Preliminary F4Q21 Results: 29% YoY Revenue Growth Drives Top & Bottom Line Beats



KEY POINTS
  • Extreme Networks President and CEO Ed Meyercord highlighted the record year for the company as it passed the billion-dollar revenue mark. The F4Q21 revenue was up 29% YoY, which followed the 21% YoY growth in F3Q21. The company said it is “in the strongest competitive position it's ever been in.”
  • F4Q21 revenue of $278 million was $15 million above consensus, better than last quarter’s revenue beat of $8 million. Non-GAAP EPS was $0.19, which was also above the consensus of $0.17. Non-GAAP gross margin came in at 60.5% (up 90 basis points YoY), and a non-GAAP operating margin of 13.4% (up 780 basis points YoY).
  • Positive trends include positive demand outlooks for six of the seven industries Extreme serves, with Retail & Logistics/Transport demand holding flat. Supply constraints related to chip shortages led to higher component and freight costs entering 1FQ22. The company expects to grind down the record backlog in 2FQ22.
  • Guidance for 1FQ22 for $250-263 million in revenue, and non-GAAP EPS guidance is $0.13-0.20. The company noted that “demand is outstripping supply for certain products,” which is slightly different than last quarter’s supply commentary when the company said it believes it is in a “favorable” supply chain situation versus its competitors.
  • The stock moved up to the $11 level after the report and is trading at a forward P/S of 1.218, slightly below its two-year high P/S of 1.40x back in May. On a P/E basis, the stock is above its five-year average of 10.1x, trading at 11.9x.
  • See our initiation and other reports and management interview videos on Extreme Networks on our website.
COMPANY OVERVIEW

Headquartered in San Jose, CA, with 2,800 employees, Extreme Networks provides software-driven networking services for enterprise customers. Its products include wired and wireless network infrastructure equipment and software for network management, policy, analytics, and access controls. It offers high-density Wi-Fi, centralized management, cloud-based network management, and application analytics capabilities. The company serves several end-markets including Government & Education (>35% of sales), Healthcare (>10%), Manufacturing (~10%), Retail Logistics / Transportation (~10%), Telco / Service Provider (<10%), and Sports / Entertainment & Hospitality (<5%). Roughly half of the firm's revenue is generated in the Americas, with the rest coming from Europe, the Middle East, Africa, and Asia-Pacific.

Extreme Networks President and CEO Ed Meyercord highlighted the record year for the company as it passed the billion-dollar revenue mark. The F4Q21 revenue was up 29% YoY, which followed the 21% YoY growth in F3Q21. The company said it is “in the strongest competitive position it's ever been in.”

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