All right. Welcome, everybody. Welcome to our second time at MLB headquarters from New York City. We're here live, and we also have a webcast going on. So thank you, everybody, for joining us live and, online. You know, last year we did this, and, we were still coming out of COVID, so, we didn't have as many people here. We had some executives that had COVID that were zooming in. This, this feels like New York City is back, and we're back in New York City. The All-Star Game, if you follow baseball, at we had our access points there, and then for the World Series, Texas Rangers, they have our access points in the dugouts using them. So, Joe, I think we need another authorized partner. We have a, an amazing store down here. MLB has a, an MLB store.
We should, we should have it. You know, you guys are getting so crowded in New York. I'm sure the, the Wi-Fi at your offices is getting really congested, so, it's a great opportunity. XIQ is so easy to use. Just buy an access point, bring it to your office, light it up. It's gonna be great. So, thank you for being here. We have, as usual, when we start these days, we have some, non-GAAP measures that we'll be talking about, so I wanted to give that disclosure. And, our statements will include forward-looking statements. So if you're in the room here, you've got the printouts, and if you're listening to us online, just remember that they're available on our website, in our filings, and in our press releases as well. So we wanted to make sure you have that disclaimer.
We've got a great lineup for you today here. We're gonna kick things off. Our CEO is kicking us off, and we're gonna talk about why we're confident, why we're confident in our outlook. And we're gonna actually talk about, you know, what is making us tick, why we believe in double-digit growth, and then we're gonna talk about what exactly makes us so different, what technology we have, amazing technology, amazing customers that we have, and our CTO, Chief Product Officer, Nabil, is gonna talk about that, about our tech leadership. And we're gonna go into a brief Q&A with Ed and Nabil, and after that, we're gonna take a break.
Then, our Chief Revenue Officer, Joe Vitalone, is gonna talk to us about go-to-market, our trends, our strategy, and how we're taking all of this great technology and selling this in the marketplace and adding value to our customers. What better way to have a proof point of that than having some actual customers here and some of our consultants that help us evangelize Extreme in the marketplace and help their customers understand the technology? So we'll do a panel hosted by our COO, Norman Rice. And following that, I know everyone's waiting for this, our CFO, Kevin Rhodes, will talk about our financials and our outlook. You know, last year it was really great to see so many people were right across the street from Radio City Music Hall.
At Radio City Music Hall, they had the NYU graduation last year, and if you know NYU, their color is also purple. So we came here, we just thought everyone graduated Extreme University from YouTube and was just coming to join us here. But we will leave ample time for Q&A, so I wanna make sure everybody gets the best of this, and happy to follow up after we have this event. Everyone knows where to find the investor relations team, and the executives are always available. Without further ado, I want to welcome our CEO, Ed Meyercord. Thank you.
Thank you, Stan. Yeah, I'll reiterate the welcome to everybody for being here. So it was May of 2022. I'll just give you a little background of where you are. So you, you're in the room, you know, where the commissioner meets with the owners. And right before COVID, I guess, they had this idea to build out kind of this state-of-the-art space, and they completed this, and I'm going to say it was like March or April of 2020, and that went unused for almost two years. And then we were the very first people to use this space in May of 2022 in our investor meeting. And I also want to say thank you to Major League Baseball, a true partner.
You know, you'll see, you know, for us, sports and entertainment and, you know, these venues are so important to us and for our brand. When you think about it globally, and, you know, we've expanded globally, we've added, you know, Man U and the Portugal Football Club, you know, is the latest to the list. But it's great for our brand, and it's great for our partner community, as people really love to go to the games, and it's really helpful for us to build that up. Looking at the video, one of the things you'll hear us say is that there's always a new way for a better outcome.
I can say when I'm traveling around the world, I'm always amazed to learn about new customers, new partners, and new ways people are leveraging our technology for better outcomes. I just learned one on this video. I just learned that they're using our technology for auto beer pouring. So I guess now we have a new use case for Extreme. We'll jump into this. You know, the header here is, you know, why we're confident. I'm gonna talk about that. Obviously, we've made some adjustments to our forecast growth rate. Obviously, that's something that is really important that I need to comment on. So I'm gonna talk about the current environment. I'm also gonna talk about our position in the market and why we're taking market share.
We'll get into that, and then Nabil's gonna follow me, and he'll get into some of the technology about just how we are different as a provider in the industry, and we have real technology differentiation there. The proof point behind confidence is really in your customers. At the end of the day, if you are winning business, and keep in mind, you know, in all of our business, we go ahead and have a Cisco every single day, HP every single day. This isn't like once in a month we have a big competitive deal. This is every single day. We're competing, and we're winning. And so what gives us confidence is the fact that we win, and we're winning every day in the marketplace. We're also gonna talk about some new growth opportunities.
If you look at our market share, Extreme, what, 6% market share as a company? Well, there's 94% of the market that we can go after, and we don't have to invent new products to do this. We have commercial opportunity, we have go-to-market opportunities, and there are some strategic investments that we're making that we'll talk about. The other thing, we, in terms of our financial model, and, and we look, you know, there is a near-term tampering of our growth rate that we'll talk about and, and, and why that is what it is. However, the financial model remains strong. Kevin, our new CFO, you know, you'll hear from him and, you know, why he's confident, you know, to still call 25% growth in EPS as a baseline for Extreme.
Alex Henderson and I were talking earlier, and there is the element of growth and taking share and some new growth opportunities. There's also margin expansion. If you've got six points of margin expansion and operating leverage built into the model, it's pretty powerful, and that makes us somewhat unique, and I'll talk about that. So navigating the current environment, I'll just share, you know, where we are and sort of how we got to where we are, because we were cruising along. You know, our fiscal year end is June. We're cruising along, and we're all the way into September, and our teams are feeling good about the quarter. Then, you know, we started feeling the impacts of deals pushing out.
Now, we call our business every week, and we call a weekly number, we call a monthly number, we call a quarterly number, and we have our teams rolling this up. And so what happened, really, in the third week of September, we saw an unusually large volume of deals slide out to the right. And when we talk about, you know, what is going on, and we're getting color from our field teams globally, the idea is more people are getting involved in the decision-making process, and that deals aren't going away. And I want to reiterate that networking is strategic, networking is important. When we think about all of our enterprise customers and the importance of digital transformation, regardless of the industry that they're in, networking is critical.
So it's not a function of networking going away, it's just a function of the timing of how we close business. And so what we saw is a lot of deals moving out to the right. In some cases, school boards are saying the school board wants to get involved and understand where we're spending the dollars. So normally, instead of IT just spending the money, now we're gonna pull in the school board. Well, that takes a little extra time. They got to schedule the meeting. These are the kinds of things that we saw. In some economies challenged with macroeconomics, like Germany, at Extreme, we have a very high customer concentration and business concentration in Germany. They have some unique challenges. First recession since World War II, and they're dealing with some things. Is networking still important to them? Absolutely.
However, you know, with their energy policy, they're saying: "Well, wait a minute, are we prioritizing the spend right now on the network, or do we have to heat the schools for the kids coming up this season?" So things... You know, so there were some microeconomic issues that came into play, and it really did—it came quickly to us. So in terms of the sales cycle moving out to the right, which we talked about, in terms of some of the macroeconomic trends coming back into play, you know, we felt this really in the mid part of September. What does that do to our teams?
As they're looking out, they want to be more cautious in how they call the December quarter and how they call the March quarter, and understanding how long will these trends persist and when will we come out of it. So I would say our teams were fairly guarded and fairly cautious about how they were calling the number. The last point I'll make is, on a run rate business, there are, you know, high volume, sort of low, ASP-type, business transactions that happen from our channel that largely dried up, during the supply chain, constrained environment that we were in. We were expecting that to come back. We're anticipating that to come back a little faster than it has.
So those are really the three contributing elements to what happened to our call and why we revised our growth estimates down. I will say at Extreme, we move very quickly. We sized up the impact to our business. We took very decisive action, in taking costs out of the business. So we took 8% of our operating costs out of the business in two weeks. We were able to move quickly. We could be nimble. It's no fun for everybody to go through that exercise, but we've got to be responsive, and, you know, we'll be very prudent in terms of, our commitment to shareholders and our earnings growth numbers and, and earnings commitments. Now, if we, if we-...
If we move back to more of the confidence play, why are we, you know, why are we confident and what gives us the confidence? You know, we're winning business. We're winning, like, really important logos. When you think about the Kroger win for us, the world's largest grocer, and what does that mean? We're now building the world's largest cloud-managed network, and we're midstream on this deployment. That was a big deal. They took a very objective view of wanting to have the best technology, the best solution for going forward and building the store of the future for this massive technology upgrade. They invited everybody in. First out, Cisco, second out, HPE, and we'll talk about why. Then it turned into a battle between Extreme and Juniper, and we won. When we win that kind of business, it opens the door.
You know, Ahold, you know, in EMEA, Soriana, I'm gonna talk about, you know, in Mexico, large retailers all around the world, this becomes a really important win for us. Success begets success. Why are we confident we're gonna win in the, the marketplace? Because, yeah, we won head-to-head objective review of the best solution for Kroger. We just won our SD-WAN business, and, and our SD-WAN solution came through again in head-to-head competition for McDonald's in the UK, 1,500 stores. Another example, then we then can take that, and we can play off that. Success begets success. Norwegian Cruise Line, you know, one ship is a $5 million project, okay? They have 45 ships in the fleet. That... Yeah, we're starting with the first one. What gives us confidence?
They're delighted with Extreme, and they're delighted with the technology solution that we have relative to, again, Cisco, the larger player. Now we know there's a big pipeline of opportunities as they refresh their fleet. I'm gonna come back to PNC Bank, Cedar Fair. You may have seen the merger with Six Flags. That was a big win for us, you know, the amusement park environment. Again, these kinds of customers help Extreme, and we leverage brands. We'll talk to that in a second. It doesn't hurt when Gartner, a lot of the- a lot of enterprise customers out there will rely on Gartner. They'll look to Gartner and say, "All right, you know, who do you think?
Who's got the best solution?" We're five years in a row in the leadership quadrant at Gartner, but we just leapfrogged Cisco, which is a big deal. It's a big deal when you think about customers. If 60% of the industry is running on Cisco, and they say, "Wait a minute, we're thinking about modernizing and upgrading our networking infrastructure, who should we consider?" Oh, they're gonna consider Extreme now. So this is another thing that gives us confidence because we're seeing more at-bats, and you'll hear us talk about the fact that, you know, our funnel is growing. We're seeing this funnel of opportunities growing, which gives us a lot of confidence. But, you know, with our customers, with third parties giving Extreme these kinds of accolades, that really helps us in the marketplace. People are surprised. We have this thing called Did You Know?
You're not gonna see Extreme advertising in the Super Bowl, okay? That is a complete waste of money for us at Extreme. We're gonna be very smart about how we build our brand out in the marketplace. And people are surprised when we talk to them about just how prevalent Extreme is in the daily fabric of all of your lives. So I got on a call. We had an opportunity with PNC Bank. I was talking to the head of technology at PNC Bank, and she asked me, she said, "Ed, I don't really know that much about Extreme. You know, are you enterprise-grade?" In which case, I almost fell out of my chair. Like, "What do you mean, are we enterprise? This is what we do.
You know, we're, we're enterprise networking, and we're focused, and no one, no one, you know, delivers enterprise networking solutions like Extreme. And she was like, "Oh, okay." And I said, "Well, let me just put it this way. Have you ever gotten a FedEx package?" "Of course, I've got them." "Well, every time you get a FedEx package, you know, it's run through an Extreme network. Ever got on an airplane in U.S. airspace? Well, the FAA runs on Extreme, and the program they use to manage U.S. airspace runs on an Extreme network. So every single airport in the country has Extreme Networks technology. You might not have known that." Burj Khalifa, the tallest building in the world, runs on Extreme. I don't know how many people are getting Social Security checks in there, but Social Security runs on Extreme.
And we have this, you know, we have great examples all around the world through these amazing customers that we have, you know, that people are blown away. Samsung Electronics, the largest electronics company in the world, runs on Extreme, corporate headquarters, partners with Extreme. And people get comfortable with us understanding our customer brands and the kinds of enterprise customers that are trusting Extreme. And so that's a big help for us, and in a way, it's our stealth branding campaign that is what we're deploying internally. We are gonna be doing more with this. We're super excited about a new hire of a new Chief Marketing Officer.
She has not been announced yet, but a player, who's gonna be starting in the mid-December timeframe, and, we're gonna be adding a little more edginess to our campaigns, with a real focus on the channels. I'll talk about that in a little bit. So networking is inherently complicated. It, it is complex when you think about all the different places in the network, and, and what you have to deal with, in managing, you know, an enterprise networking environment. You know, everything, you know, from the edge to the core. You think about distributed networks, you think about IoT devices. You think about a, you know, a, a large campus environment, and at the end of the day, with all the changes in technology that are taking place today, people are just begging, begging. They wanna have simplicity.
They really, they're looking for a way to make it easier for them to deliver this high-quality experience to their users. They're looking for flexibility. They wanna have choices. They wanna have alternatives. They wanna make sure that they're future-proof in their ability to go forward. They don't wanna get locked into a technology that doesn't allow them to evolve, which is really important. And then they wanna have advanced insights. We talked about new ways, better outcomes. I know I talked about, you know, beer pouring, but in general, there are just myriad ways that people can leverage networking technology, and you're gonna hear about them today, more and more, about how to leverage the network to deliver better business outcomes.
The network has complete visibility to not only all the networking elements, but everyone attached to the network and everything that they're running on all their devices. So if you have all of that intelligence and all of that data, it's just, it's rich for analytics and the ability to glean and pull insights to drive your business outcomes. So when I'm meeting with customers, I'm asking them: "How are you leveraging the network to drive better business outcomes?" And that's really the story that we have, and that's somewhat different. Now, we think about how are we doing this, and Nabil's gonna get into a lot more detail, but we do this with what we call One Network. We have a Universal Hardware platform that no one else in the industry has. We also have a fabric technology.
We're the only player in the industry that has an enterprise fabric. You'll hear people talk about fabric and why fabrics are important. Everyone in the industry has a fabric. They're IP fabrics designed for the data center, that have seven different protocols that are really complicated. If you try to take a static data center environment and apply it to campus, you can't do it. No one uses any of our competitor fabrics for the enterprise campus. No one. It's way too complicated. We're the only one that has an enterprise campus fabric, that it runs on one protocol, and we make it very easy, and I'll talk about some customer examples here, to deliver this high quality and secure experience. We'll talk about network segmentation a bit in some of these examples.
