Extreme Networks Inc 10-Q for FY2022 Q1

About this 10-Q

Headline figures

Extreme Networks Inc (EXTR)

10-Q 2021-11-05 For: 2021-09-30

Added on April 12, 2026

Extreme Networks Inc filed this 10-Q on November 5, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).

September 30,

2021

June 30,

2021

Tech Data Corporation

Jenne Corporation

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $267.68M; up 13.5% from $235.8M a year earlier
Net income: $12.7M; compared with a net loss of $8.81M a year earlier
Diluted EPS: $0.10; compared with -$0.07 a year earlier

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delaware		77-0430270
[State or other jurisdiction of incorporation or organization]		[I.R.S Employer Identification No.]

2121 RDU Center Drive, Suite 300, Morrisville, North Carolina		27560
[Address of principal executive office]		[Zip Code]


		PAGE
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2021 and June 30, 2021	3

	Condensed Consolidated Statements of Operations for the three months ended September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders' Equity for the three months ended September 30, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosure	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

Signatures		38

	September 30, 2021			June 30, 2021
ASSETS
Current assets:
Cash	$	191,349		$	246,894
Accounts receivable, net		129,611			156,476
Inventories		32,439			32,885
Prepaid expenses and other current assets		70,772			51,340
Total current assets		424,171			487,595
Property and equipment, net		52,878			55,004
Operating lease right-of-use assets, net		33,820			36,927
Intangible assets, net		45,898			36,038
Goodwill		387,808			331,159
Other assets		64,229			63,370
Total assets	$	1,008,804		$	1,010,093
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net of unamortized debt issuance costs of $2,356 and $2,404, respectively	$	26,144		$	23,721
Accounts payable		63,394			60,142
Accrued compensation and benefits		52,098			71,610
Accrued warranty		10,780			11,623
Current portion of operating lease liabilities		18,453			18,743
Current portion of deferred revenue		216,807			212,412
Other accrued liabilities		67,384			57,449
Total current liabilities		455,060			455,700
Deferred revenue, less current portion		139,216			133,172
Long-term debt, less current portion, net of unamortized debt issuance costs of $4,121 and $4,760, respectively		297,379			315,865
Operating lease liabilities, less current portion		28,744			32,515
Deferred income taxes		3,986			3,828
Other long-term liabilities		12,094			14,545
Commitments and contingencies (Note 9)
Stockholders’ equity:
Convertible preferred stock, $0.001 par value, issuable in series, 2,000 shares authorized; none issued		—			—
Common stock, $0.001 par value, 750,000 shares authorized; 136,351 and 133,279 shares issued, respectively; 129,754 and 126,682 shares outstanding, respectively		136			133
Additional paid-in-capital		1,084,671			1,078,602
Accumulated other comprehensive loss		(3,722	)		(2,811	)
Accumulated deficit		(965,647	)		(978,343	)
Treasury stock at cost, 6,597 shares		(43,113	)		(43,113	)
Total stockholders’ equity		72,325			54,468
Total liabilities and stockholders’ equity	$	1,008,804		$	1,010,093

	Three Months Ended
	September 30, 2021			September 30, 2020
Net revenues:
Product	$	185,161		$	161,396
Service and subscription		82,523			74,406
Total net revenues		267,684			235,802
Cost of revenues:
Product		80,944			73,395
Service and subscription		31,137			27,389
Total cost of revenues		112,081			100,784
Gross profit:
Product		104,217			88,001
Service and subscription		51,386			47,017
Total gross profit		155,603			135,018
Operating expenses:
Research and development		47,766			49,524
Sales and marketing		69,527			64,325
General and administrative		17,003			16,461
Acquisition and integration costs		1,510			1,975
Restructuring and related charges		279			1,001
Amortization of intangibles		1,154			1,792
Total operating expenses		137,239			135,078
Operating income (loss)		18,364			(60	)
Interest income		110			118
Interest expense		(3,880	)		(6,663	)
Other income (expense), net		171			(887	)
Income (loss) before income taxes		14,765			(7,492	)
Provision for income taxes		2,069			1,320
Net income (loss)	$	12,696		$	(8,812	)

Basic and diluted income (loss) per share:
Net income (loss) per share - basic	$	0.10		$	(0.07	)
Net income (loss) per share - diluted	$	0.10		$	(0.07	)

Shares used in per share calculation - basic		128,324			121,705
Shares used in per share calculation - diluted		133,225			121,705

