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Pure Storage Announces Third Quarter Fiscal 2021 Financial Results - PRNewswire

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MOUNTAIN VIEW, Calif., Nov. 24, 2020 /PRNewswire/ -- Pure Storage (NYSE: PSTG), the IT pioneer that delivers storage as-a-service in a multi-cloud world, today announced financial results for its third quarter ended November 1, 2020.

"Our strategy and vision to deliver hybrid and multi-cloud data services is exciting the industry, our customers and developers alike," said Charles Giancarlo, Chairman and CEO of Pure Storage. "Pure made bold moves in the quarter to deliver on our strategy with the acquisition of Portworx and the addition of Dominick Delfino to lead our sales organization."

Third Quarter Financial Highlights 

  • Revenue $410.6 million, down 4% year-over-year
  • Subscription services revenue $136.1 million, up 29% year-over-year
  • GAAP gross margin 67.3%; non-GAAP gross margin 69.1%
  • GAAP operating loss $(65.2) million; non-GAAP operating income $3.4 million
  • Operating cash flow was $32.8 million
  • Free cash flow was $7.9 million
  • Total cash and investments of $1.2 billion
  • Deferred revenue $762.8 million, up 19% year-over-year
  • Remaining performance obligations (RPO) exceeding $1.0 billion, up 25% year-over-year

"We are pleased with our financial performance and execution during the quarter which slightly exceeded our expectations at the beginning of the quarter," said Kevan Krysler, CFO of Pure Storage. "Key highlights include consecutive quarters of strong sales of our Subscription Services, and record sales during a quarter for our FlashBlade and FlashArray//C solutions."

Third Quarter Company Highlights

Pure continued setting the pace in the industry by changing expectations for data and storage management. The technology momentum in Q3 across the portfolio includes:

  • Subscription Services momentum - Pure's Subscription Services, including Evergreen and unified Pure as-a-Service offerings, grew 29% year-over-year. Selecting Pure as-a-Service in Q3, leading organizations, including ME Bank in Australia and The University of Texas Health Science Center, recognize the flexibility and choice that these offerings provide. Our unified subscription, Pure-as-a-Service, which includes Cloud Block Store, enables customers to subscribe to storage in their data center and the cloud, paying for only what they consume, making migration to the public cloud possible at any time without worrying about stranded assets.
  • Advancing Pure as-a-Service offerings - Today marks another milestone and industry first for the Pure as-a-Service offering with the announcement of the Pure Service Catalog, which includes a number of new service tiers. The new service tiers deliver increased transparency and flexibility for customers, allowing them to choose the right storage service level for each workload. Pure is also making Pure as-a-Service more accessible by offering lower cost service tiers.
  • Acquisition of Portworx, market leader in Kubernetes storage - In Q3, Pure acquired Portworx, the leading Kubernetes data services platform that enterprises trust to run mission-critical applications in containers in production. By combining Portworx with Pure's industry-leading data platforms and Pure Service Orchestrator software, Pure provides a comprehensive suite of data services that can be deployed in-cloud, on bare metal, or on enterprise arrays, all natively orchestrated in Kubernetes.
  • FlashArray//C Momentum - FlashArray//C, well into its second generation, continues to grow at an accelerated pace and this month, received the Best of Show Award at the Flash Memory Summit for Most Innovative Flash Memory Technology. The performance and financial efficiencies delivered by FlashArray//C enable customers to reduce the cost of running capacity-oriented workloads so significantly it eliminates the need for hybrid disk arrays.
  • Strong FlashBlade momentum and AWS Outposts Designation - FlashBlade's unified fast file and object capabilities to consolidate and modernize unstructured data across a number of use cases including technical computing, analytics, backup and rapid restore is validated by strong customer momentum this quarter. Customers such as The First National Bankers Bank, Louisiana Office of Technology Services and Sinai Health System demonstrate that FlashBlade continues to be the leading choice to enable rapid recovery and defend against ransomware. Also in Q3, FlashBlade achieved the AWS Outposts Ready designation, delivering a hybrid cloud solution with all-flash performance, cloud scalability, and operational simplicity to accelerate modern applications and break down IT silos.

