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PSTG Pure Storage

Filed: 23 Nov 21, 4:04pm


Exhibit 99.1
 
Pure Storage Announces Third Quarter Fiscal 2022 Financial Results
Q3 revenue growing 37% year-over-year
Subscription Services ARR $788 million, up 30% year-over-year
Raised FY22 revenue outlook to $2.1 billion
 
MOUNTAIN VIEW, Calif. – November 23, 2021 – Today Pure Storage (NYSE: PSTG), the IT pioneer that delivers storage as-a-service in a multi-cloud world, announced financial results for its fiscal third quarter ended October 31, 2021.

"With Q3 revenue up 37% year-over-year and with increasing profitability, it's clear that Pure continues to set the pace for the industry," said Charles Giancarlo, Chairman and CEO, Pure Storage. "We're delighted to provide cutting edge data services to customers and with our continued leadership in two Gartner Magic Quadrants."

Third Quarter Financial Highlights 

Revenue $562.7 million, up 37% year-over-year
Subscription Services revenue $187.8 million, up 38% year-over-year
Subscription Annual Recurring Revenue (ARR) $788.3 million, up 30% year-over-year
Remaining Performance Obligations (RPO) $1.2 billion, up 27% year-over-year
GAAP gross margin 66.6%; non-GAAP gross margin 68.5%
GAAP operating loss $(18.1) million; non-GAAP operating income $69.5 million
GAAP operating margin (3.2)%; non-GAAP operating margin 12.3%
Operating cash flow $127.0 million; free cash flow $101.3 million
Total cash and investments $1.4 billion

"Our strong Q3 performance was fueled by increased customer demand and execution across the entire business," said Kevan Krysler, CFO, Pure Storage. "We are in a great innovation cycle with our portfolio."

Third Quarter Company Highlights and Achievements

Gartner Magic Quadrant: A storage leader for eight consecutive years
Magic Quadrant for Primary Storage Arrays: Gartner named Pure a storage leader eight years in a row and the second year in a row the company has been positioned highest on the ability to execute axis and furthest on the completeness of vision axis.
Magic Quadrant for Distributed File Systems and Object Storage: Gartner positioned Pure as a leader in the rapidly growing storage market for unstructured data.

Net Promoter Score (NPS) of 83.5: For six years running, Pure continues to maintain a market-leading NPS, taking the top 1% spot across Medallia benchmarked B2B scores.

Significant announcements in Q3 bring infrastructure and applications closer together by enabling cloud-like automation and delivery of storage:
Pure FusionTM, a self-service, autonomous storage-as-code platform built for limitless scale, lets customers bring the cloud operating model anywhere and run, operate, and consume traditional storage like a cloud service.
Portworx® Data Services, a Database-as-a-Service platform for Kubernetes, lets DevOps engineers deploy a managed, production-grade data service with the click of a button.

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Fourth Quarter and FY22 Guidance

Q4 FY22FY22
Revenue$630 million$2.1 billion
Non-GAAP Operating Income$90 million$206 million
Non-GAAP Operating Marginapprox. 14%approx. 10%

These statements are forward-looking and actual results may differ materially. Refer to the Forward Looking Statements section below for information on the factors that could cause our actual results to differ materially from these statements. Pure has not reconciled its guidance for non-GAAP operating income and non-GAAP operating margin to their most directly comparable GAAP measures because certain items that impact these measures are not within Pure’s control and/or cannot be reasonably predicted. Accordingly, a reconciliation of these non-GAAP financial measures guidance to the corresponding GAAP measures is not available without unreasonable effort.

Conference Call Information

Pure will host a teleconference to discuss the third quarter fiscal 2022 results at 1:30 pm PT today, November 23, 2021. A live audio broadcast of the conference call will be available at the Pure Storage Investor Relations website, investor.purestorage.com. Pure will also post its earnings presentation to this website in advance of the call and post its prepared remarks to this website within 24 hours of completion of the call. A replay will be available following the call on the Pure Storage Investor Relations website or for two weeks at 800-585-8367 (or 416-621-4642 for international callers) with passcode 9027916.

