EXTREME NETWORKS INC

Previous wording

This Quarterly Report on Form 10-Q for the second quarter ended December 31, 2023 (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, 2023, our Quarterly Report on Form 10-Q for the first quarter ended September 30, 2023, and other filings we have made with the Securities and Exchange Commission. These risk factors include, but are not limited to: risks related to supply chain disruptions; 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, currency and regulatory factors; risks related to pending or future litigation; a dependency on third parties for certain components and for the manufacturing of our products and our ability to receive the anticipated benefits of acquired businesses.

Current wording

This Quarterly Report on Form 10-Q for the third quarter ended March 31, 2024 (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, 2023, our Quarterly Reports on Form 10-Q for the first and second quarter ended September 30, 2023 and December 31, 2023, respectively, 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; risks related to supply chain disruptions; 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, currency and regulatory factors; risks related to pending or future litigation; a dependency on third parties for certain components and for the manufacturing of our products and our ability to receive the anticipated benefits of acquired businesses.

Previous wording

Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of cloud networking solutions and industry leading services and support. Extreme designs, develops, and manufactures wired, wireless, and software-defined wide area-network (“SD-WAN”) infrastructure equipment, software and cloud-based management solutions. The Company’s cloud solution is a single platform that offers unified network management of wireless access points, switches, and SD-WAN. It leverages machine learning, Artificial Intelligence for IT Operations and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights to save time, lower costs and streamline operations. Extreme is currently managing more than two and a half million devices in the cloud.

Current wording

Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of cloud networking solutions and industry leading services and support. Extreme designs, develops, and manufactures wired, wireless, and software-defined wide area-network (“SD-WAN”) infrastructure equipment, software and cloud-based network management solutions. The Company’s cloud solution is a single platform that offers unified network management of wireless access points, switches, and SD-WAN. It leverages machine learning, Artificial Intelligence for Information Technology Operations ("AIOps") and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights to save time, lower costs and streamline operations.

Previous wording

Extreme has been pushing the boundaries of networking technology since 1996, driven by a higher purpose of helping our customers connect beyond the network. Extreme’s cloud networking technologies provide flexibility and scalability in deployment, management, and licensing of networks globally. Our global footprint provides service to over 50,000 customers and over 10 million daily end users across the world including some of the world’s leading names in business, 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.

Current wording

Extreme has been pushing the boundaries of networking technology since 1996, driven by a higher purpose of helping our customers connect beyond the network. Extreme’s cloud networking technologies provide flexibility and scalability in deployment, management, and licensing of networks globally. Our global footprint provides service to over 50,000 customers including some of the world’s leading names in business, 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.

Previous wording

Extreme Cloud IQ cloud platform conforms to ISO/ IEC 27017, is certified by DQS to ISO/IEC 27001 and ISO/IEC 27701 by the International Standards Organization (“ISO”), and is CSA STAR certified.

Current wording

Extreme Cloud IQ cloud platform conforms to ISO/ IEC 27017, is certified by DQS to ISO/IEC 27001 and ISO/IEC 27701 set forth by the International Standards Organization (“ISO”), and is CSA STAR certified.

Previous wording

Highest value of cloud management subscriptions. ExtremeCloud IQ Pilot provides our customers with four key applications enabling organizations to eliminate overlays.

Current wording

Highest value of cloud management subscriptions. ExtremeCloud IQ Pilot provides our customers with three key applications enabling organizations to eliminate overlays.

Previous wording

Expand Wi-Fi technology leadership. Wireless is today’s network access method of choice, and every business must deal with scale, density, and BYOD challenges. Wired and wireless networks are changing as the explosion of mobile and IoT devices increase the demand for high-performance, transparent, and always-on wired to wireless services. The unified access layer requires distributed intelligent components to ensure that access control and resiliency of business services are available across the entire infrastructure and manageable from a single console. We are at a technology inflection point with the pending migration from Wi-Fi 6 solutions to 6 GHz Wi-Fi (Wi-Fi 6E and Wi-Fi 7), focused on providing more efficient access to the broad array of connected devices. We believe we have the industry’s broadest 6 GHz indoor and outdoor wireless portfolio, providing intelligence and security for wired/wireless networks by leveraging our cloud architecture, end-to-end fabric services, UZTNA policy enforcement, and AIOps management platform with Explainable ML insights.

