Everpure, Inc. Class A common stock

Good day and welcome to the Peer Storage second quarter fiscal year 2024 earnings conference call. Today's conference is being recorded. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask the question, please press star 1 on your telephone keypad. And at this time, I'd like to turn the call over to Mr. Paul Zayas, Vice President, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to Pure's second quarter fiscal 2024 earnings conference call. On the call, we have Charlie Giancarlo, Chief Executive Officer, Kevin Kreisler, Chief Financial Officer, and Rob Lee, Chief Technology Officer. Following Charlie's and Kevin's prepared remarks, we will take questions. Our press release was issued after the close of market and is posted on our website where this call is being simultaneously webcast. The slides that accompany this webcast can be downloaded at investor.purestorage.com. On this call today, we will make forward-looking statements which are subject to various risks and uncertainties. These include statements regarding our financial outlook and operations, our strategy, technology, and its advantages, our current and new product offerings, and competitive industry and economic trends. Any forward-looking statements that we make are based on facts and assumptions as of today, and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted, and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties related to our businesses contained in our filings with the SEC, and we refer you to those public filings. During this call, all financial metrics and associated growth rates are non-GAAP measures other than revenue, remaining performance obligations, or RPO, and cash and investments. Reconciliations to the most directly comparable GAAP measures are provided in our earnings press release and slides. This call is being broadcast live on the Pure Storage Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and is the property of Pure Storage. Our third quarter fiscal 24 quiet period begins at the close of business Friday, October 20th, 2023. With that, I'll turn it over to Charlie.

Good afternoon, everyone, and welcome to Pure Storage's Q2 conference call. We are pleased with our financial results this quarter. While the macro environment continued to be challenging, we outpaced our competitors and saw strong growth in our strategic investments, particularly in FlashBlade S, FlashBlade E, and Evergreen One. Our results demonstrate that we continue to lead our market and that our strategy is working. Pure is delivering extraordinary outcomes for our customers by transforming data storage from a highly fragmented solution set to a single consistent platform. Pure is today the first and only data storage company that can deliver a single, consistent, non-disruptive operating and management environment, leveraging the most advanced Flash technology across all data storage needs. With the introduction of the eFamily, our all Flash products now span from the highest performance systems to the most cost-effective systems for bulk data. Uniquely in our industry, all of Pure's products are based on one operating system, Purity, the only storage software that operates natively, direct-to-flash, rather than using less efficient commodity SSDs. All of Pure's products are managed with our Pure One management system and have consistent APIs. All of our products support non-disruptive upgrades forever. through our Evergreen technology and subscription programs, and are all available to consume as a service through Evergreen One. The data storage industry has, for decades, been plagued with different tailored software and hardware solutions for the wide range of storage protocols, formats, performance levels, and price points needed to cover the market. The storage portfolio of legacy data storage providers was generally assembled by acquisitions, and our collections of disparate inconsistent environments. That approach left customers with a complex infrastructure with multiple software operating environments with different management systems and multiple differing operational processes. As a result, legacy storage environments are complex. They vary for each use case. They require downtime for upgrades and require forklift replacements roughly every five years. Pure is the only company that provides customers a single, consolidated operating environment for all of their data storage needs, including block, file, and object. Q2 was the first full quarter of shipments for FlashBlade E. Sales and pipeline have exceeded our expectations, and it is experiencing the fastest growth of all prior new product releases. At purchase, FlashBlade E, with three years of Evergreen subscription, has an acquisition cost competitive with hard disk-based systems and has substantially lower operating costs. It enables our customers to move ever more of their cost-sensitive workloads to All Flash. The E family of products allows Pure to now cover the entire spectrum of data storage, inclusive of low-price bulk storage. providing customers with a consistent, modern, and reliable product line for all their storage needs. FlashArrayE will become available later this year, joining FlashBladeE. FlashArrayE will enable cost-effective storage for bulk data for capacities from one to four petabytes. And as part of the E family, it can also reduce customers' total operational costs by up to 60%. and produce 85% less e-waste compared to hard disk-based systems. We are seeing continued momentum and opening new opportunities with our cloud strategy. Last week, we announced an expanded multi-year partnership with Microsoft Azure Services and its Azure VMware solution, known as AVS, using our Pure Cloud Block Store. This offers a new age of cloud migration that can drive faster, more cost-effective adoption of cloud services. Combining Pure's industry-leading data reduction with our ability to decouple storage needs from compute, customers can significantly reduce their total cloud costs while increasing