SAN JOSE, Calif., April 27, 2016 /PRNewswire/ -- Extreme
Networks, Inc. (Nasdaq: EXTR) today released financial results for
its fiscal third quarter ended March
31, 2016. Third quarter GAAP revenue was $124.9 million and non-GAAP revenue was
$125.3 million. GAAP net loss
for the third fiscal quarter was $10.8
million, or $0.10 per basic
share, and non-GAAP net income was $3.5
million, or $0.03 per diluted
share.
"We posted solid performance for the quarter, achieving 4%
year-over-year organic growth and significantly improved non-GAAP
profitability, while also strengthening the balance sheet," stated
Ed Meyercord, President and CEO of
Extreme Networks. "Growth was driven by continued penetration
of targeted education and hospitality/public venue enterprise
customers in North America, and
successful execution of our software-driven solutions selling
approach for wireless and wired enterprise campus networking.
"Despite the challenging macro environment for enterprise campus
switching, which included seasonal pricing pressure, our team made
consistent progress in selling the ExtremeManagement,
ExtremeControl and ExtremeAnalytics software portfolio combined
with our Wave 2 access points and next generation end-to-end switch
portfolio powered by Broadcom. We are encouraged by the
growing number of customers who recognize the important benefits of
adopting our integrated software and hardware solution, which
include lower total cost of ownership, improved network performance
and security, and more efficient network management," Meyercord
added.
Recent Key Events:
- Unveiled Wireless Specialization Program. During
the quarter, we introduced the ExtremeWireless specialization
program to further enable global channel partners to deliver the
wireless solutions customers require in order to increase
productivity and responsiveness and extend applications beyond the
wired network.
- Strengthened the Sales Leadership Team. We
announced the appointment of John
Morrison to the position of vice president, EMEA sales and
services. Morrison will oversee EMEA sales, services and
strategy. In addition, we announced the appointment of
Gordon Mackintosh to the position of
senior director of worldwide partner program and sales business
development. In this role, Mackintosh is responsible for the
ongoing development of the Extreme Partner Network to provide the
company's global partner ecosystem with new revenue streams and
growth opportunities.
- Partnership with the NFL. To further measure and
analyze the fan experience, the NFL leveraged ExtremeAnalytics as
part of Extreme Networks' role as the Official Wi-Fi Analytics
Provider of Super Bowl 50. We also provided our ExtremeWireless
solution to Super Bowl City in the San Francisco Bay area, where
over 100 Wi-Fi Coaches assisted fans with their wireless needs to
enhance their game day digital experience.
- Key Customer Wins in Focus Markets. Extreme
Networks continued to showcase customer momentum.
Notable customer wins in key vertical markets include:
- Education: Sinclair Community
College, Slippery Rock
University, Letcher County Schools, Grant County Schools,
Valdosta City School District
- Healthcare: Hunterdon Healthcare System, Basildon &
Thurrock University Hospitals NHS Trust, Charitè
Universitätsmedizin Berlin,
Barco
- Manufacturing: Volkswagen, Schneider Electric
- Hospitality: UOA Vertical Hotel Bangsar, The Kraft Group
– New England Patriots, Carolina Panthers, Buffalo Sabres, Chicago
Cubs
- Government: The United States Department of Health
and Human Services, Commonwealth of Massachusetts – Port Authority, Perth & Kinross
Council, Republic of Turkey
– Ministry of Interior, Ankara Metropolitan Municipality Water and
Sewerage, City of Memphis
- Additional customers include: SAK Holding,
Reed Smith Shaw & McClay,
GasLINE GmbH & Co. KG, Nokia
Fiscal Q3 2016
Financial Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
92.7
|
|
|
$
|
86.5
|
|
|
$
|
6.2
|
|
|
|
7
|
%
|
Service
|
|
|
32.2
|
|
|
|
33.1
|
|
|
|
(0.9)
|
|
|
|
(3)
|
%
|
Total Net
Revenue
|
|
$
|
124.9
|
|
|
$
|
119.6
|
|
|
$
|
5.3
|
|
|
|
4
|
%
