Extreme Networks Slumps After Disappointing Q2 Sales Performance, Dull Outlook

Author: Nabaparna Bhattacharya | January 31, 2024 12:26pm

Extreme Networks, Inc. (NASDAQ:EXTR) shares are trading lower on Wednesday.

The company reported a second-quarter FY24 revenue decline of 6.9% year over year to $296.37 million, beating the consensus of $295.61 million. 

Product revenue slumped 16.5% to $186.6 million. Subscription and support revenue grew 15.7% Y/Y to $109.8 million. SaaS ARR was $158.0 million, up 37.4% year-over-year.

Adjusted EPS of 24 cents missed the consensus estimate of 25 cents. 

The adjusted gross margin was 62.5%, compared to 58.5% in the prior year’s quarter. The adjusted operating margin was 14.8%, compared to 14.9% in the prior year quarter.

During Q2, the company generated net cash flow from operations of $34.3 million and free cash flow of $28.6 million.

Extreme Networks repurchased 1.5 million shares of common stock on the open market at a total cost of $25.0 million with a weighted average price of $16.81 per share. Second-quarter ending cash balance was $221.4 million.

Outlook: Extreme Networks expects third-quarter total net revenue of $200 million-$210 million (estimate: $321.305 million). The company sees third-quarter adjusted EPS of $(0.22)-$(0.17) versus the street view of $0.28.

The company expects fourth-quarter revenue of $265 million-$275 million (estimate: $355.32 million). 

“The networking industry, like much of IT, is exiting the final stage of the COVID-induced era of supply chain constraints, which is still impacting our business. As a result, our distributors and partners have lowered inventory purchases, which we expect to accelerate in the third quarter. We expect to emerge in the fourth quarter at a more normalized level of revenue and earnings,” said Ed Meyercord, President and Chief Executive Officer.

Price Action: EXTR shares are trading lower by 16.06% to $13.97 on the last check Wednesday.

Posted In: EXTR