Recent software IPO Pivotal Software (PVTL
26.70, +5.49, +25.88%) moves higher in reaction to the company’s slimmer than
expected loss for the first quarter and equally solid guidance.
In its first quarterly report since debuting on the public markets Pivotal reported a slimmer than expected loss per share of $0.10. Revenues grew a better than expected 28.5% to $155.7 mln with 69% growth in subscription revenues to $90.1 mln.
Pivotal’s subscription gross margin was 92%, up 3 points compared to last year. Management expects subscription gross margin to generally remain in this range. Services gross margin was 26%, consistent with last year’s result and management expects it to vary quarter-to-quarter with the seasonality of projects and timing of engagements. Total gross margin for the first quarter was 64%, up 10 points compared to 54% in the year ago period, driven by a higher subscription revenue mix combined with slightly higher subscription margins.
Pivotal added 20 net new subscription customers from Q4 of fiscal 2018 for a total of 339 subscription customers in Q1. Pivotal also reported its first quarter of positive operating cash flow of $4.5 mln compared to a negative operating cash flow of $4.4 mln in Q1 of last year.
Management also noted that complementary to Pivotal’s direct sales and grassroots activities, it also partners with Dell and VMware to market and sell products and services, as partners. In the first quarter, their field sales teams began receiving compensation for Pivotal products and are actively generating new opportunities for Pivotal. The company thinks this is a compelling opportunity to accelerate its penetration in the Global 2000. Specifically, with PKS, the company has started to see the VMware sales force extend its account coverage and accelerate its sales cycles. Pivotal expects PKS will seed cross selling opportunities for other products across its portfolio over time.
Pivotal also gave strong guidance for the second quarter. The company sees subscription revenue between $92-93 mln with total revenues between $157-159 mln. The company sees non-GAAP net loss per share of ($0.10)-($0.09), assuming weighted average shares outstanding of around 249 mln.
For the full fiscal year 2019, Pivotal sees subscription revenues of $380-384 mln on total revenues between $642-649 mln. The company sees non-GAAP net loss per share of ($0.39)-($0.37), assuming weighted average shares outstanding of about 244 mln.
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