Q1 2025 Pure Storage Inc Earnings Call
Operator: Good day. Welcome to the Pure Storage First Quarter Fiscal 2025 Financial Results Conference Call. Today's conference is being recorded. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. At this time, I'd like to turn the call over to Paul Ziots, Vice President of Investor Relations. Please go ahead. Thank you.
Good day I'll come to the pure storage first quarter fiscal 2025 financial results Conference call.
Speaker Change: Today's conference is being recorded.
Speaker Change: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: At this time I'd like to turn the call over to Paul Diet, Vice President of Investor Relations. Please go ahead.
Paul Ziots: Thank you. Good afternoon, everyone, and welcome to PURE's first quarter Fiscal Year 2025 Earnings Conference Call. On the call, we have Charlie Giancarlo, Chief Executive Officer, Kevan Krysler, Chief Financial Officer, and Rob Lee, Chief Technology Officer. Following Charlie's and Kevin's prepared remarks, we will take questions.
Speaker Change: Thank you good afternoon, everyone and welcome to <unk> first quarter fiscal year 2025 earnings conference call on the call. We have Charlie Giancarlo Chief Executive Officer, Kevin Chrysler, Chief Financial Officer, and Rob Lee Chief Technology Officer, following Charlie's in Kevin's prepared remarks, we will take questions.
Paul Ziots: Our press release was issued after the close of market and is posted on our website, where this call is being simultaneously webcast. The slides that accompany this webcast can be downloaded at investor.purestorage.com. On this call today, we will make forward-looking statements that are subject to various risks and uncertainties. These include statements regarding our financial outlook and operations. [inaudible] O. G. M. N. Transcription by CastingWords. During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue, Remaining Performance Obligations, or RPO, and cash and investment.
Speaker Change: Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast. The slides that accompany this webcast can be downloaded at investor day pure storage Dot com on this call today, we will make forward looking statements, which are subject to various risks and uncertainties. These include statements regarding our financials.
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Speaker Change: Trends any forward looking sheet them, our actual results may differ materially from the results forecasted and reported results should not be considered as an indication of future performance a discussion of some of the risks and uncertainties relating to our business is contained in our filings with the SEC and we refer you to those public filings.
Speaker Change: During this call all financial metrics and associated growth rates are non-GAAP measures other than revenue remaining performance obligations or rps and cash and investments reconciliations to the most directly comparable GAAP measures are provided in our earnings press release and slides.
Paul Ziots: Reconciliations to the most directly comparable gap measures are provided in our earnings press release and slides. This call is being broadcast live on the Pure Storage Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and is the property of Pure Storage. Our second quarter fiscal 2025 quiet period begins at the close of business on Friday, July 19, 2024. With that, I'll turn it over to Charlie.
Speaker Change: This call is being broadcast live on the pure storage Investor Relations website and is being recorded for playback purposes, an archive of the webcast will be available on the IR web site and is the property of pure storage.
Speaker Change: Our second quarter fiscal 2025 quiet period begins at the close of business Friday July 19, 2024 with that I'll turn it over to Charlie.
Charles H. Giancarlo: Thank you Paul.
Charles H. Giancarlo: Good afternoon, everyone, and welcome to our Q1 Fiscal 2025 Earnings Call. Thank you for joining us today.
Charles H. Giancarlo: Good afternoon, everyone and welcome to our Q1 fiscal 2025 earnings call. Thank you for joining US today. We are pleased with our Q1 performance returning to double digit revenue growth for the quarter.
Charles H. Giancarlo: We are pleased with our Q1 performance, returning to double-digit revenue growth for the quarter. Our highly differentiated platform strategy continues to demonstrate success and rings true with customers. The recent advances in AI have opened up multiple opportunities for Pure in several market segments. Of greatest interest to the media and financial analysts has been the high-performance data storage market for large public or private GPU farms. A second opportunity is providing specialized storage for enterprise inference engine or RAG environments.
Charles H. Giancarlo: Our highly differentiated platform strategy continues to demonstrate success in rings true with customers.
Charles H. Giancarlo: The recent advances in AI have opened up multiple opportunities for pure in several market segments of greatest interest to the media and financial analysts has been the high performance data storage market for large public or private GPU farms.
Charles H. Giancarlo: A second opportunity is providing specialized storage for enterprise inference engine or rag environments.
Charles H. Giancarlo: The third opportunity, which we believe to be the largest in the long term, is upgrading all enterprise storage to perform as a storage cloud, simplifying data access and management and eliminating data silos, enabling easier data access for AI. Pure is seeing early success in all three of these AI-based opportunities, and we can address them all with our unified Purity platform. Unlike other vendors, we do not require different operating system software to address different storage needs.
Charles H. Giancarlo: The third opportunity, which we believe to be the largest in the long term is upgrading all enterprise storage to perform as a storage cloud simplifying data access and management and eliminating data silos, enabling easier data access for AI.
Charles H. Giancarlo: Pure is seeing early success in all three of these AI based opportunities and we can address them all with our unified purity platform.
Charles H. Giancarlo: Unlike other vendors, we do not require different operating systems software to address different storage needs.
Charles H. Giancarlo: AI inevitably calls customers' attention to the fragmented state of their data caused by their disparate data storage infrastructure. Data stored on widely diverse platforms with different operating and management systems, which are siloed and individually managed, are unable to feed real-time data to AI inference engines.
Charles H. Giancarlo: AI inevitably calls customers' attention to the fragmented state of their data caused by their disparate data storage infrastructure.
Charles H. Giancarlo: Data stored on widely diverse platforms with different operating and management systems, which are siloed and individually managed are unable to feed real time data to AI inference engines.
Charles H. Giancarlo: The Pure Storage Platform Strategy provides a unified and integrated data storage and delivery system across customers' various data environments. It facilitates seamless management and data access across data centers and the cloud with simplified universal policies and management. We will be announcing significant new advances to this platform strategy next month at our Accelerate Customer and Partner Conference. Our platform vision played a crucial role in securing several strategic enterprise deals this quarter.
Charles H. Giancarlo: The pure storage platform strategy provides a unified and integrated data storage and delivery system across customers various data environments.
Charles H. Giancarlo: It facilitates seamless management and data access across data centers and the cloud with simplified universal policies and management.
Charles H. Giancarlo: We will be announcing significant new advances to this platform strategy next month at our accelerate customer and partner conference.
Charles H. Giancarlo: Our platform vision played a crucial role in securing several strategic enterprise deals this quarter.
