Good morning, and thank you for standing by. Welcome to Extreme Networks second quarter fiscal year 2022 financial results. At this time, all participants are in listen only mode. After the speaker's presentation, there'll be a question- and- answer session. To ask a question during this session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stan Kovler, Vice President of Corporate Strategy and Investor Relations. Please go ahead.
Thank you, operator, and welcome to the Extreme Networks second fiscal quarter 2022 earnings conference call. I'm Stan Kovler, Vice President of Corporate Strategy and Investor Relations. With me today are Extreme Networks President and CEO, Ed Meyercord, CFO, Rémi Thomas, and Chief Technology and Product Officer, Nabil Bukhari. We just distributed a press release and filed an 8-K detailing Extreme Networks' financial results for the quarter. For your convenience, a copy of the press release, which includes our GAAP to non-GAAP reconciliations, is available in the investor relations section of our website at extremenetworks.com.
I would like to remind you that during today's call, our discussion may include forward-looking statements about Extreme's future business, financial, operational results, growth expectations and strategies, go-to-market planning related to our acquisition of Ipanema, the impact of the COVID pandemic, and continued challenges of our supply chain as they relate to chip shortages and other materials. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that can cause actual results to differ materially from those anticipated by these statements, as described in our risk factors in our 10-K report for the period ending June 30, 2021, filed with the SEC. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them except as required by law.
Now I will turn the call over to Extreme's President and CEO, Ed Meyercord.
Thank you, Stan, and thank you all for joining us this morning. Q2 was characterized by double-digit bookings and revenue growth that led to an all-time high quarterly record revenue and net income. We achieved these record results despite the challenging environment and built an incremental $90 million in backlog, which now sits at approximately $300 million in total. We see strong demand as we turn the corner into calendar 2022 for both our enterprise and 5G solutions. This marks the fourth consecutive quarter of double-digit bookings and revenue growth, including the fourth consecutive quarter of double-digit product revenue growth led by wireless adoption since our first to market introduction of Wi-Fi 6E and the highly successful launches of our universal hardware switching platforms. In this calendar year, we continue to expect double-digit organic revenue growth given the strength of demand and the size of our backlog.
SaaS annual recurring revenue was $88 million this quarter, up 55% year-over-year and 11% quarter-over-quarter, driven by significant interest in our cloud technology, which is also reflected in our 13% market share and number two position in Cloud Networking. We're larger than number three and four competitors combined. We believe this puts Extreme in a very strong position as the secular trend toward Cloud Networking continues to gain momentum with enterprise customers. This is the second quarter we are disclosing the ARR for our subscription business. We will be reporting on ARR as we diversify our business by adding new software subscriptions. I've asked Nabil Bukhari to join us on the call today to provide an update on the highly successful adoption of our cloud management platform and the introduction of our new cloud-based WAN edge subscription services.
For the fourth year in a row, we were named a leader in the Gartner Magic Quadrant for wired and wireless networking. We surpassed the largest competitor in the industry in both execution and vision and strengthened our relative position to the rest of the field. This is meaningful third-party validation from the number one enterprise IT industry analyst firm. In our Service Provider business, we're in the early stages of 5G network deployments, and this is just the beginning of a multi-year investment cycle. We're on pace to exceed our goal of attaining $20 million of incremental business in 5G for fiscal 2022, in line with our expectations. Both of our 5G solutions, Packet Broker and Cloud Native Infrastructure, create attractive new growth opportunities for Extreme. Nabil will provide more color on this growth opportunity as well.
The consistency of our execution, the growth opportunities that we have, the level of innovation we produce, and the record results are enabling us to attract the highest levels of talent in the industry. At the same time, our employee retention continues to be among the best in the industry. Net net, we're leveling up our game, and it's also evident in the quality and the magnitude of our customer engagement. I'm also proud to say we completed the systems integration of Ipanema ahead of schedule, and we integrated Ipanema technology into our product portfolio in record time within a quarter. We're on pace to introduce our ExtremeCloud branded SD-WAN solutions this quarter. We view these very strong quarterly results in the context of the Infinite Enterprise. What do we mean by the Infinite Enterprise? It's the future for our enterprise customers in a post-pandemic world.
