SAN JOSE, Calif., Aug. 3, 2016 /PRNewswire/ -- Extreme
Networks, Inc. (Nasdaq: EXTR) today released financial results for
its fiscal fourth quarter ended June 30, 2016. Fourth
quarter GAAP revenue was $139.6
million and non-GAAP revenue was $140.0
million. GAAP net loss for the fourth fiscal quarter
was $2.3 million, or $0.02 per basic share, and non-GAAP net income
was $10.2 million, or $0.10 per diluted share. For the full
fiscal year 2016, Extreme Networks reported GAAP revenue of
$528.4 million, compared to
$552.9 million for fiscal 2015.
Fiscal year 2016 non-GAAP revenue was $529.9
million compared to $556.0
million in fiscal 2015. GAAP net loss was $31.9 million, or $0.31 per share, for fiscal 2016, compared to
GAAP net loss of $71.6 million, or
$0.72 per share, for fiscal
2015. On a non-GAAP basis, net income for fiscal 2016 was
$29.4 million, or $0.28 per diluted share, compared to $5.9 million, or $0.06 per diluted share, for fiscal 2015.
"Our results reflect solid execution and significant earnings
growth compared to the prior year period. Success in delivering
software-driven networking solutions to our enterprise customers,
combined with prudent expense controls, produced a significant
annual improvement of 400% to our bottom line on a non-GAAP basis
and a healthy balance sheet," stated Ed
Meyercord, President and CEO of Extreme Networks.
"The line-up of new technology solutions like our enhanced
wireless cloud management platform released last week is generating
excitement with our field sales teams, partners and customers
alike. With a strict focus on our enterprise campus vertical
markets, our tailored portfolio of wired and wireless products,
custom software solutions and superior in-sourced technical
support, we believe we are in a strong position heading into fiscal
2017. We have the most competitive solutions for
managing the enterprise campus from access edge to the private
cloud."
Recent Key
Events:
- Strengthened the Executive Leadership Team. We
announced the appointment of Drew
Davies to Executive Vice President and Chief Financial
Officer effective June 1st.
- Unveiled Cloud-Managed Networking Platform. During
the quarter, we introduced ExtremeCloud™, a cloud-managed
networking platform, designed for zero-touch
provisioning, management simplicity and partner enablement
through white labeling of the offering.
- Strategic Relationship with the Buffalo Sabres. To
implement an arena-wide Wi-Fi solution for the 2016 NHL Draft and
upcoming hockey season, the Buffalo Sabres partnered with Extreme
to deliver pervasive and secure high-density Wi-Fi in the First
Niagara Center. Extreme Networks and partner Carousel Industries
have now implemented two large scale venue Wi-Fi deployments in
Buffalo, N.Y. at Ralph Wilson
Stadium and First Niagara Center.
- Highlighted Our Customer Success with
Concurrency. To support BYOD and improve network security
and performance among its three locations, Concurrency, an IT
consulting agency, selected Extreme's software-driven wired and
wireless solutions.
- Key Customer Wins in Focus Markets. Extreme
Networks continued to showcase customer momentum across the
global education, healthcare, manufacturing, hospitality and
government markets. Customers continue to note Extreme's software
and services as value added differentiators for choosing our
solutions. Notable customer wins in key vertical markets
include the University of Wisconsin,
Charleston Area Medical Center, Leder & Schuh AG, SJM Casino,
and the State of North
Dakota.
