Extreme Networks (EXTR) Q3 2022 Earnings Call Transcript

Extreme Networks (EXTR 2.38%)
Q3 2022 Earnings Call
Apr 27, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Extreme Networks' third quarter fiscal year 2022 financial results call. [Operator instructions] 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.

Stan Kovler -- Vice President of Strategy and Investor Relations

Thank you, operator. Welcome to the Extreme Networks' third quarter fiscal '22 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; and CFO, Remi Thomas.

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 and operational results, growth expectations and strategies. 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 by our risk factors in our 10-K report for the period ended 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.

Ed Meyercord -- President and Chief Executive Officer

Thank you, Stan, and thank you all for joining us this morning. Q3 was characterized by strong double-digit bookings and the fifth consecutive quarter of double-digit revenue growth that led to record quarterly bookings and revenue. We achieved these results despite industrywide supply chain challenges. We built an incremental $130 million in product backlog, which now sits at over $425 million.

We see strong demand as we turn the corner into Q4 and fiscal '23 for both our enterprise and 5G solutions. A record 45 customers placed orders of more than $1 million, and our product book-to-bill was over 1.4 as demand continues to exceed supply. Our competitive position in the industry has never been stronger, and we're taking share. Small share gains equate to a large impact on Extreme's top line.

Q3 marks the fifth consecutive quarter of double-digit product revenue growth led by the strength of cloud, sales of our universal switching hardware platforms and adoption of our Wi-Fi 6E access points. We expect this level of organic growth to continue. SaaS ARR was $97 million this quarter, up 54% year over year, 10% quarter over quarter, driven by strong execution. Keep in mind, this was approximately $40 million when we acquired Aerohive two and a half years ago.

Today, we have 13% share and hold the No. 2 position in cloud networking, and we continue to gain momentum, thanks to new bookings and strong renewals. As we look for new ways to drive better outcomes for our customers and build on our vision of the Infinite Enterprise, we have extended beyond the campus to support a distributed environment at the WAN Edge. This will provide the next wave of growth in our subscription business and support our long-term subscription growth outlook of 25% to 35%.

In our service provider business, we are on pace to exceed our prior $20 million growth expectation for fiscal '22. With our cloud-native infrastructure solution, we're in the early stages of a significant ramp as next-generation 5G networks are being deployed by global service providers. Given the strength of our vendor relationship, we've added new use cases that we expect to accelerate future growth. We have complete visibility into our product backlog, more than half of which consists of our latest generation products.

Extreme's product lead times are among the lowest in the industry, and our order validation process confirms the absence of duplicate orders. In addition, we have significant backlog of subscriptions and service revenue that will be recognized when supply chain constraints ease. The industrywide global supply chain environment became more challenging this quarter due to constraints on secondary and tertiary component supply. We shifted our strategy to deal directly with these vendors.

This has allowed us to strengthen our supply chain position as we are now getting committed quantities and secure ship dates. With respect to Tier 1 suppliers, our relationship with Broadcom is paying dividends in the form of product availability. While we expect to continue building backlog for the next several quarters, we anticipate the book-to-bill ratio to come down throughout the next fiscal year. Based on the lead times and vendor commitments we're getting from our suppliers, we expect this June quarter will be our low watermark in revenue, and we see stepped-up supply increases throughout fiscal '23.

We expect to be in a position to begin releasing backlog by June of next year. Extreme is focused on finding new ways to deliver better outcomes for our customers. This quarter, we helped establish one of the largest existing cloud-managed network infrastructures at Boras Stad, Sweden, transforming the municipality into a smart city. The new secure Wi-Fi 6 network delivers reliable coverage, improved network capacity and faster data speeds across the city services while automating and simplifying network management for the IT team.

We are helping customers modernize their networks by delivering secure, cloud-driven connectivity beyond the campus to the WAN Edge and tethered together disparate devices and services that enable remote workplaces, distance learning, telemedicine and more. Extreme's customers are able to unlock data from previously untapped network insights into location, app usage and workflow patterns. This is a unique differentiator for us. In doing so, our customers provide a more personal experience for their own end user while improving operating efficiency.

