Pure Storage, Inc.
Q3 2021 Earnings Call Transcript

Published: 24 Nov 2020

[Operator:]

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Pure Storage third quarter fiscal year 2021 earnings release conference call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, there will be a question-and-answer session. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference call, Ms. Nicole Noutsios. Noutsios, please go ahead.

[Nicole Noutsios:]

Thank you, and good afternoon. Welcome to the Pure Storage Third Quarter Fiscal 2021 earnings call. My name is Nicole Noutsios, Investor Relations at Pure Storage. Joining me today are our CEO, Charlie Giancarlo, our CFO, Kevan Krysler, 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 all subject to various risks and uncertainties. These include statements regarding

[Charlie Giancarlo:]

Good afternoon and good evening everyone. Thank you for joining us on today’s earnings call. As we look to the end of 2020 with relief, and look forward with high hopes for a brighter 2021, my thoughts are with all of you on this call. I hope that you, your families, colleagues and friends are all staying healthy and faring well. The challenges and the changes we’ve experienced this year have been extraordinary and seem never ending, and they have certainly reset all of our expectations and assumptions. COVID has been the change agent of this decade, and we have all learned many lessons in stamina and resilience. Like you, I am excited about the many reports on the fantastic progress with vaccines and therapies created by the world’s scientists, doctors, and engineers.

[Kevan Krysler:]

Thank you Charlie and good afternoon. We are pleased with our Q3 financial performance and execution as we continue to navigate headwinds caused by COVID-19. Our Q3 results demonstrate the value our product and subscription solutions provide to our customers. Strong sales and recurring revenue growth continues for both our Evergreen and unified Pure as-a-Service subscription offerings. Q3 total revenue was $410.6 million, down 4.2% year-over-year, slightly exceeding our expectations at the beginning of the quarter. Product revenue was $274.5 million down 15.1% year-over-year, and Subscription Services revenue totaled $136.1 million, growing 29.5% year-over-year. Subscription Services revenue during Q3 represents approximately 33% of total revenue, up from approximately 25% of total revenue during Q3 of the prior year. Subscription Services revenue includes Evergreen subscriptions, and our unified Pure as-a-Service subscription, which includes Cloud Block Store. We were pleased with the strong sales growth and demand for our Subscription Services, Flashblade and FlashArray//C offerings during the quarter. Our investments in innovation continue to drive results as both our FlashBlade platform and our second generation FlashArray//C offerings achieved their highest level of sales during the quarter. Customers, including large enterprise customers, continue to invest in our FlashBlade platform for their high-performance file and object needs, including data protection. Our remaining performance obligations, or RPO, which includes our committed and non-cancelable future revenue grew approximately 25% year-over-year, slightly exceeding $1 billion at the end of the quarter. Total deferred revenue which is included in RPO was $763 million growing 19% year-over-year. Bookings or sales during Q3, excluding cancelable orders, was generally flat declining less than 1% year-over-year.

[Operator:]

Thank you. And your first question comes from the line of Jason Ader of William Blair.

[Jason Ader:]

Yes, hi. I wanted to know from you guys, if -do you have any sense of pent up demand going into 2021? And then any update on NAND pricing and how that’s -- how that might be impacting the Street pricing?

[Charlie Giancarlo:]

Thank you, Jason. Good to hear your voice. We’re very pleased with what we saw in terms of pick up momentum in Q3, the improvement in visibility and the fact that our customers plans seem to solidify during the quarter. All the way through the end of the quarter is a very good reason for optimism as we go forward. I don’t know that I can call it pent-up demand as much as I would call it, the new. They’re planning for, you know, they’re planning for digital transformation, if anything are accelerated. And that’s, good news for the collection and storage of data, as well as managing that data and being able to take more out of it to improve their business. And I think that is going to be - that is going to continue even after the COVID is long forgotten. And so with all of the optimism around vaccines, I think we believe that comes spring or early summer, you know, we’ll start to see, you know, new buying patterns and new acceleration emerge. You know, whether that’s pent up demand or whether that’s based on accelerated digital transformation trends, I’ll leave that up to you.

[Jason Ader:]

Thank you.

