Extreme Networks CEO On Record-Breaking Bookings, Averting Supply Chain Woes And Breaking The $100M ARR Barrier

The networking provider’s cloud ARR is booming, despite supply chain challenges causing record backlog. But Extreme’s focus on cloud-first networking and its universal hardware platform is giving the company a leg up over Cisco, Extreme’s CEO Ed Meyercord told CRN.

Making Headlines

Despite ongoing supply chain woes, Extreme Networks posted its fifth consecutive quarter of double-digit product revenue, while also reporting its fourth consecutive quarter of double-digit cloud growth year over year. The company grew its enterprise business by close to 20 percent year over year, not to mention, Extreme nabbed 45 customer orders that were over a million dollars during its most recent fiscal Q3 2022 quarter. It’s a reflection of Extreme moving up-market. For channel partners, that means the company’s brand recognition is climbing higher, according to Extreme Networks’ CEO Ed Meyercord.

“People are surprised when they see what we’ve got. They see the breadth of the technology, the strength and the high quality of our cloud, security and ease of deployment, compared to the largest competitor in this space that’s pretty complicated and pretty expensive,” Meyercord told CRN in a recent interview.

Still, the San Jose, Calif.-based networking player saw an increased backlog of orders thanks to supply chain constraints to the tune of $130 million in backlog during Q3, bringing the company’s total backlog up to more than $425 million in orders that can’t be placed right away due to impacted delivery timelines.

However, unlike some of its competitors, Extreme’s cloud-first networking approach is helping the company address distributed enterprise environments. In addition to cloud, its universal hardware platform is not only giving partners a powerful solution for their customers, but it’s helping to lessen the impact of global supply chain shortages for the networking provider. “Our leadership in wireless and enterprise, the most flexible enterprise hardware in the marketplace, coming together with simple licensing is really the driver of our growth,” Meyercord said, adding that meanwhile, some smaller channel partners are being disenfranchised by networking competitors, such as Cisco Systems.

Extreme does about 85 percent of its business through the channel and is focused on all of its partners, from the most long-standing solution providers with large install bases, to those shifting wallet share to Extreme. The company also has a new partner platform in the works that is slated to be launched this summer, Meyercord said.

The company’s leader talked supply chain challenges, a newly forged partnership with edge networking specialist Cradlepoint and the opportunities it presents for partners, as well as the company’s record-breaking bookings and cloud annual recurring revenue, which grew 54 percent during the quarter.

Here’s what Meyercord had to say.

How did Extreme do in Q3 2022 in terms of revenue numbers and cloud bookings?

Our Q3 was a record quarter for us in bookings on the demand side and record in reported revenue in our history. And then, [we had] record backlog because despite the fact that we have record revenue, we are continuing to build a backlog. We built a $130 million backlog in the quarter, which brought our total backlog up over $425 million -- that‘s like a half a year product bookings for us. So, it’s a really big number, which obviously begs the question [of] do we have supply chain constraints? But the revenue was a testament to our teams working really well and effectively through supply chain constraints through the quarters to deliver.

Growth was really around the world for us, in all of our geos, across our product portfolios, and led by strength in cloud. Our cloud ARR is up 54 percent year over year. We‘re crossing over a major milestone as we speak -- we’re crossing over $100 million in annual recurring revenue software and that‘s all driven by the strength of our cloud. Cloud bookings remain very strong [and] our cloud is very sticky, so our renewal rates are incredibly high. And we’re excited that we just went open books this week on our new SD-WAN offering. We’re sending the cloud out to the edge of the wide area network. And that will provide the next wave of growth, if you will, with our cloud subscription business, along with other WAN edge services that are coming soon. So, there‘s a lot of excitement inside Extreme around just the success of our universal hardware platforms that are going to connected with cloud, the flexibility that we’re bringing there, the insights that we can provide from the cloud perspective, the management, and then the idea that we‘re bringing new ways for our customers to drive better outcomes with Extreme.

With now a record-level of backlog, just how big an issue has supply chain constraints been for Extreme?

