SAN JOSE, Calif., May 6, 2015 /PRNewswire/ -- Extreme
Networks, Inc. (Nasdaq: EXTR) today released financial results for
the third quarter of fiscal year 2015, ended March 31, 2015. GAAP revenue was
$119.6 million and non-GAAP revenue
was $120.4 million. GAAP net
loss for the third fiscal quarter was $23.5
million, or $0.24 per share,
and non-GAAP net loss was $7.9
million, or $0.08 per
share.
"Our third fiscal quarter was clearly disappointing as we saw
weakness from certain higher education and venue customers as well
as deferred sales in Europe due to
the strong U.S. dollar," stated Ed
Meyercord, president and CEO of Extreme Networks.
"Although we see normal seasonality in fiscal Q4, the prevailing
headwinds are hindering a quick rebound. As we look out to
fiscal 2016, we are encouraged by the E-Rate filings numbers,
however until the schools and districts receive final approval and
schedule installation, it is difficult to quantify the timing and
impact to our business," Meyercord continued. "That said, our
intention is to adopt a focused strategy that builds on our
strengths and competitive position in growth sectors of our
industry and is closely aligned with our structure."
Recent Key
Events:
- Extreme Networks appoints Board Chairman Ed Meyercord as its President and Chief
Executive Officer effective April 19,
2015.
- Extreme extends strategic leadership and experience to R&D
with the promotion of Eric Broockman
to CTO and executive vice president of engineering adding to his
current responsibility as CTO, a role he has served the past 14
months. Broockman holds numerous U.S. patents, is an active
inventor, and was a National Science Foundation Fellow.
- Extreme strengthens management team with three new executive
appointments, announcing the promotions of Bob Gault as executive vice president worldwide
sales, channel and services, Eileen
Brooker as executive vice president of global alliances and
strategic accounts, and Norman Rice
as executive vice president of global marketing and corporate
development. These executives have demonstrated an unwavering
commitment to customers and a passion for the highest levels of
service in the networking industry throughout their careers.
- Extreme Networks wins Network Computing's new product of the
year award for Purview Application Analytics. Readers voted Extreme
Networks' Purview™ as the best new-to-market product, highlighting
its differentiated capabilities that help transform the network
into a strategic business asset. Purview has been deployed by a
wide variety of organizations including large universities,
government agencies, healthcare organizations, and stadiums.
- Extreme Networks announces No Compromise Wi-Fi package for
Aruba and HP customers delivering
unprecedented value and a strong and stable alternative with proven
and long-standing wired and wireless integration, application
analytics, advanced policy administration and over the air security
that is managed from a single interface.
- Extreme Networks awarded 5-star rating in CRN's 2015 Partner
Program Guide. This annual directory is the definitive listing of
technology vendors that solution providers rely on to deliver
products through the IT channel. The 5-Star Partner Program rating
recognizes an elite subset of companies that offer solution
providers the best partnering elements in their channel
programs.
- Extreme Networks' Bob Gault
honored as 2015 Channel Chief and as one of CRN's 50 Most
Influential Leaders. Mr. Gault has been named to the prestigious
list of the 2015 CRN Channel Chiefs as well as earning the
distinction as one of the 50 Most Influential Leaders. The two
honors recognize top channel executives who have demonstrated
leadership and accomplishments on behalf of their partners.
