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Pure Storage, Inc. (PSTG) Q1 2019 Earnings Call Transcript

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Pure Storage, Inc. (NYSE: PSTG)
Q1 2019 Earnings Call
May 21, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Pure Storage First Quarter Fiscal 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I will now turn the call over to Matthew Danziger, Head of Investor Relations. You may begin your conference.

Matthew Danziger -- Head of Investor Relations

Thank you, and good afternoon. Welcome to the Pure Storage first quarter fiscal 2020 earnings conference call. Joining me today are our CEO, Charlie Giancarlo; our CFO, Tim Riitters; our President, David Hatfield; and our VP of Strategy, Matt Kixmoeller.

Before we begin, I would like to remind you that during this call, Management will make forward-looking statements, which are subject to various risks and uncertainties. These include statements regarding competitive, industry and technology trends; our strategy, positioning and opportunity; our current and future products; business and operations, including our operating model; growth prospects; and revenue and margin guidance for future periods. Any forward-looking statements that we make are based on assumptions as of today and we undertake no obligation to update them. Our actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties relating to our business is contained in our filings with the SEC and we refer you to these public filings.

During this call, we will discuss non-GAAP measures in talking about the Company's performance and reconciliation 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 for at least 45 days and is the property of Pure Storage.

With that, I'll turn the call over to our CEO, Charlie Giancarlo.

Charles Giancarlo -- Chairman and Chief Executive Officer

Thank you, Matt, and good afternoon, everyone. We appreciate you joining us on today's earnings call. I will begin by sharing our high-level results from the quarter, Hat will provide a go-to-market update and finally Tim will offer a detailed review of our financials.

The fundamentals of our business are strong. We are broadening our customer base, we are delivering new innovation through both organic and inorganic investments and we continue to delight our customers. For Q1, revenue was $327 million, growing 28% year-over-year. While we are growing well above the industry average, we were not satisfied with our results this quarter. Gross margin remained strong at 68.1% and operating margin was negative 9.6%. Revenue was just below the low end of our guidance, and consequently, profitability was below our guidance.

As you know, a particular area of focus has been to increase our at bats and expand our engagement with large enterprise customers. To that end, we have hired aggressively, adding nearly 40% more capacity to our sales force this last year. With this additional investment, we are seeing a significant increase in the number of large enterprise opportunities. We are aggressively going after legacy storage vendors. We are consistently beating them in the commercial market and now we are increasingly going after them in the largest enterprise environments. We are excited about these opportunities as we continue to expand both our product portfolio and our enterprise business model. The shape of our business is changing for the good, but it will have more variability. Thus, we believe it prudent to modestly adjust our revenue guide for the year to 27.5% annual growth.

We continue to position Pure ahead of the relevant trends that are top priorities for CIOs. Hybrid cloud, fast consolidated data architectures, AI and analytics and rapid recovery from failure. I want to share some highlights on our work in these areas this past quarter. Pure is leading the industry with DirectFlash Fabric on FlashArray, a HyperScale Architecture enabling large scale stateless compute. HyperScale Architecture leverages Pure shared storage with direct attached performance for modern efficient application environments.

ObjectEngine, which became generally available in Q1, is resonating with customers, delivering on our vision that customers need rapid restoration of critical data and applications rather than just backup. Customers can now recover data in minutes versus hours or days by using ObjectEngine with FlashBlade on-prem. And by using AWS S3, ObjectEngine becomes a cost-effective archive destination for long-term data retention, enabling additional uses of data in the cloud. ObjectEngine is just one part of our comprehensive suite of cloud data services. We are enabling our core FlashArray software, Purity, to run natively in the public cloud. Cloud Block Store, which delivers enterprise-grade storage on the public cloud is now many months into beta use with great customer feedback. Lastly, this quarter, we acquired Compuverde, a leading developer of file software solutions for enterprises and cloud providers. Their highly scalable software will accelerate our roadmap to provide a unified file and block offering, opening new markets for Pure and expanding our file capabilities for Pure customers.

We remain excited about the opportunities in front of us. We have a $50 billion total addressable market in multiple product segments that are essential to powering modern digital businesses. We continue to delight our customers, expanding in accounts once we are established. We continue to take market share in our industry and are extending our enterprise sales motion, and we have a strong pipeline of new and innovative products to enable continued growth of our business. We are confident in the investments we are making.

With that, I'll turn it over to Hat.

David Hatfield -- President

Thanks, Charlie. Pure's strategy remains clear, to deliver technology, the customer experience and business model that enterprises want, setting the Company completely apart from the industry. Our investments in and focus on the enterprise, largest clouds and service providers and governments globally is working, but it is changing the shape of our business and this impacted our Q1 results.

First, we added over 40% new sales capacity in the past year, including nearly 30% in the past six months alone. This, together with typical account transitions that occur at the beginning of a fiscal year, took more focus than expected. Second, the mix of large enterprise deals increased by 2x more than it has been historically, reflecting solid progress as we move upmarket. However, these transactions tend to take longer to close and have more variability. As we enter Q2, the account transitions are behind us. A series of large deals we had in Q1 are still active and the changing shape of the business is reflected in our guidance for the year. The underlying metrics of repeat purchases, customer retention, partner leverage and win rates are all continuing to perform nicely.

The core of our business cloud, commercial and public sector is strong, growing over 30% year-over-year. We finished the quarter with approximately 6,200 total customers, greater than 350 new customers in Q1, equating to more than 5 new customer additions per day. In addition, we are pleased with our growth in international markets contributing to 30% of revenue in the quarter.

Shifting to our portfolio, we continue to be excited with the speed of innovation supporting Pure's four growth areas. Hybrid cloud, fast consolidated data architectures, AI analytics and rapid restore. These capabilities expand our TAM, while also increasing the relevance with senior executives and new buying centers. Pure's cloud strategy is resonating and in particular Cloud Block Store beta customers, including Mid-America Labs have seen early success with key use cases, such as disaster recovery and application migration. This quarter, we also announced the expansion of our Evergreen Storage Service, ES2, providing customers with a unified subscription model across hybrid environments. Enterprises can now use Pure's storage-as-a-service model on-premises, hosted and in the cloud without the need to manage multiple subscriptions or purchase separate overlapping capacity.

