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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 December 31, ~~2022~~ 2023


☐	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)~~ (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~~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~~-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 January ~~20, 2023,~~26, 2024, the registrant had ~~129,182,428~~128,730,411 shares of common stock, $0.001 par value per share, outstanding.

EXTREME NETWORKS, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED

December 31, ~~2022~~2023

INDEX



		PAGE
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of December 31, ~~2022~~2023 and June 30, ~~2022~~2023	3

	Condensed Consolidated Statements of Operations for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~ 2022	4

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~ 2022	5

	Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~2022	6

	Condensed Consolidated Statements of Cash Flows for the six months ended December 31, ~~2022~~2023 and ~~2021~~2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3634

Item 4.	Controls and Procedures	3735

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3836

Item 1A	Risk Factors	3836

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3837

Item 3.	Defaults Upon Senior Securities	3837

Item 4.	Mine Safety Disclosure	3837

Item 5.	Other Information	3837

Item 6.	Exhibits	3938

Signatures		4039

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)


	December 31, 2022			June 30, 2022			December 31, 2023			June 30, 2023
ASSETS
Current assets:
Cash	$	202,521		$	194,522
Cash and cash equivalents							$	221,403		$	234,826
Accounts receivable, net		152,050			184,097			112,047			182,045
Inventories		63,763			49,231			152,521			89,024
Prepaid expenses and other current assets		79,331			61,239			72,272			70,263
Total current assets		497,665			489,089			558,243			576,158
Property and equipment, net		45,711			49,578			47,598			46,448
Operating lease right-of-use assets, net		32,732			36,454			47,124			34,739
Intangible assets, net		22,984			32,515			13,104			16,063
Goodwill		393,495			400,144			395,606			394,755
Other assets		69,589			60,730			80,983			73,544
Total assets	$	1,062,176		$	1,068,510		$	1,142,658		$	1,141,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net of unamortized debt issuance costs of $2,181 and $2,276, respectively	$	35,819		$	33,349
Current portion of long-term debt, net of unamortized debt issuance costs of $675 and $674, respectively							$	9,325		$	34,326
Accounts payable		86,350			84,338			87,790			99,724
Accrued compensation and benefits		63,401			53,710			50,862			71,367
Accrued warranty		11,820			10,852			11,397			12,322
Current portion of operating lease liabilities		12,095			13,956			10,686			10,847
Current portion of deferred revenue		260,891			238,262			300,399			282,475
Other accrued liabilities		58,726			65,714			78,507			64,440
Total current liabilities		529,102			500,181			548,966			575,501
Deferred revenue, less current portion		184,723			163,357			247,777			219,024
Long-term debt, less current portion, net of unamortized debt issuance costs of $1,331 and $2,430, respectively		222,669			270,570
Long-term debt, less current portion, net of unamortized debt issuance costs of $2,069 and $2,409, respectively								182,931			187,591
Operating lease liabilities, less current portion		30,275			33,256			43,852			31,845
Deferred income taxes		7,555			7,717			7,748			7,747
Other long-term liabilities		3,285			3,086			3,200			3,247
Commitments and contingencies (Note 9)
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; 142,137 and 139,742 shares issued, respectively; 129,080 and 129,263 shares outstanding, respectively		142			140
Common stock, $0.001 par value, 750,000 shares authorized; 146,843 and 143,629 shares issued, respectively; 128,624 and 127,775 shares outstanding, respectively								147			144
Additional paid-in-capital		1,139,416			1,115,416			1,181,230			1,173,744
Accumulated other comprehensive loss		(13,546	)		(3,055	)		(12,058	)		(13,192	)
Accumulated deficit		(903,556	)		(934,072	)		(823,334	)		(855,998	)
Treasury stock at cost, 13,057 and 10,479 shares, respectively		(137,889	)		(88,086	)
Treasury stock at cost, 18,219 and 15,854 shares, respectively								(237,801	)		(187,946	)
Total stockholders’ equity		84,567			90,343			108,184			116,752
Total liabilities and stockholders’ equity	$	1,062,176		$	1,068,510		$	1,142,658		$	1,141,707

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	December 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021			December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Net revenues:
Product	$	223,445		$	191,102		$	429,721		$	376,263		$	186,611		$	223,445		$	440,094		$	429,721
Service and subscription		94,903			89,831			186,316			172,354
Subscription and support														109,766			94,903			209,420			186,316
Total net revenues		318,348			280,933			616,037			548,617			296,377			318,348			649,514			616,037
Cost of revenues:
Product		103,587			90,933			203,350			171,877			81,493			103,587			190,029			203,350
Service and subscription		33,106			31,214			64,324			62,351
Subscription and support														31,514			33,106			63,179			64,324
Total cost of revenues		136,693			122,147			267,674			234,228			113,007			136,693			253,208			267,674
Gross profit:
Product		119,858			100,169			226,371			204,386			105,118			119,858			250,065			226,371
Service and subscription		61,797			58,617			121,992			110,003
Subscription and support														78,252			61,797			146,241			121,992
Total gross profit		181,655			158,786			348,363			314,389			183,370			181,655			396,306			348,363
Operating expenses:
Research and development		52,618			48,080			103,607			95,846			52,833			52,618			110,849			103,607
Sales and marketing		80,538			71,565			158,920			141,092			85,154			80,538			177,074			158,920
General and administrative		24,085			17,877			42,632			34,880			25,384			24,085			49,257			42,632
Acquisition and integration costs		—			2,113			390			3,623			—			—			—			390
Restructuring and related charges		476			292			957			571			9,174			476			11,891			957
Amortization of intangibles		504			804			1,027			1,958
Amortization of intangible assets														509			504			1,020			1,027
Total operating expenses		158,221			140,731			307,533			277,970			173,054			158,221			350,091			307,533
Operating income		23,434			18,055			40,830			36,419			10,316			23,434			46,215			40,830
Interest income		889			83			1,281			193			1,430			889			2,656			1,281
Interest expense		(3,884	)		(3,076	)		(7,710	)		(6,956	)		(4,269	)		(3,884	)		(8,587	)		(7,710	)
Other income, net		138			72			509			243
Other income (expense), net														(420	)		138			12			509
Income before income taxes		20,577			15,134			34,910			29,899			7,057			20,577			40,296			34,910
Provision for income taxes		2,646			1,793			4,394			3,862			3,069			2,646			7,632			4,394
Net income	$	17,931		$	13,341		$	30,516		$	26,037		$	3,988		$	17,931		$	32,664		$	30,516

Basic and diluted income per share:
Net income per share – basic	$	0.14		$	0.10		$	0.23		$	0.20		$	0.03		$	0.14		$	0.25		$	0.23
Net income per share – diluted	$	0.13		$	0.10		$	0.23		$	0.20		$	0.03		$	0.13		$	0.25		$	0.23

Shares used in per share calculation – basic		130,465			129,403			130,377			128,863			128,987			130,465			128,885			130,377
Shares used in per share calculation – diluted		134,453			133,621			133,833			133,423			131,514			134,453			132,786			133,833

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended					Six Months Ended						Three Months Ended					Six Months Ended
	December 31, 2022			December 31, 2021		December 31, 2022			December 31, 2021			December 31, 2023		December 31, 2022			December 31, 2023		December 31, 2022
Net income	$	17,931		$	13,341	$	30,516		$	26,037		$	3,988	$	17,931		$	32,664	$	30,516
Other comprehensive income (loss):
Derivatives designated as hedging instruments:
Change in unrealized gains and losses on interest rate swaps		29			346		328			261			—		29			—		328
Reclassification adjustment related to interest rate swaps		(558	)		285		(834	)		566			—		(558	)		—		(834	)
Change in unrealized gains and losses on foreign currency forward contracts		358			140		358			(61	)		—		358			—		358
Net change from derivatives designated as hedging instruments		(171	)		771		(148	)		766			—		(171	)		—		(148	)
Net change in foreign currency translation adjustments		(8,205	)		160		(10,343	)		(746	)		4,038		(8,205	)		1,134		(10,343	)
Other comprehensive income (loss)		(8,376	)		931		(10,491	)		20
Other comprehensive income (loss):													4,038		(8,376	)		1,134		(10,491	)
Total comprehensive income	$	9,555		$	14,272	$	20,025		$	26,057		$	8,026	$	9,555		$	33,798	$	20,025

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

	Common Stock				Additional Paid-			Accumulated Other			Treasury Stock						Accumulated			Total Stockholders'
	Shares		Amount		In-Capital			Comprehensive Loss			Shares			Amount			Deficit			Equity			Common Stock				Additional Paid-			Accumulated Other			Treasury Stock						Accumulated			Total Stockholders'
Balance at September 30, 2021		136,351	$	136	$	1,084,671		$	(3,722	)		(6,597	)	$	(43,113	)	$	(965,647	)	$	72,325
Net income		—		—		—			—			—			—			13,341			13,341
Other comprehensive income		—		—		—			931			—			—			—			931
Issuance of common stock from equity incentive plans, net of tax withholdings		1,127		1		(3,358	)		—			—			—			—			(3,357	)
Repurchase of stock												(1,829	)		(24,974	)					(24,974	)
Share-based compensation		—		—		11,333			—			—			—			—			11,333
Balance at December 31, 2021		137,478	$	137	$	1,092,646		$	(2,791	)		(8,426	)	$	(68,087	)	$	(952,306	)	$	69,599

Balance at June 30, 2021		133,279	$	133	$	1,078,602		$	(2,811	)	$	(6,597	)	$	(43,113	)	$	(978,343	)	$	54,468
Net income		—		—		—			—			—			—			26,037			26,037
Other comprehensive income		—		—		—			20			—			—			—			20
Issuance of common stock from equity incentive plans, net of tax withholdings		4,199		4		(7,733	)		—			—			—			—			(7,729	)
Repurchase of stock		—		—		—			—			(1,829	)		(24,974	)		—			(24,974	)
Share-based compensation		—		—		21,777			—			—			—			—			21,777
Balance at December 31, 2021		137,478	$	137	$	1,092,646		$	(2,791	)		(8,426	)	$	(68,087	)	$	(952,306	)	$	69,599
																							Shares		Amount		In-Capital			Comprehensive Loss			Shares			Amount			Deficit			Equity
Balance at September 30, 2022		141,706	$	142	$	1,125,204		$	(5,170	)		(10,479	)	$	(88,086	)	$	(921,487	)	$	110,603			141,706	$	142	$	1,125,204		$	(5,170	)		(10,479	)	$	(88,086	)	$	(921,487	)	$	110,603
Net income		—		—		—			—			—			—			17,931			17,931			—		—		—			—			—			—			17,931			17,931
Other comprehensive loss		—		—		—			(8,376	)		—			—			—			(8,376	)		—		—		—			(8,376	)		—			—			—			(8,376	)
Issuance of common stock from equity incentive plans, net of tax withholdings		431		—		(3,184	)		—			—			—			—			(3,184	)		431		—		(3,184	)		—			—			—			—			(3,184	)
Repurchase of stock		—		—		—			—			(2,578	)		(49,803	)		—			(49,803	)		—		—		—			—			(2,578	)		(49,803	)		—			(49,803	)
Share-based compensation		—		—		17,396			—			—			—			—			17,396			—		—		17,396			—			—			—			—			17,396
Balance at December 31, 2022		142,137	$	142	$	1,139,416		$	(13,546	)		(13,057	)	$	(137,889	)	$	(903,556	)	$	84,567			142,137		142	$	1,139,416		$	(13,546	)		(13,057	)	$	(137,889	)	$	(903,556	)	$	84,567

Balance at June 30, 2022		139,742	$	140	$	1,115,416		$	(3,055	)		(10,479	)	$	(88,086	)	$	(934,072	)	$	90,343			139,742	$	140	$	1,115,416		$	(3,055	)		(10,479	)	$	(88,086	)	$	(934,072	)	$	90,343
Net income		—		—		—			—			—			—			30,516			30,516			—		—		—			—			—			—			30,516			30,516
Other comprehensive loss		—		—		—			(10,491	)		—			—			—			(10,491	)
Other comprehensive income																								—		—		—			(10,491	)		—			—			—			(10,491	)
Issuance of common stock from equity incentive plans, net of tax withholdings		2,395		2		(7,185	)		—			—			—			—			(7,183	)		2,395		2		(7,185	)		—			—			—			—			(7,183	)
Repurchase of stock		—		—		—			—			(2,578	)		(49,803	)		—			(49,803	)		—		—		—			—			(2,578	)		(49,803	)		—			(49,803	)
Share-based compensation		—		—		31,185			—			—			—			—			31,185			—		—		31,185			—			—			—			—			31,185
Balance at December 31, 2022		142,137	$	142	$	1,139,416		$	(13,546	)		(13,057	)	$	(137,889	)	$	(903,556	)	$	84,567			142,137	$	142	$	1,139,416		$	(13,546	)		(13,057	)	$	(137,889	)	$	(903,556	)	$	84,567

Balance at September 30, 2023																								146,264	$	146	$	1,164,589		$	(16,096	)		(16,734	)	$	(212,835	)	$	(827,322	)	$	108,482
Net income																								—		—		—			—			—			—			3,988			3,988
Other comprehensive income																								—		—		—			4,038			—			—			—			4,038
Issuance of common stock from equity incentive plans, net of tax withholdings																								579		1		(4,316	)		—			—			—			—			(4,315	)
Repurchase of stock																								—		—		—			—			(1,485	)		(24,966	)		—			(24,966	)
Share-based compensation																								—		—		20,957			—			—			—			—			20,957
Balance at December 31, 2023																								146,843	$	147	$	1,181,230		$	(12,058	)		(18,219	)	$	(237,801	)	$	(823,334	)	$	108,184

Balance at June 30, 2023																								143,629	$	144	$	1,173,744		$	(13,192	)		(15,854	)	$	(187,946	)	$	(855,998	)	$	116,752
Net income																								—		—		—			—			—			—			32,664			32,664
Other comprehensive income																								—		—		—			1,134			—			—			—			1,134
Issuance of common stock from equity incentive plans, net of tax withholdings																								3,214		3		(33,390	)		—			—			—			—			(33,387	)
Repurchase of stock																								—		—		—			—			(2,365	)		(49,855	)		—			(49,855	)
Share-based compensation																								—		—		40,876			—			—			—			—			40,876
Balance at December 31, 2023																								146,843	$	147	$	1,181,230		$	(12,058	)		(18,219	)	$	(237,801	)	$	(823,334	)	$	108,184

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended						Six Months Ended
	December 31, 2022			December 31, 2021			December 31, 2023			December 31, 2022
Cash flows from operating activities:
Net income	$	30,516		$	26,037		$	32,664		$	30,516
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,983			10,233			9,485			9,983
Amortization of intangible assets		7,852			11,393			3,064			7,852
Reduction in carrying amount of right-of-use asset		6,240			7,778			5,891			6,240
Provision for doubtful accounts		102			14			82			102
Share-based compensation		31,185			21,777			40,876			31,185
Deferred income taxes		65			890			(21	)		65
Non-cash interest expense		764			2,517			532			764
Other		(5,904	)		(474	)		(2,481	)		(5,904	)
Changes in operating assets and liabilities, net of acquisition:
Changes in operating assets and liabilities:
Accounts receivable		31,944			24,626			69,915			31,944
Inventories		(14,506	)		(4,239	)		(64,552	)		(14,506	)
Prepaid expenses and other assets		(6,557	)		(34,215	)		(7,850	)		(6,557	)
Accounts payable		2,164			(2,505	)		(12,263	)		2,164
Accrued compensation and benefits		9,170			(8,378	)		(20,625	)		9,170
Operating lease liabilities		(7,383	)		(9,675	)		(6,444	)		(7,383	)
Deferred revenue		28,776			17,785			48,272			28,776
Other current and long-term liabilities		(4,074	)		(1,082	)		13,320			(4,074	)
Net cash provided by operating activities		120,337			62,482			109,865			120,337
Cash flows from investing activities:
Capital expenditures		(6,271	)		(6,653	)		(9,955	)		(6,271	)
Business acquisition, net of cash acquired		—			(69,517	)
Net cash used in investing activities		(6,271	)		(76,170	)		(9,955	)		(6,271	)
Cash flows from financing activities:
Payments on revolving facility								(25,000	)		—
Payments on debt obligations		(46,625	)		(23,875	)		(5,000	)		(46,625	)
Repurchase of common stock		(49,803	)		(24,974	)		(49,855	)		(49,803	)
Payments for tax withholdings, net of proceeds from issuance of common stock		(7,183	)		(7,729	)		(33,387	)		(7,183	)
Payment of contingent consideration obligations		—			(816	)
Deferred payments on an acquisition		(2,000	)		(2,000	)		—			(2,000	)
Net cash used in financing activities		(105,611	)		(59,394	)		(113,242	)		(105,611	)
Foreign currency effect on cash		(456	)		(264	)
Net increase (decrease) in cash		7,999			(73,346	)
Foreign currency effect on cash and cash equivalents								(91	)		(456	)
Net increase (decrease) in cash and cash equivalents								(13,423	)		7,999

Cash at beginning of period		194,522			246,894
Cash at end of period	$	202,521		$	173,548
Cash and cash equivalents at beginning of period								234,826			194,522
Cash and cash equivalents at end of period							$	221,403		$	202,521

See accompanying notes to the condensed consolidated financial statements.

EXTREME NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~(Unaudited)

Description of Business and Basis of Presentation

~~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, ~~2022~~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, ~~2022.~~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 December 31, ~~2022.~~2023. The results of operations for the three and six months ended December 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for fiscal ~~2023~~2024 or any future periods.

Fiscal Year

The Company uses a fiscal calendar year ending on June 30. All references herein to “fiscal ~~2023”~~2024” represent the fiscal year ending June 30, ~~2023.~~2024. All references herein to “fiscal ~~2022”~~2023” represent the fiscal year ended June 30, ~~2022.~~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.

Summary of Significant Accounting Policies

~~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, ~~2022.~~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.

