Earnings Call: Q4 2020

Feb 27, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the Pure Storage 4th Quarter Fiscal 2020 Earnings Conference Call. At this questions. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Danziger, Vice President of Investor Relations. Thank you. Please go ahead, sir. Thank you, and good afternoon. Welcome to the Pure Storage Fourth Quarter and full year fiscal 2020 earnings conference call. Joining me today are our CEO, Charlie Giancarlo our CFO Kevin Chrysler, our VP of Strategy, Matt Kixmuller. Before we begin, I would 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, competitive industry and technology trends our strategy positioning and opportunities our current and future products business and operations, including our operating model, growth and sales prospects, bookings and its relation to our revenue, and revenue and margin guidance for future periods. 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 relating to our business is contained in our filings with the SEC, and we refer you to these public filings. During this call, we will discuss non GAAP measures in talking about the company's performance and reconciliations to the most directly comparable GAAP 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 for at least 45 days and is the property of Pure Storage. With that, I'll turn the call over to our CEO, Charlie Giancarlo. Thank you, Matt and good afternoon, everyone. Thank you for joining us on today's earnings call. I am pleased with I'll share highlights from the year, explain why Pure is best positioned to help enterprises navigate their digital transformation and share our excitement for the future. Kevin joining us for his first pure earnings call will follow with a review of our financials and an outlook for next year. At Accelerate last September, we announced pure strategy for our 2nd decade. Our portfolio of products running our unified purity software and all managed by our pure one cloud can now serve the majority of data workloads for our customers. Mission critical production test dev, analytics, disaster recovery and backup and recovery in all environments, on premise, in cloud and hybrid. The purity software platform brings performance, simplicity, and cloud era API automation to storage at any scale. We call this strategy the modern data experience and we are succeeding by helping our customers transform their storage operations to a modern shared as a service model. I will share Before I share our results and because it is on the minds of both our customers and investors, I would like to spend a moment on the Corona virus outbreak. We sympathize with all of those directly affected by the virus and we commend everyone working so tirelessly to address it. We have taken active measures Based on what we although the situation remains and we continue to monitor the developing situation diligently. Now to our results. I will share color the full year and later Kevin will provide highlights from Q4. Fiscal 2020 finished strong with total revenue of 1,640,000,000 growing 21% year over year, while navigating through an unparalleled industry pricing decline. In Q4, we started to see a return to a more normalized pricing environment. PURE's continued differentiation is evidenced by our 70.5 percent non GAAP full year gross margin. Non GAAP operating profit was 56,000,000 demonstrating yet another full year of profitability. We exited the year with over 1700 new customers bringing our total customer count to more than 7500, which now includes 44% of the Fortune 500. Pure is delivering the modern data experience through our portfolio solutions and services built around 4 key tenets. Fast matters, cloud everywhere, simple and smart, and a subscription to innovation. These tenants drive our engineering innovation engine and resonate with customers because it aligns with their requirements for cloud like API driven operations and performance across their infrastructure. It enables them to deliver a storage as a service experience to meet the needs of their developers dev ops teams, and modern applications. Pure's technology portfolio and continued pace of innovation are paying off with transformative products and solutions that delight our customers. Pure enabled customers to transform their storage operations from bespoke manually manage silos to a modern shared as a service model, delivering choice and flexibility in how storage is consumed and managed. A key hallmark in Pure Strategy is our subscription services with Cloud Block Store, PURE as a service, and our evergreen business model. Cloud Block Store on AWS released in Q2 of last year is helping customers implement migration test dev and disaster recovery use cases for mission critical applications and cloud block store is now in beta for Microsoft Azure. PURE also joined Google Cloud Anthos Ready Storage Initiative for multi cloud deployments earlier this month. We achieved the largest ever bookings of PUREZA Service in Q4, including wins at 3 major international banks. PURE as a service allows customers to unify their storage procurement strategy to a consistent cloud model whether deployed on premise, in cloud or in a hybrid environment so that they can focus on what matters, driving business transformation. Pure provides a true hybrid utility model offering flexible storage consumption as a genuine hands free OpEx service. Turning to our portfolio. Pure suite of products has never been more comprehensive. Today, we announced the 7th generation of FlashArray further raising the bar on the product that continuously redefines modern storage. This new FlashArray X delivers 25% higher performance for mission critical applications with a fully end to end NVMe architecture across all