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PSTG Pure Storage

Participants
Matthew Danziger Vice President of Investor Relations
Charles Giancarlo Chairman and Chief Executive Officer
David Hatfield President
Timothy Riitters Chief Financial Officer
Matt Kixmoeller Vice President of Strategy
Alexander Kurtz KeyBanc Capital Markets Inc.
Matthew Cabral Credit Suisse AG
Pinjalim Bora JPMorgan Chase & Co.
Kathryn Huberty Morgan Stanley
Victor Chiu Raymond James & Associates, Inc.
Steven Fox Cross Research LLC
Aaron Rakers Wells Fargo Securities, LLC
Timothy Long Barclays
Andrew Vadheim Wolfe Research, LLC
Jason Ader William Blair & Company L.L.C.
Karl Ackerman Cowen and Company, LLC
Roderick Hall Goldman Sachs Group Inc.
Nehal Chokshi Maxim Group LLC
David Ryzhik Susquehanna Financial Group, LLLP
George Iwanyc Oppenheimer & Co. Inc.
Eric Martinuzzi Lake Street Capital Markets, LLC
Call transcript
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Operator

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pure Storage Second Quarter Fiscal 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions] [Operator

turn Relations. to now President Danziger, call Investor of the will Matthew over Vice I

begin conference. may You your

Matthew Danziger

Thank you, and Storage second good afternoon. Welcome fiscal earnings to XXXX conference call. quarter the Pure

our are CEO, David today and of VP Matt our Riitters; me Joining Hatfield; Charlie Giancarlo; our CFO, our President, Kixmoeller. Strategy, Tim

and like remind forward-looking subject are statements, that begin, uncertainties. this during risks we Before to call, I which to would you management make various will

opportunity, our include model, our and These and regarding strategy, and future business and competitive, growth for periods. revenue operating and trends, technology current operations statements industry and margin our products, guidance future positioning including prospects,

forward-looking undertake Any assumptions we no on obligation based to make that statements update are and as of today, them. we

results be A relating should the actual and these predicted, we in Our and various is from reported filings. contained refer considered you future filings performance. an our results not indication discussion of of our business uncertainties risks with may differ to the public and as results SEC, to materially

this non-GAAP performance, will slides. measures press talking and provided most the in in discuss comparable are directly release measures we reconciliations to Company's our and the earnings about During call, GAAP

on is This will purposes. and the broadcast Storage being at XX live website for on Storage. least the and available property Pure Pure days be is call archive Relations of being is Investor playback for webcast of recorded the An the IR website

our the to call CEO, turn I'll over Giancarlo. that, Charlie With

Charles Giancarlo

Hat a of for update, I us begin high-level offer will our will results the Thank our you, good review Thank will go-to-market detailed today’s on by Matt, and provide call. earnings financials. Tim everyone. quarter, joining and a afternoon, sharing you from

our solid. and strong the fundamentals quarter a had business remain of We

growing XX% For QX, above guidance. the which year-over-year, midpoint was our of $XXX was revenue million,

to grew margin our X.X%, negative beating margin was guidance gross operating and a XX.X% range. industry-leading Our

the the modern we of performance, years, delivered XXx XX than creating usability. in and automated, disrupted improvements and that operation, are and storage intelligent, by less the industry In solutions cost

which are the We set for XXx path decade of will deliver bold our second a setting next now new Pure for breakthroughs.

fragmented environment into to Our multi-cloud the and a goal data take antiquated recreate is and experience. data unified, it and automated, storage

a delivers experience while a deliver infrastructure Pure Unlike expense the that to of complexity utilize operating hybrid customers automation. vendors, their customers common enables our to of legacy multiple experience customers. AI-driven our across more creates modern provide centers reducing that behind easing We via offer infrastructure on-prem managing We Pure data environment clouds, a data operations data, and cloud data a integrated it. data APIs experience. modern to and flexible now subscription consumable as and and solutions, intelligent the

believe the Looking is whom clearly of this macro not affected as macro market us at economy. expressed the the whole, We some our do around has traditional concerns environment quarter. past have Pure out-executing a competitors,

What supply/demand as component which impacted prices we and do industry is a see storage whole. imbalance significant a transitory the NAND

We costs the expect us of market between to for component given balance continue the year storage pricing. affect situation natural the and this to lag

the in pricing are market, already to spot market additional these However, we capacity. improving believe suppliers point year. rise fab are an seeing next NAND delaying We and signals

our leadership continued to differentiation customer margin is Pure’s As growth growing, highlight validated consistently and our others, which compared base. by exceptional happy

that Our is our results underscore working. strategy

proposition value challenging market even is in that also know market enables more when gain us it share. to environments We our superior

future. is understand and relying the software. where innovation Customers, investment hardware and on in transformation, instead the have an in at that core all world are that attempt to all systems are matters. in and their data investment that is legacy decreased is today’s In convince vendors however, investment commodity their inexplicably digital They same, customers innovation price an of that

we than part will are our and announce reasons continued Our innovations public our conference of month, competitors. as decade. At market investment additions successful growing future in portfolio of Accelerate we one for faster groundbreaking strategy several innovation next next is the

Pure’s transitioning fast, and deriving from to architectures; IT ever a analytics; data cloud; focus and enabling to important Pure. CIOs business failures, that value to more hybrid consolidated recover today on choosing building customers are mean customers rapidly than from AI priorities

are providing and in experience change the business We industry, delight. unparalleled delivers outcomes essential data customer company the driving ensures an which

more like personal would I news. to share Now,

will Riitters, As and you transition. for personal in may underway release, is participate in the An reasons. in executive Tim process for will be read Pure Tim press our will that leaving already our have our help CFO, search CFO. next

our were he Five acquired Pure, product. dramatically partnership industry, and I years company. entire portfolio. in our his my an for we and and Tim joined personally and grown almost incredible consistently care, an disrupted companies, later, over XXx, had excellent annual friendship profitability, have his achieved company, private his a When an two had we revenue, service, employees, asset double-digit years revenue we just we to expanded want consistent He’s and and been tenure. delivering one invaluable of million for first on energy growth; less thank $XXX impact than we XXX has