Guidance

Consistent with the prior quarter, Pure is sharing its internal expectations of Q4 business outlook, but will not provide formal guidance due to the resurgence and continued uncertainty of COVID-19.

Pure's current internal view of fiscal Q4 outcomes, which should not be viewed as guidance, is that total revenue for Q4 will be $480 million, a decline of two percent year-over-year. With the current view of revenue, Pure believes non-GAAP operating profit will be approximately $26 million in Q4.

Conference Call Information

Pure will host a teleconference to discuss the third quarter fiscal 2021 results at 2:00 p.m. PT on November 24, 2020. A live audio broadcast of the conference call will be available at the Pure Storage Investor Relations website at investor.purestorage.com. Pure will also post its supplemental earnings presentation and prepared conference call remarks to the Investor Relations website in advance of the call for reference. A replay will be available following the call on the Pure Storage Investor Relations website or for two weeks at (855) 859-2056 (or 404-537-3406 for international callers) with passcode 2343447.

Upcoming IR Events

  • Pure will be presenting at the Credit Suisse 24th Annual Technology Virtual Conference on November 30 at 10:40 a.m. PT.
  • Wells Fargo Technology, Media and Telecom Virtual Summit on December 2 at 9:00 a.m. PT.
  • Barclays Global Technology, Media and Telecommunications Virtual Conference on December 9 at 1:00 p.m. PT.

The presentations from these events will be webcast live, and all information will be available on the Investor Relations website at investor.purestorage.com.

About Pure Storage

Pure Storage (NYSE: PSTG) gives technologists their time back. Pure delivers a Modern Data Experience that empowers organizations to run their operations as a true, automated, storage as-a-service model seamlessly across multiple clouds. One of the fastest-growing enterprise IT companies in history, Pure helps customers put data to use while reducing the complexity and expense of managing the infrastructure behind it. And with a certified 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.

Analyst Recognition: Pure Storage has been named a Leader in the 2019 Gartner Magic Quadrant for Primary Storage.

Forward Looking Statements

This press release contains forward-looking statements regarding our products, business and operations, including but not limited to our views relating to future period outcomes, the scope and duration of the COVID-19 pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, supply chain, financial results and the economy, our expectations regarding product and technology differentiation, including our new offerings, strategy and adoption of subscription services, the impact of the Portworx acquisition and technology, and other 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 February 2, 2020. All information provided in this release and in the attachments is as of November 24, 2020, and Pure undertakes no duty to update this information unless required by law.

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, Pure uses 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 and free cash flow 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, payments to former shareholders of acquired companies, payroll tax expense related to stock-based activities, amortization of debt discount and debt issuance costs, amortization of intangible assets acquired from acquisitions, acquisition-related transaction and integration expenses, restructuring activities, and expenses directly related to the COVID-19 pandemic that may not be indicative of our ongoing core business operating results. Pure believes 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.

The non-GAAP operating profit for Q4 above also excludes the expenses and expenditures consistent with the non-GAAP financial measures described above. Non-GAAP operating profit is not reconciled to GAAP operating profit as the items that impact this measure are not within our control and/or cannot be reasonably predicted. Accordingly, a reconciliation is not available without unreasonable effort.

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," included at the end of this release.

PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)




At the End of



Third Quarter of
Fiscal 2021


Fiscal 2020






Assets





Current assets:





Cash and cash equivalents


$

263,702



$

362,635


Marketable securities


937,718



936,518


Accounts receivable, net of allowance of $558 and $542


378,193



458,643


Inventory


43,152



38,518


Deferred commissions, current


42,728



37,148


Prepaid expenses and other current assets


77,813



56,930


Total current assets


1,743,306



1,890,392


Property and equipment, net


158,200



122,740


Operating lease right-of-use-assets


137,856



112,854


Deferred commissions, non-current


109,361



102,056


Intangible assets, net


81,075



58,257


Goodwill


360,997



37,584


Restricted cash


11,349



15,287


Other assets, non-current


50,851



25,034


Total assets


$

2,652,995



$

2,364,204


Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

89,369



$

77,651


Accrued compensation and benefits


83,163



106,592


Accrued expenses and other liabilities


47,939



47,223


Operating lease liabilities, current


30,902



27,264


Deferred revenue, current


408,086



356,011


Total current liabilities


659,459



614,741


Long-term debt


748,422



477,007


Operating lease liabilities, non-current


124,382



92,977


Deferred revenue, non-current


354,678



341,277


Other liabilities, non-current


30,973



8,084


Total liabilities


1,917,914



1,534,086


Stockholders' equity:





