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Pure Storage Announces Fourth Quarter and Full Year Fiscal 2020 Financial Results

Pure achieved record bookings, revenues, and non-GAAP gross margin in Q4

MOUNTAIN VIEW, Calif. , Feb. 27, 2020 /PRNewswire/ -- Pure Storage (NYSE: PSTG), the data solutions leader delivering a modern data experience, today announced financial results for its fourth quarter and full-year ended February 2, 2020.

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

"Pure finished the year with the strongest growth and margin profile in the industry," said Charles Giancarlo , Chairman, and CEO, Pure Storage. "We are well-positioned for a successful year ahead with a growing and robust technology portfolio, and our strategy to deliver the Modern Data Experience."

Key Financial Highlights

  • Q4 Revenue; $492.0 million , up 17% year-over-year
  • Full-year revenue $1.643 billion , up 21% year-over-year

  • Q4 GAAP gross margin 70.8%; non-GAAP gross margin 72.1%
  • Full-year GAAP gross margin 69.0%; non-GAAP gross margin 70.5%

  • Q4 GAAP operating loss $0.7 million ; non-GAAP operating profit $60.9 million
  • Full-year GAAP operating loss $191.2 million ; non-GAAP operating profit $55.6 million

  • Q4 GAAP operating margin -0.1%; non-GAAP operating margin 12.4%
  • Full year GAAP operating margin -11.6%; non-GAAP operating margin 3.4%

  • Q4 operating cash flow was $69.9 million , down -14% year-over-year
  • Full-year operating cash flow was $189.6 million , up 15% year-over-year

  • Q4 free cash flow was $56.2 million , up 9% year-over-year
  • Full-year free cash flow was $101.7 million , up 59% year-over-year

"Our Q4 performance was the result of solid execution and growth from our expanding product and subscription services portfolio," said Kevan Krysler , CFO, Pure Storage. "Through expansion of our portfolio, we look forward to continued industry leading growth rates and gross margins."

Recent Company Highlights

Customer Traction : Pure added more than 500 new customers in the quarter equating to greater than five new customers per day, reaching over 7,500 total customers.

Advancing the Modern Data Experience:

  • Today, Pure announced availability for the third-generation all-NVMe FlashArray//X family that provides customers with higher performance and enables faster time-to-market. With our one-of-a-kind, industry-first EvergreenTM Storage model, customers have access to continuous innovation from Pure that includes these and future updates to its product and solutions suite. Read more in the press release here .
  • Pure continues to advance its multi-cloud strategy with the beta launch of Cloud Block Store on Microsoft Azure. Pure also joined Google Cloud's Anthos Ready Storage Initiative for hybrid cloud environments earlier this month.

Industry Recognition : In Q4, leading peer review site Gartner Peer Insights recognized FlashArray//X with a Customers' Choice distinction for Best Primary Storage in 2020 as reviewed by customers.

Guidance

Pure Storage's full-year fiscal 2021:

  • Revenue of approximately $1.90 billion
  • Non-GAAP gross margin of approximately 69.5%
  • Non-GAAP operating profit of approximately $60 million

Pure Storage's first-quarter fiscal 2021 guidance is as follows:

  • Revenue of approximately $365 million
  • Non-GAAP gross margin of approximately 69.5%
  • Non-GAAP operating loss of approximately $40 million

Conference Call Information

Pure will host a teleconference to discuss the fourth quarter and full-year fiscal 2020 results at 2:00 p.m. (PT) on February 27, 2020. Pure will post its supplemental earnings presentation to the Investor Relations website at investor.purestorage.com following the conference call. To Listen via Telephone: (866) 393-4306 or (734) 385-2616 (for international callers) with passcode 9329497. 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 two hours after the call ends on Thursday, February 27, 2020, through March 12, 2020 . The replay will be accessible by calling (855) 859-2056 or (404) 537-3406 (for international callers), with conference ID 9329497.

Upcoming Events

Pure will be presenting at KeyBanc Emerging Technology on March 3rd at 3.00 p.m. (PST) and the Morgan Stanley Technology, Media & Telecom Conference on March 4th at 12.30 p.m. (PST) . The presentations from these events will be webcast live, and all information will be available on the investor relation website at investor.purestorage.com.

About Pure Storage

Pure Storage (NYSE: PSTG) helps modern organizations turn data into business advantage. 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. 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. And with a 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:
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 our guidance for the first quarter and full year fiscal 2021, our our beliefs about our bookings, growth and market share, our expectations regarding product and technology differentiation, including our new products, strategy and adoption of subscription services, 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 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 2, 2020. All information provided in this release and in the attachments is as of February 27, 2020, 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, 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 company, payroll tax expense related to stock-based activities, amortization of debt discount and debt issuance costs, and amortization of intangible assets acquired from acquisitions 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 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)




Fiscal Year Ended



2020


2019






Assets





Current assets:





Cash and cash equivalents


$

362,635



$

447,990

Marketable securities


936,518



749,482

Accounts receivable, net of allowance of $542 and $660


458,643



378,729

Inventory


38,518



44,687

Deferred commissions, current


37,148



29,244

Prepaid expenses and other current assets


56,930



51,695

Total current assets


1,890,392



1,701,827

Property and equipment, net


122,740



125,353

Operating lease right-of-use assets


112,854



Deferred commissions, non-current


102,056



85,729

Intangible assets, net


58,257



20,118

Goodwill


37,584



10,997

Restricted cash


15,287



15,823

Other assets, non-current


25,034



13,178

Total assets


$

2,364,204



$

1,973,025






Liabilities and stockholders' equity





Current liabilities:





Accounts payable


$

77,651



$

103,462

Accrued compensation and benefits


106,592



99,910

Accrued expenses and other liabilities


47,223



39,860

Operating lease liabilities, current


27,264



Deferred revenue, current


356,011



266,584

Total current liabilities


614,741



509,816

Convertible senior notes, net


477,007



449,828

Operating lease liabilities, non-current


92,977



Deferred revenue, non-current


341,277



269,336

Deferred income taxes, non-current


5,323



Other liabilities, non-current


2,761



6,265

Total liabilities


1,534,086



1,235,245






Stockholders' equity:





Common stock and additional paid-in capital


2,107,605



1,820,067

Accumulated other comprehensive income (loss)


5,449



(338)

Accumulated deficit


(1,282,936)



(1,081,949)

Total stockholders' equity


830,118



737,780

Total liabilities and stockholders' equity


$

2,364,204



$

1,973,025

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)




Fourth Quarter of 


Fiscal Year Ended



2020


2019


2020


2019










Revenue:









Product


$

376,517



$

340,137



$

1,238,654



$

1,075,586

Subscription services


115,487



82,079



404,786



284,238

Total revenue


492,004



422,216



1,643,440



1,359,824










Cost of revenue:









Product (1)


103,510



110,762



362,970



352,054

Subscription services (1)


40,284



30,758



146,916



105,474

Total cost of revenue


143,794



141,520



509,886



457,528










Gross profit


348,210



280,696



1,133,554



902,296










Operating expenses:









Research and development (1)


114,904



96,630



433,662



349,936

Sales and marketing (1)


190,389



171,092



728,022



584,111

General and administrative (1)


43,611



37,934



163,153



137,506

Total operating expenses


348,904



305,656



1,324,837



1,071,553










Loss from operations


(694)



(24,960)



(191,283)



(169,257)

Other expense, net


(924)



(96)



(3,383)



(8,016)

Loss before provision for income taxes


(1,618)



(25,056)



(194,666)



(177,273)

Income tax provision


3,033



699



6,321



1,089

Net loss


$

(4,651)



$

(25,755)



$

(200,987)



$

(178,362)










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


$

(0.02)



$

(0.11)



$

(0.79)



$

(0.77)

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


259,218



239,571



252,820



232,042



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



Cost of revenue -- product


$

889



$

761



$

3,732



$

2,951

Cost of revenue -- subscription services


3,302



3,438



14,403



12,378

Research and development


26,726



24,528



107,658



92,484

Sales and marketing


16,389



16,460



67,560



66,350

General and administrative


8,857



9,520



33,352



36,482

Total stock-based compensation expense


$

56,163



$

54,707



$

226,705



$

210,645

 

...

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)




Fourth Quarter of 


Fiscal Year Ended



2020


2019


2020


2019










Cash flows from operating activities









Net loss


$

(4,651)



$

(25,755)



$

(200,987)



$

(178,362)


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









Depreciation and amortization


22,925



19,497



89,710



70,878


Amortization of debt discount and debt issuance costs


6,993



6,617



27,179



21,031


Stock-based compensation expense


56,163



54,707



226,705



210,645


Other


1,819



(2)



1,336



(5,039)


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









Accounts receivable, net


(96,521)



(73,026)



(79,442)



(135,649)


Inventory


(329)



4,814



2,393



(12,289)


Deferred commissions


(16,073)



(18,533)



(24,231)



(27,660)


Prepaid expenses and other assets


(18,198)



(8,968)



(16,734)



(6,972)


Operating lease right-of-use assets


6,549





26,511




Accounts payable


16,388



2,493



(18,856)



14,293


Accrued compensation and other liabilities


47,059



44,218



20,296



51,810


Operating lease liabilities


(6,357)





(25,377)




Deferred revenue


54,091



74,732



161,071



161,737


Net cash provided by operating activities


69,858



80,794



189,574



164,423











Cash flows from investing activities









Purchases of property and equipment


(13,641)



(29,439)



(87,847)



(100,246)


Acquisitions, net of cash acquired






(51,594)



(13,899)


Purchases of intangible assets






(9,000)




Purchase of other investment




(5,000)





(5,000)


Purchases of marketable securities


(155,556)



(107,109)



(795,580)



(665,357)


Sales of marketable securities


83,733



1,076



200,251



19,878


Maturities of marketable securities


73,402



97,231



419,059



253,280


Net cash used in investing activities


(12,062)



(43,241)



(324,711)



(511,344)











Cash flows from financing activities









Net proceeds from exercise of stock options


17,095



4,429



42,899



47,771


Proceeds from issuance of common stock under employee stock purchase plan


7





43,298



33,444


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






(11,555)



(6,101)


Tax withholding on vesting of restricted stock


(1,592)



(632)



(10,379)



(632)


Repurchase of common stock


(15,017)





(15,017)



(20,000)


Net cash provided by financing activities


493



3,797



49,246



551,914


Net increase (decrease) in cash and cash equivalents and restricted cash


58,289



41,350



(85,891)



204,993


Cash, cash equivalents and restricted cash, beginning of period


319,633



422,463



463,813



258,820


Cash, cash equivalents and restricted cash, end of period


$

377,922