Cisco Systems, Inc. (CSCO) Earnings Call Transcript & Summary

Thanks, Sue. I'd like to welcome all of you to the quarterly earnings conference call for Cisco's fourth quarter of fiscal 2020. I'm Marilyn Mora, and I lead Investor Relations. With me today are Chuck Robbins, who serves as our Chairman and CEO, and our CFO, Kelly Kramer. You should have had a chance to look at our earnings press release by this point. Later on, once this call ends, a webcast with slides — which includes supplemental information — will be posted in the investor relations section of our website. You can also locate income statements, complete GAAP to non-GAAP reconciliation details, balance sheets, cash flow statements, and additional financial information in the financial information section of our investor relations website. During this call, we'll reference financial results on both a GAAP and a non-GAAP basis, and unless otherwise noted, we'll talk about product results in terms of revenue, while geographic and customer results will be discussed in terms of product orders. Every comparison we make today will be on a year-over-year basis. What we discuss today includes forward-looking statements, among them the guidance we're giving for the first quarter of fiscal 2021. Those statements carry risks and uncertainties, COVID-19 included, that are described at length in the documents we file with the SEC — in particular, our latest reports on forms 10-K and 10-Q, which point out significant risk factors that might lead actual results to differ materially from what the forward-looking statements contain. Regarding guidance, please also review the slides and press release accompanying this call for more details. Cisco won't comment on its financial guidance during the quarter unless it happens through an explicit public disclosure; in Q2 fiscal 2019, we closed the sale of our SPVSS business. Because of that, all financial information we discuss is normalized to exclude the SPVSS business from our historical results. I'll hand things over now to Chuck.