Fiscal Q4 2016 Financial Metrics:
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
106.0
|
|
|
$
|
116.3
|
|
|
$
|
(10.3)
|
|
|
|
(9)
|
%
|
Service
|
|
|
33.6
|
|
|
|
33.6
|
|
|
|
(0.0)
|
|
|
|
0
|
%
|
Total Net
Revenue
|
|
$
|
139.6
|
|
|
$
|
149.9
|
|
|
$
|
(10.3)
|
|
|
|
(7)
|
%
|
Gross
Margin
|
|
|
52.1
|
%
|
|
|
50.9
|
%
|
|
|
1.2
|
%
|
|
|
2
|
%
|
Operating
Margin
|
|
|
(0.3)
|
%
|
|
|
(9.0)
|
%
|
|
|
8.7
|
%
|
|
|
97
|
%
|
Net Loss
|
|
$
|
(2.3)
|
|
|
$
|
(15.7)
|
|
|
$
|
13.4
|
|
|
|
85
|
%
|
Loss per basic
share
|
|
$
|
(0.02)
|
|
|
$
|
(0.16)
|
|
|
$
|
0.14
|
|
|
|
88
|
%
|
Non-GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
106.0
|
|
|
$
|
116.3
|
|
|
$
|
(10.3)
|
|
|
|
(9)
|
%
|
Service
|
|
|
34.0
|
|
|
|
34.3
|
|
|
|
(0.3)
|
|
|
|
(1)
|
%
|
Total Net
Revenue
|
|
$
|
140.0
|
|
|
$
|
150.6
|
|
|
$
|
(10.6)
|
|
|
|
(7)
|
%
|
Gross
Margin
|
|
|
54.8
|
%
|
|
|
54.4
|
%
|
|
|
0.4
|
%
|
|
|
1
|
%
|
Operating
Margin
|
|
|
8.6
|
%
|
|
|
8.2
|
%
|
|
|
0.4
|
%
|
|
|
5
|
%
|
Net Income
|
|
$
|
10.2
|
|
|
$
|
10.1
|
|
|
$
|
0.1
|
|
|
|
1
|
%
|
Earnings per diluted
share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
-
|
|
|
|
—
|
|
- Cash and investments ended the quarter at $94.1 million, as compared to $88.3 million from the prior quarter and up
$17.9 million from the previous
year-end.
- Accounts receivable balance ending Q4 was $81.4 million, with days sales outstanding
("DSO") of 53.
- Inventory ending Q4 was $41.0
million, a decrease of $11.8
million from the prior quarter and down $17.0 million from the previous year.
Business Outlook:
Extreme Networks' Business Outlook is based on current
expectations. The following statements are forward-looking,
and actual results could differ materially based on market
conditions and the factors set forth under "Forward-Looking
Statements" below.
On an annual basis for fiscal year 2017 we are targeting revenue
growth of 2% to 4%. For its first quarter of fiscal 2017
ending September 30, 2016, the
Company is targeting GAAP revenue in a range of $120.6 million to $130.6 million with non-GAAP
revenue in a range of $121.0 million to
$131.0 million. GAAP gross margin is targeted between 53.5%
and 55.0% and non-GAAP gross margin is targeted between 56.7% and
58.1%. Operating expenses are targeted to be between $70.0 million and $72.5 million on a GAAP basis
and $63.5 million to $66.0 million on
a non-GAAP basis. GAAP earnings are targeted to be between a net
loss of $1.5 million to $6.2 million, or a loss of $0.01 to $0.06 per
share. Non-GAAP earnings are targeted in a range of net
income of $4.3 million to $9.0
million, or $0.04 to $0.09 per
diluted share. The GAAP and non-GAAP net income (loss) targets are
based on an estimated 106 million and 108 million average
outstanding shares, respectively.
Conference Call:
Extreme Networks will host a conference call at 4:30 p.m. Eastern (1:30
p.m. Pacific) today to review the fourth fiscal quarter
results as well as the first quarter and full fiscal year 2017
business outlook, including significant factors and assumptions
underlying the targets noted above. The conference call will be
available to the public through a live audio web broadcast via the
Internet at http://investor.extremenetworks.com and a replay of the
call will be available on the website through August 3, 2017. The conference
call may also be heard by dialing 1-877-303-9826
(international callers dial 1-224-357-2194). Supplemental 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 including the non-GAAP reconciliation
attached to this press release. The encore recording can be
accessed by dialing (855) 859-2056 /or international 1 (404)
537-3406 Conference ID # 43898604.
About Extreme Networks:
Extreme Networks, Inc. ("EXTR") delivers software-driven
networking solutions that help IT departments everywhere deliver
the ultimate business outcome: stronger connections with customers,
partners and employees. Wired to wireless, desktop to datacenter,
we go to extreme measures for our 20,000-plus customers in more
than 80 countries, delivering 100% insourced call-in technical
support to organizations large and small, including some of the
world's leading names in business, education, government,
healthcare, manufacturing and hospitality. Founded in 1996, Extreme
is headquartered in San Jose,
California. For more information, visit Extreme's website or
call 1-888-257-3000.
