Everpure, Inc. (P) Earnings Call Transcript & Summary

Okay. Welcome, everybody. I'm Rod Hall. I'm Goldman Sachs' hardware analyst. I've got the great pleasure of having Pure Storage here with us today. We've got Charlie Giancarlo, the CEO; and also Kevan Krysler, the CFO. So welcome, guys, really great to have you here. Thanks for participating.

Great to be here. Thanks, Rod.

Thank you, Road. Really our pleasure.

Thanks to the audience as well. I'd just remind the audience, there is an interactive system. So if you have questions, the way to get those answered is to put them into the system, and at the end of the Q&A that we're going to do, I'll ask the team here to answer the questions. I think to kick us off, though, Charlie, I wonder if you could say a few words about growth drivers for Pure. I know you've launched some new products. Maybe just a couple of words on what's driving growth? What you expect to drive growth? And then we'll jump into the rest of the Q&A.

Absolutely. Thank you, Rod, for that. So for those people that have been following Pure, they probably know that Pure, just 4 years ago, was a single-product company. And then we introduced our FlashBlade product, which has grown tremendously for us, which is able to provide very high levels of performance for scale -- for large and high-speed data requirements, especially performance in areas of artificial intelligence, machine learning, but also in the ability to rapidly recover for our customers in situations of ransomware and other types of cyber threats. But since then, now, we've become a multiproduct company. We're the first company to introduce a QLC product that addresses and is actually more effective at providing storage for what has traditionally been hybrid array products, that is the so-called Tier 2 of storage. And now increasingly, we're becoming more of a services company, and services as in Storage as a Service. Our evergreen model, which allows our customers to consistently and constantly improve the products that they have previously bought from us through a subscription model as well as our Pure as-a-Service capability, where customers just procure Storage as a Service, whether it's on-prem or in the cloud, whether that's in a hyperscaler environment or in their private distributed cloud, we provide that now purely as a service, where the customer gets consistent upgrades, consistent software and improvements in performance as on a continuous basis throughout their lifetime. So we've consistently added more and more product capability. I'm very proud to say that we are the uppermost in the Gartner Magic Quadrant this past year as well as achieving new milestones in terms of Net Promoter Score. We've recently been approved for an 83.5 score in NPS, and that puts us literally at the highest company that Medallia -- that Medallia measures. The highest in the world in any industry. And so our customers truly love our product, and once they try us, they continue with us and continue to grow with us. That's a great start, and we can talk more as we go through Q&A. Thanks, Rod.

All right. Thanks, Charlie. It makes me want to put a Pure array at home here, but probably a little more than I need. So -- macro, let's talk about demand. Last earnings call, you talked about improving business visibility, improving conditions. A lot of people have talked about stabilization at the back end of the year, but then I think the question really remains, well, in '21, how high will the ball bounce off the bottom? And how are budgets getting reset? Our own CIO survey is still negative. People think that spending will be lower in '21 than in '20, not as negative as it was in the middle part of the year so the expectations have improved. I'm just curious what you're seeing out there. Do you think you have enough information from your customers to know what their plans are? Are they still in the process of budgeting? Just any color you can add would be great.

Yes. Thank you. I think the vaccine backstop that has basically been placed on the economy, that is to say that as companies look forward, knowing that there is a vaccine that is starting to be distributed, gives them confidence, if you will, that the second half of next year is not going to suffer the way that we started to suffer in September and October, and of course, continuing to do so through the winter of this year. And therefore, companies, I believe, what we're seeing is that companies are leaning forward and continuing to invest. And especially, in their IT environment because they understand that regardless of whether the pandemic stays with us longer or less, that the right way forward for them is with digital transformation. And so whereas, there might be other parts of their business where they are, in fact, looking to economize. In the area of digital transformation, I think almost every business in the world is looking to lean forward. Our best view is that the effects of COVID will start to ameliorate at the beginning -- at the end of the spring, beginning of the summer, just like it does on a seasonal basis, and that we won't go into full lockdown again next fall and winter because of the vaccine. And based on that, we actually believe that that start -- that towards the middle of next year, we're going to start to see an economic boost as -- especially as the mid-market so-called commercial customers start to realize the benefits of people engaging more in that part of the economy. I'll remind -- well, I don't know if it's a reminder since very few people were alive at that time. But after the 1918 flu came, the roaring '20s, I think that when people go through a near-death experience, their desire to get out to enjoy the freedoms of being able to be out in public will drive the economy for at least a few years. So that's what we're seeing -- that's what we're banking on at the moment.