|
Gross
Margin
|
|
|
50.2
|
%
|
|
|
48.3
|
%
|
|
|
1.9
|
%
|
|
|
4
|
%
|
Operating
Margin
|
|
|
(7.1)
|
%
|
|
|
(17.8)
|
%
|
|
|
10.7
|
%
|
|
|
60
|
%
|
Net Loss
|
|
$
|
(10.8)
|
|
|
$
|
(23.5)
|
|
|
$
|
12.7
|
|
|
|
54
|
%
|
Loss per basic
share
|
|
$
|
(0.10)
|
|
|
$
|
(0.24)
|
|
|
$
|
0.14
|
|
|
|
58
|
%
|
Non-GAAP Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
92.7
|
|
|
$
|
86.5
|
|
|
$
|
6.2
|
|
|
|
7
|
%
|
Service
|
|
|
32.6
|
|
|
|
33.9
|
|
|
|
(1.3)
|
|
|
|
(4)
|
%
|
Total Net
Revenue
|
|
$
|
125.3
|
|
|
$
|
120.4
|
|
|
$
|
4.9
|
|
|
|
4
|
%
|
Gross
Margin
|
|
|
53.4
|
%
|
|
|
52.6
|
%
|
|
|
0.8
|
%
|
|
|
2
|
%
|
Operating
Margin
|
|
|
4.3
|
%
|
|
|
(4.7)
|
%
|
|
|
9.0
|
%
|
|
|
191
|
%
|
Net Income
(Loss)
|
|
$
|
3.5
|
|
|
$
|
(7.9)
|
|
|
$
|
11.4
|
|
|
|
144
|
%
|
Earnings (loss) per
diluted share
|
|
$
|
0.03
|
|
|
$
|
(0.08)
|
|
|
$
|
0.11
|
|
|
|
138
|
%
|
- Cash and investments ended the quarter at $88.3 million, as compared to $85.9 million from the prior quarter.
- Accounts receivable balance ending Q3 was $62.7 million, with days sales outstanding (DSO)
of 46.
- Inventory ending Q3 was $52.8
million, a decrease of $3.8
million from the prior quarter.
Business Outlook:
Extreme Networks' Business Outlook statements are based on
current expectations. The following statements are
forward-looking, and actual results could differ materially based
on market conditions and the factors set forth under
"Forward-Looking Statements" below.
For its fourth quarter of fiscal 2016 ending June 30, 2016, the Company is targeting GAAP
revenue in a range of $136.6 million to
$146.6 million with non-GAAP revenue in a range of
$137.0 million to $147.0 million.
GAAP gross margin is targeted between 50.5% and 52.3% and non-GAAP
gross margin is targeted between 53.5% and 55.0%. Operating
expenses are targeted to be between $71.6
million and $73.6 million on a GAAP basis and $63.5 million to $65.5 million on a non-GAAP
basis. GAAP earnings are targeted to be between a net loss of
$4.2 million to net income of
$1.0 million, or a loss of
$0.04 to net income of $0.01 per share. Non-GAAP earnings are
targeted in a range of net income of $8.1
million to $13.3 million, or $0.08 to $0.12 per
diluted share. The GAAP and non-GAAP net income (loss) targets are
based on an estimated 105 million and 107 million average
outstanding shares, respectively. Targeted non-GAAP earnings
exclude expenses related to stock-based compensation expense, the
amortization of acquired intangibles, acquisition and integration
related expenses, restructuring expenses, litigation expenses,
overhead adjustments and the purchase accounting adjustment related
to deferred service revenue.
Conference Call:
Extreme Networks will host a conference call at 4:30 p.m. Eastern (1:30
p.m. Pacific) today to review the third fiscal quarter
results and fourth fiscal quarter 2016 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 April
27, 2017. The conference call may also be
heard by dialing 1-877-303-9826 (international callers dial
1-224-357-2194). Supplemental financial information to be discussed
during the conference call will be posted in the Investor Relations
section of the Company's website www.extremenetworks.com including
the non-GAAP reconciliation attached to this press release. The
encore recording can be accessed by dialing (855) 859-2056 /or
international 1 (404) 537-3406 Conference ID #
87958911.
About Extreme Networks:
Extreme Networks, Inc. (EXTR) delivers software-driven
networking solutions that help IT departments everywhere deliver
the ultimate business outcome: stronger connections with customers,
partners and employees. Wired to wireless, desktop to datacenter,
we go to extreme measures for our 20,000-plus customers in more
than 80 countries, delivering 100% insourced support to
organizations large and small, including some of the world's
leading names in business, education, government, healthcare,
manufacturing and hospitality. Founded in 1996, Extreme is
headquartered in San Jose,
California. For more information, visit Extreme's website or
call 1-888-257-3000.
