Pure Storage ( PSTG Quick Quote PSTG - Free Report) reported non-GAAP earnings of 32 cents per share in second-quarter fiscal 2023, which beat the Zacks Consensus Estimate of 22 cents. In the prior-year quarter, the company reported 14 cents per share. Total revenues increased 30% from the year-ago quarter to $646.8 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 1.6%. The upside can be attributed to momentum in product and subscription services and revenue growth in the domestic and international segments.
Following the announcement, shares are up 6.8% in the pre-market trading on Sep 1. The stock has gained 11.6% in the past year against the
industry’s decline of 22.1%. Image Source: Zacks Investment Research Quarter in Detail
Product revenues (contributing 64% to total revenues) amounted to $414.6 million, up 27.6% on a year-over-year basis.
Subscription services revenues (36%) of $232.2 million rose 35% on a year-over-year basis. The upside can be attributed to ongoing support contracts and the robust adoption of Evergreen subscription services and synergies from Portworx acquisition . Subscription Annual Recurring Revenues (ARR) amounted to $955 million, up 31% 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 31% and the same in International increased 29% 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. The solution provides customers higher performance capabilities and enables them to run complex cloud workloads on a single platform. In the quarter under review, Pure Storage rolled out a new FlashBlade//S suite of products and announced the general availability of Pure Fusion. Pure Storage added more than 350 customers in the reported quarter. The company’s customer base includes 56% of Fortune 500 companies. Margin Highlights
The non-GAAP gross margin contracted 10 basis points (bps) from the year-ago quarter to 70.4%.
The non-GAAP Product gross margin contracted 130 bps from the year-ago quarter to 69%. The non-GAAP subscription gross margin was 72.9%, which expanded 220 bps on a year-over-year basis. Non-GAAP operating expenses, as a percentage of total revenues, were 54% compared with 61.1% reported in the prior-year quarter. Pure Storage reported a non-GAAP operating profit of $106 million compared with the non-GAAP income of $46.6 million reported in the year-ago quarter. The non-GAAP operating margin stood at 16.4% compared with 9.4% reported in the prior-year quarter. Balance Sheet & Cash Flow
Pure Storage exited the quarter ended Aug 7, 2022, with cash and cash equivalents and marketable securities of $1.4 billion compared with $1.3 billion as of May 8, 2022.
Cash flow from operations amounted to $159.4 million compared with $123.4 million in the prior-year quarter. Free cash flow was $134.2 million compared with $95.7 million in the previous-year quarter. In the fiscal second quarter, the company returned $61 million to shareholders by repurchasing of 2.4 million shares. The company has approximately $123 million remaining under the $250-million share repurchase plan. Deferred revenues increased 29.6% to $1.18 billion in the quarter under review. The remaining performance obligations at the end of the fiscal second quarter totaled $1.5 billion, up 25% year over year. The metric represents total committed non-cancellable future revenues. Guidance
Pure Storage expects revenues of $670 million for third-quarter fiscal 2023, indicating growth of 19% from the year-ago reported figure. The Zacks Consensus Estimate is pegged at $650.2 million, suggesting year-over-year growth of 15.5%.
The non-GAAP operating income for the fiscal third quarter is expected to be $85 million. The non-GAAP operating margin is expected to be 12.7%. For fiscal 2023, Pure Storage now expects revenues of $2.75 billion, indicating year-over-year growth of 26%. Earlier, Pure Storage expected revenues of $2.66 billion, indicating year-over-year growth of 22%. The Zacks Consensus Estimate is pegged at $2.67 billion, suggesting year-over-year growth of 22.4%. The non-GAAP operating income is expected to be $390 million and the non-GAAP operating margin is expected to be 14%. Earlier, the non-GAAP operating income was expected to be $320 million and the non-GAAP operating margin to be 12%. Zacks Rank and Stock to Consider
Pure Storage currently carries a Zacks Rank #3 (Hold).
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