The best examples of this capability and usage are within the sports and entertainment vertical. However, more and more of Extreme's customers are also embracing these data capabilities. For segments like manufacturing or smart cities, insights from networking data can help them reduce their carbon footprint by ensuring energy efficient network usage. Further analytics can optimize, which tasks are addressed and when location-based insights specific to people, devices and available resources are tracked.

Lastly, as products such as CoPilot exit public data at the end of this fiscal year, customers can fully leverage prior network investments, benefit from advances in AI/ML and reduce SaaS time on management and more. In campus networking, the success of our 5420 product launch drove strong growth during the quarter in the value tier, along with the recently introduced 5320. Our new Wi-Fi 6E APs drove over 10% of all wireless revenue in just two quarters. We strongly believe Extreme's first-to-market move and Wi-Fi 6E is leading us to win in the market transition.

Adoption of 6E wireless will also drive multi-gig switching demand in the future. As of this week, ExtremeCloud SD-WAN is available for quoting and will become generally available in May, a quarter ahead of our initial goal. It combines the industry-leading capabilities of ExtremeCloud IQ and feature-rich SD-WAN from Ipanema into a single subscription. This is another proof point of our strategy to have our entire enterprise portfolio now inclusive of SD-WAN fully managed from XIQ.

So in summary, with the strength of bookings from our market share gains in the enterprise and SP markets, the normalization of book-to-bill and the releasing of our backlog, we expect unprecedented acceleration of revenue, cash flow and earnings growth through fiscal '25. I hope to see everybody at our upcoming investor day on May 18, where we will discuss Extreme's cloud expansion, our go-to-market strategy, detailed plans to drive supply and provide an updated long-term model for the company. And with that, I'll turn the call over to our CFO, Remi Thomas.

Remi Thomas -- Chief Financial Officer

Thanks, Ed. As Ed noted, fiscal '22 continues to be an exceptional year for Extreme and we're executing well across the board. Q3 total revenue of $286 million, grew 13% year over year. Strong demand for our wired and wireless portfolio drove year-over-year revenue growth of 12% for product and 13% for services and subscription.

Product book-to-bill was at 1.43 and the $425 million of backlog we are currently carrying is over two times larger than our product revenue this quarter. Services book-to-bill was also high at 1.21 as we show on Page 5 of our quarterly earnings deck. We saw another strong quarter of SaaS subscription bookings with year-over-year growth of 85%. SaaS annual recurring revenue or SaaS ARR reached $97 million, up 54% year over year and 10% quarter to quarter.

The historical ARR data can be found on Page 15 of the Q3 earnings deck posted on our website. SaaS deferred revenue was $143 million at the end of Q3, up 44% year over year and 5% quarter over quarter. Non-GAAP earnings per share was $0.21, up from $0.16 in the year ago quarter and flat from last quarter. On a geographic basis, and looking at total company revenue, EMEA enjoyed the strongest year-over-year growth in revenue, followed by Americas, while APAC revenue was most constrained by supply chain.

From a vertical standpoint and looking at total company bookings, the highest year-over-year growth came from sports and entertainment, manufacturing, government and healthcare, all of which grew strong double digits year over year. Turning to product trends. Wireless bookings were exceptional, both year over year and sequentially, but revenue was constrained by supply chain challenges. Our wired business maintained very strong and consistent double-digit growth in bookings and revenue for the fifth quarter in a row.

Services and subscription revenue reached a new high at $87.1 million, up 13% from the year ago quarter and down 3% sequentially, driven by maintenance, primarily due to a few numbers updates in the quarter. Overall growth was largely driven by the strength of cloud subscriptions. Total Q3 recurring revenue, including maintenance, managed services and subscription rose to $81.3 million or 28% of total company revenue, down from 30% last quarter. The growth of cloud subscription and service renewals drove the total deferred revenue sitting on our balance sheet to $372 million, up 17% year over year and flat sequentially.

Our non-GAAP gross margin came in at 58% at the midpoint of 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 cost, partially offset by the price increases we implemented in October, favorable mix and internal productivity gains. Gross margin would have been at least 500 basis points higher, if not for additional expedite fees and higher freight cost. Q3 non-GAAP operating expenses were $130 million, up from $127.3 million in the year ago quarter and from $126.8 million in Q2, reflecting higher R&D expenses and sales and marketing spending from the acquisition of Ipanema.

