Earnings Call: Q4 2021

Feb 24, 2021

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Pure Storage 4th Quarter Fiscal Year 2021 Earnings Release Conference Call. At this time, all participants are in a listen only mode. At the conclusion of our prepared remarks, There Will Be A Question and Answer Session. Touchtone pad at any time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Ms. Nicole Nattis. Ms. Nattis, please go ahead. Thank you, and good afternoon. Welcome to Pure Storage 4th quarter fiscal 2021 earnings call. My name is Nicole Noutsias, Investor Relations at Pure Storage. Joining me today are CEO, Charlie Giancarlo our CFO, Kevin Kreisler and our VP of Strategy, Matt Kixmuller. Before we begin, I'd like to remind you that during this call, management will make forward looking statements, which are subject to various risks and uncertainties. These include statements regarding the COVID-nineteen pandemic and related disruptions, our growth and sales prospects, competitive industry and technology trends, our strategy and its advantages, our current and future product offerings and Business and Operations. Any forward looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update 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 related to our business performance and reconciliations to the most directly comparable GAAP measures are provided in our earnings release and slides. Call. This call is being broadcast live on the Pure Storage Investor Relations website and is being recorded for playback purposes. Quarter. An archive of the webcast will be available on the IR website and is property of Pure Storage. With that, I'll turn the call over to our CEO, Charlie Giancarlo. Hello, everyone. Thank you for joining us on our Q4 earnings call today. I hope that each of you, your loved ones and colleagues are all safe and healthy. Pure ended fiscal 2021 with great strength in growth, setting revenue and sales records for the quarter and for the full fiscal year. Our portfolio has never been stronger with record sales in our Pure as a service offering, FlashBlade, FlashArrayC and Portworx. The completeness of our product suite accelerated sales growth in our enterprise and cloud segments in each and every theater and in our major verticals. Our Q4 results are a confirmation of the strength of our long term strategy and and a leading indicator of our opportunity to accelerate growth. I am pleased to share with you today these Q4 successes. Our long term strategy is to deliver a modern data experience to customers. It was gratifying that so many of our existing customers chose to Deepened the relationship with Pure as we've become an ever more critical component in their own plans for digital transformation. We also saw net new customer acquisition growth over last quarter and continued strength in enterprise. In Q4, we booked 8 figure deals with 8 large enterprise customers, a new record. It was just 2 years ago that we began significant investments in our enterprise go to market team. Our strength in that segment this past year is proof point of the successful execution of that strategy. Our ongoing commitment to marrying technological innovation with Customer centric business model is increasingly recognized by customers and the industry. With 7 years ranked as a leader, Gartner's recognition this year of Pure's clear leadership across both ability to execute and vision in their Magic Quadrant for primary storage arrays is a great validation of our strategy. And we also improved our already leading excellence in customer experience As measured through our net promoter score, for calendar 2020, Pure's 3rd party certified NPS Was 83.5, our 6th year in a leadership position and the highest score among vendors measured by Medallion. One of the most important components of our growth strategy is, of course, Pure's leadership team. This quarter, we welcomed Ajay Singh, our new Chief Product Officer. As CTO, Ajay will be responsible for our 5 business units and our technology alliances and will be a key contributor to our strategy to deliver modern data services. He brings to Pure extensive expertise in software and services to accelerate our growth into our as a service model and cloud native support. Our growth in Q4 is proof that our ability to deliver a modern data experience is resonating with our customers. They see the benefits of advanced technology from a trusted storage leader that supports a wide range of structured and unstructured data at scale and across any workload. But the Pure value proposition goes well beyond this. The Pure vision is to deliver real time access to resilient hybrid cloud managed storage services via code to developers and operations managers. Customers desire managed data services that are dynamic and provide a cloud experience with flexible on demand consumption. Needless to say, we continue to dramatically outpace our industry in both innovation and customer delight. And I'm excited to share four reasons why customers continue to lead with Pure. 1st, Pure delivers the simplest storage platform to operate, period. We continue to innovate with what customers appreciate, namely seamless upgrades, cloud management, pay as you go consumption models and both traditional and cloud native data services. This strategy is resonating with customers as validated In a Wikibon analyst report for cloud spending and adoption, their survey showed that Pure leads both hyperscalers and on premise legacy vendors in customer spending intent with an off the charts net score of 63%. 