Charles H. Giancarlo: The ease of use of our platform and a notable interest in saving power and reduced environmental impact led to a notable win with a managed service provider specializing in high-performance computing. Their accelerated environment for both large language models and inferencing delivers top-tier AI infrastructure and training solutions for their financial services, energy, and life sciences customers. Enterprise and international market segments were strong this last quarter.
Charles H. Giancarlo: The ease of use of our platform and a notable interest in saving power and reduced environmental impact led to a notable win with a managed service provider specializing in high performance computing.
Charles H. Giancarlo: They are accelerated environment for both large language models and inferencing delivers top tier AI infrastructure and training solutions for their financial services energy and life Sciences customers.
Charles H. Giancarlo: Enterprise and international market segments were strong this last quarter.
Charles H. Giancarlo: Our e-family continues its strong growth and was also a key enabler in our discussions with Hyperscaler. FlashBlade had a record Q1, including in AI workloads. We are seeing broader adoption across geographies, including both prospects and existing customers.
Charles H. Giancarlo: R. E family continues its strong growth and was also a key enabler in our discussions with Hyperscale.
Flash blade had a record Q1, including in AI workloads.
Charles H. Giancarlo: We are seeing broader adoption across geographies, including both prospects and existing customers.
Charles H. Giancarlo: FlashBlade's ability to span the price performance spectrum, from the highest sustained performance required for AI to low-cost applications, such as backup, is incredibly compelling. We continue to make significant progress in penetrating every area of online data storage with our Purity and DirectFlash technologies, both in the enterprise and in the cloud. The quantity and quality of our discussions with hyperscalers advanced considerably this past quarter.
Charles H. Giancarlo: <unk> ability to span the price performance spectrum from the highest sustained performance required for AI to low cost applications, such as backup is incredibly compelling.
Charles H. Giancarlo: We continue to make significant progress in penetrating every area of online data storage with our purity and direct flash technology, both in the enterprise and in the cloud.
Charles H. Giancarlo: Quantity and quality of our discussions with Hyperscale.
Charles H. Giancarlo: We have advanced considerably this past quarter.
Charles H. Giancarlo: Hyperscalers have a broad range of storage environments. These include high-performance storage based on SSDs, multiple levels of lower-cost HDD-based nearline storage, and tape-based offline storage. We are in a unique position to provide our purity and direct flash technology for both their high performance and their near line environment, which make up the majority of their storage purchases. Our most advanced engagements now include both testing and commercial discussions. As such, we continue to believe we will see a design win this year.
Charles H. Giancarlo: Hyperscale or have a broad range of storage environments. These.
Charles H. Giancarlo: These include high performance storage based on Ssds multiple levels of lower cost HDD base near line storage and tape based offline storage.
Charles H. Giancarlo: We are in a unique position to provide our purity and direct flash technology for both their high performance and their near line environments, which make up the majority of their storage purchases.
Charles H. Giancarlo: Our most advanced engagements now include both testing and commercial discussions.
Charles H. Giancarlo: As such we continue to believe we will see a design win this year.
Charles H. Giancarlo: Pure storage technology brings multiple advantages to hyperscaler infrastructure. Data storage is either first or second in power and space consumption in data centers. First, Purity and DirectFlash reduce the power space and cooling requirements for hyperscale data storage by a factor of 10 or more. Second, Pure reduces the need for sophisticated caching and other technologies that hyperscalers use to make up for the relatively low performance of hard drives. Third, Pure's technology improves server performance by accelerating data delivery. And finally, Pure's technology significantly improves both the reliability and the longevity of their storage, thereby significantly reducing cost.
Charles H. Giancarlo: Pure storage technology brings multiple advantages to hyperscale or infrastructure.
Charles H. Giancarlo: Data storage is either first or second in power and space consumption in data centers.
Charles H. Giancarlo: First purity and direct flash reduces the power space and cooling requirements for Hyperscale data storage by a factor of 10 or more.
Charles H. Giancarlo: Second.
Charles H. Giancarlo: Pure reduces the need for sophisticated caching and other technologies that hyperscale is used to make up for the relatively low performance of hard drives.
Charles H. Giancarlo: Third pure technology improved server performance by accelerating data delivery.
Charles H. Giancarlo: And finally, <unk> technology significantly improves both the reliability and the longevity of their storage, thereby significantly reducing costs.
Charles H. Giancarlo: Increased energy use is a major issue and cost for both hyperscalers and enterprise data centers. This is even more important as introducing AI in data centers promises to consume ever greater amounts of power and cooling. Pure Storage can dramatically reduce the power usage in existing data centers by upwards of 20%, bringing significant power and cooling for AI workloads. Another reason why hyperscalers are interested in pure technology.
Charles H. Giancarlo: Increased energy use is a major issue in costs for both Hyperscale and enterprise data centers.
Charles H. Giancarlo: This is even more important as introducing AI and data centers promises to consume ever greater amounts of power and cooling.
Speaker Change: Sure storage can dramatically reduce the power usage in existing data centers by upwards of 20%.
Speaker Change: <unk> significant power and cooling for AI workloads.
Speaker Change: Another reason why hyperscale or are interested in pure technology.
Charles H. Giancarlo: In the enterprise, we are seeing continued momentum and opening new opportunities with our cloud operating model. Enterprises want their data centers to operate the same way as cloud companies operate theirs. Customers should be able to automate and manage storage as virtualized clouds of storage, whether located on-premises or in the cloud. Delivering a complete cloud operating model, Evergreen One allows customers to consume storage as a service, based entirely on guaranteed service level agreements, enabling them to store their data whenever and wherever they want with guaranteed reliability and performance.
Speaker Change: In the enterprise, we are seeing continued momentum and opening new opportunities with our cloud operating model.
Speaker Change: Enterprises want their data centers to operate the same way as cloud companies operate theirs.
Speaker Change: Customers should be able to automate and manage storage as virtualized cloud storage, whether located on prem or in the cloud.
Speaker Change: Delivering a complete cloud operating model evergreen one allows our customers to consume storage as a service based entirely on guaranteed service level agreements, enabling them to store their data whenever and wherever they want with guaranteed reliability and performance.
Charles H. Giancarlo: It provides customers with hands-free storage services where and when they need them, managed entirely through our Pure One Management Portal. Additionally, hybrid cloud has now become the standard design practice by enterprises. They now expect the same cloud experience of self-service, flexibility, and agility from their private data center infrastructure. It's no longer only about price, performance, and features. Pure Fusion solves the complexity of traditional IT and storage by joining storage arrays into a virtual storage pool.