Extreme Networks and the Extreme Networks logo,
ExtremeManagement, ExtremeWireless, ExtremeControl and
ExtremeAnalytics are either trademarks or registered trademarks
of Extreme Networks, Inc. in the United
States and/or other countries.
Non-GAAP Financial Measures:
Extreme Networks provides all financial information required in
accordance with generally accepted accounting principles (GAAP).
The Company is providing with this press release non-GAAP revenue,
non-GAAP gross margins, non-GAAP operating expenses, and non-GAAP
income (loss) per share. In preparing non-GAAP information, the
Company has excluded, where applicable, the impact of share-based
compensation, acquisition and integration costs, purchase
accounting adjustments, amortization of acquired intangibles,
restructuring charges, litigation expenses, executive transition
expenses and overhead adjustments. The Company believes that
excluding these items provides both management and investors with
additional insight into its current operations, the trends
affecting the Company, the Company's marketplace performance, and
the Company's ability to generate cash from operations. Please note
that the Company's non-GAAP measures may be different than those
used by other companies. The additional non-GAAP financial
information the Company presents should be considered in
conjunction with, and not as a substitute for, the Company's GAAP
financial information. The Company has provided a non-GAAP
reconciliation of the results for the periods presented in this
release, which are adjusted to exclude certain items as
indicated. These measures should only be used to evaluate the
Company's results of operations in conjunction with the
corresponding GAAP measures for comparable financial information
and understanding of the Company's ongoing performance as a
business. Extreme Networks uses both GAAP and non-GAAP measures to
evaluate and manage its operations.
Forward Looking Statements:
Statements in this release, including those concerning the
Company's business outlook, future financial and operating results,
and overall future prospects are forward-looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements speak only as of the date of this release. Actual
results or events could differ materially from those anticipated in
those forward-looking statements as a result of certain factors,
including: failure to achieve targeted revenues and forecasted
demand from end customers; a highly competitive business
environment for network switching equipment; our effectiveness in
controlling expenses; the possibility that we might experience
delays in the development or introduction of new technology and
products; customer response to our new technology and products; the
timing of any recovery in the global economy; risks related to
pending or future litigation; and a dependency on third parties for
certain components and for the manufacturing of our
products.
More information about potential factors that could affect the
Company's business and financial results is included in the
Company's filings with the Securities and Exchange Commission,
including, without limitation, under the captions: "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," and "Risk Factors". Except as required under the
U.S. federal securities laws and the rules and regulations of
the U.S. Securities and Exchange Commission, Extreme
Networks disclaims any obligation to update any
forward-looking statements after the date of this release, whether
as a result of new information, future events, developments,
changes in assumptions or otherwise.
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(In
thousands)
|
|
(Unaudited)
|
|
|
|
|
|
March 31,
2016
|
|
|
June 30,
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
88,334
|
|
|
$
|
76,225
|
|
Accounts receivable,
net of allowances of $5,090 at March 31, 2016 and $2,396 at June
30, 2015
|
|
|
62,670
|
|
|
|
92,737
|
|
Inventories
|
|
|
52,755
|
|
|
|
58,014
|
|
Deferred income
taxes
|
|
|
577
|
|
|
|
760
|
|
Prepaid expenses and
other current assets
|
|
|
9,710
|
|
|
|
10,258
|
|
Total current
assets
|
|
|
214,046
|
|
|
|
237,994
|
|
