SAN JOSE, Calif., July 28, 2021 /PRNewswire/ -- Extreme
Networks, Inc. ("Extreme") (Nasdaq: EXTR) today released financial
results for its fourth fiscal quarter and fiscal year ended
June 30, 2021.
Fiscal Fourth Quarter
Results:
- Revenue $278.1 million, up 29%
year-over-year and up 10% quarter-over-quarter
- GAAP EPS $0.08, up from
($0.18) in Q4 last year
- Non-GAAP EPS $0.19, up from
$0.03 in Q4 last year
- GAAP gross margin 57.9% compared to 56.0% in Q4 last year
- Non-GAAP gross margin 60.5% compared to 59.4% in Q4 last
year
- GAAP operating margin 6.3% compared to (6.1)% in Q4 last
year
- Non-GAAP operating margin 13.4% compared to 5.2% in Q4 last
year
- Net cash provided by operating activities of $57.0 million
- Free Cash Flow of $52.2
million
Fiscal Year 2021 Results:
- Revenue $1,009.4 million, up 6%
compared to $948.0 million in fiscal
2020
- GAAP operating margin 3.4% compared to (10.4)% in fiscal
2020
- Non-GAAP operating margin 10.9% compared to 4.3% in fiscal
2020
- Free Cash Flow of $127.4
million
"Demand for our enterprise solutions is unprecedented, as
momentum in our business built through the fiscal year and
culminated in 36% year-over-year bookings growth in Q4. Our record
setting revenue of over $1 billion
for the fiscal year is even more meaningful considering we tripled
product backlog during the period. And, the fact that our cloud new
subscription bookings grew 111% year-over-year is a proof point
that we're taking share in the fastest growing segment of the
networking industry, solidifying our #2 market share position,"
stated Ed Meyercord, President and
CEO of Extreme.
"Our innovative and industry-leading solutions for both the
Infinite Enterprise and for 5G cloud-native network infrastructure
are resonating with customers and creating significant growth
opportunities for Extreme. During Q4, we extended our technology
differentiation with the most successful product launch in our most
recent history – the 5420 universal hardware platform – as well as
the 9920 next-gen packet broker, and the release of Extreme
CoPilot, our Explainable AI tool. And just yesterday, we announced
that we are the first in the industry to ship game-changing Wi-Fi
6E access points to customers," concluded Meyercord.
"Extreme has never been in a stronger financial position. With
record non-GAAP operating margins and $127.4
million in free cash flow generated during FY21, our net
debt position fell to just under $100
million. In Q4, we navigated a unique environment of rising
demand, but also rising supply chain constraints, leading to
results that are a testament to our focus on driving operational
excellence," stated Rémi Thomas, CFO of Extreme.
"The current environment of supply chain constraints has created
record backlog and added incremental costs that will continue to
increase into the September quarter. Importantly, we have secured
vendor commitments that will allow us to accelerate product
delivery and bring down backlog as of Q2 and beyond. As a result,
we are confident in guiding FY22 revenue towards the high-end of
our 5% to 9% long-term growth target, with double-digit operating
income margins and significant free cash flow growth," concluded
Thomas.
Recent Key Highlights:
- Extreme is first in the industry to ship enterprise-grade
Wi-Fi 6E access points. The AP4000 universal wireless
platform is the most advanced Wi-Fi 6E solution in the market with
industry-leading cloud management and capable of operating in the
new 6 GHz frequency band. AP4000 will enable multi-gigabit, low
latency connections and new use cases for high-reliability customer
experiences, eliminating downtime and reducing risk of data and
privacy vulnerabilities for high-density environments, such sports
and entertainment, schools, warehouses, and healthcare
facilities.
- In June 2021, Extreme provided
automated access to our explainable artificial intelligence/
machine learning insights tool, "CoPilot," within the
ExtremeCloud IQ platform. CoPilot was launched with anomalous
threat detection, the ability to reduce false alarms, and
troubleshooting capabilities for IT professionals tasked with
managing complex, often highly distributed, networks. New features
will be added in fiscal Q2 and we expect CoPilot to become a
billable license in the second half of FY22.
- Extreme introduced the 9920 intelligent next generation
packet broker for service provider networks. The platform
delivers high-speed throughput at 12.8 Tbps for detailed data
insights and provides the flexibility to adapt for future network
enhancements so service providers can quickly respond to new user
demands and 5G use cases. It is based on the Intel Tofino™ 2
programmable ASIC, providing a massively scalable architecture that
easily integrates with existing service provider environments and
can quickly adapt to new use cases.
- A report from 650 Group identified Extreme as the second
leading vendor in the cloud-managed network services market,
with more market share than the third and fourth ranked vendors
combined in CY20. Extreme also significantly outpaced the market,
delivering 101% revenue growth year over year from 2019 to 2020
while the overall market experienced 28% revenue growth during that
same period.
