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

Okay. Good afternoon, everyone. I'm Sidney Ho. I cover semi-cap equipment and IT hardware at Deutsche Bank. The next company we have is Pure Storage. Pure is an all-flash array enterprise storage vendor. Today, we're very pleased to have Ajay Singh, Chief Product Officer, with us today. We also have Sanjot Khurana, Head of Investor Relations. So welcome, Ajay. Welcome, Sanjot.

Thank you.

So before we begin, we'll make this session as interactive as possible. So for those who are in attendance and want to ask a question, raise your hand, we'll run the mic to you.

So with that out of the way, maybe I'll just kick off with a few questions on the current demand. You guys just reported last night. So I think -- I don't expect things to have changed really that much over the last 24 hours, but you do sound quite optimistic versus some of your peers. So the question is, can you kind of recap what you are seeing from a demand perspective, especially given the macro headwinds? And also the company seems to be slowing down hiring, are you seeing any different trends between your enterprise customers, commercial customers and public customers?

Definitely. So we're highly aware of the macro environment. Obviously, it's everywhere in the news. And we do a lot of diligence on our pipeline and look at all the data that we get to see internally. And we are definitely seeing a solid line on demand for our products at this point. While we're seeing that, we have seen some -- on the enterprise side, some elongation of sales cycles as there's been maybe one additional review happening. Obviously, at our end, we're starting to tighten up our inspection and making sure we don't get surprised by that kind of stuff. We definitely see that. In terms of segments, I would say, it's pretty broad-based. The [indiscernible], if you may, elongation of the sales cycle is a little more on the enterprise side. But for us, commercial and pub sector in this particular quarter was really strong. So generally, pretty good. We have a pretty good line of sight for the second half.

Yes. So I'd just like to add to that as well. So we feel digital transformation is so critical for companies not just to drive top line growth, but then for driving efficiencies and productivities, right? That's really critical in this environment. And so we expect some of that digital transformation spending and IT spending to continue to remain strong. So even though we've seen some slowdown -- not slow down, we've seen some elongation of sales cycles on the enterprise side, we feel that's not meaningful enough. But overall, just like Ajay mentioned, when we look at our sales pipeline, we've spent a lot of time with the sales guys looking at the pipeline. We have good visibility in the second half of the year. And overall, the demand signals continue to be very healthy. There's no red flags, no other indicators. So demand signals continue to be healthy, just seeing elongation on the sales cycle from the enterprise side. But again, just the reason -- given demand signals were so strong, we also raised guide for the full year, right? So you saw that as well. On a full year basis, we have good confidence, good visibility in second half, and we actually raised guide for the full year.

Great. Just on this point on elongation in the enterprise customers, what are your customers telling you in terms of not just for your products and services, but is there a broader statement about, hey, is there going to be a budget flush sometime toward the end of this year?

Let me start off with that. So net-net, I mean, I would say, as Sanjot mentioned, we tend to be engaged in scenarios where these projects tend to be a little bit more mission-critical. We tend to get sold in those situations. So a little bit more around the digital transformation as opposed to just standard old IT, if you may. And so certainly, on that front, we see decent demand signals. Not hearing anything, I don't know -- Sanjot about budget flash?

So in terms of budget flash, I don't think we are seeing any of that. What we're seeing is enterprises becoming more diligent and cautious in terms of their decision-making on larger deals. And that's what it's taking a longer time because there's more diligence. You have more layers of management involved in making those decisions on larger deals, and that's what we're seeing. We're not seeing that much in the budget flash side.

Okay. That's fair. You did mention that you raised your guidance for the full year from 22% growth to 26% growth.

Correct.

But that also implies a very good growth in calendar Q4 and quarter-over-quarter basis. So can you walk us through the various parts of your business that you feel most comfortable with that will grow? And what areas you see as the biggest variable, both on the upside and the downside?

Yes. So we believe, I think, second half, I think it's going to be broad-based, right? So you're seeing, like we said, good demand signals on the enterprise side. You see elongation of sales cycles on the enterprise side, but we do expect those deals to close. Maybe they'll close a little bit later. We do expect those deals to close. So continued strength on the enterprise side. Demand signals continue to be healthy. And then commercial, we feel was impacted during the pandemic. We saw a good quarter and some green shoots in terms of resurgence of commercial. Public sector was really good for us, but again, there's much more that we can do there. So in general, and then even across geos, if you look at the results of the growth across geo, international grew 29%, U.S. grew 31%. So good balance growth across geos as well. And we expect that to continue broad-based growth in the second half of the year.