Opex as a percentage of revenue was 45.5%, well ahead of the long-term target range of 46% to 49% we set at our investor day last year. All in all, we delivered an operating margin of 12.5%, up 1.2 percentage points from 11.3% in the year ago quarter and down slightly from 13.1% in Q2. Our net debt remained at $149 million, flat from Q2 and was impacted by an increase in receivables from our distributors due to billing linearity this quarter. Now, turning to guidance.

We reiterate our outlook for fiscal '22 of double-digit revenue growth and a 10% to 15% operating margin. For Q4, we expect revenue to be in the range of $265 million to $275 million. Q4 non-GAAP gross margin is anticipated to be in the range of 57% to 59% as we expect elevated expedite fees and freight costs to continue to impact our business. Q4 non-GAAP operating expenses are expected to be in the range of $126.9 million to $130.9 million.

Q4 non-GAAP earnings are anticipated to be in the range of $16.7 million to $23.9 million or $0.12 to $0.18 per diluted share. Given the confidence in our market and company trends, along with our record backlog, our visibility has strengthened with respect to top line. As a result, we expect revenue growth to accelerate to a range of 10% to 15% for fiscal '23 and to the mid-teens range through fiscal '25. 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 fiscal year '23, exiting the year above 60%.

Looking out at fiscal '25, we expect gross margin to increase to a range of 64% to 66% on a non-GAAP basis. I will provide further commentary on this outlook at our upcoming investor day on May 18. With that, I will now turn it over to the operator to begin the question-and-answer session.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Alex Henderson with Needham. Your line is open.

Alex Henderson -- Needham and Company -- Analyst

Great. Thank you very much. All I can say is, wow, that's a big acceleration, congratulations. So I'm a little concerned about what's going on in China right now with massive lockdowns in large portions of the country, over 400 million people currently locked in their apartments.

I got to believe that that's going to have some impact on supply chain, but not yet. I would think it would take a couple of quarters for that to fully manifest out to people. Can you talk to your exposure to China, whether that be in parts or whether that be in chips or any other elements? And to what extent you factored that supply chain challenge into the outlook?

Ed Meyercord -- President and Chief Executive Officer

Sure. Thanks, Alex. This is Ed. Yes.

The answer is we have factored that into our outlook, and we're very much aware, as you know, this is something that, given the fact that our top line is being driven by supply and will be really throughout fiscal '23, it's all hands on deck 24/7 as far as how we manage -- how we're managing supply chain. What I mentioned, the big change for us, first of all, I'll say that as it relates to Broadcom and that chipset, we've shared this before, we are not constrained, and we're confident in our outlook. The issue has been with secondary and tertiary component part providers. Historically, we relied on ODMs.

In the fourth quarter, we moved aggressively to establish direct relationships with these providers. And so, now we're in the process of securing ship dates and quantities out into the future. And I would say that's the main driver of our confidence. We are very much aware of what's going on over in China and the lockdowns there.

And we rely on our suppliers to provide us with that feedback in terms of how they feel their confidence levels. So -- and that's how we built our forecast. Obviously, in the near term, we're confident around Q4 and what we're guiding there. As we mentioned, we think it's the low watermark and we have confidence in stepping through this in fiscal '23.

So yes, we're mindful of it. We're aware of it. It's top of mind for everyone throughout our entire supply chain. It's something that we considered in our outlook.

Alex Henderson -- Needham and Company -- Analyst

As you look out to that FY '23 guide, I assume then that it really is very heavily back-half loaded in -- it's more the March and June quarters of FY '23 that are providing the growth. Is that a fair assessment in terms of the slope of the year?

Ed Meyercord -- President and Chief Executive Officer

Yes. We're assuming that we're stepping out of it. I'll let Remi come in. But it is, as I mentioned, it's very supply chain oriented.

So we have visibility to a quarterly step and then, based on a few of our largest Tier 2 and 3 component providers, we see relief in the second half of our fiscal, and I called out in my comments, June is when we expect to be in a position to begin to release backlog.

