NetApp Inc (NTAP) Q3 2019 Earnings Conference Call Transcript

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NetApp Inc (NASDAQ: NTAP)Q3 2019 Earnings Conference CallFeb. 13, 2019, 2:30 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Welcome to NetApp's Third Quarter Fiscal Year 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I will now turn the call over to Kris Newton, Vice President, Corporate Communications and Investor Relations.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you for joining us on our Q3 fiscal year 2019 earnings call. With me today are our CEO, George Kurian; and CFO, Ron Pasek. This call is being webcast live and will be available for replay on our website at netapp.com. As a reminder, we adopted the new accounting standard ASC 606 in Q1. Our historical financial results have been restated to conform to the new revenue recognition rules. Reconciliations of our previously reported GAAP results to the restated 606 GAAP results as well as our 606 GAAP to non-GAAP results are included in our Q3 earnings release for the applicable periods which is posted on our website along with our financial tables and guidance, a historical supplemental data table and the non-GAAP to GAAP reconciliation. Unless otherwise noted, we will refer to non-GAAP and 606 numbers.

During today's call, we will make forward-looking statements and projections with respect to our financial outlook and future prospects such as our guidance for the fourth quarter and full fiscal year 2019, our expectations regarding future revenue, profitability, cash flow and shareholder returns, and our ability to grow and expand our opportunities and address the key market transitions, all of which involve risk and uncertainty. We disclaim any obligation to update our forward-looking statements and projections. Actual results may differ materially from our statements and projections for a variety of reasons, including global political, macroeconomic and market conditions, and our ability to expand our total available market, introduce and deliver new and differentiated products and services without disruption, manage our gross profit margins, capitalize on our market position in cloud strategy, maintain execution and continue our capital allocation strategy.

Please also refer to the documents we file from time to time with the SEC and available on our website, specifically our most recent Form 10-K for fiscal year 2018 and our current reports on Form 8-K. During the call, all financial measures presented will be non-GAAP unless otherwise indicated.

I'll now turn the call over to George.

George Kurian -- Chief Executive Officer and President

Thank you, Kris, and thanks to everyone joining us today. In the face of an uncertain macroeconomic environment, we focused on the variables within our control and delivered a strong third quarter. Although I'm disappointed with revenue being at the low end of expectations, our operational discipline delivered gross margin, operating margin and EPS that were above the high end of our guidance ranges. Regardless of the demand headwinds, we remain well positioned for the long term, as we address the growth areas of the market and drive efficiency in our business. I'd like to address the challenges we saw in Q3 head on.

The macroeconomic environment is outside of our control, but I remain exceptionally confident about our strategic position and operational focus to deliver profitable growth and shareholder value. After a normal close to the calendar year, we saw a slowdown in purchasing across the board in January, driven by deteriorating outlooks for the global economy as well as uncertainty around trade policy. In the face of these headwinds, our largest customers became more cautious in their purchasing behavior and sought more information on the implications for their businesses of slowing economies. We did not see any real change in the competitive environment.

Our win rates stayed constant and our pipeline remains healthy. Our customers' purchasing decisions continue to be based on our features, capabilities and future-proved cloud innovation strategy. Even in the face of softening demand, we were able to further expand product margins in the third quarter by focusing on the value our solutions bring in addressing customers' largest IT imperatives. Like any company, we do not have perfect visibility into all the reasons for purchasing slowdowns.

However, we are deeply involved in the strategic planning and purchasing process at our large customers and have good visibility into how they deploy us and where we fit into their IT strategies. We remain tightly engaged with them, and as such, are confident that we have the right product set and the right go-to-market strategy to continue capturing a greater share of our customers' IT wallet. Our unique customer value is reinforced by digital transformation initiatives, which are fueling data center modernization projects and cloud first strategy. To succeed in the data-driven digital economy and radically improve business performance, customers need to accelerate digital innovation, generate real-time insights and secure access to their data across multiple clouds and on-premises.

This requirement for hybrid multi-cloud capabilities is creating three significant market transitions: disk to flash, traditional IT to private cloud, and on-premises infrastructure to hybrid clouds. It is in these key strategic battlegrounds that we have substantial opportunity to exploit the advantages created by the NetApp data fabric and take share. We are driving the market transition from disk to flash, as we help customers modernize, simplify and improve application performance. We are displacing competitor's complex equipment, gaining share in new workload deployments and upgrading our installed base with cloud-connected all-flash solutions.

In Q3, our all-flash array business inclusive of all-flash FAS, ES and SolidFire products and services grew 19% year-over-year to an annualized net revenue run rate of $2.4 billion. We are overindexed in the large and growing all-flash market with a significantly higher all-flash array share than in the total storage market. Our advantage here will continue as the market shifts to flash and we expect that shift TO accelerate with ongoing NAND price declines. All-flash arrays carry a higher ASP which benefits not only product revenue, but also recurring services revenue. With only 15% of our installed base currently running all-flash arrays, the runway for this secular transition remains in the early innings.

The second major market transition we're exploiting is the shift from traditional IT to private cloud. SolidFire and NetApp HCI are the building blocks for private cloud deployments, enabling customers to bring public cloud like experience and economics into their data centers. In the third quarter, we announced new validated and proven architectures that simplify the design, deployment and support of on-demand services and applications, as well as support hybrid cloud workflows with an on-premises S3-compatible object storage. Customers are embracing our unique value that couples extreme ease of use with enterprise scalability and quality of service.

And as a result, the momentum in our private cloud business that began in the October quarter accelerated in Q3. The shift from on-premises infrastructure to hybrid clouds is the third key market transition that we are taking advantage of to expand our business. Only NetApp is building a comprehensive set of cloud data services available across multiple clouds. We help customers extend on-premises environments to the cloud, deploy enterprise workloads in the cloud, and build and refactor primary workloads for the cloud with tools to optimize hybrid cloud workloads and cost. Based on the last month of Q3, our cloud data services annualized recurring revenue is approximately $33 million, up 22% from Q2. As we've said before, this is a foundational year for our cloud data services, during which we are focusing on operational readiness and deployment with the hyperscalers.

