Good afternoon, and thank you for attending today's Nutanix Q3 Fiscal 2022 Earnings Conference Call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Rich Valera, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to today's conference call to discuss the results of our third quarter fiscal 2022. Joining me today are Rajiv Ramaswami, Nutanix’s President and CEO; and Rukmini Sivaraman, Nutanix’s CFO. After the market closed today, Nutanix issued a press release announcing financial results for its third quarter 2022. If you'd like to read the release, please visit the Press Releases section of our IR website. During today's call, management will make forward-looking statements, including statements regarding our business plans, strategies, initiatives, vision, objectives and outlook, including our financial guidance, as well as our ability to execute there on successfully and in a timely manner and the benefits and impact thereof on our business, operations and financial results. Our financial performance and targets and use of new or different performance metrics in future periods, our competitive position and market opportunity, the timing and impacts of our current and future business model transitions, the factors driving our growth, macroeconomic, geopolitical and industry trends, including the ongoing global supply chain challenges and the current and anticipated impact of the COVID-19 pandemic. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a detailed description of these risks and uncertainties, please refer to our SEC filings, including our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, and our quarterly reports on Form 10-Q for fiscal quarter ended October 31, 2021 and January 31, 2022, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we undertake no obligation to revise these statements after the call. As a result, you should not rely on them as representing our views in the future. Please note, unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Lastly, Nutanix management will be participating in the 42nd Annual William Blair Growth Stock Conference on June 6th. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Rich, and good afternoon, everyone. Against a volatile macro backdrop, we delivered another solid quarter, exceeding all our guided metrics and seeing continued strong performance in our renewables business. We continue to see solid demand for our Nutanix cloud platform, driven by businesses looking to accelerate their digital transformation, modernize their data centers and adopt hybrid multi-cloud operating model. That said, the quarter didn't finish as we had expected. Late in the third quarter, when we typically book a significant portion of our orders, we saw an unexpected impact from challenges that limited our upside in the quarter and affected our outlook for the fourth quarter. Increased hardware supply chain delays resulted in an increasing percentage of our orders having start dates in future quarters, or in some cases being delayed, pending availability of hardware. This affected both our billings and revenue upside in Q3, and we expect this trend to continue in Q4. In addition, after seeing our attrition rate among sales improved for each of the prior two quarters. We saw it worsen in Q3, driving a lower than expected rep headcount entering Q4. Rukmini will discuss these issues in more detail in her prepared remarks. Overall, our third quarter reflected continued execution on our subscription model and was marked by solid topline and improving bottom line performance. We delivered ACV billings growth of 28%, bolstered by strong execution on our building base of renewables. Our revenue, which continues to be affected by term compression grew 17%. Topline growth, combined with diligent expense management and leverage from renewals drove a sharp year-over-year improvement in non-GAAP operating income. While timing of collections adversely impacted our free cash flow performance for the quarter. We continue to prioritize working towards sustainable free cash flow generation in FY '23. Overall,…

Thank you, Rajiv. I am honored to join you all today for my first Nutanix earnings call. Getting directly to Q3 performance. Q3 was a solid quarter, and we beat all our guided metrics. ACV billings was $205 million, representing a year-over-year growth of 28%, exceeding our guidance range of $195 million to $200 million. Our renewals business continues to do well, and the ACV billings upside in Q3 was due to renewals performing better than expected. Gross retention rate, GRR, was in line with our expectations. Revenue for Q3 was $404 million, representing year-over-year growth of 17%, exceeding our guidance range of $395 million to $400 million. Growth in ACV billings was greater than growth in revenue, because orders with future start dates that are booked and collected are reflected in ACV billings, but revenue can only begin to be recognized in the quarter of the actual license start date and also because of slight term compression from 3.3 years in Q3 2021 to 3.2 years in Q3 2022. ARR at the end of Q3 was $1.114 billion, growing at 46% year-over-year. Q3 sales productivity was in line with our expectations. However, we ended Q3 with fewer reps than planned as the talent market remained highly competitive. As Rajiv mentioned, we saw rep attrition worse than in Q3, resulting in lower-than-expected rep headcount entering Q4. Under the leadership of our new Chief Revenue Officer, Dom Delfino, our sales leaders remain focused on getting rep headcount to our target level via both better retention and increased hiring efforts. Our overall company head count grew slightly in Q3. We added 586 new logos in Q3, which is largely in line with our historical seasonal trend in new logo additions from Q2 to Q3. As we've discussed in previous quarters, our sales…

