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Extreme Networks (EXTR) Tops Q4 EPS by 1c, Slight Miss on Revenues

August 8, 2018 7:38 AM EDT

Extreme Networks (NASDAQ: EXTR) reported Q4 EPS of $0.20, $0.01 better than the analyst estimate of $0.19. Revenue for the quarter came in at $278.3 million versus the consensus estimate of $279.22 million.

  • Fourth quarter revenue was $278.3 million, or an increase of 56% year-over-year.
  • GAAP gross margin for the fourth fiscal quarter was 54.0%, a reduction of 340 basis points year-over-year, and non-GAAP gross margin was 57.6%, an increase of 10 basis points year-over-year.
  • GAAP operating margin for the fourth fiscal quarter was (1.2)% and non-GAAP operating margin was 9.8%, compared to 8.8% and 12.8%, respectively, year-over-year.
  • GAAP net loss for the fourth fiscal quarter was $5.6 million, or $(0.05) per basic share, a decrease of $18.8 million and $0.17 per basic share, year-over-year. Non-GAAP net income was $24.0 million, or $0.20 per diluted share, an increase of $3.6 million and $0.02 per diluted share, year-over-year.

"Our FY18 results highlight year-over-year revenue growth and non-GAAP gross margin improvement. We completed two acquisitions during the fiscal year and achieved 5% year-over-year organic revenue growth in our core Extreme wired and wireless business in our fiscal fourth quarter, the fourth quarter in a row of year-over-year organic growth," stated Ed Meyercord, President and CEO of Extreme Networks.

"On June 19, we launched our Smart OmniEdge solution for wired and wireless networks, along with validated designs for the educational, healthcare, and retail verticals. We expect to build on our network edge capabilities throughout fiscal 2019 as the industry embraces 802.11ax technology."

"Looking out into fiscal 2019, we are entering the year with $98 million of cross-sell opportunities after closing $40 million in FY18. However, we are resetting expectations for our data center business, and are taking swift action to rebuild our sales pipeline after a disappointing fiscal fourth quarter, while celebrating some key wins. Last quarter, we completed a digital transformation initiative within our supply chain and vendor managed inventory systems, allowing us to run a much more responsive operation. We are now undertaking an initiative over the next six months to bring our portfolio together and consolidate distribution to improve channel efficiency. We expect this change to impact our revenues for the first two quarters of fiscal 2019 by approximately $30-40 million as compared with prior full-year outlook. We believe these actions will materially improve our operating efficiency and working capital. While we expect the combination of lower anticipated revenue in our data center business and our initiative to consolidate distribution to result in a challenging fiscal first quarter 2019, we expect sequential revenue improvements throughout the fiscal year, and we continue to target a 60% gross margin after fiscal Q1," Meyercord added.

Lastly, Meyercord added: "We have a strong team with a track record of execution. We stabilized and transformed the original Enterasys acquisition into a growth asset. We transformed the Zebra WLAN business into a growth asset with significantly higher margins. We stabilized the Avaya networking assets where we are projecting growth at significantly higher gross margins. And now, we are focused on driving growth and higher margins in the data center business we acquired from Brocade. We are investing in our datacenter solutions portfolio and are confident we will be able to grow this business at higher margins. With a growing pipeline of cross-sell opportunities, we have more evidence now than ever before, that our end-to-end networking strategy from the wireless edge to the cloud datacenter will drive overall growth and margin expansion at Extreme."

For earnings history and earnings-related data on Extreme Networks (EXTR) click here.



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