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Published: 2023-08-30 00:00:00 ET
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EX-99.1 2 pstg-ex991q2fy2024xpressre.htm EX-99.1 Document

Exhibit 99.1

 
Pure Storage Announces Second Quarter Fiscal 2024 Financial Results
Record sales quarter for FlashBlade portfolio
Doubled subscription sales year-over-year for Evergreen//One
Increased operating margin annual guidance
 
SANTA CLARA, Calif. – August 30, 2023 – Today Pure Storage (NYSE: PSTG), the IT pioneer that delivers the world's most advanced data storage technology and services, announced financial results for its second quarter fiscal 2024 ended August 6, 2023.

"Customers have responded enthusiastically to Pure’s new ability to satisfy all of their data storage needs on a single, consistent, flash data storage and management platform," said Charles Giancarlo, Chairman and CEO, Pure Storage. "With the introduction of Pure’s //E family of products, customers can now store cost sensitive bulk data with the benefits of all flash.”

Second Quarter Financial Highlights 

•Revenue $688.7 million, an increase of 6.5% year-over-year
•Subscription services revenue $288.9 million, up 24% year-over-year
•Subscription annual recurring revenue (ARR) $1.2 billion, up 27% year-over-year
•Remaining performance obligations (RPO) $1.9 billion, up 26% year-over-year
•GAAP gross margin 70.7%; non-GAAP gross margin 72.8%
•GAAP operating loss $(6.2) million; non-GAAP operating income $111.8 million
•GAAP operating margin (0.9)%; non-GAAP operating margin 16.2%
•Operating cash flow $101.6 million; free cash flow $46.5 million
•Total cash, cash equivalents, and marketable securities $1.2 billion
•Returned approximately $22.0 million in Q2 to stockholders through share repurchases of 0.6 million shares

"We were very pleased with record sales across our FlashBlade portfolio, and doubling sales of our Evergreen//One subscription offering this quarter,” said Kevan Krysler, CFO, Pure Storage. "With our Purity software working directly with raw flash, we have established substantial differentiated advantages and business value for our customers, while at the same time expanding our margins."

Second Quarter Company Highlights

•Platform Innovation: Pure expanded the Pure//E™ family of products with the all-new FlashArray//E™, meeting the needs of the secondary storage market at prices competitive to 7200 RPM hard disk systems, with a fraction of the power, space, and operational costs. Pure introduced a new ransomware SLA guarantee for Evergreen//One™ and enhanced AIOps capabilities, offering customers advanced data resilience, enabling organizations to benefit from a comprehensive data protection strategy. In addition, Pure introduced the next generation FlashArray//X™ and FlashArray//C™ models, delivering the largest ever performance, efficiency, and security advancements to customers.

•Awards in AI and Cloud-Native Software: AIRI//S, Pure’s next-gen AI-ready infrastructure, was recognized by AI Breakthrough Awards as the Best AI Solution for Big Data. Portworx by Pure Storage was recognized as a leader in kubernetes storage by GigaOm for the fourth consecutive year.

•New Global Headquarters: Pure opened its new global corporate headquarters in Santa Clara, California to provide state-of-the-art support to employees and customers as the company’s industry-leading innovations continue to drive strong growth. Pure was also recognized by Fortune’s Best Workplaces in the Bay Area and was again certified as a Great Place to Work®.
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Third Quarter and FY24 Guidance

Q3FY24FY24
Revenue$760MMid to High Single Digit Y/Y Growth
Non-GAAP Operating Income$135M
Non-GAAP Operating Margin17.8%15.5%

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, reconciliations of these non-GAAP financial measures guidance to the corresponding GAAP measures are not available without unreasonable effort.

Conference Call Information

Pure will host a teleconference to discuss the second quarter fiscal 2024 results at 2:00 pm PT today, August 30, 2023. 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 following completion of the call.

A replay will be available following the call on the Pure Storage Investor Relations website or for two weeks at 1-800-770-2030 (or +44 647 362 9199 for international callers) with passcode 5667482.

Additionally, Pure is scheduled to participate at the following investor conference or event:

Goldman Sachs Communacopia + Technology Conference
Date: Tuesday, September 5, 2023
Time: 11:30 a.m. PT / 2:30 p.m. ET
Kevan Krysler, CFO and Rob Lee, CTO

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

----

About Pure Storage

Pure Storage (NYSE: PSTG) uncomplicates data storage, forever. Pure delivers a cloud experience that empowers every organization to get the most from their data while reducing the complexity and expense of managing the infrastructure behind it. Pure’s commitment to providing true storage as-a-service gives customers the agility to meet changing data needs at speed and scale, whether they are deploying traditional workloads, modern applications, containers, or more. Pure believes it can make a significant impact in reducing data center emissions worldwide through its environmental sustainability efforts, including designing products and solutions that enable customers to reduce their carbon and energy footprint. And with the highest Net Promoter Score in the industry, Pure's ever-expanding list of customers are among the happiest in the world. For more information, visit www.purestorage.com.

