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p262Tejo

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to ______

Commission file number 000-25711

 

EXTREME NETWORKS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

delaware

77-0430270

[State or other jurisdiction

of incorporation or organization]

[I.R.S. Employer

Identification No.]

2121 RDU Center Drive, Suite 300,

Morrisville, North Carolina

27560

[Address of principal executive offices]

[Zip Code]

Registrant’s telephone number, including area code: (408) 579-2800

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

EXTR

 

NASDAQ Global Select Market

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§-232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of April 26, 2024, the registrant had 129,947,600 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

EXTREME NETWORKS, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED

March 31, 2024

 

INDEX

 

 

 

 

PAGE

PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023

3

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2024 and 2023

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2024 and 2023

5

 

Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended March 31, 2024 and 2023

6

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024 and 2023

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

37

Item 1A

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosure

37

Item 5.

Other Information

37

Item 6.

Exhibits

38

Signatures

39

 

2


 

PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,
2024

 

 

June 30,
2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

151,007

 

 

$

234,826

 

Accounts receivable, net

 

 

94,438

 

 

 

182,045

 

Inventories

 

 

185,357

 

 

 

89,024

 

Prepaid expenses and other current assets

 

 

75,182

 

 

 

70,263

 

Total current assets

 

 

505,984

 

 

 

576,158

 

Property and equipment, net

 

 

47,254

 

 

 

46,448

 

Operating lease right-of-use assets, net

 

 

44,236

 

 

 

34,739

 

Intangible assets, net

 

 

11,789

 

 

 

16,063

 

Goodwill

 

 

394,177

 

 

 

394,755

 

Other assets

 

 

82,028

 

 

 

73,544

 

Total assets

 

$

1,085,468

 

 

$

1,141,707

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt, net of unamortized debt issuance costs of $674
 and $
674, respectively

 

$

9,326

 

 

$

34,326

 

Accounts payable

 

 

81,483

 

 

 

99,724

 

Accrued compensation and benefits

 

 

44,053

 

 

 

71,367

 

Accrued warranty

 

 

11,067

 

 

 

12,322

 

Current portion of operating lease liabilities

 

 

9,989

 

 

 

10,847

 

Current portion of deferred revenue

 

 

299,580

 

 

 

282,475

 

Other accrued liabilities

 

 

72,804

 

 

 

64,440

 

Total current liabilities

 

 

528,302

 

 

 

575,501

 

Deferred revenue, less current portion

 

 

258,731

 

 

 

219,024

 

Long-term debt, less current portion, net of unamortized debt issuance costs of $1,903 and $2,409, respectively

 

 

180,597

 

 

 

187,591

 

Operating lease liabilities, less current portion

 

 

42,248

 

 

 

31,845

 

Deferred income taxes

 

 

7,476

 

 

 

7,747

 

Other long-term liabilities

 

 

3,152

 

 

 

3,247

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Convertible preferred stock, $0.001 par value, issuable in series, 2,000 shares
     authorized;
none issued

 

 

 

 

 

 

Common stock, $0.001 par value, 750,000 shares authorized; 148,105 and 143,629 shares issued, respectively; 129,886 and 127,775 shares outstanding, respectively

 

 

148

 

 

 

144

 

Additional paid-in-capital

 

 

1,204,885

 

 

 

1,173,744

 

Accumulated other comprehensive loss

 

 

(14,511

)

 

 

(13,192

)

Accumulated deficit

 

 

(887,759

)

 

 

(855,998

)

Treasury stock at cost, 18,219 and 15,854 shares, respectively

 

 

(237,801

)

 

 

(187,946

)

Total stockholders’ equity

 

 

64,962

 

 

 

116,752

 

Total liabilities and stockholders’ equity

 

$

1,085,468

 

 

$

1,141,707

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

 

March 31,
2024

 

 

March 31,
2023

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

106,442

 

 

$

241,058

 

 

$

546,536

 

 

$

670,779

 

Subscription and support

 

 

104,594

 

 

 

91,449

 

 

 

314,014

 

 

 

277,765

 

Total net revenues

 

 