models and supports advanced storage class memory. And like every generation of FlashArray, the new FlashArray X is available through our non disruptive evergreen subscription upgrade for existing customers. Flasher AC introduced in Q3 of last year is the 1st and only all flash product in the industry to bring flash performance to Tier 2 application economics. We are seeing phenomenal adoption of FlashArray see and in its first two quarters has already become PURE's fastest growth product ever. Pure's FlashBlade product has redefined what's possible with big, fast data as customers look to create an all flash data hub to consolidate their file and object data to power next generation analytics AI and container infrastructure. A particular area of strength is the massive growth of log analytics as customers use FlashBlade to solve cybersecurity fraud detection and IoT use cases in partnership with Splunk, Elastic and Vertica, and rapid restore continues to be popular use case for FlashBlade made better in Q4 with the introduction of FlashBlade Safe Mode a unique anti ransomware solution that has already helped several metropolitan area cities protect and recover from potential ransomware attacks. Lastly, we held our annual sales kickoff meeting in San Francisco just 2 weeks ago and the excitement from our team was extraordinary. On our Decadle anniversary last fall, we announced our strategy to transform the current box based enterprise storage environment to an integrated multi cloud experience. In FY 2021 and beyond, we're committed to deliver on our modern data experience and pure as a service strategies to accelerate our customer's digital transformation journeys. And with that, I'll turn it over to Kevin. Thank you, Charlie. We were pleased with our solid broad based performance across all key financial metrics this quarter. Total revenue during Q4 was $492,000,000 growing 17% year over year. Product revenue was $377,000,000, growing 11% year over year and subscription services revenue was 116,000,000 growing 41% year over year, which includes revenues from our evergreen subscriptions, pure as a service and cloud Block store. Total revenue in the United States in Q4 was $345,000,000, growing at 15% year over year in total international revenue in Q4 was $147,000,000, growing 21% year over year. Non GAAP gross margins in the quarter for product and subscription services continue to be strong and differentiates us in the market Total non GAAP gross margin in Q4 was 72.1 percent, increasing 4.5 basis points year over year. Non GAAP product gross margin in Q4 was 73.3%, increasing 5.5 basis points year over year. And non GAAP subscription services margin in Q4 was 68.1%, increasing 1.3 basis points year over year. Total non GAAP operating profit during Q4 was 61,000,000, increasing 30,000,000 year over year. Non GAAP net income during Q4 was $64,000,000 and non GAAP earnings per share was $0.23 per share, Non GAAP net income in Q4 of the prior year was $37,000,000 and non GAAP earnings per share was $0.14 per share. Weighted average shares used for the non GAAP earnings per share calculation was $277,000,000 in Q4 and $264,000,000 in Q4 of the prior year. Operating cash flow for fiscal 2020 was 190,000,000 and was $165,000,000 in fiscal 2019. Operating cash flow in Q4 was 70,000,000 and was $81,000,000 in Q4 of the prior year. Free cash flow for fiscal 2020 was 102,000,000 and $64,000,000 in fiscal 2019. Free cash flow was $56,000,000 in Q4 and was $51,000,000 at the end of Total deferred revenue at the end of the year was $697,000,000, increasing from $536,000,000 at the end of the prior year. During Q4, we repurchased $135,000,000 remaining in our share repurchase authorization. Total headcount at the end of the year was approximately 3400 employees and was approximately 2900 employees at the end of the prior year. As Charlie mentioned in his prepared remarks, we are actively monitoring the coronavirus developments and although we are not seeing specific impacts on the business currently the situation is fluid and unpredictable. Potential adverse effects to our business have and growth outlook of our Revenue derived from our subscription service offerings is recognized over time and is recurring as such we believe a useful is the annual growth rate including initiated Evergreen, peers of service, and cloud Block store subscription services. Given that these subscription offerings provide recurring revenue, Total revenue next year is expected Non GAAP gross margins $60,000,000 for the fiscal year. Moving to our Q1 guidance. Total revenue for Q1 is expected to be approximately 3.65 last year's Q1 revenue benefited from a shipping issue during Q4 twenty nineteen. When normalizing for this shipping issue, our guided Q1 revenue growth rate would be are expected to be approximately 69.5 percent and non GAAP operating loss in Q1 is expected to be approximately $40,000,000. I am very excited to have joined the team at Pure Storage and the opportunity ahead. We see strong momentum and with our Your first question comes from Alan Ray, Aaron Rakers from Wells Fargo. Yes, thanks guys for taking the question. If you can, I think you mentioned during the during the prepared remarks you're starting to see a more normalized pricing environment and flash? Can you just help us understand how we should think about that dynamic to the model. And I, you know, just curious of what you saw pricing wise this last quarter, on a, on a quarter over quarter basis and what underpins your assumption for the current quarter guidance? Right. Well, as you know, from prior quarters, We had a early in the early parts of the year, just saw breathtaking price declines in the market that were created through by a free fall of NAND