All right, good morning, everyone. Nice to see a lot of familiar faces. I'm Jason Ader with William Blair. Thanks for joining us. Very pleased to introduce Rob Lee, Chief Technology and Growth Officer at Everpure, formerly Pure Storage. Rob is like a regular we were just talking about at this conference, so love to have you every year. Keep coming. I think I always get great feedback from these sessions, and we've got a lot to talk about. We're just going to do fireside chat. Before we begin, I'm required to inform you that a complete list of research disclosures or potential conflicts of interest is available on our website at williamblair.com. Rob also has a safe harbor statement to read. Yes, so thanks for having me again, Jason. Love
coming out every year. I also have a statement to read, statements made in these discussions which are not statements of historical fact or forward-looking statements based on current expectations. Actual results could differ materially from those projected due to a number of factors, including those referenced in EverPure's most recent SEC filings on Forms 10Q, 10K, and 8K. All right, out of the way.
Well done. So for those less familiar with Pure, can you give us a high-level overview of the company and how it really has evolved over the last several years? How many years have you been with the company now?
This is my 13th year with the firm. So, yeah, no, it's evolved quite a bit. I joined pre-revenue. And what I'd say is since the early days, really our goal and our mission has been to revolutionize how customers work with their data. We started, we saw our initial opportunity. We started at the storage infrastructure layer. We saw the opportunity of a new hardware medium at the time, flash storage, NAND flash. the potential for that medium and that hardware technology to fundamentally disrupt the enterprise storage market when coupled with the right software and architecture approaches. And that really dominated our focus for the first, I would call, decade of the company. We then grew from, I would describe us as a point solution provider to a fully, you know, kind of a broad-based storage infrastructure provider really evolving from walking to a customer and saying hey I've got the best storage solution for this workload to being able to walk into the fortune 500 and say hey I can you know I can go and serve all of your storage infrastructure needs across the data center over the last couple of years we've continued that evolution over where we want to head in terms of making data more usable more approachable and just easier you know to access for our customers, we've expanded that from storage infrastructure at the single unit, single array, single workload level to really the full fleet level, you know, making it easier for customers to bring cloud storage, cloud kind of cloud operating model automation principles into their enterprise storage environments. And then more recently, with the rebranding of the company, the evolution, you know, of kind of our direction, expansion, and certainly the acquisition of OneTouch, expanding even further beyond that into more the data management and data intelligence layer. Quite simply, we've gone from storage infrastructure bits and bytes to connecting that across a customer's footprints in the data center to now getting into the layer of providing greater insights, whether that's for characterization, analysis, security for customers in terms of their data assets.
Okay. And then obviously you've evolved from just enterprise to hyperscalers. Maybe talk a little bit about the hyperscaler opportunity, what you've announced there, what you haven't announced, where things are going with that hyperscaler opportunity.
Yeah, absolutely. And I'll just take a quarter step back. You know, one of the things that we've done as we've grown the company and the intellectual property, the R&D, if you will, in the company, the software that we've built over the years, what we've found in recent years is the potential to repackage some of that IP to go meet the needs of different market segments. We initially started with our focus on the commercial and the enterprise. But what we found is that portions of our IP are very applicable, you know, packaged for whether it's the hyperscalers, whether it's the needs of the neoclouds, et cetera. And so, you know, as we've expanded into these market segments, certainly a lot of the discussion has been around the hyperscalers and the hyperscale solution. You know, I actually had a discussion of this in our Financial Analyst Day materials last year where I kind of broke this down in terms of the area of IP the hyperscalers are most interested in, which is really our software that understands deeply how to go manage Flash. The advantage to the hyperscalers of that approach and that software is it gives them a tremendous leg up in terms of efficiency, power, space, cost efficiency, total cost of ownership, reliability over SSD-based approaches. And so that solution in that business is growing nicely. We've talked quite a bit about that with the financial community. you know we're working eagerly with you know our next prospects across both the hyperscaler community as well as and Charlie talked a little bit about this in his prepared remarks this quarter though we've focused our efforts and the solution at the top hyperscalers we are now seeing I would say growing and broader interest in that solution across a slightly larger cohort of customers uh to include a broader set of cloud uh customers uh as well as some of the ai focused
tech titans okay yeah that was a that was a little bit of cryptic um comment that he made on the earnings call um about the tech titans because i don't know i guess i i thought that was like synonymous with hyperscalers so what is that just it's just a broader um i would say
It's a broadening of the targeting and the customer cohort that's interested in the solution. If we step back from it, the true value of the solution in the direct flash software is giving that path to working with NAND flash in a much more efficient, more reliable way. Now, the way that solution is packaged, it does require that the customer has their own large-scale storage software designs, largely their own hardware designs, et cetera, et cetera, attributes you don't typically see in the enterprise. The enterprise customers want the full solution. They want the full appliance. When we took this hyperscale solution to market, we really focused on the largest hyperscaler as well. If you look at those attributes, a lot of the broader set of cloud providers, a lot of the larger tech titans also fit that mold. They have their own distributed large-scale software stacks that want to take advantage of Flash, want the benefits of the solution. And we're seeing greater interest in the solution from, say, a broader set of customers.