Speaker Change: It provides customers with hands free storage services, where and when they need it managed entirely through our peer one management portal.
Speaker Change: Additionally, hybrid cloud has now become the standard design practice by enterprises. They now expect the same cloud experience of self service flexibility and agility from their private data center infrastructure.
Speaker Change: It's no longer only about price performance and features.
Speaker Change: Sure fusion solve the complexity of traditional.
Speaker Change: And storage by joining storage arrays into virtual storage pools managers can manage their entire fleet of arrays by policy and are able to set up custom storage services for both <unk> and developers.
Charles H. Giancarlo: Managers can manage their entire fleet of arrays by policy and are able to set up custom storage services for both IT and development. Pure Fusion combines enterprise storage with a cloud operating model, cloud agility, and scalability, and enables easier access to real-time data stores for applications such as AI. Hear more about Pure Fusion at next month's Pure Accelerate event. Moving on to the market as a whole, we have not seen a significant change in the overall macro environment or customers' intentions to buy, while we have great enthusiasm for our opportunities in AI. Spending on AI may put pressure on other parts of IT budgets.
Speaker Change: Pure fusion combines enterprise storage with our cloud operating model cloud agility and scalability.
Speaker Change: <unk> enables easier access to real time data stores for applications such as AI.
Speaker Change: They're more about pure fusion at next month's pure accelerate event.
Speaker Change: Moving on to the market as a whole we have not seen a significant change in the overall macro environment or customers' intentions to buy.
Speaker Change: While we have great enthusiasm for our opportunities in AI spending on AI may put pressure on other parts of it budgets.
Charles H. Giancarlo: We believe that the storage market will fare relatively well in this IT economy but has yet to see a major inflection. Overall, we believe that we are well positioned in all of the segments we compete in, and we will continue to gain share across our market. Our leadership position is now clearly demonstrated by our competitors' increased fervor to mimic our strategy and our message. We also believe that long-term secular trends for data storage are no longer based on the expectation of commoditized storage but rather on high-technology data storage systems, which run very much in our favor. We will discuss these long-term trends in more detail at our upcoming Financial Analyst Session at Accelerate. With that, I'll turn it over to Kevin.
Speaker Change: We believe that the storage market will fare relatively well in this economy, but have yet to see a major inflection.
Overall, we believe that we are well positioned in all of this segments. We compete in and we will continue to gain share across our markets.
Speaker Change: Our leadership position is now clearly demonstrated by our competitors increased fervor to mimic our strategy and our messages.
Speaker Change: We also believe that long term secular trends for data storage are no longer based on the expectation of commoditize storage, but rather on high technology data storage systems and run very much in our favor we will discuss these long term trends in more detail at our upcoming financial analyst session.
Speaker Change: At accelerate.
Speaker Change: With that I'll turn it over to Kevin.
Kevan Krysler: Thank you, Charlie. We saw a strong start to our year in Q1, as our financial performance outperformed across both revenue and profitability. Revenue grew a healthy 18%, and operating profit of $100 million resulted in a new high record for Q1. Specifically, we were very pleased that we returned to strong double-digit revenue growth in Q1. Two key drivers of our revenue growth this quarter were, one, sales to new and existing enterprise customers across our entire data storage platform, and two, strong customer demand for our FlashBlade solutions, including FlashBlade E. In Q1, Subscription Services' Annual Recurring Revenue, or ARR, was healthy, growing 25% to over $1.4 billion. As we mentioned previously, the Subscription Services ARR excludes non-cancellable Evergreen subscription contracts where the effective service date has not started.
Kevan Krysler: Thank you Charlie we saw a strong start to our year in Q1, as our financial performance outperformed across both revenue and profitability.
Revenue grew a healthy 18% an operating profit of $100 million resulted in a new high record for a Q1 <unk>.
Kevan Krysler: Specifically, we were very pleased that we returned to strong double digit revenue growth in Q1.
Kevan Krysler: Two key drivers of our revenue growth. This quarter were one sales to new and existing enterprise customers across our entire data storage platform and to strong customer demand for our flash blade solutions, including Flash Brady.
Kevan Krysler: In Q1 subscription services annual recurring revenue or a R. R was healthy growing 25% to over one $4 billion.
Kevan Krysler: As we mentioned previously subscription services <unk> excludes noncancelable evergreen subscription contracts, where the effective service date has not started include.
Kevan Krysler: Including non-cancellable subscription contracts where the effective service date has not started, subscription services ARR at the end of Q1 grew 26%. Total RPO, which includes both subscription services and product orders, grew 27% year-over-year in Q1 to $2.3 billion. As a reminder, product orders within RPO include a non-cancellable telco order in Q3 FY24 and orders relating to a Fortune 500 financial services company in Q4 FY24.
Kevan Krysler: Including noncancelable subscription contracts, where the effective service state has not started subscription services.
Kevan Krysler: <unk> at the end of Q1 grew 26%.
Kevan Krysler: Total <unk>, which includes both subscription services and product orders grew 27% year over year in Q1 to $2 $3 billion.
Kevan Krysler: As a reminder, product orders within our <unk> include a noncancelable telco order in Q3, FY 'twenty four and orders relating to a fortune 500 financial services company in Q4, FY 'twenty four.
Kevan Krysler: RPO associated solely with our subscription service offerings at the end of Q1 grew 24 percent. Q1 year-over-year subscription RPO growth was affected by several large Evergreen One opportunities that closed during Q1 of last year. Although we expect larger Evergreen I opportunities to close as we progress through the year, no large opportunities closed during Q1.
Kevan Krysler: Our Po associated solely with our subscription service offerings at the end of Q1 grew 24% Q.
Kevan Krysler: Q1 year over year subscription <unk> growth was affected by several large evergreen one opportunities that closed during Q1 of last year.
Kevan Krysler: Although we expect larger evergreen one opportunities to close as we progress through the year no large opportunities closed during Q1.
Kevan Krysler: Total contract value or TCV sales for our Storage as a Service offerings during Q1 were $56 million. We saw building demand and pipeline, including large opportunities for our Storage as a service offerings during Q1. Consistent with our original FY25 forecast, we expect 50% growth in our Storage-as-a-Service offerings, including Evergreen One and Evergreen Flex, achieving $600 million in TCV sales. U.S. revenue for Q1 was $489 million, and international revenue was $204 million.
Kevan Krysler: Total contract value or T. C V sales for our storage as a service offerings. During Q1 were $56 million, we saw building demand and pipeline, including large opportunities for our storage as a service offerings during Q1 <unk>.
