Pure Storage Announces Fourth Quarter and Full Year Fiscal 2019 Financial Results

MOUNTAIN VIEW, Calif., Feb. 28, 2019 /PRNewswire/ -- Pure Storage PSTG, the data solutions leader that helps innovators build a better world with data, today announced financial results for its fourth quarter and full year ended January 31, 2019.

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

"We finished a strong FY19, growing annual revenue 33% year over year, to over $1.3B, and we are excited about our ability to continue to deliver strong growth," said Charles Giancarlo, Chairman and CEO, Pure Storage. "Looking ahead, we expect to drive industry leading growth, expand our product portfolio, and increase our lead in customer delight."

Key Business and Financial Highlights:

  • Q4 Revenue; $422 million, up 24% year over year
  • Full-year revenue $1.36 billion, up 33% year over year

 

  • Q4 GAAP gross margin 66.5%; non-GAAP gross margin 67.6%
  • Full-year GAAP gross margin 66.4%; non-GAAP gross margin 67.6%

 

  • Q4 GAAP operating margin -5.9%; non-GAAP operating margin +7.4%
  • Full year GAAP operating margin -12.5%; non-GAAP operating margin +3.7%

While Q4 results were below the company's guided ranges, they were directly impacted by two distinct items. First, a process breakdown at a contract manufacturer prevented a number of orders from shipping in the quarter. Second, Pure exceeded its expectations in selling the company's ES2 subscription offering, which ultimately drives positive long-term economics for Pure, but resulted in lower revenue recognized in the quarter. Except for these two items, our revenue and profits would have been within our guided range.

Recent Company Highlights:

  • Following the quarter close, Pure signed a more than $100 million-dollar deal over approximately two years with a leading global systems integrator.
  • As part of Pure's Cloud Data Services, the company announced ObjectEngine, redefining data protection to rapid restoration built for modern enterprises.
  • In addition, Pure launched DirectFlash™ Fabric for end-to-end NVMe and NVMe-oF support, enabling customers to improve performance of mission-critical applications and web-scale applications that traditionally have relied on direct attached storage.

"Pure delivered another strong fiscal year of growth, leverage, and scale," said Tim Riitters, CFO, Pure Storage. "The innovative portfolio of platform, software, and cloud products Pure is bringing to market is expanding our opportunity and positioning us for long-term success."

Fourth Quarter Fiscal 2019 Financial Highlights

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

GAAP Quarterly Financial Information





Three Months Ended

January 31, 2019



Three Months Ended

January 31, 2018



Y/Y Change

Revenue



$422.2



$339.9



24%

Gross Margin



66.5%



65.3%



1.2 ppts

Product Gross Margin



67.4%



66.2%



1.2 ppts

Support Subscription Gross Margin



62.5%



60.6%



1.9 ppts

Operating Loss



$(25.0)



$(18.8)



$(6.2)

Operating Margin



-5.9%



-5.5%



-0.4 ppts

Net Loss



$(25.8)



$(14.9)



$(10.9)

Net Loss per Share - Basic and Diluted



$(0.11)



$(0.07)



$(0.04)

Weighted-Average Shares



239.6



218.0



21.6

Headcount



>2,800



>2,100



~700



Non-GAAP Quarterly Financial Information





Three Months Ended

January 31, 2019



Three Months Ended

January 31, 2018



Y/Y Change

Gross Margin



67.6%





66.3%





1.3 ppts

Product Gross Margin



67.8%





66.5%





1.3 ppts

Support Subscription Gross Margin



66.8%





65.4%





1.4 ppts

Operating Income



$31.1





$24.9





$6.2

Operating Margin



7.4%





7.3%





0.1 ppts

Net Income



$37.0





$28.8





$8.2

Net Income per Share - Diluted



$0.14





$0.11





$0.03

Weighted-Average Shares - Diluted



263.7





250.8





12.9

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

Financial Outlook

Pure Storage's first quarter fiscal 2020 guidance is as follows:

  • Revenue in the range of $327 million to $339 million, 30% Y/Y growth at the midpoint
  • Non-GAAP gross margin in the range of 65.0% to 68.0%
  • Non-GAAP operating margin in the range of -8.5% to -4.5%

Pure Storage's full year fiscal 2020 guidance is as follows:

  • Revenue in the range of $1.735 billion to $1.805 billion, 30% Y/Y growth at the midpoint
  • Non-GAAP gross margin in the range of 65.0% to 68.0%
  • Non-GAAP operating margin in the range of 3.0% to 7.0%

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 asset acquired from acquisition, 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 fourth quarter and fiscal year 2019 results at 2:00 p.m. (PT) on February 28, 2019. Pure Storage will post management's prepared remarks and supplemental earnings presentation to the investor relations website at investor.purestorage.com in advance of the conference call.

