Everpure (NYSE:P) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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View the webcast at https://events.q4inc.com/attendee/756200454

Summary

Everpure, Inc reported a 35% year-over-year growth in Q1 revenue, with operating profit nearly doubling to $159 million.

The company is experiencing strong sales momentum and increased market share in data storage and management, with significant wins in AI and machine learning sectors.

Everpure's acquisition of One Touch aims to enhance data management capabilities, and the company expects hyperscale product revenue to rise significantly in the second half of the fiscal year.

EvergreenOne storage as a service sales grew 73% year-over-year, driven by longer contracts and lower upfront costs.

Management has raised full-year guidance, expecting a revenue increase of 22% and operating profit growth of 32%, citing strong pipeline and customer commitments.

Despite the current supply chain challenges, Everpure is managing costs to maintain customer trust and expects gradual recovery in product gross margins in H2.

Full Transcript

OPERATOR

Good afternoon everyone and welcome to EverPure's first quarter fiscal year 2027 earnings conference call. On the call we have Charlie Giancarlo, Chief Executive Officer, Tarek Robbiati, Chief Financial Officer and Rob Lee, Chief Technology and Growth Officer. Following Charlie's and Tarek's prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website with this call is being simultaneously webcast.

The slides that accompany this webcast can be downloaded at investor.everpuredata.com on this call today we will make forward looking statements which are subject to various risks and uncertainties. These include statements regarding our financial outlook and operations, our strategy, technology and its advantages, our current and new product offerings, our ability to procure a sufficient supply of components and manage our supply chain, our hyperscaler opportunity and competitive industry and economic trends.

Any forward looking statements that we make are based on facts and assumptions as of today and we undertake no obligation to update them. Our actual results may differ materially from the results forecasted and reported results should not be considered as an indication of future performance. A discussion of some of the risks and uncertainties related to our business is contained in our filings with the SEC and we refer you to these public filings during this call.

All financial metrics and associated growth rates are non GAAP measures other than revenue, remaining performance obligations or RPO and cash and investments. Reconciliations to the most directly comparable GAAP measures are provided in our earnings press release and slides. This call is being broadcast live on the Everpure Investor Relations website and is being recorded for playback purposes. An archive of the webcast will be available on the IR website and is the property of EverPure.

Our second quarter fiscal 2027 quiet period begins at the close of business on Friday, July 17, 2026. With that, I'll turn it over to Charlie.

Charlie Giancarlo (Chief Executive Officer)

Thank you. Good afternoon everyone and welcome to EverPure's Q1 fiscal 2027 earnings call. Q1 was another outstanding and a truly remarkable quarter reflected in the strength of both top and bottom line revenue. Growth of 35% year on year is a very strong start to our fiscal year 27 operating profit nearly doubled year over year to 159 million. Sales momentum started off strong and continued to build throughout the quarter. Revenue and operating profit exceeded the high end of our guidance range and we foresee continued strength throughout the year as will be seen in our revised full year guidance.

Undoubtedly much of the recent strength in the market has been kindled by the current supply chain crisis, but our strength is also driven by increased win rates for our solutions in contested opportunities. Our market share gains are accelerating as customers increasingly adopt Everpure Inc as their preferred vendor for data storage and management. Growth was driven by broad based strength across our core businesses and geographies. Large deals above 5 million were up in high double digits compared to prior year and our commercial business also showed strong momentum.

New customer logos were up 20% year on year. We also achieved significant marquee expansions, including a global financial services customer that relies on Everpure Inc as foundational infrastructure for private cloud environments across virtualized and kubernetes based workloads. It highlights the strength of our platform as customers bridge traditional and modern application architectures. As expected, Q1 included relatively little revenue associated with our hyperscale products.

As discussed last quarter, we expect hyperscale product revenue to rise significantly in Q3 and Q4 based on customer order commitments in the AI space. Flashblade EDSA scored more wins this past quarter including application in AI machine learning and financial services GPU accelerated trading applications 1 FinTech customer using advanced GPU based AI modeling for algorithmic trading on global financial markets selected FlashBlade Exa for their high performance AI infrastructure.

