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): February 1, 2010

 

 

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))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On February 1, 2010, Extreme Networks, Inc. issued a press release announcing its financial results for the quarter ended December 27, 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 February 1, 2010 announcing the financial results of Extreme Networks, Inc. for the quarter ended December 27, 2009.

 

2

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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: February 1, 2010

 

 

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 EXCEEDS REVENUE GUIDANCE FOR QUARTER

Reports 27 Percent Sequential Product Revenue Growth

SANTA CLARA, Calif.; February 1, 2010 – 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.”

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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

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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, 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

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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.”

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EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

		December 27, 2009				June 28, 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.

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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

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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 provided by (used in) 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 (used in) provided by 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

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EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

(In thousands, except per share amounts)

(Unaudited)

 

		Three Months Ended							Six Months Ended
		December 27, 2009				December 28, 2008			December 27, 2009				December 28, 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