Pure Storage Announces Record Fourth Quarter and Full Year Fiscal 2018 Financial Results

03.01.2018

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.

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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
January 31, 2018


Three Months Ended
January 31, 2017


Y/Y Change

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
January 31, 2018


Three Months Ended
January 31, 2017


Y/Y Change

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.

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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
January 31,


Twelve Months Ended
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
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)


























$

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
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)


























$

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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SOURCE Pure Storage

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