The firm has processed more than 13 million transactions during their peak trading day, underscoring the performance and consistent reliability that FlashBlade Exa delivers in data intensive AI environments. More broadly, we are now beginning to displace competitive AI storage products in the enterprise and NEO cloud markets as customers transition to our FlashBlade family for its unmatched performance, operational simplicity, flexibility and overall quality.

As Tarek Robbiati Robbiati will explain, current sales performance has been positively affected by industry wide cost and price increases. In my over 40 years in technology, I have never seen another supply chain situation remotely like this. Obviously, these price increases are of great concern to our customers. Consequently, on April 23rd we published a letter to customers explaining our position and philosophy during this supply chain crisis. In particular, we wanted our actions and intentions to be clear and transparent.

In the letter, we reassured our customers that we would share the cost pain with them and not see seek to profiteer from the crisis. To this end, we have carefully managed our component supplies to enable us to hold off price increases until far later and far less than competitive price raises. As mentioned last quarter, we are choosing to operate at the lower end of our product gross margin range to help our customers while component costs escalate.

We expect product gross margins will begin to recover in the second half of our year, but the recovery is likely to be gradual as costs continue to rise the current environment has enhanced the benefits of our Evergreen One storage as a service offering. Evergreen One benefits from longer contracts, lower upfront costs and longer lifetimes. This allows us to blend costs over many years, leading to more stable and lower operating costs for customers.

An increasing number of customers are choosing Evergreen One to enjoy the benefits of Everpure Inc. Evergreen One sales were up 73% year on year in Q1, reflecting greater customer appreciation for the operational and financial benefits of our storage as a service model. Our enterprise data cloud strategy continues to gain momentum PurityFusion adoption, which enables customers to build their own data clouds, doubled in Q1 with more than 1,200 customers.

Wins and expansions include CardConnect, a subsidiary of Fiserv and E&Co. formerly a Tislot Inc, as well as a leading North American financial institution and a large Asian healthcare IT provider. Its growth reflects rising customers interest in developing their own enterprise data clouds and reinforces PurityFusion's strategic role within EverPure's architecture. One state department of revenue, which processes more than $9 billion annually, told us that Fusion gave them the ability to scale and manage infrastructure with the simplicity of the cloud, but within their own data centers it allows their staff to to provision with confidence while providing more time for higher value strategic work. Our acquisition of One Touch, which closed earlier this month, will expand EverPure's opportunity to help customers manage their enterprise data. One Touch enables customers to better manage all of their data, whether on pure products or not, both on on-prem and in the cloud. This technology allows customers to build full data catalogs across all enterprise data add semantics as well as full ontologies and knowledge graphs to comprehensively manage their global enterprise data.

These capabilities will enable customers to reduce the number of copies of similar data, increase the utility and quality of their data, and reduce the cost of data preparation for AI and analytics. Regarding our hyperscale business, our solution continues to make steady progress with an expanding set of hyperscale cloud and large Tech Titan customers. Due to its enhanced efficiency, flexibility and reliability, we are currently investing significant resources in system qualification with multiple prospects.

As stated previously, we expect to significantly expand shipments of our hyperscale product in the second half of this year and even further next year. We look forward to providing more details on our product advancements, particularly our expansion into advanced data management at our upcoming Accelerate conference in June as well as at our Financial Analyst meeting scheduled for September 23rd here in Santa Clara. We continue to operate in a very dynamic macro environment.

The current supply chain crisis created by seemingly insatiable AI demand has entirely eclipsed the tariff crisis of last year. Costs and component shortages now change rapidly and are challenging to predict with any degree of certainty. We have confidence in our ability to weather these challenges better than most because of our architectural advantages, strong engineering and supply chain capabilities and our excellent supplier relationships. The current market turmoil has highlighted the importance of trust and transparency and has separated true partners from profiteers.

We are building Everpure Inc to be a long term trusted partner with customers, channel partners, suppliers, employees and our long term shareholders. I will now turn the call over to Tarek Robbiati Robbiati to provide greater insight into our performance and our expectations for the remainder of the year.