Fiscal Q3 2015 Financial Metrics:
|
|
Third
Quarter
|
|
|
|
|
|
|
(in millions, except
per share amounts and percentages)
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
86.5
|
|
|
$
|
109.9
|
|
|
$
|
(23.4)
|
|
|
(21)
|
%
|
Service
|
|
$
|
33.1
|
|
|
$
|
31.9
|
|
|
$
|
1.2
|
|
|
4
|
%
|
Total Net
Revenue
|
|
$
|
119.6
|
|
|
$
|
141.8
|
|
|
$
|
(22.2)
|
|
|
(16)
|
%
|
Gross
Margin
|
|
48.3
|
%
|
|
50.0
|
%
|
|
(1.7)
|
%
|
|
(3)%
|
|
Operating (Loss)
Margin
|
|
(17.8)
|
%
|
|
(16.5)
|
%
|
|
(1.1)
|
%
|
|
7
|
%
|
Net Loss
|
|
$
|
(23.5)
|
|
|
$
|
(25.1)
|
|
|
$
|
1.6
|
|
|
(6)
|
%
|
Loss per diluted
share
|
|
$
|
(0.24)
|
|
|
$
|
(0.26)
|
|
|
$
|
0.02
|
|
|
(8)
|
%
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
86.5
|
|
|
$
|
109.9
|
|
|
$
|
(23.4)
|
|
|
(21)
|
%
|
Service
|
|
$
|
33.9
|
|
|
$
|
33.8
|
|
|
$
|
0.1
|
|
|
—
|
%
|
Total Net
Revenue
|
|
$
|
120.4
|
|
|
$
|
143.7
|
|
|
$
|
(23.3)
|
|
|
(16)
|
%
|
Gross
Margin
|
|
52.6
|
%
|
|
55.3
|
%
|
|
(2.7)
|
%
|
|
(5)
|
%
|
Operating (Loss)
Margin
|
|
(4.7)
|
%
|
|
2.3
|
%
|
|
(7.0)
|
%
|
|
(304)
|
%
|
Net (Loss)
Income
|
|
$
|
(7.9)
|
|
|
$
|
1.6
|
|
|
$
|
(9.6)
|
|
|
(600)
|
%
|
(Loss) Earnings per
diluted share
|
|
$
|
(0.08)
|
|
|
$
|
0.02
|
|
|
$
|
(0.10)
|
|
|
(500)
|
%
|
- Cash and investments ended the quarter at $75.6 million, as compared to $109.3 million from the prior quarter.
- Accounts receivable balance ending Q3 was $78.7 million, with days sales outstanding (DSO)
of 59.
- Inventory ending Q3 was $66.8
million, an increase of $12.4
million from the prior quarter.
Business Outlook:
For its fourth quarter of fiscal 2015 ending June 30, 2015, the Company is targeting GAAP
revenue in a range of $124.2 million to
$134.2 million with non-GAAP revenue in a range of
$125 million to $135 million. GAAP
gross margin is targeted between 49.0% and 50.5% and non-GAAP gross
margin targeted between 53.5% and 54.5%. Operating expenses are
targeted to be between $77.5 million and
$80.5 million on a GAAP basis and $69.0 million to $72.0 million on a non-GAAP
basis. GAAP net loss is targeted to be between $14.5 million to $18.5 million, or $0.15 to $0.19 per share. Non-GAAP earnings
are targeted in a range of a net loss of $4.0 million to break even, or a loss of
$0.04 to net income of $0.00 per share. The GAAP and non-GAAP net (loss)
income targets are based on an estimated 100 million average
outstanding shares. Targeted non-GAAP earnings exclude expenses
related to stock-based compensation expense, the amortization of
acquired intangibles, acquisition and integration related expenses,
restructuring expenses and the purchase accounting adjustment
related to deferred service revenue.
Conference Call:
Extreme Networks will host a
conference call at 5:00 p.m. Eastern
(2:00 p.m. Pacific) today to review
the third fiscal quarter results and fourth fiscal quarter 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 May 5, 2016.
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 #:20788580.
About Extreme Networks:
Extreme Networks, Inc. (EXTR)
is a customer-focused company with advanced networking
technology solutions and service platforms that address business
critical challenges. Extreme Networks backs these solutions with
our best-in-industry customer support model. Extreme Networks is
headquartered in San Jose, CA and
has more than 14,000 customers in over 80 countries. For more
information, visit the company's website
at http://www.extremenetworks.com
Extreme Networks and the Extreme Networks logo
are either trademarks or registered trademarks of Extreme
Networks, Inc. in the United States and/or other
countries. All other names are the property of their respective
owners.
