Hello. There we go. Well, good afternoon. Well, it's still morning here in the San Francisco time zone. Good morning, everyone. My name's Tom Blakey. I'm the infrastructure, technology, and software analyst here. We have with us the CTO and CFO of Pure Storage. The company has asked me to read the following statements made in these discussions, which are not statements of historical fact, are forward-looking statements based upon current expectations. Actual results could differ materially from those projected due to a number of factors, including those referenced in Pure Storage's most recent SEC filings, Form 10-Q, 10-K, and 8-K. So with that, without further ado, thank you very much, both of you, for coming. Thank you. Thanks. Pure, you know, on the most recent conference call commented that overall, the storage environment has been firming up, and demand overall is strong. Could you just maybe, you know, catch us all up here in terms of what you're seeing in the market as we head into 2024 here? You wanna hit that first? Yeah, absolutely. I mean, so first of all, you know, saw some great signs of kind of rebuilding strength in Q4, which is good to see. But early data points, right? You know, I don't think that, you know, still a lot to work through. I think a couple things I'd call out in at least my conversations with customers, you know, I think one is, you know, as we went through the last couple of years, I think we did see in the IT environment, you know, a lot of folks pulling back, looking at, "Hey, how much, you know, can I put off this refresh? How much longer can I sweat these assets?" as an example. And, you know, there's only so long you can do that. And I think we're starting to see some of that start to shake loose. You know, but, you know, I'd go back to yeah, we saw some good signs of rebuilding strength in Q4, but, you know, still kind of earlier in terms of rebuilding. Is there maybe just double-clicking on that, any pent-up demand from the year that maybe there was some softness earlier in the calendar year? You know, I'm not sure I'd call that out. I mean, again, I think, when we've you know, discussed in prior calls, as we've gone through the last couple of years in these kind of tighter environments, you know, deal approvals taking you know, what used to be a one-week turnaround with you know, two signatures, now everything's out of the CFO desk. Everything takes you know, five, six looks. And so you know, I think the environment you know, has certainly changed. But you know, I think the main thing is, well, a couple. One is, I think, our teams have done a better job of you know, meeting the customer in this kinda new environment, really understanding you know, how these purchase decisions are gonna get through the system, you know, building that into their plans. Earlier on, I think we're doing a really nice job of articulating and selling the value that we can deliver to customers in terms of cost savings, in terms of highlighting our TCO benefits. And then, you know, as I mentioned before, I do think that some of these refresh cycles, some of the kinda sweating assets, are really coming due. And we are seeing some signs of that knocking loose. Great. We'll just jump right into I think one of the top topics was the success you've had last year in your fiscal 2024, technically calendar 2023, with Evergreen One, your consumption-based storage solutions. Called out many times, 100% growth or more than 100% growth throughout the year, with a total contract value of $400 million booked last fiscal year. Just what's driving that, you know, just to help the audience understand what are customers so excited about here? Yeah, look, I think there's a lot of factors driving the success we saw with Evergreen One. I mean, first of all, when you have a cloud operating model, and it's a true cloud operating model that we've leveraged, we're really leveraging the Evergreen One architecture. But you think about all the goodness and benefit you get with a cloud operating model, and that's not new. And then with the macro environment, on top of that, look, labor, you know, more sensitive in terms of having labor support the infrastructure. With Evergreen One, you don't need that labor. That's operated by us. You think about, really from the infrastructure lens, I, I think, folks are getting more accustomed to leveraging our technology through a service. I think at the infrastructure layer, folks, whether it's our partners or our customers or even our sellers, are really accustomed to selling product solutions. So really, over the last few years, we've been working with our field, working with our channel ecosystem to help them understand the value proposition associated with a service offering backed with substantive SLAs. We saw some great traction with that this year. I think that's just building. Now, we obviously, at the beginning of last year, modified our comp structure, where there's a bias for our sellers—they'll make more money—to sell our Evergreen One offering. We'll again amplify that, again, a little bit