Extreme Networks and the Extreme Networks logo,
ExtremeManagement, ExtremeWireless, ExtremeControl and
ExtremeAnalytics are either trademarks or registered trademarks
of Extreme Networks, Inc. in the United
States and/or other countries.
Non-GAAP Financial Measures:
Extreme Networks provides all financial information required in
accordance with generally accepted accounting principles ("GAAP").
The Company is providing with this press release non-GAAP revenue,
non-GAAP gross margins, non-GAAP operating expenses, and non-GAAP
income (loss) per share. In preparing non-GAAP information, the
Company has excluded, where applicable, the impact of share-based
compensation, acquisition and integration costs, purchase
accounting adjustments, amortization of acquired intangibles,
restructuring charges, litigation expenses, executive transition
expenses and overhead adjustments. The Company believes that
excluding these items provides both management and investors with
additional insight into its current operations, the trends
affecting the Company, the Company's marketplace performance, and
the Company's ability to generate cash from operations. Please note
that the Company's non-GAAP measures may be different than those
used by other companies. The additional non-GAAP financial
information the Company presents should be considered in
conjunction with, and not as a substitute for, the Company's GAAP
financial information. The Company has provided a non-GAAP
reconciliation of the results for the periods presented in this
release, which are adjusted to exclude certain items as
indicated. 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.
Forward Looking Statements:
Statements in this release, including those concerning the
Company's business outlook, future financial and operating results,
and overall future prospects are forward-looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements speak only as of the date of this release. Actual
results or events could differ materially from those anticipated in
those forward-looking statements as a result of certain factors,
including: failure to achieve targeted revenues and forecasted
demand from end customers; a highly competitive business
environment for network switching equipment; our effectiveness in
controlling expenses; the possibility that we might experience
delays in the development or introduction of new technology and
products; customer response to our 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 our
products.
More information about potential factors that could affect the
Company's business and financial results is included in the
Company's 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". Except as required under the
U.S. federal securities laws and the rules and regulations of
the U.S. Securities and Exchange Commission, Extreme
Networks disclaims any obligation to update any
forward-looking statements after the date of this release, whether
as a result of new information, future events, developments,
changes in assumptions or otherwise.
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
94,122
|
|
|
$
|
76,225
|
|
Accounts receivable,
net of allowances of $3,257 at June 30, 2016 and $2,396 at June 30,
2015
|
|
|
81,419
|
|
|
|
92,737
|
|
Inventories
|
|
|
40,989
|
|
|
|
58,014
|
|
Deferred income
taxes
|
|
|
-
|
|
|
|
760
|
|
Prepaid expenses and
other current assets
|
|
|
12,438
|
|
|
|
10,258
|
|
Total current
assets
|
|
|
228,968
|
|
|
|
237,994
|
|
Property and
equipment, net
|
|
|
29,580
|
|
|
|
39,862
|
|
Intangible assets,
net
|
|
|
19,762
|
|
|
|
52,132
|
|
Goodwill
|
|
|
70,877
|
|
|
|
70,877
|
|
Other
assets
|
|
|
25,662
|
|
|
|
27,795
|
|
Total
assets
|
|
$
|
374,849
|
|
|
$
|
428,660
