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Extreme Networks Q2 EPS Beats Expectations

February 3, 2017

Extreme Networks released financial results for its fiscal second quarter ended December 31, 2016. Second quarter revenue was $148.1 million. GAAP gross margin for the second fiscal quarter was 50.9% and non-GAAP gross margin 57.5%. GAAP operating margin for the second fiscal quarter was (5.0)% and non-GAAP operating margin was 9.4%. GAAP net loss for the second fiscal quarter was $8.6 million, or $0.08 per basic share, and non-GAAP net income was $12.7 million, or $0.12 per diluted share.

Earnings, adjusted for costs beat expectations that were set at 7 cents per share. But Extreme Networks' revenue of $148.1 million missed expectations of $152.1 million.

"We are pleased to announce solid second quarter results reflecting strong execution of our operating plan to drive higher cash flows," stated Ed Meyercord, President and CEO of Extreme Networks. "During the quarter, we expanded gross margins and increased profitability through our focused selling strategy to enterprise campus customers across our targeted verticals, while also implementing significant cost savings initiatives. We grew our non-GAAP gross margin by 390 basis points and operating margin by 160 basis points year-over-year, each reaching their highest levels in three years, underscoring the progress we have made both strategically and operationally."

"Looking ahead, we are well-positioned to take advantage of new growth opportunities by delivering industry-leading solutions and services to our enterprise customers. These customers include large, multi-national accounts from our recently acquired WLAN business from Zebra Technologies. Additionally, we remain focused on managing our cost structure as we continue to realize the synergies from the acquired business and implement our realignment of the Company's resources to accelerate the achievement of our growth and margin objectives," Meyercord added.

For its third quarter of fiscal 2017 ending March 31, 2017, the Company is targeting revenue in a range of $151.0 million to $161.0 million. GAAP gross margin is targeted between 53.4% and 54.5% and non-GAAP gross margin is targeted between 55.5% and 56.5%. Operating expenses are targeted to be between $90.3 million and $92.8 million on a GAAP basis and $74.9 million to $77.5 million on a non-GAAP basis. GAAP earnings are targeted to be between a net loss of $7.4 million to $12.0 million, or a loss of $0.07 to $0.11 per share. Non-GAAP earnings are targeted in a range of net income of $6.6 million to $11.2 million, or $0.06 to $0.10 per diluted share. The GAAP and non-GAAP net income (loss) targets are based on an estimated 109.1 million and 110.6 million average outstanding shares, respectively.

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