Next, we see continued progress with AI initiatives and Pure is paving the way with solutions from early inception to large scale production. This quarter, customers across several industries, including Geisinger Health have chosen the AIRI converged platform from Pure, NVIDIA and Cisco as the backbone of their AI deployments to gain better insight into their data. And finally, this quarter, UK Ministry of Defense and the University of Texas MD Anderson Cancer Center have both chosen FlashBlade, signaling the excitement around our flash-to-flash-to-cloud architecture and rapid restore use case. This was yet another proof point for Pure beginning to disrupt the roughly $8 billion data protection market.

Shifting to our go-to-market momentum. Pure's partner ecosystem continues to broaden and deliver real impact to the business. We saw another good quarter from national partners with solid year-over-year growth and increased net new logo contribution. Strategic alliance partnerships were also a bright spot in Q1, particularly with next-generation analytics use cases, like Spark, Elastic and Splunk. And perhaps most exciting, as we execute on our cloud strategy, our relationship with AWS is advancing through further joint engineering development, sales enablement and global alignment. We also continue to see success driving large enterprise and government businesses through global systems integrators with a combination of sell to activities, migrating dozens of the largest global enterprises on to Pure as part of their managed services and sell with motions, building new pipeline and at bats from our joint offerings.

In summary, we are as excited as ever with the added sales capacity, continued rate of innovation and expanding partner ecosystem. We continue to execute on our long-term vision, are making great progress with large enterprises and we are growing 3x faster than our competitors, taking share in the overall storage market. We truly are just getting started.

With that, I will now turn it over to Tim. Tim?

Tim Riitters -- Chief Financial Officer

Thanks, Hat. Q1 was a solid beginning of the year for Pure, as we continued to demonstrate growth at scale, industry-leading gross margins and continued innovation across our product portfolio. Before I dive into the specifics, I'll make my usual note that the gross margin, operating

margin, OpEx, net income and free cash flow numbers I will use are non-GAAP, unless otherwise noted. Reconciliations of these non-GAAP metrics to their GAAP comparables as well as our full Q1 results and presentation are available on our website at investor.purestorage.com.

For the quarter, total revenue grew 28% year-on-year to $326.7 million. Product revenue grew 22% year-on-year to $238.7 million and support revenue grew 45% year-on-year to $88 million. Geographically, 70% of sales came from the United States and 30% came from our international markets for the quarter. Our gross margins continue to be strong, remaining at the upper end of our long-term model range of between 63% and 68%. Total gross margins for the quarter were 68.1%, up 0.5 point sequentially. Our industry-leading gross margins continue to reflect the value we deliver to our customers through consistent differentiation, technological innovation and customer focus.

Product gross margins were 68.7%, up 0.9 point sequentially, due primarily to benefits we are seeing in component costs. Support gross margins were 66.3%, down 0.5 point sequentially. The sequential decrease in margins is due to continued investments in our professional services organization as we build support capabilities to serve our largest and most strategic customers. OpEx was $254 million for the quarter. As has been our pattern for the last several years, Q1 was an investment quarter, particularly in the hiring of our sales force and this year was no different. As you heard from Charlie and Hat earlier, we are pleased with the significant additional sales capacity we've added in the last six months.

Moving to operating margins, in Q1, operating profit was negative $31.2 million or negative 9.6% of revenue and compares to an operating profit of negative $15.3 million or negative 6% in the year-ago quarter. Operating profit was less than expected due to our lower than expected top line performance. This revenue shortfall directly impacts our bottom line. While we were not satisfied with our profit performance this quarter, given our revenue shortfall, we remain on track to drive profitability for the full year.

Q1 net income for the quarter was negative $27.6 million or negative $0.11 per share. This compares to the year-ago period of negative $16.2 million or negative $0.07 per share. The weighted average shares used for the per share calculations were 245 million shares in Q1 and 224 million shares for the year-ago period.

Moving on to the balance sheet and cash flow, we finished the quarter with cash and investments of $1.17 billion, a decrease of $31 million from the previous quarter. Our quarter-on-quarter decrease in cash was impacted by a $60 million cash payment as part of the Compuverde acquisition. Without this impact, we would have grown our cash balance for the seventh straight quarter in a row.

We had another strong quarter of deferred revenue growth, which we believe is a key indicator of the success we are having in executing on our strategy and building long-term relationships with our customers. Deferred revenue at the end of the quarter was $564.3 million, an increase of 45% over the same period a year ago. The strong deferred revenue performance continues to be driven by three key trends, significant year-on-year renewals growth, longer initial service agreement purchases and the early momentum we are seeing with our ES2 product line.

Free cash flow in Q1 was negative $17.7 million, which includes $22 million of impact related to our employee stock purchase plan. Adjusting for the normal impact of our employee stock purchase plan, free cash flow was positive $4.3 million in the quarter.

Now, I will turn to our guidance. As you heard us say earlier, we have put a significant amount of capacity into the business, with an emphasis on our enterprise segment. Our focus on the enterprise has already yielded results, adding a significant number of large opportunities for our sales team to execute on. We're excited that larger deals are becoming a more important part of our overall business. At the same time, we would naturally expect a greater degree of fluctuation in any given quarter.

As such, we are prudently incorporating these dynamics into our outlook. For the second quarter of fiscal 2020, we expect revenues in the range of between $389 million and $401 million, a $395 million midpoint or 28% year-over-year revenue growth. Non-GAAP gross margins in the range of between 65% and 68% and non-GAAP operating margins in the range of between negative 5% to negative 1%, or negative 3% at the midpoint. For the full year of fiscal 2020, we now expect revenues of between $1.7 billion and $1.77 billion, a $1.735 billion midpoint or 27.5% year-over-year growth. Non-GAAP gross margins in the range of between 65.5% and 68% and non-GAAP operating margins in the range of between positive 1.5% and positive 5.5%, or positive 3.5% at the midpoint.

With that, I'll turn it back over to the operator for questions.

Questions and Answers:

Operator

(Operator Instruction) Your first question comes from Alex Kurtz from KeyBanc.

Alex Kurtz -- KeyBanc -- Analyst

Hey, guys. Can you hear me OK?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yes, Alex. Hi.