The Infinite Enterprise delivers three main outcomes for our customers. Infinite distribution, consumer or user centricity, and unlimited scale as we operate through the cloud. We deliver this through our portfolio that brings all our enterprise networking and WAN edge products and services into a single framework. Data is becoming increasingly critical for our customers in delivering better business outcomes across all our verticals. For example, retailers connecting supermarkets, warehouses, corporate offices are relying on cloud analytics to deliver contextual insights that drive operational efficiencies, inform sales strategies, and drive business growth. Our government customers are creating smart roads and highways to deploy advanced transportation technology, digital speed signs that improve motorist safety. There's no better example of the value of our data analytics than in our sports and entertainment vertical.
As we announced today, we've just added Manchester United and the NHL to our list of valued customers who've named Extreme their exclusive Wi-Fi data analytics provider. We already have this designation in Major League Baseball, NASCAR, and the NFL, and we'll power the analytics for the ninth consecutive Super Bowl in a few weeks. Our analytics solution provides real-time visibility into network data, giving customers instant business intelligence and insights regarding fan preferences, foot traffic flow, mobile sports betting trends, application usage, and network security. These are but a few examples of how our customers are leveraging our intuitive insights from networking data to drive better business outcomes. With that, I'll turn the call over to our Chief Technology and Product Officer, Nabil Bukhari, to elaborate on our vision on the innovations in our cloud, our infrastructure, WAN edge, and 5G.
Thank you, Ed, and good morning, everyone. We continue to execute on our vision of the Infinite Enterprise. ExtremeCloud IQ, our cloud management platform, is the cornerstone of this vision, delivering on our commitment to reduce operational complexity, decrease risk, and increase reliability for our customers, of course, at cloud speed. In Q2, we introduced instance stacking, which enables automated deployment, management, and troubleshooting of stack switching from ExtremeCloud IQ. This differentiated single-click feature brings much-needed simplicity and reliability compared to our competitors' solutions, saving our customers time and effort. Customers' experience and their trust in our technology is central to our vision of enterprise networking. IT teams are increasingly using mobile devices to operate their networks. In Q2, we further enriched that experience.
Now users can view topology, onboard any wired or wireless device right from their XIQ mobile app, greatly simplifying rollout of network devices across the entire enterprise. We are integrating ExtremeCloud IQ CoPilot, our explainable AI platform, into the mobile app as well. Valuable and up-to-date AI ML-driven insights are instantly available to enterprise IT teams no matter where they are. Trust is a central theme in Cloud Networking. We announced the completion of SOC 2 Type 2 and SOC 2 Type 3 certifications for ExtremeCloud IQ, which puts us years ahead of our competition and reduces security risk for our customers. Digital transformation is accelerating, and every customer is defining their unique journey. We at Extreme differentiate ourselves by providing choice and flexibility to these customers. In Q2, we added an additional deployment option for our ExtremeCloud IQ customers.
ExtremeCloud IQ Site Engine can now be deployed in an air-gapped environment, which enables customers to use XIQ without tapping into a public cloud environment, providing an additional way to satisfy specific security mandates, for example, in healthcare and government work schools. Similarly, we enhanced our API framework with additional SDKs for Java, Go, Python, JavaScript, so our customers and technology partners can easily integrate ExtremeCloud IQ into the broader ecosystem of their choice. We continue to refresh our infrastructure portfolio, both wired and wireless, with universal platforms. As part of this universal platform strategy, we were first to market with Wi-Fi 6E solutions in Q1. In Q2, we expanded this Wi-Fi 6E portfolio with new mid-range universal AP 4000 Series.
With the introduction of 5520, 5420, and upcoming 5320 Series switching platforms, we will complete the refresh cycle of our edge switching portfolio this fiscal year, from the entry level all the way to the premium tier. Customers in healthcare, education, and other verticals are embracing our universal portfolio of Wi-Fi 6E APs. The universal switches with their software-upgradable features, like high-density multi-rate ports and high-powered PoE, are a perfect complement to the Wi-Fi 6E wireless. These universal platforms, both wired and wireless, are fully managed from ExtremeCloud IQ, making this an attractive, all-inclusive solution for our customers as they start to upgrade the edge of their networks. Earlier, Ed provided an update on the integration of Ipanema. We have integrated the Ipanema technology into our portfolio in record time.
