AP NEWS
Press release content from PR Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from PR Newswire
Press release content from PR Newswire. The AP news staff was not involved in its creation.

Pure Storage Announces Third Quarter Fiscal 2020 Financial Results

November 22, 2019 GMT
www.purestorage.com (PRNewsFoto/Pure Storage)
www.purestorage.com (PRNewsFoto/Pure Storage)

MOUNTAIN VIEW, Calif., Nov. 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 third quarter ended October 31, 2019.

“Our continued market-beating growth is a result of ever more customers realizing the superior value that our solutions offer,” said Charles Giancarlo, Chairman and CEO, Pure Storage. “With one integrated data platform, Pure’s Modern Data Experience frees our customers to benefit from infrastructure that enables them to better manage their applications and data to fuel their digital transformation.”

Key Financial Highlights:

Recent Company Highlights:

Pure’s third quarter yielded industry-leading growth as customers continued to select Pure’s modern approach that enables organizations to better utilize their data across both their private and public cloud infrastructures. Our product innovation performance continued this quarter as we released:

Organizational Changes

Today we announced that Kevan Krysler will be joining Pure as our new CFO. Most recently, Kevan serves as the Senior Vice President of Finance and Chief Accounting Officer at VMware and brings a wealth of experience both in finance and the industry. Prior to VMware, Kevan was a partner with KPMG, where he served both multi-national and emerging software and technology companies.

Third Quarter Fiscal 2020 Financial Highlights

The following tables summarize our consolidated financial results for the fiscal quarters ended October 31, 2019 and 2018 (in millions except percentages, per share amounts and headcount, unaudited):

GAAP Quarterly Financial Information



Three Months Ended
October 31, 2019


Three Months Ended
October 31, 2018


Y/Y Change

Revenue


$428.4


$372.8


15%

Gross Margin


70.2%


66.8%


3.4 ppts

Product Gross Margin


72.2%


67.7%


4.5 ppts

Support Subscription Gross Margin


64.1%


63.4%


0.7 ppts

Operating Loss


$(28.3)


$(27.2)


$(1.1)

Operating Margin


-6.6%


-7.3%


0.7 ppts

Net Loss


$(30.0)


$(28.2)


$(1.8)

Net Loss per Share – Basic and Diluted


$(0.12)


$(0.12)


Weighted-Average Shares


255.0


235.2


19.8

Headcount


>3,350


>2,650


~700


Non-GAAP Quarterly Financial Information



Three Months Ended
October 31, 2019


Three Months Ended
October 31, 2018


Y/Y Change

Gross Margin


71.7%


68.1%


3.6 ppts

Product Gross Margin


73.0%


68.1%


4.9 ppts

Support Subscription Gross Margin


67.5%


68.1%


-0.6 ppts

Operating Income


$29.1


$33.9


$(4.8)

Operating Margin


6.8%


9.1%


-2.3 ppts

Net Income


$34.2


$35.4


$(1.2)

Net Income per Share


$0.13


$0.13


Weighted-Average Shares


272.2


266.5


5.7

A reconciliation between GAAP and non-GAAP information is provided at the end of this release.

Financial Outlook

Fourth quarter fiscal 2020 guidance:

Full year fiscal 2020 guidance:

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 will host a teleconference to discuss the third quarter fiscal 2020 results at 2:00 p.m. (PT) on November 21, 2019. Pure will post its supplemental earnings presentation to the Investor Relations website at investor.purestorage.com following the conference call.

Teleconference details are as follows:

Upcoming Events

Pure will be presenting in the Credit Suisse 23rd Annual Tech Conference on December 3rd at 1:45 p.m. (MT), and the Raymond James Technology conference on December 9th at 3:00 p.m. (PT). The presentations from these events will be webcast and all information will be available on the investor relation website at investor.purestorage.com

About Pure Storage

Pure Storage (NYSE: PSTG) helps modern organizations turn data into business advantage. Pure solutions enable a unified data experience that can adapt as customer needs evolve. One of the fastest-growing enterprise IT companies in history, Pure Storage helps customers put data to use while reducing the complexity and expense of managing the infrastructure behind it. Pure Storage provides a modern data experience that creates a common operating environment across multiple data centers and clouds, easing operations via APIs and intelligent AI-driven automation. 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, Evergreen, FlashArray, FlashBlade, Pure1, 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 outlook for the fourth quarter and full year fiscal 2020, our momentum, growth prospects and expectations regarding product and technology differentiation, including our new products and innovative product cycle, 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 November 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 October 31,
2019