Thanks, Marilyn, and I hope everyone listening, along with your loved ones, is safe and well. Our hearts go out to all those touched by the pandemic, and we feel deep appreciation for the people still on the front lines, putting in the work to support those suffering through these difficult days. Getting ready for today's call gave me a chance to look back at everything accomplished since I took on this position 5 years ago. Thanks to the dedication of the entire Cisco team, we've been through a major transformation during some of the most complicated periods in the company's history. The things our teams have done make me incredibly proud. They've shown resilience, resolve, and empathy while we hit our financial commitments, delivered market-leading innovation to our customers, shifted our business model, and built a culture that has genuinely stood out over the last 6 months. Today's Cisco is nimbler, more inventive, and more focused. By pursuing innovation both organically and inorganically, we brought out amazing new technology, along with fresh, more adaptable consumption offerings for our customers, featuring more software and subscriptions. During our financial analyst conference in 2017, we set out the important metrics behind our transformation. Our goal was for 30% of revenue to come from software, and though we reached 29% in fiscal year 2020, we did hit 31% in Q4. We also generated 51% of revenue from software and services in FY 2020, which beat our 50% target. Finally, 78% of our software revenue is now sold as subscription, surpassing our 66% goal. With customers guiding everything we do, we've successfully carried out our strategy of helping them transform and modernize their organizations; we rolled out our intent-based networking architecture, which relies on automation and machine learning, to help customers achieve simplicity along with cost-effective management of their networks. As customers shift more workloads into the cloud, we provide fast, highly secure access to applications hosted anywhere — whether in the private data center, the public cloud, or a SaaS platform — through cloud security built into our SD-WAN solution. We rolled out new capabilities spanning software, silicon, and optics to help make the internet for the future a reality. The innovation we've pushed across our security portfolio has helped us become the top enterprise security company in the world; with Webex, we offer the enterprise the most trusted, secure platform for remote collaboration, and we're also giving customers real-time insights across their multi-cloud environments so they can optimize user experience, using our insights and observability assets such as AppDynamics. Over the last few years, this transition has produced better financial results, including wider margins and evidence of ongoing financial discipline. Once more, I want to thank our teams for everything we've achieved. If there's one lesson the past year has given us, it's that we must always stay nimble. I believe the changes we've made to our business now leave us in a position of strength as we turn our attention to the future. We are an organization that welcomes transformation, and we have demonstrated the capacity to flourish no matter what circumstances arise. The last six months have without a doubt transformed our world. Dramatic shifts have occurred across industries, governments, and work, and a great number of those shifts are here to stay. Here at Cisco, we are dedicated to assisting our customers in genuinely digitizing their organizations for what lies ahead, no matter what difficulties or fundamental changes we might encounter. Just as many other organizations have done, we have also had the chance to take a fresh look at our business and our portfolio for this new world. As I mentioned during the previous quarter, we intended to spend time gaining a deeper understanding of both the near-term and long-term effects of COVID-19; we now feel we possess a clearer picture. Drawing on the numerous discussions we have held with customers across the globe, we feel we have insight into the way they will adjust their technology strategies going forward to guarantee enhanced resiliency, agility, and innovation. We understand how to modify our business and strategy so they line up with the direction our customers are taking. The adjustments we are making to our business mirror how we are capitalizing on our existing strengths, putting money into growth, and opening up new opportunities; we will additionally remain highly disciplined regarding our cost structure, just as we have always done. During the coming few quarters, we are going to remove more than $1 billion on an annualized basis in order to shrink our cost structure. Simultaneously, we are going to rebalance the investments we make in R&D so they concentrate on crucial areas that will put us in a strong position going forward. To be more specific, we will speed up the shift of the bulk of our portfolio toward being delivered as a service; we will likewise speed up our investments in these areas: cloud security, cloud collaboration, key enhancements for education, healthcare, and other industries, increased automation in the enterprise, the future of work, and application insights and analytics. Simultaneously, we will maintain our emphasis on these areas, a number of which the pandemic has accelerated: multi-cloud investment, 5G and Wi-Fi 6, 400G, Optical Networking, Next-Generation Silicon, AI, and more; these investments will assist in defining the next stage of our transformation and enable us to deliver the finest, most pertinent innovation to our customers in simpler, more easily consumable ways. I have no doubt that, yet again, we possess the correct strategy that will provide what our customers require from us, and we will come out of this difficult period as a stronger company than we were before. Allow me to talk about our performance during the quarter. Although our results mirror the continuing difficulties in the present environment, we performed well. As one would anticipate, the pandemic has affected our enterprise and commercial orders most heavily, pushed by an overall deceleration in spending; we observe customers continuing to postpone their purchasing decisions in certain areas while raising spend in others until they gain greater visibility and clarity regarding the timing and shape of the global economic recovery. Even with the economy in this tough spot, the pandemic has set off a huge, swift move toward working remotely and automating more, all to keep people as safe as possible. Because of that, a growing number of customers now depend heavily on the wide range of technologies we offer, which gave us yet another quarter of robust demand for Catalyst 9000, Security, Webex, and our other SaaS-based offerings. Across fiscal year 2020, we showed we could keep operations steady, thanks to close ties with customers, a healthy financial base, distinctive innovation, and a persuasive strategic transformation resting on the power of our core technology platforms. I'll now walk through a handful of quarter highlights. During June, we rolled out a broader business resiliency portfolio, bringing healthcare and education solutions together with easier consumption models and services meant to speed up adoption; we'll keep growing that portfolio into areas like keeping distance between people at work, engaging virtual employees effectively at scale, and connected clinics that pop up. In our infrastructure platforms business, the Catalyst 9000 portfolio keeps climbing strongly, since plenty of customers are using the fact that employees work from home to modernize outdated infrastructure, which lets them make network management simpler, safer, and more automated.