We have one cloud, so when you're interfacing with Extreme, all of our services, whether it be SD-WAN, whether it be our switching portfolio, whether it be our wireless, whether it it's the core of the network or regardless of all the solutions, the security solutions that we're bringing forward, there's one single cloud interface. No one else has that. So in the case of a Kroger, for example, they're looking at interfacing with Juniper. They have to try to figure out how to interface with seven different clouds. Cisco, it's even more. You're in double digits, so the complexity goes way up. When we talk about simplicity, we also talk about it in commercial terms. Our licensing is the simplest in the industry. One license for one device. You're gonna hear Nabil talk about good, better, best.
We're getting ready to make it simpler and even collapsing that support with our management and other services in a really simple model, which will be another industry first. And one Extreme is really about, you know, there's commercial terms, and we'll talk about some of the new growth opportunities we have, about how we make it easy for people to deliver this high-quality experience and net-net, make more money working with Extreme rather than working with some of the older, larger vendors. Soriana is a great outcome. This is another, this is another retailer, you know, a 30-year customer that made the move to Extreme. They're in the whole way, so they have our entire solution. This is where One Cloud really matters for them. They had a lot of complexity that they were wrestling with.
They made the move to Extreme, and then they've just started growing and growing. This is a eight-figure customer for Extreme. This is a very large, important retailer, and it starts off with the elements that I've just been talking about, which is Universal Hardware platform. You know, the only ones that have that. Very simple, easy to deploy, flexible hardware. They have fabric technology, which makes it very easy to create a network within a network, segmenting networks. Again, the only enterprise fabric that exists. And they have a wireless, they have XIQ, and they have complete visibility of the entire environment from one cloud, including SD-WAN, and then the ability to have visibility of the entire network from one cloud.
Finally, our Copilot, which is our AIOps and our insights, and they're looking at: How do I drive better business outcomes from all of our stores by leveraging the latest modern cloud networking technology, which is AI, ML, and then the whole operational benefits from leveraging modern technology? And this is why Soriana went with Extreme. Didn't help that we had Kroger in our back pocket. You know, healthcare is another example. There's a healthcare entity called Zwijnaarde, which is in Belgium. They had a serious issue. They had a security breach. They were hacked in 2021. Their network went down. A massive healthcare system, hospitals. Pretty painful when people are taking down, you know, critical care facilities like this. They couldn't find the problem. They had a Cisco environment, and they had an HP environment.
They couldn't find, they couldn't find the issue. They got very excited about our enterprise fabric. Why? Because we make it very easy to create a network within a network. They had technology in each room that they wanted to protect. They wanted to create a network for each room in their hospitals. They couldn't do it with anyone else except for Extreme. Why? Because we can, what we call hyper- segmented network, and we have an enterprise fabric that makes it easier for for them to do that. And so now, here again, we have an end-to-end customer leveraging Extreme technology, in a way where this is an example of a vertical in healthcare. Resorts, Vail Resorts, many of you familiar with them. Vail had an issue. They were trying to upgrade to modern technology. Vail has over 40 different resorts.
They were making a selection of upgrading three of those resorts. These are ski areas, hotels, golf courses, you know, you name it. Think about everything in that compound and in that complex. Well, they had a problem because they were working with Cisco, and they didn't have a path forward. It was easy. Basically, they were confronted with rip and replace, take out all the old technology and swap it out with the new technology. In this case, Extreme has the ability to provide them with the tools to manage at their own pace. So we can provide them visibility to their entire network, including Cisco gear or other competitor gear, and have the ability to then upgrade at their own pace.
Extreme is the only player, with our cloud technology and with our tools, to provide the ability to manage our competitor networking equipment. It's kind of a big deal, especially when Meraki can't manage Cisco equipment, and technically, they're the same company, even though in the market they're very different. Again, another reason why, you know, we're able to position Extreme in a way where we're winning. This is the last 12 months at Extreme. Over the past several years, you know, this isn't really, you know, an M&A. We used to have the M&A slide, where you saw the acquisitions that we've made. Here, you know, what you've got is, you know, a fully integrated company with technology differentiation that has been executing.
You know, and I can tell you that as I look forward, there's never been, you know, better opportunities that we have for organic growth than what we have today, despite our, you know, air pocket, you know, takedown for organic growth this year. And this is where it starts. If you look at, we have our core business and our core differentiation, we're gonna get into this in a lot more detail, but this is where the simplicity and the flexibility, and the insights come in from our modern net, technology solutions for networking. This is how that plays into the core, how, you know, the Enterprise Fabric allows us to win. The customer examples I've given you, and then how we penetrate our partners to grow this core network.
We also have some opportunities where historically we haven't played, that are more commercial in nature, that are very large opportunities for Extreme. Managed service providers, many of our enterprise customers don't want to be in the business of managing networks. They wanna... If you're Vail Resorts, you know, you wanna run a resort, and maybe you wanna have a partner manage the entire networking infrastructure for you. The current MSP platforms out there are very complicated, and cumbersome, and hard to deal with commercially. So we set out to build, and we launched our MSP platform, in July, we turned it up. We're now adding partners. We think this is a very large growth vector. So we have core growth at the bottom line, we add MSP.
We also have a private subscription offering for large service providers, which we already have a very large service provider very interested in this. That, again, is another white space for Extreme, and it's another growth opportunity. Then in terms of strategic opportunities, we'll talk about what we're able to do on the subscription side of the house by basically, where today we have 65% of devices attached, where we can take this up to and approaching 100% of our devices and grow that revenue line significantly. We're also gonna talk about security, our unique position.
When you look at our network access control capability and our technology, and you look at cloudifying ZTNA inherent in the network, this is another area where we take an existing base of subscription and now start thinking about our cloud as a platform, a platform for orchestrating new services. We're excited about this opportunity as well, and everyone will be talking about that today. So we're excited about our differentiation in the marketplace today. We are looking forward, you know, we look through the lens of our customer and all the amazing customer wins that we've got ongoing and our funnel of opportunities, that's continuing.
We look at the growth opportunities that are new, that are organic, many of them commercial in nature, that don't require us to invent a new technology, but it's more about how we go to market, and we've got very interested partners there. As we execute on this, you know, we see these growth opportunities over the core base level growth that has us excited about the long-term potential of Extreme. So I'm gonna leave it right there. Stan, we're not taking questions yet. I think we're gonna have Nabil come up, and then we'll open up for questions. Thank you.
All right. So Ed, I think, laid out the vision for the company, that, how we're doing, what's the core business. Actually, you know what? I'm gonna stand here.
... I just feel like I'm too far away from you behind that podium. It's like, I wanna be more closer to everybody. All right. So Ed laid out the vision, right? So and it's very clear. We have the core business, where we have great traction. You heard the customer examples, why the customers select us, why they go with us compared to our competitors and stuff. And then we have these four growth opportunities, two strategic and two go-to-market. So I'm gonna give you the details of these, that what they are, how do they layer in, why do we believe that these opportunities exist for us? But I'll give you a main message, an overarching message for all of them. We have been, from a technology point of view, we have been on this journey.
We were the first ones that came out in the networking world and said, "Look, networking will all go to the cloud." We were the first ones with our acquisition that we did 4 years ago. We said, "Cloud first." Then we said, "Once you have taken everything to the cloud, then you can layer in more and more opportunities on top of it, deliver more value to your customers, which then, in turn, delivers us more subscription revenue." We have not changed that message. We have been on that journey for the last 3 years. I've been talking to you guys for the last 4 years. Every year, I come up, and I tell you what we are going to do next from a technology point of view, and then we go ahead, and we deliver that. This year is not going to be any different.
I'm gonna start with what was it that I said in the core business last time I met you, and then how have we done against that? So Ed mentioned the universal platforms. Just so that everybody's on the same page, I know you are constantly thinking about Extreme and everything that we say on a daily basis, but just in case, I'm gonna revise and remind everybody why universal platforms are important. So universal platforms are important for three main reasons to our customers. Number one, you do not have to manage, you do not have to buy hundreds, and in some of our competitors' cases, thousands of different SKUs for different use cases across your enterprise. It is one set of SKUs that work all the way from the core into the edge and out into the WAN and the remote sites as well.
So it's ease of use. Number 2, our universal products are 3 times higher in hardware quality than anybody else, and we have a lot of data around that. It's actually 3 times better than the previous generation of our own products, so higher quality. Number 2, you do not have to make a choice of what architecture and technology you are going to deploy at the time of buying the technology. So for our competitors, Ed briefly mentioned Cisco, so I'll go ahead with Cisco. If you want to run Catalyst, well, you have to buy Catalyst day one. If you wanna run Meraki, you have to buy Meraki day one. You can't change your mind later down the road because they're different hardware, different technologies, different operating systems, different management systems. But with us, no.
You buy Universal Hardware, and then you can choose which one, whichever one of our architectures, whichever one of our operating systems you wanna deploy at any time on its life. So that flexibility from the time of buying all the way to operating and deploying, that's the second biggest advantage. The third one, and which is nearest and dearest to my heart, is that universal products are built ground up to connect to the cloud. Because remember we said cloud first? So it is not that we had these products, and then we decided, like, "Oh, you know, we really need to put it into our cloud." No, these were built ground up to connect to the cloud for management, for analytics, and then providing other value. So these are the three advantages to our customers. What's the advantage to us?
I said this is three times better in hardware quality. That leads to lower warranty costs internally for us. Universal Hardware is more efficient on the COGS side, and we have been telling you that, that this is more. It provides more gross margin for us when we actually sell the Universal. So this is why Universal is important to our customers as well as to us. So how have we been doing on this? Last time when I talked to you, I said I will have 100% coverage of Universal by the end of this fiscal year. Today, we are in November, and we have 100% coverage of Universal across our entire portfolio. What do I mean by that? For every portion of our portfolio, now there is a Universal product that is being quoted and sold. So we are done with this migration.
In under three years, we have gone from all those different acquisitions and all of those different portfolios into one unified Universal Portfolio from zero to 100%. Now, you might ask: "Well, okay, so you have delivered that, but then how much of it are you selling?" So what is the percentage of universal products in our bookings? In the last quarter that just closed, 80% of our bookings are now coming from our universal products. So not only have we actually pushed out and delivered these universal products, Joe and his team and our partners are actually selling them more and more and more, and in the next four quarters or so, the rest of the 20% will transition over to universal as well.
So huge amount of execution from our side, something that we have been telling you, promising you for the last three years, and here we are, and we have delivered and completed that. The next two are around subscription. When cloud comes first, we are cloud first on anything, then the model, the financial model that goes with cloud, is the subscription. And we've been talking about increasing our subscription... you know, generating more subscription, growing it, and so on and so forth for a while now. We said last time that we will grow our subscription revenue, the ARR, 25%-30%, and as you see, we are growing it at 30%.
Now, that bodes really well for us, and I'll talk a little bit more about how we have a long ways to go, where we can continue to grow at this CAGR and why we are so confident about that. But I really like the second number there, which is 20%. What is that? When we started introducing the subscription, yes, in the networking world, people were like: "Oh, I'm not used to subscription. I really wanna buy a license once, and I wanna use it for the rest of my life." And that was the whole idea behind, you know, reluctance in moving to the cloud, into the subscription. So therefore, early on, when we moved to subscription, we had to discount it. And if you guys remember, last time I said our customers are seeing more and more and more value into our subscription business.
Now, how do you translate that into a metric? How do you know that your customers really value your subscription when they're willing to pay you more for it? So that 20% number, which is the increase year-over-year in the ACV, that is the average selling price of our XIQ license, and we have increased that average selling price, the average contract value, by 20% year-over-year. Our customers are willing to pay us more for the same subscription because they see value in it. And this is very different compared to the ASP of a hardware or a service, where every year they wanna pay you less. That's the beauty of cloud. That's the beauty of subscription. They want, and they will, and they do pay you more in the subscription world. And on the right-hand side, that's a 65% attach rate.
Ed kind of mentioned that. We pretty much went from 0% attach rate because we didn't have a cloud, to 65% attach rate now across everything that we sell. Now, this number has two messages in it. One, look, we've gone from nothing to 65% over the last four years. That's good progress, but the fact is we are only at 65%. That means that we have a lot more room to grow, even our current subscription business, and that is very critical for us, that continued growth on the subscription business, you know, not only just in double digit, but close to, like, 30% and even more than that. The last number, 2.5 million devices. So this is an interesting number.
Last time when I stood up, I actually wasn't here because I was the one who got COVID last time, and I was beaming in from a hotel in Sacramento, and that was funny. It was 4:00 A.M. in the morning, and I had to, like, balance my iPad and all that kind of stuff. I'm glad I'm here in person this time. But last time when I talked to you, that number was around 1.6 million, and today that number is 2.5 million. We roughly are adding close to 750,000-1 million devices every year into our cloud, and this is at that 65% attach rate. So we have a lot more room to grow. So this is all the stuff that we have been doing on the core business.
This is the thing that we have been talking to you about. So what is the core business? So I'll briefly talk. I won't go into the detail of that. You know, some of it Ed mentioned quite a bit and in the context of the customers, but I'll quickly go through it. Because it is cloud first, I'll start from the top. Rather than going bottoms up, we always start top first, because when we go out, when Joe's team goes out and talks to the customer, it is always about the outcome, how do we deliver from the cloud? And then it takes the rest of the portfolio with it. So ExtremeCloud is our cloud platform.
Last time when I talked to you, some of you might remember that we talked about how we are developing this platform, which allows us to provide cloud management, but we are not building this platform just to provide cloud management. XIQ, which is ExtremeCloud IQ, is our cloud management application, and most of our revenue, almost 99--95% of our revenue, that is in the ARR, is really based on that one application, which is ExtremeCloud IQ, which is our management application. But ExtremeCloud is a platform, and this allows us to scale and provide multiple applications, management applications, analytics applications, as well as security applications. So that sits at the top, our platform, our cloud platform. Now, I'll give you one key fact about this platform, which we are very proud of and it is very unique.
This is the only platform in the networking industry that seamlessly runs in public clouds. And notice the S at the end, because we are in GCP, Azure, as well as, AWS, all at the same time. At the same time, it runs in private clouds, be it in private IoTCs or private data centers. And earlier this year, we announced our Edge Cloud, which is a local version of the cloud. So all the way from public, private, to local, seamlessly, the same applications that can run across all of them. Now, that is the perfect example and definition of hybrid cloud, which is all the rage in the world. We are the only company in networking that not only talks about it, but have actually delivered it.
And then on top of it, it's the same licensing, same operating model, everything exactly the same that runs, and we call it the Cloud Continuum. And that is a major differentiation for us because when you're standing in U.S., we all believe that everybody is ready to run in the public cloud or any public cloud. But think again, people have their own choices that they wanna make, and now with security at the forefront, you will see that compliance becomes more and more and more important. Okay, so this cloud portfolio then drives our hardware portfolio, our networking portfolio, which goes across wired, wireless, and SD-WAN. Now, we acquired the SD-WAN portfolio, like, a couple years ago, and we told you at that point that we will integrate it fully into our cloud. Done.
