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What changed in EXTREME NETWORKS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EXTREME NETWORKS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+386 added−348 removedSource: 10-K (2024-08-16) vs 10-K (2023-08-24)

Top changes in EXTREME NETWORKS INC's 2024 10-K

386 paragraphs added · 348 removed · 277 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

79 edited+35 added−12 removed84 unchanged
Biggest changeWith the added Bluetooth and Bluetooth low energy intrusion prevention, network administrators can address growing threats against Bluetooth and Bluetooth low energy devices. o ExtremeLocation™ delivers proximity, presence and location-based services for advanced contact tracing in support of the location-intelligent enterprise. o ExtremeGuest™ is a comprehensive guest engagement solution that enables IT administrators to use analytical insights to engage visitors with personalized engagements. o Extreme IoT™ delivers simple and secure onboarding, profiling, segmentation and filtering of IoT devices on a production network. • Offers universal platforms for enterprise class switching and wireless infrastructure.
Biggest changeWith the added Bluetooth and Bluetooth low energy intrusion prevention, network administrators can address growing threats against Bluetooth and Bluetooth low energy devices. o ExtremeLocation™ delivers proximity, presence and location-based services for advanced contact tracing in support of the location-intelligent enterprise. • Additional AI capabilities. The ExtremeCloud IQ CoPilot license tier is an add-on to the Pilot license tier.
When performance suffers, and the tug on internal systems and IT staff becomes more intense, often technology is being overworked. Resolving network problems expeditiously and identifying their root cause, can improve organizational productivity and result in higher performance of operations. We believe that the network has never been more vital than it is today.
When performance suffers, and the tug on internal systems and IT staff becomes more intense, technology is often being overworked. Resolving network problems expeditiously and identifying their root cause, can improve organizational productivity and result in higher performance of operations. We believe that the network has never been more vital than it is today.
Included also are security options such as a built-in zone-based firewall, EdgeSentry (in partnership with Check Point) for cloud-based firewall as a service and other advanced security capabilities, and integration with Secure Web Gateway partners such as Palo Alto Networks, Zscaler, and Symantec. • Cloud Native Platforms and Applications for Service Providers: 5G is the first generation of cellular technologies built on cloud-native principles, and most traditional network visibility tools cannot be easily adapted for future use cases like autonomous vehicles or industrial IoT.
Included also are security options such as a built-in zone-based firewall, EdgeSentry (in partnership with Check Point) for cloud-based firewall as a service and other advanced security capabilities, and integration with Secure Web Gateway partners such as Palo Alto Networks, Zscaler, and Symantec. 8 • Cloud Native Platforms and Applications for Service Providers: 5G is the first generation of cellular technologies built on cloud-native principles, and most traditional network visibility tools cannot be easily adapted for future use cases like autonomous vehicles or industrial IoT.
Extreme offers universal platforms which support multiple deployment use cases, providing flexibility and investment protection. o Universal switches (7720/5720/5520/5420/5320) support fabric or traditional networking with a choice of cloud or on-premises (air-gapped or cloud connected) management. o Universal Wi-Fi 6/6E APs (300/400, 4000, and 5000 series) support campus or distributed deployments with a choice of cloud or on-premises (air-gapped or cloud connected) management. o Universal licensing with one portable management license for any device and for any type of management.
Extreme offers universal platforms which support multiple deployment use cases, providing flexibility and investment protection. o Universal switches (7720/5720/5520/5420/5320) support fabric or traditional networking with a choice of cloud or on-premises (air-gapped or cloud connected) management. 5 o Universal Wi-Fi 6/6E APs (300/400, 4000, and 5000 series) support campus or distributed deployments with a choice of cloud or on-premises (air-gapped or cloud connected) management. o Universal licensing with one portable management license for any device and for any type of management.
Distributors are generally given the right to return a portion of inventory to us for the purpose of stock rotation, to claim rebates for competitive discounts and participate in various cooperative marketing programs to promote the sale of our products and services. 8 • Resellers . We rely on many resellers worldwide that sell directly to the end-user customer.
Distributors are generally given the right to return a portion of inventory to us for the purpose of stock rotation, to claim rebates for competitive discounts and participate in various cooperative marketing programs to promote the sale of our products and services. • Resellers . We rely on many resellers worldwide that sell directly to the end-user customer.
Often tasked to manage the network with a limited IT staff, our customers appreciate the excellent service and support we strive to provide. 9 Customers with 10% of net revenues or greater See Note 3, Revenues , in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for more information regarding our customers with 10% of net revenues or greater.
Often tasked to manage the network with a limited IT staff, our customers appreciate the excellent service and support we strive to provide. 10 Customers with 10% of net revenues or greater See Note 3, Revenues , in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for more information regarding our customers with 10% of net revenues or greater.
ExtremeCloud IQ – Site Engine extends cloud management to non-cloud native and multi-vendor devices to provide one dashboard view of your entire network that can be managed in the cloud or on-premises. ExtremeCloud IQ – Site Engine provides task automation, access control, granular visibility with real-time analytics and multi-vendor device management.
ExtremeCloud IQ – Site Engine extends cloud management to non-cloud native and multi-vendor devices to provide one dashboard view of your entire network that can be managed in the cloud or on-premises. The application provides task automation, access control, granular visibility with real-time analytics and multi-vendor device management.
This includes device location support and change detection, rogue BLE Beacon detection and unsanctioned BLE device detection. 6 • Wired for Edge, Campus, and Data Center: Our switching portfolio includes products designed to make every connection effortless by enabling the deployment of high-speed performance at scale for access, high-density, campus, core, and data center environments.
This includes device location support and change detection, rogue BLE Beacon detection and unsanctioned BLE device detection. • Wired for Edge, Campus, and Data Center: Our switching portfolio includes products designed to make every connection effortless by enabling the deployment of high-speed performance at scale for access, high-density, campus, core, and data center environments.
We utilize our field sales organization to support our channel partners and to sell directly to certain end-user customers, including some large enterprise and service provider global accounts. The details of our sales and distribution channels are as follows: • Original Equipment Manufacturers (“OEM”) and Strategic Relationships .
We utilize our field sales organization to support our channel partners and to sell directly to certain end-user customers, including some large enterprise and service provider global accounts. 9 The details of our sales and distribution channels are as follows: • Original Equipment Manufacturers (“OEM”) and Strategic Relationships .
This includes a wide range of standard support programs to the level of service our customers require, from standard business hours to global 24-hour-a-day, 365-days-a-year real-time responsive support. • Extend switching and routing technology leadership.
This includes a wide range of standard support programs to the level of service our customers require, from standard business hours to global 24-hour-a-day, 365-days-a-year real-time responsive support. 6 • Extend switching and routing technology leadership.
Products Our products and services categories include: • Cloud Networking Platform: Core to our product portfolio and providing the end-to-end visibility from the access edge to the data center is our industry-leading cloud platform and cloud management application, ExtremeCloud IQ.
Products Our products and services categories include: • Cloud Networking Platform: Core to our product portfolio and providing the end-to-end visibility and control from the access edge to the data center is our industry-leading cloud platform and cloud management application, ExtremeCloud IQ.
Our corporate governance guidelines, the charters of our Audit Committee, our Compensation Committee, our Nominating, Governance, Environmental & Social Responsibility Committee and our Code of Business Conduct and Ethics policy (including code of ethics provisions that apply to our principal executive officer, principal financial officer, controller and senior financial officers) are available on the Investors section of our website at investor.extremenetworks.com under “Corporate Governance.” These items are also available to any stockholder who requests them by calling (408) 579-2800. 14
Our corporate governance guidelines, the charters of our Audit Committee, our Compensation Committee, our Nominating, Governance, Environmental & Social Responsibility Committee and our Code of Business Conduct and Ethics policy (including code of ethics provisions that apply to our principal executive officer, principal financial officer, controller and senior financial officers) are available on the Investors section of our website at investor.extremenetworks.com under “Corporate Governance.” These items are also available to any stockholder who requests them by calling (408) 579-2800. 15
We make connecting simple and easy with effortless networking experiences that enable all of us to advance how we live, work, and share. • Provide a differentiated end-to-end cloud architecture.
We make connecting simple and easy with effortless networking experiences that enable all of us to advance how we live, work, and share. 4 • Provide a differentiated end-to-end cloud architecture.
Additionally, we have launched new product features such as Secure Boot, which are being designed to provide additional integrity assurance of the 10 firmware and software running on our hardware platform by establishing an encrypted key-based chain-of-trust relationship in the boot process. The manufacturing processes and procedures are generally certified to International Organization for Standardization (“ISO”) 9001 standards.
Additionally, we have launched new product features such as Secure Boot, which are being designed to provide additional integrity assurance of the firmware and software running on our hardware platform by establishing an encrypted key-based chain-of-trust relationship in the boot process. The manufacturing processes and procedures are generally certified to International 11 Organization for Standardization (“ISO”) 9001 standards.
In certain foreign jurisdictions, where required by local law or customs, some of our employees are represented by local workers’ councils and/or industry collective bargaining agreements. We consider our relationship with our employees to be good, and we have not experienced any work stoppages due to labor disagreements. Talent Acquisition and Management.
In certain foreign jurisdictions, where required by local law or customs, some of our employees are represented by local workers’ councils and/or industry collective bargaining agreements. We consider our relationship with our employees to be good, and we have not experienced any work stoppages due to labor disagreements. Talent Acquisition and Development.
As enterprises continue to migrate increasing numbers of applications and services to either private clouds or public clouds offered by third parties and to adopt new IT delivery models and applications, they are required to make fundamental network alterations and enhancements spanning from device access points (“AP”) to the network core.
As enterprises continue to migrate increasing numbers of applications and services to either private clouds or public clouds offered by third parties and to adopt new IT delivery models and applications, they are required to make fundamental network alterations and enhancements spanning from device access points (“APs”) to the network core.
We believe we compete with our competitors with respect to many of the foregoing factors. However, the market for network switching solutions is dominated by a few large companies, particularly Cisco Systems, Inc., Hewlett-Packard Enterprise Co., Huawei Technologies Co. Ltd., Arista Networks Inc., Juniper Networks Inc.
We believe we compete with our competitors with respect to many of the foregoing factors. However, the market for network switching solutions is dominated by a few large companies, particularly Cisco Systems, Inc., Hewlett-Packard Enterprise Co., Huawei Technologies Co. Ltd., and Juniper Networks Inc.
ExtremeCloud IQ Essentials provides four key applications - WIPS, location services, IoT, and guest management - for ExtremeCloud IQ Pilot license customers at no added cost, enabling organizations to take advantage of an all-in-one platform for wired and wireless management, business insights, location tracking, wireless security, seamless IoT onboarding and guest access, and guest access through a single user interface. • Wireless LAN AP: One of the industry’s broadest and most comprehensive, Extreme’s wireless AP portfolio includes both indoor and outdoor Wi-Fi 6 and prior generation APs.
ExtremeCloud IQ Essentials provides three key applications - WIPS, location services, and guest management - for ExtremeCloud IQ Pilot license customers at no added cost, enabling organizations to take advantage of an all-in-one platform for wired and wireless management, business insights, location tracking, wireless security, seamless IoT onboarding and guest access, and guest access through a single user interface. 7 • Wireless LAN AP: One of the industry’s broadest and most comprehensive, Extreme’s wireless AP portfolio includes both indoor and outdoor Wi-Fi 7 and prior generation APs.
Their networks must be highly available with the ability to continue operations in the event of a service interruption. Secure access is essential to ensuring the protection of mission-critical systems and confidential information.
Their networks must be highly available with the ability to continue operations in the event of a service interruption. Secure remote and network access is essential to ensuring the protection of mission-critical systems and confidential information.
The network edge landscape is changing as the explosion of mobile devices increases the demand for mobile, transparent, and always-on wired to wireless edge services. The unified access layer requires distributed intelligent components to ensure that access control and resiliency of business services are available across the entire infrastructure and manageable from a single console.
The network edge landscape is changing as the explosion of mobile and IoT devices increases the demand for high-performance, transparent, and always-on wired to wireless edge services. The unified access layer requires distributed intelligent components to ensure that access control and resiliency of business services are available across the entire infrastructure and manageable from a single console.
Although we compete in many vertical markets, in fiscal year 2023, we have focused on the specific verticals of healthcare, education, retail, manufacturing, government, sports, and entertainment venues. Years of experience and a track record of success in the verticals we serve enable us to address industry-specific problems.
Although we compete in many vertical markets, we have focused on the specific verticals of healthcare, education, retail, manufacturing, government, sports, and entertainment venues. Years of experience and a track record of success in the verticals we serve enable us to address industry-specific problems.
Research and development efforts are conducted in several of our locations, including Morrisville, North Carolina; San Jose, California; Salem, New Hampshire; Toronto, Canada; Shannon, Ireland; Massy, France; Hangzhou, China; and Bangalore and Chennai, India. 11 Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights.
Research and development efforts are conducted in several of our locations, including Morrisville, North Carolina; San Jose, California; Salem, New Hampshire; Toronto, Canada; Shannon, Ireland; Hangzhou, China; and Bangalore and Chennai, India. 12 Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights.
We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), SD-WAN solutions and management, automation, and elements of the Secure Access Services Edge (“SASE”) market to be over $40 billion, and growing at approximately 12% annually over the next five years.
We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), SD-WAN solutions and management, automation, and elements of the Secure Access Services Edge (“SASE”) market to be over $47 billion, and growing at approximately 13% annually over the next five years.
In addition to powering large venues and stadiums, our Extreme APs also deliver flexible and scalable options for highly distributed environments for major companies globally. Our APs allow our customers to purchase unified hardware, starting with our Wi-Fi 6 (802.11ax) AP portfolio, and choose the software mode option for the optimal deployment architecture in their environments.
In addition to powering large venues and stadiums, our Extreme APs also deliver flexible and scalable options for highly distributed environments for major companies globally. Our APs allow our customers to purchase unified hardware, starting with our Wi-Fi 7 AP portfolio, and choose the software mode option for the optimal deployment architecture in their environments.
Our arrangements with these Tier 1 manufacturers generally provide for quality, cost, and delivery requirements, as well as manufacturing process terms, such as continuity of supply; inventory management; flexible capacity, quality, and cost management; oversight of manufacturing; and conditions for use of our intellectual property that allow us to adjust more quickly to changing end-customer demand.
Our arrangements with these manufacturing partners generally provide for quality, cost, and delivery requirements, as well as manufacturing process terms, such as continuity of supply; inventory management; flexible capacity, quality, and cost management; oversight of manufacturing; and conditions for use of our intellectual property that allow us to adjust more quickly to changing end-customer demand.
When ML and AI are applied with cloud-driven networking and automation, administrators can quickly scale to provide productivity, availability, accessibility, manageability, security, and speed, regardless of the distribution of the network. As the edge of the network continues to expand, our customers are managing more endpoints. With that comes a host of challenges.
When ML and GenAI are applied with cloud-driven networking and automation, administrators can quickly scale to provide productivity, availability, accessibility, manageability, security, and speed, regardless of the distribution of the network. As the edge of the network continues to expand, our customers are managing more endpoints which comes with a host of challenges.
Our value-based subscription tiers (including Connect, Navigator, Pilot and CoPilot) provide customers with flexibility to grow, as well as offer pool-able and portable licenses that can be transferred between products ( e . g . access points and switches) at one fixed price. o “No 9s” Reliability and Resiliency to ensure business continuity for our customers. 4 o Extreme Cloud IQ cloud platform conforms to ISO/ IEC 27017 and is certified by DQS to ISO/IEC 27001 and ISO/IEC 27701 by the International Standards Organization (“ISO”) and CSA STAR certified. • Offer customers choice: public or private cloud, or on-premises.
Our value-based subscription tiers provide customers with flexibility to grow, as well as offer pool-able and portable licenses that can be transferred between products ( e . g . access points and switches) at one fixed price. o “No 9s” reliability and resiliency to ensure business continuity for our customers. o Extreme Cloud IQ ("XIQ") cloud platform conforms to ISO/ IEC 27017 and is certified by DQS to ISO/IEC 27001 and ISO/IEC 27701 by the International Standards Organization (“ISO”) and CSA STAR certified. • Offer customers choice: public or private cloud, or on-premises.
Our premier wireless security solution, ExtremeAirDefense delivers intrusion detection and prevention capabilities across the wireless portfolio. Recently, we also introduced the first WIPS solution to incorporate support for Bluetooth and Bluetooth Low Energy (“BLE”) visibility and intrusion protection.
Our premier wireless security solution, Extreme AirDefense delivers intrusion detection and prevention capabilities across the wireless portfolio. Recently, we also introduced the first WIPS solution to incorporate support for Bluetooth and Bluetooth Low Energy (“BLE”) visibility and intrusion protection.
International sales International sales are an important portion of our business. In fiscal 2023, sales to customers outside of the United States accounted for 56% of our consolidated net revenues, compared to 55% in fiscal 2022, and 52% in fiscal 2021. These sales are conducted primarily through foreign-based distributors and resellers managed by our worldwide sales organization.