So would the AI labs be considered part of tech titans or would they be a different cohort?
yeah so uh you know hard hard to hard to to parse that exactly but yeah i mean i i think you know i think along the lines of uh some of the largest most sophisticated tech companies with large uh you know very large scale data center footprints um you know we typically you know we're not really referring to the neoclouds in this environment i think our our offerings for the neoclods and really the business that we're uh you know growing there uh is primarily led with flashblade exa and then bringing in the broader portfolio more traditional appliance based systems we're really talking about uh large you know kind of almost hyperscale type
deployments that have more of a like a software stack yeah exactly okay sorry to you know make you uncomfortable with that question. So I know you're not the finance guy, but can you talk at all about kind of hyperscaler contribution to the business? Is that something you're going to be able to talk more about, like quantify it over time? Yeah. So I think, you know, a couple,
a couple of thoughts there. So one, you know, we have a financial analyst day coming up later this year um you know i suspect that we will provide a bit more clarity in terms of the longer term view uh you know the hyperscaler part of the business um you know it's a bit it's been a bit um a bit challenging to to quantify exactly uh because again we have one large customer at the moment and so there's there's a number of factors there um you know what we've said uh What we said previously is we've quantified this in terms of bid growth and exabyte expectations that hasn't changed. You know, we have said, you know, in FY26, we recognized tens of millions of dollars of revenue from the hyperscalers. And we would expect this year to have a multiple of that. But I realize that's fairly wide ranges. Because, look, I think the focus really for us is, you know, in continuing to make that customer successful, progressing with our additional prospects. You know, Charlie said on the call yesterday, the demand and interest in the solution continues to grow. You know, at this point, if anything, I would say we're supply constrained.
And you spend a lot of your time, your day job kind of working with hyperscalers, correct?
Yes, when we're not hanging out.
okay um and so fair to say you're feeling good about that part of the business and the opportunity there yes is that fair yeah okay great all right uh let's switch gears to enterprise because that you guys had a killer q1 for enterprise um maybe just talk about some of the dynamics there obviously we've got pricing we've got um you know component cost inflation we got pull forward um Even though, like, you have a major competitor that said there wasn't a lot of pull forward, which was a bit weird. But maybe just talk through the kind of dynamics that you're seeing out there today and then what the outlook is. Especially if you have a lot of pull forward, everyone worries about, you know, like a pocket of an air pocket of demand at some point.
Yeah, yeah, absolutely. So I think the part of our performance and what we're seeing in the enterprise in first quarter hasn't dominated the conversation, which is just the strength of our organic growth. If you look even back into FY26, we started the year calling 11%. We raised that to 14%. We raised that again and ended around 17%. We've seen continued and growing momentum as we went through FY26. We exited the 4Q and FY26 with tremendous momentum leading into this year. We saw that momentum continue throughout Q1, and from where we sit today, or last week, calling Q2, we see that robust demand continue. And I really attribute that to the things that we've been talking about for years, the completion of our portfolio, the evolution of EverCure from being a set of point solutions to really a enterprise, a player in the enterprise that brings enterprise-level values, being able to walk into the CIO's office and approach an account, approach a sales opportunity from a franchise point of view, from a percent of spend point of view, as opposed to a workload by workload point of view. And so you see that in our sustained growth and accelerating growth. You see that in our sustained and accelerating share capture. I think that's part of the dialogue that really hasn't pulled through. Now, no pun intended, there has been a lot of dialogue about pull-through. And part of that is, look, there is a real dynamic in the market in terms of supply chain, demand outstripping supply, and input cost rises leading to pricing actions. and we felt it important to provide at least some data points as far as, hey, how much did we see that affecting the business in the quarter? And so what we said was, you know, roughly speaking, we'd attribute about a third of the growth we saw in the quarter, you know, to the combined impacts of pricing, you know, pricing actions that we took, as well as to a lesser degree, some pull forwards. But what gets lost in that conversation is the tremendous strength and continued robust
demand that we see across the enterprise. So like, let's break down the demand. So you're gaining share. You've been gaining share for a long time. You continue to gain share for a variety of reasons. I think you mentioned the portfolio, but also like your channel distribution, which is, you know, second to none. What's actually happening like in the market that Is AI actually driving up demand for on-prem storage?
