Good day. Thank you for standing by. Welcome to the Nutanix Q4 Fiscal 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question- and- answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. And now I'd like to hand the conference over to your speaker today, Richard Valera, VP Investor Relations. Please go ahead. Good afternoon and welcome to today's conference call to discuss the results of our fourth quarter and fiscal year 2021. Joining me today are Rajiv Ramaswami, Nutanix's President and CEO, and Duston Williams, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing financial results for its fourth quarter and fiscal year 2021. If you'd like to read the release, please visit the press releases section of our IR website. During today's call, management will make forward-looking statements, including statements regarding our business plans, strategies, initiatives, vision, objectives, and outlook, as well as our ability to execute thereon successfully and in a timely manner, and the benefits and impact thereof on our business, operations, and financial results, our financial performance and targets and use of new or different performance metrics in future periods, our competitive position and market opportunity, the timing and impact of our current and future business model transitions, the factors driving our growth, macroeconomic and industry trends, and the current and anticipated impact of the COVID-19 pandemic. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a detailed description of these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as well as our earnings press release issued today. These forward-looking statements apply as of today. We undertake no obligation to revise these statements after this call. You should not rely on them as representing our views in the future. Please note, unless otherwise specifically referenced, all financial measures we use on today's call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Lastly, Nutanix management will be participating in the Deutsche Bank Technology Conference on September 10th, the Piper Sandler Global Technology Conference on September 13th, and the Jefferies Software Conference on September 14th. We hope to see many of you at these upcoming events. With that, I'll turn the call over to Rajiv. Rajiv? Thank you, Rich. Good afternoon, everyone. I hope you and your loved ones are healthy and safe as we continue to navigate through the COVID pandemic. Our Q4 was a strong end to an excellent fiscal year, which was marked by consistent execution and good progress across both financial and strategic objectives. Nutanix delivered a strong fiscal 2021 across a number of areas. We exceeded our guidance every quarter of the year as our team consistently overachieved. We saw good linearity within each quarter as we benefited from ongoing operational improvements in our go-to-market engine. We also saw improved deal economics and the continued build-out of our renewals business, which will help drive acceleration of our top line as we approach the completion of our subscription journey. Importantly, we drove these top-line improvements while carefully managing expenses, leading to a substantially improved bottom-line performance compared to our prior fiscal year. On the strategic front, we received a $750 million investment from Bain Capital in Q1, which provided additional financial flexibility to fund our growth. We made good progress on our alliance partnerships, extending our relationships with HPE, Lenovo, and most recently, signing a new agreement with Red Hat. Looking deeper at Q4, we outperformed on all our key metrics, seeing all-time or recent records in a number of areas. We reported record revenue up 19% year-over-year, the best growth we've delivered in the last three years. We saw record ACV billings, which grew 26% year-over-year, our highest growth rate in over two years. We again saw good linearity in Q4, which contributed to better-than-expected cash flow. The underlying momentum in the business gives us confidence in providing strong guidance for the first quarter of our fiscal 2022, and we believe positions us well to achieve our plan for the balance of the year. Overall, we were pleased with our fourth quarter and fiscal 2021 financial results, which were delivered against the continued challenging backdrop of COVID-19. We saw strong momentum across our entire hybrid multi-cloud portfolio during the quarter, including both core and emerging products. Our emerging products, new ACV bookings grew over 100% year-over-year and saw a record rolling four-quarter attach rate of 41%. One example of a complete portfolio solution was our largest deal of the quarter, a multimillion-dollar ACV deal with a Fortune 100 financial services company that expanded their use of our core HCI software to run their mission-critical applications, along with a large expansion of their Era footprint to automate and simplify their database management. Nutanix Clusters, a key component of our hybrid multi-cloud platform, continued to see solid momentum during the quarter. One example was a Global 2000 real estate e-commerce company that purchased Clusters on AWS to expand their Nutanix footprint and enable their lift and shift data center consolidation. In Europe, a large government ministry chose our cloud platform, along with a unified storage solution, including files and objects, as their primary cloud platform. I'd now like to take a moment to highlight some key takeaways from our Investor Day in June. We highlighted our leadership position in the large and growing hyper-converged infrastructure market and the substantial additional opportunity we see in our adjacent markets. Specifically, we noted a combined total available market opportunity in our core and adjacent