Pure Storage Announces Record Fourth Quarter and Full Year Fiscal 2018 Financial Results
MOUNTAIN VIEW, Calif., March 1, 2018 /PRNewswire/ -- Pure Storage (NYSE: PSTG) today announced financial results for its fourth quarter and full year ended January 31, 2018.
Key quarterly financial highlights include:
-- Record revenue: $338.3 million, up 48% Y/Y, 2% ahead of the midpoint of
guidance; Record full year revenue: $1.023 billion, up 41% Y/Y.
-- Record operating margin: -4.7% GAAP; 8.3% non-GAAP, up 13.9 ppts and
10.2 ppts Y/Y, respectively, marking Pure's first profitable quarter on
a non-GAAP basis.
-- Record operating cash flow of $59.0 million and free cash flow of $38.3
million, and record full-year operating cash flow of $72.8 million and
free cash flow of $7.7 million.
"This quarter marks an important milestone for Pure surpassing $1 billion in annual sales and achieving non-GAAP profitability," said Charles Giancarlo, CEO of Pure Storage. "Momentum in the business is strong as we continue our drive to help customers turn data into intelligence and advantage."
Approximately 500 customers joined Pure Storage in the quarter, increasing the total to more than 4,500 organizations. A few new customer wins in the quarter include: Advance Financial Corporation, Jenny Craig, Mid America Pet Food, Portland Trail Blazers, Suzuki Motor of America and the Texas Rangers.
"Pure Storage delivered another outstanding quarter to finish the year, growing nearly 50% over the year-ago quarter," said Tim Riitters, CFO of Pure Storage. "As we look ahead to next year, we remain focused on driving both growth and leverage in our business, including achieving our first full-year of non-GAAP profitability."
Fourth Quarter Fiscal 2018 Financial Highlights
The following tables summarize our consolidated financial results for the fiscal quarters ended January 31, 2018 and 2017 (in millions except percentages and per share amounts, unaudited):
GAAP Quarterly Financial Information
Three Months Ended Three Months Ended Y/Y Change
January 31, 2018 January 31, 2017
---------------- ----------------
Revenue $338.3 $227.9 48%
------- ------ ------ ---
Gross Margin 65.1% 65.3% -0.2 ppts
------------ ---- ---- ---------
Product Gross Margin 65.4% 66.5% -1.1 ppts
-------------------- ---- ---- ---------
Support Gross Margin 63.9% 59.6% 4.3 ppts
-------------------- ---- ---- --------
Operating Loss -$15.8 -$42.5 $26.7
-------------- ------ ------ -----
Operating Margin -4.7% -18.6% 13.9 ppts
---------------- ---- ----- ---------
Net Loss -$11.9 -$42.9 $31.0
-------- ------ ------ -----
Net Loss per Share (Basic and Diluted) -$0.05 -$0.21 $0.16
------------------------------------- ------ ------ -----
Weighted-Average Shares (Basic and Diluted) 218.0 201.0 N/A
------------------------------------------ ----- ----- ---
Headcount >2,100 >1,700 ~400
--------- ------ ------ ----
Non-GAAP Quarterly Financial Information
----------------------------------------
Three Months Ended Three Months Ended Y/Y Change
January 31, 2018 January 31, 2017
---------------- ----------------
Gross Margin 66.2% 66.1% 0.1 ppts
------------ ---- ---- --------
Product Gross Margin 65.7% 66.6% -0.9 ppts
-------------------- ---- ---- ---------
Support Gross Margin 68.3% 63.6% 4.7 ppts
-------------------- ---- ---- --------
Operating Income (Loss) $27.9 -$4.4 $32.3
---------------------- ----- ----- -----
Operating Margin 8.3% -1.9% 10.2 ppts
---------------- --- ---- ---------
Net Income (Loss) $31.8 -$4.8 $36.6
---------------- ----- ----- -----
Net Income (Loss) per Share (Diluted) $0.13 -$0.02 $0.15
Weighted-Average Shares (Diluted) 250.8 201.0 N/A
-------------------------------- ----- ----- ---
A reconciliation between GAAP and non-GAAP information is provided at the end of this release.
Financial Outlook
Our first quarter and full year fiscal 2019 guidance numbers are based on the new revenue standard (ASC 606) that is effective beginning February 1, 2018. Please refer to our earnings presentation on investor.purestorage.com for further information on the adoption impact of ASC 606 on our results of operations.
Pure Storage's first quarter fiscal 2019 guidance is as follows:
-- Revenue in the range of $246 million to $254 million
-- Non-GAAP gross margin in the range of 63.5% to 66.5%
-- Non-GAAP operating margin in the range of -13.0% to -9.0%
Pure Storage's full year fiscal 2019 guidance is as follows:
-- Revenue in the range of $1.310 billion to $1.360 billion
-- Non-GAAP gross margin in the range of 63.5% to 66.5%
-- Non-GAAP operating margin in the range of 0% to 4%
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 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 such 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 fourth quarter and fiscal year 2018 results at 2:00 p.m. (PT) on March 1, 2018. 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: (833) 245-9656 or (647) 689-4543 (for
international callers).
