Extreme Networks Inc 10-Q for FY2026 Q1
Extreme Networks Inc (EXTR)
About this 10-Q
Extreme Networks Inc filed this 10-Q on October 30, 2025, covering the quarter ended September 30, 2025 (FY2026 Q1).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $310.25M
- up 15.2% from $269.2M a year earlier
- Net income
- $5.61M
- compared with a net loss of $10.5M a year earlier
- Diluted EPS
- $0.04
- compared with -$0.08 a year earlier
p262Tejo
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to ______
Commission file number
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§-232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 24, 2025, the registrant had
EXTREME NETWORKS, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED
September 30, 2025
INDEX
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PAGE |
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Item 1. |
3 |
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Condensed Consolidated Balance Sheets as of September 30, 2025 and June 30, 2025 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
33 |
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Item 4. |
34 |
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Item 1. |
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Item 1A |
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Item 2. |
35 |
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Item 3. |
35 |
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Item 4. |
35 |
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Item 5. |
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Item 6. |
36 |
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2
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
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September 30, |
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June 30, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets, net |
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Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation and benefits |
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Accrued warranty |
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Current portion of deferred revenue |
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Current portion of long-term debt, net of unamortized debt issuance costs of $ |
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Current portion of operating lease liabilities |
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Other accrued liabilities |
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Total current liabilities |
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Deferred revenue, less current portion |
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Long-term debt, less current portion, net of unamortized debt issuance costs of $ |
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Operating lease liabilities, less current portion |
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Deferred income taxes |
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Other long-term liabilities |
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Stockholders’ equity: |
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Convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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( |
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Treasury stock at cost, |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
3
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended |
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September 30, |
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September 30, |
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Net revenues: |
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Product |
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$ |
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$ |
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Subscription and support |
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Total net revenues |
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Cost of revenues: |
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Product |
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Subscription and support |
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Total cost of revenues |
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Gross profit: |
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Product |
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Subscription and support |
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Total gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Restructuring and related charges |
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Amortization of intangible assets |
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Total operating expenses |
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Operating income (loss) |
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Interest income |
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Interest expense |
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( |
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Other expense, net |
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( |
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Income (loss) before income taxes |
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( |
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Provision for income taxes |
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Net income (loss) |
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$ |
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$ |
( |
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Basic and diluted income (loss) per share: |
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Net income (loss) per share – basic |
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$ |
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$ |
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Net income (loss) per share – diluted |
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$ |
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$ |
( |
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Shares used in per share calculation – basic |
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Shares used in per share calculation – diluted |
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See accompanying notes to condensed consolidated financial statements.
4
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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Three Months Ended |
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September 30, |
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September 30, |
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Net income (loss) |
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$ |
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$ |
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Other comprehensive income (loss): |
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Net change in foreign currency translation adjustments |
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Other comprehensive income (loss): |
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( |
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Total comprehensive income (loss) |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
5
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated Other |
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Treasury Stock |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Paid-In-Capital |
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Comprehensive Loss |
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Shares |
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Amount |
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Deficit |
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Equity |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
( |
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( |
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$ |
( |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock from equity incentive plans, net of tax withholdings |
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( |
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— |
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— |
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— |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at September 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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( |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance at June 30, 2025 |
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$ |
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$ |
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$ |
( |
) |
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( |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Issuance of common stock from equity incentive plans, net of tax withholdings |
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( |
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— |
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— |
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— |
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— |
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( |
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Repurchase of stock |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at September 30, 2025 |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
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$ |
( |
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$ |
( |
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$ |
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See accompanying notes to condensed consolidated financial statements.
6
EXTREME NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended |
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September 30, |
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September 30, |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation |
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Amortization of intangible assets |
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Reduction in carrying amount of right-of-use asset |
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Provision for credit losses |
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Share-based compensation |
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Deferred income taxes |
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Provision for (benefit from) excess and obsolete inventory |
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Non-cash interest expense |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Inventories |
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( |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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Accrued compensation and benefits |
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( |
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Operating lease liabilities |
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( |
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( |
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Deferred revenue |
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Other current and long-term liabilities |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Cash flows from investing activities: |
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Capital expenditures for property, equipment and capitalized software development costs |
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( |
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( |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities: |
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Borrowings under revolving facility |
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— |
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Payments on debt obligations |
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( |
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( |
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Payments on debt financing costs |
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— |
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( |
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Repurchase of common stock |
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( |
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— |
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Payments for tax withholdings, net of proceeds from issuance of common stock |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Foreign currency effect on cash and cash equivalents |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
7
EXTREME NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Extreme Networks, Inc., together with its subsidiaries (collectively referred to as “Extreme” or the “Company”), is a leader in providing software-driven networking solutions for enterprise customers. The Company conducts its sales and marketing activities on a worldwide basis through distributors, resellers, and the Company’s field sales organization. Extreme was incorporated in California in 1996 and reincorporated in Delaware in 1999.
The unaudited condensed consolidated financial statements of Extreme included herein have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under such rules and regulations. The condensed consolidated balance sheet at June 30, 2025 was derived from audited financial statements as of that date but does not include all disclosures required by generally accepted accounting principles for complete financial statements. These interim financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition of Extreme at September 30, 2025. The results of operations for the three months ended September 30, 2025 are not necessarily indicative of the results that may be expected for fiscal 2026 or any future periods.
Fiscal Year
The Company uses a fiscal calendar year ending on June 30. All references herein to “fiscal 2026” represent the fiscal year ending June 30, 2026. All references herein to “fiscal 2025” represent the fiscal year ended June 30, 2025.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Extreme and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated.
The Company predominantly uses the United States Dollar as its functional currency. The functional currency for certain of its foreign subsidiaries is the local currency. For those subsidiaries that operate in a local functional currency environment, all assets and liabilities are translated to United States Dollars at current month end rates of exchange and revenues, and expenses are translated using the monthly average rate.
Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
For a description of significant accounting policies, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. There have been no material changes to the Company’s significant accounting policies since the filing of the Annual Report on Form 10-K.
Recently Adopted Accounting Pronouncements
There were no recently adopted accounting standards which would have a material effect on the Company's condensed consolidated financial statements and accompanying disclosures.
8
Recently Issued Accounting Pronouncements Not Yet Adopted
In September 2025, the Financial Accounting Standards Board (“FASB") issued Accounting Standards Update ("ASU") 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU removes all references to prescriptive and sequential software development stages and requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed, and the software will be used for its intended purpose. The amendments in this ASU are effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2025-06 on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets to address challenges encountered when applying the guidance in Topic 326, Financial Instruments—Credit Losses, to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2025-05 on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses to improve disclosures about public business entities’ expenses and to provide more detailed information around the types of expenses included in commonly presented expense captions. Additionally, in January 2025 the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods for fiscal years beginning after December 15, 2027, and can be applied on a prospective basis or on a retrospective basis to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 and ASU 2025-01 on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax disclosures primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements and related disclosures.
The Company accounts for revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company derives the majority of its revenues from sales of its networking equipment, with the remaining revenues generated from sales of subscription and support, which primarily includes software subscriptions delivered as software as a service (“SaaS”) and additional revenues from maintenance contracts, professional services and training for its products. The Company sells its products, SaaS and maintenance contracts to customers and partners in
Revenue Recognition
Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
The Company’s performance obligations are satisfied at a point in time or over time as the customer receives and consumes the benefits provided. Substantially all of the Company’s product sales revenues are recognized at a point in time. Substantially all of the Company’s subscription and support revenues are recognized over time. For revenues recognized over time, the Company primarily uses an input measure, days elapsed, to measure progress.
As of September 30, 2025, the Company had $
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Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the condensed consolidated balance sheets. Services provided under renewable SaaS subscription and support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are either billed fully at the inception of contract or at periodic intervals (e.g., quarterly or annually). The Company generally receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the condensed consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.