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~December 2022,~~November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standard~~Standards Update (“ASU”) ~~2022-06,~~ 2023-07, ~~Reference Rate Reform~~Segment Reporting (Topic ~~848)~~280): ~~Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ~~from December 31, 2022~~Improvements to ~~December 31, 2024. Upon issuance~~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 ~~2020-04, the Company elected~~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 ~~apply certain of the optional expedients for contract modifications to its financial instruments impacted by the London Interbank Offered Rate (“LIBOR”) discontinuance.~~all periods presented. Early adoption is permitted. The Company ~~expects to continue to elect various optional expedients for contract~~

~~modifications to~~is currently evaluating the ~~Company’s financial instruments affected by the reference rate reform through the effective date~~impact of ~~December 31, 2024, as extended by~~adopting ASU ~~2022-06. The application of this guidance did not have any impact~~2023-07 on ~~our~~its consolidated financial ~~statements.~~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.

Revenues

~~Revenues~~

The Company accounts for revenues in accordance with ~~ASU 2014-09,~~ Accounting Standards Codification (“ASC”) 606, Revenue from Contracts ~~from Customers (Topic 606)~~with Customers.. The Company derives the majority of its revenues from sales of its networking equipment, with the remaining revenues generated from sales of ~~services~~subscription and ~~subscriptions,~~support, which primarily includes ~~maintenance contracts and~~ 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 ~~and SaaS~~ 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 ~~its~~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 ~~services~~subscription and support may be sold separately or in bundled packages.

Revenue Recognition

Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ~~Topic~~ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other observable ~~inputs.~~inputs.

The Company’s performance obligations are satisfied at a point in time or over time as the customer receives and consumes the benefits provided. Substantially all of the Company’s product sales revenues are recognized at a point in time. Substantially all of the Company’s ~~service,~~ subscription and ~~SaaS~~support revenues are recognized over time. For revenues recognized over time, the Company uses an input measure, days elapsed, to measure progress.

On December 31, ~~2022,~~2023, the Company had ~~$445.6~~$548.2 million of remaining performance obligations, which ~~are~~ primarily comprised of deferred maintenance and deferred SaaS revenues. The Company expects to recognize approximately ~~36%~~32% of its deferred revenue as revenue in the remainder of fiscal ~~2023,~~2024, an additional ~~34%~~34% in fiscal ~~2024~~2025, and ~~30%~~34% of the balance ~~thereafter.~~thereafter.

Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the condensed consolidated balance sheets. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are either billed fully at the inception of contract or at periodic intervals (e.g., quarterly or annually). The Company ~~sometimes~~generally receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the condensed consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the three months ended December 31, ~~2022~~2023 and ~~2021~~2022 that was included in the deferred revenue balance at the beginning of each period was ~~$83.9~~$105.7 million and ~~$81.9~~$83.9 million, respectively. Revenue recognized for the six months ended December 31, ~~2022~~2023 and ~~2021~~2022 that was included in the deferred revenue balance at the beginning of each period was ~~$145.7~~$172.0 million and ~~$132.5~~$145.7 million, respectively.

Contract Costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives as a result of obtaining ~~service~~subscription and ~~subscription~~support contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount of ~~$17.5~~$22.2 million and ~~$16.3~~$20.0 million at December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, respectively. Capitalized commissions are included within other assets in the condensed consolidated balance sheets. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying condensed consolidated statements of operations. Amortization recognized during the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022 was $ ~~2.2~~2.7 million and ~~$1.8~~$2.2 million, respectively. Amortization recognized during the six months ended December 31, 2023 and 2022 ~~and 2021,~~ was ~~$4.3~~$5.2 million and ~~$3.6~~$4.3 million, respectively.

Estimated Variable Consideration. There were no material changes in the current period to the estimated variable consideration for performance obligations, which were satisfied or partially satisfied during previous periods.

Revenues by Category

The Company operates in three geographic regions: Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific). The following table sets forth the Company’s net revenues disaggregated by sales channel and geographic region based on the billing addresses of its customers (in thousands):


	Three Months Ended												Three Months Ended
	December 31, 2022						December 31, 2021						December 31, 2023						December 31, 2022
	Distributor		Direct		Total		Distributor		Direct		Total		Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	70,963	$	66,630	$	137,593	$	68,565	$	68,585	$	137,150	$	81,350	$	68,199	$	149,549	$	70,963	$	66,630	$	137,593
Other		10,807		4,614		15,421		3,865		4,955		8,820		8,244		4,842		13,086		10,807		4,614		15,421
Total Americas		81,770		71,244		153,014		72,430		73,540		145,970		89,594		73,041		162,635		81,770		71,244		153,014
EMEA		97,147		40,903		138,050		68,934		42,128		111,062		64,082		46,523		110,605		97,147		40,903		138,050
APAC		7,403		19,881		27,284		5,034		18,867		23,901		8,864		14,273		23,137		7,403		19,881		27,284
Total net revenues	$	186,320	$	132,028	$	318,348	$	146,398	$	134,535	$	280,933	$	162,540	$	133,837	$	296,377	$	186,320	$	132,028	$	318,348


	Six Months Ended
	December 31, 2023						December 31, 2022
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	199,151	$	133,150	$	332,301	$	144,277	$	130,942	$	275,219
Other		10,775		15,208		25,983		26,832		8,712		35,544
Total Americas		209,926		148,358		358,284		171,109		139,654		310,763
EMEA		166,393		87,815		254,208		173,403		80,156		253,559
APAC		8,975		28,047		37,022		9,441		42,274		51,715
Total net revenues	$	385,294	$	264,220	$	649,514	$	353,953	$	262,084	$	616,037

Six Months Ended

December 31,
2022

December 31,
2021

Distributor

Direct

Total

Distributor

Direct

Total

Americas:

United States

$
144,277

$
130,942

$
275,219

$
124,633

$
135,916

$
260,549

Other

26,832

8,712

35,544

11,664

8,322

19,986

Total Americas

171,109

139,654

310,763

136,297

144,238

280,535

EMEA

173,403

80,156

253,559

146,832

77,859

224,691

APAC

9,441

42,274

51,715

9,369

34,022

43,391

Total net revenues

$
353,953

$
262,084

$
616,037

$
292,498

$
256,119

$
548,617

For the three months ended December 31, 2023, the Company generated 10% of its net revenues from Germany. For the six months ended December 31, 2023, the Company generated approximately 11% of its net revenues from the Netherlands. For the three months ended December 31, 2022, the Company generated ~~11%~~11% and ~~10%~~10% of its net revenues from the Netherlands and Germany, respectively. For the six months ended December 31, 2022, the Company generated ~~10%~~10% of its net revenues from each of ~~its revenues from~~ the Netherlands and Germany. ~~For the six months ended December 31, 2021 the Company generated 10% of its revenues from the Netherlands.~~ No other foreign country accounted for ~~10%~~10% or more of ~~revenue~~its net revenues for the three and six months ended December 31, ~~2022~~2023 and ~~2021.~~2022.

Customer Concentrations

The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit.

The following table sets forth customers accounting for 10% or more of the Company’s net revenues for the periods indicated below:


	Three Months Ended		Six Months Ended
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
Jenne, Inc.	23%	13%	25%	13%
Westcon Group, Inc.	10%	19%	18%	17%
TD Synnex Corporation	24%	17%	21%	18%
ScanSource, Inc.	*	11%	*	*
* Less than 10% of revenue

Three Months Ended

Six Months Ended

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Westcon Group, Inc.

19%

11%

17%

15%

TD Synnex Corporation

17%

21%

18%

22%

Jenne, Inc.

13%

18%

13%

16%

ScanSource, Inc.

11%

*

*

*

* Less than 10% of revenue

The following table sets forth major customers accounting for 10% or more of the Company’s net accounts receivable balance:



	December 31, 2022	June 30, 2022	December 31, 2023	June 30, 2023
Jenne, Inc.	16%	28%	52%	39%
TD Synnex Corporation			*	10%
ScanSource, Inc.	10%	*	*	10%
TD Synnex Corporation	10%	11%
* Less than 10% of accounts receivable.
Ingram Micro			10%	*
* Less than 10% of accounts receivable

4.	~~Business Combination~~

~~Fiscal 2022 Acquisition~~

~~Ipanema Acquisition~~

~~On September 14, 2021 (the “Acquisition Date”),~~The Company's net accounts receivable balance with Jenne, Inc. as of December 31, 2023 is current and the Company ~~completed its acquisition (the “Acquisition”)~~expects to collect the majority of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network (“SD-WAN”) business unit of Infovista pursuant to a Sale and Purchase Agreement. Under the terms of the Acquisition, the net consideration paidthis balance by Extreme to Ipanema stockholders was $70.9 million, which was funded through cash on hand. The primary reason for the acquisition was to acquire the talent and the technology to allow the Company to expand its portfolio with new cloud-managed SD-WAN and security offerings to support its enterprise customers. March 31, 2024.

The Acquisition was accounted for using the acquisition method of accounting whereby the acquired assets and liabilities of Ipanema have been recorded at their respective fair values and added to those of the Company including an amount for goodwill calculated as the difference between the acquisition consideration and the fair value of the identifiable net assets. The purchase price has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed. Of the total purchase consideration, $68.9 million was allocated to goodwill, $16.3 million to identifiable intangible assets and the remainder to net tangible liabilities assumed. All valuations were finalized as of June 30, 2022.

Balance Sheet Accounts

Cash and Cash Equivalents

The ~~unaudited pro forma results~~Company considers highly liquid investments with maturities of ~~operations reflect~~three months or less at the ~~Acquisition as if it had occurred on July 1, 2020, the beginning~~date of ~~fiscal 2021, after giving effect~~purchase to ~~purchase accounting adjustments relating to depreciation and amortization of intangibles and acquisition and integration costs.~~be cash equivalents.

The pro forma results of operations are not necessarily indicative of the combined results that would have occurred had the acquisition been consummated as of the beginning of fiscal 2021, nor are they necessarily indicative of future operating results. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions, which could alter the unaudited pro forma results.

The unaudited pro forma financial information for the three and six months ended December 31, 2021 combines the historical results for Extreme for that period, which include the results of Ipanema subsequent to the Acquisition Date, and Ipanema’s historical results up to the Acquisition Date.

The following table summarizes the ~~unaudited pro forma financial information~~Company's cash and cash equivalents (in ~~thousands, except per share amounts)~~thousands):


	December 31, 2023		June 30, 2023
Cash	$	211,526	$	227,675
Cash equivalents		9,877		7,151
Total cash and cash equivalents	$	221,403	$	234,826

Inventories

Three months ended

Six Months Ended

December 31,
2021*

December 31,
2021*

Net revenues
$
280,438

$
551,743

Net income
$
15,562

$
29,631

Net income per share – basic
$
0.12

$
0.23

Net income per share – diluted
$
0.12

$
0.22

Shares used in per share calculation – basic

129,403

128,863

Shares used in per share calculation – diluted

133,621

133,423

*Amount reflects the adoption of ASU 2021-08, Business Combinations (Topic 805): ~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which the Company early adopted the standard in the quarter ended December 31, 2021 and retrospectively applied to the fiscal year beginning July 1, 2021.~~

5.	~~Balance Sheet Accounts~~

~~Inventories~~

Inventories are stated at the lower of cost, ~~determined on the first-in, first-out (“FIFO”) basis,~~ or net realizable value. Extreme uses a standard cost methodology to determine the cost basis for its inventories. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company adjusts the carrying value of its inventory when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any previously written down or obsolete inventory subsequently sold has not had a material impact on gross margin for any of the periods presented.

~~Inventories consist of~~The following table summarizes the ~~following~~Company's inventory by category (in thousands):


	December 31, 2023		June 30, 2023
Finished goods	$	124,668	$	78,180
Raw materials		27,853		10,844
Total inventories	$	152,521	$	89,024

December 31,
2022

June 30,
2022

Finished goods

$
55,721

$
40,733

Raw materials

8,042

8,498

Total inventories

$
63,763

$
49,231

Property and Equipment, Net

~~Property~~The following table summarizes the Company's property and equipment, net ~~consist of the following~~by category (in thousands):


	December 31, 2023			June 30, 2023
Computers and equipment	$	83,633		$	81,612
Purchased software		54,378			51,444
Office equipment, furniture and fixtures		9,002			8,899
Leasehold improvements		51,563			48,943
Total property and equipment		198,576			190,898
Less: accumulated depreciation and amortization		(150,978	)		(144,450	)
Property and equipment, net	$	47,598		$	46,448

December 31,
2022

June 30,
2022

Computers and equipment

$
78,042

$
75,387

Purchased software

49,285

47,161

Office equipment, furniture and fixtures

9,465

9,463

Leasehold improvements

53,098

52,564

Total property and equipment

189,890

184,575

Less: accumulated depreciation and amortization

(144,179
)

(134,997
)
Property and equipment, net

$
45,711

$
49,578

Deferred Revenue

Deferred revenue represents invoiced amounts for deferred maintenance, ~~support,~~ SaaS, and other deferred revenue including professional services and training when the revenue recognition criteria have not been met.

Guarantees and Product Warranties

The majority of the Company’s hardware products are shipped with either a one-year warranty or a limited lifetime warranty, and software products receive a ~~90-day~~90-day warranty. Upon shipment of products to its customers, the Company estimates expenses for the cost to repair or replace products that may be returned under warranty and accrues a liability in cost of product revenues for this amount. The determination of the Company’s warranty requirements is based on actual historical experience with the product or product family, estimates of repair and replacement costs, and any product warranty problems that are identified after shipment. The Company estimates and adjusts these accruals at each balance sheet date in accordance with changes in these factors.

The following table summarizes the activity related to the Company’s product warranty liability during the ~~three and six months ended December 31, 2022 and 2021~~following periods (in thousands):


	Three Months Ended						Six Months Ended
	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Balance beginning of period	$	12,164		$	11,522		$	12,322		$	10,852
New warranties issued		2,777			3,807			6,451			7,815
Warranty expenditures		(3,544	)		(3,509	)		(7,376	)		(6,847	)
Balance end of period	$	11,397		$	11,820		$	11,397		$	11,820

Three Months Ended

Six Months Ended

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Balance beginning of period

$
11,522

$
10,780

$
10,852

$
11,623

Warranties assumed due to acquisition

—

—

—

41

New warranties issued

3,807

3,822

7,815

6,532

Warranty expenditures

(3,509
)

(3,465
)

(6,847
)

(7,059
)

Balance end of period

$
11,820

$
11,137

$
11,820

$
11,137

To facilitate sales of its products in the normal course of business, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising ~~for~~from intellectual property infringement and certain other losses. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position.

Concentrations

~~Concentrations~~

The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable. See Note 3, Revenues, for the Company’s accounts receivable concentration. The Company does not invest an amount exceeding ~~10%~~10% of its combined cash in the securities of any one obligor or maker, except for obligations of the United States government, obligations of United States government agencies, and money market accounts.

Fair Value Measurements

~~Fair Value Measurements~~

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

•

Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;

•

Level 2 Inputs - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

•

Level 3 Inputs - unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.

•

~~Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;~~

•

~~Level 3 Inputs - unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.~~

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at December 31, ~~2022~~2023 and June 30, ~~2022~~2023 (in thousands).:

December 31, 2022	Level 1		Level 2		Level 3		Total

December 31, 2023									Level 1		Level 2		Level 3		Total
Assets
Certificates of deposit									$	—	$	9,877	$	—	$	9,877
Foreign currency derivatives	$	—	$	475	$	—	$	475		—		133		—		133
Interest rate swaps		—		808		—		808
Total assets measured at fair value	$	—	$	1,283	$	—	$	1,283	$	—	$	10,010	$	—	$	10,010
Liabilities
Foreign currency derivatives	$	—	$	8	$	—	$	8
Total liabilities measured at fair value	$	—	$	8	$	—	$	8


June 30, 2023	Level 1		Level 2		Level 3		Total
Assets
Certificates of deposit	$	—	$	7,151	$	—	$	7,151
Foreign currency derivatives		—		31		—		31
Total assets measured at fair value	$	—	$	7,182	$	—	$	7,182

June 30, 2022

Level 1

Level 2

Level 3

Total

Assets

Interest rate swaps

$
—

$
1,314

$
—

$
1,314

Total assets measured at fair value

$
—

$
1,314

$
—

$
1,314

Liabilities

Foreign currency derivatives

$
—

$
31

$
—

$
31

Total liabilities measured at fair value

$
—

$
31

$
—

$
31

Level 1 Assets and ~~Liabilities~~Liabilities: :

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities. The Company states accounts receivable, accounts payable, and accrued liabilities at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

Level 2 Assets and ~~Liabilities~~Liabilities: :

The Company's level 2 assets consist of certificates of deposit and derivative instruments. Certificates of deposit do not have regular market pricing and are considered Level 2. The fair value of derivative instruments under the Company’s foreign exchange forward contracts ~~and interest rate swaps~~ are estimated based on valuations provided by alternative pricing sources supported by observable inputs, which is considered Level 2.

As of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, the Company had investment in certificates of deposit of $9.9 million and $7.2 million, respectively, with maturity of three months at the date of purchase, which are recorded as cash equivalents in the condensed consolidated balance sheets. The Company considers these cash equivalents to be available-for-sale and, as of December 31, 2023 and June 30, 2023, their fair value approximated their amortized cost.