I will add a little note on international. We definitely saw some challenges in the U.K. around that. So that was one of the softest parts for us. But otherwise, the rest of international was pretty decent.

Great. Great. Embedded in your guidance, what are -- how should we think about the -- your revenue from hyperscalers, whether that's the one that you already announced and -- or maybe another hyperscaler out there?

Sure. So hyperscaler for us is a CEO-level priority. We recognize that these are design wins that and hyperscaler data center architectures don't happen that frequently. I mean, there's typically a 4 to 5-year cycle when they do a new architecture. And so we're typically try to get designed in into the next-generation architecture. We feel bullish that over the course of this decade, our view is that data centers are going to be mostly flash from a storage standpoint. In fact, we want to be bold and say we think it's all-flash data centers, just the way the price of NAND versus [ hard disk ]. And so we feel like at the next design of the data centers that the hyperscalers are looking at, they are seriously contemplating flash. And because they're seriously contemplating flash, because we've been the only vendor that's 100% born in flash, we've been staring at NAND for a decade and figuring out how to hyper-optimize it. We are, in fact, the only vendor at scale that has had QLC in the market for 2 years. I mean none of the other competitors yet has a QLC offer at scale. And so -- and QLC is the tip of the NAND spear today, that's leading and we're driving that tip. As you can imagine, the benefits that you get from that are -- just to give you a sense, are all-flash array compared to say competitors' all-flash array. We consume a [indiscernible] power, half the space, 1/5 to 1/10 of the labor required to sustain it. That does a pretty attractive outcome for hyperscalers as they think about the design of the next-generation data center. Now of course, there's NIH. Some of the hyperscalers, they were built in themselves. That's totally understandable, but not all of them have the engineering staffs. And while we've got great talent looking at it for 10 years, can they pull it off in 2 or 3 years? And so that's what -- then there's optimism that we have a unique technology, a 2-year lead on anybody in the industry. And it's not an easy problem to solve. So we feel like we will get some of the -- some additional hyperscalers. Of course, the [indiscernible] will be announced, but we're optimistic on some more traction.

Maybe a couple of questions on the supply chain side. So supply chain hasn't really been an impact for you guys, even though it has been a big impact for the rest of the industry. Can you talk about why that is the case? And are there areas that you are particularly monitoring?

Yes. So just from a supply chain perspective, I think it continues to be a dynamic and challenging environment. Things have eased a little bit compared to prior quarters. So that's definitely helpful. And even though on the NAND side, supply is pretty good at this point in time. But if you look at all the other semiconductor components, it really depends on a component-by-component basis, right? So you still really have to stay on top of your supply chain operations to make sure there are no delays. And then from an architecture standpoint, Ajay can expand on your architecture in terms of how that helps with the [ bill ] of materials that we have and the architectures that we have from a supply chain perspective.

Yes. So 1 other thing that I do want to mention is we talked about -- we've been working directly with NAND for 10 years. And one of the big differences between us and where the rest of the industry does is [indiscernible] the industry tends to deal with NAND like a disk, just because they've been born in disk, we've been born in NAND. That's kind of the key difference. And so it's easy for the whole industry to treat it like disk and then you can handle your software can handle it. What ends up happening is you create an additional [ aid ] of controller to kind of make it look like a disk and you lose a lot of that translation, especially as you start to only focus on the flash. And as a result, your bill of materials gets more complex. So if you think about it, when we say we have the space compared to somebody else in all-flash array [indiscernible]. So we tend to be mostly NAND with a little bit of fixed cost. They've got 2 layers of fixed cost of controllers. And you can imagine when you have a supply chain crunch, our lead times change but not that much. Their lead times because of more complex bond really stretched out. So that's -- it's the architecture that gives us the advantage of kind of -- ability to kind of navigate the supply chain challenges.

Yes, that makes a lot of sense. The other thing that we've been hearing is that I understand your supply chain is in relatively good shape. But we've been hearing the availability of other hardware products like servers is a problem. Have you seen any impact to your business because of shortages of other hardware products?

So generally, what we see is that we get some pull in because folks want to try and make sure they get it before supply challenges. And then we see some of them, for sure, somebody getting a full stack and they overweight for the full stack. I think in the end, it's a wash as far as we're concerned, we get a little bit of both. So nothing that's material.