pricing earlier in the year. Now NAND prices do fall every year, which is generally good for us because creates elasticity in the market. It allows us to go after more magnetic, magnetic storage, which we're very excited about. But when it dropped very suddenly, then elasticity doesn't have time to catch up. What we saw in Q4 is what we, are used to seeing, generally year in and year out in normal years. And we know that, the commodity prices are, have been, have stabilized for some time, are projected to go up next year. And so that, presages to us a normal pricing environment and one in which we can hopefully, regain even better growth initiatives, and certainly allow us to continue to grow ahead of the industry. Aaron, this is Kevin. When you think about specifically for the annual guide and Q1 guide, in this concept of a normalized pricing environment, that really contemplates both a volume expansion as well as what we would consider normalized declines in ASPs. And again, that's what we've seen outside of the dynamic that we saw this past year. Okay. And then just as a quick follow-up and maybe somewhat tied to that is you guys continue to report a really remarkably strong gross margin for the business, both product and overall. How do you guys think about using maybe gross margin more actively to go after more velocity in the business? Is that Is that something that as we look at this next, you know, forward fiscal year, given the guidance that you guys are starting to invoke a little bit more activity on that front? Or what's embedded in the gross margin outlook going forward? Thank you. Yes, thank you. As you know, we can use gross margin in two ways. One is to fund the business, and the other, of course, is to, fund pricing declines compared to competitors. Our view is that, and we look at this literally every week. And our belief is that, in fact, it's the software value that we provide that is having our customers paying 10% to 20% premium for our product versus our competition. And we don't really believe that we ever lose a deal based on price. So I mean, we do lose deals. And when we do, the price may be lower than ours, but generally, it speaks it's for other reasons. And so, the minute we feel like we could win, we would certainly trade off price for, for more wins, but we don't believe that that's what we're seeing right now. We continue to believe that expansion of the sales force more feet on the street, calling on more customers on more opportunities is the right way to use our, our margin. Thank you. Thanks, Aaron. Next question. Your next question comes from Alex Kurtz from KeyBanc Capital Markets. Hey, thanks guys for, for taking the question. You know, Charlie, the last couple of quarters with the pricing environment, I remember having a discussion with you about And when when the market stabilized that, you know, there would be, some revenue upside as you kind of see the NAND price environment improve, right, because at some level, it's a little bit of a pass through impacting both negatively and positively. So you know, as you look at the full year guide, is that contemplated at all as far as, capturing some some revenue upside from this? We definitely are looking at this year as a much more normal, pricing environment. And that allows us to forecast a 20% growth year, compared to a flat industry. We're certainly not we're looking at a roughly a flat macro year to year. So we're not projecting upside or downside, you know, in the overall industry, overall, but we believe that in a in a, overall, environment in which pricing holds that we're going to have well above competitive performance in terms of growth. And let me just add on to that, if I could, and Charlie, look, we're in terms of our business growth next year, as Charlie said, we're running at 20% and that's why we provided that bookings metric for you, Alex, for this year in terms of how we're looking at it. And a couple of dynamics that I would just highlight. One is, again, the subscription services that, that we're seeing in terms of momentum, which really is creating this dynamic of a lag between bookings and revenue that we'll see next year. But we also want to be prudent given the current environment, as we're, we're clearly seeing some headwinds on the macro side and want to make sure we're contemplating that. Now that would exclude coronavirus, but Outside of that, we're still seeing some headwinds. Just one question quickly for you, Kevin, given your time at VMware company that can obviously distribute software at scale globally. You know, what do you think about as far as bringing best practices from from that platform cure and kind of where do you see opportunities to, you know, expand Evergreen And Cloud Block Store? What's your initial thoughts so far? Yes, let me, I'll share some initial thoughts in terms of my view, but I would also probably comment from an observation standpoint that the company is doing a really nice job. In fact, best practice in terms of software development, the amount of investment we have in our R and D group on soft where and and clearly, that's what's already differentiating this company, from from its competitors. And so from there, you know, we'll we'll look at different models, to spand on. And that's why we're really focusing on our subscription services, including pure as a service and a cloud block store. And, you know, Alex, you actually know this well. 95% of our developers are software developers. So we're a software company that in, you know, started out by shrink wrapping it in, in iron. And now, you know, more significantly, you know, we have products such as cloud Block Store, which is 100% of our purity software operating directly top of AWS and now in beta on