Revenue Growth of 19% and Operating Leverage
Doubles GAAP EPS
Cloud Adoption Drives 30% Growth in SaaS
ARR
Extreme Networks, Inc. (“Extreme”) (Nasdaq: EXTR) today released
financial results for its first quarter ended September 30,
2023.
"Extreme delivered another quarter of double-digit growth as we
continued to increase both market and mindshare with new customers,
while expanding our presence within our existing base," said Ed
Meyercord, President and Chief Executive Officer. "Our funnel of
new opportunities continued to grow double-digits and the value of
deals over $1 million once again grew from the prior quarter. Our
highly differentiated cloud solutions deliver simplicity,
flexibility and actionable insights to customers, making it easier
to manage and secure their networks. And our subscription bookings
and SaaS ARR growth of 30% are a testament to that. We continue to
focus on gaining core market share, making strategic investments,
and driving go-to-market initiatives to position the company for
success as we navigate potential macroeconomic headwinds in FY24.
We remain committed to driving double-digit long-term growth while
being prudent stewards of shareholder capital," concluded
Meyercord.
Kevin Rhodes, Executive Vice President and Chief Financial
Officer stated, "We are pleased with our Q1 financial and
operational performance. Our topline growth and operating leverage
enabled us to double our EPS from the prior year, and generate
$71.3 million in free cash flow. We repurchased another $24.9
million worth of shares and our net cash position grew to $26.9
million. Looking ahead at FY24, we expect changing customer buying
patterns based on macroeconomic conditions in certain geographies.
Therefore, we expect revenue growth to be more tempered for the
balance of the year. Despite these market conditions and slower
revenue growth expectations, we expect continued growth of EPS of
over 25% in FY24. We have taken recent actions to ensure we align
our cost structure to the current level of revenue growth we expect
to achieve. As a result, we believe we are well-positioned to
deliver strong profitability and improved operating margins during
the year."
Fiscal First Quarter Results:
- Revenue $353.1 million, up 19% year-over-year.
- SaaS ARR $141.0 million, up 30% year-over-year
- GAAP diluted EPS $0.21, compared to $0.09 in the prior year
quarter
- Non-GAAP diluted EPS $0.35, compared to $0.20 in the prior year
quarter
- GAAP gross margin 60.3% compared to 56.0% in the prior year
quarter
- Non-GAAP gross margin 61.1% compared to 57.6% in the prior year
quarter
- GAAP operating margin 10.2 % compared to 5.8 % in the prior
year quarter
- Non-GAAP operating margin 17.7 % compared to 12.1% in the prior
year quarter
Liquidity:
- During Q1, we generated net cash flow from operations of $75.6
million and free cash flow of $71.3 million.
- During Q1, we repurchased 0.9 million shares of our common
stock on the open market at a total cost of $24.9 million with a
weighted average price of $28.28 per share.
- Q1 ending cash balance was $224.4 million, a decrease of $10.4
million from the end of Q4 2023 and an increase of $26.1 million
from the end of Q1 in the prior year.
- Q1 net cash was $26.9 million, an increase of $17.1 million
from net cash of $9.8 million from the end of Q4 2023 and an
increase of $100.1 million from net debt of $73.2 million at the
end of Q1 in the prior year.
Recent Key Highlights:
- Extreme Networks will host an Investor Day on Tuesday, Nov.
7 at the headquarters of Major League Baseball (MLB) in New
York City. Topics will include an overview of the company,
including an update on its strategic growth opportunities, customer
highlights, go-to-market developments and the company’s outlook and
longer-term financial targets. The in-person event will begin at
8:30 a.m. ET and will also be livestreamed for virtual attendees.
For more information and to register for the in-person or
livestreamed event, visit: https://cvent.me/kxXbGK?RefId=PR
- Extreme continues to see significant traction around our highly
differentiated fabric solutions. More than 6,000 customers around
the world rely on Extreme’s network fabric solutions for
simplified, secure, resilient networking benefiting from zero-touch
provisioning, automation, hyper-segmentation, and simplified
network management. These capabilities have helped the City of
Milwaukee secure mission-critical systems, Harry Reid International
Airport simplify operations, and San Diego Community College
District connect 80,000 students across multiple campuses.
