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On Tuesday, June 3, 2025, Pure Storage (NYSE:PSTG) presented at the 45th Annual William Blair Growth Stock Conference. The company outlined its strategic initiatives, highlighting growth areas such as enterprise solutions, AI, and hyperscaler opportunities. While the tone was optimistic, challenges in competition and market conditions were acknowledged.
Key Takeaways
- Pure Storage is transitioning from a product provider to offering outcome-based solutions.
- The company emphasizes its DirectFlash technology, particularly for hyperscalers like Meta.
- Evergreen One, their storage-as-a-service model, offers flexibility in uncertain markets.
- Pure Storage aims to capture market share in the growing enterprise storage sector.
- The company expects royalty revenue from hyperscaler engagements to boost operating margins.
Hyperscaler Opportunities
- Background: Hyperscalers are moving from HDDs to flash storage due to efficiency demands.
- Meta Engagement: Pure Storage began discussions with Meta over two years ago, focusing on DirectFlash technology for cost and efficiency benefits.
- Technology: Pure Storage’s custom-built drives enhance NAND flash utilization by 30%, offering significant power and space savings.
- Deployment: Production validation with Meta is ongoing, with large-scale shipments expected by fiscal year 2027.
- Financial Impact: Revenue from technology licenses will be recognized alongside shipments, positively affecting margins.
Evergreen One (Storage as a Service)
- Overview: Evergreen One is an SLA-based model, providing flexibility and reducing upfront risks for customers.
- Benefits: Adaptable to customer needs, it lowers risks in volatile markets, enhancing the value of flexibility.
- Market Impact: This model aligns with increasing demand for as-a-service offerings, as companies seek adaptable solutions.
Enterprise Storage Market
- Market Outlook: The enterprise storage sector is poised for low to mid-single-digit growth, presenting opportunities for Pure Storage.
- Competitive Advantage: With a comprehensive portfolio, Pure Storage engages strategically with enterprises to modernize storage infrastructure through PureFusion.
Q&A Highlights
- Meta and Other Hyperscalers: While Meta is not unique, lessons learned are accelerating discussions with other hyperscalers.
- Competition: Pure Storage competes with internal efforts of hyperscalers and existing technologies.
- Flash Technology: DirectFlash technology offers flexibility across all storage tiers, enhancing deployment options for hyperscalers.
In conclusion, Pure Storage’s presentation at the William Blair conference underscored its strategic positioning and growth potential. For more details, refer to the full transcript below.
Full transcript - 45th Annual William Blair Growth Stock Conference:
Jason Ader, Analyst, William Blair: Alright. Good morning, everyone. Oh, Thanks for being here. Kicking off the conference with us with Pure Storage.
I’m very happy to introduce Rob Lee, who’s the chief technology officer for Pure Storage. Also have, Paul Zayas, head of investor relations, some of you may know. You guys are becoming a regular here, so we we appreciate that. Kind of like a house, William Blair name. A lot of lot of lot of the folks here own it, on the on the private wealth side as well.
Before we begin, I, require to inform you that a complete list of research disclosures or potential conflicts of interest is available on our website at williamblair.com. And, from statements made in these discussions, which are not statements of historical fact are forward looking statements based upon current expectations. Actual results could differ materially from those projected due to a number of factors, including those referenced in PURE’s most recent SEC filings on forms 10 k, 10 q, and eight k. Alright. With that on with that out of the way, Rob, thanks for being here with us.
We’re just gonna do fireside chat format. And, I guess I didn’t introduce myself. I’m Jason Ader from William Blair, so nice to see a lot of familiar faces. And, we’re we’re gonna get we’re gonna get, rolling here, and we’ll we’ll have some time for questions. And then following this session, we’ll be up in Adler room, for the breakout.
So to start things off, Rob, can you just tell us what you see are the big opportunities that Pure is focused on at
Rob Lee, Chief Technology Officer, Pure Storage: the moment? Yeah. Absolutely. Thanks for having us back, Jason. So, look, I I you know, there’s a number of opportunities that we’re focused on at Pure as we think about growth, as we think about, you know, the future of the next couple of years.
