EXTREME NETWORKS INC

Previous wording

This Quarterly Report on Form 10-Q for the first quarter ended September 30, 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, 2024, 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; 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; geopolitical tensions and conflicts; risks related to pending or future litigation and a dependency on third parties for certain components and for the manufacturing of our products.

Current wording

This Quarterly Report on Form 10-Q for the second quarter ended December 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, 2024, 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; 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; geopolitical tensions and conflicts; risks related to pending or future litigation and a dependency on third parties for certain components and for the manufacturing of our products.

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 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.

Current wording

Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of cloud networking with integrated security and Artificial Intelligence (“AI”) solutions along with 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 and security and AI software solutions. The Company’s Platform ONETM solution, announced in December 2024, is a technology platform that reduces the complexity for enterprises by seamlessly integrating networking, security and AI solutions into a single platform. AI-powered automation includes conversational, interactive and autonomous AI agents—to assist, advise and accelerate the productivity of networking, security and business teams—reducing the time to complete complex.

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 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

Our global footprint provides service to 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

Enterprises across every industry are going through unprecedented changes, such as leading digital initiatives, migrating their workloads to cloud-based environments, modernizing applications, finding new ways to leverage generative AI (“GenAI”) technology, and adopting to a distributed workforce. In order to accomplish this, they are adopting new Information Technology (“IT”) delivery models and applications that require fundamental network alterations and enhancements spanning from the access edge to the data center. As networks become more complex and more distributed in nature, we believe IT teams in every industry will need more control and better insights than ever before to ensure secure, distributed connectivity and comprehensive centralized visibility. Networking is mission critical and touches all elements of how services are delivered to customers, employees, students, and patients. Managing networks from cloud-based applications where customers can run their entire end-to-end networks, from wired or wireless infrastructure to SD-WAN, while ensuring full IT management of the business becomes critical. In addition, Machine Learning (“ML”) and GenAI technologies have the potential to vastly improve the network experience in today's world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network. When ML and GenAI are applied with cloud-driven networking and automation, administrators can quickly scale to provide productivity, availability, accessibility, manageability, security, and speed, regardless of the distribution of the network.

Current wording

Enterprises across every industry are going through unprecedented changes, such as leading digital initiatives, migrating their workloads to cloud-based environments, modernizing applications, finding new ways to leverage generative AI (“GenAI”) technology, and adapting to a distributed workforce. To accomplish this, they are adopting new Information Technology (“IT”) delivery models and applications that require fundamental network alterations and enhancements spanning from the access edge to the data center. As networks become more complex and more distributed in nature, we believe IT teams in every industry will need more control and better insights than ever before to deliver secure, distributed connectivity and comprehensive centralized visibility. Networking is mission critical and touches all elements of how services are delivered to customers, employees, students, and patients. Managing networks from a single platform that integrates AI networking and security is critical to help reduce complexity and minimize the time it takes to complete tasks.

Previous wording

We believe Extreme will continue to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic fabric attach architecture that delivers simplicity for moves and changes at the edge of the network together with corporate-wide role-based policy. This enables customers to migrate to new cloud managed switching, Wi-Fi, and SD-WAN, agnostic of the existing switching or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership, and more flexibility along with a more resilient network.

Current wording

We believe Extreme will continue to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic network fabric architecture that delivers simplicity for moves and changes at the edge of the network together with corporate-wide role-based policy. This enables customers to migrate to new cloud-managed switching, Wi-Fi, and SD-WAN, agnostic of the existing switching or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership, and more flexibility, along with a more resilient network.

Previous wording

We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), SD-WAN solutions and management, automation, and elements of the Secure Access Services Edge (“SASE”) market to be over $47 billion, and growing at approximately 13% annually over the next five years. This comprises over $36 billion for networking and infrastructure spanning enterprise and service provider (largely 5G) applications, and $11 billion for networking cloud and security software, which is expected to grow to $31 billion by 2028.

Current wording

We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), SD-WAN solutions and management, automation, and elements of the Secure Access Services Edge (“SASE”) market to be over $47 billion, and growing at approximately 13% annually over the next five years based on data from the 650 Group, Gartner, IDC, and Dell'Oro. This comprises over $36 billion for networking and infrastructure spanning enterprise and service provider (largely 5G) applications, and $11 billion for networking cloud and security software, which is expected to grow to $31 billion by 2028.