Absolutely. [Operator Instructions] The first question comes from Wamsi Mohan with Bank of America. Please go ahead.

Hi. Thank you for taking my question. It's Rutu [ph] filling in for Wamsi today. Rukmini congrats on the new role. Look forward to working with you. My first question is for Rajiv. The two things that impacted you in the quarter, you said were the attrition more than expected of the sales reps and the supply chain issues that impacted hardware availability. Rajiv, do you think these are things that will resolve in the fiscal fourth quarter, specifically when we think about sales rep, I'm assuming you're going to try and replace them. But given the labor shortages, do you think that you can make up the required sales reps in the quarter? And the same question on the supply chain delays, how long do you think this will last? And so should we expect that going into fiscal 2023, these effects linger on into fiscal 1Q as well? So just your thoughts on the timing on when you can replace the reps, as well as on the hardware issues that you're seeing?

Yes. So Rutu that -- so first of all, let me start with the supply chain because that was the biggest contributor, right? The vast majority of the lower outlook is because of supply chain hardware constraints. And we saw this really start to come in play very late in the last -- in Q3. Now if you look at that, I mean, until -- again, really until now, we were managing that, right? We didn't have -- we didn't experience any real issues from supply chain, but of course, late in Q3 just started to become much more significant with orders being delayed. Now with respect to the supply chain, we are working very closely with our hardware partners to try and improve the availability of hardware. But keep in mind that we have one step removed, right, because we don't directly supply the hardware. So the ability to influence them is somewhat limited. Now that said, based on what we are hearing from all the server manufacturers and the hardware partners, we expect that these challenges in the supply chain are likely to persist for multiple quarters. Now on the rep headcount, which was a smaller, much smaller component of the issues that we're facing. Now we've been affected by the broader industry trend of greater resignations across the board, right? And we noted in prior quarters that we were somewhat behind our rep headcount targets. Now in the third quarter, after two quarters of improving attrition, we saw a quarter-over-quarter increase in rep attrition. That led to a lower than expected headcount entering the fourth quarter. Now in terms of what we're doing about that, right? So specifically with our new CRO, Dom Delfino is very focused on three things, right, rep retention, productivity of the reps…

Yes. So Q3 is seasonally weaker than Q2. And we saw a decline roughly in line with historical seasonality in the third quarter, when it came to new logos. Now as you indicated also, we have been focused on higher quality, higher ASP new logos more so than absolute new logo comp. And on that front, we saw a solid year-over-year new logo ASP growth in Q3, which is what we're driving for. So, if you look – go forward, right, we expect a new logo growth to be driven through enabling more partner-based selling, continuing to drive our partner autonomy program, trying to get more leverage from our strategic partners and by continuing to make sure that we have the right sales incentives in place. So yes, we are focused more on new – the quality of these logos going forward and the ASPs that we can capture. Q –Unidentified Analyst: Got it. And let me just sneak one more in, if I could for Rukmini. I think you had guided average contract term to be flat. I think it went up a little bit from 3.1 to 3.2 years in 3Q. I think you're guiding flat again for fiscal 4Q. How do – how would you say that the growth in your renewables business, how would that be impacting both the ACV billings seasonality, as well as this – the average contract terms? And should we expect that after 4Q, 1Q average contract term will decline given that the federal business is a more significant part of your revenues in that quarter? So, any thoughts you have on the growth in the renewables business and how should we think about the seasonality of ACV billings, as well as the trend in the average contract term? Thank you.

Yes. Thank you for the question. So, on -- to first answer your question on the contract terms. So, I think this quarter in Q3, we had a couple of significant transactions that came in at higher terms, so that's probably sort of 3.2. But I think more generally, I'd say at this point, we are quite close to sort of what we think was where terms will eventually settle, which is around the 2.8 to 3 year mark, which we had laid out previously. So we're quite close to that level, right? So it fluctuates a little bit as you're seeing, I think, here and what we are projecting for Q4 as well. And we expect that to again maybe trend down slightly, but not too dramatically at this point, given where we are and how close we are to the sort of where we think we'll settle. I think your second question was on the seasonality as it relates to renewals and what that does for ACV billings, and what I'll say in renewals as we talked about, I think, on the – in the prepared remarks, right, renewals which is continues performed really well for us overall. And I think what it does is we do see the available to renew or ATR, which I think we talked about before on these calls, does go up in general over time, as the base of renewals continues to build. So I would say that, renewals in general is less seasonal than new ACV overall. But as you can imagine, right renewals is just at this point, outflow of when those orders came in going back, right? If the new business that we booked three years ago, two years ago, is – has that seasonality, the available to renew also has some of that seasonality, right? So it's not perfectly correlated, but I hope that answers your question that overall, I think our renewal business is doing really well. We're seeing slightly less seasonality in that business. But again, it follows the same pattern as what new business did few years ago, which is somewhat seasonal between the quarters, right? So – this is our first sort of full year of renewals, and so we'll continue to watch that closely.

Thank you for all the details. Appreciate it.

Thank you. The next question comes from James Fish with Piper Sandler. Please go ahead.

Hey, guys. Thanks. I want to continue on the supply chain challenges. Is there – appreciate the color you just gave, but is there a way to think of the backlog you now have that should come in when supply comes back, or put another way, is your backlog up by roughly the $90 million that you had to guide down for fiscal Q4, understanding there's multiple ways here of how orders get booked or delayed. Are you expecting that $80 million, $90 million then to come in during all of fiscal 2023? And do you think the persistence of these issues actually persist long enough that puts your $300 million to $500 million free cash flow guiding the out year at risk.

Thank you, Jim for that question. I can take that, Rajiv. So a couple of thoughts, and maybe I'll add a little more color to what we said about supply chain. So as you'll recall, one of the things we said was a significant majority of the Q4 ACV billings guidance relative to what was implied at our previous quarter when we guide for Q3 and for full year, the significant majority of that delta is coming from the supply chain challenges, and it shows up in two ways. One is orders that come in and have future start dates, they're booked, but have to start date, or they don't get booked because customers are waiting for the availability of the hardware. And the way we thought about trying to estimate Q4 is we looked at the percentage of our orders in Q3 that came in with future start dates. And as Rajiv talked about and I talked about, we saw late in Q3 that the percentage of those orders that came in with future start dates went up. And what we are modeling for Q4, we are modeling that percentage of our orders to come in future start dates to go up to increase or worsen compared to what it was in Q3. So that's how we – that's how we've approached estimating Q4. And I do want to make the point, I think, to your question, Jim, on the revenue piece, right? So, if it's booked and we're able to collect it, it does shows up in ACV billings, and we do, do that even with orders with future start dates. Whereas in revenue, even if we have booked and collected it, it doesn't show up in revenue until the actual date of the license starting. So, those are some of the sort of the nuances there. And to answer your question, Jim, on backlog and deferred and so on, right? So, because of this effect of these increased percentage of orders coming with delayed start dates, we do expect to build some deferred revenue and backlog. But until supply chain starts to improve and we see that percentage start to decrease, we would really not expect to sort of see that upside or that same margin would kind of show up in our topline just yet, right? So, that's how I would characterize thinking about backlog and deferred revenue.

Got it. And just on that $300 million to $500 million free cash flow, is that still on the table here? I know that's far out, but--

Yes, thank you for reminding me of that. So I think what we're -- we are in the process of planning for fiscal 2023, as you can imagine. But we are anticipating exiting fiscal 2022, below our earlier expectations and all the increased uncertainty we're seeing in respect to the supply chain. So, what I'm in the position right now to affirm those targets we provided Jim, but we do plan to update our view more generally for 2023 specifically in the Q4 earnings call. However, I will say -- and I think it's worth emphasizing this that we remain focused on profitable growth and continue to prioritize working towards sustainable free cash flow generation and non-GAAP operating margin breakeven in fiscal 2023.

Okay, fair enough. My follow-up would be on actually the new packaging modules. How should we think about the rank order of these new packaging modules that are being adopted? And after the primary one, what package or two are coming in second or third? I know it's very early, but in what kind of timeframe are you expecting to get that second or third add-on, especially you guys were one quarter into kind of the new packaging? Thank you.

Yes. So, Jim, I'll take that one. It's still early, but the initial rollout here has been pretty good, right? So, if you look at -- the largest deal of our quarter last quarter was from an EMEA-based financial services company. And this was presented by the use of our new solution-based pricing. And by the way, in that case, they essentially bought the entire portfolio, right? The full Nutanix Cloud Platform, all of it. Now, more specifically, a couple of things we've been seeing. First is more rapid closure of deals, utilizing this new power pricing and packaging. And second, to your question around add-ons, we are seeing a notably higher attach of our Nutanix Cloud Management solution to our Cloud Infrastructure solution. So, at least the new solution packaging continues to be adopted on an increased pace, we expect to see, again, higher velocity transactions and more attach of our portfolio products, which should help in the productivity of our sales reps and our partners.

Thank you. The next comes from Meta Marshall with Morgan Stanley. Please proceed.

Great. Thanks. I wanted to just kind of briefly touch on stock-based compensation as a part of attrition. And just you noted that you were seeing kind of larger-than-expected attrition, was stock-based comp any part of that, just given the reset and valuations kind of across a lot of names, are there any efforts or adjustments that you guys are planning on making as part of, kind of increasing retention of sales reps? And then clearly, it sounds as if kind of the core underlying business is seeing some similar trends. But just whether in any region or any particular vertical, you've seen any kind of slowdown in activity just given macro would just be helpful? Thanks.

Yes. So I think on the first – the two questions, Meta. On the first one, look, I think it's an overall statement around compensation overall, right? That includes, of course, equity and it includes cash compensation. There's clearly some inflationary pressure on that, right? And stock price, of course, has a more salespeople very much are focused on quota-attainment. And a lot of it therefore is focused on enabling them to achieve quotas. And so, we have -- that's the work that we talked about when it's going to a segmentation, better segmentation, better coverage models, better training, getting them leverage through partners, all of that helps from a retention perspective because ultimately, it gives them a much better shot at achieving or overachieving their quota, right? So, I think that's what we are really focused on there. We're also factoring in some degree of inflation in our wages. This has moved forward and factoring that into our conversation plans. The other thing that I do believe is that some of the companies that we compete with for talent, especially start-ups, maybe increasingly focused on conserving cash and slowing down hiring in this current environment, which should actually help us. And the second question, I think, was on demand and whether we are seeing any changes in demand around verticals and so forth. I would say overall, our demand remains solid, but our ability to execute against it is being sustained by these supply chain issues, which are causing delayed start dates and delayed orders and to some extent, the shortage of reps as well that we need to focus on hiring back. Overall, on a demand perspective, we haven't seen any notable changes in customer spending. But we are watching the demand and macro backdrop quite closely. Our fundamental demand is driven by accelerating digital transformation, customers modernizing legacy 3-tier infrastructure, running all forms of workloads, including performance or into databases and mission-critical workloads on our platform and extending to the public cloud. So, we talked about a few customer wins during our compared remarks, right, that highlight these.

Got it. Perfect. Thank you.

The next question comes from Nehal Chokshi with Northland Capital Markets. Please proceed.