Alex Henderson -- Needham and Company -- Analyst

All right. And just one last question, then I'll cede the floor. On the pricing side of the equation, it looks like Cisco has increased prices somewhere in the 10% to 15% vicinity in the campus, as much as 20% plus in the data center. And it does also look like they're subsidizing an attack into the cloud from the enterprise and making their parts or their supply availability skew toward their largest customers, which does seem to me to open a significant opportunity for you guys.

First off, are the data points that I just threw out consistent with what you're seeing? And do you think that there's increased share gain because of the orientation to competing with Arista, combined with focusing on their largest accounts, creating an opportunity for share gains. Can you talk to that issue?

Ed Meyercord -- President and Chief Executive Officer

I think that's a contributing factor, Alex. And I think I would agree with your numbers. Obviously, there's not a precise science behind it, but 10% to 15% for enterprise in terms of what we see makes sense. We tend to price just below the Cisco umbrella.

And we've been able to raise price as well, which has helped us offset the increased cost of supply chain. But to your point, the prioritization of larger customers and also larger partners out in the channel have been opening up interesting opportunities for us with direct end-user projects, as well as taking share out in the channel community. So I think your assessment is on -- I can't really comment on whether or not there's a subsidy of enterprise to fund data center. We're not really playing up in that data center space, so that's hard for me to comment on.

But I can't tell you that we're clearly taking share from Cisco. We're the largest player in our space. They have been raising price, and they are supply chain constrained. And I think to the extent that we are able to benefit despite our own constraints, I think it's a very fair assessment.

Alex Henderson -- Needham and Company -- Analyst

Congratulations on a really great execution. You guys really have stepped it up. Thanks.

Ed Meyercord -- President and Chief Executive Officer

Thanks, Alex.

Operator

Thank you. And our next question comes from Eric Martinuzzi with Lake Street. Your line is open.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Yes. I wanted to focus on the outlook for Q4. For looking here at the midpoint, that $270 million on the top line, that would be down year-on-year versus Q4, you were at $278 million a year ago. And I'm just wondering, given the outlook for 2023, what sort of -- I know you're going to comment more on it at your analyst day, but what does that say about the first half of FY '23?

Ed Meyercord -- President and Chief Executive Officer

I'll comment and Remi, let you follow me. But as I just mentioned to Alex, it's all driven by supply chain. So this is all the work that our teams have been doing on many fronts. I highlighted the -- our shift in strategy to go direct to the Tier 2 and Tier 3.

There's been a lot of work establishing those connections, relationships. And as I mentioned, importantly, the secure ship dates and desired quantities, working directly with them on getting at. That has been very helpful. Our teams are getting much more savvy in terms of how to get that supply.

And that's the main driver. The other thing that we do is we look at -- we look at reengineering, how do we swap out components and parts. Normally, we would do that more from a cost perspective and trying to drive margins. Here, I'd say we have 10x the volume of our supply chain operations teams working with our engineering teams to swap out components to find parts where we need them.

And it's a very tactical exercise, but the teams have been doing a great job on that. So it's the combination of a lot of different tactical initiatives that are giving us confidence in calling the number, which is supply chain driven. As we mentioned, we're still looking and we expect to build backlog obviously, in this quarter and then, throughout fiscal '23. But the change in the book-to-bill, we do see that beginning to come down.

So as this year, as you look out and you look at all of the backlog we built this year, we expect that backlog number to be lower next year. And then, therefore, that along with -- even if you assumed a flat bookings number, and we're taking share and we're growing in terms of the bookings line, just that change in book-to-bill and the change in the backlog outlook creates significant growth for Extreme. So that's kind of what we're -- that's what we're gearing up for. And then, when you move further out, you contemplate a release of backlog, that's where the growth numbers really pick off.

So that near-term is all very much supply chain oriented. I mentioned some of the initiatives. And then, longer term, there's other factors that come into play, not to mention this growth in subscription, and we expect that -- those growth rates to continue. Remi, do you want to add anything to what I said.

Remi Thomas -- Chief Financial Officer

Yes, sure. Yes. Just to put a little color behind what Ed just said. So Q4 is really the only quarter where because of the supply chain constraints, we see a slight year-over-year decline at $270 million.