Revenue recognized for the three months ended September 30, 2025 and 2024 that was included in the deferred revenue balance at the beginning of each period was $
Contract Costs. The Company recognizes the of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives as a result of obtaining subscription and support contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount of $
Estimated Variable Consideration. There were no material changes in the current period to the estimated variable consideration for performance obligations, which were satisfied or partially satisfied during previous periods.
Revenues by Geography
The Company operates in three geographic regions: Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
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Three Months Ended |
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September 30, |
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September 30, |
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Americas: |
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United States |
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$ |
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Other |
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Total Americas |
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EMEA |
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APAC |
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Total net revenues |
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$ |
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$ |
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Geographic Concentrations
For the three months ended September 30, 2025 and 2024 no foreign country accounted for
Customer Concentrations
The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit.
The following table sets forth customers accounting for 10% or more of the Company’s net revenues for the periods indicated below:
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Three Months Ended |
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September 30, |
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September 30, |
Jenne, Inc. |
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TD Synnex Corporation |
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Westcon Group, Inc. |
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The following table sets forth major customers accounting for 10% or more of the Company’s net accounts receivable balance:
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September 30, |
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June 30, |
Jenne, Inc. |
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J's Communication Co., Ltd. |
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* |
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Ericcson, Inc. |
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* |
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* Less than 10% of accounts receivable |
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Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.
The following table summarizes the Company's cash and cash equivalents (in thousands):
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September 30, |
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June 30, |
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Cash |
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$ |
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$ |
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Cash equivalents |
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Total cash and cash equivalents |
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$ |
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$ |
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Inventories
The following table summarizes the Company's inventory by category (in thousands):
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September 30, |
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June 30, |
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Finished goods |
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$ |
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$ |
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Raw materials |
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Total inventories |
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$ |
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$ |
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Property and Equipment, Net
The following table summarizes the Company's property and equipment, net by category (in thousands):
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September 30, |
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June 30, |
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Computers and equipment |
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$ |
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$ |
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Software |
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Office equipment, furniture and fixtures |
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Leasehold improvements |
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Total property and equipment |
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Less: accumulated depreciation and amortization |
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( |
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( |
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Property and equipment, net |
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$ |
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$ |
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Deferred Revenue
Guarantees and Product Warranties
The majority of the Company’s hardware products are shipped with either a
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The following table summarizes the activity related to the Company’s product warranty liability during the following periods (in thousands):
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Three Months Ended |
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September 30, |
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September 30, |
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Balance at beginning of period |
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$ |
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$ |
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New warranties issued |
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Warranty expenditures |
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( |
) |
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( |
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Balance at end of period |
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$ |
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$ |
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To facilitate sales of its products in the normal course of business, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising from intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position.
Concentrations
The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable. See Note 3, Revenues, for the Company’s accounts receivable concentration. The Company does not invest an amount exceeding
A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:
The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):
September 30, 2025 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets |
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Certificates of deposit |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Foreign currency derivatives |
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— |
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— |
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Total assets measured at fair value |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Liabilities |
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Foreign currency derivatives |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Total liabilities measured at fair value |
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$ |
— |
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$ |
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$ |
— |
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$ |
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June 30, 2025 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets |
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Certificates of deposit |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Foreign currency derivatives |
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— |
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— |
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Total assets measured at fair value |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Liabilities |
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Foreign currency derivatives |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Total liabilities measured at fair value |
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$ |
— |
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$ |
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$ |
— |
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$ |
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Level 1 Assets and Liabilities:
The Company’s financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities. The Company states accounts receivable, accounts payable, and accrued liabilities at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.
Level 2 Assets and Liabilities:
The Company's level 2 assets consist of certificates of deposit and derivative instruments. Certificates of deposit do not have regular market pricing and are considered Level 2. The fair value of derivative instruments under the Company’s foreign exchange forward contracts are estimated based on valuations provided by alternative pricing sources supported by observable inputs, which is considered Level 2.
As of September 30, 2025 and June 30, 2025, the Company had investment in certificates of deposit of $
As of September 30, 2025 and June 30, 2025, the Company had foreign exchange forward contracts that were not designated as hedging instruments with a total notional principal amount of $
The fair value of borrowings under the Amended Credit Agreement (as defined in Note 7) is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. Since the interest rate is variable in the Amended Credit Agreement, the fair value approximates the face amount of the Company’s indebtedness of $
Level 3 Assets and Liabilities:
Certain of the Company’s assets, including intangible assets and goodwill, are measured at fair value on a non-recurring basis if impairment is indicated.
As of September 30, 2025 and June 30, 2025, the Company did
Intangible Assets
The following tables summarize the components of gross and net intangible assets (in thousands, except years):
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Weighted Average |
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Remaining Amortization |
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Gross Carrying |
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Accumulated |
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Net Carrying |
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Period |
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Amount |
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Amortization |
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Amount |
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September 30, 2025 |
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Developed technology |
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$ |
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$ |
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$ |
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Customer relationships |
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Trade names |
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License agreements |
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Total intangible assets, net* |
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$ |
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$ |
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$ |
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* The carrying amount of foreign intangible assets are affected by foreign currency translation |
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Weighted Average |
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Remaining Amortization |
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Gross Carrying |
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Accumulated |
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Net Carrying |
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Period |
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Amount |
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Amortization |
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Amount |
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June 30, 2025 |
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Developed technology |
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$ |
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$ |
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$ |
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Customer relationships |
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Trade names |
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License agreements |
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Total intangible assets, net* |
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$ |
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$ |
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$ |
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* The carrying amount of foreign intangible assets are affected by foreign currency translation |
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The following table summarizes the amortization expense of intangible assets for the periods presented (in thousands):
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Three Months Ended |
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September 30, |
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September 30, |
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Amortization of intangible assets in “” |
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$ |
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$ |
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Amortization of intangible assets in “Total operating expenses” |
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Total amortization expense |
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$ |
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$ |
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The amortization expense that is recognized in “Total cost of revenues” primarily consists of amortization related to developed technology and license agreements.
The estimated future amortization expense to be recorded for each of the respective future fiscal years is as follows (in thousands):
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Amount |
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For the fiscal year ending June 30: |
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2026 (the remainder of fiscal 2026) |
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$ |
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2027 |
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2028 |
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2029 |
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Total |
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$ |
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Goodwill
The Company had goodwill in the amount of $
The Company’s debt is comprised of the following (in thousands):
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September 30, |
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June 30, |
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Current portion of long-term debt: |
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Term Loan |
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$ |
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$ |
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Revolving Facility |
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— |
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Less: unamortized debt issuance costs |
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( |
) |
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( |
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Current portion of long-term debt |
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$ |
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$ |
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Long-term debt, less current portion: |
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Term Loan |
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$ |
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$ |
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Less: unamortized debt issuance costs |
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( |
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( |
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Total long-term debt, less current portion |
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Total debt |
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$ |
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$ |
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On June 22, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “2023 Credit Agreement”), by and among the Company, as borrower, BMO Harris Bank, N.A., as an issuing lender and swingline lender, Bank of America, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association, and Wells Fargo Bank, National Association, as issuing lenders, the financial institutions or entities party thereto as lenders, and Bank of Montreal, as administrative agent and collateral agent, which amended and restated the Amended and Restated Credit Agreement, dated August 9, 2019, by and among the Company, as borrower,
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several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent for the Lenders. The 2023 Credit Agreement provides for i) a $
Borrowings under the 2023 Credit Agreement bear interest, and at the Company’s election, the initial term loan may be made as either a base rate loan or a Secured Overnight Funding Rate (“SOFR”) loan. The applicable margin for base rate loans ranges from
The 2023 Credit Agreement requires the Company to maintain certain minimum financial ratios at the end of each fiscal quarter. The 2023 Credit Agreement also includes covenants and restrictions that limit, among other things, the Company’s ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or sell all or substantially all of its assets. The 2023 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding balance.