With to it that, Hat. turn I’ll over

David Hatfield

years. for family five the time he some enjoy Thanks, thanks Charlie. hope add And past with can Tim has over me let friends. my We all deserved you and much to done

outcomes tackle their and to not previously share, enterprises Pure our achieve most to possible. enabling positioned strategic is is IT that initiatives, market were customers help gaining

customers. choice expanding satisfaction, industry-leading not model, for but our our as innovative, of only solutions ownership customer Our the the most us and position our Evergreen suite also safest

XXx Xx customers investment. competitor while average contrast, challenged are expansion Customers experience of its rate capabilities is is innovation spending continuous than less competitor on and their services. product-line with of In any new our with approximately on growing disruptive and benefit navigating of faster reap and upgrades, Pure’s the Evergreen R&D consolidation Pure than Pure’s

and investment, adoption data of containers, scale. especially requires Customers workflows. existing new as architectures accelerate of unprecedented Pure selecting simultaneously enable real-time and their are that strategic to them are transformation innovation and because performance, hybrid We data journey. is believe cloud, modernize their at our driving digital applications customer’s to application AI, we multi-cloud DevOps, analytics, parallelism, and Data levels

Unlike model arrays, flexible is our Pure’s not is grandparents’ are storage shipping can and a a experience improving, data that subscription storage modern consumable environment. data via AI-driven, cloud-managed, who This be competitors, commodity simply IT constantly deployed hybrid in your environment.

Public QX, Commercial realizing in our continued focus We any Our new net-new Cloud, adding differentiation are to storage largest and consumers Customers the history. quarter X,XXX rates on QX highest nicely. markets working. seven approximately the is each across more customers equated our of and win Pure’s day, hold Enterprise, the finished with number of in more customers, to total business than than XXX Sector

new quality the of sellers sellers. QX, transition During we we and and we QX. pleased new the with execution In earnings, increase in discussed encountered ramp last sales of the level were and the of

a Enterprise pleased closed business. of deals segments, including with This a in Public and as large the in increase progress quarter, we both of million-dollar We were our overall XX% our outpaced number growth transactions, Sector particularly from QX. the

Cisco converged Restore analytics, across to We protection a of mission-critical and segments include Turning the and to in Alliances deliver the Learning, Rapid NVIDIA saw strategic Data next-generation AI for the fastest Protection. of infrastructure, Machine our continued in partners range ecosystem broad and for Splunk and next-generation technology market. our of growing Elastic progress and partnerships. data

continued data specifically on FlashBlade as as our the with analytics Services, Data thrilled cases, We were the Store including momentum, for use Rapid Cloud the AWS. well in Restore excitement and Cloud Block

month. Accelerate more will next with this on at share them We

to of meet highlight To QX compliance large some chose this and objectives a Splunk policy regulatory for agency U.S. a to scale manage and momentum, government SmartStore large in FlashBlade implementation.

by the avoided thousands penalties to X, physical for of copies multiple result, consumption TCO. and a data, eliminated a reduced highly dollars in agency and their power As space of compelling achieving X footprint potential

global quarter, asset money, management, customer ease firm hybrid notable their Pure orchestration firm, and cloud now freeing automation, management resources, By for own of success operations. cloud-native up can in focus of instead time, day-to-day Another their this chose on the in large innovation and environment. a

unique our hybrid Services Evergreen model unified Cloud with our subscription And across Service interest Storage finally, IT the and growing. is in Data

contract. where data ESX strategy Illinois existing Cloud in enables their invested AWS which ESX with under planning, This that capacity XXX% to have will them to allow model Customers their subscription mid-sized they performance more our this architect future today, Pure, like empowers flexibility moved will Store technology easy customer than a our while also and This forward. hospital quarter, on-premises to and Block their in and them offering. how shift going a infrastructure ESX $X realized million on utilize preserving for to

market peers. build tomorrow. share freedom month. for our getting to execute on our Pure’s are differentiation We excited performance vision against and just QX our you rapid as Accelerate organizations traditional ever competition are for the and truly and at from today to demonstrate We as gains provide started. See next long-term

And with Tim. now that, turn will it over I Tim? to

Timothy Riitters

Hat. to a quarter across continued product our portfolio for environment. gross Pure industry-leading as QX an continued Thanks, in innovation demonstrate we strong was margins, and growth, evolving

non-GAAP available investor.purestorage.com. make specifics, I cash well non-GAAP use I net to flow website our GAAP income, unless free are margin, as Before the as of I’ll and my numbers and QX usual are dive these at our full noted. metrics the that gross operating presentation, will results the into OpEx, note otherwise Reconciliations comparables, margin, on

Product million. support grew the of to the grew year-on-year million. revenue the and quarter. revenue XX% million Geographically, subscription to year-on-year from sales came XX% markets $XXX.X $XX.X XX% grew States came to from and United for For total and revenue International our $XXX.X XX% year-on-year quarter, XX% our

Total X.X industry-leading all-time XX.X%, the competitors differentiation innovation Our above margins and margins gross and an high deliver be our sequentially. gross up to customers. gross reflect margins well margins we of aggregate points quarter continue in significant to product our the with reaching