You know, look, I think number one is the set of opportunities that still sit in the enterprise for us. If you look at, you know, what we’ve done over the last couple of years, expanding the portfolio now driving into the disc replacement ranges in terms of storage tiers, really being able to go and address the full suite of enterprise needs. We’ve still got a lot of growth left in the core enterprise business. Fusion, as we’ve discussed over the last couple of quarters, you know, in Charlie’s remarks as well as quite a bit on the calls, you know, is a significant strategic initiative that’s geared towards further expanding our footprint in the enterprise and building that network effect that’s, you know, really gonna help us grow and expand within those enterprise accounts. You know, I think AI, clearly a topic that’s top of mind for investors and customers alike.
You know, we’re now really the only company that’s got the full suite of, you know, offerings for AI from smallest research and and kind of experimental environments to the largest scale environments in the world. And then hyperscalers. Right? You know, we’ve had a robust dialogue with this community about our hyperscaler opportunity over the last year and a half, really driving from the initial pursuit of that opportunity to announce the design win and now progressing steadily towards production. So a lot of opportunities across the board, but those would be the key ones that, you know, we’re focused on here.
Great.
Jason Ader, Analyst, William Blair: You know, we’ll drill down on each of those. Maybe maybe we’ll start with the hyperscalers, probably the the one that you get asked the most about, so we’ll get that out of the way. So may maybe just to kind of frame for the audience here and for those, on the webcast, what have the hyperscalers done historically with storage, and then why do they care about what you guys are doing?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. So, you know, the hyperscaler environments, as we’ve discussed before, very different than the enterprise environments in a number of ways. You know, number one, they tend to tend to design their entire infrastructure stack, compute, networking, storage, software, all, you know, entirely integrated. They tend not to, you know, buy off the shelf systems and then and then just deploy fit for purpose products. They design those stacks wholly together.
You know, the other material way that hyperscalers have differed from the enterprise is somewhat paradoxically. They’ve lagged the enterprise in terms of mainstream flash adoption. Right? They’ve been able to through r and d, through, you know, their optimized designs. They’ve been able to drive a longer lifetime and or not service lifetime, but they’ve been able to stay on hard disk drive technology for a much longer period of time, because of those, optimized designs that they’ve put into place, over the last dozens of years.
What’s happening though is a couple things. One is, the disk drive technology, really is, in terms of a road map, in terms of rate of improvement, is coming to an end, and and they recognize that. The ability to, get further performance, further, you know, capacity and density improvements really is tailing off. And then number two, you know, they are pressed for power, power and space. And so this is an ideal moment.
This is kind of a point in time where hyperscalers, well, like the enterprises several years ago, are recognizing, hey. It’s time to move to Flash. They also recognize that there are inherent disadvantages with the most straightforward approach, if you will, of using commodity off the shelf SSDs. Recognize that with a direct to flash approach that Pure has with our direct flash technology, really, that’s the only approach that’s gonna give them the efficiencies, the reliability that they’re gonna go need. And so, you know, that’s really what’s brought us to the table in a lot of these opportunities is, you know, the prospect of helping the hyperscalers navigate the transition from hard disk drive technology to flash, being able to do that and get the reliability, the performance, and the economics they need.
And then number three, at a time when power and space are in such high demand because of GPU build outs.
Jason Ader, Analyst, William Blair: Okay. Great. Thanks for that background. Now on the design win with Meta, can you talk about how they’re gonna be deploying your product? Maybe maybe some sense of, you know, who you’re competing with in that process, and then, you know, what ultimately drove, their decision to to work with you guys.
And then we’ll talk a little more about the, like, the actual deployment process and the licensing. But maybe just start out with the, kind of the the the genesis of the win and, and, you know, how how that came together.
Rob Lee, Chief Technology Officer, Pure Storage: Sure. Absolutely. And I’ll hit those in reverse order. So, we’ve been, working with Meta. Well, Meta’s been a customer on IT side, on the AI and research side for a number of years, and and we’ve had some dialogue, you know, with the financial community about that over the years.
As far as the, the larger scale, hyperscaler kind of general kind of production environments, engagement. That started about two, two and half years ago. Started with initial discussions around the technology, direct flash or direct flash technology that is, what that would be capable of, in terms of, giving them, you know, cost savings, power and space savings in their production cloud environment. A lot of bidirectional discussions looking at TCO analysis, looking at configurations. You know, this is engineered engineer modeling of, hey.