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 acquisition and
integration costs, purchase accounting adjustments, amortization of
acquired intangibles, and share-based compensation. 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 concerning the Company's business
prospects, future financial and operating results, and overall
future prospects are forward-looking statements that involve a
number of uncertainties and risks. 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, increased price competition, product
technology developments, ongoing uncertainty in global economic
conditions, infrastructure development or customer demand,
collectability of receivables, the ability to integrate the
business of Extreme and Enterasys effectively, the ability to
meet current financial covenants, inability to anticipate
demand from end customers, dependencies on third parties to
manufacture our products, delays in development and
commercialization of products under development, and ongoing
litigation.
The matters set forth in this press release 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. Because such statements deal with future events, they are
subject to risks and uncertainties. Other important factors that
could cause actual results to differ materially are contained in
the Company's 10-Qs and 10-Ks that are on file with the Securities
and Exchange Commission. http://www.sec.gov. More information
about potential factors that could affect the Company's business
and financial results is included in its filings with
the Securities and Exchange Commission, including, without
limitation, under the captions: "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and
"Risk Factors," which are on file with the Securities and
Exchange Commission. Except as required under the U.S.
federal securities laws and the rules and regulations of
the SEC, 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,
except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
March 31,
2015
|
|
June 30,
2014
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
74,067
|
|
|
$
|
73,190
|
|
Short-term
investments
|
1,506
|
|
|
32,692
|
|
Accounts receivable,
net of allowances of $4,344 at March 31, 2015 and $3,618 at June
30, 2014
|
78,727
|
|
|
124,664
|
|
Inventories
|
66,811
|
|
|
57,109
|
|
Deferred income
taxes
|
797
|
|
|
1,058
|
|
Prepaid expenses and
other current assets
|
10,069
|
|
|
14,143
|
|
Total current
assets
|
231,977
|
|
|
302,856
|
|
Property and
equipment, net
|
42,399
|
|
|
46,554
|
|
Intangible assets,
net
|
61,096
|
|
|
87,459
|
|
Goodwill
|
70,877
|
|
|
70,877
|
|
Other
assets
|
25,029
|
|
|
18,686
|
|
Total
assets
|
$
|
431,378
|
|
|
$
|
526,432
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
|
9,750
|
|
|
$
|
29,688
|
|
Accounts
payable
|
46,378
|
|
|
37,308
|
|
Accrued compensation
and benefits
|
20,502
|
|
|
26,677
|
|
Accrued
warranty
|
7,879
|
|
|
7,551
|
|
Deferred revenue,
net
|
73,206
|
|
|
74,735
|
|
Deferred distributors
revenue, net of cost of sales to distributors
|
35,687
|
|
|
31,992
|
|
Other accrued
liabilities
|
29,820
|
|
|
38,357
|
|
Total current
liabilities
|
223,222
|
|
|
246,308
|
|
Deferred revenue,
less current portion
|
23,141
|
|
|
22,942
|
|
Long-term debt, less
current portion
|
58,750
|
|
|
91,875
|
|
Deferred income
taxes
|
2,572
|
|
|
—
|
|
Other long-term
liabilities
|
7,934
|
|
|
8,595
|
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
115,759
|
|
|
156,712
|
|
Total liabilities and
stockholders' equity
|
$
|
431,378
|
|
|
$
|
526,432
|
|
EXTREME NETWORKS,
INC.
