Pure Storage Announces Second Quarter Fiscal 2019 Financial Results
MOUNTAIN VIEW, Calif., Aug. 21, 2018 /PRNewswire/ -- Pure Storage (NYSE: PSTG), the all-flash storage leader that helps innovators build a better world with data, today announced financial results for its second quarter ended July 31, 2018.
Key quarterly business and financial highlights include:
-- Revenue: $308.9 million, up 37% Y/Y, exceeding the high end of our
guidance;
-- Gross margin: 66.7% GAAP; 68.0% non-GAAP, all-time high in history;
-- Operating margin: -17.9% GAAP; 0.3% non-GAAP, up 9.2 ppts and 10.6 ppts
Y/Y, respectively;
-- Acquired StorReduce, Inc., a cloud-first software-defined storage
solution.
"Pure has delivered another exceptional quarter, with all measures exceeding our Q2 guidance ranges," said Charles Giancarlo, CEO, Pure Storage. "Our continued focus on enabling customers to succeed in a data-centric world is working and validated, maintaining Pure's lead in the data storage market."
Nearly 400 new customers joined Pure Storage in the quarter, increasing the total to more than 5,150 organizations. New customer wins in the quarter include: Dustin Sverige, Honda Federal Credit Union, Fresenius Medical Care, Lufthansa Aero Alzey Gmbh, New York Genome Center, Syntax, TaxSlayer, The University of Texas MD Anderson Cancer Center, and Zeiss Vision Care France.
"Q2 was another strong quarter for Pure," said Tim Riitters, CFO, Pure Storage. "Growth was strong, gross margins were the highest in history, and we achieved another profitable quarter."
Second Quarter Fiscal 2019 Financial Highlights
The following tables summarize our consolidated financial results for the fiscal quarters ended July 31, 2018 and 2017 (in millions except percentages, per share amounts and headcount, unaudited):
GAAP Quarterly Financial Information
Three Months Ended Three Months Ended Y/Y Change
July 31, 2018 July 31, 2017
------------- -------------
Revenue $308.9 $224.7 37%
------- ------ ------ ---
Gross Margin 66.7% 66.0% 0.7 ppts
------------ ---- ---- --------
Product Gross
Margin 67.5% 68.1% -0.6 ppts
------------- ---- ---- ---------
Support
Subscription
Gross Margin 63.9% 57.3% 6.6 ppts
------------- ---- ---- --------
Operating Loss $(55.2) $(60.9) $5.7
-------------- ------ ------ ----
Operating Margin -17.9% -27.1% 9.2 ppts
---------------- ----- ----- --------
Net Loss $(60.1) $(58.4) $(1.7)
-------- ------ ------ -----
Net Loss per
Share - Basic
and Diluted $(0.26) $(0.28) $0.02
-------------- ------ ------ -----
Weighted-Average
Shares 229.4 209.2 20.2
---------------- ----- ----- ----
Headcount >2,450 >1,900 ~550
--------- ------ ------ ----
Non-GAAP Quarterly Financial Information
Three Months Ended Three Months Ended Y/Y Change
July 31, 2018 July 31, 2017
------------- -------------
Gross Margin 68.0% 67.2% 0.8 ppts
------------ ---- ---- --------
Product Gross
Margin 67.9% 68.3% -0.4 ppts
------------- ---- ---- ---------
Support
Subscription
Gross Margin 68.4% 62.5% 5.9 ppts
------------- ---- ---- --------
Operating Income
(Loss) $0.9 $(23.1) $24.0
---------------- ---- ------ -----
Operating Margin 0.3% -10.3% 10.6 ppts
---------------- --- ----- ---------
Net Income (Loss) $2.4 $(20.7) $23.1
---------------- ---- ------ -----
Net Income (Loss)
per Share -
Diluted $0.01 $(0.10) $0.11
----------------- ----- ------ -----
Weighted-Average
Shares - Diluted 262.6 209.2 53.4
----------------- ----- ----- ----
A reconciliation between GAAP and non-GAAP information is provided at the end of this release.