Tarek Robbiati

Thank you Charlie Q1 was an exceptionally strong strong quarter for Everpure, highlighted by revenue growth of 35% year over year and operating profit growth of more than 90%, both surpassing the high end of our guidance range. Performance was broad based across our core business segments and geographies and as expected we had a minimal contribution to product revenues from hyperscalers in the quarter. We expanded the number of customers transacting during the quarter while delivering solid execution and on large scale opportunities.

Product revenue, which includes revenues from hyperscale shipments as well as a portion of Portworx software revenue when sold as term licenses grew 55% year over year to $577 million. Our Q1 results reflected the combined impact of higher pricing and some degree of customer purchase acceleration as customers move proactively to secure product availability and mitigate anticipated future price increases amid ongoing supply constraints. We entered Q2 with a strong pipeline and continue to see healthy demand trends across the business.

Based on this momentum, we expect continued strength throughout the year as reflected in our increased full year guidance FlashBlade. Exa continued to gain traction delivering a number of new wins including deployments supporting AI and machine learning applications as well as GPU accelerated trading environments within financial services. While still in early stages, we are seeing strong engagement and active discussions with dozens of prospective customers across the AI ecosystem.

Our market share gains are accelerating driven by strong competitive win rates across enterprise and commercial businesses and an increased rate of competitive displacements thanks to our unique ability to support practically all storage needs and use cases. In Q1 we expanded our customer base by 275 new customers and our penetration of Fortune 500 now stands at 64%. We also added 223 new logos in our commercial business which attests to the strength of our business across all segments.

We completed the acquisition of One Touch on May 7 and are actively integrating the technology into our platform to further enhance our capabilities in preparing and managing data for AI driven applications. We are very excited to welcome the OneTouch team to EverPure. Together, EverPure and OneTouch will enable customers to focus on readying infrastructure for AI and unlocking the strategic value of their data. This combination strengthens our ability to help organizations maximize the value of their data assets in an increasingly AI centric environment.

As a reminder, we expect OneTouch to be approximately 12 million dilutive to operating profit in fiscal year 27 and to become accretive to operating profit within 24 months from the acquisition on a post synergies basis. Turning to margins and profitability, total Gross margin was 70.1% while subscription services margin was 75.6%. Product gross margin stood at 65.5% in line with our long term range of 65 to 70%, representing an increase of 150 basis points year over year and a decrease of 180 basis points sequentially, as foreshadowed in our Q4 earnings call. The sequential change in product gross margin was primarily driven by increased commodities cost, partially offset by price increases and shift in customer and product mix towards higher performance. Flash arrays and blades as anticipated during our last call, revenue contribution from our hyperscale business in Q1 was minimal and we continue to expect a significant majority of hyperscale revenues in H2 of fiscal year 27.

We expect aggregate product gross margins to improve in the second half of the year, supported by the contribution from hyperscale revenues, which we expect to yield 75% to 85% gross margins. However, the recovery of product gross margin excluding the contribution from hyperscales is expected to be gradual as pricing actions continue to catch up with ongoing volatile and rapidly rising input costs. Operating profit of $159 million grew over 90% year over year, resulting in an operating margin of 15.1%.

Strong revenue growth and operational discipline drove this excellent performance. Moving on to our subscription business, Q1 subscription services revenue of $476 million increased 17% year over year, accounting for 45% of total revenue. Our annual recurring revenue or ARR grew 19% to over $2 billion, which represents a sequential acceleration of nearly 300 basis points from Q4 2026 growth levels consistent with last quarter. Our remaining performance obligations OR RPO grew 41% to $3.8 billion, driven by the execution of large deals and strength of our Evergreen Forever and Evergreen One offerings.

