Pure Storage PSTG reported non-GAAP earnings per share (EPS) of 50 cents in fourth-quarter fiscal 2024, which beat the Zacks Consensus Estimate by 11.1%. The company reported non-GAAP EPS of 53 cents in the prior-year quarter.

Total revenues decreased 3% from the year-ago reported quarter to $789.8 million. However, revenue’s beat the Zacks Consensus Estimate by 1%.

Strong demand for subscription-based offerings particularly Evergreen//One and Portworx acted as catalysts amid macroeconomic weakness.

For fiscal 2024, the company reported revenues of $2.8 billion, up 3% year over year. Subscription services revenues of $1.2 billion rose 26% year over year. PSTG noted that the total contract value (TCV) sales for Evergreen//One and Evergreen//Flex exceeded $400 million in fiscal 2024.

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Quarter in Detail

Product revenues (contributing 58% to total revenues) amounted to $460.9 million, down 15.4% on a year-over-year basis.

Subscription services revenues (42%) of $328.9 million rose 24% on a year-over-year basis.

We expected Product and Subscription services revenues to be $502.8 million and $279.2 million, respectively, for the fiscal fourth quarter.

Subscription annual recurring revenues (ARR) amounted to nearly $1.374 billion, up 25% on a year-over-year basis. Subscription ARR includes the annualized value of all active subscription contracts as of the last day of the quarter, along with annualized on-demand revenues.

Total revenues in the United States and International were $522 million and $268 million, respectively.

Margin Highlights

The non-GAAP gross margin expanded 290 basis points (bps) year over year to 73.7%.

The non-GAAP Product gross margin expanded 420 bps year over year to 73.4%. The non-GAAP Subscription gross margin was 74.1%, which contracted 10 bps on a year-over-year basis.

Non-GAAP operating expenses, as a percentage of total revenues, were 53.7% compared with 51.3% in the prior-year quarter.

Pure Storage reported non-GAAP operating income of $157.8 million compared with $158.6 million in the year-ago quarter. The non-GAAP operating margin was 20% compared with 19.6% in the prior-year quarter.

Balance Sheet & Cash Flow

Pure Storage exited the fiscal fourth quarter that ended on Feb 4 with cash, cash equivalents and marketable securities of $1.5 billion, up from $1.35 billion as of Nov 5, 2023.

Cash flow from operations amounted to $244.4 million in the fiscal fourth quarter compared with $158.4 million in the prior-year quarter. Free cash flow was $200.9 million compared with $113.3 million in the prior-year quarter.

In the fiscal fourth quarter, the company returned $21.4 million to shareholders by repurchasing 0.6 million shares. For fiscal 2024, it returned $135.7 million to shareholders by repurchasing 4.7 million shares. It has $145 million left from its previously announced $250 million share repurchase plan. PSTG also announced a new buyback authorization worth $250 million.

Deferred revenues increased 15.1% year over year to $1.595 billion in the quarter under review.

The remaining performance obligations at the end of the fiscal fourth quarter totaled $2.3 billion, up 31% year over year. The metric represented total committed non-cancelable future revenues.