Bringing ThousandEyes into the fold will build on what we already offer, giving us more depth and breadth of visibility and analytics spanning networks and applications, so we can create the strongest experiences possible for our customers. When we combine their SaaS-delivered solution with our AppDynamics application intelligence portfolio and SD-WAN technology, we're able to offer unmatched intelligence and insights at cloud scale, which improves both customer experience and the reliability of their applications. For our customers, security remains a leading priority, especially in a distributed digital world like today's. Because we can connect and protect customers who work from anywhere on any device, adoption of our comprehensive security portfolio is speeding up, producing double-digit revenue growth in the quarter. With more data moving to the cloud and users spread out more widely, we saw good momentum in our cloud security solutions, safeguarding workloads, applications, and data. We're also continuing to broaden what we can do to simplify and automate our customers' security infrastructure. Our SecureX platform is a strong illustration of that — it's built to unify visibility, make automation possible, and provide a consistent experience. In the six weeks since launch, we have more than 2,100 active daily customers, and two-thirds of them have two or more products active; beyond that, we're delivering secure remote worker solutions covering our endpoint security portfolio, paired with the strength of our zero trust architecture through Duo, AnyConnect, Umbrella, and AMP for Endpoints. For a great many organizations, applications have turned into a lifeline. That trend has grown further during the last few months. As organizations figure out what their future will be, our collaboration technology will be central to changing the way they work, transact, and connect. Webex delivered strong performance in the quarter, with double-digit growth, as businesses, governments, educators, and frontline workers all over the world have adopted remote work. We anticipate that momentum carrying forward, since free trials have started converting into paid subscriptions. AppDynamics posted another solid quarter as well. By giving real-time insights from one pane of glass to optimize user experience across their multi-cloud environments, these monitoring tools deliver significant value to our customers. Reflecting on everything accomplished across the last five years, I'd like to pause and recognize Kelly Kramer, our Chief Financial Officer, who has been a wonderful partner to me. Reshaping Cisco into the company it is today is something she was central to. I want to share with all of you that Kelly has decided to retire from Cisco. During her eight-plus years with us, Kelly has driven the work to strengthen our financial performance, kept the focus on investor confidence, and helped put Cisco in a position to succeed. Kelly and I have concentrated on simple, clear communication, complete transparency, meeting our commitments, and always aligning Cisco for future growth. Kelly has kindly agreed to remain as CFO until her successor is in place, and she will advise us through the succession process. Let me say this plainly: since Kelly will remain in place while the search is underway, and given the caliber of our finance organization, the handoff will go smoothly. Kelly, I'm deeply grateful for the collaboration and the friendship we've shared. Your presence here will genuinely be missed. Ahead of handing things to Kelly, let me restate how confident I am about what lies ahead. Across the last 5 years, we haven't hesitated to take daring steps aimed at setting ourselves up for growth over the long term, and that's exactly what we're doing now; we're dedicated to operating a robust business while also applying technology for good to address the planet's toughest problems and open up fresh possibilities going forward. As we've shown, we've assisted our customers in developing resilience amid tough conditions, amid shifts within industries, and during periods of swift expansion; we'll keep on using our standing to improve our communities and the world. Be it confronting the global health pandemic or facing social injustice and intolerance, we stay true to our mission of powering an inclusive future for all. With a new fiscal year beginning, I think tremendous opportunities lie before us. We'll steer through the pandemic as effectively as we can while avoiding harm to Cisco's longer-term prospects. We stay tightly focused on what our customers prioritize and firmly devoted to producing long-term growth. At this point I'll hand things over to Kelly.

