 From the CUBE Studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is a CUBE Conversation. Hi, I'm Stu Miniman and welcome to this special CUBE presentation. We're talking with Pensando and their event is Future Proof, Your Enterprise to help us really understand where the company is and the partnerships, what they're hearing from customers. Really happy to welcome back for our program, Randy Pond. He is the Chief Financial Officer of Pensando. Randy, thanks so much for joining us. My pleasure, thanks for having me. All right, well, Randy, obviously today, we're talking to people everywhere they're remote, so not quite as plush as the last time we talked to you at the Goldman Sachs office in New York City, beautiful view in the background, but that was a great backdrop. When you talk about bringing a company out of stealth, John Chambers there, your Chairman, Antonio Neary, talking about the investment and the partnership and Goldman Sachs, an excellent customer there. Here we are a little bit more than six months later, and that partnership with HPE is taking the next step. You've got the general availability this month of the HPE ProLiant with Pensando solutions. Bring us up to speed a little bit though. We'll talk about HPE maybe in a second, but your customers, your progress, I believe it was up to your C round of funding when you came out of stealth, so give us your viewpoint as to where the company is today. So today I think we're sort of divided conversation between financial and from a business perspective. So financially, we're in great shape. The C round came together very well. We were way oversubscribed. We raised our limits to secure additional funding, which has worked out really well given where we are currently with the pandemic. So financially, we're in great shape. Our case burn is held steady and we've done a good job of forecasting that, so I think the board's pleased. From a business perspective, we've done a really good job delivering on our road mass and product perspective. So the team has released the cloud production. I mean, released the cloud of customers about a month or two ago. We just did a release to the enterprise space, the HPE. We got another release coming up at the end of this month. There's releases scheduled for Q3 and Q4 this year. Our second ASIC will come out of, we'll come back, I think the 15th of June. So we're going to get access to our new design. I think that's great news. Some of our cloud customers are excited about that because it provides a little more capability than the current device does. So, and we had a great Q1 and we're off to a great start on Q2. We overachieved in Q1. We look like we're going to overachieve again in Q2, both in terms of units and dollars. So we're in a pretty good place. Yeah, I like, we can break down to kind of the financial and the business piece. On the financial side piece, you've worked with this team for quite a long time. There's got to be a different financial model that you put in place when you know that you've got really your exit built in as had from the three spin-ins before. It proved the product, get it out there. And then, well, I've got an in-house team with the full channel there as opposed today. Is the model we should be thinking, what percentage of that is OEM? You talk about, there's the cloud model and the enterprise model. And how do you structure things a little bit differently for that time of model versus maybe what the spin-ins were or a traditional startup that might have a few different models to choose from? So we're much closer aligned to a traditional startup environment. Now, the one unique point is the HPE relationship because they've been my primary, they are my primary go-to-market partner in the enterprise space today. They're also a strategic investor. So the reality is in the enterprise space we have to sell the product through the OEMs. Most of the average enterprise customer doesn't have the capacity to install themself. That's a very different model than it is in the cloud side. So it's an indirect sales model, most likely through HPE and other server providers like Dell, Cisco, possibly Super Micro. Every customer has their sort of requested server manufacturer. On the cloud side, those individuals build their own. So that's a, I shifted them and they install it themselves. It's a different software model. It's a different manufacturing model. And then we have a more traditional direct sales model on that side where we've got a partner enablement model on the enterprise side today. We've set them up as both. HPE sort of serves like a quasi-Cisco environment for us because we're depending on their engine to find our leads and it's worked out really, really well. Excellent. Maybe bring us inside a little bit where you are with what you're talking about customer acquisition leading up to now and what's the expectation now that HPE is fully ready to roll? So we, let me just put the conversation again. There's the cloud side. So on the cloud side, we have three committed customers today. One is in production. The other two are going into production later part of this year. They need the release. We're going to give them in September, October timeframe, but they've committed to us from a design perspective. And then there's a follow on generation of product in 21 when they really ramp hard. I've already have a signed contract with two while I'm working on the third. On the enterprise side, we're modeling ourselves after the top 200 HPE customers right now, so they normally align themselves around financial services, pharmaceuticals, transportation, sled. We're working through those customers. We have active POPs than many of them today. They're in our sales pipeline. We manage that relationship together. Generally HPE opens the door. We explain the technology to the technical team. They say they can see a place for us and they let us stand up a POP. And then we go from there. Excellent. So Randy, we reference the global pandemic going on right now. It's been a bit of a bifurcated model in the tech world. It's been definitely a tailwind somewhat from the cloud standpoint. There's many infrastructure pieces that have seen an immediate acceleration, things like work from home technology. So there's certain