- Wynn Resorts, a developer and operator of luxury hotels
and casinos with locations in Las
Vegas, Boston, Macau, and Cotai, selected Extreme to deploy a
next-generation Fabric network across its Las Vegas location, and a separate
fabric-based network for audio visual (A/V) system management. By
standardizing on Extreme, Wynn can simplify device on-boarding and
management across properties and deliver a secure, dedicated
connection for bandwidth-intensive A/V equipment.
- Retailer Colruyt Group, which operates 619 stores and
supplies over 580 independent shops throughout Belgium, Luxembourg and France, deployed Extreme's Wi-Fi solutions and
cloud management platform across its retail and corporate office
locations. Extreme's network solutions enable Colruyt Group
Services to support the opening of new physical locations, increase
bandwidth in response to growing numbers of IoT devices, and
deliver network insights such as device location data to help
inform sales strategies.
- Madrid-based grocery retailer
Ahorramas deployed Extreme Wi-Fi 6 access points,
SD-WAN solutions, and ExtremeCloud IQ network management software
across its 265 retail locations. The new network enables the
grocery retailer to simplify network management, as Extreme wired
network solutions were previously deployed across its corporate
offices and warehouses. It also delivers an improved Wi-Fi
experience for employees and customers in all retail
locations.
Fiscal
Q4 2021 and Fiscal Year 2021 Financial
Metrics:
(in millions, except
percentages and per share information)
|
|
|
|
GAAP
Results
|
|
|
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Change
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Change
|
|
Product
|
|
$
|
195.8
|
|
|
$
|
141.5
|
|
|
|
38
|
%
|
|
$
|
699.4
|
|
|
$
|
653.6
|
|
|
|
7
|
%
|
Service and
subscription
|
|
|
82.3
|
|
|
|
74.0
|
|
|
|
11
|
%
|
|
|
310.0
|
|
|
|
294.4
|
|
|
|
5
|
%
|
Total net
revenue
|
|
$
|
278.1
|
|
|
$
|
215.5
|
|
|
|
29
|
%
|
|
$
|
1,009.4
|
|
|
$
|
948.0
|
|
|
|
6
|
%
|
Gross
margin
|
|
|
57.9
|
%
|
|
|
56.0
|
%
|
|
190 bps
|
|
|
|
58.0
|
%
|
|
|
54.6
|
%
|
|
340 bps
|
|
Operating
margin
|
|
|
6.3
|
%
|
|
|
(6.1)
|
%
|
|
1240 bps
|
|
|
|
3.4
|
%
|
|
|
(10.4)
|
%
|
|
1384 bps
|
|
Net income
(loss)
|
|
$
|
10.3
|
|
|
$
|
(21.2)
|
|
|
|
149
|
%
|
|
$
|
1.9
|
|
|
$
|
(126.8)
|
|
|
|
101
|
%
|
Net income (loss) per
diluted share
|
|
$
|
0.08
|
|
|
$
|
(0.18)
|
|
|
|
144
|
%
|
|
$
|
0.02
|
|
|
$
|
(1.06)
|
|
|
|
102
|
%
|
|
|
|
Non-GAAP
Results
|
|
|
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Change
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Change
|
|
Product
|
|
$
|
195.8
|
|
|
$
|
141.5
|
|
|
|
38
|
%
|
|
$
|
699.4
|
|
|
$
|
653.6
|
|
|
|
7
|
%
|
Service and
subscription
|
|
|
82.3
|
|
|
|
74.0
|
|
|
|
11
|
%
|
|
|
310.0
|
|
|
|
294.4
|
|
|
|
5
|
%
|
Total net
revenue
|
|
$
|
278.1
|
|
|
$
|
215.5
|
|
|
|
29
|
%
|
|
$
|
1,009.4
|
|
|
$
|
948.0
|
|
|
|
6
|
%
|
Gross
margin
|
|
|
60.5
|
%
|
|
|
59.4
|
%
|
|
110 bps
|
|
|
|
60.9
|
%
|
|
|
59.1
|
%
|
|
180 bps
|
|
Operating
margin
|
|
|
13.4
|
%
|
|
|
5.2
|
%
|
|
820 bps
|
|
|
|
10.9
|
%
|
|
|
4.3
|
%
|
|
660 bps
|
|
Net income
|
|
$
|
24.6
|
|
|
$
|
3.3
|
|
|
|
635
|
%
|
|
$
|
72.4
|
|
|
$
|
14.1
|
|
|
|
412
|
%
|
Net income per
diluted share
|
|
$
|
0.19
|
|
|
$
|
0.03
|
|
|
|
533
|
%
|
|
$
|
0.57
|
|
|
$
|
0.12
|
|
|
|
375
|
%
|
- Q4 ending cash balance was $246.9 million, an increase of $43.8 million from the end of Q3. This was
primarily driven by operating cash flow generation of $57.0 million, partially offset by cash usage of
$8.4 million for financing
activities, along with $4.9 million
for capital expenditures.
- Q4 accounts receivable balance was $156.5 million, an increase of $25.9 million from the end of Q3 and with days
sales outstanding of 51, an increase of 5 days from Q3 and a
decrease of 1 day from Q4 last year.
