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Pure Storage (PSTG) Q4 Earnings Beat Estimates, Shares Up

·6 min read

Pure Storage Inc. PSTG reported non-GAAP earnings of 36 cents per share in fourth-quarter fiscal 2022, which beat the Zacks Consensus Estimate by 33.3%. In the prior-year quarter, the company reported earnings of 13 cents per share.

Total revenues increased 41% from the year-ago quarter’s level to $708.6 million. Moreover, the top line surpassed the Zacks Consensus Estimate by 12.3%.

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

In fiscal 2022, the company reported revenues of $2.18 billion, up 29% year over year. Subscription services revenues rose 37% year over to $738.5 million.

Following the better-than-expected results, shares of Pure Storage are up more than 8.7% in the pre-market trading on Mar 3. The stock has gained 31.2% in the past year compared with the industry’s return of 1.5%.

Pure Storage, Inc. Price, Consensus and EPS Surprise

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 Details

Product revenues (contributed 69.5% to total revenues) amounted to $493 million, up 40.5% on a year-over-year basis.

Subscription services revenues (30.5%) of $216 million surged 42% on a year-over-year basis. The upside can be attributed to ongoing support contracts and robust adoption of Evergreen subscription services and Pure as-a-Service subscription, including Cloud Block Store.

Subscription Annual Recurring Revenue (ARR) amounted to $848.8 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, added Pure Storage.

Management reported that total revenues in the United States were up 51% and the same for International increased 20% year over year.

Pure Storage is also gaining from the growing clout of its latest second-generation FlashArray//C, 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, the company unveiled a new FlashArray//XL solution, primarily designed for vital enterprise applications like huge databases, cloud-native and containerized applications. The new FlashArray solution safeguards the stored data and enables easy recovery following any adverse situation. FlashArray//XL solution helps in workload consolidation on lesser arrays and streamlines operations along with lowering rack-space requirements. It also helps to slash power consumption and cooling expenses.

Solid pipeline and synergies from the Portworx acquisition, which strengthened capabilities for containerized and cloud-native applications, favored performance.

Pure Storage added 470 new customers in the reported quarter. The company’s customer count now stands at 10,0000, including 50% of the Fortune 500 companies, noted Pure Storage.

Margin Highlights

Non-GAAP gross margin contracted 60 basis points (bps) from the year-ago quarter’s level to 68.8%.

Non-GAAP Product gross margin contracted 210 bps from the year-ago quarter’s level to 67%. Product gross margin was affected by increasing supply chain costs in the quarter under review. Non-GAAP Subscription gross margin came in at 73%, which expanded 280 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, came in at 52% compared with 62.1% reported in the prior-year quarter.

Pure Storage reported a non-GAAP operating income of $119 million in the fiscal fourth quarter compared with the non-GAAP income of 37 million reported in the year-ago quarter. Non-GAAP operating margin stood at 16.8% compared with 7.3% reported in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the quarter ended Feb 6, 2022, with cash, cash equivalents and investments of $1.41 billion compared with $1.4 billion as of Oct 31, 2021. As of Oct 31, long-term debt stood at $786.8 million compared with long-term debt of $778 million as of Oct 31, 2021

Cash flow from operations amounted to $138 million compared with $127 million in the prior quarter. Free cash flow was $117 million compared with $101.3 million in the previous quarter.

For fiscal 2022, cash flow from operations was $410 million compared with $188 million in the prior year. Free cash flow was $308 million compared with free cash flow of $93 million in the previous year.

During the fiscal fourth quarter, the company returned $69 million to shareholders via share repurchases of more than 2.4 million shares and completed its $200-million share repurchase authorization. The company also announced a new $250-million share repurchases plan.

Deferred revenues increased 28% to $1.08 billion in the quarter under review.

The remaining performance obligations (RPO) at the end of the fiscal fourth quarter totaled $1.4 billion, up 29% on a year-over-year basis. The metric represents total committed non-cancelable future revenues.

Guidance

Pure Storage expects first-quarter fiscal 2023 revenues to be $520 million, indicating year-over-year growth of 26%. The Zacks Consensus Estimate is pegged at $516.4 million, suggesting year-over-year growth of 25.1%.

Non-GAAP operating income for the fiscal first quarter is expected to be $16 million. Non-GAAP operating margin is expected to be 3%.

For fiscal 2023, Pure Storage expects revenues to be $2.6 billion, indicating year-over-year growth of 19-20%. The Zacks Consensus Estimate is pegged at $2.49 billion, suggesting year-over-year growth of 48%.

Non-GAAP operating income is expected to be $300 million and non-GAAP operating margin is expected to be 11.5%.

Zacks Rank and Stock to Consider

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

Some better-ranked stocks worth considering from the broader technology sector include Broadcom AVGO, Apple AAPL and Texas Instruments TXN. Apple and Texas Instruments sport a Zacks Rank #1 (Strong Buy), while Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $33.18 per share. The long-term earnings growth rate of the company is pegged at 14.5%.

Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, the average surprise being 1.41%. Shares of Broadcom have increased 36% in the past year.

The Zacks Consensus Estimate for Apple’s fiscal 2022 earnings is pegged at $6.16 per share. The long-term earnings growth rate of the company is pegged at 12.5%.

Apple’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 20.3%. Shares of AAPL have rallied 39.5% in the past year.

The Zacks Consensus Estimate for Texas Instruments for 2022 earnings is pegged at $9.09 per share. The long-term earnings growth rate of the company is pegged at 9.3%.

Texas Instruments’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.4%. Shares of TXN have increased 6.7% in the past year.


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