Ed Meyercord: Yes, Eric, we were encouraged because what we’re seeing, and I mentioned it in my comments, that we’re moving up market. And we see a return to health as we get back to this kind of, call it, $35 million to $40 million plus deals in a quarter. This quarter was unusually low. However, we had a handful of really nice wins in the quarter that, including, eight-digit and eight-digit win and some large seven-digit wins that created, really nice new logo wins. And that’s what sort of inflated the new logo amounts in terms of the dollar volume amount of new logo business. We have a lot of that in our funnel as well, which is what we’re excited about. That said, when we’re calling Q4, we don’t want to rely on large binary deals that could move either way.
We feel like we’re in a stronger competitive position with some of the logos we talked about. At Connect, we had Kroger up on stage saying that, their experience with Extreme, far exceeded expectations. And there’s a lot of new business opportunities, obviously, with the world’s largest grocer. Korean Air, major airlines, after 30 years with Cisco, kind of fed up and ready for a change. They made the trip and flew all the way from Seoul to be there. big endorsement. That means a lot in those markets. Wash U, prestigious university making the move. Really intrigued by Fabric and our security story. And so, these are just some of the examples of large wins, important logos, important reference accounts that we’re winning. And we won them in the quarter.
We don’t necessarily have the magnitude of those deals in Q4 to call, which is why when you look at the Q3 to Q4, you might be wondering, OK, why am I not seeing more growth? We want to be careful about calling the larger deals. But the fact of the matter is, we are more competitive and we are winning them. And success begets success in this marketplace. So that’s what’s giving us confidence. And, with a few more of these things that should really strengthen our position, our confidence for calling a stronger ’25.
Operator: Thank you. One moment for our next question. And our next question comes to the line of David Vogt from UBS. Your question, please.
Brian Hull: Hey, this is Brian in for David, thank you for taking my question. So, on balance sheet inventory, that increased quarter-over-quarter to $185 million from $153 million last quarter. Can you discuss how inventory should get worked down given the somewhat soft revenue guide relative to 9 days ago? And then I will follow up. Thank you.
Kevin Rhodes: Sure, Brian. I’ll take that one Ed. So we did we did have a use of cash in the quarter for, building of inventory. you have to realize that, first of all, all of these inventory purchases that are coming in now were more than a year ago when those orders were put in place. And actually, what we’re seeing in the market right now is this slowdown is, obviously exacerbating, if you will, the inventory built. There’s a positive on that, which is we bought all this inventory. It’s all good inventory that we have on our balance sheet. We work down the inventory, the distribution side of things. We talked about and we have our inventory that we’ve now paid for. So that’s going to be a cash generation opportunity for us in the future.
I would say over the next year, all that inventory is good inventory and should work itself into the market over time. We assess our inventory balances every quarter. As an example, you saw this quarter we moved one of our ODMs out of China and into Vietnam. The raw inventory that we had there for the raw materials, we ended up taking that out. And that’s just because of the movement of the line. And we were reestablishing that line in Vietnam as we moved out of China. These were materials that we were using for the China market. And so it just didn’t make sense because we weren’t replacing that line. So, we evaluated every quarter. But right now, yes, we had a build in the inventory, but that’s going to generate cash flow.
Brian Hull: Got it. That’s helpful. And then as a follow up, can you share with us what would be a normal inventory level when product revenue slash demand normalizes? Is there a good rule of thumb? Can we think about it as like a percentage of quarterly product revenue?
Kevin Rhodes: Yes, I mean, so we were running, I would say, more like $90 million of inventory in the past. So we’re probably double the size that we would like to be at, as a percentage of revenue, 90 into roughly, a billion, $900 million of product revenue would give you about 10 percent of the total annual product revenue is to give you a guidance range. From our perspective, that will work itself down over the next year. And as I said, I would also say in Q4, we expect inventory levels to come down. That’s another thing that we’re looking at right now.
Operator: Thank you. One moment for our next question. And our next question comes from the line of David Kang from B. Riley, your question, please.
David Kang: Thank you. Good morning. First question is on seasonality for fiscal first quarter ’25. I know that’s typically seasonally weak, but any difference this time?
Ed Meyercord: Yes, David, I think, given where we are in Q4 and given how we’re looking to build from Q3, I don’t think we’re at a point where we can say that normal seasonality applies just because of the unusual nature of demand. And the market environment that we’re in today. So whereas normally I think what you’re hitting on is the fact that there’s this dip in September and then, we’re up in December, a dip in March and then up in June. I don’t think that the traditional seasonality adjustments will apply.
David Kang: So you’re implying that it could be up or even at or at least flat maybe for September from June to September?
Ed Meyercord: Yes, I mean, given where we are today, Kevin mentioned that. Well, I mentioned that we have some large deals that are somewhat binary. And I will say, Kevin mentioned before talking about the guidance that we want to we want to be more cautious and have a more cautious tone. In Q3, we hit a number. We can argue the bar wasn’t that high, but, we’re on track for hitting a number. And that’s how we want to run the business and how we want to manage expectations where we’re going to meet or exceed our guidance. And, we’ve set the table, in such a way that way for Q4. And I think it’s too early to call. I think right now Kevin will get upset with me if I start calling Q1. But what I would say is I don’t think that, that we’re not in a point to say we’ve returned to normalcy and normal seasonality.