We are excited by the feedback that we are receiving from the growing number of customers who are in controlled production with us. While still in the early phases, we are well-positioned for when these services soon become broadly available. Roughly two-thirds of early Cloud Volumes Service customers are new to NetApp. This coupled with the strong customer interest we are experiencing gives us tremendous confidence in the potential of this part of our business. In closing, we are confident in our position for long-term success. We are a leader in the large all-flash array market.

We are seeing accelerating momentum with our private cloud solutions, and our public cloud solutions are positioned to deliver strong growth in FY '20. We are playing into the big market transition from a position of strength. Flash and cloud integration enables us to protect and expand the installed base of our core ONTAP business. Our private and public cloud solutions enable us to reach new buyers. Our flash hybrid cloud infrastructure and AI solutions are serving as pillars of customers' new architectures and we are seeing adoption of our cloud offerings as part of our customers' foundation for moving applications and data to the cloud.

These factors combined give us confidence in our ability to reaccelerate growth, as customers become more comfortable with the external environment. We have demonstrated discipline in managing the business and will continue with a keen focus on the factors within our control. We are paying close attention to execution to maximize our opportunity in an uncertain macro. We again expanded gross margin and increased profitability in the quarter despite the slight moderation in customer buying behavior. I would like to thank the NetApp team for their commitment to a high level of discipline, execution and customer focus.

With that, I'll now turn the call over to Ron to walk through our Q3 financial performance and go-forward expectations.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Thanks, George. Good afternoon, everyone, and thank you for joining us. As a reminder, I'll be referring to non-GAAP numbers unless otherwise noted. As George highlighted, in Q3, we delivered strong margins and operating leverage in the face of caution from our customers around the macro environment. This is a solid testament to the strength of our underlying business model. Despite the market uncertainty, we are confident in our product leadership and strategy to reaccelerate growth going forward and we remain sharply focused on execution and managing the variables within our control. Consistent with our commitment to shareholders, we again improved gross margin, operating margin and delivered outstanding free cash flow.

In Q3, despite a slower demand environment experienced in January, net revenues of $1.56 billion were within our guided range and grew 2% year-over-year including about a point of currency headwind. Product revenue of $967 million, increased 2% year-over-year, reflecting our shift to all-flash arrays and growing traction in our hybrid cloud solutions, offset by about 150 basis points of currency headwinds. There were no ELAs in the quarter. Moving down to P&L, software maintenance and hardware maintenance revenue of $531 million, increased 2% year-over-year, driven by our continued growth in our installed base, and to a lesser extent, our cloud data services business. Gross margin of 63.7% was above the high end of our guided range.

As expected, we saw the normal seasonal sequential decline in product margin from Q2 to Q3. Product gross margin came in at 52.6%, which is an increase of about 100 basis points year-on-year, reflecting continued sales force discipline in the face of macroeconomic uncertainty and about 50 basis points of currency headwinds. This was the eighth straight quarter we increased product margins year-over-year. The combination of software and hardware maintenance and other services' gross margin of 81.7%, increased about 50 basis points year-over-year. Operating expenses of $629 million were down 2% year-over-year, coming in lighter than anticipated, largely due to lower variable compensation.

We remain committed to strong OpEx discipline and continue to expect operating expenses for fiscal 2019 to be roughly flat year-over-year. Operating margin of 23.5% came in solidly above the high end of guidance and represented a new company record. EPS of $1.20 was above the high end of our guided range and increased 14% year-over-year. We closed Q3 with $4 billion in cash and short-term investments. Similar to Q2, we again saw healthy growth in deferred and financed unearned services revenue, which increased 7% year-over-year and was up $151 million sequentially. Deferred revenue growth continues to be a strong leading indicator of the health of our installed base.

Our cash conversion cycle remained extremely healthy at a negative 11 days which was roughly flat year-over-year. Cash flow from operations was $451 million. Free cash flow of $420 million represented 27% of revenues while year-to-date free cash flows of $804 million represents 18% of revenues. Q4 has historically proven to be a strong seasonal period for free cash flow conversion. As such, we remain committed to driving free cash flow of 19% to 21% of revenues for the full fiscal year. Our confidence in our long-term vision and execution is reflected in our capital allocation strategy. During Q3, we repurchased 8.1 million shares at an average price of $67.84 per share for a total of $550 million. Weighted average diluted shares outstanding were $255 million, down $21 million year-on-year representing an 8% decline. We have $2.4 billion remaining on our current share repurchase authorization and we'll continue to be aggressive given NetApp's free cash flow yield and return on invested capital profile.

During the quarter, we paid out $99 million in cash dividends. In total, we returned $649 million to shareholders, representing 155% of free cash flow generated in the quarter. Now onto guidance. Customer caution around the macro that backdrop has heightened as we enter the new calendar year. As a result, we expect Q4 net revenues to range between $1.59 billion and $1.69 billion, which at the midpoint implies flat revenues year-over-year. It is worth noting that our Q4 revenue guidance includes 200 basis points of currency headwind and is off a very challenging Q4 2018 compare, where we grew total revenue by 11% year-over-year. Consistent with the normal seasonal sequential decline in gross margin from Q3 to Q4, associated with product revenue being a larger portion of the overall revenue mix, we expect Q4 consolidated gross margins to range between 62% and 63%.

We expect Q4 operating margin to be between 23% and 23.5%. We expect earnings per share for the fourth quarter to range between $1.22 and $1.28 per share. The midpoint of our Q4 revenue guidance implies total fiscal '19 revenue growth of 4.6%. Our Q4 guidance also implies fiscal '19 gross margin of 64.3%, operating margin of 22.7% and EPS growth of 28%. As we look out to FY '20 and beyond, I'm confident in our ability to reaccelerate growth and deliver on our long-term profitability targets. We remain diligently focused on both disciplined execution and continued innovation. In the face of a slower demand environment, our business model leverage and the secular tailwinds created by the three key market transitions, flash, private cloud and cloud data services, will enable us to continue to deliver on the commitments we've made to shareholders, partners and customers.

With that, I'll hand it back to Kris to open the call for Q&A. Kris?