PCB sales for our storage as a service offerings of $165 million grew 73% year over year. The recent supply chain pricing environment has reinforced the value proposition of our Evergreen One storage as a service offering, which has experienced significantly lower price increases compared to traditional product sales. Evergreen1 benefits from longer term contracts, reduced upfront costs and extended asset life cycles, enabling us to spread costs over multiple years and deliver more predictable, cost efficient operating models for customers, driving strong year over year growth momentum with respect to our geographic mix of revenues, US revenue was $739 million, growing 39% and international revenue was $314 million, growing 27% year over year. International revenue represented 30% of total revenue in Q1 2027. Scaling our international presence represents a significant opportunity and a key strategic focus for the company. Moving on to our balance sheet Our balance sheet remains robust with over $1.5 billion in cash and investments at the end of the quarter, cash flow from operations was $180 million, impacted by elevated sales activity including higher commission payments pertaining to Q4 over achievement driven by the strong demand environment as well as merit bonus payments.

Capital investments were $68 million, representing approximately 6.5% of revenue for the quarter. Our capital investments supported the continued scaling of our hyperscale business as we ramp up investments to qualify more NAND for various hyperscales, tech timeframes and cloud providers and accelerate growth of our EvergreenOne subscription offering. As a result, free cash flow was $112 million. In Q1 we repurchased 1.3 million shares, returning approximately $84 million to shareholders.

We also paid $101 million in withholding taxes on employees awards, offsetting dilution of approximately 1.6 million shares. We currently have about $245 million remaining under our existing $400 million repurchase authorization announced in Q4 of fiscal year 26. Finally, our headcount increased sequentially by 211 employees, bringing our total headcount to 6,600 employees. Now turning on to guidance As I mentioned earlier, a portion of this year's strength comes from the current supply chain environment.

The sudden sharp and continuing rise in the cost of components has forced the entire high tech industry to raise prices. Price increases have led to higher sales per unit and customer pull ins to buy ahead of future price increase. We estimate that these two effects represented nearly a third of our Q1 year on year revenue growth and will continue to drive performance in future quarters this year. The strength of our Q1 results, good short term pipeline visibility in Q2 and continued momentum we are seeing across our customer base gives us confidence to increase our full year guidance for Q2, we anticipate revenue to be in the range of $1,095,000,000 to $1,105,000,000, representing approximately a 28% year over year increase at the midpoint. We expect operating profit to be in the range of $195 million to $205 million, representing approximately a 54% year over year increase at the midpoint.

Again, I would like to remind everyone that we continue to expect hyperscale product revenue to rise significantly in Q3 and Q4 based on customer order commitments. Consequently, for fiscal year 27 we anticipate revenue to be in the range of $4.41 billion to $4.51 billion to representing a 22% year over year increase at the midpoint. This is a 300 basis point increase from our previously provided revenue guidance of 19% year over year growth. We expect operating profit to be in the range of 820 to $860 million, representing approximately a 32% year over year increase at the midpoint.

This is more than 600 basis points increase from our prior provided operating profit guidance. In terms of seasonality, we entered fiscal year 27 with very strong momentum and are executing extremely well in a difficult supply chain environment. The current full Year guide indicates that 48% of our revenues will be generated in H1 27 compared to 45% in prior years. I would like to finish by saying that our execution focus is a balancing act between short term pipeline generation to improve visibility and drive sales on a quarterly basis while keeping an eye on sustainability of demand in H2 of fiscal year 27 and beyond.

As Charlie said, we're not looking to profiteer from this crisis and have been prudent with our price increases and consistent with terms and conditions offered to customers in order to continue to enhance our market share and protect the franchise for the long term. In normal circumstances, such strong momentum in first half revenue in our core enterprise and commercial business would drive a higher full year guide with a seasonality akin to prior years.

However, in today's highly dynamic environment, it is too early to call for further upside to our guide in the second half of fiscal year 27 as market participants adjust to price levels that are unprecedented globally. Yet we continue to be confident in our ability to execute our priorities this year and beyond. With that, I'll now turn the call back to Paul for Q and A. Thanks Tarek.

Paul (Moderator)

Before we begin the Q and A session, I'll ask you to please limit yourselves to one question consisting of one part, so we can get to as many people as possible. If you have additional questions, we kindly ask that you please rejoin the queue and we'll be happy to take those additional questions as time allows. Operator, let's get started.

OPERATOR

Thank you. If you would like to ask a question, please press Star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press STAR followed by one again. To ask a question, press Star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We'll pause here briefly as questions are registered. Our first question comes from Amit Daryanami from Evercore. Please go ahead. Your line is open.