Yes. In a short, the short answer is yes. The more nuanced answer is, and I touched on this a little bit on the conference call, but it was very brief. You know, what we see, the impact of AI we see in the enterprise is a bit different than the dynamics we see in called the neoclouds or even, you know, what's influencing the broader hyperscale buildouts. I think if you look at the hyperscale, they're clearly increasing their capital expenditures, their data center build outs because of the overall, you know, impact of AI. In the NeoClouds, you see them laying out specific solutions to meet the needs of AI. When we look at the enterprise, what we see more of is customers recognizing, hey, as I deploy AI technologies in whatever form, whether that's models that I'm serving on premise, whether it's some small-scale training, whether it's just connecting to SaaS models, the aggregate demand on storage, whether it's capacity demand, whether it's performance demand, but just the aggregate demands are growing. and that's driving a significant need to modernize their storage solutions. So, you know, that's really the effect that we're seeing in the broader enterprise as opposed to, you know, outside of pockets, you generally don't see enterprises deploying specific storage solutions just to do AI. I think more enterprises are now evolving to the point to understand, hey, AI is a technology, it's a broad base, it's going to have effects on my entire footprint in order to meet the needs that are going to derive or are going to fall out of deployment of AI, I've got to modernize everything across the board. I've got to be in a position to meet the growing demands on capacity and performance, et cetera, and I've got to be able to do it in a very flexible way that doesn't lock me into a particular technology stack if the technology continues to evolve at the breakneck pace that it does. And so that's really what's driving most of our AI conversations in the enterprise is really resulting in just a modernization of the footprint. And that's where we're uniquely positioned to be able to do that across the board.
So absent any kind of supply chain pricing, market share, you think the enterprise storage market is actually seeing tailwinds from AI?
I think it will. Yeah, I think I think it is. And I think it will. You know, I mean, there's look, the pricing shock in the short term is not insignificant. So let's let's acknowledge that. But look, if I look in the medium term, I look at the long term is from basic first principles. It's hard not to see it being constructive for overall storage market growth. said more simply, you know, in the age of AI, before the age of AI, you know, a lot of companies would, you know, enterprises would stand up storage to meet their transactional needs, their near-term needs. But, you know, why did you keep data for six, seven years? Compliance, regulatory, audit, you know, in the world of AI where every bit of data becomes incrementally more valuable, who wants to be, you know, the CIO who goes back to the business and says, oh, we can't actually run that analysis because, you know, I didn't spend the money to store the data. You know, I think there is also byproducts of AI deployment that will be constructive for storage demands. You know, if you look at AI systems today, it's hard to imagine, you know, there's been a lot of focus on agentic development, agent deployment. It's hard not to imagine how you, you know, deploy agents without a ton of logging, a ton of observability and telemetry to understand what these things are doing, why they're making decisions, how do you fine-tune them? I think all of these factors will be constructive. And you have a memory too, right?