Azure. And it's a unique, and unified software offering operating across all of our products, and multi cloud, multi platform. And, pretty soon, both, with respect to FlashArray multi tier and multi protocol. So we think this is a real big differentiator. Most of our have multiple products to deal with different workloads and environments. We're going to be able to satisfy it with 1, one software based all managed by a single management system in Pier 1. So, we think that it's such a pleasure to have Kevin on board to help us, you know, because, of course, it does mean, transitions in the way that, that we look at, recognizing revenue, at managing, yeah, subscription business, managing software business. So it's great to have the skill set on board. Thanks Alex. Next question please. Your next question comes from Rod Hall from Goldman Sachs. Hi, this is Bhalla Reddy on for Rod. Thanks for taking my question. If I look at this full year, clear 21 revenue guidance of 1,900,000,000. The implied revenue growth is 16% year over year. However, if I compare this 1,900,000,000 guidance to the original fiscal 2020 revenue guidance that you that you guys gave any year back, the hypothetical implied growth rate is only 7%. You mentioned a faster subscription business But outside of that, just wondering if anything has changed fundamentally in the all flash array market for the past year? There an element of conservatism in the guide as well? I have a follow-up. Well, I can't speak to the 7%. I don't understand that calculation. I mean, it is, we in our prepared remarks identified the revenue growth is 16%. But we do believe that increasing amounts of our bookings as subscription revenue, is going to, of course, cause bookings to increase at a faster rate overall than revenue. And that's what we meant to start to identify, for our, for our investors. All right. I have a query on operating expense as well. So the implied OpEx guidance, if my math is right, it looks like it's growing at roughly the same rate as revenues around about like 15%, 16%. Can you give some color on why you're not seeing the benefits of operating leverage as the revenue scale increases? Yes, I think the first thing I would highlight is that we'd be expecting our growth of operating expenses to actually be less than our revenue growth, which would be different than what we saw this year. So, so good improvement on that, on that front. Other thing I'd highlight is, when we look at our investment plan for next year, we're contemplating a 20% growth rate. Again, that's why we provided, a new metric for you in terms of bookings. And, you know, as we're growing the subscription revenue business, obviously, you see a lag in revenue due to the recurring revenue we're generating our subscription business. And that's putting some pressure, on our operating profits. But even with this dynamic, like I said, our revenue growth will be outpacing our investment, growth. And look, we're committed to continuing to invest in growth, our philosophy of driving more, operating leverage into the business over the long term remains unchanged. Next question comes from Katy Huberty from Morgan Stanley. 5 new customers signed in the quarter is, I think, a record. Can you just talk about the initiatives behind driving the stronger level of new customers and therefore bookings? And then I have a follow-up. Absolutely, Katie. We took on an initiative early in the year to really improve our overall ability to build, on lead generation and building a good pipeline. And that included really focusing on new customers, especially of course, enterprise customers. And, we're very pleased that to finished so strong in the year. And we believe that this is something that's going to continue to work for us. I'm especially pleased with the growth that we saw in enterprise customers. A lot of them quite new, and therefore opening up new potential for the future. And then any color around the contribution from FlashArray C in terms of percentage of bookings or the number of new customers that product brought to you in because they can be quite lumpy. But two quarters of growing revenues with the FlashArray, as I mentioned, fastest new product, fastest growth of any new product in the company's history. I think one reason for that is it is a FlashArray it's just a flash array with, QLC rather than regular. So it's a full fledged. It's not a, I wouldn't consider it, for example, a version 1.0 product. It's a version 7.0 product with a new price performance range built into it. And, so we would expect it to get out of the box early and good, but it's probably it's performing even better than we might have hoped. First quarter, I knew it was going to be good because obviously we had been there have been pent up demand and we've been pre selling it for a couple of quarters before that. But to see the second quarter outpaced the first was really, largely based on in quarter demand gen, it was really nice. That's great to hear. And just lastly, Kevin, you said that you don't expect supply or operational impact from coronavirus? Do you have much of a revenue base in China? Have you seen any demand either in that market or in APJ more broadly? Yes. So, we do have some business in APJ. It's a lower percentage than what we see across the world. But as we mentioned, we're not seeing any demand issues at this point in time, relating to coronavirus. Right. And Katie, just FYI, as you know, we have very little, revenue that comes out of China. We're not really invested in China in that way. So, and China is a relatively small part of our supply chain. Your next question comes from Karl Ackerman from Cowen. I was curious, how much of the slowdown in revenue over the last few quarters? Do you think is