Good day, thank you for standing by. Welcome to Nutanix fiscal Q1 2023 conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. I would now like to hand the conference over to your speaker for today, Rich Valera. You may begin. Good afternoon, welcome to today's conference call to discuss the results of our fiscal Q1 of 2023. Joining me today are Rajiv Ramaswami, Nutanix's President and CEO, and Rukmini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing financial results for its fiscal Q1 of 2023. 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, including our financial guidance, 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, expectations regarding profitability, our competitive position and market opportunity, the timing and impact of our current and future business model transitions, the factors driving our growth, macroeconomic, geopolitical, and industry trends, including global supply chain challenges, and the current and anticipated impact of the COVID-19 pandemic and pandemic effects. 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 more detailed description of these and other risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K for the fiscal year ended July 31st 2022, 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. As a result, 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, except for revenue, 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 Raymond James Technology Investors Conference in New York on December sixth, and the Barclays Global TMT Conference in San Francisco on December 7th. Nutanix will also be holding an Investor Day in New York City on Tuesday, April 4th 2023. Please save the date. We'll be following up with more details in the coming weeks. With that, I'll turn the call over to Rajiv. Rajiv. Thank you, Rich. Good afternoon, everyone. Against a volatile macro backdrop, we delivered a good Q1. We exceeded all of our guided metrics and saw continued strong performance in our renewables business. Supply chain constraints with our server partners, while remaining a headwind, improved somewhat compared with the prior quarter. With respect to the macro backdrop, in our Q1, we continued to see businesses prioritizing their digital transformation and data center modernization initiatives enabled by our platform. We have seen anecdotal evidence of increased inspection of deals by customers, which we believe is likely related to the more uncertain macro backdrop. We continue to factor this uncertainty into our outlook for the remainder of the fiscal year. Taking a closer look at the Q1. We delivered ACV billings and revenue above our guidance, driven by strong, continued performance of our renewables business. We again demonstrated good expense management, coming in slightly below our OpEx targets. Top line outperformance, combined with diligent expense management, enabled us to achieve positive non-GAAP operating income for the first time, another milestone in our drive towards sustainable, profitable growth. Finally, strong billings linearity and collections contributed to generation of $46 million of free cash flow, meaningfully exceeding our breakeven target and continuing our strong recent free cash flow performance. Overall, I'm pleased with our financial performance in the Q1. Our Q1 is typically a stronger one for our federal business, and this one was no exception. Our largest customer in the quarter was a federal civilian agency that was already a significant user of Nutanix Cloud Platform, including our Unified Storage and database automation solutions, as well as Nutanix Cloud Clusters or NC2 on AWS for bursting additional resource capacity into the public cloud. This customer added additional cybersecurity workloads to the Nutanix Cloud Platform, reflecting their confidence in the ability of our platform to handle their most business-critical applications and resulting in a substantial expansion order for us. We see this customer as a great example of how we are able to land and expand with some of the largest organizations in the world. On the product and partnership front, we achieved an important milestone in realizing our hybrid multi-cloud vision with the general availability of NC2 on Microsoft Azure. Now, with support of AWS, Azure, and service provider cloud environments, we continue to deliver on our hybrid multi-cloud vision. Our customers have the ability to rapidly and seamlessly shift their workloads between their private clouds and the largest public cloud providers with the consistent management, governance, and data services provided by the Nutanix Cloud Platform, all without the time and expense of refactoring their workloads. One of our early customers for NC2 on Azure is Unum Group, a Fortune 500 financial services provider who is part of our customer preview program. Unum chose NC2 on Azure because they were looking to leverage our seamless hybrid multi-cloud platform for disaster recovery as well as to migrate and run their workloads in Azure without having to refactor their applications. They're also looking to take advantage of the ability to expand their Nutanix Cloud Platform to different Azure regions on demand. Another exciting development on the product front is the recent enhancements we made to our platform to accelerate adoption of Kubernetes-based applications in the enterprise. In keeping with our philosophy of offering customers choice throughout the stack, we added Amazon's Kubernetes service to an already long list of supported Kubernetes container platforms, including Red Hat OpenShift, SUSE Rancher, Google Anthos, Azure Arc, and our own native Nutanix