Extreme Networks Reports 23.7% Decline in Net Revenues, Net Loss in Q1 Fiscal 2025

Extreme Networks, Inc. reported a significant decline in financial performance for the first quarter of fiscal 2025, ending September 30, 2024. The company generated net revenues of $269.2 million, a decrease of 23.7% from $353.1 million in the same period of the previous year. This decline was primarily driven by a 36.0% drop in product revenues, which fell to $162.3 million from $253.5 million. In contrast, subscription and support revenues increased by 7.3% to $106.9 million, up from $99.7 million.

The total gross profit for the quarter was $169.5 million, down 20.4% from $212.9 million in the prior year, with a gross margin of 63.0%, compared to 60.3% in Q1 fiscal 2023. Operating income turned into a loss of $4.7 million, contrasting sharply with an operating income of $35.9 million in the same quarter last year. The net loss for the quarter was $10.5 million, compared to a net income of $28.7 million in Q1 fiscal 2023, resulting in a basic and diluted net loss per share of $(0.08).

Cash flows from operating activities also saw a decline, providing $18.6 million compared to $75.6 million in the previous year. However, cash and cash equivalents increased slightly to $159.5 million from $156.7 million at the end of the previous quarter.

On the strategic front, Extreme Networks has been focusing on restructuring efforts, incurring $1.3 million in related charges during the quarter, primarily for severance and benefits associated with a global reduction-in-force. This is part of a broader strategy to streamline operations and reduce costs, which has included a decrease in research and development expenses by 6.1% and a reduction in sales and marketing expenses by 11.5%. However, general and administrative expenses rose by 53.3%, largely due to increased litigation costs.

The company continues to maintain a strong liquidity position, with $135.8 million available under its revolving credit facility. As of September 30, 2024, Extreme Networks had total debt of $187.5 million, down from $190 million in the previous quarter. The company is also facing ongoing legal challenges, including a class action lawsuit related to securities purchased between July 2022 and January 2024.

Overall, Extreme Networks is navigating a challenging market environment, with a focus on restructuring and strategic adjustments to improve its financial health and operational efficiency.