What to expect from Pivotal Software Q2 earnings

Pivotal Software Inc. (NYSE: PVTL) will report its earnings results for the second quarter of fiscal 2020 on Wednesday, September 4, after the market closes. The company is expected to not achieve sufficient revenue to attain and maintain profitability due to an increase in operating expenses. Investors will look for the management’s views on the agreement to be acquired by VMware (NYSE: VMW) for an enterprise value of $2.7 billion.

The company achieves revenue from the sale of Pivotal Cloud Foundry (PCF) subscriptions, Labs, as well as implementation and other professional services. The company expects that over time subscription revenue will become a larger percentage of total revenue as customers continue to adopt and expand their PCF subscriptions and as systems integrator partner relationships ramp to directly deliver Labs-like services to its customers.

Pivotal had incurred a net loss in each year since formation and as of May 3, 2019, the company had an accumulated deficit of $1.32 billion. The operating expenses are likely to increase significantly in the future due to additional hiring, strategic investments, scale relationships with ecosystem partners, and open new offices.

The company’s ability to increase sales of PCF and Labs depends on growth in its target markets, which include the markets for cloud application infrastructure, Platform-as-service and application infrastructure, middleware and development solutions. Pivotal’s future growth depends in part on customers renewing their subscriptions and expanding their use of its platform.

Analysts expect the company to report a loss of $0.04 per share on revenue of $186.57 million for the second quarter. In comparison, during the previous year quarter, Pivotal posted a loss of $0.06 per share on revenue of $164.41 million. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

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For the first quarter, Pivotal reported a narrower loss helped by a 19% growth in the total revenues. The company was beneficial from the 43% subscription growth and customer expansions that continued to fuel its strong net expansion rate of 143% while the sales execution and a complex technology landscape impacted the quarter.

For the second quarter, the company expects total revenues in the range of $185 million to $189 million, subscription revenue of $131 million to $133 million, and adjusted loss in the range of $0.04 to $0.03 per share. For fiscal 2020, the company predicts total revenue in the range of $756 million to $767 million, subscription revenue of $530 million to $538 million, and adjusted loss in the range of $0.15 to $0.13 per share.

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