Previous wording

We are driven to help our customers find new ways to deliver better outcomes. Connectivity is just the foundation. We make the network a strategic asset. The combination of our solutions provides the connectivity, bandwidth, performance and insights that organizations of all sizes need to move their organizations forward. IT leaders are now tasked with ensuring the global, hybrid workforce is functional and successful no matter where they are, and ensuring people can work wherever they want.

Current wording

We are driven to help our customers find new ways to deliver better outcomes. Extreme empowers organizations with new ways to simply and securely connect with Extreme's intelligent technology platform to help move their organizations forward.

Previous wording

Provide a differentiated end-to-end cloud architecture. Cloud networking is estimated to be an $11 billion segment of the networking market comprising cloud managed services and cloud-managed products, which are largely WLAN access points and ethernet switches, growing at 14% annually over the next five years, according to data from the 650 Group, Gartner, IDC, and Dell'Oro. Cloud management technology has evolved significantly over the past decade. We believe we deliver a combination of innovation, reliability, and security with the leading end-to-end cloud management platform powered by ML and AI that spans from the Internet of Things (“IoT”) edge to the enterprise data center. Key characteristics of our cloud architecture include:

Current wording

Provide a differentiated end-to-end cloud networking architecture. Cloud networking is estimated to be an $11 billion segment of the networking market comprising cloud managed services and cloud-managed products, which are largely WLAN access points and ethernet switches, growing at 14% annually over the next five years, according to data from the 650 Group, Gartner, IDC, and Dell'Oro. Cloud management technology has evolved significantly over the past decade. We believe we deliver a combination of innovation, reliability, and security with the leading end-to-end cloud management platform powered by machine learning (“ML”) and AI that spans from the Internet of Things (“IoT”) edge to the enterprise data center. Key characteristics of our cloud architecture include:

Previous wording

A robust cloud management platform that delivers visibility, intelligence, and assurance from the IoT edge to the network core.

Current wording

A robust cloud management platform that delivers visibility, intelligence, and assurance from the network edge to the core.

Previous 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.

Current wording

The ExtremeCloud IQ: Our cloud platform conforms to ISO/IEC 27017, ISO/IEC 27001 and ISO/IEC 27701 standards for data privacy and protection as set forth by the International Standards Organization (“ISO”), and is CSA STAR certified.

Previous wording

Highest value of cloud management subscriptions. ExtremeCloud IQ provides unified cloud-native management driven by AI and ML for wireless access points, network switches, and SD-WAN solutions. It features intuitive configuration workflows, real-time and historical monitoring, comprehensive troubleshooting, and integrated network applications for Extreme customers. The innovative ML technologies of ExtremeCloud IQ analyze and interpret millions of network and user data points, from the edge to the data center, to power actionable business and IT insights. The platform streamlines operations by delivering new levels of network automation and intelligence. The ExtremeCloud IQ Pilot license tier streamlines every aspect of network management from deployment and maintenance to problem resolution. The Pilot license includes key capabilities for guest management, WIPS, and location services with associated services: ExtremeGuest, ExtremeAirDefense, and ExtremeLocation.

Current wording

Highest value of cloud management subscriptions. ExtremeCloud IQ provides unified cloud-native management driven by AI and ML for wireless access points, wired switches, network security and SD-WAN solutions. It features intuitive configuration workflows, real-time and historical monitoring, comprehensive troubleshooting, and integrated network applications for Extreme customers. The innovative ML technologies of ExtremeCloud IQ analyze and interpret millions of network and user data points, from the edge to the data center, to power actionable business and IT insights. The platform streamlines operations by delivering new levels of network automation and intelligence. The ExtremeCloud IQ Pilot license tier streamlines every aspect of network management from deployment and maintenance to problem resolution. The Pilot license includes key capabilities for guest management, WIPS, and location services with associated services: ExtremeGuest, ExtremeAirDefense, and ExtremeLocation.

Previous wording

Additional AI Capabilities. The ExtremeCloud IQ CoPilot license tier is an add-on to the Pilot license tier. It includes all the capabilities of the ExtremeCloud Pilot and Navigator license tiers. CoPilot serves as more than a centralized point of management with AIOps, Digital Twin and other enhancements to network management and automation. It is a trusted digital advisor for your Extreme cloud-managed Wi-Fi networks that proactively reduces risk and provides the fastest time to the best experience. This includes advanced anomaly detection and capabilities to ensure the user experience of wireless and wired devices.

