Pure Storage (PSTG) Q1 Earnings & Revenues Beat Estimates

Pure Storage Inc. PSTG reported breakeven earnings on a non-GAAP basis for first-quarter fiscal 2022. The Zacks Consensus Estimate stood at a loss per share of 7 cents. For first-quarter fiscal 2021, the company had reported loss of 2 cents per share.

Total revenues increased 12.4% from the year-ago quarter’s level to $412.7 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 1.6%.

The upside can be attributed to growth in subscription services, led by momentum in Pure as-a-Service, Cloud Block Store and Evergreen offerings.

Following the results, shares of Pure Storage are up more than 1.5% in the pre-market trading on May 27. Notably, the stock has gained 14.4% in the past year compared with the industry’s rally of 44.9%.

Quarter Details

In fiscal first quarter, Product revenues (contributed 61% to total revenues) amounted to $249.9 million, up 1.2% on a year-over-year basis.

Pure Storage, Inc. Price, Consensus and EPS Surprise

Pure Storage, Inc. price-consensus-eps-surprise-chart | Pure Storage, Inc. Quote

Subscription services revenues (39%) of $162.8 million surged 35% on a year-over-year basis, driven by the company’s ongoing support contracts and robust adoption of Evergreen subscription services and Pure as-a-Service subscription, which includes Cloud Block Store.

Management noted that total revenues in the United States were up 12%, while International revenues saw 14% year-over-year growth.

Pure Storage also announced the general availability of Pure Cloud Block Store on Amazon’s AMZN Amazon Web Services as well as Microsoft’s MSFT Azure platform.

Also, the company rolled out a new Bare Metal as-a-Service solution with Equinix that provides a cohesive and connected platform for any stage of cloud migration.

Pure Storage is also gaining from growing clout of its latest second generation FlashArray//C, a cost-effective storage array solution to provide customers with higher performance capabilities and enable them to run complex cloud workloads onto a single platform.

Also, solid pipeline and synergies from Portworx acquisition, which strengthened capabilities for containerized and cloud-native applications, favored performance.

Pure Storage reported 15% increase in new customer acquisition in the reported quarter driven primarily by strength in commercial business.

Margin Highlights

Non-GAAP gross margin contracted 140 basis points (bps) from the year-ago quarter’s level to 70.5%. The contraction in gross margin can be attributed to margin contraction of Product revenues.

Non-GAAP Product gross margin shrunk 310 bps from the year-ago quarter’s level to 70.2%. Non-GAAP Subscription gross margin came in at 71.1%, which expanded 220 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, came in at 70.4% that contracted 300 bps on a year-over-year basis.

Pure Storage reported a non-GAAP operating income of $0.3 million in the fiscal first quarter against non-GAAP loss of 5.4 million reported in the year-ago quarter. Non-GAAP operating margin stood at 0.1%.

Balance Sheet & Cash Flow

Pure Storage exited the quarter ended May 2, 2021, with cash, cash equivalents and marketable securities of $1.234 billion compared with $1.254 billion as of Jan 31, 2021.

Cash flow from operations during the reported quarter was $21.4 million compared with $69 million in the prior quarter. Free cash outflow was $6.4 million compared with free cash flow of $47.7 million in the prior quarter.

During the fiscal first quarter, the company returned $30 million to shareholders via share repurchases of more than 1.38 million shares completing the planned share repurchase authorization of $200 million.

On Feb 24, Pure Storage’s board of directors approved incremental share buybacks of up to an additional $200 million under its stock repurchase program.

Deferred revenues increased 23% to $866.2 million in the fiscal first quarter.

Remaining performance obligations (RPO) at the end of fiscal first quarter were $1.1 billion, up 24% on a year-over-year basis. The metric represents total committed non-cancelable future revenues.

Guidance

Pure Storage expects second-quarter fiscal 2022 revenues to be $470 million, indicating year-over-year growth of 16%. The Zacks Consensus Estimate is pegged at $456.5 million, suggesting year-over-year growth of 13.1%.

Non-GAAP operating income for fiscal second quarter is expected to be $15 million.

Zacks Rank And Stock to Consider

Pure Storage currently carries a Zacks Rank #2 (Buy).

Another stock worth consideration in the broader technology sector worth consideration is NetApp NTAP, which also carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

NetApp is slated to announce results on Jun 2. Long-term earnings growth rate of NetApp is pegged at 8.8%.

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