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
17,875
|
|
|
$
|
11,375
|
|
Accounts
payable
|
|
|
30,711
|
|
|
|
40,135
|
|
Accrued compensation
and benefits
|
|
|
27,145
|
|
|
|
25,195
|
|
Accrued
warranty
|
|
|
9,600
|
|
|
|
8,676
|
|
Deferred revenue,
net
|
|
|
72,934
|
|
|
|
76,551
|
|
Deferred distributors
revenue, net of cost of sales to distributors
|
|
|
26,817
|
|
|
|
40,875
|
|
Other accrued
liabilities
|
|
|
26,691
|
|
|
|
32,623
|
|
Total current
liabilities
|
|
|
211,773
|
|
|
|
235,430
|
|
Deferred revenue,
less current portion
|
|
|
21,926
|
|
|
|
23,231
|
|
Long-term debt, less
current portion
|
|
|
37,625
|
|
|
|
55,500
|
|
Deferred income
taxes
|
|
|
4,693
|
|
|
|
2,979
|
|
Other long-term
liabilities
|
|
|
8,635
|
|
|
|
7,285
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
90,197
|
|
|
|
104,235
|
|
Total liabilities and
stockholders' equity
|
|
$
|
374,849
|
|
|
$
|
428,660
|
|
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
106,017
|
|
|
$
|
116,347
|
|
|
$
|
395,464
|
|
|
$
|
418,046
|
|
Service
|
|
|
33,600
|
|
|
|
33,523
|
|
|
|
132,925
|
|
|
|
134,894
|
|
Total net
revenues
|
|
|
139,617
|
|
|
|
149,870
|
|
|
|
528,389
|
|
|
|
552,940
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
54,462
|
|
|
|
60,736
|
|
|
|
208,739
|
|
|
|
225,018
|
|
Service
|
|
|
12,480
|
|
|
|
12,807
|
|
|
|
48,862
|
|
|
|
48,185
|
|
Total cost of
revenues
|
|
|
66,942
|
|
|
|
73,543
|
|
|
|
257,601
|
|
|
|
273,203
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
51,555
|
|
|
|
55,611
|
|
|
|
186,725
|
|
|
|
193,028
|
|
Service
|
|
|
21,120
|
|
|
|
20,716
|
|
|
|
84,063
|
|
|
|
86,709
|
|
Total gross
profit
|
|
|
72,675
|
|
|
|
76,327
|
|
|
|
270,788
|
|
|
|
279,737
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
18,885
|
|
|
|
22,242
|
|
|
|
78,721
|
|
|
|
93,447
|
|
Sales and
marketing
|
|
|
39,364
|
|
|
|
41,322
|
|
|
|
150,806
|
|
|
|
169,299
|
|
General and
administrative
|
|
|
9,767
|
|
|
|
11,001
|
|
|
|
37,675
|
|
|
|
42,092
|
|
Acquisition and
integration costs
|
|
|
-
|
|
|
|
923
|
|
|
|
1,145
|
|
|
|
10,205
|
|
Restructuring charge,
net of reversals
|
|
|
998
|
|
|
|
9,819
|
|
|
|
10,990
|
|
|
|
9,819
|
|
Amortization of
intangibles
|
|
|
4,141
|
|
|
|
4,467
|
|
|
|
17,001
|
|
|
|
17,869
|
|
Total operating
expenses
|
|
|
73,155
|
|
|
|
89,774
|
|
|
|
296,338
|
|
|
|
342,731
|
|
Operating
loss
|
|
|
(480)
|
|
|
|
(13,447)
|
|
|
|
(25,550)
|
|
|
|
(62,994)
|
|
Interest
income
|
|
|
29
|
|
|
|
70
|
|
|
|
113
|
|
|
|
541
|
|
Interest
expense
|
|
|
(694)
|
|
|
|
(757)
|
|
|
|
(3,098)
|
|
|
|
(3,177)
|
|
Other income
(expense), net
|
|
|
174
|
|
|
|
(174)
|
|
|
|
987
|
|
|
|
(1,206)
|
|
Loss before income
taxes
|
|
|
(971)
|
|
|
|
(14,308)
|
|
|
|
(27,548)
|
|
|
|
(66,836)
|
|
Provision for income
taxes
|
|
|
1,369
|
|
|
|
1,349
|
|
|
|
4,336
|
|
|
|
4,807
|
|
Net loss
|
|
$
|
(2,340)
|
|
|
$
|
(15,657)
|
|
|
$
|
(31,884)
|
|
|
$
|
(71,643)
|
|
Basic and diluted net
loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share -
basic
|
|
$
|
(0.02)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.31)
|
|
|
$
|
(0.72)
|
|
Net loss per share -
diluted
|
|
$
|
(0.02)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.31)
|
|
|
$
|
(0.72)
|
|
Shares used in per
share calculation - basic
|
|
|
104,837
|
|
|
|
100,226
|
|
|
|
103,074
|
|
|
|
99,000
|
|
Shares used in per
share calculation - diluted
|
|
|
104,837
|
|
|
|
100,226
|
|
|
|
103,074
|
|
|
|
99,000
|
|
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Year
Ended
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Net cash provided
by operating activities
|
|
$
|
30,366
|
|
|
$
|
37,423
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(5,327)
|
|
|
|
(7,205)
|
|
Purchases of
non-marketable equity investment