Financial Outlook
Pure Storage's third quarter fiscal 2019 guidance is as follows:
-- Revenue in the range of $361 million to $369 million
-- Non-GAAP gross margin in the range of 64.5% to 67.5%
-- Non-GAAP operating margin in the range of 4.0% to 8.0%
Pure Storage's full year fiscal 2019 guidance is as follows:
-- Revenue in the range of $1.350 billion to $1.380 billion
-- Non-GAAP gross margin in the range of 65.5% to 67.5%
-- Non-GAAP operating margin in the range of 2.5% to 4.5%
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 and 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 second quarter fiscal 2019 results at 2:00 p.m. (PT) on August 21, 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: (877) 201-0168 or (647) 788-4901 (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 approximately two hours after the call ends on Tuesday, August
21, 2018, through September 4, 2018. The replay will be accessible by
calling (800) 585-8367 or (416) 621-4642 (for international callers),
with conference ID 9794206.
Upcoming Events
Management will participate in upcoming financial Q&A discussions at Deutsche Bank Technology Conference on September 13, 2018 at 10:00 a.m. (PT). Pure Storage will post a link to these events on the investor relations website at investor.purestorage.com for both the live and archived webcasts.
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 Satmetrix-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.
Analyst Recognition
Gartner Magic Quadrant for Solid-State Arrays
IDC MarketScape for All-Flash Arrays
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 third quarter and full year fiscal 2019, 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 will also be available in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2018. All information provided in this release and in the attachments is as of August 21, 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, 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 and amortization of debt discount and debt issuance costs 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, or superior to, 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 (used in) 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 As of
July 31, 2018 January 31, 2018
------------- ----------------
(As Adjusted*)
Assets
Current assets:
Cash and cash equivalents $370,457 $244,057
Marketable securities 736,205 353,289
Accounts receivable, net of
allowance of $957 and $1,062 242,409 243,001
Inventory 41,673 34,497
Deferred commissions, current 23,521 21,088
Prepaid expenses and other
current assets 36,071 47,552
------ ------
Total current assets 1,450,336 943,484
Property and equipment, net 101,718 89,142
Intangible assets, net 4,305 5,057
Deferred income taxes, non-
current 1,534 1,060
Restricted cash 15,778 14,763
Deferred commissions, non-current 67,948 66,225
Other assets, non-current 4,610 4,264
----- -----
Total assets $1,646,229 $1,123,995
========== ==========
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable $68,058 $84,420
Accrued compensation and benefits 51,654 59,898
Accrued expenses and other
liabilities 27,049 26,829
Deferred revenue, current 213,100 191,229
Liability related to early
exercised stock options - 320
--- ---
Total current liabilities 359,861 362,696
Convertible senior notes, net 436,687 -
Deferred revenue, non-current 200,147 182,873
Other liabilities, non-current 5,140 4,025
----- -----
Total liabilities 1,001,835 549,594
--------- -------
Stockholders' equity:
Common stock and additional paid-
in capital 1,675,234 1,479,905
Accumulated other comprehensive
loss (2,826) (1,917)
Accumulated deficit (1,028,014) (903,587)
---------- --------
Total stockholders' equity 644,394 574,401
------- -------
Total liabilities and
stockholders' equity $1,646,229 $1,123,995
========== ==========
* Prior period information has
been adjusted to reflect the
adoption impact of Accounting
Standards Codification 606,
Revenue from Contracts with
Customers (ASC 606), which we
adopted on February 1, 2018.
PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
Three Months Ended July 31, Six Months Ended July 31,
2018 2017 2018 2017
---- ---- ---- ----
(As Adjusted*) (As Adjusted*)
Revenue:
Product $241,137 $179,669 $436,586 $322,519
Support subscription 67,747 45,001 128,243 84,796
------ ------ ------- ------
Total revenue 308,884 224,670 564,829 407,315
------- ------- ------- -------
Cost of revenue:
Product (1) 78,262 57,252 144,682 103,897
Support subscription(1) 24,457 19,199 47,667 36,102
------ ------ ------ ------
Total cost of revenue 102,719 76,451 192,349 139,999
Gross profit 206,165 148,219 372,480 267,316
------- ------- ------- -------
Operating expenses:
Research and development
(1) 84,031 69,361 162,523 134,789
Sales and marketing (1) 143,749 117,552 266,116 209,315
General and
administrative (1) 33,591 22,162 60,921 42,258
Total operating expenses 261,371 209,075 489,560 386,362
------- ------- ------- -------
Loss from operations (55,206) (60,856) (117,080) (119,046)
Other income (expense),
net (4,032) 3,266 (5,031) 5,261
------ ----- ------ -----
Loss before provision for
income taxes (59,238) (57,590) (122,111) (113,785)
Provision for income
taxes 885 821 2,316 1,785
--- --- ----- -----
Net loss $(60,123) $(58,411) $(124,427) $(115,570)
======== ======== ========= =========
Net loss per share
attributable to common
stockholders, basic and
diluted $(0.26) $(0.28) $(0.55) $(0.56)
====== ====== ====== ======
Weighted-average shares
used in computing net
loss per share
attributable to common
stockholders, basic and
diluted 229,359 209,193 226,609 207,515
======= ======= ======= =======
* Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
(1) Includes stock-based compensation expense as follows:
Cost of revenue --
product $720 $358 $1,328 $755
Cost of revenue --
support subscription 2,929 2,245 5,613 4,019
Research and development 22,232 17,971 43,322 33,559
Sales and marketing 17,269 11,439 31,209 22,065
General and
administrative 10,504 4,825 16,137 8,659
------ ------ -----
Total stock-based
compensation expense $53,654 $36,838 $97,609 $69,057
======= ======= ======= =======
PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three Months Ended July 31, Six Months Ended July 31,
2018 2017 2018 2017
---- ---- ---- ----
(As Adjusted*) (As Adjusted*)
Cash flows from operating activities
Net loss $(60,123) $(58,411) $(124,427) $(115,570)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and
amortization 17,173 15,175 33,590 30,000
Amortization of debt
discount and debt
issuance costs 6,434 - 7,889 -
Stock-based compensation
expense 53,654 36,838 97,609 69,057
Other (70) 346 82 797
Changes in operating assets and
liabilities:
Accounts receivable, net (46,436) (36,546) 707 25
Inventory (4,471) 5,618 (8,900) (10,487)
Deferred commissions (5,424) (8,220) (4,155) (9,587)
Prepaid expenses and
other assets 23 3,758 11,134 (186)
Accounts payable 667 4,183 (18,135) 201
Accrued compensation and
other liabilities 22,423 21,201 (7,458) (2,993)
Deferred revenue 24,634 15,867 39,144 24,251
------ ------ ------ ------
Net cash provided by
(used in) operating
activities 8,484 (191) 27,080 (14,492)
----- ---- ------ -------
Cash flows from investing activities
Purchases of property and
equipment (20,437) (17,331) (42,733) (30,100)
Purchases of marketable
securities (412,805) (39,382) (494,507) (95,358)
Sales of marketable
securities 3,131 28,145 13,585 33,529
Maturities of marketable
securities 36,770 27,360 97,793 73,681
Net cash used in
investing activities (393,341) (1,208) (425,862) (18,248)
-------- ------ -------- -------
Cash flows from financing activities
Net proceeds from
exercise of stock
options 19,453 4,536 29,067 6,793
Proceeds from issuance of
common stock under
employee stock purchase
plan - - 19,698 14,166
Proceeds from issuance of
convertible senior
notes, net of issuance
costs - - 562,062 -
Payment for purchase of
capped calls - - (64,630) -
Repurchase of common
stock - - (20,000) -
Net cash provided by
financing activities 19,453 4,536 526,197 20,959
------ ----- ------- ------
Net increase (decrease)
in cash, cash
equivalents and
restricted cash (365,404) 3,137 127,415 (11,781)
Cash, cash equivalents
and restricted cash,
beginning of period 751,639 181,491 258,820 196,409
------- ------- ------- -------
Cash, cash equivalents
and restricted cash, end
of period $386,235 $184,628 $386,235 $184,628
======== ======== ======== ========
* Prior period information
has been adjusted to reflect
the adoption impact of ASC
606 and ASU No. 2016-18,
Statement of Cash Flows
(Topic 230): Restricted
Cash, which we adopted on
February 1, 2018.