[Operator:]

Your next question comes from Alex Kurtz of KeyBanc Capital Markets.

[Alex Kurtz:]

Yeah, thanks. Can you guys hear me okay?

[Charlie Giancarlo:]

Absolutely, Alex.

[Alex Kurtz:]

Great. I hope everyone is safe and healthy. And we’ll have a good Thanksgiving week here.

[Charlie Giancarlo:]

Indeed.

[Alex Kurtz:]

To Charlie, you brought in a new Head of Sales, obviously from a very strong background in software and subscription. And it’s clear that, with Pure as-a-Service doing well, there’s a move towards a bigger focus on this type of selling motion and licensing to your customers. So, I guess, if you could just frame up how you would talk to your sales organization and to big customers next fiscal year? Like, what’s the message from here about, how you want to be selling the product, how you wanted to - how you want to be licensed? And ultimately for Kevan, like, what does this mean for revenue growth? Because obviously deferred would start to pick up. So, some big top-level question, you know, just do the best you can on those?

[Charlie Giancarlo:]

You bet. And well, actually, I’m fully practiced because I addressed my entire sales force on this just a couple of weeks ago at our Global Leadership Summit. So, the world is changing and the world is changing from if you ask why are they going to SaaS, why are they going to the cloud? It’s not because it’s in the cloud, you know, it’s because they’re choosing to -- they were choosing services and vendors that provide them with outcomes -- better outcomes, rather than just the means for a customer to develop the outcome for themselves. You know, SaaS, if you will, if you go to a SaaS service, it actually provides a direct interface to their internal customers with a solution, rather than just providing, for example, software for the customer to implement themselves. And so, as we go forward, we are increasingly tailoring our solutions to provide those outcomes for customers. What our customers want is data management, not a device that for them to be able to create data management out of. And you see that in our Pure as-a-Service offering that we announced today, which is our Pure services catalog, where a customer now can go online, find all sorts of tools to measure and figure out what type of service categories and tiers they need for their workloads and then completely subscribe to it online. And whether it’s on-prem or in the cloud, Pure takes the responsibility for delivering that to the customer, you know, as I said, of service level guarantees. So increasingly, you know, our approach is to provide customers what they need, both onprem and in the cloud, but to do so through a service offering. Now, that does generally mean migrating to more of a subscription style of sales, although the customers can get this even if they go with a CapEx purchase. But we’ve been signaling for quite a while that our expectations that subscriptions would be picking up, you know, as a percentage of our sales. That has largely come out to be true. As you can tell from our announcements this quarter about the improvement in overall subscription sales. And we expect that to continue to be true. But we will manage that. We’re the - forecasting that we’re providing to the Street takes that into account. And so, we feel comfortable with that. And of course, we think this is a better solution for our customers. And so increasingly, our sales team wants to go where the customers are going and they feel good about the changes we’re making.

[Kevan Krysler:]

No, I’ll just add a little bit to that, Charlie. Look, you know, a third of our revenue is really coming from Subscription Services to begin with. So, we’ve got a great start to this transition.. Given that our Eevergreen subscription model is running at scale, the idea that we will have ramp of our Pure-as-a-Service unified subscription will have less of an impact in my mind on total revenue though there will be some impact. The other benefit that we’ll see is obviously Portworx being part of our subscription revenue, and that would be incremental to our growth curve as it relates to our Subscription Services.

[Alex Kurtz:]

Thank you.

[Operator:]

The next question comes from Aaron Rakers of Wells Fargo.

[Aaron Rakers:]

Yeah, thanks for taking the question. I want to kind of build on that last comment around subscription. I think one of the metrics that’s always a little bit interesting is just the RPO balance expansion. And that delta relative to deferred revenue I think it was up about 47.5% year-over-year. Can you just remind us how much of that is the true subscription business? And was there any Portworx contribution in that number this quarter?

[Kevan Krysler:]

Great question. And this is Kevan. Thank you, Aaron. In terms of the differential, when you look at it sequentially in the growth we’re seeing sequentially between deferred revenue and RPO, that is really our Pure as-a-Service offering that’s contributing to that build. And then Portworx would not have a significant contribution though there would be some contribution to RPO for Portworx.