We are on track to launch ExtremeCloud SD-WAN this quarter. This combines the industry-leading capabilities of ExtremeCloud IQ and the feature-rich SD-WAN from Ipanema into a single subscription. This is another proof point of our strategy to have our entire portfolio, now inclusive of SD-WAN, fully managed from XIQ. This continues to differentiate us from our competitors. ExtremeCloud SD-WAN will provide simplified licensing, deployment flexibilities, and advanced features to address the needs of vast variety of customers across multiple verticals and markets. Existing Extreme customers will find it operationally easy and financially attractive to add ExtremeCloud SD-WAN to their existing XIQ deployments. With the introduction of ExtremeCloud SD-WAN, our subscription offerings continue to expand and now include enterprise-wide cloud management, AI and ML-driven insights, and SD-WAN. We expect these services and offerings to enhance our subscription growth profile going into fiscal 2023.
Finally, I would like to provide an update about our solutions for 5G use cases, Packet Broker, and Cloud Native Infrastructure. These solutions combine cutting-edge programmable platforms, carrier-grade orchestration, and advanced features like trusted delivery. We have seen better than expected market interest in these solutions as our initial customers move from proofs of concept to successful deployments in production, marking a major milestone for us. Given the strength of our relationship with our partner in this space, we are seeing new opportunities beyond our initial use cases. With that, I will turn the call back over to you, Ed.
Thanks, Nabil. On top of the strong demand in the first half of our fiscal year, our business momentum is increasing. The funnel of opportunities is strengthening both from a new bookings perspective and a substantial backlog of business we've built. We're attracting new customers at an unprecedented pace, and this gives us confidence in our ability to capitalize on our growth objectives. We expect to grow our market share and drive record double-digit organic growth rates into the foreseeable future. With that, I will turn the call over to our CFO, Rémi Thomas.
Thanks, Ed. As Ed noted, fiscal 2022 continues to be a strong year for Extreme, and we're executing well across the board. Q2 total revenue of $281 million grew 16% year over year. Strong demand for our wired and wireless portfolio drove year-over-year revenue growth of 15% for product and 18% for services and subscription. We saw another quarter of double-digit year-over-year growth in total bookings, driven by a 47% growth in SaaS subscription bookings. SaaS annual recurring revenue or SaaS ARR reached $88 million, up 55% year over year and 11% quarter over quarter. The historical ARR data can be found on page 16 of the Q2 earnings deck posted on our website.
We also reported SaaS deferred revenue of $136 million, up 49% year-over-year and 11% quarter-over-quarter. Non-GAAP earnings per share was $0.21, up from $0.13 in the year-ago quarter and flat from last quarter. On a geographic basis and looking at total company revenue, the Americas enjoyed the strongest year-over-year growth in revenue, followed by APAC and EMEA. From a vertical standpoint and looking at total company bookings, the highest year-over-year growth came from sports and entertainment, followed by transportation and logistics, retail, E-Rate, and higher education. Turning to product trends, wireless enjoyed a strong recovery both year-over-year and sequentially, and accounted for close to a third of total product revenue this quarter. Wired maintained a healthy double-digit year-over-year growth in both bookings and revenue.
Services and subscription revenue reached a new high at $89.8 million, up 18% from the year-ago quarter and 9% sequentially, largely driven by the strength of cloud subscriptions. Total Q2 recurring revenue, including maintenance, managed services, and subscription, rose to $85.2 million, or 30% of total company revenue, and that was up from 29% last quarter. The growth of cloud subscription and service renewals drove the total deferred revenue sitting on our balance sheets to $373 million, up 20% year-over-year and 5% sequentially. Our non-GAAP gross margin came in at 58.2% in line with our guidance.
The year-over-year and sequential decline in the company's gross margin was driven for the most part by higher supply chain and freight costs, partially offset by the price increases we implemented in October. Q1 non-GAAP operating expenses were $126.8 million, up from $122.9 million in the year-ago quarter, and from $124.5 million in Q1, reflecting higher R&D expenses and sales and marketing spending from the acquisition of Ipanema. OpEx as a percentage of revenue was 45.2%, well ahead of the long-term target range of 46%-49% we set at our Investor Day last year.
