Pure Storage Inc.

05/21/2019 | Press release | Distributed by Public on 05/21/2019 14:50

Pure Storage Announces First Quarter Fiscal 2020 Financial Results

MOUNTAIN VIEW, Calif., May 21, 2019 /PRNewswire/ -- Pure Storage (NYSE: PSTG), the data solutions leader that helps innovators build a better world with data, today announced financial results for its first quarter ended April 30, 2019.

'Pure continues to gain market share with innovation, a differentiated business model and our laser focus on customer delight,' said Charles Giancarlo, Chairman and CEO, Pure Storage. 'As enterprises embark on their hybrid cloud journeys, Pure is excited to play a role in modernizing their business.'

Q1 Key Business and Financial Highlights:

  • Revenue: $326.7 million, up 28% year over year
  • Gross margin: GAAP 66.2%; non-GAAP 68.1%
  • Operating margin: GAAP -29.8%; non-GAAP -9.6%

Recent Company Highlights:

During Pure's first quarter of fiscal year 2020, the Company:

  • Announced the acquisition of Compuverde - a leading developer of file software solutions for enterprises and cloud providers. The acquisition will expand Pure Storage's file capabilities by providing a unified storage offering, as well as empowering customers to implement true hybrid architectures.
  • Released ObjectEnginefor General Availability - the industry's first data protection platform purpose-built for flash and cloud. ObjectEngine unifies cloud and on-premises with seamless, rapid backup and recovery across both on-prem and the cloud and enables customers to modernize their entire data protection strategy to a 'flash-to-flash-to-cloud' model.
  • Announced expansion of EvergreenStorage Service (ES2) - to enable a unified subscription model across hybrid environments. This allows organizations to leverage Pure's best-in-class storage-as-a-service model on-premises, hosted and in the cloud, without the need to manage multiple subscriptions or purchase separate or overlapping capacity.

'Q1 was a solid beginning of the year for Pure,' said Tim Riitters, CFO, Pure Storage. 'We continued to demonstrate strong growth, industry-leading margins, and innovation across our product portfolio.'

First Quarter Fiscal 2020 Financial Highlights

The following tables summarize our consolidated financial results for the fiscal quarters ended April 30, 2019 and 2018 (in millions except percentages, per share amounts and headcount, unaudited):

GAAP Quarterly Financial Information

Three Months Ended
April 30, 2019

Three Months Ended
April 30, 2018

Y/Y Change

Revenue

$326.7

$255.9

28%

Gross Margin

66.2%

65.0%

1.2 ppts

Product Gross Margin

67.9%

66.0%

1.9 ppts

Support Subscription Gross Margin

61.7%

61.6%

0.1 ppts

Operating Loss

$(97.4)

$(61.9)

$(35.5)

Operating Margin

-29.8%

-24.2%

-5.6 ppts

Net Loss

$(100.3)

$(64.3)

$(36.0)

Net Loss per Share - Basic and Diluted

$(0.41)

$(0.29)

$(0.12)

Weighted-Average Shares

245.3

223.8

21.5

Headcount

>3,150

>2,300

~850

Non-GAAP Quarterly Financial Information

Three Months Ended
April 30, 2019

Three Months Ended
April 30, 2018

Y/Y Change

Gross Margin

68.1%

66.3%

1.8 ppts

Product Gross Margin

68.7%

66.3%

2.4 ppts

Support Subscription Gross Margin

66.3%

66.3%

0.0 ppts

Operating Loss

$(31.2)

$(15.3)

$(15.9)

Operating Margin

-9.6%

-6.0%

-3.6 ppts

Net Loss

$(27.6)

$(16.2)

$(11.4)

Net Loss per Share

$(0.11)

$(0.07)

$(0.04)

Weighted-Average Shares

245.3

223.8

21.5

A reconciliation between GAAP and non-GAAP information is provided at the end of this release.