You know, if we were to integrate this technology in a variety of ways, what would that mean for the environment? Through that process, you know, our teams identified very very easy to consume integration of our direct flash technology, really the software into their software stack. We identified a way to deliver the technology in a way that didn’t did not require them to fundamentally redesign their software that really could be more of a drop in replacement for the storage technology they previously used. And from there, you know, progressed towards, you know, some testing, some initial POC testing of the technology, you know, then wanting to see, hey. What what is DirectFlash capable of?
How does this fit within their stack? Moving all the way towards what we call a design win, really, which is that gate that they go through in their design process before which they’re evaluating technology saying, hey. What is it capable of? Could this fit my need? To some point in the engineering process, you you kinda stamp a plan and say, alright.
This is my plan of record. I’m moving forward with this. And and, clearly, you still have work to do to go integrate that and test and validate it, but that becomes a plan of record. And so that was really a process that we followed with Meta. I would say that one of the biggest drivers in terms of their motivation to work with us, you know, really was, you know, initially driven by long term, you know, view of TCO and cost savings, but significantly accelerated by view of the power and energy and space savings that that our technology was gonna go forward.
Jason Ader, Analyst, William Blair: And just for those unaware, what what is the difference between what you guys are able to deliver on the power and cost side the power and space versus, like, the traditional SSDs?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. No. That’s a that’s a really good point. So, you know, stepping back, one of the one of the significant differentiators, you know, within Pure’s flash technology is we don’t work with SSDs. Right?
We we build on flash based systems. We build off of the same flash NAND, NAND flash that, you know, is your tablets and phones and laptops. The difference is we source the rod chips. We don’t use SSDs. Instead, we build our own drives, and we move a lot of the work and the inefficiency that typically sits within an SSD, into our higher level software.
If we go back in time, SSDs, were essentially an industry technology coping mechanism. Flash came on the market. All the software in the world was built to write to hard disk drives. Hard disk drives behave very differently than Flash. SSDs were kind of that coping mechanism to be that translation layer to make flash look like and behave like hard drives for all the software in the world.
Like any translation layer, like any sort of go between middleman, if you will, there’s inefficiency introduced. There’s inefficiency measured performance, reliability, and ultimately density and cost savings. Our technology removes that middleman, and at high at large scale, you know, has very, very significant, benefits. To put some numbers on it, you know, our typical drives, we’re able to to get about 30% more utilization out of the NAND flash than SSDs. Right?
If you go buy you know, go to Amazon and you buy a 15.36 terabyte SSD and you were to tear it open, you’d find the same number of NAND chips, same chips in a lot of cases as our 18.3 terabyte drives. Right? And that extra 25, 30 percent comes from the efficiencies that we drive. For the hyperscalers, you know, we’re taking that that technology and those efficiencies and packaging it in much denser ways. We’re able to ship in the same form factor up to five, sometimes 10 times as much usable storage as they could achieve with SSDs, resulting in commensurate five to 10 x improvements or reduction in space and power requirements.
So when you put this in the context of folks that are looking at, you know, do I need to build, you know, n more data centers? Do I need to go, you know, refurbish, you know, why you know, this many more nuclear reactors? That that amount of power and space savings becomes very meaningful.
Jason Ader, Analyst, William Blair: Okay. Can you talk about how, where you are in the process, with with Meta in terms of the deployment and then, and then how the licensing works? Because, you know, probably a lot of people are thinking that that you’re just shipping, you know, hardware into these guys. When in fact, you know, you’re not actually gonna be recognizing any revenue from hardware. Correct?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. So let me let me hit both pieces of that. So in terms of where we are in process, mentioned before, you know, we’re that that gate, that design win where we become a plan of record, we’ve passed that gate. So we are part of that plan of record. There is additional testing, validation, and and ramp to scale, that is ahead of us.