devices and certain deployments. And there's other things that of course, we put a pause button trying too much uncertainty out there. What are you seeing out in the market and how's that impacting? You as a relatively new start-up. So in general, your point is well taken. The cloud players are telling us their demand is up dramatically. And therefore the signal they're sending us is they want to accelerate deployment and it's likely it's going to be bigger than we had originally had estimated. So that's been great news for us. In the enterprise space, it's really very different. We're not suddenly a lot of product of Walmart or Gap or the retail space. They're struggling mightily. Any hotels, motels, carnival lines is not buying our product today. But if you look at the financials, if you look at the farmers, their demand's up quite a bit. They're both buying ahead a little bit to hedge their bets in the supply chain for a situation today. And they're actually seeing their real demand go up. The banks especially have seen it go up because their work from home has gone through the roof. So it's been a good opportunity for us to sort of seize the moment and demonstrate how we can be part of their new implementations and bring new services to them. Yeah, Randy, wondering if you can actually give us a little bit of that voice of the customer and what is the problem you're solving? Because we talked about there are certain immediate initiatives that companies need to take care of. Absolutely like today, security is more important than ever. When people are working from home, the bad actors actually are trying even harder to get involved there. We talked a little bit about clouds. So what is that itch that Pensando scratches and therefore how do you fit into the current land? Sure. You know with our customers today, there's similar problems and dissimilar problems between the cloud and the enterprise. The similar problems is that Pensando quickly solves things like East-West security inside of their environments or compute environments, which is difficult to do today. It's expensive and difficult to do today and we provide it pervasively at wire rate. So that's sort of an easy sell initially. Another one has been pretty easy for everyone to look at is observability and telemetry. Because where we're positioned in the compute space, we see every packet which provides us with a lot of knowledge about what's going on in their environment. So that's been a pretty easy initial sell. In the case of the enterprise customers, we can solve other pieces of their solution that are either expensive or introduced latency or management problems, whether it's firewall technology or load balancing technology or micro segmentation technology, all of which we can do inside of our blade. And today has done either through appliances or through virtual machines consuming CPUs. In the cloud space, we do all of that. Plus we allow them to download their own image into our devices today, which is pretty powerful. We have a lot of memory and we have a lot of capacity from an ARM corp perspective. And we allow them to pick and choose the features and functionalities they want and then run everything at wire speeds at much faster speeds. The enterprise is running 10, 25. The cloud partners are running 25, 50 going to 100 where we're even more compelling, we think. Randy, I want to get back to talk a little bit more about HPE. You spent a long time working at Cisco. For a good part of that, HPE was one of your bigger partners on that. So tell us what it's like working with HPE. Any compare contrast would be welcome. You know, it's interesting. So the cultural environment of HPE under Antonio Neri is very similar to what we saw at Cisco. And he and John have a phenomenal relationship. It's a very collegial environment. It's a very bright environment. They move quickly for a big business where it's vastly different. Is there a much tougher on the numbers side because they under much more margin pressure and competitive pressures that we ever had at Cisco? Just an all fairness to them. But if we look into the organization, like the executive that was assigned to our account from a sales perspective, used to work at Cisco. I think one or two of his guys used to work at Cisco. There's program management people that used to work at Cisco. There are people in engineering that came from Cisco. So it's an environment that's similar enough that it's easy enough for us to navigate. And we're connected sort of at all levels, which has really been useful. And we have a weekly standing dialogue across all the different functions. So we're pretty deeply embedded with HPE right now and it's gone very, very well. Yeah. You said that, even with the global pandemic right now, that Pensando is a bit ahead of where you expected shipments to be. I'm curious always when I talk to the CFO, how do you see macroeconomic impact of what is going on there? Any concerns on your end about supply chain, either for yourselves or for partners like HPE? How do you see what we're currently going through and the recovery future? So it's an interesting question. Getting this pandemic sort of processed through the supply chains like a pig to a Python. There's just no way to get around it. I mean, we had the first breakdown where they closed the country of Malaysia and I just couldn't build final product. They literally just shut the place down. So it took us about 10 days to get ourselves up and running from a skeleton perspective. The government worked with us to let a small crew come into our manufacturing partner to get some finished goods out for one of our OEM customers. As we've come back up, we've seen lead times extend on some of the custom parts. It's just a fact of life. I think there's a little bit of an artificial demand that's driving the supply chain a little bit crazy right now because now people are panicked that what happens if it comes back? Will I get caught again? Can I get enough inventory to buffer myself for two weeks to three or four months being on how aggressive you want to be or a conservative you want to be in that space? And then I think as the supply chain trickles back online, you end up discovering that, yes, I can build final product and I can get the A6 in the