[Aaron Rakers:]

Okay. And just as a quick follow up, maybe you’ve got one of your competitors also reporting tonight. Just curious, PowerStore been in the market for a quarter or better now. Just kind of update us on what you’re seeing in the competitive landscapes as you say, the digital transformation is poised to kind of accelerate?

[Charlie Giancarlo:]

Yeah, I’m going to underwhelm you here, Aaron. We’re just not seeing power store. I mean, the little we’re seeing of it is not being terribly successful. So if anything, when it’s introduced to a customer, it gives us an opportunity to go in because it’s always a disruptive upgrade to the customer, regardless of which of the products that they’re attempting to sell or upgrade against. So, it’s just not been - it’s not been a big factor. Our win rates generally with Dell have been very consistent. You know, they’re consistent quarter-by-quarter. I’d say no, not terribly different this quarter, if anything, a little bit better. So, the power store has been largely absent. I will say that most of the time, even if they go in with power store, they quickly change their bid to power max. And that’s the more typical competition for us.

[Operator:]

Your next question comes from the line of Pinjalim Bora of JPMorgan.

[Pinjalim Bora:]

Hello, thank you. Hey Charlie and Kevin. The first question, just on the pipeline, I think you said the pipeline is up, but is not as up as much as last year. But help us understand the composition of the pipeline that you’re seeing last quarter. I think you’ve kind of indicated that the maturity curve is towards the early stage. Has that changed at all as we head into Q4?

[Kevan Krysler:]

Yeah, great. Great question. And absolutely. You know, when we’re looking at the pipeline composition, you are right in terms of the year-over-year compare. What we are pleased with is the strength we’re seeing sequentially in our build from Q3 to Q4, which gives us some confidence in terms of our internal view of our Q4 outlook. And then when we actually peel that back a little bit, we are confident to see some evolution in terms of the aging of those pipeline opportunities. As you mentioned, when we are going into Q3, we saw that, we are getting some nice build, but those were earlier stage opportunities. And as we’re looking at Q4, we see a much better balance between early stage opportunities as well as advanced stage. So nice evolution in terms of what we’re seeing sequentially between our Q3 and Q4 pipeline.

[Pinjalim Bora:]

Understood. Thank you for that. And Charlie, one for you. Talking to some of your partners, we have kind of gathered with you -- that there has been a few mid-eight figures and even larger past contracts. Help us understand what’s driving that. Is that transitory as companies try to preserve cash outlay right now in this environment? Or do you think it’s kind of a fundamental change in hardware buying behavior?

[Charlie Giancarlo:]

Well, I think it’s the beginning of a fundamental change. And again, I won’t say, it’s hardware buying behavior there. We’re delivering this as a service. So, I really want to call attention to the fact that, you know, and especially with PaaS 2.0, but actually also when we first introduced PaaS, it was a lot more than just a financial construct for customers to acquire hardware. We’re delivering it as a service. They have no commitment to long-term holding of the hardware. And it’s a unified subscription with the same set of services, in fact, the same software in the cloud. And increasingly, every aspect of their usage, if you will, of the service will be service oriented. That is to say that, you know, it’ll be fully managed. It’ll scale up and scale down without disruption and without the customer getting involved in that at all. We take full responsibility for it. So, I just want to identify that it’s not about acquiring hardware. It really is about subscribing to a service that just happens to be on their premises as well as in the cloud. And I do think that over time we’ll see more and more of this. Absolutely.

[Matt Kixmoeller:]

Yeah. Just to jump in for a second, I think Charlie is really hitting on one of the key differentiators of PaaS from our competition where we’re really pursuing this like a product opportunity. You know, if you look at our competitors, their offerings tend to come from their financial services groups and they’re just kind of dressed up leases in a different name. We have a business unit that has engineers as the GM who’s running this program. And we’re thinking about how we really change the entire customer experience around and as a service experience. And so hopefully what you’ve seen with the launch of the service catalog today is a good example where we’re really rethinking what’s the entire way a customer thinks about purchasing a service, looks at their existing workloads, and uses AI-driven modeling tools to understand the right service. And then just enjoys the same level of transparency that people have today in the public cloud around open service pricing, performance SLAs and then driving the process for getting procurement going. So really, it’s the beginning of a whole new interaction with customers of Pure.