On August 14, 2024, the Company entered into an Amendment Number One to the 2023 Credit Agreement (the 2023 Credit Agreement as amended by that certain Amendment Number One, the “Amended Credit Agreement”). Under the Amended Credit Agreement, the Company modified the definition of the consolidated EBITDA for the purposes of evaluating compliance with financial covenants under the 2023 Credit Agreement. The amended definition of consolidated EBITDA modifies the amount and type of add-backs that are allowable to better align with the Company's operations and activities. Further, the Amended Credit Agreement provided a waiver for the Company's compliance with the consolidated interest charge coverage ratio for each of the quarters ended June 30, 2024, September 30, 2024, and December 31, 2024. As of September 30, 2025, the Company was in compliance with the modified terms and financial covenants under the Amended Credit Agreement.
Financing costs incurred in connection with obtaining long-term financing are deferred and amortized over the term of the related indebtedness or credit agreement. Amortization of deferred financing costs is included in “Interest expense” in the accompanying condensed consolidated statements of operations was $
During the three months ended September 30, 2025, the Company borrowed $
The Company had $
Purchase Commitments
The Company currently has arrangements with contract manufacturers and suppliers for the manufacture of its products. Those arrangements allow the contract manufacturers to procure long lead-time component inventory based upon a rolling production forecast provided by the Company. The Company is obligated to purchase long lead-time component inventory that its contract manufacturer procures in accordance with the forecast, unless the Company gives notice of order cancellation outside of applicable component lead-times. As of September 30, 2025, the Company had commitments to purchase $
Legal Proceedings
The Company may from time to time be party to litigation arising in the course of its business, including, without limitation, allegations relating to commercial transactions, business relationships, or intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Litigation in general, and intellectual property litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict.
In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. When a loss contingency is not both probable and reasonably estimable, the Company does not record a loss accrual. However, if the loss (or an additional loss in excess of any prior accrual) is at least reasonably possible and material, then the Company would disclose an estimate of the possible loss or range of loss, if such estimate can be made, or disclose that an estimate cannot be made. The assessment of whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, involves a series of complex
15
judgments about future events. Even if a loss is reasonably possible, the Company may not be able to estimate a range of possible loss, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel or unsettled legal theories or a large number of parties. In such cases, there is considerable uncertainty regarding the ultimate resolution of such matters, including the amount of any possible loss, fine or penalty. However, an adverse resolution of one or more of such matters could have a material adverse effect on the Company's results of operations in a particular quarter or fiscal year.
SNMP Research, Inc. and SNMP Research International, Inc. v. Broadcom Inc., Brocade Communications Systems LLC, and Extreme Networks, Inc.
On October 26, 2020, SNMP Research, Inc. and SNMP Research International, Inc. (collectively, “SNMP”) filed a lawsuit against the Company in the Eastern District of Tennessee for copyright infringement, alleging that the Company was not properly licensed to use its software. SNMP sought actual damages and profits attributed to the infringement, as well as equitable relief. On March 2, 2023, SNMP filed an amended complaint adding claims against Extreme on additional products for copyright infringement, breach of contract, and fraud. The parties reached a settlement, and on July 29, 2025, the case was dismissed with prejudice.
Mala Technologies Ltd. v. Extreme Networks GmbH, Extreme Networks Ireland Ops Ltd., and Extreme Networks, Inc.
On April 15, 2021, Mala Technologies Ltd. (“Mala”) filed a patent infringement lawsuit against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. The lawsuit alleges indirect infringement of the German portion of a patent (“EP ‘498”) based on the offer and sale in Germany of certain network switches equipped with the ExtremeXOS operating system. Mala is seeking injunctive relief, accounting, and an unspecified declaration of liability for damages and costs of the lawsuit. On December 20, 2022, the trial court ruled that the Company did not infringe the EP ‘498 patent and dismissed Mala’s complaint entirely. Mala has filed an appeal. On December 9, 2024, the Higher Regional Court stayed the matter until the nullity action has been finally decided.
The Company filed a nullity complaint against EP ‘498 with the German Federal Patent Court on September 24, 2021. The German Federal Patent Court issued a decision finding that the patent was invalid on November 20, 2024. Mala appealed the decision on March 3, 2025, and filed its Grounds of Appeal on June 5, 2025. The Company filed its response to the Grounds of Appeal on October 6, 2025.
Steamfitters Local 449 Pension & Retirement Security Funds v. Extreme Networks, Inc., et al.
On August 13, 2024, a putative securities class action (the “Class Action”) was filed in the United States District Court for the Northern District of California captioned Steamfitters Local 449 Pension & Retirement Security Funds v. Extreme Networks, Inc., et al., Case No. 5:24-cv-05102-TLT, naming the Company and certain of its current and former executive officers as defendants. The lawsuit is purportedly brought on behalf of purchasers of Extreme Networks securities between July 27, 2022 and January 30, 2024 (the “Class Period”). The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, based on allegedly false and misleading statements about the Company's business and prospects during the Class Period. The lawsuit seeks unspecified damages. On December 30, 2024, the Court selected Oklahoma Firefighters Pension and Retirement System, Oklahoma Police Pension and Retirement System, Oakland County Voluntary Employees’ Beneficiary Association, Oakland County Employees’ Retirement System as the lead plaintiffs. The Company's Motion to Dismiss was granted on August 15, 2025, but the plaintiffs were granted leave to file a second amended complaint. Plaintiffs filed a second amended complaint on September 9, 2025. The Company filed a motion to dismiss the second amended complaint on October 3, 2025.
On February 27, 2025, a shareholder derivative case was filed in the United States District Court for the Northern District of California captioned Turner v. Brown et al., Case No. 3:25-cv-02101. On March 6, 2025, a shareholder derivative case was filed in the United States District Court for the Northern District of California captioned Hemani v. Meyercord et al., Case No. 3:25-cv-02318-AGT. On March 25, 2025, a shareholder derivative case was filed in the United States District Court for the Eastern District of North Carolina captioned Miller v. Meyercord et al., Case No. 5:25-cv-00161. Each of these cases (collectively, the “Derivative Cases”) names current and former officers, directors, and employees of the Company as defendants, and seeks recovery on behalf of the Company based on substantially the same allegations as the Class Action. These cases remain stayed pending a decision on the motion to dismiss the second amended complaint in the Class Action.
Indemnification Obligations
Subject to certain limitations, the Company may be obligated to indemnify its current and former directors, officers, and employees. These obligations arise under the terms of its certificate of incorporation, its bylaws, applicable contracts, and applicable law. The obligation to indemnify, where applicable, generally means that the Company is required to pay or reimburse, and in certain circumstances the Company has paid or reimbursed, the individuals’ reasonable legal expenses and possible damages and other liabilities incurred in connection with certain legal matters. The Company also procures Directors and Officers liability insurance to help cover its defense and/or indemnification costs, although its ability to recover such costs through insurance is uncertain. While it is not possible to estimate the maximum potential amount that could be owed under these governing documents and agreements due to the Company’s
16
limited history with prior indemnification claims, indemnification (including defense) costs could, in the future, have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.