The efficiency due of an operating Product were XX%, component line declines. one-time we to seeing up X.X sequentially. were in benefits gross improvements, Support with from business. margins margins in in this largely along gross in were one-half approximately quarter cost due X.X to points, benefits sequential margins XX.X%, increase ongoing point both points up are the impact

in over the gross margin, profit expected profit was and Moving QX was of million, or better Operating to quarter. revenue, X.X% quarter. an than X.X% for to to negative or compares margins operating year-ago the primarily $X.X profit operating on $X.X performance in due operating million, of negative

$X.X used This positive $X.X QX positive million or per-share weighted-average year-ago net calculation quarter shares share. $X.XX shares XXX was of shares period income compares the million XXX QX $X.XX The per year-ago period. million or the to and share. the positive in the in for for million positive per are

quarter of $XX increase the an the $X.XX we cash sheet quarter. Moving billion, flow, with to million finished balance cash the and investments from of and previous

is which for QX was Our quarter-on-quarter cash strong free driven cash in typically in low by a quarter increase primarily flow us.

cash cash employee impact related purchase purchase $XX.X Free in in $X.X positive the which QX of of million, includes plan. was flow stock employee quarter. plan, Adjusting our free stock million flow our normal impact positive the was $XX.X million to for

delivered increase key trends: traction strong the million, a $XXX.X The meaningful year-on-year We revenue was renewals was growth, and quarter Deferred the ago. longer agreement same over revenue deferred XX% quarter. revenue product. subscription initial driven year ESX the early the end by period in at performance strong the our growth of ongoing of deferred purchases, an of three

and potential. note has program. This strategy of $XXX confidence the will stock program release, demonstrates Directors an Pure’s repurchase addition, our growth up from million our in you Board today’s company In to long-term press authorized

Our and for reduce shareholders program gives we to dilution the in shares the can will top us allocation employee time, of continues going this same amount to forward. stock more periods tool priority levels be At return repurchase to capital one in where help business at reasonable our growth. value net investing award

to I Now will guidance. turn our

an to importantly, QX we respect NAND originally and price as with environment pricing than in mentioned with As Charlie first we declines it falling to anticipated. relates the had revenue, phase are in most faster inflection

consistent the year balanced and While we mindful we these dynamic more the were revenue of able guide. about be QX we the as NAND to market emerge and return show circumstances, as market in the of this a believe quarters trend rest developing want will in We our NAND progress, to in think spite to line. strong long-term topline environment of growth

vendors. impacted to quarter, nevertheless of ability of Second, in environment while the that confident business to see infrastructure in drive and mindful We want macro we recent headlines cautionary indications the growth any did given the not the we be remain tone other ahead. quarters specific in our our

million $XXX range and in this of the the and between at or and between non-GAAP of between and million third or X% margins we context, margin in range operating quarter fiscal the With XX%, as $XXX million, in for midpoint. at XX% of the X%, of XXXX, $XXX expect gross the midpoint, the X% range revenues non-GAAP

XXXX, in $X.XXX we billion, of billion expect For between in the and X.XX%, $X.XXX between the at margin fiscal or and range non-GAAP XX% of and non-GAAP revenues the now or of range the XX%, midpoint, billion midpoint. and in the full-year of the at $X.XXX X.XX% gross range X.X% between operating margin

to our This speaks guidance topline notice on will adjusting carefully our unchanged. despite You profit our in that operating investing environment, profit goals reduction maintain our given and remains focus current thoughtfully expectations. spend plans the to the and our

competitors. two, exciting us remain results our offer be in roughly on the I’d than of some continue excited a like ahead Pure’s growing at smart the public about fundamentals momentum driving Number up, focused cusp Number QX business on with here three, our we one, cycle. wrap are thoughts to And I profitable faster of significant to road and As we final business. our why Number we highlight a XXx strong. the any on finally, Pure. remain product and

and In the next personal new with will last My made And year, selection is to have to Pure. closing, meeting Pure’s decision leave our in and CFO. and as day look later well Investor company I its of for you what Pure has decade. in be will as and participate to Charlie next to our an been transition really Accelerate I’ll Day. I at am see at month It future, excited be the the the to I positioned interim mentioned, the The does in forward of many CFO. honor serve

back turn it With the operator that, for I’ll to questions.

Operator

first Instructions] from Kurtz [Operator Your comes question from KeyBanc. Alex

Alexander Kurtz

you me, okay? Can guys. hear Thanks,

Charles Giancarlo

You bet.

Timothy Riitters

Hi, Alex.

Alexander Kurtz

get a and say, we will just you, into pleasure it's working you maybe day. mountain been real before to we on the want see I Hey, questions, with Tim, one

Timothy Riitters

you. Thank Alex. appreciate, I

Alexander Kurtz

of what's Yes. next. on luck Best

to you can quick try tell you understand a can as how the So I'm here. in dynamic remarks, prepared I off made and give points your I just me pricing example far

beginning So expecting came when per gig, customers are into at maybe a to of the $X they deal. effective the $X year,

in to oversupply NAND Now they're the $X maybe this market, for $X. looking

framework? guidance. And are reps that so extra their to the Is have bit they'd your the to now but hitting ship numbers, to right original get

Charles Giancarlo

to terabytes tiers, a is but more expect, Yes. new one buying looking drop a terabytes And per more while for planned, sale, at two takes the idea workloads We're now workloads, and the right. just at that adjust takes side. shipping prices more little you time that they've on when customer rapidly customers and already to of more it for new than things; planning

you long the decreasing an Alex, So commodity as past, we a so as I've said And while steadily it's what expect that, the steady have faster right. as that's than customers it's many the that, in to with and the that, slow in live saw. times a – it where environment and for steady, but with equilibrates component in in do tech up That's you market. catch prices, market we on entire quarters takes

Alexander Kurtz

to as be far as correctly, yield there, just been cohorts their context rates And have trending Tim? any clear,

Timothy Riitters

Yes.

mean cohorts sales customer You or cohorts?