Alex Kurtz -- KeyBanc -- Analyst

Hey. Good afternoon. Just a clarification and then a question. So on -- Tim, on ES2, I know there have been some revenue headwinds created by that service. Was wondering, if there was any contribution this quarter? And then on the broader sales question. Just want to take your temperature on the competitive environment. I know that the incumbents are gearing to discount at pretty extreme levels to retain footprint. I'm just kind of wondering, if that's playing into all this as well?

Tim Riitters -- Chief Financial Officer

Yeah. So Alex, this is Tim. On ES2, ES2 was tracking very nicely to our expectations for the quarter, so that business is performing where we expected it. So not an explanation of the couple of points off our overall world performance.

David Hatfield -- President

And Alex, this is Hat. On the competitive landscape, I wouldn't say anything is materially different in the quarter than what we've seen historically. As you know, we focus on value, not price. And so when we get our TCO argument in place and people understand our technology and our differentiated business model and customer experience, our win rates are holding great against them.

Alex Kurtz -- KeyBanc -- Analyst

But they exist on...

Charles Giancarlo -- Chairman and Chief Executive Officer

Alex, so I'd add though that in the net new logos in the large enterprise, they'll go to almost any length to keep us out. And so our -- the early entry into the enterprise is something that we're putting special attention on.

Alex Kurtz -- KeyBanc -- Analyst

Okay. Thank you.

Operator

Your next question comes from Steve Milunovich from Wolfe Research.

Steve Milunovich -- Wolfe Research -- Analyst

Thank you. First of all, I just want to be clear. Last quarter, you had an issue with your EMS provider and the timing of deliveries. Is that completely passed? Was that a factor at all? And then second, Charlie, when you first arrived, you talked about wanting to get more efficiency out of new sales people, get them effective faster. You're obviously bringing in lots of people and it sounds like it's fairly recent. Do you feel like you're getting that efficiency from the cohorts or is it going to lag a little bit because you are going for these larger accounts?

Charles Giancarlo -- Chairman and Chief Executive Officer

Right. So on the ops question, ops performed flawlessly that -- this quarter, so I think that's largely behind us now. And then let me just start on the productivity question. We do think we have a very good factory for new sales reps that -- and new SEs that come in. So we've got a pretty good factory, but really we -- not only do we have a record number, but we had a record percentage add this Q1 over the last six months. And so that always takes a lot of work and effort as Hat put in and it's something that we're going to pay a lot of attention to over the next quarter or two.

Steve Milunovich -- Wolfe Research -- Analyst

Thank you.

Operator

Your next question comes from Aaron Rakers from Wells Fargo.

Aaron Rakers -- Wells Fargo -- Analyst

Yeah, guys. Thanks for taking the question. I'm going to slip in two as well, maybe first a little bit of a clarification, just so I understand the model. Can you explain or define exactly what enterprise deals are? What percentage of your revenue is in enterprise deals and maybe how that compares to a year ago? I'm just trying to understand and put some context behind business push to going after these enterprise deals. And then the second real quick question I'll just put it out there right away is, Charlie, can you give us some flavor of how effective you've been, either be it metrics quantitatively or even qualitatively in selling a portfolio motion for the Company, meaning deals that you sell both FlashArray and FlashBlade or any kind of metrics you can share on that front would be helpful?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. Hat, do you want to start?

David Hatfield -- President

Yeah. So A, when we talk about enterprise deals, we are talking about multi-million dollar large deals. So the shape of those is expanding and really nicely 2x over a year ago period. And then as a percent of the overall -- we haven't broken everything out from a revenue mix perspective, but we did talk about we're now at 40% of the Fortune 500. So we're incrementally adding there and added over a 100 enterprise customers in the quarter as well. So not only the quantity of new customer adds were great, but the quality were nice as well.

Aaron Rakers -- Wells Fargo -- Analyst

Just to be clear, that's a 100 new customers that were deal sizes greater than a $1 million or not? I'm just -- I want to...

David Hatfield -- President

There are two different issues.

Aaron Rakers -- Wells Fargo -- Analyst

Okay.

David Hatfield -- President

So we're obviously working within our install base and so the average deal sizes are growing and the mix of the larger deals as a percentage of the overall pipeline is higher, 2x higher than we've seen historically, so we like that shape. Obviously, there's more variability in those deals and it takes sometimes longer for those to close, but we like the strategic nature in which we're competing for the larger transactions. And a separate topic from an enterprise perspective, a combination of the Fortune 500 now at 40% and a 100 new -- net new enterprise customer adds in the quarter are two good proof points in terms of the progress of market.

Aaron Rakers -- Wells Fargo -- Analyst

Okay. And then on the portfolio motion?

Charles Giancarlo -- Chairman and Chief Executive Officer

Right. On the portfolio, it had been something along the lines of 30%, although I'm not -- is that correct, Kix? Our FlashBlade and FlashArray customers -- or 30% of the FlashBlade customers are FlashArray customers.

Matt Kixmoeller -- Vice President, Strategy

I don't know the number offhand, but we are absolutely seeing bundling working. And I think that was one of our key investments areas was the belief that not only can we get synergy between FlashArray and FlashBlade, but as we start to tie in rapid recovery and use cases really drive closer synergies between them, we're just seeing that bundling take off.

Aaron Rakers -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

Your next question comes from Pinjalim Bora from JPMorgan.

Pinjalim Bora -- JPMorgan -- Analyst

Hey, thank you. Just on -- double clicking on the performance, seems like the DR at least outperforms, our numbers grew massively. Is it possible to understand how much of a positive variance was DR for you in Q1 versus what you had expected 90 days ago?

Tim Riitters -- Chief Financial Officer

Well, on deferred revenue, I guess, I would say, we've known as we've looked at the business for the last several quarters that that flywheel in our strategy is indeed working. So you're seeing very nice customer retention rates and so very nice customer retention rates resulting in increasing deferred revenue balance, so that's obviously a positive trend. I think the other positive trend we're seeing there is that customers are taking and buying longer-term subscription contracts with us from the get-go, which basically speaks to us about making a longer-term and a more pronounced commitment to Pure. And obviously, we like that, that builds the deferred revenue balance as well. So I think, again, we were expecting these types of performance and we're very happy with where the deferred revenue balance landed this quarter.

