UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): April 23, 2009
EXTREME NETWORKS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 000-25711 | 77-0430270 | ||
| (State or other jurisdiction of incorporation) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
3585 Monroe Street
Santa Clara, California 95051
(Address of principal executive offices)
Registrant’s telephone number, including area code: (408) 579-2800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On April 23, 2009, Extreme Networks, Inc. issued a press release announcing its financial results for the fiscal quarter ended March 29, 2009. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in Item 2.02 of this Current Report, including Exhibit 99.1 to this Current Report, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document filed by Extreme Networks with the Securities and Exchange Commission, whether made before or after the date of this Current Report, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference to this Item and Exhibit 99.1 in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit No. |
Description | |
| 99.1 | Press Release dated April 23, 2009 announcing the financial results of Extreme Networks, Inc. for the fiscal quarter ended March 29, 2009. | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: April 23, 2009
| EXTREME NETWORKS, INC. | ||
| By: |
/s/ Karen M. Rogge | |
| Karen M. Rogge | ||
| Senior Vice President and Chief Financial Officer | ||
3
Exhibit 99.1
FOR IMMEDIATE RELEASE
For more information, contact:
| Extreme Networks | ||
| Investor Relations | Public Relations | |
| 408/579-3030 | 408/579-3483 | |
| investor_relations@extremenetworks.com | gcross@extremenetworks.com |
EXTREME NETWORKS REPORTS THIRD QUARTER FINANCIAL RESULTS
Revenue of $77.2 million: Pro-Forma Net Income of $1.2 million
SANTA CLARA, Calif.; April 23, 2009 – Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its third quarter ended March 29, 2009. For the quarter, net revenue was $77.2 million, compared to $82.0 million in the year-ago quarter.
Non-GAAP net income for the third fiscal quarter of 2009 was $1.2 million or $0.01 per diluted share, excluding $1.2 million in share-based compensation charges and $2.1 million in restructuring charges, compared to a year ago non-GAAP net income of $1.1 million or $0.01 per diluted share, excluding $1.3 million in share-based compensation. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying financial tables.
“We delivered positive pro-forma earnings in a challenging market and took steps to reduce our cost structure,” said Mark Canepa, president and CEO of Extreme Networks. “In addition, during the quarter we continued to deliver new products to meet the demand for cost-effective bandwidth for the carrier, enterprise and data center markets.”
Net loss on a GAAP basis was $2.2 million or a loss of $0.02 per diluted share. That compares to the year-ago net loss of $0.2 million or a loss of $0.00 per diluted share.
For the third fiscal quarter of 2009, revenues in North America (U.S., Canada, and Central America) were $26.9 million, revenues in EMEA (Europe, Middle East, Africa, and South America) were $38.5 million, and revenues in APAC (Asia Pacific and Japan) were $11.8 million. That compares to the year-ago revenues of $31.0 million in North America, $38.2 million in EMEA, and $12.8 million in APAC.
Cash and investments were $120.8 million as of March 29, 2009, a decrease of $22.7 million sequentially from the fiscal second quarter, primarily due to the timing of trade accounts payables and accrued liabilities payments, which vary throughout the year. Over the nine months since the start of fiscal 2009, the Company utilized $4.0 million in cash for operating activities.