At this point in time, our SD-WAN portfolio is managed from the same Extreme Cloud as any other portion of our portfolio. Then comes the fabric part, and I think Ed did an amazing job in describing why our fabric is important. So I will talk a slightly different, take a more technical angle to it. Our enterprise fabric is not only the only fabric that is custom-built for enterprise, but it is also the only fabric that spans across wired, wireless, goes across the WAN into the SD-WAN, all the way out to remote. So one fabric that really delivers on that message and that vision of one network. And why is that one network important? Because nobody wakes up in the morning and says, "Today, I'm going to go buy a new AP." No CIO wakes up in the morning and thinks that, you know what?
I really need a new 48-port switch. They all wake up every single day thinking about: How am I gonna connect my people, my customers, my employees, my partners? How am I gonna connect all of these devices that are becoming more and more cloud-connected? And how am I going to deliver all of these applications, which could be sitting in my data centers, being, you know, 18,000 different SaaS applications that an enterprise uses or could be running in any of the clouds? How do I connect all of them? How do I provide the best experience, and how do I secure it? That's the challenge. And in order to deliver that, you need a network that spans the entire enterprise, and you need a cloud that connects all of them, configures, manages, orchestrates, and then, as we move forward, secures all of them.
Recording in progress.
In that vision, then there is no competition. We are the only game in town. Now, technology is really important, but so is the rest of the stuff, which is what we call as One Extreme, which is our partners with our Extreme Alliances. We are further expanding our alliances with technology partners, be it Microsoft on, you know, the security and identity side, or be it Palo Alto, which has been very fundamental for us, you know, out in Asia, and many, many other partners that we integrate with. Licensing has been a huge advantage for us. We were the first ones to go with a device-agnostic, one device, one license concept, and I'll show you how we will continue to lead this market. And then, of course, our support.
If you look at Gartner, I mean, like, our support is ranked the best in the world, I think, like, six times in a row now, and of course, Extreme Capital, which allows you different ways to buy it. So this is our entire portfolio. It's not just about technology, it is about us, how you package it, best technology, packaged the easiest way, and then delivered through multiple routes. Okay. I think I talked quite a bit about this. I'll take just one quick example that... Don't take my word on the fact that our fabric does all of these things. You know, some of these customers Ed talked about. So, but some I will add a different angle to it. So Turning Stone, you know, the casino, probably more surveillance cameras per square inch than anywhere else in the world. Now, what's the problem that they have?
They cannot allow or afford for these cameras to go down, no matter what happens, and if something happens, they must isolate it instantly. Nobody can solve that problem for them. Who can? We can, because of one fabric and one cloud, they went with us. Japanese government, they decided they are behind in digital transformation, created a new ministry called Digital Agency. Digital Agency came in and said: We're gonna deliver the best cloud. We're gonna deliver the best connectivity, but it must be secure from day one, and we need a partner that can integrate directly with Microsoft and all of the things that they're bringing forward. Who did they go with? They went with us. Why? Because nobody else can do it. We won MAFF, which is the Ministry of, I think, Forestry and Fisheries. I always stumble on exactly what that ministry is.
Then we won the Prime Minister's office and residence, and now we have 8 ministries out of 44 out there. Why? Because they want an outcome that nobody else can deliver. Dubai World Trade Center, the home of GITEX. You know, 60,000 exhibitors every single year because everybody wants to go do an exhibition in Dubai. That's the kind of the playground of everybody out there in the world. What they want is, they want a network that can create hundreds and thousands of individual networks with minimal number of people on a daily basis. Why did they go with us? Because nobody else can do it. That's the power of our Fabric and our Universal together. Now, if you look in the cloud side, Ed talked about Kroger. I will give you another stat about Kroger.
Not only is it the largest, you know, retail network in the world, they also want to deploy it faster than anybody else. 150 stores every month.... Nobody deploys their network that fast. Why? Because most of the time, the technology cannot be deployed that fast. With our One Cloud, because everything is One Cloud, we said, "150, no worries. We can do 200, 300, 500. How fast do you wanna go?" Why did they go with us? Not just because of the best technology in the world, but because nobody else can do what they want to accomplish, right? Same thing with McDonald's, PNC. PNC, one, one of the main banks out there, their issue, they can't decide whether they want a public cloud or a private or a local cloud. Guess what? They want all of them.
There is nobody else that can give them all of those clouds simultaneously. That's why they went with us. I can go on and on and on, but I know Stan is already giving me the eyes in terms of, you know, moving faster. But the point here is we are almost past the stage of differentiation. We have moved into the space of definitive technology leadership. We had a vision four years ago that we started sharing with you, and at this point in time, we are so established in that leadership that now it's easy and efficient for us to layer on more things on top of that, which brings me to my next point: What are the new things that we're gonna layer on top of them?
I'm gonna go through this rather quickly, and I'm gonna put my financial hat, you know, that I borrowed from Kevin for a second. Why are these things important? Yes, we are leading with the cloud. Great. We can put more technologies on it. We can put more services on it. I can talk about technology all day long, but you're sitting here, why is it important for you? Number one, on the left-hand side, leading with the cloud, that's the attach rate. We are at 65%, and we wanna go to 100%. We are delivering more and more value through the cloud. Our customers know and agree that the more value is in the cloud, they pay us more for that subscription. So now we are gonna go from 65% to 100%.
Every enterprise product that we sell out there will have a subscription with it. By the way, we can do it because all of our enterprise products are in that One Cloud. So from 65% to 100% attach rate, this is starting with the 4,000 series and Wi-Fi 7, which is right now quotable. So those are the first two products that go into that format, where the value is spread across the hardware and subscription. Over the next X number of quarters, we will transition it to the rest of our portfolio. That's number one vector growth for the subscription business. By the way, it's not just for the subscription business. That value drives our hardware sales as well as you heard about various different customer examples. Good, better, best.
Those of you who follow any of the subscription terms out there, you'll be like, "Oh, yeah, of course, that is exactly how subscription world sells." There is a good package, and then there's a better package, and then there's a best package. And you just go ahead and choose which one you wanna use. Life is as simple as that. Well, guess what? Not really in the networking world, not till now, because people have to, you know, scan through thousands of SKUs on the hardware side, then multiple licenses on the software OS side, and then figure out there is multiple licenses per, you know, application, cloud application. I'm talking about our competitors. We were the first ones where we said, "Here's your hardware, and here's one subscription for cloud management." But guess what? Now we have moved on from just cloud management.
So we said, like, "What are we gonna do? Are we gonna follow our competitors and become complex?" Absolutely not. We're gonna stick to that simplicity. So we're moving our entire cloud portfolio into a singular good, better, best model. So when you buy a good package, you get all of these good level key features across all of our applications. When you go to a better one, it unlocks a lot more functionality across all of our applications on the hardware, and so for the best one. But not just that, we are also combining the cloud applications as well as support, because it is about simplicity.
Rather than now having your cloud subscription, and then you figure out your support and your hardware, how about you simply figure out your hardware, and you get one subscription that gives you all the applications and give you the support on that hardware as well? How's that for simplification? So we are the first company in networking that is heading in that direction, and we believe that this is a good opportunity, huge opportunity for us to increase ARPU, which is average revenue per unit, because just like the attach rate on the cloud subscription side, we have a certain attach rate on the support side as well. And as you can imagine, when people want to sell support on edge switches, they tend to... That's where they tend to cut.
But when you combine these two things together and you get to 100% attach rate on your subscription, at least on the good level, then that increases the attach rate for your support as well. You all are probably better at math than I am. You can do the math on that, but how big of an opportunity that is. And the last one is TAM expansion. Cloud platform. This is the word that I want you guys to remember. We said cloud, cloud, cloud, cloud, and now I'm adding one more word to it, which is cloud platform. We have been a cloud application company, and that was the cloud management application. That is what has driven all of our subscription revenue.
We are now transitioning from a cloud application to a cloud platform company on the basis of all of the things that I talked about in Extreme Cloud platform. So now we can deliver not just management, but other capabilities. So what other capabilities are we gonna deliver?... Of course, it is going to be security and AI, because today you cannot have a conversation without talking about security and AI. So what did we announce this morning? We announced ExtremeCloud Universal ZTNA. Now, there's a lot of things on the slides. This is for your happy reading after this, you know, when you're on a flight or on a train. But I wanna deliver this message: What's the issue that we are trying to solve? When I go and talk to the CIOs, you know, our customers, this is the message that I typically get.
It's really complicated to secure the entire enterprise." They are not even talking about XDR and firewalls and stuff. They are talking about access security. You have to deliver NAC in the campus, you have to go deliver, you know, universal - or you have to deliver ZTNA for VPN replacement and for the remote site, then you have to go figure out SWG, then you have to figure out CASB, and so on and so forth. The chances are you'll end up with three or four different vendors. That leads to complexity, that leads to cost.
They ask me: "Is there perhaps a way to provide a singular place from where I can add all of my policies for access security, and then that goes ahead and implements it wherever it needs to get implemented, on the wired, on the wireless, on the SD-WAN, on your Android, on your Apple phone, on your Microsoft computer, on your Mac computer?" Yes, there is, and that is exactly what Universal ZTNA is. What Universal ZTNA provides? Two things. Number one, one place in the cloud where you can provide all access security policies, be it for campus, be it for your applications running in the data center or in the SaaS, or be it for remote users. Any user, any application, one place to put those policies. Once you have put those in those cloud, and guess where that cloud is?
That cloud is the same ExtremeCloud where you manage your network. So that even further simplifies that. Then it goes and implements it wherever it needs to get implemented. There is another thing I want you guys to remember on this one. Our cloud management worked for our products, and yes, we can manage Cisco and stuff for this use case of migration, but this is our first application, first cloud application that does not require an Extreme network underneath it. It will work perfectly fine over anybody else's network. But if you do apply it on top of Extreme network, then it seamlessly integrates with our Wi-Fi, with our wired, with our fabric, with our SD-WAN, and everything in the middle. So first application that doesn't require Extreme network underneath it, but if you do have the Extreme network, then it provides you that much more.
So Universal ZTNA, you will hear a lot more from us on this because we are on this quest to provide anywhere to anywhere security. The next one is analytics. We are in MLB, after all. You know, MLB has been a great partner for us in developing this technology. This was really started in our stadium business. This is a technology that we have been perfecting for the last 3, 4, or 5 years. Every time you get the stats on the Super Bowl or the All-Star Game or Taylor Swift concert, you know, same thing. Whatever you are doing in the venues, what is the biggest thing that you want from analytics? There's 2, 3 things. You wanna know what's the experience of your spectators in there. You wanna know the experience that . . . or how well your operations are doing.
You wanna provide them, you know, which beer stall to go to, and hopefully now get automated beer. Yay to that. I love that use case. Or which restroom to go to and which ticketing booth to go to, and so on and so forth. But that's just the start. How about in-stadium betting? You need analytics for that, and I know, you know, there'll be some conversation. Norman and one of his guests will talk about that. So no matter what you are doing across the venues, venues could be sports stadium, it could be amusement parks, it could be big, you know, halls where events happen and stuff. Wherever you congregate people, you need analytics. And what's the best source of analytics? Where everything connects, which is network.
Whether it's a device, or a user, or an application, anything that you're doing, it's going through the network. That's the best source of analytics. We are taking this technology, and for the first time, we are productizing it for our entire venue vertical. So one thing I always want, I want everybody to remember and I always say, is that when it comes to analytics, analytics is verticalized. It's very vertical specific. The same analytics doesn't work in venue and healthcare. So the first time we are bringing it out, this is for venues, and then we will take it out to healthcare. We'll productize that and other verticals as well. Quick thing around AI. AI is not a product, AI is a concept, AI is a common service when you think about the cloud platform. We introduced Copilot last time.
That was the first time we introduced it. We have more than 200,000 devices in the last 12 months that are now actively being monitored by Copilot, so this has been a very good uptake rate for us. But we won't stop there. We're introducing EVA, which is Extreme Virtual Advisor, which will front-end all of our AI. We are collaborating, I can say that. We will probably do a PR about it later as well. But we are collaborating with Azure AI on this. Major, major partner for us. It will be present in every single product that we push out because it is part of the cloud platform. So look out for EVA, it is coming out.
And from day one, as opposed to some of our competitors who believe that natural language processing is the ultimate of AI, this will not only deal with the public data or your private data, but will find and will give a very easy way to plug in your ecosystem data to it as well. Keep an eye on this. This will move very, very, very fast. Okay, go-to-market opportunities. So lots of strategic opportunities to increase our subscription business, drive more hardware, generate more revenue, more ARPA, more ARPU. But what about finding new routes to market? This is not gonna come as a surprise to any one of you. MSPs have been around for 25, 30 years, but they are kind of having a moment right now.
Because the way the world is moving, people don't really have enough people, they don't really have enough capital, so a lot of customers are moving towards a managed services provider, you know, to satisfy their business needs. But what's the problem? The problem is the MSP world is very complicated. If you look at our competitors, the way they have come out with their MSP models, it is complicated. You have to find a subscription for everybody, and you can't move it from one customer to another, and then you have thousands and thousands of contracts that you need to quote term, and it adds to transaction cost. And if you ever talk to an MSP, there's only two terms that they will use: transaction cost, operational cost, because that is their business model. Their entire margin is dependent on these two costs. So what did we do?
We decided to create a managed service provider model that really reduces those two costs. How do we do that? There's one price, one price for all cloud applications as well as support. Remember, I didn't say SKU, I said one price. This is tiered model on consumption. You don't need any discounting. You do not need any advanced math to figure out what your bill is going to be. It's a single consumption model. You pay what you use across the entire portfolio, and it's all 100% automated. We started that in July. As Ed said, we already have seven of our partners who have transacted with us on this model. We plan on expanding it to a lot of our partners as well as new partners. We see this as a major opportunity for us.
Again, the innovation we could bring because of our cloud expertise, one price, one consumption model, and the MSP portal, which is built on Extreme Cloud, that can take a partner from zero to transacting as an MSP in few weeks, because that's really the power of that cloud. Now, next one, and I'm not gonna go too much into the detail of that, but I do wanna point this out. If you look at the large enterprise TAM, which is about $15 billion, the biggest route to market are through telcos, the service providers as a channel. So I'm not talking about their MSP business, but service providers, tier one telcos as a channel. Now, what's happening? That entire space have had, had one or two incumbents for a long period of time, and you can probably guess who those are, who those incumbents are.
But because of that almost pseudo monopoly, there's a massive compression in the margins for these telcos. So there's a lot of fatigue around these incumbents. And as these newer technologies and newer financial models, like the cloud platform, like the MSP, single subscription, you know, single consumption models, as they come out, there's willingness for these telcos to actually let another player in, and actually, in a lot of cases, do share shift from their incumbents. This is a massive opportunity for us because our cloud platform and some of these packaging methodologies that I talked about, they are perfect fit for this market. So this is something that would be really interesting for us as we move forward in the next few quarters, and we'll definitely tell you more about it as we, as we deliver on this. And this is the last one.
