Pure Storage Announces Second Quarter Fiscal 2018 Financial Results

August 24, 2017

MOUNTAIN VIEW, Calif., Aug. 24, 2017 /PRNewswire/ -- Pure Storage (NYSE: PSTG) today announced financial results for its second quarter ended July 31, 2017.

Key quarterly business and financial highlights include:

  • Quarterly revenue: $224.5 million, up 38% Y/Y, 3% ahead of midpoint of guidance
  • Quarterly gross margin: 65.9% GAAP; 67.1% non-GAAP
  • Quarterly operating margin: -28.6% GAAP; -11.8% non-GAAP, up 7.8 ppts and 7.5 ppts Y/Y, respectively
  • Raising full-year fiscal 2018 revenue guidance to between $985 million and $1.025 billion and non-GAAP operating margin guidance to between -7% and -3%

"Pure continues to deliver the absolute best data platform for the cloud era," said Pure Storage CEO Scott Dietzen. "We're succeeding at our core mission: helping organizations get more value from their data through a radical increase in performance and radical reduction in complexity and total cost of ownership."

"Our Q2 results highlight solid topline growth and continued improvement in operating leverage," said Pure Storage CFO Tim Riitters. "We are laser-focused on executing against our plan to achieve $1B+ in revenue this year and marching steadily to profitability in the near future."

In the quarter, more than 350 new customers joined Pure Storage, increasing the total to more than 3,700 organizations, including more than 25% of the Fortune 500. New customer wins in the quarter include: Airbus, COCC, Delta Dental of Michigan, Ford Otomotiv Turkey, Man AHL, Mentor, NASA's Kennedy Space Center, ServiceNow, SSI, and Zenuity.

Second Quarter Fiscal 2018 Financial Highlights

The following tables summarize our consolidated financial results for the fiscal quarters ended July 31, 2017 and 2016 (in millions except per share amounts, unaudited):

GAAP Quarterly Financial Information


Three Months Ended
July 31, 2017

Three Months Ended
July 31, 2016

Y/Y
Change

Revenue

$224.5

$163.2

38%

Gross Margin  

65.9%

65.2%

0.7 ppts

Product Gross Margin

67.3%

67.3%

0.0 ppts

Support Gross Margin

61.2%

56.6%

4.6 ppts

Operating Loss

-$64.1

-$59.5

-$4.6

Operating Margin

-28.6%

-36.4%

7.8 ppts

Net Loss

-$61.7

-$59.6

-$2.1

Net Loss per Share

-$0.29

-$0.31

$0.02

Weighted-Average Shares (Basic and Diluted)

209.2

192.7

N/A



Non-GAAP Quarterly Financial Information


Three Months Ended
July 31, 2017

Three Months Ended
July 31, 2016

Y/Y
Change

Gross Margin

67.1%

66.3%

0.8 ppts

Product Gross Margin

67.5%

67.4%

0.1 ppts

Support Gross Margin

65.9%

62.0%

3.9 ppts

Operating Loss

-$26.4

-$31.4

$5.0

Operating Margin

-11.8%

-19.3%

7.5 ppts

Net Loss

-$24.0

-$31.5

$7.5

Net Loss per Share

-$0.11

-$0.16

$0.05

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

Financial Outlook

Pure Storage's third quarter fiscal 2018 guidance is as follows:

  • Revenue in the range of $267 million to $275 million
  • Non-GAAP gross margin in the range of 63.5% to 66.5%
  • Non-GAAP operating margin in the range of -5% to -1%

Pure Storage's full year fiscal 2018 guidance is as follows:

  • Revenue in the range of $985 million to $1.025 billion
  • Non-GAAP gross margin in the range of 63.5% to 66.5%
  • Non-GAAP operating margin in the range of -7% to -3%

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 second quarter fiscal 2018 results at 2:00 p.m. (PT) on August 24, 2017. 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 two hours after the call ends on Thursday, August 24, 2017, through September 7, 2017. The replay will be accessible by calling 800-585-8367 or 416-621-4642 (for international callers), with conference ID 53427026. The call runs 24 hours per day, including weekends.

President Commentary

Pure Storage has posted a blog from its President discussing second quarter fiscal 2018 results at investor.purestorage.com and blog.purestorage.com.