Consistent with our original FY 'twenty five forecast, we expect 50% growth of our storage as a service offerings, including evergreen won an evergreen flex achieving $600 million and T. C V sales.
Kevan Krysler: U S revenue for Q1 was $489 million and international revenue was $204 million.
Kevan Krysler: Our new customer acquisition grew by 262 customers during Q1, and we now serve 61% of the Fortune 500. Product and subscription services gross margins both contributed to strong total gross margin strength of 73.9% in Q1. Product gross margin was 72.8%, and subscription services gross margin was 74.9%.
Kevan Krysler: Our new customer acquisition grew by 262 customers during Q1, and we now serve 61% of the Fortune 500.
Kevan Krysler: Product and subscription services gross margins both contributed to strong total gross margin strength of 73, 9% in Q1.
Kevan Krysler: Product gross margin was 72, 8% and subscription and services gross margin was 74, 9%.
Kevan Krysler: While reflecting strong gross margins, we are aggressively competing and winning customers' secondary and lower storage tiers with our eFamily solutions and Flasher AC. Operating profit and margin strength of 14.5% were positively impacted by revenue overachievement, strong gross margin performance, and disciplined investment. Our headcount decreased slightly to approximately 5,500 employees at the end of the quarter.
Kevan Krysler: While reflecting strong gross margins, we are aggressively competing and winning customers secondary and lower storage tiers with R E family solutions and flash or AC.
Kevan Krysler: Operating profit and margin strength of 14, and one 5% were positively impacted by revenue over achievement strong gross margin performance and disciplined investing.
Kevan Krysler: Our head count decreased slightly to approximately 5500 employees at the end of the quarter.
Kevan Krysler: Pure's balance sheet and liquidity remain very strong, including $1.7 billion in cash and investments at the end of Q1. Cash flow from operations during the quarter was $222 million, and capital expenditures were $49 million, representing approximately 7% of revenue. Factors contributing to capital expenditures included test equipment, supporting our engineering teams for new innovations, continued build out of our new headquarters, and infrastructure supporting our Evergreen One Storage as a Service sales. Our objective of partially offsetting dilution using share repurchases remains. Though during Q1, we did not repurchase shares of stock because of trading restrictions.
Kevan Krysler: <unk> balance sheet and liquidity remains very strong, including $1 $7 billion in cash and investments at the end of Q1.
Kevan Krysler: Cash flow from operations during the quarter was $222 million and capital expenditures were $49 million.
Kevan Krysler: Representing approximately 7% of revenue.
Kevan Krysler: Factors contributing to capital expenditures included test equipment supporting our engineering teams for new innovations.
Kevan Krysler: Continued build out of our new headquarters and infrastructure supporting our evergreen one storage as a service sales.
Kevan Krysler: Our objective of partially offsetting dilution using share repurchases remains though during Q1, we did not repurchase shares of stock because of trading restrictions.
Kevan Krysler: Beginning in June, we will also fund withholding taxes due on employee equity awards by net share withholding, which will also reduce share dilution. We have approximately $395 million available on our existing repurchase authorization. Now turning to our guidance. For Q2, we expect revenue of $755 million and expect that operating profit will be $125 million, or an operating margin of 16.6%. Turning to our annual guidance for FY25, we are reiterating our FY25 revenue and operating margin guidance.
Kevan Krysler: Beginning in June we will also fund withholding taxes due on employee equity awards by net share withholding, which will also reduce share dilution.
Kevan Krysler: We have approximately $395 million on our existing repurchase authorizations.
Kevan Krysler: Now turning to our guidance for Q2, we expect revenue of $755 million and expect that operating profit will be $125 million or operating margin of 16, 6%.
Kevan Krysler: Turning to our annual guidance for FY 'twenty five.
Kevan Krysler: We are reiterating our FY 'twenty five revenue and operating margin guidance. We are pleased with the strong start to the year with both top line and operating profit outperforming.
Kevan Krysler: We are pleased with the strong start to the year, with both the top line and operating profit outperforming. Also, while storage spending for AI is still in its early stages, we believe that we are well positioned as demand for data storage accelerates. At the same time, we are also remaining mindful of the macro spending environment. In closing, we are pleased with the strong start to the year. This is an unprecedented time for Pure as we are well positioned to participate in substantial and sustained growth opportunities, whether driven by AI or our pursuit of replacing the vast majority of data storage with Pure Flash for all customer workloads, including Hyperscaler's bulk storage. We look forward to seeing many of you at our product and technology focus financial analyst meeting at Accelerate in Las Vegas on June 20th. With that, I will turn it back to Paul for Q&A.
Kevan Krysler: Also while storage spending for AI is still in its early stages. We believe that we are well positioned as demand for data storage accelerates at the same time. We are also remaining mindful of the macro spending environment.
Kevan Krysler: In closing we are pleased with the strong start to the year.
Kevan Krysler: This is an unprecedented time for peer as we are well positioned to participate and substantial and sustained growth opportunities whether driven by AI for our pursuit of replacing the vast majority of data storage with pure flash for all customer workloads, including hyper scaler bulk storage.
Kevan Krysler: We look forward to seeing many of you at our product and technology focused financial analyst meeting at accelerate in Las Vegas on June 20th.
Speaker Change: With that I will turn it back to Paul for Q&A.
Paul Ziots: Thanks, Kevin before we begin the Q&A session I will ask you to please limit yourselves to one question consisting of one part so we can get to as many people as possible. If you have additional questions. We kindly ask that you. Please rejoin the queue and we'll be happy to take those additional questions as time allows operator, let's get started.
Paul Ziots: Thanks, Kevan. Before we begin the Q&A session, I'll ask you to please limit yourselves to one question consisting of one part so we can get to as many people as possible. If you have additional questions, we kindly ask that you please rejoin the queue, and we'll be happy to take those additional questions as time allows. Operator, let's get started.
Operator: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by one. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from Amit Daryanani from Evercore. Please go ahead; your line is open.
Speaker Change: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Any reason you would like to turn the first question. Please press star followed by one again to ask a question press Star one.
Speaker Change: As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
Speaker Change: Pause here briefly as questions are registered.
Speaker Change: Our first question comes from Amit <unk> from Evercore. Please go ahead. Your line is open.
Speaker Change: Hum.
Charles H. Giancarlo: Good afternoon, guys. I guess, Charles, I'm hoping you could just talk a bit more about the cloud opportunity for Pure going forward. You know, I think Meta had the white paper out recently, but they talked about using some other provider for this opportunity and then talked about a huge cloud win at some point this year. But, you know, it's not large; even the cloud opportunity can be for Pure. Do you think the opportunity is bigger in AI versus non-AI? Is there anything more on the cloud side that would be helpful?