Yes, pretty bullish. How much risk do you think -- when you talk about that, I guess, you're talking about mainly focus on pure spending, which I could imagine might be a little bit different than the overall enterprise spending environment. But you think that the total environment as well, people are just going to look through the first part of the year and go ahead and spend normally. Or is that strict -- are your comments mainly focused on spending on flash arrays and pure cloud?

No, no. It's mainly focused -- I want to be very clear. It's on the general IT economy, not specific to us.

Okay. All right. That's helpful. Enterprise business. Let's talk about momentum in enterprise, larger enterprises versus the -- mid-market is a bad way to describe it. You know what we mean, the high end of mid-market, which are pretty large enterprises in and of themselves. But what's the momentum in the big Fortune 500, Fortune 100-type customers been?

I would say that outside of the industries that have suffered most during corona, again, going back to travel and entertainment. Outside of that core segment, enterprise spending has actually been quite healthy in the IT environment. In fact, it's made up partially for the challenges in the -- as you and I were just talking about, the middle part of that -- the mid and lower part of that mid-market segment that has suffered proportionately more in -- that we've seen, or at least their spending has reduced significantly more than the upper part of mid-market and the large enterprise. I think part of that is that large enterprise generally has more capital that they've kept aside and perhaps, looked further ahead in terms of their willingness to spend in digital transformation. But what we've seen is that the large enterprise as well as the top end of that mid-market have stayed relatively healthy spenders during this period of time.

Great. Okay. Appreciate that. Let's talk about software and product differentiation a little bit. Could you just talk to us a little bit about the data management software focus and what you think differentiates Pure from some of the other players out there? Everybody talks about software advantage, but I'd love to hear what your take on your competitive position is there.

Absolutely. I believe it's really 2 things. The first, and by far, the most important is simplicity itself. The -- to give you a sense of that, enterprise storage traditionally is very difficult. It requires a lot of tuning and training. It could take several days to deploy a new set of enterprise arrays for storage. Our competitors typically give 1- to 2-week courses in how to install and operate their systems. We, by contrast, our systems can come from literally cardboard box in which they're shipped to full production within an hour. We do not have week-long training courses. We don't have training courses in installing our product. In fact, our entire installation and operation manual fits on a tent card. So our founder, John Colgrove, who started the company in 2009, looked at an iPhone and said, when I buy an iPhone, I don't get a manual, I don't need to be trained. It just works out of the box, and I can figure it out just by playing with the device itself. We do exactly the same thing in terms of our product. Our product works out of the box, simple to install, simple to operate. Doesn't mean it's simplistic, it actually is as sophisticated, if not more sophisticated, than anything else out there. It's just that we put the extra work into making it simple to operate. The second great thing that differentiates us is what we call our Evergreen program. And what that is, is regardless of whether you buy our product as CapEx or whether you purchase our product with Pure as-a-Service, which is a pure subscription service model. The way that -- that product stays new literally forever. Now in almost every other IT industry, when you buy a product, it becomes obsolete after about 5 years. You have to replace it. And in the case of storage, replacing is very difficult. Not only do you have to physically replace it, but you have to replicate or what's called migrate all the data. And if you have petabytes of data, that could -- not only does that take a long time, but it's very disruptive. You have to take all of your applications down while you do that. Customers don't like doing it. It's also very risky. We are the only vendor that has nondisruptive upgrades and with our Evergreen program, it means we are consistently and constantly upgrading not just software but hardware as well so that 10 years after the customer first buys the product, it's still our latest generation product, and the customers never had to take their application down. And you can only do that if you've designed your software from day 1 to incorporate that as well as every new release of software, you designed to have that consistent, nondisruptive upgrade capability. Again, the only company in the industry that provides such a capability. Beyond that, that's what has allowed us to put together our Pure as-a-Service program. Pure as-a-Service, again, Pure subscription model. Customer only pays for what they store when they store it, regardless of where they store it. Because they can store it on our equipment on their premise, they could store it in a shared data center such as Equinix or any one of the -- or Rackspace or any one of the shared data center models. But we also have our software operating on AWS and Azure, and so the customer can also store their data there. And that's what modern software can do, it can allow the customer to be able to not just store but to manage their data environment regardless of -- in a multi-cloud environment.