- Q4 ending inventory was $32.9 million, a decrease of $11.0 million from Q3 and a
decrease of $29.7 million
from Q4 last year. The year-over-year and quarter-over-quarter
decreases in inventory largely reflect improved demand planning,
SKU rationalization and higher inventory turnover. In addition,
supply constraints in the recent quarters have contributed to the
reduction in inventory.
- Q4 ending gross debt* was $346.8 million, a decrease of
$4.8 million from the prior
quarter. The $74.0
million decrease from Q4 last year resulted primarily
from principal payments and payments on our revolver loan. Net
debt* of $99.9 million decreased
by $48.5 million from
$148.4 million in Q3.
Extreme uses the non-GAAP free cash flow metric as a measure of
operating performance. Free cash flow represents GAAP net cash
provided by operating activities, less purchases of property, plant
and equipment. Extreme considers free cash flow to be useful
information for management and investors regarding the amount of
cash generated by the business after the purchases of property,
plant and equipment, which can then be used to, among other things,
invest in Extreme's business, make strategic acquisitions, and
strengthen the balance sheet. A limitation of the utility of this
non-GAAP free cash flow metric 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. The
following table shows non-GAAP free cash flow calculation (in
thousands):
Free Cash
Flow
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Cash flow provided by
operations
|
$
|
57,039
|
|
|
$
|
8,823
|
|
|
$
|
144,535
|
|
|
$
|
35,884
|
|
Less: Property and
equipment capital expenditures
|
|
(4,858)
|
|
|
|
(2,638)
|
|
|
|
(17,176)
|
|
|
|
(15,268)
|
|
Total free cash
flow
|
$
|
52,181
|
|
|
$
|
6,185
|
|
|
$
|
127,359
|
|
|
$
|
20,616
|
|
*Gross debt is defined as long-term and current portion of
long-term debt as shown on the balance sheet plus unamortized debt
issuance costs. Net debt is defined as gross debt minus cash, as
shown in the table below (in millions):
Gross
debt
|
|
|
Cash
|
|
|
Net
debt
|
|
$
|
346.8
|
|
|
$
|
246.9
|
|
|
$
|
99.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Outlook:
Extreme's business outlook is based on current expectations. The
following statements are forward-looking, and actual results could
differ materially based on various factors, including market
conditions and the factors set forth under "Forward-Looking
Statements" below.
For its first quarter of fiscal 2022, ending September 30,
2021, the Company is targeting:
(in millions, except
percentages and per share information)
|
Low-End
|
|
|
High-End
|
|
FQ1'22 Guidance –
GAAP
|
|
|
|
|
|
|
|
Total net
revenue
|
$
|
250.0
|
|
|
$
|
265.0
|
|
Gross
margin
|
|
55.6
|
%
|
|
|
57.8
|
%
|
Operating
expenses
|
$
|
132.6
|
|
|
$
|
134.6
|
|
Operating
margin
|
|
2.6
|
%
|
|
|
7.0
|
%
|
Net income
(loss)
|
$
|
0.1
|
|
|
$
|
12.1
|
|
Net income (loss) per
diluted share
|
$
|
0.00
|
|
|
$
|
0.09
|
|
Shares outstanding
used in calculating GAAP EPS
|
133.2
|
|
|
133.2
|
|
FQ1'22 Guidance –
Non - GAAP
|
|
|
|
|
|
|
|
Total net
revenue
|
$
|
250.0
|
|
|
$
|
265.0
|
|
Gross
margin
|
|
58.0
|
%
|
|
|
60.0
|
%
|
Operating
expenses
|
$
|
121.5
|
|
|
$
|
123.5
|
|
Operating
margin
|
|
9.4
|
%
|
|
|
13.4
|
%
|
Net income
|
$
|
16.7
|
|
|
$
|
26.7
|
|
Net income per
diluted share
|
$
|
0.13
|
|
|
$
|
0.20
|
|
Shares outstanding
used in calculating non-GAAP EPS
|
|
133.2
|
|
|
|
133.2
|
|
The following table shows the GAAP to non-GAAP reconciliation
for Q1 FY'22 guidance:
|
Gross
Margin
Rate
|
|
|
Operating
Margin
Rate
|
|
|
Earnings
per
Share
|
|
GAAP
|
55.6% -
57.8%
|
|
|
2.6% -
7.0%
|
|
|
$0.00 -
$0.09
|
|
Estimated adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
product intangibles
|
1.7%
|
|
|
1.7%
|
|
|
0.03
|
|
Share-based
compensation
|
0.3%
|
|
|
3.9%
|
|
|
0.08
|
|
Restructuring
|
—
|
|
|
0.3%
|
|
|
—
|
|
Amortization of
non-product intangibles
|
0.3%
|
|
|
0.8%
|
|
|
0.02
|
|
Tax effect of
non-GAAP adjustments
|
—
|
|
|
—
|
|
|
(0.00) -
(0.02)
|
|
Non-GAAP
|
58.0% -
60.0%
|
|
|
9.4% -
13.4%
|
|
|
$0.13-
$0.20
|
|
The total of percentage rate changes may not equal the total
change in all cases due to rounding.