Equity Incentive Plan
The Compensation Committee of the Board unanimously approved an amendment to the Extreme Networks, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”) on September 14, 2025 to increase the maximum number of available shares by
Common Stock Repurchases
On February 18, 2025, the Company announced that the Board had authorized management to repurchase up to $
During the three months ended September 30, 2025, the Company repurchased a total of
As a provision of the Inflation Reduction Act enacted in the U.S., the Company is subject to an excise tax on corporate stock repurchases, which is assessed as
Shares Reserved for Issuance
The Company had the following reserved shares of common stock for future issuance as of the dates noted (in thousands):
|
|
September 30, |
|
|
June 30, |
|
||
2013 Equity Incentive Plan shares available for grant |
|
|
|
|
|
|
||
Employee stock options and awards outstanding |
|
|
|
|
|
|
||
2014 Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Total shares reserved for issuance |
|
|
|
|
|
|
||
Share-based Compensation Expense
Share-based compensation expense recognized in the condensed consolidated financial statements by line-item caption is as follows (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Cost of product revenues |
|
$ |
|
|
$ |
|
||
Cost of subscription and support revenues |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
||
17
Stock Options
The following table summarizes stock option activity for the three months ended September 30, 2025 (in thousands, except per share amount and contractual term):
|
|
Number of Shares |
|
|
Weighted-Average Exercise Price Per Share |
|
|
Weighted-Average Remaining Contractual Term (years) |
|
|
Aggregate Intrinsic Value |
|
||||
Options outstanding at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding at September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
There were
Stock Awards
Stock awards may be granted under the 2013 Plan on terms approved by the Compensation Committee of the Board. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance-condition or market-condition RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria or market conditions. The Company recognizes compensation expense on the stock awards over the vesting period based on the awards’ fair value as of the date of grant. The Company does not estimate forfeitures, but accounts for them as incurred.
The following table summarizes stock award activity for the three months ended September 30, 2025 (in thousands, except grant date fair value):
|
|
Number of Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
|
Aggregate Fair Value |
|
|||
Non-vested stock awards outstanding at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Released |
|
|
( |
) |
|
|
|
|
|
|
||
Canceled |
|
|
( |
) |
|
|
|
|
|
|
||
Non-vested stock awards outstanding at September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|||
Stock awards expected to vest at September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|||
During the three months ended September 30, 2025, the Company granted
The grant date fair value of each MSU was determined using the Monte Carlo simulation model. The weighted-average grant-date fair value of the TSR MSUs granted during the three months ended September 30, 2025 and 2024 was $
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Expected term |
|
|
|
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Volatility |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
18
As of September 30, 2025, there was $
Employee Stock Purchase Plan
There were approximately
|
|
Employee Stock Purchase Plan |
|
|||||
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Expected term |
|
|
|
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Volatility |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
The weighted-average grant-date fair value of shares under the ESPP during the three months ended September 30, 2025 and 2024 was $
The Company has
Measure of segment profit or loss:
Consolidated non-GAAP net income is exclusive of certain items that are non-recurring or not consistent with the Company's operations. The CODM reviews and utilizes functional expenses (costs of revenue, research and development, sales and marketing, and general and administrative) at the consolidated level to manage and assess the Company's operations. Other segment items included in consolidated non-GAAP net income are interest income, interest expense, other expense, net, and the provision for income taxes, which are reflected in the condensed consolidated statements of operations.
19
A reconciliation of consolidated GAAP net income (loss) to consolidated non-GAAP net income is shown in the table below:
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
GAAP net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments: |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
|
|
|
|
||
Restructuring and related charges |
|
|
|
|
|
|
||
Litigation charges(1) |
|
|
|
|
|
|
||
System transition costs(2) |
|
|
|
|
|
|
||
Amortization of intangibles |
|
|
|
|
|
|
||
Debt refinancing charges, Other expense |
|
|
— |
|
|
|
|
|
Tax effect of non-GAAP adjustments |
|
|
( |
) |
|
|
( |
) |
Total adjustments to GAAP net income (loss) |
|
$ |
|
|
$ |
|
||
Non-GAAP net income |
|
$ |
|
|
$ |
|
||
(1)
(2)
Measure of segment assets:
The measure of segment assets that is reviewed by the CODM is reported within the condensed consolidated balance sheets as “Total assets.” Depreciation expense recorded for the three months ended September 30, 2025 and 2024 was $
The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):
|
|
|
|
|||||
|
|
September 30, |
|
|
June 30, |
|
||
Segment long-lived assets: |
|
|
|
|
|
|
||
Americas |
|
$ |
|
|
$ |
|
||
EMEA |
|
|
|
|
|
|
||
APAC |
|
|
|
|
|
|
||
Total segment long-lived assets |
|
$ |
|
|
$ |
|
||
Foreign Exchange Forward Contracts
The Company uses derivative financial instruments to manage exposures to foreign currency risk that may or may not be designated as hedging instruments. The Company’s objective for holding derivatives is to use the most effective methods to minimize the impact of these exposures. The Company does not enter into derivatives for speculative or trading purposes. The Company enters into foreign exchange forward contracts to attempt to mitigate the effect of gains and losses generated by foreign currency transactions related to certain operating expenses and remeasurement of certain assets and liabilities denominated in foreign currencies.
For foreign exchange forward contracts not designated as hedging instruments, the fair value of the Company’s derivatives in a gain position are recorded in “Prepaid expenses and other current assets” and derivatives in a loss position are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. Changes in the fair value of derivatives are recorded in “Other expense, net” in the accompanying condensed consolidated statements of operations. As of September 30, 2025 and June 30, 2025, foreign exchange forward contracts not designated as hedging instruments had a total notional principal amount of $
20
There were
The Company recorded restructuring charges of $
During the third quarter of fiscal 2024, the Company executed a global reduction-in-force plan targeted towards the reorganization of the Company's research and development and sales and marketing functions to align the Company's workforce with its strategic priorities and to focus on specific geographies and industry segments with higher growth opportunities (the “Q3 2024 Plan”). During the three months ended September 30, 2025 and 2024, the Company recorded restructuring charges of $
During the second quarter of fiscal 2024, the Company executed a global reduction-in-force plan to rebalance its workforce to create greater efficiency and improve execution, in alignment with the Company's business and strategic priorities, while reducing its ongoing operating expenses to address reduced revenue and macro-economic conditions (the “Q2 2024 Plan”). During the three months ended September 30, 2024, the Company recorded restructuring charges of $
Through September 30, 2025, the Company has incurred $
During the third quarter of fiscal 2023, the Company initiated a restructuring plan to transform its business infrastructure and reduce its facilities footprint and the facilities related charges (the “2023 Plan”). As part of this project, the Company moved engineering labs from its San Jose, California location to its Salem, New Hampshire location. This move is expected to help reduce the cost of operating the Company's labs. During the three months ended September 30, 2024, the Company recorded restructuring charges of approximately $
Restructuring liabilities are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. As of September 30, 2025 and June 30, 2025, the restructuring liability was $
The following table summarizes the activity related to the Company’s during the following periods (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Period charges |
|
|
|
|
|
|
||
Period reversals |
|
|
( |
) |
|
|
( |
) |
Period payments |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
$ |
|
||
For the three months ended September 30, 2025 and 2024, the Company recorded an income tax provision of $
The income tax provisions for the three months ended September 30, 2025 and 2024, consisted of (1) taxes on the income of the Company’s foreign subsidiaries, (2) state taxes in jurisdictions where the Company has no remaining state net operating losses (“NOLs”), (3) foreign withholding taxes, and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the wireless local area network business from Zebra Technologies Corporation, the Campus Fabric Business from Avaya and the Data Center Business from Brocade. The interim income tax provisions for the three months ended September 30, 2025 and 2024 were calculated using the discrete effective tax rate method as
21
allowed by ASC 740-270-30-18, Income Taxes – Interim Reporting. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as (i) the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings on a jurisdictional basis and (ii) the Company’s ongoing assessment that the recoverability of certain U.S. and Irish deferred tax assets is not more likely than not.
The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets as well as a portion of the deferred tax assets in Ireland. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence to determine whether it is “more likely than not” that deferred tax assets are recoverable including past operating results, estimates of future taxable income, changes to enacted tax laws, and the feasibility of tax planning strategies; such assessment is required on a jurisdiction-by-jurisdiction basis. The Company's inconsistent earnings in recent periods, including historical losses, tax attributes expiring unutilized in recent years and the cyclical nature of the Company's business provides sufficient negative evidence that require a full valuation allowance against its U.S. federal and state net deferred tax assets as well as a portion of the deferred tax assets in Ireland. These valuation allowances will be evaluated periodically and can be reversed partially or in whole if business results and the economic environment have sufficiently improved to support realization of some or all of the Company's deferred tax assets. In the event the Company changes its determination as to the amount of deferred tax assets that can be realized, it will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
The Company had $
The Company’s policy is to accrue interest and penalties related to the underpayment of income taxes as a component of tax expense in the accompanying condensed consolidated statements of operations.