Conference Call
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 1-800-218-8862 (international callers dial 1-303-262-2075). A 48-hour replay will be available following the call by dialing 1-800-405-2236 (international callers dial 1-303-590-3000); the replay passcode is 11129306. 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 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 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 networks that support data, voice and video for enterprises and service providers. The company’s network solutions feature high performance and high availability switching that deliver insight and control enabling customers to solve their real-world business communications challenges. 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, acceptance of the Company’s newer products in the market and its expectations regarding its products. 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: 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)
| March 29, 2009 |
June 29, 2008 |
|||||||
| (unaudited) | (1) | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 38,595 | $ | 70,370 | ||||
| Short-term investments |
4,510 | 42,922 | ||||||
| Accounts receivable, net |
43,588 | 64,417 | ||||||
| Inventories, net |
22,752 | 13,942 | ||||||
| Deferred income taxes |
289 | 254 | ||||||
| Prepaid expenses and other current assets, net |
4,823 | 4,654 | ||||||
| Total current assets |
114,557 | 196,559 | ||||||
| Property and equipment, net |
43,204 | 43,348 | ||||||
| Marketable securities |
77,708 | 112,380 | ||||||
| Other assets, net |
13,388 | 13,474 | ||||||
| Total assets |
$ | 248,857 | $ | 365,761 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 15,414 | $ | 16,921 | ||||
| Accrued compensation and benefits |
11,633 | 18,956 | ||||||
| Restructuring liabilities |
4,459 | 2,612 | ||||||
| Accrued warranty |
3,193 | 4,824 | ||||||
| Deferred revenue, net |
32,171 | 31,284 | ||||||
| Deferred revenue, net of cost of sales to distributors |
12,445 | 14,138 | ||||||
| Other accrued liabilities |
18,254 | 27,728 | ||||||
| Total current liabilities |
97,569 | 116,463 | ||||||
| Restructuring liabilities, less current portion |
4,329 | 6,777 | ||||||
| Deferred revenue, less current portion |
7,604 | 9,006 | ||||||
| Deferred income taxes |
562 | 403 | ||||||
| Other long-term liabilities |
693 | 1,058 | ||||||
| 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; 128,261,067 issued at March 29, 2009 (127,358,570 June 29, 2008) and capital in excess of par value |
128 | 127 | ||||||
| Treasury stock, 39,625,305 shares at March 29, 2009 (11,053,877 June 29, 2008) |
(149,665 | ) | (48,303 | ) | ||||
| Additional paid-in-capital |
947,644 | 943,156 | ||||||
| Accumulated other comprehensive income (loss) |
264 | (723 | ) | |||||
| Accumulated deficit |
(660,271 | ) | (662,203 | ) | ||||
| Total stockholders’ equity |
138,100 | 232,054 | ||||||
| Total liabilities and stockholders’ equity |
$ | 248,857 | $ | 365,761 | ||||
| (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 29, 2008. |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 29, 2009 |
March 30, 2008 |
March 29, 2009 |
March 30, 2008 |
|||||||||||||
| Net revenues: |
||||||||||||||||
| Product |
$ | 62,017 | $ | 67,388 | $ | 208,946 | $ | 218,960 | ||||||||
| Service |
15,185 | 14,642 | 45,330 | 44,562 | ||||||||||||
| Total net revenues |
77,202 | 82,030 | 254,276 | 263,522 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Product |
26,142 | 27,126 | 87,686 | 89,421 | ||||||||||||
| Service |
6,642 | 7,801 | 22,049 | 24,923 | ||||||||||||
| Total cost of revenues |
32,784 | 34,927 | 109,735 | 114,344 | ||||||||||||
| Gross profit: |
||||||||||||||||
| Product |
35,875 | 40,262 | 121,260 | 129,539 | ||||||||||||
| Service |
8,543 | 6,841 | 23,281 | 19,639 | ||||||||||||
| Total gross profit |
44,418 | 47,103 | 144,541 | 149,178 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
24,293 | 25,232 | 75,926 | 74,820 | ||||||||||||
| Research and development |
13,928 | 15,579 | 44,457 | 49,223 | ||||||||||||
| General and administrative |
6,967 | 8,610 | 22,818 | 23,725 | ||||||||||||
| Restructuring charge, net of reversal |
2,092 | — | 2,092 | — | ||||||||||||
| Total operating expenses |
47,280 | 49,421 | 145,293 | 147,768 | ||||||||||||
| Operating (loss) income |