Conference Call:
Extreme will host a conference call
at 8:00 a.m. Eastern (5:00 a.m. Pacific) today to review the fourth
fiscal quarter results as well as the business outlook for first
fiscal quarter ending September 30,
2021, 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 for at least 7 days following
the call. The conference call may also be heard by dialing 1 (877)
303-9826 or international 1 (224) 357-2194 with Conference ID #
8056219. 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 1 (855) 859-2056 or
international 1 (404) 537-3406. Conference ID # 8056219. The encore
recording will be available for at least 7 days following the
call.
About Extreme:
Extreme Networks, Inc. (EXTR) creates
effortless networking experiences that enable all of us to advance.
We push the boundaries of technology leveraging the powers of
machine learning, artificial intelligence, analytics, and
automation. Over 50,000 customers globally trust our end-to-end,
cloud-driven networking solutions and rely on our top-rated
services and support to accelerate their digital transformation
efforts and deliver progress like never before. For more
information, visit Extreme's website or follow us on
Twitter, LinkedIn, and Facebook.
Extreme Networks, and the Extreme Networks logo, are
trademarks of Extreme Networks, Inc. or its subsidiaries in
the United States and/or other
countries. Other trademarks shown herein are the property of their
respective owners.
Non-GAAP Financial Measures:
Extreme provides all
financial information required in accordance with U.S. generally
accepted accounting principles ("GAAP"). The Company is providing
with this press release non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating margin, non-GAAP operating income,
non-GAAP net income, non-GAAP net income per diluted share, and
non-GAAP free cash flow. In preparing non-GAAP information, the
Company has excluded, where applicable, the impact of share-based
compensation, acquisition and integration costs, acquired inventory
adjustments, amortization of intangibles, inventory valuation
adjustment, and restructuring charges. 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
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 uses both GAAP and
non-GAAP measures to evaluate and manage its operations.
Forward-Looking Statements:
Statements in this press
release, including statements regarding those concerning the
company's business outlook and future financial and operating
results, 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. There are several important factors
that could cause actual events to differ materially from those
suggested or indicated by such forward-looking statements. These
include, among others, the company's failure to achieve targeted
revenues and forecasted demand from end customers; a highly
competitive business environment for network switching equipment
and cloud management of network devices; the company's
effectiveness in controlling expenses; the possibility that the
company might experience delays in the development or introduction
of new technology and products; customer response to the company's
new technology and products; risks related to pending or future
litigation; macroeconomic and political and geopolitical factors; a
dependency on third parties for certain components and for the
manufacturing of the company's products; and the impacts of
COVID-19, and any worsening of the global business and economic
environment as a result, on the company's business.
More information about potential factors that could affect the
Company's business and financial results are described in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors" included in the Company's
Annual Report on Form 10-K for the year ended June 30, 2020, Quarterly Report on Form 10-Q for
the quarter ended December 31, 2020
and March 31, 2021, and other
documents of the Company on file with the Securities and Exchange
Commission (available at www.sec.gov). As a result of these
risks and others, actual results could vary significantly from
those anticipated in this press release, and the company's
financial condition and results of operations could be materially
adversely affected. Except as required under the U.S. federal
securities laws and the rules and regulations of the U.S.
Securities and Exchange Commission, Extreme 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, except
per share amounts)
(Unaudited)
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
246,894
|
|
|
$
|
193,872
|
|
Accounts receivable,
net of allowance for doubtful accounts of $986 and $1,212,