You know, we’ve, we’re in the process of, that production validation testing as we discussed in in last week’s call. And this is really the stage of testing where they’re bringing the entire solution together inclusive of Pure’s technology, their technology, their software in a production ready, you know, essentially, a form to do pretty close to final validation. We would expect, you know, as anticipated at the end of the year, we didn’t we did expect the one to two exabytes of of the solution to ship later this year as, you know, as we expected going into this year, and that that would represent, you know, further progression of that validation testing into smaller scale pilots all the way to production deployments, which we would expect closer to our fiscal twenty seven as we discussed coming into the year. As far as, you know, what is the business model and the license structure look like, you’re right, Jason. We’re we would not be anticipating providing the hardware directly to Meta instead allowing them to leverage their supply chain.
We’d actually look at the business model here as more being centered around technology license or or royalty, if you will, that would be associated with the delivery of the solution and accompanied with a small maintenance support contract. And so we’ve gotten a lot of questions. Hey. How should I expect this to be recognized? We would expect that royalty to be generally recognized under product revenue associated and and co time with the shipment of the solution.
And support, we’d expect to come in over time during the over the duration of that support contract.
Jason Ader, Analyst, William Blair: Okay. So you you get the hardware and the software licensing, basically, plus the support over the lifespan. Yep. K. So then the the the the next obvious question is, like, you know, what percentage of the solution kinda goes to you guys versus to the hardware?
Do you have a have you talked about
Rob Lee, Chief Technology Officer, Pure Storage: that at all? In terms of the overall value of that stack, you know, we haven’t we haven’t broken out specifically. You know, I think we’ll be in a position to speak a little bit more as we ship the anticipated one to two exabytes later in the year. I think we’ll be in a a better position to break down more specifically, you know, kind of financials and and how that looks. You know?
But, you know, net net, I think the way I’d look about look at valuing the solution is, you know, look at the end of the day, the alternatives that the hyperscalers have, and I think this is a question you had earlier in terms of who are we competing with, we’re not there’s no other vendors at the table. Right? So let me just put that out there. Right? What we’re competing with is their alternatives in terms of moving forward their designs.
Well, what are those alternatives? Number one is the hyperscalers attempting to build a similar technology themselves, which we don’t see at the moment happening. They’ve tried in the past and generally have not progressed in those efforts. You know, number two is staying with hard disk drive technology, essentially moving you know, continuing to do what they’ve always done. And then number three would be attempting to move to SSDs and kind of the value second TCO that they get from doing that.
But really, are the three options or alternate options on the table. And so when we think about the value to Pure of that solution, generally, I’d be thinking about it as, you know, essentially the the total cost of ownership all in, right, of the SSD based systems and the hard disk drive based systems are gonna form somewhat of a floor and a ceiling, and so we’re gonna float somewhere in between that. And so, you know, if you look at what that total TCO is of the hard disk drive based systems, you know, you apply a bit of a premium for the, you know, the simplicity, the reliability, the longer service lifetimes we can go drive, and then back out, you know, some of the hardware elements, you’re gonna get pretty close to what we view as the value of
Jason Ader, Analyst, William Blair: the solution. I mean, this I I think it I guess it’s somewhat novel though to sort of figure out for you guys together with the customer to figure out, like, what’s the value of the software in the full solution. Right?
Rob Lee, Chief Technology Officer, Pure Storage: I mean, that’s sort of somewhat new. Well, it is. But again, you know, at the end of the day, for the hyperscalers, they’re looking at really, they’re looking at what are their options on the table. Right? It’s it’s continue with status quo.
It’s move to better technology with a significant, you know, cost premium, or if there’s a better option that, that we can provide, that solves, for acute issues that they have elsewhere in terms of power space and the associated cost savings of that, it’s all a balance there. Right? So you’ve got to float somewhere in between there in terms of, what what the value is to the customer.
Jason Ader, Analyst, William Blair: Okay. Great. And then what what have you guys said in terms of the impact on the on the on the margins or, you know, anything around the the business model for you guys in terms of long term impact, assuming this ramps up the way you want it to?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. So, I mean, the primary thing we’re looking at is and the primary lens we’re looking at it through is we expect this to be very operating margin accretive. Right? In the current you know, in the expectation of the licensing model that we outlined, I think you can make some assumptions in terms of what that translates to in terms of gross margins as well. But, you know, our primary lens is looking at this through an accretion lens.
Great.