Thank you, Chuck. This has truly been a wonderful experience, and I'd like to express my appreciation to you, the leadership group, and honestly everyone at Cisco. My gratitude also goes out to the finance organization, whose performance has been outstanding. Leaving Cisco will definitely be difficult, though I'm eager about the opportunities ahead. Let me begin by going over the quarter's financial results, then I'll walk through the full year, and after that I'll share Q1 guidance. The Q4 numbers we posted show solid execution and robust margins despite a highly difficult backdrop. We brought in total revenue of $12.2 billion, which represents a 9% decline. The non-GAAP operating margin rate came in at 33%, an increase of 0.4 points. Non-GAAP net income totaled $3.4 billion, a 5% drop compared with the same period last year. Non-GAAP EPS landed at $0.80, which is 4% lower. Let me go deeper into the Q4 revenue picture. Product revenue overall fell 13%, coming to $8.8 billion. Infrastructure platforms declined 16%. No other product area felt the COVID situation more heavily than this one. We experienced drops in switching, routing, data center, and wireless, largely because of softness in the commercial and enterprise markets; however, there were some bright spots, including ongoing expansion of Cat 9k, which grew at a double-digit rate, along with momentum building for our Wi-Fi 6 products. Data center stood out as especially soft given the market's downturn and falling DRAM prices. Applications slipped 9%; on a brighter note, Webex delivered robust double-digit expansion as remote working became essential; AppDynamics and IoT software also posted healthy growth. Those gains were counterbalanced by weaker unified communication and TP endpoints. Security climbed 10%, powered by impressive results in network security, identity and access, advanced threat, and unified threat management. Our cloud security portfolio turned in a good performance with strong double-digit growth, and our Duo and Umbrella offerings kept up their momentum. Service revenue stayed level during the quarter, yet our maintenance business along with software and support services grew; advisory services weighed against that, having been hurt by the COVID situation; we kept reshaping our operations, providing additional software options and generating more subscriptions. Software subscriptions accounted for 78% of total software revenue, which is eight points higher than a year ago. Remaining performance obligations, or RPO, stood at $28.4 billion when Q4 ended, marking a 12% rise. Product RPO increased 17%, while service RPO was up 9%. The continued growth in RPO speaks to the strength of what we offer across software and services. Now, looking at orders in Q4: total product orders were down 10%. If you break that out by region, the Americas declined 11%, EMEA was off 6%, and APJC decreased 13%. Emerging markets as a whole were down 19%, while the group we call BRICS plus Mexico saw a 26% drop. On the customer segment side, public sector was down 1%, and enterprise declined 7%. Commercial had a 23% decrease, and service provider was down 5%. On the non-GAAP profitability side, gross margin for Q4 came in at 65% overall, which is 0.5 points lower. Product gross margin was 63.2%, a drop of 1.5 points, and service gross margin hit 69.8%, which is 1.9 points better than the same period last year. Looking at Q4, our GAAP tax rate came in at 16.7%, and that number includes the true-ups tied to the annual tax rate. On the bottom line under GAAP, net income for Q4 reached $2.6 billion, with EPS of $0.62. When Q4 closed, we had $29.4 billion in total cash equivalents and investments. Cash flow from operations totaled $3.8 billion, a decline of 4% compared with the same period a year earlier. Turning to capital allocation, we gave back $1.5 billion to shareholders through our quarterly dividend. We kept putting money to work both organically and inorganically in our innovation pipeline. Only last week, we completed the acquisition of ThousandEyes. That step aligns with our approach of boosting investment in innovation and R&D across our growth areas. Now I'll walk through the results for the entire fiscal year. We posted strong margins and increased EPS despite a very challenging environment. Revenue came to $49.3 billion, which was down 5%. Non-GAAP gross margin on a total basis was 66%, an increase of 1.4 points, while our non-GAAP operating margin rate reached 33.8%, up 1.5 points. On the bottom line, non-GAAP net income totaled $13.7 billion, a decrease of 1%, and non-GAAP EPS was $3.21, which rose 4%. GAAP net income came in at $11.2 billion, with GAAP EPS of $2.64; operating cash flow for the year was $15.4 billion, down 3%. Taking out the cash from the Arista legal settlement that landed in the first quarter of fiscal 2019, our operating cash flow stayed level through all of fiscal 2020. Turning to how we deployed capital, shareholders received $8.6 billion back over the fiscal year — 59% of free cash flow — split between $2.6 billion of share repurchases and $6 billion of quarterly dividend payments. Wrapping up, Q4 and the full fiscal year both came in strong, with healthy margins despite a very tough backdrop. The payoff from what we've invested in innovation is starting to show, and we're steering the business toward software and subscriptions, which is what drives growth over the long term and creates shareholder value. I want to go over our outlook for Q1 of fiscal 2021 once more. As Marilyn noted before, this outlook includes the standard caution regarding forward-looking statements. For revenue, we're looking at a year-over-year decrease somewhere between -9% and -11%. On a non-GAAP basis, we expect the gross margin rate to land in the 64%-65% range. The non-GAAP operating margin rate should come in between 30% and 31%, while the non-GAAP tax provision rate is projected at 19%. For non-GAAP earnings per share, the anticipated range is $0.69-$0.71. With that, I'll turn things back over to Marilyn so we can begin the Q and A.

Appreciate that, Kelly. Sue, the line is now open for questions. Just a quick note that we're asking everyone to keep to a single question, which lets us reach as many people as we can. Sue, over to you.

Thanks a lot. The first thing I'd like to ask is directed at the group here. Now that software plus services account for 50% of revenue — which was the benchmark set out at the 2017 Analyst Day — I just want to know whether you have a fresh objective and a fresh range in mind. I'm aware that you've rolled out some new offerings and new services along with some new areas of investment. My hope is simply to figure out whether we might receive, say, a new roadmap or a new goal against which we could hold you accountable or gauge your progress.

Sure, Sami, I appreciate the question. The last three years have gone quite well while we've been carrying out this shift, and clearly, as you're asking, there's still ground to cover when it comes to a new target. This came up in our discussions over the past week or so, and our sense is that we simply need to finish getting through the pandemic cycle we're in, and after that we'll establish some fresh targets and share them with you at that point. As of now, none exists.

Understood. Appreciate it.

Thank you, Sami. Let's take the following question.

Great. Thanks. Chuck, you mentioned some adjustments to the portfolio that would come from the discussions you've been having with customers. When it comes to their awareness of what their network architectures will look like once they return, or simply how their budgets are shaping up for the rest of the year, where do you think they stand? Thanks.