Current wording

Expand Wi-Fi technology leadership. Wireless is today’s network access method of choice, and every business must deal with scale, density, and BYOD challenges. Wired and wireless networks are changing as the explosion of mobile and IoT devices increase the demand for high-performance, transparent, and always-on wired to wireless services. The unified access layer requires distributed intelligent components to ensure that access control and resiliency of business services are available across the entire infrastructure and manageable from a single console. We are at a technology inflection point with the pending migration from Wi-Fi 6 solutions to 6 GHz Wi-Fi (Wi-Fi 6E and Wi-Fi 7), focused on providing more efficient access to the broad array of connected devices. We believe we have the industry’s broadest 6 GHz indoor and outdoor wireless portfolio, providing intelligence and security for wired/wireless networks by leveraging our cloud architecture, end-to-end fabric services, Universal Zero Trust Network Access, and AIOps management platform with Explainable ML insights.

Previous wording

During the second quarter of fiscal 2024, we achieved the following results:

Current wording

During the third quarter of fiscal 2024, we achieved the following results:

Previous wording

Total gross margin of 61.9% of net revenues compared to 57.1% of net revenues in the second quarter of fiscal 2023.

Current wording

Total gross margin of 56.8% of net revenues compared to 57.7% of net revenues in the third quarter of fiscal 2023.

Previous wording

During the first six months of fiscal 2024, we reflected the following results:

Current wording

During the first nine months of fiscal 2024, we reflected the following results:

Previous wording

Cash flows provided by operating activities of $109.9 million compared to $120.3 million in the six months ended December 31, 2022.

Current wording

Cash flows provided by operating activities of $40.0 million compared to $168.5 million in the nine months ended March 31, 2023.

Previous wording

Cash and cash equivalents of $221.4 million as of December 31, 2023 compared to $234.8 million as of June 30, 2023.

Current wording

Cash and cash equivalents of $151.0 million as of March 31, 2024 compared to $234.8 million as of June 30, 2023.

Previous wording

Product revenue is generated primarily from sales of our networking equipment. Subscription and support revenue is derived primarily from sales of our subscription and support offerings which includes SaaS offerings, maintenance contracts, professional services and training for its products. Prior to fiscal 2024, subscription and support revenue was referred to as “service and subscription revenue,” however, the composition of subscription and support revenue has not been modified.

Current wording

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 includes SaaS offerings, maintenance contracts, professional services and training for its products. Prior to fiscal 2024, we referred to subscription and support revenue as “service and subscription revenue”; however, the composition of subscription and support revenue has not been modified.

Previous wording

Product revenues decreased $36.8 million or 16.5% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The decrease in product revenues was primarily driven by lower bookings and shipments as well as elongated sales cycles in the channel caused by current macroeconomic conditions. Product revenues increased $10.4 million or 2.4% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in product revenues was primarily due to strong demand for our products and higher shipments of prior period backlog resulting from the easing of supply chain constraints in the first quarter of fiscal 2024.

Current wording

Product revenues decreased $134.6 million or 55.8% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. Product revenues decreased $124.2 million or 18.5% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The decreases in product revenues were primarily driven by lower bookings and shipments as well as elongated sales cycles in the channel caused by current macroeconomic conditions.

Previous wording

Subscription and support revenues increased $14.9 million or 15.7% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. Subscription and support revenues increased $23.1 million or 12.4% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increases in subscription and support revenues were primarily due to the continued growth in our subscription business.

Current wording

Subscription and support revenues increased $13.1 million or 14.4% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. Subscription and support revenues increased $36.2 million or 13.1% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increases in subscription and support revenues were primarily due to the continued growth in our subscription business.

Previous wording

Product gross profit increased $23.7 million or 10.5% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in product gross profit was primarily due to higher product revenues along with lower amortization of intangible assets due to certain intangible assets being fully amortized, favorable purchase price variance and distribution costs due to easing of supply chain constraints and lower warranty reserve partially offset by higher reserves for excess and obsolete inventory.

Current wording

Product gross profit decreased $86.5 million or 65.5% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. Product gross profit decreased $62.8 million or 17.5% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The decreases in product gross profit were primarily due to lower product revenues and higher reserves for excess and obsolete inventory, partially offset by lower intangible asset amortization due to certain intangible assets being fully amortized, favorable purchase price variance, lower distribution costs due to easing of supply chain constraints and lower warranty reserves.

Previous wording

Subscription and support gross profit increased $16.5 million or 26.6% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. Subscription and support gross profit increased $24.2 million or 19.9% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increases in subscription and support gross profits were primarily due to increased subscription and support revenues as well as lower personnel costs.

Current wording

Subscription and support gross profit increased $14.5 million or 24.3% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. Subscription and support gross profit increased $38.8 million or 21.3% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increases in subscription and support gross profits were primarily due to increased subscription and support revenues as well as lower personnel costs.