more this year, as well as working with our channel, to again, have a slight bias towards the Evergreen One service offering. And then obviously, as our customers are using Evergreen One and seeing the benefits and business value associated with Evergreen One, that's building on the success and momentum we're seeing as well. And so that was really interesting about the, you know, the incentives, last year, and you may be taking that up a little bit in fiscal 2025. You know, when we talk to investors, there's, you know, a discussion around how the company is forecasting fiscal 2025, which you just reported, $3.1 billion, forecast for fiscal 2025, which I believe it was ahead of expectations, as folks thought maybe there would be an acceleration into the Evergreen One, which would draw down product sales. Anyway, how do you walk us through, like, how you get comfortable in terms of providing that guidance relative to the understanding that the mix shift between product and Evergreen One? You can't. You don't know exactly what your customers are gonna wanna buy. Well, that's exactly right. And that's, you know, when we think about the selling motion today, through our field and with our channel partners, there's still very much an opportunity to evaluate our technology via sale or via service. And we're still presenting both options in large part to our customers. Now, we've had a full year to see how those conversions either work themselves to a sale or work themselves to a service offering with Evergreen One. So we're getting some more data points. Still early in that process. But when I look out for FY 2025, this was the first year, obviously, that we've treated TCV sales for Evergreen One and Evergreen Flex as part of our annual guide. So when you think about the work that we typically would do in setting the guide for our annual revenue, a lot of work goes into that. We're looking at pipeline. We're looking at conversions. We're looking at business models. We're stress-testing kinda where we're coming out with our annual guide. Well, we did the same thing, obviously, this year, with TCV sales, for Evergreen One and Flex to present a annual view of where we think that will come out. But there's still subjectivity in terms of how this will play out. Now, we again are trying to assume different assumptions as a result of the compensation changes we've made to again prefer the Evergreen One for our sellers. So we've kinda built that into our assumptions. And then we've also, you know, thought through, "Well, hey, look, if the TCV sales of Evergreen One and Flex for next year, if that comes down, would we expect annual revenue to come up, not one for one, but based on the conversion?" And the answer to that is yes. But the also holds true that if we completely outperform the 50% assumption, 50% growth assumption we've built in, that will have some bearing and impact on our annual guide. So think about it both ways. And that's how we're thinking about it in terms of what we've provided at Pure Storage. Has the business at the end of fiscal 2024, has the Evergreen One, the storage as a consumption product, storage as a service business, decelerated? no. It did not? Okay. So it continued to, you know, that robust kinda growth. It was a really nice momentum. Exactly right. It's a really nice momentum. Okay. And then, so the 50% growth relative to the prior 100, is it fair to say that there'd be a one-to-one if, like, you outperform on the TCV, that could be eaten directly away from product? Well, I think that's fair. I mean, look, look, when we look at the guide for FY 2025, we have 10.5%, revenue growth, right? And we've got 50% growth and $600 million of TCV sales for Evergreen One and Evergreen Flex. If we exceed that $600 million significantly, that would have an impact on the 10.5% growth rate we provide. Clarify. Thank you. Yeah. Yeah. Well, is there a penetration rate, like, that you could share with us in terms of what that $400 million or the $600 million kinda thinks? Or is this all new to the kinda Pure Storage platform? Oh, yeah. I think this would be all new. This is really driven, in my mind, in terms of still creating awareness, right? When you still think about the infrastructure buyers, they think buying first. And so the idea and the education, the awareness of buying a service, we're making progress on that. But that's still early days in terms of that ecosystem awareness, and what the value attributes are, via purchasing a service, versus purchasing a product. But that's still a ways away. Where we're focused on is really making sure that education is happening, making sure there's incentive and energy to sell the Evergreen One service, with our field and our channel partners, with the idea of increasing participation, frankly. Well, and the only just to jump in on that. Sure. Just the only clarification. I'm not sure if the question was, is this new to customers. You know, we are earlier in the journey of building the Evergreen One service offering. But to be clear, you know, we're seeing traction in both net new