Okay. Let me try to get you involved here a little bit, Kevan. So I want to talk about the -- this as a service model from a financial point of view, it looks an awful lot like a lease in a lot of cases, and that means -- a lease means you're taking default risk on. And I'm curious, but we've seen models emerge like, for instance, I mean Apple is offloading the default risk at Citizens Bank. So Citizens Bank takes the risk. You make your payments to them. Apple pays them a little bit of interest, and that kind of model is emerging in other elements of hardware as well. Do you think -- is that an -- would it be attractive if somebody were to come in and offer that to Pure? Are you already familiar with how you guys are looking at financing for the as a service, especially the on-prem part of it?

Well, well, look, I think the first thing, Rod, is going back to Charlie's point around differentiation in our Pure as-a-Service offering where we're actually truly negotiating a service-level agreement with our customer. So that's on performance, capacity. They don't have to worry about the underlying infrastructure, we'll take care of that. And that's very unique in terms of what we're seeing against the competitive landscape. And I think that's really the primary differentiator for us. In terms of how we're negotiating payment terms, no different than any other arrangement with our channel or end customers. And so we're also seeing, frankly, that our customers are feeling very comfortable entering into minimum commits for multiyear periods under our Pure as-a-Service offering. In some cases, we're getting payments upfront. In some cases, our customers are more comfortable paying overtime. We allow them that flexibility. And so given where we're sitting right now, we're not seeing a huge difference between payment terms via selling our integrated appliance versus selling our Pure as-a-Service. Now I do expect that to evolve as we continue to scale this offering, and we have plenty of options for our customers and our channel partners, and we'll continue to work that. But right now, we're seeing a lot of flexibility and a lot of uptake and really significant differentiation. I can't overstate the difference between our offering when we're just negotiating service-level commitments. And when a customer starts understanding that difference, it really highlights the special unique characteristics of our arrangement versus our competitors.

Great. Okay. I wanted to talk a little bit about cloud strategy, Charlie, if we could. Everybody has got one now. So there is -- everybody's got a cloud strategy, and everybody's got Azure service strategy, especially post-COVID. On cloud, in particular, do you see yours as relatively similar to companies like NetApp and others that are looking to roll out? Or how would your strategy be different? Or is it different, in your opinion?

Well, there are some physical differences. NetApp is focused primarily on file services in the cloud, whereas, we focus primarily on block and primary workload challenges. We've also focused quite a bit with our Portworx acquisition on so-called cloud-native workloads based on containers and Kubernetes. So that's -- there are some just very substantial differences in the sense that we don't compete directly with one another because we're providing different services in the cloud. Another difference is that by virtue of having the same software in all those cases, operating both on-prem and in the cloud, what that means is there is a consistent service offering and a consistent capability for our customers to have a hybrid cloud environment. The capabilities in the cloud are not different in any way, shape or form and are managed as an individual entity with the capabilities on-prem. So it allows a true hybrid cloud environment. Some of the vendors have a completely different service in the cloud that they do on-prem. And therefore, it's for different applications, and it separates the application between on-prem and in the cloud. And then third and finally, I believe we're the only vendor with a consistent management system where the customer has one way to look at all of their storage and can manage it as a pool of storage between those environments in a hybrid or multi-cloud environment. So this is an area of very rapid innovation, certainly by us, but by others as well. So it's an area that's going to be in continued, I think, evolution for some time, but there's a clear differentiation currently between the players.

