Hello, and welcome to NEDM's Technology, Media, and Consumer Conference. I'm Ryan Koontz. I cover the networking sector here at NEDM. I'm really excited today to be joined by Extreme Networks. We've got CFO Kevin Rhodes and SVP of Finance, Stan Kovler. How are you guys doing?
Hey, doing well, Ryan. Good to see you.
Hey, Ryan. Good to be here.
Excellent. Great. Let's get to the meat and potatoes first. Just your recent quarter looked like it came out pretty darn good and in line with what you had hoped for. Can you maybe walk us through those results, Kevin? Maybe talk about some of the different segments in North America and Europe and inventories. Then we'll get to the little tariff question.
Yeah, sure. No worries. Yeah. Aside from tariffs, what's going on? I mean, generally, yes, we had a very good quarter. We had another quarter of sequential revenue growth. We've had several quarters in a row. That's atypical for this particular quarter because typically we're seasonally down in the third quarter versus Q2 being year-end, a little bit more budget flush there. We bucked that trend and continued to grow through it. Obviously, overachieved our revenue guide and the profit guide. That was good too. What I was most happy in the quarter to see was really our bookings performance, which was better than any of our last six quarters. When you think about with seasonality, overachieving any of the prior quarters, bookings performance means that you're overachieving even some of the stronger quarters that you normally have. That was good too.
I was happy to see the cash flow was strong at $30 million from operations as that inventory reduction came through. Profitability remained healthy at $0.21 in non-GAAP earnings. I think all the results of the Q3 were good. I think the best part was really the fourth quarter guidance, which is what we've been talking about, Ryan, for several quarters, even your predecessor, about getting back to that $300 million mark and being able to get back there. We've been talking about it for a while, but now we're projecting in the midpoint of our guidance range to get back to that $300 million with some pretty reasonable profitability associated with it. We're seeing more scale in the model, and we're seeing just, I'd call it, better bookings and better pipelines. That's exciting.
Among different segments, where would you say you had saw the most outperformance to kind of some puts and takes across segments?
Yeah, we continue to do well government. And when I say government, I mean outside typically the United States government-wise. We do very strong in Europe. We're doing very strong in Asia-Pacific with a lot of governmental spending. We also do fairly well in the United States with what I call small government spending. And that is at the state and local level as well. We do quite well there too. We don't have a lot of exposure, the good news, at the federal level. I do have a federal team that they do quite a good job, but the reality is it's really a nascent opportunity for us to grow federal spending over time within our business. But we don't have a lot of exposure in terms of risk of losing federal business based on DOGE or anything along those lines. So we feel pretty good there.
That's great. Nice to hear Europe turning around. I mean, it seems like that's a pretty broad consensus view that Europe is turning around in spend and hopefully means it's sustainable, not just isolated.
Yeah, I mean, geographically, Europe did better. We're still seeing strong activity for us in Asia-Pacific. Even America's is certainly strong and doing fine. I think the opportunities for us in the future are Germany's just formed their government. They've got a chancellor now a few days ago. That is kind of exciting. We're seeing a little bit of this administration conversation around NATO. A lot of these countries are realizing that they need to invest in their own militaries. We see opportunities coming to us through individual pockets of governmental spending to beef up their own military presence, especially with the war in Ukraine and Russia. We see more people, especially on the border, being concerned about that. As we talked about before, there's the geographic pockets, and then there's manufacturing.
We see manufacturing coming back a little bit more on the vertical markets like you talked about. We're really strong on the sports and entertainment side. That continues to do well for us. We saw more in the quarter. Healthcare, we did another couple of hospital systems in Europe this last quarter too. We almost see Europe being a really good, strong area for us with some tailwind opportunity.
Sure. That's fantastic. Let's touch base on tariffs. It feels like we've lived a lifetime already since Liberation Day, doesn't it? Walk us through kind of how your expectations have changed from how you thought about them at first, how you think about them now, what your kind of game plan is relative to Extreme, and how you're going to deal with the various outcomes that could roll out here over the second half, maybe as early as July.