2nd, we continue to see strong customer adoption of our subscription services, which include our Evergreen and Pure as a Service offerings. Only Pure delivers a true enterprise class utility with flexible storage consumption, a cloud experience on premise, An easy path to move data to the cloud at any time and aligns spend with actual consumption. This year, we've continued to advance Our subscription services platform, reducing complexity by eliminating additional licenses and support costs and introducing a service catalog with transparent pricing. This quarter, our subscription services grew over 30% from 1 year ago. New customers for our Pure as a Service offering included 1 customer over $10,000,000 as well as U. S. Customer CloudWork, M ACA Mining Services in Australia and German telecom provider, Vodcom. And we saw customer adoption increase across every major area of the world. Given the significant customer benefits with our subscription services, we have created enhancements to our field compensation for these offers going forward. 3rd, last quarter, We expanded our industry leading data services capabilities for containerized cloud native applications with the acquisition of Portworx. Cloud native databases, analytics applications and AI frameworks such as Cassandra, MongoDB, Postgres, Kafka, Elasticsearch, Spark and TensorFlow are the tools upon which customers build their modern data pipelines. Pure has been quarter, with particular growth through our IBM partnership given our best in class support for Red Hat OpenShift and IBM Cloud Pak for data. The integration of Portworx into Pure has been one of the best that I have ever experienced, And we are just beginning to leverage Pure's go to market engine to drive Portworx. And earlier this month, We expanded our market leadership with major software updates to our flagship Purity software on both FlashBlade and FlashArray file capabilities to serve more markets and use cases. Best of all, we enabled customers to adopt these new innovations without disruption, downtime, additional cost or the requirement to rebuy new capacity. Sustainability is my 4th and final point. From our founding, Pure has focused on how our products can use less energy, require less Cooling need less maintenance and take up less space in the data centers and produce less waste. In the last 8 years, we estimate that Pure's FlashArray offering alone has saved over 4,000,000,000 kilowatt hours in energy use, Avoiding the greenhouse gas emissions equivalent to over 7,000,000,000 miles of automobile travel. It's eliminated 96 percent of data center rack space when compared to legacy solutions, which is approximately 19 continuously upgrade rather than discard their older storage equipment, avoiding the rip and replace required by legacy vendors and reducing waste in landfills. Pure's industry leading storage density allows customers to save on data center space and power when compared to other flash storage vendors. Now with Flasher AC, customers can fit 1 petabyte of effective storage into roughly 1 rack unit the size of a pizza box. Paying for only what one consumes is the right model for customers' bottom line, and rightsizing energy use and physical infrastructure ensures that customers don't pay to cool and power excess equipment. I'm very pleased with both the internal investments we've made over the past fiscal year and our focus on operational discipline. We made a commitment early in the COVID-nineteen pandemic that we would continue to make strategic investments in global talent focusing on innovation, including our acquisition of Portworx, customer support and scaling the company. We dramatically reduced travel, entertainment and other operating expenses, while increasing our investments in talent and critical growth initiatives in anticipation of increasing growth this year, while continuing to deliver operating income and generating positive operating cash flows. Our employees and our charitable foundation, Pure Good, also stepped up investments focused on COVID-nineteen response, food and housing in our local communities and in our workforce development initiative. Continuing our thoughtful approach to operating in this new normal, We recently announced to the company that we plan to use a hybrid approach when we return to the office with most employees able to work from home part activity and allow us to continue to attract and retain the best employees in the industry. I have never felt more fortunate to be at Pure. Our dedicated Puritans, our loyal customers and our partners and suppliers all displayed incredible perseverance, creativity and positivity during the past 12 months despite the personal challenges they each faced. The effect of the COVID economy on Pure's business has largely played out as we predicted over this past year. First, a short acceleration of business as customers shifted to work at home, an online business, then a sharp pullback as they took both of their business prospects and new plans for digital transformation, followed by a gradual stabilization based on the new normal. Now we look forward to a return to more significant economic growth as we expect the effects of COVID will begin to diminish during our fiscal Q2. I have increasing confidence that this year will be far better than last. On a macro front, I'm hopeful about the promise of increasingly plentiful and effective vaccines being distributed throughout the world. I believe that in this fiscal year, Our customers will accelerate their investment in digital transformation with renewed confidence of economic recovery. They will be increasingly confident in their ability to deploy new vendors, new systems and software into new use cases, And Pure will be high on their list. Thank you. And now I will turn the meeting over to Kevin for details on our financials. Thank you, Charlie, and good afternoon. We are very pleased with the strength of our Q4 performance, which was much stronger than we planned. FlashBlade and FlashArrayC both achieved consecutive record sales, and we continue to see strong demand with our enterprise customers who recognize The value that we are delivering. We completed a record number of deals above $10,000,000 