Speaker Change: Good afternoon, guys I guess Chuck.
Amit Jawaharlaz Daryanani: I'm, hoping you could just talk a bit more about the cloud opportunity.
Speaker Change: Forward.
Speaker Change: I think that I had.
Speaker Change: Quite figure out recently that talked about using some other provider for this.
Speaker Change: And then Scott.
Speaker Change: Neutral.
Speaker Change: Sure.
Speaker Change: But.
Speaker Change: Even without opportunity can be for pure.
Speaker Change: Hi.
Speaker Change: Stick when.
Speaker Change: Do you think the opportunity is bigger in AI, which does not anticipate any more on the cloud side would be helpful.
Charles H. Giancarlo: Sure, thank you, Amit. So we have a discipline in terms of how we refer to these, what I'll call, three different segments, AI, cloud, and hyperscaler. And when we speak about each one of them, I want to be clear to everyone, we try to be quite specific. So, when we have an AI win, whether that's in an enterprise or a GPU cloud or even in a hyperscaler, you know, we'll call that AI.
Speaker Change: Sure. Thank you Amit so we have a discipline in terms of how we refer to these what I'll call three different segments.
Speaker Change: <unk> cloud and Hyperscale or and when we speak about each one of them I want to be clear to everyone, where we tried to be quite disciplined. So when we have an AI win whether that's in an enterprise or a GPU cloud or even though in our hyperscale or we'll call that AI.
Charles H. Giancarlo: When we've been speaking about getting a design win in a hyperscaler, that speaks specifically to their standard storage that they use, both for their own compute and for their customers' storage that goes on to, you know, the hyperscaler storage cloud environments. And when we speak about the cloud, we speak about our capabilities to operate like a cloud in the enterprise, but also our software that operates on top of the hyperscaler, such as Cloud Block Store or Portworx, that allows our customers to achieve, if you will, a multi-cloud of data. So, when we, you mentioned Meta, and yes, we sold it into their GPU environment.
Speaker Change: When we we've been speaking about getting a design win in our hyperscale or that speaks specifically to their standard storage that they use both for their own compute and for their customers storage that go onto the hyperscale or storage cloud environments and when we speak about cloud.
Speaker Change: We speak about our capabilities to operate like a cloud in the enterprise, but also our software that operates on top of the hyperscale or such as cloud block store or port works that allow our customers to achieve if you will a multi cloud of data. So when we you mentioned meta.
Speaker Change: And yes, we have sold into there.
Speaker Change: Theyre GPU environment by the way they have multiple AI environments and we are in the majority of the environments that we're aware of.
Charles H. Giancarlo: By the way, they have multiple AI environments, and we are in the majority of the environments that we're aware of in Meta AI. But when we speak about that, we'll speak about that as AI wins. That'll contribute to our AI win.
Speaker Change: In in meta AI.
Speaker Change: But when we speak about that we'll speak about that as it as AI wins that will contribute to our AI winds.
Charles H. Giancarlo: When we speak about getting a design win in a hyperscaler, we're talking about their standard storage. And when we speak about the cloud, that really does speak to Cloud Block Store, as well as Portworx, as well as, you know, when we operate our arrays as a platform across multiple data centers of the customer, and even into the Cloud Block Store on the hyperscaler, we refer to that as our cloud wins. So going back to your question, and sorry to elongate it, but I wanted to make sure that everyone is aware of the way we use those words.
Speaker Change: When we speak about getting a design win in our Hyperscale or were talking about their standard.
Speaker Change: Storage and when we speak about cloud that really does speak to a cloud block store as well as port works as well as when we operate our arrays as a platform across multiple data centers of the customer.
Speaker Change: And even into the cloud block store on the hyper scaler, we referred that to that is our cloud wins, so going back to your question and sorry to elongate it but I wanted to make sure that everyone is aware of the way we use those those words I believe that we think that.
Charles H. Giancarlo: I believe that we think that... You know, AI presents an immediate opportunity in machine learning, but that it will also drive customers to focus on upgrading their entire data storage. And we believe that represents an opportunity for us with our platform play to not only upgrade their capabilities, but allow their storage to operate as a cloud of storage rather than as individual arrays. And we believe that, you know, we believe that's a very big opportunity in the somewhat longer term. We also believe that our opportunity to sell into the hyperscalers for their traditional storage environment, you know, their customer environment, their own storage environment represents a very big opportunity, one that we're very excited about. Yeah.
Speaker Change: Yo AI presents an immediate opportunity in machine learning, but that it will also drive customers to <unk>.
Speaker Change: Focus on upgrading their entire data storage and we believe that represents an opportunity for us.
Speaker Change: With our platform play.
Speaker Change: To not only upgrade their capabilities, but allow their storage to operate as a cloud storage rather than as individual arrays.
Speaker Change: And we believe that we.
Speaker Change: We believe that's a very big opportunity in the somewhat longer term. We also believe that our opportunity to sell into the hyperscale is for their traditional storage environment.
Speaker Change: There are customer environment and their own storage environment represents a very big opportunity and one that we're very excited about it.
Robert Lee: Yeah, Amit, and this is Rob, just to jump on that, to help you think about size, scale, and just some context behind it. As we think about the hyperscaler environments in particular, yeah, there's been a lot of focus and attention paid to the AI deployments and build-outs, but the larger general purpose bulk storage environments that Charlie's speaking of, we believe consist of, even today, 80 to 90%, you know, of their total storage build-outs are sitting on disk, are being deployed on disk, and are going to serve these general purpose environments.
This is Rob just to jump on to that to help you think about size scale and.
Charles H. Giancarlo: Some context behind it as we think about the hyperscale environments. In particular, yes, there's been a lot of focus and attention paid to the AI deployments and build outs, but the larger general purpose bulk storage environments that Charlie speaking of we believe consistent even today, 80% to 90%.
Charles H. Giancarlo: Their total storage build outs are sitting on disk are being deployed on disk are going to serve these general purpose environments and that's really the opportunity that we see.
Robert Lee: And that's really the opportunity that we see, you know, as we refer to the hyperscalers. And to some extent, as Charlie said, the AI opportunity is one that we do well in as well. I think the other thing that's going on in these hyperscaler environments is because there's so much focus being placed on AI build-out, and that's presenting a real challenge when it comes to power and space.