|
|
|
-
|
|
|
|
(3,000)
|
|
Proceeds from
maturities of investments and marketable securities
|
|
|
-
|
|
|
|
23,321
|
|
Proceeds from sales of
investments and marketable securities
|
|
|
-
|
|
|
|
9,051
|
|
Purchases of
intangible assets
|
|
|
-
|
|
|
|
(569)
|
|
Net cash (used in)
provided by investing activities
|
|
|
(5,327)
|
|
|
|
21,598
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Borrowings under
Revolving Facility
|
|
|
15,000
|
|
|
|
24,000
|
|
Repayment of
debt
|
|
|
(26,375)
|
|
|
|
(78,688)
|
|
Proceeds from issuance
of common stock
|
|
|
4,637
|
|
|
|
2,218
|
|
Net cash used in
financing activities
|
|
|
(6,738)
|
|
|
|
(52,470)
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
effect on cash
|
|
|
(404)
|
|
|
|
(3,516)
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
|
17,897
|
|
|
|
3,035
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
|
76,225
|
|
|
|
73,190
|
|
Cash and cash
equivalents at end of period
|
|
$
|
94,122
|
|
|
$
|
76,225
|
|
Extreme Networks, Inc.
Non-GAAP
Measures of Financial Performance
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles, ("GAAP"), Extreme Networks uses non-GAAP measures of
certain components of financial performance. These non-GAAP
measures include non-GAAP net income, non-GAAP earnings per diluted
share, non-GAAP gross margin, non-GAAP operating expenses and free
cash flow.
Reconciliation to the nearest GAAP measure of all historical
non-GAAP measures included in this press release can be found in
the tables included with this press release. In this press
release, Extreme Networks also presents its target for non-GAAP
expenses, which is expenses less share-based compensation expense,
acquisition and integration costs, purchase accounting adjustments,
amortization of intangibles, restructuring expenses, litigation
expenses, executive transition and overhead adjustments.
Non-GAAP measures presented in this press release are not in
accordance with or alternative measures prepared in accordance with
GAAP and may be different from non-GAAP measures used by other
companies. In addition, these non-GAAP measures are not based
on any comprehensive set of accounting rules or principles.
Non-GAAP measures have limitations in that they do not reflect all
of the amounts associated with Extreme Networks' results of
operations as determined in accordance with GAAP. These
non-GAAP measures should only be used to evaluate Extreme Networks'
results of operations in conjunction with the corresponding GAAP
measures.
Extreme Networks believes that these non-GAAP measures when
shown in conjunction with the corresponding GAAP measures enhance
investors' and management's overall understanding of the Company's
current financial performance and the Company's prospects for the
future, including cash flows available to pursue opportunities to
enhance shareholder value. In addition, because Extreme
Networks has historically reported certain non-GAAP results to
investors, the Company believes that the inclusion of non-GAAP
measures provides consistency in the Company's financial
reporting.
For its internal planning process, and as discussed further
below, Extreme Networks' management uses financial statements that
do not include share-based compensation expense, acquisition and
integration costs, purchase accounting adjustments, amortization
of intangibles, restructuring expenses, litigation expenses,
executive transition expenses and overhead adjustments.
Extreme Networks' management also uses non-GAAP measures, in
addition to the corresponding GAAP measures, in reviewing the
Company's financial results.
As described above, Extreme Networks excludes the following
items from one or more of its non-GAAP measures when
applicable.