As of December 31, 2023 and June 30, 2023, the Company had foreign exchange forward contracts that were not designated as hedging instruments with notional principal amounts of ~~$11.1~~$15.6 million and ~~$9.6~~$3.4 million, respectively. These contracts currently have maturities of 6040 days or less. Changes in the fair value of these foreign exchange forward contracts not designated as hedging instruments are included in other income, ~~or expenses~~net in the condensed consolidated ~~statement~~statements of operations. For the three ~~and six~~ months ended December 31, 2023 and 2022, there were net gains of ~~$0.1~~$0.4 million and $0.1 million, respectively. For the six months ended December 31, 2023 and 2022, there were net gains of $0.3 million and net losses of ~~$0.4 million, respectively. For the three and six months ended December 31, 2021, there were net losses of less than $0.1 million and $0.2~~$0.4 million, respectively. As of December 31, 2022, the Company had foreign exchange forward contracts that were designated as hedging instruments with a notional principal amount of $5.5 million. These contracts have maturities of less than twelve months. Gains2023 and losses arising from these contracts designated as hedging instruments are recorded as a component of accumulated other comprehensive income (loss). As of December 31, 2022, these contracts had an unrealized gain of $0.4 million. As of June 30, ~~2022,~~2023, there were no outstanding foreign exchange forward contracts that were designated as hedging instruments. See Note ~~13, Derivatives and Hedging, for additional information.~~

~~The fair values of the interest rate swaps are based upon inputs corroborated by observable market data which is considered Level 2. As of~~ ~~December 31, 2022~~ ~~and June 30, 2022~~, the Company had interest rate swap contracts, designated as cash flow hedges, with the total notional amount of $75.0 million. Changes in the fair value of these contracts are recorded as a component of accumulated other comprehensive income (loss). As of ~~December 31, 2022and~~ ~~June 30, 2022~~, ~~these contracts had unrealized gains of $0.8 million and $1.3 million, respectively.~~ ~~See Note 13,~~12, Derivatives and Hedging, for additional information.

The fair value of borrowings under the ~~2019~~2023 Credit Agreement (as defined in Note 8)7) is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. Since the interest rate is variable ~~for~~in the ~~2019~~2023 Credit Agreement, the fair value approximates the face amount of the Company’s indebtedness of ~~$262.0~~$195.0 million and ~~$308.6~~$225.0 million as of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, respectively.

Level 3 Assets and Liabilities:

Certain of the Company’s assets, including intangible assets and goodwill, are measured at fair value on a non-recurring basis if impairment is indicated.

As of December 31, ~~2022,~~2023 and June 30, ~~2022,~~2023, the Company did ~~not~~not have any ~~asset~~assets or ~~liability~~liabilities that were considered Level 3.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 during the three and six months ended December 31, ~~2022~~2023 and ~~2021~~.2022. There were no impairments recorded for the three and six months ended December 31, ~~2022~~2023 and ~~2021.~~2022.

7.	~~Intangible Assets and Goodwill~~

Intangible Assets and Goodwill

Intangible Assets

The following tables summarize the components of gross and net intangible ~~asset balances (dollars in thousands)~~assets (in thousands, except years):


	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
December 31, 2023
Developed technology	4.1 years	$	169,646	$	161,690	$	7,956
Customer relationships	2.9 years		64,721		59,787		4,934
Trade names	0 years		10,700		10,700		—
License agreements	2.9 years		2,445		2,231		214
Total intangible assets, net*		$	247,512	$	234,408	$	13,104
* The carrying amount of foreign intangible assets are affected by foreign currency translation

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying			Weighted Average
	Period	Amount		Amortization		Amount			Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
December 31, 2022
									Period	Amount		Amortization		Amount
June 30, 2023
Developed technology	3.0 years	$	169,203	$	153,441	$	15,762		4.1 years	$	169,460	$	159,592	$	9,868
Customer relationships	3.4 years		64,665		57,728		6,937		3.4 years		64,839		58,894		5,945
Trade names	0.0 years		10,700		10,700		—		0 years		10,700		10,700		—
License agreements	3.9 years		2,445		2,160		285		3.4 years		2,445		2,195		250
Total intangibles, net*		$	247,013	$	224,029	$	22,984

* Foreign intangible assets carrying amounts are affected by foreign currency translation.
Total intangible assets, net*										$	247,444	$	231,381	$	16,063
* The carrying amount of foreign intangible assets are affected by foreign currency translation								* The carrying amount of foreign intangible assets are affected by foreign currency translation

Weighted Average

Remaining Amortization

Gross Carrying

Accumulated

Net Carrying

Period

Amount

Amortization

Amount

June 30, 2022

Developed technology

3.3 years

$
170,600

$
146,560

$
24,040

Customer relationships

3.9 years

64,839

56,704

8,135

Trade names

0.1 years

10,700

10,680

20

License agreements

4.4 years

2,445

2,125

320

Total intangibles, net*

$
248,584

$
216,069

$
32,515


* Foreign intangible assets carrying amounts are affected by foreign currency translation.

The following table summarizes the amortization expense of ~~intangibles~~intangible assets for the periods presented ~~is summarized below~~ (in thousands):

Three Months Ended

Six Months Ended

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Amortization of intangibles in “Total cost of revenues”

$
3,220

$
4,149

$
6,825

$
9,435

Amortization of intangibles in “Total operating expenses”

504

804

1,027

1,958

Total amortization expense

$
3,724

$
4,953

$
7,852

$
11,393


	Three Months Ended				Six Months Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Amortization of intangible assets in “Total cost of revenues”	$	611	$	3,220	$	2,044	$	6,825
Amortization of intangible assets in “Total operating expenses”		509		504		1,020		1,027
Total amortization expense	$	1,120	$	3,724	$	3,064	$	7,852

The amortization expense that is recognized in “Total cost of revenues” ~~is comprised~~primarily consists of amortization ~~for most of the~~related to developed technology and license agreements.

The estimated future amortization expense to be recorded for each of the respective future fiscal years is as follows (in thousands):


	Amount
For the fiscal year ending June 30:
2024 (the remainder of fiscal 2024)	$	2,585
2025		4,414
2026		3,165
2027		1,418
2028		1,259
Thereafter		263
Total	$	13,104

Goodwill

For the fiscal year ending:

2023 (the remainder of fiscal 2023)

$
7,166

2024

5,212

2025

4,450

2026

3,191

2027

1,430

Thereafter

1,535

Total

$
22,984

~~Goodwill~~

The Company had Goodwill in the amount of ~~$393.5~~$395.6 million and ~~$400.1~~$394.8 million as of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, respectively. The change in goodwill during the six months ended December 31, ~~2022~~2023 is due to foreign currency translation adjustment that is recorded as a component of accumulated other comprehensive loss.

Debt

~~Debt~~

The Company’s debt is comprised of the following (in thousands):


	December 31, 2022			June 30, 2022			December 31, 2023			June 30, 2023
Current portion of long-term debt:
Term Loan	$	38,000		$	35,625		$	10,000		$	10,000
Revolving Facility								—			25,000
Less: unamortized debt issuance costs		(2,181	)		(2,276	)		(675	)		(674	)
Current portion of long-term debt	$	35,819		$	33,349		$	9,325		$	34,326

Long-term debt, less current portion:
Term Loan	$	224,000		$	273,000		$	185,000		$	190,000
Less: unamortized debt issuance costs		(1,331	)		(2,430	)		(2,069	)		(2,409	)
Total long-term debt, less current portion		222,669			270,570			182,931			187,591
Total debt	$	258,488		$	303,919		$	192,256		$	221,917

On August 9, 2019, the Company entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”), by and among the Company, as borrower, several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent for the ~~Lenders.~~Lenders which was subsequently amended during fiscal 2023.

On June 22, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “2023 Credit Agreement”), by and among the Company, 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. The ~~2019~~2023 Credit Agreement provides for i) a $~~five-year~~200.0 million first lien term loan facility in an aggregate principal amount ~~of $380.0~~(the “2023 Term Loan”), ii) a $150.0 million ~~and a~~ five-year revolving credit facility (the “2023 Revolving Facility”) and, iii) an uncommitted additional incremental loan facility in ~~an aggregate~~the principal amount of ~~$75.0 million (the “2019 Revolving Facility”). In addition,~~up to $100.0 million. On June 22, 2023, the Company ~~may request incremental term loans and/or incremental~~borrowed $25.0 million against its $150.0 million revolving ~~loan commitments in an aggregate amount not~~credit facility to ~~exceed the sum of $100.0 million, plus an unlimited amount that is subject to pro forma compliance with certain financial tests.~~refinance its debt. On ~~August 9, 2019,~~July 7, 2023, the Company ~~used~~made a payment of $25.0 million to pay off the ~~additional proceeds from~~outstanding revolving credit balance.

Borrowings under the ~~term loan~~to~~partially fund the acquisition of Aerohive Networks, Inc.~~2023 Credit Agreement bear interest, and ~~for working capital and general corporate purposes~~.

Atat the Company’s election, the initial term loan ~~under the 2019 Credit Agreement~~ may be made as either a base rate ~~loans~~loan or ~~Eurodollar loans.~~a Secured Overnight Funding Rate (“SOFR”) loan. The applicable margin for base rate loans ranges from ~~0.25%~~1.00% to ~~2.50%~~1.75% per annum, and the applicable margin for ~~Eurodollar~~SOFR loans ranges from ~~1.25%~~2.00% to ~~3.50%~~2.75%, in each case ~~based on Extreme’s consolidated leverage ratio. All Eurodollar loans are subject to a Base Rate of 0.00%.~~ ~~In addition, the Company is required to pay a commitment fee of between 0.25% and 0.40% quarterly (currently 0.25%) on the unused portion of the 2019 Revolving Facility, also~~ based on the Company’s consolidated leverage ratio. ~~Principal installments~~All SOFR loans are ~~payable on~~subject to a floor of 0.00% per annum and spread adjustment of 0.10% per annum. The Company paid other closing fees, arrangement fees, and administration fees associated with the ~~new term loan in varying percentages quarterly starting December 31, 2019 and to the extent not previously paid, all outstanding balances are to be paid at maturity. The 2019~~2023 Credit ~~Agreement is secured by substantially all of the Company’s assets.~~Agreement.

The ~~2019~~2023 Credit Agreement requires the Company to maintain certain minimum financial ratios at the end of each fiscal quarter. The ~~2019~~2023 Credit Agreement also includes covenants and restrictions that limit, among other things, the Company’s ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or sell all or substantially all of its assets. The ~~2019~~2023 Credit Agreement also includes customary events of default which may result in acceleration of the ~~payment of the~~ outstanding balance.

On April 8, 2020, the Company entered into an amendment to the 2019 Credit Agreement (the “First Amendment”) to waive certain terms and financial covenants of the 2019 Credit Agreement through July 31, 2020. On May 8, 2020, the Company entered into a second amendment to the 2019 Credit Agreement (the “Second Amendment”), which superseded the First Amendment and provided certain revised terms and financial covenants through March 31, 2021. The Second Amendment required the Company to maintain certain minimum cash requirement and financial metrics at the end of each fiscal quarter through March 31, 2021 and the Company was restricted from pursuing certain activities such as incurring additional debt, stock repurchases, making acquisitions or declaring a dividend, until the Company was in compliance with the original covenants of the 2019 Credit Agreement.

On November 3, 2020, the Company and its lenders entered into a Third Amendment to the 2019 Credit Agreement (the “Third Amendment”), to increase the sublimit for letters of credit to $20.0 million. On December 8, 2020, the Company and its lenders entered into a fourth amendment to the 2019 Credit Agreement (the “Fourth Amendment”), to waive and amend certain terms and financial covenants within the 2019 Credit Agreement through March 31, 2021.

The Second Amendment provided for the Company to end the covenant Suspension Period early and revert to the covenants and interest rates per the original terms of the 2019 Credit Agreement dated August 9, 2019 by filing a Suspension Period Early Termination Notice and Covenant Certificate demonstrating compliance. For the twelve-month period ended March 31, 2021, the Company’s financial performance was in compliance with the original covenants defined in the 2019 Credit Agreement and, as such, the Company filed a Suspension Early Termination Notice and Covenant Certificate with the administration agent subsequent to filing the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021. Returning to compliance, the original terms and

~~financial covenants under the 2019 Credit Agreement dated August 9, 2019 resumed in effect.~~ During the ~~three and~~ six months ended December 31, ~~2022,~~2023, the Company was in compliance with all the terms and financial covenants ~~under~~of the ~~2019~~2023 Credit ~~Agreement.~~Agreement.

Financing costs incurred in connection with obtaining long-term financing are deferred and amortized over the term of the related indebtedness or credit agreement. Amortization of deferred financing costs included in “Interest expense” in the accompanying condensed consolidated statements of ~~operations~~operations were ~~$0.7~~$0.3 million and $0.7 million for ~~each of~~ the three months ended December 31, 2023 and 2022, respectively, and ~~2021~~were $0.5 million and ~~totaled $1.5~~$1.5 million for ~~each of~~ the six months ended December 31, 2023 and 2022, ~~and 2021.~~ respectively. The interest rate as of December 31, ~~2022~~2023 was ~~5.5%~~7.46% and as of December 31, ~~2021~~2022 was ~~1.86%~~5.50%.

As of December 31, ~~2022,~~2023, the Company did ~~not~~not have any outstanding balance against its ~~2019~~2023 Revolving Facility’s outstanding balance. The Company had ~~$60.2~~$135.5 million of availability under the ~~2019~~2023 Revolving Facility as of December 31, ~~2022.~~2023. During the three and six months ended December 31, 2023 the Company did not make any additional payments against its term loan facility other than the scheduled payments per the terms of the 2023 Credit Agreement. During the six months ended December 31, 2022, ~~and 2021,~~ the Company made an additional payment of ~~$30.0 million and $12.0~~$30.0 million, against its term loan facility ~~respectively.~~under the 2023 Credit Agreement.

The Company had ~~$14.8~~$14.5 million of outstanding letters of credit as of December 31, ~~2022.~~2023.

Commitments and Contingencies

~~Commitments and Contingencies~~

Purchase Commitments

The Company currently has arrangements with contract manufacturers and suppliers for the manufacture of its products. Those arrangements allow the contract manufacturers to procure long lead-time component inventory based upon a rolling production forecast provided by the Company. The Company is obligated to purchase long lead-time component inventory that its contract manufacturer procures in accordance with the forecast, unless the Company gives notice of order cancellation outside of applicable component ~~lead-times~~.lead-times. As of December 31, ~~2022,~~2023, the Company had commitments to purchase ~~$57.1~~$92.1 million of inventory.

Legal Proceedings

The Company may from time to time be party to litigation arising in the course of its business, including, without limitation, allegations relating to commercial transactions, business relationships, or intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Litigation in general, and intellectual property litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict.

In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. When a loss contingency is not both probable and reasonably estimable, the Company does not record a loss accrual. However, if the loss (or an additional loss in excess of any prior accrual) is at least reasonably possible and material, then the Company would disclose an estimate of the possible loss or range of loss, if such estimate can be made, or disclose that an estimate cannot be made. The assessment whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, involves a series of complex judgments about future events. Even if a loss is reasonably possible, the Company may not be able to estimate a range of possible loss, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel or unsettled legal theories or a large number of parties. In such cases, there is considerable uncertainty regarding the ultimate resolution of such matters, including the amount of any possible loss, fine or penalty. However, an adverse resolution of one or more of such matters could have a material adverse effect on the Company's results of operations in a particular quarter or fiscal year.

~~XR Communications, LLC d/b/a Vivato Technologies v. Extreme Networks, Inc.~~

On April 19, 2017, XR Communications, LLC (“XR”) (d/b/a Vivato Technologies) filed a patent infringement lawsuit against the Company in the Central District of California. The operative Second Amended Complaint asserts infringement of certain U.S. Patents based on the Company’s manufacture, use, sale, offer for sale, and/or importation into the United States of certain access points and routers supporting multi-user, multiple-input, multiple-output technology. XR seeks unspecified damages, on-going royalties, pre- and post-judgment interest, and attorneys’ fees. The Court dismissed the case without prejudice on January 4, 2022 and on April 18, 2022, entered final judgment in favor of the Company. XR filed a notice of appeal on May 9, 2022 and the Company and other defendants filed a response brief on November 7, 2022.

Orckit IP, LLC v. Extreme Networks, Inc., Extreme Networks Ireland Ltd., and Extreme Networks GmbH

On February 1, 2018, Orckit IP, LLC (“Orckit”) filed a patent infringement lawsuit against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. The lawsuit alleges direct and indirect infringement of the German portion of a patent (“EP ‘364”) based on the offer, distribution, use, possession and/or importation into Germany of certain network switches that are equipped with the ExtremeXOS operating system. Orckit is seeking injunctive relief, accounting, and an unspecified declaration of liability for damages and costs of the lawsuit. On January 28, 2020, the Court rendered a decision in the infringement case in favor of the Company. The matter is proceeding through the appellate process.

On April 23, 2019, Orckit filed an extension of the patent infringement complaint against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. With this extension, Orckit alleges infringement of the German portion of a second patent (“EP ‘077”) based on the offer, distribution, use, possession and/or importation into Germany of certain network switches that the Company no longer sells in Germany. Orckit is seeking injunctive relief, accounting and sales information, and a declaration of liability for damages as well as costs of the lawsuit. On October 13, 2020, the Court issued an infringement decision against the Company and granted Orckit the right to enforce thethe judgment against the Company, which Orckit has provided notification to the Company that it will enforce the ~~judgment~~.judgment. In the rendering of account, Orckit was informed that the products at issue were in end of sale status prior to the filing of the EP ‘077 complaint. The Company has appealed the infringement decision, and thethe matter is proceeding through the appellate ~~process~~process..

The Company filed a nullity action related to the EP ‘364 patent on May 3, 2018, and one related to the EP ‘077 patent on October 31, 2019, both in the Federal Patent Court in Munich. The Federal Patent Court in Munich found the EP ‘364 patent to be valid and the Company ~~has~~ filed an ~~appeal.~~appeal, which was dismissed on October 12, 2023. On October 25, 2022 the Federal Patent Court in Munich issued an opinion partially invalidating the EP ‘077 patent and the Company ~~has~~and Orckit have filed ~~an appeal.~~appeals.

SNMP Research, Inc. and SNMP Research International, Inc. v. Broadcom Inc., Brocade Communications Systems LLC, and Extreme Networks, Inc.