markets that we expect to exceed $60 billion by 2025. We shared our plan to focus on delivering a single platform that takes Nutanix's hallmark simplicity and performance into the hybrid multi-cloud market. We laid out a roadmap for our solution strategy and how we are streamlining our portfolio, focusing on fewer, bigger bets in the areas of Database as a Service, unified storage, and Desktop as a Service. We also explained how we are expecting to see go-to-market leverage by executing on low-cost renewals, benefiting from solution selling, and from increasing our focus on partnerships. Finally, we provided a model targeting free cash flow breakeven in the second half of calendar 2022 and 25% annualized ACV billings growth through fiscal year 2025, and we are tracking well on both metrics. Next, I'd like to also provide an update on some of our previously discussed priorities. First, on deepening our partnerships to provide more impact on how we go to market. Our recently announced partnership with Red Hat, the world's leading provider of commercial open source solutions, brings together Red Hat industry-leading Red Hat Enterprise Linux, or RHEL, and its OpenShift container platform with the simplicity, flexibility, and resilience of our cloud platform. Nutanix is now the preferred choice for HCI on Red Hat's platform, and our AHV hypervisor is certified to support RHEL and OpenShift on the Nutanix platform. Likewise, OpenShift is now the preferred choice for enterprise full stack Kubernetes on the Nutanix platform. Finally, the two companies also have a mutual support agreement and a research and development roadmap focused on ensuring customer success and enhanced integration respectively. This partnership provides customers with a full stack platform to build, scale, and manage containerized and virtualized cloud-native applications in a hybrid multi-cloud environment. We see it as an important proof point in our strategy of furthering customer choice and enhancing our platform by partnering with other best-in-class providers. During the quarter, we also announced an expanded partnership with HPE, in which we are offering Nutanix Era, our multi-database operations and management solution, bundled with HPE ProLiant Servers as a service through HPE GreenLake, in addition to our core platform, which is already a part of the HPE GreenLake offering. Now, I'd like to turn to another of my priorities, diversity and inclusion. We released our first environmental, social, and governance, or ESG, report during the quarter detailing our initiatives in these areas and establishing a baseline we can measure ourselves against. This is an important first step in our journey towards having greater diversity and inclusion in our workforce and enabling more sustainable businesses for both Nutanix and our customers. We also held our first global women's conference in July, where Nutanix leaders and outside experts spoke to our entire employee base about how we can redefine leadership to include diverse backgrounds and perspectives. In closing, I am pleased with the execution across the board in our fourth quarter, as well as our full fiscal year, especially given the challenging backdrop created by the pandemic, and the fact that it was the first year of our ACV model. We are entering our fiscal 2022 with a strong position. Finally, I'm looking forward to connecting with many of you at our upcoming.NEXT user conference being held September 20th through the 23rd, where we look forward to welcoming tens of thousands of our customers and partners. Please see our earnings press release, our website for registration details. With that, I will hand it over to Duston Williams. Duston? Thank you, Rajiv. Q4 was another quarter of consistent execution, as well as a great way to finish out the fiscal year. Sales were strong throughout the entire quarter. There was no unusual deal slippage, and we built backlog during the quarter. In Q4, we exceeded all guidance metrics, and our overall business model continues to be strengthened by the benefits of our subscription focus. A few key highlights for the quarter included, record new ACV billings, record total ACV billings, record total billings, record total revenue, record emerging products new ACV bookings, record number of greater than $1 million transactions in the quarter, and we had the largest year-over-year total percentage growth in revenue since Q4 2018. I'll move on to some specific Q4 financial highlights. Before I get into the specific details for the Q4 and FY 2021 financial highlights, I would like to remind you that all future financial disclosures will align with the disclosure and guidance metrics roadmap that we provided during our June 22nd Investor Day presentation. For further details and clarifications about our go-forward disclosure plan, I would encourage investors to review the slide titled Guidance and Disclosure Plan FY 2022 from my Investor Day presentation. ACV billings for Q4 were $176 million, reflecting 26% growth year-over-year, above our guidance range of $170 million-$175 million, and ahead of the street consensus number of $173 million. New ACV bookings, which includes new logo ACV as well as upsell ACV, experienced the strongest year-over-year growth rate since Q1 2019. ARR at the end of Q4 was $88 billion, growing 83% year-over-year. Run rate ACV as of the end of Q4 was $1.54 billion, growing 26% year-over-year compared to our estimated growth of mid-20% range. Our average contract term length increased slightly to 3.4 years versus 3.3 years in Q3 2021 as our largest deal in the quarter from an existing customer was a five-year term. We also had a few other notable five-year deals from existing customers. At this point, we would expect our average contract term lengths to