Alexander Kurtz

Yes, sales cohorts.

Timothy Riitters

Sales and cohorts positive. – come class mean year early a that's the we performing I in had big signs are nicely. this

Alexander Kurtz

you. Thank

Timothy Riitters

bet. You

Operator

Suisse. Cabral Your Credit next from from comes Matt question

Matthew Cabral

caution us run ago? that looking and you to that understand ask a wonder how compares guidance, enterprise where you're making guidance the the little to versus it were wanted just just Also the into you. you're where help larger XX rate Thank just you in the commercial push could days if the parse Yes. more the between deals about and putting lower incremental just bit business

Charles Giancarlo

quite answer between I'll Yes, and answer let not two – our but I'll calculate enterprise affect let those not piece, Hat not things first two. let's Hat the really, balance, for that complexion are but all, separate commercial at between it did into – the We're us. or guide those is say,

David Hatfield

in Quarter-on-quarter, my and dollar about of highlight. growth a sector good figures. eight In the the for a enterprise about we seven QX progress million of prepared That's more both the we really enterprise. closed, and ones including larger the deals remarks, outpacing couple company. talked Yes, public talked in

feel we overall. So about business in the momentum the great

Matthew Cabral

gross meaningfully on quarter. then came your above range obviously margins, And the in for

could little wondering bit get against versus talk bit little a to if more you there? an a you a environment more if difficult what Just aggressive balancing how about be seems think growth of And little just there's bit to a you're profitability? out opportunity

David Hatfield

not Yes. don't we're don't I've price. we said on We price, price, before. lose generally, losing on win on and this

the think a take adds lower rest bit I advantage upward of margin we the pricing that to that of so before fact to get component competition, So, the it. do reflects the little

new could we if we thought think deal, a especially win customer with discounting, it. that we I by a do

holding not us that's So back.

So pricing generally, holding us thing – that back. things those are not the is that's the not

Operator

question next from comes JPMorgan. Pinjalim from Bora Your

Pinjalim Bora

then any to pipeline peers related is are be the seeing I Great. you question, thanks bleak. on But How any the with so or points my the guidance? is congrats is across and macro pause signs in or much the which of deal pricing basically strong And prudent guidance, the mean, how in also to Brexit environment? QX. more macro is to revenue maybe of much taking way a signal is I guys, well, there the market XXX scrutiny cut. weakness know the pretty more you kind on or of is wanted concerns? the your narrative for or I softness maybe Hey, causing

Timothy Riitters

Yes. Tim. This is

the the but of number, just Charlie we're talked majority part really first The environment that is the pricing of question, your about. not – it

as in second some macro, to guidance. and that's to want a put reason for quarter we As sort of certainly there it the well relates prudence

about push to seeing, right, up. – But situation your signals one of which if is measures the that that number deal down was number look deals at go a and question the to quarter-on-quarter, big we're macro into push our you'd I expect you're

differentiation leadership, really didn't those signals seeing just just we're the not obviously good the we those a see we're driving signals. we So but it's when thing, are,

Charles Giancarlo

a it. just to I less so When macro out a right less to think share and you just that. taker affect you're – because little me share and maybe it may an sensitive there you're let a now. to tends the innovator And be add we But we're taker,

Tim it's created the that mostly And caution. environment what so as – said, not pricing that's has the

Pinjalim Bora

said. longer a ask well wanted kind Understood, you've there you of just the page. to I jump the think said meaningful for duration out part because main of Obviously, pretty and growth agreements. I And initial of on the is is that agreements follow-up been strength. I ESXisprobably a in reason the think DR here small? these subscription Has the change for driver

Timothy Riitters

Yes.

So renewals Evergreen a of way renewal revenue, one, the deferred indeed deferred a is, renew rates. very is growing for Number nice on big main working business, to couple model is and revenue subscription things. our see business. tranches That it starting the reason our

which that's really it's So what's more that's reason, happening, second order than of a main rates the elongation the primary happening but is and renewal. On effect initial the reason. of overall

Pinjalim Bora

so much. Got it. you Thank

Operator

from Your next Morgan Katy question from comes Stanley. Huberty

Kathryn Huberty

you. Thank Yes.

give in quarter. at looking large into deal October the but see you confidence guidance you January around Is lowered versus something much or that Just consensus not product the terms of cycles today, January more so versus pipeline you your quarter? the coming there October,

Timothy Riitters

Really year. easier Katy, of of challenging it's sort question Tim. this more comps in last is a

the so in harder QX? given made the and relatively it's less we last the at had versus So things if look comp you definition some year adjustment that in a by it's is we of QX, comp, easier of

Kathryn Huberty

towards makes higher last else of timing something have there sense. three a collections Okay. And run subscription impacting you DSOs? That going Tim, dynamic move the deals quarters. or on Is or changing DSOs of that's terms in as

Timothy Riitters

our terms. enterprise lot focus up-market can wanting different, be any more our to longer balance great accounts. customers. something a And we it's enterprise of day use tend into that and larger if Those talked We've sheet. We'll Katy. slightly get extended about larger a big and and do Yes, into forceful customers getting

So than longer-term what that's they'll typically than seeing more else are. take anything a you're they and little bit

Kathryn Huberty

have grow And leading place? Okay. a pretty to Do despite a the when seeing sales marketing you then as continues as resources lastly, can sustainable view market significant of revenue leverage to sales put percentage in we growth just and scale start and on rate. you that

Charles Giancarlo

I'll take that Katy.

this and that to it's year of able investment going are coming larger to As of enterprise. the really the year, with the take and going major addition as be of out matter. be products But enterprise yes, we said we more believe early at next really in this the new for share that we was that expanded a were year – into just beginning to us that course this

to expect start be will So years. see you in will I be this the – come would the and to year see future when that that this it start where year you you'll last down

Kathryn Huberty

luck, Tim. on Thank Okay. you. Best quarter. of the Congrats

Timothy Riitters

Thank you.