We talked a little bit about security, but security comes in many forms, and, you know, security certifications and compliance and stuff is another big part of it. Now, this is not new to us. You can see on the right-hand side, we have had a lot of reference accounts in the public sector, regulated industries, in the U.S. federal, in the international governments and stuff across the board. But this has been kind of a springboard for us, but we never really sprung from it up till now. So now we have made a commitment that we already have some of these certifications and portions of our portfolio that you see on the left-hand side. By end of this fiscal year, every single part of our portfolio would be certified with all of them.
Now, you combine this with the reference accounts on the left-hand side, we believe that's a huge opportunity for us to really build on that early success. And I don't want you to think just U.S. federal, because these certifications are becoming more and more relevant for regulated industries, think insurance, think finance, think SLED, and so on and so forth. So another huge opportunity for us. So we had two strategic opportunities and these two, go-to-market, you know, opportunities. So we are very hyper-focused on delivering that and taking a leaf from Ed's presentation, why are we confident? Because these are the ingredients that are with us. I love cooking. This is our pantry. We open it up, and we see the best technology, be it the cloud or be it the fabric, sitting right there.
We see this amazing innovation in packaging and licensing, be it the single, you know, license SKU. This is the MSP consumption, be it what we are doing with Espo and stuff. I see it sitting there, and I see a lot of these opportunities opening up in the market. So what do we do? We put all of them together into one recipe for success, because that's what chefs do. So with this, I'll lead you here because I have my colleagues that'll take you to the next step of this journey. But thank you for being here, sticking with us. We are on a ride together, and it's gonna be awesome. Thank you so much.
Thanks, everyone. We have a short video to play for you, and, in the interest of time, we're gonna go to a quick break, so we'll do one slightly longer Q&A at the end of our presentations.
Okay, we're gonna, we're gonna go ahead and get started. I wanna welcome everybody back into the room. My name is Joe Vitalone. I'm the Chief Revenue Officer here at Extreme Networks. I've been at Extreme now three and a half years with the company. Last year, I came to you, I was the big head on the jumbotron, so it's really nice to meet Alex and Greg and my friends at Regions Bank in person. So, thanks for being here. Last year in Lisbon, when I was on the big screen, made a lot of promises. Our stock was at $9 a share, and we accomplished a lot in that year. Stan wanted me to talk a little bit about my background, because he felt like it was...
Yep, he felt like it was relative, and a little more about why, kind of, why we're winning in the marketplace. But I've been doing this for 40 years, so I started my career kind of back with Alex in 1983. Forty years selling in technology, 32 managing dynamic sales organizations, 4 times Section 16 officer at a publicly traded company. I've been through a lot, a lot of crises around the world, bunch of recessions, but nothing really prepared me for a pandemic. Haven't had one since 1918. We joked that you would, in communications, you would have to be using a horse, I guess, to have had to deal with it, but nothing prepared me for dealing with a pandemic.
I spent 25 years in video conferencing, so my biggest concern coming out of the pandemic is: How am I gonna manage a global sales organization on video conferencing? And I was one person that was uniquely qualified to be able to do that. And so, we educated our team on doing that. When I met with the team in Lisbon, it was a year and a half ago. It's the very first time I met my team in Europe, and so, we were able to accomplish an awful lot. Ed gave me pretty much free rein to, when he hired me, to build my own sales organization. And over the last 3.5 years, we've built just a tremendous team.
Starting in Asia Pacific, where I hired Jeff Remis, we added Lawrence to the team most recently to manage our hospitality business. And then we changed out almost every single geo leader throughout Asia Pacific. We did the same thing in the Americas when we hired Peter Brandt and Jennifer Orr, taking both of those people from very big companies. And probably 3.5 years ago, I wouldn't have been able to attract the talent that we were able to attract, but we now were able to do that. So really, really have built a really good team. I'm gonna talk a lot about the go-to-market, why we're winning. I'm gonna address some of the issues that we're seeing right now in the funnel.
The air bubble that Kevin mentioned, I wanna hit that head on because I just think it's a blip in the road. The pandemic did a lot of things. It created the constraints, which led to price increases, which led to a backlog, which created challenges for my channel partners. We have 8,000 channel partners around the globe. They get paid when they install this stuff, and they get a check from their customer, and they pay off their distributor, and then the chain keeps moving on. Well, the problem with, like, schools, as an example, in the Americas, which is a very big business, when all the kids went back into schools, you just can't install things when the kids are all at school. So we have to wait for a break.
The most recent break coming up will be the holiday break that we've got in December, and then spring break, and then in June. So all of these things created this challenge for the organization. What we're seeing now is it's starting to flow very nicely. We're returning to normal product flow. Transportation is starting to come back on, and our partners are starting to install this, collect money, pay down their debt and the receivables that they have with the group. So that's what we are seeing right now in the channel, and I'm happy to say that our volume business is starting to return. We're seeing our new channel partners start to sell really big deals. Ed and Nabil talked about some of those.
I'm gonna address a few others as we go forward, but I wanna talk about really how we're winning in the market. Alex, you mentioned our deal size is going up. Why is our deal size going up? Because the partners, the 8,000 we have, are now selling the full stack solution that we had. When I spoke to a lot of you from Lisbon a year ago, only 50% of our channel partners sold the full stack solution. We now have 85% of our partners selling it from wired to wireless, from edge to enterprise, and up into the cloud. This also allows them access into the new technologies that you heard Nabil talk about, so it really sets us up for big growth. This also gives us into double-digit growth.
If you look at the last 12 months, right now, we have double-digit growth in our funnel. Our deal size has never been bigger. When I was at Lisbon over a year ago, we could have a handful of deals that were $1 million. We had 182 deals over $1 million, more than 20 over $5 million. We had deals at $20 million and $32 million in the last year, so we're really moving upmarket. Success begets success. I'm gonna talk about that, but we're really seeing nice improvement in the bigger deals now in our funnel. We have 800 brand-new channel partners this past year that probably wouldn't have been as available to us 3 years ago. Certainly, they are now. Why? Because we're winning in the market...
They're losing, or were losing when they were selling other competitive brands. They're now winning when they're selling Extreme. So we're bringing on new active partners, which is creating net new funnel, net new logos for the business, as you can see, which is now 19%. This was typically 14%. So we're seeing a lot of really net new logos, really prestigious logos, as Ed talked about, earlier, in the session. So really proud of what we're doing on the channel front. We've added a new channel leader, Boris, in EMEA, Jennifer Orr, as I mentioned, in the Americas, and then, Hawk, who is brand new to the company, in Asia Pacific. The other thing that we did, which was key, was we split up our partner conference.
Well, last two weeks ago, we were in Salt Lake City, where we had our big Americas Partners Conference. Ed and I, Nabil, and team leave next week to go to Monte Carlo, where we'll have our European Partner Conference, where we'll be educating the team, talking a lot about the new things that Nabil and Ed have talked about from a technology perspective, and we'll be doing that next week in Monte Carlo, and then we'll go over to Asia later on, later on, next year. So these are all brand-new things that we're doing to build funnel and net new logos in the business. The funnel is improving. That's the great news, both the gross funnel and the weighted funnel. We have put more discipline now in our funnel than ever before because of the events that we've got.
We've got a couple of wars now raging in Europe, which are creating some problems. Germany is in a bit of a recession, so we're moving a lot of our growth initiatives to markets that are really taking off, such as MENA, which is the Middle East, Turkey, and Africa. We're seeing really big improvement in Latin America, and our Asia Pacific market is really starting to take off as well, so we're spending a lot of time there. So our funnel is improving in those areas where it's weaker, we're mitigating that right now, and then we're moving to areas where we're seeing really, really strong growth.
We have some big upside, for example, in federal, where we're gonna be adding some really big new partners, some new certifications that are gonna allow us to further penetrate state and local government and our federal markets now here in the US. On the sales enablement front, I want to talk a lot about this because what shifted a lot in the last couple of years is the way buyers buy. Ed talked about it. It's now by committee, where you used to just address one or two people, maybe the CIO, you now address five, six, seven people, the CRO, the CMO, the CISO. Security is becoming a big deal. You're dealing with a chief financial officer because he's concerned about budget and how the money is being spent.
So we are now spending a lot of time and effort in educating our channel on how to sell broadly across the entire enterprise of the organization so that we can hit the mark. And this is being done. We promoted Christie into this role. She's now gonna lead our sales enablement program. We're gonna be rolling out outcome-based selling at Monte Carlo. We also did it in Salt Lake City. So these are things we're doing on the sales enablement side of the business to address the way buyers are buying now, because the customer journey in the last two years has, has really, really changed. And so we hired a really big consulting firm called SBI. They've been working very closely with us on this.
They interviewed over 300 CIOs and CEOs around the country, and this is the data that came back, and so we're doing this, which is driven a lot on data and the feedback that we're getting from our customers. The other thing is bringing on really new channels. We brought on 800 last year. I predict we'll probably bring on over 1,000 this year. Some of these channels are gonna be really, really big channels, service providers, managed service providers, national resellers, and then our typical diamond and gold partners that you're gonna hear me talking about in a minute. What this is gonna do, allow us to attract more net new logos as we move forward. Okay, so you heard Ed talk about in purple. This is our core business.
This is where our existing partners play right now, where we have product or subscription and all of our support. The go-to-market motions that we got with our targeted geographic focus that we're gonna put on to go into these new markets, like federal and some of the new state and local markets that we'll be able to get into with our public sector expansion. All of these are gonna be net new to me. These aren't big investments that Kevin needs to make. These are pivots. These are very simple for us to do. We're set up for growth here. The managed service provider that you heard Ed and Nabil talk a lot about, a lot of these are our existing channels that we have today. Some of these are net new and will be fully accretive as we move forward.
And then you can see the strategic opportunities that we have right now with our cloud management, and some of the good, better, best stuff that Nabil talked about. So these are, these are really big for us as we, as we go forward in the market. The teams are really ready to go. We're gonna be talking a lot about this next week, in Monte Carlo, and so we're looking forward to some really big, focused, growth, expansions and opportunities, moving forward. This is our core business. I want to stop and pause on this. So this business, we're investing a lot in. It's set up by diamond partners, gold partners, and authorized. We have about 365 diamond partners right now in the world.
We have 362 gold partners and 8,102 authorized partners that sell the product line. 85%, as I mentioned, now, are selling the full breadth of the product line, and they will all be available now to sell some of the new security technologies and Copilot and a lot of other things that we're bringing, we're bringing online. We've got some really big service providers that we're working with right now. We had a very big sale, over $20 million, to one of the major service providers this past quarter, which was, which was big. These new federal resellers are really starting to come online. We added Rob Cottrone. He came to us from Cisco, very senior leader. Super impressed with Rob.
That business right now should triple in the next two or three years, so we're looking for a really big rise out of our federal business. And then some of the national resellers that we're bringing on, these are the CDWs, the WWTs, the SHIs. We're starting to see really big growth there. A lot of share shift away from competitive products, moving all to, all to Extreme.... Okay, so this is, this is the existing core business. We're not taking our eye off this. Frankly, we're doubling down with our current core partners, and we're gonna make sure that we leverage this as we move into the new, into the new campaign. Ed talked a lot about the customer wins. Success begets success. Kroger got us Soriana. Federal Express got us Norwegian Cruise Lines. We're seeing wins all the way across the board.
The University of North Carolina at Chapel Hill got us the School of Mines. When they saw our reference ability, the Colorado School of Mines completely switched away from a competitive brand over to Extreme Networks. We're seeing our customer wins not only get us new customer wins, but get us new reseller wins as well, because we're beating people at these, and a lot of these partners now are choosing to switch over to Extreme. Why? Because they make more money selling our product. There's higher margins for them to be made selling the Extreme product. If they're selling a competitive brand, they might finish seventh out of 10. You may as well finish dead last. But with Extreme, they're typically the only one in, and when they win, their margins are 30, 40, 50% at times.
We're seeing really nice margins upfront on the sale of the product, and then as an annual recurring revenue stream as they sell support and cloud services and managed services down the road. So this is a really big factor that we have right now. Then creating all these new routes to market. These aren't hard to do. These aren't taking big investments. These new routes to market will allow us to expand our total available market that we have to us. So we are already well on our way here to establishing new markets. Then it's all about funnel growth.
So we are spending a lot of discipline on making sure that we build both the top of the funnel and then our weighted funnel with all of the things that I just described here. Okay, so with that, I'm gonna pause. I'm gonna be here for Q&A after. We couldn't get to Q&A 'cause Nabil and Ed ran a little bit long, but we'll be able to address a lot of the questions if you didn't have any. But now it's my pleasure to introduce our next speaker, Norman Rice. Ed and Nabil went a little long.
So, hey, first of all, Norman Rice, Chief Commercial Officer. Last time I stood in front of you all in May 2022, we were talking about supply chain. And today I'm happy to report we're not gonna talk about supply chain. The quick update is that things continue, things continue to improve. What, what's still hanging out there is some of the cost structures. So whether it's logistics costs and logistics complications or other elements such as price point variance. So some of that overage is still in the system. It's working its way through, and we're able to support clients.
So our challenge in terms of being able to build and deliver product has subsided, and we're, you know, continuing down that path, which has given us a great opportunity to deliver on our, our backlog that was so important to customers. Now, Ed talked about... You know, my transition here is I get to have fun, which is I get to talk with our actual customers and give you real-life proof points. And, you know, just as a fun fact, or did you know, however you got here today, you touched an Extreme Networks. So if you came by plane, you came by train, you came by ferry, or even if you walked, you were on an Extreme Networks, including there's 95 blocks in Manhattan that's continuously supported by Extreme, which is the longest stretch in the United States, which is pretty cool.
Also here, we're in the MLB headquarters. So when I spoke to you in May, or in May 2022, we had just started this relationship. Today, Extreme is in every single MLB venue around the country. It's unique and different because they centrally manage it. So MLB is like a service provider. So all the decisions, all the management is done centrally through our cloud system here, here in New York, here in this facility, managing every single dugout, every single bullpen, and every single venue around the country. There's some unique analytics too, that we get there by looking at what the, you know, what you see, and we're not gonna comment on which team used more information during the last, playoff games, but there's definitely some anomalies. But, you can, you can take some wild guesses and see what happens.
So, I'm gonna have first, Jonathan Young come and join me. I'd like to roll a video that gives him an intro, but Jonathan is an independent advisor who supports a lot of different customers around the country, specifically in higher ed. He's gonna give us some insights into what's actually happening out there and what's going on with the decision-making process. So go ahead and roll the video. Come on up, Jonathan.
Jonathan Young, Vice President and Chief Troublemaker, and the lead for our network modernization practice. We provide trusted advisor services across all facets of information technology and information or cybersecurity. A large pent-up need, that's from the extensive technical debt and deferred maintenance that's being released as universities grapple with how to modernize their networks and information security practices within the bounds of the available resources. Many institutions have delivered network services essentially the same way since networks evolved organically in the eighties. While today's networks are faster, our clients realize that they need to rethink a great deal of what and how that is delivered and meet a rapidly changing space with highly agile capability.