Upcoming Events

Pure is scheduled to participate at the following investor conferences:

Wells Fargo Virtual 5th Annual TMT Summit
Date: Tuesday, November 30, 2021
Time: 11:00 am PST
Pure Presenters: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFO
Pure Participants: Rob Lee, VP and CTO, Sanjot Khurana, VP, Investor Relations

Credit Suisse 25th Annual Technology Conference
Date: Wednesday, December 1, 2021
Time: 1:10 pm MST
Pure Presenters: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFO
Pure Participants: Rob Lee, VP and CTO, Sanjot Khurana, VP, Investor Relations

UBS Virtual Global TMT Conference
Date: Monday, December 6, 2021
Pure Participants: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFO, Rob Lee, VP and CTO, and Sanjot Khurana, VP, Investor Relations

Barclays Virtual Global Technology, Media and Telecommunications Conference
Date: Tuesday, December 7, 2021
Pure Participants: Kevan Krysler, CFO, Rob Lee, VP and CTO, and Sanjot Khurana, VP, Investor Relations

Raymond James Virtual Technology Investors Conference
Date: Wednesday, December 8, 2021
Pure Participants: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFO, Rob Lee, VP and CTO, and Sanjot Khurana, VP, Investor Relations

The presentations will be webcast live and archived on Pure’s Investor Relations website at investor.purestorage.com.

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About Pure Storage

Pure Storage 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. 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

Leader in the 2021 Gartner Magic Quadrant for Primary Storage Arrays
Leader in the 2021 Gartner Magic Quadrant for Distributed File Systems & Object Storage

Connect with Pure

Blog
LinkedIn
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Facebook

Pure Storage, the Pure P Logo, Portworx, and the marks on the Pure Trademark List at www.purestorage.com/legal/productenduserinfo.html are trademarks of Pure Storage, Inc. Other names are trademarks of their respective owners.

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 financial results, our continued momentum and growth potential, supply chain constraints, the scope and duration of the COVID-19 pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, financial results and the economy, demand for our products and subscription services, our expectations regarding product and technology differentiation, new customer acquisition, the continued success of the Portworx 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 caption "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 is also set forth in our Annual Report on Form 10-K for the year ended January 31, 2021. All information provided in this release and in the attachments is as of November 23, 2021, and Pure undertakes no duty to update this information unless required by law.

Key Business Metric

Subscription ARR is a key business metric that refers to total annualized contract value of all active subscription agreements, including Evergreen, on the last day of the quarter, plus on-demand revenue for the quarter multiplied by four.

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, and free cash flow.

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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 related to long-term debt, 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.

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.

Contacts
Sanjot Khurana -- Investor Relations, Pure Storage
ir@purestorage.com
 
Rena Fallstrom -- Global Communications, Pure Storage
pr@purestorage.com

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PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
At the End of
Third Quarter of Fiscal 2022Fiscal 2021
 
Assets 
Current assets: 
Cash and cash equivalents$404,692 $337,147 
Marketable securities958,180 916,388 
Accounts receivable, net of allowance of $965 and $1,033354,179 460,879 
Inventory44,036 46,733 
Deferred commissions, current63,422 57,183 
Prepaid expenses and other current assets102,117 89,836 
Total current assets1,926,626 1,908,166 
Property and equipment, net193,141 163,041 
Operating lease right-of-use-assets115,731 134,668 
Deferred commissions, non-current144,898 130,741 
Intangible assets, net66,992 76,648 
Goodwill358,736 358,736 
Restricted cash10,544 10,544 
Other assets, non-current39,088 36,896 
Total assets$2,855,756 $2,819,440 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$48,708 $67,530 
Accrued compensation and benefits122,969 160,817 
Accrued expenses and other liabilities73,884 61,754 
Operating lease liabilities, current35,061 32,231 
Deferred revenue, current499,176 438,321 
Total current liabilities779,798 760,653 
Long-term debt778,366 755,814 
Operating lease liabilities, non-current99,031 120,361 
Deferred revenue, non-current450,574 405,376 
Other liabilities, non-current23,563 27,230 
Total liabilities2,131,332 2,069,434 
Stockholders’ equity:  
Common stock and additional paid-in capital2,447,945 2,307,608 
Accumulated other comprehensive (loss) income(307)7,410 
Accumulated deficit(1,723,214)(1,565,012)
Total stockholders' equity724,424 750,006 
Total liabilities and stockholders' equity$2,855,756 $2,819,440 

