PSTG Pure Storage

Filed: 24 Nov 20, 4:05pm

Exhibit 99.1
Pure Storage Announces Third Quarter Fiscal 2021 Financial Results

Subscription Services recurring revenue growing 29% year-over-year
Acquired Portworx in Q3; creating most complete Kubernetes data services platform
Record sales quarter for FlashBlade and FlashArray//C

MOUNTAIN VIEW, Calif., November 24, 2020 – Pure Storage (NYSE: PSTG), the IT pioneer that delivers storage as-a-service in a multi-cloud world, today announced financial results for its third quarter ended November 1, 2020.

“Our strategy and vision to deliver hybrid and multi-cloud data services is exciting the industry, our customers and developers alike," said Charles Giancarlo, Chairman and CEO of Pure Storage. “Pure made bold moves in the quarter to deliver on our strategy with the acquisition of Portworx and the addition of Dominick Delfino to lead our sales organization.”

Third Quarter Financial Highlights 

Revenue $410.6 million, down 4% year-over-year
Subscription services revenue $136.1 million, up 29% year-over-year
GAAP gross margin 67.3%; non-GAAP gross margin 69.1%
GAAP operating loss $(65.2) million; non-GAAP operating income $3.4 million
Operating cash flow was $32.8 million
Free cash flow was $7.9 million
Total cash and investments of $1.2 billion
Deferred revenue $762.8 million, up 19% year-over-year
Remaining performance obligations (RPO) exceeding $1.0 billion, up 25% year-over-year

“We are pleased with our financial performance and execution during the quarter which slightly exceeded our expectations at the beginning of the quarter,” said Kevan Krysler, CFO of Pure Storage. “Key highlights include consecutive quarters of strong sales of our Subscription Services, and record sales during a quarter for our FlashBlade and FlashArray//C solutions.”

Third Quarter Company Highlights

Pure continued setting the pace in the industry by changing expectations for data and storage management. The technology momentum in Q3 across the portfolio includes:

Subscription Services momentum - Pure’s Subscription Services, including Evergreen and unified Pure as-a-Service offerings, grew 29% year-over-year. Selecting Pure as-a-Service in Q3, leading organizations, including ME Bank in Australia and The University of Texas Health Science Center, recognize the flexibility and choice that these offerings provide. Our unified subscription, Pure-as-a-Service, which includes Cloud Block Store, enables customers to subscribe to storage in their data center and the cloud, paying for only what they consume, making migration to the public cloud possible at any time without worrying about stranded assets.

Advancing Pure as-a-Service offerings - Today marks another milestone and industry first for the Pure as-a-Service offering with the announcement of the Pure Service Catalog, which includes a number of new service tiers. The new service tiers deliver increased transparency and flexibility for customers, allowing them to choose the right storage service level for each workload. Pure is also making Pure as-a-Service more accessible by offering lower cost service tiers.

Acquisition of Portworx, market leader in Kubernetes storage - In Q3, Pure acquired Portworx, the leading Kubernetes data services platform that enterprises trust to run mission-critical applications in containers in production. By combining Portworx with Pure’s industry-leading data platforms and Pure Service Orchestrator

software, Pure provides a comprehensive suite of data services that can be deployed in-cloud, on bare metal, or on enterprise arrays, all natively orchestrated in Kubernetes.

FlashArray//C Momentum - FlashArray//C, well into its second generation, continues to grow at an accelerated pace and this month, received the Best of Show Award at the Flash Memory Summit for Most Innovative Flash Memory Technology. The performance and financial efficiencies delivered by FlashArray//C enable customers to reduce the cost of running capacity-oriented workloads so significantly it eliminates the need for hybrid disk arrays.

Strong FlashBlade momentum and AWS Outposts Designation - FlashBlade’s unified fast file and object capabilities to consolidate and modernize unstructured data across a number of use cases including technical computing, analytics, backup and rapid restore is validated by strong customer momentum this quarter. Customers such as The First National Bankers Bank, Louisiana Office of Technology Services and Sinai Health System demonstrate that FlashBlade continues to be the leading choice to enable rapid recovery and defend against ransomware. Also in Q3, FlashBlade achieved the AWS Outposts Ready designation, delivering a hybrid cloud solution with all-flash performance, cloud scalability, and operational simplicity to accelerate modern applications and break down IT silos.