As of January 31,
2019






Assets





Current assets:





Cash and cash equivalents


$

304,346


$

447,990

Marketable securities


936,969


749,482

Accounts receivable, net of allowance of $589 and $660


362,115


378,729

Inventory


39,851


44,687

Deferred commissions, current


32,360


29,244

Prepaid expenses and other current assets


46,539


51,695

Total current assets


1,722,180


1,701,827

Property and equipment, net


130,236


125,353

Operating lease right-of-use-assets


119,403


Deferred commissions, non-current


90,771


85,729

Intangible assets, net


61,028


20,118

Goodwill


36,420


10,997

Deferred income taxes, non-current


1,239


1,060

Restricted cash


15,287


15,823

Other assets, non-current


16,215


12,118

Total assets


$

2,192,779


$

1,973,025






Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

59,650


$

103,462

Accrued compensation and benefits


59,901


99,910

Accrued expenses and other liabilities


48,223


39,860

Operating lease liabilities, current


26,574


Deferred revenue, current


325,947


266,584

Total current liabilities


520,295


509,816

Convertible senior notes, net


470,014


449,828

Operating lease liabilities, non-current


100,023


Deferred revenue, non-current


317,251


269,336

Deferred tax liabilities, non-current


5,658


Other liabilities, non-current


1,588


6,265

Total liabilities


1,414,829


1,235,245






Stockholders' equity:





Common stock and additional paid-in capital


2,051,119


1,820,067

Accumulated other comprehensive income (loss)


5,116


(338)

Accumulated deficit


(1,278,285)


(1,081,949)

Total stockholders' equity


777,950


737,780

Total liabilities and stockholders' equity


$

2,192,779


$

1,973,025

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2019


2018


2019


2018









Revenue:








Product

$

323,268


$

298,863


$

862,137


$

735,449

Support subscription

105,141


73,916


289,299


202,159

Total revenue

428,409


372,779


1,151,436


937,608









Cost of revenue:








Product (1)

89,998


96,610


259,460


241,292

Support subscription(1)

37,773


27,049


106,632


74,716

Total cost of revenue

127,771


123,659


366,092


316,008









Gross profit

300,638


249,120


785,344


621,600









Operating expenses:








Research and development (1)

106,663


90,783


318,758


253,306

Sales and marketing (1)

184,819


146,903


537,633


413,019

General and administrative (1)

37,416


38,651


119,542


99,572

Total operating expenses

328,898


276,337


975,933


765,897









Loss from operations

(28,260)


(27,217)


(190,589)


(144,297)

Other income (expense), net

9


(2,889)


(2,459)


(7,920)

Loss before provision for income taxes

(28,251)


(30,106)


(193,048)


(152,217)

Income tax provision (benefit)

1,731


(1,926)


3,288


390

Net loss

$

(29,982)


$

(28,180)


$

(196,336)


$

(152,607)









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

$

(0.12)


$

(0.12)


$

(0.78)


$

(0.66)

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

255,047


235,205


250,618


229,505



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


Cost of revenue -- product

$

912


$

862


$

2,843


$

2,190

Cost of revenue -- support subscription

3,517


3,327


11,101


8,940

Research and development

27,827


24,634


85,180


67,956

Sales and marketing

16,802


18,681


51,171


49,890

General and administrative

5,171


10,825


24,495


26,962

Total stock-based compensation expense

$

54,229


$

58,329


$

174,790


$

155,938

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2019


2018


2019


2018









Cash flows from operating activities








Net loss

$

(29,982)


$

(28,180)


$

(196,336)


$

(152,607)

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








Depreciation and amortization

23,194


17,791


66,785


51,381

Amortization of debt discount and debt issuance costs

6,896


6,525


20,186


14,414

Stock-based compensation expense

54,229


58,329


174,790


155,938

Other

(810)


(5,119)


(483)


(5,037)

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








Accounts receivable, net

(9,474)


(63,330)


17,079


(62,623)

Inventory

(4,130)


(8,203)


2,722


(17,103)

Deferred commissions

(4,563)


(4,972)


(8,158)