So welcome, Jonathan Young. Thank you. Jonathan, what's a Chief Troublemaker?
That's a really difficult question.
So, Jonathan, you work as an independent advisor to a number of different customers around the country, a number of different organizations, and you're predominantly in higher ed, which is where we see you most. Tell us what's going on in higher ed, what some of the trends are.
... things that have been happening, as discussed throughout the day. So a couple of things have been, pretty common trends. As you heard earlier in the day, right, security is front and center. So for many of our universities, as they think about the future network, it is more of a security project than a network project, even though it may be run by the network team. One of the other trends that we're seeing pretty commonly is that the level of visibility has gone from what might have been the network team or the CIO, certainly along the way for the network changes. It's being led by the board.
So often the thing that brings us in the door in the first place is something from the board of trustees saying: "We have security risks, we have institutional risks, we have agility challenges, and we need to get some help along the way." But that level of visibility and decision making is very different than it was a few years ago. It was informational occasionally to the board. Now they're starting it.
Yeah, and you were saying that there's some regulation that's been driving that as well in terms of security, and it's, it's creating a longer decision-making process.
Yeah. I mean, higher ed is always a slow decision-making process and is further exacerbated now. Honestly, two years is not uncommon from inception of idea to actually making a final decision along the way in higher ed for us at the moment. And certainly what is happening for federal regulations around security, particularly around things that the federal government is calling zero trust, those are driving direction, and they're some of those regulations are current, some of them are writing on the wall, but everybody needs to make those key decisions. While we were sitting here this morning, I had a client email this morning about the IPv6 mandates coming from the federal government. That apply to the feds, but there's a presumption that it's gonna make its way along for interaction with them.
What do they do with their network as an impact to them?
You had said, you know, the boards are getting involved because of security concerns and some high-profile security incidents. So you're getting more and more boards and more and more decision makers into these discussions.
Absolutely. And particularly many large universities, those of you who may have worked in the university space, there are an almost infinite number of stakeholders whose opinions they believe matter. And so the number of stakeholders, the deans, the provosts, the board, the leaders across the institution, the adjacent institution, maybe the hospital that is related to them, but isn't actually part of the same institution, are all part of that decision-making process, and it slows things down.
Yeah, and you heard Ed, and you heard, Joe reference that, that, you know, more and more people are involved, new entrants. It also is an opportunity. So looking at it from one perspective, it takes longer, there's more providers or more players involved, but the opportunity for somebody like Extreme, what's that opportunity?
So one of the things that happens when that level of engagement happens is they ask different questions. Instead of the detailed technical questions, it might have been, "How do we keep doing what we were doing with the incumbent?" There's the larger strategic question of: What is this trying to achieve? And are there different partners we should be looking at, and what is the cost structure? And so that opens up opportunities for other players to get their foot in the door and show, here's what an opportunity might look like for you. Here's how you can get more rapid time to value.
One of the big challenges within higher education has been because of those slow decision making, because of the pace of investment, the time to value from whatever it is they may be purchasing, tends to be very, very long, and sometimes they never realize it. And as they talk to their peers across higher education and they say, "Well, what happened when you bought vendor XYZ for whatever that next thing might happen to be?" And they say, "Well, you know, that promised value, we're three years in, we still haven't gotten to any portion of that, but we're paying for it." And so that's bringing up the opportunity to say: Well, well, what can I do faster? What can I make a difference with? And your Fabric technology is one of the things that we're seeing as a difference maker there.
Yeah. And so organizations will, during these processes, whether they're using public funding or they're using their own funding, they bring in your organization to help advise them on making the right decision for them. So when a customer does choose to select Extreme, what do you tell her? Why or why do you recommend Extreme?
So there's a few different things that tend to be the biggest difference makers for you in that decision funnel. So there is this thing that might be called zero trust or identity or dynamic segmentation. You heard segmentation referenced a few times today. Those are fundamental to any future network, and the fabric technology is one of the effective ways to do that and do that rapidly. It's not the only way, but it is a big difference maker. Automation and orchestration is central to everybody, and some of the directions you're going are providing some opportunities there. Not the only approach, but it's one of the strong approaches.
And one of the things that's been in my experience, one of the biggest differences is that when the customers or when I and others talk to you and Ed and others within Extreme about what they're trying to achieve and changes they might desire, whether it's in the product or overall direction, you get it, you listen, changes happen. And they hear that when they talk to reference customers and say: Look, here's something we wanted to do, or here's something we want to do. Say, "Well, that wasn't something we're going to tell us more," and you actually make a change. That's not something we often see from some of the others, and it, it matters a lot when you're talking to the CIO and they're saying: "Look, here's where we're going. How are we actually gonna fit that?
Yeah, it was just a few weeks ago, you were up in front of 150 of, you know, call it higher ed colleagues at Educause, and you brought up that same comment. And, you know, really your closing statement there was, "Extreme gets it." And thank you for that, and thank you for, you know, continuing to be here and for providing insight. So everybody, thank you, Jonathan. All right, we're gonna go ahead. I'm gonna ask my two customers to come up and go ahead and roll the intro video.
... I'm Mike Restuccia, Senior Vice President, Chief Information Officer of Penn Medicine. Penn Medicine is a large, complex academic medical center, so we seek solutions that are reliable, resilient, scalable. I think finally, we look at, organizations that are investing in research and development and keep us ahead of the curve versus trying to catch up.
I'm Chris Golier, Group Vice President at the National Hockey League. I focus on innovation and new business development for the league, and look for new business opportunities through the lens of digital media and technology to grow revenues, grow our fan base, and make the game accessible to all. One major challenge we're faced with today is how younger generations are consuming our game. We're living through a very interesting time right now, the transformation of the entertainment industry in the whole, with consumption behavior shifting from primarily linear broadcast to streaming. The younger generations are consuming our game differently, and it's up to us to figure out how best to enable enough touch points to cater to their needs. With younger fans having more choice than ever for entertainment, we're trying to super serve them as best we can.
Basically, build wherever they are, primarily through mobile, through tablets, through PC, and obviously through linear. Each one is a different experience, so building across all these screens is certainly a challenge.
Please welcome Michael and Chris. Thank you. All right, Michael, so we're gonna ask you first, our conversation started with COVID, and how did that impact your operations and what was going on with your mission at Penn Medicine?
So first, thanks for the opportunity to join the group here. COVID was transformational for many industries, probably for most of you also. But healthcare was specifically transformational in that not only did we have to react to it, but we were all the epicenter for treating patients that would come in and needed to adjust rapidly. And rapidly meant pretty much shutting down many services, predominantly elective type events, and many of our clinics, and beginning to react to the pandemic itself, and setting up unique settings in order to treat patients, often in parking lots, not your normal standard location for care. Which then involved the opportunity to put in new networks, new communication devices, and new treatment patterns.
So in many ways, we were flipped upside down, like many, almost overnight, and needed to rely on not only our application technologies, but also our network technology in order to keep, you know, sort of the world functioning, and in our case, at least southeastern Pennsylvania, functioning in many ways.
Yeah, you had to adapt to adding temporary capabilities to expand and, and take on this, you know, massive changing need, and, and the technology had to go with you and, and drive that to ensure that continuity of support.
It, it absolutely did. In the middle of all this, we were building our new patient pavilion, which is about 500 beds, spans 2 football fields, right in downtown Philadelphia. That was in the middle of COVID, and trying to work the logistics of outfitting that building with all the gear, whether it's medical equipment, networking equipment... If you remember back, and everyone forgets, just 3 years ago, there were restrictions on how many people could be in a building and in a space at any given time. So trying to marry the delivery of equipment and the supply chain issues that were in extreme in that instance was fantastic because we were competing with others to get the equipment so we could open the building on time. Fortunately, all worked out pretty well.
But it was really challenging times, and it takes really significant group of partners to make all that happen and open on time in a quality manner. So we thank you for that.
Yeah, and thank you. Thank you for delivering on that mission for everybody there. So, Chris, changing gears a little bit, does it make you cringe sitting in an MLB building, or I seriously don't know. I mean, maybe, or it could be a wonderful thing. It's like, "Oh, these guys are just down the street. We don't really compete." But you know, for the NHL, we talk a lot about fan experience. So how's your fan experience changed over the last couple, three years, really, COVID to now?
So we sell tickets, and we always say that regardless if you're an avid fan or a casual fan, when you get to a game, that is the greatest experience that you can have. It's camaraderie, you're high-fiving, but just to see the players up close, it's really important for us and... So we think that we can convert you a lot easier if you have a great experience. The truth is, you know, it's a different experience in the actual arena versus at home when you're watching TV. You're somewhat at a disadvantage, right? 'Cause you don't have the instant replay, you don't have the commentary. So with that, you know, we need technology to make that experience better for you.
You're paying a heck of a lot of money to come to a game, and we don't want to have you at a disadvantage. We want you to come back. So it's important for us to for everyone to have access, you know, through their phone, to be able to take their selfie and say, "Look at me, check me out, I'm at the game." But everything else that we're doing, from, you know, gambling, right? You know, that is a very low latency type of a business, that every single of our 32 clubs have gravitated towards. So we need networks to provide that great experience for fans. And so, you know, we had the opportunity to partner with Extreme.
They came in right, kind of pre-pandemic, and we looked at the pandemic as an opportunity, right? We weren't selling tickets, people weren't in the arenas, but that was your chance to sort of upgrade the experience, because when everyone came back, we needed it to be a much better experience than what they remembered.
Yeah, and, you know, the NHL, as you talked about in the video, continues to evolve its experience. So streaming, just different ways to touch different audiences. And you had something really cool happen just a couple of weeks ago, where all teams played in one day, and it was every 15 minutes, a new game started. So just some, some differences in programming. And the—as I drill down a little bit on, you know, the analytics and insight that we provide. So Nabil talked about our analytics systems. The NHL is using that across, multiple venues, so you're seeing some unique things. What are some of the unique things that you're able to see?
So it's real time. You know, one of the problems, another problem we have is that, we don't always know who's in the arena at any given point in time. So Ticketmaster sells tickets. We have a bunch of ticket partners, and people pass tickets along. They send them to each other. So the ability to market to people in real time is really important. And sitting there and understanding what they're doing at any given point in time, people like me sit in the office and, you know, we're sports fans, so we think we understand exactly. But when you actually get to the data and see. We marry up the events, goals, hits, saves, with inflection points, with the network traffic, and are able to see what happens when a goal is scored.
Does traffic go through the roof? Are people out there, they're sending pictures and saying, "Hey, check this out?" They are. We see social media as a big driver, and obviously gambling, I mentioned that. So every one of our clubs at this point has an authorized gambling partner. I think what's interesting is, you know, on a sponsorship side, to have the knowledge and understanding of fans, who they're using, who people are betting through. And oftentimes it's not the authorized partner. Oftentimes, it's not the legal partners that are registered in that particular state. So those kinds of points of data that we didn't necessarily have can be very useful for our sales and sponsorship team.
Not even going to touch on the operational elements of, you know, how to make it easier to get a hot dog or to come in and out of the arena, right? Those are some of the kind of advanced clubs are diving deeper into as we go on.
Yeah, and, just to build on that, you know, we see that in baseball. We also see it in the NFL, where the organizations are able to utilize the analytic systems to understand if people are violating, you know, gambling rules, whether it's illicit gambling or actually spotters. So there's spotters in every game, shouldn't be a surprise, but you can actually track where that spotter is, what their behavior is, and that becomes very important as this monetization avenue continues to evolve within sports here in the US. Michael, back to you. In terms of the evolving mission, you know, the mission that you had, you know, prior to COVID was all healthcare, and then we added a pandemic and things changed, and that impacted your ability to generate business and be able to reinvest.
That was a huge impact in healthcare, where elective surgeries weren't happening, all these things. Going forward, that mission is now dual. Can you talk to that for a moment?
Sure. I think what's really great about instances like this is, you meet people like Chris, and you learn that his customers are called fans. Our customers are called patients. We're all fans, we're all patients, and it's pretty cool that we need a mechanism to digitally engage with them in some way, shape, or form. From my perspective as CIO, really what my end users look for, whether they're physicians, nurses, therapists, administrators, they want resiliency, that reliability in the network, and they want instantaneous speed. Our industry in healthcare is characterized by statements like, stat orders and stat results and 911. So it's instantaneous.
You don't want to be a patient and have your physician say: "I'll get the results, you know, the data to you in a few hours later or days later." You want it like that. And so the right data to the right—for the right patient, to the right clinician, at the right time, in the right location, is really our five rights of data that we strive for in trying to push forward. And whether it was through COVID, where we got diverted a little bit, or now post-COVID, where, like many industries, there's this pent-up demand, where people just didn't come into the hospitals. They couldn't come into the hospitals for a period of time. They couldn't see their physician for a period of time.
Now they're just coming through at record levels, and it's up to us to meet that demand and further digitally engage, either through their patient portals or through images being shared electronically through the networks in that type of that world. But it has really elevated in recent days and recent years, and we're prepared for it. And in order to do that, you know, we say every project in IT is people, process, and technology, and it's the right people, the right processes through the supply chain, and certainly the technology has enabled a lot of our advancements in digital engagement.
Yeah, and Chris, you know, same to you in terms of what people learned a lot about during COVID with sports is that when you have an empty arena, it's tough to run a business. So all the innovation of hey, people coming back, what can we do to continue to build on that? What else can we be doing? And just some of your thoughts there.
I did not get a bonus during the pandemic. Beyond that, it's the camaraderie with fans, and I think the connection between them. I think the idea that you don't know who the person is sitting next to you, but you still have that kinship is important. And there's a human connection, but mostly it's technology, and people are communicating with everybody outside of the arena, all their friends, their family. Social media is just, it's huge for our business, without a doubt. So not having a, you know, I won't say it's critical when I'm sitting next to Penn Medicine here, that the networks are up. It's a different kind of critical, right?
I think, again, getting people to reengage, which means coming back and buying tickets again, they wanna walk away saying, "That was an experience like none other," and we need to deliver to them. It's, you know, there's so many different entertainment opportunities. Sitting at home and watching Netflix, we compete with that. Competing with Major League Baseball, competing with everything that you do, going out with your wife for dinner, right? These are all entertainment choices that you make, and you only have so much disposable income. So, you know, the technology aspect is really critical and crucial for everything that we're doing.
Great. So just closing thoughts for each of you. Michael, you know, why Extreme?
So it goes back to the people process technology. In really challenging times, we need to lean on partners that could truly deliver and understood our business and the challenging times we were going through. And to outfit that new pavilion, and we have six hospitals, but this was a brand-new pavilion. It's billed as one of the most technology advanced facilities in the world. But to get the equipment in place, in time, in a partnership mode, was really second to none, and that's what we value in our partners.
