Exhibit 99.1
FOR IMMEDIATE RELEASE
For more information, contact:
Extreme Networks | ||
Investor Relations | Public Relations | |
408/579-3030 | 408/579-3483 | |
investor_relations@extremenetworks.com | gcross@extremenetworks.com |
EXTREME NETWORKS REPORTS INCREASED FOURTH QUARTER REVENUE
Highest Revenue in Six Quarters; Up Sequentially and Y/Y; Company in Full Compliance
with Nasdaq Listing Obligations
SANTA CLARA, Calif.; Aug. 1, 2007– Extreme Networks, Inc. (Nasdaq: EXTR) today announced financial results for its fiscal fourth quarter and year ended July 1, 2007. For the quarter, net revenue increased 6 percent to $87.1 million, from $82.4 million in the fiscal fourth quarter of 2006.
Net loss on a GAAP basis for the fiscal fourth quarter of 2007 was $5.0 million or a loss of $0.04 per diluted share, compared to a net loss of $4.3 million or $0.04 per diluted share in the fiscal fourth quarter of 2006. Non-GAAP net income for the fiscal fourth quarter of 2007 was $0.3 million or less than $0.01 per diluted share, compared to non-GAAP net income of $1.2 million or $0.01 per diluted share in the prior-year quarter. A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying attachments.
“Revenue represents our best quarter since the second fiscal quarter of 2006,” said Mark Canepa, president and CEO of Extreme Networks. “We’re pleased with our U.S. business results, which show year-over-year revenue growth of 17 percent. We’re experiencing strong demand for some of our newer products, such as the Summit X450 and the X250, and we are performing well in our vertical markets. We continue to drive the turnaround, focusing both on revenue growth and expense control.”
Net revenue for the 12 months ended July 1, 2007 was $342.8 million, compared to $358.6 million for the prior 12-month fiscal period. Net loss on a GAAP basis was $14.2 million or a loss of $0.12 per diluted share in fiscal 2007, compared to GAAP net income of $8.5 million or $0.07 per diluted share in fiscal 2006. Non-GAAP net income for the most recent 12-month period was $2.9 million or $0.03 per diluted share, compared to non-GAAP net income of $18.8 million or $0.15 per diluted share in the 12 months ended July 2, 2006.
Cash, short-term investments, and marketable securities were $215.9 million as of July 1, 2007, compared to $214.7 million as of April 1, 2007, reflecting positive cash flow from operations.
Nasdaq Compliance
Extreme Networks also announced that its 2006 Annual Stockholders meeting was held on July 30, 2007, and that it believes it is now in full compliance with all Nasdaq Marketplace Rules. On July 19, 2007 it received written notice from the Nasdaq Stock Market confirming that the Nasdaq Listing Qualifications Panel (the “Listing Panel”) had granted the Company’s request for continued listing on the Nasdaq Stock Market, on the condition that the Company inform the Listing Panel that it has held its 2006 Annual Meeting of Stockholders on or before August 1, 2007 and the Company has provided that notice to the Listing Panel.
Conference Call
Extreme Networks will host a conference call to discuss these results today at 5:00 p.m. EDT (2:00 p.m. PDT). Visithttp://www.extremenetworks.com/about-extreme/investor-relations.aspx Financial information to be discussed during the conference call is posted on the Investor Relations section of the Company's website (www.extremenetworks.com).
Non-GAAP Financial Measures
Extreme Networks provides all financial information required in accordance with generally accepted accounting principles (GAAP). To supplement its consolidated financial statements presented in accordance with GAAP, the Company has provided a non-GAAP reconciliation of its Consolidated Statement of Operations for the fiscal quarters and 12-months ended July 1, 2007 and July 2, 2006, which are adjusted to exclude share-based compensation expense, costs associated with the stock option Special Investigation and restructuring charges. These non-GAAP measures are not computed in accordance with GAAP and may differ from the methods used by other companies. These non-GAAP measures are not meant as a substitute for comparable GAAP measures. 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.
Extreme Networks, Inc.