[Operator:]

And your next question comes from the line of Nehal Chokshi of Northland Capital.

[Nehal Chokshi:]

Yeah, thanks, and congrats on the strong results and strong guidance as well, in my opinion. I want to go back to the discussion of RPO especially the unbuild RPO portion, which -- it was up $16 million QoQ, which is more than the $5 million in the year ago period. So clearly on a year-over-year basis, as Aaron had alluded to, a nice acceleration. But still a step down from the $20 plus million in the past two quarters. So, is that a deceleration of the performance of the past few quarters or is there some seasonality that you’re seeing with the Pure as-a-Service dignified periods of service offerings?

[Charlie Giancarlo:]

Nehal, really, I think this may be more of the fact that we did a large Pure as-a-Service deal this quarter and we’re able to bill for the entire amount upfront. So that entire portion is actually in deferred revenue. So when we look at our Pure as-a-Service trends quarter over quarter. Actually they’re very strong and we’re quite pleased with those trends. What you’re looking at between the unbilled portion versus deferred revenue, we do have some mix in there where we’ve got some PaaS deals that are being reflected in deferred revenue because we were fortunate to bill for those upfront.

[Nehal Chokshi:]

I see. Okay. Great. Fantastic. Congratulations.

[Charlie Giancarlo:]

Thanks, Nehal.

[Operator:]

Your next question comes from Karl Ackerman of Cowen.

[Karl Ackerman:]

Yes, good afternoon. Charlie, starting with you first, if I may. Your internal outlook is healthy, considering the headwinds across commercial. Are you seeing any rebound internationally, particularly in Europe, that is giving you greater confidence for the January quarter? Or are you actually seeing a sustained improvement in onprem in the U.S.? And I have a follow-up Thanks.

[Charlie Giancarlo:]

Yeah. So, interesting Karl. So, I think international really shows the effect of COVID on business in general. So, as you know, in Q2 we saw a real improvement in international overall as they came out of the crisis earlier than did the U.S. and we saw an uptick. In Q3 in contrast, we saw Europe in particular, but Asia -- but international in general start to go back into lockdown, you know, early late September, early October. And already we started right around the same time with little bit of latency we saw the effect on our business. So COVID really does have an effect on the local economies, whichever country it happens to hit. And it’s why we’re a little bit cautious for Q4. But we do believe at the same time that businesses now have become, let’s say, more accustomed to operating in the COVID environment. And therefore, they’re more robust in terms of pursuing their IT and digital transformation plans. So we don’t expect the kind of turn down that we saw in Q2. Even with our cautious optimism, we feel that --we feel confident in what -- how we’re looking at Q4 right now. But clearly, I think once, the same effect that we saw in Europe when they came out of the crisis in the spring gives us confidence for this spring, especially, let’s say around the spring to summer of this year. And then with vaccines, we think that’ll be a longer-term phenomenon. So we’re very much looking forward to the future, but we do believe the next few months are reasons to be a bit more cautious.

[Karl Ackerman:]

Yeah. Understood. Appreciate that. For Kevan, it’s quite apparent that your recent acquisition and expansion of as a service offering today underscore your desire to increasingly shift your portfolio toward a recurring revenue model. How does that impact OpEx growth in 2021 over the next couple of quarters? When we think about that, will 2021 be characterized by an investment year in sales and marketing? You know, I guess we’ve modified our sales approach. But how do we think about the ability to get leverage on the OpEx side, because it’s really, I think, a great initiative. But if we could think about that from an OpEx side, that would be helpful. Thank you.

[Kevan Krysler:]

Yeah. Thanks Karl. When I think about our operating margin leverage potential, even with the transition to increasing Pure as-a-Service and our subscription offerings, both are very achievable and we’re planning on that as we look out to next year. I think we’re making some great efforts across the board to leverage our investments, especially this year as we kind of invested ahead of the growth curve, if you will, going into next year. So, I’m looking to actually improve operating margin and profitability even when considering growth in our subscription offerings.