And then, as you think about entering fiscal '23, I'd say Q1 should be in the mid-single-digit year-over-year growth. Q2, you'll see a mid-to-high single-digit growth. Q3 will be comfortably above $300 million and with an almost double-digit growth. And then, you're going to see an acceleration in Q4 when supply chain constraints really finally completely ease up and you should see strong -- very strong double-digit growth in that fiscal Q4 of next year.

So this is the ramp as we see it with the $300 million mark being crossed around Q2.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. And then, just looking backwards here on the March quarter, you talked a little bit about the AR spike, the DSO increase there. What do you believe was behind the linearity that you saw versus a year ago?

Remi Thomas -- Chief Financial Officer

Yes. It's usually we have a split, which I haven't really communicated in our revenue for products in the quarter. There's a normal ramp, but we do have shipments in January and February. And based on our payment terms, quite often, we'll be able to collect on those shipments.

We have very, very low shipments in the first couple of months of the year. A lot of the shipments were in the third month, and so, we were not able to have a pool of receivable as high as we normally do, which is why you saw that increase of about $30 million.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

OK. Thank you for taking my question.

Remi Thomas -- Chief Financial Officer

Thank you, Eric.

Operator

Thank you. Our next question comes from Dave Kang with B. Riley. Your line is open.

Dave Kang -- B. Riley Financial -- Analyst

Thank you. Good morning. My first question is regarding the supply chain situation. As far as the intensity of the situation, is the June quarter the peak?

Ed Meyercord -- President and Chief Executive Officer

Yes. And then, that's -- I call it the low watermark for revenue. But for us, it's the peak constraint. And some of that also has to do with we had a lot of projects with some of our low running supply in the March quarter that we were able to unlock.

But our outlook now is that it is the -- we're peaking here as we establish and we look to build the secondary and component parts.

Dave Kang -- B. Riley Financial -- Analyst

And you're guiding gross margin to 58%. So it sounds like 58% is the bottom and then, we should see some kind of modest increase, improvement beyond June quarter?

Ed Meyercord -- President and Chief Executive Officer

That's right. And I'll let Remi, if you want to add any other color or commentary.

Remi Thomas -- Chief Financial Officer

Yes. Because of the historical strength of our backlog, some of the orders that we have yet to deliver were booked prior to a certain price increase. So it takes a while as we release the backlog to get the full benefit of the price increase. And so, you're going to see that coming through in the next couple of quarters.

In the meantime, however, we still have a high level of expedite fees and free cost.

Dave Kang -- B. Riley Financial -- Analyst

Got it. And then, Ed, you talked about for 5G, you mentioned about new use cases. Can you provide more color? Are we talking about your customers or?

Ed Meyercord -- President and Chief Executive Officer

It's the existing -- we have -- we always talk about two large customers as it relates to our cloud native infrastructure service, which is the biggest opportunity we have, that growth vector with that large Swedish manufacturer. And that is -- we've done very well with them. And in their annual vendor review, we were named as one of their top three. I can also tell you from a supply chain perspective, that's part of our portfolio that is less constrained.

And so, we've been able to fill demand, and we've been able to take share from some of the larger competitors that we go up against inside of that account. So that's put us in a really good stead and it's very much of a partnership. And yes, they've opened the door to us to some very large new opportunities. We are -- we believe, based on our overall market share within the account, we're still a very small players, call it, sub-10% players.

So they have opened up some new opportunities for us and new use cases for us, and we'll be investing in them. And we think that will only help build on the growth that we're experiencing right now. A lot of their customers are moving from proof of concept. So we look at our funnel and you see this big growth of proof-of-concept.

And then, you see through that, you see now people starting to roll out and you see deployments -- and now we're at the phase where those early coop of concepts are starting to deploy. And so, we're starting to see that ramp. I'm not at liberty to comment yet on the other use cases that we're working with them on. But we're excited that they've chosen us to work with them on them, and we're excited about what it means for us for future growth and then, to build on the momentum that we have with CNIS.

Dave Kang -- B. Riley Financial -- Analyst

And my final question is, are you on, as far as 5G revenue is concerned, are you still on track to do $20 million this fiscal year and then, $50 million to $100 million next fiscal year?

