Strong subscription growth made for a very good first-ever quarterly financial report for Pivotal Software.
The San Francisco-based software and services company on Tuesday reported its financial results for its first fiscal quarter of 2019, which was the first full reporting financial quarter since Pivotal went public earlier this year.
Pivotal Software develops cloud-native platforms and developer tools aimed at helping businesses transform how they build software and run strategic applications.
"[Pivotal] enables developers to create and deploy software rapidly. … As software development becomes a strategic imperative, we enable software developers to run strategic software on any platform," said CEO Rob Mee during the company's Tuesday financial analyst conference call.
Pivotal Software has found several ways to build its business, including an important developer community, Mee said. For instance, he said, developers download the company's Spring Boot software for developing cloud-native Java-based applications over 35 millions times every month.
The company also has a strong direct sales team and partners with sister companies Dell and VMware. It has also built has strong solution provider and ISV partnerships that are helping bring Pivotal Software's technologies to the largest organizations, he said. The company during the first fiscal quarter added 18 ISV partners to its Pivotal Marketplace, he said.
For its first fiscal quarter of 2019, which ended May 4, Pivotal Software reported total revenue of $155.7 million, which was up 28 percent compared to the $121.2 million the company reported for its first fiscal quarter of 2018.
That revenue included $90.1 million in subscription revenue, which was up 69 percent year-over-year, and $65.6 million in services, which was down 3 percent over last year, said Cynthia Gaylor, the company's chief financial officer.
"Growth in subscriptions is the driver of growth of our revenue," Gaylor said.
The drop in services revenue was caused by a fall in maintenance revenue related to legacy products, Gaylor said. At the same time, Pivotal Software is moving to better leverage partners to build their services capabilities. "Services are not a revenue driver on their own," she said.
Pivotal Software reported a GAAP net loss of $32.5 million, or 31 cents per share, compared to last year's loss of $51.5 million, or 76 cents per share. On a non-GAAP basis, the company reported a net loss of $23.3 million, or 10 cents per share, compared to last year's net loss of $42.7 million, or 20 cents per share.
Analysts had been expecting non-GAAP loss of 13 cents per share, according to Seeking Alpha.
Mee, responding to an analyst's question during the call, said that his company's Pivotal Application Service, or PAS, platform for building cloud-native applications, and its Pivotal Container Service, or PKS, platform for deploying Kubernetes containers, are not totally separate offerings.
While PAS helps customers code their applications for modern platforms, PKS expands the number of platforms on which an application can run.
Over the last five years, Mee said, customers have shifted from a focus on developing new application using PAS to running most or all of their applications with PAS and PKS. "Customers getting their applications on the [Pivotal] platform is a measurement of our success," he said.
Looking forward, Gaylor said Pivotal expects second fiscal quarter subscriptions to reach $92 million to $93 million, or up 43 percent year-over-year at the midway point. Total revenue is expected to rise 25 percent to reach $157 million to $159 million. The non-GAAP operating loss is expected to between $23 million and $22 million, which she said will be a 25-percent improvement. The company expects to show a non-GAAP loss of 10 cents to 9 cents per share, she said.
For its full fiscal 2019, Pivotal Software expects subscription revenue of $380 million to $384 million, or up 47 percent over fiscal 2018 at the midpoint, Gaylor said. Total revenue is expected to grow 27 percent to reach $642 million to $649 million. The company expects to post a non-GAAP operating loss of $96 million to $91 million, which would be a 27-percent improvement over fiscal 2018. It also expects a non-GAAP loss of 39 cents to 37 cents per share, she said.
Shares of Pivotal Software, which rose by about 1.3 percent to $21.21 per share by the close of the trading day, shot up an additional 7-plus-percent in after-hours trading after the company reported its quarterly financials.