customers to Pure as well as existing customers. So it's not new in that respect. I see. Okay. I was gonna say they, they were all new. Yeah. That's, that's where I thought you were ahead of me. The TCV. That's, that's pretty darn impressive. And it still is impressive even at this point. You know, AI is a topic on top of everyone's mind. How do you, you know, I've even been sniped before by some investors saying there's no such thing as, you know, GenAI storage. But walk us through how Pure Storage plans to benefit or that you believe you know, maybe Rob can answer this, how Pure Storage can benefit from, you know, enterprises shifting to use GenAI? Yeah, absolutely. So, you know, if we look at generative AI or AI in general, and what we believe the storage impacts will be and to Pure, really thinking of that in a couple of buckets, if you will, right? So number one, certainly the direct attached to GPU AI training environment set of opportunities. Number two is really understanding, hey, as this technology matures and develops, what do the inference environments look like, right? So, you know, once these models are built, how are they gonna be put into place? What does that environment look like? How do we have a place in that infrastructure? And then number three, which we discussed a little bit on the call last week, is really stepping back and understanding how the enterprise more broadly is planning to, and really starting to plan to incorporate AI into their environments. And what does that look like for the overall data storage environment? So if we think of it in those three buckets, you know, number one in the AI training environments, I think this is where the industry as a whole is placing the greatest focus. Certainly, most of the questions, most of the dialogue is focused around that. And that's a space that we do well in, right? We've served hundreds of customers in that space going back 6-7 years. We've called out a number of high-profile wins. Certainly, the Meta RSC environment, which we've spoken quite a bit about. We called out some larger wins earlier last year. And then the GPU cloud environment we spoke about last week on the call. All continued great points of validation for not just the fit of our technology in these training environments, but now with the GPU Cloud win, I think really highlighting the flexibility and the benefits of Evergreen One, combined with the technology to go meet the needs, the changing needs of, you know, the AI space and and service providers in general. In area number 2 in terms of the inference environments, you know, I think we're still fairly early in cycle, in terms of, what does that stack look like? What does that infrastructure look like? You know, I think, you know, I think most, most folks out there are still trying to figure out and sort out, you know, what these environments, how these environments are gonna be built out. And I think this year will, that'll play out a lot more. And then I think the third area is, you know, what gives us the—we view—as the largest opportunity, if you will, is really looking at how the enterprises step back and say, "Hey, here's where I'm at. I want to go deploy, you know, all this whiz-bang AI technology. How do I connect all of my data sets, you know, to this to these new models, to this new technology?" In all of, you know, my customer conversations and conversations with partners, you know, it's becoming clear that most enterprises are stepping back and realizing, "Gee, you know, if I look at where all of my operational data is stored, it's in, you know, scattered in these 15 different environments, trapped in these various silos. You know, in order to apply this AI technology to it, I've gotta do a better job of getting my data house in order." I think that's really the most immediate opportunity we see and most broad-based, right, to just modernize a lot of these legacy storage environments. That's perhaps maybe I didn't have this question prepared, but that's a perfect opportunity maybe for you to give a minute or two example of in terms of why Pure's platform is more advantaged in that regard versus other storage platforms. Boy, yeah, absolutely. I'm looking at the timer. We only have 10 minutes, so we'll have to keep this brief. That's fine. Yeah, I think there's a couple things that come to mind, right? So number one, you know, if you look at historically why data storage has been so fragmented and siloed, it's because legacy providers really haven't been able to meet a wide range of application needs with a consistent set of technology. And so what that's forced customers down a path of is having to go and configure bespoke environments for every single usage. And look, in a world where each data store was only meant to be used for a singular purpose, like, that kinda worked okay. But as soon as you start thinking about connecting AI technology or really any, you know, any need to connect all these data sources, that becomes a significant hindrance. And so the fact that we're able to go address, you know, all, entire spectrum