Financial Outlook

Second quarter fiscal 2020 guidance:

  • Revenue in the range of $389 million to $401 million, or $395 million at the midpoint
  • Non-GAAP gross margin in the range of 65.0% to 68.0%, or 66.5% at the midpoint
  • Non-GAAP operating margin in the range of -5.0% to -1.0%, or -3.0% at the midpoint

Full year fiscal 2020 guidance:

  • Revenue in the range of $1.70 billion to $1.77 billion, or $1.735 billion at the midpoint
  • Non-GAAP gross margin in the range of 65.5% to 68.0%, or 66.75% at the midpoint
  • Non-GAAP operating margin in the range of 1.5% to 5.5%, or 3.5% at the midpoint

All forward-looking non-GAAP financial measures contained in this section titled 'Financial Outlook' exclude stock-based compensation expense, payroll tax expense related to stock-based activities, amortization of debt discount and debt issuance costs, amortization of intangible assets acquired from acquisitions, any applicable anti-dilutive share count impact of our convertible debt hedge agreements and, as applicable, other special items. We have not reconciled guidance for non-GAAP gross margin and non-GAAP operating margin to their most directly comparable GAAP measures because the items that impact these measures are not within our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.

Conference Call Information

Pure Storage will host a teleconference to discuss the first quarter fiscal 2020 results at 2:00 p.m. (PT) on May 21, 2019. Pure Storage will post its supplemental earnings presentation to the investor relations website at investor.purestorage.com following the conference call.

Teleconference details are as follows:

  • To Listen via Telephone: (866) 393-4306 or (734) 385-2616 (for international callers) with passcode 4955207.
  • To Listen via the Internet: A live and replay audio broadcast of the conference call with corresponding slides will be available at investor.purestorage.com.
  • Replay: A telephone playback of this conference call is scheduled to be available two hours after the call ends on Tuesday, May 21, 2019, through June 4, 2019. The replay will be accessible by calling (855) 859-2056 or (404) 537-3406 (for international callers), with conference ID 4955207.

Upcoming Events

Management will participate in upcoming financial Q&A discussions at the Bank of America Global Technology Conference on June 4th at 3:50 pm PT, the William Blair 2019 Growth Stock Conference on June 6th at 6 am PT, and the Stifel Cross Sector Insights Conference on June 11th at 12:35 pm PT. Pure Storage will post a link to each session on the investor relations website at investor.purestorage.com for both live and archived events.

About Pure Storage

Pure Storage (NYSE: PSTG) helps innovators build a better world with data. Pure's data solutions enable SaaS companies, cloud service providers, and enterprise and public sector customers to deliver real-time, secure data to power their mission-critical production, DevOps, and modern analytics environments in a multi-cloud environment. One of the fastest growing enterprise IT companies in history, Pure Storage enables customers to quickly adopt next-generation technologies, including artificial intelligence and machine learning, to help maximize the value of their data for competitive advantage. And with a certified NPS customer satisfaction score in the top one percent of B2B companies, Pure's ever-expanding list of customers are among the happiest in the world.

Pure Storage, DirectFlash, Evergreen, FlashBlade, FlashStack, ObjectEngine and the 'P' Logo mark are trademarks of Pure Storage, Inc. All other trademarks or names referenced in this document are the property of their respective owners.

Forward Looking Statements

This press release contains forward-looking statements regarding our products, business and operations, including our growth prospects and expectations regarding product and technology differentiation, and our outlook for the second quarter and full year fiscal 2020, and statements regarding our products, business, operations and results. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions 'Risk Factors' and elsewhere in our filings and reports with the U.S. Securities and Exchange Commission, which are available on our investor relations website at investor.purestorage.com and on the SEC website at www.sec.gov. Additional information is also set forth in our Annual Report on Form 10-K for the year ended January 31, 2019. All information provided in this release and in the attachments is as of May 21, 2019, and we undertake no duty to update this information unless required by law.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, free cash flow, free cash flow as a percentage of revenue, free cash flow without ESPP impact, and free cash flow without ESPP impact as a percentage of revenue.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures such as stock-based compensation expense, amortization of debt discount and debt issuance costs, and amortization of intangible assets acquired from acquisitions that may not be indicative of our ongoing core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and planning, forecasting, and analyzing future periods. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for, our financial results prepared in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned 'Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures' and 'Reconciliation from net cash provided by operating activities to free cash flow and free cash flow without ESPP impact,' included at the end of this release.

PURE STORAGE, INC.

