Pure Storage, Inc. (NYSE:PSTG) Q2 2020 Earnings Conference Call - Final Transcript
Aug 21, 2019 • 05:00 pm ET
[Operator Instructions] Your first question comes from Alex Kurtz from KeyBanc.
Thanks, guys. Can you hear me okay?
You bet. Hi, Alex.
Hey, before we get into questions, I just want to say, Tim, it's been a real pleasure working with you, and maybe we will see you on the mountain one day.
I appreciate it, Alex. Thank you.
Yes. Best of luck on what's next. So as I understand -- as I try to understand your pricing dynamic points you made in the prepared remarks, can I just give a quick example and you can tell me how far I'm off here. So at the beginning of the year, customers are expecting maybe $2 to $3 per effective gig, when they came into a deal now with this oversupply in the NAND market, maybe they're looking for $1 to $3. And so your reps are hitting their numbers, but now they'd have to ship extra bit to get to the original guidance. Is that the right framework?
Yes. We're just shipping more terabits -- terabytes per sale, right. And when prices drop more rapidly than you expect, it takes a while for customers to adjust to the idea of two things; one is buying more terabytes for workloads that they've already planned, but now looking at new workloads, at new tiers, and that takes a little more time and planning on the customer side. So, as I've said many times in the past, Alex, that, in a steady -- we live in an environment with steadily decreasing component in commodity prices, right. That's the entire tech market. And as long as it's slow and steady, the market equilibrates on that, but you do have quarters where it's faster than you expect and it takes a while for the customers to catch up with that, so that's what we saw.
And just to be clear, cohorts as far as their yield rates have been trending correctly, any context there, Tim?
Yes. You mean sales cohorts or customer cohorts?
Yes. No, sales cohort.
Sales cohorts performing nicely. I mean, and you know, we had a big class come in this year and that's -- the early signs are positive.
Your next question comes from Matt Cabral from Credit Suisse.
Yes. Thank you. Also wanted to ask about the lower guidance, just wonder if you could parse a little bit between just the push you're making in the larger enterprise deals versus the more run rate commercial business and just help us understand the incremental caution that you're putting into the guidance and just how that compares to where you were looking about it 90 days ago?
Yes, I'll let Hat answer that first piece, but really, those two things are quite separate for us. We're not the balance, let's say, between enterprise and commercial is not -- it did not affect or calculate into our guide at all, but I'll let Hat answer the complexion between those two.
David M. Hatfield