First and foremost, tons and tons of mitigation strategies and scenario planning happening on the back end. We have spent a lot of time management team-wise looking at what pricing adjustments might we do, what optimization of the supply chain might we need to do, enhancing our logistics efficiencies, exploring different warehousing solutions. Can we directly ship, for instance, from our OEDMs into distribution centers in Europe so we can bypass all the U.S. tariff stuff if it happens? It's still a lot up in the air right now because obviously July 8th is the 90-day reprieve, if you will, for now for most folks. They're all in active negotiations. We are prepared to kind of manage tariffs if they come our way through price increases and these other methods of managing through. For now, I would say our exposure is pretty darn limited.
I just communicated this last quarter about $1.5 million exposure in the fourth quarter. We expect that to be similar next year if things stay as they are. We have decided not to price increase in Q4. Through June 30, no price increases. Ryan, as you know, I have got inventory that is coming down, but even the inventory I have today that is on my balance sheet is non-tariffed inventory. I can go a couple more quarters of selling into the market without having to actually impose any price increases on the existing inventory I have. There are a lot of ways for us to kind of mitigate that risk over the next several quarters.
Yeah, that's great. Have you seen any action from your competitors on the pricing front?
You know, there's some talk about prices going up and lift prices starting to go up. We're hearing that Juniper is communicating some price list changes coming up here soon. We're not aware of what the amounts will be of the price increases. I did hear at a conference earlier that, for instance, Cisco has got a lot of their switching coming out of Mexico and that they may have a hit to margins of 70 basis points. That's what I heard. That might yield some price increases as well. We're very attuned to the market, and we will move prices according to the rest of the market. We don't want to be the standalone guy out there leading with price increase. If other competitors go out with price increase, I think rest assured we'd certainly be behind them.
Gotcha. For sure. Yeah. One of the important markets you guys sold into and you talked about in the call is E-rate and K through 12, where you have a really strong share there. What are the dynamics that are going on in that market relative to federal on all the DOGE efforts and around streamlining federal and that program? What are you seeing now, and what are you thinking about that over the coming year?
Yeah, I mean, first and foremost, I'd say it doesn't appear that the E-rate program or the programs that we have for K through 12 are going to be affected by DOGE or the governmental spending reductions that we're seeing. The E-rate program is a funded program through the Universal Services Fund. The grants to schools to basically get themselves off blackboards and into smartboards and to have iPads in the classroom, that appears to still be on track like it has been, by the way, for many, many years. It seems like that's okay. I think from our perspective, we're seeing stronger bookings level activity there. I think it's in part due to the uncertainty surrounding HPE Juniper acquisition. Schools want a sure thing, and they want a good roadmap.
When you blind bid these things and you're kind of getting your best foot forward and they're reading through that, you've got school boards a little bit more nervous around who are they buying from these days with the uncertainty of that acquisition. I think that's helping us. I think secondly, we're also presenting ourselves with our Platform One solution into that market, and they really like it, and they're really appreciative. We've had 100 of those customers buy that Platform One solution. They like the idea of the AI as well as the networking and then security built in. They don't have to buy a bunch of different security features over the top of their school system network. They have the ability to have security built into the network.
Our security and our AI is going to help them be more secure there too. That is helping us as well.
Great. Stan, with your biz dev hat on and thinking about products and your core campus market, how do you think the campus market is changing before our eyes here? Where was it a year ago? Where do you see it going in the next year? What sort of changes are happening in the landscape of campus?
Yeah, Ryan, I think what we really need to see as an industry is just the adoption and use of AI. What's really great is that we're bringing forth a lot of solutions that will help customers drive more automation and really make things easier for them to manage their networks. One of the biggest things that we're espousing is the use of agentic AI agents. In other words, you can tell these agents what you'd like, what services you'd like them to perform, what activities you'd like them to perform, and do analysis on the network, what-if scenarios. That takes a lot of time back. That gives a lot of time back to the IT team because they can automate a lot of these activities and get reporting out of them much faster than they could in the past.