trend back down next quarter, most likely in the low three-year range, as Q1 usually carries a significant amount of federal business. Our federal customers typically have much shorter average contract term lengths. Assuming contract term lengths do approach the low three-year range in Q1, we would approximate the TCV to ACV billings ratio to be somewhere around 2.25 versus the 2.4 in Q4. Revenue was $391 million, growing 19% from Q4 2020, substantially above the street consensus number of $365 million. We have not seen this level of year-over-year growth rate in revenue since Q4 2018. Emerging products new ACV bookings grew in excess of 100% year-over-year. Emerging products attach rate was 41%. The Q4 sales rep productivity significantly exceeded our assumptions set forth at Investor Day. Our non-GAAP gross margin in Q4 was 82.9% versus our guidance of 81.5%-82%. Operating expenses were $373 million versus our guidance of $380 million-$385 million. Our Q4 expenses included approximately $12 million in severance expense related to our previously disclosed sales and marketing headcount reduction. Our non-GAAP net loss was $55 million for the quarter, or a loss of $0.26 per share. Q4 linearity remained very good. DSOs in Q4 were 48 days, up from 37 days in Q3 2021, and down significantly from 68 days in Q4 2020. Our free cash flow for Q4 was once again aided by good linearity, coming in at a $-42 million, $16 million better than the Street consensus. We closed the quarter with cash and short-term investments of $1.21 billion, down slightly from $1.25 billion in Q3 2021. Before I provide the Q1 guidance overview, let me first do a quick recap of FY 2021. ACV billings were $594 million, growing 18% versus FY 2020, and versus the $590 million-$595 million range we provided at our Investor Day. Once again, as we mentioned last quarter, our total fiscal year ACV billings are not derived from the simple addition of the four fiscal quarters. For our reported quarterly ACV billings, we annualize any deal that is less than one year in term length, and our yearly ACV billings calculations eliminate any duplication that happens with the renewal of a deal that occurs within the period and is less than one year in duration. Based on this methodology, over the last three fiscal years, the sum of the four fiscal quarters of ACV billings have exceeded the adjusted annual ACV billings by 6%-7%. We would encourage investors to account for this distinction during the modeling process. FY 2021 new ACV billings, which includes new logo ACV as well as upsell ACV, were $433 million, growing 11% versus FY 2020 and versus the $430 million-$435 million range we provided at our Investor Day. Our renewal business performed well within our expectations. FY 2021 renewals ACV, including LOD support renewals, were $161 million, growing 38% versus FY 2020 and versus the approximate $160 million estimate we shared at Investor Day. FY 2021 renewals TCV, including LOD support renewals, were $179 million, growing 32% versus FY 2020. Revenue was $1.39 billion, growing 7% versus FY 2020. The yearly revenue growth was impacted by term compression during the year. Customer retention, including LOD and subscription, closed the year at 96%. The gross retention rate for our subscription business continued to operate within the range of greater than 90% as provided during our Investor Day. The net dollar retention rate, including the LOD business, was 124% versus the Investor Day estimate of approximately 125%. The net dollar retention rate for our subscription-based business only was 158% versus the Investor Day estimate of approximately 155%. Emerging products new ACV bookings grew 97% in FY 2021, and we also added 61 G2K customers in FY 2021. Now, turning to our Q1 2022 guidance. The guidance for Q1 is as follows. ACV billings to be between $172 million-$177 million, representing year-over-year growth of 25%-28%. Gross margin of approximately 81.5%. Operating expenses between $365 million-$370 million. Weighted average shares outstanding of approximately 216 million. The Q1 ACV billings guidance, which calls for the year-over-year growth of 25%-28%, compares to the actual growth of 14% in Q1 2020, 10% in Q1 2021, and versus the Street consensus growth for Q1 2022 of 23%. Based on continued good execution, an increasing renewal base, and a robust backlog, all supported by a strong product portfolio, we are pleased to project a Q1 2022 year-over-year ACV billings growth rate that is on par with our strong Q4 2021 ACV billings growth rate of 26%. Based on the Q1 2022 ACV billings guidance, we expect ARR to grow 65% or more year-over-year. I'd like to make one final comment regarding our ACV billings trends for FY 2022. Due to our growing mix of renewals, for the second half of FY 2022, we would expect a higher amount of ACV billings in Q4 versus Q3 than what is currently reflected in the consensus estimates. This mix shift from Q3 to Q4 is a direct result of our growing ATR, or Available to Renew, base of renewals that show a proportionally larger increase in Q4 versus Q3. We strongly advise analysts and investors to carefully look at their quarter-over-quarter ACV billings estimates to ensure that the strong growth in Q4 relative to Q3 is reflected in models. With that, operator, could you please open the call up for questions? Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Your first question comes the line of Aaron Rakers with Wells Fargo. Yeah, thanks. Congratulations on the quarter. I just wanted to maybe level set the discussion around the base of renewal opportunity and the linearity throughout this next fiscal year. Duston, is there any way that you can help us frame of, just relative in size, how large the base of renewal opportunity looks like this year, relative to fiscal 2021, and what exactly that linearity does look like as a progression through the quarterly numbers through fiscal 2022? Sure. Aaron, we provided a fair amount of detail during the Investor Day. We obviously just reported on the 2021 numbers. We gave a 2023 estimate. We gave a 2025 estimate during the Investor Day, too. Relative to FY 2022, again, there won't be obviously a massive increase in FY 2022 on the renewals, just because you've got some offsetting LOD support renewals declining, and then the subscription renewals increasing. I will tell you, and I mentioned this in the script, that the first three quarters of the fiscal year have a slight increase, but not much, but there's a large tranche in Q4 that starts to kick in on the subscription renewals. That's why the comment was just to look at the quarterly splits there, because there will be, just based on the ATR, the Available to Renew in Q4, the amount increases quite a bit relative to certainly Q2 and Q3. Yep. The real quick follow on is that you talked about the average weighted terms coming down relative to 3.4 in fiscal 1Q. Do you think that we continue to trend downward through the course, the successive quarters through fiscal 2022? Well, probably not that much. A tenth here or there maybe, but again, in Q1, the federal business ends up being a much larger percentage of the total business just because of the. Federal terms are quite a bit lower in general. You saw the same thing actually from Q4 to Q3, you saw. I think it's a three-tenths of a year decrease Q4. As we see it today, we're seeing already Suspect it'd be flattish a little bit. I don't think there's any change of the 2.8 to the 3.0 as we see it today, as we laid out at Investor Day. Very good. Thank you, Duston. You're welcome. Your next question comes the line of Jason Ader with William Blair. Thanks. I have two quick ones. First is, it seems like you're taking share in the HCI market in the first half of calendar 2021, and I was hoping you could talk about why you think that's happening. Yeah, look, Jason, we are seeing some nice quarter-over-quarter improvement in our win rates. Our GTM execution has continued to improve through the entire year. There with a very strong offering that continues to get better. We're the best in storage, moving that to hybrid cloud today, as you know. We provide the best freedom of choice across hypervisors, across hardware platforms, and across cloud-native stack, and of course, going forward, across multiple clouds. Customers like the simplicity of what we provide, and then our NPS at 90 continues to be better than almost everybody else. We have a sustainable advantage here, combined with the increasing focus and improvements in our operational execution. That's what's leading to the success so far. All right. Thanks. Just a follow-up on that is, in terms of this whole cloud versus on-prem debate, how are your conversations with customers changing over the last year, and are you seeing any pendulum swing back towards on-prem environments? Yes. I think there's been a lot said about this recently, right, about cloud. I think customers are going to be more nuanced about how they go to the cloud. There's both existing applications and new applications that come into play here. Obviously, customers now are looking at this and saying, Well, I need to be in a multi-cloud world. I don't want to be just locked to one cloud. I'm going to be running my applications across all clouds. We are seeing very specific use cases that customers are looking at. One class of customers is people who've been on-prem wanting to migrate to the cloud or use the cloud. We are seeing them use us to expand their existing footprints into the cloud, look at disaster recovery as a use case. For customers that have been more public cloud-oriented historically, they're starting to look at cloud costs. They're starting to look at data governance security. They're starting to look at cloud lock-in and see that they're also looking at more of a multi-cloud environment and a hybrid environment. I think there's definitely more conversations that are happening with our customer base around these. Again, we're starting to see the use cases then come into play in production. Thanks very much. Your next question comes the line of James Fish with Piper Sandler. Hey, guys. Thanks for the questions. I'm pretty sure that's Nutanix's biggest upside in four years versus our estimates. Nice to see the software side really driving that upside and coming out of this transition at great speed. Kudos to you guys. At a high level, are you seeing a pickup or steady state for the conversions of traditional 3-tier storage architectures to hyper-converged? Going back to what you just said around use cases, any changes in the use cases for hyper-converged versus the last few quarters? Yeah. James, as we said at our Investor Day, the fundamental benefits of HCI continue to apply, right? Simplicity in operations management, bringing these silos together, providing a good TCO compared to a traditional three-tier. What we're seeing now is HCI is able to address a broad set of enterprise workloads. We're seeing that. For example, our largest deal of this quarter was with this largest financial services customer, and they are, of course, running all their databases on our platform. That's a high-performance workload. We're seeing broadening adoption of HCI for lots of enterprise workloads. I think that trend continues. Second trend really is as you go to the cloud, HCI becomes a logical. It's not just an on-prem three-tier replacement, but it also becomes a platform that they can then take- Understood. Any further commentary you guys can provide on how sustainable this productivity can be and how that compares to your analyst