Everpure, Inc. Class A common stock

Good day and welcome to the EverPure first quarter fiscal 2027 financial results 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 a question, please press star one on your telephone keypad. At this time, I'd like to turn the call over to Paul Dyett, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to EverPure's first quarter fiscal year 2027 earnings conference call. On the call, we have Charlie Giancarlo, Chief Executive Officer, Derek Robbiati, Chief Financial Officer, and Rob Lee, Chief Technology and Growth Officer. Following Charlie's and Tarek's prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website where this call is being simultaneously 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, our ability to procure a sufficient supply of components and manage our supply chain, our hyperscaler opportunity, 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 business is contained in our filings with the SEC, and we refer you to these 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 EverPure 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 EverPure. Our second quarter fiscal 2027 quiet period begins at the close of business Friday, July 17, 2026. With that, I'll turn it over to Charlie.

Thank you, Paul. Good afternoon, everyone, and welcome to EverPure's Q1 fiscal 2027 earnings call. Q1 was another outstanding and a truly remarkable quarter reflected in the strength of both top and bottom line. Revenue growth of 35% year on year is a very strong start to our fiscal year 27. Operating profit nearly doubled year over year to $159 million. Sales momentum started off strong and continued to build throughout the quarter. Revenue and operating profit exceeded the high end of our guidance range, and we foresee continued strength throughout the year, as will be seen in our revised full year guidance. Undoubtedly, much of the recent strength in the market has been kindled by the current supply chain crisis. But our strength is also driven by increased win rates for our solutions in contested opportunities. Our market share gains are accelerating as customers increasingly adopt EverPure as their preferred vendor for data storage and management. Growth was driven by broad-based strength across our core businesses and geographies. Large deals, above 5 million, were up in high double digits compared to prior year. and our commercial business also showed strong momentum. New customer logos were up 20% year on year. We also achieved significant marquee expansions, including a global financial services customer that relies on EverPure as foundational infrastructure for private cloud environments across virtualized and Kubernetes-based workloads. It highlights the strength of our platform as customers bridge traditional and modern application architectures. As expected, Q1 included relatively little revenue associated with our hyperscale products. As discussed last quarter, we expect hyperscale product revenue to rise significantly in Q3 and Q4 based on customer order commitments. In the AI space, FlashBlade EXA scored more wins this past quarter, including application in AI machine learning and financial services GPU accelerated trading applications. One FinTech customer, using advanced GPU-based AI modeling for algorithmic trading on global financial markets, selected FlashBlade EXA for their high-performance AI infrastructure. The firm has processed more than 13 million transactions during their peak trading day, underscoring the performance and consistent reliability that FlashBlade EXA delivers in data-intensive AI environments. More broadly, we are now beginning to displace competitive AI storage products in the enterprise and neocloud markets. as customers transition to our FlashBlade family for its unmatched performance, operational simplicity, flexibility, and overall quality. As Tarek will explain, current sales performance has been positively affected by industry-wide cost and price increases. In my over 40 years in technology, I have never seen another supply chain situation remotely like this. Obviously, these price increases are of great concern to our customers. Consequently, on April 23rd, we published a letter to customers explaining our position and philosophy during this supply chain crisis. In particular, we wanted our actions and intentions to be clear and transparent. In the letter, we reassured our customers that we would share the cost pain with them and not seek to profiteer from the crisis. To this end, we have carefully managed our component supplies to enable us to hold off price increases until far later and far less than competitive price raises. As mentioned last quarter, We are choosing to operate at the lower end of our product gross margin range to help our customers while component costs escalate. We expect product gross margins will begin to recover in the second half of our year, but the recovery is likely to be gradual as costs continue to rise. The current environment has enhanced the benefits of our Evergreen One storage as a service offering. Evergreen One benefits from longer contracts, lower upfront costs, and longer lifetimes. This allows us to blend costs over many years, leading to more stable and lower operating costs for customers. An increasing number of customers are choosing Evergreen One to enjoy the benefits of Everpure. Evergreen One sales were up 73% year on year in Q1, reflecting greater customer appreciation for the operational and financial benefits of our storage-as-a-service model. Our enterprise data cloud strategy continues to gain momentum. Security Fusion adoption, which enables customers to build their own data clouds, doubled in Q1, with more than 1,200 customers. Wins and expansions include Card Connect, a subsidiary of Fiserv, and EAND, formerly Atisalot, as well as a leading North American financial institution and a large Asian healthcare IT provider. This growth reflects rising customers' interest in developing their own enterprise data clouds and reinforces Purity Fusion's strategic role within EverPure's architecture. One state department of revenue, which processes more than $9 billion annually, told us that Fusion gave them the ability to scale and manage infrastructure with the simplicity of the cloud, but within their own data centers. It allows their staff to provision with confidence while providing more time or higher value strategic work. Our acquisition of OneTouch, which closed earlier this month, will expand EverPure's opportunity to help customers manage their enterprise data. OneTouch enables customers to better manage all of their data, whether on pure products or not, both on-prem and in the cloud. This technology allows customers to build full data catalogs across all enterprise data, add semantics, as well as full ontologies and knowledge graphs to comprehensively manage their global enterprise data. These capabilities will enable customers to reduce the number of copies of similar data, increase the utility and quality of their data, and reduce the cost of data preparation for AI and analytics. Regarding our hyperscale business, our solution continues to make steady progress with an expanding set of hyperscale, cloud, and large tech titan customers due to its enhanced efficiency, flexibility, and reliability. we are currently investing significant resources in system qualification with multiple prospects. As stated previously, we expect to significantly expand shipments of our hyperscale product in the second half of this year and even further next year. We look forward to providing more details on our product advancements, particularly our expansion into advanced data management at our upcoming Accelerate conference in June. as well as at our financial analyst meeting scheduled for September 23rd here in Santa Clara. We continue to operate in a very dynamic macro environment. The current supply chain crisis, created by seemingly insatiable AI demand, has entirely eclipsed the tariff crisis of last year. Costs and component shortages now change rapidly and are challenging to predict with any degree of certainty. We have confidence in our ability to weather these challenges better than most because of our architectural advantages, strong engineering and supply chain capabilities, and our excellent supplier relationships. The current market turmoil has highlighted the importance of trust and transparency and has separated true partners from profiteers. We are building Everpure to be a long-term trusted partner with customers,