- Hosted by Dubai World Trade Center (DWTC), GITEX, the
world's largest technology trade show, was powered by Extreme's
wireless, fabric and cloud solutions. DWTC supports more than
180,000 attendees, 6,000 exhibitors and 30,000 devices at this
massive event. Extreme Fabric is the only solution that can
quickly, simply, and securely segment 3,300 individual networks in
a matter of minutes. Competitive solutions take hours and introduce
a significant margin of error due to their complexity.
- A leading global fast-food chain has selected ExtremeCloud
SD-WAN to ensure consistent performance and improve guest
experiences at its 1,500 locations across the UK. With Extreme,
this industry leader has greater visibility and will be able to
simplify network management across its locations, increase overall
network security and optimize operations by improving performance
for critical applications.
- Extreme will deploy fabric-enabled wired networks for three
new BAPS temples including the BAPS Mandir in Robbinsville, New
Jersey, which is the largest Hindu temple outside of Asia. The new
networks will enable BAPS to support and secure technology across
its temple complexes, including multimedia displays and security
cameras in exhibition halls, prayer halls and offices.
- Sporting Clube de Portugal (Sporting CP), one of the
most decorated football clubs in Portugal, chose Extreme to enhance
the fan experience at its 50,000-plus seat stadium in Lisbon. With
Universal Switching and Wi-Fi 6E solutions from Extreme, Sporting
CP can easily support connectivity throughout its facilities and
enhance logistics and activities such as mobile tickets, in-seat
concessions sales and digital signage throughout the stadium.
Extreme also completed the rollout of the highly anticipated Wi-Fi
6 network at Old Trafford Stadium for Manchester United.
Fiscal Q1 2024 Financial
Metrics:
(in millions, except percentages and per
share information)
GAAP Results
Three Months Ended
September 30, 2023
September 30, 2022
Change
Product
$
253.5
$
206.3
$
47.2
Subscription and support*
99.6
91.4
8.2
Total net revenue
$
353.1
$
297.7
$
55.4
Gross margin
60.3
%
56.0
%
4.3
%
Operating margin
10.2
%
5.8
%
4.3
%
Net income
$
28.7
$
12.6
$
16.1
Net income per diluted share
$
0.21
$
0.09
$
0.12
Non-GAAP Results
Three Months Ended
September 30, 2023
September 30, 2022
Change
Product
$
253.5
$
206.3
$
47.2
Subscription and support*
99.6
91.4
8.2
Total net revenue
$
353.1
$
297.7
$
55.4
Gross margin
61.1
%
57.6
%
3.5
%
Operating margin
17.7
%
12.1
%
5.6
%
Net income
$
46.5
$
27.1
$
19.5
Net income per diluted share
$
0.35
$
0.20
$
0.15
* Prior to fiscal 2023, subscription and
support revenue was referred to as service and subscription
revenue, however, the composition of subscription and support
revenue has not been modified.
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
millions):
Free Cash Flow
Three Months Ended
September 30, 2023
September 30, 2022
Cash flow provided by operations
$
75.6
$
49.7
Less: Property and equipment capital
expenditures
(4.3
)
(3.1
)
Total free cash flow
$
71.3
$
46.6
SaaS ARR: Extreme uses SaaS annual recurring revenue
(“SaaS ARR”) to identify the annual recurring revenue of
ExtremeCloud™ IQ (XIQ) and other subscription revenue, based on the
annualized value of quarterly subscription revenue and term-based
licenses. We believe that SaaS ARR is an important metric because
it is driven by our ability to acquire new customers and to
maintain and expand our relationships with existing customers. SaaS
ARR should be viewed independently of revenue or deferred revenue
that are accounted for under U.S. GAAP. SaaS ARR does not have a
standardized meaning and therefore may not be comparable to
similarly titled measures presented by other companies. SaaS ARR is
not intended to be a replacement for forecasts of revenue.
Gross Debt: Gross debt is defined as long-term debt and
the current portion of long-term debt as shown on the balance sheet
plus unamortized debt issuance costs, if any.