Extreme Networks designs, builds, and installs Ethernet infrastructure solutions that solve the toughest business communications challenges. Our commitment to open networking sets us apart from the alternatives by delivering meaningful insight and unprecedented control to applications and services. We believe openness is the best foundation for growth, freedom, flexibility, and choice. We focus on enterprises and service providers who demand high performance, converged networks that support voice, video and data, over a wired and wireless infrastructure.
# # #
Extreme Networks and Summit are among the trademarks of Extreme Networks, Inc., that may be registered in the United States and other countries. All other marks are the property of their respective holders.
This announcement contains forward-looking statements that involve risks and uncertainties, including statements regarding our expectations regarding our products, future revenue and expenses and strategy. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: our, fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; changes in results identified as part of the process of completing the closing and audit of results for the quarter and the year, effectiveness in controlling expenses, the possibility that we might experience delays in the development of new technology and products; customer response to our new technology and product; risks related to pending or future litigations, and a dependency on third parties for certain components and for the manufacturing of our products. We undertake no obligation to update the forward-looking information in this release. More information about potential factors that could affect our business and financial results is included in our 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 is on file with the Securities and Exchange Commission.”
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
July 1, 2007 | July 2, 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 71,573 | $ | 92,598 | ||||
Short-term investments | $ | 91,599 | 297,726 | |||||
Accounts receivable, net | $ | 23,066 | 27,681 | |||||
Inventories, net | $ | 25,261 | 19,303 | |||||
Prepaid expenses and other current assets, net | 14,457 | 9,420 | ||||||
Total current assets | 225,956 | 446,728 | ||||||
Property and equipment, net | 43,156 | 46,499 | ||||||
Marketable securities | 52,683 | 42,781 | ||||||
Other assets, net | 20,102 | 22,710 | ||||||
TOTAL ASSETS | $ | 341,897 | $ | 558,718 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 21,303 | $ | 20,138 | ||||
Accrued compensation and benefits | 14,841 | 11,758 | ||||||
Restructuring liabilities | 5,532 | 5,571 | ||||||
Accrued warranty | 7,182 | 7,027 | ||||||
Deferred revenue | 32,160 | 35,406 | ||||||
Convertible subordinated notes | — | 200,000 | ||||||
Other accrued liabilities | 23,263 | 19,581 | ||||||
Total current liabilities | 104,281 | 299,481 | ||||||
Restructuring liabilities, less current portion | 8,456 | 11,471 | ||||||
Deferred revenue, less current portion | 10,286 | 9,699 | ||||||
Deferred income taxes | 688 | 579 | ||||||
Other long-term liabilities | 1,962 | 1,307 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock and capital in excess of par value | 934,540 | 927,835 | ||||||
Treasury stock | (48,303 | ) | (33,700 | ) | ||||
Accumulated other comprehensive loss | 572 | (1,567 | ) | |||||
Accumulated deficit | (670,585 | ) | (656,387 | ) | ||||
Total stockholders’ equity | 216,224 | 236,181 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 341,897 | $ | 558,718 | ||||
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Twelve Months Ended | ||||||||||||||
July 1, 2007 | July 2, 2006 | July 1, 2007 | July 2, 2006 | ||||||||||||
Net revenues: | |||||||||||||||
Product | $ | 71,863 | $ | 66,761 | $ | 280,497 | $ | 294,824 | |||||||
Service | 15,235 | 15,681 | 62,337 | 63,777 | |||||||||||
Total net revenues | 87,098 | 82,442 | 342,834 | 358,601 | |||||||||||