International sales International sales are an important portion of our business. In fiscal 2024, sales to customers outside of the United States accounted for 48% of our consolidated net revenues, compared to 56% in fiscal 2023, and 55% in fiscal 2022. These sales are conducted primarily through foreign-based distributors and resellers managed by our worldwide sales organization.
We also leverage and depend on the strong Environmental, Social and Governance policies and standards of our Tier 1 manufacturers. The ODM manufacturing process uses automated testing equipment and burn-in procedures, as well as comprehensive inspection, testing, and statistical process controls, which are designed to help ensure the quality and reliability of our products.
We also leverage and depend on the strong Environmental, Social and Governance policies and standards of our manufacturing partners. The ODM manufacturing process uses automated testing equipment and burn-in procedures, as well as comprehensive inspection, testing, and statistical process controls, which are designed to help ensure the quality and reliability of our products.
To foster an inclusive environment, we support several employee resource groups (“ERGs”), including Women in Networking, Black @ Extreme (Black/African American), LaRaza (Hispanic), Maitri (employees in India), Pride Alliance (LGBTQ+), Global Veterans Council, API (Asian Pacific Islanders), APPs (Aspiring Professionals Program) and Abilities Alliance (employees with disabilities).
To foster an inclusive environment, we support several employee resource groups, including Women in Networking, Black @ Extreme (Black/African American), LaRaza (Hispanic), Maitri (employees in India), Pride Alliance (LGBTQ+), Global Veterans Council, API (Asian Pacific Islanders), APEX (Aspiring Professionals @ Extreme) and Abilities Alliance (employees with disabilities).
Therefore, we do not believe our backlog, as of any particular date is necessarily indicative of actual revenues for any future period. Our product backlog at June 30, 2023, net of anticipated back-end rebates for distributor sales, was $267.3 million, compared to $513.0 million at June 30, 2022.
Therefore, we do not believe our backlog, as of any particular date is necessarily indicative of actual revenues for any future period. Our product backlog at June 30, 2024, net of anticipated back-end rebates for distributor sales, was $64.0 million, compared to $267.3 million at June 30, 2023.
As administrators grapple with more data, coming from more places, more connected devices, and more Software-as-a-service (“SaaS”) based applications, the cloud is fundamental to establishing a new normal. Traditional network offerings are not well-suited to fulfill enterprise expectations for rapid delivery of new services, more flexible business models, real-time response, and massive scalability.
As administrators grapple with more data, coming from more places, more connected devices, and more Software-as-a-service (“SaaS”) based applications, the cloud is fundamental to managing and maintaining a modern network. Traditional network offerings are not well-suited to fulfill enterprise expectations for rapid delivery of new services, more flexible business models, real-time response, and massive scalability.
Current activities include the continuing development of our innovative switching technology aimed to give our customers flexibility in how they deploy, connect to the cloud, monitor, and configure instantly saving time and money.
Current activities include the continuing development of our innovative switching technology aimed at giving our customers flexibility in how they deploy, connect to the cloud, monitor, and configure instantly saving time and money.
Included in that portfolio are our custom stadium and large venue Wi-Fi 6 outdoor APs, which, when combined with ExtremeAnalytics, are the basis of our selection as the Official Wi-Fi & Analytics Provider for the National Football League (“NFL”) and the Major League Baseball (“MLB”).
Included in that portfolio are our custom stadium and large venue outdoor Wi-Fi 7 APs, which, when combined with ExtremeAnalytics, are the basis of our selection as the Official Wi-Fi & Analytics Provider for the National Football League and Major League Baseball.
All can be managed, assessed, and controlled from a single pane of glass on premises or from the cloud. • Provide high-quality “in-house” customer service and support. We seek to enhance customer satisfaction and build customer loyalty through high-quality service and support.
All can be managed, assessed, and controlled from a single pane of glass on premises or from the cloud. • Provide high-quality in-house customer service and support. We seek to enhance customer satisfaction and build customer loyalty through high-quality service and support.
Customer Profiles: Furthermore, in fiscal 2023, we decided to continue focus on the following customer profiles where we believe we can add the most value: • Customer size: Those customers with annual revenues of $100 million to $2.5 billion. • Target deployment: Campus deployments with 250 to 5,000 employees or education campuses with 1,000 to 15,000 students. • Target data centers: Data centers with 1,000 racks or fewer, with an emphasis on service provider networks. • Vertical markets: Healthcare, education, government, manufacturing, retail, and hospitality, which includes sports and entertainment venues. • Customer characteristics: Our customers tend to operate in transient environments, such as college campuses, hospitals and sports venues, where BYOD and secure network access and identity control are critical.
Customer Profiles: We focus on the following customer profiles where we believe we can add the most value: • Customer size: Those customers with annual revenues of $100 million to $2.5 billion. • Target deployment: Enterprise campus, data center, or branch networks with 250 to 5,000 employees or educational institutions with 1,000 to 15,000 students. • Target data centers: Data centers with 1,000 or fewer racks, with an emphasis on service provider networks. • Vertical markets: Healthcare, education, government, manufacturing, retail, and hospitality, which includes sports and entertainment venues. • Customer characteristics: Our customers tend to operate in transient environments, such as college campuses, hospitals and sports venues, where BYOD and secure network access and identity control are critical.
Although we have patent applications pending, there can be no assurance that patents will be issued from pending applications or that claims allowed on any future patents will be sufficiently broad to protect our technology. As of June 30, 2023, we had 36 registered trademarks in the United States and 326 registered trademarks outside of the United States.
Although we have patent applications pending, there can be no assurance that patents will be issued from pending applications or that claims allowed on any future patents will be sufficiently broad to protect our technology. As of June 30, 2024, we had 31 registered trademarks in the United States and 341 registered trademarks outside of the United States.
Our global footprint provides service to over 50,000 customers and over 10 million daily end users across the world including some of the world’s leading names in business, hospitality, retail, transportation and logistics, education, government, healthcare, manufacturing, and service providers. We derive all our revenues from the sale of our networking equipment, software subscriptions, and related maintenance contracts.
Our global footprint provides service to over 50,000 customers including some of the world’s leading names in business, hospitality, retail, transportation and logistics, education, government, healthcare, manufacturing, and service providers. We derive all our revenues from the sale of our networking equipment, software subscriptions, and related maintenance contracts.
In addition, Machine Learning (“ML”) and Artificial Intelligence (“AI”) technologies have the potential to vastly improve the network experience in today's world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network.
In addition, Machine Learning (“ML”) and Gen AI technologies have the potential to vastly improve the network experience in today's world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network.
We rely upon third-party contract manufacturers and original design manufacturers (“ODM”), such as Alpha Networks, Inc, Lite-On Technology Corporation, Hon Hai Precision Industry Co., Ltd (Foxconn), Quanta Computer Inc., Senao Networks, Inc., Sercomm Corporation and Wistron Neweb Corporation to manufacture, support and ship our products, and therefore are exposed to risks associated with their businesses, financial condition, geographies and geopolitical conflict in which they operate.
We rely upon original design manufacturers (“ODM”), such as Alpha Networks, Inc., Lite-On Technology Corporation, Quanta Computer Inc., Senao Networks, Inc., Sercomm Corporation and Wistron Neweb Corporation to manufacture, support and ship our products, and therefore are exposed to risks associated with their businesses, financial condition, and geopolitical conflict in geographies in which they operate.
The ExtremeCloud IQ application already manages over two million devices in public, private, and on-premises global cloud deployment.
The ExtremeCloud IQ application already manages around three million devices in public, private, and on-premises global cloud deployment.
We are at a technology inflection point with the pending migration from 5 Wi-Fi 5 solutions to Wi-Fi 6 (802.11ax), focused on providing more efficient access to the broad array of connected devices.
We are at a technology inflection point with the pending migration from Wi-Fi 6 solutions to 6 GHz Wi-Fi (Wi-Fi 6E and Wi-Fi 7), focused on providing more efficient access to the broad array of connected devices.
As of June 30, 2023, we had 721 issued patents in the United States and 465 patents outside of the United States. The expiration dates of our issued patents in the United States range from calendar years 2023 to 2041.
As of June 30, 2024, we had 681 issued patents in the United States and 451 patents outside of the United States. The expiration dates of our issued patents in the United States range from calendar years 2024 to 2041.
In that regard, we expect to face increased competition from certain cloud computing companies such as Amazon, Microsoft, and Google providing a cloud-based platform of data center compute and networking services for enterprise customers.
We expect to face increased competition from both traditional networking solutions companies and cloud platform companies offering Infrastructure-as-a-Service (“IaaS”) and Platform-as-a-Service (“PaaS”) products to enterprise customers. In that regard, we expect to face increased competition from certain cloud computing companies such as Amazon, Microsoft, and Google providing a cloud-based platform of data center compute and networking services for enterprise customers.
Industry Background Enterprises across every industry are going through unprecedented changes, such as leading digital initiatives, migrating their workloads to cloud-based environments, modernizing applications, and adopting to a distributed workforce.
Industry Background Enterprises across every industry are going through unprecedented changes, such as leading digital initiatives, migrating their workloads to cloud-based environments, modernizing applications, finding new ways to leverage generative AI ("GenAI") technology, and adopting to a distributed workforce.
Research and Development The success of our products to date is due in large part to our focus on research and development. We believe that continued success in the marketplace relies on our ability to regularly bring to the market new and enhanced products employing leading-edge technology that provide business solutions affordably, securely, and effortlessly.
We believe that continued success in the marketplace relies on our ability to regularly bring to the market new and enhanced products employing leading-edge technology that provide business solutions affordably, securely, and effortlessly.
Cloud networking is estimated to be a $4.1 billion segment of the networking market comprised of cloud-managed services and cloud-managed products, which are largely WLAN access points and ethernet switches, growing at a 13% over the next three years, according to data from the 650 Group. Cloud management technology has evolved significantly over the past decade.
Cloud networking is estimated to be a $11 billion segment of the networking market comprising cloud-managed services and cloud-managed products, which are largely WLAN access points and ethernet switches, growing at 31% annually over the next five years, according to data from the 650 Group, Gartner, IDC and Dell’Oro. Cloud management technology has evolved significantly over the past decade.
These employees were located worldwide, with 47.3% located in the United States, 7.9% in other locations in the Americas, 26.0% in the Asia Pacific region (“APAC”), which includes India and 18.8% in the regions of Europe, Middle East and Africa (“EMEA”). None of our U.S. employees are subject to a collective bargaining agreement.
These employees were located worldwide, with 42.8% located in the United States, 8.6% in other locations in the Americas, 29.2% in the Asia Pacific region (“APAC”), which includes India and 19.4% in the regions of Europe, Middle East and Africa (“EMEA”). None of our U.S. employees are subject to a collective bargaining agreement.
Environmental Matters We are subject to various environmental and other regulations governing product safety, materials usage, packaging and other environmental impacts in the United States and in various countries where our products are manufactured and sold.
The Company expects to complete the 2023 Plan during fiscal year 2025. Environmental Matters We are subject to various environmental and other regulations governing product safety, materials usage, packaging and other environmental impacts in the United States and in various countries where our products are manufactured and sold.
Although we believe that our solutions and strategy will improve our ability to meet the needs of our current and potential customers, we cannot guarantee future success. 12 Restructuring and Impairment Fiscal year 2021 During fiscal year 2021, the Company continued its effort associated with the reduction-in-force plan (the “2020 Plan”) which was initiated during the third quarter of fiscal 2020, due to the global disruptions and slow-down in the demand of our products caused by the global pandemic outbreak of COVID-19, and the uncertainty around the timing of the recovery of the market.
Although we believe that our solutions and strategy will improve our ability to meet the needs of our current and potential customers, we cannot guarantee future success. 13 Restructuring and Impairment Fiscal year 2022 During fiscal year 2022, the Company completed the reduction and realignment of the headcount and relocation of lab test equipment under its 2020 reduction in force plan, which was initiated during fiscal year 2020 due to the global disruptions and slow-down in the demand of our products caused by the global pandemic outbreak of COVID-19, and the uncertainty around the timing of the recovery of the market.
As of June 30, 2023, our research and development organization consisted of 788 employees.
As of June 30, 2024, our research and development organization consisted of 926 employees.
Item 1. B usiness Overview Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of cloud networking solutions and industry leading services and support. Extreme designs, develops, and manufactures wired, wireless, and software-defined wide area-network (“SD- WAN”) infrastructure equipment. The Company's cloud solution is a single platform that offers unified network management of wireless access points, switches, and SD-WAN.
Item 1. B usiness Overview Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of cloud networking solutions and industry leading services and support. Extreme designs, develops, and manufactures wired, wireless, and software-defined wide area-network (“SD- WAN”) infrastructure equipment, software and cloud-based network management solutions.
We apply these principles to talent acquisition and management, compensation and benefits, and diversity and inclusion. As of June 30, 2023, we employed 2,849 people. Of these, 41.1% work in sales and marketing, 27.7% in research and development, 4.2% in operations, 16.3% in customer support and services and 10.7% in finance and administration.
We apply these principles to talent acquisition and management, compensation and benefits, and diversity and inclusion. As of June 30, 2024, we employed 2,656 people. Of these, 32.8% work in sales and marketing, 34.9% in research and development, 5.4% in operations, 16.0% in customer support and services and 10.9% in finance and administration.
Our solutions include wired switching, wireless switching, wireless access points, WLAN controllers, routers, and an extensive portfolio of software applications that deliver AI-enhanced access control, network and application analytics, as well as network management.
Our cloud-driven solutions provide visibility, control and strategic intelligence from the edge to the data center, across networks and applications. Our solutions include wired switching, wireless switching, wireless access points, WLAN controllers, routers, and an extensive portfolio of software applications that deliver AI-enhanced access control, network and application analytics, as well as network management.
As networks become more complex and more distributed in nature, we believe IT teams in every industry will need more control and better insights than ever before to ensure secure, distributed connectivity and comprehensive centralized visibility.
As networks become more complex and more distributed in nature, we believe IT teams in every industry will need more control and better insights than ever before to ensure secure, distributed connectivity and comprehensive centralized visibility. Networking is mission critical and touches all elements of how services are delivered to customers, employees, students, and patients.
As of June 30, 2023, our worldwide sales and marketing organization consisted of 1,172 employees, including vice presidents, directors, managers, sales representatives, and technical and administrative support personnel. We have domestic sales offices located in four states within the United States and international sales offices located in 28 countries.
As of June 30, 2024, our worldwide sales and marketing organization consisted of 872 employees. We have domestic sales offices located in four states within the United States and international sales offices located in 28 countries.
We on-board new employees through the New Hire Academy and encourage skill development throughout the employee journey utilizing various role-specific training programs, career development tools, manager training, coaching, and mentorship. Compensation and Benefits. Our compensation philosophy is to offer a competitive compensation package designed to reward achievement of the Company’s goals.
We on-board new employees through the New Hire Academy and encourage skill development throughout the employee journey utilizing various role-specific training programs, career development tools, manager training, coaching, and mentorship. We continue to develop our employees with regular performance management reviews. Compensation and Benefits.
This comprises over $28 billion for networking, infrastructure spanning enterprise and service provider (largely 5G) applications, and a $4 billion SD-WAN market, and we also participate in $7 billion of the served addressable market for networking software. The Extreme Strategy We are driven to help our customers find new ways to deliver better outcomes. Connectivity is just the foundation.
This comprises over $36 billion for networking and infrastructure spanning enterprise and service provider (largely 5G) applications, and $11 billion for networking cloud and security software, which is expected to grow to $31 billion by 2028. The Extreme Strategy We are driven to help our customers find new ways to deliver better outcomes. Connectivity is just the foundation.
Our product development efforts also depend upon continued collaboration with our key suppliers, including our merchant silicon vendors such as Broadcom.
Collaborative partnerships with our ODMs and diversified sourcing strategies also emerged, fostering greater flexibility and risk mitigation. Our product development efforts also depend upon continued collaboration with our key suppliers, including our merchant silicon vendors such as Broadcom.
With automation applications becoming increasingly critical in manufacturing, warehousing, logistics, healthcare and other key industries, we believe this will continue to create demand for networking technology to serve as a foundation to run these services.
With automation applications becoming increasingly critical in manufacturing, warehousing, logistics, healthcare and other key industries, we believe this will continue to create demand for networking technology to serve as a foundation to run these services. 3 Service providers are investing in network enhancements with platforms and applications that deliver data insights, provide flexibility, and can quickly respond to new user demands and 5G use cases.
In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership and more flexibility along with a more resilient network.
This enables customers to migrate to new cloud managed switching, Wi-Fi, and SD-WAN, agnostic of the existing switching or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership and more flexibility along with a more resilient network.
We believe our sourcing and manufacturing strategy allowed us to adjust quickly to changes in market demand, working with our ODM suppliers and developing direct relationships with key component suppliers to support the backlog.
Further information on risks relating to our inventory forecasting and supply chain is set forth below in Item 1A. “Risk Factors.” We believe our sourcing and manufacturing strategy allows us to adjust quickly to changes in market demand, working with our ODM suppliers and developing direct relationships with key component suppliers to support the backlog.