211,036

 

 

 

332,507

 

 

 

860,550

 

 

 

948,544

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

60,837

 

 

 

108,915

 

 

 

250,866

 

 

 

312,265

 

Subscription and support

 

 

30,298

 

 

 

31,654

 

 

 

93,477

 

 

 

95,978

 

Total cost of revenues

 

 

91,135

 

 

 

140,569

 

 

 

344,343

 

 

 

408,243

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

45,605

 

 

 

132,143

 

 

 

295,670

 

 

 

358,514

 

Subscription and support

 

 

74,296

 

 

 

59,795

 

 

 

220,537

 

 

 

181,787

 

Total gross profit

 

 

119,901

 

 

 

191,938

 

 

 

516,207

 

 

 

540,301

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

54,517

 

 

 

54,837

 

 

 

165,366

 

 

 

158,444

 

Sales and marketing

 

 

87,708

 

 

 

83,962

 

 

 

264,782

 

 

 

242,882

 

General and administrative

 

 

25,213

 

 

 

21,683

 

 

 

74,470

 

 

 

64,315

 

Acquisition and integration costs

 

 

 

 

 

 

 

 

 

 

 

390

 

Restructuring and related charges

 

 

14,421

 

 

 

1,363

 

 

 

26,312

 

 

 

2,320

 

Amortization of intangible assets

 

 

511

 

 

 

510

 

 

 

1,531

 

 

 

1,537

 

Total operating expenses

 

 

182,370

 

 

 

162,355

 

 

 

532,461

 

 

 

469,888

 

Operating income (loss)

 

 

(62,469

)

 

 

29,583

 

 

 

(16,254

)

 

 

70,413

 

Interest income

 

 

1,239

 

 

 

774

 

 

 

3,895

 

 

 

2,055

 

Interest expense

 

 

(4,179

)

 

 

(3,946

)

 

 

(12,766

)

 

 

(11,656

)

Other income (expense), net

 

 

361

 

 

 

(367

)

 

 

373

 

 

 

142

 

Income (loss) before income taxes

 

 

(65,048

)

 

 

26,044

 

 

 

(24,752

)

 

 

60,954

 

Provision for (benefit from) income taxes

 

 

(623

)

 

 

3,913

 

 

 

7,009

 

 

 

8,307

 

Net income (loss)

 

$

(64,425

)

 

$

22,131

 

 

$

(31,761

)

 

$

52,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share – basic

 

$

(0.50

)

 

$

0.17

 

 

$

(0.25

)

 

$

0.41

 

Net income (loss) per share – diluted

 

$

(0.50

)

 

$

0.17

 

 

$

(0.25

)

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculation – basic

 

 

129,299

 

 

 

128,816

 

 

 

129,021

 

 

 

129,864

 

Shares used in per share calculation – diluted

 

 

129,299

 

 

 

133,025

 

 

 

129,021

 

 

 

133,716

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

 

March 31,
2024

 

 

March 31,
2023

 

Net income (loss)

 

$

(64,425

)

 

$

22,131

 

 

$

(31,761

)

 

$

52,647

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains and losses on interest rate swaps

 

 

 

 

 

16

 

 

 

 

 

 

344

 

Reclassification adjustment related to interest rate swaps

 

 

 

 

 

(732

)

 

 

 

 

 

(1,567

)

Change in unrealized gains and losses on foreign currency forward contracts

 

 

 

 

 

(315

)

 

 

 

 

 

44

 

 Net change from derivatives designated as hedging instruments

 

 

 

 

 

(1,031

)

 

 

 

 

 

(1,179

)

Net change in foreign currency translation adjustments

 

 

(2,453

)

 

 

1,655

 

 

 

(1,319

)

 

 

(8,688

)

Other comprehensive income (loss):

 

 

(2,453

)

 

 

624

 

 

 

(1,319

)

 

 

(9,867

)

Total comprehensive income (loss)

 

$

(66,878

)

 

$

22,755

 

 

$

(33,080

)

 

$

42,780

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

Common Stock

 

 

Additional

 

 

Accumulated Other

 

 