and also achieved record sales during the quarter to our Fortune 500 customers. Sales of our subscription services continue to be strong, consistent with what we have been seeing throughout the year, including one of our top deals above $10,000,000 being Pure as a Service. Our sales growth, excluding cancelable orders, was slightly over 9% in Q4 compared to last year, driven by strength both in the U. S. And international markets. We are also very pleased with new customer acquisitions during the quarter as 471 new customers chose 1 or more of our solutions. Now turning to specific Q4 financial results. Total revenue of approximately $503,000,000 exceeded our expectations, quarter. Subscription services revenue grew approximately 32% year over year and represents approximately 30% of total revenue. As a reminder, Subscription services revenue includes Evergreen subscriptions and our unified Pure as a Service subscription, which includes Cloud Block Store. Total revenue, both in the United States and international, saw a slight growth compared to a strong Q4 last year. Our remaining performance obligations, or RPO, which includes our committed and non cancelable future revenue, grew approximately 24% year over year. Non GAAP total gross margins in Q4 was 69.4%, up 30 basis points sequentially compared to 72.1% last year. Product gross margins were 69.1% compared to 73.3% last year. As you might recall, last year's product gross margins benefited from unprecedented pricing dynamics of NAND. Subscription services gross margins were strong at 70.2% compared to 68.1% last year. Non GAAP operating profit during the quarter was approximately $36,700,000 compared to $60,900,000 last year. We were pleased that as we were navigating COVID related headwinds, we continued to invest in the business while only slightly increasing overall operating expenses. Operating income for the year was $46,000,000 as operating expenses for the year grew less than 3%. Non GAAP net income during Q4 was $38,800,000 and non GAAP net income per share was $0.13 Weighted average shares used With over $1,250,000,000 in cash and approximately 3,800 employees. Cash flow from operations was $69,000,000 and free cash flows was $48,000,000 in the quarter. During Q4, we repurchased a little over 1,000,000 shares for approximately $23,600,000 completing our $150,000,000 planned share repurchase program. We have also announced a new share repurchase program of up to $200,000,000 Now turning to guidance, Where we will provide some color on how we are thinking about this year as well as Q1. We do not plan on updating our annual view as we progress throughout year. For FY 'twenty two, we expect that total revenue growth will be in the range of 14% to 15%, factoring in continued growth of our subscription service offerings that will be a significant contributor to our overall performance. Capitalizing on the investments we made in FY 'twenty one, we expect to grow operating income to near $90,000,000 this year. Now moving to our Q1 outlook, as visibility continues to improve and with the strength of our enterprise business and momentum of our technology platform, We are forecasting total revenue will be $405,000,000 growing start out by talking a little bit about deferred revenue growth And reminding me what sits outside of deferred in RPO. Yes. Jake, thanks for the question. Let me just start because I'd like to just Start the overall conversation with the fact that we really did see an excellent quarter Across the board and given the strength that we've had in subscription revenues that we commented upon, As you might expect, we're seeing good growth and even greater growth in deferred than we see in actual revenues, Which bodes well for the future, gives us additional confidence overall going forward. So Kevin? Yes, Jake, let me just add on in terms of Obviously, RPO or remaining performance obligations, when you're seeing the growth sequentially, it's really being driven By the momentum we're seeing in our subscription services, principally around Pure as a service and the unified subscription with CBS. We're seeing some strength as well on deferred revenue and that's really in part due to the momentum overall we're seeing Both with our sales of our subscription services as well as increased momentum with the sales of our integrated solutions and appliances Great. Thanks for that. And then, on another note, I was wondering if you could talk a little bit more about Portworx and what you're seeing in the competitive landscape there. You bet. Right now, Portworx actually is almost the only game in town from what we can see with respect Two areas. One is a SPS offering for container based storage systems that And the second is the Kubernetes layer on top, which allows for the orchestration and management And in fact, we've recently provided additional information around what we call PX backup Portworx backup that enables customers to automate by policy the regular backup of the storage that they've created for their container based systems. So it and really, it's the only capability that combines Those two elements. And we're seeing very good traction. We're seeing good traction through our channels. We're seeing good traction directly by customers. And in particular, What is especially gratifying is the fact that we have a very high uptake by enterprise customers, Large banks in other areas as well. Yes, I would just add to that, Charlie, that I think it's been really gratifying to see the different types of customers that are adopting Portworx and Kubernetes. On one hand, you have literally the largest Wall Street banks in the world transitioning all their applications to Kubernetes and using Portworx to build out very large shared On the other hand, you have, for example, some of the largest gaming customers in the world that my kids spend probably too much time