Consistent with the prior quarter, Pure is sharing its internal expectations of Q4 business outlook, but will not provide formal guidance due to the resurgence and continued uncertainty of COVID-19.

Pure’s current internal view of fiscal Q4 outcomes, which should not be viewed as guidance, is that total revenue for Q4 will be $480 million, a decline of two percent year-over-year. With the current view of revenue, Pure believes non-GAAP operating profit will be approximately $26 million in Q4.

Conference Call Information

Pure will host a teleconference to discuss the third quarter fiscal 2021 results at 2:00 p.m. PT on November 24, 2020. A live audio broadcast of the conference call will be available at the Pure Storage Investor Relations website at Pure will also post its supplemental earnings presentation and prepared conference call remarks to the Investor Relations website in advance of the call for reference. A replay will be available following the call on the Pure Storage Investor Relations website or for two weeks at (855) 859-2056 (or 404-537-3406 for international callers) with passcode 2343447.

Upcoming IR Events

Pure will be presenting at the Credit Suisse 24th Annual Technology Virtual Conference on November 30 at 10:40 a.m. PT.
Wells Fargo Technology, Media and Telecom Virtual Summit on December 2 at 9:00 a.m. PT.
Barclays Global Technology, Media and Telecommunications Virtual Conference on December 9 at 1:00 p.m. PT.

The presentations from these events will be webcast live, and all information will be available on the Investor Relations website at

About Pure Storage

Pure Storage (NYSE: PSTG) gives technologists their time back. Pure delivers a Modern Data Experience that empowers organizations to run their operations as a true, automated, storage as-a-service model seamlessly across multiple clouds. One of the fastest-growing enterprise IT companies in history, Pure helps customers put data to use while reducing the complexity and expense of managing the infrastructure behind it. And with a certified 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: Pure Storage has been named a Leader in the 2019 Gartner Magic Quadrant for Primary Storage.

Forward Looking Statements

This press release contains forward-looking statements regarding our products, business and operations, including but not limited to our views relating to future period outcomes, the scope and duration of the COVID-19 pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, supply chain, financial results and the

economy, our expectations regarding product and technology differentiation, including our new offerings, strategy and adoption of subscription services, the impact of the Portworx acquisition and technology, and other 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 and on the SEC website at Additional information is also set forth in our Annual Report on Form 10-K for the year ended February 2, 2020. All information provided in this release and in the attachments is as of November 24, 2020, and Pure undertakes no duty to update this information unless required by law.

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, Pure uses 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.

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, payments to former shareholders of acquired companies, payroll tax expense related to stock-based activities, amortization of debt discount and debt issuance costs, amortization of intangible assets acquired from acquisitions, acquisition-related transaction and integration expenses, restructuring activities, and expenses directly related to the COVID-19 pandemic that may not be indicative of our ongoing core business operating results. Pure believes 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.

The non-GAAP operating profit for Q4 above also excludes the expenses and expenditures consistent with the non-GAAP financial measures described above. Non-GAAP operating profit is not reconciled to GAAP operating profit as the items that impact this measure are not within our control and/or cannot be reasonably predicted. Accordingly, a reconciliation is not available without unreasonable effort.

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.

Nicole Noutsios - Investor Relations, Pure Storage
Rena Fallstrom – Public Relations, Pure Storage

