PSTG
$17.99
Pure Storage
$.57
3.27%
Earnings Details
3rd Quarter October 2018
Monday, November 19, 2018 4:05:00 PM
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Summary

Pure Storage Reports In-line

Pure Storage (PSTG) reported 3rd Quarter October 2018 earnings of $0.12 per share on revenue of $372.8 million. The consensus earnings estimate was $0.09 per share on revenue of $366.6 million. The Earnings Whisper number was $0.12 per share. Revenue grew 34.3% on a year-over-year basis.

The company said it expects fourth quarter revenue of $438.0 million to $446.0 million. The current consensus revenue estimate is $439.7 million for the quarter ending January 31, 2019. The company said it expects fiscal year revenue of $1.376 billion to $1.384 billion. The company's previous guidance was revenue of $1.35 billion to $1.38 billion and the current consensus estimate is revenue of $1.37 billion for the year ending January 31, 2019.

Results
Reported Earnings
$0.12
Earnings Whisper
$0.12
Consensus Estimate
$0.09
Reported Revenue
$372.8 Mil
Revenue Estimate
$366.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Pure Storage Announces Third Quarter Fiscal 2019 Financial Results

MOUNTAIN VIEW, Calif., Nov. 19, 2018 /PRNewswire/ -- Pure Storage (NYSE: PSTG), the all-flash storage leader that helps innovators build a better world with data, today announced financial results for its third quarter ended October 31, 2018.

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

Key quarterly business and financial highlights:

  • Revenue: $372.8 million, up 34% Y/Y, exceeding the high end of our guidance;
  • Gross margin: 66.8% GAAP; 68.1% non-GAAP, representing an all-time high;
  • Operating margin: -7.3% GAAP; 9.1% non-GAAP, up 3.4 ppts and 5.4 ppts Y/Y, respectively.

"Pure delivered another excellent quarter, and today we're announcing the extension of Pure's data centric architecture to the cloud," said Charles Giancarlo, Chairman and CEO, Pure Storage. "With the launch of our new Pure Storage Cloud Data Services, we're bringing our storage software directly to the public cloud in partnership with AWS."

"Q3 was a strong quarter for Pure with revenue and margins exceeding our expectations," said Tim Riitters, CFO, Pure Storage. "As we finish the fiscal year we are excited about the opportunities ahead, and have raised FY19 guidance to reflect the momentum we are seeing in our business."

Announcing Pure Storage Cloud Data Services

Today the company announced Pure Storage Cloud Data Services, a suite of new cloud offerings that run natively on Amazon Web Services (AWS). With these new products, customers will be able to invest in a single storage architecture that unifies application deployments on-premises and in the public cloud to flexibly turn data into value virtually anywhere.

Third Quarter Fiscal 2019 Financial Highlights

The following tables summarize our consolidated financial results for the fiscal quarters ended October 31, 2018 and 2017 (in millions except percentages, per share amounts and headcount, unaudited):

GAAP Quarterly Financial Information


Three Months Ended
October 31, 2018

Three Months Ended
October 31, 2017

Y/Y Change

Revenue

$372.8

$277.6

34%

Gross Margin

66.8%

65.5%

1.3 ppts

Product Gross Margin

67.7%

66.9%

0.8 ppts

Support Subscription Gross Margin

63.4%

58.9%

4.5 ppts

Operating Loss

$(27.2)

$(29.6)

$2.4

Operating Margin

-7.3%

-10.7%

3.4 ppts

Net Loss

$(28.2)

$(29.4)

$1.2

Net Loss per Share – Basic and Diluted

$(0.12)

$(0.14)

$0.02

Weighted-Average Shares

235.2

213.3

21.9

Headcount

>2,650

>2,000

~650


Non-GAAP Quarterly Financial Information


Three Months Ended
October 31, 2018

Three Months Ended
October 31, 2017

Y/Y Change

Gross Margin

68.1%

66.4%

1.7 ppts

Product Gross Margin

68.1%

67.0%

1.1 ppts

Support Subscription Gross Margin

68.1%

63.9%

4.2 ppts

Operating Income

$33.9

$10.2

$23.7

Operating Margin

9.1%

3.7%

5.4 ppts

Net Income

$35.4

$10.4

$25.0

Net Income per Share – Diluted

$0.13

$0.04

$0.09

Weighted-Average Shares – Diluted

266.5

242.9

23.6

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

Financial Outlook

Pure Storage's fourth quarter fiscal 2019 guidance is as follows:

  • Revenue in the range of $438 million to $446 million
  • Non-GAAP gross margin in the range of 64.5% to 67.5%
  • Non-GAAP operating margin in the range of 8% to 12%

Pure Storage's full year fiscal 2019 guidance is as follows:

  • Revenue in the range of $1.376 billion to $1.384 billion
  • Non-GAAP gross margin in the range of 66.6% to 67.6%
  • Non-GAAP operating margin in the range of 3.9% to 5.3%

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 third quarter fiscal 2019 results at 2:00 p.m. (PT) on November 19, 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 Monday, November 19, 2018, through December 3, 2018. The replay will be accessible by calling (800) 585-8367 or (416) 621-4642 (for international callers), with conference ID 2157679.