Ed Meyercord -- President and Chief Executive Officer

Yes. I don't know what we've said about next fiscal year, but we are absolutely on track to exceed the $20 million increase that we guided to for this year. So for our 5G SP, we are on track. That's very healthy.

And then, I believe we've said 50 to 100 over time, and we feel very confident of that. I'm not -- I don't know if we gave that 100 number for fiscal '23. But out in the future, that is clearly a high-growth vector for us inside of Extreme.

Dave Kang -- B. Riley Financial -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Christian Schwab with Craig-Hallum. Your line is open.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Great. Thanks for taking my questions. Just really strong outlook. Remi, can you explain your very optimistic top line growth expectations.

I can understand as we kind of go throughout this year as supply chain loosens up and then, we begin to work through backlog. But can you talk about the verticals that you believe are going to be driving such strong top line growth expectations following fiscal year '23?

Remi Thomas -- Chief Financial Officer

Yes, that's a great question, Christian. Thanks for asking. So we see strength in terms of bookings across all verticals. We feel some of it may be driven by customers getting in line because of the longer lead times and sometimes getting ahead of the price increase.

But if I look at education, government, healthcare, manufacturing, sports, entertainment, we've been really enjoying innovated strong growth in bookings over the past few quarters. So that's the first driver of this. And based on the pipe and the funnel that we see for next year, we don't really see any slowdown. The other side of the equation is the backlog.

I mean, three years ago, we would start the quarter, Christian, with anywhere between $20 million to $30 million to $40 million in product backlog, which was basically to 20% of the product revenue we would generate in that quarter. Right now, we're north of $425 million, which is more than two quarters of product revenue. So when you continue to see the trend in bookings and obviously, the year-over-year growth for bookings will no doubt decline. But you combine that with our ability, which really accelerated as of fiscal '23 and specifically in Q4, to release that backlog, the combination of both is what drives the mid-teens growth.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Remi, what were your lead times when you had $20 million to $40 million in backlog? And what are you currently quoted lead time?

Remi Thomas -- Chief Financial Officer

The lead time at the time were measured in weeks. Today, they're measured in months. And it really depends on the SKUs, but that's how you should be thinking about this. And unfortunately, it's not two months.

It's, in many cases several months.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

OK. And then, my last question is just a follow-up on what you said a few minutes ago, you talked about customer order patterns, given lead times and price increases. Have you guys left the channel or your leading customers know that in an organized fashion way that another price increase is coming their way?

Remi Thomas -- Chief Financial Officer

We did, yes. Typically noted by our distributors and our large business partners about a month ahead of any price increase.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Great. All right. Perfect. No other questions.

Thanks guys.

Remi Thomas -- Chief Financial Officer

Thank you, Christian.

Operator

Thank you [Operator instructions] And it looks like we have a follow-up from Alex Henderson with Needham. Your line is open.

Alex Henderson -- Needham and Company -- Analyst

Great. Thanks. I wanted to focus in on the June quarter, not so much in terms of revenue, but rather in terms of the expectations around the book-to-bill and whether you'll be building backlog again in the June quarter. It sounds like even though you're finally lapping the very strong order growth from last year that you might actually have booking or orders up again? I would assume that the -- at a minimum, your book-to-bill will be above one, but will orders actually be up?

Ed Meyercord -- President and Chief Executive Officer

Yes. I'll jump here, Remi, and then, you follow. But the answer is yes. I mean, book-to-bill will definitely be over one.

In the quarter from a bookings perspective, we had an incredible March quarter. Some of that due to a price increase and then, some of that due to just what's going on in supply chain and demand. And then, a lot of that is just how we're executing in the marketplace. And that is continuing.

So we see the strength in the bookings continue to build this quarter. And as we look forward at our funnel of opportunities, that continues to grow at a really nice clip as well. So the outlook for bookings remains very strong. We will absolutely build backlog in the June quarter based on the supply chain constraints.

So I think, Alex, as you're looking out the over 425 today will definitely continue to expand, not only in the June quarter, but we expect for the next several quarters to go forward based on strength of demand and bookings.