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

As of
April 30, 2019

As of
January 31, 2019

Assets

Current assets:

Cash and cash equivalents

$

287,192

$

447,990

Marketable securities

878,958

749,482

Accounts receivable, net of allowance of $642 and $660

311,843

378,729

Inventory

45,936

44,687

Deferred commissions, current

28,532

29,244

Prepaid expenses and other current assets

54,570

51,695

Total current assets

1,607,031

1,701,827

Property and equipment, net

129,185

125,353

Operating lease right-of-use-assets

120,446

-

Deferred commissions, non-current

84,725

85,729

Intangible assets, net

57,220

20,118

Goodwill

36,407

10,997

Deferred income taxes, non-current

1,118

1,060

Restricted cash

16,286

15,823

Other assets, non-current

16,771

12,118

Total assets

$

2,069,189

$

1,973,025

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

75,481

$

103,462

Accrued compensation and benefits

48,166

99,910

Accrued expenses and other liabilities

47,392

39,860

Operating lease liabilities, current

25,761

-

Deferred revenue, current

283,160

266,584

Total current liabilities

479,960

509,816

Convertible senior notes, net

456,318

449,828

Operating lease liabilities, non-current

101,112

-

Deferred revenue, non-current

281,070

269,336

Other liabilities, non-current

6,753

6,265

Total liabilities

1,325,213

1,235,245

Stockholders' equity:

Common stock and additional paid-in capital

1,924,972

1,820,067

Accumulated other comprehensive income (loss)

1,289

(338)

Accumulated deficit

(1,182,285)

(1,081,949)

Total stockholders' equity

743,976

737,780

Total liabilities and stockholders' equity

$

2,069,189

$

1,973,025

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)

Three Months Ended April 30,

2019

2018

Revenue:

Product

$

238,741

$

195,449

Support subscription

87,959

60,496

Total revenue

326,700

255,945

Cost of revenue:

Product (1)

76,592

66,420

Support subscription (1)

33,721

23,210

Total cost of revenue

110,313

89,630

Gross profit

216,387

166,315

Operating expenses:

Research and development (1)

105,075

78,492

Sales and marketing (1)

166,626

122,367

General and administrative (1)

42,110

27,330

Total operating expenses

313,811

228,189

Loss from operations

(97,424)

(61,874)

Other income (expense), net

(1,816)

(999)

Loss before provision for income taxes

(99,240)

(62,873)

Income tax provision

1,096

1,431

Net loss

$

(100,336)

$

(64,304)

Net loss per share attributable to commonstockholders, basic and diluted

$

(0.41)

$

(0.29)

Weighted-average shares used in computing netloss per share attributable to commonstockholders, basic and diluted

245,334

223,768

(1) Includes stock-based compensation expense as follows:

Cost of revenue -- product

$

977

$

608

Cost of revenue -- support subscription

3,951

2,684

Research and development

28,245

21,090

Sales and marketing

18,314

13,940

General and administrative

10,670

5,633

Total stock-based compensation expense

$

62,157

$

43,955

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

Three Months Ended April 30,

2019

2018

Cash flows from operating activities

Net loss

$

(100,336)

$

(64,304)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

21,060

16,417

Amortization of debt discount and debt issuance costs

6,490

1,455

Stock-based compensation expense

62,157

43,955

Other

(811)

152

Changes in operating assets and liabilities, net of effects of acquisition:

Accounts receivable, net

67,299

47,143

Inventory

(2,023)

(4,429)

Deferred commissions

1,716

1,269

Prepaid expenses and other assets

(7,298)

11,111

Operating lease right-of-use assets

6,209

-

Accounts payable

(25,807)

(18,802)

Accrued compensation and other liabilities

(43,993)

(29,881)

Operating lease liabilities

(6,034)

-

Deferred revenue

28,013

14,510

Net cash provided by operating activities

6,642

18,596

Cash flows from investing activities

Purchases of property and equipment

(24,296)

(22,296)

Acquisition, net of cash acquired

(47,881)

-

Purchases of marketable securities

(312,859)

(81,702)

Sales of marketable securities

22,344

10,454

Maturities of marketable securities

164,139

61,023

Net cash used in investing activities

(198,553)

(32,521)

Cash flows from financing activities

Net proceeds from exercise of stock options

16,761

9,614

Proceeds from issuance of common stock under employee stock purchase plan

32,042

19,698

Proceeds from issuance of convertible senior notes, net of issuance costs

-

562,062

Payment for purchase of capped calls

-

(64,630)

Repayment of debt acquired from acquisition

(11,555)

-

Tax withholding on vesting of restricted stock

(5,672)