Analyst Recognition

Leader in the 2022 Gartner Magic Quadrant for Primary Storage
Leader in the 2022 Gartner Magic Quadrant for Distributed File Systems & Object Storage

Connect with Pure

Blog
LinkedIn
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Facebook

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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 technology and product strategy, specifically customer priorities around sustainability, the benefits to our customers of using our products, our ability to adjust to current macro conditions and expand market share, our sustainability goals and benefits, the timing and magnitude of large orders, the impact of inflation, economic or supply chain disruptions, demand for our products and subscription services, including Evergreen//One, our expectations regarding our product and technology differentiation, including FlashBlade//E, 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 February 5, 2023. All information provided in this release and in the attachments is as of August 30, 2023, 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 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.

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 issuance costs related to debt, amortization of intangible assets acquired from acquisitions, acquisition-related transaction and integration expenses, and costs associated with the exit of certain operations and closing of certain leased facilities 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.







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Contacts

Paul Ziots -- 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
Second Quarter of Fiscal 2024
Fiscal 2023
 
Assets 
Current assets: 
Cash and cash equivalents$408,900 $580,854 
Marketable securities819,777 1,001,352 
Accounts receivable, net of allowance of $1,062 and $1,057
525,260 612,491 
Inventory47,498 50,152 
Deferred commissions, current71,344 68,617 
Prepaid expenses and other current assets168,283 161,391 
Total current assets2,041,062 2,474,857 
Property and equipment, net325,783 272,445 
Operating lease right-of-use-assets133,066 158,912 
Deferred commissions, non-current184,073 177,239 
Intangible assets, net40,906 49,222 
Goodwill361,427 361,427 
Restricted cash 9,960 10,544 
Other assets, non-current37,645 38,814 
Total assets$3,133,922 $3,543,460 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$98,008 $67,121 
Accrued compensation and benefits165,394 232,636 
Accrued expenses and other liabilities128,842 123,749 
Operating lease liabilities, current41,697 33,707 
Deferred revenue, current769,871 718,149 
Debt, current— 574,506 
Total current liabilities1,203,812 1,749,868 
Long-term debt100,000 — 
Operating lease liabilities, non-current132,191 142,473 
Deferred revenue, non-current667,172 667,501 
Other liabilities, non-current44,419 42,385 
Total liabilities2,147,594 2,602,227 
Stockholders’ equity:  
Common stock and additional paid-in capital2,610,513 2,493,799 
Accumulated other comprehensive loss(12,607)(15,504)
Accumulated deficit(1,611,578)(1,537,062)
Total stockholders' equity986,328 941,233 
Total liabilities and stockholders' equity$3,133,922 $3,543,460 

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PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2024202320242023
 
Revenue:  
Product$399,738 $414,603 $708,701 $815,764 
Subscription services288,933 232,169 569,277 451,413 
Total revenue688,671 646,772 1,277,978 1,267,177 
Cost of revenue:  
Product (1)
120,605 134,292 216,818 259,776 
Subscription services (1)
81,473 68,912 161,220 137,407 
Total cost of revenue202,078 203,204 378,038 397,183 
Gross profit486,593 443,568 899,940 869,994 
Operating expenses:
Research and development (1)
182,492 165,690 367,823 326,963 
Sales and marketing (1)
232,732 206,836 465,178 424,989 
General and administrative (1)
60,831 56,679 128,215 108,246 
Impairment and other (2)
16,766 — 16,766 — 
Total operating expenses492,821 429,205 977,982 860,198 
Income (loss) from operations(6,228)14,363 (78,042)9,796 
Other income (expense), net6,686 585 18,435 (5,596)
Income (loss) before provision for income taxes458 14,948 (59,607)4,200 
Income tax provision7,573 4,026 14,909 4,813 
Net income (loss)$(7,115)$10,922 $(74,516)$(613)
Net income (loss) per share attributable to common stockholders, basic$(0.02)$0.04 $(0.24)$(0.00)
Net income (loss) per share attributable to common stockholders, diluted$(0.02)$0.03 $(0.24)$(0.00)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic309,510 297,475 307,687 296,659 
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted309,510 312,720 307,687 296,659 

(1) Includes stock-based compensation expense as follows:
Cost of revenue -- product$2,958 $2,607 $5,613 $4,470 
Cost of revenue -- subscription services6,851 5,808 12,498 11,164 
Research and development44,085 41,575 82,317 78,092 
Sales and marketing19,493 17,954 36,674 36,299 
General and administrative16,060 15,620 30,175 28,110 
Total stock-based compensation expense$89,447 $83,564 $167,277 $158,135 
(2) Lease impairment and abandonment charges associated with cease-use of our former corporate headquarters
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PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2024202320242023
 