of price performance, protocols, data access, with a very consistent, you know, shared set of, software technology, shared set of hardware technology, makes it extremely, you know, compelling for customers, easier for us to consolidate that, together. The second reason that customers have been, you know, historically in this very fragmented mode is, the performance wasn't there, right? They didn't want to, put these workloads together. They didn't wanna connect these systems because, you know, if the performance isn't there, you know, you have one workload that starts creating problems with other workloads. You put up the walls. You put up the defenses. And pretty soon, you're in this fragmented, world of islands. We do performance. That's what we do. And then, third of all, you know, I think what, where we're going with, you know, building on Evergreen, building on the cloud operating model, and what we're doing with Fusion, we're going the next step further to help customers really bring these environments together, manage these not just systems but manage these pools of data storage resources much more in a much more automated fashion, much more by policy, by code rather than, you know, as physical pieces of hardware. That's ideal, all driven by the Purity one code-based operating system. Maybe shifting back to the model or shifting over to the model, Kevan, rather. As the storage as a service story is accelerated - those are my words, and I, and I'm modeling that for next fiscal year - you in the last three years, that business model that segment that's now 50% of revenue has expanded gross margins 500 basis points. What will you know, what's gonna be the impact of this Evergreen One success that you're having now on the future of gross margins of that segment? Yeah. That's a great question, right? So when we think about, first of all, our subscription businesses, it really is comprised of our subscription Evergreen subscriptions that are attached to product sales. And that's primarily Evergreen Forever. And then obviously, you've got Evergreen One. You've got a large portion of Evergreen Flex and Portworx and Cloud Block Store. Those would be the offerings that would be all part of our subscription offering. And obviously, with the ramp on Evergreen One, storage as a service, which has accelerated, I do see a long-term expansion on subscription gross margin. The reason being is when I look at the Evergreen Forever subscription margin profile, which obviously is well, it's higher than our corporate subscription gross margin profile. I think we can get up or close to that level with Evergreen One as we scale. We're very efficient with the Evergreen technology. We've been working with it for over a decade and that business model. And so as we scale our Evergreen One, I think we can get more and more improved margins, which should give us some expansion opportunity in our subscription gross margin profile overall. Those are the leading question there, and you set it up better than I could. Is the, you know, Charlie speaks, you're the CEO, about weaponizing gross margin on the product side. Yes. And gross margins continue to go up, 73% the most recent quarter. They're expanding as well. So talk to us about, you know, from a strategy perspective, with the successes in the subscription side, as that increases the percentage of revenue and expands margins, how Pure plans to address and attack the market with product gross margin. Yeah. I mean, when we look at our Pure Storage platform, which, again, goes all the way from the high-performance to the cost-sensitive workload, we are, you know, when I think about the acceleration in terms of really penetrating the disk market and taking out disk, it's really with our E-family. And we're early days with our E-family. We had some really nice ramp this year, really consistent with what we were expecting and maybe a bit overachieving that slightly. And we wanna be aggressive in taking out disk. It's as simple as that. And, you know, with that, you know, we'll balance it. But, you know, the whole point of that offering is to compete on a price perspective for those workloads. And we'll go compete on a price perspective for those workloads. Is it fair? And then, just to add on to that, and then beyond that, you know, as we've said before, you know, we're not gonna typically go win a deal on price. We're not gonna lose a deal on price either, right? Okay. So, you know, wanna get aggressive in E, that clearly is ramping, but, you know, to the degree that, you know, we're not gonna let that stand in the way of winning deals. From a strategic perspective and as CFO, is it fair to just balance it and say that for the success you have in the subscription side, in the services side, that could fund the product gross margin in the sense of being aggressive? Or do you still wanna overall have overall corporate average gross margins expand longer term? It's a great question. I mean, look, I see this from a strategic perspective. It's more strategic to me. I think, you know, when you think about