All in all, we delivered an operating margin of 13.1%, up 2.9 percentage points from 10.2% in the year-ago quarter, and down slightly from 13.8% in Q1. Our cash conversion cycle of 22 days was down substantially from 44 days in the year-ago quarter, but up from a historically low level of just nine days in Q1. That was driven by reduction in payables to support timely delivery of component supplies. This quarter, we executed a $25 million share repurchase program for 1.8 million shares at an average price of $13.65. This was part of our previously authorized $100 million share buyback program with $30 million remaining.
Our net debt increased to $149 million, up from $139 million in Q1, largely driven by the share buyback. Had we not done the buyback, our adjusted net debt would have seen a $14 million reduction. Now turning to guidance. As we enter the second half of fiscal 2022, we expect our product book-to-bill ratio to move closer to one and our backlog to stabilize. We reiterate our outlook for fiscal 2022 of double-digit revenue growth and a 10%-15% operating margin. For Q3, we expect revenue to be in the range of $276 million-$296 million, up 11% year-over-year at the midpoint.
Q3 non-GAAP gross margin is anticipated to be in the range of 57.3%-59.3%, as we expect elevated expedite fees and freight costs to continue to impact our business. Q3 non-GAAP operating expenses are expected to be in the range of $129.3 million-$133.3 million. Q3 non-GAAP earnings are anticipated to be in the range of $21.3 million-$28.7 million, or $0.16-$0.21 per diluted share. We anticipate that the reduction in expedite and shipping fees, combined with the full impact of our recent pricing actions, will lead to some gross margin recovery in Q4, with further improvement expected in fiscal year 2023. With that, I will now turn it over to the operator to begin the question- and- answer session.
Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Our first question comes from Alex Henderson with Needham. Your line is open.
Hey, guys. Nice print. It's gratifying to see the progress you're making. I wanted to talk about first to the logistics costs. It should be coming down pretty steeply. I recall that back in the summer, it was as much as 50% of the supply chain cost pressures. Obviously, the parts pressures have increased, but it looks like those have been falling pretty steadily across the industry. Can you talk about how much, you know, the ratio of component cost to supply cost at this point?
Alex, I'll make a high-level comment and then let Rémi jump in maybe with some more detail. We have seen in terms of the supply chain, incremental expense from supply chain. We saw that step up meaningfully in the second quarter, and we do expect that to persist through this quarter in Q3, and then to loosen a bit in the fourth quarter. In terms of specifics around the parts of that, Rémi , I don't know if you wanna add any color for Alex.
I would just say, Alex, that if I think of how we went from the Q1 gross margin to the Q2 gross margin, there was sequentially a negative impact from both expedite fees, which is what we have to pay to our component suppliers to secure deliveries of key components and freight costs. In combination, these two were 4.5 points of gross margin. So you take that 4.5x our revenue, and that gives you a dollar impact. We see a stabilization of freight costs as we enter the third quarter. Unfortunately, we continue to see the expedite fees increasing slightly this quarter. They will be largely offset by the impact of the price increase, which will continue to deliver some benefits in Q3.
Unfortunately, when we mix the two together, they kinda neutralize each other, which is the reason we're providing this guidance for Q3.
The other night, F5 reported, and they stated that they had seen a very significant erosion in supply chain availability of components, particularly chipsets, that are supporting chipsets in the networking portion of their systems business. It's resulted in them bringing down their forecast for systems quite dramatically for the large quarter sequentially. Did you see, they said that step down happened in the last month or so. Have you seen anything comparable to that, or is that something that's less evident in your experience?
I would say, Alex, that.
Alex, yeah, I would jump in, Rémi , and just say that you know, as it relates to chipsets, we're not seeing that. I think some of that has to do. We always talk about our relationship with Broadcom. Our supply chain teams have worked aggressively to move and establish relationships with the secondary and tertiary component providers. They've done a nice job building, I'd say, quality relationships. We have very healthy working relationships, but it's less on the chipset side where we're constrained and more on the smaller component parts that typically we wouldn't be out chasing. It would be our ODMs who are chasing that. We don't see constraints on the chipset side of the equation.
It's more on the, you know, the smaller component parts that we're working to secure. Rémi, do you wanna add?
Yeah, I was just gonna add that this comes at a cost. We're able to find these smaller components, Alex, but you've gotta go and find them, and they come at a premium today. That's, you know, what was just built in my prior comments of the fact that we will see an increase in what we call purchase price variance, which is basically the cost of our components versus our initial expectation in the March quarter to make sure we get our hands on these components.