Yep, thank you. When in the quarter did you start to notice higher-than-expected sales attrition?

Nehal, could you repeat the question, please? I couldn't catch it.

Yes. When in the quarter as you start to notice a higher-than-expected sales rep attrition rate?

Very, very late in the third quarter, literally the last couple of weeks in the quarter, Nehal.

Okay. So, sales and marketing that expense line item was down 10% year and I think 9% below where I think most analysts were -- so would it be fair to say that your sales rep headcount ended up much lower than the 10%. I mean, where is your sales rep headcount relative to your expectations? Is it 10% lower or is it 20% lower 30% lower? Can you give us some indication here? What's the magnitude here is?

Yeah. Nehal, we have not quantified exactly where we are at. We are – let's call it, we're slightly below where we would like to be. And we are doing everything we can to get it back up to where we want it to be going into next fiscal year.

Got it. Understood. Okay. The last question…

The one thing that I would add –

Rukmini, go ahead.

Sorry, Nehal, I wanted to add one point there, if you were referring to just sort of the Q3 sales and marketing line item, I did mention this in my remarks, but in case, I just want to highlight that there was about $6 million in OpEx within that line item that was supposed to be in Q3, the sales enablement in-person event that got moved from Q3 to Q4. And so that's now in the Q4 number in the guidance we gave for Q4, but it was not in Q3. I just wanted to point that out as well.

Right. Yes, very good point. Okay. And then in terms of sales attrition often it is correlated to a weakened the demand outlook as salespeople tend to flock towards where there is demand and away from where there is a weak demand. So pushback on that natural correlation that tends to be out there.

Yeah. I think, look, our – again, I think part of this is, like I said, focusing in terms of making – refining our coverage model, refining our segmentation, to make sure that our sales reps can hit that number, right? Basically, sales reps need's to hit their numbers and give them every ability to do that. I don't believe it's a reflection of demand, right? The environment is also competitive, right? We've had – our sales reps typically go, the ones at a trip end-up going in many cases, to these – start ups, right, in the promise of quick IPO riches. And some of that, of course, is starting to potentially moderate at this point as well. So I don't believe this has anything to do with the demand or the ability to – for them to go achieve their numbers.

Great. Great. Thank you for taking the questions.

And the thing – the other thing I'd add to that rep point is our rep productivity was in line with expectations in the quarter. And if you recall, in the past, you said we expect rep like to go up over time. So that was in line with what we expected, which means that our reps, our productive in terms of bringing in and closing deals. That said, we absolutely are keeping our ear to the ground on demand.

Awesome. Thank you.

Thank you. The next question comes from Rod Hall with Goldman Sachs. Please proceed.

Yeah. Thank you for the question. Welcome aboard, Rukmini. Good to have you aboard or I guess, aboard with the markets anyway. So first question I had for you is your comment on the renewals and the deviation on ACV billings kind of representing upside to your expectations on renewals? I wonder, if you could say a little bit more about that. Are you talking about the high end of the ACV billings guidance range and then what you actually printed so $5 million? And then that, I'm just kind of trying to triangulate into the renewals number from that comment. I wonder, if you could give us a little bit more color on that. And then I have a follow-up question.

Thank you, Rod. I appreciate that. Yeah, so on – as we said, I think just to emphasize what we said, we said the outperformance in Q3 on ACV billings was due to our renewals performance, right. And I think as we've said, we said this last quarter, our business continues to do really well. And they have largely not been impacted by the challenges that we've talked about in this call, on the supply chain side and on overall rep headcount. Those are predominantly affecting our new ACV outlook. So, that all said, we don't provide the split of new ACV, which is renewals on a quarterly basis, so I won't give that, Rod. But hopefully, that gives you some color on what I meant when I said outperformance for Q3 and renewals doing well.