Charlie's viewpoint, you know, the disk—you won't sell any new disk solutions in now four years. He was a year ago when he was saying five years. I think that's right. Our strategy is to take out disk. And so with that, we've got the E-family. Let's say, so with FlashArray C. But we'll be aggressive with that. And I don't view that as a trade-off. I view that as executing against our strategy. That's how I view that. And then from a broader perspective, you know, Charlie and I are very much aligned that we will always be prioritizing growth, but with a philosophy of modest expansion of our operating market. Operating. Right? And I think we can do that and a lot of different ways from a leverage standpoint. And we've been showing that over the last couple of years, which has been good. Any questions from the audience? I have a couple. Yes, please, Jackson. Yeah. Great question. Oh, yeah, I guess for the webcast. Sorry. I think the net of the question is, as we look at the inference environments, if the stacks are still being defined, is there a worry that, "Hey, all this CapEx that's going out there is, you know, 's gonna stall out, hit a cliff," that sort of thing? You know, I think there are a couple things. I think, when you look at the tech titans, you look at the large CapEx spend, I think a lot of that still is very much focused in building out the training environments, which, again, is a little bit more well understood. I think that's in a separate bucket. Really, what I was referring to was more, what does the enterprise deployment of inference look like? What does that stack look like? That's gonna be a little bit different, for a variety of reasons, than I would expect, than what you'd see in a public cloud hyperscaler or large SaaS type of firm. Okay. Thank you. There's another question. You mentioned the E-family. And Pure has mentioned that, they expect to announce a design win, this fiscal year fiscal 2025, fiscal year in January. Walk us through what maybe that design win looks like from a use case perspective. Is it a hard disk drive replacement opportunity? Is it? Yeah. Yeah. So. Before you get it, separate out the E-family from the design. Yeah. No, absolutely. So, so when we talk about the hyperscaler opportunity, really looking at replacing the majority of their footprint today, which is deployed on hard disk drives. And we think about that, you know, differently than the enterprise hard disk systems replacement opportunities. Similar technology, but different opportunities and different ways of going and capturing them. You know, when we step back, I think the E-family, the success we've seen there, the growth and the 75-terabyte blades, these have been DFMs, I'm sorry. These have been very, very significant points of validation that help us go drive these conversations and push further in the engineering co-engineering process with these hyperscaler partners as, you know, as part of pursuing that design win. You know, it's one thing to go in and say all the great things you can do and show slides, but to show somebody, "Hey, we've been shipping this into the enterprise. It exists," it's a completely different conversation. And so when we think about the hyperscaler opportunity, the opportunity very much is hard disk drive replacement. It's for their think of the general pools of storage that they have out there. And, you know, that's going extremely well. You know, what's driving that from their point of view is, they know they need to transition that footprint from disk to flash. They know that SSDs and that technology is really not gonna get them there. It's not gonna get them the efficiency, the reliability, the cost profiles they need. They know that not having the technology we do to work with flash natively is a big barrier. And that's where we're working very closely with them, you know, to leverage the technology we've developed in the enterprise products for these hyperscaler environments. So, pursuing you know, pursuing these opportunities, it's going very, very well. And, you know, Charlie's put it out there that he's expecting a design win this year. So we're gonna do everything we can to make him right. We can follow up with the audience if everyone wants to address me or the firm here about the difference between an SSD and the Direct flash Module. That was the last quick question. How about the gross margin profile of a win with such a large buyer, Kevan? In the event we get a design win with a hyperscaler? Yes. Yeah. Yeah. It's a great question in terms of with the gross margin profile. And I look, I think that will come with the commercial construct, really, of how that plays out, when it plays out. Really, the vision, though, is it gonna be accretive to our operating margins? And that's what we're focused on. And the answer is we would expect it to be accretive to our operating margins. It's a great answer. We see that with other providers too, the hyperscalers, so. Yeah. Great. That was a great summary in a short period of time. Thank you, Rob. Thank you, Kevan. Great. Thank you. Thanks. Yep.