Pure Storage CEO: We Have Made Adjustments For ‘Near-Term Economic Headwinds’
‘We believe that our successful sales motion over the last few years will need to adapt to the additional scrutiny that customers are now placing on purchases. We are therefore adjusting our sales motion for the additional economic analysis that customers need to justify purchases with tightened budgets,’ says Pure Storage CEO Charles Giancarlo as the company reports a healthy fiscal fourth quarter.
All-flash storage technology developer Pure Storage Wednesday cautioned that macroeconomic headwinds could impact growth in fiscal 2023 after the company posted a healthy fiscal fourth quarter and full year 2023.
Pure Storage CEO Charles Giancarlo, speaking Wednesday to financial analysts during the company’s fiscal year 2023 quarterly financial conference call, said the Mountain View, Calif.-based company was pleased with its fourth fiscal quarter year-over-year revenue growth of 14 percent, its 26 percent annual revenue growth and its 30 percent growth in annual recurring revenue, especially in light of the challenges of the steadily increasing global economic slowdown.
While Pure Storage is excited about the prospects for its products and its competitiveness, it is also well aware of the challenges of the current economic environment and the strains that it places on customers, Giancarlo said.
“Since our Q2 earnings call, we have discussed seeing instances of longer sales cycles and caution with large purchases, especially in the enterprise segment,” he said. “As expected, these conditions continued through Q4, and close rates of our advanced-stage deals continued to be consistent with the earlier quarters. While we were able to generate considerable new opportunities and pipeline during Q4, the development and progression of these new opportunities slowed substantially, especially in our enterprise segment.”
The recent slowdown in customers’ purchasing expectations, together with heightened concerns around further tightening monetary actions by the U.S. Federal Reserve and other central banks and governments, have impacted Pure Storage’s growth outlook for the coming year, Giancarlo said.
“We also believe that our successful sales motion over the last few years will need to adapt to the additional scrutiny that customers are now placing on purchases,” he said. “We are therefore adjusting our sales motion for the additional economic analysis that customers need to justify purchases with tightened budgets. In particular, [we are] focusing our efforts on steps our customers can take to reduce their costs, both capital as well as operational, while improving their human productivity.”
Recently unveiled technologies from Pure Storage, including Pure Storage Evergreen//One storage-as-a-service, the new FlashBlade//E all-flash storage array for unstructured data and the FlashArray//C QLC-based low-cost flash storage array, will all play a large role in this new economy, Giancarlo said.
“We have high confidence in our long-term growth and strategy but have made operational changes for what we believe will be near-term economic headwinds,” he said. “We have already taken action to reduce spending across the company, and have reduced our spending and budgetary growth plans for FY 24 until we see improvements in the environment. We’re very excited about the innovations we delivered in the year and are particularly excited about the introduction of FlashBlade//E, which will further fuel our ability to make the all-flash data center a reality.”
Pure Storage expects to continue to take share from its competitors in fiscal 2024 because its products’ energy efficiency, total cost of ownership and technology strongly resonate with customers, especially in the current environment where organizations need to do more with less, Giancarlo said.
“Despite the lower-than-anticipated revenue guide for fiscal year ’24, we are confident that we will continue to grow faster than the overall storage market and continue to take share from our key competitors,” he said. “We will continue to lead the market in meaningful innovation in data storage and management. We will increase our relevance and opportunities with the world’s largest technology companies. And we will further leverage our leadership position to accelerate the drive to the all-flash data center.”
For its fourth fiscal quarter 2023, which ended Feb. 5, Pure Storage reported total revenue of $810.2 million, which was up 14 percent from the $708.6 million the company reported for its fiscal fourth quarter 2022.
That was in line with analysts’ expectations, according to Seeking Alpha.
This included product revenue of $545.1 million, up from $492.6 million, and subscription services revenue of $265.1 million, up from $216.0 million. The quarter also saw subscription annual recurring revenue of $1.1 billion, up 30 percent over last year.
For the quarter, Pure Storage reported GAAP net income of $74.5 million, or 22 cents per share, up significantly from the $14.9 million, or 5 cents per share, the company reported last year. On a non-GAAP basis, Pure Storage reported net income of $169.7 million, or 53 cents per share, up from last year’s $112.4 million, or 36 cents per share.
Pure Storage’s GAAP fiscal fourth quarter net income beat analyst expectations by 15 cents per share, Seeking Alpha said.
For all of fiscal 2023, Pure Storage reported total revenue of $2.75 billion, up 26 percent over the $2.18 billion it reported for fiscal 2022.
This included product revenue of $1.79 billion, up from $1.44 billion, and subscription services revenue of $961.3 million, up from $738.5 million.
For the year, Pure Storage reported GAAP net income of $73.1 million, or 23 cents per share, up significantly from last year’s net loss of $143.3 million, or 50 cents per share.
Looking ahead, Pure Storage said it expects mid- to high-single-digit year-over-year growth in fiscal 2024. The company also expects non-GAAP operating margin of 15 percent in fiscal 2025, down from this year’s 16.6 percent.