memory, but now I want to buy some RS-232 devices. And it turns out that, sure, he's got them, but the magnetic that goes inside of it that comes from east, western China, they aren't quite up and running just yet. So we're seeing legacy problems, nothing catastrophic, nothing that's been painful. We've had to move some work around to get an incremental volume for ourselves. We've added fab vendors and a few other things. So it's really made us focus on second sourcing everywhere we can because we were, we thought we were small enough from a volume perspective, it wasn't that big a deal. We'll just get the second sourcing once we get the product market. That's heated back up when we're doing all that work now. So I think knock on wood. This is, our recovery has gone very well. We don't see any big problems in the supply chain. Now, I think the bigger the player, like an HPE and the longer the window they were shut down, the harder they pull when they turn the supply chain back on. So I think the big players, Cisco, HPE, and others, that it's gonna take them a longer time. I think they really see how this trickles all the way through, because you can't really get good visibility. How much safety stock or buffer stock does everybody have at every level of the chain? So if everybody pulls at once, do you run dry in a week a month? Is it fast enough to recover from production perspective? All those things I think are still not quite resolved yet. Yeah, just one other related aspect of the pandemic that I would love you to point on, work from home obviously is what everyone is doing right now. I'm curious if you think that, what the recovery looked like from that standpoint, is there anything from Pensando that makes you shift where you think about hiring it? I've been to the Cisco headquarters and it's a long street with a lot of buildings and a lot of people. And everybody's wondering, will that headquarters and centralized structure that we had before, is that forever changed? That's a great question. So it's for certain changed, I think until there's a therapeutic or a vaccine for the current COVID virus. So that's just a fact of life. And we've been comparing notes with a lot of other companies about what they're doing to bring the workers back who are comfortable and want to come back to work. Because even inside of Pensando, I've got some folks like this and I'm not comfortable coming back. I've got kids at home, I don't want to take the chance. That's fine, we don't have a problem with that. And quite frankly, we can make a case that in some of our functional areas, we're more productive than we were before the pandemic. In India specifically, this has been a boon for us because they're not getting on enough buses, they're not spending three or four hours trying to get back and forth to work. They're happy working from home. We're happy having them at home. The guy who runs India for us says, productivity's up and employee satisfaction couldn't be higher. Our plans now is we have to bring a small team back into our headquarters in Moffitas to bring up our new ASIC. So that's going to be 15 to 20 people and not all at one time. We're going to spread them out. We're already articulating what parts of the building can and can't be used, one-way hallways, masking, temperature taking, everything you would expect. The next phase for us is some sort of rotational work where we'll say we're going to bring 25% of the people in, 30% of the people in, you work a week, you're off for two, you work a week, you're off for two. Until we can get through the back of this thing, it's unlikely, it's almost impossible in my mind, we would bring back 100% of our employees into the building. Now, does that change the view long term? It's a great question because I think what it's forced us to do is to get more comfortable with remote work so that we can truly make it an option of any one employee in specific areas. Like the lab guys have to be in the lab and the IT guys got to be in the computer room, but if you're a software developer, if you're a marketing guide, you really have to be in the building. And I think it's pushed us to really learn to manage them more effectively with remoteness. And I think it provides us, at least with options going forward, when I hire the next 100, do I have to put them in a building someplace or do I just deal with them where they are and bring them into the fold? We've brought on dozens of people since the pandemic started and quite honestly, we onboard them, we train them and we mainstream them remotely and it's worked out great. Excellent, all right. Randy, let's bring it back to the HPE partnership for the final question. Sure. Tell us what we should be looking at through the rest of this year, what the general availability of this means to your business and the impact you expect to have on your customer. So from an HPE perspective, I think this is going to be great innovation that will bring it to the marketplace to their customer set. It allows them to, I think, separate themselves in the market, at least for some period of time. Until the other players get pulled along by the end users. The product has a pretty steep ramp, the front half and the back half of the year for us are dramatically different in terms of size and ramp and it really sets us up for a very large, we hope, fiscal 22, which for us will end in January 31st of 22. We're going to know, I mean, if we go GA in just a few weeks, we're going to get a sense so we can turn these pox into end customers. We're also going to see the ramp of the cloud customers in Q4. So I really feel like both for us and for HPE, the next three, four months, as we start getting back to some regularity of interacting with customers physically, not just remotely. And we see the early benefits and some of the early cost of ownership analysis on deployment of our technology, this could be dramatic for us and for them, quite honestly. All right, well, Randy Pahn, CFO of Pensando. Thanks so much. Really pleasure catching up with you and getting to discuss about how Pensando is helping to future-proof your enterprise. Thank you very much, it's my pleasure. Have a great day. All right, I'm Stu Miniman. Check out theCUBE.net for all our coverage. Thank you for watching theCUBE.