Everyone wants to see the entire network, right? Visualization is very important of how you visualize all of your network flows from one place to another. It has become even more important. You have return to office initiatives, but you also have hybrid. Where people are, it matters a lot. The other thing besides AI is clearly security. Security is top of mind for everyone. We think about security in a layered approach. You can have your firewalls and your other security products. The network security can get beefed up. Fabric, in our case, campus fabric is highly secure. Giving people additional new tools for network access control, up-leveling network access control to a zero trust posture, and then creating a universal zero trust for the devices and the users collectively. That is kind of what we are seeing.
A lot of interest in those types of areas. And then the normal speeds and feeds upgrade that you would expect, interest in Wi-Fi 7, interest in higher throughput switching. That is what people are focused on. It is a lot of those activities.
That's great. That's great. Relative to channels, either one of you can speak to this, but how is your channel strategy evolving? Where are you leveraging distributors and VARs now versus more direct sales? How do you kind of bifurcate that?
Stan, you want to cover that one?
Yeah. I think what we're doing on that front would be clearly deepening our relationships on the channel front. We just hired a new channel strategy, channel chief, hired him away from one of our larger competitors, and he was very happy to join us. We got good feedback from some of the investors that we saw this morning that know him, that he brings a lot of capabilities and a lot of good relationships to Extreme as our channel chief. It'll help us when we move up market because, as you know, when you move up market, it's dealing with the channel partners that sell to the larger customers. That's one aspect of it. I would say that's the core business. The other two things that we're doing is adding additional commercial models into our quiver.
One is growing our business with managed service providers. We added another 11 this quarter, so we're up to 48 managed service providers. They actually were in beta before last quarter because this quarter we added the capability for them to use our Platform One management console. Now the managed service providers have consumption billing and the multi-tenant capabilities that we gave them with Platform One. They're actually using it already in some cases, and we're getting good feedback on that. The other commercial model that we're driving is this private offer, which is kind of like a disaggregated model. That is for the largest customers that we have with a certain purchase commitment that they would need to join this category.
That allows us to help them procure products that are compatible products with Extreme, but in a quasi white box kind of way. Then we license our operating system service or support to them and our tech services, and they can subscribe to our SaaS-based applications. Those are really good deals for both because the customer gets the margin benefit on the gear, less of an uplift on hardware. We get the benefit of a steady stream subscription from the customer on that front. Those are the three things that I think we're driving. The competitive environment is becoming more favorable to us, in our view. There is a lot of consternation between the players beyond the largest company in our space.
With what's happening with HPE and Juniper, and then with Cisco still trying to merge some of the capabilities of Meraki and Catalyst and driving their channel partners to sell both Cisco security and Cisco networking. If you have a VAR or channel partner that has more of a pure play focused approach on security, that channel partner might actually want to do more business with Extreme so that they have a best of breed approach for networking and a best of breed approach to security.
Exactly. Yeah, makes sense. It sounds like the disaggregated market really opens the door for you to move up market then so that you can compete in these bigger Fortune 500 enterprise type opportunities.
Yeah. Yeah, and that's one of the larger deals that we got. John Deere was a competitive win. I mean, first and foremost, it's technology differentiation, right? And then beyond that, it's your commercial model, right? Are you easy to do business with? How is your support contracts and your support services and experience? And then what's your licensing model? I think that we, despite the technology differentiation that we have on campus networking, I think we really, really overachieve on a lot of the other soft elements of doing business with us. We're just easy to do business with.
That's great. Stan, you mentioned some of the MSPs are in beta on Platform One. They get the advantage of kind of managing multiple customers then from a single pane, huh?
Exactly. Their version of Platform One, there is going to be Platform One that comes out for end customers that allows them to do all these things on their own. Platform One for managed service providers adds the element of multi-tenancy to their platform so that they can get all of this great information, data, and use AI, but they can use it across multiple customers.
To be clear, we are GA for Platform One for MSPs. We are GA there. We are going GA with Platform One for all customers in early July. That is the exciting part.