Common stock and additional paid-in capital


2,238,741



2,107,605


Accumulated other comprehensive income


9,059



5,449


Accumulated deficit


(1,512,719)



(1,282,936)


Total stockholders' equity


735,081



830,118


Total liabilities and stockholders' equity


$

2,652,995



$

2,364,204


PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)



Third Quarter of Fiscal


First Three Quarters of Fiscal


2021


2020


2021


2020









Revenue:








Product

$

274,470



$

323,268



$

793,718



$

862,137


Subscription services

136,149



105,141



387,743



289,299


Total revenue

410,619



428,409



1,181,461



1,151,436


Cost of revenue:








Product (1)

86,661



89,998



240,677



259,460


Subscription services(1)

47,442



37,773



132,717



106,632


Total cost of revenue

134,103



127,771



373,394



366,092


Gross profit

276,516



300,638



808,067



785,344


Operating expenses:








Research and development (1)

122,981



106,663



350,079



318,758


Sales and marketing (1)

172,282



184,819



517,149



537,633


General and administrative (1)

46,467



37,416



132,063



119,542


Restructuring and other (2)





22,990




Total operating expenses

341,730



328,898



1,022,281



975,933


Loss from operations

(65,214)



(28,260)



(214,214)



(190,589)


Other income (expense), net

(4,887)



9



(6,700)



(2,459)


Loss before provision for income taxes

(70,101)



(28,251)



(220,914)



(193,048)


Income tax provision

4,121



1,731



8,869



3,288


Net loss

$

(74,222)



$

(29,982)



$

(229,783)



$

(196,336)










Net loss per share attributable to common stockholders, basic and diluted

$

(0.28)



$

(0.12)



$

(0.87)



$

(0.78)


Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

269,144



255,047



265,626



250,618



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









Cost of revenue -- product

$

1,027



$

912



$

3,013



$

2,843


Cost of revenue -- subscription services

3,883



3,517



10,961



11,101


Research and development

29,220



27,827



87,770



85,180


Sales and marketing

14,898



16,802



48,018



51,171


General and administrative

10,581



5,171



29,993



24,495


Total stock-based compensation expense

$

59,609



$

54,229



$

179,755



$

174,790



(2) Includes expenses related to restructuring and incremental expenses directly related to COVID-19

PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)






Third Quarter of Fiscal


First Three Quarters of Fiscal


2021


2020


2021


2020









Cash flows from operating activities








Net loss

$

(74,222)



$

(29,982)



$

(229,783)



$

(196,336)


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








Depreciation and amortization

18,214



23,194



49,811



66,785


Amortization of debt discount and debt issuance costs

7,400



6,896



21,525



20,186


Stock-based compensation expense

59,609



54,229



179,755



174,790


Impairment of long-lived assets





7,505




Other

2,139



(810)



4,111



(483)


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








Accounts receivable, net

(8,676)



(9,474)



83,220



17,079


Inventory

(6,459)



(4,130)



(4,724)



2,722


Deferred commissions

(7,402)



(4,563)



(12,885)



(8,158)


Prepaid expenses and other assets

(11,217)



2,099



(37,606)



1,464


Operating lease right-of-use assets

7,253



6,524



21,434



19,962


Accounts payable

29,656



(4,417)



8,566



(35,244)


Accrued compensation and other liabilities

(6,520)



(5,307)



(9,737)



(31,011)


Operating lease liabilities

(7,373)



(5,937)



(20,444)



(19,020)


Deferred revenue

30,397



35,935



57,860



106,980


Net cash provided by operating activities

32,799



64,257



118,608



119,716


Cash flows from investing activities








Purchases of property and equipment

(24,867)



(20,977)



(73,643)



(74,206)