Current wording

Additional AI Capabilities. The ExtremeCloud IQ CoPilot license tier is an add-on to the Pilot license tier. It includes all the capabilities of the ExtremeCloud Pilot and Navigator license tiers. CoPilot serves as more than a centralized point of management with AIOps and other enhancements to network management and automation. It is a trusted digital advisor for your Extreme cloud-managed Wi-Fi networks that proactively reduces risk and provides the fastest time to the best experience. This includes advanced anomaly detection and capabilities to ensure the user experience of wireless and wired devices.

Previous wording

Universal licensing with one portable management license for any device and for any type of management. For switches, OS feature licenses are portable, and bulk activated through ExtremeCloud IQ.

Current wording

Universal licensing with one portable management license for any device and for any type of management. For switches, operating system feature licenses are portable, and bulk activated through ExtremeCloud IQ.

Previous wording

There are several ways customers will be able to leverage our AI in the future:

Current wording

There are several ways customers will be able to leverage our AI in the future as part of Extreme Platform ONE:

Previous wording

Knowledge queries provide the ability to answer any question in context (i.e., role, application, conversation). Questions are answered with Extreme’s product documentation, GTAC knowledge base and selected training, and best practices material.

Current wording

Knowledge queries provide the ability to answer any question in context (i.e., role, application, conversation). Questions are answered with Extreme’s product documentation, Global Technical Assistance Center knowledge base and selected training, and best practices material.

Previous wording

Intelligent Queries are answered with customer network data from multiple applications (ExtremeCloud IQ, SD-WAN, etc.). User Manuals, Release Notes, How to Guides, EOSL, EOL, Licensing, Service Contracts ,and Company information.

Current wording

Intelligent Queries are answered with customer network data from multiple applications (ExtremeCloud IQ, SD-WAN, etc.).

Previous wording

We launched ExtremeCloud Universal ZTNA, the first network security offering to integrate network, application, and device security within a single solution. By combining Cloud Network Access Control ("NAC") and Zero Trust Network Authentication ("ZTNA") into a single, easy-to-use SaaS offering, we help customers ensure unified observability, frictionless user experiences and a consistent security policy for applications and devices and supports secure hybrid work use cases for customers. As the VPN market transitions to ZTNA, the proliferation of individual applications, each with their own policy and dashboard, is adding complexity and expense for enterprise customers. We expect the broadening of our security offering to drive significant traction for our business with growth opportunities.

Current wording

ExtremeCloud Universal ZTNA. Universal ZTNA is the first network security offering to integrate network, application, and device security within a single solution. By combining Cloud Network Access Control (“NAC”) and Zero Trust Network Authentication (“ZTNA”) into a single, easy-to-use SaaS offering, we help customers ensure unified observability, frictionless user experiences and a consistent security policy for applications and devices, as well as support secure hybrid work use cases for customers. As the virtual private network market transitions to ZTNA, the proliferation of individual applications, each with their own policy and dashboard, is adding complexity and expense for enterprise customers. We expect the broadening of our security offering to drive significant traction for our business with growth opportunities.

Previous wording

Extreme’s unique and highly differentiated fabric makes it simple to orchestrate applications and policy across the entire campus, from the core to the wireless edge, and across the wide area network. We bring enhanced security, the ability to segment networks and zero touch provisioning, thus eliminating confusion, complexity and the need for additional IT staff. This is in stark contrast to our competitors’ fabric solutions, which were designed for service provider and data center networks and not meant for the campus.

Current wording

Extreme’s unique and highly differentiated network fabric makes it simple to orchestrate applications and policy across the entire campus, from the core to the wireless edge, and across the wide area network. We bring enhanced security, the ability to segment networks and zero touch provisioning, thus eliminating confusion, complexity and the need for additional IT staff. This is in stark contrast to our competitors’ fabric solutions, which were designed for service providers and data center networks and not meant for the campus.

Previous wording

Provide high-quality “in-house” customer service and support. We seek to enhance customer satisfaction and build customer loyalty through high-quality service and support. This includes a wide range of standard support programs to the level of service our customers require, from standard business hours to global 24-hour-a-day, 365-days-a-year real-time responsive support.