Cost of revenues: | |||||||||||||||
Product | 31,398 | 30,682 | 124,298 | 130,557 | |||||||||||
Service | 7,997 | 8,166 | 33,341 | 34,168 | |||||||||||
Total cost of revenues | 39,395 | 38,848 | 157,639 | 164,725 | |||||||||||
Gross margin: | |||||||||||||||
Product | 40,465 | 36,079 | 156,199 | 164,267 | |||||||||||
Services | 7,238 | 7,515 | 28,996 | 29,609 | |||||||||||
Total gross margin | 47,703 | 43,594 | 185,195 | 193,876 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 25,893 | 25,426 | 102,052 | 98,452 | |||||||||||
Research and development | 17,314 | 15,577 | 67,085 | 61,966 | |||||||||||
General and administrative | 8,315 | 5,766 | 33,638 | 25,498 | |||||||||||
Restructuring charge | 2,857 | 3,268 | 4,003 | 3,268 | |||||||||||
Total operating expenses | 54,379 | 50,037 | 206,778 | 189,184 | |||||||||||
Operating income (loss) | (6,676 | ) | (6,443 | ) | (21,583 | ) | 4,692 | ||||||||
Other income, net | 2,217 | 1,876 | 9,526 | 5,615 | |||||||||||
Income (loss) before income taxes | (4,459 | ) | (4,567 | ) | (12,057 | ) | 10,307 | ||||||||
Provision for income taxes | 586 | (232 | ) | 2,140 | 1,798 | ||||||||||
Net income (loss) | $ | (5,045 | ) | $ | (4,335 | ) | $ | (14,197 | ) | $ | 8,509 | ||||
Net income (loss) per share — basic | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.12 | ) | $ | 0.07 | ||||
Net income (loss) per share — diluted | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.12 | ) | $ | 0.07 | ||||
Shares used in per share calculation — basic | 113,604 | 118,453 | 114,122 | 121,286 | |||||||||||
Shares used in per share calculation — diluted | 113,604 | 118,453 | 114,122 | 123,049 |
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twelve Months Ended | ||||||||
July 1, 2007 | July 2, 2006 | |||||||
Net income (loss) | $ | (14,197 | ) | $ | 8,509 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 7,926 | 11,899 | ||||||
Provision for doubtful accounts | — | 1,166 | ||||||
Provision for excess and obsolete inventory | 3,030 | 1,259 | ||||||
Deferred income taxes | (50 | ) | (249 | ) | ||||
Amortization of warrant | 4,048 | 4,691 | ||||||
Restructuring charge | 4,003 | 3,268 | ||||||
Loss on disposal of assets | 54 | 9 | ||||||
Stock-based compensation | 6,183 | 6,995 | ||||||
Changes in operating assets and liabilities, net | ||||||||
Accounts receivable | 4,541 | 3,306 | ||||||
Inventories | (8,990 | ) | 5,405 | |||||
Prepaid expenses and other assets | (6,244 | ) | (2,075 | ) | ||||
Accounts payable | 1,165 | 1,855 | ||||||
Accrued compensation and benefits | 3,083 | (2,274 | ) | |||||
Restructuring liabilities | (7,057 | ) | (6,182 | ) | ||||
Lease liability | — | (471 | ) | |||||
Accrued warranty | 155 | (444 | ) | |||||
Deferred revenue | (2,659 | ) | (5,368 | ) | ||||
Other accrued liabilities | 4,084 | (2,304 | ) | |||||
Other long-term liabilities | 655 | (958 | ) | |||||
Net cash provided by (used in) operating activities | (270 | ) | 28,037 | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (4,637 | ) | (7,969 | ) | ||||
Purchases of investments | (210,711 | ) | (273,986 | ) | ||||
Proceeds from sales and maturities of investments and marketable securities | 408,673 | 247,726 | ||||||
Net cash provided by (used in) investing activities | 193,325 | (34,229 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock, net of repurchases | 523 | 5,020 | ||||||
Repurchase of common stock | (14,603 | ) | (33,700 | ) | ||||
Principal payment on convertible debt | (200,000 | ) | — | |||||
Net cash used in financing activities | (214,080 | ) | (28,680 | ) | ||||
Net decrease in cash and cash equivalents | (21,025 | ) | (34,872 | ) | ||||
Cash and cash equivalents at beginning of period | 92,598 | 127,470 | ||||||
Cash and cash equivalents at end of period | $ | 71,573 | $ | 92,598 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 3,500 | $ | 7,000 | ||||
Cash paid for income taxes | $ | 5,285 | $ | 587 |
See accompanying notes to unaudited condensed consolidated financial statements.