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PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
 Third Quarter of FiscalFirst Three Quarters of Fiscal
 2022202120222021
 
Revenue:  
Product$374,913 $274,470 $949,736 $793,718 
Subscription services187,827 136,149 522,542 387,743 
Total revenue562,740 410,619 1,472,278 1,181,461 
Cost of revenue:  
Product (1)
129,721 86,661 309,935 240,677 
Subscription services(1)
58,227 47,442 165,658 132,717 
Total cost of revenue187,948 134,103 475,593 373,394 
Gross profit374,792 276,516 996,685 808,067 
Operating expenses:  
Research and development (1)
147,808 122,981 419,296 350,079 
Sales and marketing (1)
193,172 172,282 567,054 517,149 
General and administrative (1)
51,890 46,467 138,500 132,063 
Restructuring and other (2)
— — — 22,990 
Total operating expenses392,870 341,730 1,124,850 1,022,281 
Loss from operations(18,078)(65,214)(128,165)(214,214)
Other income (expense), net(7,953)(4,887)(20,090)(6,700)
Loss before provision for income taxes(26,031)(70,101)(148,255)(220,914)
Income tax provision2,700 4,121 9,947 8,869 
Net loss$(28,731)$(74,222)$(158,202)$(229,783)
Net loss per share attributable to common stockholders, basic and diluted$(0.10)$(0.28)$(0.56)$(0.87)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted287,462 269,144 283,918 265,626 


(1) Includes stock-based compensation expense as follows:
Cost of revenue -- product$1,634 $1,027 $4,547 $3,013 
Cost of revenue -- subscription services5,555 3,883 15,098 10,961 
Research and development36,797 29,220 102,343 87,770 
Sales and marketing19,151 14,898 54,317 48,018 
General and administrative12,863 10,581 31,458 29,993 
Total stock-based compensation expense$76,000 $59,609 $207,763 $179,755 

(2) Includes expenses related to restructuring and incremental expenses directly related to COVID-19
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PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
 Third Quarter of FiscalFirst Three Quarters of Fiscal
 2022202120222021
 