Current wording

Provide high-quality insourced customer service and support. We seek to enhance customer satisfaction and build customer loyalty through high-quality service and support. This includes a wide range of standard support programs to the level of service our customers require, from standard business hours to global 24-hour-a-day, 365-days-a-year real-time responsive support.

Previous wording

During the first quarter of fiscal 2025, we achieved the following results:

Current wording

During the second quarter of fiscal 2025, we achieved the following results:

Previous wording

Total gross margin of 63.0% of net revenues compared to 60.3% of net revenues in the first quarter of fiscal 2023.

Current wording

Total gross margin of 62.7% of net revenues compared to 61.9% of net revenues in the second quarter of fiscal 2024.

Previous wording

During the first three months of fiscal 2025, we reflected the following results:

Current wording

During the first six months of fiscal 2025, we reflected the following results:

Previous wording

Cash flows provided by operating activities of $18.6 million compared to $75.6 million in the three months ended September 30, 2023.

Current wording

Cash flows provided by operating activities of $40.1 million compared to $109.9 million in the six months ended December 31, 2023.

Previous wording

Cash and cash equivalents of $159.5 million as of September 30, 2024 compared to $156.7 million as of June 30, 2024.

Current wording

Cash and cash equivalents of $170.3 million as of December 31, 2024 compared to $156.7 million as of June 30, 2024.

Previous 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 our products.

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 include SaaS offerings, maintenance contracts, professional services and training for our products.

Previous wording

Subscription and support revenues increased $7.3 million or 7.3% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The increase in subscription and support revenues was primarily due to the continued growth in our subscription business.

Current wording

Subscription and support revenues decreased $2.7 million or 2.4% for the three months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The decrease in subscription and support revenues was primarily due to lower support revenues, partially offset by higher subscription revenue. Subscription and support revenues increased $4.6 million or 2.2% for the six months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The increase in subscription and support revenues was primarily due to the continued growth in our subscription business.

Previous wording

Product gross profit decreased $52.1 million or 35.9% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The decrease in product gross profit was primarily due to lower product revenues, partially offset by lower reserves for excess and obsolete inventory, lower intangible asset amortization due to certain intangible assets being fully amortized, lower distribution costs due to lower shipments and lower warranty reserves.

Current wording

Product gross profit decreased 57.5 million or 23.0% for the six months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The decrease in product gross profit was primarily due to lower product revenues, partially offset by lower reserves for excess and obsolete inventory and lower distribution costs.

Previous wording

Subscription and support gross profit increased $8.6 million or 12.7% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The increase in subscription and support gross profit was primarily due to increased subscription and support revenues as well as lower personnel costs partially offset by increased subscription costs.

Current wording

Subscription and support gross profit increased $5.9 million or 4.0% for the six months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The increase in subscription and support gross profit was primarily due to increased subscription revenues and lower professional fees offset by higher subscription costs.

Previous wording

Research and development expenses decreased by $3.6 million or 6.1% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The decrease in research and development expenses was primarily due to a $2.7 million decrease in personnel costs due to lower compensation and benefits costs and a $2.6 million decrease in contractor costs partially offset by a $0.7 million increase in engineering project costs, a $0.7 million increase in information technology and facilities costs, and $0.4 million increase in other expenses primarily recruiting and professional fees.

Current wording

Research and development expenses decreased by $1.5 million or 1.4% for the six months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The decrease in research and development expenses was primarily due to a $5.8 million decrease in contractor costs, partially offset by a $1.9 million increase in personnel costs due to higher headcount and higher compensation and benefits costs, a $1.4 million increase in information technology and facility related expenses, and a $1.0 million increase in other expenses primarily consisting of recruiting and professional fees.

Previous wording

Sales and marketing expenses decreased by $10.5 million or 11.5% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The decrease in sales and marketing expenses was primarily due to a $9.2 million decrease in personnel costs primarily due to lower headcount, a $1.0 million decrease in travel costs and a $0.3 million decrease in professional fees.

Current wording

Sales and marketing expenses decreased by $5.2 million or 6.1% for the three months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The decrease in sales and marketing expenses was primarily due to a $3.2 million decrease in personnel costs primarily due to lower headcount, a $0.4 million decrease in contractor costs and professional fees and a $1.6 million decrease in other expenses primarily related to travel and other marketing event costs.