Operator

Your from next comes Simon Raymond question from James. Leopold

Victor Chiu

quarter? Chiu Hi, Victor the provide Leopold. Simon July is the whether reduced specifically, the slowed guys. you of some during in go as for around October you business July and the quarter saw into you linearity This month pipeline color Can in

David Hatfield

continued really is in toward beginning but what Hat. throughout linearity a of We saw we momentum differently July, peers This that actually solid the see our really I'd the Yes. we things QX. strong some of end actually the were say and great seeing. had quarter, momentum and had

Victor Chiu

deals? in And metrics, guess Okay. progress hires I pivoting up the an that's sales speed on progress how and update the impacting of towards have you us ramping that towards larger I do guess, give any – new to

David Hatfield

all on diligent classes. cohort We're Yes. looking the super at

is, cohort since looked had we we relative peer what to ramped here we've group. have at I've that We they and been And classes their productivity XX measure month-by-month.

deliver had and previous seen classes we've with in and in in over cohorts. line And with come couple largest we've so the the last line expectations quarters of

nice a driving spending energy, but days of really lot we're enablement, and signs. early et time So cetera, it's and early

Victor Chiu

great. you. Thank Okay,

Operator

Research. next Fox Cross Your from Steven from comes question

Steven Fox

afternoon. Good Thanks.

public First, color if I give a the can was little wondering you on sector. more

large exceeded You one growth was beyond broad had the that I overall how mentioned win, And win? then a follow-up. one growth that

Charles Giancarlo

Public to has two of and rate last a get couple the We we've been into investing think an I that area been more last years. quarters in the run sector Yes. we've seen, quarter-on-quarter. quarters federal that coming central consistent across three well real U.S., as contributing. governments and we've and seen It's the in state government in agencies that growth for wanted local in meaningful as the large the

breadth. continue So that for feel We the the September of it's nice year. positive end will the especially quarter into fiscal

we feel And kind we've in globally. starting in but U.S. in business the hit public to so of also like particular, our stride the sector

Steven Fox

a we that pretty transition? follow-up, Thanks. And what transition NVMe, to just mean, as impacting have financials on that just rapidly. which forward that from I does move then the you think was guys – about when technology

Charles Giancarlo

Thanks Yes. for that question.

first and us incorporate at you as end the cases, both both end innovated on the course market, were end. we of of helped we to front the the may and and the And the systems competitors. margin were back overall helped both performance recall, made and NVMe pricing the in well back – versus in So competitive that we the

on with And then quarters a it the front over ago, the NVMe introduced fabric. couple just we end

most the interest nice very advanced a by level customers. seeing are We

early its fabric do you you recall, As nice add? rack there, change a but to days. want in a architecture. overall Kix, NVMe We're may requires pickup seeing over

Matt Kixmoeller

is in the we great. far, to ahead we're I of a majority the of that only point, talk with regard. that businesses add us would industry think this And I in lead No, analysts, comments as NVMe. quarter kind our thing with of the I far analysts last shift competitor believe mean, that’s we mentioned at I we're any from the that think

Steven Fox

helpful. That's Thank you. Great.

Operator

Aaron Your Fargo. next question Wells from comes Rakers from

Aaron Rakers

expansion Thanks it's with back question. taking kind I want leverage luck. for you Tim, that you sales the of seen? wish any go to the question across of updated great of maybe talk the been to about and bundling best of first given product and you success also, far portfolio the Yes. working all you've you've around the metrics as seen Can the kind as that

ago in is also I had front And quarters Have a integrator systems million plus alignment. of then this us? from still to recognize started couple a you that last opportunities relationship? that large XXX still know Or you GSI that revenue quarter, in

David Hatfield

Aaron. Hat. Hey, is This Yes.

super our motion portfolio to all, FlashBlade working business. performance, products, the key So also is first uptick really portfolio deals saw of It's we're but well. a why introduced ability with contributor find thrilled And a that nice the motion the we in through as opportunities or attached reps other our that we have core FlashStack their to new to encouraging. is really

core a at. we haven't the which specific provided any the that on multiple on seeing metrics selling look that. we So our But uptick of metric we're percentage sellers nice through products, is really key pull

momentum. couple of specifically in from see quarter with nice across organization GSI did sector, GSI in mentioned quarters announcements and great we're seeing seeing some we and incremental broadly product that number win contribution the their ago, of the we yes, of that a the on build the rest then the And pipeline

route contribute to to nice market net critical it's and in be we us revenue was starting about us going for see to that talked the So quarter. as to

Aaron Rakers

And perfect. a then Okay, quick real follow-up.

As of product look a in understand that fall of gross level to why on us sustainability flash gross kind possibly we've XX% pricing below you hit we do line? normalize of help kind margin you forward, margin? can gross should product expect new as the think margin we Or here just again

Timothy Riitters

in. again, it this the for we're we would which the I environment Aaron, I is raised the full-year, Tim. point Yes. mean guide is for What to to speaks that year. we the offered

we it longer-term so As number it in relates we'll to typically talk leave a longer-term that. gross at earnings probably a number, don't about an margin call,

Aaron Rakers

Thank you. enough. Fair

Operator

Your from Tim next from question comes Barclays. Long

Timothy Long

Thank you.