Jason Ader, Analyst, William Blair: I want I want to open it up to questions in a minute, but one thing I did wanna have you address, which seems like it’s been a big trend in the market, is storage as a service models that you guys have helped pioneer. And I know that’s been, you know, a kind of a a growth area of the business. Can you just talk about what storage as a service is? What some of the history there is? Because it’s not a new concept, but it seems like in the last, you know, call it three, four years, it started to really see, you know, meaningful adoption.
And then what’s the long term kind of picture there? Is it do you think in five to ten years, like, most enterprise customers are gonna buy that way? Or do you think it will still be heavily weighted towards CapEx? Yeah. It’s a it’s
Rob Lee, Chief Technology Officer, Pure Storage: a great question. And let me start by saying, think, if I look across the industry, storage as a service, a lot of vendors use that as a fancy term for a dressed up lease with some t’s and c’s. Right? The way that we approach storage as a service and really driven by our Evergreen One and Evergreen Flex offerings is really centered around an SLA based and outcome based sale as opposed to a product based sale. Right?
Well, what does that mean? So in a traditional product sale, typically, you go to a customer, they’d have some sense some sense of what their needs are. Hey. I’ve got this application. I’ve got this growth plan.
I’ve got this set of performance requirements. You then have the customer sit down with, you know, our sales personnel, our our partner sales, go through an exercise to map those requirements to specific set of products, apply some, you know, conservatism buffer. Like, well, you know, if I think I’m gonna grow 20% year on year, what if I grow faster than that? Let me overbuy a little bit. Maybe I need 200 terabytes.
Okay. Let’s call that two fifty. Well but I don’t wanna go to, you know, finance if I’m wrong, and so let’s go buy 300 because getting a PO approved is a pain. And so, you know, that process is typical with a traditional product sale and purchase. In a Evergreen One or SLA based sale or storage as a service based sale, we meet the customer at step one.
Hey. You’ve got a sense of an application, your performance needs, what your capacity needs are today. We’ll go meet those requirements. And as your needs change, we’ll go add to that environment. Right?
If you grow faster than that, right, we’ll come and we’ll we’ll add to that environment. If your application needs more performance over time, we can move that that application to a higher performance storage offering all under that same contract. So, really, it’s a mindset shift from, you know, the customer taking the upfront risk, if you will, right, of locking you know, kind of taking their needs, identifying the products, and then going and running and operating that versus on a storage as a service sale, us meeting the customer at their needs and then us adapting the footprint to meet those needs over time. And so from a customer point of view, you know, the a tremendous amount of flexibility, tremendous amount of optionality that that we give in in terms of, you know, in terms of that model. You know?
And and what we have seen historically over the last couple of years is, you know, as the amount of uncertainty increases in the market, whether it’s macro, whether it’s IT budget related, that flexibility, the value of that optionality, becomes much higher. So we have seen, certainly as we, came through the post COVID, kind of recessionary anticipatory environments, you know, a little bit of a tailwind to our as a service offerings as customers, I think, you know, paid renewed attention to the value of that optionality.
Jason Ader, Analyst, William Blair: K. Great. I wanna ask one last question, then I’ll see if anybody in the audience has a question, which is, just the enterprise storage market. You talked about your your, expansion there, and and, you know, obviously, that’s been a been the engine of of growth for the business since the beginning. What is the outlook for kind of just enterprise storage?
Is is it still a growing market? I know you guys are expect to take share, but, like, what is like, the the ultimate kind of, you know, base that you’re working with, right, in terms of if if that market will will actually grow over time? Yeah. So a
Rob Lee, Chief Technology Officer, Pure Storage: couple of things. So the mark yeah. The enterprise storage market is, you know, is and continues to be a growing market. It’s, you know, certainly measured by bit capacity. It’s growing, you know, quite well on on a dollar basis.
Generally, you know, we would view the next couple of years, you know, low to mid single digit growth for the market overall. But, Jason, yeah, to your point, I think within the enterprise storage market, we’ve got a ton of share to go take. Right? And and I think we’re well positioned to do that in a way that the company really hasn’t been, you know, in the past. If I look at the breadth of my portfolio, if I look at, you know, my ability now to go into an enterprise and have a much more strategic conversation about, hey.
How can I how can I meet all of your needs? Right? Soup to nuts from AI to archive, from block file object. How can I do this on, you know, one consistent technology? How can I do this with PureFusion in a way that, you know, not just modernizes your storage infrastructure, but allows you to modernize your operations, automate, and and and save on labor?