Yeah. The memory layer, short-term, long-term memory for the agents. Yeah. Gotcha. Yeah. Okay. Maybe talk a little bit about the guidance because the stock was down on the quarter, even though you guys had tremendous growth. It seemed like people were a little bit disappointed in the guidance for the full year. Maybe talk through the kind of dynamics around
the guidance and why you guys gave the guidance that you gave. Sure. So let me let me take us back to FY26. As I mentioned before, we've seen all the way back through FY26 accelerating momentum and growth. As a reminder, we entered the year at 11 percent. We raised, raised. We exited the year at 17%. Naturally, that implies sequential strength and stronger comps as you go throughout the year. So that's one element as we entered into this fiscal year. Really, as we look at the guidance this quarter, and Tarek hit this in his prepared remarks, we saw the strength and the momentum that we entered the year with continue through Q1. You saw that in the Q1 results. We see that as we sit here today. We see that strength continue and the robust demand into Q2. We have very good visibility in that, so we called that. And really, we kind of said, okay, there's a lot of moving pieces here in terms of pricing, in terms of supply chain. I think the words he used were, it's premature, it's a little bit early to call for additional upside to the second half. So net-net, we kind of took the outperformance in Q1 flowed that through to the full year called Q2 as we saw it and then I think as we transit through Q2 we'll have you know much better visibility into the back half of the year but like I said the the demand that we've seen you know quarter to date and you know where you know where we've entered the year where we've exited Q1 that momentum that continues to go and you know we're really just watching the pricing environment but you did say that for this for the back half
of the year you expect the hyperscaler business to really ramp up correct yeah okay so if you kind of i think what people were doing was the math was just saying okay the hyperscaler business is a multiple of the tens of millions of nfy26 and it's all coming in the second half that almost means the enterprise business is like you know going to be terrible in the second half so i guess what it sounds like what you're saying is you don't really think that but you don't want to uh, say it's going to be as strong as the first half based on all the dynamics.
Yeah. I mean, I think if you look at, uh, if you, if you go back to, uh, Tarek's prepared remarks, right. Uh, I think one of the ways he put it was if you look at the, uh, tremendous strength and momentum we've seen in Q1 and what we're forecasting for Q2 and essentially first half, uh, absent these other exogenous factors, normally you'd expect a closer to, uh, typical seasonality of 45-55. Our guidance, just by math, implies a different mix of 48-52. But absent those factors, we would expect it to be more seasonally normal.
Gotcha. So 48, first half 52, second half. Gotcha. Okay. All right. I'm not going to ask you more about guidance. What I do, one of the biggest questions I get from investors is, okay, hey, you won the big hyperscaler, clearly they saw something in your technology that you've been talking about for a while, which is all these, you know, these cost of ownership advantages, power efficiency, density, et cetera. Like, if it's so good, how come other hyperscalers are not jumping on that bandwagon?
Well, it takes a while to notch that design win. You know, as we've talked about previously, I don't even think of it as a sales cycle. Yes, it's a sales cycle, but it's really more of a co-engineering exercise because, as a reminder to the audience, the hyperscale solution really is an integration of our direct flash software and, to a degree, our hardware technology with the hyperscaler's own software and hardware designs. So it really is a hardware, software kind of co-engineering exercise, more so than a, here's my product, let me go drive a sales activity. That's a very long process. It's got to fit in with their design cycles for not just the storage infrastructure, but the data center designs as a whole. That said, the discussions and really, I would say, testing and prototyping with additional hyperscaler prospects continues to advance. We haven't yet announced another design win. We remain, I would say, strengthening confidence that that will happen, but we haven't uh haven't uh yet uh been able to announce that fair enough um okay um i guess
we haven't touched on um on the competitive landscape um but it like is the competitive landscape changing i know there's a you know some newer players in the market kind of you know venture backed um you still go i'm sure every day against the dells and hpes and net apps of the world, but maybe just talk through how the competitive landscape might be evolving and how you position against the different sets, the different buckets out there.
I wouldn't describe it as changing materially, or what I'd say is most of our competitors aren't changing at all, which puts us in a great position as we continue to evolve our offerings and our portfolio. What I'd say, and we talked a little bit about this on the call, what I'd say in the near term, we are seeing that, you know, the current pricing and supply chain dynamics and how we're navigating the situation versus, you know, how some of our competitors are being forced to navigate the situation, I think is incrementally constructive for us. You know, we talked about, for example, you know, our ability to moderate and buffer the impact of input cost swings and rises to our customers in terms of pricing much longer and much more moderate than our competitive set. We've been very, very adamant of taking a tack of transparency and open communication with our customers. If we put out a pricing commitment, we're going to go honor that. Just the basics of doing business, that hasn't been uniform across the industry. I've had a number of customers personally thank me for the approach we're taking, understanding that, yes, this is a difficult environment to navigate, but we're doing it with, you know, we're taking the high road. I think that that, you know, that all accrues to our favor. You know, remember, if you look at the enterprise market, a lot of our growth opportunity is in expanding our wallet share. You know, we believe as of the quarter, we're something like 64% of the Fortune 500. We're not 64% of the wallet share. That's incumbency, right? That incumbent footprint is a lot of that's that's all our opportunity and the more that we can use the strength of our portfolio our enterprise value that we're adding in terms of the additional layers with fusion and one touch as well as some of the tactical advantages to our favor all of that you know
I think is coming into play you think if people saw some of the kind of expansion that you've had with some big accounts over the last several years people would be kind of like whoa yes yeah
And we gave some color to that on the call in terms of I think we quantified the growth of large accounts, deals over $5 million, something of that nature. Just by way of reference, I've been with a firm 13 years since pre-revenue. There was a day in time not too long ago where deals over $1 million I would know about, deals over $5 million I would know about. It's not uncommon these days that I'll see a deal book and be like, huh, didn't know about that one, which is great to see.