Pinjalim Bora -- JPMorgan -- Analyst

Okay. And again, on tariffs, I mean, obviously, I don't think you will probably have much impact from it, but it was -- was there any direct impact and more importantly was there -- did you saw any kind of slowness in sales cycle as an indirect impact of tariffs affecting spending in governments, leading to higher security and deal sign offs, et cetera? Or was there any hangover from any -- the government shutdown last end of the year?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. I'll take the first part of the question. I'll have Hat ask the -- answer the second part of the question. On the COGS and build materials side, relatively small amount of our overall BOM is sourced out of China, so therefore very, very little impact to us on the cost side.

David Hatfield -- President

Yeah. Similar on the sales cycle. Directly related to that, we had a nice contribution, 30 % of our revenue coming from our international markets. So those businesses are firing nicely.

Pinjalim Bora -- JPMorgan -- Analyst

Thank you.

Operator

Your next question comes from Jason Ader from William Blair.

Jason Ader -- William Blair -- Analyst

Yeah. Thank you. I got a couple, I want to slip in two. Just on -- continuing on the last thread, would you say the environment is tougher today just from a business standpoint getting deals done versus a year ago? I mean, we saw NetApp have a challenged last quarter, we saw Nutanix have some struggles. I mean, it seems like maybe there's a larger environment issue here.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. I would say, last year this time, there was a bit of tailwind in the -- in this market overall growing or growing fairly well or better than it had been in several years. I would say, today, there's no tail -- we don't perceive a tailwind, but we don't see a lot of a headwind either from a overall macro standpoint. We think our challenges are our challenges and we're still a relatively small player in a huge market. So it's really up to us to capture more of that share.

Jason Ader -- William Blair -- Analyst

Okay, great. And then secondly maybe for Tim. When did you know you were going to miss and were there -- were these deals that slipped, were they -- or that didn't close, were they lost to competitors or did they slip into the Q2 period?

Tim Riitters -- Chief Financial Officer

Yeah. So all of those deals absolutely are still active, Jason. So they slipped into the Q2 period. And I think, again, that's what we talked about in our prepared remarks is that as you engage in these larger deals, they go sometimes on their own cycles. And so, again, what we're happy about is we absolutely continue to be in the fight on these deals.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. And I just...

Jason Ader -- William Blair -- Analyst

And when did you...

Charles Giancarlo -- Chairman and Chief Executive Officer

Sorry, Jason.

Jason Ader -- William Blair -- Analyst

Go ahead. Go ahead.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. I think we did anticipate -- so every year, you've got -- you have transition of accounts and new capacity, et cetera. I think the added capacity at the scale that we did it kind of order 40% created more transition from a territory management perspective than we have done historically. And so good news is that's behind us. And I think on the larger deals we love the size of deals that we're competing for and the relevance that we're having in the large enterprise and so the shape changes, but it changes for the better and I think we factored that in -- variability in for the balance of the year.

Jason Ader -- William Blair -- Analyst

And was this a situation where you kind of thought you were going to hit numbers until like the very end and it just didn't come through or was this something that was problematic throughout the quarter and it just didn't -- it was sort of you were behind plan all quarter?

Charles Giancarlo -- Chairman and Chief Executive Officer

No. I mean, I guess -- we typically don't talk about variability in the quarter, Jason. What I'll tell you is that sort of we had a good last half last part of the quarter, very strong part of the quarter. And again, this is relative to our expectations, we're outside of guidance by a couple of million dollars. So again, it's not a big number, it's really -- we really look at the fact that the business continues to grow 28% and doing that at scale in this environment something we're particularly proud of.

Jason Ader -- William Blair -- Analyst

Thank you.

Operator

Your next question comes from Karl Ackerman from Cowen.

Karl Ackerman -- Cowen -- Analyst

Hi, gentlemen. I think investors understand your weaker operating margin this quarter, given you're previously committed to invest in R&D and headcount. But in the event compute and storage spending doesn't return as healthily in the back half as you may expect. How much capability do you have at pushing out R&D projects that perhaps don't yet have order rates attached to them yet?

Charles Giancarlo -- Chairman and Chief Executive Officer

Right. Well, that's a perspective for the future. But in general, at this kind of gross margins that we're operating with, we've got a lot of leverage in the business. And so -- and I've been clear that if investments don't yield the kind of results we expect on the top line in terms of growth that we will bring spending in line with that, so that's for the future right now. Right now, we believe we're making the right investments and it's going to yield the kind of growth that we've seen historically. And so we feel very strongly about the investments that we're making currently. We have -- as you might imagine that if you look at it, we are bringing spending down more in line with our growth. But at this point, we feel confident about the investments we're currently making.

Karl Ackerman -- Cowen -- Analyst

Appreciate that. And if I may squeeze in one more, you previously suggested cloud data services, I think, would be in GA later this summer, but Compuverde would seem to accelerate your efforts. So may you quantify the capabilities Compuverde provide you for cloud data services and whether you think you have all the pieces of your portfolio to compete more competitively in cloud file services? Thank you.

Matt Kixmoeller -- Vice President, Strategy

This is Kix, I'll take that one. So yeah, we're tracking well first off with Block Store as well as our ObjectEngine cloud product. Both are on track for GA in the second half of the year. And more broadly beyond that, the Compuverde acquisition was an acquisition for really bringing in software to find file capability in the Company. Our first approach with that is really going to be to leverage it as part of the FlashArray product line. If you look at the unified space within the block world, there is a number of customers who buy just a few arrays and really expect both file and product -- file, product and block protocol out of those arrays. And so our first integration with Compuverde will be to help deliver unified capabilities for FlashArray and we really think that sets us up well to go after the entirety of the file market. We're already doing really well at the high end with FlashBlade going after next-gen use cases going after really high performance use cases. This will allow us to feather in the more scalable kind of lower part of the file market to really be able to have a solution and the right solution for every part of the market.

Operator

Your next question comes from Andrew Nowinski from Piper Jaffray.