attributed to what seems to be a, shift in the purchasing decisions of how on prem customers procure storage, such as greater input across software storage and compute departments before making the final decision. And I guess, does that partially explain maybe the elevated level of OpEx investment you plan for this year. So just if you could comment on that. And then as my follow-up, just given what appears to be somewhat of an uncertain spending environment, how are you thinking about, ways to extract costs beyond just maybe more efficient sales cohorts such as customer acquisition costs and or other indirect channel costs. Thank you. Thank you. So in terms of the changing nature of decision making, in the enterprise. That's certainly the case. I feel that we've actually, that's an area where we've actually had some fairly good results we believe because we're we're very focused around, workloads and use cases and we're able to go into the different departments, not always the storage admin and be able to describe our products in terms of how we can make it easier with less less activity around infrastructure manage management for those organizations to get the output of the applications that they're looking for. So I think that's actually worked for us. I wouldn't say that that's increased our cost of sales, at all. If anything, I think it's made us a bit more effective in being able to penetrate accounts that, let's say, were strongly held before by our competition. On the, I'm sorry, just to Operational efficiencies. Oh, the operational efficiencies. We have a big push this year to really expand the see and effectiveness of our channels. Part of that was due to the fact that, as a smaller vendor before, The channel has really relied on us to do most of the selling as we're getting bigger and more, a greater percentage of their, of of their portfolio is based on pure. They are training more of their staff to do more of the selling. But another part of this is that we were deficient in our systems and in our materials to better enable our channel partners to be more independent. And there's been a big initiative starting last year but ongoing this year. And we, I think we'll see some more fruit coming out of that this year. The lag in revenue, which is putting some pressure on operating profits this year. When you take a look at our operating expense as a percentage of revenue that's coming down slightly. And we're looking to get some operational efficiencies, especially within sales and marketing, in the non quota caring head environment. And so we expect to see some improvements there despite, what we're trying to do from an investment standpoint in your investments with our quota carrying heads. Thanks Carl. Next question please. Your next question comes from Jason Ader from William Blair. Yeah. Thanks, guys. I jumped on the call late, so apologies if this was already asked. I thought I was on the, VM work call with Kevin here. So but I I I wanted to just understand a little bit better about the, the leverage So, originally, you had talked about 6% to 11% for fiscal 2021. Obviously, the revenue growth has been pretty solid, and you're clearly taking a lot of market share. But what was the explanation you gave for, you know, the the limited leverage this year because my math says it's about 3% operating margin implied for fiscal 2021? Yes, your math is in line there, Jay. And we addressed that and how we are looking at that for next year is first of all, when we think about our business growth trajectory, it's about a 20% growth rate. And that's why we provided a new metric for bookings to give you a sense on how fast we think the business will grow next year. And so as a result of the fact that that growth is being, driven by, increased subscription services, we're seeing a lag in revenue due to the recurring nature of the revenue being recognized. But even with that dynamic of our revenue growth, it's a revenue growth that's outpacing our investment growth, even with that dynamic. But look, at the end of the day, we're still committed to investing for growth and our overall philosophy of driving more operating leverage, which again, we'll see in sales and marketing next year. Over the long term remains unchanged. Okay. So just to be clear, This is just a function of more of the business, being ratable. And as a result, you're gonna you're basically getting less revenue upfront and therefore, you you can't get the leverage as quickly. Is that Yeah. You're thinking about that right. That's right, Jason. Yep. All right. Thank you. Thank you. Next question. Your next question comes from Simon Leopold from Raymond James. Great. Thank you for taking the question. I wanted to try to maybe get a bridge on what happened in the, in the gross margins in fiscal 2021, both the next quarter as well as the year. In that you've had, you know, two quarters with, with product gross margins that look like they're, you know, they've been 73 and so our net's been better than expected. And so I'm trying to discern how much of of the the forecast is regarding input pricing, competitiveness, product mix, if there's some kind of bridge that you could help kind of connect the dots between where you've been and where you're going on gross margin? Yes. Sure, Simon. And this is Kevin, and I'll take it at first. And again, like you've mentioned, our gross margins have been terrific and really do believe this is a differentiator for us in the market. Now, a couple of things specific to this year, that I think is different than how we're looking at it, for next year. But we did see some benefit in our gross margin this year, from the extraordinary pricing dynamic that we experienced. And again, as Charlie mentioned, we that