Charles H. Giancarlo: As we referred to the Hyperscale and you know to some extent.
Speaker Change: As Charlie said the AI opportunity.
Speaker Change: Is one that we do well and as well I think the other thing that's going on in these hyperscale environments is because there is so much focus being placed on AI buildout, that's presenting a real challenge when it comes to power and space.
Robert Lee: So that's really, in our ongoing discussions with these hyperscaler firms, it's becoming clear that power availability, securing, you know, just the operational limitations to be able to go and maintain the storage footprint they have today on disk is becoming a real challenge for them and one that, you know, we're very hopeful to go and help them with.
Speaker Change: So that's really in our advancing discussions with these hyperscale or firms, it's becoming clearer that power availability securing just the operational limitations to be able to go in and maintain the storage footprint to have today on disk is becoming a real challenge for them and one that we're very hopeful.
Speaker Change: To go in and help them with.
Operator: Thank you, Amit. Next question, please. Our next question comes from Meta Marshall from Morgan Stanley. Please go ahead. Your line is open. Great. Thanks so much.
Speaker Change: Thank you Amit next question please.
Operator: Our next question comes from Meta Marshall from Morgan Stanley. Please go ahead; your line is open.
Speaker Change: Our next question comes from meta Marshall from Morgan Stanley. Please go ahead. Your line is open.
Meta A. Marshall: Great. Thanks, so much.
Meta A. Marshall: Just wanted to get any commentary you could provide on just as an add on.
Meta A. Marshall: <unk> increase just on how you guys are thinking about gross margin clearly.
Speaker Change: No impact this quarter, but just any expected impact over the calendar year.
Charles H. Giancarlo: Thanks, Neeta. You know, as you recall, we operate in a dynamic pricing environment; storage, in general, is in a dynamic pricing environment. That is to say that customers buy storage episodically, and when they do, they want to negotiate. We negotiate in a competitive environment against competitive players who tend to price in a cost plus environment. And as such, you know, ASPs, if you will, for on a per gigabyte basis tend to fluctuate with the underlying commodity.
Meta A. Marshall: Peter.
Peter: As you recall, we operate in a dynamic pricing of storage in general isn't in a dynamic pricing environment.
Speaker Change: That is to say that customers buy storage episodically when they do they want to negotiate.
Peter: We negotiate in a competitive environment against the competitive players who tend to.
Peter: Price on a cost plus environment and as such.
Peter: Asps, if you will for on a per gigabyte basis tend to fluctuate with the underlying commodity and so the net net of all that is.
Charles H. Giancarlo: So the net net of all that is, NAN prices generally don't affect our gross margin as much as they do with the market, the top line of the market as a whole. And so with prices rising, I think that's, you know, somewhat of a tail that should be something of a tailwind in general, although, you know, customers generally have a set budget. So, you know, put that all in a blender, and it shouldn't affect our or the industry's gross margins all that significantly. Yeah. And in addition,
Peter: As NAND prices generally don't affect our gross margin as much as they do with the market. The top line of the market as a whole.
Peter: And so with prices rising I think that's somewhat of a tale that should be something of a tailwind in general although customers generally have a set budget. So.
Speaker Change: Put that all in the blender it shouldnt affect our or the industry's gross margins all that significantly yeah in in a meaningful way and just following on to Charlie's point.
Kevan Krysler: Yeah, in a meaningful way. And just following on to Charlie's point, look, we're really pleased with our gross margin performance in Q1. We did see product gross margins decline slightly sequentially, though remaining strong, while at the same time, we are aggressively competing and winning customer secondary and lower storage tiers with our eFamily solutions and FlashArray C. But, you know, the flash pricing volatility just highlights the differentiated advantages of our Purity software and direct flash technology. And as a reminder, QLC Flash represents the majority of the flash we consume today, really providing a meaningful sustained cost advantage, both against TLC flash and commercial SSDs using QLC.
Operator: Thank you, Meta. Next question, please.
Look we're really pleased with our gross margin performance in Q1, we did see product gross margins had declined slightly sequentially, though remaining strong while at the same time, we are aggressively competing and winning customers secondary and lower storage tiers with our <unk> family solutions and flash array C.
Speaker Change: The flash pricing volatility again, just highlights the differentiated advantages of our purity software and direct flash technology.
Speaker Change: And as a reminder, <unk> flash represents the majority of the flash we consumed today.
Speaker Change: Really providing a meaningful sustained cost advantage, both against TLC flash and commercial ssds using <unk> flash.
Speaker Change: Thank you Matt next question please.
Operator: Our next question comes from Howard Ma from Guggenheim Securities. Please go ahead; your line is open.
Speaker Change: Our next question comes from Howard MA from Guggenheim Securities. Please go ahead. Your line is open.
Operator: Thanks. Good afternoon, everyone.
Doug: Thanks, Doug Good afternoon, everyone and thanks for taking the question.
Charles H. Giancarlo: And thanks for taking the question. I guess for Charlie or for Kevin, how would you guys characterize the demand environment relative to, say, all of last fiscal year and then relative to a few months ago? Would you say that IT spending optimizations are largely behind us now and you're starting to see a material uptick in demand, or not necessarily? And then just one quick follow-up on AI inferencing specifically or AI inferencing-driven demand? Are you starting to see enough of an uptick, at least in pipeline? I know it's not in the numbers yet, but in pipeline to call it out, or is that still too early? Thank you.
Speaker Change: Yes.
Howard Ma: Charlie or for Kevin how would you guys characterize the demand environment relative to say I guess all of last fiscal year, and then relative to a few months ago would you say that it's any optimizations are largely behind us now and youre starting to see material uptick in demand or not necessarily and then just one quick follow up on a.
Howard Ma: AI inferencing, specifically or AI inferencing, driven demand are you starting to see enough of an uptick at least in pipeline I know, it's not in the numbers, yet and pipeline to call out or is that still too early. Thank you Howard we're going to we're going to take your first question because we're giving one question of one part, but we'll get back to it if we can if there's time the second one so.
Charles H. Giancarlo: Howard, we're gonna, we're gonna take your first question, because we're going to take one question at a time, but we'll get back to it if we can, if there's time, the second one. So I think that, you know, I did say in my prepared remarks that, certainly, it's an improvement over last year, but I can't say we've seen a major inflection So, you know, starting to pick up around Q4, but I can't say it's changed much since Q4.
Speaker Change: I think that.
I did say in my prepared remarks is that.
Speaker Change: It is an improvement over last year, but I can't say, we've seen a major inflection yet so.