Yeah. Thanks, Meta. When we consider network architectures, one thing that's clear to us is that our customers operate in a multi-cloud world. As they shifted to working from home—something I mentioned during our previous call—those carrying technical debt, and those who hadn't made real investments in modernizing their infrastructure, realize they'll have to address that eventually. The speed at which they do so will vary according to what they can afford financially. It's evident that a large number of our customers are interested in consuming the technology as a service, so at the moment we're reviewing the whole portfolio to determine how far we can go in offering it that way. By the time this calendar year wraps up, I expect a significant amount of that will be available in the market. On top of that, we'll be collaborating with our customers around their network architectures—architectures that will clearly lean heavily on cloud security and SD-WAN, and on bringing those pieces together. We intend to speed that effort up, and we'll also guide them through the multi-cloud landscape, since I genuinely believe a number of customers have already been hastening that transition. The designs for networks we put in place 15 years back, which I've mentioned before, simply don't fit what's needed now, since the way traffic moves is entirely different. We're going to keep collaborating with customers, and my sense is the timing will vary depending on each one's situation and how they deal with the pandemic.

Great. Thanks.

Next question, please.

Thank you. Chuck, regarding the portfolio and the adjustments that are necessary there, plus the speeding up of R&D in certain segments, could you get more granular about which segments you believe require the greatest amount of tweaking? Also, it appears the rate at which technology develops simply continues to increase. A lot of that work can be handled by us in-house, and historically you have made plenty of acquisitions, yet I cannot shake the feeling that you must act far more quickly and be significantly more forceful when it comes to M&A. I realize you have maintained strong discipline when it comes to price, and obviously, a market such as the one we see now is not exactly favorable to that. Given that things are progressing far, far more rapidly, are you now more willing to become somewhat more forceful on the M&A side to plug holes? Since it seems that the longer this is delayed, those holes are only going to grow, not shrink.

Yes, Ittai, that is an excellent question, and regarding your initial question about the segments where we believe investment is needed — I believe this pandemic is essentially providing us with the air cover to speed up the shift of R&D expense toward cloud security and cloud collab, and away from the on-prem elements of the portfolio. Obviously, we have a great deal of technology in development right now to assist our customers across the coming three, four, five years in this multi-cloud world they will inhabit, and you will see additional offerings emerge over the coming couple of years. As for the M&A question, I believe there is definitely an acknowledgment that valuations for the attractive assets have reached varying levels. I believe we will stay disciplined, though I would say we are willing to consider the current environment and the reality we find ourselves in. I believe we are willing to entertain any and all ideas, and we keep working through various options, and we hold a list of possible targets that we update fairly regularly. I believe the key distinction is that there must be an acknowledgment that valuations are no longer the same, yet we will aim to remain disciplined and act correctly at the appropriate moment.

Thanks, Ittai. Let's get the next question.

Thanks a lot, Chuck and Kelly. Kelly, your presence will be greatly missed, so I appreciate all the time you've given. Going forward, assuming my model holds up—and it might not—it appears the year-over-year revenue comparisons become considerably simpler, perhaps on the order of 400 basis points year-over-year for the quarterly guidance. For instance, with Huawei having been pushed out and Cisco being favored in many nations, even outside the United States, plus an incumbency advantage stemming from coronavirus. Please help me bridge your year-over-year revenue growth, and perhaps that's still to come, regarding why things aren't more favorable, since the comps are simpler, Huawei is less favored than Cisco has an incumbency factor, and we're emerging from coronavirus. Thank you.

Well, I'll speak subjectively, and then I'll have Kelly discuss the numbers a bit. I wouldn't claim we're emerging from the coronavirus at this moment. To me, it feels very much the way it felt 90 days ago. Obviously, within the U.S., certain areas have improved and clearly others haven't. Broadly speaking, it feels largely identical to how it seemed 90 days ago for us regarding that. I believe some of the items you're mentioning about service providers globally, and the chance that we'd be receiving opportunities we wouldn't have previously had, I believe some of those remain to be seen. We'd share that optimism, and we'll need to wait and see how that unfolds. Kelly, would you like to discuss the-

Right. When we look at comparisons, the first quarter of 2020 — so my guidance for the upcoming quarter, Q1 of 2021 — represents our hardest comparison. Clearly, Q3 and Q4 were quite difficult for us during 2020 as a result of COVID. Measured against Q1 of 2020 at this point, we still face some challenging comparisons, though they become easier as the year progresses, provided the pandemic comes to an end. As you're aware, Jim, our forecast reflects what we observe, reflects order rates, and we believe this guidance is fairly accurate.

Chuck and Kelly, I really appreciate the details you provided. Kelly, many thanks for everything you have done.