pricing dynamic is going to normalize, similar to what we saw in Q4 throughout next year. So obviously, we wouldn't get the benefit in gross margin next year, from that pricing dynamic. The other, element I would highlight is that we did see, last year, more of a mix shift towards our larger systems, which also had a higher margin profile for us. And we will, we're actually estimating that that mix shift will remain relatively consistent as we look at next year. So those 2 benefits, if you will, will normalize going into next year. And that's why a little bit of a drop in gross margin. Great. And I wanted to follow-up in terms of the demand side of the coronavirus in that it's obviously a very fluid situation. And I get certainly the aspects around your supply chain. I'm a little bit surprised that you're not seeing anything from a demand perspective in that. It sounds like we're seeing large enterprises, for example, you may have customers that are airlines and hotels that may be rethinking their businesses. And so I I I respect the fact you've done your due diligence and you surveyed your sales channel. I I just sort of feel a bit puzzled that you're you're not picking up slowing from from your customer base. Is there any way you can help us get a better understanding of why you'd you'd see that resilience or your immunity from the virus? Absolutely, Simon. So, we're just going to speak very, you may very well be correct, but let me just speak factually. We're not yet seeing it in any of our Q1 business. And I think it's far too early to start predicting Q2 and beyond. Given the uncertainty of the virus, whether it's contained or not contained, how much of the quarantines may affect you know, customers orders and so forth. So you may very well be correct. I hope you're not, but the fact of the matter is we're not yet seeing any effect on our Q1 business or on the Q1 forecast. Obviously, that could change in 2 weeks, but we are where we are right now in the quarter. Thanks, Simon. Thank you for taking my questions. You bet. Next question please. Your next question comes from George Iwany from Oppenheimer. Thank you for taking my question. So, Charlie, just following up on that, are there any regions where there any indications that things are changing, our deal sales cycle is basically the same as they were last quarter. It's very early in the quarter, to be honest with you. So, I'm not even sure that that we would see it unless it were a dramatic change, you know, in tenor. But so far, no. Okay. And just from a competitive standpoint, how do you feel about win rates versus your, main competitors? Very good. No real changes, you know, every week, every month, every quarter. Is a tough fight with our competitors, but we continue to outpace them in terms of growth. We're group, if we look at Q1 through Q3 for where we have the industry analysts, we grew three times more than our closest competitor and probably 20 points more than the industry, as a whole. I think we're taking share from every, from every competitor. And if you look at some of some of the more recent announcements, they're actually shrinking while we're growing. So, we feel very good about our competitive position. Thank you. And last question. Yes, please. Just on the cloud box store, you know, with Azure and beta now, AWS being GA for a while, how do you see the customer reaction to, the expanding reach? Yes, very good. I think for several reasons. One is, they really see it as a, as a unifying force and portfolio. They can design to 1 set of interfaces. They can design to 1 management environment and manage their data regardless of whether it's on prem in or, or regardless of which cloud they put it into, they're, they're pleased that they can take some of their primary their primary application environments, and now they have an easier way of being able to, transition them the cloud without having to do, you know, a full, refactoring or rewrite, of the software. And, you know, we're seeing a lot of interest in new use cases that I outlined in my prepared remarks, especially around Doctor, DevOps, and, and backup and recovery. So you know, it is very new. I will put it that way. It's very new for customers. And so there's, and we're happy to see a lot of tire kicking and a lot of testing. Going on. And, we're, it gives us great optimism as we, that, the products will continue to scale and grow in our customers' minds. Thank you. Thank you. Next question please. Your next question comes from Wamsi Mohan from Bank of America. Hi. Yes. Thank you. Can you help us think through how much of your 2020 growth either in revenue or bookings terms you're expecting that might come from upgrades from prior controller sales versus new customer sales? Yes, this is Kevin. We don't break that out. And really what we're looking at is really, the differentiation between our subscription business, which is growing very fast rate versus, you know, cap purchases. And that's really how we were looking at the business. Although, Wamsi, I think, you know, with 500 new customers in in the quarter over 1700 on a year to year basis. I think you can understand that there's quite a quite a bit of business that comes from new customers. You know, of course, the new customers have to absorb the products that they buy, get used to them, understand our value proposition. To come in for more. But we get some very large new customers. We've gotten some very large orders from brand new customers, which is a change from before, when we were younger, there'd be a lot of tire kicking before purchase. Now we're finding new customers buying with sometimes 7 figure new product sales. So first time sales, I should say. So we're very pleased with new customers, but of course, the