Thank you. Chris?
So for us, we have 32 clubs. They don't all own their own arenas. Talking to the right folks is really important. I think Extreme has proven that they know how to appeal to us in a, in a very unique vertical. So they're able to gather the information, the analytics that are important to us, right? We wanna sell tickets, we wanna engage fans. It's different than Penn Medicine and how, how they're treating their, their constituents and consumers. And I think, they've proven that they're able to sort of bypass a couple of levels and get right to the point with the, the decision makers. That was impressive to us. We've, we've seen, in 2+ years now, incredible growth with our, with our clubs.
Great. Thank you both. Everybody, give a warm applause here. Thank you. I'm gonna hand it over to Kevin Rhodes to close this out.
My colleagues have done a great job setting me up for the, if you will, sticking the landing today. And I appreciate that. First of all, I just wanna say we've got a lot of people in the audience. We have sell-side, buy-side analysts, we've got lenders here, we've got board members, et cetera. So it's really great to have everybody here, both physically and online. So thank you for coming. Just go to the next slide, and I'll tell you what I'm gonna talk about. So, you know, from my perspective, you know, it's important to look back and see what had we established as our targets in the past, and let's just make sure that we understand that, 'cause we're resetting our targets for the future.
You know, for me, the revenue, you know, as we think about the revenue and the revenue contribution that we're gonna get, as we showed you today, we've kind of bifur- or trifurcated it, if you will, in three ways. There's the core business, there's these areas where we have go-to-market opportunities, and then these strategic initiatives. Those are, to me, I'll call it a layer cake of opportunity, where we can grow our business over time. And each one of them, I'll call it, you know, has its own pragmatic perspective around how we can achieve those revenue growth opportunities. Margin. Gross margin has been a good story for us and will continue to be a good story for us. And that gross margin, not only as we manage our OpEx, but drives our EPS growth over time.
We'll talk a little bit about that. For me, you know, like, when I came into Extreme about five months ago, you know, my whole historical background is in SaaS businesses, and I love recurring revenue growth. It's highly visible, highly predictable revenue, and from our perspective, you know, gives us the ability to walk in on the first, you know, day of the quarter knowing, you know, at least a portion of our business is already there. And then you've got to kind of build out the product beyond that. I think we've got an outstanding recurring revenue story here at Extreme that is going to continue to grow over time.
And then that's gonna yield, you know, for us, you know, good growth in cash flow, good EPS growth, and just an overall very attractive model for us. So let me go into the historical. So when we go to the next slide, I'll show you what we ended up doing in the past. So we have a number of different areas here where we had focused in, you know, creating targets over time. You know, many of them, as you can see, check marks, you know, we've been achieving. This was our analyst day, you know, what we expected to achieve, you know, from 2022 to 2025. From a revenue perspective, first, our last six years, our CAGR has been 14% as a company. It's pretty impressive.
We just landed this last year at 18%.... Now, listen, I get it. We've got a little bit of an air pocket that we're going through right now. As we talked a little about, you know, the supply chain normalizing, we've got, you know, these, these, you know, indecisions that are being made in Q1. But, but I still feel very strongly about our ability to at least hit double-digit growth in the future. I'm not gonna come out and say, "Hey, mid-teens growth tomorrow." I don't think that we should say that from a credibility perspective, given where we are right now, and given, I'll call it, some of the indecision that's being made in the marketplace. But I do believe that over time, we will continue to get back to double-digit growth in the future.
The second area, you know, for us is OpEx. I mean, you know, I'll call it, we're at the high end of the range, or better yet, you know, we're at the better end of the range, if you will, at 44% of our overall revenue in OpEx. That is what we expected, you know, well within our range. From a cash flow margin, we just generated 18% cash flow, you know, in this last quarter, so that's at the very high end of our range. We're managing our working capital really well. We are generating not only good cash flow, but we're managing our receivables well, our cash conversion cycles, the CapEx that we're using in our business is really strong.
And then you can see, you know, on the operating margin, you know, we're continuing to improve, you know, that over time as well. The one area where we are missing a little bit, you can see it there, is on the gross margins. You know, we're expecting to be more in the 64% to 62% to plus range, 66% range. But we've been making really good progress there. And I will tell you that as we see, you know, better mix shift in subscription and support over time, the 65% going to a 100% attach. As we get a higher mix of our revenue coming from higher margin activities, we're gonna continue to see our margin grow over time. Let's go to the next slide.
These are the three areas. When I think about the core business, the core business is going to continue to grow probably above where we are from a market perspective in terms of the market growth rate, probably about 4%-6%, maybe even a little higher as we think about that over the next several years. It is the, you know, markets that we are in, it is the, resellers that we sell today. It is -- you know, we continue to have the, the existing customers buying from us. I will tell you one thing that's interesting is that we have 4.7 million devices that are out there with Extreme, and 2.5 million, as Nabil showed you, in our cloud management.
Those 2.2 million incremental devices are eventually gonna come into the cloud, into Universal Hardware and into the cloud, which is going to generate, you know, more cloud revenue and subscription revenue for us over time. That alone, you know, is going to be a very strong momentum for us. I don't need to sell, theoretically, a new device than the device I just need to replace to drive more growth there. When we think about the go-to-market activities, the managed service provider, let's talk about that for a second. We signed up 7. We're expecting to sign 20-25 this year. When we think about this 20-25 just this year, never mind 20-25 next year or the year after that, let's just say we do $2 million-$5 million in each one of those.
20-25, 2-5 million, that's $40 million-$125 million a year in incremental sales that we can generate off MSP alone. That's a very ... That can move the needle for us. We don't need to do a lot, like, we don't have to be distracted by 15 things that we're doing. We're being very focused. We're being very, you know, you know, concerted in what we are going after, and MSP is one of those areas. We think this service provider opportunity is another area. They are frustrated, and they're not making a lot of money in margin, and we think that we can go and drive us a better growth there. These are new vectors of growth for us. Those grow-- Those vectors don't... We don't need to do anything new for those.
Like, there's no new products that we need to do. This is packaging, this is pricing, this is us just going after certain markets that exist today, that we feel that we can play in. Because we have one price per device for our subscription, it enables us to do this MSP. It enables us to do this service provider opportunity because it's simple to do business with us. It's easy for them to absorb into their world. And then we have just a couple really strategic initiatives. Not, again, 15, but a couple. And those are gonna be very, very focused on, like I said before, the recurring revenue side.
So when we think about the cloud platform that we have as a company, the next thing beyond cloud management, that Nabil talked about, is going to be other logical extensions that we can put within our platform that are software-centric in nature, that we will build on a software basis. And the good, better, best, and the principle attach, all that's gonna drive revenue growth in the future. So let's talk about that for a second. When we look at... Just go to the next slide, please. When we look at our revenue growth over the next, in our new targets in the future, we're just calling for, right now, 10%-12% growth over the next five years. That's the CAGR that we're expecting over the next five years. But within that, we're expecting our recurring revenue to grow 16%-18%....
We believe that the go-to-market opportunities are going to yield this better outcome in terms of our recurring revenue. When we go to the next slide, when we look at the recurring, it expands as a mix from 29% today to 38% when we look at 2028. So that's a meaningful shift in our recurring revenue. And if you go to the next slide, you'll see when we look on the left side, this is just the SaaS, the subscription part of our business. And where we are today, we had $129 million in ARR. If you look at the graph, you can see with this type of growth, we're going to double 2.5, maybe even three times the size of the subscription over the next five years.
When you look at the overall, you know, recurring revenue, that's at least going to double with a 16%-18% CAGR, that's going to double over the next five years. So products are going to continue to sell as we sell today, but we're going to get more and more recurring revenue as a part of our overall model. Again, more predictability, higher visibility in our business that drives more meaningful value to the customers, and it's going to be software-centric in nature. That yields us, that leads us to a very attractive model. When we look at the next slide, I'll roll out what we're actually looking at for overall. So we're at 62% margins today. That's what we are calling for this year. We're going to get to 64%-66%.
So that 2-4 percentage points, how are we going to do that? Well, part of that is going to be supply chain normalizing. We've got more component manufacturers that we can re-negotiate with and get better deals. We've got better distribution costs coming through as well now that supply chains have normalized. But more importantly, we're going to have a mix shift. Like I talked about, 29%-38% of this higher margin business coming to us over time. I feel like the 64%-66% margin range is going to be very reasonable. When we look at, at the OpEx that we have here as well, you know, all reasonable ranges that we can, you know, fit within, and that gets us to an operating margin of 23%-25%. Let me just give you some numbers from the past.
Four years ago, we had $0.10 in EPS. Then the year after that, we went to $0.57. The year after that, $0.77. Last year, $1.09. This year, we said 25% growth in EPS. It's $1.36 minimally. That's a good business. And over the last four years, we've gone from $0.10 to this year, $1.36. And despite air pockets and what's happening macro right now in this absorption period that we're going through, the business of Extreme is going to continue to take market share. We're going to continue to grow not only from a profitability perspective, but also a revenue perspective. And if we go to the next slide, I'll show you what it really means. The Rule of 40. You know, have you heard of the Rule of 40, people out there?
Rule of Forty company is, you know, top 10% SaaS companies or other companies, you know, get to, you know, be considered in a Rule of Forty category. That is, your revenue growth is, you know, X percent, and then your operating margin is Y percent. You combine those together, you get to the Rule of Forty. Boy, we're really approaching that Rule of Forty status. Maybe we can get there. Maybe we'll just be slight under, like we're showing here in our long term, you know, range. But boy, it's a really good, you know, attractive profile of our business. So I'll leave us with just a couple more slides. First, let's talk about cash flow and what we're expecting there. You know, we're at 18% today, and we believe we can grow that to 20%-25%.
We will continue, as we are, you know, have been in the past, delivering return back to shareholders through share repurchases. We will continue to do that. We do about now $25 million per quarter in share purchases. We did about $100 million over the last year or the last four quarters, so we could see that continuing. Of course, that requires board authorization, but we feel good about shareholder returns of, of the, you know, margins that we are generating on the cash flow side. And then last but not least, you know, the attractive margin, the attractive long-term, you know, targets that we have. Just to lay that out one last time, you know, 7%-9% product, we can get there. Like, I feel like we're very, you know, well-positioned at that moderate level of product growth.
We can get there over the next five years. But you've got the recurring story here. That's on top of that. That gets you to 10%-12% growth overall. Our margins are going to continue to grow. We're going to grow our margins, but we can still get scale in our OpEx. Like I said before, some of these growth initiatives we have don't require a lot of investment on our behalf. Some of them are just packaging and pricing, you know, those growth areas. Some of them are, you know, TAM expansions, but for the most part, we've got just a select number of key, you know, growth areas that we are focusing on, and we're going to execute exceptionally well against those. But that's what drives the Rule of Forty company for us. And it's Q&A. We're ready for Q&A.
All right, everyone, we're going to set up for Q&A. And as the executives make their way up, I just want to make sure you have the logistics set. There's going to be mics at your desk, so you just have to press the microphone button, and the mic will light up, and you can ask a question. Just raise your hand, and I can take questions. I've also got the iPad here for questions from the web. So we have Q&A live online. If you're listening to us on the webcast, you can type in your questions in Q&A, and I'll ask the executives here live in the room. And without further ado, we can queue it up. Just a correction for the room. Touch the face button on the microphone when you have a question.
Alex, I think you have the first question.
Hey, you're ready.
All right. So first off, I wanted to compliment Nabil. That was an outstanding presentation. I think you did a great job of clarifying the technology differential. As I look at the trajectory of the last quarter and where we are here, clearly, the Street is very concerned about that, you know, air pocket. The air pocket seems to be driven by the inventory in the field channels, as well as a combination of macro pressures causing pushouts late in the quarter. Can you give us some sense of what the trajectory is over the next two or three quarters as that air pocket starts to fill in? And when do you get back to that double-digit top-line growth based on your current thought processes? Thanks.
Yeah, Alex, I mean, so this year is going to be a challenge to get back to double-digit growth in 2024, right? Given that air pocket in Q2, it takes a, what I'd call the wind in the sails. All of a sudden, you know, the sailboat just comes to a screaming halt, and then you're building that back up momentum again. You know, we are looking at 25 and 26 and 27, 28 to get back, not to get back there, but we believe that we will, I'll call it, ascend, you know, back into the double-digit growth rate here over that period of time. When we get into the double digits, I, I'm not ready to say at this moment, you know, when we will be there.
I would think it would be sometime in 2025, but we're, we're not guiding on 25 yet. I would just say what you're gonna see is you're gonna see Q2 being the nadir, you know, the, the low point for the year, and then Q3, Q4 coming up out of that. And then as we get into 2025, again, we think that there's, there could be a resurgence, in, in all of our, our markets and, and growth.
So the second piece of this question is really around the margin story. I think the stock is now selling at a percentage point lower multiple than Cisco. It's below Juniper, it's below F5 on a valuation basis. But there's 2 legs to the story. The margin story is as powerful as the growth story. How much of the margin expansion, 300-400 basis points out of the supply chain, 100+ basis points out of the universal platform, and then some leverage to the OpEx, is tied to the growth, and how much is orthogonal to it, i.e., can be delivered regardless of what the top-line growth rate is?
Well, that's why I gave you, I mean, a couple things, right?
Thanks.
One, we're gonna get, you know... I mean, we're already seeing it right now, right? That we are going to get increased, you know, margin and an EPS this year in a year with lower growth. We can manage our OpEx structure pretty well, even in times, you know, bad times, if you will. From our perspective, as we think about this new universal platform that we have, that has got better margins associated with it. We think about the 4.7 million devices out there versus the 2.5. As those 2.2 million come into the new fold, they will be sold at higher margins within Universal, and they'll have attach associated with them. So that's the gift that's going to keep on giving there as well.
And we're just going to be very pragmatic from an OpEx perspective to ensure that we're driving this growth. But I don't think, you know, from a core growth perspective, the resellers that we have, once they get their installed base, you know, I'll call it, once they install all of the different orders that they've had over the last, you know, six months or a year, and they get back to selling again, we believe that we're going to be in a strong position there to continue to grow our profitability.
Got one in the room, there.
Great. Woo Jin Ho from Bloomberg Intelligence. First, a go-to-market question. You guys are pursuing larger deals. From a longer-term perspective, as you pursue these deals, one, do you need an upgrade to the sales force, as you go after these seven- and eight-figure deals? And then, two, given the air pocket now, but longer term, how do you smooth out expectations, given the lumpiness of these large deals? And I have a follow-up.
Let me talk about the sales force piece. So yes, you, we have started to upgrade the sales force. We've added some really high-level enterprise sellers into the mix. We've always had a really strong major accounts program at the company, led by John Brams, and sellers, which that is the Kroger deal and a lot of Norwegian Cruise Lines and Cedar Fair and so on. And so we're starting to model our major accounts team now into the enterprise group to be able to sell above the line. And as an example, we have five times the number of deals over $1 million in Asia Pacific right now than we've ever had.