Well, it's interesting. They said that the spot market completely dried up. The second question is I've heard Cisco has pushed through another price increase here in January. I get it, like they're on their almost fourth price increase over the last year. A, are you seeing that in the field? B, we're hearing that it's creating, you know, people looking at Cisco like, "You're really just screwing us at this point," to the point that some people are exasperated enough to say, "I'm done. I want out of Cisco, and I'm looking for alternatives." Have you seen any of either of those dynamics in the field?
We have, Alex. You know, we did put in place our own price increase on effective October first. But it's not surprising, you know, given the cost that Rémi's describing, it's not surprising to see others raising price, and you know, especially from Cisco. When Cisco does that, it is a benefit to us because it gives us an umbrella, it gives us more flexibility if we wanna contemplate our own price increase. But to your point, we are taking share in this environment. You can see it from our growth and from our bookings. I would say, you know, I think it's more about our cloud and the value add that we're bringing, as opposed to just, you know, a commodity price transaction.
We are seeing more people, and we're seeing the channel community, importantly, looking for an alternative. The last comment I will make, and you did raise the supply chain issue, we're getting really good marks from our distributors in how we're managing through this environment, and putting commit dates that we're honoring. As a result, we have seen some business come our way, because of the confidence in our delivery and supply chain.
Oh, nice. One last question then I'll cede the floor. As we start to lap the significant increase in orders, as you get into the June and back half of calendar 2022, industry-wide orders jumped, you know, 30%-40% year over year. Every company in the space saw similar kind of, you know, big stretch in orders and duration. Should we start to anticipate a decline in orders in the June quarter against that top or decline in orders in the back half of the year, book-to-bill, you know, going below one? You know, we could have the oddity of beat and raise on top line and bottom line as supply chain improves, but the duration coming in causing orders to decline. How do we think about those mechanics? Thanks.
You know, it's interesting, Alex. You know, in my comments, I noted that we're actually seeing the momentum build. We had the same reaction as we were thinking about the magnitude of the first half of our fiscal year, the second half of fiscal 2021. We're not seeing it. On our end, we're seeing a build of momentum and growth, especially when we look to that June quarter, the visibility that we have in our funnel of opportunities in the pipeline. I also mentioned we're upleveling our team. We've made some incredible hires, you know, throughout the organization, but a lot of strengthening in terms of the teams and our go-to-market organization. You know, we're seeing unprecedented levels of demand.
We see no abatement there at Extreme.
Okay. Thank you.
Thank you. Our next question comes from Dave Kang with B. Riley. Your line is open.
Hi. Yes, good morning. I guess I may have missed it, but did you give out the book-to-bill for product and services?
Rémi, do you wanna put that up?
Yeah, we're very happy to give it to you. The book-to-bill for product was 1.12, and for services was 1.16. Total company book-to-bill was 1.14.
Got it. I just wanted to clarify on the supply chain situation. I think, Rémi, you said margin impact was about 4.5 points. What about on the revenue side? How much of revenue was impacted by component shortages?
Well, we increased our backlog by $19 million this quarter. Had we been able to deliver everything, revenue would have been, it's very theoretical, but would have been an extra $19 million, but that's the extent of the constraints that we saw this quarter.
Okay. That's pretty significant. On 5G, I guess, did I hear you correctly that you expect fiscal 2022 5G revenue to exceed $20 million? Did I hear that correct, Ed?
Yes. Dave, what you heard is, you know, incremental revenue from our Service Provider business to grow by $20 million. You know, we are on track for that. Nabil-
What about-
You heard Nabil comment that we had a lot of. You know, we have, you know, two very large customers, and one of those large customers is at the early stage. There's a lot of proof of concepts that are out in the field. What we're seeing now is that we're going into production. Some of these, you know, very large carriers that are out there are starting to move from testing phase of Cloud Native Infrastructure into production phase, and this is very early stages of ramp. We'll start to see other service providers move and transition from sort of test phase to production phase, and we're at the very beginning of a ramp cycle there. We have.
Nabil, your line, I don't know if you wanna add any color to what I've just said.
