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Extreme Networks Reports First Quarter and Fiscal Year 2013 Financial Results
Oct 31, 2012 (04:10 PM EDT)
SANTA CLARA, Calif., Oct. 31, 2012 /PRNewswire/ -- Extreme Networks, Inc. (Nasdaq: EXTR) today announced revenue of $76.1 million for its first quarter of fiscal 2013 ending September 30, 2012. This represents a 3.5% decrease compared to revenue of $78.9 million reported for the first quarter of fiscal 2012 and a 13.1% decrease compared to the fourth quarter of fiscal 2012. GAAP net income for the first quarter was $12.9 million, or $0.14 per diluted share, an increase year-over-year compared to GAAP net income of $1.6 million, or $0.02 per diluted share, for the first quarter of fiscal 2012. On a non-GAAP basis, net income for the first quarter of fiscal 2013 was $3.5 million, or $0.04 per diluted share, compared to non-GAAP net income for the first quarter of fiscal 2012 of $4.4 million, or $0.05 per diluted share.
"Q1 results were in-line with our targets and we are encouraged by customer and partner response related to our strategy and products released earlier in the calendar year," stated Oscar Rodriguez, President and CEO of Extreme Networks. "Our goal is to grow revenues while continually refining our cost structure and enhancing our selling efforts to deliver superior products that we believe provide both a technology and cost advantage for both new and existing customers."
Recent Business Highlights:
For its second quarter of fiscal 2013 ending December 31, 2012, the company is targeting revenue in a range of $78 million to $85 million with GAAP and non-GAAP gross margin targeted to be 55% +/-. Operating expenses are targeted to increase by $2.0 million to $3.0 million on a GAAP basis and by $2.5 million to $3.5 million on a non-GAAP basis. GAAP net income is targeted at $2.5 million to $4.0 million, or $0.02 to $0.05 per diluted share. Non-GAAP net income is targeted in a range of $4.0 million to $6.5 million, or $0.04 to $0.07 per diluted share. The GAAP and non-GAAP net income targets are based on an estimated 96 million +/- diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to stock-based compensation expense.
Financial Model Goals:
The company is targeting a quarterly financial model with the goal of achieving non-GAAP gross margin of 56% +/- and for non-GAAP operating income of 10% +/-, at a revenue level in the low $80 million range by the end of fiscal 2013. To help achieve this goal, the company intends to focus on growing its revenue with higher performing and lower cost products as well as further realigning its operating cost structure around this set of products.
The schedules attached to this release are an integral part of the release.
Extreme Networks will host a conference call at 5:00 p.m. Eastern (2:00 p.m. Pacific) today to review the highlights of the first fiscal quarter 2013 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 November 13th, 2012. 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.
About Extreme Networks:
Extreme Networks is a technology leader in high-performance Ethernet switching for cloud, data center and mobile networks. Based in Santa Clara, CA, Extreme Networks has more than 6,000 customers in over 50 countries. Extreme Networks is a trademark or registered trademark of Extreme Networks, Inc. in the United States and/or other countries.
For additional product and company information, please refer to www.extremenetworks.com.
Non-GAAP Financial Measures:
Forward Looking Statements:
Actual results, including with respect to the company's financial targets and general business prospects, could differ materially due to a number of factors, including the risk that the company may not obtain sufficient orders to achieve targeted revenues for the company's products and services given both increasing price competition in key network switching equipment markets and the need to align the company's cost structure to meet the company's financial goals; the company's effectiveness in controlling expenses, the risk that it or its distributors and other channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as it experiences wide fluctuations in supply and demand; the risk that its results will suffer if it is unable to balance fluctuations in customer demand and capacity; risks associated with the ramp-up of production of its new products and its entry into new business channels different from those in which it has historically operated; the risk that it may experience production delays that preclude it from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; its ability to complete development and commercialization of products under development, such as its pipeline of new network switches and related software; its ability to lower costs; risks resulting from the concentration of business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the rapid development of new technology and competing products that may impair demand or render its products obsolete; the potential lack of customer acceptance for new products; and risks associated with ongoing litigation; 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 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.
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, litigation settlements, restructuring expenses and gains related to the sale of the Santa Clara campus.
Non-GAAP measures presented in this press release are not in accordance with or an 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 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 Network's management uses financial statements that do not include stock-based compensation expense, litigation settlement expenses, restructuring expenses or gains related to the sale of the Santa Clara campus. 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 operating results.
Restructuring expenses. Restructuring expense 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.
Gains related to the sale of the Santa Clara Campus. The one-time net gain related to the sale of the Santa Clara campus consist of the gross proceeds of the sale less the expenses directly related to the sale such as commissions, closing costs and legal fees. Extreme Networks excludes this gain because it is a one-time event and does not believe that the gain is reflective of ongoing operations.
Extreme Networks expects to incur stock-based compensation 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 increases or decrease in the company's cash balance for the period.
SOURCE Extreme Networks, Inc.