Excellent. Great. That's great. In terms of, Kevin, your inventories, they came down in the quarter, solid cash flow there. Where are you aiming to get your inventory level to relative to where you've been here?
Yeah, great. I mean, I was happy to see the $16 million improvement of the inventory, and then we cash flowed that out. I think the good news is we have more room to go, right? I think that we'll benefit with probably, I'd say, another $36 million of cash flow to go before we normalize at around $80 million of inventory levels for us. There's a mix there of raw material as well as finished goods. We always want to have a good mix of both. It's not 100% all finished.
I can imagine the tariff uncertainty too might have you hedge your bets a little bit there, just navigating this transition.
Yeah, yeah. Obviously, there is probably, I've talked to my operations team around, do we want to buy some inventory before tariffs could come in? There is a delicate balance there, but I would say, I'm not putting a timeframe on it, on the $80 million, but I'm just saying they will normalize to $80 million. It's probably the next couple of few quarters that we will definitely get there. The other thing I will say, Ryan, that was always inventory can be an amorphous. Is it channel inventory? Is it our inventory, right? On the channel side, that's fully normalized, and there's no increased inventory there anymore. We have our own inventories that we should get that $36 million additional benefit from in the future.
Yeah. Yeah. Great. Stan, what's the competitive landscape look like here? We kind of touched on it, but where do you really feel like your differentiation here is with Platform One arriving? It really feels like a step function up in terms of your sophistication of your software offering.
Yeah, Ryan, that's exactly it, right? When we think about the capabilities that we have, we've always had a very, very high-quality networking solution, and we've differentiated with the capabilities that we have in Campus Fabric. Campus Fabric, the resiliency of Campus Fabric is one of the main differentiators, right? You can't really break the network. You can't take down the network. If it does go down, it lights back up in milliseconds. That allows us to get a lot of interest in high-performance applications, like for example, video, HD video, 4K, 8K video, right? When you need that superior capability for network connectivity. And then.
Wayne Casino is a good example of that, right?
Yeah.
Good customer of ours.
Yeah.
Yeah. I always bring, as you know, my favorite example of that is the Ocean's 11, right? Campus goes down for 30 seconds. You can't do that to an Extreme network, right? You can't have that heist in an Extreme Casino. The other thing is security, right? Security is huge in that element. All of these attributes that we've had and the ease of use of cloud. Now, when you take Platform One on top of that, and we talked about the AI and the agentic agents of AI, if we go back to some of the leading industry conferences right now, we're seeing some of the key industry analysts talk about this and how the use of agentic AI for networking, and that's what we're all about. We're not necessarily the networking for AI. We're bringing AI to networking.
It is bleeding edge to bring agentic AI to networking capabilities. This is beyond first-generation AI for networking, which was more machine learning, alerts, and those types of things that some of our competitors have, or even document search. ChatGPT, you can get document search. This is actual service agents with AI built in. Yes, you can have a chatbot. That is fine. We can give you a chatbot. We actually have tested a lot of that internally. Our tech support people have tested it out. Our systems engineers have all tested that out. We have taught the system a lot of these things through the cases. Now it is just bringing that level of automation to the IT community. I was on a customer call a couple of weeks ago, a new potential customer in the financial services industry. They said, "Okay, we want automation.
We're tired of reprogramming every hop from one VLAN to another. That is what we're bringing forth. It is kind of like when we hear these stories, it is unfortunate that a lot of customers still have to deal with that and running seven year-old, 10-year-old networks. There are enough of them out there, and a lot of them are running the gear of our competitors. It is an easier displacement discussion. To your point about competitive, bringing that forth, having that vision and the capabilities that we've had, the competitive landscape has become favorable to us. I think some of the dynamics in the industry have helped us as well. The political environment has helped us. I think where we used to compete more with Huawei in Europe and other places, like more of the Western markets, we are not seeing them as much.