In general, the Company’s U.S. federal income tax returns are subject to examination by tax authorities for fiscal years 2004 forward due to NOLs and the Company’s state income tax returns are subject to examination for fiscal years 2005 and forward due to NOLs. In general, the Company’s Irish tax returns are subject to examination by tax authorities for fiscal years 2022 and forward.
The Company is currently under examination in the U.S. by the Internal Revenue Service for the tax year ended June 30, 2023. Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.
On July 4,2025, federal legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes numerous changes to existing tax law including provisions providing current deductibility of domestic research and development costs, modifications to the limitation on deductibility of business interest expense and modifications to the international tax framework. This legislation has multiple effective dates, with certain provisions effective for the Company's fiscal year ended June 30, 2026 and others for the Company's fiscal year ended June 30, 2027. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. The effects of the new legislation are reflected in the condensed consolidated financial statements for the period ended September 30, 2025.
22
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock used in the basic net income (loss) per share calculation plus the dilutive effect of shares subject to repurchase, options and unvested RSUs.
The following table presents the calculation of net income (loss) per share of basic and diluted (in thousands, except per share data):
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Weighted-average shares used in per share calculation – basic |
|
|
|
|
|
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Employee Stock Purchase Plan shares |
|
|
|
|
|
|
||
Weighted-average shares used in per share calculation – diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) per share – basic and diluted |
|
|
|
|
|
|
||
Net income (loss) per share – basic |
|
$ |
|
|
$ |
( |
) |
|
Net income (loss) per share – diluted |
|
$ |
|
|
$ |
( |
) |
|
The following securities were excluded from the computation of net income (loss) per diluted share of common stock for the periods presented as their effect would have been anti-dilutive (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
Options to purchase common stock |
|
|
— |
|
|
|
|
|
Restricted stock units |
|
|
|
|
|
|
||
Employee Stock Purchase Plan shares |
|
|
|
|
|
|
||
Total shares excluded |
|
|
|
|
|
|
||
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q for the first quarter ended September 30, 2025 (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular, our expectations regarding market demands, customer requirements and the general economic environment, future results of operations, and other statements that include words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions. These forward-looking statements involve risks and uncertainties. We caution investors that actual results may differ materially from those projected in the forward-looking statements as a result of certain risk factors identified in the section entitled “Risk Factors” in this Report, our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and other filings we have made with the Securities and Exchange Commission. These risk factors include, but are not limited to: adverse general economic conditions; fluctuations in demand for our products and services; 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; fluctuations in the global economy, including as a result of political, social, economic, and regulatory factors, currency fluctuations, and tariff and trade policies; geopolitical tensions and conflicts; risks related to pending or future litigation and a dependency on third parties for certain components and for the manufacturing of our products.
Business Overview
The following discussion is based upon our unaudited condensed consolidated financial statements included elsewhere in this Report. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the manufacturing and shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory and service parts, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors, including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. For further information about our critical accounting policies and estimates, see the “Critical Accounting Policies and Estimates” section included in this “Management's Discussion and Analysis of Financial Condition and Results of Operations.”
Extreme Networks, Inc. (“Extreme,” “Company,” “we,” “us” and “our”) is a leader in AI-powered cloud networking, focused on delivering simple and secure solutions that help businesses address challenges and enable connections among devices, applications, and users. We push the boundaries of technology, leveraging the powers of artificial intelligence (“AI”), analytics, and automation and have industry leading support services. Tens of thousands of customers globally trust Extreme to drive value, foster innovation, and overcome extreme challenges. Extreme also designs, develops, and manufactures wired, wireless, and software-defined wide area-network (“SD-WAN”) infrastructure equipment. Our Extreme Platform ONETM solution, announced in December 2024 and made generally available in July 2025, is a technology platform that is designed to reduce the complexity for enterprises by seamlessly integrating networking, security and AI solutions into a single platform. AI-powered automation includes conversational, interactive and autonomous AI agents—to assist, advise and accelerate the productivity of networking, security and business teams—reducing the time to complete complex tasks.
Our global footprint provides service to some of the world’s leading names in business across verticals such as large sports and entertainment venues, hospitality, retail, transportation and logistics, education, government, healthcare, manufacturing and service providers. We derive all our revenues from the sale of our networking equipment, software subscriptions, and related maintenance contracts.
Industry Background
Enterprises across every industry are going through unprecedented changes, such as digital transformation initiatives, migrating their workloads to cloud-based environments, modernizing applications, finding new ways to leverage generative, multimodal and agentic AI technology, and adapting to a distributed workforce. To accomplish this, they are adopting new Information Technology (“IT”) delivery models and applications that require fundamental network alterations and enhancements spanning from the access edge to the data center. As networks become more complex and more distributed in nature, we believe IT teams in every industry will need more control and better insights than ever before to deliver secure, distributed connectivity and comprehensive centralized visibility. Networking is mission critical and touches all elements of how services are delivered to customers, employees, students, and patients. Managing networks from a single platform that integrates AI networking and security is critical to help reduce complexity and minimize the time it takes to complete tasks. A new category has emerged in the industry to address challenges related to managing the breadth and depth of complexities related to network administration, deployment and on-going management termed AI for networking. This new category is defined by innovation in generative, multimodal and agentic AI technology.
As the edge of the network continues to expand, our customers are managing more endpoints which comes with a host of challenges. This continued expansion creates issues such as a higher risk of cyberattacks and a need for more bandwidth due to an increase in applications running across the network.
24
Network complexity manifests itself in the form of more endpoints to manage, more applications to monitor, and more services that rely on the network for service delivery and enablement. When performance suffers, and the tug on internal systems and IT staff becomes more intense, technology is often being overworked. Resolving network problems expeditiously and identifying their root cause can improve organizational productivity and result in higher performance of operations. AI for networking is needed to improve an IT team’s agility and responsiveness to address these challenges.
We believe that the network has never been more vital than it is today. As administrators grapple with more data, coming from more places, more connected devices, and more Software-as-a-Service (“SaaS”) based applications, the cloud is fundamental to managing and maintaining a modern network. Traditional network offerings are not well-suited to fulfill enterprise expectations for rapid delivery of new services, more flexible business models, real-time response, and massive scalability. We expect Extreme Platform ONE to deliver significant productivity gains for IT teams by streamlining network design, deployment, management, and commercial operations through its generative, multimodal, and agentic AI capabilities..
As enterprises continue to migrate increasing numbers of applications and services to either private clouds or public clouds offered by third parties and to adopt new IT delivery models and applications, they are required to make fundamental network alterations and enhancements spanning from wireless access points (“APs”) to the network core. In either case, the network infrastructure must adapt to this new dynamic environment. AI and automation are key if enterprises are to derive maximum benefit from their cloud deployments. With automation applications becoming increasingly critical in manufacturing, warehousing, logistics, healthcare and other key industries, we believe this will continue to create demand for networking technology to serve as a foundation to run these services.
Service providers are investing in network enhancements with platforms and applications that deliver data insights, provide flexibility, and can quickly respond to new user demands and 5G use cases. The scale of issues and challenges seen within service provider networks is even greater than the enterprise network -- thus they too can greatly benefit from operational gains from Extreme Platform ONE.
We believe Extreme will continue to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic network fabric architecture that delivers simplicity for moves and changes at the edge of the network together with corporate-wide role-based policy. This enables customers to migrate to new cloud-managed switching, Wi-Fi, and SD-WAN, agnostic of the existing switching or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership and more flexibility along with a more resilient network, powered by Extreme Platform ONE.