Andrew Nowinski -- Piper Jaffray -- Analyst

Great. Thank you. I want to ask a question as it relates to your guidance for the year. So if we take out the $15 million to $20 million that slipped into Q1 from that contract manufacturing issue you had last quarter, your revenue was only increased about 21%, which is well below the 27.5% growth you guided to for the year. So I'm wondering, if you could just walk us through the puts and takes that give you confidence that your business can accelerate well above that normalized growth rate that you just delivered?

Charles Giancarlo -- Chairman and Chief Executive Officer

Right. Well, as we stated last quarter, I mean, every quarter is a new quarter for sales operations, so you start from zero. And we had incorporated in the Q4 results obviously into our Q1 at the time. So as we look -- what we have done is we've taken the same kind of math that we do for our guide, and in this case, looked at the percentage of large deals in the pipeline and adjusted for the greater variability of those large deals. And all of that gave us confidence in this new guide. And obviously, we are where we are today, we don't want to be in the same position later in the year, which was the primary reason for adjusting the guide.

Tim Riitters -- Chief Financial Officer

Well, and Andrew, I'd say a couple additional things as well. So first of all, you sort of quoted the $15 million to $20 million number. And again, we've never said $15 million to $20 million. Remember that a portion of that was ES2, a large portion of that was ES2. So that $15 million number is a bit high as you sort of think about how you sort of rolled your model from Q4 into Q1. I think more broadly though as well is that we talked about this at the beginning of the year, we talk about it again right now, which is new routes to market, new product innovations, Kix just talked about coming out later this year combined with a very significant increase in overall productive capacity in the form of quarter bearing heads. All of those things sort of bode well for our excitement about what really is not that much, if any, reacceleration to the business, that would be sort of normalize some of these revenue patterns we just talked about.

Andrew Nowinski -- Piper Jaffray -- Analyst

Okay. And then your DSOs increased for roughly five straight quarters now, kind of the highest level that we've ever seen. I guess, is that what we would expect, given the increasing mix from enterprise?

Charles Giancarlo -- Chairman and Chief Executive Officer

Well, I think you're absolutely right on a portion of that. Certainly, we see enterprise customers that are a little bit more aggressive in terms of how they negotiate terms, payment terms. And candidly, that's an easy gift for us to get into an account and get good margin business. So you are going to absolutely see some of that. And then I think in Q1, you always have a seasonal dynamic in terms of our DSOs. And so if you look back many years, it will spike in Q1 just because of seasonality. I think you're seeing both of those dynamics play out in Q1.

Andrew Nowinski -- Piper Jaffray -- Analyst

All right. Thank you.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah.

Operator

Your next question comes from Katy Huberty from Morgan Stanley.

Katy Huberty -- Morgan Stanley -- Analyst

Good afternoon. Two questions from me as well. How much contribution did you get from the large systems integrator deal that you talked about last quarter in April? And then what would you say is the right revenue run rate for the remainder of the year from that contrast?

David Hatfield -- President

Hey, Katy. This is Hat. So the minimum commitment as we articulated was a couple year deal and it continues to trend very, very well. Much like the large enterprise, it's not linear every quarter. So there was no net new contribution from that deal we announced in this quarter, but we're thrilled with the progress. We're migrating currently dozens of the largest enterprise customers on to our platform via the managed services agreements with this partner. That would take us a much longer period of time to get to on our own. So serving as a route to marketing, getting access to some of the largest global customers I think is great. We also certified a number of joint offerings with that partner and are building pipeline against it. So, it's definitely on track and continuing to accelerate, but it's not going to be a linear contribution each quarter.

Katy Huberty -- Morgan Stanley -- Analyst

Okay. Thank you. And then -- and Charlie, maybe a question for you. How are you thinking about opportunities to expand the TAM and maybe even move up the stack over time and whether that would be organic or inorganic investments?

Charles Giancarlo -- Chairman and Chief Executive Officer

Katy, it's going to be both. It'll be a bit of organic and a bit of inorganic and I'll give you one example. What we discussed is our DirectFlash Fabric. When I talked about on the -- on my prepared remarks of HyperScale Infrastructure and HyperScale Architecture, that is a new construct that allows stateless compute in a data center scale environment, that's something that we put together internally. I can tell you that there are a number of internal projects on that and we do look external for some capabilities as well to be able to deliver whole stack compute in a hyperconverged or HyperScale environment. So that is an area that we are very focused on both internally and externally. In addition to that, though, as I mentioned, we're focused on a number of different areas. One is hyper -- hybrid cloud, which is extremely important to us and everything we're doing in that area, including ObjectEngine, Cloud Block Store or CloudSnap, et cetera, we've got a lot of activity there. The fast consolidated data, what we're doing with Splunk and Cisco, Arista and others to be able to create an environment, where data can be consolidated, not so many copies with many applications accessing the same data at the same time. You know our work in AI and analytics, which is growing nicely. And then finally, the idea that companies don't want backup, they want restoration and bringing restoration from hours to minutes is really resonating well with our customer base. So quite a few things in the pipeline. You'll hear about -- a lot more about them at the Accelerate Conference in September. And I invite you all to come.

Katy Huberty -- Morgan Stanley -- Analyst

Thank you.

Operator

Your next question comes from Rod Hall from Goldman Sachs.

Rod Hall -- Goldman Sachs -- Analyst

Yeah. Hi, guys. Thanks for the question. I just have five, I'm actually kidding. So, I wanted to just go back to the sales efficiency question and see if you guys can expand on that a little bit. It doesn't seem like the kind of thing that would crop up in a quarter and drive weakness. So I'm just trying to understand, what the color around that is? What might have caused that to be one of the things you called out this particular quarter? And why it sort of caught you by surprise? And then I also I guess would like to kind of understand a little bit better how things are going with FlashBlade on the AI front. Just any color you can give us on market dynamics there, what you're seeing in terms of demand? Thanks.

David Hatfield -- President

Hey, Rod, this is Hat. Yeah. So we definitely anticipated that we were going to have transition in the quarter. You know that I'm not a big fan of any big changes and so we made incremental changes and -- but didn't really changed much under the hood, we just absorbed 40% more capacity. So the amount of change that happened in the quarter took more focus than in years past. And so I think that contributed to a series of deals that we had, that pushed in the quarter, that any one of those that we would have closed would have made a big difference. So when you're dealing with deals that are multi-million, they elevate in the organizations up to the CEO and to the CFO and things happen outside of your control, even though you've got a technical win budget, an executive sponsor and the rest of it. So from a Q1 perspective, there was more disruption that we typically had and that absorption, I think, had an impact. The best news is that it's behind us and we feel great about this quarter and the quarters ahead. On the FlashBlade front, we had a great FlashBlade quarter and continue to have momentum in that business. It's tied to AI, next-generation analytics. Use cases and rapid restore is the two primary use cases that are driving it and we see continued progress there.