No, that's exactly right. So you still have kind of a mix of pullouts and push-ins. But net-net, we're not seeing any kind of major impact as a [indiscernible]

Well, I want to switch gears a little bit to talk about the products, which is your main area. So Pure started off with one product. right? So it was a the FlashArray. But over the past few years, you have expanded it into including FlashArray//C, FlashBlade and most recently, FlashBlade S. Can you talk about the use cases of these products? And I'm also interested in how the uptick of some of these newer products is?

Sure. So as you rightly said, we started actually in the commercial space with one product, and this was a block product of FlashArray X, kind of our mainstream product. And the use case initially was mostly around Tier 1, Tier 0 databases. SAP, Oracle, VMware kind of applications. As we've been investing, we kind of added our FlashBlade product with the objective to go after unstructured data use cases, machine learning, EDA, genomics, PACS, which is imaging for health care, those kind of use cases. So we expanded to -- now we have got flash-array, which is a scale-up architecture, really good for latency intensive applications like databases, VMware applications, SAP, et cetera. And then we've got FlashBlade, which is a scale-out architecture, which is really good for [indiscernible] applications, like I mentioned, EDA, genomics, health care, life sciences, et cetera, AIML. And so what we've done is, over the last 3 years, we've started to add more enterprise-grade features into our products. So from the commercial segment, we've expanded the use cases to now handle bigger block use cases, more resiliency, snapshots, et cetera, in larger enterprises we made those investments. As well as we just recently re-upped the FlashBlade architecture with the FlashBlade S. We kind of took it to the next generation. Third-less power, 3x the performance from the existing product, which is already doing very well. And we feel like today, we've got both FlashBlade, which is a QLC-based product, so really also very cost competitive for these unstructured applications. We've got FlashArray X for these Tier 0, Tier 1-type of database applications, mission-critical applications. And now we have FlashArray C, also a QLC product on the same architecture and the scale up, which is targeted for Tier 2, Tier 3 databases and Tier 3-type of applications. So now between FlashArray X, which is a performance product, FlashArray C and FlashBlade S, 2 QLC products, we feel we have a state-of-the-art simple portfolio, basically 2 fundamental architectures spanning a wide set of use cases. In addition, we have Portworx. Portworx really is -- the biggest use case there is on as customers start to build modern applications using [indiscernible] between storage associated with the application state for modern application, they need a means to manage the containers storage associated with that application to do backup disaster recovery, those kind of functions, the automation for that. Portworx recently, again for the third year in a row, as the leader in the GigaOm Radar, is by far the leader in that particular category with big enterprise scale customers in deployment. And we've just recently also announced Portworx Data Services, a new announcement as well, that is really offering data services built on top of Portworx. So some of these newer offers, FlashBlade S doing really well. I mean, we introduced it in Q2. And 20%, 25% of our bookings in Q2 were already in the new architecture. We feel there's going to be a rapid shift from the old architecture. You can imagine 1/3 of power, 3x performance. That's kind of a pretty natural shift to take place. Also getting some good early signs with Portworx Data Services. We're generally very pleased with the way Portworx has come along and FlashArray C, which is really the [ work cost ] that drives this replacement of hybrid disk, and the disk replacement is also growing super-fast. So generally, good traction on the product.

Yes. I'm going to jump ahead a little bit because the Portworx, I believe, is one area that I don't think investors really appreciate that whole business and all the new services. How would you say the integration in general? Is it pretty much done at this point, you start adding services? Just to give investors a little color as to, I mean, you talked a lot about that already, but anything that you would add to it just to show why people -- why Portworx makes sense as part of your portfolio?

Sure. Sure. We really want to be a data partner for customers in their digital transformation. And as part of the deal in a data partner, our view is that the way we partner with them is we help them modernize their infrastructure -- the data infrastructure through all-flash. We are leading the charge there with QLC, a 2-year lead on competitors in that. But then also as part of modernizing their operations, we've introduced Fusion, which is the cloud operating model and more automation. Kind of how do you -- cloud is really not a destination, it's an operating model. And so we're investing in that. And then finally, we are also as part of using data for your digital transformation, you want to be able to operate on this data using data services. And so being able to offer a lot of these modern data services like a Kafka, Spark, RabbitMQ, MongoDB, Cassandra, et cetera, these data services typically run on Kubernetes. And so with Portworx and being able to run -- get these data services a customer with a few clicks, we also help them start to operate on this data that you saw in the modern infrastructure to get the insights by them and give them an edge in the digital transformation. So that's why we call ourselves a kind of a modern if you may, storage and data services company.