On October 26, 2020, SNMP Research, Inc. and SNMP Research International, Inc. (collectively, “SNMP”) filed a lawsuit against the Company in the Eastern District of Tennessee for copyright infringement, alleging that the Company was not properly licensed to use its software. SNMP is seeking actual damages and profits attributed to the infringement, as well as equitable relief. The Company filed a motion to transfer the case to the Northern District of California. The motion to dismiss was denied in part and denied without

prejudice in part. ~~The~~On March 2, 2023, SNMP filed an amended complaint adding claims against Extreme on additional products for copyright infringement, breach of contract, and fraud. On March 16, 2023, the Company ~~also~~ filed ~~and was granted,~~ a motion to ~~compel mediation. The parties conducted~~dismiss, challenging multiple claims from the amended complaint. On March 20, 2023, the Company filed a ~~mediation from January 19~~motion to ~~January 26, 2023.~~refer questions to the US Copyright Office on the invalidity of SNMP’s copyrights. The trial date has been set for ~~February 2023 has been rescheduled to January~~October 2024.

Mala Technologies Ltd. v. Extreme Networks GmbH, Extreme Networks Ireland Ops Ltd., and Extreme Networks, Inc.

On April 15, 2021, Mala Technologies Ltd. (“Mala”) filed a patent infringement lawsuit against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. The lawsuit alleges indirect infringement of the German portion of a patent (“EP ‘498”) based on the offer and sale in Germany of certain network switches equipped with the ExtremeXOS operating system. Mala is seeking injunctive relief, accounting, and an unspecified declaration of liability for damages and costs of the ~~lawsuit~~.lawsuit. On December 20, 2022, the trial court ruled that the Company did not infringe the EP ‘498 patent and dismissed Mala’s complaint entirely. Mala has filed an ~~appeal.~~appeal and the matter is proceeding through the appellate process.

The Company filed a nullity complaint against EP ‘498 with the German Federal Patent Court on September 24, ~~2021. This matter is still pending.~~2021 and a hearing date has been set for November 20, 2024.

Indemnification Obligations

Subject to certain limitations, the Company may be obligated to indemnify its current and former directors, officers, and employees. These obligations arise under the terms of its certificate of incorporation, its bylaws, applicable contracts, and applicable law. The obligation to indemnify, where applicable,, generally means that the Company is required to pay or reimburse, and in certain circumstances the Company has paid or reimbursed, the individuals’ reasonable legal expenses and possible damages and other liabilities incurred in connection with certain legal matters. The Company also procures Directors and Officers liability insurance to help cover its defense and/or indemnification costs, although its ability to recover such costs through insurance is uncertain. While it is not possible to estimate the maximum potential amount that could be owed under these governing documents and agreements due to the Company’s limited history with prior indemnification claims, indemnification (including defense) costs could, in the future, have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

Stockholders’ Equity

~~10.~~

~~Stockholders’ Equity~~

~~Stockholders’ Rights Agreement~~

On May 17, 2021, the Company entered into the Amended and Restated Tax Benefit Preservation Plan (the “2021 Tax Benefit Preservation Plan”), which amended and restated the Amended and Restated Rights Agreement between the Company and Computershare Shareholder Services LLC, as the rights agent. The 2021 Tax Benefit Preservation Plan was approved by stockholders of the Company at the annual meeting of stockholders held on November 4, 2021. The 2021 Tax Benefit Preservation Plan governs the terms of each right (“Right”) that has been issued with respect to each share of common stock of Extreme Networks. Each Right initially represents the right to purchase one one-thousandth of a share of the Company’s Preferred Stock.

The Company’s Board of Directors (the “Board”) adopted the 2021 Tax Benefit Preservation Plan to preserve the value of deferred tax assets, including net operating loss carry forwards of the Company, with respect to its ability to fully use its tax benefits to offset future income which may be limited if the Company experiences an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986 as a result of ordinary buying and selling of shares of its common stock. Following its review of the terms of the plan, the Board decided it was necessary and in the best interests of the Company and its stockholders to enter into the 2021 Tax Benefit Preservation Plan.

Equity Incentive Plan

The Compensation Committee of the Board unanimously approved an amendment to the Extreme Networks, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”) on September ~~12, 2022~~14, 2023 to increase the maximum number of available shares by ~~6.5~~5.0 million shares. The amendment was approved by the stockholders of the Company at the annual meeting of stockholders held on November ~~17, 2022.~~8, 2023.

Employee Stock Purchase Plan

The Compensation Committee of the Board unanimously approved an amendment to the 2014 Employee Stock Purchase Plan (the “ESPP”) on September 9, 2021 to increase the maximum number of shares that will be available for sale thereunder by 7.5 million shares. The amendment was approved by the stockholders of the Company at the annual meeting of stockholders held on November 4, 2021.

Common Stock Repurchases

On May 18, 2022, the Company announced the Board had authorized management to repurchase up to ~~$200.0~~$200.0 million of shares of the Company’s common stock over a three-year period commencing July 1, 2022 (as amended, the “2022 Repurchase Program”). Initially, under the 2022 Repurchase ~~program,~~Program, a maximum of ~~$25.0~~$25.0 million of shares was authorized to be repurchased in any quarter; however, on November 17, 2022, the Board increased the authorization to repurchase shares in any quarter from up to ~~$25.0~~$25.0 million of shares per quarter to up to ~~$50.0~~$50.0 million of shares per quarter. Purchases may be made from time to time in the open market or pursuant to a 10b5-1 plan.

During the three months ended December 31, 2023, the Company repurchased 1,485,005 shares of its common stock on the open market at a total cost of $25.0 million with an average price of $16.81 per share. During the six months ended December 31, 2023, the Company repurchased a total of 2,365,220 shares of its common stock on the open market at a total cost of $49.9 million with an average price of $21.08 per share. During the three and six months ended December 31, 2022, the Company repurchased a total of 2,578,175 shares of its common stock on the open market at a total cost of ~~$49.8~~$49.8 million with an average price of ~~$19.32~~$19.32 per share. During the three and six months ended December 31, 2021, the Company repurchased a total of 1,829,333 shares of its common stock on the open market at total cost of $25.0 million with an average price of $13.65 per share pursuant to a share repurchase authorization that was replaced by the 2022 Repurchase Program. As of December 31, ~~2022,~~2023, approximately ~~$150.2~~$50.3 million remains available for share repurchases under the 2022 Repurchase Program.

As a provision of the Inflation Reduction Act enacted in the U.S., the Company is subject to an excise tax on corporate stock repurchases, which is assessed as one percent of the fair market value of net corporate stock repurchases after December 31, 2022. The Company expects that the impact of the excise tax on net corporate stock repurchases will not be material for fiscal 2024.

10.

Employee Benefit Plans

~~11.~~

~~Employee Benefit Plans~~

Shares Reserved for Issuance

The Company had the following reserved shares of common stock for future issuance as of the dates noted (in thousands):


	December 31, 2022		June 30, 2022		December 31, 2023		June 30, 2023
2013 Equity Incentive Plan shares available for grant		9,764		11,430		12,634		9,995
Employee stock options and awards outstanding		10,830		7,616		8,875		10,038
2014 Employee Stock Purchase Plan		9,280		9,961		7,948		8,467
Total shares reserved for issuance		29,874		29,007		29,457		28,500

Share-based Compensation Expense

Share-based compensation expense recognized in the condensed consolidated financial statements by line-item caption is as follows (in thousands):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Cost of product revenues	$	499	$	303	$	873	$	613	$	464	$	499	$	947	$	873
Cost of service and subscription revenues		966		351		1,638		713
Cost of subscription and support revenues										749		966		1,615		1,638
Research and development		3,962		2,664		7,052		5,122		4,435		3,962		8,812		7,052
Sales and marketing		5,910		3,860		10,549		7,435		7,535		5,910		14,523		10,549
General and administrative		6,059		4,155		11,073		7,894		7,774		6,059		14,979		11,073
Total share-based compensation expense	$	17,396	$	11,333	$	31,185	$	21,777	$	20,957	$	17,396	$	40,876	$	31,185

Stock Options

The following table summarizes stock option activity for the six months ended December 31, ~~2022~~2023 (in thousands, except per share amount and contractual term):

Number of Shares

Weighted-Average Exercise Price Per Share

Weighted-Average Remaining Contractual Term (years)

Aggregate Intrinsic Value

Options outstanding at June 30, 2022

1,187

$
6.56

3.70

$
2,801

Granted

—

—

Exercised

—

—

Canceled

—

—

Options outstanding at December 31, 2022

1,187

$
6.56

3.20

$
13,948

Vested and expected to vest at December 31, 2022

1,187

$
6.56

3.20

$
13,948

Exercisable at December 31, 2022

1,068

$
6.55

3.14

$
12,562


	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Options outstanding at June 30, 2023		1,187		$	6.56		2.70	$	23,136
Granted		—			—
Exercised		(57	)		6.40
Canceled		—			—
Options outstanding at December 31, 2023		1,130		$	6.57		2.22	$	12,513
Vested and expected to vest at December 31, 2023		1,130		$	6.57		2.22	$	12,513
Exercisable at December 31, 2023		1,130		$	6.57		2.22	$	12,513

The fair value of each stock option grant under the 2013 Plan is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free interest rate is based upon the estimated life of the option and the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock. There were no stock options granted during the ~~three and~~ six months ended December 31, ~~2022~~2023 and ~~2021. There were no stock options exercised during the three and six months ended December 31,~~ 2022.

Stock Awards

Stock awards may be granted under the 2013 Plan on terms approved by the Compensation Committee of the Board. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance-condition or market-condition RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria or market conditions. The Company recognizes compensation expense on the stock awards over the vesting period based on the awards’ fair value as of the date of grant. The Company does not estimate forfeitures, but accounts for them as incurred.

The following table summarizes stock award activity for the six months ended December 31, ~~2022~~2023 (in thousands, except grant date fair value):

	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Value
Non-vested stock awards outstanding at June 30, 2022		6,429		$	9.57
								Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Value
Non-vested stock awards outstanding at June 30, 2023									8,851		$	14.25
Granted		6,186			14.50				3,553			29.30
Released		(2,731	)		8.30				(4,114	)		12.57
Canceled		(241	)		11.31				(545	)		17.51
Non-vested stock awards outstanding at December 31, 2022		9,643		$	13.05	$	176,564
Stock awards expected to vest at December 31, 2022		9,643		$	13.05	$	176,564
Non-vested stock awards outstanding at December 31, 2023									7,745		$	21.81	$	168,918
Stock awards expected to vest at December 31, 2023									7,745		$	21.81	$	168,918

The RSUs granted under the 2013 Plan vest over a period of time, generally one to three years, and are subject to participant's continued service to the ~~Company~~Company.. The stock awards granted during the six months ended December 31, ~~2022~~2023 included ~~1.4~~0.6 million RSUs including the market condition awards discussed below to the named executive officers and directors.

Market Condition Awards

During the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Compensation Committee of the Board granted ~~1.0~~0.8 million and ~~0.7~~1.0 million RSUs, respectively, with vesting based on market conditions (“MSU”) to certain of the Company’s executive officers. ~~These~~The MSUs granted during the six months ended December 31, 2023 included 0.5 million MSUs subject to total shareholder return (“TSR”) and 0.3 million MSUs subject to certain stock price targets. The MSUs granted during the six months ended December 31, 2022 were subject to TSR.

The TSR MSUs vest based on the Company’s ~~total shareholder return (“TSR”)~~TSR relative to the TSR of the Russell 2000 Index (“Index”). The MSU award represents the right to receive a target number of shares of common stock of up to ~~150%~~150% of the original grant, as indicated in the table below. The MSUs vest based on the Company’s TSR relative to the TSR of the Index over performance periods of three years from the grant date, subject to the grantees’ continued service through the certification of performance.


Level	Relative TSR	Shares Vested
Below Threshold	TSR is less than the Index by more than 37.5 percentage points	0%
Threshold	TSR is less than the Index by 37.5 percentage points	25%
Target	TSR equals the Index	100%
Maximum	TSR is greater than the Index by 25 percentage points or more	150%

Total shareholder return is calculated based on the average closing price for the 30-trading days prior to the beginning and end of the performance periods. Performance is measured based on three periods, with the ability for up to one-third of target shares to vest after years one and two and the ability for up to the maximum of the full award to vest based on the full three-year TSR less any shares vested based on one- and two-year periods. Linear interpolation is used to determine the number of shares vested for achievement between target levels.

The grant date fair value of each MSU was determined using the Monte Carlo simulation model. The weighted-average grant-date fair value of the TSR MSUs granted during the six months ended December 31, ~~2022~~2023 was ~~$16.57~~$34.09 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of ~~67%~~50%, risk-free interest rate of ~~3.12%~~4.48%, no expected dividend yield, expected term of three years and possible future stock prices over the performance period based on the historical stock and market prices. The weighted-average grant-date fair value of the TSR MSUs granted during the six months ended December 31, 2022 was $16.57 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of 67%, risk-free interest rate of 3.12%, no expected dividend yield, expected term of three years, and possible future stock prices over the performance period based on the historical stock and market prices. The Company recognizes the expense related to these MSUs on a graded-vesting method over the estimated term.

The stock price target MSUs vest upon the achievement of a certain stock price target over the defined performance period. The stock price target shall be deemed as achieved if the average closing stock price over any thirty consecutive trading days during the period from grant date through the third anniversary of the grant date equals or exceeds the price target of $41.38 for the initial performance period. Upon satisfaction of the initial stock price target, 50% of the target shares will vest on the 3rd anniversary of the grant date and the remaining 50% will vest on the 4th anniversary of the grant date, subject to employees continued service through the applicable vesting dates. If the units are not earned on the last day of initial performance period, the units will remain outstanding and be eligible to be earned if the average closing stock price over any thirty consecutive trading days equals or exceeds the price target of $46.96.

The grant date fair value of these stock price target MSUs was determined using the Monte Carlo simulation model. The weighted-average grant-date fair value of ~~the~~these stock price target MSUs granted during the six months ended December 31, ~~2021~~2023 was ~~$12.69~~$28.80 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of ~~66%~~63%, risk-free interest rate of ~~0.44%~~4.45%, no expected dividend yield, expected term of three years ~~and~~based on possible future stock prices over the performance period based on the historical stock ~~and market~~ prices. The Company recognizes the expense related to these MSUs on a graded-vesting method over the estimated term.

Employee Stock Purchase Plan

The fair value of each share purchase option under the ESPP is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of the ESPP represents the term of the offering period of each option. The risk-free interest rate is based ~~upon~~on the estimated life and on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s common stock.

There were ~~0.7~~0.5 million and ~~1.0~~0.7 million shares issued under the ESPP during the six months ended December 31, 2023 and 2022, ~~and 2021,~~ respectively. The following assumptions were used to determine the grant-date fair values of the ESPP shares during the following periods:


	Employee Stock Purchase Plan
	Six Months Ended
	December 31, 2023			December 31, 2022
Expected term	0.5 years			0.5 years
Risk-free interest rate		5.54	%		3.12	%
Volatility		42	%		60	%
Dividend yield		—	%		—	%

Employee Stock Purchase Plan

Three Months Ended

December 31,
2022

December 31,
2021

Expected life

0.5 years

0.5 years

Risk-free interest rate

3.12
%

0.05
%
Volatility

60
%

52
%
Dividend yield

—
%

—
%

The weighted-average grant-date fair value of shares under the ESPP during the six months ended December 31, 2023 and 2022 was $8.09and ~~2021 was $4.38 and $3.18~~$4.38 per share, respectively.

11.

Information about Segments and Geographic Areas

~~12.~~

~~Information about Segments and Geographic Areas~~

The Company operates in one segment, the development and marketing of network infrastructure equipment and related software. The Company conducts business globally and is managed geographically. Revenues are attributed to a geographical area based on the billing address of customers. The Company operates in three geographical areas: Americas, EMEA, and APAC. The Company’s chief operating decision maker, who is its ~~CEO,~~Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

See Note 3, Revenues, for the Company’s revenues by geographic regions and channel based on the customer’s billing address.

The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):


	December 31, 2023		June 30, 2023
Americas	$	140,161	$	124,375
EMEA		37,335		35,175
APAC		11,313		11,244
Total long-lived assets	$	188,809	$	170,794

December 31,
2022

June 30,
2022

Americas

$
122,896

$
130,715

EMEA

35,837

36,792

APAC

12,283

11,770

Total long-lived assets

$
171,016

$
179,277

12.

Derivatives and Hedging

~~13.~~

~~Derivatives and Hedging~~

Interest Rate Swaps

The Company is exposed to interest rate risk on its debt. The Company ~~enters~~may enter into interest rate swap contracts to effectively manage the impact of fluctuations of interest rate changes on its outstanding debt which ~~has a~~may have floating interest rate. The Company does not enter into derivative contracts for trading or speculative purposes.

At the inception date of the derivative contract, the Company performs an assessment of these contracts and has designated these contracts as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, by performing qualitative and quantitative ~~assessment,~~assessments of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow

hedge are recorded in other comprehensive income (loss). When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively. In accordance with ASC 815 ~~“Derivatives~~Derivatives and Hedging”, the Company may prospectively discontinue the hedge accounting for an existing hedge if the applicable criteria are no longer met, the derivative instrument expires, is sold, terminated or exercised or if the Company removes the designation of the respective cash flow hedge. In those circumstances, the net gain or loss remains in ~~accumulated~~“Accumulated other comprehensive ~~income (loss)~~loss” and is reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings, unless the forecasted transaction is no longer probable in which case the net gain or loss is reclassified into earnings immediately.

During the fiscal year ended June 30, 2020, the Company entered into multiple interest rate swap contracts, designated as cash flow hedges, to hedge the variability of cash flows in interest payments associated with the Company’s various tranches of floating-rate debt. As of December 31, 2023, the Company did not have any outstanding interest rate swaps contracts. As of December 31, 2022, ~~and 2021,~~ the ~~total~~ notional amount of these interest rate swaps ~~were $75.0~~was $75.0 million, ~~and $200.0 million, respectively,~~ and had maturity dates through April 2023. As of December 31, 2022, ~~and 2021,~~ these contracts had unrealized gains of ~~$0.8~~$0.8 million, and ~~unrealized losses of $0.3 million, respectively, and are~~were recorded in “Accumulated other comprehensive ~~income (loss)”~~loss” with the associated asset in “Prepaid expenses and other current assets” ~~or with the associated liability in “Other accrued liabilities,” respectively,~~, in the condensed consolidated balance sheets. Cash flows associated with periodic settlements of interest rate swaps are classified as operating activities in the condensed consolidated statement of cash flows. Realized gains and losses are recognized as they accrue in interest expense. Amounts reported in ~~accumulated~~“Accumulated other comprehensive ~~income (loss)~~loss” related to these cash flow hedges are reclassified to interest expense over the life of the swap contracts. The Company estimates that $0.8 million will be reclassified to interest income over the next twelve months. The classification and fair value of these cash flow hedges are discussed in Note 6, Fair Value Measurements.

