It has been about a month since the last earnings report for Pure Storage (PSTG - Free Report) . Shares have added about 2.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pure Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Pure Storage Q1 Earnings & Revenues Top Estimates
Pure Storage Inc. reported non-GAAP loss of 2 cents per share in first-quarter fiscal 2021, narrower than the Zacks Consensus Estimate of a loss of 16 cents. The company had reported a loss of 11 cents per share in the year-ago quarter.
Total revenues improved 12% from the year-ago quarter’s level to $367.1 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 7.5%.
Year-over-year increase in revenues can be attributed to strong FlashBlade and FlashBlade implementation and new deal win from a major national bank based in the United States. Moreover, robust adoption of subscription offerings, including Pure as-a-Service, Cloud Block Store, and Evergreen, contributed to growth.
In the fiscal first quarter, Product revenues (contributed 67% to total revenues) of $246.9 million increased 3.4% on a year-over-year basis, primarily on the back of existing customers and continued expansion of customer base.
During the reported quarter, Pure Storage added more than 300 customers, bringing the total count to more than 7,800 organizations.
Robust adoption of strong product portfolio, including the likes of FlashArray, FlashStack and FlashBlade business segments, is a key catalyst.
Subscription revenues (33%) of $120.2 million surged 36.6% on a year-over-year basis, driven by the company’s ongoing support contracts and robust adoption of Pure as-a-Service, Cloud Block Store, and Evergreen subscription services.
Total revenues in the United States during the reported quarter came in at $264 million, up 15% year over year. Meanwhile, total International revenues of $103 million, improved 5% on a year-over-year basis.
Non-GAAP gross margin expanded 380 basis points (bps) from the year-ago quarter’s level to 71.9%. The expansion in gross margin can be attributed to growth in revenues and margin expansion of Product and Subscription services.
Non-GAAP Product gross margin expanded 460 bps from the year-ago quarter’s level to 73.3%.
Non-GAAP Subscription gross margin came in at 68.9%, which expanded 260 bps on a year-over-year basis.
Total operating expenses climbed 8.9% year over year to $341.7 million. As a percentage of total revenues, the figure came in at 93.1%, which contracted 300 bps on a year-over-year basis.
Pure Storage reported a non-GAAP operating loss of 5.4 million in the fiscal first quarter, compared with operating loss of 31.2 million in the prior-year quarter.
Balance Sheet & Cash Flow
Pure Storage exited the quarter ended May 3, 2020 with cash, cash equivalents and marketable securities of $1.274 billion, compared with $1.299 billion as of Feb 2, 2020.
Cash flow from operations during the reported quarter was $35.1 million compared with $69.9 million in the fiscal fourth quarter.
Free cash flow came in at $11.3 million compared with $56.2 million in the prior quarter.
During fiscal first quarter, Pure Storage returned $70 million to shareholders via share repurchases of 5.96 million shares, with approximately $65 million remaining in share repurchase authorization.
Total deferred revenues in the fiscal first quarter came in at $706 million, compared with $697 million at the end of fiscal fourth quarter. The upside was led by growth in multiple subscription service offerings.
Pure Storage withdrew guidance for fiscal 2021 and refrained from providing fiscal second-quarter outlook citing uncertainty in demand due to COVID-19-related business impact.
How Have Estimates Been Moving Since Then?
Estimates review followed an upward path over the past two months. The consensus estimate has shifted 35.93% due to these changes.
Currently, Pure Storage has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Pure Storage has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.