(2,862 | ) | (2,318 | ) | (752 | ) | 1,410 | |||||||||
| Interest income |
672 | 2,693 | 2,965 | 8,326 | ||||||||||||
| Interest expense |
(23 | ) | (28 | ) | (92 | ) | (69 | ) | ||||||||
| Other income / (expense), net |
411 | (152 | ) | 1,727 | (643 | ) | ||||||||||
| (Loss) income before income taxes |
(1,802 | ) | 195 | 3,848 | 9,024 | |||||||||||
| Provision for income taxes |
371 | 355 | 1,917 | 1,415 | ||||||||||||
| Net (loss) income |
$ | (2,173 | ) | $ | (160 | ) | $ | 1,931 | $ | 7,609 | ||||||
| Basic and diluted net (loss) income per share: |
||||||||||||||||
| Net (loss) income per share - basic |
$ | (0.02 | ) | $ | (0.00 | ) | $ | 0.02 | $ | 0.07 | ||||||
| Net (loss) income per share - diluted |
$ | (0.02 | ) | $ | (0.00 | ) | $ | 0.02 | $ | 0.07 | ||||||
| Shares used in per share calculation - basic |
88,553 | 115,629 | 96,066 | 114,688 | ||||||||||||
| Shares used in per share calculation - diluted |
88,553 | 115,629 | 96,139 | 115,685 | ||||||||||||
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Nine Months Ended | ||||||||
| March 29, 2009 |
March 30, 2008 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 1,931 | $ | 7,609 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
4,200 | 5,616 | ||||||
| Gain on value of option to put securities |
(4,616 | ) | — | |||||
| Mark to market, trading loss |
4,616 | — | ||||||
| Provision for doubtful accounts |
(232 | ) | 207 | |||||
| Provision for excess and obsolete inventory |
838 | 2,111 | ||||||
| Deferred income taxes |
124 | 420 | ||||||
| Amortization of warrant |
— | 1,349 | ||||||
| Gain (loss) on retirement of assets |
94 | (7 | ) | |||||
| Stock-based compensation |
2,630 | 3,732 | ||||||
| Restructuring charge, net of reversal |
2,092 | — | ||||||
| Changes in operating assets and liabilities, net |
||||||||
| Accounts receivable |
21,060 | (2,477 | ) | |||||
| Inventories |
(9,651 | ) | 5,114 | |||||
| Prepaid expenses and other assets |
(83 | ) | 3,274 | |||||
| Accounts payable |
(1,506 | ) | (9,508 | ) | ||||
| Accrued compensation and benefits |
(7,323 | ) | 3,233 | |||||
| Restructuring liabilities |
(2,693 | ) | (4,826 | ) | ||||
| Accrued warranty |
(1,630 | ) | (2,130 | ) | ||||
| Deferred revenue, net |
(515 | ) | (22,836 | ) | ||||
| Deferred revenue, net of cost of sales to distributors |
(1,693 | ) | 23,546 | |||||
| Other accrued liabilities |
(11,642 | ) | 596 | |||||
| Net cash (used in) provided by operating activities |
(3,999 | ) | 15,023 | |||||
| Cash flows provided by (used in) investing activities: |
||||||||
| Capital expenditures |
(4,150 | ) | (4,032 | ) | ||||
| Purchases of investments |
(33,645 | ) | (250,504 | ) | ||||
| Proceeds from maturities of investments and marketable securities |
28,164 | 93,625 | ||||||
| Proceeds from sales of investments and marketable securities |
81,354 | 142,944 | ||||||
| Net cash provided by (used in) investing activities |
71,723 | (17,967 | ) | |||||
| Cash flows (used in) provided by financing activities: |
||||||||
| Proceeds from issuance of common stock |
1,864 | 3,248 | ||||||
| Proceeds from exercise of warrants |
— | 9 | ||||||
| Repurchase of common stock, including expenses |
(101,363 | ) | — | |||||
| Net cash (used in) provided by financing activities |
(99,499 | ) | 3,257 | |||||
| Net decrease in cash and cash equivalents |
(31,775 | ) | 313 | |||||
| Cash and cash equivalents at beginning of period |
70,370 | 71,573 | ||||||
| Cash and cash equivalents at end of period |
$ | 38,595 | $ | 71,886 | ||||
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||||
| March 29, 2009 |
March 30, 2008 |
|||||||
| Net loss - GAAP Basis |
$ | (2,173 | ) | $ | (160 | ) | ||
| Non-GAAP adjustments |
||||||||
| Stock-based compensation expense |
$ | 1,237 | $ | 1,304 | ||||
| Restructuring charge, net of reversal |
2,092 | — | ||||||
| Total non-GAAP adjustments |
$ | 3,329 | $ | 1,304 | ||||
| Net income - Non-GAAP Basis |
$ | 1,156 | $ | 1,144 | ||||
| Non-GAAP adjustments |
||||||||
| Cost of product revenue |
$ | 96 | $ | 125 | ||||
| Cost of service revenue |
79 | 65 | ||||||
| Sales and marketing |
420 | 424 | ||||||
| Research and development |
387 | 415 | ||||||
| General and administrative |
255 | 275 | ||||||
| Restructuring charge, net of reversal |
2,092 | — | ||||||
| Total non-GAAP adjustments |
$ | 3,329 | $ | 1,304 | ||||