Extreme Networks Reports Q3 Earnings Beat, Raises FY23 Revenue Growth Outlook

Extreme Networks, Inc EXTR reported third-quarter FY23 revenue growth of 16% Y/Y to $332.5 million Wednesday, beating the consensus of $319.5 million. 

• Product revenue grew by 22% Y/Y to $241.1 million. Service and subscription revenue grew 5% Y/Y to $91.4 million.
• SaaS ARR was $117 million, up 22% Y/Y.
• Adjusted EPS of 29 cents beat the consensus estimate of 26 cents. 
• Adjusted gross margin expanded to 59.1% from 58.0% a year ago. Adjusted operating margin improved to 15.6% from 12.5% in prior year.
• EXTR generated $48.2 million in operating cash flow and held $203 million in cash balance at the end of the quarter.
• At the end of Q3, net debt was down to $34 million from $149.2 from the prior year.
• Repurchases: The company repurchased shares worth $25 million in Q3.
• President and CEO Ed Meyercord stated: "We believe the improving supply chain and cloud software subscription growth will support an over 20% year-over-year revenue increase in Q4. We also expect earnings to more than double year-over-year, on both a GAAP and Non-GAAP basis, driven by gross margin expansion and operating leverage." 
• "We've raised our full year FY23 revenue outlook to 16% year-over-year, which is the midpoint of our guidance. We remain committed to our long-term outlook of mid-teens topline growth and margin expansion through FY25."
• Outlook: EXTR sees Q4 revenue of $340 million-$350 million, above the consensus of $332.4 million.
• It sees Q4 Non-GAAP EPS of 28-34 cents compared to the consensus of 30 cents. 
• EXTR Price Action: EXTR shares were rallying 9.4% to $17.22 premarket Wednesday. 
• Photo via Shutterstock.