Net Cash (Debt) is defined as cash minus gross debt, as
shown in the table below (in millions):
Cash
Gross debt
Net cash (debt)
$
224.4
$
197.5
$
26.9
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 second quarter of fiscal 2024, ending December 31, 2023,
the Company is targeting:
(in millions, except percentages
and per share information)
Low-End
High-End
FQ2'24 Guidance – GAAP
Total net revenue
$
312.0
$
327.0
Gross margin
59.5
%
61.5
%
Operating margin
5.0
%
7.4
%
Net income per diluted share
$
0.07
$
0.12
Shares outstanding used in calculating
GAAP EPS
134.3
134.3
FQ2’24 Guidance – Non-GAAP
Total net revenue
$
312.0
$
327.0
Gross margin
60.2
%
62.2
%
Operating margin
15.4
%
17.3
%
Net income per diluted share
$
0.26
$
0.31
Shares outstanding used in calculating
non-GAAP EPS
134.3
134.3
The following table shows the GAAP to non-GAAP reconciliation
for Q2 FY’24 guidance:
Gross Margin Rate
Operating Margin Rate
Earnings per Share
GAAP
59.5% - 61.5%
5.0% - 7.4%
$0.07 - $0.12
Estimated adjustments for:
Share-based compensation
0.5%
6.6% - 7.0%
0.16
Amortization of product intangibles
0.2%
0.2%
0.00
Amortization of non-product
intangibles
—
0.2%
0.00
Restructuring
—
2.0% - 2.1%
0.05
Litigation charges
—
0.5%
0.01
System transition cost
—
0.4%
0.01
Tax adjustment
—
—
(0.04)
Non-GAAP
60.2% - 62.2%
15.4% - 17.3%
$0.26 - $0.31
The total of percentage rate changes may
not equal the total change in all cases due to rounding.
For its Fiscal 2024, ending June 30, 2024, the Company is
targeting:
- Revenue to grow mid-to-high single digits
- Non-GAAP operating margin to remain mid-to-high teens
- EPS growth of over 25% for full year Fiscal Year 24
No reconciliation of the forward-looking non-GAAP financial
measure to the most directly comparable GAAP financial measure for
Extreme’s Fiscal 2024 non-GAAP operating margin target is included
in this press release because, due to the high variability and
difficulty in making accurate forecasts and projections of some of
the excluded information, together with some of the excluded
information not being ascertainable or accessible, Extreme is
unable to quantify certain amounts that would be required to be
included in the most directly comparable GAAP financial measure
without unreasonable efforts.
Conference Call:
Extreme will host a conference call at 8:00 a.m. Eastern (5:00
a.m. Pacific) today to review the first quarter results of fiscal
2024 as well as the business outlook for the second quarter of
fiscal 2024 ending December 31, 2023, 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. To access the call, please go to
this link (Extreme Networks Q1'24 Earnings Registration Link) and
you will be provided with dial in details. To avoid delays, we
encourage participants to dial into the conference call fifteen
minutes ahead of the scheduled start time.
About Extreme:
Extreme Networks, Inc. (EXTR) creates 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 at
https://www.extremenetworks.com/ or LinkedIn, YouTube, Twitter,
Facebook or Instagram.
Extreme Networks, ExtremeCloud, 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 margin, non-GAAP operating income,
non-GAAP net income, non-GAAP net income per diluted share, net
cash (debt) 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,
amortization of intangibles, restructuring charges, system
transition costs, litigation charges, and the tax effect of
non-GAAP 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 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
operating metrics, 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 results and other future events to differ materially from
those suggested or indicated by such forward-looking statements.
These include, among others, risks related to global macroeconomic
and business trends; the Company’s failure to achieve targeted
financial metrics; 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; political and
geopolitical factors, including the Russia/Ukraine conflict; and a
dependency on third parties for certain components and for the
manufacturing of the Company’s products.