with, unfortunately, Where every time we log on globally, they're building more and more points of presence to host those gaming sessions totally in the cloud, all powered by Thoughtworks. So the diversity between large on prem as well as totally cloud native use cases is amazing. Yes, still early days, of course, But we're seeing good growth. Your next question comes from Jason Van Ader with William Blair. You may now ask your question. Yes, thank you. Charlie, can you talk about, I guess, just generally enterprise demand, which are the Strongest verticals for you right now. And then what I guess, what surprised you in the quarter overall? Yes. We are seeing, as we mentioned in our remarks, really good uptake by enterprise. And as you know, it's a while we've sold into enterprise most of our Existence, we really didn't make a major focus on it from a sales standpoint until a couple of years ago. And since that time, we've had 2 effects That we can really call out. One is that major strengthening of sales into existing enterprise customers, on more and more of their overall portfolio that we can fill. And secondly, a faster uptake by new enterprise customers, and in particular, as we mentioned, Our customers in the 8 figures, we've had several this year that were brand new customers that contracted with us for 8 figures. 1 of whom was a PaaS actually 2 of whom through the year were PaaS deals. And so our reputation, I think, in enterprise has been very strong, and we can expect, we think, this And just any comments on verticals and then what surprised you in the quarter? Yes. Frankly, the one vertical that where we had been struggling a bit is now coming through for us and that is big banks. Big banks were, if you might say, more conservative in their use of new technology and new well, especially new vendors. And we've seen an opening up of that segment for us. Yes, we're also strong in service provider and healthcare, and those have been good for us this year as well. And obviously, the cloud business 2018. Yes. I mean, of course, we've talked about that before. Again, 30% plus of our sales into cloud customers. We call it clouds 4 through N, 4 through 1,000, and that includes companies that Only provide cloud service to their customers as well as the cloud service of more traditional companies such as Epic. So we're in the Epic Cloud. And federal, any quick one on that? Yes. Federal is still not an area of strength for us, to be honest. That's an area where we are making Your next question comes from Alex Kurtz of KeyBanc. You may now ask your question. Thanks and congrats on the good quarter guys. Just on RPO and thinking about what The right metrics are for measuring the business given the move to Pure as a Service and Cloud Block Store. Is that really how we should be thinking about The growth rate going forward, I'd just like to hear your thoughts on how you guys look at the growth of the business outside of reported revenue growth. Yes, Alex, this is Kevin. A couple of things that we look at and share. Obviously, the bookings outpacing revenue is one metric That we look at and we were at 9% year over year growth on sales, which is outpacing revenue, really in large part Given the continued momentum we're seeing in our subscription services, if you break that down a bit more, when we're looking at the unbilled component of RPO and the strength there. That's primarily driven by our Pure as a Service offering. And then deferred revenue is really supported by the continued momentum we're seeing around our evergreen offering As well as the incremental momentum we're seeing in sales of our appliances, which includes the Evergreen report as well and subscription. So that's kind of how we're thinking about it and seeing good strength and momentum across the board there. Charlie, would you add anything there? Because if the future of the company is increasingly going to be Pure as a Service, Shouldn't RPO be kind of at the center of the discussion around what the growth rate of the business is? On a longer term basis, there are going to be other metrics. RPO, certainly one of them, such as ACV and net We've talked about this in the past. We think we need to get to a certain critical mass Before we think it makes sense to start to identify those on a regular basis. But increasingly, as subscription becomes a larger and And Alex, We'll take a look at that as we go through this year. We do plan on having an Analyst Day this year and we'll land on a date and Obviously, we'll look at some other metrics that will give you a good read in terms of our overall subscription business because For me, it's far beyond just Pure as a Service, which is great, but our Evergreen and Portworx are layered nicely into that as well, obviously. Yes. Thank you. Your next question comes from the line of Karl Ackerman with Cowen. You may now ask your question. Yes. Good afternoon, gentlemen. Kevin, could you discuss the linearity of OpEx leverage for fiscal area of OpEx leverage for fiscal 2022. I ask because the $20,000,000 loss in Q1 appears a little bit larger than normal But yet the full year outlook for operating margin of $90,000,000 well, it implies the best operating margin on record. So I guess maybe specifically, could you discuss the investments you are making in Portworx that might explain the outlook for Q1? Yes, I think Yes, good question, Karl. And then I think the first thing I'd start out with is, with Q1, you typically have this seasonality. It is our seasonally lowest Quarter in terms of revenue, that's pretty consistent. And so we were benefited if you look at the compare There in Q1 of last year on a couple of different areas. One was really around the fact that we did do some realignment with our work Forrester took a benefit in Q1 last year. When I think about what we're looking at in Q1, that might be a little bit different on the OpEx front. Certainly