Questions and Answers:

Kris Newton -- Vice President, Corporate Communications & Investor Relations

We'll now open the call for Q&A. Please be respectful of your peers and limit yourself to one question, so we can get to as many people as possible. Thanks for your cooperation. Operator?

Operator

(Operator Instructions) Our first question comes from the line of Andrew Nowinski with Piper Jaffray. Your line is now open.

Andrew Nowinski -- Piper Jaffray & Co. -- Analyst

Okay. Thanks a lot. Thanks for the question. Maybe I'll just ask a question as it relates to kind of your guidance that you gave at Analyst Day regarding fiscal '20 and '21. I'm curious just given the results that we saw today and your guidance for Q4. Would you say you're still expecting to deliver at least 15% earnings growth over the next two years? And then also on the revenue, is that mid single-digit still valid?

Ron Pasek -- Executive Vice President & Chief Financial Officer

Hi, Andy, yes, that is our plan and you're seeing in FY '19, we're going to do well above that. And yes, our long-term guidance is still at mid single-digits on the top line absolutely.

Andrew Nowinski -- Piper Jaffray & Co. -- Analyst

All right. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Andy. Next question?

Operator

Our next question comes from the line of Rod Hall with Goldman Sachs. Your line is now open. Pardon me, Rod Hall, please check your mute button. Okay. Our next question comes from the line of Matt Sheerin with Stifel.

Matt Sheerin -- Stifel -- Analyst

Yes. Thank you. Thanks for taking my question. Just relative to the weakness that you're seeing from your large enterprise customers, it looked like your direct business was down 12% year-on-year. That was the first time in, I think, six quarters that you were down, but your channel business was actually up mid-single digits. What do you think the difference is in terms of the tone of the smaller customers versus large customers? Because if you look at all the channel partners that have reported, they all talked about fairly strong growth and still good outlook for this year.

George Kurian -- Chief Executive Officer and President

Our largest customers are the ones that we serve through a direct pathway. The broad range of customers are served through a channel model. The largest customers are the ones that are most affected by some of the uncertainty, both economic and political uncertainty around the globe. And you saw incremental caution in their buying behavior in January.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Matt, the other thing that's a little misleading just to factor in is, in Q1 and Q2, we did have ELAs, which show up in direct revenue. So, they skewed the direct number a little bit higher. If you adjust for that for always within the last, say, eight quarters of 2018. And again, that's where the demand is fulfilled, not necessarily where it's created.

Matt Sheerin -- Stifel -- Analyst

Okay. And in terms of the ELAs, you didn't have any revenue. You've had some good revenue there in the last few quarters. Is that more of a timing issue and related to the weakness that you're seeing from your large customers?

Ron Pasek -- Executive Vice President & Chief Financial Officer

No. That's nothing to do with that, nothing at all. It's just -- as we said, when we first started talking about ELAs, they tend to be difficult to predict and lumpy. And there weren't any we had in the quarter or anticipated to have.

Matt Sheerin -- Stifel -- Analyst

Okay. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Matt.

Operator

Thank you. Our next question comes from the line of Rod Hall with Goldman Sachs. Your line is now open. Rod, please go ahead.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Let's move on to the next question.

Operator

Our next question comes from the line of Wamsi Mohan with Bank of America. Your line is now open.

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Yes, thank you. Ron, can you talk about the gross profit at the product level? If you could bridge that sequentially from last quarter to this quarter the 150 bps sequentially? And given the revenue deceleration that you have seen, do you think that you can hold the 50% product gross margin over the next year or so, especially when the competitive environment becomes a little tougher within the -- around the mid-range storage product launches that are anticipated to happen later in the year?

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yes. Thanks, Wamsi. Yeah, I mean, if you look at the last eight quarters, we've grown product margin each of the last eight quarters year-over-year. And our intent is still to do that. The target we gave you was 55% to 56%, we still plan to do that. The bridge from Q2 to Q3 on the products side, remember this is always a seasonal thing that happens with the public sector quarter being Q2. And then typically we have a follow-up in that business. So, that's very traditionally followed (ph) each of the last five years. So, we had some of that seasonality effects of the headwind and then we had no ELAs in the quarter. We had in the last quarter and that's offset with some benefit from NAND pricing.

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Okay. Great. And George, just a quick clarification for you. I think you noted elasticity of demand that sort of kick in given these NAND prices. Is there typically three- to six-month lag that you expect to see this elasticity of demand in this macro environment sort of clouding, maybe the elasticity of demand from kicking in faster?

George Kurian -- Chief Executive Officer and President

We think that over time, as NAND prices continued to decline that customers will shift the mix of their business from disk-based systems to flash-based systems. We saw good acceleration in our flash system counts through the course of the quarter. We saw some incremental caution in terms of how much capacity customers were buying which could be correlated to buying for today's needs as opposed to building out for their entire future requirements. So, we saw a little bit of that. It's reflective of a bit to the macro environment. We believe that as NAND prices continue to move favorably, it gives us an opportunity. We are well-positioned in the all-flash market. We have strong differentiation with software which has allowed us to preserve and even grow gross margins. And if you look at the ASPs of a flash-based system as opposed to a disk-based system, they are actually higher. So, we think that's a good trend for us to capitalize on.

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Wamsi. Next question?

Operator

Our next question comes from the line of Aaron Rakers with Wells Fargo. Your line is now open.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Yeah. Thank you for taking the quick questions. First of all, could you just help us understand, I mean, the rate of deceleration that you saw during the month of January? And as you thought about the guidance for this current quarter, your assumptions, how maybe February played out? And how -- what assumptions you're making relative to what you saw in January as far as any kind of improvement? I have a quick follow-up.

George Kurian -- Chief Executive Officer and President

I would say that we felt very good about where we were within the quarter sort of heading into the Christmas holiday and things changed materially through the last week of December and really January. I think that we did not see any change in the competitive dynamic, win rates or any of those aspects. We just saw an increased amount of scrutiny in terms of spending within our customers, them requiring more approvals and just buying for today as opposed to buying the full scope of what they plan to buy with us. I think that with regard to some of our largest customers, the global customers that are exposed to geographies around the world, as well as to public sector, there will be time before they come back to their normal course of spending, right? Some of that is related to sort of clarity on how their businesses impacted and some of that like in public sector is, it takes time to get the workforce back and into normal operating cadence which is reflective of our caution in Q4.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Okay. That's very helpful. And then on the NAND pricing front, can you just help us understand what rate of declines you're currently seeing on the flash side? And how you would characterize your ability to hold flash pricing in the market?