Okay. So you mentioned Portworx in the container functionality and how you're layering in your own products there. But could you help us understand how your current offering fits together with Portworx and explain what that looks like from a broader product offering point of view and how do you articulate that back to a customer?

You're on mute, Charlie.

Sorry, I was on mute. Portworx brings 2 things to Pure. First, they bring a what's so-called software-defined storage layer that is focused entirely on containers, and it allows customers to be able to start a container development at very low-cost because it can be ported onto a single server. It could be utilized entirely virtually in the cloud on any one of the hyperscalers, and allows a customer in early development to be able to develop cloud-native workloads. Now it turns out that Pure also had the ability to support containers on our much larger, much more highly sophisticated storage platforms, but of course, that was for production workloads. So by buying Portworx, we now have the ability to really take the customer all through their environment, like, everything from their early development all the way through to full and highly scaled production because Portworx, frankly, has always worked with Pure underneath as the storage layer as well. Secondly, they brought this Kubernetes layer for data storage management. That is the ability to not just orchestrate, if you will, data storage for container-based workloads, but also to orchestrate, let's call them apps, that support and that manage data workflows. So things such as a disaster recovery, things such as replication or backup or even the ability to attach databases, if you will, to data. And that Kubernetes layer, again, will work for both the Portworx set of products in the software-defined storage layer as well as the Pure sets of products, and we are extending that Kubernetes now to be able to orchestrate, not just data management capabilities on container-based workloads, but frankly, on all workloads, on both primary, secondary workloads, starting with block but eventually going to file as well.

So you think that -- did I hear you right there, you're seeing the Kubernetes capabilities of Portworx to manage a more broad storage environment? So you're going to use their framework?

That's correct. We had actually already started on our own framework that now we're merging the 2 as we go forward.

Is that the primary technology integration you expect to occur? Or do you think -- what other integration of Portworx technologically do you anticipate, if anything, beyond that?

Yes. Well, I do want to stress, especially to Portworx customers, that we're continuing the existing Portworx road map that was there. Portworx will continue to be offered as a standalone software-defined set of capabilities. But at the same time, yes, we're doing integration at 2 levels: The first is that we're doing integration at the Kubernetes level so that we have one Kubernetes layer to be able to orchestrate data management for container-based workloads as well as traditional workloads across Portworx's software-defined storage capabilities as well as all Pure storage capabilities, both on-prem and in the cloud; and then secondly, we're integrating at the management level so that our Pure1 management system can manage all Pure storage as a single entity as well as all storage management at the Pure1 level.

And is that the extent of the integration you have in mind? And then the rest of it, that would be just leveraging core technologies over time? Or are there other integration efforts you still -- and also, could you say how far along on those 2 things, are you done with those? Are you still working on them?

Yes, remember, we closed Portworx only about only 3 or 4 months ago. So I'm giving you, for the most part, the next 18 months of our activities without speculating on what goes on after that. But I imagine that what customers want is not a fragmented base of data. They don't want fragmented workloads. They don't want to deal with the cloud as being entirely different than on-prem. They really would like cloud capabilities and cloud management capabilities on-prem, and they really like the cloud to be able to support enterprise applications in the same way, with the same reliability and performance as they have on-prem. And really the design between the 2 based on economics and other characteristics, not based on the lock-in of the operating environment in those 2 areas. What we're really trying to do is bring the best of both worlds to each world to make on-prem be able to be accessed as easily as customers are able to in the cloud and to make the cloud as reliable and as functional as what they've been used to with on-prem.

Okay. Let's talk about -- you guys have gone into as a service and what differentiates it a little bit. Let's talk a little bit about metrics and measurement of it. So we've got the RPO metric. Are you able to give us any other stats that might help us understand kind of how this is progressing? And if not today, maybe what sorts of other milestones might you be able to give us over time? I'm thinking like number of customers, amount of storage, et cetera, et cetera. So could you talk a little bit about this milestones beyond RPO? And...