day factors? Duston specifically, any change to how you're thinking about that mid to high teens growth for next year that you alluded to at the- As I said, we're running ahead of the Investor Day estimates certainly in Q4. We think the productivity will continue to be strong. We have a lot of autonomous selling that we're trying to enable with the channel. We'll start some solution selling. Clearly, partnerships are picking up, not to mention that. Lots of good stuff happening from a productivity perspective. I think if you kind of little bit higher level there, the demand environment's good. The pipeline is strong. Not only is the pipeline strong, the quality of the pipe continues to get really stronger as we go on here. The product's performing well. Emerging products continue to increase. Deal sizes and ASPs are increasing. The renewals are building and stuff like that. When you step back on that and then you look at FY 2022, we feel good about 2022, obviously our plan for FY 2022, in meeting that. The modeling assumptions that we provided at Investor Day for FY 2022, that was obviously meant to be a kind of a one-time thing to help with the modeling efforts. We're really happy what happened in Q4. We're really pleased with what we have guided, certainly for Q1, and the likes there. We feel really good as we go into the fiscal year. We'll address things as we move forward. At this point in time, again, that was meant to be kind of a one-time look at 2022. In general, we feel very good about 2022 going into the fiscal year. Helpful. Thanks, guys. Your next question comes line of Pinjalim Bora with JP Morgan. Oh, great. Hey, guys. Thanks for taking my questions, and congrats from my side as well. Just taking a step back, could you maybe talk about the demand environment? Are you kind of seeing the hesitancy around big data center transformation projects kind of fade away at this point? How did the demand environment kind of trend through August versus expectations? Are you seeing any kind of down due to Delta or anything in the revenue here? Yeah, maybe I'll start there, Pinjalim, here. First of all, I think we're seeing a healthy demand backdrop. It's being driven by this broad acceleration of digital transformation initiatives that, to some extent, COVID actually catalyzed. There is some extent of pent-up demand being realized now as customers have now become used to operating in a COVID environment. For us specifically, I would say the demand is being driven by four key areas. First, it's of course continuing the, what there was already a question about this, about continuing modernization of their legacy T3 infrastructure. Running more workloads, helping extend as they move to the cloud, right? We're helping our customers migrate to the cloud. Then of course, hybrid and remote work is here to stay, and that's another driver for what we are seeing. Overall, Delta has not impacted demand. We are still seeing good demand environment, and people are continuing to invest in these initiatives with us. Understood. Okay. Thank you for that. One thing about Clusters, I guess I think it's now available in what has been the early feedback from federal customers? I know you're going into your biggest federal quarter, but are there conversations forming in that area? How do you feel about Clusters in the government side? Yes, as you know, Clusters just became available here in AWS GovCloud. We do expect, again, a number of government agencies are looking at operating in GovCloud. We are fairly early in our conversations with them, but essentially the same use cases apply to them as well, right? How do I extend myself to the public cloud? How do I do disaster recovery? How do I do capacity expansion? How do I consolidate data centers? The exact same use cases we are starting to see also play out in government. Again, I think it's still early days for us, as the offering just became available. I hope to be able to talk to you about future government customers and about government customers in future calls at some point. Understood. Thank you. Your next question comes to the line of Jack Andrews with Needham. Good afternoon. Thanks for taking my question. I was wondering if you could unpack a little bit more the very strong net dollar retention rates you're seeing, particularly the 158%, excluding life and devices. Could you provide some more context on what's really driving that number? Yeah, let me take it, and Rajiv might want to chime in here. There's only a few inputs to that output of 158, and obviously the up-sell is continuing to get better. Again, the deal sizes are getting larger. I think, as we continue to go up the stack with our product offering, that's a natural enhancement to total deal sizes/up-sell in the business. The gross retention rate, which huge focus internally on that, but the gross retention rate is still a relatively small base. What we've seen so far, we're happy with the gross retention rate. That will come down a little bit as we showed in the investor day, but I think that will still be up at the top there as far as a metric from a competitive perspective. Again, the product continues to perform well. The NPS score still stays at 90 plus, and all those things add up to a lot of up-sell and increased deal sizes, and a pretty good net retention rate. Yeah. No, it makes sense. Appreciate that. I would just add to that saying, all this played out in this largest deal that we had this quarter, right? Everything that Duston said played out. Large customer went in with a small deployment to start with. They've continuously expanded their deployment. They're continuously buying more, and buying more of our portfolio. No, that's great to hear. Maybe just as a follow-up, Rajiv, just given an increasing focus on