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands,
except per share amounts)
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
Net
revenues:
|
|
|
|
|
|
|
|
Product
|
$
|
86,527
|
|
|
$
|
109,891
|
|
|
$
|
301,700
|
|
|
$
|
290,001
|
|
Service
|
33,063
|
|
|
31,871
|
|
|
101,372
|
|
|
74,260
|
|
Total net
revenues
|
119,590
|
|
|
141,762
|
|
|
403,072
|
|
|
364,261
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
Product
|
49,761
|
|
|
58,703
|
|
|
164,282
|
|
|
153,112
|
|
Service
|
12,105
|
|
|
12,204
|
|
|
35,377
|
|
|
26,742
|
|
Total cost of
revenues
|
61,866
|
|
|
70,907
|
|
|
199,659
|
|
|
179,854
|
|
Gross
profit:
|
|
|
|
|
|
|
|
Product
|
36,766
|
|
|
51,188
|
|
|
137,418
|
|
|
136,889
|
|
Service
|
20,958
|
|
|
19,667
|
|
|
65,995
|
|
|
47,518
|
|
Total gross
profit
|
57,724
|
|
|
70,855
|
|
|
203,413
|
|
|
184,407
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
23,858
|
|
|
24,265
|
|
|
71,205
|
|
|
53,098
|
|
Sales and
marketing
|
39,226
|
|
|
44,703
|
|
|
127,976
|
|
|
108,033
|
|
General and
administrative
|
9,711
|
|
|
11,178
|
|
|
31,091
|
|
|
29,301
|
|
Acquisition and
integration costs
|
1,725
|
|
|
6,443
|
|
|
9,283
|
|
|
18,826
|
|
Restructuring charge,
net of reversals
|
—
|
|
|
(6)
|
|
|
—
|
|
|
499
|
|
Amortization of
intangibles
|
4,467
|
|
|
7,666
|
|
|
13,402
|
|
|
11,444
|
|
Total operating
expenses
|
78,987
|
|
|
94,249
|
|
|
252,957
|
|
|
221,201
|
|
Operating
loss
|
(21,263)
|
|
|
(23,394)
|
|
|
(49,544)
|
|
|
(36,794)
|
|
Interest
income
|
129
|
|
|
156
|
|
|
471
|
|
|
603
|
|
Interest
expense
|
(758)
|
|
|
(764)
|
|
|
(2,419)
|
|
|
(1,288)
|
|
Other expense,
net
|
(535)
|
|
|
(146)
|
|
|
(1,033)
|
|
|
(1,338)
|
|
Loss before income
taxes
|
(22,427)
|
|
|
(24,148)
|
|
|
(52,525)
|
|
|
(38,817)
|
|
Provision for income
taxes
|
1,121
|
|
|
910
|
|
|
3,458
|
|
|
2,262
|
|
Net loss
|
$
|
(23,548)
|
|
|
$
|
(25,058)
|
|
|
$
|
(55,983)
|
|
|
$
|
(41,079)
|
|
Basic and diluted net
loss per share:
|
|
|
|
|
|
|
|
Net loss per share -
basic
|
$
|
(0.24)
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.57)
|
|
|
$
|
(0.43)
|
|
Net loss per share -
diluted
|
$
|
(0.24)
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.57)
|
|
|
$
|
(0.43)
|
|
Shares used in per
share calculation - basic
|
99,783
|
|
|
96,069
|
|
|
98,591
|
|
|
95,116
|
|
Shares used in per
share calculation - diluted
|
99,783
|
|
|
96,069
|
|
|
98,591
|
|
|
95,116
|
|
EXTREME NETWORKS,
INC.
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
Net cash provided
by (used in) operating activities
|
$
|
33,564
|
|
|
$
|
(30,617)
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(5,610)
|
|
|
(17,384)
|
|
Acquisition, net of
cash acquired
|
—
|
|
|
(180,000)
|
|
Purchases of
investments
|
—
|
|
|
(9,045)
|
|
Purchases of equity
investments
|
(3,000)
|
|
|
—
|
|
Proceeds from
maturities of investments and marketable securities
|
21,815
|
|
|
26,722
|
|
Proceeds from sales
of investments and marketable securities
|
9,051
|
|
|
56,594
|
|
Purchases of
intangible assets
|
(569)
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
21,687
|
|
|
(123,113)
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings under
Revolving Facility
|
24,000
|
|
|
59,000
|
|
Issuance of Term
Loan
|
—
|
|
|
65,000
|
|
Repayment of
debt
|
(77,062)
|
|
|
(1,625)
|
|
Proceeds from
issuance of common stock
|
2,455
|
|
|
6,296
|
|
Net cash (used in)
provided by financing activities
|
(50,607)
|
|
|
128,671
|
|
|
|
|
|
Foreign currency
effect on cash
|
(3,767)
|
|
|
611
|
|
Net increase
(decrease) in cash and cash equivalents
|
877
|
|
|
(24,448)
|
|
Cash and cash
equivalents at beginning of period
|
73,190
|
|
|
95,803
|
|
Cash and cash
equivalents at end of period
|
$
|
74,067
|
|
|
$
|
71,355
|
|
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, or GAAP, Extreme Networks uses non-GAAP measure 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 stock based compensation expense,
acquisition and integration costs, purchase accounting adjustments,
amortization of intangibles and restructuring expenses
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 stock-based compensation expense, acquisition and
integration costs, purchase accounting adjustments, amortization
of intangibles, and restructuring expenses. 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.
