Extreme Networks Reports Second Quarter Fiscal Year 2025 Financial Results

Consistent Execution Drives Third Quarter of Sequential Revenue Growth, Powering Earnings Above Guidance

MORRISVILLE, N.C.: Extreme Networks, Inc. (“Extreme”) (Nasdaq: EXTR) today released financial results for its second quarter ended December 31, 2024, highlighting continued market recovery in enterprise networking, and marking Extreme's third consecutive quarter of sequential revenue growth.

"Our competitive win rates continue to improve, especially with larger enterprise customers. Our success is based on the simplicity and feature differentiation of our cloud networking platform and unique enterprise campus fabric solution. Changes in the competitive environment and early traction with our commercial models are creating new growth opportunities for Extreme," said Ed Meyercord, President and Chief Executive Officer.

"In the second quarter, we announced our vision for Extreme Platform ONE™, our innovative technology platform that integrates Extreme's networking and security solutions by collapsing all of our applications into a single interface. We are introducing new AI models at the core of the platform that will drive impactful advances to the networking experience. Platform ONE will deliver significant productivity gains for IT teams in network design, deployment, management and commercial operations, by reducing complex tasks from hours to minutes," concluded Meyercord.

Kevin Rhodes, Executive Vice President and Chief Financial Officer, stated, "The continued sequential revenue growth in the second quarter, coupled with higher operating margin and earnings growth, demonstrates the strong operating leverage in our financial model. We expect better than seasonal revenue for the third quarter, at the midpoint of our outlook, and further improvement in cash flow generation. For FY25, we expect growth in revenue, along with higher operating margins and cash flow generation, based on the ongoing recovery in our business and prudent management of our expenses."

Fiscal Second Quarter Results:

• Revenue $279.4 million, down 5.7% year-over-year, and up 3.8% quarter-over-quarter
• SaaS ARR $181.1 million, up 14.4% year-over-year, and up 4.0% quarter-over-quarter
• GAAP diluted EPS $0.06, compared to GAAP diluted EPS $0.03 last year and GAAP Loss per share $0.08 last quarter
• Non-GAAP diluted EPS $0.21, compared to $0.24 last year and $0.17 last quarter
• GAAP gross margin 62.7% compared to 61.9% last year and 63.0% last quarter
• Non-GAAP gross margin 63.4% compared to 62.5% last year and 63.7% last quarter
• GAAP operating profit margin 4.5% compared to GAAP operating profit margin 3.5% last year and GAAP operating loss margin 1.8% last quarter
• Non-GAAP operating profit margin 14.7% compared to 14.8% last year and 12.4% last quarter

Liquidity:

• Q2 ending cash balance was $170.3 million, an increase of $10.8 million from the end of Q1 2025 and a decrease of $51.1 million from the end of Q2 in the prior year.
• Q2 net debt was $14.7 million, a decrease of $13.3 million from net debt of $28.0 million at the end of Q1 2025 and an increase of $41.1 million from net cash of $26.4 million at the end of Q2 in the prior year.
• During Q2, we generated net cash flow from operations of $21.5 million and had free cash flow of $16.1 million.

Recent Key Highlights:

• Extreme introduced Extreme Platform ONE, an innovative technology platform that integrates networking, security and AI to drive automation that helps customers reduce complex tasks from hours to minutes. The platform’s AI-powered automation includes conversational, interactive and autonomous AI agents—to assist, advise and accelerate the productivity of networking, security and business teams. CRN Magazine named Platform ONE one of the “Ten Hottest Networking Products of 2024.”
• Extreme continued its dominance in professional sports, as the Pittsburgh Steelers will deploy state-of-the-art 6GHz Wi-Fi to enhance the fan experience and optimize retail PoS systems, ensuring faster transactions and shorter concession lines. NHL teams such as the Anaheim Ducks, Calgary Flames, Columbus Blue Jackets, St. Louis Blues, and Nashville Predators have deployed Extreme Fabric and ExtremeCloud™ IQ to improve in-arena Wi-Fi, deliver immersive fan experiences, support new digital services and secure IoT devices running throughout the arenas.
• The München Klinik, the largest hospital network in Munich and the number one emergency hospital in the region, has invested in Extreme Fabric, Universal switching and ExtremeCloud IQ to provide a more robust and secure network across its five sites. The investment in Extreme will help them advance patient care, better secure patient records and improve the performance of medical devices.
• Philadelphia International Airport selected Extreme for core routing services as well as secure automation via Extreme Fabric and Extreme’s Network Access Control (NAC) solution. PHL serves over 12 million passengers a year and is upgrading its terminals and technology. Deploying Extreme's technology provides the network team increased agility during construction phases of the projects in addition to daily operations.
• UK-based law firm Taylor Wessing needed to update its legacy infrastructure across its 28 offices. With Extreme Wireless and ExtremeCloud IQ, the firm will have faster Wi-Fi for employees, streamlined network management for its IT team and a simplified licensing structure that will be easier to manage and scale as the firm continues to grow.
• The City of Temple, Texas, needed to modernize its network infrastructure and help its IT staff better support services across multiple municipal offices for its rapidly growing population. Temple selected Extreme to fully refresh its wired and wireless network and standardize its infrastructure on Extreme Fabric, significantly improving network security, visibility and control.
• Extreme was recognized as one of the Great Tech Places to Work by NC TECH and was ranked #33 on Newsweek's 2025 Excellence 1000 Index, demonstrating our commitment to innovation, ethical practices, and sustainability while prioritizing our customers, employees, and global impact. ExtremeCloud Universal ZTNA was also named a winner in the 2025 BIG Innovation Awards and in the TMCNet 2024 Cybersecurity Excellence Awards.

Fiscal Q2 2025 Financial Metrics:

(in millions, except percentages and per share information)

Extreme uses the non-GAAP free cash flow metric as a measure of operating performance. Free cash flow represents GAAP net cash provided by (used in) operating activities, less capital expenditures for purchases of property and equipment and capitalized software development costs. Extreme considers free cash flow to be useful information for management and investors regarding the amount of cash generated by the business after the purchases of property and equipment and capitalized software development costs, which can then be used to, among other things, invest in Extreme’s business, make strategic acquisitions, and strengthen the balance sheet. A limitation of the utility of this non-GAAP free cash flow metric as a measure of financial performance is that it does not represent the total increase or decrease in the Company's cash balance for the period. The following table shows non-GAAP free cash flow calculation (in millions):

SaaS ARR: Extreme uses SaaS annual recurring revenue (“SaaS ARR”) to identify the annual recurring revenue of ExtremeCloud IQ and other subscription revenue, based on the annualized value of quarterly subscription revenue and term-based licenses. We believe that SaaS ARR is an important metric because it is driven by our ability to acquire new customers and to maintain and expand our relationships with existing customers. SaaS ARR should be viewed independently of revenue or deferred revenue that are accounted for under U.S. GAAP. SaaS ARR does not have a standardized meaning and therefore may not be comparable to similarly titled measures presented by other companies. SaaS ARR is not intended to be a replacement for forecasts of revenue.

Gross Debt: Gross debt is defined as long-term debt and the current portion of long-term debt as shown on the balance sheet plus unamortized debt issuance costs, if any.

Net Cash (Debt) is defined as cash and cash equivalents minus gross debt, as shown in the table below (in millions):

Business Outlook:

Extreme’s business outlook is based on current expectations. The following statements are forward-looking, and actual results could differ materially based on various factors, including market conditions and the factors set forth under “Forward-Looking Statements” below.

For its third quarter of fiscal 2025, ending March 31, 2025, the Company is targeting:

The following table shows the GAAP to non-GAAP reconciliation for Q3 FY'25 guidance: