Pure Storage Announces Second Quarter Fiscal 2019 Financial Results

Pure Storage Announces Second Quarter Fiscal 2019 Financial Results

PR Newswire

MOUNTAIN VIEW, Calif., Aug. 21, 2018 /PRNewswire/ -- Pure Storage 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.

www.purestorage.com (PRNewsFoto/Pure Storage) (PRNewsfoto/Pure Storage)

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

July 31, 2018



Three Months Ended

July 31, 2017



Y/Y Change

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

July 31, 2018



Three Months Ended

July 31, 2017



Y/Y Change

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 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

July 31, 2018



As of

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

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)































































$

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

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)























































$

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

%

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/pure-storage-announces-second-quarter-fiscal-2019-financial-results-300700463.html

SOURCE Pure Storage

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