Stock based compensation expense. This expense consists
of expenses for stock options, restricted stock and employee stock
purchases through its ESPP. Extreme Networks excludes stock
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 stock-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.
Amortization of intangibles. Amortization of
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.
Purchase accounting adjustments relating to deferred
revenue. Purchase accounting adjustments 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.
Purchase accounting adjustments relating to
inventory. Purchase accounting adjustments relating to
inventory consists of the amortization of the step up value from
the valuation of the inventory at fair value in cost of revenues as
part of business combination accounting. Extreme Networks
excludes these expenses since they result from an event that is out
the ordinary course of continuing operations.
Restructuring expenses. Restructuring expenses primarily
consist of cash severance and termination benefits. Extreme
Networks excludes restructuring expenses since they result from
events that often occur outside of the ordinary course of
continuing operations. Extreme Networks expects to incur
restructuring expenses in future periods.
In addition to the non-GAAP measures discussed above, Extreme
Networks also uses free cash flow as a measure of operating
performance. Free cash flow represents operating cash flows
less net purchase of property and equipment. 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, strengthen
the balance sheet and repurchase stock. A limitation of the
utility of free cash slows 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
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
Revenue - GAAP
Basis
|
$
|
119,590
|
|
|
$
|
141,762
|
|
|
$
|
403,072
|
|
|
$
|
364,261
|
|
Adjustments:
|
|
|
|
|
|
|
|
Purchase accounting
adjustments
|
$
|
766
|
|
|
$
|
1,912
|
|
|
$
|
2,299
|
|
|
$
|
3,676
|
|
Revenue - Non-GAAP
Basis
|
$
|
120,356
|
|
|
$
|
143,674
|
|
|
$
|
405,371
|
|
|
$
|
367,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Margin
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
Gross profit - GAAP
Basis
|
$
|
57,724
|
|
|
$
|
70,855
|
|
|
$
|
203,413
|
|
|
$
|
184,407
|
|
Gross margin - GAAP
Basis percentage
|
48.3
|
%
|
|
50.0
|
%
|
|
50.5
|
%
|
|
50.6
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
$
|
519
|
|
|
$
|
688
|
|
|
$
|
1,639
|
|
|
$
|
1,190
|
|
Purchase accounting
adjustments
|
$
|
766
|
|
|
$
|
3,803
|
|
|
$
|
2,299
|
|
|
$
|
14,803
|
|
Amortization of
intangibles
|
$
|
4,292
|
|
|
$
|
4,042
|
|
|
$
|
12,875
|
|
|
$
|
6,736
|
|
Gross profit -
Non-GAAP Basis
|
$
|
63,301
|
|
|
$
|
79,388
|
|
|
$
|
220,226
|
|
|
$
|
207,136
|
|
Gross margin -
Non-GAAP Basis percentage
|
52.6
|
%
|
|
55.3
|
%
|
|
54.3
|
%
|
|
56.3
|
%
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
Operating loss - GAAP