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yeah. The price declines we're seeing are not particularly linear. They continue to go down. I think what we -- you got to remember is the storage industry in our Company's history is predicated on decreasing commodity pricing. So, in many ways, it's too early to catalyze the demand for new use cases and drives the never-ending appetite for increasing data consumption. So, it's something we're predicting. That's why we have overrotation on flash. We know that that's the growth area. The price reductions helped that growth. As George said, you see the elasticity between the different types of media. And so as NAND prices come down, more workloads move to all-flash.

George Kurian -- Chief Executive Officer and President

And we're seeing that. If you look at the system counts and capacity counts through the course of this fiscal year, they have been both up quite substantially. I think what we noted this quarter, especially in January, was a little bit of a step back in caution around capacity. System counts continued to be really good.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Okay. Thank you very much.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Aaron. Next question?

Operator

Our next question comes from the line of Ananda Baruah with Loop Capital. Your line is now open.

Ananda Baruah -- Loop Capital Markets -- Analyst

Hey. Good afternoon, guys. Thanks for taking the question. I appreciate. Hey, George and Ron, any greater context you can provide on what your large customers are using a Signpost? You know, I mean, you mentioned, George, I think, in the prepared remarks if they're looking at their end business. And then just quick follow-up to that, do you have any sense of if they're pausing on how broad it is, they're pausing on new implementations? Are they milking capacity, not milking -- but are they sort of raising capacity on existing project? You mentioned that they might be adding less capacity on new projects like that. Would just love any more context around those two things.

George Kurian -- Chief Executive Officer and President

I think it's just too early to draw broad conclusions. I would say that January represents a new budget cycle for a lot of our customers. And as they get their planning in place, I think they took a little bit longer this year than typical because of the uncertainty. I think we saw the transformational projects that have multi-quarter implementations continue a pace. I think in the net new projects, I think people were probably a little bit more cautious waiting for clarity in terms of how their business rolled out. I would say in terms of our book of business, all of the strategic areas of focus for us, all-flash arrays, private cloud and our cloud data services, we feel good about our progress across all of those dimensions. They really reflect the strategic aspect of our discussions with customers and we feel good about the progress on all of those dimensions.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Just keep in mind even if you isolate Q3, it's really -- we were up 2% from the midpoint. And if you look at the full year based on the midpoint of Q4 guide, we're off maybe a little over -- almost two points in the full year. So, in the scope of the greater scheme of things, we're still pretty much on exactly, we thought, from mid single-digits.

Ananda Baruah -- Loop Capital Markets -- Analyst

That's great. Thanks for the context.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Ananda. Next question?

Operator

Our next question comes from the line of Katy Huberty with Morgan Stanley. Your line is now open.

Katy Huberty -- Morgan Stanley -- Analyst

Yeah. Thanks for the question. Ron, for you on gross margin guidance, if I look back at the last two fourth quarters, total Company gross margins were actually up a little bit sequentially despite the fact that the lower margin product business was growing very fast. And you didn't have as much help from NAND. So, can you just talk through why this year, you think, total Company gross margins are down sequentially?

Ron Pasek -- Executive Vice President & Chief Financial Officer

So, Katy, well, we -- I think the better compare is really year-over-year and I think that's a more meaningful compare. And then remember what we typically see sequentially is, and you see this from Q1 to Q2, Q2 to Q3 generally and Q3 to Q4, the higher weight (ph) of product margin and product revenue which grows, this is a slightly lower margin than the services margin, so that always puts pressure. That's a mix issue that we see all the time.

Katy Huberty -- Morgan Stanley -- Analyst

Okay. I think, George, this is a follow-up, I think a year ago, you talked about exiting this fiscal year with perhaps...

Kris Newton -- Vice President, Corporate Communications & Investor Relations

I think we lost Katy.

Katy Huberty -- Morgan Stanley -- Analyst

Sorry, sorry. Just a follow-up for George, about a year ago, you talked about exiting this year with $6 million of cloud services revenue. And it looks like you're tracking a little bit below that. Why do you think that is? Or is that not the right way to think about it? Thanks.

George Kurian -- Chief Executive Officer and President

We are in the foundational year of our cloud data services business. I would say we're a bit behind where we expected to be in terms of the operational readiness of our service offerings with our cloud providers. We are, as we said, generally available with AWS. We are, you know, in controlled pilot production projects with both Azure and Google, and we expect them to be available imminently. I would say that we are probably 0.5 basis point toward -- below where we guided for the full year revenue. But we are excited that the results that we're seeing. It confirms all of our expectations in terms of differentiation. We have broadened the range of use cases and workloads that we serve. And so as soon as we get to generally available with these cloud providers, we feel very good about our ability to inflect the business and return and accelerate that. In terms of our long-term model for cloud data services, we're not backing off the projections we had. As Ron mentioned, we feel confident about our long-term model for the whole business as well as for our cloud data services.

Katy Huberty -- Morgan Stanley -- Analyst

Thank you, George.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Katy. Next question?

Operator

Our next question comes from the line of Steven Fox with Cross Research. Your line is now open.

Steven Fox -- Cross Research -- Analyst

Hi. Good afternoon. Just one other question on the slowdown you saw in January. Is there -- could you isolate it to what verticals maybe were more -- were, you thought, more in terms of the slowdown or geographic regions? And given we're talking about longer term start-up projects like what would you say would be the extended decision timeline versus what you previously thought for these things closing or starting to ramp at the pace you originally anticipated?