[Operator:]

Your next question from Mehdi Hosseini of SIG.

[Mehdi Hosseini:]

Thanks for taking my questions. I have two follow-ups. When we go to your presentation with slides, specifically slide 5 and 6, obviously the number of new customer addition has declined on a year-over-year basis. But what is interesting, the revenue mix is shifting. And I just want to get some clarification. Is that just driven by the change in the customer type, more driven by app developers and if that was probably more better project, especially impacting the subscription services. Is that the right way of thinking about on a year-over-year basis?

[Kevan Krysler:]

Well, I’ll take that first, Charlie and then feel free to add on. I mean, when we think about our new customers, our new customers will either purchase our Pure as-a-Service offering, which would contribute to our subscription services, or they’ll purchase our integrated appliance that comes with our Evergreen subscription. And so that will play into it as well. But we’re also getting a significant amount of momentum with customers who are continuing to invest in the Evergreen subscriptions from a renewal standpoint. And that momentum is really coming from our existing customers. And so that hopefully would answer that question specific to the mix occurring.

[Charlie Giancarlo:]

Well, let me also answer, in terms of the mix of new customers overall and as you point out, a decline in year-over-year. First of all, I have to say that given the COVID environment, we’re pretty pleased with the number of new customers we’ve been able to gain because in the COVID environment, clearly, incumbents tend to have a bit of an advantage as new customers are just more -- as customers are more cautious about considering changes to their existing environment. That being said, if you were to break down the new customers or the net new logos, what you’d find out is, a good growth as a percentage in enterprise and of course, lower net new logos in commercial. And simply again, because commercial is under pressure worldwide much more so than enterprises, you know, in terms of numbers from the Corona environment. So, again, our expectation is that when the Corona pandemic abates, hopefully by spring, we should see a good pick up in this.

[Kevan Krysler:]

Yeah, thanks, Charlie. But the momentum when we think about recurring revenues will be driven probably more from our existing customer base as well.

[Charlie Giancarlo:]

Much more from the existing customer base. Yeah

[Mehdi Hosseini:]

Now, one quick follow up, more of a housekeeping item. When I -- looking at the product revenue, as we look into next fiscal year and the increased availability of QLC NAND, is that going to have a positive impact on product margin or would you prefer passing that along to customers to increase market share?

[Charlie Giancarlo:]

Yeah, let me take a try. I think it’s a little bit early for us to be able to opine with great confidence on that. But I suppose my belief is that, we’re utilizing QLC first and primarily to penetrate into new markets, you know, in the disk space and therefore, disk economics are the ones that were competing with in that environment. And as such, I would expect margins to be consistent with our overall company margins rather than to be used strictly as an enhancement. I think over the long term it may improve overall product margin. But in the short term, I expect that it will be utilizing it to penetrate into that market.

[Matt Kixmoeller:]

And I’d also say that, your question somewhat implied that our QLC product was being limited by availability of NAND, and that’s not the case. You know, we’re in a second generation of that product being GI now. We’ve now shipped the largest QLC flash module in the industry, our 48-terabyte module. And so, we’re in a really great place from a supply point of view to supply that product. And we believe it’s really differentiated in the market.

[Operator:]

Our next question comes from Simon Leopold of Raymond James.

[Simon Leopold:]

Thanks for taking the question. First thing I wanted to ask a little bit more about this announcement you’ve made today about publishing the service catalog. I guess, I’m trying to think about the potential consequences. One scenario might suggest this could trigger price wars responses from your competitors. On the other hand, I could imagine maybe this leads to less discounting by you, given that you’re putting prices out in print for your customers. Just wondering how you think about the various scenarios or outcomes from this action you’ve taken.