We estimate the total addressable market (“TAM”) for our networking solutions, consisting of cloud networking, wireless local area networks (“WLAN”), campus local area networks (“LAN”), Ethernet switching, data center networking, SD-WAN solutions, and elements of the Secure Access Service Edge (“SASE”), exceeded $42 billion in calendar year 2024. Based on data from 650 Group, Gartner, IDC, and Dell'Oro Group, demand is projected to grow at a five-year compound annual growth rate (“CAGR”) of approximately 7%, reaching $59 billion by 2029. Within this market, cloud-managed networking solutions are expected to grow at a CAGR of approximately 15% through 2029. And with Extreme Platform ONE, we are addressing AI Networking for the Campus, a high-growth segment forecasted to grow at a 72% CAGR over the next five years.
The Extreme Strategy
Extreme is committed to empowering organizations with new ways to simply and securely connect with Extreme's intelligent technology platform that help move their organizations forward.
Extreme Platform ONE is designed to reduce complexity for enterprises by seamlessly integrating networking, security and AI solutions. The platform’s AI-powered automation includes conversational, interactive and autonomous AI agents, to assist, advise and accelerate the productivity of networking, security and business teams—reducing the time to complete complex tasks. Extreme Platform ONE is also designed to offer the industry's simplest licensing.
Key elements of Extreme’s strategy and differentiation include:
25
26
27
Results of Operations
During the first quarter of fiscal 2026, we achieved the following results:
During the first three months of fiscal 2026, we reflected the following results:
Net Revenues
The following table presents net product and subscription and support revenues for the periods presented (in thousands, except percentages):
|
|
|
Three Months Ended |
|
||||||
|
|
|
September 30, |
|
September 30, |
|
$ |
|
% |
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
Product |
|
|
$194,041 |
|
$162,284 |
|
$31,757 |
|
19.6 % |
|
Percentage of net revenues |
|
|
62.5% |
|
60.3% |
|
|
|
|
|
Subscription and support |
|
|
116,204 |
|
106,920 |
|
9,284 |
|
8.7 % |
|
Percentage of net revenues |
|
|
37.5% |
|
39.7% |
|
|
|
|
|
Total net revenues |
|
|
$310,245 |
|
$269,204 |
|
$41,041 |
|
15.2 % |
|
We generate product revenues primarily from sales of our networking equipment. We derive subscription and support revenues primarily from sales of our subscription and support offerings which include SaaS subscription offerings, maintenance contracts, professional services and training for our products.
Product revenues increased $31.8 million or 19.6% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in product revenues was primarily due to strong demand for our products, which contributed to higher bookings and higher shipments than the corresponding period in fiscal 2025.
Subscription and support revenues increased $9.3 million or 8.7% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in subscription and support revenues was driven by increased adoption of our cloud network management solutions and continued growth in our subscription business.
The following table presents the product and subscription and support gross profit, and the respective gross profit percentages for the periods presented (in thousands, except percentages):
|
|
Three Months Ended |
|
||||||
|
|
September 30, |
|
September 30, |
|
$ |
|
% |
|
Gross profit: |
|
|
|
|
|
|
|
|
|
Product |
|
$107,913 |
|
$92,882 |
|
$15,031 |
|
16.2 % |
|
Percentage of product revenues |
|
55.6% |
|
57.2% |
|
|
|
|
|
Subscription and support |
|
80,116 |
|
76,625 |
|
3,491 |
|
4.6 % |
|
Percentage of subscription and support revenues |
|
68.9% |
|
71.7% |
|
|
|
|
|
Total gross profit |
|
$188,029 |
|
$169,507 |
|
$18,522 |
|
10.9 % |
|
Percentage of net revenues |
|
60.6% |
|
63.0% |
|
|
|
|
|
28
Product gross profit increased $15.0 million or 16.2% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in product gross profit was primarily due to higher product revenues, partially offset by higher standard costs for products and increased distribution costs.
Subscription and support gross profit increased $3.5 million or 4.6% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in subscription and support gross profit was primarily due to higher subscription revenues, partially offset by higher professional services costs and higher subscription hosting costs.
Operating Expenses
The following table presents operating expenses for the periods presented (in thousands, except percentages):
|
|
Three Months Ended |
|
|
||||||
|
|
September 30, |
|
September 30, |
|
$ |
|
% |
|
|
Research and development |
|
$57,753 |
|
$54,451 |
|
$3,302 |
|
6.1 % |
|
|
Sales and marketing |
|
88,923 |
|
81,383 |
|
7,540 |
|
9.3 % |
|
|
General and administrative |
|
29,187 |
|
36,601 |
|
(7,414) |
|
(20.3)% |
|
|
Restructuring and related charges |
|
371 |
|
1,277 |
|
(906) |
|
(70.9)% |
|
|
Amortization of intangible assets |
|
500 |
|
512 |
|
(12) |
|
(2.3)% |
|
|
Total operating expenses |
|
$176,734 |
|
$174,224 |
|
$2,510 |
|
1.4 % |
|
|
Research and Development Expenses
Research and development expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), consultant fees and prototype expenses related to the design, development, and testing of our products.
Research and development expenses increased by $3.3 million or 6.1% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in research and development expenses was primarily due to a $2.1 million increase in personnel costs due to higher headcount and higher compensation and benefits costs, a $1.0 million increase in engineering project costs, and $0.8 million increase in information technology, equipment and depreciation costs, offset by a $0.6 million decrease in facilities and occupancy related costs.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), as well as trade shows and promotional expenses.
Sales and marketing expenses increased by $7.5 million or 9.3% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The increase in sales and marketing expenses was primarily due to a $4.6 million increase in personnel costs due to higher salaries and benefits costs, a $2.0 million increase in sales and marketing costs primarily related to higher sales commissions and higher travel costs, and a $1.0 million increase in other expenses primarily related to information technology and equipment costs and professional fees.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), legal and professional service costs, and facilities and information technology costs.
General and administrative expenses decreased by $7.4 million or 20.3% for the three months ended September 30, 2025 as compared to the corresponding period in fiscal 2025. The decrease in general and administrative expenses was primarily driven by a $8.8 million decrease in legal costs related to litigation matters, and a $0.6 million decrease in professional services, partially offset by a $2.0 million increase in personnel costs due to higher salaries, benefits and share-based compensation costs.
Restructuring and Related Charges
For the three months ended September 30, 2025, we recorded restructuring charges of $0.4 million which primarily consisted of additions to severance and benefits costs and professional services fees as well as reversals of previously established accruals related to unused severance benefits associated with the reduction-in-force actions related to the “Q2 2024 Plan”, and “Q3 2024 Plan”, each as described in Note 13, Restructuring and Related Charges, in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report.
29
For the three months ended September 30, 2024, we recorded restructuring and related charges of $1.3 million, which primarily consisted of additional severance and benefits costs and professional services fees associated with the reduction-in-force actions related to the “Q2 2024 Plan”, and “Q3 2024 Plan”, each as described in Note 13, Restructuring and Related Charges, in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report.
Amortization of Intangible Assets
During the three months ended September 30, 2025 and 2024, we recorded $0.5 million of operating expenses for each period related to the amortization of intangible assets.
Interest Income
During the three months ended September 30, 2025 and 2024, we recorded $1.2 million and $0.8 million, respectively, in interest income. The increase in interest income was primarily related to the higher interest earned on our cash accounts due to higher cash and cash equivalents balances held during the first quarter in fiscal 2026.
Interest Expense
During the three months ended September 30, 2025 and 2024, we recorded $3.7 million and $4.4 million, respectively, in interest expense related to the debt obligations held under our Amended Credit Agreement. The decrease in interest expense was primarily due to lower average rates under the Amended Credit Agreement.
Other Expense, Net
During the three months ended September 30, 2025 and 2024, we recorded other expense, net of $0.5 million and $0.7 million, respectively. The other expense, net for each period primarily related to the foreign exchange impact from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.
