SAN JOSE - Extreme Networks , Inc. (NASDAQ:EXTR), a provider of networking solutions, reported a narrow beat on adjusted earnings per share (EPS) for the third quarter, but shares fell 1.6% due to a weaker-than-expected outlook for the fourth quarter and full fiscal year 2024.
The company's Q3 adjusted EPS came in at -$0.19, just $0.01 below the analyst consensus of -$0.18. However, revenue for the quarter exceeded expectations at $211 million, compared to the consensus estimate of $204.63 million.
Despite the revenue beat, the company's financials showed a significant decline from the previous year, with revenue down 36.5% from the same quarter last year. The SaaS Annual Recurring Revenue (ARR) grew by 38% YoY, indicating a shift towards a subscription-based model. The GAAP diluted EPS was -$0.50, a stark contrast to the $0.17 reported in the prior year's quarter. The company's non-GAAP gross margin also saw a decrease to 57.6% from 59.1% YoY.
President and CEO Ed Meyercord attributed the quarter's performance to the company's focus on networking, security, and AI, which led to double-digit growth in net new logos, particularly in the Americas. "Our competitive positioning in the market has never been stronger," Meyercord stated, pointing to the distractions faced by competitors.
Looking ahead, Extreme Networks provided Q4 2024 EPS guidance in the range of $0.11 to $0.15, with the midpoint below the analyst consensus of $0.15. The company's revenue guidance for the fourth quarter is projected to be between $250 million and $260 million, which is also below the consensus estimate of $271.2 million.
For the full fiscal year 2024, the company expects EPS to be between $0.51 and $0.55, with revenue forecasted to be between $1.11 billion and $1.12 billion, both slightly below the consensus estimates of $0.57 EPS and $1.125 billion in revenue.
Kevin Rhodes, Executive Vice President and CFO, commented on the company's efforts to improve its operating expense profile, expressing confidence in returning to solid profitability and cash flow generation in the fourth quarter.
The company's recent achievements, including the tech preview of Extreme AI Expert and recognition as a Leader in the Gartner (NYSE:IT) Magic Quadrant for Enterprise Wired and Wireless LAN Infrastructure, underscore its commitment to innovation at the intersection of AI, networking, and security.
Investors reacted cautiously to the mixed financial results and the softer guidance, with the stock experiencing a modest downturn following the earnings release.
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