Pure Storage Announces Third Quarter Fiscal 2021 Financial Results
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.
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"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 2020
Fiscal 2021
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 GAAP Adjustment Non- Non- GAAP GAAP Adjustment Non- Non-
results gross GAAP GAAP results gross GAAP GAAP
margin (a) results gross margin (a) results gross
margin (b) margin (b)
$
1,027 (c) $
912 (c)
13 (d) 21 (d)
2,396 (e) 1,933 (e)
Gross profit -- $
187,809 68.4
% % %
% $
3,436 $
191,245 69.7 $
233,270 72.2 $
2,866 $
236,136 73.0
product
$
3,883 (c) $
3,517 (c)
59 (d) 96 (d)
7 (f)
Gross profit -- $
88,707 65.2
subscription % % %
services % $
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 GAAP Adjustment Non- Non- GAAP GAAP Adjustment Non- Non-
GAAP
results operating GAAP GAAP results operating GAAP operating
margin (b)
margin (a) results operating margin (a) results
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 $
(65,214) -15.9 $
68,643 $
3,429 0.8 $
(28,260) -6.6 $
57,322 $
29,062 6.8
(loss)
% % % %
$
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
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