meat and potatoes of the business is growing our revenue inside of existing customers. And I think that's an area where we continue to focus a lot of attention. Thanks for that, Charlie. And just on cash flow, you obviously had a very nice cash flow generation for the full year. How are you expecting both CapEx and free cash flow to trend in this coming year? Yes, I think a general line of thinking for CapEx and year would be about 5% of revenue is how you should be thinking about it. Your next question comes from Pinjellan Borer from JPMorgan. Thank you. Hey, guys. One question on, the platform motion, Charlie, we have heard from your partners a pretty positive things about selling the platform. I'd love to hear what, how are you driving the sales motion, what are you seeing, especially are you positioning pure as a service as the default choice essentially for the same? And, are you making any specific changes on the compliance to incentivize kind of a bundled up from selling? Absolutely. Well, Pinjolin, we just, we just completed our sales kickoff and, a big theme of the kickoff was, you know, what we call our modern data experience strategy, and pure as a service. And I would say that the encouragement for the sales force is to position PURE as a service first in a new, in a new customer situation, because it very much differentiates us in the market overall. Now that being said, the sales force is paid pretty much equally. There should be no For a salesman, they will get paid roughly the same, whether it's pure as a service or or a CapEx sale because we really want them focused on providing the customer what they want, what they want and they need. We want to give the customer flexibility and give them choice. But at the end of the day, we want the customer to really be deciding for themselves, not our sales team based on how they're, how they're compensated. But we're, we're very pleased with the take up of, of pure as a service. And we, definitely a good acceleration year for us. And, I think it's taking time, customer's time to look at their own data centers differently than they look the cloud, of course, clouds always subscription first, but their data centers have been communities. I will say, some color on this is that we're getting not just first time 6, but also 7 figure deals. For PURE as a service. First time deal, it might be an existing customer or new customer, but either way, these deals now first time Puros service deals in these customers, 6 and 7 figures. Wow. Interesting. Okay. And on that vein, I guess, as that takes, or accelerates and the subscription becomes the business becomes larger and you're talking about this lag effect to revenue and you kind of highlighted the bookings metric how should investors track that on a quarterly basis? I mean, should people start looking at calculated billings, RPO based bookings, or would those metrics have kind of an impact from term changes and maybe add some noise What is the best metric for investors? Right. It's a great question. We, as Kevin mentioned on the call earlier, we provided a bookings metric and that can be used on an annual basis right now is what we're looking at to track it somewhat. But we do understand there are other metrics that as this becomes a greater percentage of our business, that investors are going to want to know. I'll let Kevin, speak to this Yes, I think a good starting point, especially with the traction we're getting with our subscription services was this first new metric around bookings on an annual basis. And I think an annual basis is the right way to look at it, at least for this year. Because you're going to have variability quarter over quarter. So we'll give this a start. And as we get into the year, if there's important information to reflect, we'll definitely do that. Your next question comes from Eric Suppiger from JMP Securities. Yeah, thanks for taking the question. Couple of questions. 1, just to be clear, are you not doing any of your contract manufacturing in China? And then secondly, Can you talk a little bit about your visibility into your flash supply? Do you have 90 days out or what kind of inventory do you stockpile on that? Yes, let me start with that and then I'll turn it over to Kevin for some of So we do have some of our sub assemblies, that come out of China. We've been right on top of that, where we know each of the factories, each of the lines know how they're operating. And so as we said, we're very confident. We're fairly confident as confident as one can be at an uncertain environment, for Q1. We high degree of confidence. Q2, obviously, it's a fluid situation. It's too early to project for Q2. We have no reason to doubt it, but it's still we can't really speak to it with, with surety at this point in time. Yes, nothing to add to that, Charlie. Yes. In terms of the flash supply, we have good visibility into it. We're very close to our suppliers. As you know, most flash comes out of places like Korea, Japan, and the U. S. We are, fairly well diversified. And we, as I said before, we feel fairly confident in our ability to supply this with FlashArray seat. You've been shipping that for a couple of quarters. Is there any updates in terms of who you're seeing most or any competitive pricing dynamics there? This is Kix. I'll take this one. So I think one of the biggest surprises around FlashArray C is it's largely been completely unanswered by the competition. And so, you know, we've really enabled ourselves to go after a whole new set of use cases around Tier 2 data with FlashArray C. And operability between X And C allows customers to implement tiering strategies and to really have applications seamlessly go back and forth between tier 1 and tier 2 flash. It's been a great