Treasury Stock

 

 

Accumulated

 

 

Total Stockholders'

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Comprehensive Loss

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

142,137

 

 

$

142

 

 

$

1,139,416

 

 

$

(13,546

)

 

 

(13,057

)

 

$

(137,889

)

 

$

(903,556

)

 

$

84,567

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,131

 

 

 

22,131

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

624

 

 

 

 

 

 

 

 

 

 

 

 

624

 

Issuance of common stock from equity incentive plans, net of tax withholdings

 

1,159

 

 

 

1

 

 

 

5,497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,498

 

Repurchase of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,351

)

 

 

(25,004

)

 

 

 

 

 

(25,004

)

Share-based compensation

 

 

 

 

 

 

 

15,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,376

 

Balance at March 31, 2023

 

143,296

 

 

$

143

 

 

$

1,160,289

 

 

$

(12,922

)

 

 

(14,408

)

 

$

(162,893

)

 

$

(881,425

)

 

$

103,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

139,742

 

 

$

140

 

 

$

1,115,416

 

 

$

(3,055

)

 

 

(10,479

)

 

$

(88,086

)

 

$

(934,072

)

 

$

90,343

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,647

 

 

 

52,647

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(9,867

)

 

 

 

 

 

 

 

 

 

 

 

(9,867

)

Issuance of common stock from equity incentive plans, net of tax withholdings

 

3,554

 

 

 

3

 

 

 

(1,688

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,685

)

Repurchase of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,929

)

 

 

(74,807

)

 

 

 

 

 

(74,807

)

Share-based compensation

 

 

 

 

 

 

 

46,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,561

 

Balance at March 31, 2023

 

143,296

 

 

$

143

 

 

$

1,160,289

 

 

$

(12,922

)

 

 

(14,408

)

 

$

(162,893

)

 

$

(881,425

)

 

$

103,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

146,843

 

 

$

147

 

 

$

1,181,230

 

 

$

(12,058

)

 

 

(18,219

)

 

$

(237,801

)

 

$

(823,334

)

 

$

108,184

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,425

)

 

 

(64,425

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(2,453

)

 

 

 

 

 

 

 

 

 

 

 

(2,453

)

Issuance of common stock from equity incentive plans, net of tax withholdings

 

1,262

 

 

 

1

 

 

 

5,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,823

 

Share-based compensation

 

 

 

 

 

 

 

17,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,833

 

Balance at March 31, 2024

 

148,105

 

 

$

148

 

 

$

1,204,885

 

 

$

(14,511

)

 

 

(18,219

)

 

$

(237,801

)

 

$

(887,759

)

 

$

64,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2023

 

143,629

 

 

$

144

 

 

$

1,173,744

 

 

$

(13,192

)

 

 

(15,854

)

 

$

(187,946

)

 

$

(855,998

)

 

$

116,752

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,761

)

 

 

(31,761

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

(1,319

)

 

 

 

 

 

 

 

 

 

 

 

(1,319

)

Issuance of common stock from equity incentive plans, net of tax withholdings

 

4,476

 

 

 

4

 

 

 

(27,568

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,564

)

Repurchase of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,365

)

 

 

(49,855

)

 

 

 

 

 

(49,855

)

Share-based compensation

 

 

 

 

 

 

 

58,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,709

 

Balance at March 31, 2024

 

148,105

 

 

$

148

 

 

$

1,204,885

 

 

$

(14,511

)

 

 

(18,219

)

 

$

(237,801

)

 

$

(887,759

)

 

$

64,962

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(31,761

)

 

$

52,647

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

13,821

 

 

 

15,014

 

Amortization of intangible assets

 

 

4,192

 

 

 

11,415

 

Reduction in carrying amount of right-of-use asset

 

 

8,834

 

 

 

9,274

 

Provision for credit losses

 

 

1,770

 

 

 

245

 

Share-based compensation

 

 

58,709

 

 

 

46,561

 

Deferred income taxes

 

 

(153

)

 

 

338

 

Non-cash interest expense

 

 

795

 

 

 

756

 

Other

 

 

(3,225

)

