31.08.2022 22:02:00

Pure Storage Announces Second Quarter Fiscal 2023 Financial Results

Q2 revenue growth of 30% year-over-year, record Q2 operating profit

Subscription services ARR $955 million, up 31% year-over-year

Raised FY23 revenue outlook to $2.75 billion

MOUNTAIN VIEW, Calif., Aug. 31, 2022 /PRNewswire/ -- 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 fiscal second quarter ended August 7, 2022.

www.purestorage.com (PRNewsFoto/Pure Storage)

"Pure saw continued growth and solid market share gains as our expanding portfolio of industry leading products and services are recognized and embraced by more and more enterprises around the world," said Charles Giancarlo, Chairman and CEO, Pure Storage. "Customers struggling with their ability to manage their exploding volumes of data look to Pure for simple, automated solutions." 

Second Quarter Financial Highlights 

  • Revenue $646.8 million, up 30% year-over-year
  • Subscription services revenue $232.2 million, up 35% year-over-year
  • Subscription Annual Recurring Revenue (ARR) $955.3 million, up 31% year-over-year
  • Remaining Performance Obligations (RPO) $1.5 billion, up 25% year-over-year
  • GAAP gross margin 68.6%; non-GAAP gross margin 70.4%
  • GAAP operating income $14.4 million; non-GAAP operating income $106.0 million
  • GAAP operating margin 2.2%; non-GAAP operating margin 16.4%
  • Operating cash flow $159.4 million; free cash flow $134.2 million
  • Total cash, cash equivalents, and marketable securities $1.4 billion
  • Returned approximately $61 million in Q2 to stockholders, repurchased 2.4 million shares

"We are pleased to again deliver strong revenue growth and profitability in Q2," said Kevan Krysler, CFO, Pure Storage. "We are helping our customers navigate a dynamic and challenging environment as we continue our track record of delivering highly performant solutions within our normal lead times, requiring less energy and space than other data storage alternatives."

Second Quarter Company Highlights

  • Market-Leading Portfolio Innovation: Pure introduced the new FlashBlade//S family of products, built with a modular architecture that shares components with Pure's industry leading FlashArray. The highly flexible, all-QLC system combines performance and cost effectiveness to address the demands of unstructured data and modern application growth. Pure also delivered AIRI//S, the next generation of its complete AI-ready infrastructure developed with NVIDIA.
  • Expanded Storage Flexibility and as-a-Service Offerings: Pure advanced its portfolio of Evergreen offerings, including the new fleet-level Evergreen//Flex, extending leadership in Storage-as-a-Service (STaaS) while supporting customers where they are in their journey to embracing flexible delivery models.
  • General Availability of Pure Fusion: Pure Fusion enables enterprises and MSPs to automate and orchestrate their data storage environment and offer storage services to customers and developers through APIs, dramatically accelerating developer workflow.
  • Kubernetes Leadership Recognition: Portworx was named a leader and outperformer in the GigaOm Radar Reports for Enterprise Kubernetes Storage and Cloud-Native Kubernetes Data Storage for the third consecutive year. Additionally, in Q2, Portworx Data Services (PDS) became generally available and the company introduced portfolio advancements to its suite of Portworx offerings.

Third Quarter and FY23 Guidance


Q3 FY23

FY23

Revenue

Approx. $670 Million

Approx. $2.75 Billion

Non-GAAP Operating Income

$85 Million

$390 Million

Non-GAAP Operating Margin

Approx. 12.7%

Approx. 14%

 

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 second quarter fiscal 2023 results at 1:30 pm PT today, August 31, 2022. 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 1-866-813-9403 (or +44 204 525 0658 for international callers) with passcode 367923.

Upcoming Events

Pure is scheduled to participate at the following investor conferences:

Deutsche Bank's 2022 Technology Conference
Date: Thursday, September 1, 2022
Fireside Chat Time: 1:15 pm PDT
Pure Presenters: Ajay Singh, Chief Product Officer and Sanjot Khurana, VP, Investor Relations & Treasurer

Evercore ISI 2nd Annual TMT Conference
Date: Wednesday, September 7, 2022
Pure Participant: Sanjot Khurana, VP, Investor Relations & Treasurer

Citi's 2022 Global Technology Conference
Date: Thursday, September 8, 2022
Pure Participant: Sanjot Khurana, VP, Investor Relations & Treasurer

Goldman Sachs Communacopia + Technology Conference
Date: Monday, September 12, 2022
Fireside Chat Time: 4:30 pm - 5:10 pm PDT
Pure Presenters: Charles Giancarlo, Chairman and CEO and Kevan Krysler, CFO
Pure Participants: Sanjot Khurana, VP, Investor Relations & Treasurer

The presentation(s) 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 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. For more information, visit www.purestorage.com.

