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Extreme Networks (EXTR)
NASDAQ:EXTR
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Extreme Networks
(NASDAQ:EXTR)
40Underperform
Positive Factors
Financial Performance
EXTR delivered a financial performance that exceeded expectations for the second quarter.
Market Demand
Surprising improved demand in EMEA boosted revenue.
Product Development
The company's network fabric architecture and new products, including WiFi-7, are driving share gains.
Negative Factors
Regional Performance
EMEA struggled with challenging macroeconomic conditions affecting revenue.
Regional Sales
Americas experienced an impact due to seasonally soft K-12 spending.
Extreme Networks (EXTR) vs. S&P 500 (SPY)
Market Cap
$1.66B
Dividend YieldN/A
Average Volume (3M)1.35M
Price to Earnings (P/E)―
Beta (1Y)1.35
Revenue Growth-24.49%
EPS Growth-250.61%
CountryUS
Employees2,656
SectorTechnology
Sector Strength62
IndustryCommunication Equipment
Share Statistics
EPS (TTM)-0.94
Shares Outstanding132,755,310
10 Day Avg. Volume1,306,077
30 Day Avg. Volume1,353,237
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.95
Price to Cash Flow (P/CF)23.00
P/FCF Ratio20.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$18.00Price Target Upside44.12% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
Extreme Networks Business Overview & Revenue Model
Company DescriptionExtreme Networks, Inc. provides software-driven networking solutions worldwide. It designs, develops, and manufactures wired and wireless network infrastructure equipment; and develops software for network management, policy, analytics, security, and access controls. The company offers ExtremeCloud IQ, an ML/AI powered, wired, and wireless cloud network management solution that offers advanced visibility and control over users, devices, and applications; ExtremeCloud IQ Site Engine that provides task automation, access control, granular visibility with real-time analytics and multi-vendor device management; and ExtremeCloud IQ Essentials offers WIPS, location services, IoT, and guest management services. It also provides wireless access point products; ExtremeSwitching portfolio that includes access edge products that offer physical presentations along with options to deliver Ethernet or convergence-friendly Power-over-Ethernet (POE), including high-power universal POE; aggregation/core switches designed to address aggregation, top-of-rack, and campus core environments; and data center switches and routers. In addition, the company offers cloud native platforms and applications for service providers; and customer support and services. It markets and sells its products through distributors, resellers, and field sales organizations to healthcare, education, government, manufacturing, retail, and hospitality markets. Extreme Networks, Inc. was incorporated in 1996 and is headquartered in Morrisville, North Carolina.
How the Company Makes MoneyExtreme Networks generates revenue primarily through the sale of its networking hardware and software products. This includes switches, routers, and wireless access points, as well as proprietary software for network management, automation, and security. Additionally, the company offers support and maintenance services, which provide a recurring revenue stream. Extreme Networks also engages in strategic partnerships and alliances with technology providers and resellers to extend its market reach and enhance its product offerings. The company's earnings are influenced by its ability to innovate in networking technology, expand customer relationships, and adapt to changing market demands.
Extreme Networks Financial Statement Overview
Summary
Extreme Networks faces significant financial challenges with declining revenue, negative profitability margins, high leverage, and inadequate cash flow. Strategic adjustments are necessary to stabilize financial health.Income Statement
Extreme Networks shows a challenging financial trajectory with negative profitability margins in the TTM period. The Gross Profit Margin stands at 56.6%, indicating efficient production cost management. However, the company has struggled with negative EBIT and Net Profit Margins, signaling operational inefficiencies and loss-making activities. Additionally, the revenue has decreased by 8.9% compared to the previous year, further compounding financial pressures.45
Neutral
Balance Sheet
The balance sheet reflects a concerning financial health with a high Debt-to-Equity Ratio of 1.19, indicating significant leverage. The company's Return on Equity is negative at -237.7%, highlighting poor returns on shareholder investments. The Equity Ratio is also low at 4.7%, demonstrating limited equity buffer against liabilities. This poses a risk of solvency issues if financial performance does not improve.40
Negative
Cash Flow
Cash flow analysis reveals troubling signs with a negative Free Cash Flow Growth Rate and negative Operating Cash Flow to Net Income Ratio, suggesting cash outflows are exceeding inflows. The Free Cash Flow to Net Income Ratio is also negative, indicating that the company is not generating enough cash to cover its net losses. These factors raise concerns about the company's cash sustainability.30
Negative
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.02B | 1.12B | 1.31B | 1.11B | 1.01B | 948.02M | Gross Profit |
| 575.33M | 630.83M | 754.72M | 629.94M | 585.12M | 517.84M | EBIT |
| -79.04M | -28.88M | 108.31M | 64.19M | 34.38M | -42.66M | EBITDA |
| -73.78M | -19.61M | 158.62M | 120.07M | 110.09M | -36.39M | Net Income Common Stockholders |
| -121.75M | -85.96M | 78.07M | 44.27M | 1.94M | -126.84M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 103.56M | 156.70M | 234.83M | 194.52M | 246.89M | 193.87M | Total Assets |
| 250.36M | 1.04B | 1.14B | 1.07B | 1.01B | 979.09M | Total Debt |
| 4.28M | 239.60M | 264.61M | 351.13M | 390.84M | 480.54M | Net Debt |
| -36.09M | 82.91M | 29.78M | 156.61M | 143.95M | 286.66M | Total Liabilities |
| 105.86M | 1.02B | 1.02B | 978.17M | 955.63M | 973.69M | Stockholders Equity |
| 144.50M | 25.28M | 116.75M | 90.34M | 54.47M | 5.40M |
| Cash Flow | Free Cash Flow | ||||
| -34.75M | 37.37M | 235.41M | 112.74M | 127.36M | 20.62M | Operating Cash Flow |
| -14.26M | 55.49M | 249.21M | 128.18M | 144.53M | 35.88M | Investing Cash Flow |
| -20.49M | -18.12M | -13.80M | -84.95M | -17.18M | -189.48M | Financing Cash Flow |
| -15.73M | -114.98M | -194.78M | -94.66M | -74.78M | 178.49M |
Extreme Networks Technical Analysis
Neutral
12.49
Price Trends
13.83
Negative
15.39
Negative
15.08
Negative
Market Momentum
-0.58
Negative
49.04
Neutral
85.02
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EXTR, the sentiment is Neutral. The current price of 12.49 is above the 20-day moving average (MA) of 11.96, below the 50-day MA of 13.83, and below the 200-day MA of 15.08, indicating a neutral trend. The MACD of -0.58 indicates Negative momentum. The RSI at 49.04 is Neutral, neither overbought nor oversold. The STOCH value of 85.02 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for EXTR.