George Kurian -- Chief Executive Officer and President

You know, I would say that one of the areas that we talked about as having some decisions pushed out was in U.S. public sector, where we said in Q2 some decisions pushed out. We saw the recapture of pre-pondering (ph) majority of those decisions in Q3 and we were able to move those projects forward. With regard to the broader macro, I don't think there were any specific industry trends that we noticed. I think that clearly those industries with specific exposure to China and public sector were incrementally more cautious. But I think there weren't any other specific trends that we could draw out. With regard to the U.S. public sector, as we said earlier on the call, we think that it will take some time for the government to get back to full-fledged operations. And so we don't have perfect visibility into how projects shape out through the course of the coming quarters. S, so we're being incrementally cautious there.

Steven Fox -- Cross Research -- Analyst

Great. That's very helpful. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Steve. Next question?

Operator

Our next question comes from the line of Mehdi Hosseini with SIG. Your line is now open.

Mehdi Hosseini -- SIG -- Analyst

Yes. Thank you. One question for George. How do you see the replacement cycle for 10K RPM train-out (ph) for the remainder of 2019? Is it going to be more of late in the year? Or should we think of this cycle kicking in next year? And for Ron, how -- I know this is a little bit far out, but as we look into fiscal year '20, how aggressive are you going to be in managing your OpEx?

George Kurian -- Chief Executive Officer and President

Let me take the 10K RPM drive question. I think there's still work to be done to get a viable solution to replace some of the capacity points that 10K drives or focused on. If you notice the majority of the 10-K drives that are still being deployed are actually lower capacity points than some of the TFC NAND solutions that are available in the market and comparable effective dollar per gigabyte price points. So, you know, you can see some customers, let's say, listen, I want to strategically move to all-flash for its benefits. That increasingly starts to look at that as an option. But I think for the full transformation to happen, you will need quad layer cell or the next sort of capacity price point in the NAND cycle. And we're working on that, but it will take some time.

Ron Pasek -- Executive Vice President & Chief Financial Officer

So, Mehdi, on your OpEx question, it's a little early for that. But I'll remind you what we said at the Analyst Day last April. So, I guided this year to be roughly flat on OpEx and actually next year as well. But remember we're still actively doing a ton of transformations. So, we're still doing a lot of investment and a lot of disinvestments. So, it's not as if we're just staying flat, not doing anything. We're really working and getting lot more efficient.

George Kurian -- Chief Executive Officer and President

You know, in terms of just to underscore that point, we have made all of these bets into the new parts of the market, private cloud, all-flash arrays, cloud data services and new pathways to market while simultaneously improving operating margins to a record. This quarter operating margins have been the highest in the Company's history, right? So, we will continue to stay disciplined on the operating expense side of the business, but we're not going to forego strategic opportunities for short-term gain. I think we have maintained discipline and you'll see us continue to invest into the future opportunities while being prudent about overall spend.

Mehdi Hosseini -- SIG -- Analyst

Thanks, guys.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Mehdi. Next question?

Operator

Our next question will come from the line of Alex Kurtz with KeyBanc Capital Markets. Your line is now open.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Yeah. Thanks for taking the questions, guys. George, just on hyperconverged, I know this has been a big area of investment for the Company over the last couple of years. I know it's still kind of work its way through the channel and with the sales organization if we're looking to fiscal '20. Are you prepared at this point to provide kind of a run rate that you think is reasonable or a percentage of product revenue? Or just serve a contribution to the overall product side of the business? That'll be helpful to understand.

George Kurian -- Chief Executive Officer and President

Our overall private-cloud business, meaning SolidFire deployed stand-alone or as part of a hyperconverged model. For large customers, they deployed stand-alone. For smaller and mid-market customers, they deployed as hyperconverged. As well as Object Storage, which are deployed for cloud-native applications in a private cloud form, were a substantial contributor to NetApp's revenue this quarter. I'm not prepared at this point to break it out, but I can tell you that they performed in a really good pattern across customer accounts, revenue contribution, units, strategic wins, you name it, we got it. And we think that as we look forward to fiscal '20, it gives us a really strong second-leg foundation to our growth, right? So we're already a leader in the all-flash array market. We are seeing accelerating -- a materially accelerating momentum in the private-cloud game. So stay tuned, we'll tell you more as we head into fiscal '20.

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

All right. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Alex. Next question?

Operator

Our next question comes from the line of Tim Long with BMO Capital Markets. Your line is now open.

Tim Long -- BMO Capital Markets -- Analyst

Thank you. Ron, you talked a little bit about the installed base when referring to the software and hardware maintenance and services. Just give us -- if you can just give us a little more clarity there? It was up a little bit year-over-year. It looks like it was down a little bit sequentially. So, is there a seasonal pattern there as well? And when do you think we could expect to see that line with a little bit more sustainable growth? Is it dependent on just all-flash array being a bigger piece of the overall base or cloud data services? Or what do you think will help move that line higher more sustainably? Thank you.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yeah. So, as we talked about, we continue to grow system counts in the installed base. And remember up until two years ago, we had 13 quarters of sequential decline in a row on the product side. So, we've really get to get back to 13 quarters of year-over-year increase in the installed base to really get back to where that -- you'll see that grow again. So, we're probably several quarters away from that. We don't -- as you know, we don't guide that discretely, Tim. So, even though we'll give guidance on the next call for FY '20, I won't guide it specifically. I'll give some general color though.

Tim Long -- BMO Capital Markets -- Analyst

Okay. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Tim. Next question?

Operator

Our next question comes from the line of Simon Leopold with Raymond James. Your line is now open.

Simon Leopold -- Raymond James -- Analyst

Hey. Thank you for taking the question. I wanted to see if you could talk a little bit about what's happening in your competitive environment? And to what degree your growth is driven by your customer base upgrading their base of NetApp platforms versus to what degree are you dependent on basically taking footprint from others in the marketplace? Thank you.

George Kurian -- Chief Executive Officer and President

We did not see any change in the competitive dynamic through the quarter. I would say that when you look at our all-flash array business, it is expanding wallet that we used to not have within our traditional enterprise customers, as well as through our cloud solutions, both private cloud and certainly public cloud solution, we are expanding to net new customers. I'll simply give you some data, which says that all of our cloud customers that we are engaged with either through the hyperscalers or through our own cloud software offerings. Two-thirds of them are net new to NetApp. So, they are opening up new relationships and new logos for us to acquire. So, we did not see any fundamental change within the comparative landscape. We think that as the market transitions from disk-based to flash-based systems, given that we are a leader in all-flash with the substantially higher market share percentage than we are in disk, there are a lot of weak large players in disk-based system that we will take share from, IBM, Hitachi, Fujitsu, Oracle HP, there's a lot of them. And even Dell has a challenged mid-range portfolio and IM portfolio. So, we feel good about our opportunities. We've got to execute to capture them.