 

 

(6,148

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

85,837

 

 

 

25,216

 

Inventories

 

 

(97,589

)

 

 

(21,989

)

Prepaid expenses and other assets

 

 

(13,855

)

 

 

2,226

 

Accounts payable

 

 

(17,340

)

 

 

12,570

 

Accrued compensation and benefits

 

 

(27,252

)

 

 

(6,158

)

Operating lease liabilities

 

 

(8,780

)

 

 

(11,172

)

Deferred revenue

 

 

59,301

 

 

 

46,502

 

Other current and long-term liabilities

 

 

6,693

 

 

 

(8,778

)

Net cash provided by operating activities

 

 

39,997

 

 

 

168,519

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(13,632

)

 

 

(8,634

)

Net cash used in investing activities

 

 

(13,632

)

 

 

(8,634

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments on revolving facility

 

 

(25,000

)

 

 

 

Payments on debt obligations

 

 

(7,500

)

 

 

(71,625

)

Repurchase of common stock

 

 

(49,855

)

 

 

(74,807

)

Payments for tax withholdings, net of proceeds from issuance of common stock

 

 

(27,564

)

 

 

(1,685

)

Deferred payments on an acquisition

 

 

 

 

 

(3,000

)

Net cash used in financing activities

 

 

(109,919

)

 

 

(151,117

)

Foreign currency effect on cash and cash equivalents

 

 

(265

)

 

 

(294

)

Net increase (decrease) in cash and cash equivalents

 

 

(83,819

)

 

 

8,474

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

234,826

 

 

 

194,522

 

Cash and cash equivalents at end of period

 

$

151,007

 

 

$

202,996

 

 

See accompanying notes to the condensed consolidated financial statements.

 

7


 

EXTREME NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Description of Business and Basis of Presentation

Extreme Networks, Inc., together with its subsidiaries (collectively referred to as “Extreme” or the “Company”), is a leader in providing software-driven networking solutions for enterprise customers. The Company conducts its sales and marketing activities on a worldwide basis through distributors, resellers, and the Company’s field sales organization. Extreme was incorporated in California in 1996 and reincorporated in Delaware in 1999.

The unaudited condensed consolidated financial statements of Extreme included herein have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under such rules and regulations. The condensed consolidated balance sheet at June 30, 2023 was derived from audited financial statements as of that date but does not include all disclosures required by generally accepted accounting principles for complete financial statements. These interim financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition of Extreme at March 31, 2024. The results of operations for the three and nine months ended March 31, 2024 are not necessarily indicative of the results that may be expected for fiscal 2024 or any future periods.

Fiscal Year

The Company uses a fiscal calendar year ending on June 30. All references herein to “fiscal 2024” represent the fiscal year ending June 30, 2024. All references herein to “fiscal 2023” represent the fiscal year ended June 30, 2023.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Extreme and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated.

The Company predominantly uses the United States Dollar as its functional currency. The functional currency for certain of its foreign subsidiaries is the local currency. For those subsidiaries that operate in a local functional currency environment, all assets and liabilities are translated to United States Dollars at current month end rates of exchange and revenues, and expenses are translated using the monthly average rate.

Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

2.
Summary of Significant Accounting Policies

For a description of significant accounting policies, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023. There have been no material changes to the Company’s significant accounting policies since the filing of the Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

There were no recently adopted accounting standards which would have a material effect on our condensed consolidated financial statements and accompanying disclosures.

8


 

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2023-07 on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax disclosures primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements and related disclosures.

3.
Revenues

The Company accounts for revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company derives the majority of its revenues from sales of its networking equipment, with the remaining revenues generated from sales of subscription and support, which primarily includes software subscriptions delivered as software as a service (“SaaS”) and additional revenues from maintenance contracts, professional services and training for its products. The Company sells its products, SaaS and maintenance contracts direct to customers and to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock the Company's products and sell primarily to resellers. The second tier of the distribution channel consists of non-stocking distributors and value-added resellers that sell directly to end-users. Products and subscription and support may be sold separately or in bundled packages.

Revenue Recognition