Pure Storage (PSTG) Q4 Earnings, Revenues Beat Estimates

Pure Storage Inc. (NYSE:PSTG) delivered non-GAAP earnings of 13 cents per share in the fourth quarter of fiscal 2018, which beat the Zacks Consensus Estimate by 6 cents. The figure improved considerably from the year-ago loss of 2 cents per share.

As anticipated, the fourth quarter was the first profitable quarter for the company since it went public.

Total revenues increased 48% from the year-ago quarter to $338.3 million, surpassing the Zacks Consensus Estimate of $332 million. Revenues outpaced the midpoint of the guided range by 2%.

Fiscal 2018 revenues surged 41% year over year to $1.023 billion surpassing the upper end of management’s guided range of $1.02 billion.

Pure Storage’s shares have returned an astounding 127.4% year over year, substantially outperforming the 22.2% rally of the industry it belongs to.

Quarter Details

In the fourth quarter, Product revenues of $277.7 million surged 48% on a year-over-year basis, primarily driven by “strong repeat business” from existing customers and continued expansion of customer base.

Product gross margin was 65.7%, down 0.6 points sequentially, due to FlashBlade’s increased contribution to revenues.

The company’s strong product portfolio with the likes of FlashArray, FlashStack and FlashBlade business segments was a top-line booster. Additionally, the company’s data platform for cloud is gaining traction.

Cisco’s (NASDAQ:CSCO) tie-up with the company’s FlashStack has significantly accelerated overall converged infrastructure and integrated systems markets. FlashStack is well-positioned for the future as the company continues to invest with its partners in full stack automation and simplicity.

Support revenues of $60.9 million increased a notable 48% on a year-over-year basis on the back of the company’s ongoing support contracts.

Support gross margins were 68.3%, up 1.3 points sequentially. Management stated that margins were driven by a continued increase in amortization of ongoing support contracts and impressive execution in support organization.

During the quarter, Pure Storage added more than 500 new customers, bringing the total base to 4500 organizations and reflecting an increase of 50% from the year-ago quarter.

Geographically, the United States comprised 76% of total revenues while the remaining 24% came from international market.

Management is optimistic about scalable storage solutions in an era when the world is typically being driven by big-data, artificial intelligence (AI) and data analytics-based information.

Pure Storage continues to focus on three major aspects, namely increasing cloud customer base, solidifying the position of its next generation workload related core data infrastructure and tapping large enterprises as they “cloudify” their on-premise IT infrastructure.

However, the company continues to face intense competition due to the presence of major players such as Amazon’s Web Services (AWS) and Microsoft’s (NASDAQ:MSFT) Azure in cloud storage.

Nevertheless, management is positive about the company’s partner ecosystem, which assisted it in winning a multimillion dollar deal with a prominent financial services institution.

The company’s partnership with NVIDIA (NASDAQ:NVDA) , a dominant player in AI related computation, is anticipated to strengthen further its growth prospects and expand product offerings.

Management was optimistic on top-line growth positively impacting operating results. The company reported its first ever non-GAAP operating income of $27.9 million and margin of 8.3%. This marks a significant improvement from the year-ago quarter, when it had reported operating loss of $4.4 million. The year-over-year improvement was due to the company’s sustained focus on improving operational efficiency.

Pure Storage, Inc. Price, Consensus and EPS Surprise

Pure Storage, Inc. Price, Consensus and EPS Surprise | Pure Storage, Inc. Quote

Balance Sheet & Cash Flow

Pure Storage exited the year ended Jan 31, 2018 with cash and cash equivalents of $183.7 million down from $604.7 million in the previous year.

Positive free cash flow for the full-year ended Jan 31, 2018 was reported for the first time in the company’s history at $7.7 million, compared with ($61.2 million) fiscal 2017. This can be attributed to strong performance in the quarter and employee stock purchase worth $11.5 million in the fourth quarter of fiscal 2018.

Guidance

Pure Storage expects first-quarter fiscal 2019 revenues in the range of $246-$254 million.

Non-GAAP gross margin is anticipated to be in the range of 63.5-66.5%. Non-GAAP operating margin is projected to be in the range of (13%) to (9%).

For fiscal 2019, management expects revenues to be in the range of $1.31-$1.36 billion. Non-GAAP gross margin is expected to be in the range of 63.5-66.5%. Non-GAAP operating margin is anticipated to be in the range of 0-4%.

Zacks Rank

Pure Storage carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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