Extreme Networks (EXTR) Tops Q4 EPS by 6c, Revenues Beat; Offers 1Q EPS/Revenue Guidance Above Consensus

Extreme Networks (NASDAQ: EXTR) reported Q4 EPS of $0.03, $0.06 better than the analyst estimate of ($0.03). Revenue for the quarter came in at $215.5 million versus the consensus estimate of $212.71 million.

Fiscal Fourth Quarter Results:

• Revenue $215.5 million, down 15% year-over-year and up 3% quarter-over-quarter
• GAAP EPS $(0.18), down from $(0.14) in Q4 last year
• Non-GAAP EPS $0.03, down from $0.06 in Q4 last year
• GAAP gross margin 56.0% compared to 55.1% in Q4 last year
• Non-GAAP gross margin 59.4% compared to 59.2% in Q4 last year
• GAAP operating margin (6.1)% compared to (4.8)% in Q4 last year
• Non-GAAP operating margin 5.2%, compared to 4.9% in Q4 last year
• Net cash provided by operating activities of $8.8 million

Free Cash Flow of $6.2 million

"During Q4 Extreme established itself as a critical business partner to our customers and partners with two industry-leading offers. We announced unparalleled choice of cloud management across all three public cloud platforms, and we set a new standard for access to cloud data and insights by offering unlimited data to cloud customers for the lifetime of their subscriptions. These actions helped us to substantially grow our lead generation during the quarter, which bodes well for future funnel growth. We achieved 4% sequential product revenue growth and grew our subscription and services revenue 18% year-over-year. We also grew our cloud new subscription bookings by 42% quarter-over-quarter. These trends highlight the pace at which our customers are embracing our solutions," stated Ed Meyercord, President and CEO of Extreme Networks.

"We are positioning Extreme for future growth and our outlook for Q1'21 reflects our expectations for continued sequential improvement in revenue and operating income. Heading into FY21 we have revamped our go-to-market by removing silos between channel and direct sales, strengthened key partner relationships, and segmented our sales organization to better serve specific customers. We also brought on a new Chief Revenue Officer who has a proven track record of helping organizations transition to more cloud and subscription-oriented businesses," concluded Meyercord.

Remi Thomas, CFO of Extreme Networks noted: "Following the sequential improvement in revenue, return to non-GAAP profitability, and positive cash flow we achieved in Q4, we ended FY20 on a stronger note in a difficult environment. We are also increasingly confident in our outlook heading into FY21 as we are seeing improving customer demand in key verticals such as Government, Education, and Manufacturing. These trends are reflected in our better-than-seasonal Q1 outlook that calls for a 4% sequential increase in revenue. We also remain confident in our margin outlook heading into FY21 as we reduced our non-GAAP operating expenses by $20 million, or 15%, year-over-year in Q4. We expect the combination of improved revenue and lowered costs and expenses to drive increased operating leverage throughout FY21. Finally, our balance sheet remains solid with $194 million of cash and cash equivalents on hand at the end of Q4."

GUIDANCE:

Extreme Networks sees Q1 2021 EPS of $0.01-$0.04, versus the consensus of $0.00. Extreme Networks sees Q1 2021 revenue of $220-230 million, versus the consensus of $216.94 million.

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

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