Rod Hall -- Goldman Sachs -- Analyst

You guys wouldn't...

Matt Kixmoeller -- Vice President, Strategy

Real quick, this is Kix. If you look at Gartner and IDC data, AI (inaudible) be one of the top three CIO care abouts. And so when you look at something that helps us get into net new enterprises, this is a huge entry vector for Pure. We also announced an update to the AIRI architecture this quarter, where we embraced DGX-2. That just helps us continue to grow to larger and larger sites. And then the final thing I'll say is that our thesis of AI not existing in a vacuum I think is playing out well, where people who do AI also do analytics at large scale. And so the power of FlashBlade is not only the power of the AI initiative, but really to look at that whole data pipeline. And so we're seeing more and more of the analytics players really refactor for not only cloud, but on-prem flash and using the S3 API. That's been a great area of growth for us.

Rod Hall -- Goldman Sachs -- Analyst

Any update on FlashBlade mix for the quarter?

Matt Kixmoeller -- Vice President, Strategy

No. As you know, we've not been reporting on individual products now for some quarters. But FlashBlade really is doing quite well for us and we're really pleased with it.

Rod Hall -- Goldman Sachs -- Analyst

Okay. Thank you.

Operator

Your next question comes from Steven Fox from Cross Research.

Steven Fox -- Cross Research -- Analyst

Thanks. Good afternoon. Just going back to the new cohort hirings. Can you talk -- maybe step back and talk a little bit about the strategy, either by industry vertical region that you're going after? And I guess, within that strategy, is it clear to say that this was the plan all along or did something change in terms of the opportunities that started to rise as you thought about the full fiscal year? And then as a quick follow up, you mentioned public sales growing. I thought you said 30%, I just wanted to clarify that and if there's any color around that that'd be helpful. Thanks.

David Hatfield -- President

Yeah. Steven, this is Hat. So, no, no new strategy. This is exactly the strategy that we set out to go do. We wanted to add capacity and put the majority of that capacity in the most important accounts and opportunities market. We have verticalized our public sector business at a national level in the US and we've broken it out across EMEA as well and we saw very nice progress on our public sector business. And so as one industry vertical that we're starting to see really nice progress now consistently quarter-in and quarter-out from the production there. And then in the large enterprise, we're -- we focus at a territory level around in this resolution groups, around financials, service providers and telcos, healthcare, et cetera. And so when you get to application-specific solutions by industry, it drives the portfolio motion as well. And so we're focused on five key industry verticals and we're continuing to invest up-market in the largest accounts across each of those verticals. So in line with what we planned on doing. I think the part that was a little bit different is just absorbing that amount of capacity in the quarter, just took us more time than we anticipated.

Steven Fox -- Cross Research -- Analyst

Understood. Thank you very much.

Operator

Your next question comes from Simon Leopold from Raymond James.

Simon Leopold -- Raymond James -- Analyst

Thanks for taking the question. I wanted to see if maybe you could build a gross margin bridge to us in terms of some of the dynamics affecting your gross margin outlook. You had a good gross margin this quarter, we know memory prices are coming down. Yet, you're guiding to the 65% to 68% from a just over 68% this quarter. How much of this is competitive? How much is customer mix? How much is expectations on costs? Thank you.

Tim Riitters -- Chief Financial Officer

Yeah. Simon, this is Tim. In terms of the guide going forward, it's really kind of how we thought about guiding the business in the past. I mean, if you watch this guidance from us, it's pretty consistent kind of over the last couple of years. What it really does is it gives us flexibility. Right? So we have the flexibility to use gross margin at our disposal. Sometimes, we run a little bit higher on gross margin, which is what you saw in this quarter and that's allowed us to spend more on OpEx and hire more productive capacity. Other times, it may make sense to go and do some hyper-discounted deals to sort of get into some really good and interesting footprints. Right? So, we just want to leave ourselves the room and the flexibility to manage the business over the course of the next couple of quarters as the year sort of plays out and that's really been kind of standard operating procedure for the last couple of years as a public company.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. And just to be clear, we're not signaling any major change, either in premium we get in the market or in costs that we see. Obviously, we expect the standard competition and the standard declining cost base.

Simon Leopold -- Raymond James -- Analyst

So, just to be clear, it sounds like your answer is to say you're being conservative to give yourselves the opportunity to discount. But looking at the last four quarters, you've been in this 68% neighborhood. I'm not quite sure, I see any reason why that would change.

Tim Riitters -- Chief Financial Officer

Well, I guess, I would say, it's slightly different. We're giving ourselves flexibility to invest in the business as we see fit, whether that'd be through OpEx or using those points of margin to our advantage to sort of get into better deals.

Simon Leopold -- Raymond James -- Analyst

Okay. Thank you for taking the question.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah.

Operator

Our next question comes from Eric Martinuzzi from Lake Street.

Eric Martinuzzi -- Lake Street -- Analyst

Yeah. I had a question in particular about the AWS relationship. You talked about three things that you're evidencing the closeness of the relationship, the engineering, the sales alignment and then the global alignment. I think all three of those things could be said about each of your competitors. And I'm wondering, if there is -- is there anything you can point to that maybe differentiates your relationship with the biggest player in cloud?

Matt Kixmoeller -- Vice President, Strategy

This is Kix, I'll take that one. So if you look at our cloud strategy, I think actually the differentiation with respect to competition has gotten even more clearer over the last quarter. You've seen most of the major stores' vendors go down a path, where they're largely putting their arrays in cloud connected data centers (Technical Difficulty) kind of a pseudo cloud service off that connected to the HyperScale (Technical Difficulty) while that's an expedient thing to do because they can just (Technical Difficulty) hardware in there, sometimes even just through a partner and kind of calling it their own service. It's not real cloud. And so I think as we've worked with the HyperScalers, they're quite excited about our initiative and our focus to basically take our software and optimize it to run natively on the cloud providers. And so as we said publicly, our first goal is absolutely to have a premium set of offerings on AWS, the market share leader, but our strategy is multi-cloud. And so as we shift to AWS, we'll certainly move on and we already have engineering efforts under way on more than AWS.