Kubernetes Engine. We also added built-in infrastructure as code capabilities and advanced cloud-native data services for modern applications, both of which will enhance the Nutanix Cloud Platform's ability to efficiently run Kubernetes applications at scale. Go-to-market leverage is one of my top priorities. We saw progress across a number of partner categories in the Q1. In the public cloud category, our customers are now able to get on-demand consumption of Nutanix software through Azure Marketplace, facilitating frictionless license procurement and movement of workloads between private clouds and Azure. For our channel partners, we updated our Elevate Partner Program ecosystem with enhanced incentives to encourage and enable these partners to sell Nutanix into net new accounts and to drive opportunities through the entire sales cycle autonomously. We rolled out training designed to enable partners to speed up sales cycles through rapid capacity planning, quoting, and order fulfillment, thereby generating more leverage for our sales reps. Finally, our two largest new customer wins in the quarter were in partnership with a global leader in data center colocation and interconnection services and part of our service provider program. We are encouraged by the early progress we are seeing with service providers and see good growth potential in our service provider-related businesses as we add additional partners and enhancements to our platform supporting service provider business models. One of these service provider wins was from an EMEA-based publishing and education company that was looking to modernize and consolidate their data center footprint while having disaster recovery capability in AWS. They chose our Nutanix Cloud Platform, including Nutanix Cloud Management, to run their business-critical applications, leveraging its simplicity and built-in automation for infrastructure as a service. They also added Nutanix Unified Storage to service their unstructured data needs. We see this as a great example of a customer adopting our full stack offering to consolidate and modernize their IT infrastructure. Now I'd like to talk about the industry recognition we continue to receive for our solutions. For the second year in a row Nutanix was named a visionary in Gartner's Magic Quadrant for distributed file systems and object storage. We believe our improved position within the visionary quadrant this year reflects advances in customer traction, go-to-market efforts, enhanced product capabilities, and an expanded ecosystem for our Nutanix Unified Storage solution. With customers needing a simple and secure way to manage and protect their data, this recognition highlights the advantages of Nutanix Unified Storage. In closing, I'd like to provide some thoughts on our priorities and outlook. First, our overarching priority remains driving towards sustainable, profitable growth through judicious investment in the business, execution on a growing base of renewals, and diligent expense management. Our achievement of positive non-GAAP operating income in the Q1 represents tangible progress towards this goal. The strength of our business model is underpinned by a growing base of renewals and the strong value proposition of our platform in an uncertain macro landscape. I remain confident in our ability to continue to capitalize on the vast opportunity in front of us while driving towards sustainable, profitable growth. With that, I'll hand it over to Rukmini Sivaraman. Rukmini. Thank you, Rajiv. I will first walk through our Q1 results, followed by our outlook for Q2, and then finally provide an update on our fiscal year 2023 outlook. Q1 2023 was a good quarter, with results that came in better than our guidance and across all guided metrics. ACV billings in Q1 was $232 million, higher than our guidance of $210 million-$215 million, and representing a year-over-year growth of 27%. The significant majority of that growth came from growth in renewals billings. Revenue in Q1 was $434 million, higher than our guidance of $410 million-$415 million, and a year-over-year growth rate of 15%. ARR at the end of Q1 was $1.281 billion, a year-over-year growth of 34%. New logo additions were about 530 in Q1. Contract durations decreased quarter-over-quarter to three years as expected, partly due to a seasonally higher mix of U.S. federal business that typically has shorter contract durations. As described previously, the percentage of orders with future start dates continued to be a key assumption in our Q1 guidance. This percentage came in lower than it was in Q4 2022, and slightly below our expectations. Q1 revenue also benefited approximately $12 million from the improvement in percentage of future start dates from Q4 to Q1 as more licensed revenue was recognized in quarter than deferred. non-GAAP growth margin in Q1 was 83% because of our higher than expected revenue performance. Non-GAAP operating margin in Q1 was positive 2%, our Q1 of positive non-GAAP operating profit, and a proof point of our ongoing focus on profitable growth. Non-GAAP operating expenses in Q1 were $351 million, better than our guidance of $360 million-$365 million, and included about $2 million of benefit from favorable currency exchange rates in the quarter. Non-GAAP net income was $8 million or EPS of $0.03 per share based on weighted average shares outstanding of approximately 275,000,000 shares. We are happy to report positive net income and EPS for the first time in the history of Nutanix. Billings linearity was very good in Q1 and better than our expectations. DSOs were 18 days in Q1, a demonstration