Condensed Consolidated Balance Sheets
(in thousands, unaudited)
At the End of
Third Quarter of Fiscal 2021Fiscal 2020
Current assets: 
Cash and cash equivalents$263,702 $362,635 
Marketable securities937,718 936,518 
Accounts receivable, net of allowance of $558 and $542378,193 458,643 
Inventory43,152 38,518 
Deferred commissions, current42,728 37,148 
Prepaid expenses and other current assets77,813 56,930 
Total current assets1,743,306 1,890,392 
Property and equipment, net158,200 122,740 
Operating lease right-of-use-assets137,856 112,854 
Deferred commissions, non-current109,361 102,056 
Intangible assets, net81,075 58,257 
Goodwill360,997 37,584 
Restricted cash11,349 15,287 
Other assets, non-current50,851 25,034 
Total assets$2,652,995 $2,364,204 
Liabilities and stockholders' equity  
Current liabilities:  
Accounts payable$89,369 $77,651 
Accrued compensation and benefits83,163 106,592 
Accrued expenses and other liabilities47,939 47,223 
Operating lease liabilities, current30,902 27,264 
Deferred revenue, current408,086 356,011 
Total current liabilities659,459 614,741 
Long-term debt748,422 477,007 
Operating lease liabilities, non-current124,382 92,977 
Deferred revenue, non-current354,678 341,277 
Other liabilities, non-current30,973 8,084 
Total liabilities1,917,914 1,534,086 
Stockholders’ equity:  
Common stock and additional paid-in capital2,238,741 2,107,605 
Accumulated other comprehensive income9,059 5,449 
Accumulated deficit(1,512,719)(1,282,936)
Total stockholders' equity735,081 830,118 
Total liabilities and stockholders' equity$2,652,995 $2,364,204 


Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 Third Quarter of FiscalFirst Three Quarters of Fiscal
Product$274,470 $323,268 $793,718 $862,137 
Subscription services136,149 105,141 387,743 289,299 
Total revenue410,619 428,409 1,181,461 1,151,436 
Cost of revenue:  
Product (1)
86,661 89,998 240,677 259,460 
Subscription services(1)
47,442 37,773 132,717 106,632 
Total cost of revenue134,103 127,771 373,394 366,092 
Gross profit276,516 300,638 808,067 785,344 
Operating expenses:  
Research and development (1)
122,981 106,663 350,079 318,758 
Sales and marketing (1)
172,282 184,819 517,149 537,633 
General and administrative (1)
46,467 37,416 132,063 119,542 
Restructuring and other (2)
— — 22,990 — 
Total operating expenses341,730 328,898 1,022,281 975,933 
Loss from operations(65,214)(28,260)(214,214)(190,589)
Other income (expense), net(4,887)(6,700)(2,459)
Loss before provision for income taxes(70,101)(28,251)(220,914)(193,048)
Income tax provision4,121 1,731 8,869 3,288 
Net loss$(74,222)$(29,982)$(229,783)$(196,336)
Net loss per share attributable to common
   stockholders, basic and diluted
Weighted-average shares used in computing net
   loss per share attributable to common
   stockholders, basic and diluted
269,144 255,047 265,626 250,618 

(1) Includes stock-based compensation expense as follows:
Cost of revenue -- product$1,027 $912 $3,013 $2,843 
Cost of revenue -- subscription services3,883 3,517 10,961 11,101 
Research and development29,220 27,827 87,770 85,180 
Sales and marketing14,898 16,802 48,018 51,171 
General and administrative10,581 5,171 29,993 24,495 
Total stock-based compensation expense$59,609 $54,229 $179,755 $174,790 

(2) Includes expenses related to restructuring and incremental expenses directly related to COVID-19

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 Third Quarter of FiscalFirst Three Quarters of Fiscal
Cash flows from operating activities  
Net loss$(74,222)$(29,982)$(229,783)$(196,336)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization18,214 23,194 49,811 66,785 
Amortization of debt discount and debt issuance costs7,400 6,896 21,525 20,186 
Stock-based compensation expense59,609 54,229 179,755 174,790 
Impairment of long-lived assets— — 7,505 — 
Other2,139 (810)4,111 (483)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net(8,676)(9,474)83,220 17,079 
Deferred commissions(7,402)(4,563)(12,885)(8,158)
Prepaid expenses and other assets(11,217)2,099 (37,606)1,464 
Operating lease right-of-use assets7,253 6,524 21,434 19,962 
Accounts payable29,656 (4,417)8,566 (35,244)
Accrued compensation and other liabilities(6,520)(5,307)(9,737)(31,011)
Operating lease liabilities(7,373)(5,937)(20,444)(19,020)
Deferred revenue30,397 35,935 57,860 106,980 
Net cash provided by operating activities32,799 64,257 118,608 119,716 
Cash flows from investing activities
Purchases of property and equipment(24,867)(20,977)(73,643)(74,206)
Acquisitions, net of cash acquired(339,806)(3,713)(339,806)(51,594)
Purchase of intangible assets— — — (9,000)
Purchase of strategic investment(5,000)— (5,000)— 
Purchases of marketable securities(163,154)(151,527)(454,391)(640,024)
Sales of marketable securities40,856 56,150 132,207 116,518 
Maturities of marketable securities118,606 74,901 324,780 345,657 
Net cash used in investing activities(373,365)(45,166)(415,853)(312,649)
Cash flows from financing activities
Net proceeds from exercise of stock options4,019 6,544 25,677 25,804 
Proceeds from issuance of common stock under employee stock purchase plan16,418 11,249 32,439 43,291 
Proceeds from borrowings, net of issuance costs246,942 — 251,892 — 
Repayment of debt assumed from acquisition— — — (11,555)
Tax withholding on vesting of restricted stock(1,239)(1,614)(4,080)(8,787)
Repurchases of common stock(21,411)— (111,554)— 
Net cash provided by financing activities244,729 16,179 194,374 48,753 
Net increase (decrease) in cash, cash equivalents and restricted cash(95,837)35,270 (102,871)(144,180)
Cash, cash equivalents and restricted cash, beginning of period370,888 284,363 377,922 463,813 
Cash, cash equivalents and restricted cash, end of period$275,051 $319,633 $275,051 $319,633 