Simon Leopold -- Raymond James -- Analyst

Thank you for taking the question.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Simon. Next question?

Operator

Our next question comes from the line of Jason Ader with William Blair. Your line is now open.

Jason Ader -- William Blair -- Analyst

Yeah. Thank you. George, you know, Cisco just reported and they didn't see the macro issues that you guys apparently did. So I'm just wondering how do you explain that, number one? And number two, do you think there might be something else going on in terms of maybe NAND pricing causing some customers to delay just because they want to see where prices go in the market?

George Kurian -- Chief Executive Officer and President

You know, we did not -- I can't comment on what Cisco saw or not, so I would leave that to Chuck to comment. I think with regard to our business, what I can tell you is, we maintain discounting through the end of the quarter. So, it's not a matter of, hey, if you offered lower price, customers would step forward and transact. I would tell you based on being involved deeply in many of these transactions, we saw an increased level of scrutiny on transactions, where you would have to get more purchasing approvals or provide for greater explanation of ROI or business case or things like that. And so I would just tell you that if it were as easy as providing a discount to deal with forward price NAND contract, we have the vehicles to do that and we would have applied those.

Jason Ader -- William Blair -- Analyst

Okay. And then one quick follow-up for you, George. Just on AWS reinvent this year, Andy Josh, he spent like half an hour talking about Amazon's new file-based storage offerings. And I was just wondering what impact you think that might have on your offering through AWS?

George Kurian -- Chief Executive Officer and President

We continue to see really good uptake of our cloud volume software through AWS. And so I'm sure he has his own offerings, but that hasn't had any impact on NetApp.

Jason Ader -- William Blair -- Analyst

Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Jason. Next question?

Operator

Our next question comes from the line of George Iwanyc with Oppenheimer. Your line is now open.

George Iwanyc -- Oppenheimer -- Analyst

Thank you for taking my question. George, Europe looked to behave a little bit differently, it looked relatively strong. Can you give us an idea of what's happening there? And then just a quick follow-up as well.

George Kurian -- Chief Executive Officer and President

You know, it was really good execution by European team. We are the leader in all-flash arrays in many parts of the European market. We have big strategic relationship with the customers. There is volatility in the European political landscape. We did see some GDP changes. We're being cautious about the overall environment, but I just want to say that our team executed well and stayed in control of the business till the end.

George Iwanyc -- Oppenheimer -- Analyst

Okay. And can you give us an update on your Lenovo partnership, you know, that's helping in China?

George Kurian -- Chief Executive Officer and President

It's too early to comment about the success of the partnership. We are in the market. We are seeing wins that are additive to the NetApp footprint. It's too early for me to characterize them in terms of size or color except that listen, this is additive to NetApp. I think with regard to China, it gives us a pathway into that market that is isolated from some of the trade tensions. The NetApp team finished the NetApp quarter well and executed well and I want to thank them for that. And we're looking forward to the joint venture getting off the ground soon enough and we'll keep you posted, as the news of that and the operational readiness comes online. So, we feel like the China approach that we have is positioned well to endure all of the challenges that might exist between the geopolitical -- in the geopolitical relationship and it allows us to focus from a branded channel perspective on the rest of the world while Lenovo helps us with their enormous resources in China. Stay tuned.

George Iwanyc -- Oppenheimer -- Analyst

Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, George. Next question?

Operator

Our next question comes from the line of Paul Coster with JPMorgan. Your line is now open.

Paul Coster -- JPMorgan -- Analyst

Yes. Thanks for taking my question. The macro uncertainty that you saw in January that was manifesting the slight changing behavior of your large customers. Was that also true of the cloud service providers either as partners or even as customers?

George Kurian -- Chief Executive Officer and President

We don't -- the three major hyperscalers, meaning Amazon, Google and Microsoft, do not buy hardware from us. They work with us where we deliver a service through their data centers to customers. So they're more like a partner. We saw no evidence of them backing off. In fact, the range of use cases and the deployments that we have with them are widening rather than narrowing. There were -- you know, there are other cloud service providers who, we sell to, is sort of not the super jumbo hyperscalers. And across them, there was a variety of puts and takes. I think many of them are being careful to prioritize the investments around their best opportunities. For example, 5G wireless, right? So I would just say they're going through one of these evaluation of priorities process and so we did see some changes in that mix.

Paul Coster -- JPMorgan -- Analyst

Okay. And then the other sort of big secular decision is happening of course is more and more workloads and data is being pushed to the edge. Are you seeing any manifestation of that to your business?

George Kurian -- Chief Executive Officer and President

Yeah. We are pleased by the growth of the use cases that we are deploying in the edge. So, we have software-defined solutions that are part of ruggedized environment that are deployed at the edge of industrial and public sector use cases. We saw good traction. We saw good traction with our Object Storage portfolio providing a private cloud for certain advanced telemetry use cases in autonomous driving. We saw a good adoption early, but still good adoption of some of our AI solutions to crunch the data that is generated at the edge and brought back to the core. So, we remain optimistic that our solution portfolio is good and differentiated and the number of growth engines we have as the macro stabilizes is certainly broadening from even a year ago.

Paul Coster -- JPMorgan -- Analyst

Okay Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Paul. Next question?

Operator

Our next question comes from the line of Jim Suva with Citi. Your line is now open.

Jim Suva -- Citigroup -- Analyst

Thanks very much. George, I think you've been very clear about the demand environment and a lot of questions on that. So, maybe I'll switch a question over to Ron. Ron, in the past few quarters, there were you know several ELAs that came up and then NAND this quarter. I think some people were thinking that ELAs might just kind of be a normal course of doing business. So with none this quarter, is the normal course of doing business is one or two a quarter kind of not really how it's going to turn out or were there a couple of customers who signed ELAs and just other people don't want that? Or any type of behavior change on just kind of the topic of ELAs? Or just simply is it lumpy and we shouldn't expect it to be one per quarter or something like that?