of good linearity and strong collections. We expect DSOs to trend back up to historical levels going forward. The strong billings linearity and collections contributed to free cash flow generation of $46 million in Q1, significantly better than our expectations. We also collected in Q1 about $10 million of invoices due in early Q2. We are finding that while our cash collections remain strong, there is a normal level of variation in timing of payments from quarter to quarter. Going forward, and given our transition into positive free cash flow generation, we expect to provide color on free cash flow on an annual basis. A brief note on severance payments related to our reduction in force that we announced in August. One, we expect the severance payments to total about $17 million rather than our previously estimated range of $20 million-$25 million. Two, about $6 million of the approximately $17 million in severance payments are being delayed to Q2, mainly in non-U.S. regions, when we had previously assumed that the full amount would be paid in Q1. We ended Q1 with cash equivalents and short-term investments of $1.388 billion, up slightly from $1.324 billion in Q4 2022. Moving on to Q2 outlook. The guidance for Q2 2023 is as follows: ACV billings of $245 million-$250 million, implying a year-over-year growth rate of 13% at the midpoint. Revenue of $460 million-$470 million, a year-over-year growth of 13% at the midpoint. Non-GAAP growth margin of 82%-83%. Non-GAAP operating margin of approximately 5%-10%. Weighted average shares outstanding of approximately 279,000,000 shares. I'll now provide some more context around our Q2 guidance. First, the top-line guidance for Q2 assumes that supply chain dynamics for our server partners would remain more or less the same compared to Q1 2023. Second, it assumes that contract durations would stay approximately flat in Q2 2023 compared to Q1 2023. Third, the revenue guidance includes approximately $10 million of revenue benefit from the decline in percentage of orders with future start dates over the last few months. Said differently, we expect to recognize more license revenue in Q2 than is deferred, similar to the dynamic we saw in Q1. Over time, as our partners' supply chain constraints resolve and our future start date percentages normalize, we would expect this dynamic to normalize as well. I will now provide an update on our full year 2023 guidance. While we had a good Q1 and our renewals business continues to provide a strong foundation for growth and efficiency, the macro environment remains uncertain, and we believe it is prudent to remain cautious in our full year top-line guide, which remains unchanged. We also remain focused on disciplined expense management and are therefore raising our operating margin and free cash flow outlook for the year. Our guidance for full year fiscal year 2023 is as follows: ACV billings guidance remains unchanged at $895 million-$900 million, year-over-year growth of 19% at the midpoint. Revenue guidance remains unchanged at $1.77 billion-$1.78 billion, year-over-year growth of 12% at the midpoint. non-GAAP growth margin of 82%-83%. non-GAAP operating margin of 2%-4%. I'll now provide some color on our full year guidance. First, similar to our comments last quarter, the full year guidance assumes that contract durations would decrease slightly compared to fiscal year 2022. The fiscal year 2023 revenue guidance also assumes that the percentage of orders with future start dates would remain more or less the same in Q2 compared to Q1 and would start to ease slightly in the second half of the fiscal year. Second, the demand for our solutions continues, we are seeing continued new and expansion opportunities. However, as Rajiv mentioned, we have started to see some anecdotal evidence of increased inspection on deals which we believe is likely related to the more uncertain macro backdrop, which could potentially lead to an increase in sales cycles. We have considered this dynamic and the uncertain macro environment in our guidance. We expect that the significant majority of our growth in ACV billings for fiscal year 2023 will come from growth in renewals ACV billings, with the uncertainty in the macro environment factored into our expectations for new and expansion ACV billings. At the same time, our continued focus on expense management and operating discipline enables us to increase our operating margin and free cash flow outlook for the year. Which is a good segue to the third point, which is that we expect to deliver about $100 million-$125 million of free cash flow for fiscal year 2023, an increase from our prior expectations of $75 million-$100 million. Finally, a note on seasonality. As we look ahead to the second half, we expect to see a low double-digit% decline quarter-over-quarter in ACV billings in the Q3, followed by a low double-digit% increase quarter-over-quarter in ACV billings in the Q4. In closing, we are pleased that our Q1 results reflect our continued execution towards our stated objective of sustainable, profitable growth. We expect to continue that focus. We look forward to sharing more about our medium-term outlook during our Investor Day in April 2023, as Rich referenced. With that, operator, please open the line for questions. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. That's star one one to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jim Fish with Piper Sandler. Your line is open. Hey, guys. Great quarter in the wake of this kind of macro environment. That gets me to my question of, you know, why has demand for hyperconverged really remained strong in this kind of difficult macro spending environment? Really the crux of my question here is how much of the current strength in numbers here is due to that backlog build and deferral from, you know, fiscal Q3 of last year versus what you're booking during this quarter? Yeah. Jim, thank you for the question. Rajiv here. First of all, I think, you know, as we've said, we've got a good, strong and growing base of renewals and that's performing well and that's certainly helped reduce the risk in the model. As we did say, you know, we have taken into account a little bit of this uncertainty in the macro environment in our guidance. We have built some conservatism in terms of IT spending. I wouldn't necessarily say that HCI is completely immune from a, you know, potential slowdown in IT spending. HCI per se produces better TCO compared to legacy architectures, and it's a foundation for the hybrid cloud. From that perspective, customers can actually save money by moving to HCI from traditional legacy architectures. So far when you look at the macro again, you know, we've seen greater inspection of deals by some customers which could potentially lead to an increase in sales cycles, but we have factored this into our guidance. I take the backlog portion of that question. Hi, Jim. You know, as you point out, we had noted, when we announced our fiscal 2022 results that we ended fiscal 2022 with a record level of backlog, which combined with our growing base of renewals, as Rajiv said, provided a foundation for our growth in fiscal 2023 and helped overall reduce the risk inherent in our forecast. In the Q1, consistent with our expectations and consistent with typical seasonality, we did use some backlog. The only other comment I'd add is that given the unusually high level of backlog we entered the year with, I think some of which was related to our partners' supply chain issues, we would expect that over the course of the year we would likely consume some backlog. Makes sense. If I could sneak in one more. Rajiv, a bunch of your customer commentary kind of focused in around cloud, and trying to understand how much of the focus on customers is about, you know, optimizing cloud spending and how much that is helping Nutanix, you know, this past and current quarter as that's one of the biggest line items for IT spending. Thanks, guys. Yeah. That's a good question. Increasingly, more and more of our conversations with our customers are around how can we efficiently help them operate in this multi-cloud environment. Many of our customers have looked at public cloud. They've moved to the public cloud in portions, and they're also realizing that it can be expensive. What we tell them is that, we can actually help them take their existing workloads and move it and run it very efficiently in the public cloud, and we can save money and optimize how we do it for them. Yes, it's an increasing part of our conversation. I think the broader theme here is almost with every customer that I talk to, we are talking about how to help them operate well in a multi-cloud world and how we can save them money, how we can make it simpler for them, both from a, you know, ongoing, you know, CapEx cost, but also in terms of the people side of this equation, in terms of having a consistent operating environment where you don't have to have different teams, to operate each of these cloud environments. It's, it's very much becoming a centerpiece of many of our conversations there. Thanks. Great quarter, guys. Thank you. Please stand by for our next question. Our next question comes from the line of Meta Marshall with Morgan Stanley. Your line is open. Great, thanks. maybe just wanted to see if you could give more color on just kind of the macro impact that you're seeing. you know, clearly you talked about it not impacting the renewal business, but just are there regions or customer types or just any other color as far as kind of that second set of eyes that are maybe needed to get a deal across the line? Maybe this is the second question for me, just kind of given M&A within the space, you know, how are you, maybe taking advantage of the acquisition of or pending acquisitions of competitors? Thanks. Yeah, I think two good questions there, Meta. On the first one, you know, there's multiple portions to that. As you said, the renewals business is largely a steady-state, not impacted by the uncertain macro. Now, in terms of the uncertain macro, we've taken, you know, some of that into our account, into account when we give you a conservative forecast. To your point, we have seen anecdotal evidence of greater inspection of deals by some customers. What that also means is that potentially, you know, there could be an increase in sales cycles. We haven't quite seen that as much yet happening, but, you know, this is an indication of what might be coming. We have factored those in in terms of our guidance per se. Now, Rukmini, you may want to comment on the foreign, FX impact as well here, in terms of the macro. Yeah. Why don't I do that, and then I can hand it back to you on the- Yeah. On the broader question on M&A. Obviously, the dollar has strengthened, I think as we all know. Our sales contracts are all denominated in U.S. dollars, that relative strengthening has effectively made our products more expensive to customers in some international markets. Anecdotally, and this is not something we've seen systemically, but we've seen it sort of put pressure on some price negotiations and some transactions, and we don't believe that that's causing us to lose deals. Anecdotally, we've seen it show up in some