[Matt Kixmoeller:]

I’ll take the first stab at that. Look, I guess the first thing here is, we’re doing this because it’s something customers demand and increasingly customers want to self-qualify research solutions on their own. Do someone understand relative pricing and then contact a sales rep or a channel partner when they’re much further along in the buying process. And so, this is, from a Pure point of view, is all about really upping our digital go to market chops and being able to sell how customers want to buy much more in this cloud model. In the case of the service catalog, what we publish in there are MSRP prices. And so, customer can get a discount obviously by coming to Pure and working through our channel programs and that’s not published. So, there’s still some, you know, room for negotiation in there. But you know, what the service catalog does do is, it allows them to very openly see what the different services are or see what the performance levels are, so they can make a good choice around. Okay, is it worth a 2x increase in spend in order to get a certain amount of increase in performance? And indeed, if you look at the new service tiers that we’ve introduced, we now offer a 10x range in pricing for a 20x range of performance. And so, there’s quite a range of services and customers have the right service level for every work load in their environment.

[Simon Leopold:]

That’s very helpful and just maybe as a follow up, I think earlier in the Q&A, you talked about customers adjusting to this new normal. So even as we aren’t fully backed and don’t have a vaccine widely available yet, your customers are adjusting to how they do business. With that in mind, do you think that your next quarter, basically, as we turn it to next year, you might defy normal seasonality, that we might have a more muted sequential decline as your customers are sort of catching up to business that they didn’t do during the pandemic’s worst period? Thank you.

[Charlie Giancarlo:]

Well, it’s an interesting question. Look, we’re not epidemiologists here, but I think it’s fair to say that our expectation would be that COVID will be with us through the early spring and then hopefully start to abate at that point in time. And I would expect to see then, a return to growth economically across the world. That’s what we’re planning on right around that time and then get back to, you know, so that might suggest greater seasonality next year, simply because the beginning of the year might be a little bit more muted than the end of the year. But from that point going forward, I would expect to start to get back to, you know, our normal seasonality.

[Kevan Krysler:]

What I was pleased to see is a couple of things. I was pleased to see overperformance in Q3, followed by what we’re seeing currently is sequential strength going from Q3 to Q4. And I think those are positive, actually, because I think the COVID resurgence. Back to your point, Simon, in terms of folks knowing how to sell in this new environment, customers being more comfortable purchasing, I think, will help mitigate this resurgence we’re seeing globally. And then we just need to see how Q4 performance evolves throughout the quarter. But look, we’re really confident in our growth drivers, especially with what we saw in Q3 in terms of our Subscription Services, FlashBlade performance and FlashArray//C. So, it’s coming together for us. COVID certainly creates uncertainty. And to Charlie’s point, we do expect that to continue in Q1. We’re going in the right direction.

[Operator:]

And your next question comes from Tim Long of Barclays.

[Tim Long:]

Thank you. Yes, just two, if I could as well. Just wanted to follow up on FlashArray//C. Just curious what you kind of learned from Gen 1 to Gen 2 of that product, maybe just, win rates, deal sizes, new applications, what are you seeing as that product evolves? And then second, Charlie, if you could just give us, it sounded like Enterprise was pretty strong. Could you just give us a little color around small-medium businesses and what you think it’s going to take to see a better rebound from that customer group? Thank you.

[Charlie Giancarlo:]

Yeah, well, let me give it a shot. In terms of the -- let me start with the second one first, which is that commercial as we I think as other companies have identified as well, the mid-market and small medium have as a group have been harder hit by the COVID crisis than large enterprise. And perhaps because they were not quite as ready to operate entirely online as were many of the large enterprises that had already invested in it. So I think it’s just a generally stronger economy overall will help that. As you can see, it’s not completely disappeared. The net new logos indicates by us, you know, indicates that there is still a healthy commercial market, but it’s far muted from, you know, from pre-COVID days overall. And I’m sorry, remind me the first part of the question. But I think the main thing is that with FlashArray//C, with its primary target being the secondary tier market and disk economics, the additional pricing flexibility that it gave us to go after the disk market when we were able to introduce true QLC, has made a big difference and allowed the very fast, early momentum allowed that to continue.

[Matt Kixmoeller:]

Yeah, I guess selling of that is that it just hasn’t been the type of product that’s been very hard to sell in terms of going and finding very focused use cases. It turns out customers run disk-based arrays for a wide range of use cases. And so really the easiest way to go to market with it is just to go to a customer who’s already bought in and understood the benefits of flash at the high end of their application space. And ask them are they still running disk array, and work with them to say, look, if we can actually sell you an old FlashArray that brings the simplicity and performance of flash, and it’s actually 30% less expensive than a disk, why do we need disk still?