Previous wording

General and administrative expenses increased by $12.7 million or 53.3% for the three months ended September 30, 2024 as compared to the corresponding period in fiscal 2024. The increase in general and administrative expenses was primarily due to a $9.3 million increase in litigation charges due to an additional accrual for an ongoing litigation matter and a $4.8 million increase in system transition costs, partially offset by a $1.4 million decrease in equipment related expenses primarily due to lower depreciation and software maintenance costs.

Current wording

General and administrative expenses increased by $13.4 million or 27.2% for the six months ended December 31, 2024 as compared to the corresponding period in fiscal 2024. The increase in general and administrative expenses was primarily due to an $8.8 million increase in legal costs related to litigation matters, net of insurance recoveries, a $7.8 million increase in system transition costs, partially offset by a $2.8 million decrease in professional fees, and a $0.4 million decrease in other expenses primarily facilities related expenses.

Previous wording

For the three months ended September 30, 2024, we recorded restructuring and related charges of $1.3 million, which primarily consisted of additional severance and benefits costs and professional services fees associated with the reduction-in-force actions related to the “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.

Current wording

For the three and six months ended December 31, 2024, we recorded restructuring and related charges of $1.0 million and $2.3 million, respectively, which primarily consisted of additional severance and benefits costs and professional services fees associated with the reduction-in-force actions related to the “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 months ended September 30, 2023, we recorded restructuring and related charges of $2.7 million, which primarily consisted of costs associated with the headcount reduction related to the reduction-in-force plan executed during the first quarter in fiscal 2024.

Current 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”.

Previous wording

During the three months ended September 30, 2024 and 2023, we recorded $0.8 million and $1.2 million, respectively, in interest income. The decrease in interest income was primarily related to the lower interest earned on our cash accounts due to lower cash and cash equivalents balances held during the first quarter in fiscal 2025.

Current wording

During the three months ended December 31, 2024 and 2023, we recorded $0.8 million and $1.4 million, respectively, in interest income. The decrease in interest income was primarily related to the lower interest earned on our cash accounts due to lower interest rates as well as lower cash and cash equivalents balances held during the second quarter in fiscal 2025.

Previous wording

During the three months ended September 30, 2024 and 2023, we recorded $4.4 million and $4.3 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the Amended Credit Agreement, as defined below.

Current wording

During the three months ended December 31, 2024 and 2023, we recorded $4.2 million and $4.3 million, respectively, in interest expense related to the debt obligations held under our Amended Credit Agreement. The decrease in interest expense was primarily due to lower average rates under the Amended Credit Agreement.

Previous wording

During the three months ended September 30, 2024 and 2023, we recorded other expense, net of $0.7 million and other income, 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.

Current wording

During the three months ended December 31, 2024 and 2023, we recorded other income, net of $0.7 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

For the three months ended September 30, 2024 and 2023, we recorded income tax provision of $1.5 million and $4.6 million, respectively.

Current wording

For the three months ended December 31, 2024 and 2023, we recorded income tax provision of $2.6 million and $3.1 million, respectively.

Previous wording

The income tax provisions for the three months ended September 30, 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 months ended September 30, 2023 includes U.S. federal income tax expense of $1.4 million.

Current wording

The income tax provisions for the three and six months ended December 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 for the three months ended December 31, 2024 includes U.S. federal income tax expense of $1.4 million and $0.2 million, respectively.

Previous wording

As of September 30, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $159.5 million, accounts receivable, net of $97.2 million, and available borrowings under our 2023 Revolving Facility of $135.8 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 $159.5 million of cash and cash equivalents at September 30, 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.

Current wording

As of December 31, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $170.3 million, accounts receivable, net of $117.6 million, and available borrowings under our 2023 Revolving Facility of $135.8 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 $170.3 million of cash and cash equivalents at December 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 (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 September 30, 2024, the Company did not repurchase any shares of its common stock. As of September 30, 2024, the Company had $50.3 million available under the 2022 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 and six months ended December 31, 2024, the Company did not repurchase any shares of its common stock. As of December 31, 2024, the Company had $50.3 million available for share repurchases under the 2022 Repurchase Program.