Executive Summary
Extreme Networks delivered a challenging QQ3 2024 quarter with meaningful top-line decline and a continued drag on profitability. Revenue declined 36.5% year-over-year to $211.0 million, and net income dropped to a loss of $64.4 million (EPS -0.50), driven by higher operating expenses and amortization that outweighed gross profit stability. Gross margin remained healthy at approximately 55.2%, but operating and net margins were negative (operating income -$48.0 million; net income -$64.4 million), underscoring a cost structure and mix that are constraining near-term profitability. EBITDA was negative $52.5 million, with an EBITDAR of -24.9%. Cash burn from operations was $69.9 million for the quarter, contributing to negative free cash flow of about $73.5 million and ending cash of $151.0 million. Liquidity metrics show near-term liquidity pressure: current ratio 0.96 and quick ratio 0.61, highlighting ongoing working-capital and inventory headwinds (inventory days outstanding ~177 days). Despite the earnings weakness, the company retains a cash-rich balance sheet relative to quarterly losses and maintains a sizable goodwill/intangible asset base and a substantial accumulated deficit, which raises questions about value realization from product rationalization and cloud-focused initiatives. The strategic takeaway is that Extreme’s margin recovery is contingent on a successful transition to cloud-based software and managed services (e.g., ExtremeCloud IQ) and sustained cost discipline. Investors should monitor progress on cloud adoption, gross-to-operating expense conversion, working capital optimization, and any clarity on guidance as the company continues to rebalance its mix toward higher-margin software and recurring revenues.
Key Performance Indicators
QoQ: -28.79% | YoY:-36.53%
QoQ: -36.42% | YoY:-39.26%
QoQ: -565.76% | YoY:-262.42%
QoQ: -1 715.47% | YoY:-391.11%
QoQ: -1 718.12% | YoY:-394.12%
Key Insights
Revenue: $211.0m; YoY -36.5%; QoQ -28.8%
Gross Profit: $116.59m; Gross Margin 55.2%; YoY -39.3%; QoQ -36.4%
Operating Income: -$48.05m; Operating Margin -22.8%; YoY -262.4%; QoQ -565.8%
Net Income: -$64.42m; Net Margin -30.5%; YoY -391.1%; QoQ -1715.5%
EPS: -$0.50; EPS Diluted -$0.50; YoY -394.1%; QoQ -1718.1%
EBITDA: -$52.46m; EBITDA Margin -24.9%
Cash Flow: Operating cash flow -$69.87m; Free cash flow -$73.55m; Cash at end of period $151.01m; Net debt $91.15m
Balance Sheet: Total assets $1.085...
Financial Highlights
Revenue: $211.0m; YoY -36.5%; QoQ -28.8%
Gross Profit: $116.59m; Gross Margin 55.2%; YoY -39.3%; QoQ -36.4%
Operating Income: -$48.05m; Operating Margin -22.8%; YoY -262.4%; QoQ -565.8%
Net Income: -$64.42m; Net Margin -30.5%; YoY -391.1%; QoQ -1715.5%
EPS: -$0.50; EPS Diluted -$0.50; YoY -394.1%; QoQ -1718.1%
EBITDA: -$52.46m; EBITDA Margin -24.9%
Cash Flow: Operating cash flow -$69.87m; Free cash flow -$73.55m; Cash at end of period $151.01m; Net debt $91.15m
Balance Sheet: Total assets $1.0856b; Total liabilities $1.0205b; Stockholders’ equity $64.96m; Cash & equivalents $151.01m; Cash conversion cycle ~139 days; Current ratio 0.96; Inventory days ~177; Net receivables turnover ~2.23x.
Valuation/Leverage: Total debt $242.16m; Net debt $91.15m; P/B ~22.9x; P/S ~7.05x; EV multiple negative to reflect negative EBITDA; Retained earnings negative $887.76m; Goodwill/Intangibles $405.97m; Debt to capitalization ~78.8%; Interest coverage negative (~-11.5x).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
211.04M |
-36.53% |
-28.79% |
| Gross Profit |
116.59M |
-39.26% |
-36.42% |
| Operating Income |
-48.05M |
-262.42% |
-565.76% |
| Net Income |
-64.43M |
-391.11% |
-1 715.47% |
| EPS |
-0.50 |
-394.12% |
-1 718.12% |
Key Financial Ratios
operatingProfitMargin
-22.8%
operatingCashFlowPerShare
$-0.54
freeCashFlowPerShare
$-0.57
Management Commentary
Note: The earnings transcript was not provided in the input. As such, there are no verbatim management quotes available to cite in this section. The analysis below incorporates management guidance implications where available from the press materials and typical industry commentary.
Thematic synthesis (without direct quotes):
- Strategy: Management is focused on accelerating the shift to software-driven networking and cloud management through ExtremeCloud IQ and related cloud-native platforms, aiming to convert higher-margin annuity-like revenue from subscriptions and services.
- Operations: Cost structure remains elevated relative to revenue, with R&D and SG&A contributing to the operating loss; ongoing pressure from product mix and utilization of gross margins.
- Market conditions: Competitive pressures in telecom and enterprise networking persist, with a macro backdrop that can delay network refresh cycles and affect order velocity.
Forward Guidance
No explicit forward guidance was provided in the input data. However, the results imply that near-term profitability hinges on three levers: (1) stabilizing or growing recurring revenue from cloud-native offerings (subscription-based ARR growth), (2) aggressive cost discipline, particularly in SG&A and R&D efficiency, and (3) inventory and working-capital optimization to improve cash conversion. Management commentary in typical cycles would likely emphasize progress on ExtremeCloud IQ monetization, cross-sell of software to existing hardware customers, and leveraging channel strategies to improve unit economics. The achievability of margin recovery depends on successfully converting project-based hardware purchases into software-enabled, higher-margin subscriptions and reducing operating expenses without compromising product development and go-to-market capabilities.