Eric Martinuzzi -- Lake Street -- Analyst

And is that tighter relationship -- are you seeing that evidence in this large enterprise pipeline that you've discussed?

Matt Kixmoeller -- Vice President, Strategy

It's different -- definitely contributing to it. I mean, customers and CIOs are interested in a hybrid cloud strategy and what we're doing. They love the fact that we're doing software-only and embedding us natively inside of their environment. And ultimately, the goal is to make the data movement in and out of on-prem or in a hosted environment or in the public cloud very seamless, not only technically, but also commercially. And the expansion of what we talked about in my prepared remarks around our ES2 offering, including providing that flexibility, makes it commercially easy. So we are an insurance policy to get them to the public cloud whenever they want commercially and we think that customers are responding well to that.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. And I'd also just add that I think the technology approach we're taking is also a better go-to-market motion with the key cloud partners. When we sell our software in their cloud, the customer also has to buy the native services to run that software. And so it's a win-win for us and the cloud partner, it really aligns the go-to-market motion.

Eric Martinuzzi -- Lake Street -- Analyst

Got it. Thank you.

Operator

Your next question comes from Matt Cabral from Credit Suisse.

Matt Cabral -- Credit Suisse -- Analyst

Yeah. Thank you. Just wanted to circle back to the downtick in guidance for the full year. Just want to make sure, are you guys seeing a change in pipeline or win rates or anything for the balance of the year versus how you were thinking about it 90 days ago or is this just about adding in more of an element of variability just given the unknowns around deal timing?

Charles Giancarlo -- Chairman and Chief Executive Officer

It's absolutely the latter, Matt, in terms of how we think about the business.

Matt Cabral -- Credit Suisse -- Analyst

Got it. And then just thinking about Q1 specifically and some of the prices that we've seen in terms of NAND. Is that having any impact on sort of customer behavior or decision delays as they sort of wait to see what happens in terms of underlying commodity costs?

Charles Giancarlo -- Chairman and Chief Executive Officer

No, I'd say that's the first time -- you're mentioning is the first time I ever heard that question. So no, I don't think so.

Matt Cabral -- Credit Suisse -- Analyst

Thank you.

Operator

Your next question comes from Mehdi Hosseini from SIG.

Mehdi Hosseini -- SIG -- Analyst

Yes. Thanks for taking my question. I'm going to go back to the sales productivity and I realize the question has come up a couple of times. But I'm going to try to ask the same thing different way. I see sales per number of employee down at perhaps single-digit and down -- on a year-over-year and down double-digits on a Q-by-Q. Should we expect as we exit this fiscal year we would see a rebound in these metrics or is this more of a sometime next fiscal year? And I have a follow up.

Tim Riitters -- Chief Financial Officer

No Mehdi, it -- this is Tim. It definitely should start to climb. I mean, as we've talked in the past, you followed the story for a while now. It takes a while the ramp that productive capacity. And so you have the influx of people that Charlie and I have talked about, it's going to take some time to ramp. So your aggregate sort of productivity measures will look like they're going down, but that's really just a maturation of the sales force versus anything else. So you're thinking about it exactly right.

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. Again (Multiple Speakers) I'll just repeat. Record number and record percentage of new sellers in the field. So yes. And obviously, they start at low productivity and then continue scaling up through a period of time.

Mehdi Hosseini -- SIG -- Analyst

So we should see a rebound in the next two, three quarters, correct?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yes.

Mehdi Hosseini -- SIG -- Analyst

Okay. And then the follow up, which is one of a big picture. You have -- you and your peers have been highlighting hybrid cloud infrastructure. Some of these arrays were installed five, eight years ago. There's also opportunity with 10K RPM replacement. And in that context, when should I expect, A, replacement cycle kick in and when incremental opportunity from replacing 10K RPM to materialize? Thank you.

Matt Kixmoeller -- Vice President, Strategy

Yeah. So this is Kix. I think there's two dynamics that I can talk to in our business. First of all, just within our business, as you know, we run an evergreen cycle. And so we constantly have the opportunity to go back to existing customers and deployments of which there are many now and get them to upgrade to the latest thing and to do so in a very positive motion for both the customer and for Pure. And so that continues to be an important part of our business, especially as our installed base out there grows. If you look at the market at large, though, I think the days of the 15K hard drive have been long gone. The 10K hard drive is not far behind it. And we feel like today we very economically compete with that. And I would say, there's a particularly strong opportunity in the market right now, which is the mid-range product refresh from our competitor Dell. They've gone out and publicly announced kind of a next-generation product coming 6 to 12 months away. Meanwhile, three of their existing product lines essentially need to be converted to that. And so we think that's a huge opportunity to go out and bring people over to (inaudible) model.

Mehdi Hosseini -- SIG -- Analyst

If I may, just a quick follow up. Would it be fair to say that those opportunities have yet to come into your backlog, those are the kind of opportunities that could actually help you with a continued increase in deferred revenue and it would actually strengthen your enterprise mix of business in the coming quarters?

Matt Kixmoeller -- Vice President, Strategy

Well, look, I think it's fair to say that part of why we've been excited over time around the long-term trajectory of Flash getting less and less expensive is every time Flash gets a little bit less expensive and a new crop of hard drives out there come up for refresh that we can now economically go target. And so, I think we remain very excited about the coming years where Flash continues to drive standardization and we're on the cusp of a transition around QLC coming over the next few years and that just opens up even more of the market.

Mehdi Hosseini -- SIG -- Analyst

Thank you.

Operator

Your next question comes from the Nehal Chokshi from Maxim Group.