transactions. Yeah and Me ta, on the other question around how other M&A activity is potentially impacting us, yeah, you know, we're all reading the news around Broadcom acquiring VMware. What we have seen as a result of that is a significantly higher level of engagement from prospective customers. These customers are looking to explore their options, looking at managing potential risks related to the transaction. Now, as you know, our sales cycles, especially for larger deals, tend to be nine to 12 months. We're not assuming any significant benefit from that in our fiscal 2023 outlook. I can certainly tell you that the volume of conversations with customers and prospective customers around this topic has increased and we are a good alternative provider. Great. Thanks so much. Thank you. Please stand by for our next question. Our next question comes from the line of Pinjalim Bora with JP Morgan. Your line is open. Hi, guys. Thank you for taking my question. This is Ratikant for Pinjalim. My first question is, what are you hearing from customers with respect to the new IT transformation projects in the current macro environment? Like, do you think that they might take a back seat and people might move back towards the third tier architecture temporarily? Look, I think first of all, accelerating digital transformation continues to be a key driver for customers. We are seeing this across all kinds of industries here, particularly, you know, in verticals such as financial services, healthcare, state, local education. There's a clear mandate to modernize IT operations and applications, improve costs, and help the business redirect non-productive legacy kind of spend. In the current macro, I would say this is intensified. There's even more of a focus on cost and better TCO. From that perspective, you know, modernizing legacy treated infrastructure, especially when things are up for renewal, right? Up for a cycle, you're running out of, you know, your hardware is getting old. HCI is a very viable option for improving TCO, simplifying operations, making things much simpler. We haven't quite seen a slowdown in that mindset with customers. I mean, the other thing for us, we see is that, you know, HCI has now also become a platform for where customers can run all their workloads, including all their highest performance, most mission-critical workloads. We saw an example of that here in the call where we talked about this large federal agency, but there's many other customers who are doing that. Then finally, I would say we're also seeing more people looking at hybrid multicloud and how they can operate efficiently in this cloud environment for which, again, our solution is a good option. You know, we can help them run in the right private cloud or public cloud based on criteria around cost, performance, and governance. All of that, I think, is continuing to play out there, even despite the macro situation. Got it. Then, maybe a quick one. Can you help us understand, like, what you are seeing with respect to the gross retention trends in your renewables portfolio? Yeah, Rukmini? Yeah. Thank you for the question. Our GRR or gross retention rates will remain, you know, in line with sort of our stated objective of in the 90+% range. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of George Wang with Barclays. Your line is open. Hey, guys. Congrats again on a strong quarter. I've got two quick questions. Firstly, just, you know, it's nice to see a kind of raise for the FCF and up income for this year. Definitely you guys are seeing strong leverage. Just curious, kind of going forward, are there additional OpEx which can be taken out of the system? Just curious kind of what area, you know, you guys can be targeting in terms of the lever to pull for further cost cuts, whether that's in the back office, whether that's in sales support roles. Maybe you can give more color on that. Maybe, Rukmini, I'll just give a high-level view. you know, I would just say that we are not as much focused on cost cutting. I mean, a lot of the efficiency in the model is coming from the fact that we're seeing a growing base of renewals that can be prosecuted at a significantly lower cost than our traditionally new business. Now, we have been focused on efficiencies already over the last few years in every area. On the sales side, we're focused on increasing sales productivity. On the marketing side, we have already, you know, redirected and optimized our demand generation dollars to be mostly digital with some hybrid events. We have simplified our product portfolio. We have been doing the right things in terms of efficiency and so forth. That's where I will leave it. Rukmini, if you want to add anything. No, I think that was a good summary, Rajiv. Okay, thanks. Yeah. My follow-up is, just kind of looking out in terms of as a service, any kind of color you can give in terms of future as a service model, you know, such as partnering with GreenLake, maybe more traction there or kind of through other MSPs. Just curious, kind of what areas are you guys exploring to further this journey of as a service in the HCI adoption? Absolutely. That's actually a very good question because we are seeing a trend in the market where more customers would like to consume more offerings delivered to them as a service. There's many routes to getting there. One of our first routes is through service providers. As you saw, for example, this quarter, this last quarter, our two largest wins came through partnering with service providers. These are service providers in some cases who will take us and sell through, right, and