solution-based selling, could you just speak to maybe how you navigate the relationships with some of your partners who also would typically look to bundle technology offerings into their own solutions? Yeah, I think if you look at the solutions that we focused on today, it's cloud, it's hybrid cloud being one. It's database management being another, for example. Of course our traditional focus on end user computing. All of these play very nicely from a solutions perspective. If you look at some examples with us with partners. When we go with HPE, they're looking at bundling our software from a cloud platform perspective along with their hardware, and offering all of that as a subscription with GreenLake. They're doing that for both our hybrid cloud as well as now our Database as a Service offerings. Typically what we find is our solution selling combined with what we can do with partners, including like Lenovo, for example, two end-to-end virtual desktop offerings, right? Server, PCs, full stack from Nutanix, all delivered as a service. It just enhances the overall value of the solution and makes it easier for a customer to purchase whatever they need to achieve their business outcome in a simpler form. I appreciate that context. Thanks. Congratulations on the results. Thank you. Your next question comes the line of Katy Huberty with Morgan Stanley. Thank you. Good afternoon. With all the demand indicators and sales productivity metrics tracking really well exiting last year, what's driving the October quarter ACV billings decline of 1% sequentially? If you look over the past three years, that was up about 3% on average. Is it just a function of the business is scaling and we'll see more seasonality in the business or anything else to read into that? I have a follow-up. Sure. Katy, as far as the guide, as you saw there, it's still a year-over-year increase of 26% compared to the 14% and the 10% from the prior two years. It's a huge year-over-year increase. Q1 usually, typically, when you look at it, is a bit slower for us. Certainly, EMEA, when you look what the trends were there and the wild card's kind of federal, and so far federal is playing out fine in Q1. We'll see. I think we have a lot of things going for us, certainly, not only in Q1 but in FY 2022. We'll see how things play out there. Obviously, a pretty robust backlog, which gives us a lot of comfort. Got it. That's clear. Duston, OpEx is tracking below your prior guidance of $380-$385. Is that tied to temporary dynamics around just the timing of reopening and labor market tightness, or is this a more sustainable reduction in what you think the spending run rate is? Well, as we, again, said at Investor Day, you'll see what we expect in 2022 was at that point in time, we were saying single-digit growth year-over-year. Clearly one of the bigger variables is travel. That still continues to stay locked down for the most part anyway. We'll see some increases there. I think the focus on expenses continues to be pretty robust from what we're doing on the expense side of the equation. It will continue that way. We need to fund, obviously, reps and engineering projects and things like that, which we're doing. I think we're still assuming we're still somewhere in that single-digit growth year-over-year, but we'll continue to try, just like we did this quarter and in the guide for Q1 to continue to drive it down, but still grow the business at our 25%+. Duston, is the 172 reduction in sales and marketing heads this quarter, which is bigger than the prior quarter, is that all related to the restructuring that you referenced in your prepared remarks? Clearly restructuring is in there. Not all of it, but clearly restructuring is in there, that's some of the severance that you saw that we booked in the quarter there. Okay. Thank you. Your next question comes the line of Wamsi Mohan with Bank of America. Hi, yes. Thank you, and congrats on the strong results. Duston, you noted some seasonality in ACV billings weighted more in 4Q, given what is available to renew. Is that a dynamic that carries over into quarters beyond that? When should we expect stabilization of that? I have a follow-up. You're not going to see ultimately stabilization for a while because it's going to continue to increase, right? We've given a FY 2023 number in the Investor Day presentation there. You're going to continue to see an acceleration of the renewals. That's, again, what we've been working on for the last three years or so with the transition to subscription. More tranches are going to come in for renewal. That's what you're going to see there. The comment I made on Q3 to Q4 was, because still it's not a massive amount in any given quarter, what I was saying there is we just had a pretty big bump up in ATR that we expect from Q3 to Q4, relative to the size of Q3, and that's why we thought we'd call that out just to make sure that was clear from a modeling perspective. Again, into FY 2023, you'll continue to see it'll be a little bit more linear, but there'll be some bumps up and down, but more linear certainly we expect to see Q3 to Q4. Okay, trend-wise it'll sort of not be as big of step-ups on a sequential basis. On a quarter-over-quarter, you've got a benchmark again that we're running to for FY 2023, that kind of gives you a feel for that type of growth from 2022 to 2023. Okay, thanks. A continued increase, right? Yeah. No, I get it. I'm just questioning- Yeah The trend sequentially, if there's abnormality in those trends that you would want to call out at a later point in time. Yeah. As a follow-up, Rajiv, I think the analyst that you noted that VDI was 20%-25% of workloads. I'm curious, just given back to work in many places, if you're expecting to see any impact from that at all. On the PC side, clearly there