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):
 Third Quarter of Fiscal 2021Third Quarter of Fiscal 2020
margin (a)
Adjustment Non-
margin (b)
margin (a)
Adjustment Non-
margin (b)
$1,027 (c)$912 (c)
13 (d)21 (d)
2,396 (e)1,933 (e)
Gross profit --
$187,809 68.4 %$3,436  $191,245 69.7 %$233,270 72.2 %$2,866  $236,136 73.0 %
   $3,883 (c)    $3,517 (c)  
59 (d)96 (d)
Gross profit -- subscription services$88,707 65.2 %$3,949  $92,656 68.1 %$67,368 64.1 %$3,613  $70,981 67.5 %
   $4,910 (c)    $4,429 (c)  
72 (d)117 (d)
2,396 (e)1,933 (e)
Total gross profit$276,516 67.3 %$7,385  $283,901 69.1 %$300,638 70.2 %$6,479  $307,117 71.7 %

(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.
(f) To eliminate payments to former shareholders of acquired company.


The following table presents certain non-GAAP consolidated results before certain items (in thousands, except per share amounts and percentages, unaudited):
 Third Quarter of Fiscal 2021Third Quarter of Fiscal 2020
margin (a)
Adjustment Non-
margin (b)
margin (a)
Adjustment Non-
margin (b)
$59,609 (c)$52,335 (c)
3,533 (d)1,894 (d)
1,166 (e)1,160 (e)
2,573 (f)1,933 (f)
1,762 (g)— 
Operating Income (loss)$(65,214)-15.9 %$68,643  $3,429 0.8 %$(28,260)-6.6 %$57,322  $29,062 6.8 %
   $59,609 (c)    $52,335 (c) 
3,533 (d)1,894 (d)
   1,166 (e)    1,160 (e) 
2,573 (f)1,933 (f)
1,762 (g)— 
7,400 (h)6,896��(h)
Net income (loss)$(74,222) $76,043 $1,821  $(29,982) $64,218  $34,236  
Net income (loss) per share -- basic and diluted$(0.28)   $0.01  $(0.12)   $0.13  
Weighted-average shares used in per share calculation -- basic and diluted269,144  15,677 (i)284,821  255,047  17,161 (i)272,208 

(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 payments to former shareholders of acquired companies.
(e) To eliminate payroll tax expense related to stock-based activities.
(f) To eliminate amortization expense of acquired intangible assets.
(g) To eliminate acquisition-related transaction and integration expenses.
(h) To eliminate amortization expense of debt discount and debt issuance costs related to our long-term debt.
(i) To include effect of dilutive securities (employee stock options, restricted stock, and shares from employee stock purchase plan).


Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):
 Third Quarter of FiscalChange
Net cash provided by operating activities$32,799 $64,257 $(31,458)
Less: purchases of property and equipment(24,867)(20,977)(3,890)
Free cash flow (non-GAAP)$7,932 $43,280 $(35,348)
Free cash flow as % of revenue1.9 %10.1 %