From time to time, we may experience price volatility or supply constraints for certain components that are not available from multiple qualified sources or where our suppliers are geographically concentrated. The onset of the coronavirus (“COVID-19”) pandemic presented numerous challenges to global supply chains, causing disruptions and bottlenecks that led to a constrained environment.
From time to time, we may experience price volatility or supply constraints for certain components that are not available from multiple qualified sources or where our suppliers are geographically concentrated.
Our products rely on key components, including merchant silicon, integrated circuit components and power supplies purchased from a limited number of suppliers, including certain sole source providers. Lead times for materials and components vary significantly, and depend on factors such as the specific supplier, complexity, contract terms, demand and availability for a component at a given time.
Lead times for materials and components vary significantly, and depend on factors such as the specific supplier, technology, complexity, contract terms, demand and availability for a component at a given time.
Cloud networking management allows customers to gain real-time visibility and insights into areas such as application usage, location and workflow patterns across their environment, helping to inform strategic business decisions and create personalized experiences. Customers benefit from visibility, control and reduced time to resolution. This is the cornerstone of our One Network, One Cloud, One Extreme vision.
Our sole focus on networking allows us to offer a differentiated and integrated portfolio and a clear roadmap to meet customers’ needs. Cloud networking management allows customers to gain real-time visibility and insights into areas such as application usage, location and workflow patterns across their environment, helping to inform strategic business decisions and create personalized experiences.
We believe that we gain valuable perspective that drives better decision making when we listen to diverse voices.
Our international benefits plans are competitive locally and generally provide similar benefits. Diversity and Inclusion . We believe that we gain valuable perspective that drives better decision making when we listen to diverse voices.
It leverages machine learning, Artificial Intelligence Operations and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights to save time, lower costs, and streamline operations. Extreme is currently managing more than two million devices in the cloud.
The Company's cloud solution is a single platform that offers unified network management of wireless access points, switches, and SD-WAN. It leverages machine learning, Artificial Intelligence for Information Technology Operations (“AIOps”) and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights to save time, lower costs, and streamline operations.
We believe we have the industry’s broadest Wi-Fi 6 wireless portfolio providing intelligence for the wired/wireless edge and enhanced by our cloud architecture with ML and AI-driven insights. • Offer a superior quality of experience.
We believe we have the industry’s broadest 6 GHz indoor and outdoor wireless portfolio, providing intelligence and security for wired/wireless networks by leveraging our cloud architecture, end-to-end fabric services, Universal Zero Trust Network Access, and AIOps management platform with Explainable ML insights. • Offer a superior quality of experience.
The Extreme Visibility Manager has an intuitive graphical user interface to establish new rule sets and commands for all of Extreme's visibility devices.
The Extreme Visibility Manager has an intuitive graphical user interface to establish new rule sets and commands for all of Extreme's visibility devices. It provides full visibility into every aspect of the network, from a highly geographically dispersed environment with regions and zones to the services running on the system . • Universal ZTNA.
We continue to focus on optimizing product availability through sourcing, rationalizing our supply chain, outsourcing or virtualizing certain activities, and consolidating distribution sites and service logistics partners. These efforts also include process optimization initiatives, such as vendor managed inventory, and other operational models and strategies designed to drive improved efficiencies in our sourcing, production, logistics and fulfillment.
These efforts also include process optimization initiatives, such as vendor managed inventory, and other operational models and strategies designed to drive improved efficiencies in our sourcing, production, logistics and fulfillment. Research and Development The success of our products to date is due in large part to our focus on research and development.
Our short-term bonus plan is designed to motivate employees to meet half-year goals, and our employee stock purchase plan and grants of restricted stock units to eligible employees reward longer-term stock price appreciation.
Our short-term bonus plan is designed to motivate employees to meet half-year goals, and our employee stock purchase plan and grants of restricted stock units to eligible employees reward longer-term stock price appreciation. 14 Our U.S. benefits plan includes health benefits, life and disability insurance, various voluntary insurances, flexible time off and leave programs, an employee assistance plan, an educational assistance policy, and a 401(k) plan with a competitive employer match.
Most of these competitors have longer operating histories, greater name recognition, larger customer bases, broader product lines and substantially greater financial, technical, sales, marketing and other resources. We expect to face increased competition from both traditional networking solutions companies and cloud platform companies offering Infrastructure-as-a-Service (“IaaS”) and Platform-as-a-Service (“PaaS”) products to enterprise customers.
To a lesser extent, Extreme competes with products and solutions from Arista Networks Inc., CommScope Holding Company, Inc., Fortinet, Inc., and Ubiquiti Inc. Most of these competitors have longer operating histories, greater name recognition, larger customer bases, broader product lines and substantially greater financial, technical, sales, marketing and other resources.
The decrease in backlog year over year is primarily due to a combination of a resumption in shipment of orders during fiscal 2023, after experiencing significant delays due to supply chain constraints in prior years, and a reduction in distributor orders due to shorter lead times .
The decrease in backlog year over year is primarily due to resumption in shipment of orders during fiscal 2023 and 2024, after experiencing significant delays due to supply chain constraints in prior years. Seasonality Like many of our competitors, we historically have experienced seasonal fluctuations in customer spending patterns, which generally adversely affect our first and third fiscal quarters.
Manufacturing We utilize a global sourcing strategy that emphasizes procurement of materials and product manufacturing in competitive geographies.
This pattern should not be relied upon or be considered indicative of our future performance, as it has varied in the past. Manufacturing We utilize a global sourcing strategy that emphasizes procurement of materials and product manufacturing in competitive geographies.
As part of this project the Company will move engineering labs from its San Jose, California location to its Salem, New Hampshire location. This move is expected to help reduce the cost of operating our labs.
Fiscal year 2023 During fiscal 2023, the Company initiated a restructuring plan to transform our business infrastructure and reduce our facilities footprint and the facilities related charges (the “2023 Plan”). As part of this project the Company is moving engineering labs from its San Jose, California location to its Salem, New Hampshire location.
Extreme has blended a dynamic fabric attach architecture that delivers simplicity for moves and changes at the edge of the network, together with corporate-wide role-based policy. This enables customers to migrate to new cloud managed switching, Wi-Fi, and SD-WAN, agnostic of the existing switching or wireless equipment they already have installed.
We believe Extreme will continue to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic fabric attach architecture that delivers simplicity for moves and changes at the edge of the network, together with corporate-wide role-based policy.
For switches, OS feature licenses are portable, and bulk activated through ExtremeCloud IQ. • Enable a common fabric to simplify and automate the network. Fabric technologies virtualize the network infrastructure (decoupling network services from physical connectivity) which enables network services to be turned up faster, with lower likelihood of error.
Fabric technologies virtualize the network infrastructure (decoupling network services from physical connectivity) which enables network services to be turned up faster, with lower likelihood of error. They make the underlying network much easier to design, implement, manage and troubleshoot. • Offer a frictionless experience for secure hybrid work.
ExtremeCloud IQ Pilot provides our customers with four key applications enabling organizations to eliminate overlays. o Extreme AirDefense™ is a comprehensive wireless intrusion prevention system (“WIPS”) that simplifies the protection, monitoring and security of wireless networks.
The Pilot license includes key capabilities for guest management, WIPS, and location services with associated services: ExtremeGuest, ExtremeAirDefense, and ExtremeLocation. o ExtremeGuest™ is a comprehensive guest engagement solution that enables IT administrators to use analytical insights to engage visitors with personalized engagements. o Extreme AirDefense™ is a comprehensive wireless intrusion prevention system (“WIPS”) that simplifies the protection, monitoring and security of wireless networks.
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Service providers are investing in network enhancements with platforms and applications that deliver data insights, provide flexibility, and can quickly respond to new user demands and 5G use cases. 3 We believe Extreme will continue to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may experience challenges or delays in forecasting, generating or recognizing revenue for a number of reasons and our revenues and operating results have varied significantly in the past and may vary significantly in the future due to a number of factors, including, but not limited to, the following: • our dependence on obtaining orders during a quarter and shipping those orders in the same quarter to achieve our revenue objectives; • orders in our backlog could be cancelled by customers, impacting the accuracy of our revenue forecasting; • decreases in the prices of the products we sell; • the mix of products sold and the mix of distribution channels through which products are sold; • acceptance provisions in customer contracts; • our ability to deliver installation or customer acceptance by the end of the quarter; • seasonal fluctuations in demand for our products and services; • a disproportionate percentage of our sales occurring in the last month of a quarter; • reduced visibility into the implementation cycles for our products and our customers’ spending plans; • our ability to forecast demand for our products, which in the case of lower-than-expected sales, may result in excess or obsolete inventory in addition to non-cancelable purchase commitments for component parts; • our sales to the telecommunications service provider market, which represents a significant source of large product orders, being especially volatile and difficult to forecast; • product returns or the cancellation or rescheduling of orders; • announcements and new product introductions by our competitors; • our ability to develop and support relationships with enterprise customers, service providers and other potential large customers; • our ability to obtain sufficient supplies of sole- or limited-source components for our products on a timely basis; and • changes in funding for customer technology purchases in our markets. 21 In addition to risks related to revenue, we are subject to risks related to costs, which may be influenced by a number of factors, including, but not limited to, the following: • our ability to achieve and maintain targeted cost reductions; • fluctuations in warranty or other service expenses actually incurred; • increases in the price of the components we purchase; • increases in costs associated with sourcing and shipping components and finished products; • general inflationary pressures, increasing the cost of all inputs; and • rising interest rates, increasing the cost of borrowing.
Biggest changeWe may experience challenges or delays in forecasting, generating or recognizing revenue for a number of reasons and our revenues and operating results have varied significantly in the past and may vary significantly in the future due to a number of factors, including, but not limited to, the following: • our dependence on obtaining orders during a quarter and shipping those orders in the same quarter; • orders in our backlog could be cancelled by customers • decreases in the prices of the products we sell; • the mix of products sold and the mix of distribution channels through which products are sold; • acceptance provisions in customer contracts; • our ability to deliver installation or customer acceptance by the end of the quarter; • seasonal fluctuations in demand for our products and services; • a disproportionate percentage of our sales occurring in the last month of a quarter; • reduced visibility into the implementation cycles for our products and our customers’ spending plans; • our ability to forecast demand for our products, which in the case of lower-than-expected sales, may result in excess or obsolete inventory in addition to non-cancelable purchase commitments for component parts; • our sales to the telecommunications service provider market, which represents a significant source of large product orders, being especially volatile and difficult to forecast; • product returns or the cancellation or rescheduling of orders; • announcements and new product introductions by our competitors; • our ability to develop and support relationships with enterprise customers, service providers and other potential large customers; • our ability to obtain sufficient supplies of sole- or limited-source components for our products on a timely basis; and • changes in funding for customer technology purchases in our markets.
Additionally, our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ products and their ability to continue to manufacture products that are competitive and that comply with laws relating to environmental and efficiency standards.
Additionally, our operations are materially dependent upon the continued market acceptance and quality of these manufacturers’ products and their ability to continue to manufacture products that are competitive and comply with laws relating to environmental and efficiency standards.
If we fail to anticipate technological shifts, market needs and opportunities, and develop products, product enhancements and business strategies that meet those technological shifts, needs and opportunities in a timely manner or if they do not gain market acceptance, we may not be able to compete effectively and our ability to generate revenues will suffer.
If we fail to anticipate technological shifts, market needs and opportunities, and fail to develop products, product enhancements and business strategies that meet those technological shifts, needs and opportunities in a timely manner or if they do not gain market acceptance, we may not be able to compete effectively and our ability to generate revenues will suffer.
Any such breach could compromise our networks, products, or cloud-based services by creating system disruptions, slowdowns or even shutdowns, and exploiting security vulnerabilities of our products, and the information stored as part of our operations could be accessed, publicly disclosed, lost or stolen.
Any such breach could compromise our networks, products, or cloud-based services by creating system disruptions, slowdowns or even shutdowns, and exploiting security vulnerabilities of our products or services, and the information stored as part of our operations could be accessed, publicly disclosed, lost or stolen.
Our credit facilities impose financial and operating restrictions on us and if we fail to meet our payment or other obligations under our 2023 Credit Agreement (as defined in Item 7, “Liquidity and Capital Resources”), the lenders under such 2023 Credit Agreement, as amended, could foreclose on, and acquire control of, substantially all of our assets.
Our credit facilities impose financial and operating restrictions on us and if we fail to meet our payment or other obligations under our 2023 Credit Agreement, as amended (as defined in Item 7, “Liquidity and Capital Resources”), the lenders under such 2023 Credit Agreement could foreclose on, and acquire control of, substantially all of our assets.
If we fail to comply with these laws and regulations, we could incur penalties and sanctions from governments, and could be restricted from exporting products.
If we fail to comply with these laws and regulations, we could incur penalties and sanctions from governments, and could be restricted from exporting products.
Accordingly, the product evaluation process frequently results in a lengthy sales cycle, typically ranging from three months to longer than a year, and as a result, our ability to sell products is subject to a number of significant risks, including risks that: • budgetary constraints and internal acceptance reviews by customers will result in the loss of potential sales; • there may be substantial variation in the length of the sales cycle from customer to customer, making decisions on the expenditure of resources difficult to assess; • we may incur substantial sales and marketing expenses and expend significant management time in an attempt to initiate or increase the sale of products to customers, but not succeed; • when a sales forecast from a specific customer for a particular quarter is not achieved in that quarter, we may be unable to compensate for the shortfall, which could harm our operating results; and • downward pricing pressures could occur during the lengthy sales cycle for our products.
Accordingly, the product evaluation process frequently results in a lengthy sales cycle, typically ranging from three months to longer than a year, and as a result, our ability to sell products is subject to a number of significant risks, including risks that: • budgetary constraints and internal acceptance reviews by customers will result in the loss of potential sales; • there may be substantial variation in the length of the sales cycle from customer to customer, making decisions on the expenditure of resources difficult to assess; • we may incur substantial sales and marketing expenses and expend significant management time in an attempt to initiate or increase the sale of products to customers, but not succeed; 22 • when a sales forecast from a specific customer for a particular quarter is not achieved in that quarter, we may be unable to compensate for the shortfall, which could harm our operating results; and • downward pricing pressures could occur during the lengthy sales cycle for our products.
There are a number of risks arising from our international business, including: • difficulties in managing operations across disparate geographic areas; • longer accounts receivable collection cycles; • higher credit risks requiring cash in advance or letters of credit; • potential adverse tax consequences; • increased complexity of accounting rules and financial reporting requirements; • the payment of operating expenses in local currencies, which exposes us to risks of currency fluctuations; • fluctuations in local economies; • difficulties associated with enforcing agreements through foreign legal systems • reduced or limited protection of intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes, such as China and India; • differing privacy regulations, data localization requirements, and restrictions on cross-border data transfers; • compliance with regulatory requirements of foreign countries, including compliance with rapidly evolving environmental regulations; • import tariffs imposed by the United States and the possibility of reciprocal tariffs by foreign countries; • compliance with export controls, including restrictions on trade with embargoed or sanctioned countries or with denied parties, and rules related to the export of encryption technology • compliance with U.S. laws and regulations pertaining to the sale and distribution of products to customers in foreign countries, including anti-corruption laws such as the Foreign Corrupt Practices Act and the U.K.
There are a number of risks arising from our international business, including: • difficulties in managing operations across disparate geographic areas; • longer accounts receivable collection cycles; • higher credit risks requiring cash in advance or letters of credit; • potential adverse tax consequences; • increased complexity of accounting rules and financial reporting requirements; 18 • the payment of operating expenses in local currencies, which exposes us to risks of currency fluctuations; • fluctuations in local economies; • difficulties associated with enforcing agreements through foreign legal systems • reduced or limited protection of intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes, such as China and India; • differing privacy regulations, data localization requirements, and restrictions on cross-border data transfers; • compliance with regulatory requirements of foreign countries, including compliance with rapidly evolving environmental regulations; • import tariffs imposed by the United States and the possibility of reciprocal tariffs by foreign countries; • compliance with trade compliance laws and regulations, including restrictions on trade with embargoed or sanctioned countries or with denied parties, and rules related to the export of encryption technology • compliance with U.S. laws and regulations pertaining to the sale and distribution of products to customers in foreign countries, including anti-corruption laws such as the Foreign Corrupt Practices Act (“FCPA”) and the U.K.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may 28 nevertheless seek to bring a claim in a venue other than those designated in the exclusive-forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive-forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions.
Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal control over financial reporting and to disclose if such controls were unable to provide assurance that a material error would be prevented or detected in a timely manner.
Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal control over financial reporting and to disclose if such controls were unable to provide assurance that a material error would be prevented or detected 25 in a timely manner.
If we are unable to repay outstanding borrowings when due or comply 23 with other obligations and covenants under our 2023 Credit Agreement, the lenders under our 2023 Credit Agreement will have the right to proceed against these pledged capital stock and take control of substantially all of our assets.
If we are unable to repay outstanding borrowings when due or comply with other obligations and covenants under our 2023 Credit Agreement, the lenders under our 2023 Credit Agreement will have the right to proceed against these pledged capital stock and take control of substantially all of our assets.
