Pure Storage Misses Revenue, Earnings Expectations, Lowers 2020 Guidance
Pure Storage CEO Charles Giancarlo said on the company’s first fiscal quarter 2020 earnings call that although he was not satisified with the quarter’s results, the company is ‘broadening’ its customer base and ‘delivering new innovations through both organic and inorganic investments.’
All-flash storage technology developer late Tuesday posted first fiscal quarter 2020 revenue and earnings that fell short of investor expectations, leading to a 19-plus-percent drop in share prices in after-hours trading.
However, the Mountain View, Calif.-based company said it is investing in the technology and the sales force it needs to get back to growth.
For its first fiscal quarter 2020, which ended April 30, Pure Storage reported revenue of $326.7 million, up 28 percent over the $255.9 million the company reported for the first fiscal quarter 2019. However, that missed analyst expectations of about $333 million, as reported by Seeking Alpha.
That included product revenue of $238.7 million, up from last year's $195.4 million, and support subscription revenue of $88.0 million, up from last year's $60.5 million.
The company posted a GAAP loss of $100.3 million, or 41 cents per share, which was much higher than the $36.0 million, or 12 cents per share, the company reported last year. On a non-GAAP basis, the loss was $27.6 million, or 11 cents per share, compared with last year's loss of $16.2 million, or 7 cents per share.
Analysts had been expecting a GAAP loss of 32 cents per share and a non-GAAP loss of 8 cents per share, according to Seeking Alpha.
Charles Giancarlo, Pure Storage chairman and CEO, said during the company's Tuesday financial analyst conference call that his company's fundamentals are strong.
"We are broadening our customer base," Giancarlo said. "We are delivering new innovations through both organic and inorganic investments. And we continue to delight our customers."
While Pure Storage was growing well above the industry average, it was not satisfied with the quarter's results, Giancarlo said.
"Revenue was just below the low end of our guidance, and consequently, profitability was below our guidance," he said.
Pure Storage is investing in its outreach to clients, including adding nearly 40 percent to its sales force capacity, Giancarlo said. A Pure Storage spokesperson later clarified that the company increased the number of salespeople by nearly 40 percent.
"With this additional investment, we are seeing a significant increase in the number of large enterprise opportunities," he said. "We are aggressively going after large legacy storage vendors. We are consistently beating them in the commercial market. And now we are increasingly going after them in the largest enterprise environments."
Because of the variability in the business, Pure Storage is decreasing its revenue guidance for the year to growth of 27.5 percent, Giancarlo said. The company in February set fiscal year 2020 revenue guidance to a range of $1.735 billion to $1.805 billion. Instead, it now expects a 2020 revenue range of $1.7 billion to $1.77 billion.
Pure Storage continues to position itself ahead of trends that are CIOs' top priorities, Giancarlo said. These include hybrid cloud, fast consolidated data architectures, AI and analytics, and rapid recovery from failure.
One of the highlights of Pure Storage's forward-looking activities is its DirectFlash Fabric on its Flash Array all-flash storage offering. DirectFlash Fabric, introduced in February, aims to replace legacy iSCSI connectivity with RDMA over converged Ethernet to increase storage performance.
"[This is] a hyper-scale architecture enabling large-scale stateless compute," he said. "[It] leverages Pure's shared storage with direct-attach [storage] performance for modern, efficient application environments."
Giancarlo also touted the company's ObjectEngine, a new technology that allows backing up of data from primary flash storage to secondary flash storage to S3-compatible clouds. It became available in the first fiscal quarter.
"[It] is delivering on our vision that customers need rapid restoration of critical data and applications rather than just backup," he said.
For hybrid clouds, Pure Storage also allows its Purity storage operating system to run natively in the cloud, Giancarlo said. The company last fall also introduced Cloud Block Store for AWS, which allows its storage software to run natively on AWS for managing block data across on-premises and Amazon Web Services cloud environments.
Pure Storage is also placing a lot of faith in its April acquisition of Compuverde, a Sweden-based developer of file software storage for enterprises and cloud providers, Giancarlo said.
"Their highly scalable software will scale our road map to provide a unified file and block offering, opening new markets for Pure and expanding our file capabilities for Pure customers," he said.