Upcoming Events

Management will participate in an upcoming financial Q&A discussion at the 2018 Wells Fargo Tech Summit on December 5, 2018 at 10:50 a.m. (PT). Pure Storage will post a link to this event on the investor relations website at investor.purestorage.com for both live and archived webcasts.

About Pure Storage

Pure Storage (NYSE: 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 new Pure Storage Cloud Data Services, and our outlook for the fourth 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 October 31, 2018. All information provided in this release and in the tables attached hereto is as of November 19, 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, 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, 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 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
October 31, 2018


As of
January 31, 2018




(As Adjusted*)

Assets




Current assets:




Cash and cash equivalents

$

406,641



$

244,057


Marketable securities

737,020



353,289


Accounts receivable, net of allowance of $1,052 and $1,062

305,649



243,001


Inventory

50,737



34,497


Deferred commissions, current

24,100



21,088


Prepaid expenses and other current assets

44,657



47,552


Total current assets

1,568,804



943,484


Property and equipment, net

115,266



89,142


Deferred commissions, non-current

72,340



66,225


Intangible assets, net

21,126



5,057


Goodwill

10,997




Deferred income taxes, non-current

1,766



1,060


Restricted cash

15,822



14,763


Other assets, non-current

5,245



4,264


Total assets

$

1,811,366



$

1,123,995






Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

101,979



$

84,420


Accrued compensation and benefits

53,213



59,898


Accrued expenses and other liabilities

43,633



26,829


Deferred revenue, current

232,570



191,229


Liability related to early exercised stock options



320


Total current liabilities

431,395



362,696


Convertible senior notes, net

443,212




Deferred revenue, non-current

228,618



182,873


Other liabilities, non-current

5,813



4,025


Total liabilities

1,109,038



549,594






Stockholders' equity:




Common stock and additional paid-in capital

1,761,621



1,479,905


Accumulated other comprehensive loss

(3,099)



(1,917)


Accumulated deficit

(1,056,194)



(903,587)


Total stockholders' equity

702,328



574,401


Total liabilities and stockholders' equity

$

1,811,366



$

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 October 31,


Nine Months Ended October 31,


2018


2017


2018


2017




(As Adjusted*)




(As Adjusted*)

Revenue:








Product

$

298,863



$

227,772



$

735,449



$

550,291


Support subscription

73,916



49,819



202,159



134,615


Total revenue

372,779



277,591



937,608



684,906










Cost of revenue:








Product (1)

96,610



75,392



241,292



179,289


Support subscription(1)

27,049



20,467



74,716



56,569


Total cost of revenue

123,659



95,859



316,008



235,858










Gross profit

249,120



181,732



621,600



449,048










Operating expenses:








Research and development (1)

90,783



68,927



253,306



203,716


Sales and marketing (1)

146,903



116,971



413,019



326,286


General and administrative (1)

38,651



25,406



99,572



67,664


Total operating expenses

276,337



211,304



765,897



597,666










Loss from operations

(27,217)



(29,572)



(144,297)



(148,618)


Other income (expense), net

(2,889)



1,138



(7,920)



6,399


Loss before provision for income taxes

(30,106)



(28,434)



(152,217)



(142,219)


Income tax provision (benefit)

(1,926)



970



390



2,755


Net loss

$

(28,180)



$

(29,404)



$

(152,607)



$

(144,974)










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

$

(0.12)



$

(0.14)



$

(0.66)



$

(0.69)


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

235,205



213,274



229,505



209,456



* 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

$

862



$

143



$

2,190



$

898


Cost of revenue -- support subscription

3,327



2,422



8,940



6,441


Research and development

24,634



18,073



67,956



51,632


Sales and marketing

18,681



12,104



49,890



34,169


General and administrative

10,825



6,121



26,962



14,780


Total stock-based compensation expense

$

58,329



$

38,863



$

155,938



$

107,920


 

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2018


2017


2018


2017




(As Adjusted*)




(As Adjusted*)

Cash flows from operating activities








Net loss

$

(28,180)



$

(29,404)



$

(152,607)



$

(144,974)