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

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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 sustainable growth strategy, our continued momentum and growth potential, particularly within our enterprise customer segment, our sustainability goals and benefits, the timing and magnitude of large customer orders, the potential for supply chain disruptions, the scope and duration of the COVID-19 pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, inflation, financial results and the economy, demand for our products and subscription services, including Evergreen//One, our expectations regarding our 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 February 6, 2022. All information provided in this release and in the attachments is as of August 31, 2022, 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 discount and debt issuance costs related to long-term debt, amortization of intangible assets acquired from acquisitions, acquisition-related transaction and integration expenses, and costs associated with the exit of certain operations 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.

 

PURE STORAGE, INC.

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

 



At the End of



Second Quarter of
Fiscal 2023


Fiscal 2022






Assets





Current assets:





Cash and cash equivalents


$          652,567


$          466,199

Marketable securities


709,889


947,073

Accounts receivable, net of allowance of $1,077 and $945


402,007


542,144

Inventory


52,265


38,942

Deferred commissions, current


70,918


81,589

Prepaid expenses and other current assets


133,360


116,232

Total current assets


2,021,006


2,192,179

Property and equipment, net


219,559


195,282

Operating lease right-of-use-assets


172,392


111,763

Deferred commissions, non-current


164,763


164,718

Intangible assets, net


57,537


62,646

Goodwill


361,427


358,736

Restricted cash


10,544


10,544

Other assets, non-current


42,631


39,447

Total assets


$        3,049,859


$       3,135,315






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable


$            64,005


$            70,704

Accrued compensation and benefits


150,924


205,431

Accrued expenses and other liabilities


93,752


78,511

Operating lease liabilities, current


33,872


35,098

Deferred revenue, current


609,549


562,576

Debt, current


573,205


Total current liabilities


1,525,307


952,320

Long-term debt



786,779

Operating lease liabilities, non-current


150,711


93,479

Deferred revenue, non-current


569,142


517,296

Other liabilities, non-current


43,341


31,105

Total liabilities


2,288,501


2,380,979

Stockholders' equity:





Common stock and additional paid-in capital


2,392,203


2,470,972

Accumulated other comprehensive loss


(20,099)


(8,365)

Accumulated deficit


(1,610,746)


(1,708,271)

Total stockholders' equity


761,358


754,336

Total liabilities and stockholders' equity


$        3,049,859


$       3,135,315

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)



Second Quarter of Fiscal


First Two Quarters of Fiscal


2023


2022


2023


2022









Revenue:








Product

$         414,603


$         324,935


$         815,764


$         574,823

Subscription services

232,169


171,896


451,413


334,715

Total revenue

646,772


496,831


1,267,177


909,538

Cost of revenue:








Product (1)

134,292


101,150


259,776


180,214

Subscription services(1)

68,912


55,654


137,407


107,431

Total cost of revenue

203,204


156,804


397,183


287,645

Gross profit

443,568


340,027


869,994


621,893

Operating expenses:








Research and development (1)

165,690


140,107


326,963


271,488

Sales and marketing (1)

206,836


190,386


424,989


373,882

General and administrative (1)

56,679


43,464


108,246


86,610

Total operating expenses

429,205


373,957


860,198


731,980

Income (loss) from operations

14,363


(33,930)


9,796


(110,087)

Other income (expense), net

585


(7,410)


(5,596)


(12,137)

Income (loss) before provision for income taxes

14,948


(41,340)


4,200


(122,224)

Income tax provision

4,026


3,925


4,813


7,247

Net income (loss)

$           10,922


$          (45,265)


$              (613)


$        (129,471)









Net income (loss) per share attributable to common stockholders, basic

$              0.04


$             (0.16)


$             (0.00)


$             (0.46)

Net income (loss) per share attributable to common stockholders, diluted

$              0.03


$             (0.16)


$             (0.00)


$             (0.46)

Weighted-average shares used in computing net income (loss) per share
attributable to common stockholders, basic

297,475


283,931


296,659


282,147

Weighted-average shares used in computing net income (loss) per share
attributable to common stockholders, diluted

312,720


283,931


296,659


282,147


(1) Includes stock-based compensation expense as follows:









Cost of revenue -- product

$             2,607


$             1,566


$             4,470


$             2,913

Cost of revenue -- subscription services

5,808


5,137


11,164


9,543

Research and development

41,575


35,125


78,092


65,546

Sales and marketing

17,954


18,358


36,299


35,166

General and administrative

15,620


10,243


28,110


18,595

Total stock-based compensation expense

$           83,564


$           70,429


$         158,135


$         131,763

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)



Second Quarter of Fiscal


First Two Quarters of Fiscal


2023


2022


2023


2022









Cash flows from operating activities








Net income (loss)

$               10,922


$              (45,265)


$                    (613)


$            (129,471)

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:








Depreciation and amortization

23,886


19,273


46,549


38,099

Amortization of debt discount and debt issuance costs

802


7,751


1,603


15,154

Stock-based compensation expense

83,564


70,429


158,135


131,763

Other

1,282


3,895


1,428


6,516

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








Accounts receivable, net

(56,122)