provide a service to their customers. That's one approach. HPE GreenLake is another approach, where HPE GreenLake includes Nutanix as part of their offering, and they can provide a combined hardware software solution delivered as a service in a subscription model to their customers. Selectively, some of our own offerings are also available directly as a service, but those are small, relatively speaking, in our portfolio. Especially some of our management offerings, are delivered even today as a service, but that's a small portion relatively. Largely, we are focused on enabling as a service models through our partners, whether they be service providers, whether they be, strategic partners like HPE. Okay, great. Thank you. The only other thing I would just add there. Sorry, I should say this. We are also an Azure Marketplace right now, where an Azure customer can use Azure, their Azure spend dollars and buy Nutanix through the marketplace. Thank you. Please stand by for our next question. Our next question comes from the line of Dan Bergstrom with RBC. Your line is open. Any sense on where we are from a rep headcount perspective? I think you were flat in the Q4, expectation to grow modestly for the year, focus on productivity. Is that still the right way to think about rep headcount and growth and productivity? Yes. Our rep headcount was roughly flat quarter-over-quarter. We do expect to grow our rep headcount modestly from current levels, while at the same time continuing to focus on driving higher rep productivity. Thank you. Thank you. As a reminder, ladies and gentlemen, that's star one one to ask the question. Please stand by for our next question. Our next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. Hi. Thanks for taking the questions. It's Ruplu filling in for Wamsi today. I have one question for Rukmini and one for Rajiv. Maybe I'll ask Rukmini the first question. I think you guided a low double-digit percent decline in ACV billings sequentially for 3Q and then low double-digit increase for 4Q. That seems to be a more pronounced seasonality than the last couple of years. Maybe can you give us some puts and takes and, and, you know, how does that take into account? Is that normal seasonality or is that, you know, worse than normal, and how should we think about that? Yes. Hi, Ruplu. Thanks for the question. We called it out because we did want to provide some color on how seasonality would we expect seasonality to show up for the rest of the year. As you just to reiterate what I mentioned in my prepared remarks, we expect to see a low double-digit percentage decline quarter-over-quarter in ACV billings in the third quarter, which by the way, seasonally, we do see a decline in ACV billings from Q2 to Q3. Low double-digit percentage is a little higher than what we normally see, which is why we wanted to call it out. Followed by in Q4, we expect low double-digit percentage increase quarter-over-quarter in ACV billings. To answer your question, Ruplu, our available to renew pool, that is due in Q3, is expected to be lower than it is in Q2, and then expected to then pick back up in Q4. That combined with our typical quarterly seasonality, leads us to expect that this trend will occur for the second half of 2023. Okay, got it. Can I just also ask a clarification? In the past, you said that the sum of the four quarter ACV billings is typically 6%-7% higher than the annual reported number. Does that rule still hold for fiscal 2023, and how should we think about that going forward? So generally the concept still holds, Ruplu, because effectively what we do, just to remind folks on why we had that out there, is that when we report the quarterly ACV numbers, we have some contracts that come in for less than a year duration, and we do annualize those to report the ACV billings on a quarterly basis. Of course, on an annualized basis, we sort of normalize for that. That's the, that's what Ruplu is referring to. I would say that that, it's in the general ballpark, Ruplu, maybe 95, 94%-95% something or what about 6%-7%, as you said, maybe it's 5%-6%. But around that range is what I'd expect to see this year as well. Okay, thanks for the details there. Maybe Rajiv, if I can ask a question. If you can talk about the demand trends by region, are the shutdowns in China impacting you either directly or indirectly? If you can just touch on the business with your partnership with Red Hat, any progress or anything happening there? Thank you so much. Yeah, we didn't see any significant difference in terms of performance across regions. As you know, our business in China is relatively small, so not a direct impact there. Then of course, the indirect impact, that's really up to our customers. We haven't seen, we haven't really seen anything significant for us as a result of that directly. In terms of Red Hat, continuing to see good momentum with Red Hat this quarter as well. We continue to see a growing pipeline with some wins. This Q1, for example, we saw a government ministry in Asia Pac combining, you know, the two, right? Red Hat OpenShift and our cloud platform. So, from a 3-tier solution to our platform, using our own hypervisor. This is an example of the kind of deals that we work on together with them. We're seeing that continue to grow along nicely. Okay, thank you for all the details. Thank you. As a reminder, ladies and gentlemen, that's star one one to ask the question. That's star one one to ask the question. I'm showing no further questions in the queue. Ladies and gentlemen, this concludes conference call. Thank you for your participation. You may now disconnect.