some strength around our sales of our subscription services. So we do have more comp coming through as a result over time because of the subscription services. So we're dealing with that a little bit in Q1. But to your point, Seeing a lot of strength post Q1 in terms of what we see in returning to operating profitability. And to your point, really happy with the fact that we're looking at almost 90,000,000 profitability for the year. And really what we're doing is capitalizing on the investments we made really through this COVID environment. And Daniel, we saw some early indicators of that return in Q4. Expect that to carry forward as we continue through the rest of the year. So hopefully that helps you out, Carl. Yes, it does, Kevin. Thank you. Maybe a question for Charlie. Earlier today, Seagate spoke about how data growth is going to Double every 3 years. While it would appear that most of these data will continue to be stored on high capacity disk in the aerial density Improvement shown from HED roadmaps. Your FlashArray C addresses very well. I think the demand for low cost fast storage across multi tenant environments. And so first, do you think FlashArrayC will remain the largest driver for you over the next 2 to 3 years? 2nd, now that FlashArrayC appears to be more than 10% of your revenue, Is there a way to frame the TAM or growth opportunity of your FlashArray offering? Thank you. Yes. No, it's a great question. We do think We had regularly given out TAM numbers before. We think FlashArrayC fits within the TAM numbers that we had identified previously. It just opens up more of that market to From a serviceable portion, but FlashArrayC continues to be, 1st of all, the fastest new product we've ever introduced. Secondly, the only product of its glass that can compete from a purely a price standpoint with hybrid disc arrays. And third, and to your point, the price of QLC and the price of And what we're able to do with it for C shows that flash continues to decrease on a per bit basis faster than magnetic. And what that means is that as those Costs converge, we're going to see more and more of the magnetic market move over to flash. It opens up the opportunity for us given our first mover advantage In that secondary tier of storage with flasher AC, we think we're in the best position to continue to take advantage Yes. The only thing I would add to that is there was some great analyst commentary just this last quarter about how we're a couple of years off from that complete convergence. But that commentary misses the benefit of data reduction. And so today, we actually deliver the value that folks think are years away of being able to replace disk in the data center completely with Flash. And I think it's the crystallarity of our founding vision of Pure 10 years ago Look at flash as something that would really be the dominant storage technology in the data center to deliver the all flash data center. It seemed like a pipe dream 10 years ago, But those are the exact kind of deals we're doing today for customers, bringing together the strength of FlashArray, FlashBlade and FlashArray C to go after every use case in the data And just to finish your question, which has to do with FlashArrayC versus everything else, It's a great new product and we expect great things of it. I also expect great things from FlashBlade and from Portworx. They're all in large growth segments of the market. It's certainly true that the secondary tier market has been immune to the economics of flash up until now, And it's equal in size and opportunity to the primary tier market that we've already taken advantage of. So yes, we think it's Going to be a great opportunity for us, but not the only one. Your next question comes from Rod Hall of Goldman Sachs. You may now ask your question. Great. Thank you. So I wanted to ask you I wanted to go back to these 8 large enterprise deals that you guys called out and see if maybe you could talk a little bit The competitive situation there, was there any particular competitor you were displacing there, any particular use case that's resonating with people? Just wonder if you could dig into those deals a little bit more and help us understand how you won those? And then I've got a follow-up. Absolutely. Well, it was a mixture of new and existing customers, mostly existing customers. Certainly a mixture of portfolio of the verticals, big banks, cloud and traditional More traditional enterprise companies. I would say that on average, as I think across All eight of them. It shook out pretty similarly to our average competitive Portfolio, that is to say, mostly Dell, but certainly NetApp, a very big win up against NetApp and primarily those 2 vendors, I would say. Okay, great. And then I wanted to follow-up on the supply shortages that are out there and expectations that NAND pricing is going to go up later in the year. I wonder if you maybe could Wrap those two questions into one answer. Do you expect supply shortages to be a problem? And Are you factoring that into your thinking? How you're factoring it in? And then what does NAND do to your economics later in the year? Thanks. You bet. So As you may recall, we are we have a very strong supply chain. We were unaffected and of course Our supply chain team was very busy, but our customers were completely unaffected at the beginning of last year when COVID hit. We have some of the best lead times in the business overall. As we look going forward, yes, we do expect NAND pricing to stabilize, if not to get a bit stronger, that is a bit higher In the next couple of quarters, we think demand has picked up and supplies are a bit constrained, We don't expect any shortages. There have also been reports, of course, of other semiconductor shortages. We're on top of that. We don't Expect to see any, although certainly lead times are starting to lengthen, but we're taking