Still see them in price competitive markets, maybe like Asia, Latin America. That has really helped us narrow the field in terms of where we are seeing competition. We had a lot of takeouts. We spoke on earnings, right? Various takeouts in all sorts of industries of competitors across the board. It is nice to see. We are seeing numbers come in from some of our competitors, and some of them had a down quarter from December to March, specifically in the narrow area where we see them and compete. Defying seasonality in March was a really good sign in the context of this environment.
Totally. Yeah. I mean, Cisco's obviously the one that has probably the most at risk here. Why do you think Meraki is in a tougher spot to follow your or to keep pace?
Yeah. I mean, Cisco tends to lead with breadth, right? Breadth and depth of the solutions they have.
Portfolio. Yeah.
Their portfolio, right? When we compete with them best of breed networking solutions, they actually tend to fall out fairly quickly, right? Because of the Campus Fabric, because of the differentiation we have, we find that they actually can't compete as well as we can in a head-to-head network, wireless, wired competition, right? They've got some aggressive channel tactics at times, right, to give them market presence and that sort of thing. Generally, I would say what they've not done very well with, but that we oftentimes see as a reason to come to us, very difficult licensing and very complex licensing that creates Cisco fatigue, that lack of integration of their solutions together, right? They've owned Meraki for 10 years, and they're still on a path of integrating Meraki with Catalyst switches that they have. They just have never done a good job of that.
Now they've got Splunk, and they're almost distracted from networking and focusing more on the Splunk acquisition and trying to drive more subscription revenue there. I think a lot of people who are buyers of networking equipment are like, "Are they still there? Are they not? Are they going to integrate? What's the roadmap look like?" I think they're just worried about being a number versus with us, you're a name, right? For me, that's an important element of the Extreme story is all of our customers. We deeply care about their success and making sure that they've got the best networking solution they can possibly have with us.
Yeah. That's great. The other big two players, HPE and Juniper, are trying to merge.
Trying to merge.
Saga, quite the saga here. I mean, it's very clear that HPE made clear that they're hurting in Wi-Fi, and they need Juniper to try to shore up their position. How's that playing out for you guys right now?
You know, I think fairly well. I mean, you look at the HPE Juniper, right? HPE is about 15% of the market, Juniper. And the enterprise market, I would say, is more like 5-6% close to us. Obviously, they've got the data center side as well. I don't consider that, right? When I think about the size, I think we're about the same size as Juniper on the enterprise side. I still think about Juniper as a very formidable competitor, right? When we go head-to-head against the four, right, it's typically kind of Juniper at the end. I'm excited about the AI that we're going to come out with. We think NIST is a very good AI solution that they had, but we think we are going to leapfrog it, as Stan said, with this agentic agent-driven AI solution. So that's exciting to us.
On the HP side, I think they're a wounded animal, as we've described them a little bit. Not dead, but certainly struggling with momentum. They lost a lot of the management team from the prior company. I think that a lot of people were just like, "Where's your roadmaps? Where are you on the reseller side?" I think a lot of people were very worried.
Our hands are tied right now.
I'm buying from them. Yeah.
Yeah. The lack of clarity probably plays in pretty close to the end game there, which is that HPE's roadmap is going to go away, right? Get replaced with NIST over time. It seems to be extending the misery for them. HPE.
I would imagine they've had a really difficult time innovating over the last year and a half, thinking that Juniper will be the platform that they're jumping onto. Have things stalled from a roadmap perspective? They haven't certainly been able to communicate to customers what that roadmap looks like. On the innovation side, have they really stalled out on that side? We don't see any real AI coming out through there or security. I think that there's a real challenge and opportunity, quite frankly, for us and Juniper. If the deal doesn't go through, I think it's still a benefit to us to go into that.
Yeah. Because they already invalidated their own product line, essentially.
A little bit. I mean, probably not totally because Aruba's still a good solution on the wireless side. I think that they will really struggle with having a cohesive wired wireless solution with AI. All of the feature sets that we will have and Juniper have, I think will struggle on a head-to-head competition there.
