million in North America, $37.8 million in EMEA, and $14.1 million in APAC in the previous quarter.

2010 Fiscal Fourth Quarter non-GAAP Financial Guidance

For its 2010 fiscal fourth quarter ending June 27, 2010, the Company currently expects net revenue to be in a range of $82-$85 million; gross margin of 57%-59%; non-GAAP operating income of $5.0-$7.0 million; and non-GAAP net income of $0.05-$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 48-hour replay will be available following the call by dialing 1-800-642-1687 (international callers dial 1-706-645-9291); the replay passcode is 67170982. 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/(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 and share-based compensation. 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 Condensed 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 expectations regarding financial performance and product introduction. 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)


                                                      March 28,   June 28,
                                                            2010       2009
                                                            ----       ----
                                                     (unaudited)         (1)

                          ASSETS
    Current assets:
       Cash and cash equivalents                         $40,362    $46,195
       Short-term investments                             63,197      8,976
       Accounts receivable, net                           36,598     37,616
       Inventories, net                                   23,638     12,380
       Deferred income taxes                                 347        244
       Prepaid expenses and other current assets,
        net                                                3,072      4,368
                                                           -----      -----
          Total current assets                           167,214    109,779
    Property and equipment, net                           43,457     44,229
    Marketable securities                                 24,358     72,231
    Other assets, net                                     15,333     13,736
                                                          ------     ------
          Total assets                                  $250,362   $239,975
                                                        ========   ========

           LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                                  $18,853    $12,771
       Accrued compensation and benefits                  11,941     12,320
       Restructuring liabilities                           3,242      3,559
       Accrued warranty                                    3,326      3,170
       Deferred revenue, net                              30,697     30,058
       Deferred revenue, net of cost of sales to
        distributors                                      14,465      9,821
       Other accrued liabilities                          14,228     14,666
                                                          ------     ------
          Total current liabilities                       96,752     86,365

    Restructuring liabilities, less current
     portion                                               1,035      3,519
    Deferred revenue, less current portion                 6,922      7,425
    Deferred income taxes                                    713        564
    Other long-term liabilities                              435        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; 129,328,008 issued at
        March 28, 2010 (128,425,140 June 28,
        2009) and capital in excess of par value             129        128
       Treasury stock, 39,625,305 shares at March
        28, 2010 and June 28, 2009                      (149,666)  (149,666)
       Additional paid-in-capital                        954,937    949,113
       Accumulated other comprehensive income              1,677      1,323
       Accumulated deficit                              (662,572)  (659,388)
                                                                   --------
          Total stockholders' equity                     144,505    141,510
                                                         -------    -------
          Total liabilities and stockholders' equity    $250,362   $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     Nine Months Ended
                                   ------------------     -----------------
                                           March
                                   March 28,     29,   March 28,  March 29,
                                        2010      2009      2010       2009
                                        ----      ----      ----       ----
    Net revenues:
          Product                    $63,197   $62,017  $178,425   $208,946
          Service                     15,000    15,185    45,478     45,330
                                      ------    ------    ------     ------
                Total net revenues    78,197    77,202   223,903    254,276
                                      ------    ------   -------    -------

    Cost of revenues:
           Product                    26,689    26,142    77,606     87,686
           Service                     6,169     6,642    18,417     22,049
                                       -----     -----    ------     ------
               Total cost of
                revenues              32,858    32,784    96,023    109,735
                                      ------    ------    ------    -------

    Gross profit:
          Product                     36,508    35,875   100,819    121,260
           Service                     8,831     8,543    27,061     23,281
                                       -----     -----    ------     ------
                Total gross profit    45,339    44,418   127,880    144,541
                                      ------    ------   -------    -------

    Operating expenses:
           Sales and marketing        24,634    24,293    70,789     75,926
           Research and
            development               11,277    13,928    37,309     44,457
           General and
            administrative             6,135     6,967    19,890     22,818
           Restructuring, net            371     2,092     4,004      2,092
               Total operating
                expenses              42,417    47,280   131,992    145,293
                                      ------    ------   -------    -------

    Operating income
     (loss)                            2,922    (2,862)   (4,112)      (752)
    Interest income                      408       672     1,118      2,965
    Interest expense                     (29)      (23)      (98)       (92)
    Other income /
     (expense), net                      160       411      (135)     1,727
                                         ---       ---      ----      -----
    Income (loss) before
     income taxes                      3,461    (1,802)   (3,227)     3,848
    Provision for income
     taxes                              (215)      371       (42)     1,917


    Net Income (Loss)                 $3,676   $(2,173)  $(3,185)    $1,931
                                      ======   =======   =======     ======