I could. ones, quick if Just two

investment just deals, to OpEx, the just the where and a needed with good large large Just with seeing that. like the sounds if talk talk can you back It enterprise where we little you can are about investment about bit are? traction penetrate better and we you're the to

And if the you. those Data then How and over ESX trajectory about Services few mentioned the Thank talk you secondly, Cloud businesses? does can as look well. quarters for there maybe you traction next

David Hatfield

Tim, Hat. is this Yes.

first made and Let so part capacity, to number route we've of One that. is The the the investments me market. across sales in of QX of that, a investment QX take QX really areas. is are the obviously significant and

But the to be routes critical managed pipeline others, really take of with think mix reasons nice enterprise as signs. to some very are see service been that so at deals. the encouraging to access those time able larger of Rackspace the the And to one as we've provider trajectory all highlighting GSI I look that we we of to market And continued customers growth and build. wins the the of why wins as get and go metrics, on well those

expect line opportunities on are As Charlie is to some year and as those get through do comes mentioned, we capacity where that. And the next TAM year leverage beyond that higher. the

to customers. revenue we those catering we'll So get, enterprise head do quota-bearing to get per more are that and expect

Matt Kixmoeller

answer Services. question I'll Data Cloud about the

our the into So already it's a Cloud beta phase product our overall, be I'd a in say success with turning for we're But whole. line as still Block Store.

where can kinds people having only platform earlier, mentioned future. of a to the the how we're today, in at If but that you dimension in about platform the talk them it platform take not changed our has motion materially cloud the conversations and Hat look

discussion. around really to and in the again has deploy materially is provide cloud to the ESX on-prem the flexibility able be that the future extend we And to changed

more next of well, far terms Amazon both going that month, hear and from results from the Accelerate. beta, In so to us at and come Accelerate great really you'll

Charles Giancarlo

Amazon. on And it are that using customers

Timothy Long

much. Okay. Thank very you

Operator

comes question next Wolfe from Vadheim Your Research. Andrew from

Andrew Vadheim

Yes, DSO a the follow-up question. on I’ve

saw of So to down the if other as prior side days year. we you balance sheet, go the compared to move meaningfully the payable

So it those allowing taking seems tepid like and as but you it like also collect, like pay indicators. it’s seems customers kind longer seem longer of to together aren't

wise read this? So there anything from is to else macro

Charles Giancarlo

all. not No, at

reason On the asset ARs little side, of does we bit. talked a sort the rise about

that so terms sort read really change of we're the seeing AP wouldn't just that. whatnot, vendors, not it's I There's timing. On in which would side, our anything into of any or

Andrew Vadheim

on be Okay. strength potentially then any that October and dilute sector so see that And indication quarter? commentary, just in but maybe occurred there what in quarter, the we'll forward the might a pulled public the might follow-up

Charles Giancarlo

our I we're wins the contributor No, that are they reasonable don't getting topline, It's build overall so. and new on. deals smaller that think to still

of there's we'll see or what year-end. this not quarter pull a the So lot quarter at we're before, fiscal forward about and in optimistic the

Andrew Vadheim

Thank you.

Operator

question William next from comes Ader Blair. from Your Jason

Jason Ader

Thank you.

use update where First just can the the Block give for on on traction and also about you some us Cloud customers you've talk Charlie, applying seen that technology? you are ObjectEngine an Can with Store? cases then question just

Charles Giancarlo

that up realized never less mover customers a that and get they and of ObjectEngine overall major proven rapid Well, Sure. in restore, a But based introduction FlashBlade, is This lot back be hour the to us. circumstances. that on could product for rapid restore helps has to on line. of be really than strong an a FlashBlade it's depending the running in proven product

I so no in As Kix but contract. subscription there's look, life beta, confident, QX, it to yet. know of Block mentioned that over fairly the will it's the the in you – because we'll on it's customers a Cloud feel ratably recognized do of revenue, We of see speak course, first have are revenue be revenue Store, as

are have into their beta standardizing development Store, application many of talking but cloud the days. so very promising, about as very customers, Block of some But they Cloud whom we on early dozens go and

Matt Kixmoeller

you about add, just asked I'll cases. use

really we've is, pleased but directions. things we migration, been of use both wanting I do is application the to in the people where cases, the actually think about of see one diversity

the in as and are interested people on-prem between in on-prem, DR and around. are a cloud use way People doing cloud, just then deploy other case Dev/Test mobility. or course, in So say, the interested application of

still it's seeing. days, we're So encouraged by early what we're but

Jason Ader

second rates then have question different And guide methodology? Tim. Okay. to made guidance assumptions any in on your relative normal you Tim, your conversion for

Timothy Riitters

so that, sort Well, implicit I acknowledging as measuring of of conversions. as pricing macro well of think, think Jason well. in as about think we to about is a is different ways of that ensuring mean function I sort

So answer short I yes. think the is

Jason Ader

Okay, you, great. Tim. And good luck to

Timothy Riitters

you. Thank

Operator

Your next from Ackerman from Cowen comes question Company. and Karl

Karl Ackerman

please. questions Two Hi.