No, Ed, I think you're spot on. Dave, what we're seeing is that as this 5G movement, the cycle kind of just starts going on, and this is a global trend. We are seeing two kind of trends that counter each other. One is that with the whole, you know, supply chain and budgets and networking, it's like everything. We are seeing that larger customers that entered into proof of concepts, let's call it like a couple of years ago, they are now slowly kind of ramping up their productions. At the same time, we are actually seeing that the interest in the Cloud Native Infrastructure as opposed to the virtual infrastructure has actually expanded tremendously, you know, way beyond our expectations.
When you kinda like, bring them together, you know, that gives the confidence that Ed is talking about. Another part that we are also seeing is, for us specifically, that we are in a very specific use case for 5G, a specific solution or portion of the 5G network. Now we are starting to see opportunities to kind of broaden that into other areas of 5G deployment as well. It's overall a pretty good story for us.
Got it. Just a couple more on that 5G. Given that momentum in 5G, should we be thinking about maybe towards the high end of $50 million-$100 million for fiscal 2023, or is it still too early?
I think, you know, Dave, we haven't updated our guidance yet. I would defer to Rémi in terms of what's out on the street. You know, one of the things we'll talk about is that we are gonna have an Analyst Day in late spring, and you know, we're expecting to dive in, you know, do a deep dive here. I think that's probably a time where we'll revise numbers. Rémi, do you wanna add anything to that question?
No, for now, the $50 million-$100 million stands, Dave. We're just, given the ramp-up that we have, the fact that we have networks that are running live with our solution, and the opportunities that the 5G market represents, we feel confident about this $50 million-$100 million range that we provided last year.
Got it. Any new customers in the pipeline?
Yeah, that question, it's interesting because we have in the case of our cloud native infrastructure solutions, we have a force multiplier because our partner, you know, they're selling to service providers. The answer there is yes, there are a lot of new customers that are adopting the cloud native solution that Nabil was talking about. From that standpoint, you know, we are able to leverage, you know, our partner's global selling team that's selling into major service providers, and they're winning new business. I would say their demand it has been greater, as Nabil mentioned, for cloud native than they had expected. From that standpoint, yes.
The other comment, and then Nabil, I will ask you to chime in here. The technologies that we are building for, you know, our very large customers are also applicable to the broader Service Provider market. The quality of the solutions that we're building, you know, the carrier grade resiliency, if you will, is spurring growth with our other Service Provider customers. Nabil, I invite you into this conversation here.
Yeah. Thank you, Ed. No, absolutely. It's all answered, or I'll make two comments. One is obviously around the 5G. I think as I mentioned in the last
Answer that the opportunity, the interest in Cloud Native Infrastructure is actually growing, so which means a lot of newer customers, and by customers I mean service providers, are kind of entering that foray. Now, of course, remember that things happen a little bit at a different pace in service providers. These newer customers will go through their early stages, their POCs, and then, you know, early deployments. But generally, we are definitely seeing a lot more interest along with our partner. Now to the second comment, these technologies that we are building specifically for 5G, they're also very relevant for, you know, cloud service, but not the mega ones, but, you know, broader, cloudish kind of service providers.
Just to kind of give you an example, one of our European Service Provider customers actually picked up that solution or portions of that solution that is being used in 5G and are actually deploying it pretty widely in their environment. We do see this, you know, cross-usage of technology between the 5G side and the broader data center market as well. That's true for our Packet Broker solutions as well, which right now are very, very aimed at these massive requirements of the 5G rollouts. But at the same time, they're equally, you know, valuable to other service providers and perhaps some larger enterprises as well. We see this technology kind of broadening its influence beyond 5G as the quarters roll out. Yeah.
Got it. Thank you.
Thank you. Our next question comes from Eric Martinuzzi with Lake Street. Your line is open.
Yeah, I wanted to focus on the SaaS part of the business. I understand the ARR number, very healthy, $88 million up 55%. I wanted to go into the SaaS bookings, the subscription bookings at 47%. A terrific number, but it is down. You know, I think Q1's number was 71% on the bookings. I think previously you guys have been running in the 100% range. Are you seeing a change in appetite for the subscription form factor? Maybe if I could ask it a different way, what is your expectation for subscription bookings in Q3, Q4?