Nehal Chokshi -- Maxim Group -- Analyst

Yeah. Thank you. Appreciate the color on the adding over a 100 enterprise customers net adds in the quarter and that now 40% of Fortune 500. But I'm still trying to wrap my head around exactly what percent of your sales force, and I'd rather think about it in terms of mature sales force or at least some of your sales force that has been around for one year, is focused on enterprise opportunities. And perhaps -- and then versus one year ago. Could you probably help tease that out for us?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. So the numbers that we provided are 40% increase in capacity, right. So that's new and the majority of that capacity is moving into the enterprise. So those investments take a little bit more time to mature, but what we love that we're seeing is on already larger number of deal sizes as a mix of the overall pipeline. So we're seeing some early results of that mix, but we haven't broken out the exact percentage of all of our sellers in terms of how they break out by segment.

Nehal Chokshi -- Maxim Group -- Analyst

And typically clear in the year ago period, the percent of new sales reps that came in was well below the majority of -- the percent of new sales rep focused on enterprise opportunities was well below the majority. Is that correct, well below 50%?

Charles Giancarlo -- Chairman and Chief Executive Officer

Below what we're doing now. I mean, we definitely have ramped up efforts because we see the opportunity in the enterprise with a combination of our product portfolio, expanding our routes to market now are getting us access into those at bats that I've been wanting for the last several years. And so we think it's prudent to make those investments. So the GSI win that we talked about last quarter, it's not just one, it's multiple GSIs and they are proving to be quite productive in getting us access to accounts that we've been trying to get access to on around for years and are now actually deploying and migrating data. So we see more of that, we're going to keep investing.

Nehal Chokshi -- Maxim Group -- Analyst

Okay, great. And if I might, one for Tim. And I recognize that ES2 did where you expected and did not exceed and was not a factor in the underperformance. But for future reference, I think it would be helpful if you could take us through an example of how ES2 booking will differ from a FlashArray booking in terms of product revenue, service revenue and deferred revenue?

Tim Riitters -- Chief Financial Officer

Yeah. I'll give you a quick overview on that, Nehal. And then, obviously, we've talked about tucking in more deep dive when we come up to our Analyst Day here later in the year. As we've typically said for every $100 of a traditional CapEx deal, I think kind of between 70% and 75% of those dollars get recognized immediately upon shipment and call it the remaining 25% to 30% gets amortized over three years. If someone is signing up for a three-year TCV with us on the ES2 product that will get amortized at a-third, a-third, a-third. So obviously, very different sort of rev rec dynamics in the business.

Nehal Chokshi -- Maxim Group -- Analyst

And does that all go to service revenue?

Tim Riitters -- Chief Financial Officer

Yeah. I'll roll up through support and subscription revenue, all in that one, nothing in product.

Nehal Chokshi -- Maxim Group -- Analyst

Thank you.

Operator

Your last question at this time comes from the line of George Iwanyc from Oppenheimer.

George Iwanyc -- Oppenheimer -- Analyst

All right. Thank you for getting me in. Touching on the sales and the hiring again. When you look at the rest of this year, how much hiring do you anticipate? And when we follow through to the following year, how much seasonality, is it going to be the same pattern where you anticipate a very heavy upfront hiring pattern and possibly a repeat of the disruption?

Charles Giancarlo -- Chairman and Chief Executive Officer

Yeah. In the sales force, Q1 is our largest hiring period. It's not our only one, but the biggest hiring quarter for, I think, maybe obvious reasons, right. Sales guys that you're recruiting want to finish out their year wherever they are, tends to be in -- either at the end of calendar Q4. So in our Q4 or early in Q1. So that tends to be the majority of hires, but we do continue to hire through the year, especially to cover any attrition that we have. But then, a bit more. For the rest of the Company, it's much more linear through the year. And if anything, we probably bring them in a little -- not in Q1 just because we know we're bringing in so much in the sales force in Q1. So Hat, do you want to...?

David Hatfield -- President

I just think you would see a tapering off for the balance of the year. I think we had a particularly strong Q4 of hiring and a record Q1 and the combination of those two I think made the absorption levels higher than we have ever seen in the past, but it will follow more of the seasonal route Q2 through the balance of the year and will taper off.

George Iwanyc -- Oppenheimer -- Analyst

Right. And with all the new product expansion, can you give us a sense of ES2 cloud data services? How much of a wild card from a late year contribution standpoint they are or should we look at that more as a calendar year '20 getting more mature and becoming a bigger contributing factor?

Tim Riitters -- Chief Financial Officer

Yeah. George is Tim. I think it's too early to tell on those factors. Remember, those are going to be largely subscription businesses as well, so you probably aren't going to see as much on the revenue side, you'd see it more manifest itself in the continued build of the deferred revenue line item.

George Iwanyc -- Oppenheimer -- Analyst

All right. Thank you.

Operator

And that was our last question. At this time, I will turn the call back over to Charlie Giancarlo for closing comments.

Charles Giancarlo -- Chairman and Chief Executive Officer

Thank you. We're excited about the future of Pure. We're proud of our progress and the opportunities ahead of us in FY '20. I want to thank the entire Pure team and our global partners for their commitment to making Pure the industry leader. I also want to thank our customers for their business and their confidence in the solutions we provide. And thanks to all of you on this call for your time today. Good bye.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 59 minutes

Call participants:

Matthew Danziger -- Head of Investor Relations

Charles Giancarlo -- Chairman and Chief Executive Officer

David Hatfield -- President

Tim Riitters -- Chief Financial Officer

Matt Kixmoeller -- Vice President, Strategy

Alex Kurtz -- KeyBanc -- Analyst

Steve Milunovich -- Wolfe Research -- Analyst

Aaron Rakers -- Wells Fargo -- Analyst

Pinjalim Bora -- JPMorgan -- Analyst

Jason Ader -- William Blair -- Analyst

Karl Ackerman -- Cowen -- Analyst

Andrew Nowinski -- Piper Jaffray -- Analyst

Katy Huberty -- Morgan Stanley -- Analyst

Rod Hall -- Goldman Sachs -- Analyst

Steven Fox -- Cross Research -- Analyst

Simon Leopold -- Raymond James -- Analyst

Eric Martinuzzi -- Lake Street -- Analyst

Matt Cabral -- Credit Suisse -- Analyst

Mehdi Hosseini -- SIG -- Analyst

Nehal Chokshi -- Maxim Group -- Analyst

George Iwanyc -- Oppenheimer -- Analyst

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