respectively
|
|
|
156,476
|
|
|
|
122,727
|
|
Inventories
|
|
|
32,885
|
|
|
|
62,589
|
|
Prepaid expenses and
other current assets
|
|
|
51,340
|
|
|
|
35,019
|
|
Total current
assets
|
|
|
487,595
|
|
|
|
414,207
|
|
Property and
equipment, net
|
|
|
55,004
|
|
|
|
58,813
|
|
Operating lease
right-of-use assets, net
|
|
|
36,927
|
|
|
|
51,274
|
|
Intangible assets,
net
|
|
|
36,038
|
|
|
|
68,394
|
|
Goodwill
|
|
|
331,159
|
|
|
|
331,159
|
|
Other
assets
|
|
|
63,370
|
|
|
|
55,241
|
|
Total
assets
|
|
$
|
1,010,093
|
|
|
$
|
979,088
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt, net of unamortized debt issuance costs of $2,404
and $2,484, respectively
|
|
$
|
23,721
|
|
|
$
|
16,516
|
|
Accounts
payable
|
|
|
60,142
|
|
|
|
48,439
|
|
Accrued compensation
and benefits
|
|
|
71,610
|
|
|
|
50,884
|
|
Accrued
warranty
|
|
|
11,623
|
|
|
|
14,035
|
|
Current portion,
operating lease liabilities
|
|
|
18,743
|
|
|
|
19,196
|
|
Current portion,
deferred revenue
|
|
|
212,412
|
|
|
|
190,226
|
|
Other accrued
liabilities
|
|
|
57,449
|
|
|
|
58,525
|
|
Total current
liabilities
|
|
|
455,700
|
|
|
|
397,821
|
|
Deferred revenue,
less current portion
|
|
|
133,172
|
|
|
|
100,961
|
|
Long-term debt, less
current portion, net of unamortized debt issuance costs of $4,760
and $7,165, respectively
|
|
|
315,865
|
|
|
|
394,585
|
|
Operating lease
liabilities, less current portion
|
|
|
32,515
|
|
|
|
50,238
|
|
Deferred income
taxes
|
|
|
3,828
|
|
|
|
2,334
|
|
Other long-term
liabilities
|
|
|
14,545
|
|
|
|
27,751
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Convertible preferred
stock, $0.001 par value, issuable in series, 2,000
shares authorized; none issued
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001
par value, 750,000 shares authorized; 133,279 and 127,114 shares
issued, respectively; 126,682 and 120,517 shares outstanding,
respectively
|
|
|
133
|
|
|
|
127
|
|
Additional
paid-in-capital
|
|
|
1,078,602
|
|
|
|
1,035,041
|
|
Accumulated other
comprehensive loss
|
|
|
(2,811)
|
|
|
|
(6,378)
|
|
Accumulated
deficit
|
|
|
(978,343)
|
|
|
|
(980,279)
|
|
Treasury stock at
cost: 6,597 and 6,597 shares, respectively
|
|
|
(43,113)
|
|
|
|
(43,113)
|
|
Total stockholders'
equity
|
|
|
54,468
|
|
|
|
5,398
|
|
Total liabilities and
stockholders' equity
|
|
$
|
1,010,093
|
|
|
$
|
979,088
|
|
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except
per share amounts)
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
195,821
|
|
|
$
|
141,478
|
|
|
$
|
699,396
|
|
|
$
|
653,651
|
|
Service and
subscription
|
|
|
82,267
|
|
|
|
74,044
|
|
|
|
310,022
|
|
|
|
294,368
|
|
Total net
revenues
|
|
|
278,088
|
|
|
|
215,522
|
|
|
|
1,009,418
|
|
|
|
948,019
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
86,116
|
|
|
|
71,628
|
|
|
|
309,958
|
|
|
|
326,333
|
|
Service and
subscription
|
|
|
30,872
|
|
|
|
23,304
|
|
|
|
114,337
|
|
|
|
103,847
|
|
Total cost of
revenues
|
|
|
116,988
|
|
|
|
94,932
|
|
|
|
424,295
|
|
|
|
430,180
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
109,705
|
|
|
|
69,850
|
|
|
|
389,438
|
|
|
|
327,318
|
|
Service and
subscription
|
|
|
51,395
|
|
|
|
50,740
|
|
|
|
195,685
|
|
|
|
190,521
|
|
Total gross
profit
|
|
|
161,100
|
|
|
|
120,590
|
|
|
|
585,123
|
|
|
|
517,839
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
49,376
|
|
|
|
44,533
|
|
|
|
196,995
|
|
|
|
209,606
|
|
Sales and
marketing
|
|
|
74,886
|
|
|
|
66,707
|
|
|
|
276,841
|
|
|
|
283,632
|
|
General and
administrative
|
|
|
17,357
|
|
|
|
15,792
|
|
|
|
66,201
|
|
|
|
60,991
|
|
Acquisition and
integration costs
|
|
|
—
|
|
|
|
1,998
|
|
|
|
1,975
|
|
|
|
32,073
|
|
Restructuring and
related charges, net of reversals
|
|
|
504
|
|
|
|
2,604
|
|
|
|
2,625
|
|
|
|
22,011
|
|
Amortization of
intangibles
|
|
|
1,406
|
|
|
|
2,059
|
|
|
|
6,110
|
|
|
|
8,425
|
|
Total operating
expenses
|
|
|
143,529
|
|
|
|
133,693
|
|
|
|
550,747
|
|
|
|
616,738
|
|
Operating income
(loss)
|
|
|
17,571
|
|
|
|
(13,103)
|
|
|
|
34,376
|
|
|
|
(98,899)
|
|
Interest
income
|
|
|
71
|
|
|
|
54
|
|
|
|
352
|
|
|
|
1,420
|
|
Interest
expense
|
|
|
(4,531)
|
|
|
|
(6,373)
|
|
|
|
(22,856)
|
|
|
|
(23,750)
|
|
Other (expense)
income, net
|
|
|
(115)
|
|
|
|
(391)
|
|
|
|
(1,687)
|
|
|
|
737
|
|
Income (loss) before
income taxes
|
|
|
12,996
|
|
|
|
(19,813)
|
|
|
|
10,185
|
|
|
|
(120,492)
|
|
Provision for income
taxes
|
|
|
2,670
|
|
|
|
1,404
|
|
|
|
8,249
|
|
|
|
6,353
|
|
Net Income
(loss)
|
|
$
|
10,326
|
|
|
$
|
(21,217)
|
|
|
$
|
1,936
|
|
|
$
|