Teleconference details are as follows:

  • To Listen via Telephone: (866) 393-4306 or (734) 385-2616 (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, February 28, 2019, through March 14, 2019. The replay will be accessible by calling (855) 859-2056 or (404) 537-3406 (for international callers), with conference ID 5479904.

Upcoming Events

Management will participate in an upcoming financial Q&A discussion at the Eighth Annual Technology Conference in New York on March 12, 2019. Pure Storage will post a link to this event on the investor relations website at investor.purestorage.com for both live and archived events.

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.

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 technology differentiation, and our outlook for the first 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, 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, 2019. All information provided in this release and in the attachments is as of February 28, 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 asset acquired from acquisition 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)







January 31, 2019



January 31, 2018









 (As Adjusted*)

Assets









Current assets:









Cash and cash equivalents



$

447,990





$

244,057



Marketable securities



749,482





353,289



Accounts receivable, net of allowance of $660 and $1,062



378,729





243,001



Inventory



44,687





34,497



Deferred commissions, current



29,244





21,088



Prepaid expenses and other current assets



51,695





47,552



Total current assets



1,701,827





943,484



Property and equipment, net



125,353





89,142



Deferred commissions, non-current



85,729





66,225



Intangible assets, net



20,118





5,057



Goodwill



10,997







Deferred income taxes, non-current



1,060





1,060



Restricted cash



15,823





14,763



Other assets, non-current



12,118





4,264



Total assets



$

1,973,025





$

1,123,995













Liabilities and stockholders' equity









Current liabilities:









Accounts payable



$

103,462





$

84,420



Accrued compensation and benefits



99,910





59,898



Accrued expenses and other liabilities



39,860





27,149



Deferred revenue, current



266,584





191,229



Total current liabilities



509,816





362,696



Convertible senior notes, net



449,828







Deferred revenue, non-current



269,336





182,873



Other liabilities, non-current



6,265





4,025



Total liabilities



1,235,245





549,594













Stockholders' equity:









Common stock and additional paid-in capital



1,820,067





1,479,905



Accumulated other comprehensive loss



(338)





(1,917)



Accumulated deficit



(1,081,949)





(903,587)



Total stockholders' equity



737,780





574,401



Total liabilities and stockholders' equity



$

1,973,025





$

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

January 31,



Twelve Months Ended

January 31,



2019



2018



2019



2018







(As Adjusted*)







(As Adjusted*)

Revenue:















Product

$

340,137





$

284,163





$

1,075,586





$

834,454



Support subscription

82,079





55,693





284,238





190,308



Total revenue

422,216





339,856





1,359,824





1,024,762



















Cost of revenue:















Product (1)

110,762





95,953





352,054





275,242



Support subscription (1)

30,758





21,970





105,474





78,539



Total cost of revenue

141,520





117,923





457,528





353,781



















Gross profit

280,696





221,933





902,296





670,981



















Operating expenses:















Research and development (1)

96,630





75,480





349,936





279,196



Sales and marketing (1)

171,092





137,763





584,111





464,049



General and administrative (1)

37,934





27,506





137,506





95,170



Total operating expenses

305,656





240,749





1,071,553





838,415



















Loss from operations

(24,960)





(18,816)





(169,257)





(167,434)



Other income (expense), net

(96)





5,046





(8,016)





11,445



Loss before provision for income taxes

(25,056)





(13,770)





(177,273)





(155,989)



Income tax provision

699





1,134





1,089





3,889



Net loss

$

(25,755)





$

(14,904)





$

(178,362)





$

(159,878)



















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

$

(0.11)





$

(0.07)





$

(0.77)





$

(0.76)



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

239,571





218,009





232,042





211,609





*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

$

761





$

732





$

2,951





$

1,630



Cost of revenue -- support subscription

3,438





2,609





12,378





9,050



Research and development

24,528





19,597





92,484





71,229



Sales and marketing

16,460





13,518





66,350





47,687



General and administrative

9,520





6,297





36,482





21,077



Total stock-based compensation expense

$

54,707





$

42,753





$

210,645





$

150,673



 

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)





Three Months Ended

January 31,



Twelve Months Ended

January 31,



2019



2018



2019



2018







(As Adjusted*)







(As Adjusted*)

Cash flows from operating activities















Net loss

$

(25,755)