Cash flows from operating activities  
Net loss$(28,731)$(74,222)$(158,202)$(229,783)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization21,506 18,214 59,605 49,811 
Amortization of debt discount and debt issuance costs7,857 7,400 23,011 21,525 
Stock-based compensation expense76,000 59,609 207,763 179,755 
Impairment of long-lived assets471 — 471 7,505 
Other2,060 2,139 8,576 4,111 
Changes in operating assets and liabilities:
Accounts receivable, net4,282 (8,676)106,788 83,220 
Inventory3,280 (6,459)38 (4,724)
Deferred commissions(12,354)(7,402)(20,395)(12,885)
Prepaid expenses and other assets12,672 (11,217)(12,283)(37,606)
Operating lease right-of-use assets7,243 7,253 22,061 21,434 
Accounts payable(4,989)29,656 (14,256)8,566 
Accrued compensation and other liabilities5,701 (6,520)(35,251)(9,737)
Operating lease liabilities(7,889)(7,373)(22,094)(20,444)
Deferred revenue39,937 30,397 106,054 57,860 
Net cash provided by operating activities127,046 32,799 271,886 118,608 
Cash flows from investing activities
Purchases of property and equipment(25,718)(24,867)(81,217)(73,643)
Acquisition, net of cash acquired— (339,806)— (339,806)
Purchase of strategic investment— (5,000)— (5,000)
Purchases of marketable securities(185,667)(163,154)(503,038)(454,391)
Sales of marketable securities32,896 40,856 146,934 132,207 
Maturities of marketable securities133,388 118,606 303,158 324,780 
Net cash used in investing activities(45,101)(373,365)(134,163)(415,853)
Cash flows from financing activities
Net proceeds from exercise of stock options22,580 4,019 33,743 25,677 
Proceeds from issuance of common stock under employee stock purchase plan18,915 16,418 36,641 32,439 
Proceeds from borrowings, net of issuance costs— 246,942 — 251,892 
Repayments of borrowings(265)— (870)— 
Principal payments on finance lease obligations(414)— (414)— 
Tax withholding on vesting of equity awards(2,106)(1,239)(8,670)(4,080)
Repurchases of common stock(56,215)(21,411)(130,608)(111,554)
Net cash (used in) provided by financing activities(17,505)244,729 (70,178)194,374 
Net increase (decrease) in cash, cash equivalents and restricted cash64,440 (95,837)67,545 (102,871)
Cash, cash equivalents and restricted cash, beginning of period350,796 370,888 347,691 377,922 
Cash, cash equivalents and restricted cash, end of period$415,236 $275,051 $415,236 $275,051 


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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 2022Third Quarter of Fiscal 2021
 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)
$1,634 (c)$1,027 (c)
42 (d)13 (d)
3,207 (e)2,396 (e)
Gross profit --product$245,192 65.4 %$4,883  $250,075 66.7 %$187,809 68.4 %$3,436  $191,245 69.7 %
   $5,555 (c)    $3,883 (c)  
279 (d)59 (d)
24 (f)(f)
Gross profit -- subscription services$129,600 69.0 %$5,858  $135,458 72.1 %$88,707 65.2 %$3,949  $92,656 68.1 %
   $7,189 (c)    $4,910 (c)  
321 (d)72 (d)
3,207 (e)2,396 (e)
24 (f)(f)
Total gross profit$374,792 66.6 %$10,741  $385,533 68.5 %$276,516 67.3 %$7,385  $283,901 69.1 %


(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.

















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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 2022Third Quarter of Fiscal 2021
 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)
$76,000 (c)$59,609 (c)
4,230 (d)3,533 (d)
2,631 (e)1,166 (e)
551 (f)— 
3,739 (g)2,573 (g)
382 (h)1,762 (h)
Operating Income (loss)$(18,078)-3.2 %$87,533  $69,455 12.3 %$(65,214)-15.9 %$68,643  $3,429 0.8 %
   $76,000 (c)    $59,609 (c) 
4,230 (d)3,533 (d)
   2,631 (e)    1,166 (e) 
551 (f)— 
3,739 (g)2,573 (g)
382 (h)1,762 (h)
7,857 (i)7,400 (i)
Net income (loss)$(28,731) $95,390 $66,659  $(74,222) $76,043  $1,821  
Net income (loss) per share -- diluted$(0.10)   $0.22  $(0.28)   $0.01  
Weighted-average shares used in per share calculation -- diluted287,462  20,835 (j)308,297  269,144  15,677 (j)284,821 

(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 impairment of right-of-use assets associated with cease-use of a certain facility.
(g) To eliminate amortization expense of acquired intangible assets.
(h) To eliminate acquisition-related transaction and integration expenses.
(i) To eliminate amortization expense of debt discount and debt issuance costs related to our long-term debt.
(j) To include effect of dilutive securities (employee stock options, restricted stock, and shares from employee stock purchase plan).





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Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):
 Third Quarter of Fiscal
 20222021
Net cash provided by operating activities$127,046 $32,799 
Less: purchases of property and equipment(25,718)(24,867)
Free cash flow (non-GAAP)$101,328 $7,932 

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