(126,845)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - basic
|
|
$
|
0.08
|
|
|
$
|
(0.18)
|
|
|
$
|
0.02
|
|
|
$
|
(1.06)
|
|
Net income (loss) per
share - diluted
|
|
$
|
0.08
|
|
|
$
|
(0.18)
|
|
|
$
|
0.02
|
|
|
$
|
(1.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculation - basic
|
|
|
126,318
|
|
|
|
120,314
|
|
|
|
124,019
|
|
|
|
119,814
|
|
Shares used in per
share calculation - diluted
|
|
|
132,355
|
|
|
|
120,314
|
|
|
|
127,669
|
|
|
|
119,814
|
|
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
|
Year
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net Income
(loss)
|
|
$
|
1,936
|
|
|
$
|
(126,845)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
22,961
|
|
|
|
28,603
|
|
Amortization of
intangible assets
|
|
|
32,356
|
|
|
|
35,218
|
|
Reduction in carrying
amount of right-of-use asset
|
|
|
16,134
|
|
|
|
16,420
|
|
Provision for doubtful
accounts
|
|
|
409
|
|
|
|
1,289
|
|
Share-based
compensation
|
|
|
39,051
|
|
|
|
37,842
|
|
Deferred income
taxes
|
|
|
1,785
|
|
|
|
1,760
|
|
Non-cash restructuring
and impairment charges
|
|
|
-
|
|
|
|
7,622
|
|
Non-cash interest
expense
|
|
|
5,055
|
|
|
|
4,196
|
|
Other
|
|
|
3,989
|
|
|
|
(349)
|
|
Changes in operating
assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(34,158)
|
|
|
|
62,151
|
|
Inventories
|
|
|
22,729
|
|
|
|
19,951
|
|
Prepaid expenses and
other assets
|
|
|
(18,979)
|
|
|
|
781
|
|
Accounts
payable
|
|
|
10,810
|
|
|
|
(26,080)
|
|
Accrued compensation
and benefits
|
|
|
20,088
|
|
|
|
(8,080)
|
|
Operating lease
liabilities
|
|
|
(19,986)
|
|
|
|
(17,345)
|
|
Deferred
revenue
|
|
|
54,398
|
|
|
|
19,530
|
|
Other current and
long-term liabilities
|
|
|
(14,043)
|
|
|
|
(20,780)
|
|
Net cash provided by
operating activities
|
|
|
144,535
|
|
|
|
35,884
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(17,176)
|
|
|
|
(15,268)
|
|
Business acquisition,
net of cash acquired
|
|
|
—
|
|
|
|
(219,458)
|
|
Maturities and sales
of investments
|
|
|
—
|
|
|
|
45,249
|
|
Net cash used in
investing activities
|
|
|
(17,176)
|
|
|
|
(189,477)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Borrowings under
Revolving Facility
|
|
|
—
|
|
|
|
55,000
|
|
Borrowings under Term
Loan
|
|
|
—
|
|
|
|
199,500
|
|
Payments on debt
obligations
|
|
|
(74,000)
|
|
|
|
(34,517)
|
|
Loan fees on
borrowings
|
|
|
—
|
|
|
|
(12,029)
|
|
Repurchase of common
stock
|
|
|
—
|
|
|
|
(30,000)
|
|
Proceeds from issuance
of common stock, net of tax withholding
|
|
|
4,516
|
|
|
|
8,789
|
|
Payment of contingent
consideration obligations
|
|
|
(1,298)
|
|
|
|
(4,251)
|
|
Deferred payments on
an acquisition
|
|
|
(4,000)
|
|
|
|
(4,000)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(74,782)
|
|
|
|
178,492
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
effect on cash
|
|
|
445
|
|
|
|
(634)
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
53,022
|
|
|
|
24,265
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning
of period
|
|
|
193,872
|
|
|
|
169,607
|
|
Cash at end of
period
|
|
$
|
246,894
|
|
|
$
|
193,872
|
|
Extreme Networks, Inc.
Non-GAAP
Measures of Financial Performance
To supplement the Company's consolidated financial statements
presented in accordance with U.S. generally accepted accounting
principles, ("GAAP"), Extreme uses non-GAAP measures of certain
components of financial performance. These non-GAAP measures
include non-GAAP gross margin, non-GAAP operating expenses,
non-GAAP operating margin, non-GAAP operating income, non-GAAP net
income, non-GAAP net income per diluted share and non-GAAP 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 also presents its range for projected non-GAAP
operating expenses, which is operating expenses less share-based
compensation expense, restructuring charges and amortization of
intangibles.
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's results of operations as
determined in accordance with GAAP. These non-GAAP measures
should only be used to evaluate Extreme's results of operations in
conjunction with the corresponding GAAP measures.
Extreme believes 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
stockholder value. In addition, because Extreme has
historically reported certain non-GAAP results to investors, the
Company believes 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's management uses financial statements that do not
include share-based compensation expense, acquired inventory
adjustments, acquisition and integration costs, amortization of
intangibles, inventory valuation adjustments, restructuring
charges, and the tax effect of non-GAAP adjustments.