Our ability to realize the anticipated benefits of any current and future acquisitions, divestitures and investment activities also entail numerous risks, including, but not limited to: • difficulties in the assimilation and successful integration of acquired operations, sales functions, technologies, and/or products; • unanticipated costs, litigation or other contingent liabilities associated with the acquisition or investment transaction; • incurrence of acquisition- and integration-related costs, goodwill or in-process research and development impairment charges, or amortization costs for acquired intangible assets, that could negatively impact our business, financial condition, and results of operations; • the diversion of management's attention from other business concerns; • adverse effects on existing business relationships with suppliers and customers; • risks associated with entering markets in which we have no or limited prior experience; • the potential loss of key employees of acquired organizations and inability to attract or retain other key employees; and • substantial charges for the amortization of certain purchased intangible assets, deferred stock compensation or similar items.
Our ability to realize the anticipated benefits of any current and future acquisitions, divestitures and investment activities also entail numerous risks, including, but not limited to: • difficulties in the assimilation and successful integration of acquired operations, sales functions, technologies, products, and/or personnel; • unanticipated costs, litigation or other contingent liabilities associated with the acquisition or investment transaction; • incurrence of acquisition- and integration-related costs, goodwill or in-process research and development impairment charges, or amortization costs for acquired intangible assets, that could negatively impact our business, financial condition, and operating results; • the diversion of management's attention from other business concerns; • adverse effects on existing business relationships with suppliers and customers; 26 • risks associated with entering markets in which we have no or limited prior experience; • the potential loss of key employees of acquired organizations and inability to attract or retain other key employees; and • substantial charges for the amortization of certain purchased intangible assets, deferred stock compensation or similar items.
This could continue as we or our competitors announce new products, our results or those of our customers or competition fluctuate, conditions in the networking or semiconductor industry change, conditions in the global economy change, or when investors change their sentiment toward stocks in the networking technology sector.
This could continue as we or our competitors announce new products, our results or those of our customers or competition fluctuate, conditions in the networking or 23 semiconductor industry change, conditions in the global economy change, or when investors change their sentiment toward stocks in the networking technology sector.
In addition, our effective tax rate will materially increase as we made an accounting policy election to treat GILTI as a period cost (i.e., recorded when incurred) in 2018 when the GILTI rules were introduced.
In addition, our effective tax rate will materially increase as we made an accounting policy election to treat GILTI as a period cost (i.e., recorded 29 when incurred) in 2018 when the GILTI rules were introduced.
We may not have adequate insurance coverage to cover all of our litigation costs and liabilities. Claims of infringement by others may increase and the resolution of such claims may adversely affect our business, financial condition, and operating results.
We may not have adequate insurance coverage to cover all of our litigation costs and liabilities. Claims of infringement by others may increase and the resolution of such claims may materially adversely affect our business, financial condition, and operating results.
Although we believe our tax estimates are reasonable, there is no assurance that the final determination of our income tax 27 liability will not be materially different than what is reflected in our income tax provisions and accruals.
Although we believe our tax estimates are reasonable, there is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and accruals.
Item 1A. Ri sk Factors We face a number of risks and uncertainties which may have a material and adverse effect on our business, operations, industry, financial condition, results of operations or future financial performance.
Item 1A. Ri sk Factors We face a number of risks and uncertainties which may have a material and adverse effect on our business, operations, industry, financial condition, operating results or future financial performance.
We may not be able to access additional capital resources due to a variety of reasons, including the restrictive covenants in our 2023 Credit Agreement and the lack of available capital due to global economic conditions.
We may not be able to 24 access additional capital resources due to a variety of reasons, including the restrictive covenants in our 2023 Credit Agreement and the lack of available capital due to global economic conditions.
We may not fully realize the anticipated positive impacts to future financial results from our restructuring efforts. 22 We have undertaken restructuring efforts in the past to streamline operations and reduce operating expenses.
We may not fully realize the anticipated positive impacts to future financial results from our restructuring efforts. We have undertaken restructuring efforts in the past to streamline operations and reduce operating expenses.
Bribery Act 2010; • difficulty in conducting due diligence with respect to business partners in certain international markets; • political and economic turbulence or uncertainty; • terrorism, war or other armed conflict; and • natural disasters, epidemics, and pandemics. Any or all of these factors could have a material adverse impact on our business, financial condition, and results of operations.
Bribery Act 2010; • difficulty in conducting due diligence with respect to business partners in certain international markets; • political and economic turbulence or uncertainty; • terrorism, war or other armed conflict; and • natural disasters, epidemics, and pandemics. Any or all of these factors could have a material adverse impact on our business, financial condition, and operating results.
We may also be required to restate our financial statements from prior periods. Execution of restatements create a significant strain on our internal resources and could cause delays in our filing of quarterly or annual financial results, increase our costs and cause management distraction. Restatements may also significantly affect our stock price in an adverse manner.
We may also be required to restate our financial statements from prior periods. Execution of restatements create a significant strain on our internal resources and could cause delays in our filing of quarterly or annual financial results, increase our costs and cause management distraction. Restatements may also significantly affect our stock price in a materially adverse manner.
Our 2023 Credit Agreement may not be sufficient for our future working capital, investments and cash requirements, in which case we would need to seek additional debt or equity financing or scale back our operations. In addition, we may need to seek additional financing to achieve and maintain compliance with specified financial ratios under our 2023 Credit Agreement, as amended.
Our 2023 Credit Agreement may not be sufficient for our future working capital, investments and cash requirements, in which case we would need to seek additional debt or equity financing or scale back our operations. In addition, we may need to seek additional financing to achieve and maintain compliance with specified financial ratios under our 2023 Credit Agreement.
Our provision for income taxes and overall cash tax costs are affected by a number of factors, including reorganizations or restructurings of our business, jurisdictional revenue mix and changes in tax regulations or policy, all of which could materially adversely affect our business, financial condition and results of operations.
Our provision for income taxes and overall cash tax costs are affected by a number of factors, including reorganizations or restructurings of our business, jurisdictional revenue mix and changes in tax regulations or policy, all of which could materially adversely affect our business, financial condition and operating results.
Because the techniques used by bad actors, many of whom are highly sophisticated and well-funded, to access or sabotage networks change frequently and generally are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques.
Because the techniques and tools used by bad actors, many of whom are highly sophisticated and well-funded, to access or sabotage networks change frequently and generally are not recognized until after they are used, we may be unable to anticipate or immediately detect and remediate these techniques.
Any significant default could adversely affect our results of operations and delay our ability to recognize revenue. A material portion of our sales is derived through our distributors, systems integrators, and value-added resellers. Some of our distributors, systems integrators and value-added resellers may experience financial difficulties, which could adversely affect our collection of accounts receivable.
Any significant default could adversely affect our operating results and delay our ability to recognize revenue. A material portion of our sales is derived through our distributors, systems integrators, and value-added resellers. Some of our distributors, systems integrators and value-added resellers may experience financial difficulties, which could adversely affect our collection of accounts receivable.
Litigation resulting from claims that we are infringing the proprietary rights of others has resulted and could in the future result in substantial costs and a diversion of resources and could have a material adverse effect on our business, financial condition and results of operations.
Litigation resulting from claims that we are infringing the proprietary rights of others has resulted and could in the future result in substantial costs and a diversion of resources and could have a material adverse effect on our business, financial condition and operating results.
We may not realize anticipated benefits of past or future acquisitions, divestitures and strategic investments, and the integration of acquired companies or technologies may negatively impact our business, financial condition and results of operations or dilute the ownership interests of our stockholders.
We may not realize anticipated benefits of past or future acquisitions, divestitures and strategic investments, and the integration of acquired companies or technologies may negatively impact our business, financial condition and operating results or dilute the ownership interests of our stockholders.
We have entered into foreign exchange forward contracts to offset the impact of payment of operating expenses in local currencies to some of our operating foreign subsidiaries. However, if we are not successful in managing these foreign currency transactions, we could incur losses from these activities. There are compliance risks associated with complex tariff regulations and export control laws.
We have entered into foreign exchange forward contracts to offset the impact of payment of operating expenses in local currencies to some of our operating foreign subsidiaries. However, if we are not successful in managing these foreign currency transactions, we could incur losses from these activities. There are compliance risks associated with complex tariff regulations and trade compliance laws.
If we find errors in the existing software or defects in the hardware used in our customers’ networks, we may need to modify our software networking solutions to fix or overcome these errors so that our products will inter-operate and scale with the existing software and hardware, which could be costly and could negatively affect our business, financial condition, and results of operations.
If we find errors in the existing software or defects in the hardware used in our customers’ networks, we may need to modify our software networking solutions to fix or overcome these errors so that our products will inter-operate and scale with the existing software and hardware, which could be costly and could negatively affect our business, financial condition, and operating results.
If a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
If a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results.
Such disruptions to the availability or integrity of utilities, transportation infrastructure, or the internet could have significant macroeconomic impacts, decreasing demand for our products and impacting our ability to get them to market. As a result, our financial situation and operating results would be negatively affected. 29 Item 1B. Unresolve d Staff Comments None.
Such disruptions to the availability or integrity of utilities, transportation infrastructure, or the internet could have significant macroeconomic impacts, decreasing demand for our products and impacting our ability to get them to market. As a result, our business, financial situation, and operating results could be negatively affected. 31 Item 1B. Unresolve d Staff Comments None.
Violations of laws or key control policies by our employees, contractors, channel partners, or agents could result in termination of our relationship, financial reporting problems, fines, and/or civil or criminal penalties for us, or prohibition on the importation or exportation of our products and could have a material adverse effect on our business, financial condition, and results of operations.
Violations of these regulations, laws, or key control policies by our employees, contractors, channel partners, or agents could result in termination of our relationship, financial reporting problems, fines, and/or civil or criminal penalties for us, or prohibition on the importation or exportation of our products and could have a material adverse effect on our business, financial condition, and operating results.
Our success may be impacted by our ability to provide successful cloud networking solutions that address the needs of our channel partners and end customers more effectively and economically than those of other competitors or existing technologies.
Our success may be impacted by our ability to provide successful cloud networking solutions that address the needs of our customers more effectively and economically than those of other competitors or existing technologies.
Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a lawsuit in which we are a defendant could result in a court order against us or payments to other parties that would have an adverse effect on our business, results of operations or financial condition.
Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a lawsuit 27 in which we are a defendant could result in a court order against us or payments to other parties that would have a material adverse effect on our business, financial condition, or operating results.
If we are unable to mitigate these effects, this could have a material adverse effect on our ability to meet customer orders and will negatively impact our gross margin and results of operations.
If we are unable to mitigate these effects, this could have a material adverse effect on our ability to meet customer orders and will negatively impact our gross margin and operating results.
Our 2023 Credit Agreement provides for interest to be calculated based on the prime rate, the federal funds rate and/or the secured overnight financing rate. The Federal Reserve has increased interest rates in 2022 and 2023 and these increases may continue into 2024 or beyond.
Our 2023 Credit Agreement provides for interest to be calculated based on the prime rate, the federal funds rate and/or the secured overnight financing rate. The Federal Reserve increased interest rates in 2022 and 2023 and these increases could continue in 2024 or beyond.
Under specified conditions, some third-party distributors are allowed to return products to us and unexpected returns could adversely affect our business, financial condition, and results of operations. The sales cycle for our products is long and we may incur substantial non-recoverable expenses or devote significant resources to sales that do not occur when anticipated.
Under specified conditions, some third-party distributors are allowed to return products to us and unexpected returns could materially adversely affect our business, financial condition, operating results, and future financial performance. The sales cycle for our products is long and we may incur substantial non-recoverable expenses or devote significant resources to sales that do not occur when anticipated.
If our financing requirements are not met and we are unable to access additional financing on favorable terms, or at all, our business, financial condition and results of operations could be materially adversely affected. Our indebtedness could expose us to interest rate risk to the extent of our variable rate debt.
If our financing requirements are not met and we are unable to access additional financing on favorable terms, or at all, our business, financial condition, operating results, and future growth prospects could be materially adversely affected. Our indebtedness could expose us to interest rate risk to the extent of our variable rate debt.
These laws, rules and regulations and the interpretation of these requirements are evolving, and we are making investments to evaluate current practices and to continue to achieve compliance, which investments may have a material impact on our financial condition.
These laws, rules and regulations and the interpretation of these requirements are evolving, and we are making investments to evaluate current practices and to continue to achieve compliance, which investments may have a material adverse impact on our business, financial condition, and operating results.
Furthermore, particularly in the service provider market, rapid consolidation will lead to fewer customers, with the effect that loss of a major customer could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants. The cloud networking market is rapidly evolving.
Furthermore, particularly in the service provider market, rapid consolidation will lead to fewer customers, with the effect that loss of a major customer could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants.
If we fail to anticipate market requirements or opportunities or fail to develop and introduce new products, product enhancements or business strategies to meet those requirements or opportunities in a timely manner, it could cause us to lose customers, and such failure could substantially decrease or delay market acceptance and sales of our present and future products and services, which would significantly harm our business, financial condition, and results of operations.
If we fail to anticipate market requirements or opportunities or fail to develop and introduce new products, product enhancements or business strategies to meet those requirements or opportunities in a timely manner, it could cause us to lose customers, and such failure could substantially decrease or delay market acceptance and sales of our present and future products and services, which would materially adversely affect our business, financial condition, and operating results.
Our income taxes are subject to volatility and could be adversely affected by several factors including earnings that are lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates, expiration of or lapses in the research and development tax credit laws, transfer pricing adjustments in the various jurisdictions we do business, tax effects of nondeductible compensation, including stock-based compensation, changes in accounting principles and imposition of withholding or other taxes on payments by subsidiaries or customers.
Our income taxes are subject to volatility and could be adversely affected by several factors including earnings that are lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates, expiration of or lapses in the research and development tax credit laws, transfer pricing adjustments with respect to our methods for valuing developed technology or intercompany arrangements in the various jurisdictions we do business, tax effects of nondeductible compensation, including stock-based compensation, changes in accounting principles and imposition of withholding or other taxes on payments by subsidiaries or customers.
System security risks, data breaches, and cyberattacks could compromise our proprietary information, disrupt our internal operations, impact services to customers, and harm public perception of our products, which could adversely affect our business, financial condition and results of operations.
System security risks, data breaches, and cyberattacks could compromise our proprietary information, disrupt our internal operations, impact services to customers, and harm public perception of our products, which could materially adversely affect our business, financial condition, operating results, and future growth prospects.
We monitor individual end-customer payment capability in granting such open credit arrangements, seek to limit such open credit to amounts we believe the end customers can pay and maintain reserves we believe are adequate to cover exposure for doubtful accounts.
We monitor partners’ and direct end customers’ payment capability in granting such open credit arrangements, seek to limit such open credit to amounts we believe the end customers can pay and maintain reserves we believe are adequate to cover exposure for doubtful accounts.
One or more of these channel partners could delay payments or default on credit extended to them, either of which could materially adversely affect our business, financial condition, results of operations and prospects.
One or more of these channel partners could delay payments or default on credit extended to them, either of which could materially adversely affect our business, financial condition, operating results, and future financial performance.
As COVID-19 pandemic illustrated, world events such as a pandemic or geopolitical events can spread quickly around the world and result in impacts to the supply chain and the business environment that result in a material negative impact on our business, financial condition, and results of operations.
World events such as a pandemic or geopolitical events can spread quickly around the world and result in impacts to the supply chain and the business environment that result in a material negative impact on our business, financial condition, and operating results.
These government measures include export controls restricting certain exports, re-exports, transfers or releases of commodities, software, and technology to Russia and Belarus, and sanctions targeting certain officials, individuals, entities, regions, and industries in Russia, Belarus, and Ukraine, including the financial, defense and energy sectors.
These government measures could and do include export controls restricting certain exports, re-exports, transfers or releases of commodities, software, and technology to certain countries, and sanctions targeting certain officials, individuals, entities, regions, and industries in those countries, including the financial, defense, and energy sectors.
While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, results of operations, industry, financial position and financial performance in the future.
While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may materially adversely affect our business, financial condition, operating results, and future financial performance.
Further, if products are not accepted by customers due to such defects, and such returns exceed the amount we accrued for defective returns, our business, financial condition, and results of operations would be adversely affected. Our products must successfully inter-operate with products from other vendors.
Further, if products are not accepted by customers due to such defects, and such returns exceed the amount we accrued for defective returns, this would materially adversely affect our business, financial condition, operating results, and future financial performance. Our products must successfully inter-operate with products from other vendors.
In addition, if our products do not inter-operate with those of our customers’ networks, demand for our products could be adversely affected or orders for our products could be canceled. This could harm our operating results, and financial condition, damage our reputation, and seriously harm our business and prospects.
In addition, if our products do not inter-operate with those of our customers’ networks, demand for our products could be adversely affected or orders for our products could be canceled. This could materially adversely affect our business, financial condition, operating results, and future financial performance.
If we do not comply with existing or evolving industry standards or government regulations, we will not be able to sell our products where these standards or regulations apply, which may prevent us from sustaining our net revenues or achieving profitability.