Yes. I think that sounds good, Rod. Charlie, I'll take this, then feel free to add on. But look, to your point, Rod, we've started out this journey really with our subscription services, and again, we've got 3 primary subscription services. So we've got the Evergreen subscription. We've got the Unified Pure as-a-Service, which includes Cloud Block Store and Portworx as well will be another layer of subscription services that gets added in and will be a long-term driver of growth for us. And so as we've embarked on that journey, you're right. We first started giving a couple of metrics to get a view on what's happening with our as a service business, right? We've got RPO. We've seen some nice traction with RPO and deferred revenue. And it really is -- although deferred revenue is part of RPO, it is important to look at both because in some cases, as I've told you, we may be billing or invoicing upfront for some of our Pure as-a-Service offerings. So RPO is important. The other metric that's important that we started providing as well is what we're doing in terms of booking growth or sales growth, anticipating the continued momentum of our Pure as-a-Service offering and Portworx, and that those sales will be outpacing the revenue that you'd be seeing on the P&L. So that's another metric that we've introduced as well. But as we look at next year, we'll definitely come back with some additional metrics. We haven't committed on what those would be yet, whether that's an ARR, a net dollar retention. There are some metrics that we're closely evaluating given the momentum we're seeing, but we want to analyze that more and evaluate it a bit more. But definitely, we'll be coming back to our investor community probably earlier this year, this next year.

And just since you mentioned ARR, well, more broadly, what we see is -- when you -- when people renew, so you sell them an initial plan, and you've got a renewal down the road, you get a lot of leverage -- margin leverage out of the renewal. Is that also going to be true for Pure somewhere down the road? Would we expect there to be a point of renewal where we could start to get a lot of leverage on the margin?

No question. No question in terms of what that looks like for us. And that would apply on all 3 of our subscription service offerings. And then as Charlie pointed out, we're continuing to expand our service capabilities. And then obviously, we would have add-on in terms of cross-sell and upsell of those services, which I think you're alluding to as well upon the renewal. And then obviously, the cost to renewal, both on the Evergreen subscription, we've seen some great leverage on that front and expect the same as we embark on doing and upgrading and upselling our Pure as-a-Service as well.

Do you have any view on when that might -- of course, this is the obvious next question. When might that start to have an impact? Is it 2 or 3 years from now? 4 years from now? I mean do you have any ideas on that?

Are you talking about the leverage that we expect to get over time?

Yes.

I think we should start -- one, is we're getting that leverage today on our Evergreen subscription, frankly, so that's real for us. And I think as we embark on Pure as-a-Service, we've really gotten some significant momentum on the unified Pure as-a-Service really this last year. So I would think when we look for renewals, and we're doing multiyear renewals. Although we do some on-demand, a large part of our momentum on Pure as-a-Service is multiyear. So you're right. I think on the renewal opportunity for Pure as-a-Service is probably 2 years out, maybe a little bit longer.

And I wanted to talk about sales of as a service because you're still pretty new to it, then the pandemic hits and the pandemic must have accelerated interest. So that, I guess, the lead list has grown a lot. So what -- how do you serve that from a selling motion point of view as we exit the pandemic? Or do you feel like you're able to address it now just with Zoom and video and all these tools that we have?

It's a great question, and I'll open it up just a little bit. During the pandemic, lots of different things occurred, lots of different buying behaviors occurred, and as you mentioned, the interest in Pure as-a-Service scaled dramatically. And largely because -- not less because of its subscription orientation and more because of the unified contract of the unified license that Kevan mentioned. The unified license being that when the customer pays their subscription, it's the same license as both on-prem and in the cloud. So what it allowed customers to do, that said, I need more capacity today for on-prem because that's where my application is. But as I move to the cloud, I don't want to be tied in for 5 years -- into a 5-year commitment on-prem. So with the Pure as-a-Service unified subscription, they're able to not have to commit to a specific period of time in any one location. So that really drove the interest on Pure as-a-Service. That being said, it is true that during COVID -- because customers were unable in many cases or unwilling to be able to go into their facilities, they became more reluctant to try not just new vendors, but they'll also try any new thing whatsoever. Whether it was a new product, a new use case or even to make any substantial changes to their -- to the environments which they had. And we saw that, of course, in terms of lower net new logos than we've traditionally been accustomed to. Now the good news is that we still had very strong net new logos, which I think speaks to our competitiveness as a company. But I believe that as we go forward and come out of COVID and where people are going to feel more comfortable going into their workplaces, that customers are going to reengage in, if you will, the new. They're going to be more willing to try new things because of the confidence that whenever you try something new, there are always issues and that they'll be able to be there. And so we think that that's going to be part of the reason why a growth company such as ours is going to see new growth once the pandemic abates.