Extreme's management also uses non-GAAP measures, in addition to
the corresponding GAAP measures, in reviewing the Company's
financial results.
As described above, Extreme excludes the following items from
one or more of its non-GAAP measures when applicable.
Share-based compensation. Consists of associated expenses
for stock options, restricted stock awards and the Company's
Employee Stock Purchase Plan. Extreme 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 its operating
results. Extreme expects to incur share-based compensation expenses
in future periods.
Acquired inventory adjustments. Purchase accounting
adjustments relating to the mark up of acquired inventory to fair
value less disposal costs.
Acquisition and integration costs. Acquisition and
integration costs consist of specified compensation charges,
software charges, legal and professional fees related to the
acquisition of Aerohive. Extreme excludes these expenses
since they result from an event that is outside the ordinary course
of continuing operations.
Amortization of intangibles. Amortization of
intangibles includes the monthly amortization expense of intangible
assets such as developed technology, customer relationships,
trademarks and order backlog. The amortization of the
developed technology and order backlog are recorded in cost of
goods sold, while the amortization for the other intangibles are
recorded in operating expenses. Extreme excludes these
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.
Inventory valuation adjustments. Adjustments relating to
the mark down of inventory due to duplication of products lines
with acquisition of Aerohive net of recoveries on the sale of
inventory marked down in previous quarters.
Restructuring charges. Restructuring charges primarily
consist of severance costs for employees which have no benefit to
continuing operations and impairment of right-of-use assets,
long-lived assets and other charges related to excess facilities.
Extreme excludes restructuring expenses since they result from
events that occur outside of the ordinary course of continuing
operations.
Tax effect of non-GAAP adjustments. Beginning with our
first quarter of fiscal 2021, we changed how we calculate our
non-GAAP provision for income taxes in accordance with the SEC
guidance on non-GAAP Financial Measures Compliance and Disclosure
Interpretation. Previously, the non-GAAP tax provision
consisted of current and deferred income tax expense on a GAAP
basis as if our carryforward net operating losses were sufficient
to offset our non-GAAP adjustments. Beginning with our first
quarter of fiscal 2021, we have assumed our U.S. federal and state
net operating losses would have been fully consumed by the
historical non-GAAP financial adjustments, eliminating the need for
a full valuation allowance against our U.S. deferred tax assets
which, consequently, enables our use of research and development
tax credits which were previously not utilizable. The
non-GAAP tax provision now consists of current and deferred income
tax expense commensurate with the non-GAAP measure of profitability
using our blended U.S. statutory tax rate of 24.2%. We have
adjusted the fiscal 2020 non-GAAP tax provision to reflect the 2020
non-GAAP operating results to be comparable with fiscal 2021
results. As a result of this change, the non-GAAP net income
for the three months ended June 30,
2020 remained the same at $0.03 per diluted share as previously reported,
but the non-GAAP net income for the year ended June 30, 2020 changed from $0.10 per diluted share as previously reported to
$0.12 net income per diluted
share.
This change does not affect our non-GAAP income (loss) before
income taxes, actual cash tax payments or cash flows, but will
result in a higher or lower non-GAAP provision for income taxes
depending on the level and jurisdictional mix of pre-tax income and
available U.S. research and development tax credits. As of
June 30, 2021, we had U.S. federal
net operating loss carryforwards of $241
million, state net operating loss carryforwards of
$156 million and Irish net operating
losses of $17 million. As of
June 30, 2020, we had U.S. federal
net operating loss carryforwards of $310
million and state net operating loss carryforwards of
$181 million. We do not expect
to pay substantial taxes on a GAAP basis in the U.S. for the
foreseeable future due to our net operating loss carryforward
balances. Over the near term, most of our cash taxes will
continue to be mainly driven by the tax expense of our foreign
subsidiaries which amounts have not historically been significant,
with the exception of the Company's Irish operating company which
has fully utilized available net operating loss carryforwards
during fiscal 2021. We also believe our long-term effective
GAAP tax rate will be lower than the U.S. statutory rate based upon
our established tax structure.
