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Pure Storage (PSTG) Q1 Earnings Beat, Revenues Rise Y/Y

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Pure Storage Inc. (PSTG - Free Report) reported non-GAAP earnings of 25 cents per share in first-quarter fiscal 2023, which beat the Zacks Consensus Estimate of 4 cents. In the prior-year quarter, the company reported break-even earnings.

Total revenues increased 50% from the year-ago quarter to $620.4 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 18.7%.

The upside can be attributed to subscription services’ growth, as well as revenue growth in both domestic and international segments.

The stock has gained 50.7% in the past year against the industry’s decline of 11.5%.

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

Quarter in Detail

Product revenues (contributing 64.7% to total revenues) amounted to $401.2 million, up 60.5% on a year-over-year basis.

Subscription services revenues (35.3%) of $219.2 million rose 34.6% on a year-over-year basis. The upside can be attributed to ongoing support contracts and the robust adoption of Evergreen subscription services and Pure as-a-Service subscriptions.

Subscription Annual Recurring Revenues (ARR) amounted to $900 million, up 29% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter plus annualized on-demand revenues.

Total revenues in the United States moved up 57% and the same for International increased 33% year over year.

Pure Storage has also been gaining from its growing clout of FlashArray, FlashArray//C, and FlashBlade, a cost-effective storage array solution. This provides customers with higher performance capabilities and enables them to run complex cloud workloads on a single platform.

In the quarter under review, Pure storage announced partnership with Snowflake, Kyndryl, and Amazon Web Service to further expand its technology portfolio.

Pure Fusion and Portworx data provide automated data delivery service as well as strengthen cloud-native applications, favored the company’s performance.

Pure Storage added 360 customers in the reported quarter. The company’s customer base includes 54% of the Fortune 500 companies.

Margin Highlights

The non-GAAP gross margin expanded 10 basis points (bps) from the year-ago quarter to 70.6%.

The non-GAAP Product gross margin contracted 20 bps from the year-ago quarter to 70%. Product gross margin was affected by increasing supply-chain costs in the quarter under review. The non-GAAP Subscription gross margin was 71.5%, which expanded 40 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, were 56.8% compared with 70.4% reported in the prior-year quarter.

Pure Storage reported a non-GAAP operating profit of $85.4 million in the first quarter of fiscal 2023 compared with the non-GAAP income of $0.3 million reported in the year-ago quarter. The non-GAAP operating margin stood at 13.8% compared with 0.1% reported in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the quarter ended May 8, 2022, with cash and cash equivalents and marketable securities of $1.3 billion compared with $1.41 billion as of Feb 6, 2022. As of May 8, 2022, long-term debt stood at $572.6 million compared with $786.8 million as of Feb 6, 2022.

Cash flow from operations amounted to $220.1 million compared with $21.4 million in the prior-year quarter. Free cash flow was $187.3 million compared with ($6.4) million in the previous-year quarter.

In the fiscal first quarter, the company returned $66 million to shareholders through the repurchase of 2.1 million shares. The company has approximately $184 million remaining under the $250-million share repurchase plan.

Deferred revenues increased 28% to $1.1 billion in the quarter under review.

The remaining performance obligations at the end of the fiscal first quarter totaled $1.43 billion, up 26% year over year. The metric represents total committed non-cancellable future revenues.

Guidance

Pure Storage expects revenues of $635 million for second-quarter fiscal 2023, indicating growth of 28% from the year-ago reported figure. The Zacks Consensus Estimate is pegged at $605.21 million, suggesting year-over-year growth of 21.8%.

The non-GAAP operating income for the fiscal second quarter is expected to be $75 million. The non-GAAP operating margin is expected to be 11.8%.

For fiscal 2023, Pure Storage expects revenues of $2.66 billion, indicating year-over-year growth of 22%. The Zacks Consensus Estimate is pegged at $2.61 billion, suggesting year-over-year growth of 19.6%.

The non-GAAP operating income is expected to be $320 million and the non-GAAP operating margin is expected to be 12%.

Zacks Rank and Stock to Consider

Pure Storage currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology space are InterDigital (IDCC - Free Report) , Vishay Intertechnology (VSH - Free Report) and Avnet (AVT - Free Report) . InterDigital, Avnet and Vishay Intertechnology currently sport a Zacks Ranks #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $3.28 per share, increasing 43.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.13%. Shares of IDCC have declined 21.1% in the past year.

The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.

Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.96%. Shares of VSH have declined 13.9% in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 21.22%. Shares of Avnet have grown 9.3% in the past year.