I challenge, or question, have think that changing as technology about as innovation because channel. asked could first the cynic address you an was don't would variable have channel the structure I utilizing of philosophically you how you with pricing cost well the The your more a you challenge. say, hoping

new changes So helpful? please. very the reign I to company's plans backdrop demand spending a on and discretionary have CFO. the would And perhaps follow-up with semi-variable color any soft that But in a amidst this be and

Charles Giancarlo

of year-ago clearer of more being price across question. standard structure and them easily, without made the to pricing We terms product we paths discount lines about accommodate where the the order in more went Pure involved. interesting much to a in product you our the an will channel pricing if how to changed gave transparent, that's all and discretionary Karl,

I tools were but done That get time been – and it us the think so largely all forth, tools is the that's took to electronic a we out. now. little all

very have channel. quite not question is provided ending sure pricing I'm where the standard up, the So now we but into

rapidly, prices Of we've that the more changes, list they and continuously. which price can will, so course, do with if lanes swim done follow-up when you drop same we follow

So rest you the Hat? handle to the want channel of question,

David Hatfield

Yes.

enterprises. customers philosophically we're right do I channel a to anticipated us the productive the very And was continuing our we're incredibly access the routes scale net asset so. our our to market driving to to from customers to GSIs majority been independence. get and we map difficult toward large to That getting channel our on identified us us segmenting the partners. of in, for access to has that very own. are mean new are beginning by Getting So for

by and able our leveraging So configure and to we channel quote of be sell costs lower the independent over actually to Pure. can time

channel to we're look And market, We'll put those dollar for very the so the all us. it. into it partner at are as accelerators getting deliver at routes every and to don't ecosystem, look and making practically ROI the I the we value sure that right they extent of to but

Karl Ackerman

I questions you the I've do overall which revenue might move to IT gets the may perhaps mid-range and If is, received investor may have back your how much from helpful. That's for been better be worse spending again? several at core competition outlook new get question, suggest outlook XXXX, environment, one attaining visibility of Yes, curtailed would it accelerating. peers fundamentals before has the

we the you multi-quarter how on perhaps time pricing earlier factor. as the have that think this visibility there macro that call any taken you you or NAND and larger pricing, would better have and that steps is to mentioned about enable that But You've over investors? you. not provide may a should how I guess, are Thank

Charles Giancarlo

a that challenge. have I'll we had as last particular, couple pricing time But we forward. case does that a you does bring respect that Every going of less with it learning less that a when it more challenging in little into it, model process tell you certainly to this the make steady, quarters linear, forward. our planning have going We is over it's market predict it the commodity get to,

we which overall, commodity we try I signals including as incorporate the firming that the are from up. that, are time, this market, With to that, the prices said, seeing commodity of everything aware that we're

let's in means, more faster in overall more that share. believe time leaders mean, despite tough are That actually is gaining our I we're or of we I modification believe say, XX% when competition. And the do some that mean, more than we growing, growing. we're leaders forecast, Now mean, cases I times, share. I a also strategy is our our working. that take

putting and loaded to difficult next, products the But that's a win are new in going I short-term are and out swings this continue to us to future. predict. year allow more – to think boat early We

Operator

Hall Rod from Goldman comes Sachs. question next from Your

Roderick Hall

just question the Yes. pricing you're question. lead the assuming what terms NAND I contract lag time in time guess, to should I go around or market. these I guys. and a ask to for about to Hi, dynamics wanted say Thanks of back kind spot of

know guidance? but then that we been you spot QX that your that are revenues it So because are assuming lags, assuming has market fiscal you the impacts implied in then recovering, positively

leading there And that's around and then offset of profit on NAND through unless gross sort can guidance you the to neutral reductions, then revenues impact pass us the lower by partially is higher component but cost lower this? we expect we profit the gross be understand Because XXX% and but that margins, to also coming down. pricing through then then you takes is gross margin talk puts of

revenues would to a long-winded one, know just but that's what relative on component changes the be Thanks. kind margins those helpful? you've the the I pricing So of commented dynamics of in

Charles Giancarlo

then That of complex the also down, to pricing to market. because alluded a thing the disk would think can think go workloads Because Well, now that workloads, creates the hybrid explicitly I Rod, you've, of but elasticity I mention perfectly is the it that you more now pricing flash to, identified the environment. as goes that fact one or more is compete semiconductor competitive. for you

of all do, looking you're when at as is be it, occurs do as together, one, not you've more making pricing the should sell terabytes. into force things they terabytes. those customers that roll bulk buy So more they It's to prices on should may start is ability you all customer got sales that pricing, convince what day to those are of they they end the ready terabytes the But yet the that our go It's other while to up for – can workloads, they lower, it. the that the at day. more lower in understand that quarter low,

to before margins, With of it we Pure. that able generally because respect a do to believe margins we good is our for costs advantage competitors, news the are take for

does it think we immediate our quarter. less than affecting most it the So of margins

difficult our that's capacity QX, that it always positive the see but in by to timing, the fab as as predict. QX, more NAND as, whether or new as market suppliers QX our market spot environment, delayed for as see yes, we that's that and And is indications being we to – hits pricing well

Roderick Hall

you. Thank Okay.

Operator

question Chokshi Your from comes next Nehal from Group. Maxim

Nehal Chokshi

Yes.

initial So other to strong relative ESX cloud-based revenue longer did ESX you guess, add renewals, especially all, that three give And initial actually deferred strong that the or the on of is and reasons the first traction. subs, is products? of I subscriptions that our really longer model. was

Charles Giancarlo

Nehal. business, mainline traditional Our

Nehal Chokshi

you. got Okay,

drivers terms percentage in what deferred drivers three strong were the those of the parse of you add? could so And revenue or biggest

Charles Giancarlo

terms of to operations is the In biggest of order smallest.

elongation about at you percentage of a on magnitude of it they up. second, a and first, sense they So contracts gives not we're stack then again, talking ESX, least renewals how and what but on basis, are

Nehal Chokshi

Okay.

you initially laid reduction in guidance. your still your for out salespeople same their So guys with reduced the was own actually Have sales second in plans? marching the this reduction this objectives Or are are along the that quarter full-year is guidance?