$

(14,904)





$

(178,362)





$

(159,878)



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















Depreciation and amortization

19,497





16,219





70,878





61,744



Amortization of debt discount and debt issuance costs

6,617









21,031







Stock-based compensation expense

54,707





42,753





210,645





150,673



Other

(2)





1,175





(5,039)





2,054



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















Accounts receivable, net

(73,026)





(40,875)





(135,649)





(74,505)



Inventory

4,814





1,719





(12,289)





(12,595)



Deferred commissions

(18,533)





(14,009)





(27,660)





(27,978)



Prepaid expenses and other assets

(8,968)





(23,687)





(6,972)





(23,799)



Accounts payable

2,493





17,470





14,293





29,278



Accrued compensation and other liabilities

44,218





26,263





51,810





26,622



Deferred revenue

74,732





46,876





161,737





101,140



Net cash provided by operating activities

80,794





59,000





164,423





72,756



















Cash flows from investing activities















Purchases of property and equipment

(29,439)





(20,709)





(100,246)





(65,060)



Acquisition, net of cash acquired









(13,899)







Purchase of other investment

(5,000)









(5,000)







Purchases of marketable securities

(107,109)





(50,658)





(665,357)





(202,656)



Sales of marketable securities

1,076





20,422





19,878





66,489



Maturities of marketable securities

97,231





45,047





253,280





144,068



Net cash used in investing activities

(43,241)





(5,898)





(511,344)





(57,159)



















Cash flows from financing activities















Net proceeds from exercise of stock options

4,429





8,916





47,771





24,677



Proceeds from issuance of common stock under employee stock purchase plan









33,444





22,137



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)







Tax withholding on vesting of restricted stock

(632)









(632)







Repurchase of common stock









(20,000)







Net cash provided by financing activities

3,797





8,916





551,914





46,814



Net increase in cash and cash equivalents and restricted cash

41,350





62,018





204,993





62,411



Cash, cash equivalents and restricted cash, beginning of period

422,463





196,802





258,820





196,409



Cash, cash equivalents and restricted cash, end of period

$

463,813





$

258,820





$

463,813





$

258,820





*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 January 31, 2019



Three Months Ended January 31, 2018 (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)



















































$

761



(c)

















$

732



(c)

















10



(d)

















8



(d)

















632



(e)



























Gross profit -- product

$

229,375





67.4

%



$

1,403





$

230,778





67.8

%



$

188,210





66.2

%



$

740





$

188,950





66.5

%



















































$

3,438



(c)

















$

2,609



(c)

















63



(d)

















82



(d)







Gross profit -- support subscription

$

51,321





62.5

%



$

3,501





$

54,822





66.8

%



$

33,723





60.6

%



$

2,691





$

36,414





65.4

%



















































$

4,199



(c)

















$

3,341



(c)

















73



(d)

















90



(d)

















632



(e)



























Total gross profit

$

280,696





66.5

%



$

4,904





$

285,600





67.6

%



$

221,933





65.3

%



$

3,431





$

225,364





66.3

%



*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.

(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 January 31, 2019



Three Months Ended January 31, 2018 (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)



















































$

54,707



(c)

















$

42,753



(c)

















763



(d)

















973



(d)

















632



(e)



























Operating income (loss)

$

(24,960)





-5.9

%



$

56,102





$

31,142





7.4

%



$

(18,816)





-5.5

%



$

43,726





$

24,910





7.3

%



















































$

54,707



(c)

















$

42,753



(c)

















763



(d)

















973



(d)

















632



(e)





































6,616



(f)



























Net income (loss)

$

(25,755)









$

62,718





$

36,963









$

(14,904)









$

43,726





$

28,822







Net income (loss) per share -- diluted

$

(0.11)













$

0.14









$

(0.07)













$

0.11







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

239,571









24,097



(g)

263,668









218,009









32,752



(g)

250,761









*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 loss divided by revenue.

(b) Non-GAAP operating margin is defined as non-GAAP operating income 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) 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 January 31,





2019



2018

Net cash provided by operating activities



$

80,794





$

59,000



Less: purchases of property and equipment



(29,439)





(20,709)



Free cash flow (non-GAAP)



$

51,355





$

38,291



Adjust: ESPP Impact



(17,027)





(11,495)



Free cash flow without ESPP impact (non-GAAP)



$

34,328





$

26,796













Free cash flow as % of revenue



12.2

%



11.3

%

Free cash flow without ESPP Impact as % of revenue



8.1

%



7.9

%

 

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SOURCE Pure Storage

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