Property and
equipment, net
|
|
|
30,439
|
|
|
|
39,862
|
|
Intangible assets,
net
|
|
|
27,425
|
|
|
|
52,132
|
|
Goodwill
|
|
|
70,877
|
|
|
|
70,877
|
|
Other
assets
|
|
|
26,204
|
|
|
|
27,795
|
|
Total
assets
|
|
$
|
368,991
|
|
|
$
|
428,660
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
16,250
|
|
|
$
|
11,375
|
|
Accounts
payable
|
|
|
21,127
|
|
|
|
40,135
|
|
Accrued compensation
and benefits
|
|
|
22,920
|
|
|
|
25,195
|
|
Accrued
warranty
|
|
|
10,280
|
|
|
|
8,676
|
|
Deferred revenue,
net
|
|
|
76,712
|
|
|
|
76,551
|
|
Deferred distributors
revenue, net of cost of sales to distributors
|
|
|
23,933
|
|
|
|
40,875
|
|
Other accrued
liabilities
|
|
|
30,182
|
|
|
|
32,623
|
|
Total current
liabilities
|
|
|
201,404
|
|
|
|
235,430
|
|
Deferred revenue,
less current portion
|
|
|
22,227
|
|
|
|
23,231
|
|
Long-term debt, less
current portion
|
|
|
42,500
|
|
|
|
55,500
|
|
Deferred income
taxes
|
|
|
3,941
|
|
|
|
2,979
|
|
Other long-term
liabilities
|
|
|
8,634
|
|
|
|
7,285
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
90,285
|
|
|
|
104,235
|
|
Total liabilities and
stockholders' equity
|
|
$
|
368,991
|
|
|
$
|
428,660
|
|
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands,
except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
92,711
|
|
|
$
|
86,527
|
|
|
$
|
289,447
|
|
|
$
|
301,700
|
|
Service
|
|
|
32,175
|
|
|
|
33,063
|
|
|
|
99,325
|
|
|
|
101,372
|
|
Total net
revenues
|
|
|
124,886
|
|
|
|
119,590
|
|
|
|
388,772
|
|
|
|
403,072
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
50,240
|
|
|
|
49,761
|
|
|
|
154,277
|
|
|
|
164,282
|
|
Service
|
|
|
11,926
|
|
|
|
12,105
|
|
|
|
36,382
|
|
|
|
35,377
|
|
Total cost of
revenues
|
|
|
62,166
|
|
|
|
61,866
|
|
|
|
190,659
|
|
|
|
199,659
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
42,471
|
|
|
|
36,766
|
|
|
|
135,170
|
|
|
|
137,418
|
|
Service
|
|
|
20,249
|
|
|
|
20,958
|
|
|
|
62,943
|
|
|
|
65,995
|
|
Total gross
profit
|
|
|
62,720
|
|
|
|
57,724
|
|
|
|
198,113
|
|
|
|
203,413
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
|
18,852
|
|
|
|
23,858
|
|
|
|
59,836
|
|
|
|
71,205
|
|
Sales and
marketing
|
|
|
38,322
|
|
|
|
39,226
|
|
|
|
111,442
|
|
|
|
127,976
|
|
General and
administrative
|
|
|
8,957
|
|
|
|
9,711
|
|
|
|
27,908
|
|
|
|
31,091
|
|
Acquisition and
integration costs
|
|
|
-
|
|
|
|
1,725
|
|
|
|
1,145
|
|
|
|
9,283
|
|
Restructuring charge,
net of reversals
|
|
|
1,358
|
|
|
|
-
|
|
|
|
9,992
|
|
|
|
-
|
|
Amortization of
intangibles
|
|
|
4,142
|
|
|
|
4,467
|
|
|
|
12,860
|
|
|
|
13,402
|
|
Total operating
expenses
|
|
|
71,631
|
|
|
|
78,987
|
|
|
|
223,183
|
|
|
|
252,957
|
|
Operating
loss
|
|
|
(8,911)
|
|
|
|
(21,263)
|
|
|
|
(25,070)
|
|
|
|
(49,544)
|
|
Interest
income
|
|
|
28
|
|
|
|
129
|
|
|
|
84
|
|
|
|
471
|
|
Interest
expense
|
|
|
(769)
|
|
|
|
(758)
|
|
|
|
(2,404)
|
|
|
|
(2,419)
|
|
Other income
(expense), net
|
|
|
(266)
|
|
|
|
(535)
|
|
|
|
813
|
|
|
|
(1,033)
|
|
Loss before income
taxes
|
|
|
(9,918)
|
|
|
|
(22,427)
|
|
|
|
(26,577)
|
|
|
|
(52,525)
|
|
Provision for income
taxes
|
|
|
866
|
|
|
|
1,121
|
|
|
|
2,967
|
|
|
|
3,458
|
|
Net loss
|
|
$
|
(10,784)
|
|
|
$
|
(23,548)
|
|
|
$
|
(29,544)
|
|
|
$
|
(55,983)
|
|
Basic and diluted net
loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share -
basic
|
|
$
|
(0.10)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.29)
|
|
|
$
|
(0.57)
|
|
Net loss per share -
diluted
|
|
$
|
(0.10)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.29)
|
|
|
$
|
(0.57)
|
|
Shares used in per
share calculation - basic
|
|
|
104,104
|
|
|
|
99,783
|
|
|
|
102,486
|
|
|
|
98,591
|
|
Shares used in per
share calculation - diluted
|
|
|
104,104
|
|
|
|
99,783
|
|
|
|
102,486
|
|
|
|
98,591
|
|
EXTREME NETWORKS,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Nine Months
Ended
|
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Net cash provided
by operating activities
|
|
$
|
18,913
|
|
|
$
|
33,564
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(2,797)
|
|
|
|
(5,610)
|
|
Purchases of
non-marketable equity investments
|
|
|
-
|
|
|
|
(3,000)
|
|
Proceeds from