	Three Months Ended
	September 30, 2021			September 30, 2020
Net income (loss)	$	12,696		$	(8,812	)
Other comprehensive income (loss):
Derivatives designated as hedging instruments:
Change in unrealized gains and losses on interest rate swaps		(85	)		(173	)
Reclassification adjustment related to interest rate swaps		281			160
Change in unrealized gains and losses on foreign currency forward contracts		(201	)		—
Net decrease from derivatives designated as hedging instruments		(5	)		(13	)
Net change in foreign currency translation adjustments		(906	)		1,455
Other comprehensive income (loss)		(911	)		1,442
Total comprehensive income (loss)	$	11,785		$	(7,370	)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Common Stock				Additional Paid-			Accumulated Other			Treasury Stock						Accumulated			Total Stockholders'
	Shares		Amount		In-Capital			Comprehensive Loss			Shares			Amount			Deficit			Equity
Balance at June 30, 2020		127,114	$	127	$	1,035,041		$	(6,378	)		(6,597	)	$	(43,113	)	$	(980,279	)	$	5,398
Net loss		—		—		—			—			—			—			(8,812	)		(8,812	)
Other comprehensive income		—		—		—			1,442			—			—			—			1,442
Issuance of common stock from equity incentive plans, net of tax withholdings		2,418		3		3,578			—			—			—			—			3,581
Share-based compensation		—		—		8,302			—			—			—			—			8,302
Balance at September 30, 2020		129,532	$	130	$	1,046,921		$	(4,936	)		(6,597	)	$	(43,113	)	$	(989,091	)	$	9,911

Balance at June 30, 2021		133,279		133		1,078,602			(2,811	)		(6,597	)		(43,113	)		(978,343	)		54,468
Net income		—		—		—			—			—			—			12,696			12,696
Other comprehensive loss		—		—		—			(911	)		—			—			—			(911	)
Issuance of common stock from equity incentive plans, net of tax withholdings		3,072		3		(4,375	)		—			—			—			—			(4,372	)
Share-based compensation		—		—		10,444			—			—			—			—			10,444
Balance at September 30, 2021		136,351	$	136	$	1,084,671		$	(3,722	)		(6,597	)	$	(43,113	)	$	(965,647	)	$	72,325

	Preliminary Allocation as of September 14, 2021
Cash and cash equivalents	$	1,364
Accounts receivable, net		1,440
Inventories		337
Prepaid expenses and other current assets		1,841
Property and equipment		46
Other assets		21
Accounts payable		(1,220	)
Accrued compensation and benefits		(2,304	)
Accrued warranty		(41	)
Other accrued liabilities		(71	)
Deferred revenue		(2,758	)
Other liabilities		(723	)
Net tangible liabilities		(2,068	)

Identifiable intangible assets		16,300
Goodwill		56,649
Total intangible assets acquired		72,949

Total net assets acquired	$	70,881

Intangible Assets	Weighted Average Estimated Useful Life (in years)		Amount
Developed technologies		6	$	14,500
Customer relationships		4		1,800
Total identifiable intangible assets			$	16,300

	September 30, 2021		June 30, 2021
Finished goods	$	26,398	$	27,901
Raw materials		6,041		4,984
Total Inventories	$	32,439	$	32,885

	September 30, 2021			June 30, 2021
Computers and equipment	$	74,943		$	75,866
Purchased software		41,421			40,037
Office equipment, furniture and fixtures		10,219			10,201
Leasehold improvements		53,130			53,329
Total property and equipment		179,713			179,433
Less: accumulated depreciation and amortization		(126,835	)		(124,429	)
Property and equipment, net	$	52,878		$	55,004

September 30, 2021	Level 1		Level 2		Level 3		Total
Liabilities
Foreign currency derivatives	$	—	$	740	$	—	$	740
Interest rate swaps		—		937		—		937
Acquisition-related contingent consideration obligations		—		—		358		358
Total liabilities measured at fair value	$	—	$	1,677	$	358	$	2,035

June 30, 2021	Level 1		Level 2		Level 3		Total
Liabilities
Foreign currency derivatives	$	—	$	560	$	—	$	560
Interest rate swaps		—		1,133		—		1,133
Acquisition-related contingent consideration obligations		—		—		913		913
Total liabilities measured at fair value	$	—	$	1,693	$	913	$	2,606

	Three Months Ended
	September 30, 2021						September 30, 2020
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	56,068	$	67,331	$	123,399	$	60,670	$	57,347	$	118,017
Other		7,799		3,367		11,166		8,241		4,090		12,331
Total Americas		63,867		70,698		134,565		68,911		61,437		130,348
EMEA		77,898		35,731		113,629		47,529		33,576		81,105
APAC		4,335		15,155		19,490		5,051		19,298		24,349
Total net revenues	$	146,100	$	121,584	$	267,684	$	121,491	$	114,311	$	235,802

