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Pure Storage(PSTG) - 2025 Q3 - Earnings Call Transcript
PSTGPure Storage(PSTG)2024-12-04 01:04
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Financial Data and Key Metrics Changes - Revenue for Q3 FY25 was 831million,representinga9831 million, representing a 9% year-over-year growth, exceeding guidance [35] - Operating profit was 167 million with an operating margin of 20.1%, positively impacted by revenue overachievement and strong gross margin performance [35][40] - Subscription services annual recurring revenue (ARR) grew 22% to 1.57billion,whiletotalremainingperformanceobligations(RPO)grew161.57 billion, while total remaining performance obligations (RPO) grew 16% year-over-year to 2.4 billion [38] Business Line Data and Key Metrics Changes - Strong demand for the //E family and FlashArray//C solutions contributed to higher product revenues, while total contract value (TCV) sales for storage-as-a-service offerings during Q3 was 96million[36]−TheconversionoflargerEvergreen//Oneopportunitiesvaluedover96 million [36] - The conversion of larger Evergreen//One opportunities valued over 5 million remained consistent, while smaller opportunities under 5millionsawameaningfulincreaseinconversionstotraditionalsales[37]MarketDataandKeyMetricsChanges−U.S.revenueforQ3was5 million saw a meaningful increase in conversions to traditional sales [37] Market Data and Key Metrics Changes - U.S. revenue for Q3 was 562 million, while international revenue was 269million,withnewcustomeracquisitiongrowingby340customersduringthequarter[39]−TheoverallITspendingenvironmentremainsmuted,withcustomersfacinghighersoftware,SaaS,andcloudcosts,impactingoperatingbudgets[29]CompanyStrategyandDevelopmentDirection−Thecompanysignedasignificantdesignwinwithatopfourhyperscaler,markingapivotalopportunitytoprovideflashstorageforstandardhyperscalerenvironments[8][14]−AdeepeningcollaborationwithKioxiaaimstosupporttheexpectedincreaseinflashdemandforthehyperscaleindustry[11]−TheintroductionofPureFusionaimstotransformenterprisedatamanagementbyenablingorganizationstocreatetheirowndatacloudenvironments[21][27]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinthecompany′spositioningacrossallsegmentsdespitethemutedITspendingenvironment[29]−ThedesignwinisexpectedtocontributesignificantlytorevenueandoperatingmarginexpansionstartinginFY2027,withearlyfieldtrialbuildoutsanticipatednextyear[46][47]−Thecompanyremainsfocusedonexecutionwhilenavigatingchallengesinthecurrenteconomiclandscape[48]OtherImportantInformation−Thecompanyrepurchased3.6millionshares,returningapproximately269 million, with new customer acquisition growing by 340 customers during the quarter [39] - The overall IT spending environment remains muted, with customers facing higher software, SaaS, and cloud costs, impacting operating budgets [29] Company Strategy and Development Direction - The company signed a significant design win with a top four hyperscaler, marking a pivotal opportunity to provide flash storage for standard hyperscaler environments [8][14] - A deepening collaboration with Kioxia aims to support the expected increase in flash demand for the hyperscale industry [11] - The introduction of Pure Fusion aims to transform enterprise data management by enabling organizations to create their own data cloud environments [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning across all segments despite the muted IT spending environment [29] - The design win is expected to contribute significantly to revenue and operating margin expansion starting in FY 2027, with early field trial buildouts anticipated next year [46][47] - The company remains focused on execution while navigating challenges in the current economic landscape [48] Other Important Information - The company repurchased 3.6 million shares, returning approximately 182 million to shareholders, with 213millionremainingonexistingrepurchaseauthorizations[42]−Cashflowfromoperationsduringthequarterwas213 million remaining on existing repurchase authorizations [42] - Cash flow from operations during the quarter was 97 million, reflecting a large upfront payment for new software technology [41] Q&A Session Summary Question: What drove the decision by the hyperscaler to choose Pure Storage? - The hyperscaler chose Pure Storage due to unmatched reliability, significant power savings, and accelerated time to value, among other factors [55][56] Question: Can you elaborate on the financial mechanics of the licensing engagement? - The licensing involves both software and hardware design, with revenue primarily coming from licensing fees, software fees, and support fees [70] Question: What is the expected revenue contribution from the hyperscaler design win? - The revenue contribution is expected to be meaningful starting in FY 2027, with the design win being a significant milestone [61][63] Question: How does the Evergreen subscription model trend in the current environment? - There has been a shift towards traditional sales due to pressures on OpEx budgets, but the company expects growth in subscription services to resume [92][130] Question: What is the nature of the CoreWeave partnership? - The partnership expands the availability of Pure Storage technology within the CoreWeave dedicated cloud, enhancing service offerings for AI customers [101][104]