Basis
|
$
|
(21,263)
|
|
|
$
|
(23,394)
|
|
|
$
|
(49,544)
|
|
|
$
|
(36,794)
|
|
Operating loss - GAAP
Basis percentage
|
(17.8)%
|
|
|
(16.5)%
|
|
|
(12.3)%
|
|
|
(10.1)%
|
|
Adjustments:
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
$
|
4,372
|
|
|
$
|
4,841
|
|
|
$
|
13,935
|
|
|
$
|
9,874
|
|
Acquisition and
integration costs
|
$
|
1,725
|
|
|
$
|
6,443
|
|
|
$
|
9,283
|
|
|
$
|
18,826
|
|
Restructuring charge,
net of reversal
|
$
|
—
|
|
|
$
|
(6)
|
|
|
$
|
—
|
|
|
$
|
499
|
|
Amortization of
intangibles
|
$
|
8,759
|
|
|
$
|
11,708
|
|
|
$
|
26,277
|
|
|
$
|
18,180
|
|
Purchase accounting
adjustments
|
$
|
766
|
|
|
$
|
3,803
|
|
|
$
|
2,299
|
|
|
$
|
14,803
|
|
Litigation settlement
(income) expense
|
$
|
—
|
|
|
$
|
(100)
|
|
|
$
|
—
|
|
|
$
|
(100)
|
|
Total adjustments to
GAAP operating income
|
$
|
15,622
|
|
|
$
|
26,689
|
|
|
$
|
51,794
|
|
|
$
|
62,082
|
|
Operating (loss)
income - Non-GAAP Basis
|
$
|
(5,641)
|
|
|
$
|
3,295
|
|
|
$
|
2,250
|
|
|
$
|
25,288
|
|
Operating (loss)
income - Non-GAAP Basis percentage
|
(4.7)%
|
|
|
2.3
|
%
|
|
0.6
|
%
|
|
6.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net
Income
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
Net loss - GAAP
Basis
|
$
|
(23,548)
|
|
|
$
|
(25,058)
|
|
|
$
|
(55,983)
|
|
|
$
|
(41,079)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
$
|
4,372
|
|
|
$
|
4,841
|
|
|
$
|
13,935
|
|
|
$
|
9,874
|
|
Acquisition and
integration costs
|
$
|
1,725
|
|
|
$
|
6,443
|
|
|
$
|
9,283
|
|
|
$
|
18,826
|
|
Restructuring charge,
net of reversal
|
$
|
—
|
|
|
$
|
(6)
|
|
|
$
|
—
|
|
|
$
|
499
|
|
Amortization of
intangibles
|
$
|
8,759
|
|
|
$
|
11,708
|
|
|
$
|
26,277
|
|
|
$
|
18,180
|
|
Purchase accounting
adjustments
|
$
|
766
|
|
|
$
|
3,803
|
|
|
$
|
2,299
|
|
|
$
|
14,803
|
|
Litigation settlement
(income) expense
|
$
|
—
|
|
|
$
|
(100)
|
|
|
$
|
—
|
|
|
$
|
(100)
|
|
Total adjustments to
GAAP net income
|
$
|
15,622
|
|
|
$
|
26,689
|
|
|
$
|
51,794
|
|
|
$
|
62,082
|
|
Net (loss) income -
Non-GAAP Basis
|
$
|
(7,926)
|
|
|
$
|
1,631
|
|
|
$
|
(4,189)
|
|
|
$
|
21,003
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Diluted net (loss)
income per share - Non-GAAP Basis
|
$
|
(0.08)
|
|
|
$
|
0.02
|
|
|
$
|
(0.04)
|
|
|
$
|
0.21
|
|
Shares used in
diluted net income per share calculation
|
99,783
|
|
|
99,512
|
|
|
98,591
|
|
|
97,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
March 31,
2015
|
|
March 31,
2014
|
|
March 31,
2015
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
Cash flow (used in)
provided by operations
|
$
|
(7,972)
|
|
|
$
|
(25,747)
|
|
|
$
|
33,564
|
|
|
$
|
(30,617)
|
|
Add: PP&E CapEx
spending
|
$
|
(1,648)
|
|
|
$
|
(4,822)
|
|
|
$
|
(5,610)
|
|
|
$
|
(17,384)
|
|
Total free cash
flow
|
$
|
(9,620)
|
|
|
$
|
(30,569)
|
|
|
$
|
27,954
|
|
|
$
|
(48,001)
|
|
|
|
|
|
|
|
|
|
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SOURCE Extreme Networks, Inc.