Foreign Exchange Forward Contracts

The Company uses derivative financial instruments to manage exposures to foreign currency that may or may not be designated as hedging instruments. The Company’s objective for holding derivatives is to use the most effective methods to minimize the impact

of these exposures. The Company does not enter into derivatives for speculative or trading purposes. The Company enters into foreign exchange forward contracts primarily to mitigate the effect of gains and losses generated by foreign currency transactions related to certain operating expenses and re-measurement of certain assets and liabilities denominated in foreign currencies.

For foreign exchange forward contracts not designated as hedging instruments, the fair value of the Company’s derivatives in a gain position are recorded in “Prepaid expenses and other current assets” and derivatives in a loss position are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. Changes in the fair value of derivatives are recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. As of December 31, ~~2022~~2023 and ~~2021,~~2022, foreign exchange forward contracts not designated as hedging instruments had a total notional principal ~~amounts~~amount of ~~$11.1~~$15.6 million and ~~$20.4~~$11.1 million, respectively. These contracts have maturities of 6040 days or less. ~~The~~During the three months ended December 31, 2023 and 2022, the net gains and losses recorded in the condensed consolidated statement of operations from these contracts ~~during~~were net gains of $0.4 million and $0.1 million, respectively. During the ~~three and~~ six months ended December 31, 2023 and 2022 the net gains and losses recorded in the condensed consolidated statement of operations were net ~~gain~~gains of ~~$0.1~~$0.3 million and net ~~loss of $0.4 million, respectively, and during the three and six months ended December 31, 2021 there were net~~ losses of ~~less than $0.1 million and $0.2~~$0.4 million, respectively. Changes in the fair value of these foreign exchange forward contracts are offset largely by remeasurement of the underlying assets and liabilities.

For foreign exchange forward contracts designated as hedging instruments, gains and losses arising from these contracts are recorded as a component of “accumulated other comprehensive income (loss)” on the condensed consolidated balance sheets. The hedging gains and losses in “accumulated other comprehensive income (loss)” are subsequently reclassified to expenses, as applicable, in the condensed consolidated statements of operations in the same period in which the underlying transactions affect the Company’s earnings. As of December 31, 2022 and 2021, ~~foreign exchange forward contracts designated as hedging instruments had the notional amount of $5.5 million and $5.7 million, respectively. These contracts have maturities of less than twelve months,~~ ~~and unrealized gains and losses arising from these contracts designated as hedging instruments are recorded as a component of “accumulated other comprehensive income (loss)”~~. ~~As of December 31, 2022 and 2021, these contracts had unrealized gain of $0.4 million and unrealized loss of $0.3 million respectively.~~

For the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized total foreign currency ~~gain~~losses of $0.7 million and total foreign currency gains of less than ~~$0.1 million and losses of less than $0.1~~$0.1 million, respectively, and for the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized total foreign currency losses of $0.3 million and total foreign currency gains of ~~$0.8 million and $0.3~~$0.8 million, respectively, related to the change in fair value of foreign currency denominated assets and liabilities.

13.

Restructuring and Related Charges

~~14.~~

~~Restructuring and Related Charges~~

The Company recorded ~~$0.5~~$9.2 million and ~~$1.0~~$11.9 million of restructuring and related charges during the three and six months ended December 31, 2023, respectively, which primarily related to the restructuring plans as noted below.

During the second quarter of fiscal 2024, the Company executed a global reduction-in-force plan to rebalance its workforce to create greater efficiency and improve execution, in alignment with the Company's business and strategic priorities, while reducing its ongoing operating expenses to address reduced revenue and macro-economic conditions (the “Q2 2024 Plan”). During the three months ended December 31, 2023, the Company recorded restructuring charges of approximately $8.8 million related to the Q2 2024 Plan, which primarily consisted of severance and benefits expenses. The Company expects to complete this Plan by the end of fiscal 2024 and expects to incur an additional $4.5 million in charges by the end of fiscal 2024.

During the first quarter of fiscal 2024, the Company initiated a reduction-in-force plan to rebalance the workforce to create greater efficiency and improve execution in alignment with the Company's business and strategic priorities (the “Q1 2024 Plan”). It consisted primarily of workforce reduction to drive productivity in research and development, sales and marketing and provide efficiency across operations and general & administrative functions. During the three and six months ended December 31, 2023, the Company incurred charges of approximately $0.2 million and $2.9 million, respectively related to the Q1 2024 Plan. As of December 31, 2023, the plan is substantially completed.

During the third quarter of fiscal 2023, the Company initiated a restructuring plan to transform its business infrastructure and reduce its 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. This move is expected to help reduce the cost of operating the Company's labs. During the three months and six months ended December 31, 2023, the Company incurred restructuring charges of approximately $0.2 million primarily for move costs. The Company expects that the project will take about 9 to 12 months from December 31, 2023 to complete, and expects to incur charges of approximately $10.0 million throughout this period, primarily for asset disposals, contractor costs, severance, relocation, and other non-recurring fees.

The Company recorded $0.5 million and $1.0 million of restructuring and related charges during the three and six months ended December 31, 2022, ~~respectively, which included additional facilities charges related to previously impaired facilities.~~As of June 30, 2022, the Company has completed all the restructuring activities under the 2020 Plan noted below and no restructuring liabilities remain in the accompanying condensed consolidated balance sheets.

~~The Company recorded $0.3 million and $0.6 million of restructuring and related charges during the three and six months ended December 31, 2021~~ which primarily included additional ~~facility related~~facilities expenses related to previously impaired facilities. The Company had minimal activity related to the 2020 Plan during the three months ended December 31, 2021. Severance and benefit restructuring charges consisted primarily of employee severance and benefit expenses incurred under the reduction-in-force action initiated in the third quarter of fiscal 2020 (the “2020 Plan”) to reduce operating costs and enhance financial flexibility as a result of disruptions caused by the COVID-19 global pandemic. With the reduction and realignment of the headcount under the 2020 Plan, the Company relocated certain of its lab test equipment to third-party consulting companies. The Company incurred $9.6 million of charges under the 2020 Plan through June 30, 2022.

Restructuring liabilities ~~related to severance, benefits, and equipment relocation obligations~~ are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. As of December 31, ~~2021,~~2023, the restructuring liability was ~~less than $0.1 million.~~$6.2 million, which primarily related to the Q2 2024 Plan.

14.

Income Taxes

~~15.~~

~~Income Taxes~~

For the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded an income tax provision of ~~$2.6~~$3.1 million and ~~$1.8~~$2.6 million, respectively. For the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded an income tax provision of ~~$4.4~~$7.6 million and ~~$3.9~~$4.4 million, respectively.

The income tax provisions for the three and six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, consisted of (1) taxes on the income of the Company’s foreign subsidiaries, (2) ~~foreign withholding taxes, (3)~~ state taxes in jurisdictions where the Company has no remaining state net operating losses (“NOLs”), (3) foreign withholding taxes, and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the wireless local area network business from

Zebra Technologies Corporation, the Campus Fabric Business from Avaya and the Data Center Business from Brocade. In addition, the tax provision for the three and six months ended December 31, 2023, includes US Federal income tax of $0.2 million and $1.6 million, respectively. The interim income tax provisions for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~2022 were calculated using the discrete effective tax rate method as allowed by ASC 740-270-30-18, Income Taxes – Interim Reporting. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as (i) the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings on a jurisdictional basis and (ii) the Company’s ongoing assessment that the recoverability of certain U.S. and Irish deferred tax assets is not more likely than not.

The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets as well as a portion of the deferred tax assets in Ireland. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence to determine whether it is “more likely than not” that deferred tax assets are recoverable including past operating results, estimates of future taxable income, changes to enacted tax laws, and the feasibility of tax planning strategies; such assessment is required on a jurisdiction-by-jurisdiction basis. The ~~Company’s~~Company's inconsistent earnings in recent periods, including ~~a cumulative loss over the last three~~historical losses, tax attributes expiring unutilized in recent years ~~coupled with its difficulty in forecasting future revenue trends by jurisdiction~~ and the cyclical nature of ~~its~~the Company's business ~~represent~~provides sufficient negative evidence tothat require a full valuation ~~allowances~~allowance against its U.S. federal and state net deferred tax assets as well as a portion of the deferred tax assets in Ireland. These valuation allowances will be evaluated periodically and can be reversed partially or in whole if business results and the economic environment have sufficiently improved to support realization of some or all of the Company's deferred tax assets. In the event the Company changes its determination as to the amount of deferred tax assets that can be realized, it will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

On September 14, 2021, the Company completed its acquisition of Ipanema. This acquisition is treated as a non-taxable stock acquisition and, therefore, Extreme will have carryover tax basis in the assets and liabilities acquired. A deferred tax liability has been established for the non-deductible amortization of the associated intangibles under US GAAP.

The Company had ~~$18.4~~$18.3 million of unrecognized tax benefits as of December 31, ~~2022.~~2023. If fully recognized in the future, ~~$0.3~~$0.2 million would impact the effective tax rate and ~~$18.1~~$18.1 million would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance with no impact to the effective tax rate. The Company does not anticipate any events to occur during the next twelve months that would materially reduce the unrealized tax benefit as currently stated in the Company’s condensed consolidated balance sheets.

The Company’s policy is to accrue interest and penalties related to the underpayment of income taxes as a component of tax expense in the accompanying condensed consolidated statements of operations.

In general, the Company’s U.S. federal income tax returns are subject to examination by tax authorities for fiscal years 2001 forward due to NOLs and the Company’s state income tax returns are subject to examination for fiscal years 2000 and forward due to NOLs. The Company is not currently under audit for income tax purposes in any material jurisdictions.

15.

Net Income Per Share

~~16.~~

~~Net Income Per Share~~

Basic net income per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted-average number of shares of common stock used in the basic net income per share calculation plus the dilutive effect of shares subject to repurchase, options and unvested RSUs.

The following table presents the calculation of net income per share of basic and diluted (in thousands, except per share data):


	Three Months Ended				Six Months Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Net income	$	3,988	$	17,931	$	32,664	$	30,516
Weighted-average shares used in per share calculation – basic		128,987		130,465		128,885		130,377
Options to purchase common stock		757		717		836		635
Restricted stock units		1,579		3,164		2,951		2,760
Employee Stock Purchase Plan shares		191		107		114		61
Weighted-average shares used in per share calculation – diluted		131,514		134,453		132,786		133,833

Net income per share – basic and diluted
Net income per share – basic	$	0.03	$	0.14	$	0.25	$	0.23
Net income per share – diluted	$	0.03	$	0.13	$	0.25	$	0.23

Three Months Ended

Six Months Ended

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Net income

$
17,931

$
13,341

$
30,516

$
26,037

Weighted-average shares used in per share calculation – basic

130,465

129,403

130,377

128,863

Options to purchase common stock

717

702

635

677

Restricted stock units

3,164

3,340

2,760

3,795

Employee Stock Purchase Plan shares

107

176

61

88

Weighted-average shares used in per share calculation – diluted

134,453

133,621

133,833

133,423

Net income per share – basic and diluted

Net income per share – basic

$
0.14

$
0.10

$
0.23

$
0.20

Net income per share – diluted

$
0.13

$
0.10

$
0.23

$
0.20

The following securities were excluded from the computation of net income per diluted share of common stock for the periods presented as their effect would have been anti-dilutive (in thousands):


	Three Months Ended				Six Months Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Restricted stock units		2,336		437		1,623		306
Employee Stock Purchase Plan shares		560		678		445		529
Total shares excluded		2,896		1,115		2,068		835

Three Months Ended

Six Months Ended

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Restricted stock units

437

7

306

8

Employee Stock Purchase Plan shares

678

764

529

620

Total shares excluded

1,115

771

835

628

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q for the second quarter ended December 31, ~~2022~~2023 (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular, our expectations regarding market demands, customer requirements and the general economic environment, future results of operations, and other statements that include words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions. These forward-looking statements involve risks and uncertainties. We caution investors that actual results may differ materially from those projected in the forward-looking statements as a result of certain risk factors identified in the section entitled “Risk Factors” in this Report, our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2022,~~2023, our Quarterly Report on Form 10-Q for the first quarter ended September 30, 2023, and other filings we have made with the Securities and Exchange Commission. These risk factors include, but are not limited to: risks related to supply chain disruptions; fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; our effectiveness in controlling expenses; the possibility that we might experience delays in the development or introduction of new technology and products; customer response to our new technology and products; fluctuations in the global economy, including as a result of political, social, economic, currency and regulatory ~~factors (such as the outbreak of COVID-19);~~factors; risks related to pending or future litigation; a dependency on third parties for certain components and for the manufacturing of our products and our ability to receive the anticipated benefits of acquired businesses.

Business Overview

The following discussion is based upon our unaudited condensed consolidated financial statements included elsewhere in this Report. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the manufacturing and shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory and service parts, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors, including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. For further information about our critical accounting policies and estimates, see the “Critical Accounting Policies and Estimates” section included in this “Management's Discussion and Analysis of Financial Condition and Results of Operations.”

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.~~equipment, software and cloud-based management solutions. 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 IT Operations and analytics to help customers deliver secure connectivity at the edge of the network, speed cloud deployments, and uncover actionable insights ~~saves~~to save time, ~~lowers~~lower costs and ~~streamlines~~streamline operations. Extreme is currently managing more than two and a half million devices in the cloud.

Extreme has been pushing the boundaries of networking technology since 1996, driven by a higher purpose of helping our customers connect beyond the network. Extreme’s cloud networking technologies provide flexibility and scalability in deployment, management, and licensing of networks globally. Our global footprint provides service to ~~more than~~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.

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. To accomplish this, they are adopting new Information Technology (“IT”) delivery models and applications that require fundamental network alterations and enhancements spanning from the access edge to the data center. 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. Managing networks from cloud-based applications where customers can run their entire end-to-end networks, from wired or wireless infrastructure to SD-WAN, while ensuring full IT management of the business becomes critical. In addition, Machine Learning (“ML”) and Artificial Intelligence (“AI”) technologies have the potential to vastly improve the network experience in ~~the post-pandemic~~today's world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network. 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 ~~faced with~~ managing more ~~endpoints. With that~~endpoints which comes with a host of challenges. This continued expansion creates issues such ~~as:~~as a higher risk of cyberattacks and a need for more bandwidth as a result of an increase in applications running across the ~~network which creates a need for more bandwidth.~~network.

~~With~~24

Network complexity manifests itself in the form of more endpoints to manage, ~~application~~more applications to monitor, and more services that rely on the network for service delivery and enablement. When performance suffers, and the tug on internal systems and IT staff becomes more ~~intense. There are more alarms, more IT tickets and~~intense, technology is often ~~time technology that is~~ being overworked. ~~Most times they have little visibility into the~~Resolving network problems expeditiously and identifying their root cause ~~of the problem and are left trying to pinpoint where, when and how these issues exist. Meanwhile,~~can improve organizational productivity ~~suffers.~~and result in higher performance of operations.

We believe that the network has never been more vital ~~and strategic~~ than it is today. As administrators grapple with more data, coming from more places, more connected devices, and more ~~Software-as-a-service~~Software-as-a-Service (“SaaS”) based applications, the cloud is fundamental to ~~establishing~~managing and maintaining a ~~new normal.~~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.

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. In either case, the network infrastructure must adapt to this new dynamic environment. Intelligence and automation are key if enterprises are to derive maximum benefit from their cloud deployments. With automation applications becoming increasingly critical in manufacturing, warehousing, logistics, healthcare and other key industries, we believe ~~this~~these changes will continue to create demand for networking technology to serve as a foundation to run these services.

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.

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. 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 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”), ~~and~~ SD-WAN solutions and management, automation, and elements of the Secure Access Services Edge (“SASE”) market to be ~~approximately $33~~over $47 billion, and growing at approximately 12% annually over the next ~~three~~five years. This comprises ~~of $22~~over $35 billion for ~~campus~~ networking, ~~$4.6 billion for 5G~~infrastructure spanning enterprise and service ~~available market in 5G and data centers, for which Extreme is targeting growing to approximately $50 - $100 million per year over the next three to five years, and~~provider (largely 5G) applications, a ~~$2.2~~$4 billion SD-WAN ~~market. We~~market, and we also participate in $8 billion of the ~~$4 billion networking software~~served addressable market for ~~solutions such as cloud-based network management, network automation, on-premises network management, and other~~ networking ~~related~~ software.

The Extreme Strategy

~~Extreme makes networking intelligent, flexible, and most importantly~~We are driven to help our customers find new ways to deliver better outcomes. Connectivity is just the foundation. We make the network a strategic asset. The combination of our solutions provides the connectivity, bandwidth, performance and insights that organizations of all sizes need to move their ~~organization~~organizations forward. IT leaders are now tasked with ensuring the global, hybrid workforce is functional and successful no matter where they are, and ~~ensure~~ensuring people can work wherever they want. ~~The data that sits in~~

We help identify and solve business challenges. We simplify and improve the ~~network provides a goldmine of insights that guide~~way our customers ~~to find~~work and are relentlessly focused on finding new ways to drive better outcomes.

Cloud networking management allows customers to gain real-time visibility and insights into areas such as ~~app~~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.

Extreme has recognized that the way we and our customers communicate has changed and ~~has~~ given rise to these distributed enterprise environments, or in other words, the Infinite Enterprise, which has three ~~key~~ tenets:

•

Infinitely distributed connectivity is the enterprise-grade reliable connectivity that allows users to connect anywhere, from anywhere. It is always present, available and assured, while being secure and manageable.