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








Depreciation and amortization

17,791



15,525



51,381



45,525


Amortization of debt discount and debt issuance costs

6,525





14,414




Stock-based compensation expense

58,329



38,863



155,938



107,920


Other

(5,119)



82



(5,037)



879


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








Accounts receivable, net

(63,330)



(33,655)



(62,623)



(33,630)


Inventory

(8,203)



(3,827)



(17,103)



(14,314)


Deferred commissions

(4,972)



(4,382)



(9,127)



(13,969)


Prepaid expenses and other assets

(9,138)



74



1,996



(112)


Accounts payable

29,935



11,607



11,800



11,808


Accrued compensation and other liabilities

15,050



3,352



7,592



359


Deferred revenue

47,861



30,013



87,005



54,264


Net cash provided by operating activities

56,549



28,248



83,629



13,756










Cash flows from investing activities








Purchases of property and equipment

(28,074)



(14,251)



(70,807)



(44,351)


Acquisition, net of cash acquired

(13,899)





(13,899)




Purchases of marketable securities

(63,741)



(56,640)



(558,248)



(151,998)


Sales of marketable securities

5,217



12,538



18,802



46,067


Maturities of marketable securities

58,256



25,340



156,049



99,021


Net cash used in investing activities

(42,241)



(33,013)



(468,103)



(51,261)










Cash flows from financing activities








Net proceeds from exercise of stock options

14,275



8,968



43,342



15,761


Proceeds from issuance of common stock under employee stock purchase plan

13,746



7,971



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)





(6,101)




Repurchase of common stock





(20,000)




Net cash provided by financing activities

21,920



16,939



548,117



37,898










Net increase in cash, cash equivalents and restricted cash

36,228



12,174



163,643



393


Cash, cash equivalents and restricted cash, beginning of period

386,235



184,628



258,820



196,409


Cash, cash equivalents and restricted cash, end of period

$

422,463



$

196,802



$

422,463



$

196,802



* 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 October 31, 2018


Three Months Ended October 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)


























$

862

(c)









$

143

(c)









29

(d)









5

(d)









503

(e)













Gross profit -- product

$

202,253


67.7

%


$

1,394


$

203,647


68.1

%


$

152,380


66.9

%


$

148


$

152,528


67.0

%


























$

3,327

(c)









$

2,422

(c)









155

(d)









71

(d)




Gross profit -- support subscription

$

46,867


63.4

%


$

3,482


$

50,349


68.1

%


$

29,352


58.9

%


$

2,493


$

31,845


63.9

%


























$

4,189

(c)









$

2,565

(c)









184

(d)









76

(d)









503

(e)













Total gross profit

$

249,120


66.8

%


$

4,876


$

253,996


68.1

%


$

181,732


65.5

%


$

2,641


$

184,373


66.4

%


 * 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 intangible asset acquired from StorReduce acquisition.

The following table presents certain non-GAAP consolidated results before certain items (in thousands, except per share amounts and percentages, unaudited):


Three Months Ended October 31, 2018


Three Months Ended October 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)


























$

58,329

(c)









$

38,863

(c)









2,282

(d)









902

(d)









503

(e)













Operating income (loss)

$

(27,217)


-7.3

%


$

61,114


$

33,897


9.1

%


$

(29,572)


-10.7

%


$

39,765


$

10,193


3.7

%


























$

58,329

(c)









$

38,863

(c)









2,282

(d)









902

(d)









503

(e)


















6,525

(f)


















(4,083)

(g)













Net income (loss)

$

(28,180)




$

63,556


$

35,376




$

(29,404)




$

39,765


$

10,361























Net income (loss) per share -- diluted

$

(0.12)






$

0.13




$

(0.14)






$

0.04



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

235,205




31,328

(h)

266,533




213,274




29,613

(h)

242,887




 * 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 intangible asset acquired from StorReduce acquisition.

(f) To eliminate amortization expense of debt discount and debt issuance costs related to our convertible debt.

(g) Release of valuation allowance due to StorReduce acquisition.

(h) To include effect of dilutive securities (employee stock options, restricted stock units, 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 October 31,


2018


2017

Net cash provided by operating activities

$

56,549



$

28,248


Less: purchases of property and equipment

(28,074)



(14,251)


Free cash flow (non-GAAP)

$

28,475



$

13,997


Adjust: ESPP impact

2,104



2,478


Free cash flow without ESPP impact (non-GAAP)

$

30,579



$

16,475






Free cash flow as % of revenue

7.6

%


5.0

%

Free cash flow without ESPP impact as % of revenue

8.2

%


5.9

%

 

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SOURCE Pure Storage