Provision for Income Taxes
For the three months ended September 30, 2025 and 2024, we recorded income tax provision of $2.7 million and $1.5 million, respectively.
The income tax provisions for the three months ended September 30, 2025 and 2024 consisted of (1) taxes on the income of our foreign subsidiaries, (2) state taxes in jurisdictions where we have no remaining state net operating losses, (3) foreign withholding taxes, and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN business from Zebra Technologies Corporation, the Campus Fabric Business from Avaya LLC and the Data Center Business from Brocade Communications System.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report are prepared in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under SEC rules and regulations. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. On an ongoing basis, we evaluate our estimates and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
As discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, 2025, we consider the following accounting policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:
There have been no changes to our critical accounting policies since the filing of our last Annual Report on Form 10-K.
30
Liquidity and Capital Resources
The following table summarizes information regarding our cash and cash equivalents (in thousands):
|
|
September 30, |
|
|
June 30, |
|
||
Cash and cash equivalents |
|
$ |
209,003 |
|
|
$ |
231,745 |
|
As of September 30, 2025, our principal sources of liquidity consisted of cash and cash equivalents of $209.0 million, accounts receivable, net of $145.8 million, and available borrowings under our 2023 Revolving Facility of $110.8 million. Our principal uses of cash include the purchase of finished goods inventory from our contract manufacturers, payroll and other operating expenses related to the development and marketing of our products, purchases of property and equipment, repayments of debt and related interest and share repurchases. We believe that our $209.0 million of cash and cash equivalents at September 30, 2025, our cash flow from operations and the availability of borrowings from the 2023 Revolving Facility will be sufficient to fund our planned operations for at least the next 12 months and into the foreseeable future.
On February 18, 2025, we announced that our Board had authorized management to repurchase up to $200 million of shares of the Company's common stock over a three-year period, commencing July 1, 2025 (the “2025 Repurchase Program”). Under these repurchase programs, purchases may be made from time to time in the open market or pursuant to a 10b5-1 plan. The manner, timing and amount of any future purchases will be determined by our management based on their evaluation of market conditions, stock price, Extreme’s ongoing determination that it is the best use of available cash and other factors. The 2025 Repurchase Program does not obligate us to acquire any shares of our common stock, and it may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. During the three months ended September 30, 2025, we repurchased a total of 577,281 shares of our common stock on the open market at a total cost of $12.0 million with an average price of $20.79 per share. As of September 30, 2025, the Company had $188.0 million available under the 2025 Repurchase Program.
On June 22, 2023, we entered into the Second Amended and Restated Credit Agreement (the “2023 Credit Agreement”) by and among Extreme, as borrower, BMO Harris Bank, N.A., as an issuing lender and swingline lender, Bank of America, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association and Wells Fargo Bank, National Association, as issuing lenders, the financial institutions or entities party thereto as lenders, and Bank of Montreal, as an administrative agent and collateral agent, which amended and restated the 2019 Credit Agreement. The 2023 Credit Agreement provides for i) a $200.0 million first lien term loan facility in an aggregate principal amount (the “Term Facility”), ii) a $150.0 million five-year revolving credit facility (the “2023 Revolving Facility”) and iii) an uncommitted additional incremental loan facility in the principal amount of up to $100.0 million plus an unlimited amount that is subject to pro forma compliance with a specified Consolidated Leverage Ratio tests. We may use the proceeds of the loans for working capital and general corporate purposes.
At our election, the initial term loan (the “Initial Term Loan”) under the 2023 Credit Agreement may be made as either a base rate loan or a Secured Overnight Financing Data Rate loan (“SOFR loan”). The applicable margin for base rate loans ranges from 1.00% to 1.75% per annum, and the applicable margin for SOFR loans ranges from 2.00% to 2.75%, in each case based on the Company’s Consolidated Leverage Ratio. All SOFR loans are subject to a floor of 0.00% per annum and spread adjustment of 0.10% per annum. We also agreed to pay other closing fees, arrangement fees, and administration fees.
The 2023 Credit Agreement requires us to maintain certain minimum financial ratios at the end of each fiscal quarter. The 2023 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or sell all or substantially all of its assets. The 2023 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding balance.
On August 14, 2024, we entered into an Amendment Number One to the 2023 Credit Agreement the (the 2023 Credit Agreement as amended by that certain Amendment Number One, “Amended Credit Agreement”). Under the Amended Credit Agreement, we modified the definition of the consolidated EBITDA for the purposes of evaluating compliance with financial covenants under the Amended Credit Agreement. The amended definition of consolidated EBITDA modifies the amount and type of add-backs that are allowable to better align with our operations and activities.
As of September 30, 2025, the Company was in compliance with the modified terms and financial covenants under the Amended Credit Agreement.
31
Key Components of Cash Flows and Liquidity
A summary of the sources and uses of cash and cash equivalents is as follows (in thousands):
|
Three Months Ended |
|||||||
|
September 30, |
|
|
September 30, |
|
|
||
Net cash provided by (used in) operating activities |
$ |
(13,998 |
) |
|
$ |
18,585 |
|
|
Net cash used in investing activities |
|
(6,855 |
) |
|
|
(6,916 |
) |
|
Net cash used in financing activities |
|
(1,716 |
) |
|
|
(9,121 |
) |
|
Foreign currency effect on cash and cash equivalents |
|
(173 |
) |
|
|
299 |
|
|
Net increase (decrease) in cash and cash equivalents |
$ |
(22,742 |
) |
|
$ |
2,847 |
|
|
Net Cash Provided by (Used in) Operating Activities
Cash flows used in operations in the three months ended September 30, 2025 were $14.0 million, including our net income of $5.6 million and non-cash expenses of $29.8 million for items such as amortization of intangible assets, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, provision for excess and obsolete inventory, provision for doubtful accounts and interest. Other uses of cash for the period included decreases in other accrued liabilities, accrued compensation and benefits, and operating lease liabilities, and increases in accounts receivable and other assets. This was partially offset by increases in deferred revenue and accounts payable and a decrease in inventory.
Cash flows provided by operations in the three months ended September 30, 2024 were $18.6 million, including our net loss of $10.5 million and non-cash expenses of $27.8 million for items such as amortization of intangible assets, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, provision for excess and obsolete inventory and interest. Other sources of cash for the period included a decrease in prepaid expenses and other assets and increases in accounts payable, deferred revenue and accrued compensation and benefits. This was partially offset by increases in accounts receivable, inventories as well as decreases in operating lease liabilities and other liabilities.
Net Cash Used in Investing Activities
Cash flows used in investing activities in the three months ended September 30, 2025 were $6.9 million for the purchases of property and equipment and the capitalized software development costs.
Cash flows used in investing activities in the three months ended September 30, 2024 were $6.9 million for the purchases of property and equipment.
Net Cash Used in Financing Activities
Cash flows used in financing activities in the three months ended September 30, 2025 were $1.7 million primarily due to share repurchases of $12.0 million under the 2025 Repurchase Program, payments of $11.0 million for taxes paid on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our Employee Stock Purchase Plan (“ESPP”) and exercise of stock options, and debt repayments of $3.8 million, partially offset by a $25.0 million borrowing against the 2023 Revolving Facility.
Cash flows used in financing activities in the three months ended September 30, 2024 were $9.1 million primarily due to payment of $5.9 million for taxes paid on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our ESPP and exercise of stock options, a payment of $0.7 million for debt financing costs related to the Amended Credit Agreement, and a debt repayment of $2.5 million.
Foreign Currency Effect on Cash and cash equivalents
Foreign currency effect on cash and cash equivalents increased in the three months ended September 30, 2025, primarily due to changes in foreign currency exchange rates between the U.S. Dollar and particularly the Indian Rupee, the UK Pound and the Euro.