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Twelve Months Ended | ||||||||||||||
July 1, 2007 | July 2, 2006 | July 1, 2007 | July 2, 2006 | ||||||||||||
Net income (loss)—GAAP Basis | $ | (5,045 | ) | $ | (4,335 | ) | $ | (14,197 | ) | $ | 8,509 | ||||
Non-GAAP adjustments | |||||||||||||||
Stock-based compensation expense | $ | 1,200 | $ | 2,236 | $ | 6,183 | $ | 6,995 | |||||||
Stock option investigation expenses | 1,298 | — | 6,916 | — | |||||||||||
Restructuring charge | 2,857 | 3,268 | 4,003 | 3,268 | |||||||||||
Total non-GAAP adjustments | $ | 5,355 | $ | 5,504 | $ | 17,102 | $ | 10,263 | |||||||
Net income (loss)—Non-GAAP Basis | $ | 310 | $ | 1,169 | $ | 2,905 | $ | 18,772 | |||||||
Non-GAAP adjustments | |||||||||||||||
Cost of product revenue | $ | 184 | $ | 205 | $ | 771 | $ | 718 | |||||||
Cost of service revenue | 51 | 140 | 359 | 417 | |||||||||||
Sales and Marketing | 401 | 888 | 2,173 | 2,764 | |||||||||||
Research and Development | 317 | 663 | 1,834 | 1,993 | |||||||||||
General and Administrative | 1,545 | 340 | 7,962 | 1,103 | |||||||||||
Restructuring charge | 2,857 | 3,268 | 4,003 | 3,268 | |||||||||||
Total non-GAAP adjustments | $ | 5,355 | $ | 5,504 | $ | 17,102 | $ | 10,263 | |||||||
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NON-GAAP PRESENTATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Twelve Months Ended | ||||||||||||||
July 1, 2007 | July 2, 2006 | July 1, 2007 | July 2, 2006 | ||||||||||||
Net revenues: | |||||||||||||||
Product | $ | 71,863 | $ | 66,761 | $ | 280,497 | $ | 294,824 | |||||||
Service | 15,235 | 15,681 | 62,337 | 63,777 | |||||||||||
Total net revenues | 87,098 | 82,442 | 342,834 | 358,601 | |||||||||||
Cost of revenues: | |||||||||||||||
Product | 31,214 | 30,477 | 123,527 | 129,839 | |||||||||||
Service | 7,946 | 8,026 | 32,982 | 33,751 | |||||||||||
Total cost of revenues | 39,160 | 38,503 | 156,509 | 163,590 | |||||||||||
Gross margin: | |||||||||||||||
Product | 40,649 | 36,284 | 156,970 | 164,985 | |||||||||||
Services | 7,289 | 7,655 | 29,355 | 30,026 | |||||||||||
Total gross margin | 47,938 | 43,939 | 186,325 | 195,011 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 25,492 | 24,538 | 99,879 | 95,688 | |||||||||||
Research and development | 16,997 | 14,914 | 65,251 | 59,973 | |||||||||||
General and administrative | 6,770 | 5,426 | 25,676 | 24,395 | |||||||||||
Restructuring charge | — | — | — | — | |||||||||||
Total operating expenses | 49,259 | 44,878 | 190,806 | 180,056 | |||||||||||
Operating income (loss) | (1,321 | ) | (939 | ) | (4,481 | ) | 14,955 | ||||||||
Other income, net | 2,217 | 1,876 | 9,526 | 5,615 | |||||||||||
Income (loss) before income taxes | 896 | 937 | 5,045 | 20,570 | |||||||||||
Provision for income taxes | 586 | (232 | ) | 2,140 | 1,798 | ||||||||||
Net income (loss) | $ | 310 | $ | 1,169 | $ | 2,905 | $ | 18,772 | |||||||
Net income (loss) per share — basic | $ | 0.00 | $ | 0.01 | $ | 0.03 | $ | 0.15 | |||||||
Net income (loss) per share — diluted | $ | 0.00 | $ | 0.01 | $ | 0.03 | $ | 0.15 | |||||||
Shares used in per share calculation — basic | 113,604 | 118,453 | 114,122 | 121,286 | |||||||||||
Shares used in per share calculation — diluted | 115,205 | 118,453 | 115,583 | 123,049 |