Pure Storage has made its first net profit, $14.9 million, reported for the fourth fiscal quarter of 2022.
The business reported revenues in the quarter ended February 6 of $708.6 million, 41 per cent up on a year ago – boosted by a “substantial” amount of FlashArray//C kit sold to Facebook parent Meta – and a first time net income of $14.9 million comparing to a net loss of $52.3 million for the same period last year.
Pure chairman and CEO Charlie Giancarlo summed it up: “By every measure, Pure had an outstanding quarter and fiscal year.” Full-year revenues were $2.2 billion, up 29.5 per cent, and there was a loss of $143.3 million, smaller than the prior year’s $282.1 million loss.
Pure CFO Kevan Krysler said “We are thrilled to be capping off the year in a position of leadership and strength. The momentum we are experiencing is the year’s culmination of relentless focus on innovating for our customers.
“Our performance in fiscal 2022 set new records for revenue, operating profit and cash flows. Our strong revenue growth this year benefited from a substantial sale of FlashArray//C to Meta, includes an extra week in the fiscal year and reflects an easier compare to fiscal 2021, which was impacted by COVID-related headwinds.”
Growth in the US outpaced other regions. Giancarlo said “The power of the IT environment in the US has been very strong,” partly because of demand for its file+object FlashBlade array. Krysler added, “The US and Canada, frankly, out-delivered for us.”
He said this about profitability: “Operating profit substantially expanded this year as a result of strong operating discipline and operating leverage. As we have previously highlighted, operating profits also benefited from slower-than-anticipated hiring, less travel and fewer physical marketing events due to the COVID environment.”
We suggested Pure could make a (GAAP) profit when discussing the prior quarter’s results because its growth rate looked so good at that point.
Pure has now passed the 10,000 customer mark, acquiring 470 new customers in the quarter, and the base includes over 50 per cent of US Fortune 500 companies. That means there is a lot of headroom for future growth – especially as disk arrays transition to all-flash arrays.
CTO Rob Lee alluded to this in the earnings call. “The transition from disk to flash is absolutely happening. We see it in the enterprise. We’re now starting to see it in the hyperscale environment. And we believe to a degree, this is not only happening, but it’s inevitable.”
Q4 subscription services revenue was up 42 per cent year-over-year at $216 million. Full-year subscription services revenue rose 37 per cent to $738.5 million. Krysler said “Our subscription net dollar retention or NDR at the end of the year exceeded 120 per cent compared to our long-term target of 115 per cent as a result of expansion growth from existing customers.”
Remaining performance obligations (RPO), meaning committed and non-cancellable future revenue, was over $1.4 billion, growing at 29 per cent.
Quarter-end finance summary
- Gross margin – 67.2 per cent
- Operating cash flow – $138.2M
- Free cash flow – $117.2M
- $1.2B in cash at quarter end
- Total cash, cash equivalents, and investments – $1.41B
Giancarlo said in the earnings call “This past quarter, we again enjoyed strong growth, especially in the Americas, our largest theater and we grew across enterprise, commercial and public sectors. I’m especially pleased with our growth in both net new logos and subscription annual recurring revenue, indicating great progress against our long-term strategy.”
He pointed out “Pure’s proprietary hardware provides higher performance, reliability and longer lifetime while requiring less space, power and cooling than competitors’ commodity-based systems, competitors would need entirely new designs and years of new software development to replicate Pure’s advantages.”
What about supply chain issues, which have affected Dell, HPE and NetApp? “I feel confident that we have one of the most robust supply chains in the business. Pure has invested in strong relationships with our supply partners and flexible multi-source global operations over many years and we benefit from the architectural advantages of our integrated hardware designs. While there have been numerous supply chain challenges over the last year, and we are certainly not invulnerable to disruption in the future, we have navigated and managed them well and continue to meet our customers’ demands.”
Supply chain issues have become a new normal and Giancarlo doesn’t see any signs of improvement yet. “We had indicated last quarter that we thought it would bottom out in Q4. And it probably has, but it hasn’t really improved. It’s still bouncing along the bottom … we’re still waiting to see signs that we’re on the upswing.”
Hiring has been a plus point: “There has never been a time in my memory when so much great talent was available all at one time.”
The company has said it now has 4,200 employees.
Pure expects to see revenues of about $520 million next quarter, up 26 per cent year-on-year, with full 2023 revenues of around $2.6 billion – a 19 per cent rise on 2022.