Contractual Obligations
As of September 30, 2025, we had contractual obligations resulting from our debt arrangement, agreements to purchase goods and services in the ordinary course of business and obligations under our operating lease arrangements.
Our debt obligations relate to amounts owed under our Amended Credit Agreement. As of September 30, 2025, we had $199.4 million of debt outstanding, which is payable on quarterly installments through our fiscal year 2028. We are subject to interest on our debt obligations and unused commitment fee. See Note 7, Debt, in the Notes to Condensed Consolidated Financial Statements in this Report for additional information regarding our debt obligations.
32
Our unconditional purchase obligations represent the purchase of long lead-time component inventory that our contract manufacturers procure in accordance with our forecast. We expect to honor the inventory purchase commitments within the next 12 months. As of September 30, 2025, we had non-cancelable commitments to purchase $48.8 million of inventory. See Note 8, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements for additional information regarding our purchase obligations.
We have contractual commitments to our suppliers which represent commitments for future services. As of September 30, 2025, we had contractual commitments of $15.1 million that are due through our fiscal year 2027.
We lease facilities under operating lease arrangements at various locations that expire at various dates through our fiscal year 2033. As of September 30, 2025, the value of our obligations under operating leases was $50.1 million.
We have immaterial income tax liabilities related to uncertain tax positions and we are unable to reasonably estimate the timing of the settlement of those liabilities.
We did not have any material commitments for capital expenditures as of September 30, 2025.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
Our exposure to market risk for changes in interest rates relates primarily to debt and foreign currencies.
Debt
At certain points in time, we are exposed to the impact of interest rate fluctuations, primarily in the form of variable rate borrowings from the Amended Credit Agreement, which is described in Note 7, Debt, in the Notes to Condensed Consolidated Financial Statements in this Report. At September 30, 2025, we had $201.2 million of debt outstanding. During the quarter ended September 30, 2025, the average daily outstanding amount was $188.9 million, with a high of $205.0 million and a low of $180.0 million.
The following table presents hypothetical changes in interest expense for the quarter ended September 30, 2025, on the outstanding borrowings under the Amended Credit Agreement as of September 30, 2025, that are sensitive to changes in interest rates (in thousands):
|
|
Change in interest expense given a decrease in |
|
|
Average outstanding |
|
|
Change in interest expense given an increase in |
|
|||||||||||
Description |
|
(100 bps) |
|
|
(50 bps) |
|
|
as of June 30, 2025 |
|
|
100 bps |
|
|
50 bps |
|
|||||
Debt |
|
$ |
(1,889 |
) |
|
$ |
(945 |
) |
|
$ |
188,900 |
|
|
$ |
1,889 |
|
|
$ |
945 |
|
* The underlying interest rate was 6.54% as of September 30, 2025.
Exchange Rate Sensitivity
A majority of our sales and expenses are denominated in United States Dollars. While we conduct some sales transactions and incur certain operating expenses in foreign currencies and expect to continue to do so, we do not anticipate that foreign exchange gains or losses will be significant, in part because of our foreign exchange risk management process discussed below.
Foreign Exchange Forward Contracts
We record all derivatives on the balance sheet at fair value. From time to time, we enter into foreign exchange forward contracts to mitigate the effect of gains and losses generated by the foreign currency forecast transactions related to certain operating expenses and re-measurement of certain assets and liabilities denominated in foreign currencies. Changes in the fair value of these foreign exchange forward contracts are offset largely by re-measurement of the underlying foreign currency denominated assets and liabilities. As of September 30, 2025 and 2024 foreign exchange forward contracts not designated as hedging instruments, had a total notional principal amount of $65.1 million and $42.6 million, respectively. Changes in the fair value of derivatives are recognized in “Other expense, net.”
For the three months ended September 30, 2025 and 2024, the Company recognized foreign currency transaction net gains of $0.9 million and foreign currency transaction net losses of $1.4 million, respectively.
33
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a – 15(f) and 15d – 15(f) under the Securities Exchange Act of 1934, as amended) during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Extreme Networks have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Notwithstanding these limitations, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Our CEO and CFO have concluded that our disclosure controls and procedures are, in fact, effective at the “reasonable assurance” level.
34
PART II. Other Information
Item 1. Legal Proceedings
For information regarding litigation matters required by this item, refer to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and Note 8, Commitments and Contingencies, to the Notes to Condensed Consolidated Financial Statements, in this Report, which are incorporated herein by reference.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2025, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended June 30, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered equity securities during the three months ended September 30, 2025.
The following table provides stock repurchase activity during the three months ended September 30, 2025 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar Value |
|
||||
|
|
Total |
|
|
Average |
|
|
Total Number of Shares |
|
|
of Shares |
|
||||
|
|
Number of |
|
|
Price Paid |
|
|
Purchased as Part of |
|
|
That May Yet Be Purchased |
|
||||
|
|
Shares |
|
|
per Share |
|
|
Publicly Announced |
|
|
Under the Plans or Programs |
|
||||
|
|
Purchased |
|
|
(1) |
|
|
Plans or Programs |
|
|
(1) (2) |
|
||||
Beginning amount available to repurchase |
|
|
|
|
|
|
|
|
|
|
$ |
200,000 |
|
|||
July 1, 2025 - July 31, 2025 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
200,000 |
|
August 1, 2025 - August 31, 2025 |
|
|
492,256 |
|
|
|
20.65 |
|
|
|
492,256 |
|
|
|
189,834 |
|
September 1, 2025 - September 30, 2025 |
|
|
85,025 |
|
|
|
21.57 |
|
|
|
85,025 |
|
|
|
188,000 |
|
Total |
|
|
577,281 |
|
|
$ |
20.79 |
|
|
|
577,281 |
|
|
|
|
|
Remaining amount available for repurchase(2) |
|
|
|
|
|
|
|
|
|
|
$ |
188,000 |
|
|||
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Mine Safety Disclosures - Not Applicable
Item 5. Other Information
Rule 10b5-1 Trading Plan
On
On
On
35
Item 6. Exhibits
|
|
|
|
Incorporated by Reference |
|
|
||||
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date |
|
Number |
|
Filed Herewith |
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Extreme Networks, Inc. |
|
8-K |
|
11/18/2022 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation. |
|
8-K |
|
11/9/2023 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
|
8-K |
|
6/9/2023 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents. |
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X |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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* Furnished herewith. Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EXTREME NETWORKS, INC. |
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(Registrant)
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/s/ Kevin Rhodes |
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Kevin Rhodes |
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Executive Vice President, Chief Financial Officer (Principal Accounting Officer)
October 30, 2025
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37
Exhibit 31.1
SECTION 302 CERTIFICATION OF EDWARD B. MEYERCORD III
AS CHIEF EXECUTIVE OFFICER
I, Edward B. Meyercord III, certify that:
Date: |
October 30, 2025 |
/s/ EDWARD B. MEYERCORD III |
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Edward B. Meyercord III |
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President and Chief Executive Officer |
Exhibit 31.2
SECTION 302 CERTIFICATION OF KEVIN RHODES
AS CHIEF FINANCIAL OFFICER
I, Kevin Rhodes, certify that:
Date: |
October 30, 2025 |
/s/ KEVIN RHODES |
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Kevin Rhodes |
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Executive Vice President, Chief Financial Officer (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF EDWARD B. MEYERCORD III AS CHIEF EXECUTIVE OFFICER, PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Extreme Networks, Inc. on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date specified below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: October 30, 2025 |
/s/ EDWARD B. MEYERCORD III |
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Edward B. Meyercord III |
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President and Chief Executive Officer |
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Exhibit 32.2
CERTIFICATION OF KEVIN RHODES AS CHIEF FINANCIAL OFFICER, PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Extreme Networks, Inc. on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date specified below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: October 30, 2025 |
/s/ KEVIN RHODES |
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Kevin Rhodes |
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Executive Vice President, Chief Financial Officer (Principal Accounting Officer) |
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