growth story. Haven't heard much from the competition on it at all. And so we feel like that's a great part of our business that set up well for the year. Thanks so much, Eric. Next question please. Thank you. Your next question comes from Amit Darianani from Evercore. Hey guys, this is Michael on for Amit. So I wanted to touch on the guide, for Q1, you're pointing sales up around 11% versus the full year around 15%. Can you just tell us kind of what changes the year goes on to have growth inflect? Yes, you know, in my this is Kevin. In my prepared remarks, our Q1 revenue does is in line with our expectations. A couple of things that I mentioned though is, you know, back in Q1 of last year, we had a shipping issue in Q4 that actually benefited Q1 to about four points. And we actually evaluate or normalize that shipping issue and the benefit in Q1 of twenty twenty, we're right in line, from a seasonality perspective, whether you look at it from Q4 to Q1. Whether you look at it as a percentage of total revenue. So, I think we're quite aligned in terms of how we're looking at it, but it did impact our growth rate for Q1. Okay. And then just one with the it sounds like pure as a service is going pretty well. We're just kind of wondering with where you're seeing the uptake on that? Is it more existing customers or is it something you're seeing enable net new gains? Yes. No, it's both, actually. It's very interesting. We're definitely seeing net new gains, but that is new customers who are buying in this like to buy in this manner. But we're also seeing existing customers who are changing the way that they want to buy. And it's actually given us new opportunities, frankly, in environments where we might not have done quite so well, but the fact that our competitors can't really compete with this model. So, it's, it's really given us new opportunities, both in existing accounts as well as new accounts. Yes, one other dimension I would add that I think sometimes folks miss is that pure as a service is also a transportable subscription. And so the conversation we're having with customers is about being able to deploy now on prem. But have that optionality to move to the cloud whenever they like is really game changing. And it's something that differentiates our as a service offering compared to all the competition. Yeah. That was particularly true in one very large customer that we have, who plans on migrating over time to Azure they're a beta customer, obviously, of our CVS on Azure. They're a big user of our on prem, but continue to be buyers of our on prem storage. But the fact that they will be able to more easily move their primary workloads, over to Azure, because it's based on our product been just a huge advantage for us. Okay. And is that something that you're not seeing offered by competitors in the market? We're seeing repackaged leases. It's not the same. Your next question comes from the line of Nehal Jockey from Maxim Group. Yeah, thank you. And congratulations on a great quarter. So this bookings guidance of 20 percent of revenue growth is 16%, the Delta subscription, to help tease out to make sure that this is indeed the, delta there is indeed subscription. Can you tell us what percent of bookings in fiscal year 2020 was subscription? And how much do you expect it to increase to in fiscal year 'twenty one? Yes, this is Kevin. And again, as I mentioned, we're sharing the bookings growth rate for next year really because this is the 1st year where we're seeing divergence, divergence where expected bookings growth rate is outpacing our revenue growth rate. We did not see a similar dynamic, last year. And so that's why we're not going to go into a lot of detail in terms of what our bookings growth rates were in the prior year, really because the divergence we're seeing is the first for this upcoming year. And again, the bookings growing at a faster rate than revenue is really being driven by the momentum of our Evergreen subscriptions and and peers of service in our cloud blog store. Okay. And then, can you just give a little detail on the mechanics of the subscription here. IE was the distribution of a of of a subscription booking between revenue, deferred revenue, and unbilled contract value, and the first quarter of a dollar of a book subscription? Yeah. So, you know, in terms of the detail, first of all, you know, TCV is really being used both for, our subscription services as well as our capital transactions. So you've got similarity there. But you're right. You are going to have situations where some of the subscription services will be outside of deferred revenue. You should be picking up a big portion of that in the remaining performance obligation that we disclose as well. And with that, we'll turn the call back over to Charlie. I want to thank you all for joining us on this call. As you might be able to tell, we are, very pleased, not only with Q4, but with our performance, you know, throughout FY 'twenty. It was a fantastic product year for us. We announced our strategy for the next decade, which is to deliver a, platform that allows customers really to realize the value of their data, as a service and with cloud like efficiency and orchestration. We are very excited about the opportunities in front of us. We understand what our customers want, and we believe the combination of our subscription services our product portfolio. And frankly, the experience that only Pure offers enable us to really deliver the kind of data experience that our customers are expecting and provide the solutions that are, that our, company, that our customers need to allow them to digitally transform. Want to thank you for your time today's conference call. Thank you for participating. You may now disconnect.