Complying with new regulations or obtaining certifications can be costly and disruptive to our business. 30 If we do not comply with existing or evolving industry standards or government regulations, we will not be able to sell our products where these standards or regulations apply, which may prevent us from sustaining our net revenues or achieving profitability.
Network products frequently contain undetected errors when new products or new versions or updates of existing products are released to the marketplace. In the past, we have experienced such errors in connection with new products and product updates.
When our products contain undetected errors, we may incur significant unexpected expenses and could lose sales. Network products frequently contain undetected errors when new products or new versions or updates of existing products are released to the marketplace. In the past, we have experienced such errors in connection with new products and product updates.
Our ability to successfully implement our business plan and comply with regulations requires an effective planning and management process. We need to ensure that any businesses acquired are appropriately integrated in our financial systems. We need to continue improving our existing, and implement new, operational and financial systems, procedures and controls.
Our ability to successfully implement our business plan and comply with regulations requires an effective planning and management process. We need to continue improving our existing, and implement new, operational and financial systems, procedures and controls.
In some cases, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain vulnerabilities in design or manufacture, including “bugs” and other problems that could allow network intrusion or unexpectedly interfere with the operation of our networks.
In some cases, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain vulnerabilities in design or manufacture that could allow network intrusion or unexpectedly interfere with the operation of our systems, products or services we provide to customers.
Congress is considering legislation that would defer the capitalization and amortization requirement to later years, however, we have no assurance the provision will be repealed or modified.
Congress has been considering legislation that would defer the capitalization and amortization requirement to later years, there has been little recent discussion and we have no assurance the provision will be repealed or modified.
Given the requirement was not repealed or modified as of June 30, 2023, our existing U.S. net operating losses have been fully utilized and we are now subject to U.S. cash tax sooner than anticipated.
Given the requirement was not repealed or modified as of June 30, 2023, our existing U.S. net operating losses were fully utilized during fiscal 2023, and we are now subject to U.S. cash tax on profits.
Although the length, impact, and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain 20 interruptions, political and social instability, changes in consumer or purchaser preferences as well as increases in cyberattacks and espionage.
Although the length, impact, and outcome of such conflicts are highly unpredictable, these conflicts and others that could arise could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increases in cyberattacks and espionage.
We rely on third-party cloud service providers such as Salesforce and Oracle to support internal operations. Disruptions to such services or data breaches related to those services could impact our ability to maintain efficient operations and to provide services to our customers.
We rely on third-party cloud service providers such as Salesforce and Oracle to support internal operations. Disruptions to such services or data breaches related to those services could impact our ability to maintain efficient operations and to provide services to our customers and could materially adversely affect our business, financial condition, operating results, and future growth prospects.
Our use of open source software subjects us to certain additional risks for the following reasons: • open source license terms may be ambiguous and may result in unanticipated obligations regarding the licensing of our products and intellectual property; • open source software cannot be protected under trade secret law; • suppliers of open-source software do not provide the warranty, support and liability protections typically provided by vendors who offer proprietary software; and • it may be difficult for us to accurately determine the developers of the open source code and whether the acquired software infringes third-party intellectual property rights. 26 We believe even if we do not infringe the rights of others, we will incur significant expenses in the future due to defense of legal claims, disputes or licensing negotiations, though the amounts cannot be determined.
Our use of open source software subjects us to certain additional risks for the following reasons: • open source license terms may be ambiguous and may result in unanticipated obligations regarding the licensing of our products and intellectual property; • open source software cannot be protected under trade secret law; • suppliers of open-source software do not provide the warranty, support and liability protections typically provided by vendors who offer proprietary software; and • it may be difficult for us to accurately determine the developers of the open source code and whether the acquired software infringes third-party intellectual property rights.
Such sanctions and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, tensions, and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition, and results of operations.
Such sanctions and other measures, as well as the existing and potential further responses from military actors or allies to such sanctions, tensions, and military actions, could adversely affect the global economy and financial markets and could materially adversely affect our business, financial condition, operating results, and future financial performance.
We primarily rely on our manufacturing partners Alpha Networks, Inc, Senao Networks, Inc, Hon Hai Precision Industry Co., Ltd (Foxconn), Delta Electronics Inc, Wistron Neweb Corporation, Sercomm Corporation, Quanta Computer Inc, Lite-On Technology Corp, and select other partners to manufacture our products.
We primarily rely on our manufacturing partners Alpha Networks, Inc, Senao Networks, Inc., Wistron Neweb Corporation, Sercomm Corporation, Quanta Computer Inc, Lite-On Technology Corp, and select other partners to manufacture our products.
The markets for our products are constantly evolving and characterized by rapid technological change, frequent product introductions, changes in customer requirements, evolving industry standards, and continuous pricing pressures.
The markets for our products are constantly evolving and characterized by rapid technological change, frequent product introductions, changes in customer requirements, evolving industry standards, and continuous pricing pressures. For example, the cloud networking market is the fastest growing segment of the networking industry.
Due to the foregoing and other factors, many of which are described herein, period-to-period comparisons of our operating results should not be relied upon as an indicator of our future performance.
Due to the foregoing and other factors, many of which are described herein, period-to-period comparisons of our operating results should not be relied upon as an indicator of our future performance. Our stock price has been volatile in the past and may significantly fluctuate in the future.
This could impede our sales, manufacturing, distribution, or other critical functions, which could adversely affect our business. In addition, the economic costs to us to eliminate, mitigate, or recover from, or remediate cyber or other security problems, such as bugs, viruses, worms, ransomware or other malware, and security vulnerabilities could be significant and may be difficult to anticipate or measure.
In addition, the economic costs to us to eliminate, mitigate, or recover from, or remediate cyber or other security problems, such as bugs, viruses, worms, ransomware or other malware, and security vulnerabilities could be significant and may be difficult to anticipate or measure.
If an actual or perceived breach of network security occurs in our products, network, or in the network of a customer of our networking products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness or security of our products could be harmed.
Any adverse impact to the availability, integrity or confidentiality of our IT systems, including any actual or perceived breach of network security occurs in our products, network, or in the network of a customer of our networking products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness or security of our products could be harmed.
If our estimates and assumptions are incorrect or if other unforeseen events occur, we may not achieve the cost savings expected from such restructurings, and our business, financial condition, and results of operations could be adversely affected. Our stock price has been volatile in the past and may significantly fluctuate in the future.
If our estimates and assumptions are incorrect or if other unforeseen events occur, we may not achieve the cost savings expected from such restructurings, and our business, financial condition, operating results and future financial performance could be materially adversely affected.
Public schools receive funding from local tax revenues, and from state and federal governments through a variety of programs, many of which seek to assist schools located in underprivileged or rural areas. The funding for a portion of our sales to U.S.-based educational institutions comes from a federal funding program known as the E-Rate program.
A significant portion of our revenues comes from sales to both public and private K-12 educational institutions. Public schools receive funding from local tax revenues, and from state and federal governments through a variety of programs, many of which seek to assist schools located in underprivileged or rural areas.
E-Rate is a program of the Federal Communications Commission (the “FCC”) that subsidizes the purchase of approved telecommunications, Internet access, and internal connection costs for eligible public educational institutions.
The funding for a portion of our sales to U.S.-based educational institutions comes from a federal funding program known as the E-Rate program. E-Rate is a program of the Federal Communications Commission (the “FCC”) that subsidizes the purchase of approved telecommunications, Internet access, and internal connection costs for eligible public educational institutions.
Many countries are also actively considering changes to existing tax laws and rates or have proposed or enacted new laws that could increase our tax obligations in countries where we do business, including the introduction of taxes targeted at digital services.
Many countries are also actively considering changes to existing tax laws and rates or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate the business.
However, we cannot ensure that the actions we have taken will adequately protect our intellectual property rights or that other parties will not independently develop similar or competing products that do not infringe on our patents.
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. However, we cannot ensure that the actions we have taken will adequately protect our intellectual property rights or that other parties will not independently develop similar or competing products that do not infringe on our patents.
In some circumstances, we must obtain regulatory approvals or certificates of compliance before we can offer or distribute our products in certain jurisdictions or to certain customers. Complying with new regulations or obtaining certifications can be costly and disruptive to our business.
In some circumstances, we must obtain regulatory approvals or certificates of compliance before we can offer or distribute our products in certain jurisdictions or to certain customers.
It may be necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that the necessary licenses would be available on acceptable terms, if at all.
Some of our products are designed to include software or other intellectual property, including open source software, licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that the necessary licenses would be available on acceptable terms, if at all.
Our inability to obtain products from one or more of these suppliers or a decline in market acceptance of these suppliers’ products could have a material adverse effect on our business, results of operations and financial condition. We do not have any material agreements with fixed long-term prices or minimum volume requirements from suppliers.
Our inability to obtain products from one or more of these suppliers or a decline in market acceptance of these suppliers’ products could have a material adverse effect on our business, financial condition and operating results.
Our products must inter-operate with many or all of the products within these networks as well as future products in order to meet our customers’ requirements.
Many of our customers’ networks contain multiple generations of products that have been added over time as these networks have grown and evolved. Our products must inter-operate with many or all of the products within these networks as well as future products in order to meet our customers’ requirements.
If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our business, financial condition, and operating results may be adversely affected.
If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our business, financial condition, and operating results may be adversely affected. We are exposed to the credit risk of our channel partners and direct customers, which could result in material losses.
Our top ten suppliers accounted for a significant portion of our purchases during the year. Given the significant concentration of our supply chain, particularly with certain sole or limited source providers, any significant interruption by any of the key suppliers or a termination of a relationship could temporarily disrupt our operations.
Given the concentration of our supply chain, particularly with certain sole or limited source providers, any significant disruption to any of the key suppliers or a termination of a relationship could temporarily impact our operations.
In many foreign countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us.
Local laws and customs in many countries differ significantly from, or conflict with, those in the United States or in other countries in which we operate. In many foreign countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us.
If we are unsuccessful in attaching cloud services and maintenance services to our hardware product, our ability to grow our subscription revenue could be limited. 18 When our products contain undetected errors, we may incur significant unexpected expenses and could lose sales.
If we are unsuccessful in attaching cloud services and maintenance services to our hardware product, our ability to grow our subscription revenue could be limited.
Misconduct by employees could include intentional failures to: • comply with securities laws and regulations or similar regulations of comparable foreign regulatory authorities; • comply with export controls and sanctions laws and regulations or similar regulations of comparable foreign regulatory authorities; • comply with anti-corruption laws and regulations or similar regulations of comparable foreign regulatory authorities; • comply with internal controls that we have established; • report financial information or data accurately; or • disclose unauthorized activities to us. 25 The precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
Misconduct by employees could include intentional failures to: • comply with securities laws and regulations or similar regulations of comparable foreign regulatory authorities; • comply with export controls and sanctions laws and regulations or similar regulations of comparable foreign regulatory authorities; • comply with anti-corruption laws such as the FCPA and regulations or similar regulations of comparable foreign regulatory authorities; • comply with internal controls that we have established; • report financial information or data accurately; or • disclose unauthorized activities to us.
Moreover, the inclusion in our products of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our proprietary rights in our products. Further, the failure to comply with the terms of any license, including free open source software, may result in our inability to continue to use such license.
Moreover, the inclusion in our products of software or other intellectual property licensed from third parties on a 28 nonexclusive basis could limit our ability to protect our proprietary rights in our products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of June 30, 2023, we have leased an aggregate of approximately 0.6 million square feet of space with various expiration dates between fiscal year 2023 and fiscal 2033. We are continuously evaluating the usage of and employee attendance at all of our locations.
Biggest changeAs of June 30, 2024, we have an aggregate of approximately 0.5 million square feet of leased space with various expiration dates between fiscal year 2025 and fiscal 2033. We are continuously evaluating our leased locations.
Legal Proceedings The information set forth under the heading “Legal Proceedings” in Note 10, Commitments and Contingencies , in Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not Applicable. 30 PA RT II
Legal Proceedings The information set forth under the heading “Legal Proceedings” in Note 10, Commitments and Contingencies , in Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not Applicable. 33 PA RT II
Item 2. P roperties Our corporate headquarters is located in Morrisville, North Carolina where we currently lease approximately 54,530 square feet of space under a lease agreement that expires in fiscal year 2028.
Item 2. P roperties Our corporate headquarters is located in Morrisville, North Carolina where we currently lease approximately 54,530 square feet of space under a lease agreement that expires in fiscal year 2031.
In addition to our headquarters in Morrisville, we lease additional sites in the United States, including facilities in Salem, New Hampshire and San Jose, California for research and development, sales and marketing and administrative offices.
In addition to our headquarters in Morrisville, we lease additional sites in the United States, including in Salem, New Hampshire and San Jose, California for research and development, sales and marketing and administrative purposes.
Outside the United States, we also lease office space in various other international geographic locations for research and development, sales and service personnel and administration, including other cities in the Americas, EMEA and APAC, such as Bangalore, India, Chennai, India, Markham, Canada, Reading, United Kingdom, and Shannon, Ireland.
Outside the United States, we also lease facilities in other geographic locations for research and development, sales and service personnel and administration, including other cities in the Americas, EMEA and APAC, such as Bangalore, India, Chennai, India, Markham, Canada, Reading, United Kingdom, Shannon, Ireland and other locations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. We have never declared or paid cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future.
Biggest changeAs of August 9, 2024, there were 155 stockholders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Certain information regarding our equity compensation plan(s) as required by Part II is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our year ended June 30, 2023 Annual Meeting of Stockholders no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Certain information regarding our equity compensation plan(s) as required by Part II is incorporated by reference from our Definitive Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our year ended June 30, 2024 Annual Meeting of Stockholders no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of our common stock. 31 Comparison of Five-Year Cumulative Total Returns Performance Graph for Extreme Networks, Inc. Index data Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved. Item 6. [RESE RVED] 32
The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of our common stock. 34 Comparison of Five-Year Cumulative Total Returns Performance Graph for Extreme Networks, Inc. Index data Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved. Item 6. [RESE RVED] 35
Set forth below is a stock price performance graph comparing the annual percentage change in the cumulative total return on our common stock with the cumulative total returns of companies comprising the NASDAQ US Benchmark TR index and the NASDAQ US Benchmark Computer Hardware TR Index commencing July 1, 2018 and ending on June 30, 2023.
Set forth below is a stock price performance graph comparing the annual percentage change in the cumulative total return on our common stock with the cumulative total returns of companies comprising the NASDAQ US Benchmark TR index and the NASDAQ US Benchmark Computer Hardware TR Index commencing July 1, 2019 and ending on June 30, 2024.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Common Stock Market and Dividends Our common stock trades on the Nasdaq Global Select Market and commenced trading on Nasdaq on April 9, 1999 under the symbol “EXTR”. As of August 17, 2023, there were 165 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Common Stock Market and Dividends Our shares of common stock trades on the Nasdaq Global Select Market and commenced trading on Nasdaq on April 9, 1999 under the symbol “EXTR”.
Removed
Issuer Purchases of Equity Securities The following table provides stock repurchase activity during the three months ended June 30, 2023 (in thousands, except per share amounts): Approximate Dollar Value Total Average Total Number of Shares of Shares Number of Price Paid Purchased as Part of That May Yet Be Purchased Shares per Share Publicly Announced Under the Plans or Programs Purchased (2) Plans or Programs (1) Beginning amount available to repurchase $ 125,193 April 1, 2023 - April 30, 2023 — $ — — 125,193 May 1, 2023 - May 31, 2023 1,447 17.32 1,447 100,130 June 1, 2023 - June 30, 2023 — — — 100,130 Total 1,447 $ 17.32 1,447 Remaining amount available to repurchase $ 100,130 (1) On May 18, 2022, the Company announced that its Board of Directors had authorized a share repurchase program with authorization to repurchase up to $200.0 million of our common stock over a three-year period commencing on July 1, 2022.
Added
We have never declared or paid cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future.
Removed
Refer to Note 11, Stockholders’ Equity , in Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information regarding the Company’s share repurchase program. (2) The aggregate price and the average price per share does not include the effect of the excise tax under the provision of the Inflation Reduction Act.