And so we've really ramped up our Asia Pacific group with really high-profile sellers, people that have 20 years experience, steeped in solution selling at the high level. And so we're seeing that start to pay off. So on the go-to-market side, we've, we've made those, we've made those improvements. Also, we've made improvements into our channel, making sure that the channels that we've got are also capable of selling major, major account customers. And so, you know, big channel partners like Comcast and some of the others that I mentioned, national resellers that we've, we've brought on.
Yeah, I think you said it right. I mean, we are investing in our teams today, and so I think higher caliber salesperson capable of winning those deals. We'll continue to invest there, and the channel is the other element where we do have a large channel opportunity. And some of the go-to-market initiatives that we're talking about, by definition, are gonna involve much larger logos, if you will. I'm not coming through? I just have to hold it up a little closer. Okay. So I think the answer is, yeah, it's a combination of channel, our direct sellers, and then the third component, I would say, does have to do with marketing.
You know, I mentioned very talented new CMO we're bringing in, reconstituting marketing, and I think these efforts will help us, particularly in the channel, create the awareness behind the larger deals. Look, that's, it's gonna be the nature of larger deals. If they're larger, they're gonna be more lumpy. You just need more of them.
Got it.
Yeah.
Then, for my technology follow-up, you know, as we look at the history of Wi-Fi, right? Every time there's a new generation of Wi-Fi that comes out, that actually led to a market share shift from a smaller player. If we look at Wi-Fi 5, Aerohive gained market share, and that pulled through business. If we look at Wi-Fi 6, I think Ruckus started to gain share on Wi-Fi. We're coming up against Wi-Fi 7. I understand the messaging around your managed cloud business, trying to, you know, change the messaging to go-to-market messaging, but why wouldn't Wi-Fi 7 be the horse that pulls the cart for the rest of the business?
You want to take that, Nabil?
Yeah, I can definitely do that. And absolutely, right? Every time there is a new technology evolution or a new generation, you know, that spurs an upgrade and all that kind of stuff. But you know, you have to think about what was Wi-Fi 5, what was Wi-Fi 6, and what is Wi-Fi 7, right? So think about Ethernet. There was like, "Oh, now we have 1 gig, and now we have 10 gig, and now we have 100." Now, nobody really knows how many gigs we have because we have enough. And now the transition or the focus moves to, well, how do you provide the best user experience, and how do you provide resiliency and stuff like that? So Wi-Fi is going through the same transition. Wi-Fi 5's pretty fast, Wi-Fi 6 was faster. Wi-Fi 6E, okay, I just added 6 gigahertz.
But when you look at Wi-Fi 7, most of the capabilities in Wi-Fi 7, beamforming or, you know, channel meshing within the technology itself, you require a cloud to take advantage of it. And we actually believe that Wi-Fi 7 is fantastic for us because just having a Wi-Fi 7 AP is just not gonna cut it, right? Anybody can build a Wi-Fi 7 AP, right? That's not really the race anymore. Now, do you have the entire stack from the hardware to the OS, to the cloud and the analytics on top of it? If you have it, then you can take advantage of Wi-Fi 7. If you don't, then you just have a box.
So therefore, Wi-Fi 7 is gonna lean towards, you know, the companies like us who have the full stack and can really allow you to take advantage of those features, as opposed to 5 and 6, where just having a box was good enough. So this bodes really, really well for our cloud-first strategy. And by the way, just as a note, our Wi-Fi 7 went open books last month, in case somebody didn't know that. So we are already in the midst of telling the story, and it's resonating really, really well. So.
Uh, Tim?
Thanks. Ed, what was the thinking about moving to a platform strategy, and what did it take to kind of, you know, make this shift? And, you know, it seems like it's a huge transition. I mean, now you're gonna have to develop a whole new ecosystem, you know, partner base, and there's a lot of, you know, new opportunities for growth, but just elaborate a little bit more what this means for-
Well, I think it's a logical extension of where we were, right? We started off... If we go back, we were talking about with Wi-Fi, our first foray into cloud was really with Aerohive, and with Aerohive, we had an opportunity to cloudify our portfolio, which is really network management. And so from, you know, from a cloud management perspective, the next evolution is gonna be to sell more things. And so I think it really starts there. It also starts from a managed services platform. We've already created a platform that we call Workspace, and from Workspace, this is gonna enable us. This really becomes our platform that enables us to support a managed services provider and more services that they require.
The platform has already been built, so that's when you hear people talk about, you know, Kevin saying, "Well, it's not gonna take that much of, of an investment." Yet there is an investment, but we've already stood up, you know, our Workspace platform, and we're enhancing it in such a way that we're gonna be able to provide more services. And a lot of those services will be self-served from the cloud in terms of, of a cloud platform. So we just look at it as a way to drive and grow the subscription business as a natural evolution. Interestingly, when you look at our security portfolio, a lot of the technology we already have. So we have a very mature, you know, network access control software and very well deployed out in the field. It just hasn't been cloudified.
The idea that there are security elements and access elements to that, that we then marry, I think it's just-
... I think it's just a smart evolution extension of what we had on-prem, that we can now cloudify and enhance sort of a built-in security offering. So I think these are just, you know, it's the natural evolution of our subscription business, and, you know, we have an eye towards software and creating more recurring revenue. So I don't know if there's a add-on to that.
I'll just add one thing to it. So from a partner point of view, our channel and partners love it. Because think about it this way, every time you sell additional value, the incremental cost of that next morsel of value is lower and your margin is higher. That's really what the partners wants to do. They wanna sell more things to the same customer. You can call it wallet share, you can call it ARPA, you can call it whatever you want. So the issue with them is that in order for them to sell more, well, they are getting this piece from this vendor and this piece from this vendor and this piece from this vendor, and that's cost, integration cost, transaction cost.
Now, once we go towards the platform side, and we can deliver them more value through that same platform, be it network management, now it is security, now it is analytics, the cost of them selling and delivering it to their customer is lower, and it gets lower and lower and lower and lower. So our channel loves this story. And this is why, you know, when we talked about the MSP, and I don't know if you noticed, the seven people that are there, those are some of our largest partners, and they jumped on it like that. Because the economics of moving from an application to the platform, like, I don't have to explain it to you. You know it better than most people out there, that this transition, we are not the first ones to do it. This is not the first industry to do it.
This is a really good recipe that has been well proven, and we are positioned just fantastically to be the first ones to make that transition in the networking world, so-
And I know, Norman, you're gonna come in here, but in terms of this ZTNA solution that we brought to market, of all the beta customers we've had for any of our new releases, this is by far the largest. So I think that just backs up what you were saying, Nabil, in terms of the interest in kind of that next service that's easier to sell over an orchestrated platform.
Yeah, I think one of the most interesting aspects of this is simplicity. So just like universal, so the beauty of the Universal Hardware platform, ZA, is that it's the same microchip. So it's the same hardware with different operating system options or different identities that the customer can choose. So you reduce friction in that sales process because, oh, it's not this one or this one or this one. You can choose based on what are the hardware capabilities that you need, then we prescribe that. Very similarly, when you start adding in all these layers, it sounds complex. It sounds, "Do you need to retrain your sales force?" The answer is no, because the motion is good, better, best. So the simple motion is, we're selling subscriptions. You're in a good, you're in a better, you're in a best.
Now, certainly, some expertise and capabilities continue to be layered in, but that simplicity of motion is the same as the simplicity of motion in hardware. That's what's translating what, what Nabil was saying. That's why the partners are picking up on this and seeing that it becomes a margin-enriched, value prop without a big extension of their capability.
David, I don't know.
Great, thanks. It's David Vogt, UBS. Maybe just a couple of quick questions on, one, the sales funnel. Can you kind of help us understand how it evolved as the year progressed? I know, I think you put up on the slide, you kind of exited the year on an LTM basis at, you know, up, you know, double digits. But how did that progress into September and where we are today? And then along those lines, how should we think about backlog going forward? Is there an opportunity for that to maybe get drawn down a little bit more than where it is today, and is that contemplated in 2024? And then I have a follow-up.
Okay.
For backlog, do you cover the funnel?
Yep. So on the funnel, the funnel side, it progressed steadily as the year goes on. I want to remind everybody that our partners are on a calendar year, typically. So of the 8,000 that I referenced, you know, 90-some odd% of them are ending their year, December 31st. So Alex, I think we're gonna see, you know, a bump because, A, consumers are gonna spend the budget that they have, and two, the partners are gonna race to try to get everything in by their year-end in order to make their year. And so typically now we're seeing this is our Q2. We're starting to see things really start to ramp in Q2. I expect that to continue strongly into Q3, led by these million-dollar opportunities we have.
We have a couple that are, that are very sizable, and then if they swing in our direction, could really move the needle. So it was a steady progression throughout the 12-month cycle leading to now, and we're seeing steady, really nice, steady improvement week over week. And we manage it, as Ed said, every single week. So on Tuesday, every single Tuesday, we have for 13 weeks, we go through the complete funnel, gross, weighted, big deals, and we highlight the big deals, and we have executive engagement on all those big deals going forward.
Yeah, I mean, we still have to close out the quarter. So, I mean, it's still early in the quarter, and so while things are looking better, you know, we still have linearity wise, the majority of our deals close in December, and we're not there yet. So hopefully we will see a strong quarter here, and we'll... That'll show up in the print for Q2. On the backlog question that you had, you know, we ended the year at $267 million. That was in June 30, and we said, we'll normalize to about $75 million-$100 million. We expect that to normalize throughout the year. It's based on customer request delivery dates, and so we know what those dates are, and we know when that backlog will come out.
So, you know, it's pretty even, you know, throughout the year, and we expect it. I think we've commented roughly, you know, $40-ish million. You think about $267 million-$100 million, that's $167 million coming out. If you spread that evenly, it's $40 million and change, you know, coming out each quarter. So that's what we continue to expect to occur from a backlog perspective.
Great. Can I just follow up on subscription and services? So if I think back to last year when we were sitting here, I think i t was still early days, obviously, but expectations were for stronger growth, if I think out over the longer term, based on what I think Kevin put up today. What's changed within that mix? Because I think, as I understood it, services were kind of in that, you know, 5, 6, 7% range. Subscription, 35, 30, 35, 40% range. If I kind of just blend it today, it feels like there's a bit of a step down in terms of the expectations over the next couple of years. Just kind of how you're thinking about it, given that's obviously a key driver of the business going forward. Thanks.
Yeah, Ed, do you want to cover that?
Yeah.
I'm happy to.
I mean, as far as subscription, I think we spent a fair amount of time talking about, you know, the 65-100, and then also talking about a good, better, best model, where we're sort of marrying support, you know, as well as, you know, our subscription in, in that line. And it sort of. I think as we look out forward over the longer term, it kinda gets combined, it combined into one.
Yeah, that's right. That's the 16%-18% that I outlined, you know, in there. I mean, and then you've got this 47 versus the 25 phenomenon, that will come into subscription over time, as well as those will get replaced, you know, over time, just naturally. So that, that'll be another, you know, I'll call it, contribution to the overall.
It's a net positive. I mean, you know, the break, fix, maintenance, you know, that line is a much slower growing line.
Yeah.
But what we're talking about doing with the repackaging is actually increasing the attach, so there'll be an acceleration in that line.
That's right.
Yeah.
All right, Greg, you have your mic on.
Yeah, thanks. Greg Mesniaeff of Westpark Capital. To what extent are your larger competitors, like Cisco, using their balance sheets to respond to your sales pitches? Or maybe phrased a little differently, if there's a bake-off and you don't want a piece of business, is it usually due to technology feature issues, or is it, you know, financing and balance sheet support issues, and how is that changing over time? Thanks.
I think there's always gonna be, you know, a corner case, if you will, where, you know, someone decides they want to go buy the business. We see that happen, normal course of business. So I would say I don't think we're seeing anything unusual, Greg, in terms of, people using a balance sheet to buy business, from, from that standpoint. Yeah, I think if, if we were to look at Cisco, where are they strong? I mentioned in my comments, you know, if you have a purely objective, review of technology, and like, what's the, what's the best technology to move forward with? It is pretty amazing how Cisco is the first one out. However, they've, they've got amazing channel relationships. There's strength in the channel, depending on... and, and, and overall relationships.
You know, that's a lot of what we have to overcome. You know, I would say that strength of the channel that they've got and those relationships.
Yeah, I would, I would add, Ed, well, we're in the home of baseball, so our slugging percentage has gotten a lot better. Our at bats have gone way up, way up, and I mentioned to Alex, I can't remember the last time I lost to Cisco. Typically, if we do, it's because of incumbency. They're the incumbent. We're trying to get into a 30-year Cisco penetrated customer. They can buy the business if they want. They can maintain that customer, but we've been winning an awful lot against them recently.
Sean, go ahead.
Sort of on that vein, you've spoken about your position against Meraki and Juniper. I haven't heard much about Aruba and HPE, and you guys were both, like, very early to the game with Wi-Fi 6E. You guys took a leadership position there, and so did they. They have their GreenLake story. You know, you have a very strong cloud proposition. So I'm just interested in understanding how you position yourself, you know, when you come up against HPE in deals.
Yeah, I mean, I can add, you know, you mentioned GreenLake. So it used to be Aruba, and now it's HPE Aruba, and most of the, I'd say, brain trust is gone, and that business is becoming more and more HPE-like. They're also making a decision to adopt the GreenLake commercial model for networking, which is not being well received in the marketplace. I think Aruba has done well, you know, in wireless. I think they've done well with their access control platform, which is very sticky for them, and it's hard to peel customers away from that. But I would say today, I think we're seeing bigger and bigger opportunities coming from that Aruba base, as people are not thrilled about what's being presented to them.
Is there alternatives to either move to cloud or to move or to stay on-prem, and to adopt the GreenLake model? It's, it's causing, I think it's creating opportunities in the marketplace, quite frankly. I would say-
Yeah.
I'll go very frank. I think HPE has lost their way when it comes to networking. I'm just going to say it the way I see it. Aruba was an amazing competitor. We loved them, even though they were competitors, but they had good technology, and they understood networking. The current way the HPE is set up, it's really server, compute, storage, business first, and then networking kind of stuck into it. Which I get it, the market that they're going after, sometimes it makes sense. But from a networking point of view, from a cloud point of view, from where and what networking has to deliver, I just feel they've lost their way a little bit. And great company, maybe they'll come back, but I think right now we love going up against them because our, our win ratio against them is just fantastic right now.
You talk about having multiple clouds, Nabil. You know, we say one cloud, and if you're dealing with HPE, you're dealing with many, many clouds for the variety of solutions that they have.