Previous wording

Research and development expenses increased by $0.2 million or 0.4% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in research and development expenses was primarily due to a $2.3 million increase in contractor costs, partially offset by a $1.0 million decrease in personnel costs, a $0.4 million decrease in information technology and facility related expenses, a $0.3 million decrease in equipment related costs, and a $0.4 million decrease in engineering project costs and other costs.

Current wording

Research and development expenses decreased by $0.3 million or 0.6% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The decrease in research and development expenses was primarily due to a $1.1 million decrease in engineering project costs, partially offset by a $0.8 million increase in personnel costs primarily related to benefits and share-based compensation costs.

Previous wording

Research and development expenses increased by $7.2 million or 7.0% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in research and development expenses was primarily due to a $4.3 million increase in personnel related costs due to higher salaries and benefits costs due to increased headcount during the prior periods and higher share-based compensation, a $4.0 million increase in contractor costs, partially offset by a $0.8 million decrease in engineering project costs and a $0.3 million decrease in information technology and facility related expenses.

Current wording

Research and development expenses increased by $6.9 million or 4.4% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increase in research and development expenses was primarily due to a $5.2 million increase in personnel related costs due to higher salaries and benefits costs and higher share-based compensation expense and a $4.4 million increase in contractor costs and professional service fees, partially offset by a $1.9 million decrease in engineering project costs, a $0.5 million decrease in information technology and facility related expenses and a $0.3 million decrease in other expenses primarily due to lower recruiting fees.

Previous wording

Sales and marketing expenses increased by $18.2 million or 11.4% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in sales and marketing expenses was primarily due to a $11.7 million increase in personnel costs due to higher salaries and benefits costs due to increased headcount during the prior periods and higher share-based compensation, a $5.5 million increase in sales promotions and marketing related expenses, a $0.5 million increase in professional fees, a $0.3 million in equipment related costs, and a $0.2 million increase in information technology and facility related expenses.

Current wording

Sales and marketing expenses increased by $3.7 million or 4.5% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increase in sales and marketing expenses was primarily due to a $1.4 million increase in personnel cost primarily due to higher commissions and higher benefit costs, a $1.6 million increase in sales promotions and marketing related expenses and a $1.1 million increase in professional fees, partially offset by a $0.4 million decrease in other expenses primarily due to lower travel expenses.

Previous wording

Sales and marketing expenses increased by $4.6 million or 5.7% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in sales and marketing expenses was primarily due to a $3.0 million increase in sales promotions and marketing related expenses, a $1.3 million increase in personnel costs due to higher salaries and benefits costs, and a $0.2 million increase in travel expenses.

Current wording

Sales and marketing expenses increased by $21.9 million or 9.0% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increase in sales and marketing expenses was primarily due to a $14.2 million increase in personnel costs due to higher salaries and benefits costs and higher share-based compensation expense, a $6.3 million increase in sales promotions and marketing related expenses, and a $1.4 million increase in professional fees.

Previous wording

General and administrative expenses increased by $1.3 million or 5.4% for the three months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in general and administrative expenses was primarily due to a $1.0 million increase in professional fees and a $0.3 million increase in software licensing and maintenance costs.

Current wording

General and administrative expenses increased by $3.5 million or 16.3% for the three months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increase in general and administrative expenses was primarily due to a $1.7 million increase in personnel costs primarily for share-based compensation, a $1.5 million increase in bad debt provision, a $0.7 million increase in professional fees, and a $0.5 million increase in software licensing costs, partially offset by a $0.9 million decrease in equipment related costs primarily due to lower depreciation expense.

Previous wording

General and administrative expenses increased by $6.6 million or 15.5% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in general and administrative expenses was primarily due to a $2.8 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a $3.6 million increase in professional fees including increase in legal costs related to litigations and preliminary costs associated with transition of our business systems and a $0.2 million increase in other costs.

Current wording

General and administrative expenses increased by $10.2 million or 15.8% for the nine months ended March 31, 2024 as compared to the corresponding period in fiscal 2023. The increase in general and administrative expenses was primarily due to a $4.4 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a $4.4 million increase in professional fees including increases in legal costs related to litigation and preliminary costs associated with the transition of our customer relationship management solution and our configure, price, quote solution, a $1.5 million increase in bad debt provision and a $1.4 million increase in software licensing costs, partially offset by a $1.7 million decrease in equipment related costs primarily due to lower depreciation expense.

Previous wording

During the six months ended December 31, 2023, we did not incur any acquisition and integration costs. During the six months ended December 31, 2022, we incurred acquisition and integration costs of $0.4 million, which primarily consisted of professional fees and certain compensation charges related to the acquisition of Ipanema Tech SAS.