Added
Issuer Purchases of Equity Securities The Company did not repurchase any of its common stock during the three months ended June 30, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Expenses The following table presents operating expenses for the fiscal years ended June 30, 2023, 2022 and 2021 (in thousands, except percentages): Year Ended Year Ended June 30, 2023 June 30, 2022 $ Change % Change June 30, 2022 June 30, 2021 $ Change % Change Research and development $ 214,270 $ 190,591 $ 23,679 12.4 % $ 190,591 $ 196,995 $ (6,404 ) (3.3 )% Sales and marketing 336,906 294,470 42,436 14.4 % 294,470 276,841 17,629 6.4 % General and administrative 89,934 68,697 21,237 30.9 % 68,697 66,201 2,496 3.8 % Acquisition and integration costs 390 7,009 (6,619 ) (94.4 )% 7,009 1,975 5,034 254.9 % Restructuring and related charges 2,860 1,748 1,112 63.6 % 1,748 2,625 (877 ) (33.4 )% Amortization of intangible assets 2,047 3,235 (1,188 ) (36.7 )% 3,235 6,110 (2,875 ) (47.1 )% Total operating expenses $ 646,407 $ 565,750 $ 80,657 14.3 % $ 565,750 $ 550,747 $ 15,003 2.7 % The following table highlights our operating expenses and operating income as a percentage of net revenues for the fiscal years ended June 30, 2023, 2022 and 2021: Year Ended June 30, 2023 June 30, 2022 June 30, 2021 Research and development 16.3 % 17.1 % 19.5 % Sales and marketing 25.7 % 26.5 % 27.4 % General and administrative 6.9 % 6.2 % 6.6 % Acquisition and integration costs 0.0 % 0.6 % 0.2 % Restructuring and related charges 0.2 % 0.2 % 0.3 % Amortization of intangible assets 0.2 % 0.3 % 0.6 % Total operating expenses 49.3 % 50.9 % 54.6 % Operating income 8.3 % 5.8 % 3.4 % Research and Development Expenses Research and development expenses consist primarily of personnel costs (which consists of compensation, benefits and stock-based compensation), consultant fees and prototype expenses related to the design, development, and testing of our products.
Biggest changeOperating Expenses The following table presents operating expenses for the fiscal years ended June 30, 2024, 2023 and 2022 (in thousands, except percentages): Year Ended Year Ended June 30, 2024 June 30, 2023 $ Change % Change June 30, 2023 June 30, 2022 $ Change % Change Research and development $211,931 $214,270 $(2,339) (1.1)% $214,270 $190,591 $23,679 12.4 % Sales and marketing 345,802 336,906 8,896 2.6 % 336,906 294,470 42,436 14.4 % General and administrative 99,938 89,934 10,004 11.1 % 89,934 68,697 21,237 30.9 % Acquisition and integration costs — 390 (390) (100.0)% 390 7,009 (6,619) (94.4)% Restructuring and related charges 36,321 2,860 33,461 1,170.0 % 2,860 1,748 1,112 63.6 % Amortization of intangible assets 2,041 2,047 (6) (0.3)% 2,047 3,235 (1,188) (36.7)% Total operating expenses $696,033 $646,407 $49,626 7.7 % $646,407 $565,750 $80,657 14.3 % The following table highlights our operating expenses and operating income as a percentage of net revenues for the fiscal years ended June 30, 2024, 2023 and 2022: Year Ended June 30, 2024 June 30, 2023 June 30, 2022 Research and development 19.0 % 16.3 % 17.1 % Sales and marketing 31.0 % 25.7 % 26.5 % General and administrative 8.9 % 6.9 % 6.2 % Acquisition and integration costs — — 0.6 % Restructuring and related charges 3.3 % 0.2 % 0.2 % Amortization of intangible assets 0.2 % 0.2 % 0.3 % Total operating expenses 62.3 % 49.2 % 50.9 % Operating income (loss) (5.8 )% 8.3 % 5.8 % Research and Development Expenses Research and development expenses consist primarily of personnel costs (which includes compensation, benefits and stock-based compensation), consultant fees and engineering expenses related to the design, development, and testing of our products.
General and administrative expenses increased by $21.2 million or 30.9% for the year ended June 30, 2023, as compared to fiscal 2022, primarily due to a $10.1 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation and higher headcount, a $6.2 million increase in professional fees primarily for legal, a $5.1 million increase for litigation settlement charges, a $0.9 million increase in system transition costs, partially offset by a $1.2 million decrease in other expenses primarily for travel and facilities related costs.
General and administrative expenses increased by $21.2 million or 30.9% for the year ended June 30, 2023, as compared to fiscal 2022, primarily due to a $10.1 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation and higher headcount, a $6.2 million increase in professional fees primarily for legal fees, a $5.1 million increase for litigation settlement charges, a $0.9 million increase in system transition costs, partially offset by a $1.2 million decrease in other expenses primarily for travel and facilities related costs.
The 2023 Credit Agreement provides for i) a $200.0 million first lien term loan facility in an aggregate principal amount (the “Term Facility”), ii) a $150.0 million five-year revolving credit facility (the “Revolving Facility”) and, iii) an uncommitted additional incremental loan facility in the principal amount of up to $100.0 million plus an unlimited amount that 40 is subject to pro forma compliance with a specified Consolidated Leverage Ratio tests.
The 2023 Credit Agreement provides for i) a $200.0 million first lien term loan facility in an aggregate principal amount (the “Term Facility”), ii) a $150.0 million five-year revolving credit facility (the “Revolving Facility”) and, iii) an uncommitted additional incremental loan facility in the principal amount of up to $100.0 million plus an unlimited amount that is subject to pro forma compliance with a specified Consolidated Leverage Ratio tests.
In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled. 38 We generally do not grant return privileges and pricing credits to our value-added resellers, non-stocking distributors and end-user customers, except for defective products during the warranty period.
In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled. We generally do not grant return privileges and pricing credits to our value-added resellers, non-stocking distributors and end-user customers, except for defective products during the warranty period.
We may provide sales incentives and other programs to these customers which are considered to be a form of variable consideration and we maintain estimated accruals and allowances using the historical actuals. Our stocking distributors are allowed certain price adjustments in the form of rebates and limited stock rotation rights.
We may provide sales incentives and other programs to these customers which are considered to be a form of variable consideration and we maintain estimated accruals and allowances using the historical actuals. 41 Our stocking distributors are allowed certain price adjustments in the form of rebates and limited stock rotation rights.
Fiscal year 2022 During fiscal 2022, the Company recorded $1.7 million of restructuring charges which primarily comprised of facility related charges. The facility restructuring charges included some impairment charges and additional facilities expenses related to previously impaired facilities. During fiscal 2022, the Company completed the reduction-in-force action initiated in the third quarter of fiscal 2020.
Fiscal year 2022 During fiscal 2022, the Company recorded $1.7 million of restructuring charges which was primarily comprised of facility related charges. The facility restructuring charges included some impairment charges and additional facilities expenses related to previously impaired facilities. During fiscal 2022, the Company completed the reduction-in-force action initiated in the third quarter of fiscal 2020.
Fiscal year 2023 During fiscal 2023, the Company recorded $2.9 million of restructuring charges which primarily comprised of $2.0 million of facility related charges related to our previously impaired facilities and $0.9 million in charges associated with our restructuring plan initiated in the third quarter of fiscal 2023 to transform our business and facilities infrastructure.
Fiscal year 2023 During fiscal 2023, the Company recorded $2.9 million of restructuring charges which was primarily comprised of $2.0 million of facility related charges related to our previously impaired facilities and $0.9 million in charges associated with our restructuring plan initiated in the third quarter of fiscal 2023 to transform our business and facilities infrastructure.
It leverages ML, AI Operations, and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights saves time, lower costs and streamlines operations. Enterprise network administrators need to respond to the rapid digital transformational trends of cloud, mobility, big data, social business and the ever-present need for network security.
It leverages ML, AI Operations, and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights to save time, lower costs and streamlines operations. Enterprise network administrators need to respond to the rapid digital transformational trends of cloud, mobility, big data, social business and the ever-present need for network security.
Extreme’s enhanced Cloud solution is the only offering in the market that seamlessly integrates the cloud with on-premises infrastructures and enables visibility from the edge to everywhere. See Part 1, Item 1. Business , for additional discussion of our business. Fiscal Year The Company uses a fiscal calendar year ending on June 30.
We believe Extreme’s enhanced Cloud solution is the only offering in the market that seamlessly integrates the cloud with on-premises infrastructures and enables visibility from the edge to everywhere. See Part 1, Item 1. Business , for additional discussion of our business. Fiscal Year The Company uses a fiscal calendar year ending on June 30.
We anticipate our principal uses of cash and cash equivalents for fiscal 2024 will be purchases of finished goods inventory from our contract manufacturers, payroll, share repurchases, payments under debt obligations and related interest, payments under lease obligations, purchases of property and equipment and other operating expenses related to the development and marketing of our products.
We anticipate our principal uses of cash and cash equivalents for fiscal 2025 will be purchases of finished goods inventory from our contract manufacturers, payroll, share repurchases, payments under debt obligations and related interest, payments under lease obligations, purchases of property and equipment and other operating expenses related to the development and marketing of our products.
Net Cash Provided by Operating Activities Cash provided by operating activities during the fiscal year ended June 30, 2023 was $249.2 million.
Cash provided by operating activities during the fiscal year ended June 30, 2023 was $249.2 million.
The following discussion is based upon our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.
The following discussion is based upon our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with U.S. generally accepted accounting principles.
Substantially all of our product sales revenues are recognized at a point in time and our service and subscription revenues are recognized over time. For revenues recognized over time, we use an input measure, days elapsed, to measure progress.
Substantially all of our product sales revenues are recognized at a point in time and our subscription and support revenues are recognized over time. For revenues recognized over time, we use an input measure, days elapsed, to measure progress.
The increase in interest expense in fiscal year ended June 30, 2023 was primarily driven by higher average rates under our Credit Agreements and write-off the unamortized deferred financing costs related to our 2019 Credit Agreement, as we amended the 2019 Credit Agreement and entered into the 2023 Credit Agreement during June 2023.
The increase in interest expense in fiscal year ended June 30, 2023 as compared to fiscal 2022 was primarily driven by higher average rates under our Credit Agreements and write-off of the unamortized deferred financing costs related to our 2019 Credit Agreement, as we amended the 2019 Credit Agreement and entered into the 2023 Credit Agreement during June 2023.
Foreign Currency Effect on Cash and cash equivalents Foreign currency effect on cash and cash equivalents increased in 2023, primarily due to changes in exchange rates between the U.S. Dollar and particularly the Indian Rupee, U.K. Pound, and the Euro.
Foreign Currency Effect on Cash and cash equivalents Foreign currency effect on cash and cash equivalents increased in 2024, primarily due to changes in exchange rates between the U.S. Dollar and particularly the Indian Rupee, U.K. Pound, and the Euro.
Contractual Obligations As of June 30, 2023, we have contractual obligations for debt obligations, purchase obligations, lease obligations and other obligations. Our debt obligations relate to amounts owed under our 2023 Credit Agreement. As of June 30, 2023, we have $225.0 million of debt outstanding which is payable in quarterly installments through our fiscal year 2028.
Contractual Obligations As of June 30, 2024, we have contractual obligations for debt obligations, purchase obligations, lease obligations and other obligations. Our debt obligations relate to amounts owed under our 2023 Credit Agreement. As of June 30, 2024, we have $190.0 million of debt outstanding which is payable in quarterly installments through our fiscal year 2028.
Sales and Marketing Expenses Sales and marketing expenses consist of personnel costs (which consists of compensation, benefits and stock-based compensation) and related expenses for personnel engaged in marketing and sales functions, as well as trade shows and promotional expenses.
Sales and Marketing Expenses Sales and marketing expenses consist of personnel costs (which includes compensation, benefits and stock-based compensation) and related expenses for personnel engaged in marketing and sales functions, as well as trade shows and promotional expenses.
For fiscal 2023, 2022 and 2021, our tax provision primarily related to taxes on our foreign operations, including foreign withholding taxes remitted to foreign tax authorities by customers on our behalf, tax expense related to the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN Business, the Campus Fabric Business and the Data Center Business and state taxes in states where we have exhausted available Net Operating Losses or are subject to certain franchise taxes qualifying as income tax under the relevant tax accounting guidance.
For fiscal 2024, 2023 and 2022, our tax provision is primarily related to (i) taxes on our foreign operations, including foreign withholding taxes remitted to foreign tax authorities by customers on our behalf, (ii) tax expense related to the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN Business, the Campus Fabric Business and the Data Center Business and (iii) state taxes in states where we have exhausted available Net Operating Losses or are subject to certain franchise taxes qualifying as income tax under the relevant tax accounting guidance.
We are not currently aware of any material cash requirements beyond the next 12 months other than those described above for fiscal 2023 and our known contractual obligations. See the section titled “ Contractual Obligations ” below.
We are not currently aware 42 of any material cash requirements beyond the next 12 months other than those described above for fiscal 2024 and our known contractual obligations. See the section titled “ Contractual Obligations ” below.
Factors contributing to cash provided by operating activities were net income of $78.1 million, non-cash expenses of $104.6 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes and interest.
Factors contributing to cash provided by operating activities were net income of $78.1 million, non-cash expenses of $104.6 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, provision for excess and obsolete inventory and interest.
Net Cash Used in by Financing Activities Cash used in financing activities during the fiscal year ended June 30, 2023 was $194.8 million due primarily to share repurchases of $99.9 million, debt repayments of $108.6 million, payments of debt financing cost of $3.2 million, $3.0 million of deferred payments on acquisitions and a $5.1 million payment for taxes on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our Employee Stock Purchase Plan (“ESPP”).
Cash used in financing activities during the fiscal year ended June 30, 2023 was $194.8 million due primarily to share repurchases of $99.9 million, debt repayments of $108.6 million, payments of debt financing cost of $3.2 million, $3.0 million of deferred payments on acquisitions and a $5.1 million payment for taxes on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our ESPP.
Other sources of cash for the period included a decrease in inventory and increases in accounts payable, accrued compensation and deferred revenue. These amounts were partially offset by increases in accounts receivable and prepaid expenses and other current assets and decreases in the current and long-term liabilities and operating lease liabilities.
Other sources of cash for the period included increases in accounts payable and deferred revenue. These amounts were partially offset by increases in accounts receivable, inventories and prepaid expenses and other assets and decreases in accrued compensation, current and long-term liabilities and operating lease liabilities.
Revenues through our distributor channel were 83% of total product revenues in fiscal 2023, 80% of total product revenues in fiscal 2022 and 77% of total product revenue in fiscal 2021. The level of sales to any one customer, including a distributor, may vary from period to period.
Revenues through our distributor channel were 85% of total product revenues in fiscal 2024, 83% of total product revenues in fiscal 2023 and 80% of total product revenue in fiscal 2022. The level of sales to any one customer, including a distributor, may vary from period to period.
Service and subscription gross profit increased to $248.6 million for the year ended June 30, 2023, from $228.8 million in fiscal 2022, primarily due to higher service and subscription revenues partially offset by higher professional services fees and increased cloud service costs. 35 Service and subscription gross profit increased to $228.8 million for the year ended June 30, 2022, from $195.7 million in fiscal 2021, primarily due to higher service and subscription revenues partially offset by higher professional fees and increased cloud service costs.
Subscription and support gross profit increased to $248.6 million for the year ended June 30, 2023, from $228.8 million in fiscal 2022, primarily due to higher subscription and support revenues partially offset by higher professional services fees and increased cloud service costs.
Net Cash Used in Investing Activities Cash used in investing activities during the fiscal year ended June 30, 2023 was $13.8 million, primarily due to the payment of $13.8 million for the purchases of property and equipment. 41 Cash used in investing activities during the fiscal year ended June 30, 2022 was $85.0 million, primarily due to the payment of $69.5 million (net of cash acquired) for the Acquisition and $15.4 million for purchases of property and equipment.
Cash used in investing activities during the fiscal year ended June 30, 2022 was $85.0 million, primarily due to the payment of $69.5 million (net of cash acquired) for the acquisition of Ipanema and $15.4 million for purchases of property and equipment.
All references herein to “fiscal 2023” or “2023"; “fiscal 2022” or “2022”; “fiscal 2021” or “2021” represent the fiscal years ending, respectively. Acquisitions Ipanematech SAS On September 14, 2021 (the “Acquisition Date”), we completed our acquisition (the “Acquisition”) of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network business unit of InfoVista pursuant to a Sale and Purchase Agreement.
All references herein to “fiscal 2024” or “2024"; “fiscal 2023” or “2023”; “fiscal 2022” or “2022” represent the fiscal years ended, respectively. Acquisitions Ipanematech SAS On September 14, 2021 (the “Acquisition Date”), we completed our acquisition (the “Acquisition”) of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network business unit of InfoVista pursuant to a Sale and Purchase Agreement.
For the fiscal years ended June 30, 2023, 2022 and 2021, we recorded income tax provisions of $16.0 million, $7.9 million, and $8.2 million respectively.
For the fiscal years ended June 30, 2024, 2023 and 2022, we recorded income tax provisions of $8.5 million, $16.0 million, and $7.9 million respectively.
As of June 30, 2023, we have contractual commitments of $34.5 million that are due through our fiscal year 2027. We have immaterial income tax liabilities related to uncertain tax positions and we are unable to reasonably estimate the timing of the settlement of those liabilities.
As of June 30, 2024, we have contractual commitments of $25.9 million that are due through our fiscal year 2027. We have immaterial income tax liabilities related to uncertain tax positions and we are unable to reasonably estimate the timing of the settlement of those liabilities.
On June 22, 2023, we entered into the Second Amended and Restated Credit Agreement (the “2023 Credit Agreement) by and among Extreme, as borrower, BMO Harris Bank, N.A., as an issuing lender and swingline lender, Bank of America, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association and Wells Fargo Bank, National Association, as issuing lenders, the financial institutions or entities party thereto as lenders, and Bank of Montreal, as administrative agent and collateral agent, which amended and restated the 2019 Credit Agreement.