Amit Daryanami (Equity Analyst)

Good afternoon everyone. Thanks for taking my question. I guess given the strong 35% growth we saw in Q1 and the guidance 28% in growth in Q2, could you spend some time about how should we think about the demand trajectory in the back half of the year? And really, when I think about your guidance framework, it implies a bit of a natural deceleration in qh. Or are you simply embedding more conservatism? Given the current component sizing and maybe even the timing of some of the AI infrastructure deployments that are happening, could you spend a little bit of time on the back half dynamic?

That would be helpful, thank you.

Charlie Giancarlo (Chief Executive Officer)

Yeah, Amit, thanks for the question. Hope you're well. Look, the second half of the year is frankly in this environment, this is a very dynamic environment. It's dynamic on the supply chain side. Obviously pricing has been very dynamic and it frankly changes almost every week. And so being able to have high visibility into the second half of the year I think is somewhat unrealistic to anyone's calendar. What I will say is we saw very strong demand, as you can see in the first quarter. We continue to see strong demand now. So the two things that frankly we'd want to see before raising guidance, one of which is will demand continue given these historically high prices, or will we start to see some demand destruction?

We don't know. And the second is the supply environment, which is very there are a lot of shortages we have to get through. You know, we have to be able to ship what we promised and make sure that we have the supply to do that. And that is a full time job at the moment. So it's just, I think it's more a matter of not knowing what the second half of the year has in store for us, despite the fact that we are seeing very good demand at the moment.

OPERATOR

Thank you, Amit. Next question, please. Our next question comes from Aaron Rakers from Wells Fargo. Please go ahead. Your line is open.

Richard Strifler

Hi, this is Richard Strifler on for Aaron.

Rob Lee (Chief Technology and Growth Officer)

I was just wondering, with the rapidly increasing context windows and tokenomics now becoming top of mind for many workloads in pure innovating in the granular prompt caching, what innovations have, what indications of KV Cache moving to SSD storage have you seen thus far? And can you help us better understand the conversations you're having with customers on this dynamic? Yeah, absolutely. Richard, this is Rob. I'll take that question. Look, I mean, I think the entire space of inference and technologies that support inference continues to evolve.

We continue to be supporting leading customers in this space as well as Nvidia and other ecosystem partners that are driving innovation here. I think as we look at the increase in context windows and what that's driving in terms of memory and storage overall, the more tokens, the more data you try to process, the more context you need to assemble. And we do see that as driving more demand of memory, both in the GPU servers, remote memory, remote storage, and that's a large part of our partnership with Nvidia.

Our solutions that we've developed around Nvidia technology, such as KV caching, as well as future plans and, and product roadmaps that look at where the expansion of context memory is likely to go in the future.

OPERATOR

Thank you, Richard. Next question, please. Our next question comes from Howard Mah from Guggenheim Securities. Please go ahead. Your line is open.

Howard Mah (Equity Analyst)

Great, thanks. I want to congratulate you all on a really strong quarter. My question is for Tarek. You said that hyperscale shipments or the ramp will in Q3 and Q4 is based on customer order commitments. Can you quantify what's actually contracted versus forecasted in the full year guide? And could the supply shortages result in higher shipments at a higher average selling price to your lead hyperscaler than you expected before? We don't safar. Thanks for the question.

Tarek Robbiati

We don't quantify specifically the revenues that we will derive from hyperscalers. These are really based on customer order commitments that were agreed before the beginning of this fiscal year. So we are on track for that. We feel very good about the prospects of our hyperscaler business. Let me reiterate to you what we said at the end of our Q4 during our earnings call. We do feel very comfortable with the prospects of this business in fiscal year 27 and beyond.

And we expect a multiple of the revenues we generated in 2026 to be realized in fiscal year 27.

OPERATOR

Thank you, Howard. Next question, please.

Matt Kalitrian

This is Matt Kalitrian from Mike Secos over at Needham. Thanks for taking our question. We're curious on what you're seeing regarding customers.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.