Current wording

During the nine months ended March 31, 2024, we did not incur any acquisition and integration costs. During the nine months ended March 31, 2023, we incurred acquisition and integration costs of $0.4 million, which primarily consisted of professional fees and certain compensation charges related to the acquisition of Ipanema Tech SAS.

Previous wording

For the three and six months ended December 31, 2023, we recorded restructuring and related charges of $9.2 million and $11.9 million, which primarily consisted of severance and benefits costs associated with the reduction-in-force actions related to the “Q1 2024 Plan” and the “Q2 2024 plan,” each as described in Note 13, Restructuring and Related Charges, in Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Current wording

For the three and nine months ended March 31, 2024, we recorded restructuring and related charges of $14.4 million and $26.3 million, which primarily consisted of severance and benefits costs and professional services fees associated with the reduction-in-force actions related to the “Q1 2024 Plan”, “Q2 2024 Plan”, and "Q3 2024 Plan", each as described in Note 13, Restructuring and Related Charges, in Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Previous wording

For the three and six months ended December 31, 2022, we recorded restructuring charges of $0.5 million and $1.0 million, respectively, which primarily consisted of facility-related charges related to our previously impaired facilities.

Current wording

For the three and nine months ended March 31, 2023, we recorded restructuring charges of $1.4 million and $2.3 million, respectively, which primarily consisted of facility-related charges related to our previously impaired facilities and $0.8 million in charges associated with the "2023 Plan" to transform our business and facilities infrastructure, as described in Note 13, Restructuring and Related Charges, in Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Previous wording

During the six months ended December 31, 2023 and 2022, we recorded $1.0 million of operating expenses for each period related to the amortization of intangible assets.

Current wording

During the nine months ended March 31, 2024 and 2023, we recorded $1.5 million of operating expenses for each period related to the amortization of intangible assets.

Previous wording

During the three months ended December 31, 2023 and 2022, we recorded $1.4 million and $0.9 million, respectively, in interest income. The increase in interest income is primarily due to higher interest earned on our cash balance due to rising interest rates.

Current wording

During the three months ended March 31, 2024 and 2023, we recorded $1.2 million and $0.8 million, respectively, in interest income. The increase in interest income was primarily due to higher interest earned on our cash balance due to rising interest rates.

Previous wording

During the six months ended December 31, 2023 and 2022, we recorded $2.7 million and $1.3 million, respectively, in interest income. The increase in interest income is primarily due to higher interest earned on our cash balance due to rising interest rates.

Current wording

During the nine months ended March 31, 2024 and 2023, we recorded $3.9 million and $2.1 million, respectively, in interest income. The increase in interest income was primarily due to higher interest earned on our cash balance due to rising interest rates.

Previous wording

During the three months ended December 31, 2023 and 2022, we recorded $4.3 million and $3.9 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

Current wording

During the three months ended March 31, 2024 and 2023, we recorded $4.2 million and $3.9 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

Previous wording

During the six months ended December 31, 2023 and 2022, we recorded $8.6 million and $7.7 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

Current wording

During the nine months ended March 31, 2024 and 2023, we recorded $12.8 million and $11.7 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

Previous wording

During the three months ended December 31, 2023 and 2022, we recorded other expense, net of $0.4 million and other income, net of $0.1 million, respectively. The other income (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.

Current wording

During the three months ended March 31, 2024 and 2023, we recorded other income, net of $0.4 million and other expense, net of $0.4 million, respectively. The other income (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.

Previous wording

During the six months ended December 31, 2023 and 2022, we recorded other income, net of less than $0.1 million and $0.5 million, respectively. The other income, 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.

Current wording

During the nine months ended March 31, 2024 and 2023, we recorded other income, net of $0.4 million and $0.1 million, respectively. The other income, 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.

Previous wording

For the six months ended December 31, 2023 and 2022, we recorded income tax provision of $7.6 million and $4.4 million, respectively.

Current wording

For the three months ended March 31, 2024 and 2023, we recorded income tax benefit of $0.6 million and income tax provision of $3.9 million, respectively.

Previous wording

For the three months ended December 31, 2023 and 2022, we recorded income tax provision of $3.1 million and $2.6 million, respectively.

Current wording

For the nine months ended March 31, 2024 and 2023, we recorded income tax provision of $7.0 million and $8.3 million, respectively.

Previous wording

The income tax provisions for the three and six months ended December 31, 2023 and 2022 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. In addition, the income tax provision for the three and six months ended December 31, 2023 includes U.S. federal income tax of $0.2 million and $1.6 million, respectively.