maturities of investments and marketable securities
|
|
|
-
|
|
|
|
21,815
|
|
Proceeds from sales of
investments and marketable securities
|
|
|
-
|
|
|
|
9,051
|
|
Purchases of
intangible assets
|
|
|
-
|
|
|
|
(569)
|
|
Net cash (used in)
provided by investing activities
|
|
|
(2,797)
|
|
|
|
21,687
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Borrowings under
Revolving Facility
|
|
|
15,000
|
|
|
|
24,000
|
|
Repayment of
debt
|
|
|
(23,125)
|
|
|
|
(77,062)
|
|
Proceeds from issuance
of common stock
|
|
|
4,460
|
|
|
|
2,455
|
|
Net cash used in
financing activities
|
|
|
(3,665)
|
|
|
|
(50,607)
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
effect on cash
|
|
|
(342)
|
|
|
|
(3,767)
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash and cash equivalents
|
|
|
12,109
|
|
|
|
877
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
|
76,225
|
|
|
|
73,190
|
|
Cash and cash
equivalents at end of period
|
|
$
|
88,334
|
|
|
$
|
74,067
|
|
Extreme Networks, Inc.
Non-GAAP
Measures of Financial Performance
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles, ("GAAP"), Extreme Networks uses non-GAAP measures of
certain components of financial performance. These non-GAAP
measures include non-GAAP net income, non-GAAP earnings per diluted
share, non-GAAP gross margin, non-GAAP operating expenses and free
cash flow.
Reconciliation to the nearest GAAP measure of all historical
non-GAAP measures included in this press release can be found in
the tables included with this press release. In this press
release, Extreme Networks also presents its target for non-GAAP
expenses, which is expenses less share-based compensation expense,
acquisition and integration costs, purchase accounting adjustments,
amortization of intangibles, restructuring expenses, litigation
expenses, executive transition and overhead adjustments.
Non-GAAP measures presented in this press release are not in
accordance with or alternative measures prepared in accordance with
GAAP and may be different from non-GAAP measures used by other
companies. In addition, these non-GAAP measures are not based
on any comprehensive set of accounting rules or principles.
Non-GAAP measures have limitations in that they do not reflect all
of the amounts associated with Extreme Networks' results of
operations as determined in accordance with GAAP. These
non-GAAP measures should only be used to evaluate Extreme Networks'
results of operations in conjunction with the corresponding GAAP
measures.
Extreme Networks believes that these non-GAAP measures when
shown in conjunction with the corresponding GAAP measures enhance
investors' and management's overall understanding of the Company's
current financial performance and the Company's prospects for the
future, including cash flows available to pursue opportunities to
enhance shareholder value. In addition, because Extreme
Networks has historically reported certain non-GAAP results to
investors, the Company believes that the inclusion of non-GAAP
measures provides consistency in the Company's financial
reporting.
For its internal planning process, and as discussed further
below, Extreme Networks' management uses financial statements that
do not include share-based compensation expense, acquisition and
integration costs, purchase accounting adjustments, amortization
of intangibles, restructuring expenses, litigation expenses,
executive transition expenses and overhead adjustments.
Extreme Networks' management also uses non-GAAP measures, in
addition to the corresponding GAAP measures, in reviewing the
Company's financial results.
As described above, Extreme Networks excludes the following
items from one or more of its non-GAAP measures when
applicable.
Share-based compensation. This expense consists of
expenses for stock options, restricted stock and employee stock
purchases through its ESPP. Extreme Networks excludes
share-based compensation expenses from its non-GAAP measures
primarily because they are non-cash expenses that the Company does
not believe are reflective of ongoing cash requirement related to
operating results. Extreme Networks expects to incur share-based
compensation expenses in future periods.