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, 2023, 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)
September 30, 2023
June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
224,434
$
234,826
Accounts receivable, net
131,511
182,045
Inventories
100,823
89,024
Prepaid expenses and other current
assets
75,688
70,263
Total current assets
532,456
576,158
Property and equipment, net
46,336
46,448
Operating lease right-of-use assets,
net
43,942
34,739
Intangible assets, net
13,857
16,063
Goodwill
392,955
394,755
Other assets
76,968
73,544
Total assets
$
1,106,514
$
1,141,707
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt, net of
unamortized debt issuance costs of $675 and $674, respectively
$
9,325
$
34,326
Accounts payable
80,003
99,724
Accrued compensation and benefits
51,997
71,367
Accrued warranty
12,164
12,322
Current portion, operating lease
liabilities
10,783
10,847
Current portion, deferred revenue
292,925
282,475
Other accrued liabilities
71,521
64,440
Total current liabilities
528,718
575,501
Deferred revenue, less current portion
232,500
219,024
Long-term debt, less current portion, net
of unamortized debt issuance costs of $2,239 and $2,409,
respectively
185,261
187,591
Operating lease liabilities, less current
portion
40,718
31,845
Deferred income taxes
7,673
7,747
Other long-term liabilities
3,162
3,247
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; 146,264 and 143,629 shares issued, respectively;
129,530 and 127,775 shares outstanding, respectively
146
144
Additional paid-in-capital
1,164,589
1,173,744
Accumulated other comprehensive loss
(16,096
)
(13,192
)
Accumulated deficit
(827,322
)
(855,998
)
Treasury stock at cost, 16,734 and 15,854
shares, respectively
(212,835
)
(187,946
)
Total stockholders’ equity
108,482
116,752
Total liabilities and stockholders’
equity
$
1,106,514
$
1,141,707
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
September 30, 2023
September 30, 2022
Net revenues:
Product
$
253,483
$
206,276
Subscription and support
99,654
91,413
Total net revenues
353,137
297,689
Cost of revenues:
Product
108,536
99,763
Subscription and support
31,665
31,218
Total cost of revenues
140,201
130,981
Gross profit:
Product
144,947
106,513
Subscription and support
67,989
60,195
Total gross profit
212,936
166,708
Operating expenses:
Research and development
58,016
50,989
Sales and marketing
91,920
78,382
General and administrative
23,873
18,547
Acquisition and integration costs
—
390
Restructuring and related charges
2,717
481
Amortization of intangible assets
511
523
Total operating expenses
177,037
149,312
Operating income
35,899
17,396
Interest income
1,226
392
Interest expense
(4,318
)
(3,826
)
Other income, net
432
371
Income before income taxes
33,239
14,333
Provision for income taxes
4,563
1,748
Net income
$
28,676
$
12,585
Basic and diluted income per share:
Net income per share – basic
$
0.22
$
0.10
Net income per share – diluted
$
0.21
$
0.09
Shares used in per share calculation –
basic
128,782
130,289
Shares used in per share calculation –
diluted
133,463
132,933
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
September 30, 2023
September 30, 2022
Cash flows from operating
activities:
Net income
$
28,676
$
12,585
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
4,865
4,953
Amortization of intangible assets
1,944
4,128
Reduction in carrying amount of
right-of-use asset
2,931
3,063
Provision for doubtful accounts
75
23
Share-based compensation
19,919
13,789
Deferred income taxes
(65
)
(85
)
Non-cash interest expense
266
552
Other
(144
)
(3,595
)
Changes in operating assets and
liabilities:
Accounts receivable
50,459
25,347
Inventories
(11,946
)
(2,671
)
Prepaid expenses and other assets
(6,841
)
(318
)
Accounts payable
(20,097
)
(591
)
Accrued compensation and benefits
(19,488
)
(6,564
)
Operating lease liabilities
(3,297
)
(3,952
)
Deferred revenue
21,978
9,699
Other current and long-term
liabilities
6,400
(6,629
)
Net cash provided by operating
activities
75,635
49,734
Cash flows from investing
activities:
Capital expenditures
(4,314
)
(3,139
)
Net cash used in investing activities
(4,314
)
(3,139
)
Cash flows from financing
activities:
Payments on revolving facility
(25,000
)
—
Payments on debt obligations
(2,500
)
(37,125
)
Repurchase of common stock
(24,889
)
—
Payments for tax withholdings, net of
proceeds from issuance of common stock
(29,072
)
(3,999
)
Deferred payments on an acquisition
—
(1,000
)
Net cash used in financing activities
(81,461
)
(42,124
)
Foreign currency effect on cash and cash
equivalents
(252
)
(649
)
Net increase (decrease) in cash and cash
equivalents
(10,392
)
3,822
Cash and cash equivalents at beginning
of period
234,826
194,522
Cash and cash equivalents at end of
period
$
224,434
$
198,344
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 margin, non-GAAP
operating income, non-GAAP net income, non-GAAP net income per
diluted share, net cash (debt) 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.
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, acquisition and
integration costs, amortization of intangibles, restructuring
charges, system transition costs, litigation 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.
Acquisition and integration costs. Acquisition and
integration costs consist of specified compensation charges,
software charges, and legal and professional fees related to the
acquisition of Ipanema. 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 is 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.
Restructuring charges. Restructuring charges consist of
severance costs for employees, asset disposal costs and other
charges related to excess facilities that do not provide economic
benefit to our future operations. Extreme excludes restructuring
expenses since they result from events that occur outside of the
ordinary course of continuing operations.