Current wording

The income tax provision (benefit) for the three and nine months ended March 31, 2024 and 2023 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. In addition, the income tax provision (benefit) for the three and nine months ended March 31, 2024 includes U.S. federal income benefit of $1.6 million, fully reversing the previously recorded U.S. federal income tax expense during the first two quarters of the year, as well as a $0.3 million income tax benefit resulting from establishment of an indefinite lived deferred tax asset for nondeductible interest expense, offsetting the deferred tax liability related to amortizable goodwill.

Previous wording

As of December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $221.4 million, accounts receivable, net of $112.0 million, and available borrowings under our five-year 2023 Revolving Facility of $135.5 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, and repayments of debt and related interest and share repurchases. We believe that our $221.4 million of cash and cash equivalents at December 31, 2023, 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.

Current wording

As of March 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $151.0 million, accounts receivable, net of $94.4 million, and available borrowings under our five-year 2023 Revolving Facility of $135.5 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, and repayments of debt and related interest and share repurchases. We believe that our $151.0 million of cash and cash equivalents at March 31, 2024, 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.

Previous wording

On May 18, 2022, our Board of Directors (the “Board”) authorized management to repurchase up to $200.0 million shares of our common stock over a three-year period commencing July 1, 2022. A maximum of $25.0 million may be repurchased in any quarter. On November 17, 2022, the Board increased the authorization to repurchase in any quarter from $25.0 million per quarter to $50.0 million per quarter. Purchases may be made from time to time in the open market or pursuant to 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 repurchase program does not obligate us to acquire any shares of its common stock, may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. During the three months ended December 31, 2023, the Company repurchased 1,485,005 shares of its common stock on the open market at a total cost of $25.0 million with an average price of $16.81 per share. During the six months ended December 31, 2023, the Company repurchased a total of 2,365,220 shares of its common stock on the open market at a total cost of $49.9 million with an average price of $21.08 per share. As of December 31, 2023, we had $50.3 million available under our share repurchase program.

Current wording

On May 18, 2022, our Board of Directors (the “Board”) authorized management to repurchase up to $200.0 million shares of our common stock over a three-year period commencing July 1, 2022 (as amended, the "2022 Repurchase Program"). A maximum of $25.0 million may be repurchased in any quarter. On November 17, 2022, the Board increased the authorization to repurchase in any quarter from $25.0 million per quarter to $50.0 million per quarter. Purchases may be made from time to time in the open market or pursuant to 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 2022 Repurchase Program does not obligate us to acquire any shares of its common stock, may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. During the three months ended March 31, 2024, the Company did not repurchase any shares of its common stock. During the nine months ended March 31, 2024, the Company repurchased a total of 2,365,220 shares of its common stock on the open market at a total cost of $49.9 million with an average price of $21.08 per share. As of March 31, 2024, the Company had $50.3 million available under the 2022 Repurchase Program.

Previous wording

On August 9, 2019, we entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”), by and among Extreme, as borrower, 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. 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 proceeds of the loans for working capital and general corporate purposes. On June 22, 2023, we borrowed $25.0 million against the 2023 Revolving Facility, which was subsequently paid off on July 7, 2023.

Current wording

On August 9, 2019, we entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”), by and among Extreme, as borrower, 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. 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. On June 22, 2023, we borrowed $25.0 million against the 2023 Revolving Facility, which was subsequently paid off on July 7, 2023.

Previous wording

During the three and six months ended December 31, 2023, we were in compliance with all the original terms and financial covenants under the 2023 Credit Agreement.

Current wording

During the three and nine months ended March 31, 2024, we were in compliance with all the original terms and financial covenants under the 2023 Credit Agreement.

Previous wording

Cash flows provided by operations in the six months ended December 31, 2023 were $109.9 million, including our net income of $32.7 million and non-cash expenses of $57.4 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, and interest. Other sources of cash for the period included a decrease in accounts receivable, and increases in deferred revenue and other current and long-term liabilities. This was partially offset by increases in inventories and prepaid expenses and other assets as well as decreases in accounts payable and accrued compensation and benefits.

Current wording

Cash flows provided by operations in the nine months ended March 31, 2024 were $40.0 million, including our net loss of $31.8 million and non-cash expenses of $84.7 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, and interest. Other sources of cash for the period included a decrease in accounts receivable, and increases in deferred revenue and other current and long-term liabilities. This was partially offset by increases in inventories and prepaid expenses and other assets as well as decreases in accounts payable, operating lease liabilities and accrued compensation and benefits.