-- 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 Thursday, March 1, 2018,
through March 15, 2018. The replay will be accessible by calling (800)
585-8367 or (416) 621-4642 (for international callers), with conference
ID 8485299. The call runs 24 hours per day, including weekends.
Upcoming Investor Event
Pure Storage will be participating in an upcoming investor discussion on March 6, 2018 at 7:30am ET in Orlando, FL. Pure Storage will post a link to the live webcast on the investor relations website at investor.purestorage.com for both live and archived events.
About Pure Storage
Pure Storage (NYSE:PSTG) helps customers build a better world with data. The Pure Storage Data Platform, powered by all-flash storage, offers a simpler, more effective, and more flexible solution for cloud infrastructure and data-rich applications like artificial intelligence, machine learning and big data analytics. With Satmetrix-certified NPS performance in the top 1% of B2B companies, Pure has an ever-expanding range of customers who are some of the happiest in the world.
Connect with Pure Storage:
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Pure Storage, Evergreen, FlashBlade, FlashStack 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 technology differentiation, and our outlook for the first quarter and full year fiscal 2019, including our first full-year of non-GAAP profitability, 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, including, which are available on our investor relations website at investor.purestorage.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended January 31, 2018. All information provided in this release and in the attachments is as of March 1, 2018, 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, and free cash flow as a percentage of revenue. In computing these non-GAAP financial measures, we exclude the effects of stock-based compensation expense and payroll tax expense related to stock-based activities. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
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 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," included at the end of this release.
PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands)
January 31, 2018 January 31, 2017
---------------- ----------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $244,057 $183,675
Marketable securities 353,289 362,986
Accounts receivable, net
of allowance of $1,062
and $2,000 as of January
31, 2018 and 2017 243,001 168,978
Inventory 34,497 23,498
Deferred commissions,
current 22,437 15,787
Prepaid expenses and
other current assets 47,552 25,157
------ ------
Total current assets 944,833 780,081
Property and equipment,
net 89,142 81,695
Intangible assets, net 5,057 6,560
Deferred income taxes,
non-current 1,060 844
Other assets, non-current 39,315 30,565
------ ------
Total assets $1,079,407 $899,745
========== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $84,420 $52,719
Accrued compensation and
benefits 59,898 39,252
Accrued expenses and
other liabilities 26,829 21,697
Deferred revenue, current 209,377 158,095
Liability related to
early exercised stock
options 320 1,362
--- -----
Total current liabilities 380,844 273,125
Deferred revenue, non-
current 196,632 145,031
Other liabilities, non-
current 4,025 3,159
----- -----
Total liabilities 581,501 421,315
------- -------
Stockholders' equity:
Common stock and
additional paid-in
capital 1,479,905 1,281,472
Accumulated other
comprehensive loss (1,917) (562)
Accumulated deficit (980,082) (802,480)
-------- --------
Total stockholders'
equity 497,906 478,430
------- -------
Total liabilities and
stockholders' equity $1,079,407 $899,745
========== ========
PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
January 31, January 31,
2018 2017 2018 2017
---- ---- ---- ----
(unaudited)
Revenue:
Product $277,351 $186,820 $813,985 $590,001
Support 60,902 41,040 209,034 137,976
------ ------ ------- -------
Total revenue 338,253 227,860 1,023,019 727,977
------- ------- --------- -------
Cost of revenue:
Product (1) 95,953 62,532 275,242 194,150
Support (1) 21,970 16,598 78,539 58,129
------ ------ ------ ------
Total cost of revenue 117,923 79,130 353,781 252,279
Gross profit 220,330 148,730 669,238 475,698
------- ------- ------- -------
Operating expenses:
Research and development
(1) 75,480 72,632 279,196 245,817
Sales and marketing (1) 133,134 97,962 480,030 360,035
General and
administrative (1) 27,506 20,631 95,170 84,652
Legal settlement (2) - - - 30,000
--- --- --- ------
Total operating expenses 236,120 191,225 854,396 720,504
------- ------- ------- -------
Loss from operations (15,790) (42,495) (185,158) (244,806)
Other income, net 5,046 500 11,445 1,627
----- --- ------ -----
Loss before provision for
income taxes (10,744) (41,995) (173,713) (243,179)
Provision for income
taxes 1,134 920 3,889 1,887
----- --- ----- -----
Net loss $(11,878) $(42,915) $(177,602) $(245,066)
======== ======== ========= =========
Net loss per share
attributable to common
stockholders, basic and
diluted $(0.05) $(0.21) $(0.84) $(1.26)
====== ====== ====== ======
Weighted-average shares
used in computing net
loss per share
attributable to common
stockholders, basic and
diluted 218,009 201,024 211,609 194,714
======= ======= ======= =======
(1) Includes stock-based compensation expense as follows:
Cost of revenue --
product $732 $176 $1,630 $601
Cost of revenue --
support 2,609 1,657 9,050 5,639
Research and development 19,597 22,620 71,229 63,495
Sales and marketing 13,518 9,598 47,687 34,317
General and
administrative 6,297 3,488 21,077 12,616
----- ----- ------ ------
Total stock-based
compensation expense $42,753 $37,539 $150,673 $116,668
======= ======= ======== ========
(2) Represents a one-time charge for our legal settlement with Dell, Inc.
PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended
January 31,
Twelve Months Ended
January 31,
2018 2017 2018 2017
---- ---- ---- ----
(unaudited)
Cash flows from operating activities
Net loss $(11,878) $(42,915) $(177,602) $(245,066)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and
amortization 16,219 14,225 61,744 50,203
Stock-based compensation
expense 42,754 37,539 150,674 116,668
Other 1,175 533 2,054 1,584
Changes in operating assets and
liabilities:
Accounts receivable, net (40,875) (5,863) (74,505) (44,049)
Inventory 1,719 (3,587) (12,595) (3,776)
Deferred commissions (4,368) (2,584) (11,997) (740)
Prepaid expenses and
other assets (23,687) (6,172) (23,799) (6,133)
Accounts payable 17,470 7,005 29,278 10,644
Accrued compensation and
other liabilities 11,992 12,595 26,621 19,381
Deferred revenue 48,479 26,742 102,883 86,922
------ ------ ------- ------
Net cash provided by
(used in) operating
activities 59,000 37,518 72,756 (14,362)
------ ------ ------ -------
Cash flows from investing activities
Purchases of property and
equipment (20,709) (12,171) (65,060) (76,773)
Purchases of intangible
assets - - - (1,000)
Purchases of marketable
securities (50,658) (43,159) (202,656) (526,717)
Sales of marketable
securities 20,422 34,539 66,489 114,354
Maturities of marketable
securities 45,047 10,300 144,068 48,513
Net increase in
restricted cash - - (2,029) (5,600)
Net cash used in
investing activities (5,898) (10,491) (59,188) (447,223)
------ ------- ------- --------
Cash flows from financing activities
Net proceeds from
exercise of stock
options 8,916 4,187 24,677 14,912
Proceeds from issuance of
common stock under
employee stock purchase
plan - - 22,137 25,606
Net cash provided by
financing activities 8,916 4,187 46,814 40,518
----- ----- ------ ------
Net increase (decrease)
in cash and cash
equivalents 62,018 31,214 60,382 (421,067)
Cash and cash
equivalents, beginning
of period 182,039 152,461 183,675 604,742
------- ------- ------- -------
Cash and cash
equivalents, end of
period $244,057 $183,675 $244,057 $183,675
======== ======== ======== ========
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 January 31, 2018 Three Months Ended January 31, 2017
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)
----------
$732 (c) $176 (c)
8 (d) 1 (d)
--- ---
Gross profit --
product $181,398 65.4% $740 $182,138 65.7% $124,288 66.5% $177 $124,465 66.6%
$2,609 (c) $1,657 (c)
82 (d) 22 (d)
--- ---
Gross profit --
support $38,932 63.9% $2,691 $41,623 68.3% $24,442 59.6% $1,679 $26,121 63.6%
$3,341 (c) $1,833 (c)
90 (d) 23 (d)
Total gross
profit $220,330 65.1% $3,431 $223,761 66.2% $148,730 65.3% $1,856 $150,586 66.1%
======== ====== ======== ======== ====== ========
(a) GAAP gross margin is defined as 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.
The following table presents certain non-GAAP consolidated results before certain items (in thousands, except per share amounts and percentages, unaudited):
Three Months Ended January 31, 2018 Three Months Ended January 31, 2017
GAAP GAAP Adjustment Non- Non- GAAP GAAP Adjustment Non- Non-
results operating GAAP GAAP results operating GAAP GAAP
margin (a) results operating margin (a) results operating
margin (b) margin (b)
----------
$42,753 (c) $37,539 (c)
973 (d) 601 (d)
--- ---
Income (loss)
from
operations $(15,790) -4.7% $43,726 $27,936 8.3% $(42,495) -18.6% $38,140 $(4,355) -1.9%
-------- ------- -------- -------
$42,753 (c) $37,539 (c)
973 (d) 601 (d)
--- ---
Net income
(loss) $(11,878) $43,726 $31,848 $(42,915) $38,140 $(4,775)
======== ======= ======== =======
Net income
(loss) per
share --
diluted $(0.05) $0.13 $(0.21) $(0.02)
====== ===== ====== ======
Weighted-
average shares
used in per
share
calculation -
- diluted 218,009 32,752 (e) 250,761 201,024 201,024
(a) GAAP operating margin is defined as loss from operations divided by revenue.
(b) Non-GAAP operating margin is defined as non-GAAP income (loss) from operations divided by revenue.
(c) To eliminate stock-based compensation expense.
(d) To eliminate payroll tax expense related to stock-based activities.
(e) To include effect of dilutive securities (employee stock options, restricted stock units, and employee stock purchase plan).
Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):
Three Months Ended January 31,
2018 2017
---- ----
Net cash provided by operating activities $59,000 $37,518
Less: purchases of property and equipment (20,709) (12,171)
------- -------
Free cash flow $38,291 $25,347
======= =======
Free cash flow as % of revenue 11.3% 11.1%
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