Acquisitions, net of cash acquired

(339,806)



(3,713)



(339,806)



(51,594)


Purchase of intangible assets







(9,000)


Purchase of strategic investment

(5,000)





(5,000)




Purchases of marketable securities

(163,154)



(151,527)



(454,391)



(640,024)


Sales of marketable securities

40,856



56,150



132,207



116,518


Maturities of marketable securities

118,606



74,901



324,780



345,657


Net cash used in investing activities

(373,365)



(45,166)



(415,853)



(312,649)


Cash flows from financing activities








Net proceeds from exercise of stock options

4,019



6,544



25,677



25,804


Proceeds from issuance of common stock under employee stock purchase plan

16,418



11,249



32,439



43,291


Proceeds from borrowings, net of issuance costs

246,942





251,892




Repayment of debt assumed from acquisition







(11,555)


Tax withholding on vesting of restricted stock

(1,239)



(1,614)



(4,080)



(8,787)


Repurchases of common stock

(21,411)





(111,554)




Net cash provided by financing activities

244,729



16,179



194,374



48,753


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

(95,837)



35,270



(102,871)



(144,180)


Cash, cash equivalents and restricted cash, beginning of period

370,888



284,363



377,922



463,813


Cash, cash equivalents and restricted cash, end of period

$

275,051



$

319,633



$

275,051



$

319,633


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):



Third Quarter of Fiscal 2021


Third Quarter of Fiscal 2020



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)
































$

1,027



(c)










$

912



(c)











13



(d)










21



(d)











2,396



(e)










1,933



(e)





Gross profit --

product


$

187,809



68.4

%


$

3,436





$

191,245



69.7

%


$

233,270



72.2

%


$

2,866





$

236,136



73.0

%
































$

3,883



(c)










$

3,517



(c)











59



(d)










96



(d)











7



(f)

















Gross profit -- subscription services


$

88,707



65.2

%


$

3,949





$

92,656



68.1

%


$

67,368



64.1

%


$

3,613





$

70,981



67.5

%
































$

4,910



(c)










$

4,429



(c)











72



(d)










117



(d)











2,396



(e)










1,933



(e)











7



(f)

















Total gross profit


$

276,516



67.3

%


$

7,385





$

283,901



69.1

%


$

300,638



70.2

%


$

6,479





$

307,117



71.7

%



(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.

(f) To eliminate payments to former shareholders of acquired company.

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


Third Quarter of Fiscal 2021


Third Quarter of Fiscal 2020


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)




























$

59,609



(c)










$

52,335


(c)









3,533



(d)










1,894


(d)









1,166



(e)










1,160


(e)









2,573



(f)










1,933


(f)









1,762



(g)















Operating Income (loss)

$

(65,214)



-15.9

%


$

68,643





$

3,429



0.8

%


$

(28,260)



-6.6

%


$

57,322



$

29,062



6.8

%




























$

59,609



(c)










$

52,335


(c)









3,533



(d)










1,894


(d)









1,166



(e)










1,160


(e)









2,573



(f)










1,933


(f)









1,762



(g)




















7,400



(h)










6,896


(h)




Net income (loss)

$

(74,222)





$

76,043





$

1,821





$

(29,982)





$

64,218



$

34,236


























Net income (loss) per share -- basic and diluted

$

(0.28)









$

0.01





$

(0.12)







$

0.13




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

269,144





15,677



(i)


284,821





255,047





17,161


(i)

272,208











































(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 payments to former shareholders of acquired companies.

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

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

(g) To eliminate acquisition-related transaction and integration expenses.

(h) To eliminate amortization expense of debt discount and debt issuance costs related to our long-term debt.

(i) To include effect of dilutive securities (employee stock options, restricted stock, and shares from employee stock purchase plan).

Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):


Third Quarter of Fiscal


Change


2021


2020


$

Net cash provided by operating activities

$

32,799



$

64,257



$

(31,458)


Less: purchases of property and equipment

(24,867)



(20,977)



(3,890)


Free cash flow (non-GAAP)

$

7,932



$

43,280



$

(35,348)








Free cash flow as % of revenue

1.9

%


10.1

%



SOURCE Pure Storage

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