appropriate action there overall. There was another part of your question. I think that was it. I mean on NAND, the margin impact, just remind us that you would expect any kind of We don't expect much of a change in margins due to NAND is fairly well behaved from the way we look at things right now, and therefore, we don't really expect much change in margin due to NAND pricing. Great. Okay. Thank you. Your next question comes from team Long of Barclays. You may now ask your question. Thank you. And just 2 if I could. Just following on those the big deals, could you just talk a little bit about obviously it was a great quarter, talk a little bit about How the pipeline for the large deals looks and anything on the complexion there? And then second, can you Charlie, can you touch a little bit on the commercial Vertical, obviously cloud and enterprise recall strong. So maybe just walk us through What's going on there? I'm sure it's a lot of macro, but kind of the outlook for some recovery in that vertical. Thanks. Let me take that second part, I'll hand it over to Kevin. So we continue to see weakness in commercial, although I will say we saw a serial strengthening of That or sequential, I should say, strengthening of commercial. But frankly, it's still suffering and it's one of the areas that As COVID subsides, we hope to see improve. There are some early signs that that might be the case, but clearly the mid market has suffered much More than the large enterprise overall on average. Our expectation, what we've built into our planning is that we should see, because of both summer months and hopefully some effect of the vaccine. We should see a dissipation of the COVID effects in the middle or somewhere in our Q2. And that's our forecast sort of is based on a lessening of COVID effect, both in Commercial market as well as in enterprise generally. But, yeah, no, commercial mid market still suffering, but we're seeing some Some light at the end of the tunnel, and we're hoping that as COVID subsides, we're going to see that improve. And then just adding A little light in terms of around our guide for Q1 and annual in correlation with the big deals that we were really pleased to see in Q4. Look, we've got plenty of opportunities that we're looking at and working with Customers on that we're hopeful. We'll continue the pace as we progress through next year, including these large deals we Saw in Q4 and building on that. But when we think about the opportunity set, it's really broader. As we think about next year, Subscription services continues to have great momentum and that's building for us and then obviously that helps out with a little bit more certainty in terms of how that rolls out into revenue. So that's great for us to see. As we see build of our opportunities, we see some nice build out further beyond Q1, which is nice in terms of our guide for the annual year. So we've got some good confidence on that, but It's broad based and not completely focused, if you will, on the big deals, which we're always pleased to get. Thank you. Yes. Your next question comes from Erik Satiger of JMP Securities. You may now ask your question. Yes. Thanks for taking the question. First off, I'd just be interested to hear, as you look out To the pandemic dissipating, how do you think that will materialize? What will change Is it more just being able to engage personally with the customer? Or where do you think the most notable changes will take place? Yes. We've thought about this a lot. I think the most notable change will actually be customers being willing to start to reenter the office. And why is that? Well, we depend a lot on as a company on 2 things. 1 is commercial, as we talked about, but the second one If the customer is willing to take on new products or put products into new use cases. And we're largely still an on prem vendor and their willingness to do so is enhanced tremendously When they can go into the office. You might imagine that using a new product in a new workload is something That customers can be concerned about. And when they're able to go into the office and address things, if something goes wrong, they feel much more comfortable Being able to do that. So our dependence on both commercial and net new logos depends on customers feeling more comfortable to go into the So that's really what we're going to be looking at. Now, it doesn't require 90% of their team to be able to go in the office, just their technology to feel comfortable going to the office trying new things. So that's what we'll be looking at. Okay. That's very helpful. You don't break this out, but can you talk a little bit about what portion of your customer base buys Across the different product categories, FlashBlade, FlashArray and maybe PAS or do you look at your cross sell metrics, anything you can share on that front? We do look at cross sell metrics and it's quite interesting. If we look at FlashBlade, for instance, it's roughly 50% of our sales will go into an existing FlashArray customer, an existing customer, and half will go into a brand new customer as well. I would say Portworx is a bit too early. Flasher AC tends to be majority new customer sorry, existing customer, but we do have brand new customer So it's a good balance. If I had to put an overall percentage on it, it'd be about fifty-fifty, but it depends on the product. What about Pure as a service? That's very interesting. We've had a very high percentage of net new customers on Pure as a service. It really has allowed us to enter new customers with a unique value proposition where we might not have been given a chance before. Your next question comes from Pindjalim Bora of JPMorgan. You may now ask your question. Great. Hey, thank you guys and congrats on the quarter. Charlie, given that this is the 1st fiscal year for Dominic to put his impression on the sales or pen and its processes. Could you