Speaker Change: Starting to pick up around Q4, I can't say, it's changed much since Q4 I do think AI has caused customers to take a second look as to how theyre going to be spending their money this year, but overall I'd say it's a.
Charles H. Giancarlo: I do think AI has caused customers to take a second look as to how they're going to be spending their money this year. But overall, I'd say it's a modest recovery from last year, but I haven't seen a big inflection. Thank you, Howard. Next question, please.
Speaker Change: It's a modest recovery from from last from last year, but I haven't seen a big inflection point.
Speaker Change: Thank you Howard next question please.
Operator: comes from Pinjalim Bora from J.P. Morgan. Please go ahead. Your line is open.
Speaker Change: It comes from pendulum Bora from J P. Morgan. Please go ahead your line is open.
Operator: Hey guys, this is Noah on behalf of Pinjalim. Thanks for taking the question. We've talked about a potential design win at a hyperscaler by the end of the year. Can you just help us understand how those discussions have evolved so far? You mentioned in your remarks that the quantity and quality of discussions with hyperscalers advanced considerably this past quarter. So any other color you can provide there would be helpful. Thank you.
Speaker Change: Hey, guys. This is <unk> on for <unk>. Thanks for taking the question.
<unk> talked about a potential design win at a hyperscale or by year end can you just help us.
Speaker Change: Understand how those discussions have evolved so far you mentioned in your prepared remarks that the quantity and quality of discussions with Hyperscale.
Speaker Change: Comparatively this past quarter. So any other color you can provide there would be helpful. Thank you.
Charles H. Giancarlo: Yeah, what I meant to convey with that remark is that we are having conversations with multiple hyperscalers. When we talk about hyperscalers, and this maybe goes back some quarters, you know, we're really speaking about the top 10 hyperscalers. So it goes beyond just the three public clouds, if you will, to the other FAANGs, etc. in this. So we, though the quantity, meaning the number of those players that we speak to and the quality of those conversations have improved, and the number of those conversations have improved, we mentioned as well that we're now not just experiencing testing in some of those environments but some commercial discussions as well. So all those are positive signs, if you will, that lead us to believe that we will have a design win this year.
Speaker Change: Yes.
Speaker Change: You meant to convey with that remark is that we are having conversations with multiple hyperscale or so when we talk about hyperscale.
Speaker Change: And this may be go back some quarters.
Speaker Change: We're really speaking about the top 10, hyperscale or so it goes beyond just the the three public clouds, if you will to the.
Speaker Change: The other the fangs, etc.
Speaker Change: In this so.
Speaker Change: We are the quantity, meaning the number of those players that we speak to and the quality of those conversations have improved <unk> mentioned.
Speaker Change: You mentioned as well that we're now not just <unk>.
Speaker Change: <unk> testing in some of those environments, but some commercial discussions as well. So all those are positive signs if you will that that lead.
Speaker Change: Lead us to believe that a design win this year.
Speaker Change: Thank you Noah next question please.
Operator: Our next question comes from Wamsi Mohan from Bank of America. Please go ahead; your line is open.
Operator: Thank you, Noah. Next question, please. Our next question comes from Wamsi Mohan from Bank of America. Please go ahead. Your line is open. Hi, thank you so much for taking my question. This is Nadi on behalf of Wamsi.
Speaker Change: Our next question comes from Malmsey Mohan from Bank of America. Please go ahead. Your line is open.
Speaker Change: Hi, Thank you so much for taking my question. This is matti on Farallon fee.
Speaker Change: Yes, I saw that in the quarter your head count declined slightly.
Wamsi Mohan: Could you expand on why that is the case and is there any implications on.
Speaker Change: How did the sales capacity will be like five.
Charles H. Giancarlo: Yeah, well, we continue to invest in sales capacity, you know, given the opportunities that we see in front of us. What I would say on the number, which does tend to fluctuate quarter to quarter, is we have been increasingly focused on two things that work against a consistently higher number. And that is that we're working on the overall quality of new customer ads.
Speaker Change: Yeah, well, we continue to invest in sales capacity given the opportunities that we see in front of us what what I would the only thing I would say on the number which does tend to fluctuate quarter to quarter. As we have been increasingly been focused on on two things that work against a consistently higher number and that is that we're working on.
Speaker Change: Overall quality of new customer ads and.
Speaker Change: And secondly on putting more focus if you will than in the past on expansions in existing accounts.
Charles H. Giancarlo: And secondly, on putting more focus, if you will, than in the past on expansions in existing accounts. But I wouldn't read too much into it. I do expect that with over 12.5, I'm not sure what the current count is, but somewhere between 12 and 13,000 customers now, we're in the back half, if you will, of customer acquisition. And so we should start to see a moderating, if you will, of those numbers.
Speaker Change: So I wouldn't read too much into it.
Speaker Change: Do expect that with over 12, five I'm not sure what the current count is but somewhere between 12 and 13000 customers now we're in this in the back half if you will of customer acquisition and so we should start to see moderating. If you will of those numbers, yes, just a quick follow on to that to look the customer acquisition count was consistent with what we saw.
Kevan Krysler: Yeah, just a quick follow-on to that to look at the customer acquisition count was consistent with what we saw a year ago in Q1. And we're also pleased with Charlie's point on the quality of new customers acquired as we continue to increase our penetration of the Fortune 500.
Speaker Change: A year ago in Q1.
Speaker Change: And we're also pleased to Charlie's point on the quality of new customers acquired as we continue to increase our penetration of the fortune 500 customers.
Operator: Thank you, Natty. Next question, please.
Speaker Change: The next question please.
Operator: Our next question comes from Mike Sikos from Needham. Please go ahead; your line is open.
Speaker Change: Our next question comes from Mike <unk> from Needham. Please go ahead. Your line is open.
Operator: Thanks for the time, guys. I just wanted to circle up on one and flex growth, just to get a temperature. But how did adoption or growth of one and flex in the quarter track versus your internal expectations? And then is there any way to think about customers who are adopting, whether it's primarily coming from existing customers or new logo lands? Anything there would be beneficial.
Mike: Thanks for the time guys I just wanted to circle up on one in flex growth just to get a temperature, but how does adoption or a growth of 1% flex.
Mike: In the quarter tracked versus your internal expectations and then is there any way to think about.
Speaker Change: <unk> customers, which are adopting whether it's.
Speaker Change: Primarily coming from existing customers or new logo lands anything there would be beneficial.
Charles H. Giancarlo: Oh, Charlie, why don't you take adoption first, your view on adoption, and I'll discuss the comparability later.