	Three Months Ended
	September 30, 2021			September 30, 2020
Beginning balance		913			2,167
Payments		(559	)		(603	)
Accretion on discount		4			12
Ending balance	$	358		$	1,576

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
September 30, 2021
Developed technology	3.4 years	$	170,600	$	135,112	$	35,488
Customer relationships	4.6 years		64,839		55,074		9,765
Backlog	— years		400		400		—
Trade names	0.6 years		10,700		10,429		271
License agreements	5.2 years		2,445		2,071		374
Total intangibles, net		$	248,984	$	203,086	$	45,898

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
June 30, 2021
Developed technology	1.8 years	$	156,100	$	129,861	$	26,239
Customer relationships	4.8 years		63,039		54,204		8,835
Backlog	— years		400		400		—
Trade names	0.7 years		10,700		10,128		572
License agreements	5.4 years		2,445		2,053		392
Total intangibles, net		$	232,684	$	196,646	$	36,038

	September 30, 2021			June 30, 2021
Current portion of long-term debt:
Term Loan	$	28,500		$	26,125
Less: unamortized debt issuance costs		(2,356	)		(2,404	)
Current portion of long-term debt	$	26,144		$	23,721

Long-term debt, less current portion:
Term Loan	$	301,500		$	320,625
Less: unamortized debt issuance costs		(4,121	)		(4,760	)
Total long-term debt, less current portion		297,379			315,865
Total debt	$	323,523		$	339,586

	September 30, 2021		June 30, 2021
2013 Equity Incentive Plan shares available for grant		2,784		6,753
Employee stock options and awards outstanding		10,553		10,359
2014 Employee Stock Purchase Plan		3,425		4,414
Total shares reserved for issuance		16,762		21,526

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Options outstanding at June 30, 2021		1,645		$	5.44		3.62	$	9,404
Granted		—			—
Exercised		(80	)		2.67
Cancelled		—			—
Options outstanding at September 30, 2021		1,565		$	5.58		3.52	$	6,677
Vested and expected to vest at September 30, 2021		1,565		$	5.58		3.52	$	6,677
Exercisable at September 30, 2021		1,247		$	5.29		3.16	$	5,674

	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Value
Non-vested stock awards outstanding at June 30, 2021		8,714		$	5.51
Granted		3,611			11.37
Released		(3,161	)		5.17
Cancelled		(176	)		5.93
Non-vested stock awards outstanding at September, 2021		8,988		$	7.97	$	88,534
Stock awards expected to vest at September 30, 2021		8,988		$	7.97	$	88,534

Level	Relative TSR	Shares Vested
Below Threshold	TSR is less than the Index by more than 37.5 percentage points	0%
Threshold	TSR is less than the Index by 37.5 percentage points	25%
Target	TSR equals the Index	100%
Maximum	TSR is greater than the Index by 25 percentage points or more	150%

	Employee Stock Purchase Plan
	Three Months Ended
	September 30, 2021			September 30, 2020
Expected life	0.5 years			0.5 years
Risk-free interest rate		0.05	%		0.12	%
Volatility		52	%		119	%
Dividend yield		—	%		—	%

Long-lived Assets	September 30, 2021		June 30, 2021
Americas	$	161,956	$	151,839
EMEA		22,486		25,940
APAC		12,383		13,560
Total long-lived assets	$	196,825	$	191,339

	Payments due by Period
	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years
Contractual obligations:
Debt obligations	$	330,000	$	28,500	$	301,500	$	—	$	—
Interest on debt obligations		21,711		8,811		12,900		—		—
Unconditional purchase obligations		64,910		64,910		—		—		—
Contractual commitments		90,844		27,732		39,416		17,233		6,463
Lease payments on operating leases		50,995		15,566		22,732		8,765		3,932
Deferred payments for an acquisition		6,000		4,000		2,000		—		—
Contingent consideration for an acquisition		358		358		—		—		—
Other liabilities		517		181		336		—		—
Total contractual cash obligations	$	565,335	$	150,058	$	378,884	$	25,998	$	10,395

	Change in interest expense given a decrease in interest rate of X bps*						Average outstanding			Change in interest expense given an increase in interest rate of X bps*
Description	(100 bps)			(50 bps)			as of September 30, 2021			100 bps			50 bps
Debt	$	(3,466	)	$	(1,733	)	$	346,568		$	3,466		$	1,733
Interest Rate Swaps		2,000			1,000			(200,000	)		(2,000	)		(1,000	)
Net	$	(1,466	)	$	(733	)				$	1,466		$	733

EXTREME NETWORKS, INC.
		(Registrant)
		/s/ REMI THOMAS
		Remi Thomas
		Executive Vice President, Chief Financial Officer (Principal Accounting Officer) November 5, 2021