[Operator:]

Your next question comes from Eric Martinuzzi of Lake Street.

[Eric Martinuzzi:]

I wanted to pick apart the pipeline a little bit by vertical. I would assume the strength that you’ve seen, at least sequentially, is that from the -- this would have been more resilient verticals, financial services, healthcare, government, any green shoots in some of the other more COVID exposed verticals, you know, your transportation, hospitality, entertainment, that sort of thing?

[Charlie Giancarlo:]

You know, Eric, I would not call out any of the more affected verticals right now as -- from our point of view, showing green shoots. I would say that we were less exposed to those industries to begin with. But no, we’ve not. I can’t say that. But we’ve seen some significant changes in the - in how they’re faring at least from buying signals to us over the last couple of quarters.

[Kevan Krysler:]

Yeah, I would add on that. The enterprise strength, it was across many of our verticals and that was broad based and it was global. So that was kind of a new green shoot for us in terms of what we were looking at. We’ve had resilience across the board on Enterprise, but the broad-based growth we saw in Enterprise was actually pleasing for us.

[Eric Martinuzzi:]

Okay. And that was echoed in the pipeline as well?

[Charlie Giancarlo:]

Correct.

[Eric Martinuzzi:]

Thank you.

[Operator:]

Your next question comes from Katy Huberty of Morgan Stanley.

[Katy Huberty:]

Thank you. Good afternoon. Kevan, what’s the revenue contribution from Portworx that’s embedded in your fourth quarter internal model? And then, Charlie, can you provide a bit more color on Paul’s decision to step down as COO? And are there any other changes or hires that you’re planning to make on the back of his departure? Thanks.

[Kevan Krysler:]

I’ll hit the Portworx first, Katy. We’re super excited with the strategic acquisition. Revenue is actually pretty small in terms of contribution as we look out into Q4. We’ll probably see that start to build in RPO and deferred revenue before that starts making its way in any significant or meaningful way to revenue. Charlie, you want to hit, Paul?

[Charlie Giancarlo:]

Thank you, Katy. Yeah, I want to thank Paul for his contributions to the company over the past year or so that he’s been here. And he’s really brought a lot of structure to our operations at the company and contributed a lot and also was part of recruiting Dominick to the company. In conversations with Paul as we were recruiting Dominick, Paul started to feel and I had to agree that Dominick was going to bring a lot of capabilities into the into the Chief Revenue Officer role that Paul had been handling. I and Paul felt that look, given Dominick coming on board and given the accession of, you know, Jason Rose as Chief Marketing Officer and so forth, that we really had, now a strong operating cadence. And that Paul’s role as Chief Operating Officer was not really required at the company. And that he had a number of opportunities that he could go pursue. And so maybe it was better to make that change. And so, we agreed with that. Paul is going to continue with us through the end of the quarter to ensure a smooth acquisition with Dominick and then move on. I do want to thank Paul for what he has contributed. And while I have this moment, I want to thank Kady as well for his leadership of the salesforce over the last three years on a global basis. Kady has gotten us - he has over his period of time leading the salesforce we’ve doubled almost every aspect of our company, the revenue, the size of the company, the size of the salesforce, et cetera. And he’s done a great job. Bringing Dom on board really signals the fact that we’re changing as a company, having now moved from a single product to two product to now a full portfolio, both in the cloud and onprem and increasingly moving to subscription. And Dominick brings the right type of background for this next step in our journey. And so we’re very pleased with that overall.

[Katy Huberty:]

Thank you for that color.

[Operator:]

And this concludes the question-and-answer. At this time, I’d like to turn the call over to Charlie Giancarlo for closing remarks.

[Charlie Giancarlo:]

Thank you. In closing, I’d like to thank all of our employees, our customers, our partners, and for all of you on the call for your hard work and dedication to our mission. It’s been a wild year and it’s not over yet. I’m looking forward to working with all of you to build a much better 2021. Thank you for joining us today. And stay safe and please have a very happy Thanksgiving to all of you. I know, we all need the rest. Please take time with family and look forward to engaging with you in the future. Take care.