David Hatfield

piece, out they're of quota for don't goals we This those comment, their toward that opportunity-based all on territories. marching and them driven are and inside is data put Hat, productive but Yes, we Nehal. the

And hitting what we're driving folks of those we're their participation goal. and toward so focused that's

Nehal Chokshi

year-over-year million Okay. deals can you And appreciate finally, give the that dollar increased then definitely on did a on but basis? color XX% Q-over-Q, how

David Hatfield

progress, up nice momentum there. so year-on-year Yes, well, as continued

Nehal Chokshi

you. Thank

Operator

Hosseini from Financial. Your from Susquehanna Mehdi next question comes

David Ryzhik

commercialized be announced Hi. from does Thanks a at about meaningful follow-up. some Ryzhik David the products? the so and is And This by new talked guide your for implied Accelerate. additions those question. I QX, QX much had portfolio to those be for include taking Charlie, Mehdi. you to impact some Would

Charles Giancarlo

some some will at GA at announce GA and which be beta. there Accelerate. will new some But which of will we be Yes. of We've very products, products got exciting new

David Ryzhik

what to diversify percentage Got international give of us, it. steps base? And maybe Thanks. you're provide you international on taking and can business the what revenue your maybe Maybe an update strategy. is

Charles Giancarlo

Yes.

is improved the you performance our We business. want internationally, in which consecutive APJ, international quarter. Americas business to be had a the quarters great, come XX% revenue, I online. in strong believe progress the great biggest business business, have and and growth, context was obviously, of that three our on at And on the continue nice that We of to of which particularly see to looking a Americas had quarter we've

great of a the that's so, indicator And health.

the and market to routes the think We that's that motion public the by talked portfolio about, and there kicking driven in. that's really enterprise we sector

half and of segments So perform feel to we softer EMEA and have given you're the second what but some about little going EMEA the some leaves was perform course, that but any higher a than lower, great for pipeline EMEA, quarter, in expected, well. would we as

and So contribution expectations. in really with line nice

David Ryzhik

pleasure. And Tim, Great, It best was really thanks. to luck a of you.

Timothy Riitters

David. you, it. Appreciate Thank

David Ryzhik

Thanks.

Operator

from from Oppenheimer. Iwanyc comes question next Your George

George Iwanyc

the Thank question. you taking for

the customer little the customers there maybe you're Is With changing with makeup lands size you color. strong new or give of anything more bit adding? a the the can us of adds, the

Charles Giancarlo

that Well, is, focus, sector and continuing GXK, our segments been government on mix very so global central we've public clear volume the a native-cloud focus cloud, commercial organization. we to so on saw of a kind enterprise, quality focus of the isn't basis, nice XK across saying, really and the and on non-public

of saw So across those all we theaters. progress

XXX like having Everybody that We to go else so out somebody, number. day from share XXX we're and – base take or the and go per to our net In business customers news. situation, day. seven we win trying protect new have is to their

really real a keep nice focus execution and we the quality think indicator. it's We a there. So the on

size, each on lands about segment, segments, they lands vary as appreciate. we're by to seeing also and you'd of purchases. our We're we seeing we're specifically. Relative nice But don't continued talk those progress seeing repeat in ASP a nice

somebody. you from when to win got at go So fundamentals, and the look take share we've

anybody so and a doing repeat than our else. purchase better that nice at doing We're We're ASP rate.

our So feel about is, nature gain great year. temporal the of in through I and it We think drive dynamic, this share QX is pricing that we'll what and next QX.

George Iwanyc

lands? time? environment, win more a across up that rates the channel drive standpoint, competitive current giving at a land helping presence primarily and from little in that those a ticking just are to on expanding And customers right. Or they you All chance so is same the a bit that's larger are

Charles Giancarlo

a on win Year-on-year, Yes, we they're nice rates. across quarter-on-quarter stable board. uptick saw the kind of and

the majority going see little so to a I we contribution. quarter-by-quarter But on you're of think quarter-on-quarter, competitor. by nice broadly pickup a saw speaking, nuances So basis that's the

we which in Our fight at biggest bats. being not remains in place the competition the are first

we on rate for win in I feel to in so, and it's we bats a end. more to maintain we continue lower more getting always continue And independent, more at but our and more that, said, and take fights the We've make front them channel invest as in exchange great.

with us dig feel in and to like a share. ourselves, like time the the really market out and competition, clearly this other more of grind, in lot the and We're pop differentiating for side with especially this the market we it's

George Iwanyc

luck. best Thank of you. And Tim,

Timothy Riitters

Thank you.

Operator

Street. next from Your Eric comes Martinuzzi from question Lake

Eric Martinuzzi

share Yes. the you My M&A I the business, guess, use the cash, to repurchase that from do a versus kind interested investing taking we burner with into cash a pulling M&A put the lever actions that work there's Typically, a are question hiring the a you've competitors? on deeper you're inferring or sales that really has to not got that you're But press to course maybe guys and program. balance of of either and take taking opportunity of midyear are obviously with correction amount to on and front sheet. tremendous dive in continue not the people

David Hatfield

build, do Storage. a And well. see stock very well No, our appropriate, M&A is that or assets strategy which if it's or able asset remains do Pure the called with priced we partner buy. as be same, have right the to We cash to now,

our so has And that. us take Board to advantage of enabled

Operator

time. questions I'll call Charlie further closing back to for are at turn over There no remarks. the Giancarlo this

Charles Giancarlo

you. Thank

solution future. out-innovating outpacing solves and offering the see, customer’s a As problems By clearly dynamic modern in that is and experience, the today Pure you legacy creating our vendors. can data a we're

on wish an will the very last over And him two month. time and on adventure. to today. Tim. for seeing impact for be us missed. you your new Accelerate has I partnership want the you years, of had many to here thank I thank all Tim his next look impressive then He Pure want best of at his he And forward to We

Operator

conference today's call. concludes This

now disconnect. may You