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

November 23, 2021 4:02 PM EST

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MOUNTAIN VIEW, Calif., Nov. 23, 2021 /PRNewswire/ -- 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 Fusion™, 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.

Fourth Quarter and FY22 Guidance

Q4 FY22

FY22

Revenue

$630 million

$2.1 billion

Non-GAAP Operating Income

$90 million

$206 million

Non-GAAP Operating Margin

approx. 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 SummitDate: Tuesday, November 30, 2021Time: 11:00 am PSTPure Presenters: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFOPure Participants: Rob Lee, VP and CTO, Sanjot Khurana, VP, Investor Relations

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

UBS Virtual Global TMT ConferenceDate: Monday, December 6, 2021Pure 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 ConferenceDate: Tuesday, December 7, 2021Pure Participants: Kevan Krysler, CFO, Rob Lee, VP and CTO, and Sanjot Khurana, VP, Investor Relations

Raymond James Virtual Technology Investors ConferenceDate: Wednesday, December 8, 2021Pure 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.

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 ArraysLeader 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 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.

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.

 

PURE STORAGE, INC.Condensed Consolidated Balance Sheets(in thousands, unaudited)

At the End of

Third Quarter of Fiscal 2022

Fiscal 2021

Assets

Current assets:

Cash and cash equivalents

$

404,692

$

337,147

Marketable securities

958,180

916,388

Accounts receivable, net of allowance of $965 and $1,033

354,179

460,879

Inventory

44,036

46,733

Deferred commissions, current

63,422

57,183

Prepaid expenses and other current assets

102,117

89,836

Total current assets

1,926,626

1,908,166

Property and equipment, net

193,141

163,041

Operating lease right-of-use-assets

115,731

134,668

Deferred commissions, non-current

144,898

130,741

Intangible assets, net

66,992

76,648

Goodwill

358,736

358,736

Restricted cash

10,544

10,544

Other assets, non-current

39,088

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 benefits

122,969

160,817

Accrued expenses and other liabilities

73,884

61,754

Operating lease liabilities, current

35,061

32,231

Deferred revenue, current

499,176

438,321

Total current liabilities

779,798

760,653

Long-term debt

778,366

755,814

Operating lease liabilities, non-current

99,031

120,361

Deferred revenue, non-current

450,574

405,376

Other liabilities, non-current

23,563

27,230

Total liabilities

2,131,332

2,069,434

Stockholders' equity:

Common stock and additional paid-in capital

2,447,945

2,307,608

Accumulated other comprehensive (loss) income

(307)

7,410

Accumulated deficit

(1,723,214)

(1,565,012)

Total stockholders' equity

724,424

750,006

Total liabilities and stockholders' equity

$

2,855,756

$

2,819,440

 

PURE STORAGE, INC.Condensed Consolidated Statements of Operations(in thousands, except per share data, unaudited)

Third Quarter of Fiscal

First Three Quarters of Fiscal

2022

2021

2022

2021

Revenue:

Product

$

374,913

$

274,470

$

949,736

$

793,718

Subscription services

187,827

136,149

522,542

387,743

Total revenue

562,740

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 revenue

187,948

134,103

475,593

373,394

Gross profit

374,792

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 expenses

392,870

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 provision

2,700

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 diluted

287,462

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 services

5,555

3,883

15,098

10,961

Research and development

36,797

29,220

102,343

87,770

Sales and marketing

19,151

14,898

54,317

48,018

General and administrative

12,863

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

 

PURE STORAGE, INC.Condensed Consolidated Statements of Cash Flows(in thousands, unaudited)

Third Quarter of Fiscal

First Three Quarters of Fiscal

2022

2021

2022

2021

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 amortization

21,506

18,214

59,605

49,811

Amortization of debt discount and debt issuance costs

7,857

7,400

23,011

21,525

Stock-based compensation expense

76,000

59,609

207,763

179,755

Impairment of long-lived assets

471

471

7,505

Other

2,060

2,139

8,576

4,111

Changes in operating assets and liabilities:

Accounts receivable, net

4,282

(8,676)

106,788

83,220

Inventory

3,280

(6,459)

38

(4,724)

Deferred commissions

(12,354)

(7,402)

(20,395)

(12,885)

Prepaid expenses and other assets

12,672

(11,217)

(12,283)

(37,606)

Operating lease right-of-use assets

7,243

7,253

22,061

21,434

Accounts payable

(4,989)

29,656

(14,256)

8,566

Accrued compensation and other liabilities

5,701

(6,520)

(35,251)

(9,737)

Operating lease liabilities

(7,889)

(7,373)

(22,094)

(20,444)

Deferred revenue

39,937

30,397

106,054

57,860

Net cash provided by operating activities

127,046

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 securities

32,896

40,856

146,934

132,207

Maturities of marketable securities

133,388

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 options

22,580

4,019

33,743

25,677

Proceeds from issuance of common stock under employee stock purchase plan

18,915

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 cash

64,440

(95,837)

67,545

(102,871)

Cash, cash equivalents and restricted cash, beginning of period

350,796

370,888

347,691

377,922

Cash, cash equivalents and restricted cash, end of period

$

415,236

$

275,051

$

415,236

$

275,051

 

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 2022

Third 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)

7

(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)

7

(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.

 

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 2022

Third 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 --  diluted

287,462

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).

 

Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):

Third Quarter of Fiscal

2022

2021

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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SOURCE Pure Storage



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