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Pure Storage (PSTG) Q1 Earnings & Revenues Beat Estimates

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Pure Storage Inc. (PSTG - Free Report) 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 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 - Free Report) Amazon Web Services as well as Microsoft’s (MSFT - Free Report) 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 - Free Report) , 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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