Extreme Networks' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Extreme Networks (EXTR)

Q2 2012 Earnings Call

February 02, 2012 5:00 pm ET

Executives

James T. Judson - Interim Chief Financial Officer and Interim Vice President

Juan Oscar Rodriguez - Chief Executive Officer, President and Director

Analysts

Jonathan Kees - Capstone Investments, Research Division

Ryan Flanagan - Wedbush Securities Inc., Research Division

Rohit N. Chopra - Wedbush Securities Inc., Research Division

Unknown Analyst

Dan Weston

Jeffrey Meyers

Presentation

Operator

Compare to:
Previous Statements by EXTR
» Extreme Networks' CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Extreme Networks' CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Extreme Networks' CEO Discusses Q3 2011 Results - Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to your Extreme Networks Fiscal Q2 2012 Financial Results Conference Call. [Operator Instructions] And as a reminder, today's conference is being recorded. And now I would like to introduce your host for today, Jim Judson.

James T. Judson

Thank you, John. Welcome to the Extreme Networks 2012 Second Quarter Conference Call. [Operator Instructions] On the call today for Extreme Networks are Oscar Rodriguez, President and CEO; and myself, Jim Judson, the Interim CFO. As a reminder, this conference is being recorded today, February 2, 2012.

This afternoon, Extreme Networks issued a press release announcing the company's financial results for the second quarter of fiscal 2012. A copy of this release and a slide presentation of the supporting financial materials are available in the Investor Relations section of the company's website at www.extremenetworks.com. This call is being broadcast live over the Internet and will be posted on the Extreme Networks' website for replay shortly after the conclusion of the call.

Extreme Networks wants to remind you that this conference call contains forward-looking statements that involve risks and uncertainties, including statements regarding the company's expectations regarding its financial performance, strategies, growth of customer demand, development of new products, customer acceptance of the company's products, customer buying and spending patterns, overall trends and economic conditions in the company's markets.

Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors including, but not limited to, a challenging macroeconomic environment worldwide, fluctuations in demand for the company's products and services, a highly competitive business environment for network switching equipment, the company's effectiveness in controlling expenses, including the company's cost restructuring efforts, the possibility that the company might experience delays in the development of new technologies and products, customer response to its new technology and products, the timing of any recovery in the global economy, risks related to pending or future litigation and the dependency on third parties for certain components and for the manufacturing of the company's products.

The company undertakes no obligation to update this information on the conference call. More information about potential factors that affect our business and financial results is included in the company's filings with the Securities and Exchange Commission.

Throughout the call, the company will reference both GAAP and non-GAAP financial results. All of my comments will be non-GAAP, except for revenue and the number of common shares. Non-GAAP results exclude stock-based compensation, restructuring charges and litigation settlements. There is a reconciliation table of GAAP to non-GAAP financial results in the slide presentation under the Investor Relations tab on our website at www.extremenetworks.com and accompanying our press release.

I will start the call by doing a review of our Q2 fiscal 2012 results. I'll then turn the call over to Oscar for some comments on recent market developments, some highlights with new customers and thoughts on the company's transformation. After Oscar's comments, I will provide guidance for our fiscal 2012 third quarter and full year. We'll then open the call up for Q&A.

I'd like to start my comments today by noting that Q2 marked the transition quarter for Extreme as we've essentially completed the restructuring of the company that began in Q3 a year ago. We have achieved the initial goals we've set for rightsizing the company, and we are continuing to evaluate our cost structure and our allocation of resources across the company to maximize results. With our focused strategy and refreshed product line-up, we have now shifted our stance to growing revenues and capturing the market opportunity we believe exist.

As we noted at the start of the fiscal year, the first half of fiscal 2012 was focused on transforming the company and positioning us for growth in the second half and beyond. We are pleased with the progress of the transformation.

Second quarter fiscal 2012 revenue totaled $82.8 million. Total revenue was up 5% sequentially, and product revenue was up a stronger 8% sequentially. Year-over-year revenue for Q2 is down 3% and was impacted by ongoing economic weakness in EMEA and some extended sales cycles and delays in project awards in Asia Pac, which we experienced in the first half of 2012.

Turning to geo performance. The Americas had a third straight strong quarter with revenue of $36.8 million, up 19% from Q2 a year ago and up 10% sequentially from Q1 2012. North America continues to execute well under the flattened management structure we implemented a year ago. North America had a particularly strong quarter in the education vertical in Q2 and is the fastest-growing region through the first half of the year. The pipeline of opportunities in North America is increasing with a greater number of large potential deals.

Latin America has also performed well, in part due to the management consolidation into one cohesive region during the restructuring, and has also shown solid growth 2 quarters in a row.

EMEA revenue is up 5% sequentially from Q1 FY '12, which is normal seasonality. EMEA revenue was $32.4 million, a decline of 13% from Q2 a year ago. This was mainly attributable to the ongoing economic weakness in many of the larger countries in the region and our strategic decision to eliminate select Metro Ethernet products from our portfolio, which had a good support within the region. We do not expect additional weakening in EMEA at this time, but our pipeline of larger deals continues to face lengthening sales cycles.

Read the rest of this transcript for free on seekingalpha.com