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yeah. You know, it's a good question. Last quarter, I mentioned it's hard to anticipate when they're going to land. So, I gave a full year view this year and the next year as you should expect roughly 2% of revenues as ELAs. It is lumpy. They're hard to predict. There will be quarters when they're 0, there will be quarters when they're quite a bit more than that. So, it's just a really difficult thing to predict and I can only give a full year guide on it. It's going to make some quarters difficult to compare. This quarter -- this year, in Q1, we had a very robust ELA quarter. That's going to be a difficult compare.

Jim Suva -- Citigroup -- Analyst

Ron, it sounds like...

George Kurian -- Chief Executive Officer and President

Hey, Jim. We did not anticipate ELAs nor did we see them. So, it performed according to plan.

Jim Suva -- Citigroup -- Analyst

Yeah. I just want to make sure there's no change in behavior. It was more just a timing of it and things like that.

Ron Pasek -- Executive Vice President & Chief Financial Officer

That's right. And remember, we did about $90 million in Q1 and about $20 million last quarter in Q2. So, we really don't have much left to do to get to that full year 2% guide.

Jim Suva -- Citigroup -- Analyst

Thank you so much for the clarification that's greatly appreciated.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Sure.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Jim. Next question?

Operator

Our next question comes from the line of Karl Ackerman with Cowen and Company. Your line is now open.

Karl Ackerman -- Cowen and Company -- Analyst

Good afternoon, George or Ron. I guess, Ron, looking at progress margins, excluding ELAs, with enterprise SSD prices declining roughly 20% this quarter and the next. Would you expect to seeing massive whip higher in your product gross margins beyond April? And you continue to improve hardware maintenance margins. Certainly an impressive feed for sure. What do you think has been the biggest key contributor to that improvement in hardware maintenance margins? And why would I be wrong to conclude that business couldn't have perhaps an eight handle on gross margin over the next few years? Thanks.

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yeah. So, the first part of your question, we are seeing some benefit in total margin for NAND. But it's really more of a focused effort really over the last eight quarters, not just in the last couple of quarters. So, it's hard to anticipate what might happen and I'm not going to telegraph what I think might happen other than I'm confident we'll get back to 55% or 56% eventually on product gross margins. I've been pretty clear about that. On the hardware maintenance margins, you know, I think you've got to be a little careful, we do have competitors in that space. We have to be careful what our margins are and what we charge, we need to make sure that customers feel that we can provide a quality service at a reasonable price. And they can see those gross margins as well. So, you've got to make sure they're not ridiculous.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Karl. Next question?

Operator

Our next question comes from the line of Steve Milunovich with Wolfe Research. Your line is now open.

Steven Milunovich -- Wolfe Research -- Analyst

Thank you. George, you talked about the importance of executing in the future. Could you talk about the evolution of your go-to-markets? And one thing i've heard is that NetApp may not be as good as some competitors and selling to new customers not as comfortable selling up to the CTO, the CIO, the CFO and I know that this is also part of your selling value to get that 55%, 56% product margin so and kind of an update on go-to market?

George Kurian -- Chief Executive Officer and President

I think it's a place that we continue to work to improve our capabilities, right? I'd say that over the last year and half years to two years, we've opened up new pathways to market. For example, with Lenovo into parts of the world that we have historically not had a lot of footprint with the hyperscalers into the top of the accounts where big digital transformation projects are and have expanded the total addressable market as the result of solutions like our private-cloud solution. We have continued to optimize our sales coverage model, so that we can align resources to go after net new accounts and net new workloads. And we believe there's substantial total available market for us to go address. And so this is an area where we have to improve and we're going to continue to try to do so every quarter.

Steven Milunovich -- Wolfe Research -- Analyst

Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Steve. Next question?

Operator

Our next question comes from the line of Eric Martinuzzi with Lake Street. Your line is now open.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Yeah, question for George. The -- in your prepared remarks, you talked a little bit about the installed base being such a terrific opportunity, because I think it was only 15% that has gotten their purchasing all-flash array. In some ways, that's encouraging, because it shows the wide-open opportunity. But in some ways, we've heard that number at least, I can recall, hearing it several quarters now. I'm just wondering what is it that's got the installed base maybe reluctant is the wrong, but what can you do to enhance the adoption of all-flash in the installed base?

George Kurian -- Chief Executive Officer and President

Installed base is a very, very large number of systems. And so what -- as we are growing our flash systems, we are also simultaneously growing our installed base, right? So, both numerator and denominator are growing. The things that will help capitalize the movement are really consolidation and economic projects to improve that installed base. As flash gets cheaper, it certainly makes it a more viable prospect to help customers upgrade their installed base and some of these next-generation data center projects get under way in our customers. There's opportunity to certainly improve that conversion. But it will take time just given the magnitude of that installed base.

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Do you have any like a two- to three-year horizon where you expect that 15% could become 25% or 30%?

George Kurian -- Chief Executive Officer and President

I don't have any forecast at this point. I do think it'll follow the trend of our flash opportunity. And we're mindful of the fact that, hey, our installed base is an opportunity.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Eric. Next question?

Operator

Our next question comes from the line of Nick Todorov with Longbow Research. Your line is now open.

Nick Todorov -- Longbow Research -- Analyst

Hey, guys. Good afternoon. It sounds like you're rightfully cautious on the large customers side in the U.S. public sector. But I just wanted to understand your underlying guidance assumptions for the channel business. Are you guys as rightfully as cautious as they're? There's a little bit more optimism into that end of the market? And overall, what is the outlook for 2019? How you are spending that you're getting from the channel business?

George Kurian -- Chief Executive Officer and President

You know, we have roughly 80% of our business fulfilled through the channel and that's the number that we break out in the categorization of our financial metrics. That number had stayed relatively stable for a very long period of time and we don't foresee a substantial mix shift this coming quarter or next year, right? I think within that channel number, there are a set of customers that the channel fulfills for large customers and others for small. The small -- medium-customer segment performed better this past quarter. We continue to believe there are growth opportunities for us given our share in that market. We're more cautious about the large customers who have global businesses.