Thank you, Jim. That means a lot to me.

Next question, please.

Thank you for taking the questions. Instead of a question, I have maybe two points I'd like clarified. Chuck, about how you responded to Jim's question — when you say things feel mostly the same in the U.S. as they did 90 days ago, do you mean enterprise as well as commercial, meaning your small and medium customers together with your large ones, across the board? Then, on the $1 billion you brought up regarding costs coming out, is all of that going to come out of OpEx? I realize there is probably some sensitivity if it includes reducing headcount, which I suspect it does. Kelly, I was hoping you could give us a sense of when that reduction happens and what kind of reductions they are. Does that sit entirely within operating expenses, or is a portion of it reflected in cost of goods sold? Thanks.

Sure, Paul — I can share some perspective on that. I'll walk you through how things have looked by customer segment and across different regions over roughly the past 90 days. That may give you a clearer picture. Looking at the U.S. specifically, the top tier of large enterprise accounts showed some real momentum for us. But moving further down-market, things deteriorated progressively — which is fairly typical — with small businesses, mid-sized companies, and even the smaller end of enterprise all underperforming compared to the biggest organizations. So the strongest results came from the largest U.S. enterprises. On top of that, the federal segment in the U.S. also delivered some clear gains. That stood out as genuinely encouraging, given that the same period last year was already a standout quarter for them — so they really delivered. When it comes to service providers globally, our business in Asia and Europe both grew. The only decline was a slight one in the U.S. Within the Americas, Canada and Mexico were the main reasons for that negative result. On the whole, this area performed well, especially beyond the United States; a handful of countries even started turning positive. I'm trying to work out whether we can create a model suggesting that because Asia was hit first, it will also recover first. On the demand side, Japan delivered a solid quarter for us. On the demand front, Korea performed well for us this quarter, and we're noticing some encouraging signs. Germany also delivered a solid quarter. If you consider how our team in Europe is feeling at the moment, they're actually doing reasonably fine—not fantastic, but an improvement over where they stood 90 days back. Right now, the Americas remains something of an unknown, I'd say. With any luck, that provides a bit more insight into what we're observing throughout the stack. Kelly, would you like to—

Right, absolutely. As for where that expense will show up, most of it, I'd say, lands in OpEx. Figure roughly an 80/20 division; there will definitely be a portion within COGS as well, on that services side, though the larger share sits in OpEx. On the timing question, the bulk of it ought to appear toward the close of Q1, with a bit spilling into Q2, varying by whichever country it happens to be in.

Paul, thanks for that. I'll miss all of you. And Chuck, thank you.

Paul, I appreciate the kind words. Thank you.

Yes, you will.

Thanks, Paul. Next question.

Thanks for taking my question. What I'd like to go back to is how consistent this pattern of orders has been, Chuck and Kelly, particularly when it comes to the enterprise segment. Looking back at 2009, commercial order volumes started to soften down to levels we saw during that downturn. Enterprise hasn't really acted that way, and I'm curious whether you think that's the direction we're moving in now. My sense is this doesn't look like it'll be a quick V-shaped bounce back. It seems more like we're actually entering a recession — or rather, an extended one. I'm interested in your perspective on the trajectory of those volumes, and how they compare at the quarter's end versus its beginning.

Sure, let me share a few thoughts, and then I'll pass it over to Kelly for additional detail. When Kelly and I reviewed our demand projections, comparing the quarter's opening to its conclusion, our expectations were essentially met. Actually, it came in marginally ahead of what we'd forecast when the quarter began. Don't read too much into that modest improvement — the guidance makes that clear. Overall, I'd say things tracked pretty linearly, though the weighting tilted somewhat more toward the back half than has typically been the case. A substantial amount of large enterprise business landed late in the quarter. Kelly, anything you'd like to add?

Okay, one more point to make here, and Chuck already mentioned part of it. What we're really talking about is those very largest premier enterprise customers. They continue to put substantial money to work, and their order rates were quite strong; however, as you move further down the enterprise tiers, things did decelerate, and on the commercial side that shouldn't come as a surprise. You've already seen the commercial figures. My belief is that this ties back to those customers holding off until they can tell what the pandemic will produce, so they're putting their spending on hold. That's exactly why watching the largest, largest accounts keep funding their digital transformation, I believe, leaves us confident that after we get past all this, we'll feel good about the position we're in when it ends.

Alright, let's take the next question.

Alright. Would it be possible for me to ask a follow-up?

Of course.