Speaker Change: Charlie why don't you take adoption first yet in your view on adoption and I'll I'll hit the comparability of the Q1 adoption was perhaps a bit lower than we than we might have expected from a pure seasonality standpoint, but I would say that typically well first of all the evergreen one.
Charles H. Giancarlo: Yeah, the Q1 adoption was perhaps a bit lower than we might have expected from a pure seasonality standpoint. But I would say that, you know, typically, well, first of all, the evergreen one, interestingly, is adopted pretty much equally by both commercial, what we call commercial enterprises, mid market, as well as by large enterprises.
Speaker Change: Interestingly is adopted pretty much equally by both.
Speaker Change: Commercial what we call commercial enterprises mid market as well as by large enterprises and in the average quarter of certainly all through last year, we had a mixture of commercial and large deals in each of the quarters and that drove a lot of the number this quarter was characterized by not having a particularly large deal in an evergreen one and that compared with last year.
Charles H. Giancarlo: And in the average quarter, certainly all through last year, we had a mixture of commercial and large deals in each of the quarters, and that drove a lot of the numbers. This quarter was characterized by not having a particularly large deal in evergreen one, and that compared with last year, as having quite a few in that quarter. So yeah, we think of it as being just an aberration. We, you know, as we mentioned, we're still expecting 600 million, roughly speaking for evergreen one this year.
Speaker Change: Is having quite a few in that quarter. So yes.
Speaker Change: Yeah, we think of it as being just an aberration.
Speaker Change: As we mentioned, we're still expecting a $600 million roughly speaking for evergreen one this year and I'll double click on that a little bit and just in terms of utilization on evergreen one that continues to be very strong.
Kevan Krysler: Yeah, and I'll double-click on that a little bit. And just in terms of utilization on Evergreen One, that continues to be very strong in terms of deployment of our infrastructure, really following a very strong year last year. But as a reminder, you know, we began providing an annual view of TCV sales for our storage as a service offerings, really to help provide insights into our annual revenue growth expectations and provide, you know, quarterly updates to monitor progress against our annual expectations for the $600 million in TCV sales that Charlie alluded to.
Speaker Change: In terms of deployment of our infrastructure I really following a very strong year last year, but as a reminder, we began providing an annual view of T. C V sales for our storage as a service offerings really to help provide insights to our annual revenue growth expectations.
Speaker Change: And providing quarterly updates to monitor progress against our annual expectations against the $600 million in PCB sales that Charlie alluded to in.
Kevan Krysler: In Q1, our TCV sales for storage as a service offerings were $56 million, which is a bit of a slower start to the year than we would have liked. However, as we progressed throughout Q1, we saw strong demand and pipeline build, including large opportunities for storage as a service offerings. And consistent with our original FY25 forecast, we continue to expect 50% growth in our storage as a service offerings, and we'll continue to provide quarterly updates as we progress through the year.
Speaker Change: In Q1, our T C V sales for storage as a service offerings, where $56 million, which is a bit of a slower start to the year than we would've liked however, as we progress throughout Q1, we saw strong demand and pipeline build including large opportunities for our storage as a service offerings and consistent with.
Our original FY 'twenty five forecast, we continue to expect 50% growth of our storage as a service offerings and will continue to provide quarterly updates as we progress through the year.
Operator: Thank you, Mike. Terrific. Next question, please. Thank you.
Thank you Mike next question. Please thank you.
Operator: Our next question comes from Avia Merchant from Citigroup. Please go ahead; your line is open.
Speaker Change: Our next question question comes from <unk> merchant from Citigroup. Please go ahead. Your line is open.
Operator: Great, thank you for taking my question. Great results!
Speaker Change: Great. Thank you for taking my question.
Speaker Change: Great results.
Speaker Change: At the last quarter I think you provided when you even you guys talked about the fiscal 'twenty five guide I think you provided some.
Charles H. Giancarlo: If I may, at the last quarter, I think you provided when you guys talked about the fiscal 25 guide, I think you provided some ways to think about product revenues versus subscription services. If you can kind of double down on that, how we should think about product revenues, they were a little bit stronger than what I was modeling, versus subscription revenues, which came in maybe slightly lower. So maybe if you could just, you know, help us understand how we should think about the trajectory of those two, that would be great. Thanks.
Speaker Change: I just think about it the product versus subscription services. If you can kind of double down on that how we should think about product revenue they were a little bit stronger than what I was modeling versus subscription that came in maybe slightly lower so maybe you can just you know.
Speaker Change: Help us understand how we should think about trajectory of those two that.
Speaker Change: That would be great sure well, if you think about a transaction.
Charles H. Giancarlo: Sure. Well, if you think about a transaction, you know, any individual transaction, it will generally be one or the other. In the case of a CapEx transaction, there is a subscription component to it, but it's much smaller. And in the case of an Evergreen One transaction, there will be no immediate revenue associated with it, but of course, a higher amount of subscription revenue, you know, on an annual basis. And so, you know, from our standpoint, we want to provide the customer with whichever one of those services that they prefer. You know, while we have some incentives for the sales force to sell the subscription, we certainly don't want to lose a deal with a customer that wants to buy on a CapEx basis.
Speaker Change: Any individual transaction it will be generally one or the other in.
Speaker Change: In the case of a Capex transaction there is a there was a.
Speaker Change: Subscription component to it but it is much smaller and in the case of an evergreen one transaction there'll be no immediate revenue associated with it but of course, a higher higher amount of subscription.
Speaker Change: On a on a annual annual basis and so from.
Speaker Change: From our standpoint, we want to provide the customer whichever whichever one of those services that they prefer.
Speaker Change: While we have some incentives and for the sales force to sell the subscription we certainly don't want to lose a deal for a customer with a customer that wants to buy on a capex basis, and so all else being equal if we see assuming we're winning at the same rate if we see slower uptake on the subscription we will see.
Charles H. Giancarlo: And so, all else being equal, if we see, assuming we're winning at the same rate, if we see slower uptake on the subscription, we'll still win the deal on CapEx. And we'll see a somewhat overachievement on the revenue line in the immediate term. Whereas if we see greater uptake on Evergreen One, we'll see a lower effect on revenue in the immediate term. So that's the right way to think about it.
Speaker Change: We will still win the deal on Capex, we will see a somewhat over achievement on the on the revenue line in the immediate in the immediate term, whereas if we see a greater uptake on evergreen one will see a slow or lower.
Speaker Change: Effect on revenue in the immediate term so that's the right way to think about it.