•

Scalable cloud allows administrators to harness the power of the cloud to efficiently onboard, manage, orchestrate, troubleshoot the network, and find data and insights of the distributed connectivity at their pace in their way.

•

Consumer-centric experience designed to deliver a best-in-class experience to users who consume network services.

•

~~Infinitely distributed connectivity~~ ~~is the enterprise-grade reliable connectivity that allows users to connect to anywhere, from anywhere. It is always present, available and assured, while being secure and manageable.~~

•

~~Scalable cloud~~ allows administrators to harness the power of the cloud to efficiently onboard, manage, orchestrate, troubleshoot the network, and find data and insights of the distributed connectivity at their pace in their way.

•

~~Consumer-centric experience~~ ~~designed to deliver a best-in-class experience to users who consume network services.~~

Extreme’s broad product, solutions and technology portfolio supports these three tenets and continues to innovate and evolve them to help businesses succeed.

Key elements of Extreme’s strategy and differentiation include:

•

Creating effortless networking solutions that allow all of us to advance. We believe that progress is achieved when we connect—allowing us to learn, understand, create, and grow. 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. Cloud networking is estimated to be a $8 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 14% annually over the next five years, according to data from the 650 Group. Cloud management technology has evolved significantly over the past decade. We believe we deliver a combination of innovation, reliability, and security with the leading end-to-end cloud management platform powered by ML and AI that spans from the Internet of Things (“IoT”) edge to the enterprise data center. Key characteristics of our cloud architecture include:

A robust cloud management platform that delivers visibility, intelligence, and assurance from the IoT edge to the network core.

Cloud Choice for customers: Our cloud networking solution is available on all major cloud providers (Amazon Web Services (“AWS”), Google Cloud Platform (“GCP”) and Microsoft Azure).

Consumption Flexibility: Offer a range of financing and network purchase options. 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.

“No 9s” Reliability and Resiliency to ensure business continuity for our customers.

Extreme Cloud IQ cloud platform conforms to ISO/ IEC 27017, is certified by DQS to ISO/IEC 27001 and ISO/IEC 27701 by the International Standards Organization (“ISO”), and is CSA STAR certified.

•

Offer customers choice: public or private cloud, or on-premises. We leverage the cloud where it makes sense for our customers and provide on-premises solutions where customers need it and also have a solution for those who want to harness the power of both. Our hybrid approach gives our customers options to adapt the technology to their business. At the same time, all of our solutions have visibility, control and strategic information built in, all tightly integrated with a single view across all of the installed products. Our customers can understand what is going on across their network and applications in real time – who, when, and what is connected to the network, which is critical for bring your own device (“BYOD”) and IoT usage.

•

Highest value of cloud management subscriptions. ExtremeCloud IQ Pilot provides our customers with four key applications enabling organizations to eliminate overlays.

Extreme AirDefense™ is a comprehensive wireless intrusion prevention system ("WIPS") that simplifies the protection, monitoring and security of wireless networks. With the added Bluetooth and Bluetooth low energy intrusion prevention, network administrators can address growing threats against Bluetooth and Bluetooth low energy devices.

ExtremeLocation™ delivers proximity, presence and location-based services for advanced contact tracing in support of the location-intelligent enterprise.

ExtremeGuest™ is a comprehensive guest engagement solution that enables IT administrators to use analytical insights to engage visitors with personalized engagements.

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. Extreme offers universal platforms which support multiple deployment use cases, providing flexibility and investment protection.

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.

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.

Universal licensing with one portable management license for any device and for any type of management. 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. They make the underlying network much easier to design, implement, manage, and troubleshoot.

•

End-to-End Portfolio. 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. 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. 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. Our technological leadership is based on innovative switching, routing and wireless products, the depth and focus of our market experience, and our operating systems- the software that runs on all of our networking products. Our products reduce operating expenses for our customers and enable a more flexible and dynamic network environment that will help them meet the upcoming demands of IoT, mobile, and cloud.

•

Expand Wi-Fi technology leadership. Wireless is today’s network access method of choice, and every business must deal with scale, density, and BYOD challenges. Wired and wireless networks are changing as the explosion of mobile and IoT devices increase the demand for high-performance, transparent, and always-on wired to wireless 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. 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. 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, UZTNA policy enforcement, and AIOps management platform with Explainable ML insights.

•

Offer a superior quality of experience. Our network-powered application analytics provide actionable business insights by capturing and analyzing context-based data about the network and applications to deliver meaningful intelligence about applications, users, locations, and devices. With an easy-to-comprehend dashboard, our applications help businesses turn their network into a strategic business asset that helps executives make faster and more effective decisions.

•

Expand market penetration by targeting high-growth market segments. Within the campus, we focus on the mobile user, leveraging our automation capabilities and tracking WLAN growth. Our data center approach leverages our product portfolio to address the needs of public and private cloud data center providers. We believe that the cloud networking compound annual growth rate will continue to outpace the compound annual growth rate for on-premises managed networking. Our focus is on expanding our technology foothold in the critical cloud networking segment to accelerate not only cloud management adoption, but also subscription-based licensing consumption.

•

Leverage and expand multiple distribution channels. We distribute our products through select distributors, a large number of resellers and system-integrators worldwide, as well as several large strategic partners. We maintain a field sales force to support our channel partners and to sell directly to certain strategic accounts. As an independent networking vendor, we seek to provide products that, when combined with the offerings of our channel partners, create compelling solutions for end-user customers.

•

Maintain and extend our strategic relationships. We have established strategic relationships with a number of industry-leading vendors to both provide increased and enhanced routes to market, and collaboratively develop unique solutions.

•

Expand our reach with ExtremeCloud SD-WAN. ExtremeCloud SD-WAN is a software-defined wide area networks solution offered as an all-inclusive subscription, which includes hardware, the cloud-based SD-WAN service, support and maintenance, and customer success support. This helps customers reduce total cost of ownership as they deliver quality user experience for applications used in site-to-site and site-to-cloud environments. This solution detects and optimizes applications automatically and can apply performance-based dynamic WAN selection for quality and reliability. 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.

Results of Operations

•

~~Creating effortless networking solutions that allow all of us to advance.~~ We believe that progress is achieved when we connect—allowing us to learn, understand, create, and grow. 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.~~ 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 650 Group Market Research. Cloud management technology has evolved significantly over the past decade. We believe we deliver a combination of innovation, reliability, and security with the leading end-to-end cloud management platform powered by ML and AI that spans from the Internet of Things (“IoT”) edge to the enterprise data center. Key characteristics of our cloud architecture include:

~~A robust cloud management platform that delivers visibility, intelligence, and assurance from the IoT edge to the core.~~

~~Cloud Choice for customers: Our cloud networking solution is available on all major cloud providers (Amazon Web Services (“AWS”), Google Cloud Platform (“GCP”) and Microsoft Azure).~~

~~Enhanced Network Data plans to improve an organization’s ability to make smarter, more effective business decisions.~~

Consumption Flexibility: Offer a range of financing and network purchase options. Our value-based subscription tiers (including Connect, Navigator and Pilot) provide customers with flexibility to grow as they go, 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.~~

~~“No 9s” Reliability and Resiliency to ensure business continuity for our customers.~~

•

~~Offer customers choice: public or private cloud, or on-premises.~~ We leverage the cloud where it makes sense for our customers and provide on-premises solutions where customers need them and also have a solution for those who want to harness the power of both. Our hybrid approach gives our customers options to adapt the technology to their business. At the same time, all of our solutions have visibility, control and strategic information built in, all tightly integrated with a single view across all of the installed products. Our customers can understand what is going on across their network and applications in real time – who, when, and what is connected to the network, which is critical for bring your own device (“BYOD”) and IoT usage.

•

~~Highest value of cloud management subscriptions.~~ ~~ExtremeCloud IQ Pilot provides our customers with four key applications enabling organizations to eliminate overlays.~~

Extreme AirDefense™ is a comprehensive wireless intrusion prevention system that simplifies the protection, monitoring and security of wireless networks. With the added Bluetooth and Bluetooth low energy intrusion prevention, network administrators can address growing threats against Bluetooth and low energy devices.

~~ExtremeLocation™ delivers proximity, presence and location-based services for advanced contact tracing in support of the location-intelligent enterprise.~~

~~ExtremeGuest™ is a comprehensive guest engagement solution that enables IT administrators to use analytical insights to engage visitors with personalized engagements.~~

~~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.~~ ~~Extreme offers universal platforms which support multiple deployment use cases, providing flexibility and investment protection.~~

~~Universal switches (5720/5520/5420/5320)~~ ~~support fabric or traditional networking with a choice of cloud or on-premises (air-gapped or cloud connected) management.~~

~~Universal WiFi 6/6E Aps (300/400, 5000 series)~~ ~~support campus or distributed deployments with a choice of cloud or on-premises (air-gapped or cloud connected) management.~~

~~Universal licensing~~ ~~with one portable management license for any device and for any type of management. For switches, operating system 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. They make the underlying network much easier to design, implement, manage and troubleshoot.

•

~~End-to-End Portfolio.~~ 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. 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. 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.~~ Our technological leadership is based on innovative switching, routing and wireless products, the depth and focus of our market experience and our operating systems - the software that runs on all of our networking products. Our products reduce operating expenses for our customers and enable a more flexible and dynamic network environment that will help them meet the upcoming demands of IoT, mobile, and cloud.

•

~~Expand Wi-Fi technology leadership.~~ Wireless is today’s network access method of choice and every business must deal with scale, density and BYOD challenges. 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. We are at a technology inflection point with the pending migration from Wi-Fi 5 solutions to Wi-Fi 6 (802.11ax), focused on providing more efficient access to the broad array of connected devices. 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 machine learning and AI-driven insights.

•

~~Offer a superior quality of experience.~~ Our network-powered application analytics provide actionable business insights by capturing and analyzing context-based data about the network and applications to deliver meaningful intelligence about applications, users, locations and devices. With an easy to comprehend dashboard, our applications help businesses turn their network into a strategic business asset that helps executives make faster and more effective decisions.

•

~~Expand market penetration by targeting high-growth market segments.~~ Within the campus, we focus on the mobile user, leveraging our automation capabilities and tracking WLAN growth. Our data center approach leverages our product portfolio to address the needs of public and private cloud data center providers. We believe that the cloud networking compound annual growth rate will continue to outpace the compound annual growth rate for on-premises managed networking. Our focus is on expanding our technology foothold in the critical cloud networking segment to accelerate not only cloud management adoption, but also subscription-based licensing (SaaS) consumption.

•

~~Leverage and expand multiple distribution channels.~~ We distribute our products through select distributors, a large number of resellers and system-integrators worldwide, as well as several large strategic partners. We maintain a field sales force to support our channel partners and to sell directly to certain strategic accounts. As an independent networking vendor, we seek to provide products that, when combined with the offerings of our channel partners, create compelling solutions for end-user customers.

•

~~Maintain and extend our strategic relationships.~~ ~~We have established strategic relationships with a number of industry-leading vendors to both, provide increased and enhanced routes to market, and collaboratively develop unique solutions.~~

•

~~Expand our reach with ExtremeCloud SD-WAN~~. ExtremeCloud SD-WAN is a software-defined wide area networks solution offered as an all-inclusive subscription, which includes hardware, the cloud-based SD-WAN service, support and maintenance, and customer success support. This helps customers reduce total cost of ownership as they deliver quality user experience for applications used in site-to-site and site-to-cloud environments. This solution detects and optimizes applications automatically and can apply performance-based dynamic WAN selection for quality and reliability. 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.

~~Key Financial Metrics~~

During the second quarter of fiscal ~~2023,~~2024, we achieved the following results:

•

Net revenues of $296.4 million compared to $318.3 million in the second quarter of fiscal 2023.

•

Product revenues of $186.6 million compared to $223.4 million in the second quarter of fiscal 2023.

•

Subscription and support revenues of $109.8 million compared to $94.9 million in the second quarter of fiscal 2023.

•

Total gross margin of 61.9% of net revenues compared to 57.1% of net revenues in the second quarter of fiscal 2023.

•

Operating income of $10.3 million compared to $23.4 million in the second quarter of fiscal 2023.

•

Net income of $4.0 million compared to $17.9 million in the second quarter of fiscal 2023.

•

~~Net revenues of $318.3 million compared to $280.9 million in the second quarter of fiscal 2022.~~

•

~~Product revenues of $223.4 million compared to $191.1 million in the second quarter of fiscal 2022.~~

•

~~Service and subscription revenues of $94.9 million compared to $89.8 million in the second quarter of fiscal 2022.~~

•

~~Total gross margin of 57.1% of net revenues compared to 56.5% of net revenues in the second quarter of fiscal 2022.~~

•

~~Operating income of $23.4 million compared to $18.1 million in the second quarter of fiscal 2022.~~

•

~~Net income of $17.9 million compared to $13.3 million in the second quarter of fiscal 2022.~~

During the first six months of fiscal ~~2023,~~2024, we reflected the following results:

•

Cash flows provided by operating activities of $109.9 million compared to $120.3 million in the six months ended December 31, 2022.

•

Cash and cash equivalents of $221.4 million as of December 31, 2023 compared to $234.8 million as of June 30, 2023.

•

~~Cash flows provided by operating activities of $120.3 million compared to $62.5 million in the six months ended December 31, 2021.~~

•

~~Cash of $202.5 million as of December 31, 2022 compared to $194.5 million as of June 30, 2022.~~

Net Revenues

The following table presents net product and ~~service~~subscription and ~~subscription~~support revenues for the periods presented ~~(dollars in thousands)~~(in thousands, except percentages):


	Three Months Ended											Six Months Ended											Three Months Ended				Six Months Ended
	December 31, 2022			December 31, 2021			$ Change		% Change			December 31, 2022			December 31, 2021			$ Change		% Change			December 31, 2023	December 31, 2022	$ Change	% Change	December 31, 2023	December 31, 2022	$ Change	% Change
Net revenues:
Product	$	223,445		$	191,102		$	32,343		16.9	%	$	429,721		$	376,263		$	53,458		14.2	%	$186,611	$223,445	$(36,834)	(16.5)%	$440,094	$429,721	$10,373	2.4 %
Percentage of net revenues		70.2	%		68.0	%							69.8	%		68.6	%						63.0%	70.2%			67.8%	69.8%
Service and subscription		94,903			89,831			5,072		5.6	%		186,316			172,354			13,962		8.1	%
Subscription and support																							109,766	94,903	14,863	15.7 %	209,420	186,316	23,104	12.4 %
Percentage of net revenues		29.8	%		32.0	%							30.2	%		31.4	%						37.0%	29.8%			32.2%	30.2%
Total net revenues	$	318,348		$	280,933		$	37,415		13.3	%	$	616,037		$	548,617		$	67,420		12.3	%	$296,377	$318,348	$(21,971)	(6.9)%	$649,514	$616,037	$33,477	5.4 %

Product revenue is generated primarily from sales of our networking equipment. Subscription and support revenue is derived primarily from sales of our subscription and support offerings which includes SaaS offerings, maintenance contracts, professional services and training for its products. Prior to fiscal 2024, subscription and support revenue was referred to as “service and subscription revenue,” however, the composition of subscription and support revenue has not been modified.

Product revenues ~~increased $32.3~~decreased $36.8 million or ~~16.9%~~16.5% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The decrease in product revenues was primarily driven by lower bookings and shipments as well as elongated sales cycles in the channel caused by current macroeconomic conditions. Product revenues increased ~~$53.5~~$10.4 million or ~~14.2%~~2.4% for the six months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The ~~increases~~increase in product revenues ~~were~~was primarily due to strong demand for our products and higher shipments of prior period backlog resulting from anthe easing inof supply chain constraints ~~which had impacted our ability to fulfill~~in the ~~demand for our products~~.first quarter of fiscal 2024.

~~Service~~Subscription and ~~subscription~~support revenues increased ~~$5.1~~$14.9 million or ~~5.6%~~15.7% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022. Service~~2023. Subscription and ~~subscription~~support revenues increased ~~$14.0~~$23.1 million or ~~8.1%~~12.4% for the six months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increases in ~~service~~subscription and ~~subscription~~support revenues were primarily due to the continued growth in our subscription business.

The following table presents the product and ~~service~~subscription and ~~subscription,~~support gross profit and the respective gross profit percentages for the periods presented ~~(dollars in thousands)~~(in thousands, except percentages):


	Three Months Ended											Six Months Ended											Three Months Ended				Six Months Ended
	December 31, 2022			December 31, 2021			$ Change		% Change			December 31, 2022			December 31, 2021			$ Change		% Change			December 31, 2023	December 31, 2022	$ Change	% Change	December 31, 2023	December 31, 2022	$ Change	% Change
Gross profit:
Product	$	119,858		$	100,169		$	19,689		19.7	%	$	226,371		$	204,386		$	21,985		10.8	%	$105,118	$119,858	$(14,740)	(12.3)%	$250,065	$226,371	$23,694	10.5 %
Percentage of product revenues		53.6	%		52.4	%							52.7	%		54.3	%						56.3%	53.6%			56.8%	52.7%
Service and subscription		61,797			58,617			3,180		5.4	%		121,992			110,003			11,989		10.9	%
Percentage of service and subscription revenues		65.1	%		65.3	%							65.5	%		63.8	%
Subscription and support																							78,252	61,797	16,455	26.6 %	146,241	121,992	24,249	19.9 %
Percentage of subscription and support revenues																							71.3%	65.1%			69.8%	65.5%
Total gross profit	$	181,655		$	158,786		$	22,869		14.4	%	$	348,363		$	314,389		$	33,974		10.8	%	$183,370	$181,655	$1,715	0.9%	$396,306	$348,363	$47,943	13.8 %
Percentage of net revenues		57.1	%		56.5	%							56.5	%		57.3	%						61.9%	57.1%			61.0%	56.5%

Product gross profit ~~increased $19.7~~decreased $14.7 million or ~~19.7%~~12.3% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The ~~increase~~decrease in product gross profit was primarily ~~due to increased~~driven by lower product revenues, ~~along with~~ partially offset by lower intangible asset amortization ~~of intangibles~~ due to certain ~~intangibles~~intangible assets being fully amortized, and favorable purchase price variance and lower distribution costs due to easing of supply chain ~~constraints, partially offset by higher product costs and higher excess and obsolete inventory.~~constraints.