talk about any material changes that you're thinking of or you have already put in place going into the new fiscal year in terms of comp changes or incentive structure changes. Yes, absolutely. Well, we've consolidated our overlay sales Operations now into a single overlay, and that's going to allow us to really treat, Which is going to be a highly technical sales and SE operation. And that really allows us to balance, if you will, new products, while at Same time transitioning the more mature new products into the core The mainstream sales operation. So that's been a significant change. Of course, we've made, As we do every year, we've made changes to the compensation program, not and I want to be clear, not major changes, but Balancing all of the products and intentions that we have for this year, making sure that we have incentives as we talked about Before, as I talked about in my prepared remarks for Pure as a Service, but also for Portworx going forward, I think Dominic's understanding of how to sell an enterprise and how to sell, in particular, software and service offerings It has really modified the way we've thought about that and therefore allowed us to change and in many ways simplify Our compensation program to really focus on the elements that are important, while at the same time making everything else mainstream And to make sure that our sales force really has the training, the knowledge and the And I'd just add just in terms of, Charlie, on the fuel compensation And what Dom and yourself are doing, it really extends to Evergreen Gold subscription. We're really trying to Make sure that the field is promoting that given the value proposition there. Pure as a service, Cloud Block Store And Portworx as well as FlashBlade. So we've continued to highlight FlashBlade. We've gotten wonderful momentum with FlashBlade and that offering in use cases and that will continue as we look at the next year. Understood, helpful. And just to follow-up, maybe Charlie or Kevin, any one of you can take this. But When I look at the guidance, it seems pretty solid. But when I look at the range, maybe it's a little bit wider than usual. So trying to understand how would you peg The environment going forward, would you say that it is back to normal? Is there I mean the shape of the year, would it be more in this towards the second half ramp versus the first half. Help us understand that. Yes. I'll start with that tactically and let Charlie add on to it. But I think you're thinking about that right. So we're looking at probably in the Q2 timeframe really to start to see noticeable diminishing effects, If you will, of COVID. And we've built that into how we're thinking about the entire year. And so that is So obviously, second half, we are looking for some incremental momentum in terms of how we're thinking about our annual outlook. Charlie, do you have anything else you want to add on that? Yes. No, I think that's correct. The only the uncertainty we face is, was it the beginning of Q2, is it the end of Q2? And what does the end of what does the fall of the year look like from a COVID standpoint? But our belief is that It will continue to improve throughout the year, second half. And obviously, the compares this coming year are going to be wonky as well Given COVID last year. But that being said, we feel fairly good about the guide that we've about the forecast that Yes. I'd just add on a little bit more in terms of, obviously, the momentum that we've seen this year and expect to continue next year in terms of outperformance on our subscription services. That gives us a little bit more predictability in terms of how things will fall. We've got really solid growth drivers As we've talked about with FlashBlade and FlashArrayC, we do expect continued momentum with Enterprise. And as Charlie mentioned, it's really looking at the commercial and mid market recovery, really second half post COVID, if Your next question comes from Simon Leffold with Raymond James. You may now ask your question. Thanks for taking the question. Charlie, I think my question It really goes back to your comment about the trend being a little bit wonky in that we've got a relatively or very easy comparison to the pandemic. So I'm wondering if you could give us some idea of what you see as the maybe normalized growth rate on a year over year basis, if there is some way to adjust for what the effect of the pandemic has been and what you think your growth should be. Yes. Well, definitely safely within the double digit range. Certainly, as you might recall, this time last We were projecting a 20% growth rate. I have no reason to believe why that wouldn't have been the growth rate Going forward, but as it is, we're going to be facing at least 4 to 5 months of this calendar year still with A strong COVID effect, and it's hard to say exactly how long that will be. So I hope that gives you some semblance of where we would expect to be. Yes. I would add on to that for the quarter, for Q1 of last year, that would be a strong compare. Obviously, when COVID set in for us, That was later in the quarter. So we had a strong start to last quarter as well as the fact that we had some tailwinds As folks were working through some technical debt to respond to COVID. So I'd actually view Q1 last year as strong compare, but it's a fair statement for the full year. Great. And then in lines of sort of the idea that there's recovery and some return to normal, What is your thinking in terms of your operating expense budget where you might be introducing or reintroducing travel expenses and things like that. Have you made some assumption for the timing and impact? And is that incorporated into this operating income for the full year that you've considered? Or do you think that happens later? Thanks. It's You're thinking about this exactly right. We're going to feather that in. It's incorporated into