is concerns of a demand rollover, and I understand the distinction between VDI and PCs, but just wondering if you're seeing any signs of that business decelerating. Thank you. No, I would say not, Wamsi. No signs of that. I think largely the workforce is going to continue to remain hybrid, even if people come back to the offices. It's going to be a mix. I would say that business for us is tended to be in that 20%-25% range overall. I don't see any significant changes for us as people come back to work here. Okay. Thanks a lot. Your next question comes from the line of Rod Hall with Goldman Sachs. Yeah. Thanks for the question, guys. I wanted to jump into, I think, the comment you made, Duston, on the five-year deal, and then I think you had said there were other five-year deals in there. Just curious if you can, firstly, help us quantify that at all, give us any idea what the billings percent that was five years in that billing stack looks like. Also, any color around why these customers are doing five-year deals. Were they five years before, and they're just kind of renewing at five years, or you're giving them better deals for five years? Any kind of color you can give us on why you're seeing that. Thanks. I have a follow-up. Yep. Yeah, the quarterly investor presentation should be loaded on the website, Rod, that will give you the ACV breakout by term. I think that answers that question for you. On the five-year deal, yeah, these are existing customers that had been purchasing on a five-year term. Again, once you have somebody on five years, it takes a little bit, if we can, to get them down to three or something like that. This happens to be the largest deal, which has turned into what we refer to sometimes, what I refer to as a chronic repeat purchaser. It's kind of a textbook example. It's a very large customer that just continues to eat away at different workloads and use cases. In this case, there was a fair amount of emerging products in there also, which was really nice to see. They were existing, and then we had several others that were already at the five-year mark, and they bulked up on some purchases. That's what we saw there in Q4. As I said, in Q1, that will reverse and come back down to the low threes, three or low threes, somewhere around there. Right. Yeah. Sorry, I missed that in the presentation, but thanks for that, Duston. That's a good color. Yeah. The other thing is on the terms. I know you're saying it comes back down next quarter. What are you thinking about term lengths now as we look out several quarters? We were thinking it kind of slowly slips, I think, toward three. Are we stabilizing now at this kind of 3 to 3.2 level? Do you think it keeps coming down just a little bit? What are you thinking now on term lengths? Yep. Same thought I had a year or two ago, that everything I see with the mix of new business and existing business, it's still, and we put this in the Investor Day presentation, 2.8-3.0, somewhere around there. I think this fiscal year, it probably remains in the three, low three range, somewhere around there. As we migrate into 2023, maybe get a little more tweak down there. As everything that we see today, that would be the continued view on terms. Great. Okay. Yeah, this quarter just kind of an anomaly, and we continue on that trend we've been on. All right. Great. Yeah. Thanks. I appreciate it. Yep. Your next question comes from the line of Mehdi Hosseini with SIG. Yes. Thanks for taking my question. Two follow-ups. It's great to see the booking, I'm just wondering if you can help me understand, is there a way of qualitatively or quantitatively you can talk about booking by a native data application versus a hybrid model? Okay. Maybe I can try. We've tried to quantify some of these by use cases, right? Yes. I think, in general, what I would just say is today, largely. Yes First of all, the bulk of our business is what I would call on-prem, right? Yes. We are starting to see more of it move to hybrid-. Right As we see these early business customers migrating to the public cloud. That portion is still relatively small, but growing nicely, right? The bulk of it today is on-prem. I expect that over time, we will see more and more up and mix of public cloud-based workloads, in addition to our on-prem workloads. That's one piece of it. The other way to think about it is also what kind of workloads are we running? There, like you said, the one workload that we quantified is end user computing, and that typically runs between 20% and 25% of our overall business. The rest of it tends to be other workloads, like databases, which we haven't quantified. Databases, anything, other server virtualization type workloads. Perhaps that will give you a reasonable framework. Sure. Yeah. You referenced, I think I'm not mistaken, $60 billion TAM, and I think the native data is the fastest growth, but perhaps is the smallest piece. It's secular, but it's going to take some time for it to scale, right? When you say native data, are you talking about cloud native? Cloud native I mean, for us, yeah, I think when we talk about $60 billion TAM, we talked about a couple of different pieces of it, right? One is our core HCI- Yeah hyper-converged, where as we said, that's continuing to grow. It's eating into 3-tier. It's capturing more enterprise workloads, and that business continues to grow very nicely, right? Over the next several years. It extends to hybrid cloud, right, which is the public cloud. Sure component of this- Yes which we talked about. unified storage, which is all about files and objects, and where we are gaining. Share against traditional providers. Yes and then of course- Right database as a whole, right? Yeah. Those are the components, and we broke it down for you. Yeah. Yeah. Actually, that