You know, I I think we’re well positioned, you know, to grow our share in that enterprise market, and and I think that’s going to be a big driver of company’s growth over the coming years. Obviously, you know, incremental to that would be the hyperscaler. Right. Okay. We got
Jason Ader, Analyst, William Blair: about five minutes left. Does anybody in the audience have a question?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. So for the transcript, so the question essentially was anything unique about Meta that would make them more likely to adopt our solution versus other hyperscalers. And, you know, look, what I’d say is each of the hyperscaler firms, as I look at the top four, five, you know, even top 10, all have their differences in one way or another. But that said, you know you know, stepping back from it, nothing terribly unique. Right?
You know? And and since announcing the design win, you know, our discussions with other top hyperscalers have advanced as we anticipated. And, you know, what we have seen from these advancing discussions is the methodology, how we are integrating our technology into Meta’s software stack and and their technology stack is generally, we believe, you know, generally very similar to the way that other hyperscalers would look to integrate the technology. And so, you know, we would expect that, you know, we can take a lot of the learnings, through the early stages of the meta engagement, and, you know, take those two or other hyperscaler prospects and allow us to, progress through that technology selection phase a little bit faster.
Jason Ader, Analyst, William Blair: Yeah. What has been I guess, who who would be competing against than something like that? What has been your, I guess, has that changed over time?
Rob Lee, Chief Technology Officer, Pure Storage: Yeah. So the question is, what would we be competing with at a place like Meta and the hyperscalers I assume you’re speaking with? And what’s our win rate been over time? Well, so, you know, we’ve we’ve just announced our first design win. You know, we are progressing with early stages with others.
Look forward to hopefully at some point speaking with you about further design wins. And so we’re really early early on in this process and and really defining this opportunity. I think Meta’s been you know, we’ve been out in front with Meta. This has really been the first time the hyperscalers on mass have given serious consideration to, I I would say, shifting a large part of their footprint over to to Flash. In terms of what we would be competing with, again, you know, there’s really not another competitor, a third party competitor at the table.
We would be competing with their own internal efforts either to develop, you know, similar technology or to stay with their existing technology set, extending the kind of designs built around hard disk drives or utilizing SSD based designs.
Jason Ader, Analyst, William Blair: Are you mixing SLC and PLC technology into a single storage device?
Rob Lee, Chief Technology Officer, Pure Storage: So the question is, are we mixing SLC and PLC technology into a single storage device? So, you know, we we certainly have that capability. We have we have parts of the portfolio that that use that those capabilities. What, you know, what’s unique about our technology is because we our software controls how each bit of flash works down to, you know, the die level, down to the block level, down to the individual cell level. We have a lot of flexibility in how we use the same media.
And so we do have the flexibility on the same physical device to differentially control how individual chips, planes, blocks, etcetera, behave, whether it’s QLC, TLC, SLC mode.
Jason Ader, Analyst, William Blair: Just to wrap up, Rob, can you talk about the different layers of storage? You guys on the earnings call talked about how Meta and other hyperscalers have different layers of storage. What does what does
Rob Lee, Chief Technology Officer, Pure Storage: that mean? Yeah. So, you know, the at a high level to to maybe oversimplify a little bit, when you look at these hyperscaler environments, very unlike enterprise environments. Right? They don’t design infrastructure stacks per application.
There’s simply too many. Right? They run, like, hundreds of applications. What they typically do is, well, they’ll design, you know, horizontally. They’ll design for, a design for, you know, high performance storage needs, lower performance, more cost sensitive, all the way down to, you know, archival, almost content storage, cat videos, that sort of thing, right, and everything in between.
And so, you know, they’re one of the things that really has been driving, you know, their interest is, you know, over time, they see all of these tiers of storage moving to flash. And what Pure and and really the direct flash technology integration offers them is a single unified architecture that would allow them to deploy our technology across each of those tiers of storage from, again, the highest performance, demanding environments all the way, down to lower performance, but the most cost sensitive environments and everything in between.
Jason Ader, Analyst, William Blair: Okay. With that, we’ll wrap it up. We gotta This presentation has now finished. Please check back shortly for the archive.
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