Product gross profit increased ~~$22.0~~$23.7 million or ~~10.8%~~10.5% for the six months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increase in product gross profit was primarily due to ~~increased~~higher product revenues along with lower amortization of ~~intangibles~~intangible assets due to certain ~~intangibles~~intangible assets being fully amortized, favorable purchase price variance and distribution costs due to easing of supply chain constraints and lower warranty reserve partially offset by higher ~~product costs, higher overhead costs and higher~~reserves for excess and obsolete inventory.

~~Service~~Subscription and ~~subscription~~support gross profit increased ~~$3.2~~$16.5 million or ~~5.4%~~26.6% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~ ~~Service~~2023. Subscription and ~~subscription~~support gross profit increased ~~$12.0~~$24.2 million or ~~10.9%~~19.9% for the six months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increases in ~~service~~subscription and ~~subscription~~support gross profits were primarily due to increased ~~service~~subscription and ~~subscription~~support revenues ~~partially offset by higher cloud services~~as well as lower personnel costs.

Operating Expenses

The following table presents operating expenses for the periods presented ~~(dollars in thousands)~~(in thousands, except percentages):


	Three Months Ended										Six Months Ended										Three Months Ended				Six Months Ended
	December 31, 2022		December 31, 2021		$ Change			% Change			December 31, 2022		December 31, 2021		$ Change			% Change			December 31, 2023	December 31, 2022	$ Change	% Change	December 31, 2023	December 31, 2022	$ Change	% Change
Research and development	$	52,618	$	48,080	$	4,538			9.4	%	$	103,607	$	95,846	$	7,761			8.1	%	$52,833	$52,618	$215	0.4 %	$110,849	$103,607	$7,242	7.0 %
Sales and marketing		80,538		71,565		8,973			12.5	%		158,920		141,092		17,828			12.6	%	85,154	80,538	4,616	5.7 %	177,074	158,920	18,154	11.4 %
General and administrative		24,085		17,877		6,208			34.7	%		42,632		34,880		7,752			22.2	%	25,384	24,085	1,299	5.4 %	49,257	42,632	6,625	15.5 %
Acquisition and integration costs		—		2,113		(2,113	)		(100.0	)%		390		3,623		(3,233	)		(89.2	)%	—	—	—	—	—	390	(390)	(100.0)%
Restructuring and related charges		476		292		184			63.0	%		957		571		386			67.6	%	9,174	476	8,698	1,827.3 %	11,891	957	10,934	1,142.5 %
Amortization of intangibles		504		804		(300	)		(37.3	)%		1,027		1,958		(931	)		(47.5	)%
Amortization of intangible assets																					509	504	5	1.0 %	1,020	1,027	(7)	(0.7)%
Total operating expenses	$	158,221	$	140,731	$	17,490			12.4	%	$	307,533	$	277,970	$	29,563			10.6	%	$173,054	$158,221	$14,833	9.4 %	$350,091	$307,533	$42,558	13.8 %

Research and Development Expenses

Research and development expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), consultant fees and prototype expenses related to the design, development, and testing of our products.

Research and development expenses increased by ~~$4.5~~$0.2 million or ~~9.4%~~0.4% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increase in research and development expenses was primarily due to a ~~$1.6~~$2.3 million increase in contractor costs, partially offset by a $1.0 million decrease in personnel costs, ~~due to higher compensation costs primarily related to share-based compensation,~~ a $0.4 million ~~increase~~decrease in ~~consultant fees,~~information technology and facility related expenses, a ~~$0.9~~$0.3 million ~~increase in software licenses and engineering project costs, a $0.7 million increase~~decrease in equipment related costs, and a $0.4 ~~increase~~million decrease in ~~facility and information technology~~engineering project costs and ~~a $0.5 million increase in~~ other ~~costs primarily related to travel and recruiting expenses.~~costs.

Research and development expenses increased by ~~$7.8~~$7.2 million or ~~8.1%~~7.0% for the six months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increase in research and development expenses was primarily due to a ~~$3.3~~$4.3 million increase in personnel related costs due to higher ~~compensation~~salaries and benefits costs ~~primarily related~~due to increased headcount during the prior periods and higher share-based compensation, a ~~$0.7~~$4.0 million increase in ~~consultant fees,~~contractor costs, partially offset by a ~~$1.4~~$0.8 million ~~increase~~decrease in ~~software licenses and~~ engineering project costs and a ~~$1.0~~$0.3 million ~~increase~~decrease in ~~equipment related costs, a $0.7 increase in facility and~~ information technology ~~costs~~ and ~~a $0.7 million increase in other costs primarily~~facility related ~~to travel and recruiting~~ expenses.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), as well as trade shows and promotional expenses.

Sales and marketing expenses increased by ~~$9.0~~$4.6 million or ~~12.5%~~5.7% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increase in sales and marketing expenses was primarily due to a ~~$7.0~~ $3.0 million increase in sales promotions and marketing related expenses, a $1.3 million increase in personnel costs due to higher ~~compensation~~salaries and benefits costs, ~~primarily related to higher commissions~~ and ~~share-based compensation,~~ a ~~$1.3~~$0.2 million increase in travel ~~costs and a $0.9 million increase in marketing and facilities related costs, partially offset by a~~ ~~$0.2~~ ~~million decrease in equipment and other~~ expenses.

Sales and marketing expenses increased by ~~$17.8~~$18.2 million or ~~12.6%~~11.4% for the six months ended December 31, ~~2022~~ 2023 as compared to the corresponding period in fiscal ~~2022~~.2023. The increase in sales and marketing expenses was primarily due to a ~~$11.8~~ $11.7 million increase in personnel costs due to higher ~~compensation~~salaries and benefits costs ~~primarily related~~due to increased headcount during the prior periods and higher ~~commission and~~ share-based compensation, a ~~$4.1~~$5.5 million increase in ~~travel~~sales promotions and marketing related expenses, a $0.5 million increase in professional fees, a $0.3 million in equipment related costs, and a ~~$2.0~~$0.2 million increase in ~~marketing~~information technology and ~~other~~facility related expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), legal and professional service costs, and facilities and information technology costs.

General and administrative expenses increased by ~~$6.2~~$1.3 million or ~~34.7%~~5.4% for the three months ended December 31, ~~2022~~2023 as compared to the corresponding period in fiscal ~~2022.~~2023. The increase in general and administrative expenses was primarily due to a ~~$2.9~~$1.0 million increase in professional fees and a $0.3 million increase in software licensing and maintenance costs.

General and administrative expenses increased by $6.6 million or 15.5% for the six months ended December 31, 2023 as compared to the corresponding period in fiscal 2023. The increase in general and administrative expenses was primarily due to a $2.8 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a ~~$1.4~~$3.6 million increase in professional ~~service~~ fees including increase in legal costs related to litigations and preliminary costs associated with transition of our business systems and a ~~$2.3 million increase in litigation charges, partially offset by a net $0.4 million decrease in facilities and other costs.~~

~~General and administrative expenses increased by $7.8 or 22.2% for the six months ended December 31, 2022~~ ~~as compared to~~ the corresponding period in fiscal 2022. The increase in general and administrative expenses was primarily due to a $4.5 million increase in personnel costs due to higher compensation and benefits costs primarily related to share-based compensation, a $0.8 million increase in professional service fees, a $2.3 million increase in litigation charges and a net $0.2 million increase in other costs.

Acquisition and Integration Costs

During the three months ended December 31, 2023 and 2022, we did not incur any acquisition and integration ~~costs .~~costs.

During the six months ended December 31, 2023, we did not incur any acquisition and integration costs. During the six months ended December 31, 2022, we incurred acquisition and integration costs of $0.4 million, which primarily consisted of professional fees and certain compensation charges related to the acquisition of ~~Ipanema.~~Ipanema Tech SAS.

~~During~~Restructuring and Related Charges

For the three and six months ended December 31, ~~2021~~,2023, we ~~incurred $2.1~~recorded restructuring and related charges of $9.2 million and ~~$3.6~~$11.9 million, ~~respectively, of acquisition and integration costs,~~ which primarily consisted of ~~professional fees for legal advisory services, system~~severance and ~~product integrations and financial services~~benefits costs associated with the reduction-in-force actions related to the ~~acquisition of Ipanema.~~

“Q1 2024 Plan” and the “Q2 2024 plan,” each as described in Note 13, Restructuring and Related Charges, in Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

For the three and six months ended December 31, 2022, we recorded restructuring ~~and related~~ charges of $0.5 million and $1.0 million, respectively, which primarily consisted of facility-related charges related to our previously impaired facilities.

For the three and six months ended December 31, 2021, we recorded restructuring charges of $0.3 million and $0.6 million, respectively, which primarily consisted of facility related charges related to our previously impaired facilities.

Amortization of ~~Intangibles~~Intangible Assets

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded $0.5 million ~~and $0.8 million, respectively,~~ of operating expenses for each period related to the amortization of ~~intangibles.~~ intangible assets.

During the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded $1.0 million ~~and $2.0 million, respectively. The decreases were primarily due to lower amortization~~of operating expenses for each period related to ~~certain acquired intangibles from previous acquisitions becoming fully amortized.~~the amortization of intangible assets.

Interest ~~Expense~~Income

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded ~~$3.9~~$1.4 million and ~~$3.1~~$0.9 million, respectively, in interest ~~expense.~~ income. The increase in interest income is primarily due to higher interest earned on our cash balance due to rising interest rates.

During the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded ~~$7.7~~$2.7 million and ~~$7.0~~$1.3 million, respectively, in interest ~~expense.~~income. The ~~increases~~increase in interest ~~expense were~~income is primarily ~~driven by~~due to higher interest earned on our cash balance due to rising interest ~~rates on our~~ ~~2019 Credit Agreement~~rates..

~~Other Income, Net~~Interest Expense

During the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded ~~other income, net of $0.1~~$4.3 million and ~~$0.1~~$3.9 million, ~~respectively.~~respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

During the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded $8.6 million and $7.7 million, respectively, in interest expense. The increase in interest expense was primarily due to higher average rates under the new 2023 Credit Agreement.

Other Income (Expense), Net

During the three months ended December 31, 2023 and 2022, we recorded other expense, net of $0.4 million and other income, net of ~~$0.5~~ ~~million and $0.2~~$0.1 million, respectively. The ~~changes~~other income (expense), net for ~~the~~ ~~three and six months ended December 31, 2022~~ ~~was~~each period primarily ~~due~~related to the foreign exchange impact from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.

During the six months ended December 31, 2023 and 2022, we recorded other income, net of less than $0.1 million and $0.5 million, respectively. The other income, net for each period primarily related to the foreign exchange impact from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.

Provision for Income Taxes

For the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded an income tax provision of $3.1 million and $2.6 million, ~~and $1.8 million,~~ respectively.

For the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, we recorded an income tax provision of $7.6 million and $4.4 million, ~~and $3.9 million,~~ respectively.

The income tax provisions for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~2022 consisted of (1) taxes on the income of our foreign subsidiaries, (2) ~~foreign withholding taxes, (3)~~ state taxes in jurisdictions where we have no remaining state net operating losses, (3) foreign withholding taxes, and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN ~~Business,~~business from Zebra Technologies Corporation, the Campus Fabric Business from Avaya LLC and the Data Center ~~Business.~~Business from Brocade Communications System. In addition, the income tax provision for the three and six months ended December 31, 2023 includes U.S. federal income tax of $0.2 million and $1.6 million, respectively.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report are prepared in accordance with accounting principles generally accepted in the United States. 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 SEC rules and regulations. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. On an ongoing basis, we evaluate our estimates and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

As discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, ~~2022,~~2023, we consider the following accounting policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:

•

Revenue Recognition

•

Inventory Valuation and Purchase Commitments

•

~~Revenue Recognition~~

•

~~Inventory Valuation and Purchase Commitments~~

There have been no changes to our critical accounting policies since the filing of our last Annual Report on Form 10-K.

Liquidity and Capital Resources

The following table summarizes information regarding our cash and cash equivalents (in thousands):

December 31,
2022

June 30,
2022

Cash

$
202,521

$
194,522


	December 31, 2023		June 30, 2023
Cash and cash equivalents	$	221,403	$	234,826

As of December 31, ~~2022,~~2023, our principal sources of liquidity consisted of cash and cash equivalents of ~~$202.5~~$221.4 million, accounts receivable, net of ~~$152.1~~$112.0 million, and available borrowings under our five-year ~~2019~~2023 Revolving Facility of ~~$60.2~~$135.5 million. Our principal uses of cash include the purchase of finished goods inventory from our contract manufacturers, payroll and other operating expenses related to the development and marketing of our products, purchases of property and equipment, and repayments of debt and related ~~interest.~~interest and share repurchases. We believe that our ~~$202.5~~$221.4 million of cash and cash equivalents at December 31, ~~2022,~~2023, our cash flow from operations and the availability of borrowings from the ~~2019~~2023 Revolving Facility will be sufficient to fund our planned operations for at least the next 12 ~~months.~~months and into the foreseeable future.

On May 18, 2022, our Board of Directors (the “Board”) authorized management to repurchase up to $200.0 million shares of our common stock over a three-year period commencing July 1, 2022. A maximum of $25.0 million may be repurchased in any quarter. On November 17, 2022, the Board increased the authorization to repurchase in any quarter from $25.0 million per quarter to $50.0 million per quarter. Purchases may be made from time to time in the open market or pursuant to 10b5-1 plan. The manner, timing and amount of any future purchases will be determined by our management based on their evaluation of market conditions, stock price, Extreme’s ongoing determination that it is the best use of available cash and other factors. The repurchase program does not obligate ~~Extreme~~us to acquire any shares of its common stock, may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. During the three months ended December 31, ~~2022, we~~2023, the Company repurchased ~~a total~~1,485,005 shares of ~~2,578,175 shares of~~its common stock on the open market at a total cost of ~~$49.8 million.~~$25.0 million with an average price of $16.81 per share. During the six months ended December 31, 2023, the Company repurchased a total of 2,365,220 shares of its 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 December 31, ~~2022,~~2023, we ~~have $150.2~~had $50.3 million available under our share repurchase program.

On August 9, 2019, we entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”), by and among Extreme, as borrower, several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent for the Lenders. 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 an administrative agent and collateral agent, which amended and restated the 2019 Credit Agreement. The ~~2019~~2023 Credit Agreement provides for i) a ~~five-year~~$200.0 million first lien term loan facility in an aggregate principal amount ~~of $380.0~~(the “Term Facility”), ii) a $150.0 million ~~and a~~ five-year revolving credit facility (the “ 2023 Revolving Facility”) and iii) an uncommitted additional incremental loan facility in ~~an aggregate~~the principal amount of ~~$75.0 million (“2019 Revolving Facility”). In addition, we may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not~~up to ~~exceed the sum of~~ $100.0 million plus an unlimited amount that is subject to pro forma compliance with ~~certain financial~~a specified Consolidated Leverage Ratio tests. ~~On August 9, 2019, we used~~We may use proceeds of the ~~proceeds to partially fund the acquisition of Aerohive and~~loans for working capital and general corporate ~~purposes~~.purposes. On June 22, 2023, we borrowed $25.0 million against the 2023 Revolving Facility, which was subsequently paid off on July 7, 2023.

At our election, the initial term loan (the “Initial Term Loan”) under the ~~2019~~2023 Credit Agreement may be made as either a base rate ~~loans~~loan or ~~Eurodollar loans.~~a Secured Overnight Financing Data Rate loan (“SOFR loan”). The applicable margin for base rate loans ranges from ~~0.25%~~1.00% to ~~2.50%~~1.75% per annum, and the applicable margin for ~~Eurodollar~~SOFR loans ranges from ~~1.25%~~2.00% to ~~3.50%~~2.75%, in each case based on ~~Extreme’s~~the Company’s Consolidated Leverage Ratio. All ~~Eurodollar~~SOFR loans are subject to a ~~Base Rate~~ floor of 0.00%. ~~The 2019 Credit Agreement is secured by substantially all~~ per annum and spread adjustment of ~~our assets.~~0.10% per annum. We also agreed to pay other closing fees, arrangement fees, and administration fees.

The ~~2019~~2023 Credit Agreement requires us to maintain certain minimum financial ratios at the end of each fiscal quarter. The ~~2019~~2023 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of ~~our~~its property, merge, consolidate or sell all or substantially all of ~~our~~its assets. The ~~2019~~2023 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding ~~balance.~~balance.

Financial covenants under the 2019 Credit Agreement require us to maintain a minimum consolidated fixed charge and consolidated leverage ratio at the end of each fiscal quarter through maturity. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of our property, merge, consolidate or sell all or substantially all of our assets. The 2019 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding balance.

On April 8, 2020, we entered into the First Amendment to waive certain terms and financial covenants of the 2019 Credit Agreement through July 31, 2020. On May 8, 2020, we entered into a Second Amendment which superseded the First Amendment and provided certain revised terms and financial covenants through March 31, 2021. The Second Amendment required us to maintain certain minimum cash requirement and financial metrics at the end of each fiscal quarter through March 31, 2021and we were restricted from pursuing certain activities such as incurring additional debt, stock repurchases, making acquisitions or declaring a dividend, until we came into compliance with the original covenants of the 2019 Credit Agreement. On November 3, 2020, we and our lenders entered into a Third Amendment to increase the sublimit for letters of credit to $20.0 million. On December 8, 2020, we and our lenders entered into a Fourth Amendment to waive and amend certain terms and financial covenants within the 2019 Credit Agreement through March 31, 2021.