Okay. That's great. Yes, it does seem like people's mindsets even adopting things like we're using here. We've all become more open to some of these technologies than we might have been before. We recognize you can get a lot of leverage out of them. Let's talk about the product revenue declines we've seen. I know this is related to COVID, and I know that a lot of this is the commercial market you've talked about a little bit before, Charlie, but we'll get into it maybe a little deeper here. But that commercial market being weak, what is it? Is it anything proactive that you think you can do to control the recovery of that trend? Or do you think it's just a function of continue to execute as you are and things coming back online and being more normal?

Yes, I think it's largely the latter, although we continue to mature as a company in terms of our -- ability to sell our products to a wider variety of customers. So to give you a sense of this, yes, we've had some reduction in terms of hardware sales during this period of time. At the same time, the enterprise has remained remarkably steady for us, the large enterprise. And the reason for that is not because the enterprises remain steady, it's because we have scaled and grown more in the enterprise. That's been one of our growth segments. And with the enterprise being relatively healthier than the commercial market, it's allowed us to put in the performance that we've seen. As the commercial market comes back, that will be additive to this. So actually, I feel quite strongly that as the commercial market comes back, it's going to add to our growth characteristics. At the same time, I believe that the -- we've also grown during the COVID period from, as I mentioned, a 2-product company to really a multiproduct company and now with a mature Pure as-a-Service offering. Not only do customers now need to come back and start to be able to experience these things, but we, of course, as a sales force, need to broaden our capabilities, including who we speak to for things like Portworx, growing beyond just the traditional IT buyer to more of the DevOps -- people responsible for DevOps and for software. So there is a lot -- to get to your point, there is a lot of training and training regimen that's going into place as we speak so that as the environment opens up, we're going to be ready and able to be able to sell into these new environments.

Great. I wonder, necessity is the mother of all invention, and I -- it's been an awfully tough time to manage pipelines and visibility. And do you feel -- now as you look back over this, both of you are welcome to answer, do you feel like maybe you didn't have as good a pipeline visibility, pipeline management as you could have had? And has this honed that for you? Do you think exiting this, it's a stronger sales management, pipeline management capability? Or do you kind of feel like you already had it and this just tested it maybe a little bit?

Well, I'll take it first, Charlie, and you can feel free to add on. But I think that -- it's the first broader question is, did we, as a company, are we getting some learnings from this COVID environment, which has definitely been a crisis and the saying, never let a good crisis go to waste. There is a lot of learnings, but extends far beyond visibility around pipeline. I mean I think across the board, we've learned how to sell differently. We've learned how to market differently. We've learned how to operate differently. And all of that, we would expect to leverage in this post-COVID environment. Specific to pipeline, COVID absolutely has had an impact in terms of visibility, and we've shared that with the investor community during the quarters. And obviously, visibility became cloudier as we were earlier in the COVID environment. We saw impacts in terms of how fast these opportunities were developing within the field, and how that kind of impacted us when we were looking earlier in the year. So -- and there is more learnings in terms of how we can go address that from a marketing standpoint, from a funnel standpoint, from a discipline standpoint. So yes, I think that the learnings have been significant, and we're still pretty early days, frankly, leveraging those and operationalizing those in a post-COVID environment.

Charlie, anything to add or...