hybrid cloud capabilities. In addition to operating in the cloud, our cloud operating model allows our customers to operate their storage environment like the cloud, to offer services like the cloud, to better build for the cloud, and also to consume storage like the cloud. Pure Fusion enables our customers to manage the Pure portfolio as a fleet, as an integrated pool of storage across data centers and across clouds. Pure Fusion allows customers to offer their developers access to bespoke data services through APIs. Portworx, the most highly rated Kubernetes data platform for deploying cloud-native applications, was chosen for the fourth consecutive year by analyst firm GigaOM as the leader for enterprise Kubernetes data storage and cloud-native Kubernetes data storage. Evergreen One allows our customers to also consume like the cloud. based entirely on a service-level agreement with Pure to allow them to store their data whenever and wherever they want. Evergreen One is available for all of Pure's product offerings. The growth of subscription services contributed significantly to our success in Q2. Evergreen One, the industry's leading storage as a service offering, saw sales double again year over year. Our Evergreen technology and programs have revolutionized the industry and provide Pure a sustainable competitive advantage, ending traditional legacy hardware replacement practices for customers and turning every sale into a storage as a service relationship. With our Evergreen Forever subscription, Companies upgrade both hardware and software to the latest technology without paying additional capital continually without downtime forever. As we discussed last quarter, generative AI and chat GPT have brought artificial intelligence to the top of mind for all customers. And AI creates two sets of opportunities for Pure. First, we can supply products for AI training environments such as the creation of large language models, or LLMs for short. And second, we can support enterprises to prepare their data architecture for AI inference, meaning the use of LLMs on their own data. Most customers will leverage third-party LLMs as their base. They will retune and retrain these models on their proprietary data within their own organizational boundaries. By adding guardrails, they will enable AI inference to achieve outcomes specific to their business. The former requires very high performance, while the latter is enhanced with the replacement of low-performance secondary hard disk systems with our e-family of cost-effective flash storage. During the quarter, FlashBlade S won a generative AI footprint in a production environment in the low eight digits. Portworx also saw multiple wins in early AI development environments. Customers purchased Portworx to ensure reliable data management during the training and inference process. Over the last five years, well over 100 customers have chosen FlashBlade to accelerate their AI and machine learning environments. With the introduction of FlashBlade E, AI customers are able to take advantage of a single operating and management environment for both their hot and their bulk data, dramatically simplifying their data storage infrastructure and reducing its cost and environmental footprint. For the last few months, I have visited customers, partners, and retailers across the U.S., Asia Pacific, and Europe to highlight Pure's new, ever more powerful position. Customers immediately grokked the benefits of and the need for a unified operating and management environment for all their data storage needs, block, file, and object, from the highest performance to the most cost effective. They responded enthusiastically to the ability to operate their storage and data environment as consistent storage pools across data centers and clouds. And they welcomed the advantages of our evergreen technology and subscription available across our entire data storage platform. Pure's products uniquely stand out in the industry due to our single operating environment and consistent APIs across our products. This is powered by our consistent use of Purity and our Pure One management system across all our products. Our new e-family of products leverage our latest direct-to-flash capabilities of Purity software to unlock the most cost-effective QLC flash to penetrate the bulk data market for the first time with all flash technology. Our high-density direct flash modules, or DFMs, work with Purity to power this advance. This enables better performance, better longevity, better reliability, and ultimately better price performance than both hard disks and even SSD-based systems. We have been shipping 48 terabyte DFMs for the last three years, and we will introduce our 75 terabyte DFM later this year. Today, Fiora's DFMs are two to four times denser than the largest hard disks and SSDs in competitive use. And our advantage in density is accelerating. Our roadmap calls for a 150 terabyte DFM next year, and a 300 terabyte DFM by 2026. Our improvements in performance and density of direct flash versus commodity products will enable us to increase our competitiveness in the industry by a wide margin, not only in performance and cost, but also in energy efficiency and e-waste reduction. Speaking of energy and e-waste, we issued our second ESG report last week. It details the advancements we continue to make across our technology portfolio, operations, and people. Our largest area of contribution continues to be the extraordinary energy, e-waste, and space savings of our products, which enable our customers to achieve their environmental sustainability goals. Pure products can reduce the total energy and emissions from data centers globally by upwards of 20% as Pure's flash-optimized systems use up to five times less power than competitive SSD-based systems and up to 10 times less power than the hard disk systems we will replace. In closing, I have never been more confident in our long-term growth strategy or in our opportunity to lead this market. I'll now turn the call over to Kevin Kreisler.