Yeah. Interesting. Kevin, on the SaaS side, we've seen a little bit of slowing on the ARR. What's been behind the slowing there? What are you doing to get back to that 20% level that you have growth you have a target on?
Yeah. A little bit of sloth on the ARR side, 13% growth versus the 20% we were experiencing in the past. We really have a three-pronged approach there. I'll describe it this way, right? First, we're leading with Platform One, right? It incorporates cloud management. It incorporates our support, our security features, and then this agentic AI. There's a bit of an ASP uplift there, about 10%-15% that we'll experience as a higher uplift on the ASP for that particular solution. I think also a stickiness factor there as well, Ryan, right? As you bundle all these things together, similar to Microsoft with their E5 subscription that includes Teams, that includes Office, and that includes also Microsoft Defender, you can't rip apart any part of that platform. It's all included. I think we're going to get better attach rates on that.
We're going to get better retention rates on that in the future. That'll continue to drive our ARR metrics there too. As Stan said earlier, we're doing pretty well on the MSP volumes. We got 48, added 11 more. We're on track to get to our 75 number that we want to get to by this next year-end. That has a good subscription support component to it under Platform One. That's going to drive. Third, kind of that market share gain that we get out of that subscription private offer, right? That enables those service providers and Fortune 100 companies to purchase hardware on a disaggregated model, nearly at cost. We wrap our operating system, the cloud management, the Platform One, all in a term-based license model. That's going to drive subscription revenue as well. Those three things.
I would just comment that also, when you think back a year ago when we had lower product bookings, right? Because we were working through the channel management. That is working its way through the model right now, right? Because the product is what you get from a subscription perspective. And so when you sell the product, you get a subscription attached. When you have less product, like Q3 of last year, it works its way through the model a little bit lagging. That is where we have seen a little slowdown there. As we have seen product bookings come back over the last several quarters, and we have had subscription attached to those, we will start to see an acceleration there again. You will even see it in Q4.
I think maintenance has been a little soft too. Is that driving the bundling?
Yeah. The bundling is going to help on the maintenance and support side, right? As we bundle subscription and maintenance and support, which are all sold separately today, and when we bundle it all together and add the AI to it and the security features to it as well, I think customers are going to see a tremendous benefit from that larger Platform One strategy.
Great. As you get ARR reaccelerating here, what's that going to do to gross margins? What's your kind of timeline to get to your target levels in mid-60s?
Yeah. Our target is still 64%-66% gross margin. We're not backing off that. We've been a little bit lower because of the $1.5 million of, I'll call it, tariff impact in the fourth quarter. That will temporarily pull us back from that. It's a combination of we'll continue to make improvements in standard costs as we get more and more universal hardware and just lower, if you will, RMAs on that hardware. We'll continue to drive gross margins on the product side. We're about 58% right now. I could see that getting to 60%, okay? When you think about the mix of recurring and subscription, the recurring, that is like in the 70%-73% range.
I could see the mix shift happening over time where we're more like 55-45 of product to subscription as I think about the next several years. That's where you're going to get to that 64%-66% range.
Yeah. Great. Maybe shifting gears again, Stan, talking about Platform One in the background. Can you kind of walk us through a little bit of history here in terms of your consolidation of a unified platform and then now the rollout of Platform One over that and what the power is of that to the end customer?
Yeah, Ryan. I'd say it's been many years since we've last done any significant acquisition. Most of our use of cash, the earlier question, has been on buybacks and that sort of thing. If you go back to the strategy like 10 years ago when our current CEO, Ed Meyercord, took over, it was really a scale-up strategy to build out both in terms of scale and a little bit of product breadth across networking. We added back in 2013, merged with a company called Enterasys. That gave us the early management capabilities that we have now and also helped us get into the early days of the arena Wi-Fi, the sports entertainment business that gives us that tip of the spear high-end capability on wireless and analytics.