Share-based compensation. This expense consists of
expenses for stock options, restricted stock and employee stock
purchases through its ESPP. Extreme Networks excludes
share-based compensation expenses from its non-GAAP measures
primarily because they are non-cash expenses that the Company does
not believe are reflective of ongoing cash requirement related to
operating results. Extreme Networks expects to incur share-based
compensation expenses in future periods.
Acquisition and integration costs. Acquisition and
integration costs primarily consist of legal and professional fees,
severance costs, and other expenses related to the acquisition and
integration of Enterasys Inc. Extreme Networks excludes these
expenses since they result from an event that is outside the
ordinary course of continuing operations.
Purchase accounting adjustments. Purchase
accounting adjustments relating to deferred revenue consists of
adjustments to the carrying value of deferred revenue. We
have recorded adjustments to the assumed deferred revenue to
reflect only a fulfillment margin and thereby excluding the profit
margin and revenue which would have been incurred had Extreme
Networks entered into the service contract post-acquisition.
Amortization of acquired intangibles. Amortization
of acquired intangibles includes the monthly amortization expense
of acquired intangible assets such as developed technology,
customer relationships, trademarks and order backlog. The
amortization of the developed technology intangible is recorded in
product cost of goods sold, while the amortization for the other
intangibles are recorded in operating expenses. Extreme
Networks excludes these non-cash expenses since they result from an
intangible asset and for which the period expense does not impact
the operations of the business and are non-cash in nature.
Restructuring expenses. Restructuring expenses primarily
consist of accrued lease costs pertaining to the estimated future
obligations for non-cancelable lease payments and accelerated
depreciation of leasehold improvements related to excess
facilities. Extreme Networks excludes restructuring expenses since
they result from events that often occur outside of the ordinary
course of continuing operations.
Litigation expenses. Litigation expenses consist of legal
and professional fees and expenses related to our on-going ligation
matter as a result of a securities laws class action lawsuit.
Executive transition expenses. Executive transition
expenses consists of severance and termination benefits. The
expenses are incurred through execution of pre-established
employment contracts with senior executives. The severance
and termination benefits are cash transactions, while the
share-based compensation are non-cash expenses the Company does not
believe these expenses are reflective of ongoing cash requirements
related to its operating results.
Overhead adjustments. Overhead adjustment relate to
service inventory overhead capitalization, this was a one-time
event and was non-cash in nature.
In addition to the non-GAAP measures discussed above, Extreme
Networks uses free cash flow as a measure of operating
performance. Free cash flow represents operating cash flows
less net purchase of property and equipment on a GAAP basis.
Extreme Networks considers free cash flows to be a liquidity
measure that provides useful information to management and
investors about the amount of cash generated by the business after
the purchases of property and equipment, which can then be used to,
among other things, invest in Extreme Networks business, make
strategic acquisitions, and strengthen the balance sheet. A
limitation of the utility of free cash flows as a measure of
financial performance is that it does not represent the total
increase or decrease in the Company's cash balance for the
period.
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
GAAP TO NON-GAAP
RECONCILIATION
|
(In thousands,
except per share amounts)
|
(Unaudited)
|
|