On June 22, 2023, we entered into the Second Amended and Restated Credit Agreement (the “2023 Credit Agreement) by and among Extreme, as borrower, BMO Harris Bank, N.A., as an issuing lender and swingline lender, BOFA Securities, Inc.., JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and Wells Fargo Securities, LLC, as issuing lenders, the financial institutions or entities party thereto as lenders, and Bank of Montreal, as administrative agent and collateral agent, which amended and restated the 2019 Credit Agreement.
Revenue Recognition We derive the majority of our revenue from sales of our networking equipment, with the remaining revenue generated from SaaS and service fees relating to maintenance contracts, professional services, and training for our products. We sell our products and maintenance contracts direct to customers and to partners in two distribution channels, or tiers.
Revenue Recognition We derive the majority of our revenue from sales of our networking equipment, with the remaining revenue generated from software delivered as a service (“SaaS”) and support fees relating to maintenance contracts, professional services, and training for our products. We sell our products and maintenance contracts direct to customers and to partners in two distribution channels, or tiers.
In addition, our tax provision for the fiscal year ended June 30, 2023 included $3.2 million of U.S. federal tax.
In addition, our tax provision for the fiscal year ended June 30, 2024 included $1.3 million of U.S. federal tax.
We do not have any material commitments for capital expenditures as of June 30, 2023. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2023. 42
We do not have any material commitments for capital expenditures as of June 30, 2024. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2024. 45
Sales and marketing expenses increased by $42.4 million or 14.4% for the year ended June 30, 2023, as compared to fiscal 2022, primarily due to a $35.1 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a $5.9 million increase in travel expenses due to loosening of COVID-19 restrictions, and a $1.4 million increase in other expenses primarily professional fees and sales and marketing activities.
Sales and marketing expenses increased by $8.9 million or 2.6% for the year ended June 30, 2024, as compared to fiscal 2023, primarily due to a $1.5 million increase in personnel costs due to higher salaries and benefits costs, a $7.2 million increase in sales promotions and marketing related expenses, and a $1.2 million increase in professional fees offset by a $1.0 million decrease in other costs primarily related to contractor costs and travel costs. 39 Sales and marketing expenses increased by $42.4 million or 14.4% for the year ended June 30, 2023, as compared to fiscal 2022, primarily due to a $35.1 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a $5.9 million increase in travel expenses due to loosening of COVID-19 restrictions, and a $1.4 million increase in other expenses primarily professional fees and sales and marketing activities.
This increase was primarily due to cash provided by operating activities of $249.2 million, which is offset by cash used in financing activities of $194.8 million mainly as a result of payments on the 2019 Initial Term Loan and share repurchases and cash used in investing activities of $13.8 million primarily for the purchase of property and equipment.
This increase was primarily due to cash provided by operating activities of $249.2 million, which is offset by cash used in financing activities of $194.8 million mainly as a result of payments on the 2019 Initial Term Loan and share repurchases and cash used in investing activities of $13.8 million primarily for the purchase of property and equipment. 43 Net Cash Provided by Operating Activities Cash provided by operating activities during the fiscal year ended June 30, 2024 was $55.5 million.
As of June 30, 2023, the value of our obligations under operating leases was $48.2 million. See Note 9, Leases , in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our lease obligations. We have contractual commitments with our suppliers which represent commitments for future services.
See Note 9, Leases , in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our lease obligations. We have contractual commitments with our suppliers which represent commitments for future services.
Amortization of Intangible Assets During the fiscal years ended June 30, 2023, 2022 and 2021, we recorded $2.0 million, $3.2 million and $6.1 million, respectively, of amortization expense in operating expenses primarily for certain intangibles related to the acquisitions of the Ipanema, and Aerohive businesses.
Amortization of Intangible Assets During the fiscal years ended June 30, 2024, 2023 and 2022, we recorded $2.0 million, $2.0 million and $3.2 million, respectively, of amortization expense in operating expenses primarily for certain intangibles related to the acquisitions of the Ipanema, and Aerohive businesses. There were no acquisitions or impairments of intangible assets during fiscal year 2024.
For fiscal 2023, we incurred $0.4 million of acquisition and integration costs which consisted primarily of professional fees and certain compensation charges related to the Acquisition. For fiscal 2022, we incurred $7.0 million of acquisition and integration costs which consisted primarily of professional fees for product integration, system integration, financial, legal and advisory services related to the Acquisition.
For fiscal 2022, the Company incurred $7.0 million of acquisition and integration costs which consisted primarily of professional fees for product integration, system integration, financial, legal and advisory services related to the acquisition of Ipanema.
Cost of Revenues and Gross Profit The following table presents the gross profit on product and service and subscription revenues and the gross profit percentage of net revenues for the fiscal years ended June 30, 2023, 2022 and 2021 (in thousands, except percentages): Year Ended Year Ended June 30, 2023 June 30, 2022 $ Change % Change June 30, 2022 June 30, 2021 $ Change % Change Gross profit: Product $ 506,159 $ 401,159 $ 105,000 26.2 % $ 401,159 $ 389,438 $ 11,721 3.0 % Percentage of product revenues 54.3 % 52.7 % 52.7 % 55.7 % Service and subscription 248,561 228,779 19,782 8.6 % 228,779 195,685 33,094 16.9 % Percentage of service and subscription revenues 65.4 % 65.3 % 65.3 % 63.1 % Total gross profit $ 754,720 $ 629,938 $ 124,782 19.8 % $ 629,938 $ 585,123 $ 44,815 7.7 % Percentage of net revenues 57.5 % 56.6 % 56.6 % 58.0 % Cost of product revenues includes costs of materials, amounts paid to third-party contract manufacturers, costs related to warranty obligations, charges for excess and obsolete inventory, scrap, distribution, product certification, amortization of developed technology intangibles, royalties under technology license agreements, and internal costs associated with manufacturing overhead, including management, manufacturing engineering, quality assurance, development of test plans, and document control.
Cost of Revenues and Gross Profit The following table presents the gross profit on product and subscription and support revenues and the gross profit percentage of net revenues for the fiscal years ended June 30, 2024, 2023 and 2022 (in thousands, except percentages): Year Ended Year Ended June 30, 2024 June 30, 2023 $ Change % Change June 30, 2023 June 30, 2022 $ Change % Change Gross profit: Product $333,498 $506,159 $(172,661) (34.1)% $506,159 $401,159 $105,000 26.2 % Percentage of product revenues 47.7% 54.3% 54.3% 52.7% Subscription and support 297,333 248,561 48,772 19.6 % 248,561 228,779 19,782 8.6 % Percentage of subscription and support revenues 71.1% 65.4% 65.4% 65.3% Total gross profit $630,831 $754,720 $(123,889) (16.4)% $754,720 $629,938 $124,782 19.8 % Percentage of net revenues 56.5% 57.5% 57.5% 56.6% Cost of product revenues includes costs of materials, amounts paid to third-party contract manufacturers, costs related to warranty obligations, charges for excess and obsolete inventory, scrap, distribution, product certification, amortization of developed technology intangibles, royalties under technology license agreements, and internal costs associated with manufacturing overhead, including management, manufacturing engineering, quality assurance, development of test plans, and document control.
Factors contributing to cash provided by operating activities were net income of $44.3 million, non-cash expenses of $104.0 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes and interest. Other sources of cash for the period included increases in accounts payable and deferred revenue.
Factors contributing to cash provided by operating activities were net income of $44.3 million, non-cash expenses of $104.0 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, provision for excess and obsolete inventory and interest.
The other income for fiscal years ended June 30, 2023 and 2022 was primarily due to foreign exchange gains from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.
The other income, net for fiscal years ended June 30, 2024, 2023 and 2022 was primarily due to foreign exchange gains from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars. Provision for Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions.
Liquidity and Capital Resources The following summarizes information regarding our cash and cash equivalent (in thousands): June 30, 2023 June 30, 2022 Cash and cash equivalents $ 234,826 $ 194,522 As of June 30, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $234.8 million, accounts receivable, net of $182.0 million and available borrowings under our five-year 2023 Revolving Facility (as defined below) of $125.0 39 million.
Liquidity and Capital Resources The following summarizes information regarding our cash and cash equivalents (in thousands): June 30, 2024 June 30, 2023 Cash and cash equivalents $ 156,699 $ 234,826 As of June 30, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $156.7 million, accounts receivable, net of $89.5 million and available borrowings under our five-year 2023 Revolving Facility (as defined below) of $135.8 million.
Factors contributing to cash provided by operating activities were net income of $1.9 million, non-cash expenses of $121.7 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes and imputed interest.
Factors contributing to cash provided by operating activities were the net loss of $86.0 million, non-cash expenses of $187.6 million for items such as amortization of intangible assets, stock-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, provision for excess and obsolete inventory and interest.
During the fiscal years ended June 30, 2023 and 2022, we recognized transaction costs related to this acquisition of $0.4 million and $7.0 million, respectively, which are included in “Acquisition and integration costs” in the accompanying consolidated statements of operations. 33 Results of Operations The following is a summary of our results of operations during the fiscal year ended June 30, 2023: • Net revenues of $1,312.5 million, increased 18.0% from fiscal 2022 net revenues of $1,112.3 million. • Product revenues of $932.5 million, increased 22.4% from fiscal 2022 product revenues of $761.7 million. • Service and subscription revenues of $380.0 million, increased 8.4% from fiscal 2022 service and subscription revenues of $350.6 million. • Total gross margin of 57.5% of net revenues in fiscal 2023, compared to 56.6% in fiscal 2022. • Operating income of $108.3 million, compared to operating income of $64.2 million in fiscal 2022. • Net income was $78.1 million in fiscal 2023, compared to net income of $44.3 million in fiscal 2022. • Cash flow provided by operating activities of $249.2 million, compared to cash flow provided by operating activities of $128.2 million in fiscal 2022, an increase of $121.0 million.
During the fiscal years ended June 30, 2023 and 2022, we recognized transaction costs related to this acquisition of $0.4 million and $7.0 million, respectively, which are included in “Acquisition and integration costs” in the accompanying consolidated statements of operations. 36 Results of Operations The following is a summary of our results of operations during the fiscal year ended June 30, 2024: • Net revenues of $1,117.2 million, decreased 14.9% from fiscal 2023 net revenues of $1,312.5 million. • Product revenues of $699.3 million, decreased 25.0% from fiscal 2023 product revenues of $932.5 million. • Subscription and support revenues of $417.9 million, increased 10.0% from fiscal 2023 subscription and support revenues of $380.0 million. • Total gross margin of 56.5% of net revenues in fiscal 2024, compared to 57.5% in fiscal 2023. • Operating loss of $65.2 million in fiscal 2024, compared to operating income of $108.3 million in fiscal 2023. • Net loss was $86.0 million in fiscal 2024, compared to net income of $78.1 million in fiscal 2023. • Cash flow provided by operating activities of $55.5 million, compared to cash flow provided by operating activities of $249.2 million in fiscal 2023, a decrease of $193.7 million.
Key Components of Cash Flows and Liquidity A summary of the sources and uses of cash and cash equivalents is as follows for the fiscal years ended June 30, 2023, 2022, and 2021 (in thousands): Year Ended June 30, 2023 June 30, 2022 June 30, 2021 Net cash provided by operating activities $ 249,212 $ 128,177 $ 144,535 Net cash used in investing activities (13,800 ) (84,950 ) (17,176 ) Net cash used in financing activities (194,783 ) (94,663 ) (74,782 ) Foreign currency effect on cash and cash equivalents (325 ) (936 ) 445 Net increase (decrease) in cash and cash equivalents $ 40,304 $ (52,372 ) $ 53,022 Cash and cash equivalent was $234.8 million at June 30, 2023, representing an increase of $40.3 million from $194.5 million at June 30, 2022.
Key Components of Cash Flows and Liquidity A summary of the sources and uses of cash and cash equivalents is as follows for the fiscal years ended June 30, 2024, 2023 and 2022 (in thousands): Year Ended June 30, 2024 June 30, 2023 June 30, 2022 Net cash provided by operating activities $ 55,486 $ 249,212 $ 128,177 Net cash used in investing activities (18,121 ) (13,800 ) (84,950 ) Net cash used in financing activities (114,978 ) (194,783 ) (94,663 ) Foreign currency effect on cash and cash equivalents (514 ) (325 ) (936 ) Net increase (decrease) in cash and cash equivalents $ (78,127 ) $ 40,304 $ (52,372 ) Cash and cash equivalents were $156.7 million at June 30, 2024, representing a decrease of $78.1 million from $234.8 million at June 30, 2023.
Cash used in investing activities during the fiscal year ended June 30, 2021 was $17.2 million for the purchases of property and equipment.
Net Cash Used in Investing Activities Cash used in investing activities during the fiscal year ended June 30, 2024 was $18.1 million for the purchases of property and equipment. Cash used in investing activities during the fiscal year ended June 30, 2023 was $13.8 million for the purchases of property and equipment.
The following table presents the total net revenues geographically for the fiscal years ended June 30, 2023, 2022 and 2021 (in thousands, except percentages): Year Ended Year Ended Net Revenues June 30, 2023 June 30, 2022 $ Change % Change June 30, 2022 June 30, 2021 $ Change % Change Americas: United States $ 572,927 $ 503,635 $ 69,292 13.8 % $ 503,635 $ 485,471 $ 18,164 3.7 % Other 84,108 44,608 39,500 88.5 % 44,608 48,049 (3,441 ) (7.2 )% Total Americas 657,035 548,243 108,792 19.8 % 548,243 533,520 14,723 2.8 % Percentage of net revenues 50.1 % 49.3 % 49.3 % 52.9 % EMEA 559,669 477,081 82,588 17.3 % 477,081 387,545 89,536 23.1 % Percentage of net revenues 42.6 % 42.9 % 42.9 % 38.4 % APAC 95,750 86,997 8,753 10.1 % 86,997 88,353 (1,356 ) (1.5 )% Percentage of net revenues 7.3 % 7.8 % 7.8 % 8.8 % Total net revenues $ 1,312,454 $ 1,112,321 $ 200,133 18.0 % $ 1,112,321 $ 1,009,418 $ 102,903 10.2 % We rely upon multiple channels of distribution, including distributors, direct resellers, OEMs and direct sales.
The following table presents the total net revenues geographically for the fiscal years ended June 30, 2024, 2023 and 2022 (in thousands, except percentages): Year Ended Year Ended Net Revenues June 30, 2024 June 30, 2023 $ Change % Change June 30, 2023 June 30, 2022 $ Change % Change Americas: United States $581,141 $572,927 $8,214 1.4 % $572,927 $503,635 $69,292 13.8 % Other 46,578 84,108 (37,530) (44.6)% 84,108 44,608 39,500 88.5 % Total Americas 627,719 657,035 (29,316) (4.5)% 657,035 548,243 108,792 19.8 % Percentage of net revenues 56.2% 50.1% 50.1% 49.3% EMEA 421,966 559,669 (137,703) (24.6)% 559,669 477,081 82,588 17.3 % Percentage of net revenues 37.8% 42.6% 42.6% 42.9% APAC 67,518 95,750 (28,232) (29.5)% 95,750 86,997 8,753 10.1 % Percentage of net revenues 6.0% 7.3% 7.3% 7.8% Total net revenues $1,117,203 $1,312,454 $(195,251) (14.9)% $1,312,454 $1,112,321 $200,133 18.0 % We rely upon multiple channels of distribution, including distributors, direct resellers, OEMs and direct sales.
During the year ended June 30, 2023 we repurchased a total of 5,375,391 shares of common stock on the open market at a total cost of $99.9 million with an average price of $18.58 per share. As of June 30, 2023, we have $100.1 million available under our share repurchase program.
During the year ended June 30, 2024, we repurchased a total of 2,365,220 shares of common stock on the open market at a total cost of $49.9 million with an average price of $21.08 per share. As of June 30, 2024, we have $50.3 million available under our share repurchase program.
Cash and cash equivalents was $234.8 million as of June 30, 2023, an increase of $40.3 million, compared to $194.5 million at the end of fiscal 2022.
Cash and cash equivalents were $234.8 million at June 30, 2023, representing an increase of $40.3 million from $194.5 million at June 30, 2022.
General and administrative expenses increased by $2.5 million or 3.8% for the year ended June 30, 2022, as compared to fiscal 2021, primarily due to a $1.4 million increase in third party software and equipment related costs, a $1.9 million increase in facilities and related costs, partially offset by a $0.2 million decrease in personnel costs and a $0.6 million decrease in travel and professional fees.
General and administrative expenses increased by $10.0 million or 11.1% for the year ended June 30, 2024, as compared to fiscal 2023, primarily due to a $2.5 million increase in personnel costs due to higher salaries and benefits costs, a $3.4 million increase in professional fees primarily related to legal and litigation matters, a $4.3 million increase in system transition costs, and a $2.4 million increase in third-party licensing fees, partially offset by a $2.6 million decrease in other expenses primarily for depreciation expense.
Product revenues increased $62.3 million or 8.9% for the year ended June 30, 2022, compared to fiscal 2021.
