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):

November 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 November 1, 2010, Extreme Networks, Inc. issued a press release announcing certain financial results for the quarter ended September 26, 2010. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference in its entirety.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 to this Current Report on Form 8-K, 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.

 

99.1		Press Release dated November 1, 2010 announcing the financial results of Extreme Networks, Inc. for the quarter ended September 26, 2010.

 

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: November 1, 2010

 

 

3

 

Exhibit 99.1

 

For more information, contact: Extreme Networks
Investor Relations 408/579-3030 investor_relations@extremenetworks.com		Public Relations 408/579-3483     gcross@extremenetworks.com

Extreme Networks Reports Q1 Revenue on the High Side of Guidance

Strength in Europe and Asia-Pacific Drive Revenue

SANTA CLARA, Calif., Nov. 1, 2010 /PRNewswire-FirstCall/ — 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.

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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.

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EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

		September 26, 2010				June 27, 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.

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EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

 

		Three Months Ended
		September 26, 2010				September 27, 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			46,837				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			44,352				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

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EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

		Three Months Ended
		September 26, 2010				September 27, 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

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EXTREME NETWORKS, INC.

GAAP TO NON-GAAP RECONCILIATION

(In thousands)

(unaudited)

 

		Three Months Ended
		September 26, 2010				September 27, 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