-

Repurchase of common stock

-

(20,000)

Net cash provided by financing activities

31,576

506,744

Net increase (decrease) in cash, cash equivalents and restricted cash

(160,335)

492,819

Cash, cash equivalents and restricted cash, beginning of period

463,813

258,820

Cash, cash equivalents and restricted cash, end of period

$

303,478

$

751,639

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures

The following table presents non-GAAP gross margins by revenue source before certain items (in thousands except percentages, unaudited):

Three Months Ended April 30, 2019

Three Months Ended April 30, 2018

GAAP
results

GAAP
gross
margin (a)

Adjustment

Non-
GAAP
results

Non-
GAAP
gross
margin (b)

GAAP
results

GAAP
gross
margin (a)

Adjustment

Non-
GAAP
results

Non-
GAAP
gross
margin (b)

$

977

(c)

$

608

(c)

49

(d)

25

(d)

922

(e)

-

Gross profit --product

$

162,149

67.9

%

$

1,948

$

164,097

68.7

%

$

129,029

66.0

%

$

633

$

129,662

66.3

%

$

3,951

(c)

$

2,684

(c)

127

(d)

142

(d)

Gross profit --support subscription

$

54,238

61.7

%

$

4,078

$

58,316

66.3

%

$

37,286

61.6

%

$

2,826

$

40,112

66.3

%

$

4,928

(c)

$

3,292

(c)

176

(d)

167

(d)

922

(e)

-

Total gross profit

$

216,387

66.2

%

$

6,026

$

222,413

68.1

%

$

166,315

65.0

%

$

3,459

$

169,774

66.3

%

(a) GAAP gross margin is defined as GAAP gross profit divided by revenue.

(b) Non-GAAP gross margin is defined as non-GAAP gross profit divided by revenue.

(c) To eliminate stock-based compensation expense.

(d) To eliminate payroll tax expense related to stock-based activities.

(e) To eliminate amortization expense of acquired intangible assets.

The following table presents certain non-GAAP consolidated results before certain items (in thousands, except per share amounts and percentages, unaudited):

Three Months Ended April 30, 2019

Three Months Ended April 30, 2018

GAAP

results

GAAP

operating

margin (a)

Adjustment

Non-

GAAP

results

Non-

GAAP

operating

margin (b)

GAAP

results

GAAP

operating

margin (a)

Adjustment

Non-

GAAP

results

Non-

GAAP

operating

margin (b)

$

62,157

(c)

$

43,955

(c)

3,124

(d)

2,667

(d)

922

(e)

-

Operating loss

$

(97,424)

-29.8

%

$

66,203

$

(31,221)

-9.6

%

$

(61,874)

-24.2

%

$

46,622

$

(15,252)

-6.0

%

$

62,157

(c)

$

43,955

(c)

3,124

(d)

2,667

(d)

922

(e)

-

6,490

(f)

1,455

(f)

Net loss

$

(100,336)

$

72,693

$

(27,643)

$

(64,304)

$

48,077

$

(16,227)

Net loss per share -- basic and diluted

$

(0.41)

$

(0.11)

$

(0.29)

$

(0.07)

Weighted-average shares used in per share calculation -- basic and diluted

245,334

245,334

223,768

223,768

(a) GAAP operating margin is defined as GAAP operating loss divided by revenue.

(b) Non-GAAP operating margin is defined as non-GAAP operating loss divided by revenue.

(c) To eliminate stock-based compensation expense.

(d) To eliminate payroll tax expense related to stock-based activities.

(e) To eliminate amortization expense of acquired intangible assets.

(f) To eliminate amortization expense of debt discount and debt issuance costs related to our convertible debt.

Reconciliation from net cash provided by operating activities to free cash flow and free cash flow without ESPP impact (in thousands except percentages, unaudited):

Three Months Ended April 30,

2019

2018

Net cash provided by operating activities

$

6,642

$

18,596

Less: purchases of property and equipment

(24,296)

(22,296)

Free cash flow (non-GAAP)

$

(17,654)

$

(3,700)

Adjust: ESPP impact

21,960

12,252

Free cash flow without ESPP impact (non-GAAP)

$

4,306

$

8,552

Free cash flow as % of revenue

-5.4

%

-1.4

%

Free cash flow without ESPP impact as % of revenue

1.3

%

3.3

%

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SOURCE Pure Storage