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 July 31, 2018 Three Months Ended July 31, 2017 (As Adjusted*)
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)
--------- ---------
$720 (c) $358 (c)
36 (d) 8 (d)
--- ---
Gross profit -- product $162,875 67.5% $756 $163,631 67.9% $122,417 68.1% $366 $122,783 68.3%
$2,929 (c) $2,245 (c)
137 (d) 87 (d)
--- ---
Gross profit --support
subscription $43,290 63.9% $3,066 $46,356 68.4% $25,802 57.3% $2,332 $28,134 62.5%
$3,649 (c) $2,603 (c)
173 (d) 95 (d)
--- ---
Total gross profit $206,165 66.7% $3,822 $209,987 68.0% $148,219 66.0% $2,698 $150,917 67.2%
======== ====== ======== ======== ====== ========
* Prior period information has been
adjusted to reflect the adoption
impact of ASC 606, which we
adopted on February 1, 2018.
(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.
The following table presents certain non-GAAP consolidated results before certain items (in thousands, except per share amounts and percentages, unaudited):
Three Months Ended July 31, 2018 Three Months Ended July 31, 2017 (As Adjusted*)
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)
--------- ---------
$53,654 (c) $36,838 (c)
2,427 (d) 906 (d)
Operating
income (loss) $(55,206) -17.9% $56,081 $875 0.3% $(60,856) -27.1% $37,744 $(23,112) -10.3%
$53,654 (c) $36,838 (c)
2,427 (d) 906 (d)
6,434 (e) -
Net income
(loss) $(60,123) $62,515 $2,392 $(58,411) $37,744 $(20,667)
======== ====== ======== ========
Net income
(loss) per
share
--diluted $(0.26) $0.01 $(0.28) $(0.10)
====== ===== ====== ======
Weighted-
average shares
used in per
share
calculation -
- diluted 229,359 33,216 (f) 262,575 209,193 - 209,193
* Prior period information has been
adjusted to reflect the adoption
impact of ASC 606, which we
adopted on February 1, 2018.
(a) GAAP operating margin is
defined as GAAP operating income
(loss) divided by revenue.
(b) Non-GAAP operating margin is
defined as non-GAAP operating
income (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 the amortization
expense of debt discount and debt
issuance costs related to our
convertible debt.
(f) To include effect of dilutive
securities (employee stock
options, restricted stock units,
and shares from employee stock
purchase plans (ESPP)).
Reconciliation from net cash provided by (used in) operating activities to free cash flow and free cash flow
without ESPP impact (in thousands except percentages, unaudited):
Three Months Ended July 31,
2018 2017
---- ----
Net cash
provided by
(used in)
operating
activities $8,484 $(191)
Less:
purchases
of property
and
equipment (20,437) (17,331)
------- -------
Free cash
flow (non-
GAAP) $(11,953) $(17,522)
Adjust: ESPP
impact (6,982) (4,964)
Free cash
flow
without
ESPP impact
(non-GAAP) $(18,935) $(22,486)
======== ========
Free cash
flow as %
of revenue -3.9% -7.8%
Free cash
flow
without
ESPP impact
as % of
revenue -6.1% -10.0%
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