Extreme Networks Inc (EXTR)

Short-term

Turnover ratios

The activity ratios of Extreme Networks Inc. over the provided period reveal notable trends and fluctuations that reflect the company's operational efficiency.

Inventory Turnover:
The inventory turnover ratio exhibits a downward trend from its peak at 13.43 as of September 2021 down to 3.56 in December 2023, with slight fluctuations thereafter. Initially, there was a significant increase from 7.39 in September 2020 to a high of approximately 13.43 in September 2021, indicating a period of efficient inventory management and rapid inventory replenishment relative to sales. However, subsequently, the ratio declines steadily, reaching the lowest point at 2.68 in March 2024, which suggests the company is holding inventory longer or experiencing slower sales velocity. The ratio's partial recovery to 4.20 by June 2025 indicates some operational improvements, but overall, the longer-term trend points to reduced inventory turnover efficiency.

Receivables Turnover:
There is evidence of increased efficiency in receivable collections in recent periods. After some decline from 7.51 in September 2020 to a low of 6.04 in June 2022, the ratio sharply improves, reaching 10.40 in September 2023 and rising further to 12.97 in March 2024. This indicates quicker collection of receivables in recent quarters, potentially reflecting enhanced credit policies or improved customer payment behavior. The rise to over 12 times indicates that receivables are turning over approximately 12 times within a year, signifying effective receivables management.

Payables Turnover:
Payables turnover demonstrates variability with an overall decreasing trend in certain periods. It fluctuates between approximately 5.72 and 7.37 during earlier periods, then notably increases to 9.53 in June 2024 before decreasing again to 6.74 in June 2025. The higher ratios in some periods suggest faster payment cycles to suppliers, while lower ratios indicate extended payment periods. Notably, the spike to 9.53 in June 2024 indicates a shift towards more aggressive payables management temporarily, while recent quarters show a trend toward shorter supplier payment cycles.

Working Capital Turnover:
Data on working capital turnover is limited, but notable figures include a dramatic peak at 1,997.65 in June 2023, which is an outlier suggesting a significant change in the working capital base or operational scale. Prior to this, the ratio was relatively stable, but the subsequent decline to 365.94 by September 2023 indicates reduced efficiency in working capital utilization or a shift in operational strategies. These fluctuations suggest periods of heightened operational activity or changes in management’s working capital management approach.

Summary:
Overall, Extreme Networks Inc.’s activity ratios indicate a period of high inventory turnover early on that gradually declines, coupled with significant improvements in receivables management in recent periods. Variability in payables indicates shifts between extended and shortened supplier payment cycles. The extreme fluctuations in the working capital turnover ratio point to potential strategic adjustments or extraordinary events impacting operational efficiency. Such trends suggest a company undergoing operational restructuring or responding to market dynamics that influence inventory and receivables management, with recent improvements in collection efficiency offset by challenges reflected in inventory turnover declines.

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Average number of days

The analysis of Extreme Networks Inc.’s activity ratios reveals significant trends and changes over the period from September 2020 to June 2025. The focus on inventory management, receivables collection, and payables payments provides insights into operational efficiency and working capital management.

Days of Inventory on Hand (DOH):
Initially, the company's inventory holding period decreased from approximately 49.38 days in September 2020 to a low of around 27.18 days in September 2021. This decline suggests an improvement in inventory management, likely reflecting increased efficiency or reductions in inventory levels. However, post-September 2021, inventory days began to climb again, reaching over 136 days by March 2024. This substantial increase indicates a significant accumulation of inventory, which could signal overstocking, slowing demand, or a strategic shift to hold higher inventory levels. While there is some fluctuation afterward, the inventory days remain elevated relative to the earlier period, implying ongoing challenges or strategic adjustments in inventory policies.

Days of Sales Outstanding (DSO):
Receivables collection periods exhibited variability over the timeframe. There was a rise from approximately 48.61 days in September 2020 to a peak of about 60.41 days in June 2022, indicating a lengthening of the time taken to collect receivables. However, from September 2022 onward, DSO notably decreased, reaching around 30.39 days by December 2023, and further declining to approximately 33.34 days by March 2025. This reduction suggests improvements in receivables management, faster collections, or more stringent credit policies, which enhance cash flow efficiency.

Number of Days of Payables:
The payment period for suppliers shows variability over time. Early in the period, payables days hovered around the low 50s to mid-60s, peaking at approximately 65.81 days in March 2023. This indicates that the company delayed payments to suppliers up to the allowable credit terms. Notably, there was a significant decrease to about 38.29 days by June 2024, signifying a phase of accelerated payments or improved cash management strategies. Subsequently, payables days slightly increased again but remained below earlier peaks, generally staying within the 37 to 60-day range.

Overall, the activity ratios demonstrate a pattern of initial efficiency improvements, followed by periods of inventory accumulation, and later refinements in receivables collection and payables management. The extended inventory days in the most recent periods could point to strategic holding or market conditions impacting inventory turnover, while the reductions in DSO highlight ongoing efforts to enhance receivables collection efficiency. The variability in payables reflects a balanced approach to supplier payments, influenced by cash flow considerations and operational policies.

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Long-term

The long-term activity ratios of Extreme Networks Inc., specifically the Fixed Asset Turnover and Total Asset Turnover ratios, exhibit notable variations over the analyzed period.

Fixed Asset Turnover:
This ratio measures how effectively the company utilizes its fixed assets to generate sales. A trend observed from September 2020 through September 2023 shows fluctuations, with an initial decline from 16.58 (September 2020) to 16.13 (December 2020), followed by a gradual increase peaking at 28.26 (June 2023). This upward trend suggests improved efficiency in utilizing fixed assets to produce revenue around 2022 and early 2023. However, a marked decrease is observed by September 2023 to 15.15, indicating a potential decline in fixed assets’ productivity or changes in asset base or business operations.

Total Asset Turnover:
This ratio, indicating the overall efficiency in using total assets to generate sales, displays a steady increasing trend from 0.97 (September 2020) to a peak of 1.24 (September 2023). The growth over this period suggests a consistent improvement in the company’s ability to generate sales from its total asset base. After reaching this peak, the ratio declines slightly to 1.18 in December 2023, then continues a downward trend to 0.98 (September 2024). It recovers slightly to 1.02 by March 2025 but remains below the peak levels experienced in late 2023.

Summary:
Overall, the company’s fixed asset efficiency experienced a significant improvement during 2022 and mid-2023, possibly reflecting better asset management or expansion aligned with increased sales activity. The total asset turnover ratio shows a consistent upward trajectory into late 2023, indicating enhanced overall asset utilization efficiency. However, both ratios diminish towards the end of 2023 and into 2024, suggesting a potential decline in operational efficiency, asset utilization, or changes in business strategy that could impact long-term activity performance.