    Basic and diluted net
     income per share:
    Net income (loss) per
     share -basic                       0.04     (0.02)    (0.04)      0.02
    Net income (loss) per
     share -diluted                     0.04     (0.02)    (0.04)      0.02
    Shares used in per
     share calculation -
     basic                            89,448    88,553    89,117     96,066
    Shares used in per
     share calculation -
     diluted                          89,696    88,553    89,117     96,139


                                EXTREME NETWORKS, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (In thousands)
                                     (unaudited)


                                                    Nine Months Ended
                                                    -----------------
                                              March 28,        March 29,
                                                    2010             2009
                                                    ----             ----

    Cash flows provided by (used in)
     operating activities:
      Net (loss) income                          $(3,185)          $1,931
      Adjustments to reconcile net (loss)
       income to net cash
            provided by operating activities:
         Depreciation and amortization             4,304            4,200
         Loss /(gain) on value of option to
          put securities                             516           (4,616)
         Mark to market, trading (gain) /
          loss on trading securities                (516)           4,616
         Provision for doubtful accounts               -              232
         Provision for excess and obsolete
          inventory                                1,373              838
         Deferred income taxes                        48              124
         Loss on retirement of assets                 78               94
         Stock-based compensation                  4,571            2,630
         Restructuring, net                        4,004            2,092
         Changes in operating assets and
          liabilities, net
           Accounts receivable                     1,017           17,304
           Inventories                           (12,626)          (9,651)
           Prepaid expenses and other assets        (303)             (83)
           Accounts payable                        6,082           (1,506)
           Accrued compensation and benefits        (378)          (7,323)
           Restructuring liabilities              (6,677)          (2,693)
           Accrued warranty                          157           (1,630)
           Deferred revenue, net                     136             (515)
           Deferred revenue, net of cost of
            sales to distributors                  4,644           (1,693)
           Other accrued liabilities                (189)          (8,350)
                                                                   ------
      Net cash provided by (used in)
       operating activities                        3,056           (3,999)
                                                   -----           ------

    Cash flows (used in) provided by
     investing activities:
      Capital expenditures                        (3,610)          (4,150)
      Purchases of investments                   (41,103)         (33,645)
      Proceeds from maturities of
       investments and marketable
       securities                                 22,551           28,164
      Proceeds from sales of investments
       and marketable securities                  12,150           81,354
      Net cash (used in) provided by
       investing activities                      (10,012)          71,723
                                                 -------           ------

    Cash flows provided by (used in)
     financing activities:
      Proceeds from issuance of common
       stock                                       1,123            1,864
      Repurchase of common stock,
       including expenses                              -         (101,363)
                                                                 --------
      Net cash  provided by (used in)
       financing activities                        1,123          (99,499)
                                                   -----          -------
      Net decrease in cash and cash
       equivalents                                (5,833)         (31,775)
                                                  ------          =======
    Cash and cash equivalents at
     beginning of period                          46,195           70,370
    Cash and cash equivalents at end of
     period                                      $40,362          $38,595
                                                 =======          =======


                             EXTREME NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         GAAP TO NON-GAAP RECONCILIATION
                    (In thousands, except per share amounts)
                                   (Unaudited)


                                    Three Months
                                        Ended           Nine Months Ended
                                     ------------    -----------------
                                            March                March
                               March 28,     29,    March 28,     29,
                                    2010      2009       2010      2009
                                    ----      ----       ----      ----

    Net income (loss) -GAAP
     Basis                        $3,676   $(2,173)   $(3,185)   $1,931
                                  ======   =======    =======    ======

    Non-GAAP adjustments
    Stock-based compensation
     expense                      $1,408    $1,237     $4,575    $2,627
    Restructuring, net              $371     2,092     $4,004    $2,092
                                    ----     -----     ------    ------
                                  $1,779    $3,329     $8,579    $4,719
                                  ------    ------     ------    ------

    Net income  - Non-GAAP
     Basis                        $5,455    $1,156     $5,394    $6,650
                                  ======    ======     ======    ======

    Non-GAAP adjustments
    Cost of product revenue         $124       $96       $347      $105
    Cost of service revenue          140        79        361       173
    Sales and marketing              413       420      1,392       923
    Research and development         338       387      1,324       848
    General and administrative       393       255      1,151       578
    Restructuring, net               371     2,092      4,004     2,092
    Total non-GAAP adjustments    $1,779    $3,329     $8,579    $4,719
                                  ======    ======     ======    ======



SOURCE Extreme Networks, Inc.

Copyright (C) 2010 PR Newswire. All rights reserved

close [x]