Acquisition and integration costs. Acquisition and
integration costs primarily consist of legal and professional fees,
severance costs, and other expenses related to the acquisition and
integration of Enterasys Inc. Extreme Networks excludes these
expenses since they result from an event that is outside the
ordinary course of continuing operations.
Purchase accounting adjustments. Purchase
accounting adjustments relating to deferred revenue consists of
adjustments to the carrying value of deferred revenue. We
have recorded adjustments to the assumed deferred revenue to
reflect only a fulfillment margin and thereby excluding the profit
margin and revenue which would have been incurred had Extreme
Networks entered into the service contract post-acquisition.
Amortization of acquired intangibles. Amortization
of acquired intangibles includes the monthly amortization expense
of acquired intangible assets such as developed technology,
customer relationships, trademarks and order backlog. The
amortization of the developed technology intangible is recorded in
product cost of goods sold, while the amortization for the other
intangibles are recorded in operating expenses. Extreme
Networks excludes these non-cash expenses since they result from an
intangible asset and for which the period expense does not impact
the operations of the business and are non-cash in nature.
Restructuring expenses. Restructuring expenses primarily
consist of accelerated depreciation of leasehold improvements
related to excess facilities. Extreme Networks excludes
restructuring expenses since they result from events that often
occur outside of the ordinary course of continuing operations.
Extreme Networks expects to incur restructuring expenses in future
periods.
Litigation expenses. Litigation expenses consist of legal
and professional fees and expenses related to our on-going ligation
matter as a result of a securities laws class action lawsuit.
Executive transition expenses. Executive transition
expenses consists of severance and termination benefits. The
expenses are incurred through execution of pre-established
employment contracts with senior executives. The severance
and termination benefits are cash transactions, while the
share-based compensation are non-cash expenses the Company does not
believe these expenses are reflective of ongoing cash requirements
related to its operating results.
Overhead adjustments. Overhead adjustment relate to
service inventory overhead capitalization, this was a one-time
event and was non-cash in nature.
In addition to the non-GAAP measures discussed above, Extreme
Networks uses free cash flow as a measure of operating
performance. Free cash flow represents operating cash flows
less net purchase of property and equipment on a GAAP basis.
Extreme Networks considers free cash flows to be a liquidity
measure that provides useful information to management and
investors about the amount of cash generated by the business after
the purchases of property and equipment, which can then be used to,
among other things, invest in Extreme Networks business, make
strategic acquisitions, and strengthen the balance sheet. A
limitation of the utility of free cash flows as a measure of
financial performance is that it does not represent the total
increase or decrease in the Company's cash balance for the
period.
EXTREME NETWORKS,
INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
GAAP TO NON-GAAP
RECONCILIATION
|
|
(In thousands,
except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
Non-GAAP
Revenue
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue - GAAP
Basis
|
$
|
124,886
|
|
|
$
|
119,590
|
|
|
$
|
388,772
|
|
|
$
|
403,072
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting
adjustment
|
|
377
|
|
|
|
766
|
|
|
|
1,131
|
|
|
|
2,299
|
|
Revenue - Non-GAAP
Basis
|
$
|
125,263
|
|
|
$
|
120,356
|
|
|
$
|
389,903
|
|
|
$
|
405,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Margin