Non-GAAP
Revenue
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue - GAAP
Basis
|
$
|
139,617
|
|
|
$
|
149,870
|
|
|
$
|
528,389
|
|
|
$
|
552,940
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting
adjustment
|
|
377
|
|
|
|
766
|
|
|
|
1,508
|
|
|
|
3,065
|
|
Revenue - Non-GAAP
Basis
|
$
|
139,994
|
|
|
$
|
150,636
|
|
|
$
|
529,897
|
|
|
$
|
556,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Margin
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit - GAAP
Basis
|
$
|
72,675
|
|
|
$
|
76,327
|
|
|
$
|
270,788
|
|
|
$
|
279,737
|
|
Gross margin - GAAP
Basis percentage
|
|
52.1
|
%
|
|
|
50.9
|
%
|
|
|
51.2
|
%
|
|
|
50.6
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
279
|
|
|
|
496
|
|
|
|
1,923
|
|
|
|
2,135
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,508
|
|
|
|
3,065
|
|
Amortization of
intangibles
|
|
3,417
|
|
|
|
4,292
|
|
|
|
14,833
|
|
|
|
17,166
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Gross profit -
Non-GAAP Basis
|
$
|
76,748
|
|
|
$
|
81,881
|
|
|
$
|
287,559
|
|
|
$
|
302,103
|
|
Gross margin -
Non-GAAP Basis percentage
|
|
54.8
|
%
|
|
|
54.4
|
%
|
|
|
54.3
|
%
|
|
|
54.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
loss
|
$
|
(480)
|
|
|
$
|
(13,447)
|
|
|
$
|
(25,550)
|
|
|
$
|
(62,994)
|
|
GAAP operating loss
percentage
|
|
(0.3)
|
%
|
|
|
(9.0)
|
%
|
|
|
(4.8)
|
%
|
|
|
(11.4)
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
2,673
|
|
|
|
3,470
|
|
|
|
14,792
|
|
|
|
17,405
|
|
Acquisition and
integration costs
|
|
-
|
|
|
|
923
|
|
|
|
1,145
|
|
|
|
10,205
|
|
Restructuring charge,
net of reversal
|
|
998
|
|
|
|
9,819
|
|
|
|
10,990
|
|
|
|
9,819
|
|
Amortization of
intangibles
|
|
7,558
|
|
|
|
8,759
|
|
|
|
31,834
|
|
|
|
35,035
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,508
|
|
|
|
3,065
|
|
Executive transition
costs
|
|
771
|
|
|
|
1,989
|
|
|
|
2,166
|
|
|
|
1,989
|
|
Litigation
|
|
167
|
|
|
|
-
|
|
|
|
331
|
|
|
|
-
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Total adjustments to
GAAP operating loss
|
$
|
12,544
|
|
|
$
|
25,726
|
|
|
$
|
61,273
|
|
|
$
|
77,518
|
|
Non-GAAP operating
income
|
$
|
12,064
|
|
|
$
|
12,279
|
|
|
$
|
35,723
|
|
|
$
|
14,524
|
|
Non-GAAP operating
income percentage
|
|
8.6
|
%
|
|
|
8.2
|
%
|
|
|
6.7
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net
Income
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
$
|
(2,340)
|
|
|
$
|
(15,657)
|
|
|
$
|
(31,884)
|
|
|
$
|
(71,643)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
2,673
|
|
|
|
3,470
|
|
|
|
14,792
|
|
|
|
17,405
|
|
Acquisition and
integration costs
|
|
-
|
|
|
|
923
|
|
|
|
1,145
|
|
|
|
10,205
|
|
Restructuring charge,
net of reversal
|
|
998
|
|
|
|
9,819
|
|
|
|
10,990
|
|
|
|
9,819
|
|
Amortization of
intangibles
|
|
7,558
|
|
|
|
8,759
|
|
|
|
31,834
|
|
|
|
35,035
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,508
|
|
|
|
3,065
|
|
Executive transition
costs
|
|
771
|
|
|
|
1,989
|
|
|
|
2,166
|
|
|
|
1,989
|
|
Litigation
|
|
167
|
|
|
|
-
|
|
|
|
331
|
|
|
|
-
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Total adjustments to
GAAP net loss
|
$
|
12,544
|
|
|
$
|
25,726
|
|
|
$
|
61,273
|
|
|
$
|
77,518
|
|
Non-GAAP net
income
|
$
|
10,204
|
|
|
$
|
10,069
|
|
|
$
|
29,389
|
|
|
$
|
5,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted net
income per share
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.28
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
diluted net income per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP shares
used
|
|
107,275
|
|
|
|
101,205
|
|
|
|
105,306
|
|
|
|
100,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by
operations
|
$
|
11,451
|
|
|
$
|
3,856
|
|
|
$
|
30,366
|
|
|
$
|
37,423
|
|
Less: PP&E CapEx
spending
|
|
(2,529)
|
|
|
$
|
(1,594)
|
|
|
|
(5,327)
|
|
|
|
(7,205)
|
|
Total free cash
flow
|
$
|
8,922
|
|
|
$
|
2,262
|
|
|
$
|
25,039
|
|
|
$
|
30,218
|
|
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SOURCE Extreme Networks, Inc.