What we also did was we then acquired Motorola's Wi-Fi business that was more for distributed Wi-Fi, but it was not yet cloud. We got great customers out of that deal, FedEx and the like. We also acquired Avaya's fabric networking business. The Campus Fabric came out of the Avaya acquisition. They were in a difficult position going through another restructuring that they have done a couple of times. We were lucky to get that asset. That asset, actually, we appreciate it. It goes all the way back to Nortel. It is the single path bridging technology. We did the Brocade data center acquisition. That gave us the relationship now that we have. We built out that technology that we received from Brocade and updated it many times over. Customers like Verizon and Ericsson that we have really like that technology.
When Kevin talked about the product portfolio, now we have new switches coming out, like 400 gigs coming out soon, things like that. We got the people and the talent and the tech for that years ago from that deal. We moved on to, I would say, more of our growthier areas, which is we bought Aerohive to get into cloud networking. That business has really taken off. I think it really had a catalyst with COVID proving out that we could scale up and do cloud in the public cloud domain. We have integrated that technology into the rest of our portfolio. Another deal that we did for some WAN app, SD-WAN assets, Ipanema in 2021.
To your point, right, we had all of these different companies that we had acquired over the years, but the strategy was always to bring the technology in and immediately integrate it with the rest of the portfolio. The platform strategy on hardware was the first iteration of that where we took and platformized all of the hardware. You can see where we're going with the software now and why we're doing this in the software layer. This is just an evolution of what we did with hardware. The hardware has multiple personalities. You can run it in the single path bridging, Campus Fabric mode, or you can run it in the traditional networking mode. The same thing is true for all the access points, right?
That allows us to give customers flexibility, investment protection because they know that we're not turning off certain parts of the portfolio. Sort of what we talked about with Cisco, right? Catalyst elements or Meraki elements are going away, and there's consolidation. You have customers that are left behind. In a deal like the HPE Juniper deal, customers would have to choose the product roadmap. The surviving entity would have to choose the product roadmap. One of the things that we differentiate on in that respect is there's certainty and investment protection that we offer because it's one portfolio. By the way, what it's done is because we've modernized everything with the cloud-native OS and modern capabilities on the hardware, the customers that we have are experiencing, at least in our experience, record lows repair or maintenance requirements.
The product quality is the best that we've had. The product quality is one of the other things that, when you talk about differentiation, matters to customers. It's the longevity of the product, the quality of the solution, all that matters both in the hardware and the software. Now, taking that platform strategy and applying it to the software that we bring, all the different software elements, being able to see all that, manage that from one place with the additional capabilities that we bring. Simplifying the licensing is also important. There's a lot of asset management that goes on with a lot of our competitors because the timing of licenses when they buy a certain batch of licenses cannot be strung together into one common timeframe.
You're constantly rolling forward and managing licensing of, "I've got this batch that's up for renewal and that batch is up for renewal.
You're really reducing complexity there. Yeah. Wow. Incredible.
When you get into thousands of devices for large environments, it becomes very complex. With Platform One, they'll be able to see all of that all in one shot. The simplicity of the support and the subscription, it's all one license now.
Yeah. I really look forward to learning more about that week after next.
Yeah. Good stuff.
Yeah. Great stuff. Kevin, anything you want to say in wrapping up here in terms of kind of outgoing message for investors?
Yeah. I mean, I think outgoing message would be, "I think we're doing well. We're on track to what we said we were going to do over the last several quarters, consistent sequential growth." I'm excited about fourth quarter and landing that like we just talked about with our guidance, getting to the $300 million at the midpoint of our guidance, but also continuing to show continued improvement in profitability and growing our gross margins as a result of that and continuing to see Platform One kind of come out into the marketplace and what's that opportunity for us as a company as we bring that to market because there's a lot of excitement here internally about the new cloud offering that we have here for the marketplace. We think it'll leapfrog us above and beyond the competition. That's just another competitive differentiator.
As we know, software is what differentiates in this marketplace, not as much on the hardware side, but software does. The agentic AI is going to be exciting.
Great. Kevin, Stan, thanks so much for joining. Really appreciate it.
Thanks, Ryan.
Thanks so much. Have a good weekend.
Thank you. You too.
See you in Paris.