This seems a little unclear to me, especially because the newer version of the application might not actually be available yet. I'm not sure of a graceful way to clarify that though. I was thinking of something like "The latest version of this extension requires a newer version of {APP_NAME}. Until that's available, you can install this older version of the extension." But that might be too long. (It's also confusing because we're referring to two versions, the version of the extension and the version of the app...)