Alex Henderson -- Needham and Company -- Analyst

Just to be clear here, so there's a difference between the book-to-bill in the year-over-year order rate because your book-to-bill could be above one and your orders decline year over year. Are you saying that you believe that your orders will actually be up year over year against that one, I think it was about 30% order growth last year, if I remember correctly?

Remi Thomas -- Chief Financial Officer

Alex, total bookings are expected to be slightly up, including services and subscription on a year-over-year basis in Q4, yes.

Alex Henderson -- Needham and Company -- Analyst

That's great. So then the year over year starts to flatten out and decline on -- against the comps in the back half of the calendar year? Is that -- would the book-to-bill still solidly above one?

Remi Thomas -- Chief Financial Officer

I think the book-to-bill will be above one for the first half of fiscal '23, although the year-over-year compare in some quarters will be tough to beat.

Alex Henderson -- Needham and Company -- Analyst

Going back to the pricing stuff. You say that you notify your dealers a month in advance. Have you notified your dealers of additional price increase?

Remi Thomas -- Chief Financial Officer

We've notified how this is of the most recent price increase, but we haven't really officially said when it took place and the extent. But Ed earlier mentioned that we keep ourselves below Cisco. So it's not the 10% to 15% that you quoted, Alex. It's a lower price increase, but we just did one.

Alex Henderson -- Needham and Company -- Analyst

I'm just -- I'm a little confused. So you did one in the March quarter that we know about, right, that's already done. Have you announced another one that hasn't actually been implemented yet?

Remi Thomas -- Chief Financial Officer

We announced one in the March quarter, but it was just effective in April, and we have not announced anything else. We're trying to stay competitive in the marketplace.

Alex Henderson -- Needham and Company -- Analyst

Perfect. That's the clarification I was looking for. Going back into the verticals for a second. Can you just remind us what's going on with the rate frankly it's hard to keep track of it?

Remi Thomas -- Chief Financial Officer

The 2020 season was just completed and Extreme Networks actively participated in that season, and we won our fair share. And the overall filings are looking like they will be growth on a year-over-year basis in terms of what the total spend for E-Rate is going to be.

Alex Henderson -- Needham and Company -- Analyst

All right. And then, one last question, if I could. As I've mentioned on their call that starting in February that there was a slowdown in the number of deals that were closed, even though their pipeline was quite strong and that it got a little bit worse in the March time frame. Have you seen any change in EMEA as a result of the war in terms of ordering rates, not so much in terms of the pipeline, but rather the closure rate?

Remi Thomas -- Chief Financial Officer

In our case, we haven't, if anything, we saw higher conversion rates. So in other words, the close one ratio on our pipe was higher in March because of what I just mentioned earlier, this season customers wanting to get ahead of a price increase. And outside of the small business that we do in Russia and Ukraine, we haven't seen any sign of slowdown because of the situation in Eastern Europe. If anything, things accelerated for us in March.

Alex Henderson -- Needham and Company -- Analyst

Perfect. Thank you.

Operator

Thank you. And I'm showing no other questions in the queue. I'd like to turn the call back to Ed Meyercord for closing remarks.

Ed Meyercord -- President and Chief Executive Officer

OK. Thank you, Catherine. Thanks, everybody, for joining us today. someone to shout out to our Extreme employees, just an incredible quarter on the execution front, both on the demand side, as well as delivering on supply in a challenging environment.

For all our investors, we're hoping to see you at investor day, we'll be in New York City, Major League Baseball headquarters, very fun venue. And importantly, we have a lot of confidence in the demand side and demand gen side of the equation as far as bookings in terms of growth, this higher-growth software subscription services and solutions that we're building on as far as WAN Edge and how we're building on that. We will go into deep detail and provide lots of color on supply chain. And finally, we have details on a long-term model that Remi has built that we want to share with everyone.

So hopefully, we'll be able to clear the calendar to join us there, and we are also in other investor conferences. So again, thank you for your time. We appreciate your participation. Have a great day.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Stan Kovler -- Vice President of Strategy and Investor Relations

Ed Meyercord -- President and Chief Executive Officer

Remi Thomas -- Chief Financial Officer

Alex Henderson -- Needham and Company -- Analyst

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Dave Kang -- B. Riley Financial -- Analyst

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

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