What I would say is that COVID was -- we had never seen, I believe this is probably true of most companies. The amount of gyration and change that took place in the pipeline, beginning -- at the beginning of the pandemic evolving over the summer and even going into the fall was, I think, beyond anything any company had ever seen before. In other words, it was less about our ability to manage and understand the pipeline and much more about the fact that customers' plans changed very, very rapidly during that period of time and then trying to keep up with the changes in the pipeline and understanding what that really meant for us was certainly a bit of a challenge. I hope never to have to see anything like that ever again, of course. At the same time, I would say that as a company, as I mentioned before, that continues to mature, that's going from 1 and 2 products to a multiproduct company, expanding the capabilities of the -- of both our own sellers as well as that of the channel, we continue to make our pipeline -- continue to work on our pipeline, our pipeline tools and make them more and more sophisticated. So more things to learn. I do -- while we learned a lot during the COVID period, there are things that I hope we don't need to learn again.

Yes. Amen to that. Okay. So gross margins. Let's finish up. We got a couple of minutes. I don't have any questions from the audience. I'll just finish up on margins. Let's start with profitability targets, and then I'll come back to gross margins if we've got time. So profitability in the Accelerate event, back in 2019, you said your long-term operating margin target was 15% to 20%. Now I assume that maybe the pandemic's delayed the time frame on that, but I'm curious whether there is any change to that 15% to 20% target?

No change from a long-term thesis on that, Rod. I mean, obviously, COVID has delayed kind of the view on that. But in terms of the long-term thesis itself and our objectives, no change from that perspective.

All right. And then shorter-term margins, just curious, your comment, your thoughts on the commodity pricing environment, NAND pricing. Also wondering on FlashArray//C, what's the margin impact of that may be? Will we see that in '21?

Do you want me to start, Kevan?

Sure. Yes, you do that. No problem.

FlashArray//C should not have an effect one way or the other on our margins of any real significance. It's a good margin product. It's very much in line with our general margin trends. In terms of flash pricing on a going-forward basis, as probably many people in your audience know, well over a year ago now, a very dramatic and frankly, once in a lifetime drop in NAND pricing within 1 year caused by a fairly significant supply-demand imbalance really caused us to have -- to come in low on our top line, trying to make up for volume what we lost in overall list price. The margins for us were fine because the costs dropped faster for us, but it did affect pricing in the market. We don't expect to see that again for many years -- for anyone who wanted to do the work, if you were to look back, I mean it was a once in a 20-year experience. As we look forward the next couple of quarters, and of course, there are many analysts that follow the NAND market, the flash market independently, we're seeing a quarter or 2 of weakness, but nothing outside of our models or our expectations.

A quarter or 2 weakness, you mean, in the pricing environments in NAND?

NAND pricing, yes. Not our price.

What were you going to say, Kevan?

Well, I was just going to just kind of follow-up to Charlie's point, just from a broader perspective, and give a little bit more detail if that's good for you, Rod, on gross margins and operating margins. But Charlie and I, going into this last year, really made a conscious decision to invest during the COVID environment with the objective that we'd be able to leverage those investments on the growth curve when it recovers as we look out to next year. We fully expect that on the recovery and are building that into our expectations for next year. So definitely, from an operating margin leverage perspective, that's a high priority for both Charlie and myself. With a particular focus on sales and marketing, I think there's -- to my point on learnings in this COVID environment, I think there is a lot we can be doing to further optimize our investment profile while not giving up any of our growth opportunity. And so we're definitely looking at that as we think about next year. And then from a gross margin perspective, to Charlie's point, I think product gross margins in terms of what we've been tracking this year is a good way to be thinking about it as we think about next year. I do think there is opportunity for us on our support gross margins over time, especially as we continue to scale out with our momentum of Pure as-a-Service. And then longer term with the contribution of Portworx and that being a software-only subscription offering for us, definitely, that will contribute long-term for us well in terms of gross margin appreciation.

All right. All right. Great. Well, we're a little bit over time. So we probably ought to leave it there, but I -- any final words, Charlie, before we wrap up?

Well, Rod, I want to thank you very much for this opportunity to speak to your audience. And I'd just like to say, Kevan and I are feeling actually quite optimistic for the latter part of next year or let's say, as COVID starts to recede, hopefully, in our view and for the IT industry as a whole, and we believe that Pure will be a beneficiary of that.

Great. All right. That's a good place to leave it. So thank you very much to both of you. Thanks for attending. Thanks, everyone, for coming to the conference.

Thanks, Rod.

Thank you. Thank you very much.