share gain was premise on my question. If I just look at Slide 16, your share gain, your 53% of AHV adoption, like eight quarters ago, it was in the mid-40%. You definitely are well over 50%. As a follower to 60%, and where do we go from there? Yeah. I expect that our AHV adoption will continue to pick up, for multiple reasons. First is that AHV is getting stronger and stronger as a hypervisor in terms of broader and broader sets of capabilities. Second, for example, is that partnerships such as the one that we just did with Red Hat, where now Red Hat is adopting AHV as a platform. I do expect that it's going to continue to pick up over time as more and more customers adopt AHV for their workloads. It's too hard to predict whether there's going to be ceiling on it or not at this point, a little too early, but I would expect it to continue to tick up, and it certainly has. Sure historically done. Sure. Sure. Just if I may just quickly, a scaling of your new products would complement, as I imagine at some point, incremental share gain would be more challenged, could help sustain the growth. Yeah, I think we are very excited about our new products. As Duston pointed out, they were 41% of our number, our deals, I think this last quarter. They're all unlocking great opportunities for us, right? Database management and Database as a Service is a huge, big market opportunity where we are relatively small, but growing rapidly into that. Unified storage for us is all, again, growing into a large existing market where our presence is relatively small rapidly, and also attached to our core platform. Yes. Great. Thank you. Your next question comes to the line of Simon Leopold with Raymond James. Thank you for taking the question. I wanted to ask about how we should be thinking in terms of the percent of billings coming from renewal. This quarter was about 12%, and you've provided a forecast for FY 2025 getting to 40%. I'm imagining that this should not be a linear progression, and I think this quarter was very similar to last. How should we think about that rate of change for that particular metric? Yeah, you'll see, again, some of it's buried into the Investor Day package. You might want to re-reference that, Simon. There's a 23 number in there. That gives you a feel there. Again, you'll see it ratcheting up, in 2023, as a percentage, and both from a ACV% and a TCV%. That bigger increase will occur in FY 2023 rather than FY 2022. That's just an ATR timing perspective on these deals that average 3+ years. It's just that they haven't come up for renewals yet. In FY 2023, there's just larger tranches that naturally come into play. Thanks. I guess the other question may be a little bit difficult to quantify, but in making the transition where you want to focus more on renewals and essentially spend less on sales and marketing and new customer acquisition, if hypothetically you under-invest and under-spend, how long would it take for you to observe that you've made a mistake in terms of your allocation? What's the sort of delay in the productivity? Any way we could judge this? Thank you. Well, yeah. I can mention that, and Rajiv might want to also pitch in here, but I just want to make something clear. It's not like we're taking massive cost out of the new and the upsell part of the equation. A vast majority of the leverage is going to come from the mix, right? As the mix of the renewals increase, which is working well from our Test Drive and all that stuff, which is really helping those efforts. It's not like we're cutting significantly on the new and the upsell. This is more, we're continuing to focus on that and do whatever we can, the majority of this leverage is going to come from that mix shift. That's helpful. Thank you very much. Your last question comes from the line of Erik Suppiger with JMP Securities. Yeah, thanks for taking the question. Congrats on a good quarter. I know you guys don't sell hardware, but can you comment, I think your software is often tied to hardware. Can you comment a little bit on what effect do you see from many of the component constraints that are out there on the hardware side? Secondly, just curious if there's been any change on the competitive front, in particular with VMware. Sure. Let me take that, Erik. Look, as you know, our software runs on a variety of hardware platforms, and it's not tied one-on-one to new hardware sales. Right? It's not that we're always selling along with hardware. Sometimes people buy software independent of hardware. They'll have hardware that they've already purchased, and of course, they have a choice. The supply chain impact on our business so far has been relatively modest. We've seen some customers pulling forward some orders to try and ensure that they have access, but the results so far have been pretty minimal for us. That said, we're very comfortable with our 1Q forecast that we guided to, and we will need to continue to monitor the situation here. That is the first. The second, I think you said, was about the competitive dynamics in terms of what we are seeing in the market. I would say again, in fourth quarter, we saw a nice quarter-over-quarter improvement. Our largest competitor, but also other HCI competitors. We're focused in terms of execution in this category. Our product is strong. We provide simplicity, freedom of choice, a great customer experience with our NPS sitting at 90. The product offering is really strong. Our go-to-market operations have continuously improved over the last several quarters, and we're benefiting from that as well. That combination of a good product plus good, strong, and improving go-to-market execution, is what's leading to these win rates. You said they have increased, though. Okay, thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.