Okay. Thanks Rukmini. And then following up that, I guess, just a little more color since there's not really an answer there. On ATR, we were modeling the lower seasonality, obviously, for the quarter. And we would guess that seasonality on ATR is about double -- a little bit more than double what it was. If you look at quarter-on-quarter development of ATR, a little more than double what it was this quarter, next quarter on quarter-on-quarter growth terms. Is that in the ballpark for ATR?

So, can you make sure I understand. So, what exactly is double in your estimate?

The quarter-on-quarter growth rate. So, when we talk about seasonality, we're talking about ATR this quarter at fiscal Q3, over the quarter before. And so if we look at the Q4 over fiscal Q3, we'd say it's kind of a little more than double what it was in fiscal Q3, but I just -- I would like to triangulate that and make sure that we're kind of in the ballpark at least on that.

Yes, it's not that high. The delta is not double. The growth is not double, Rod, right? There is, as I said, Q4 does have a higher ATR than we had going into -- but there's also, I think, the dynamics we talked about last quarter where there are some dynamics of early and so on, right? So, it's not nearly that large.

Right. Right. That's a trouble with waterfalling this stuff out. And then I had -- thank you for that and Rajiv, I wanted to come back to you and just ask on the hardware attach. Can you guys -- can you quantify how much of the new software license you're selling are attached to hardware versus not? Is there any way to -- is it most all of it, or is there a proportion of it that really isn't attached to the necessity to ship a piece of hardware along with the software license?

Yes. By the way, I mean, to be clear, we are not shipping the hardware, right? So, we're getting just a software.

I know that. I'm saying for a customer to take delivery of the new piece of hardware along with the software license, just to be clear, we understand your model.

No, I understand your question, Rod. So, it's hard for us to actually have a pretty view on that. First of all, renewals are all software, right? Renewals are largely independent of hardware, pretty much. So, people, once they have a software license from us, they're likely go to renew that on the same hardware. So, that largely decoupled and our renewals business is not being impacted by all the supply chain or hardware issues. So, really, it comes down to the new orders, right? And out of those new orders, yes, some of those are tied to customers buying hardware, in fact, is a good chunk. And some of it is just them buying software and they may already have hardware available, right, and then is just buying software to go run in the hardware. So, it's hard for us to tease apart and make a clear pattern on much of that. It tends to vary also. So, we don't have a specific proportion that I can tell you, right, what portion gets to be just software-only independent of the hardware, what portion gets to be tied to the hardware. But what we can say is the other side of the hardware, we saw a significant impact it because of the delay in hardware availability.

Okay, all right. Thanks very much.

Thank you. The next question comes from Erik Suppiger with JMP Securities. Please proceed.

Yes, thanks for taking the question. I guess, I was just trying to understand, your customers have some pretty good flexibility in terms of the different platforms that they can choose from. Why weren't they able to migrate from one platform that had supply chain constraints to another?

Yes. And by the way, this is a good question. And exactly look, until last quarter, this is exactly what we were managing, right? And people were -- had the flexibility. But the problem here is, essentially, we're seeing future started across many if not most the several platforms that we partner with. So it's not an isolated issue, and it's not like our customers can go to a different hardware supplier and get what they want. It's an across-the-board and at least with most of the hardware providers that we are partnered with, or how our customers running our software on.

Can you give us a sense? I mean, is it the majority of hardware solutions at this point that are seeing constraints?

Yes. And I would say, the constraints are different across different providers. It's not just one item that’s causing supply chain issue across all the providers; different providers seem to have different constraints in their supply chain. But it seems to be pretty much across all our major partners we are seeing this.

Okay. And is the largest partner at this point is still Supermicro?

We have -- the business at -- Supermicro is still very significant for us, but we do a fair amount of business with HP. We still do a fair amount with Dell, right, Lenovo. And then we have smaller players like Fujitsu and others.

Okay. Thank you.

The next question comes from Aaron Rakers with Wells Fargo. Please proceed.

Hi. This is Jake on for Aaron. Thanks for the question. Could you talk a little bit about the competitive landscape and maybe what's giving you the confidence that you're not seeing some increased competitive dynamics versus likes of say, VMware or others are maybe a shift in applications in the public cloud.