Got it. That makes a lot of sense. I want to go back to the product side, where you have a number of partnerships that you guys talk about. And the first one I want to talk about is the AI-ready platform called AIRI, in collaboration with NVIDIA. So can you talk a little bit about this product? What are the target applications? And what are the type of customers that can take advantage of that?

Sure. So we've had a partnership with NVIDIA for many years. And in fact, as you can imagine, we said we've got FlashBlade, which is our scale-out unstructured data type of storage product. And of course, NVIDIA products that use a lot in AIML type of use cases. And so the AIRI partnership, which is AI-ready infrastructure, is a reference design with the 2 products working together that customers can very easily with low risk [indiscernible] and manage the AI pipelines. And use cases for this tend to be a lot around various AIML-oriented kind of applications. And a lot of this tends to be used by a lot of start-ups or building a ton of AIML stuff. Defense contractors, they're doing heavy processing and machine learning AI as well as large enterprises. Machine learning and AI is a big part in the success of the [ NVIDIA-DGX-400 ], along with the networking. We are, I would say, probably one of their largest partners that's on the ground that gets deployed along with them.

Okay. Great. Another partnership that you guys recently announced was with Snowflake. Can you talk a little bit about that partnership? And what are you seeing in terms of customer interest in that service?

Yes. So Snowflake is a relatively newer partnership. We're really bullish on the partnership long term. And as Snowflake has made just great progress in the marketplace around kind of their offer. There is a subset of the customers that are reluctant to move their data into the cloud for various reasons of compliance and those kind of things. And so we are working with Snowflake to give a cloud-adjacent offer, something like in an Equinix, where they tend to use object store in the cloud. So we have an object store with FlashBlade, high-performance object store. So effectively, their idea can stay in FlashBlade in the customers' control, while the application [ computed ] network stays with Snowflake. So it solves a couple of things. It solves the customers' desire to keep control of their data. But then also, that same data can use later on for other use cases as well versus if it's in the cloud, it's kind of locked up over there. This data is available for other aspects as well. So there are several advantages. I think jointly, Snowflakes and us, we are seeing some demand for that. It's early days, yet we are kind of in our -- we designed the offer now. We're kind of in [indiscernible] stage. In the November Snowflake Summit we'll be [indiscernible] the product. So it's still early days, but we're optimistic about it.

So the business model there is do you actually sell the hardware or is it more like a as-a-service type of business model?

So the business model right now, we are kind of working through the business model. But the objective is on the business model is to kind of make it a friction-free. So that it kind of fits the Snowflake pricing paradigm. That's the objective, but it's not [indiscernible] sort of a few months ago.

Okay. We'll find out in a few months.

Yes.

I guess the other interesting data point or comments that you guys made is that you announced a large telecom customer adopting FlashArray for their 5G development. And maybe walk us through that use case. Should we think of that as a new vertical for Pure? And what's the growth potential there?

Absolutely. So we did, as we've mentioned, land a top 5G player and a global 5G player. And as you can imagine, in a 5G network, reliability, stability, is super important. I mean you want to make sure you can see and not impacting and get the data across in a super reliable way. And so the use case is, we are in their core that services the radio endpoints. And in the core, this is the core that's doing all the authentication, user mobility, all those kind of things that, that happened in the core, that's where we are. That's where the FlashArray is the use case. It's obviously not fully deployed yet. There's more to go. And we also feel like -- now there's a strong chance that this 5G provider was going -- since they're a top 5 [indiscernible] basis, this architecture, the joint -- push it with a lot of other telcos as well around the globe. So we definitely see this, along with discussions with other 5G providers, as an emerging new segment for us, where reliability is super important. It's new infrastructure. So they are conscious of the big build-outs, which means they want to have low power, lower footprint, all of those advantages of flash.

That makes sense. Maybe switching gears a little bit over to your subscription side. Obviously, your subscription revenue has been growing very nicely. I think it was up 30% per year, and first half was more like 35%. And you're targeting similar kind of growth rate over the next few years, potentially reaching 50% of your total revenue. So can you walk us through the various components within this subscription services, which you recently rebranded under the Evergreen umbrella. And which one is the largest component, which one is the fastest growth potential?