our guide. Clearly, we've taken this past year, We've taken T and E and put it into headcount, if you want to put it that way, into investment. As we go forward, travel is not going to start up like a light switch. It's going to take time to build up. Customers will have their own pace by which they will want to physically meet and get together. So we're going to be cautious. I don't even want travel and entertainment to get up to the same level it was pre COVID. But at the same time, our expectation is that expenses will grow slower than revenue, And that's on a total basis. So by definition, since we've pre invested, if you will, into headcount, It will mean an even slower growth in the area of travel and entertainment. Your next question comes from Katie Heberti of Morgan Stanley. You may now ask your question. Katie Hubertis of Morgan Stanley. Your line is now open. You may ask your question. Thank you for the question. The $10,000,000 subscription deal was particularly impressive in the quarter. Can you just talk about what you think is driving underlying adoption of Pure as a service? Is COVID a factor as companies focused on cash preservation? Or is Much more of a sustained shift in how customers are thinking about buying product on prem. And then I have a follow-up. Yes, Katie, I think it's more the latter, sustained shift. I think what they are it's more about it's less about cash flow per se For the customer and more about uncertainty of where they want their data on a going forward basis. And so with Pure as a Service, They're able to fulfill their needs, which tend to be on prem today and know that whether it's a year or 2 years For 30 months that they can then shift to the cloud without having ongoing obligation on prem or having a reduced obligation Whatever balance that they are looking for. So it gives them extreme flexibility. So it saves them It allows them to make a decision today without worrying about long term effects. That makes sense. I would also just add to that real quick, Katie, that we really view this as a product innovation strategy as much as a business model. And it's one that I When you look at what we're offering compared to the kind of financing options many of our competitors offer, it really allows us to differentiate our Our experience with customers, we're delivering a cloud like experience that bridges on prem and actual deployment in the cloud that's unified subscription. And another interesting thing we did this last quarter was open up the services catalog. So we are providing transparent pricing where a customer can go in and see Exactly what storage costs and subscribe to it. And we've seen the first transactions come through that in an automated fashion. Great. And Charlie, I want to come back to an earlier question. Somebody asked about large deal pipeline. Can you just talk about The broader pipeline exiting January, what that looked like versus October? And have you already started We've seen the commercial market, as I've mentioned, It is improving somewhat, but still far below where we had exited last year, for instance. We're seeing better conversions on the enterprise side of things. And So that gives us hope. And in general, I'd say certainly compared to a year ago, increased amount of enterprise and large enterprise, much Larger fraction of large deal activity. I hope that gives you some color. Your next question comes from Amit Duryanani of Evercore. Your line is open. You may ask your question. Hi, this is Irvin Liu dialing in for Amit. I jumped on the call a bit late, so forgive me if this was addressed. Can you help us better understand some of the assumptions that are embedded in your 14% to 50% revenue growth outlook for fiscal 2022? Just any thoughts on product versus support revenue trajectories would be helpful. Just trying to parse this out. Thanks. Yes. I'll start and then I'll let Charlie But obviously what we've been chatting about is terrific momentum with subscription services that we've seen really throughout The entire year. We fully expect to build on that as we look out to next year. And that's really being driven by our Evergreen subscription, By Pure as a Service, unified subscription with Cloud Block Store and Portworx. So again, I'd say business as usual with continued momentum there. I think on the product side, what you've seen is some modest improvement in Q4 in terms of Where we're landing from that perspective, we expect to build on that. You'll see some improvement in terms of how we look at that for Q1. And then obviously, we would expect to get back to growth on product revenue as well as we go throughout the year in terms of how we're thinking about it. The growth drivers Really will continue to be enterprise as well as FlashBlade, FlashArray C. And then we fully expect it To Charlie's point, after or as COVID diminishes to get further recovery from our commercial business and building upon our strength that we saw in Q4 on that new logo. Charlie, would you add anything else there? I think, Kevin, you handled most of it. I would just say that We do expect product growth that is traditional CapEx product growth to increase, albeit We expect subscription growth to outpace the capital equipment growth on a going forward basis. All right, this concludes the question and answer session. At this time, I will turn the call back over to Charlie Giancarlo for closing remarks. Thank you. In closing, I'd like to thank you all and thank all of our employees, our customers and our partners For all of their support through this past year. Despite it all, Pure has accomplished a great deal, both around the exact timing of the recovery from this pandemic. We're confident in our vision, our strategy and our team's ability to grow and to scale Pure. I want to thank you all for joining us today. Goodbye. This concludes today's conference call. You may now disconnect.