Yes. So, first of all, in terms of win rates in 3Q, we saw actually a year-over improvement year -- improvement in our win rates, both against our largest competitor as well as against legacy three-tier solutions. So that I think is actually going well, right? And we are much more focused on that. Now, with respect to the cloud itself, I don't think the dynamics there have changed, right? I mean the people are continuing to use the cloud for new applications, but we also -- they're also looking at a world where that is hybrid and multi-cloud and workloads are running everywhere, right? And so, we don't -- I mean, the dynamic of moving to the cloud has been there for a while. And we don't think that's changed significantly in any sense recently. And we are participating in that, right, but some of the examples that we've been showing, right, with our solutions in AWS and soon to be in Azure. So we are participating in that cloud journey as well, with our customers. So we haven't seen any significant changes on that front. And on the on-prem side, I would say, our win rates have been continuing to increase year-over-year.

Okay, great. And then, maybe just as a follow-up, you guys noted demand remains pretty strong. What about visibility, especially in the enterprise space? Are you having any major changes in visibility?

I think the biggest question around visibility is, when we have a set of opportunities in the pipeline, when is that going to be realized in orders? And what is -- how much is it going to come in with future start dates. That's the part that we don't know, right? And we have been assuming that, that part of it is actually getting worse this quarter compared to last quarter. So, the fundamental -- like fundamental demand from our perspective has not changed. But what point can the demand be realized with these hardware issues on, is the question really.

Okay. Great. Thank you.

The next question comes from Simon Leopold with Raymond James. Please proceed.

Thanks for taking the question. I wanted to see if you had some thoughts as to whether or not the circumstances will cause your customers to accelerate public cloud adoption and potentially make opportunities for on-premise business for you essentially be reduced, given that if they're facing these kinds of challenges, just building out datacenters, regardless of who the supplier of the software is, does that accelerate public cloud adoption?

Yes, that's a good question. First of all, I will also say that public cloud providers also have to deal with hardware issues, right? They have to deal with their own. But second, I think cloud is a strategic initiative for our customers. So, customers are thoughtful about figuring out what they want to do with the cloud. And it's not largely, we haven't seen them do so in a reactive manner just because they can't get hardware temporarily on-prem, right? So clearly, people have been going to the cloud for new applications. And for customers who have the Nutanix platform, we provide a very quick and simple way for them to move to the cloud, right? And so, they have our platform, they can also move to the cloud using our platform, and run-on public cloud hardware, that's available in the public cloud. And we haven't seen a lot of that happening yet, right? Because what customers decide – they decide what applications they are going to run on-prem and what applications they are going to run in the public cloud. And those applications that they are an on-prem, they have good reasons to run on prem, right? They might be systems of record or they might be mission-critical applications. So, they may have data privacy or locality issues. So, it's not easy for them to just take all of those and take it to the public cloud, right? So, they have been thoughtful. So, I think the answer to your question, Simon, is no, we haven't seen this as a reactive measure of people going more to the public cloud because they can't get hardware on-prem.

Great. And then as a follow-up, when you're thinking about your strategy for rebuilding the sales reps, do you think about trying to essentially hire experienced sales reps, which potentially cost more money or alternatively grooming and developing new sales reps, which may cost less, but take more time. How do you think about that trade-off in the rebuilding process?

Yes. I think it's a combination of both, right? I mean it's not one or the other. So clearly there’s a combination of people we are having with the experience and with the skillsets. Last year, for example, we graduated many of our inside sales people to become accountant as part of their own career development. And so, that's another thing that we have done in the past and provide a career opportunity for our people to go from, whether they are inside sales, whether they're customer success, to potentially taking on a road as an account rep and training them and taking them there forward to combine with hiring. So, it's both together, it's not one or the other. Great. Thank you for taking the questions.

Thank you. That concludes today's Q&A session as well as today's call. Thank you for joining. Please disconnect your lines.