System transition costs. System transition costs consist
of costs related to direct and incremental costs incurred in
connection with our multi-phase transition of our customer
relationship management solution and our configure, price, quote
solution. Extreme excludes these costs because we believe that
these costs do not reflect future operating expenses and will be
inconsistent in amount and frequency making it difficult to
contribute to a meaningful evaluation of our operating
performance.
Litigation charges. Litigation charges consist of
estimated settlement and related legal expenses for a non-recurring
pending litigation.
Tax effect of non-GAAP adjustments. We calculate our
non-GAAP provision for income taxes in accordance with the SEC
guidance on non-GAAP Financial Measures Compliance and Disclosure
Interpretation. 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. The non-GAAP tax provision 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
24.6%.
The non-GAAP provision for income taxes has typically been and
is currently higher than the GAAP provision given the Company has a
valuation allowance against its US and a portion of its Irish
deferred tax assets due to historical losses. Once these valuation
allowances are released, the non-GAAP and the GAAP provision for
income taxes will be more closely aligned.
Over the next year, our cash taxes will be driven by US federal
and state taxes and the tax expense of our foreign subsidiaries,
which amounts have not historically been significant, with the
exception of the Company’s Indian subsidiary which performs
research and development activities, as well as the Company’s Irish
trading subsidiaries.
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
September 30, 2023
September 30, 2022
Revenues – GAAP
$
353,137
$
297,689
Non-GAAP Gross Margin
Three Months Ended
September 30, 2023
September 30, 2022
Gross profit – GAAP
$
212,936
$
166,708
Gross margin – GAAP percentage
60.3
%
56.0
%
Adjustments:
Share-based compensation expense,
Product
483
374
Share-based compensation expense,
Subscription and support
866
672
Amortization of intangibles, Product
1,144
2,772
Amortization of intangibles, Subscription
and support
272
815
Total adjustments to GAAP gross profit
$
2,765
$
4,633
Gross profit – non-GAAP
$
215,701
$
171,341
Gross margin – non-GAAP percentage
61.1
%
57.6
%
Non-GAAP Operating Income
Three Months Ended
September 30, 2023
September 30, 2022
GAAP operating income
$
35,899
$
17,396
GAAP operating income percentage
10.2
%
5.8
%
Adjustments:
Share-based compensation expense, cost of
revenues
1,349
1,046
Share-based compensation expense,
R&D
4,377
3,090
Share-based compensation expense,
S&M
6,988
4,639
Share-based compensation expense,
G&A
7,205
5,014
Acquisition and integration costs
—
390
Restructuring charges
2,717
481
Litigation charges
1,460
—
System transition costs
569
—
Amortization of intangibles
1,927
4,110
Total adjustments to GAAP operating
income
26,592
18,770
Non-GAAP operating income
$
62,491
$
36,166
Non-GAAP operating income percentage
17.7
%
12.1
%
Non-GAAP Net Income
Three Months Ended
September 30, 2023
September 30, 2022
GAAP net income
$
28,676
$
12,585
Adjustments:
Share-based compensation expense
19,919
13,789
Acquisition and integration costs
—
390
Restructuring charge, net of reversal
2,717
481
Litigation charges
1,460
—
System transition costs
569
—
Amortization of intangibles
1,927
4,110
Tax effect of non-GAAP adjustments
(8,728
)
(4,268
)
Total adjustments to GAAP net income
$
17,864
$
14,502
Non-GAAP net income
$
46,540
$
27,087
Earnings per share
GAAP net income per share – diluted
$
0.21
$
0.09
Non-GAAP net income per share –
diluted
$
0.35
$
0.20
Shares used in net income per share –
diluted:
GAAP Shares used in per share calculation
– basic
128,782
130,289
Potentially dilutive equity awards
4,681
2,644
GAAP and Non-GAAP shares used in per share
calculation – diluted
133,463
132,933
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101874607/en/
Investor Relations Stan Kovler 919/595-4196
Investor_relations@extremenetworks.com
Media Contact Amy Aylward 603/952-5138
pr@extremenetworks.com
Extreme Networks (NASDAQ:EXTR)
過去 株価チャート
から 4 2024 まで 5 2024
Extreme Networks (NASDAQ:EXTR)
過去 株価チャート
から 5 2023 まで 5 2024