Sure, absolutely. So let me talk about the subscription business. So in subscription business, we basically have Evergreen and Portworx. And within Evergreen, we have 3 different flavors. We have the Evergreen//Forever. We have the Evergreen//One, which was originally called Pure as-a-Service, which is a fully managed service. And then you have Evergreen//Flex, which is kind of a mix of the 2. So the Evergreen//Forever model is basically a subscription services attached models. When you sell a CapEx, you attach an Evergreen subscription service to that, and that helps you modernize your data throughout the life cycle of the product. On the other hand -- and in that case, the customer buys the CapEx, right? But on the other end of the spectrum -- the book end of the spectrum is the Evergreen//One, which was previously called Pure as-a-Service. And in that case, you have a fully managed service, where we own the infrastructure, and we are fully kind of managing the infrastructure of the software and the services and delivering SLAs, and delivering performance based on those SLAs. The Flex is very interesting. We just recently launched it, and it's very interesting. It's a mix of the Evergreen//Forever and the Evergreen//One in that the customer buys the original CapEx, but the entire consumption of software services is done through a consumption model. So it's kind of a mix between the Forever as well as the Evergreen//One. The Evergreen//Forever is the largest component of the overall subscription business today. The Evergreen//One, which is PaaS originally, and Portworx is our smaller businesses, but growing at a rapid rate. And so we expect greater contribution from Evergreen//One, Evergreen//Flex as well, and Portworx is well to grow over time.

Okay. One of the questions that people are most interested in when you look at subscription revenue, I mean, obviously, product revenue when there is a downturn that can go down. But how should we think about the subscription revenue? Is this more -- how sustainable are they during a recession? And maybe what portion of that -- what portion of the business is fixed versus variable?

Yes. So I would say most of that is very sticky business, right? Once you get into -- win a deal with the customer have a subscription model where you're modernizing the data non-destructively doing upgrades. Most of these customers, again, a very sticky business model. Customers don't want to migrate the data [indiscernible] somewhere new. And so the entire subscription model is a recurring revenue, recurring profit model, very profitable model, both from a gross margin perspective and operating margin perspective, much more easier to operate. It drives a lot of operating leverage down to the operating margin side as well, yes. And so the entire model, I would say, is basically -- is sticky and it's not a CapEx model, but it's not a transaction model. It's a kind of a recurring revenue model.

And actually, what really drives some of the stickiness is that because we are automating and taking on some of the labor tasks that a customer would have to do in a CapEx scenario. It typically -- they don't move their staff on to do other things. So they don't have any staff left to do those kind of things. And so stickiness comes or when the renewal comes it's like, "Okay, do I want to migrate my data and then hire some staff? Or do we just renew?" And so that's where the stickiness comes.

Got it.

Plus the renewal rates, I just going to say the renewal rate is pretty high as well. So most of the Evergreen contracts are 3-year contracts, very high renewal rates. So again, very sticky high-renewal rates. And again, in case of a downturn, there's a lot of stability you get with this recurring revenue profit model.

So maybe more to the point, do you think how much variation of -- variability from that 30% year-over-year growth rate? Do you think that will be in a downturn? Could it be down to 10%? Or is it always going to be 20% to 30% kind of rate?

I think it will be pretty stable. I won't put a number on it. But I just think, in case of a downturn, generally speaking, renewal rates being high, Evergreen//One being on a growth path. Portworx as well be on a growth path as well with Kubernetes storage. Generally speaking, I feel it's going to be pretty stable. The subscription piece of the business is going to continue to be pretty very stable.

And generally, the market data shows that more and more of our customers are wanting to consume on a subscription consumption basis and by CapEx on the margin. So at least it's going in the direction with the [indiscernible].

Fair point. Now the margin of the business is already pretty good. It's about 70%. But based on your -- the mix that is going forward with Portworx, with the Flex and the One, do you think there is much variability? I'm thinking more about the upside versus the downside. So I'd love to hear your thoughts on that.

Yes. So on the gross margin side, definitely, I think on the product side, I think we are very happy with the high 60s kind of gross margin. On the subscription side, we've been doing about 70% plus. Over the longer term -- like I mentioned at the Analyst Day last year, over the longer term, we expect better leverage to come down to the operating margin line. The gross margins generally also better at the subscription business. So we expect subscription to start going north of 70%, close to 75% over the next few years. But again, that's an evolution. But again, as the mix changes towards more subscription and you have a better gross margin profile, better operating margin profile, you can drive more operating leverage in the business.

If I just look at the subscription side, there's also upside to that low 70%?

Yes, exactly. And that's -- again, that comes down to the growing elements of the business, right? It's the Portworx that's growing. That's basically a software platform that has software-like margins. It is the Evergreen//One that has better economic value compared to Evergreen//Forever. So as those businesses grow, they're smaller portions right now, they contribute more. They also help on the gross margin overall over the longer term.

So just generally a company as you go more into the enterprise and have a mix shift in the enterprise. We tend to sell more of the higher-end products, whether it's through subscription or CapEx doesn't matter. Those tend to be generally much higher gross margins.