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP
RECONCILIATION
(In thousands, except
percentages and per share amounts)
(Unaudited)
|
|
Revenues
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Revenues -
GAAP
|
$
|
278,088
|
|
|
$
|
215,522
|
|
|
$
|
1,009,418
|
|
|
$
|
948,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Margin
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Gross profit -
GAAP
|
$
|
161,100
|
|
|
$
|
120,590
|
|
|
$
|
585,123
|
|
|
$
|
517,839
|
|
Gross margin - GAAP
percentage
|
|
57.9
|
%
|
|
|
56.0
|
%
|
|
|
58.0
|
%
|
|
|
54.6
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
779
|
|
|
|
708
|
|
|
|
2,871
|
|
|
|
2,860
|
|
Acquired inventory
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,303
|
|
Acquisition and
integration costs
|
|
—
|
|
|
|
98
|
|
|
|
10
|
|
|
|
2,169
|
|
Amortization of
intangibles
|
|
6,432
|
|
|
|
6,633
|
|
|
|
26,129
|
|
|
|
26,430
|
|
Inventory valuation
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,677
|
|
Total adjustments to
GAAP gross profit
|
$
|
7,211
|
|
|
$
|
7,439
|
|
|
$
|
29,010
|
|
|
$
|
42,439
|
|
Gross profit -
non-GAAP
|
$
|
168,311
|
|
|
$
|
128,029
|
|
|
$
|
614,133
|
|
|
$
|
560,278
|
|
Gross margin -
non-GAAP percentage
|
|
60.5
|
%
|
|
|
59.4
|
%
|
|
|
60.8
|
%
|
|
|
59.1
|
%
|
|
Non-GAAP Operating
Income (Loss)
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
GAAP operating income
(loss)
|
$
|
17,571
|
|
|
$
|
(13,103)
|
|
|
$
|
34,376
|
|
|
$
|
(98,899)
|
|
GAAP operating income
(loss) percentage
|
|
6.3
|
%
|
|
|
(6.1)
|
%
|
|
|
3.4
|
%
|
|
|
(10.4)
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense, cost of revenues
|
|
779
|
|
|
|
708
|
|
|
|
2,871
|
|
|
|
2,860
|
|
Share-based
compensation expense, R&D
|
|
2,589
|
|
|
|
2,111
|
|
|
|
9,969
|
|
|
|
10,324
|
|
Share-based
compensation expense, S&M
|
|
3,469
|
|
|
|
3,346
|
|
|
|
12,505
|
|
|
|
11,914
|
|
Share-based
compensation expense, G&A
|
|
4,619
|
|
|
|
4,742
|
|
|
|
13,706
|
|
|
|
12,265
|
|
Inventory valuation
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,677
|
|
Acquisition and
integration costs
|
|
—
|
|
|
|
2,096
|
|
|
|
1,985
|
|
|
|
34,242
|
|
Restructuring charges,
net of reversals
|
|
504
|
|
|
|
2,604
|
|
|
|
2,625
|
|
|
|
22,011
|
|
Acquired inventory
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,303
|
|
Amortization of
intangibles
|
|
7,838
|
|
|
|
8,692
|
|
|
|
32,239
|
|
|
|
34,855
|
|
Total adjustments to
GAAP operating income (loss)
|
$
|
19,798
|
|
|
$
|
24,299
|
|
|
$
|
75,900
|
|
|
$
|
139,451
|
|
Non-GAAP operating
income
|
$
|
37,369
|
|
|
$
|
11,196
|
|
|
$
|
110,276
|
|
|
$
|
40,552
|
|
Non-GAAP operating
income percentage
|
|
13.4
|
%
|
|
|
5.2
|
%
|
|
|
10.9
|
%
|
|
|
4.3
|
%
|
|
Non-GAAP net
income
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
GAAP net income
(loss)
|
$
|
10,326
|
|
|
$
|
(21,217)
|
|
|
$
|
1,936
|
|
|
$
|
(126,845)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
11,456
|
|
|
|
10,907
|
|
|
|
39,051
|
|
|
|
37,363
|
|
Inventory valuation
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,677
|
|
Acquisition and
integration costs
|
|
—
|
|
|
|
2,096
|
|
|
|
1,985
|
|
|
|
34,242
|
|
Restructuring charge,
net of reversal
|
|
504
|
|
|
|
2,604
|
|
|
|
2,625
|
|
|
|
22,011
|
|
Acquired inventory
adjustments
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,303
|
|
Amortization of
intangibles
|
|
7,838
|
|
|
|
8,692
|
|
|
|
32,239
|
|
|
|
34,855
|
|
Tax effect of non-GAAP
adjustments
|
|
(5,514)
|
|
|
|
266
|
|
|
|
(5,608)
|
|
|
|
1,542
|
|
Total adjustments to
GAAP net income (loss)
|
$
|
14,284
|
|
|
$
|
24,565
|
|
|
$
|
70,292
|
|
|
$
|
140,993
|
|
Non-GAAP net
income
|
$
|
24,610
|
|
|
$
|
3,348
|
|
|
$
|
72,228
|
|
|
$
|
14,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per share-diluted
|
$
|
0.19
|
|
|
$
|
0.03
|
|
|
$
|
0.57
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in net
income per share - diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Shares used in
per share calculation - basic
|
|
126,318
|
|
|
|
120,314
|
|
|
|
124,019
|
|
|
|
119,814
|
|
Potentially dilutive
equity awards
|
|
6,037
|
|
|
|
484
|
|
|
|
3,650
|
|
|
|
2,419
|
|
GAAP and Non-GAAP
shares used in per share calculation - diluted
|
|
132,355
|
|
|
|
120,798
|
|
|
|
127,669
|
|
|
|
122,233
|
|
View original
content:https://www.prnewswire.com/news-releases/extreme-networks-reports-fourth-quarter-and-full-fiscal-year-2021-financial-results-301342717.html
SOURCE Extreme Networks, Inc.