About Pure Storage

Pure Storage (NYSE:PSTG) helps companies push the boundaries of what's possible. Pure's end-to-end data platform – including FlashArray, FlashBlade and our converged offering with Cisco, FlashStack – is powered by innovative software that's cloud-connected for management from anywhere on a mobile device and supported by the Evergreen business model. The Company's all-flash based technology, combined with its customer-friendly business model, drives business and IT transformation with solutions that are effortless, efficient and evergreen. With Pure's industry leading Satmetrix-certified NPS score of 83.7, Pure customers are some of the happiest in the world, and include organizations of all sizes, across an ever-expanding range of industries.

Connect with Pure Storage:
Read the blog
Converse on Twitter 
Follow on LinkedIn 

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 expectations regarding technology differentiation, our current and future opportunities and ability to execute for continued growth and industry leadership, and our outlook for the third quarter and full year fiscal 2018 and statements regarding our products, business, operations and results, including progress toward profitability. 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 Quarterly Report on Form 10-Q for the quarter ended July 31, 2017. All information provided in this release and in the attachments is as of August 24, 2017, 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 loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net 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 used in operating activities to free cash flow," included at the end of this release.

 

PURE STORAGE, INC.

Condensed Consolidated Balance Sheets

(in thousands)








As of


As of



July 31, 2017


January 31, 2017



(unaudited)



Assets





Current assets:





   Cash and cash equivalents


$     171,894


$           183,675

   Marketable securities


351,123


362,986

   Accounts receivable, net of allowance of $2,020 and $2,000


168,404


168,978

   Inventory


33,660


23,498

   Deferred commissions, current


19,700


15,787

   Prepaid expenses and other current assets


24,494


25,157

     Total current assets


769,275


780,081

Property and equipment, net


81,850


81,695

Intangible assets, net


5,808


6,560

Deferred income taxes, non-current


877


844

Other assets, non-current


32,322


30,565

          Total assets


$     890,132


$           899,745






Liabilities and stockholders' equity





Current liabilities:





   Accounts payable


$       52,092


$             52,719

   Accrued compensation and benefits


42,537


39,252

   Accrued expenses and other liabilities


18,309


21,697

   Deferred revenue, current


169,638


158,095

   Liability related to early exercised stock options


816


1,362

     Total current liabilities   


283,392


273,125

Deferred revenue, non-current


157,961


145,031

Other liabilities, non-current


3,373


3,159

     Total liabilities


444,726


421,315






Stockholders' equity:





Common stock and additional paid-in capital


1,372,241


1,281,472

Accumulated other comprehensive loss


(280)


(562)

Accumulated deficit


(926,555)


(802,480)

Total stockholders' equity


445,406


478,430






         Total liabilities and stockholders' equity


$     890,132


$           899,745

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)










Three Months Ended July 31,


Six Months Ended July 31,


2017


2016


2017


2016


(unaudited)

Revenue:








  Product 

$       175,013


$      130,920


$    313,438


$     242,658

  Support

49,448


32,294


93,654


60,503

Total revenue

224,461


163,214


407,092


303,161









Cost of revenue:








  Product (1) 

57,252


42,847


103,897


76,893

  Support (1)

19,199


14,000


36,102


26,934

Total cost of revenue

76,451


56,847


139,999


103,827









Gross profit

148,010


106,367


267,093


199,334









Operating expenses:








  Research and development (1) 

69,361


58,635


134,789


111,573

  Sales and marketing (1)

120,633


87,583


217,597


170,681

  General and administrative (1)

22,162


19,630


42,258


41,211

Total operating expenses

212,156


165,848


394,644


323,465









Loss from operations

(64,146)


(59,481)


(127,551)


(124,131)

Other income, net

3,266


37


5,261


1,319

Loss before provision for income taxes

(60,880)


(59,444)


(122,290)


(122,812)

Provision for income taxes

821


106


1,785


526

Net loss

$        (61,701)


$       (59,550)


$   (124,075)


$    (123,338)









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

$           (0.29)


$          (0.31)


$         (0.60)


$          (0.65)









Weighted-average shares used in computing net loss per share attributable

to common stockholders, basic and diluted

209,193


192,730


207,515


191,026









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
















Cost of revenue -- product

$             358


$            181


$           755


$            287

Cost of revenue -- support

2,245


1,712


4,019


2,804

Research and development

17,971


13,976


33,559


25,634

Sales and marketing

11,439


8,732


22,065


16,251

General and administrative 

4,825


3,295


8,659


5,918

Total stock-based compensation expense

$         36,838


$        27,896


$      69,057


$       50,894



PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)










Three Months Ended July 31,


Six Months Ended July 31,


2017


2016


2017


2016


(unaudited)

Cash flows from operating activities








Net loss

$ (61,701)


$ (59,550)


$(124,075)


$(123,338)