That makes sense. That makes sense. Maybe going back to a couple of financial questions. So in the short term, given the revenue upside in the year, I would have thought there will be more leverage on the operating margin line for the second half of the year. What are some of the headwinds that you might want to bring up? Or maybe it's just you guys just being a little more conservative on that side?

Yes. So I would say we are extremely happy in terms of raising the guidance, both on the top line and the bottom line, right? So if you just look at the history -- historically, last fiscal '19, 2021, we're a 3% operating margin. '22, we came out at a 10.8% operating margin. And this year, we have raised the operating margin guide to 14%. So very pleased with that trajectory of the operating margin. We expect greater amount of investments, both on the sales capacity side, increasing the hiring of especially of quota-bearing sellers and on the R&D side as well to continue making investments in the business to position the business for longer-term growth, position the business for greater traction in enterprise. So we continue -- we expect to -- the OpEx to continue to grow in the second half of the business -- in the second half of the year relative to the first half. And that's what's driving a little bit of conservatism in the operating margin line. Again, very healthy operating margins on a full year basis.

Good. There's nothing in the gross margin line that you would highlight that to be.

Nothing on the gross margin line, we expect generally gross margin to be pretty stable, pretty consistent to what we've seen in Q1 and Q2. Yes.

Okay, that's fair. Now if I look at your balance sheet, you had a pretty good net cash balance, I think it was more than $700 million. You are generating $300 million, $400 million of free cash flow per year. What are your priorities of cash usage? And is there a target cash balance that you guys are thinking?

Right. So extremely happy, like we said, with a strong balance sheet. We have about $1.4 billion of cash on the balance sheet right now. And so basically, we have a shareholder buyback program that's in place for $250 million. We've exhausted roughly half of that, about $127 million in the first half of the year. And so we have that buyback of roughly $123 million that's still outstanding for the second half of the year. We also have a convertible for -- that has a $575 million [indiscernible] value that's coming up next year. So we're thinking through options for that as well. And then obviously, given the environment that we are in and some of the valuations have come down, looking at M&A is definitely an option, right? So it's really good to have the flexibility in your balance sheet, given you have a convertible coming up given that it gives you flexibility from an M&A perspective, and you have a good buyback program in place as well.

Any particular criteria you're looking at when you look at the -- when you talk about M&A?

M&A, Ajay, any thoughts there?

Yes. So generally, for us, we have to be pretty thoughtful on M&A because the industry we're in. A lot of it is dominated by disk, and disk is challenged. And so anything we pick up as we not only strategically aligned, but also has to be accretive to growth. And so between those criteria, we're very, very thoughtful. We certainly are looking at the market after Portworx. We did do a few tuck-ins that we didn't talk about that much, but we're always on the lookout.

Okay. Well, we have one minute left. But in closing, what are some of the key messages you want investors to take away from this presentation? Are there areas that you think investors may be underappreciating with regards to the story?

Yes. So I will say in closing, I feel like -- would love for investors to appreciate the fact that we are a huge industry, that $40 billion, $50 billion market, where we are the disruptor in this market. We are leading with a 2-year lead in the journey to the all-flash data center. And we are a disruptor that is not only for commercial and enterprise, but the same set of challenges are existing in hyperscalers as well and other service providers as they think through their all-flash data centers how do they navigate that. And so we feel like it's really a disruption that goes all the way across. We are the leader. We have the leading technology in that particular space. And then we also have a really leading asset in Portworx and Portworx Data Services that truly makes us a data partner in the customer's digital transformation, where we help them modernize the infrastructure, modernize the operation through the cloud operating model and also help them modernize their services. So that they can win in the digital transformation. So sometimes, we're not your classic storage player, we're really this next-generation data storage and services company, the modern -- delivers a modern data experience.

Yes. I'd just like to add from an operating margin -- from a financial model perspective as well. So we are growing very healthily. We are taking share of the market very aggressively, and that's going to continue to be the operating model for the business. We're also very thoughtful of balancing top line growth and profitability, and we made it very important to drive top line growth but be very prudent and diligent on the operating expenses line as well, so we can drive with operating leverage and scale of the business. And so we have a dual mandate of driving top line growth, while at the same time, improving profitability and cash flows, and we're doing that pretty well for the last couple of years.

Great. I think that's all the time we have. Thank you very much, Ajay. Thank you, Sanjot.

Thank you, Sidney. Appreciate it.

Thank you. Appreciate it.