Awesome. I wanted to talk a little bit about gross margin because we didn't touch on that yet. But with the rising input costs, obviously that's going to have an impact on gross margin. Maybe just talk about the enterprise part of the business and product gross margin, what you've said about that look there. where it is today and kind of maybe how it compares to some of your competitors, which is, I think, useful information, and then the outlook. And then on the hyperscaler business, maybe talk through what the gross margin will look like on the hyperscaler.
Yeah, absolutely. A lot of pieces to that. So, you know, as we've talked about, because of the input cost rises and really the speed at which those have risen versus how quickly we've been able to adjust market pricing in the first half of the year, we have chosen to run the business at the lower end of our long-term gross margin range of 65 to 70 points. And you saw that in the fourth quarter and first quarter as well. I do think that for a variety of reasons, both in terms of our ability to more quickly adjust market pricing to input costs, input cost stabilization, as well as the hyperscaler contribution in the back half of the year, we do see that recovering modestly towards closer to the higher end of the range as we go through the year. I mentioned part of that dynamic will be, call it, upwards pressure from the hyperscalar contribution that we anticipate in the back half. As a reminder, the hyperscalar revenues we expect to generally be in the range of 75 to 85 points of gross margin, a bit north of the overall blended average. and that really has to do with the completely different nature of the solution that we're providing the hyperscalers again very much software oriented some ancillary hardware components provided in there as well not the nand flash more most importantly but generally we'd expect that part of the solution that hyperscale solution to come with a gross margin profile of closer to 75 to 85 points so if you net all that out we do expect you know you would call a modestly increasing gross margin as we go through the year.
In the hyperscaler business, are you also going to get annual support revenue on that business? Like it goes into the subscription line or is it all going to be in product?
Yeah, there will be a smaller maintenance and support element which would show up in the subscription line, but I would say that's a much smaller portion. The bulk of the revenue would be on the product line, and the bulk of that would be recognized associated with the shipment of the hardware. Think perpetual.
All right. We've got about a minute left. I'm going to ask you the question I ask a lot of companies here, which is you've been at the company 13 years. You've talked to a lot of investors over the years. What do you think is the most underappreciated aspect of Everpure?
Well, okay, I'll sneak in one and a half answers or two answers. So I think long term, I still think it's evergreen. The power of evergreen as an architecture, as a variety of business models that we offer the benefits of evergreen out to customers with. I think it's the power of evergreen to not only remove, give customers technology flexibility, remove technology, lock in an obsolescence from customers' minds, and the stickiness that that comes with. I think Evergreen is underappreciated. The fact that every one of our customers is a recurring SaaS customer, it's just a matter of are they SaaS from day one or do they make an initial hardware purchase and then transition to SaaS through Evergreen after three years or four years or what have you. So I think that's the biggest long-term kind of underappreciated piece. I think more recently, I think it's, I would add to that, as we've expanded kind of our aperture in terms of the data management stack, as we've opened new markets, whether it's the hyperscalers, whether it's the neoclouds, I think it's the fact that our IP assets, our software is so flexible and compartmentalized that we can go and take, you know, and frankly, get a lot of leverage from the IP we've built for the enterprise. and repackage that for the needs of new markets and drive growth through that mechanism, I think that's underappreciated. People focus on the discrete number, have you notched a second hyperscale or win? What they're missing is the tremendous leverage that's built into that model. Okay, awesome.
All right, we'll end it there. Thank you, everybody, for joining. Thanks, Rob, for being here. We're going to go up to the second floor for the...