Cash flows from operating activities  
Net income (loss)$(7,115)$10,922 $(74,516)$(613)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization30,223 23,886 59,913 46,549 
Stock-based compensation expense89,447 83,564 167,277 158,135 
Lease impairment and abandonment charges16,766 — 16,766 — 
Other(1,225)2,084 (3,029)3,031 
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net(133,974)(56,122)87,231 140,007 
Inventory4,152 (10,793)4,460 (12,492)
Deferred commissions(7,229)(4,683)(9,560)10,626 
Prepaid expenses and other assets5,737 (3,821)(358)(15,563)
Operating lease right-of-use assets8,634 9,071 19,635 16,820 
Accounts payable30,304 890 26,311 (6,529)
Accrued compensation and other liabilities31,558 51,139 (57,524)(37,824)
Operating lease liabilities (7,033)(12,962)(13,133)(21,442)
Deferred revenue41,373 66,205 51,392 98,807 
Net cash provided by operating activities101,618 159,380 274,865 379,512 
Cash flows from investing activities
Purchases of property and equipment (1)
(55,105)(25,184)(106,529)(57,994)
Acquisition, net of cash acquired— (1,989)— (1,989)
Purchases of marketable securities(117,829)— (246,617)(17,251)
Sales of marketable securities5,708 — 48,748 — 
Maturities of marketable securities 98,330 124,818 386,703 240,993 
Net cash provided by (used in) investing activities(68,896)97,645 82,305 163,759 
Cash flows from financing activities
Net proceeds from exercise of stock options25,218 3,859 29,848 15,264 
Proceeds from issuance of common stock under employee stock purchase plan— — 21,219 19,396 
Principal payments on borrowings and finance lease obligations(287)(182)(577,067)(251,577)
Proceeds from borrowings— — 100,000 — 
Tax withholding on vesting of equity awards(5,068)(2,793)(11,827)(12,987)
Repurchases of common stock(21,970)(60,579)(91,881)(126,999)
Net cash used in financing activities(2,107)(59,695)(529,708)(356,903)
Net increase (decrease) in cash, cash equivalents and restricted cash30,615 197,330 (172,538)186,368 
Cash, cash equivalents and restricted cash, beginning of period388,245 465,781 591,398 476,743 
Cash, cash equivalents and restricted cash, end of period$418,860 $663,111 $418,860 $663,111 

(1) Includes capitalized internal-use software costs of $5.3 million and $3.9 million for the second quarter of fiscal 2024 and 2023 and $10.6 million and $6.8 million for the first two quarters of fiscal 2024 and 2023.

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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):
 
Second Quarter of Fiscal 2024
Second Quarter of Fiscal 2023
 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)
$2,958 (c)$2,607 (c)
135 (d)64 (d)
402 (e)— 
3,306 (f)3,252 (f)
Gross profit --product$279,133 69.8 %$6,801 $285,934 71.5 %$280,311 67.6 %$5,923 $286,234 69.0 %
 $6,851 (c)$5,808 (c)
481 (d)265 (d)
413 (e)— 
5 (g)24 (g)
Gross profit -- subscription services$207,460 71.8 %$7,750 $215,210 74.5 %$163,257 70.3 %$6,097 $169,354 72.9 %
 $9,809 (c)$8,415 (c)
616 (d)329 (d)
815 (e)— 
3,306 (f)3,252 (f)
5 (g)24 (g)
Total gross profit$486,593 70.7 %$14,551  $501,144 72.8 %$443,568 68.6 %$12,020 $455,588 70.4 %


(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 duplicate lease costs during the transition of our corporate headquarters.
(f) To eliminate amortization expense of acquired intangible assets.
(g) 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):
 
Second Quarter of Fiscal 2024
Second Quarter of Fiscal 2023
 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)
$89,447 (c)$83,564 (c)
876 (d)1,780 (d)
4,507 (e)2,518 (e)
3,837 (f)3,785 (f)
2,617 (g)— 
16,766 (h)— 
Operating income (loss)$(6,228)-0.9 %$118,050 $111,822 16.2 %$14,363 2.2 %$91,647 $106,010 16.4 %
 $89,447 (c)$83,564 (c)
876 (d)1,780 (d)
 4,507 (e)2,518 (e)
3,837 (f)3,785 (f)
2,617 (g)— 
16,766 (h)— 
153 (i)802 (i)
— (1,767)(j)
Net income (loss)$(7,115)$118,203 $111,088 $10,922 $90,682 $101,604 
Net income (loss) per share -- diluted $(0.02)$0.34 $0.03 $0.32 
Weighted-average shares used in per share calculation -- diluted309,510 17,060 (k)326,570 312,720 — 312,720 

(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 payments to former shareholders of acquired company.
(e) To eliminate payroll tax expense related to stock-based activities.
(f) To eliminate amortization expense of acquired intangible assets.
(g) To eliminate duplicate lease costs during the transition of our corporate headquarters.
(h) To eliminate lease impairment and abandonment charges associated with cease-use of our former corporate headquarters.
(i) To eliminate amortization expense of debt issuance costs related to our debt.
(j) To eliminate net gain from legal settlements in connection with facilities abandoned in the second quarter of fiscal 2021.
(k) 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):
 
Second Quarter of Fiscal
 20242023
Net cash provided by operating activities$101,618 $159,380 
Less: purchases of property and equipment (1)
(55,105)(25,184)
Free cash flow (non-GAAP)$46,513 $134,196 

(1) Includes capitalized internal-use software costs of $5.3 million and $3.9 million for the second quarter of fiscal 2024 and 2023.
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