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit - GAAP
Basis
|
$
|
62,720
|
|
|
$
|
57,724
|
|
|
$
|
198,113
|
|
|
$
|
203,413
|
|
Gross margin - GAAP
Basis percentage
|
|
50.2
|
%
|
|
|
48.3
|
%
|
|
|
51.0
|
%
|
|
|
50.5
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
428
|
|
|
|
519
|
|
|
|
1,644
|
|
|
|
1,639
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,131
|
|
|
|
2,299
|
|
Amortization of
intangibles
|
|
3,417
|
|
|
|
4,292
|
|
|
|
11,416
|
|
|
|
12,875
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Gross profit -
Non-GAAP Basis
|
$
|
66,942
|
|
|
$
|
63,301
|
|
|
$
|
210,811
|
|
|
$
|
220,226
|
|
Gross margin -
Non-GAAP Basis percentage
|
|
53.4
|
%
|
|
|
52.6
|
%
|
|
|
54.1
|
%
|
|
|
54.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income (Loss)
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
loss
|
$
|
(8,911)
|
|
|
$
|
(21,263)
|
|
|
$
|
(25,070)
|
|
|
$
|
(49,544)
|
|
GAAP operating loss
percentage
|
|
(7.1)
|
%
|
|
|
(17.8)
|
%
|
|
|
(6.4)
|
%
|
|
|
(12.3)
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
3,503
|
|
|
|
4,372
|
|
|
|
12,120
|
|
|
|
13,935
|
|
Acquisition and
integration costs
|
|
-
|
|
|
|
1,725
|
|
|
|
1,145
|
|
|
|
9,283
|
|
Restructuring charge,
net of reversal
|
|
1,358
|
|
|
|
-
|
|
|
|
9,992
|
|
|
|
-
|
|
Amortization of
intangibles
|
|
7,559
|
|
|
|
8,759
|
|
|
|
24,276
|
|
|
|
26,277
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,131
|
|
|
|
2,299
|
|
Executive transition
costs
|
|
1,395
|
|
|
|
-
|
|
|
|
1,395
|
|
|
|
-
|
|
Litigation
|
|
85
|
|
|
|
-
|
|
|
|
164
|
|
|
|
-
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Total adjustments to
GAAP operating loss
|
$
|
14,277
|
|
|
$
|
15,622
|
|
|
$
|
48,730
|
|
|
$
|
51,794
|
|
Non-GAAP operating
income (loss)
|
$
|
5,366
|
|
|
$
|
(5,641)
|
|
|
$
|
23,660
|
|
|
$
|
2,250
|
|
Non-GAAP operating
income (loss) percentage
|
|
4.3
|
%
|
|
|
(4.7)
|
%
|
|
|
6.1
|
%
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net
Income (Loss)
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
$
|
(10,784)
|
|
|
$
|
(23,548)
|
|
|
$
|
(29,544)
|
|
|
$
|
(55,983)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation expense
|
|
3,503
|
|
|
|
4,372
|
|
|
|
12,120
|
|
|
|
13,935
|
|
Acquisition and
integration costs
|
|
-
|
|
|
|
1,725
|
|
|
|
1,145
|
|
|
|
9,283
|
|
Restructuring charge,
net of reversal
|
|
1,358
|
|
|
|
-
|
|
|
|
9,992
|
|
|
|
-
|
|
Amortization of
intangibles
|
|
7,559
|
|
|
|
8,759
|
|
|
|
24,276
|
|
|
|
26,277
|
|
Purchase accounting
adjustments
|
|
377
|
|
|
|
766
|
|
|
|
1,131
|
|
|
|
2,299
|
|
Executive transition
costs
|
|
1,395
|
|
|
|
-
|
|
|
|
1,395
|
|
|
|
-
|
|
Litigation
|
|
85
|
|
|
|
-
|
|
|
|
164
|
|
|
|
-
|
|
Service inventory
overhead capitalization
|
|
-
|
|
|
|
-
|
|
|
|
(1,493)
|
|
|
|
-
|
|
Total adjustments to
GAAP net loss
|
$
|
14,277
|
|
|
$
|
15,622
|
|
|
$
|
48,730
|
|
|
$
|
51,794
|
|
Non-GAAP net income
(loss)
|
$
|
3,493
|
|
|
$
|
(7,926)
|
|
|
$
|
19,186
|
|
|
$
|
(4,189)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted net
income (loss) per share
|
$
|
0.03
|
|
|
$
|
(0.08)
|
|
|
$
|
0.18
|
|
|
$
|
(0.04)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
diluted net income (loss) per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP shares
used
|
|
105,955
|
|
|
|
99,783
|
|
|
|
104,650
|
|
|
|
98,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by
/ (used in) operations
|
$
|
4,946
|
|
|
$
|
(7,889)
|
|
|
$
|
18,913
|
|
|
$
|
33,564
|
|
Add: PP&E CapEx
spending
|
|
(1,388)
|
|
|
$
|
(1,648)
|
|
|
|
(2,797)
|
|
|
|
(5,610)
|
|
Total free cash
flow
|
$
|
3,558
|
|
|
$
|
(9,537)
|
|
|
$
|
16,116
|
|
|
$
|
27,954
|
|
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To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/extreme-networks-reports-third-quarter-fiscal-year-2016-financial-results-300258715.html
SOURCE Extreme Networks, Inc.