The Second Amendment provided for us to end the covenant Suspension Period early and revert to the covenants and interest rates per the original terms of the 2019 Credit Agreement dated August 9, 2019 by filing a Suspension Period Early Termination Notice and Covenant Certificate demonstrating compliance. For the twelve-month period ended March 31, 2021, our financial performance was in compliance with the original covenants defined in the 2019 Credit Agreement and as such we filed a Suspension Early Termination Notice and Covenant Certificate with the administration agent subsequent to filing our Quarterly Report on Form 10-Q for the period ended March 31, 2021. During the three and six months ended December 31, ~~2022,~~2023, we were in compliance with all the original terms and financial covenants under the ~~2019~~2023 Credit Agreement.

Key Components of Cash Flows and Liquidity

A summary of the sources and uses of cash and cash equivalents is as follows (in thousands):


	Six Months Ended						Six Months Ended
	December 31, 2022			December 31, 2021			December 31, 2023			December 31, 2022
Net cash provided by operating activities	$	120,337		$	62,482		$	109,865		$	120,337
Net cash used in investing activities		(6,271	)		(76,170	)		(9,955	)		(6,271	)
Net cash used in financing activities		(105,611	)		(59,394	)		(113,242	)		(105,611	)
Foreign currency effect on cash		(456	)		(264	)
Net increase (decrease) in cash	$	7,999		$	(73,346	)
Foreign currency effect on cash and cash equivalents								(91	)		(456	)
Net increase (decrease) in cash and cash equivalents							$	(13,423	)	$	7,999

Net Cash Provided by Operating Activities

Cash flows provided by operations in the six months ended December 31, 2023 were $109.9 million, including our net income of $32.7 million and non-cash expenses of $57.4 million for items such as amortization of intangible assets, share-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 a decrease in accounts receivable, and increases in deferred revenue and other current and long-term liabilities. This was partially offset by increases in inventories and prepaid expenses and other assets as well as decreases in accounts payable and accrued compensation and benefits.

Cash flows provided by operations in the six months ended December 31, 2022 were $120.3 million, including our net income of $30.5 million and non-cash expenses of $50.3 million for items such as amortization of ~~intangibles,~~intangible assets, share-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 a decrease in accounts receivable and increases in accounts payable, accrued compensation and deferred revenue. This was partially offset by increases in inventories, prepaid expenses and other current assets, and decreases in operating lease liabilities and other current and long-term liabilities.

Net Cash Used in Investing Activities

Cash flows ~~provided by operations~~used in investing activities in the six months ended December 31, ~~2021~~2023 were ~~$62.5 million, including our net income of $26.0 million and non-cash expenses of $54.1~~$10.0 million for ~~items such as amortization~~the purchases of ~~intangibles, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes~~property and interest. Other sources of cash for the period included a decrease in accounts receivable and increase in deferred revenue. This was partially offset by increases in inventories and prepaid expenses and other current assets and decreases in accounts payable, accrued compensation, operating lease liabilities and other current and long-term liabilities.equipment.

~~Net Cash Used in Investing Activities~~

Cash flows used in investing activities in the six months ended December 31, 2022 were $6.3 million for the purchases of property and equipment.

Cash flows used in investing activities in the six months ended December 31, 2021 were $76.2 million primarily due to the payment of $69.5 million (net of cash acquired) for the acquisition of Ipanema and $6.7 million for the purchases of property and equipment.

Net Cash Used in Financing Activities

Cash flows used in financing activities in the six months ended December 31, ~~2022~~2023 were ~~$105.6~~$113.2 million primarily due ~~primarily~~ to ~~debt repayments~~payment of ~~$46.6 million,~~ ~~$2.0 million for deferred payments on acquisitions, share repurchase of $49.8 million under our share repurchase program, and~~ ~~$7.2~~$33.4 million for taxes paid 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”~~("ESPP"). and exercise of stock options, share repurchase of $49.9 million under our share repurchase program, a $25.0 million payment against our revolving facility, and debt repayment of $5.0 million.

Cash flows used in financing activities in the six months ended December 31, ~~2021~~2022 were ~~$59.4~~$105.6 million primarily due ~~primarily~~ to debt repayments of ~~$23.9 million, share repurchases of $25.0 million under our share repurchase program, payment of~~ ~~contingent consideration of $0.8~~$46.6 million, $2.0 million for deferred payments on acquisitions, share repurchase of $49.8 million under our share repurchase program, and ~~$7.7~~$7.2 million for taxes paid on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our ~~ESPP and exercise of stock options.~~ESPP.

Foreign Currency Effect on Cash and cash equivalents

Foreign currency effect on cash and cash equivalents decreased in the six months ended December 31, ~~2022,~~2023, primarily due to changes in foreign currency exchange rates between the U.S. Dollar and particularly the Indian Rupee, the UK Pound and the ~~EURO.~~Euro.

Contractual Obligations

As of December 31, ~~2022,~~2023, we had contractual obligations resulting from our debt arrangement, agreements to purchase goods and services in the ordinary course of business and obligations under our operating lease arrangements.

Our debt obligations relate to amounts owed under our ~~2019~~2023 Credit Agreement. As of December 31, ~~2022,~~2023, we had ~~$262.0~~$195.0 million of debt outstanding which ~~are~~is payable on quarterly installments through our fiscal year ~~2025.~~2028. We are subject to interest ~~rate~~ on our debt obligations and unused commitment fee. See Note 8,7, Debt, in the Notes to Condensed Consolidated Financial Statements in this Report for additional information regarding our debt obligations.

Our unconditional purchase obligations represent the purchase of long lead-time component inventory that our contract manufacturers procure in accordance with our forecast. We expect to honor the inventory purchase commitments within the next 12 months. As of December 31, ~~2022,~~2023, we had non-cancelable commitments to purchase ~~$57.1~~$92.1 million of inventory. See Note 9,8, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements for additional information regarding our purchase obligations.

We have contractual commitments to our suppliers which represent commitments for future services. As of December 31, ~~2022,~~2023, we had contractual commitments of ~~$44.7~~$30.2 million that are due through our fiscal year 2027.

We lease facilities under operating lease arrangements at various locations that expire at various dates through our fiscal year ~~2032.~~2033. As of December 31, ~~2022,~~2023, the value of our obligations under operating leases was ~~$47.7~~$65.7 million.

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.

We did not have any material commitments for capital expenditures as of December 31, ~~2022.~~2023.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, ~~2022.~~2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

Our exposure to market risk for changes in interest rates relates primarily to debt and foreign currencies.

Debt

At certain points in time, we are exposed to the impact of interest rate fluctuations, primarily in the form of variable rate borrowings from the ~~2019~~2023 Credit Agreement, which is described in Note 8, 7, Debt, in the Notes to Condensed Consolidated Financial Statements in this Report. At December 31, ~~2022,~~2023, we had ~~$262.0~~$195.0 million of debt outstanding, all of which was from the ~~2019~~2023 Credit Agreement. During the quarter ended December 31, ~~2022,~~2023, the average daily outstanding amount was ~~$271.4~~$197.4 million, with a high of ~~$271.5~~$197.5 million and a low of ~~$262.0~~$195.0 million.

~~Cash Flow Hedges of Interest Rate Risk~~

In conjunction with our term loan under the 2019 Credit Agreement, we entered into interest rate swap contracts with large financial institutions. This involves the receipt of variable rate amounts from these institutions in exchange for us making fixed-rate payments without exchange of the underlying notional amount of $200.0 million of our debt. The derivative instruments hedge the impact of the changes in variable interest rates. We record the changes in the fair value of these cash flow hedges of interest rate risk in “accumulated other comprehensive income (loss)” until termination of the derivative agreements.

The following table presents hypothetical changes in interest expense for the quarter ended December 31, ~~2022,~~2023, on the outstanding borrowings under the ~~2019~~2023 Credit Agreement ~~and interest rate swap contracts~~ as of December 31, ~~2022,~~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*						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 December 31, 2022			100 bps			50 bps			(100 bps)			(50 bps)			as of December 31, 2023		100 bps		50 bps
Debt	$	(2,714	)	$	(1,357	)	$	271,397		$	2,714		$	1,357		$	(1,974	)	$	(987	)	$	197,418	$	1,974	$	987
Interest Rate Swaps		750			375			(75,000	)		(750	)		(375	)
Net	$	(1,964	)	$	(982	)	$	196,397		$	1,964		$	982

* The underlying interest rate was 7.46% as of December 31, 2023.

~~Underlying interest rate was 5.5% as of December 31, 2022.~~

Exchange Rate Sensitivity

A majority of our sales and expenses are denominated in United States Dollars. While we conduct some sales transactions and incur certain operating expenses in foreign currencies and expect to continue to do so, we do not anticipate that foreign exchange gains or losses will be significant, in part because of our foreign exchange risk management process discussed below.

Foreign Exchange Forward Contracts

We record all derivatives on the balance sheet at fair value. From time to time, we enter into foreign exchange forward contracts to mitigate the effect of gains and losses generated by the foreign currency forecast transactions related to certain operating expenses and re-measurement of certain assets and liabilities denominated in foreign currencies. 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 December 31, ~~2022~~2023 and ~~2021~~2022 foreign exchange forward contracts not designated as hedging instruments, had a notional amount of $15.6 million and $11.1 million, ~~and $20.4 million,~~ respectively. These contracts have maturities of less than 6040 days. Changes in the fair value of derivatives are recognized in “other income (expense), net”. ~~As of December 31, 2022 and 2021, we had forward foreign currency contracts designated as hedging instruments with a notional amount of $5.5 million and $5.7 million, respectively.~~ These contracts have maturities of less than twelve months. Gains and losses arising from these contracts designated as hedging instruments are recorded as a component of “accumulated other comprehensive income (loss)”. As of ~~December 31, 2022 and~~ 2021, these contracts had unrealized gain of $0.4 million and unrealized loss of $0.3 million, respectively, which are recorded in “accumulated other comprehensive income (loss)” with the associated asset or liability in the accompanying condensed consolidated balance sheets.

Foreign currency transaction gains and losses from operations were ~~gains~~losses of ~~less than $0.1~~$0.7 million and ~~losses~~gains of less than $0.1 million for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Foreign currency transaction gains and losses from operations were losses of $0.3 million and gains of $0.8 ~~million and $0.3~~ million for the six months ended December 31, 2023 and 2022, ~~and 2021,~~ respectively.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a – 15(f) and 15d – 15(f) under the Securities Exchange Act of 1934, as amended) during the three ~~and six~~ months ended December 31, ~~2022~~ 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Extreme Networks have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Notwithstanding these limitations, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Our CEO and CFO have concluded that our disclosure controls and procedures are, in fact, effective at the “reasonable assurance” level.

PART II. Other Information

Item 1. Legal Proceedings

For information regarding litigation matters required by this item, refer to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2022,~~2023, and Note 9, 8, Commitments and Contingencies, to the Notes to Condensed Consolidated Financial Statements, ~~included~~ in ~~Part I, Item 1 of~~ this Report, ~~on Form 10-Q~~ which are incorporated herein by reference.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, ~~2022,~~2023, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended June 30, ~~2022~~2023 and our Quarterly Report on Form 10-Q for the three months period ended September 30, ~~2022.~~2023, except for the following risk factors which supplements the risk factors disclosed in the reports referenced above.

Military actions and other geopolitical tensions could adversely affect our business, financial condition and results of operations.

In recent years, various military actions such as the February 2022 Russian military action in Ukraine or the October 2023 Israel-Hamas military action have occurred. 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.

In addition, such military actions could lead to, and have led to, expansion of sanction programs and export control restrictions imposed by the United States and other countries whose sanctions or export control programs could impact the Company's operations. 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. 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 adversely affect our business, financial condition, and results of operations.

Furthermore, more recently, the Houthi movement, which controls parts of Yemen, launched a number of attacks on marine vessels in the Red Sea. The Red Sea is an important maritime route for international trade. As a result of such disruptions, we may experience in the future extended lead times, delays in supplier deliveries, increased transportation and component costs, and increased costs for expedited shipments. These potential supply chain disruptions may result in delayed deliveries of several key components used in the manufacturing of our products.

We regularly assess the impact of the geopolitical climate on our business, including our business partners and customers. The extent and duration of military actions, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the abovementioned factors could affect our business, financial condition, and results of operations. Any such disruptions may also magnify the impact of other risks described in this “Risk Factors” section.

If we do not adequately manage and evolve our financial reporting and managerial systems and processes, our ability to manage and grow our business may be harmed.

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, as well as ensure that any businesses acquired are appropriately integrated. Disruptions to our existing systems, procedures, or controls or any delay or disruption in the implementation of or the transition to new or enhanced systems, procedures, or controls, or any delay or disruption in the integration of acquired businesses, could have a significant impact on our business. Failure to properly or adequately address such issues could harm our ability to manage our business, meet our obligations to our customers, accurately forecast sales demand, manage our supply chain, record and report financial and management information on a timely and accurate basis, or forecast future results, which could result in a material adverse effect on our business, financial condition, and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the three months ended December 31, ~~2022.~~2023.

The following table provides stock repurchase activity during the three months ended December 31, ~~2022~~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							$	75,242
October 1, 2023 - October 31, 2023		—	$	—		—		75,242
November 1, 2023 - November 30, 2023		1,485		16.81		1,485		50,285
December 1, 2023 - December 31, 2023		—		—		—		50,285
Total		1,485	$	16.81		1,485
Remaining amount available to repurchase							$	50,285

Approximate Dollar Value

Total

Total Number of Shares

of Shares

Number of

Average

Purchased as Part of

That May Yet Be Purchased

Shares

Price Paid

Publicly Announced

Under the Plans or Programs

Purchased

per Share

Plans or Programs

(1)

Beginning available to repurchase

$
200,000

October 1, 2022 - October 31, 2022

—

—

—

200,000

November 1, 2022 - November 30, 2022

1,874

19.16

1,874

164,094

December 1, 2022 - December 31, 2022

704

19.73

704

150,204

Total

2,578

$
19.32

2,578

Remaining available to repurchase

$
150,204

(1)

On May 18, 2022, we announced that our Board had authorized management to repurchase up to $200.0 million of its common stock over a three-year period commencing on July 1, 2022. Refer to Note 9, Stockholders’ Equity, in Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report for further information regarding the Company’s share repurchase program.

~~(1)~~

On May 18, 2022, the Company announced that its Board of Directors had authorized management to repurchase up to $200.0 million of its common stock over a three-year period commencing on July 1, 2022. Refer to Note 10, “~~Stockholders’ Equity,” in Notes to the Consolidated Financial Statements included elsewhere in this Report 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.

Item 3. Defaults Upon Senior Securities - Not Applicable

Item 4. Mine Safety Disclosures - Not Applicable

Item 5. Other Information ~~- Not Applicable~~

On November 6, 2023, Ingrid J. Burton, a member of the Company's board of directors, terminated a Rule 10b5-1 trading arrangement that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and originally adopted on August 30, 2023 for the sale of up to 5,000 shares of the Company’s common stock until August 30, 2024.

On December 8, 2023, Joe Vitalone, the Company’s former Chief Revenue Officer terminated a Rule 10b5-1 trading arrangement that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and originally adopted on May 26, 2023 for the sale of up to 70,402 shares of the Company's common stock until July 31, 2024.

Item 6. Exhibits

(a)

Exhibits:


		Incorporated by Reference
Exhibit Number	Description of Document	Form	Filing Date	Number	Filed Herewith

3.1	Amended and Restated Certificate of Incorporation of Extreme Networks, Inc.	8-K	11/18/2022	3.1

3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation.	8-K	11/9/2023	3.1

3.3	Amended and Restated Bylaws of Extreme Networks, Inc.	8-K	6/9/2023	3.1

10.1	Fourth Amendment to Lease Agreement by and between OSK XIV REO, LLC and Extreme Networks, Inc. dated November 30, 2023.				X

31.1	Section 302 Certification of Chief Executive Officer.				X

31.2	Section 302 Certification of Chief Financial Officer.				X

32.1*	Section 906 Certification of Chief Executive Officer.				X

32.2*	Section 906 Certification of Chief Financial Officer.				X

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.				X

101.SCH	Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents.				X

104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

* Furnished herewith. Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.

SIGNATURES

~~(a)~~

~~Exhibits:~~

Incorporated by Reference

Exhibit
Number

Description of Document

Form

Filing Date

Number

Filed
Herewith

4.1

Amended and Restated Certificate of Incorporation

8-K

11/18/2022

3.1

4.2

Amended and Restated Bylaws

8-K

11/18/2022

3.2

10.1

Extreme Networks, Inc. Amended and Restated 2013 Equity Incentive Plan

S-8

12/15/2022

99.1

31.1

Section 302 Certification of Chief Executive Officer.

X

31.2

Section 302 Certification of Chief Financial Officer.

X

32.1*

Section 906 Certification of Chief Executive Officer.

X

32.2*

Section 906 Certification of Chief Financial Officer.

X

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

Furnished herewith. Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


EXTREME NETWORKS, INC.
		(Registrant)
		/s/ ~~REMI THOMAS~~Kevin Rhodes
		~~Remi Thomas~~Kevin Rhodes
		Executive Vice President, Chief Financial Officer (Principal Accounting Officer) ~~January 27, 2023~~February 1, 2024

4039

	Three months ended		Six Months Ended
	December 31, 2021*		December 31, 2021*
Net revenues	$	280,438	$	551,743
Net income	$	15,562	$	29,631
Net income per share – basic	$	0.12	$	0.23
Net income per share – diluted	$	0.12	$	0.22
Shares used in per share calculation – basic		129,403		128,863
Shares used in per share calculation – diluted		133,621		133,423

June 30, 2022	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	1,314	$	—	$	1,314
Total assets measured at fair value	$	—	$	1,314	$	—	$	1,314
Liabilities
Foreign currency derivatives	$	—	$	31	$	—	$	31
Total liabilities measured at fair value	$	—	$	31	$	—	$	31

For the fiscal year ending:
2023 (the remainder of fiscal 2023)	$	7,166
2024		5,212
2025		4,450
2026		3,191
2027		1,430
Thereafter		1,535
Total	$	22,984