Nick Todorov -- Longbow Research -- Analyst

Okay. Got it. Thank you.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thank you, Nick. Next question?

Operator

Our next question comes from the line of Rod Hall with Goldman Sachs. Your line is now open.

Rod Hall -- Goldman Sachs & Co -- Analyst

Hi, guys. Can you hear me this time?

George Kurian -- Chief Executive Officer and President

Yeah.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

We can.

Rod Hall -- Goldman Sachs & Co -- Analyst

Wow, it's a miracle. Okay. Thanks for the chance again. I wanted to zero in on the year-over-year growth rate on the revenue. I just -- I'm looking at the trend here back in April of '18, it was 11%, 11.6%, then 7. 2%, then 1.6% in January and then you're guiding for basically flat, maybe down just to $1 million or $2 million. And so I guess what I wanted to ask is whether you believe this April guided quarter is the bottom on that trend? And if you don't believe that why not? And if you do believe it, why do you believe it's the bottom?

Ron Pasek -- Executive Vice President & Chief Financial Officer

So, you know, I think what you've got to remember is the guide we gave which looks roughly flat year-over-year had 2 points of currency headwind. The 11% you mentioned last year had 2 points of currency tailwind. You know I would think we'll be able -- we're going to do mid single-digits next year that's the guide I can tell you right now. So, I don't know how that will quarterize, but obviously that has to be -- we have to be growing from where we'll end in Q4.

Rod Hall -- Goldman Sachs & Co -- Analyst

So, Ron, you'd be just staying than the January quarter's the bottom and you had the 2 points back you're kind of -- well, you're kind of flatlining on the growth that you saw in January and then from here we can guess what the trajectory might be?

Ron Pasek -- Executive Vice President & Chief Financial Officer

That's right. That's right.

Rod Hall -- Goldman Sachs & Co -- Analyst

Okay. Thanks for that.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Thanks, Rod. Next question?

Operator

Our next question comes from the line of Nehal Chokshi with Maxim Group. Your line is now open.

Nehal Chokshi -- Maxim Group -- Analyst

Yup. Thank you. So, I think DSOs were up five days year-over-year. So presumably that means that things were a little bit more back-end-loaded than usual yet. You talked about how you did see a slowdown at the back end of the quarter. So, hey, can you help bridge that perhaps maybe you saw a loosening up of that demand at the end of the quarter, but not enough to make up for the shortfall at the beginning of January?

Ron Pasek -- Executive Vice President & Chief Financial Officer

Yeah, Nehal, it was really odd. It was not back-end loaded. We saw kind of that demand as we talked about kind of wane in in January. So, that's not the issue. When I dissect the reason for the escalation DSOs, which is not significant. It's just a mix of customers that has slightly different terms than they did last year. Wherever you end up with collections at the end of the quarter based on that group of customers could be different than the prior-year compare -- prior-quarter compare. I would point out that we're still in a very negative cash conversion cycle. So, I'm pretty happy about that.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Go ahead, Nehal.

Nehal Chokshi -- Maxim Group -- Analyst

Yeah. George, you mentioned that you're a bit behind on the operational capability of the cloud data services with your cloud service providers. Could you delve into why it's behind? And then also there has been some management shakeups that some of these cloud service providers create some opportunity for NetApp as well.

George Kurian -- Chief Executive Officer and President

Well, we've got really good long-standing relationships with them. We are performing deep technical integration of our technology into their service delivery platform and we're going through test-again certification, right? So, we're going to be imminently available and we look forward to that. We are excited that the production pilot that we have going on with their customers. So stay tuned. I think we have an expanding range of opportunities through those cloud providers.

Kris Newton -- Vice President, Corporate Communications & Investor Relations

Well, thank you, Nehal. I appreciate it. And now I'll pass it back to George for some final remarks.

George Kurian -- Chief Executive Officer and President

Thanks, Kris. Despite the near-term demand headwinds cleared by the uncertain macro, we were able to beat on gross margin, operating margin and EPS. We continue to have strong discipline in managing the business. As the economic uncertainty abates, we are well-positioned to reaccelerate our positive momentum by capitalizing on the key market transitions created by digital transformation. We are playing into these transitions from a position of strength. Our solutions allow us to reach new buyers while growing our installed base. We are a leader in all-flash. The momentum in our private-cloud business is accelerating. Our public cloud solutions with large hyperscalers are poised to deliver strong growth in fiscal '20. All of this supports our confidence in our long-term model for mid single-digit top-line growth. Thanks for your time. I look forward to speaking to you again next quarter.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.

Duration: 68 minutes

Call participants:

Kris Newton -- Vice President, Corporate Communications & Investor Relations

George Kurian -- Chief Executive Officer and President

Ron Pasek -- Executive Vice President & Chief Financial Officer

Andrew Nowinski -- Piper Jaffray & Co. -- Analyst

Matt Sheerin -- Stifel -- Analyst

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Aaron Rakers -- Wells Fargo Securities -- Analyst

Ananda Baruah -- Loop Capital Markets -- Analyst

Katy Huberty -- Morgan Stanley -- Analyst

Steven Fox -- Cross Research -- Analyst

Mehdi Hosseini -- SIG -- Analyst

Alex Kurtz -- KeyBanc Capital Markets -- Analyst

Tim Long -- BMO Capital Markets -- Analyst

Simon Leopold -- Raymond James -- Analyst

Jason Ader -- William Blair -- Analyst

George Iwanyc -- Oppenheimer -- Analyst

Paul Coster -- JPMorgan -- Analyst

Jim Suva -- Citigroup -- Analyst

Karl Ackerman -- Cowen and Company -- Analyst

Steven Milunovich -- Wolfe Research -- Analyst

Eric Martinuzzi -- Lake Street Capital Markets -- Analyst

Nick Todorov -- Longbow Research -- Analyst

Rod Hall -- Goldman Sachs & Co -- Analyst

Nehal Chokshi -- Maxim Group -- Analyst

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