Yeah, and that's one thing actually, Ed, I would notice that's true for most of the people out there. The issue that everybody is kind of facing in our competitors is that they all went towards like, oh, subscription, right? Now we need to add subscription. Some are buying, and we know who is buying and using their balance sheet for buying subscription and what kind of problem they'll run into. But others are going towards the subscription thing, and they wanna put it into one subscription. By the way, that is what the GreenLake thing is. But they didn't start from that platform story. They didn't start from the one network.
So just kind of going and saying that now these five things are part of one subscription, that doesn't solve your complexity problem, because behind that one price is still five different clouds and still a whole lot of complexity and stuff. So I think our competitors are playing catch up. Some of it... Now, I would love to say that they're trying to catch up to us, but it's a little bit of us kind of going into that direction first, and then the market conditions changing in such a way that now everybody wants that simplicity and stuff. So everybody is in that catch-up phase, and there's a little veneer of pricing on top of it, but none of them has the technology right now. So they have to go through those three, four years of what we did previously.
So this is one of the reasons why when it comes to cloud platform, we have about 3-4 years lead, right? And now it's showing up, and this translates into like, "Oh, I'm gonna push it into GreenLake, but I have 6 clouds. I have Cisco. I'm gonna come in and say simplicity, but then I, you know, introduce a new cloud every other day." You know, now I can't even remember what the name of their clouds are. They change them so often. So that's where it's a lot of kind of panicked catching up that is happening in our competitors. That shows, and that's a strong advantage for us.
We have one question from the web from Eric Martinuzzi, Lake Street. Could you please talk about compare and contrast the competitive landscape in Europe versus North America?
I'll take it at a high level. I mean, I would say we in EMEA, we tend to be more channel-led. I think that the channel, we have smaller channel partners. There's a lot more of those channel partners, but they tend to drive more of the business than what you would see here in the US, you know, at a high level. I would... If you would-
I would say one of the other differentiators is we see Huawei a little in Europe and Germany, as an example. We don't see them at all, obviously, in the United States. They can be really price predatory priced in a lot of deals, so they'll drive margins down. That's a big differentiator. We have a lot more partners in Europe than we do in the US, so we cover the landscape better in Europe than we do in the United States. We see HP more there than we do here. I would say we run into Juniper, Juniper Mist more here, especially in the retail market, where they have a pretty good track record, and we beat them at places like Kroger and Soriana and others. So yeah, that's those are the key differentiators.
Huawei, big in Asia Pacific, so we see, you know, Huawei, much bigger in Asia Pacific.
LATAM as well.
Latam as well, yeah.
Norman, do you want to talk about what we're doing to simplify and remove friction from the channel in EMEA?
Sure. Yeah, and also I can comment on, you know, you talked about Huawei in Asia. One of the really interesting things that's been happening over the past six months is a lot of customers starting in Asia are asking about supply chain and the origin of your supply, and your ability to produce outside of mainland China. And we're fortunate, we made this plan several years ago, as we've been moving through. We're 100% non-producing in China as of January. So today a big section of our products are being produced outside of China, but by January, 100% will be produced outside of China. Now, that's really important, and it's becoming more and more important in the global landscape, and it's come up in RFPs, it's come up in requirements.
Some of these big deals that we talked about, it, it's a primary requirement. Traversing back to EMEA, you know, what we're doing in the channel in EMEA is really we've empowered the channel to be more autonomous, and that's a big step up for us. So enabling our channel to transact 4,000 transactions a quarter at a certain discount band, giving them the power through the distributor to execute on their own, that'll reduce friction in our channel, be able to accelerate our pull-through and our run rate business, which, you know, Ed made comments earlier, has been dampened over the past couple of years, and it's starting to come back, and that's a key indicator for growth. We're also empowering and upleveling our channel programs so that our channels effectively simplifying it.
You are responsible for that maintenance or that subscription or that renewal or that upsell, or you're not. That seems very simple, but there's a ton of, you know, shades of gray, if you will, in between. And we're simplifying that so that our channels have to qualify. And part of that qualification is also having really an amnesty program in terms of bringing all of all the products that are out there in the install base into this prospect and being able to have higher, call it, higher, renewal rates and so on and so forth. So we expect these initiatives to drive not only our run rates go up, but also our renewal rates, our attach rates, and our upsell rates. So those are just a couple of examples of what we're doing in EMEA.
Yeah, maybe, maybe I can add from a technology point of view as well, the competitor in Europe, because what we're seeing is that as things are moving more cloud first, there is a stark difference between what is considered cloud in, in North America versus what is in Europe. I hear you say cloud, and you don't really care. It could be AWS, Azure, or GCP, or Oracle, or whatever. The moment you step foot on the other side of Atlantic, they're gonna ask you: Where is this cloud running? Which country? So sovereignty requirements are massive in Europe. And that is really playing well for us because we were not only the first, you know, cloud provider in the networking space, that was present in all of these places. We had the highest number of pops and RDCs out in the industry.
But we recently, like about a year ago, introduced our cloud edge, which allows you the ability to take our cloud applications and run them locally with 100% sovereignty controls, but the same exact application as is run in the public cloud. Now, that is playing out fantastic for us, and not only just in Europe, but in Asia Pac as well. So Ministry of Justice in France, as an example, I saw—I put their logo up there, so I'm sure I can talk about it, as well as, you know, the Japanese opportunity that we talked about. There, when you talk about cloud, you cannot talk about cloud without talking about the sovereignty of the cloud. So from a technology point of view, that plays out really, really well for us in Europe and actually Asia Pac as well. So.
Follow-up? Yeah.
One high-level overarching question. The last couple of years, the last few years have been very tough from a planning perspective. Norman, I really appreciate your, your customer panel, right? Because we've evolved from, you know, working from home forever to when are people gonna come back, to now, I have to come back to work. Has the one, three and five-year customer technology roadmaps started to stabilize finally, and has that made it, made it easier for you from, from a product roadmap and technology roadmap basis?
Maybe I can take from a technology point of view, and then I know there are layers to it. Look, the world is gonna go hybrid. You're absolutely right. First, it was like: Hey, everybody, work from home, and now people come back. And now it's like: Okay, come back three days or two days. The reality is that most of the companies have recognized and realized that this is a hybrid world. It's neither gonna be 100% remote, and it's not gonna be a 100% in office either. So what we are seeing is that companies are now developing their roadmap around technology and how they're gonna push it out with that hybrid in mind, that it's gonna be everywhere, which then directly leads into, "Oh, shit, I don't have enough resources to do that." That's the number one response once they do that.
Then the second one is like: "Oh, if I'm gonna do that, then what is the technology that I need?" And the first thing that comes to mind is cloud, right? If you're gonna do it distributed and you're gonna do with less number of people, there is no way you can do it with cloud. And we are seeing from a technology point of view, even companies that, like, even two years ago were kind of resistant on the cloud, are now looking for those cloud-first vendors. I think that's one of the-
I think you meant to say there's no way to do it without cloud.
Yeah, I'm saying it's not possible to do without cloud. Yeah, yeah. Yeah. So, but this is one of the things that Joe was saying, is that we are now in those conversations that we were not perhaps before because they were like, "Oh, we can do it on the CLI. I have 13 CCIEs and stuff." And now, all of a sudden, well, that doesn't really work when it's so massively distributed. So the cloud... The technology roadmap for the companies is stabilizing towards a massively distributed hybrid environment, which leads them to cloud first, which leads them to us.
Yeah, and just to add on to that, you know, just building on the hybrid piece, it is stabilizing, so there's no more guessing what's the mission going to be. So it's stabilizing that to support the hybrid, it depends on each organization, each vertical, and that also is driving the evolution of technology decisions and the workforce behind that. So for example, IT. In IT, we do not hire or look for a specialized, you know, CCE type person, whether it's our IT or somebody else's. That's gone extinct. It's gone by way of the dodo. And the generalist, the idea here is that the generalist in IT has to be able to support a hybrid environment across multiple tools, across multiple service offerings, 'cause you're really managing SLAs to support that hybrid client. And so that's all stabilized.
Just look at us for a moment. You know, we've reduced our footprint by 50%. So the carpeted enterprise, depending on the vertical, depending on the business segment, doesn't need the entire carpeted enterprise. And so we've reduced our own footprint by 50%, and that means, you know, that impact has been ongoing. We think that that's, you know, that's happening a lot in the carpet enterprise, but in the categories that we're in, predominantly, it's either already happened or our verticals have already made their decision on what they're doing. Healthcare, you know, venues, education, the list goes on. So I think it's stabilized, and I think that it does help our roadmaps, and it helps us move together on the hybrid vision.
Any other questions or follow-ups? Go ahead, Rick.
Yeah, just a quick US TAM question. Looking at the mobile carriers, what are you seeing in terms of them considering offering robust enterprise-grade Wi-Fi services, particularly to smaller businesses? And if that's the case, where are you guys in kind of providing them with the tools to do that?
Is this in the context of MSP, are you thinking about?
Yes.
Leveraging our portfolio from an MSP perspective?
Yeah.
Are you talking about the big carriers, the cellular carriers-
Yeah.
And the bill operating?
We can respond in both ways.
Sure.
Because we have an advantage both ways, right? So, yes. The answer to the first question is yes. You know, big telco providers, you, you have talked, you know, you heard about the telcos. They have invested a lot of money in the 5G side, and they haven't really gotten that return yet. So now they're like, "Oh, well, we really need to get into enterprises," and Wi-Fi is the first step that typically they take. So that is absolutely true. Now, second part is they can do it two ways. One is either as an MSP themselves, where they're operating it, and the second one is that they can sell it as a reseller. Now, typically, the reseller part works more on the mid to large side, and the MSP side works a little bit mid to, you know, lower end. So that's the division and how...
Now, the advantage for us from an MSP point of view is, again, the transaction cost and operational cost, because big telcos, they work on very compressed margins. So our MSP program, with our full stack technology and the consumption, you know, billing on top of it, that really helps them reduce their transaction or operational costs. So it's very, very attractive to them. And right now, the 7 that you saw up there, you would think about there were a couple of telcos in there. For example, Telia was there, which is like a tier one telco in the Scandinavian countries. So you will see tier one telcos start showing up in that MSP program quite a bit. So that's the advantage that we have there.
Now, on the other flip side, where telcos selling into large enterprises, that's where our Extreme Private Offer comes in, and the issue is similar. It's the margin compression that is happening, and I think there, the culprit is the incumbents, because the incumbents are pressing the telcos, the customers are pressing the telcos, and telcos are like, "What do I do," right? So that's the second opportunity for us. So the entire landscape for tier one telcos is split between the MSP and reseller. So our MSP program for the first one and ESPO for the second one. I know, much longer answer than you wanted, but I wanted to describe the entire landscape.
Yeah, and we're aligned with Verizon and Comcast in that motion. And T-Mobile's a different kind of provider. They're trying to be the, you know, service provider, non-service service provider. So it's really gonna come from whether it's gonna be Verizon or a Comcast supporting that small business. And as Nabil said, their margin, you know, the predicament they're in is margins were 40% when they were completely vertically integrated. And as Cisco and others have added more capabilities to the portfolio, that margin is now squeezed down to sub-5%. That's the issue. And their overhead's gone up, their cost structures have gone up. How do you maintain that business? And, you know, the natural answer is, "Oh, geez, we'll wrap a bunch of software services around it." Now you price yourself out.
So what are ways that we can be disruptive? And we believe our ESPO program is highly disruptive because it introduces a margin component to them that's substantial. And then the benefit for us is we now can take 94% of the market through this traditional access layer and utilize the scale of this organization to get into that client base. Now, it's early days, but, you know, the pipeline is, it's building. It's very strong.
So Greg, I think, Nabil and Norman were saying yes.
Long-winded, yes.
Yeah, we will follow up from Tim too.
Well, and we've already enjoyed a lot of success with both of those that Norman just mentioned as well, so.
Dan, we have the time for... I think Tim's-
One more.
Last, I hope it's not the last, though.
Okay.
And Nabil, just to follow up on that, with the Wi-Fi 7, and we're getting all the spectrum at 6 GHz, do enterprises really need CBRS, or is that gonna be delayed, you know, for a while? And, you know, I guess related to that, you know, how much of a capacity increase are we really talking about with Wi-Fi and all these technologies to improve latency?
Yeah, so, we need, like, 30 minutes to talk about that, but I'm gonna condense it to 30 seconds. I actually had this conversation earlier at the break as well. Look, the cellular 5G, private 5G, CBRS and stuff, the issue is not really technology, the issue is cost. The general cost of it is, like, still about 4x of Wi-Fi. You know, I'm talking about, like, a good deployment out there, but the value proposition is not enough to justify that cost. I'm talking about enterprises, right? I'm not talking about, you know, if you go out and do a very, very specific manufacturing vertical, it might be different there, but general enterprise is just not there, right? So that's what we're seeing. And by the way, the telcos are suffering through the same thing.
You know, the whole promise of selling 5G into enterprises, that's just taking a lot longer, and I think cost plays a huge role in there. Now, in the meantime, Wi-Fi is progressing very nicely from 6 to 6E, exactly the point that you mentioned. You know, 6 gigahertz got entered. That provided you a lot more capacity and provided you a clean spectrum, which used to be a promise of the 5G. So some of that differentiation has kind of gone up. With Wi-Fi 7, the dual links kind of adds to the predictability of the Wi-Fi, so that takes away some of the advantages of CBRS and 5G as well.
So I feel like while 5G is still, you know, waiting for the cost to come down to at least that 2x, 2x is where I feel it will be people will be like: "Okay, maybe I can give that cost because there's a good use case." So while 5G is waiting for that, Wi-Fi is progressing really fast. From Wi-Fi 6 to Wi-Fi 6E and Wi-Fi 7, we went twice as fast as we went from Wi-Fi 4 to Wi-Fi 5. So that's the dynamic that are playing. But I know there will be a follow-up, so I'm gonna answer that anyway. So what is our strategy around this? Look, we think of 5G as yet another technology that sits under the cloud. We showed you wired, and we showed you wireless, and we then showed you SD-WAN and so on and so forth.
When the time is right, when the economics makes sense for enterprises to pick up 5G, it will be one more bubble in that one network, and it will sit under the same cloud, one cloud. The companies that will not have that would not be able to justify 5G in the enterprise because the cost of managing would be in an entire separate silo. So I think it's a little bit of time before 5G comes to enterprise. When? When it's 2x, and when it comes in, it must come under one cloud. So hopefully, I answered two of your follow-on questions.
Thank you. Thanks, everybody, for the questions, and, we appreciate everybody being here today. We've got, I know lunch—I believe lunch is served. Hopefully, everybody understands a little bit more about why we're confident in our revised outlook, and all the growth opportunities we have, which, you know, our view, collectively as a team, is that we have more today than we've ever had. So hopefully, this has been useful and helpful to all of you, and, we can, carry on the conversation over lunch. Thank you.
Thank you.
Thank you.