Product revenues increased $170.7 million or 22.4% for the year ended June 30, 2023, compared to fiscal 2022.
At the Company’s election, the initial term loan (the “Initial Term Loan”) under the 2023 Credit Agreement may be made as either a base rate loan or a Secured Overnight Financing Data Rate (“SOFR loan").
During the quarter ended June 30, 2024, the Company borrowed and subsequently repaid $30.0 million against its $150.0 million revolving credit facility. At the Company’s election, the initial term loan (the “Initial Term Loan”) under the 2023 Credit Agreement may be made as either a base rate loan or a Secured Overnight Financing Data Rate (“SOFR loan").
The decrease in amortization expense in fiscal 2023 from fiscal 2022 was primarily due to certain acquired intangibles from previous acquisitions becoming fully amortized.
The decrease in amortization expense in fiscal 2023 from fiscal 2022 was primarily due to certain acquired intangibles from previous acquisitions becoming fully amortized. Interest Income Interest income was $4.6 million, $3.2 million and $0.4 million in fiscal years ended June 30, 2024, 2023 and 2022, respectively.
Research and development expenses decreased by $6.4 million or 3.25% for the year ended June 30, 2022 as compared to fiscal 2021, primarily due to a $0.7 million decrease in personnel costs, a $3.8 million decrease in facility and information technology costs, a $1.2 million decrease in third-party software licenses and engineering project costs and a $1.0 million decrease in other expenses, partially offset by a $0.3 million increase in travel expenses.
Research and development expenses decreased by $2.3 million or 1.1% for the year ended June 30, 2024 as compared to fiscal 2023, primarily due to a $2.8 million decrease in personnel costs due to lower compensation and benefits costs, a $2.9 million decrease in non-recurring engineering project costs, offset by a $3.4 million increase in contractor costs.
Net Revenues The following table presents net product and service and subscription revenues for the fiscal years ended June 30, 2023, 2022 and 2021 (in thousands, except percentages): Year Ended Year Ended June 30, 2023 June 30, 2022 $ Change % Change June 30, 2022 June 30, 2021 $ Change % Change Net revenues: Product $ 932,454 $ 761,721 $ 170,733 22.4 % $ 761,721 $ 699,396 $ 62,325 8.9 % Percentage of net revenues 71.0 % 68.5 % 68.5 % 69.3 % Service and subscription 380,000 350,600 29,400 8.4 % 350,600 310,022 40,578 13.1 % Percentage of net revenues 29.0 % 31.5 % 31.5 % 30.7 % Total net revenues $ 1,312,454 $ 1,112,321 $ 200,133 18.0 % $ 1,112,321 $ 1,009,418 $ 102,903 10.2 % Product revenues increased $170.7 million or 22.4% for the year ended June 30, 2023, compared to fiscal 2022.
Net Revenues The following table presents net product and subscription and support revenues for the fiscal years ended June 30, 2024, 2023 and 2022 (in thousands, except percentages): Year Ended Year Ended June 30, 2024 June 30, 2023 $ Change % Change June 30, 2023 June 30, 2022 $ Change % Change Net revenues: Product $699,257 $932,454 $(233,197) (25.0)% $932,454 $761,721 $170,733 22.4 % Percentage of net revenues 62.6% 71.0% 71.0% 68.5% Subscription and support 417,946 380,000 37,946 10.0 % 380,000 350,600 29,400 8.4 % Percentage of net revenues 37.4% 29.0% 29.0% 31.5% Total net revenues $1,117,203 $1,312,454 $(195,251) (14.9)% $1,312,454 $1,112,321 $200,133 18.0 % We generate product revenues primarily from sales of our networking equipment.
Our cost of service and subscription revenues consist primarily of labor, overhead, repair and freight costs and the cost of service parts used in providing support under customer maintenance contracts as well as third-party professional services costs, data center costs and cloud hosting service costs.
Our cost of subscription and support revenues consist primarily of labor, overhead, repair and freight costs and the cost of service parts used in providing support under customer maintenance contracts as well as third-party professional services costs, data center costs and cloud hosting service costs. 38 Subscription and support gross profit increased to $297.3 million for the year ended June 30, 2024, from $248.6 million in fiscal 2023, primarily due to higher subscription and support revenues and lower headcount partially offset by higher professional services fees and increased cloud service costs.
Other Income (Expense), net We had other income of less than $0.1 million and $0.4 million in fiscal years ended June 30, 2023 and 2022, respectively, and other expense of $1.7 million in fiscal 2021.
For a discussion of our credit agreements, see the section titled " Liquidity and Capital Resources " below. Other Income, net We had other income, net of less than $0.1 million, $0.1 million, and $0.4 million in fiscal years ended June 30, 2024, 2023 and 2022, respectively.
We are subject to interest on our debt obligations and unused commitment fee. See Note 8, Debt, in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our debt obligations.
See Note 8, Debt, in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our debt obligations. 44 Our unconditional purchase obligations represent the purchase of long lead-time component inventory that our contract manufacturers procure in accordance with our forecast.
Product gross profit increased to $401.2 million for the year ended June 30, 2022, from $389.4 million in fiscal 2021, primarily due to increased revenues along with lower amortization of intangibles of $9.5 million due to certain intangibles being fully amortized, and lower excess and obsolete inventory charges of $3.0 million, partially offset by higher direct product costs and higher distribution cost of $18.5 million.
Product gross profit decreased to $333.5 million for the year ended June 30, 2024, from $506.2 million in fiscal 2023, primarily due to lower product revenues as well as an additional provision for excess and obsolete inventory and loss on supplier commitments of $64.5 million partially offset by lower amortization of intangibles due to certain intangibles being fully amortized, lower distribution costs due to easing of supply chain constraints, lower warranty reserves cost, and lower overhead costs.
For fiscal 2021, we incurred $2.0 million of integration costs which consisted primarily of additional professional fees for system integration and financial services related to the Aerohive acquisition. Restructuring and Related Charges During the fiscal years ended June 30, 2023, 2022 and 2021, we recorded restructuring and related charges of $2.9 million, $1.7 million and $2.6 million, respectively.
Restructuring and Related Charges During the fiscal years ended June 30, 2024, 2023 and 2022, we recorded restructuring and related charges of $36.3 million, $2.9 million and $1.7 million, respectively.
Interest Income Interest income was $3.2 million, $0.4 million and $0.4 million in fiscal years ended June 30, 2023, 2022 and 2021, respectively. Interest income increased in fiscal 2023 as compared to fiscal 2022 primarily due to higher interest earned cash deposits.
Interest income increased across each of the periods primarily due to higher interest earned on cash deposits. Interest Expense 40 We incurred $17.0 million, $17.4 million, and $12.8 million of interest expense for fiscal years ended June 30, 2024, 2023 and 2022, respectively.
See Note 10, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our purchase obligations. We lease facilities under operating lease arrangements at various locations that expire at various dates through our fiscal year 2032.
We expect to honor the inventory purchase commitments within the next 12 months. As of June 30, 2024, we have non-cancelable commitments to purchase $38.2 million of inventory. See Note 10, Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding our purchase obligations.
This decrease was primarily due to cash used in financing activities of $94.7 million mainly as a result of payments on the Term Loan and share repurchases and cash used in investing activities of $85.0 million, mainly for acquisition of Ipanema partially offset by cash provided by operations of $128.2 million.
This decrease was primarily due to cash used in financing activities of $115.0 million mainly as a result of payments for borrowings under the 2023 Credit Agreement and share repurchases as well as cash used in investing activities of $18.1 million primarily for the purchase of property and equipment, which is offset by cash provided by operating activities of $55.5 million.
The increase in service and subscription revenues was primarily due to the growth in our subscription business. Service and subscription revenues increased $40.6 million or 13.1% for the year ended June 30, 2022, compared to fiscal 2021.
Subscription and support revenues increased $29.4 million or 8.4% for the year ended June 30, 2023, compared to fiscal 2022. The increase in subscription and support revenues was primarily due to the growth in our subscription business. 37 We operate in three regions: Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
The decrease in interest expense in fiscal year ended June 30, 2022 as compared to fiscal 2021 was primarily driven by lower average loan balances and lower average rates under our 2019 Credit Agreement. For a discussion of our credit agreements, see the section titled " Liquidity and Capital Resources " below.
The decrease in interest expense in fiscal year ended June 30, 2024 as compared to fiscal 2023 was primarily driven by lower carrying balances under the 2023 Credit Agreement.
These amounts were partially offset by increases in accounts receivable, inventories and prepaid expenses and other assets and decreases in accrued compensation, current and long-term liabilities and operating lease liabilities. Cash provided by operating activities during the fiscal year ended June 30, 2021 was $144.5 million.
Other sources of cash for the period included a decrease in account receivable and increases in deferred revenue and other current liabilities. These amounts were partially offset by increases in inventories and prepaid expenses and other assets and decreases in accounts payable, accrued compensation and benefits, and operating lease liabilities.
Cash used in financing activities during the fiscal year ended June 30, 2021 was $74.8 million due primarily to debt repayments of $74.0 million, payments of contingent consideration of $1.3 million and $4.0 million of deferred payments on acquisitions.
Net Cash Used in by Financing Activities Cash used in financing activities during the fiscal year ended June 30, 2024 was $115.0 million due primarily to share repurchases of $49.9 million, payments on the 2023 Revolving Facility of $55.0 million, debt repayments of $10.0 million and a $30.1 million payment for taxes on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our Employee Stock Purchase Plan (“ESPP”).
Removed
The product revenues increase for the year ended June 30, 2022 as compared to fiscal 2021 was primarily due to strong demand for our products partially offset by supply chain constraints which impacted our ability to fulfill the demand for our products during fiscal 2022.
Added
Cash and cash equivalents were $156.7 million as of June 30, 2024, a decrease of $78.1 million, compared to $234.8 million at the end of fiscal 2023.
Removed
Additionally, the first half of fiscal 2021 product revenue was impacted by the material slow-down in global demand due to the global outbreak of COVID-19. Service and subscription revenues increased $29.4 million or 8.4% for the year ended June 30, 2023, compared to fiscal 2022.
Added
The Company’s reported loss per share for the year ended June 30, 2024, of $0.66 on the Company’s Consolidated Statement of Operations included within this report differs by a $0.01 as compared to the loss per share of $0.65 as reported on the Company’s Form 8-K filed with the SEC on August 7, 2024, due to a correction in shares used in the loss per share calculation for that period.
Removed
The increase in service and subscription revenues was primarily due to the growth in subscription revenues and partially due to the acquisition of Ipanema. 34 We operate in three regions: Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
Added
We derive subscription and support revenues primarily from sales of our subscription and support offerings which includes SaaS offerings, maintenance contracts, professional services and training for our products. Prior to fiscal 2024, we referred to subscription and support revenue as “service and subscription revenue;” however, the composition of subscription and support revenue has not been modified.
Removed
Sales and marketing expenses increased by $17.6 million or 6.4% for the year ended June 30, 2022, as compared to fiscal 2021, primarily due to a $6.6 million increase in personnel costs primarily due to higher headcount, a $7.0 million increase in marketing sales and promotional costs, a $5.5 million increase in travel expenses due to loosening of COVID-19 restrictions, partially offset by a $1.5 million decrease in professional fees and equipment related costs. 36 General and Administrative Expenses General and administrative expenses consist of primarily of personnel costs (which consists of compensation, benefits and share-based compensation), legal and professional service costs, travel and facilities and information technology costs.
Added
Product revenues decreased $233.2 million or 25.0% for the year ended June 30, 2024, compared to fiscal 2023.
Removed
Acquisition and Integration Costs As a result of our acquisitions of Ipanema in fiscal 2022, and Aerohive Networks, Inc. (“Aerohive”) in fiscal 2020, we incurred $0.4 million, $7.0 million and $2.0 million of acquisition and integration costs in fiscal years ended June 30, 2023, 2022 and 2021, respectively.
Added
The product revenues decrease for the year ended June 30, 2024 as compared to fiscal 2023 was primarily driven by lower bookings and shipments as well as elongated sales cycles to end customers and lower channel sell-through caused by easing of supply chain constraints and current macroeconomic conditions.
Removed
Fiscal year 2021 During fiscal 2021, we continued our cost reduction initiative that began in the third quarter of fiscal 2020 and recorded related severance, benefits, and equipment relocation charges of $1.5 million, related to the 2020 Plan. In addition, we had facility-related charges of $1.1 million, related to our previously impaired facilities.
Added
Subscription and support revenues increased $37.9 million or 10.0% for the year ended June 30, 2024, compared to fiscal 2023. The increase in subscription and support revenues was primarily due to increased adoption of our cloud network management solutions, higher attachment rates of cloud support services on product sales, and continued growth in our subscription business.
Removed
The decrease in amortization expense in fiscal 2022 from fiscal 2021 was primarily due to certain acquired intangibles from previous acquisitions becoming fully amortized, partially offset by an increase from the amortization of acquired intangibles from the Ipanema acquisition.
Added
The increase in the provisions for excess and obsolete inventory and loss on supplier commitments during fiscal 2024 was primarily for certain of our older products which are scheduled to go end of sale during the Company’s fiscal year 2025 and for which excess of such inventories is beyond the demand forecast.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed4 unchanged
Biggest changeThere were no foreign exchange forward currency contracts that were designated as hedging instruments at June 30, 2023 and 2022. Foreign currency transaction gains and losses from operations were gains of $0.8 million and $1.7 million in fiscal years ended June 30, 2023 and 2022, respectively, and a loss of $2.2 million in fiscal year ended June 30, 2021. 43
Biggest changeThere were no foreign exchange forward currency contracts that were designated as hedging instruments at June 30, 2024 and 2023. For the fiscal year ended June 30, 2024, 2023 and 2022 the Company recorded foreign currency transaction gains from operations of $0.6 million, $0.8 million and $1.7 million, respectively. 46
As of June 30, 2023 we have not entered into any derivative instruments to hedge the impact of the changes in variable interest rates under our 2023 Credit Agreement.
As of June 30, 2024 we have not entered into any derivative instruments to hedge the impact of the changes in variable interest rates under our 2023 Credit Agreement.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our financial debt and foreign currencies. As of June 30, 2023, we did not have any financial investments that were exposed to interest rate risk.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our financial debt and foreign currencies. As of June 30, 2024, we did not have any financial investments that were exposed to interest rate risk.
Changes in the fair value of these foreign exchange forward contracts are offset largely by re-measurement of the underlying foreign currency denominated assets and liabilities. As of June 30, 2023 and June 30, 2022, foreign exchange forward currency contracts not designated as hedging instruments had the total notional amount of $3.4 million and $9.6 million, respectively.
Changes in the fair value of these foreign exchange forward contracts are offset largely by re-measurement of the underlying foreign currency denominated assets and liabilities. As of June 30, 2024 and June 30, 2023, foreign exchange forward currency contracts not designated as hedging instruments had the total notional amount of $31.3 million and $3.4 million, respectively.
These contracts have maturities of less than 60 days. Changes in the fair value of derivatives are recognized in "other income, net." For the years ended June 30, 2023 and, 2022, the net loss recorded in the consolidated statement of operations from these contracts were $0.4 million and $1.4 million, respectively.
These contracts have maturities of less than 40 days. Changes in the fair value of derivatives are recognized in "other income, net." For the fiscal years ended June 30, 2024, 2023, and 2022, the net losses recorded in the consolidated statement of operations from these contracts were $0.3 million, $0.4 million, and $1.4 million, respectively.
The following table presents hypothetical changes in interest expense for the year ended June 30, 2023, on the outstanding borrowings under the 2023 Credit Agreement as of June 30, 2023, that are sensitive to changes in interest rates (in thousands): Change in interest expense given a decrease in interest rate of X bps* Average outstanding Change in interest expense given an increase in interest rate of X bps* Description (100 bps) (50 bps) as of June 30, 2023 100 bps 50 bps Debt $ (2,333 ) $ (1,167 ) $ 233,341 $ 2,333 $ 1,167 * Underlying interest rate was 7.18% as of June 30, 2023.
The following table presents hypothetical changes in interest expense for the year ended June 30, 2024, on the outstanding borrowings under the 2023 Credit Agreement as of June 30, 2024, that are sensitive to changes in interest rates (in thousands): Change in interest expense given a decrease in interest rate of X bps* Average outstanding Change in interest expense given an increase in interest rate of X bps* Description (100 bps) (50 bps) as of June 30, 2024 100 bps 50 bps Debt $ (1,992 ) $ (996 ) $ 199,221 $ 1,992 $ 996 * Underlying interest rate was 7.44% as of June 30, 2024.
At June 30, 2023, we had $225.0 million of debt outstanding, all of which was from the 2023 Credit Agreement. Through the end of our fiscal year 2023, the average daily outstanding amount was $268.8 million with a high of $308.6 million and a low of $225.0 million.
As of June 30, 2024, we had $190.0 million of debt outstanding, all of which was from the 2023 Credit Agreement. Through the end of our fiscal year 2024, the average daily outstanding amount was $199.2 million with a high of $225.0 million and a low of $190.0 million.

Other EXTR 10-K year-over-year comparisons