Pure Storage (PSTG) Q2 Earnings Beat, Revenues Rise Y/Y
Pure Storage PSTG reported non-GAAP earnings per share (EPS) of 34 cents in second-quarter fiscal 2024, which beat the Zacks Consensus Estimate by 21.4%. The company reported non-GAAP EPS of 32 cents in the prior-year quarter.
Total revenues increased 6.5% from the year-ago reported quarter to $688.7 million, which surpassed the Zacks Consensus Estimate by 1.1%. Strong uptake of the FlashBlade portfolio (including FlashBlade//E) coupled with robust Evergreen//One subscription sales acted as catalysts amid macroeconomic weakness.
Following the announcement, the company’s shares are up 1.5% in the pre-market trading on Aug 31. The stock has gained 25.9% in the past year compared with the sub-industry’s growth of 34.2%.
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Quarter in Detail
Product revenues (contributing 58% to total revenues) amounted to $399.7 million, down 3.6% on a year-over-year basis.
Subscription services revenues (42% of total revenues) of $288.9 million rose 24.4% on a year-over-year basis.
We expected Product and subscription revenues to be $420.9 million and $259.1 million, respectively, for the fiscal second quarter.
Subscription annual recurring revenues (ARR) amounted to more than $1.216 billion, up 27% 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, along with annualized on-demand revenues.
Total revenues in the United States and International were $495 and $194 million, respectively.
Pure Storage, Inc. Price, Consensus and EPS Surprise
Pure Storage, Inc. price-consensus-eps-surprise-chart | Pure Storage, Inc. Quote
Margin Highlights
The non-GAAP gross margin expanded 240 basis points (bps) from the year-ago reported quarter to 72.8%.
The non-GAAP Product gross margin expanded 250 bps from the year-ago reported quarter to 71.5%. The non-GAAP Subscription gross margin was 74.5%, which expanded 160 bps on a year-over-year basis.
Non-GAAP operating expenses, as a percentage of total revenues, were 56.5% compared with 54% reported in the prior-year quarter.
Pure Storage reported a non-GAAP operating income of $111.8 million compared with $106 million reported in the year-ago quarter. The non-GAAP operating margin was 16.2% compared with 16.4% reported in the prior-year quarter.
Balance Sheet & Cash Flow
Pure Storage exited the fiscal second quarter that ended on Aug 6, with cash and cash equivalents and marketable securities of $1.2 billion unchanged as of May 7, 2023.
Cash flow from operations amounted to $101.6 million in the fiscal second quarter compared with $159.4 million reported in the prior-year quarter. Free cash flow was $46.5 million compared with $134.2 million reported in the year-ago quarter.
In the fiscal second quarter, the company returned $22 million to shareholders by repurchasing 0.6 million shares. The company has $190 million left from its previously announced $250 million share-repurchase plan.
Deferred revenues increased 21.9% to $1.437 billion in the quarter under review.
The remaining performance obligations at the end of the fiscal second quarter totaled $1.886 billion, up 26% year over year. The metric represents total committed non-cancelable future revenues.
Guidance
The company has reiterated its revenue guidance for fiscal 2024. Amid current macroeconomic weakness, Pure Storage expects revenues to grow in the range of mid-to-high single digits on a year-over-year basis. The non-GAAP operating margin is expected to be 15.5%.
Pure Storage expects revenues to be $760 million for third-quarter fiscal 2024, representing a rise of 12% from the year-ago reported figure.
The non-GAAP operating income for the fiscal third quarter is expected to be $135 million. The non-GAAP operating margin is expected to be 17.8%.
Zacks Rank and Other Stocks to Consider
Pure Storage currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Salesforce CRM and Adobe ADBE. Each stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 5.1% in the past 60 days to $2.86 per share. BMI’s earnings beat estimates in the last four quarters, the average surprise being 6.7%. Shares of BMI have surged 75.2% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2024 EPS is pegged at $7.44, unchanged over the past 60 days. The long-term earnings growth rate is anticipated to be 21.5%.
CRM’s earnings surpassed estimates in the last four quarters, the average beat being 14.2%. Shares of CRM have rallied 40.1% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 earnings has remained unchanged in the past 60 days at $15.70 per share. ADBE’s earnings outshined estimates in the last four quarters, the average surprise being 3.1%. Shares of ADBE have jumped 47.2% in the past year.
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