Yeah. Why don't I. I think we'll have a few of us that chime in here, Eric. You know, when we turned up ExtremeCloud IQ, you know, we have an opportunity to migrate and move a lot of customers over into the platform. Some of what you saw earlier in some of the higher growth rates was the benefit that we had of customer migration. From there, I think that's why you would see, as far as XIQ license growth, some of the comparisons are not quite as favorable in the year-over-year comparisons because we had such a huge surge in XIQ subscriptions.
You know, we continue throughout the rest of this year, you know, we continue to see nice growth in new subscriptions. We do have a lot of our XIQ subscriptions tied up in backlog. If the product is constrained in backlog, then the license would be constrained as well. As we go towards the end of this year, we expect to begin unlocking some of that subscription bookings on the new side. Renewals, as we think about renewals, we expect you know, larger renewal growth to occur out in the sort of call it, you know, fiscal 2024 timeframe. Rémi, do you wanna add to that?
You know, one other thing I would mention, Eric, is that with SD-WAN and new WAN edge services, we're really expecting, you know, a lot of growth there to be driving cloud subscription. I will let Rémi, if you wanna chime in on specific numbers for Eric or how he should think about it. Nabil, if you wanna provide some commentary around kind of this evolution of XIQ subscriptions going forward, you know, which we would see to be a kind of a maybe a longer term 30% growth range. As we contemplate new WAN edge services, which will have a much higher growth rate starting from a lower base.
No, Ed, I would say, you know, the initial phase of growth in the subscription business was really driven by us acquiring new subscribers onto our platform, migrating some of the existing customers that had an on-prem solution to a cloud-based solution. Now that this business is growing, what we're seeing this quarter is a significant contribution from renewals of customers that adopted our solution two to three years ago, sometimes, you know, when they were Aerohive customers. Now we're seeing a more balanced contribution to the 47% growth that I mentioned in my comments from, you know, new customers adopting the subscription model as well as renewal of existing customers.
Basically that will grow going forward as we introduce SD-WAN, and hence, you know, us feeling very comfortable in some of the growth rate that we highlighted a year ago. At the time, if you recall, we talked about 25%-30% growth in bookings and 25%-35% growth in revenue, you know, for the next 3-5 years. Today, we feel comfortable that both bookings and revenue will grow slightly more than 30%, over the period.
Yeah, I can add, as you said, a little bit more color to it. The way to think about our subscription business is really that the subscription number that we, you know, disclose, that is made up of various different cohorts, right? That's the migration, that was one of the cohorts. Then our wireless business, the cloud wireless business that has been driving a lot of our XIQ, that's another cohort. Then switching in XIQ, that's a third cohort, and so on and so forth. All of these cohorts kind of like, you know, they have their own trajectory, they have their own trend. When you combine them together, that's the growth number that Rémi is pointing out.
What I would address from a product, from a technology point of view that we have, we have two really axes for growth in the subscription business overall. One is more and more devices that become part of our cloud, so essentially increase the subscriber. The other part is that how do you increase the ARPU, which is the average revenue per unit, you know, how much money you make off of every unit. That increases as we roll out newer services and newer licenses on top of our ExtremeCloud SD-WAN platform. I think we've been talking about CoPilot for a while, which is our AI and ML platform, which is still in public beta, but we expect in fiscal 2023 that will become GA and that will help, you know, start to raise our ARPU.
We're adding another cohort on top of all of this, which is the SD-WAN part, which we acquired from Infovista, and we're just about to, you know, launch that this quarter. Well, that will add another revenue cohort or another subscription, you know, stream on top of what XIQ is delivering us. Our strategy is pretty simple. It is like all of these cohorts, we want them to stack on top of each other. They're obviously staggered from each other when they are introduced and when they, you know, peak out and then taper off. Net-net, when you add them, we are very confident, as Rémi mentioned, in the growth numbers, that we have projected well into multiple years from now.
Got it. Thanks for taking my question, and congratulations on the quarter.
Thanks, Eric. I think we're gonna wrap up at this point. I'd like to thank all of everyone who could join us today, and we will be reaching out. We're gonna be firming up a date for an analyst and investor meeting in the late springtime timeframe, so be on the lookout for that. I also wanna reach out and I wanna congratulate all of our Extreme employees as well as our partners for record results in the past quarter and all of the hard work that's gone into executing and delivering at Extreme. I hope everybody stays in good health, and we look forward to catching up soon.
Take care and have a nice day.
This concludes today's conference call. Thank you for participating. You may now disconnect.