Adjustments to reconcile net loss to net cash used in operating activities:








    Depreciation and amortization

15,175


11,904


30,000


22,336

    Stock-based compensation expense

36,838


27,896


69,057


50,894

    Other

346


312


797


494

Changes in operating assets and liabilities:








    Accounts receivable, net

(36,546)


(22,004)


25


6,589

    Inventory

5,618


231


(10,487)


(2,392)

    Deferred commissions

(4,245)


(2,254)


(4,607)


1,887

    Prepaid expenses and other current assets

3,758


1,935


(186)


(809)

    Accounts payable

4,183


(10,173)


201


(10,007)

    Accrued compensation and other liabilities

20,308


19,704


310


8,687

    Deferred revenue

16,075


20,449


24,473


41,102

Net cash used in operating activities

(191)


(11,550)


(14,492)


(4,557)









Cash flows from investing activities








    Purchases of property and equipment

(17,331)


(21,742)


(30,100)


(46,118)

    Purchase of intangible assets

-


(1,000)


-


(1,000)

    Purchases of marketable securities

(39,382)


(84,502)


(95,358)


(427,968)

    Sales of marketable securities

28,145


35,744


33,529


59,071

    Maturities of marketable securities

27,360


5,800


73,681


5,800

    Net increase in restricted cash

-


(6,306)


-


(5,600)

Net cash used in investing activities

(1,208)


(72,006)


(18,248)


(415,815)









Cash flows from financing activities








    Net proceeds from exercise of stock options

4,536


3,278


6,793


6,369

    Proceeds from issuance of common stock under employee stock purchase plan

-


-


14,166


15,079

Net cash provided by financing activities

4,536


3,278


20,959


21,448









Net increase (decrease) in cash and cash equivalents

3,137


(80,278)


(11,781)


(398,924)

Cash and cash equivalents, beginning of period

168,757


286,096


183,675


604,742

Cash and cash equivalents, end of period

$171,894


$205,818


$ 171,894


$ 205,818

 

 

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures 















The following table presents non-GAAP gross margin by revenue source before certain items (in thousands, unaudited):
















Three Months Ended July 31, 2017


Three Months Ended July 31, 2016


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)


















$         358

(c)






$        181

(c)






8

(d)






3

(d)



Gross profit -- product

$117,761

67.3%

$         366


$118,127

67.5%


$  88,073

67.3%

$        184


$  88,257

67.4%
































$      2,245

(c)






$     1,712

(c)






87

(d)






7

(d)



Gross profit -- support

$  30,249

61.2%

$      2,332


$  32,581

65.9%


$  18,294

56.6%

$     1,719


$  20,013

62.0%
































$      2,603

(c)






$     1,893

(c)






95

(d)






10

(d)



Total gross profit

$148,010

65.9%

$      2,698


$150,708

67.1%


$106,367

65.2%

$     1,903


$108,270

66.3%





























(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, unaudited):



Three Months Ended July 31, 2017


Three Months Ended July 31, 2016


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)


















$    36,838

(c)






$   27,896

(c)






906

(d)






158

(d)
















Loss from operations

$ (64,146)

-28.6%

$    37,744


$ (26,402)

-11.8%


$ (59,481)

-36.4%

$   28,054


$ (31,427)

-19.3%


















$    36,838

(c)






$   27,896

(c)






906

(d)






158

(d)

















Net loss

$ (61,701)


$    37,744


$ (23,957)



$ (59,550)


$   28,054


$ (31,496)
















Net loss per share -- basic and diluted

$    (0.29)




$    (0.11)



$    (0.31)




$    (0.16)
















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

209,193




209,193



192,730




192,730
















(a) GAAP operating margin is defined as loss from operations divided by revenue.

(b) Non-GAAP operating margin is defined as non-GAAP loss from operations divided by revenue.

(c) To eliminate stock-based compensation expense.


(d) To eliminate payroll tax expense related to stock-based activities.
















 

Reconciliation from net cash used in operating activities to free cash flow (in thousands, unaudited):













Three Months Ended July 31,









2017


2016








Net cash used in operating activities 

$     (191)


$(11,550)








Less: purchases of property and equipment 

(17,331)


(21,742)








Free cash flow 

$(17,522)


$(33,292)








Free cash flow as % of revenue

-7.8%


-20.4%








 

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SOURCE Pure Storage

Michael Pak - IR contact, Pure Storage, Tel: (650) 243-0486, ir@purestorage.com, or John Gallagher- media contact, Pure Storage, Tel: (415) 671-7676, pr@purestorage.com