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 ObjectEngine(TM) for 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 Evergreen(TM) Storage 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
Three Months Ended
Y/Y Change
April 30, 2019 April 30, 2018
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
Three Months Ended
Y/Y Change
April 30, 2019 April 30, 2018
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 As of
April 30, 2019 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 common stockholders, basic and diluted $
(0.41) $
(0.29)
Weighted-average shares used in computing net loss per share attributable to common stockholders, 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 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)
$
977 (c) $
608 (c)
49 (d) 25 (d)
922 (e)
Gross profit -- 67.9 68.7 66.0 66.3
product
$
162,149 % $
1,948 $
164,097 % $
129,029 % $
633 $
129,662 %
$
3,951 (c) $
2,684 (c)
127 (d) 142 (d)
Gross profit -- 61.7 66.3 61.6 66.3
support
subscription
$
54,238 % $
4,078 $
58,316 % $
37,286 % $
2,826 $
40,112 %
$
4,928 (c) $
3,292 (c)
176 (d) 167 (d)
922 (e)
66.2 68.1 65.0 66.3
Total gross profit $
216,387 % $
6,026 $
222,413 % $
166,315 % $
3,459 $
169,774 %
(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 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)
$
62,157 (c) $
43,955 (c)
3,124 (d) 2,667 (d)
922 (e)
-29.8 -9.6 -24.2 -6.0
% %
Operating loss $
(97,424) $
66,203 $
(31,221) % $
(61,874) $
46,622 $
(15,252) %
$
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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