(30,874)


140,007


102,506

Inventory

(10,793)


266


(12,492)


(3,242)

Deferred commissions

(4,683)


(10,090)


10,626


(8,041)

Prepaid expenses and other assets

(3,821)


5,452


(15,563)


(24,955)

Operating lease right-of-use assets

9,071


7,237


16,820


14,818

Accounts payable

890


15,087


(6,529)


(9,267)

Accrued compensation and other liabilities

51,139


43,885


(37,824)


(40,952)

Operating lease liabilities

(12,962)


(7,308)


(21,442)


(14,205)

Deferred revenue

66,205


43,654


98,807


66,117

Net cash provided by operating activities

159,380


123,392


379,512


144,840

Cash flows from investing activities








Purchases of property and equipment(1)

(25,184)


(27,670)


(57,994)


(55,499)

Acquisition, net of cash acquired

(1,989)



(1,989)


Purchases of marketable securities


(145,808)


(17,251)


(317,371)

Sales of marketable securities


28,501



114,038

Maturities of marketable securities

124,818


104,030


240,993


169,770

Net cash provided by (used in) investing activities

97,645


(40,947)


163,759


(89,062)

Cash flows from financing activities








Net proceeds from exercise of stock options

3,859


3,147


15,264


11,163

Proceeds from issuance of common stock under employee stock purchase plan



19,396


17,726

Principal payments on borrowings and finance lease obligations

(182)


(261)


(251,577)


(605)

Tax withholding on vesting of equity awards

(2,793)


(1,514)


(12,987)


(6,564)

Repurchases of common stock

(60,579)


(44,373)


(126,999)


(74,393)

Net cash used in financing activities

(59,695)


(43,001)


(356,903)


(52,673)

Net increase in cash, cash equivalents and restricted cash

197,330


39,444


186,368


3,105

Cash, cash equivalents and restricted cash, beginning of period

465,781


311,352


476,743


347,691

Cash, cash equivalents and restricted cash, end of period

$             663,111


$             350,796


$             663,111


$             350,796



(1)

Includes capitalized internal-use software costs of $3.9 million and $2.5 million for the second quarter of fiscal 2023 and 2022 and $6.8 million and $3.8 million for the first two quarters of fiscal 2023 and 2022.

 

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 2023


Second Quarter of Fiscal 2022



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)
































$      2,607


(c)










$      1,566


(c)











64


(d)










63


(d)











3,252


(e)










3,067


(e)





Gross profit --product


$  280,311


67.6 %


$      5,923




$ 286,234


69.0 %


$  223,785


68.9 %


$      4,696




$  228,481


70.3 %
































$      5,808


(c)










$      5,137


(c)











265


(d)










196


(d)











24


(f)










24


(f)





Gross profit --
subscription services


$  163,257


70.3 %


$      6,097




$ 169,354


72.9 %


$  116,242


67.6 %


$      5,357




$  121,599


70.7 %
































$      8,415


(c)










$      6,703


(c)











329


(d)










259


(d)











3,252


(e)










3,067


(e)











24


(f)










24


(f)





Total gross profit


$  443,568


68.6 %


$    12,020




$ 455,588


70.4 %


$  340,027


68.4 %


$    10,053




$  350,080


70.5 %



(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):


Second Quarter of Fiscal 2023


Second Quarter of Fiscal 2022


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)





























$     83,564


(c)










$     70,429


(c)









1,780


(d)










4,229


(d)









2,518


(e)










2,081


(e)









3,785


(f)










3,600


(f)




















171


(g)




Operating Income (loss)

$   14,363


2.2 %


$     91,647




$  106,010


16.4 %


$   (33,930)


-6.8 %


$     80,510



$   46,580


9.4 %





























$     83,564


(c)










$     70,429


(c)









1,780


(d)










4,229


(d)









2,518


(e)










2,081


(e)









3,785


(f)










3,600


(f)




















171


(g)









802


(h)










7,751


(h)









(1,767)


(i)















Net income (loss)

$   10,922




$     90,682




$  101,604




$   (45,265)




$     88,261



$   42,996


























Net income
(loss) per
share -- diluted

$       0.03








$     0.32




$       (0.16)







$       0.14



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

312,720







312,720




283,931




16,286


(j)

300,217





(a)

GAAP operating margin is defined as GAAP operating income (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 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 eliminate net gain from legal settlements in connection with facilities abandoned in the second quarter of fiscal 2021.

(j)

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):


Second Quarter of Fiscal


2023


2022

Net cash provided by operating activities

$             159,380


$             123,392

Less: purchases of property and equipment(1)

(25,184)


(27,670)

Free cash flow (non-GAAP)

$             134,196


$               95,722



(1)

Includes capitalized internal-use software costs of $3.9 million and $2.5 million for the second quarter of fiscal 2023 and 2022.

 

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