Extreme Networks Risk Analysis
Extreme Networks disclosed 40 risk factors in its most recent earnings report. Extreme Networks reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Extreme Networks Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $18.57B | 7.00 | 12.09% | 3.20% | 10.93% | 43.19% | |
67 Neutral | $9.37B | 122.16 | 2.76% | ― | -7.29% | -64.31% | |
67 Neutral | $18.94B | 42.54 | 323.87% | 0.77% | 14.59% | 19.51% | |
62 Neutral | $11.86B | 41.38 | 6.21% | 2.47% | -8.82% | -10.01% | |
59 Neutral | $10.72B | 10.22 | -6.67% | 3.02% | 7.42% | -11.38% | |
53 Neutral | $4.15B | ― | -48.63% | ― | -1.72% | -94.98% | |
40 Underperform | $1.66B | ― | -152.77% | ― | -24.49% | -250.61% |
* Technology Sector Average
Performance Comparison
EXTR
Extreme Networks
12.49
0.94
8.14%
CIEN
Ciena
65.94
19.18
41.02%
JNPR
Juniper Networks
35.60
1.29
3.76%
UI
Ubiquiti Networks
313.09
205.31
190.49%
LITE
Lumentum Holdings
60.00
16.48
37.87%
HPE
Hewlett Packard Enterprise
16.24
-0.48
-2.87%
Extreme Networks Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -23.14% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected a positive outlook, with strong revenue growth, significant customer wins, and strategic advances like Platform ONE. However, there were some regional challenges and expected gross margin pressures in the upcoming quarters.Highlights
Strong Revenue Growth
Revenue for the second quarter of fiscal 2025 was $279.4 million, representing a 4% sequential growth, driven by 6% growth in product sales and attached subscription and support contracts.
Significant Customer Wins
36 customers spent over $1 million with Extreme in the quarter, up from 27 last quarter, including notable deals with the Pittsburgh Steelers and Taylor Wessing.
EMEA Business Growth
EMEA business grew significantly both sequentially and year-over-year, with expectations of continued momentum as governmental issues in Germany resolve.
Improved Gross Margin
Gross margin improved year-over-year by 90 basis points to 63.4%, reflecting improved standard costs.
Platform ONE Launch and Recognition
The new Platform ONE was named one of the 10 hottest networking products of 2024 by CRN Magazine, with plans for further market expansion.
Positive Cash Flow
The quarter ended with $16 million in free cash flow, reflecting higher revenue and solid profitability.
Lowlights
Sequential Revenue Decline in Americas
Americas revenue declined sequentially due to difficult comparisons with significant deals closed earlier than expected in the first quarter.
Impact of Seasonality on K-12 Vertical
Seasonality in the K-12 vertical impacted sequential growth in the Americas.
Challenges in German Market
Business in Germany is negatively impacted by a lack of government, affecting government and frame contracts.
Slight Gross Margin Decline Expected
Gross margin is expected to be in the range of 62% to 63% in the second half of fiscal 2025 due to mix shift towards product revenue.
Company Guidance
In the second quarter of fiscal year 2025, Extreme Networks reported continued growth, marked by a 4% sequential revenue increase to $279.4 million, driven by a 6% rise in product sales and subscription contracts. The company achieved its best product bookings in five quarters and improved competitive win rates, especially with enterprise customers. Revenue from the EMEA region grew significantly both sequentially and year-over-year, while the Americas faced seasonal impacts in the K-12 vertical. Extreme Networks' gross margin was 63.4%, and operating profit reached $41.2 million, translating to a 14.7% margin. The company provided guidance for the third quarter, expecting revenue between $276 million and $284 million, with gross margins from 62% to 63%, and earnings per share ranging from $0.16 to $0.20. For the full fiscal year 2025, Extreme Networks anticipates revenue between $1,120 million and $1,138 million, with increased margins and cash flow.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.