On Wall Street, [supply chain issues] was the main headline that people picked up on around concerns in the near-term. Our guidance was down a little bit quarter over quarter looking to June because of supply chain constraints. However, behind the scenes, we’re probably more confident with supply chain that we have been because of the team and the actions that they’ve taken with the secondary and tertiary suppliers. We‘ve got a great relationship with Broadcom and as far as the kind of primary chipsets -- what we would call tier one supply chain elements -- we’re in great shape there. It‘s really a tier two and tier three [issue] and normally is not an area that we would go direct towards, but our team is going direct and now we’re feeling confident about June being a low point, and then stepping out each quarter and growing our supply. The stage is set for an incredible run, starting in fiscal 2023 for the next several years as we look at the supply chain loosening.

Overall, we‘re making it easier for partners to position and win with Extreme. Our supply chain has also been somewhat of an asset [because] some of the larger players have prioritized their very largest partners and as a result, some of the maybe tier two-level partners within Cisco are a little disenfranchised, so, they‘ve become a very big fish for us. So, we’re seeing a lot of opportunities for growth.

The competition is grappling with an uptick in gray market activity due to the current supply chain issues. Is Extreme experiencing the same challenge?

That‘s happening throughout the entire supply chain. That happens with component makers that are actually building switches and access points, etc. So, that entire supply chain, either going through distributors or going direct or finding secondary markets to go find components, it’s a very active practice. And then the same thing in the channel community [with partners] just trying to find gear.

One of the things that we did a few years ago is we established our universal hardware platform. So, we‘ve been shrinking the number of [stock keeping units] SKUs we have and the flexibility we have with our universal platform is you can run multiple personalities, in terms of operating systems, on the hardware. That that gives us a lot of flexibility from a supply chain perspective. It means that we don’t have to chase as many SKUs and then as many components -- there‘s a multiplier effect associated with SKUs. We’re giving customers and partners a lot more flexibility in how they deploy our hardware, and we have the advantage of being more focused and concentrated in what we‘re building for. I think that’s given us a real competitive advantage, within Extreme shrinking the number of SKUs we have, and then being able to be much more flexible, and then on a competitive basis, the fact that we‘re a much more focused portfolio. In a way, it’s easier for us to avoid that.

Tell us about Extreme's new partnership with Cradlepoint and how partners can benefit from the new relationship?

We‘ve announced a partnership with Cradlepoint and this is the extension of our fabric out to the wireless WAN over the cellular network. A lot of our channel partners are putting together Cradlepoint and Extreme into their customer solutions.

If you think about the edge of the network and redundancy, and I‘ll give an example of healthcare, for example -- If you think about a remote clinic, you’ve got basic network connectivity over a wired network, but maybe you want to have redundancy and backup over wireless connections so that you can failover. That provides a very efficient way for customers to failover in a redundancy scenario. Or maybe you‘re a school and you’re trying to connect to a remote location and you‘re building your own, private cellular network. In this case, you’ve got a Cradlepoint device to provide you with connectivity that allows you to go wireless without having to be hardwired for your last mile. So, there‘s the primary connectivity cases and then secondary use cases where having that cellular connection as backup or primary is attractive. A lot of our partners are looking at combining that connectivity piece along with that networking piece, and that’s where [the partnership] comes in. it‘s a win-win for both of us.

What can partners expect in the second half of 2022?

We‘re taking share from the bigger provider. That’s something that we continue to do, [and] you can see that based on the demand. When we look at the network, I‘d say we’re more data centric. So, you will hear us talking about new ways for better outcomes. And it‘s really about leveraging and harnessing data from the network in a new way. We’re seeing more and more cases where our customers are thinking about the network -- which sees a lot -- and “What can we pull out of the network to maybe help us drive better outcomes across the board?” That‘s been more of a dialog [and] we’re really encouraging our enterprise customers to think that way. The message is really resonating.

From an IT perspective, we‘re investing in more tools to support the channel community. This year, one of our primary investment projects is launching a new platform for our partner community that’s going to help [partners] navigate more easily with Extreme, and we‘re going to help them drive their business. That’s probably one of the things that I‘m most excited about. We have we have all the technology pieces are in place and what we want to do is make it really easy for partners to drive their business with Extreme and we want to support them with that.