(9,127)

Prepaid expenses and other assets

2,099


(9,138)


1,464


1,996

Operating lease right-of-use assets

6,524



19,962


Accounts payable

(4,417)


29,935


(35,244)


11,800

Accrued compensation and other liabilities

(5,307)


15,050


(31,011)


7,592

Operating lease liabilities

(5,937)



(19,020)


Deferred revenue

35,935


47,861


106,980


87,005

Net cash provided by operating activities

64,257


56,549


119,716


83,629









Cash flows from investing activities








Purchases of property and equipment

(20,977)


(28,074)


(74,206)


(70,807)

Acquisition, net of cash acquired

(3,713)


(13,899)


(51,594)


(13,899)

Purchase of intangible assets



(9,000)


Purchases of marketable securities

(151,527)


(63,741)


(640,024)


(558,248)

Sales of marketable securities

56,150


5,217


116,518


18,802

Maturities of marketable securities

74,901


58,256


345,657


156,049

Net cash used in investing activities

(45,166)


(42,241)


(312,649)


(468,103)









Cash flows from financing activities








Net proceeds from exercise of stock options

6,544


14,275


25,804


43,342

Proceeds from issuance of common stock under employee stock purchase plan

11,249


13,746


43,291


33,444

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


(6,101)


(11,555)


(6,101)

Tax withholding on vesting of restricted stock

(1,614)



(8,787)


Repurchase of common stock




(20,000)

Net cash provided by financing activities

16,179


21,920


48,753


548,117









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

35,270


36,228


(144,180)


163,643

Cash, cash equivalents and restricted cash, beginning of period

284,363


386,235


463,813


258,820

Cash, cash equivalents and restricted cash, end of period

$

319,633


$

422,463


$

319,633


$

422,463

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 October 31, 2019


Three Months Ended October 31, 2018



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)
































$

912


(c)










$

862


(c)











21


(d)










29


(d)











1,933


(e)










503


(e)





Gross profit --
product


$

233,270


72.2

%


$

2,866




$

236,136


73.0

%


$

202,253


67.7

%


$

1,394




$

203,647


68.1

%
































$

3,517


(c)










$

3,327


(c)











96


(d)










155


(d)





Gross profit --
support subscription


$

67,368


64.1

%


$

3,613




$

70,981


67.5

%


$

46,867


63.4

%


$

3,482




$

50,349


68.1

%
































$

4,429


(c)










$

4,189


(c)











117


(d)










184


(d)











1,933


(e)










503


(e)





Total gross profit


$

300,638


70.2

%


$

6,479




$

307,117


71.7

%


$

249,120


66.8

%


$

4,876




$

253,996


68.1

%


(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 October 31, 2019


Three Months Ended October 31, 2018


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)




























$

54,229


(c)










$

58,329

(c)









1,160


(d)










2,282

(d)









1,933


(e)










503

(e)




Operating income (loss)

$

(28,260)


-6.6

%


$

57,322




$

29,062


6.8

%


$

(27,217)


-7.3

%


$

61,114


$

33,897


9.1

%




























$

54,229


(c)










$

58,329

(c)









1,160


(d)










2,282

(d)









1,933


(e)










503

(e)









6,896


(f)










6,525

(f)




















(4,083)

(g)




Net Income (loss)

$

(29,982)




$

64,218




$

34,236




$

(28,180)




$

63,556


$

35,376

























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

$

(0.12)








$

0.13




$

(0.12)






$

0.13



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

255,047




17,161


(h)


272,208




235,205




31,328

(h)

266,533




































(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.

(g) Release of valuation allowance due to StorReduce acquisition.

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

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 October 31,


2019


2018

Net cash provided by operating activities

$

64,257


$

56,549

Less: purchases of property and equipment

(20,977)


(28,074)

Free cash flow (non-GAAP)

$

43,280


$

28,475

Adjust: ESPP impact

2,321


2,104

Free cash flow without ESPP impact (non-GAAP)

$

45,601


$

30,579





Free cash flow as % of revenue

10.1

%


7.6

%

Free cash flow without ESPP impact as % of revenue

10.6

%


8.2

%









View original content to download multimedia: http://www.prnewswire.com/news-releases/pure-storage-announces-third-quarter-fiscal-2020-financial-results-300963406.html

SOURCE Pure Storage