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Pure Storage Announces Third Quarter Fiscal 2023 Financial Results

November 30, 2022 4:05 PM EST

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Q3 revenue growth of 20% year-over-year

Subscription services ARR exceeded $1 billion

Increased FY23 non-GAAP operating income guidance

MOUNTAIN VIEW, Calif., Nov. 30, 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 third quarter ended November 6, 2022.

"An ever growing number of customers around the world trust Pure to provide the most advanced, reliable, and energy-efficient technology to satisfy their mission-critical data storage and management needs," said Charles Giancarlo, Chairman and CEO, Pure Storage. "With the power of our unique Flash-optimized technology and differentiated business model, we look forward to managing increasingly more of their data storage requirements."

Third Quarter Financial Highlights 

  • Revenue $676.0 million, up 20% year-over-year
  • Subscription Services revenue $244.8 million, up 30% year-over-year
  • Subscription Annual Recurring Revenue (ARR) $1.0 billion, up 30% year-over-year
  • Remaining Performance Obligations (RPO) $1.6 billion, up 26% year-over-year
  • GAAP gross margin 69.0%; non-GAAP gross margin 70.9%
  • GAAP operating income $9.1 million; non-GAAP operating income $107.2 million
  • GAAP operating margin 1.4%; non-GAAP operating margin 15.9%
  • Operating cash flow $154.7 million; free cash flow $114.8 million
  • Total cash, cash equivalents, and marketable securities $1.5 billion
  • Returned approximately $24.5 million in Q3 to stockholders, repurchased 888 thousand shares

"Through solid execution, we delivered strong financial results in Q3 by growing revenue 20 percent and increasing our operating profits," said Kevan Krysler, CFO, Pure Storage. "Our leadership in Flash management, enabled with our software, and declining cost of Flash is accelerating our progress in replacing traditional disk solutions and substantially reducing data center energy consumption."

Third Quarter Company Highlights

  • Extending Leadership in Sustainability: Pure introduced advancements in its sustainability efforts, helping customers dramatically reduce their energy use and environmental footprint. The Pure1® Sustainability Assessment gives customers visibility on their environmental impact and proactively suggests optimization opportunities, including power savings analysis and a greenhouse gas emissions monitor.
  • Portworx, Delivered as-a-Service: Pure announced a new fully managed service for Portworx® Enterprise to bring a Kubernetes-ready data plane to every developer that works on containerized applications. Now, the full suite of Portworx offerings can be consumed as a fully managed service. This provides ease of use and faster deployment of Kubernetes data on any cloud or on-premises storage, enabling DevOps and platform teams to operate and scale containerized apps into production in seconds.
  • Gartner Magic Quadrant: A leader for nine consecutive years:

Fourth Quarter and FY23 Guidance

Q4 FY23 (Approx.)

FY23 (Approx.)

Revenue

$810 Million

$2.75 Billion

Non-GAAP Operating Income

$130 Million

$430 Million

Non-GAAP Operating Margin

16.0 %

15.6 %

 

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 2023 results at 2:00 pm PT today, November 30, 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 884841.

Upcoming Events

Pure is scheduled to participate at the following investor conferences:

Credit Suisse 26th Annual Technology ConferenceDate: Thursday, December 1, 2022Time: 6:35 a.m. PT/ 9:35 a.m. ETAjay Singh, Chief Product Officer (CPO)

Wells Fargo 6th Annual TMT SummitDate: Thursday, December 1, 2022Time: 11:20 a.m. PT/ 2:20 p.m. ETRob Lee, Chief Technology Officer (CTO)

UBS Global TMT ConferenceDate: Tuesday, December 6, 2022Time: 8:40 a.m. PT/ 11:40 a.m. ETCharles Giancarlo, Chairman and CEO and Kevan Krysler, CFO

Raymond James Technology Investors ConferenceDate: Tuesday, December 6, 2022Time: 10:40 a.m. PT/ 1:40 p.m. ETCharles Giancarlo, Chairman and CEO and Kevan Krysler, CFO

Barclays Global TMT ConferenceDate: Thursday, December 8, 2022Time: 8:40 a.m. PT/ 11:40 a.m. ETRob Lee, CTO and Kevan Krysler, CFO

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 2022 Gartner Magic Quadrant for Primary Storage ArraysLeader in the 2022 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 technology and product strategy, specifically customer priorities around sustainability, our growth potential, particularly within certain customer segments, our sustainability goals and benefits, the timing and magnitude of large orders, the potential for inflation, economic or supply chain disruptions, the COVID-19 pandemic and its lingering impacts, 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 November 30, 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

Third Quarter ofFiscal 2023

Fiscal 2022

Assets

Current assets:

Cash and cash equivalents

$          795,931

$          466,199

Marketable securities

669,173

947,073

Accounts receivable, net of allowance of $1,053 and $945

435,618

542,144

Inventory

61,355

38,942

Deferred commissions, current

69,397

81,589

Prepaid expenses and other current assets

176,741

116,232

Total current assets

2,208,215

2,192,179

Property and equipment, net

248,606

195,282

Operating lease right-of-use-assets

163,676

111,763

Deferred commissions, non-current

165,735

164,718

Intangible assets, net

53,379

62,646

Goodwill

361,427

358,736

Restricted cash

10,544

10,544

Other assets, non-current

40,785

39,447

Total assets

$        3,252,367

$       3,135,315

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$          102,879

$            70,704

Accrued compensation and benefits

159,231

205,431

Accrued expenses and other liabilities

108,514

78,511

Operating lease liabilities, current

31,114

35,098

Deferred revenue, current

647,116

562,576

Debt, current

573,855

Total current liabilities

1,622,709

952,320

Long-term debt

786,779

Operating lease liabilities, non-current

147,110

93,479

Deferred revenue, non-current

601,103

517,296

Other liabilities, non-current

40,937

31,105

Total liabilities

2,411,859

2,380,979

Stockholders' equity:

Common stock and additional paid-in capital

2,475,794

2,470,972

Accumulated other comprehensive loss

(23,753)

(8,365)

Accumulated deficit

(1,611,533)

(1,708,271)

Total stockholders' equity

840,508

754,336

Total liabilities and stockholders' equity

$        3,252,367

$       3,135,315

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)

Third Quarter of Fiscal

First Three Quarters of Fiscal

2023

2022

2023

2022

Revenue:

Product

$         431,281

$         374,913

$      1,247,045

$         949,736

Subscription services

244,769

187,827

696,182

522,542

Total revenue

676,050

562,740

1,943,227

1,472,278

Cost of revenue:

Product (1)

135,546

129,721

395,322

309,935

Subscription services(1)

74,169

58,227

211,576

165,658

Total cost of revenue

209,715

187,948

606,898

475,593

Gross profit

466,335

374,792

1,336,329

996,685

Operating expenses:

Research and development (1)

180,008

147,808

506,971

419,296

Sales and marketing (1)

212,140

193,172

637,129

567,054

General and administrative (1)

65,054

51,890

173,300

138,500

Total operating expenses

457,202

392,870

1,317,400

1,124,850

Income (loss) from operations

9,133

(18,078)

18,929

(128,165)

Other income (expense), net

(2,814)

(7,953)

(8,410)

(20,090)

Income (loss) before provision for income taxes

6,319

(26,031)

10,519

(148,255)

Income tax provision

7,106

2,700

11,919

9,947

Net loss

$              (787)

$         (28,731)

$           (1,400)

$       (158,202)

Net loss per share attributable to commonstockholders, basic and diluted

$             (0.00)

$             (0.10)

$             (0.00)

$             (0.56)

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

300,984

287,462

298,101

283,918

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

Cost of revenue -- product

$             2,984

$             1,634

$             7,454

$             4,547

Cost of revenue -- subscription services

5,814

5,555

16,978

15,098

Research and development

42,390

36,797

120,482

102,343

Sales and marketing

18,441

19,151

54,740

54,317

General and administrative

17,350

12,863

45,460

31,458

Total stock-based compensation expense

$           86,979

$           76,000

$         245,114

$         207,763

   

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

Third Quarter of Fiscal

First Three Quarters of Fiscal

2023

2022

2023

2022

Cash flows from operating activities

Net loss

$                   (787)

$              (28,731)

$                (1,400)

$           (158,202)

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

Depreciation and amortization

25,719

21,506

72,268

59,605

Amortization of debt discount and debt issuance costs

803

7,857

2,406

23,011

Stock-based compensation expense

86,979

76,000

245,114

207,763

Impairment of long-lived assets

471

471

Other

(1,361)

2,060

67

8,576

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

Accounts receivable, net

(33,791)

4,282

106,216

106,788

Inventory

(5,489)

3,280

(17,981)

38

Deferred commissions

549

(12,354)

11,175

(20,395)

Prepaid expenses and other assets

(38,504)

12,672

(54,067)

(12,283)

Operating lease right-of-use assets

9,253

7,243

26,073

22,061

Accounts payable

29,065

(4,989)

22,536

(14,256)

Accrued compensation and other liabilities

19,628

5,701

(18,196)

(35,251)

Operating lease liabilities

(6,897)

(7,889)

(28,339)

(22,094)

Deferred revenue

69,529

39,937

168,336

106,054

Net cash provided by operating activities

154,696

127,046

534,208

271,886

Cash flows from investing activities

Purchases of property and equipment(1)

(39,916)

(25,718)

(97,910)

(81,217)

Acquisition, net of cash acquired

(1,989)

Purchases of marketable securities

(74,878)

(185,667)

(92,129)

(503,038)

Sales of marketable securities

32,896

146,934

Maturities of marketable securities

111,302

133,388

352,295

303,158

Net cash (used in) provided by investing activities

(3,492)

(45,101)

160,267

(134,163)

Cash flows from financing activities

Net proceeds from exercise of stock options

3,867

22,580

19,131

33,743

Proceeds from issuance of common stock under employee stock purchase plan

20,569

18,915

39,965

36,641

Principal payments on borrowings and finance lease obligations

(4,568)

(679)

(256,145)

(1,284)

Tax withholding on vesting of equity awards

(3,143)

(2,106)

(16,130)

(8,670)

Repurchases of common stock

(24,565)

(56,215)

(151,564)

(130,608)

Net cash used in financing activities

(7,840)

(17,505)

(364,743)

(70,178)

Net increase in cash, cash equivalents and restricted cash

143,364

64,440

329,732

67,545

Cash, cash equivalents and restricted cash, beginning of period

663,111

350,796

476,743

347,691

Cash, cash equivalents and restricted cash, end of period

$             806,475

$             415,236

$             806,475

$             415,236

(1)

Includes capitalized internal-use software costs of $3.7 million and $2.5 million for the third quarter of fiscal 2023 and 2022 and $10.5 million and $6.2 million for the first three 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):

Third Quarter of Fiscal 2023

Third 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)

$      2,984

(c)

$      1,634

(c)

46

(d)

42

(d)

251

(e)

3,306

(f)

3,207

(f)

Gross profit --product

$  295,735

68.6 %

$      6,587

$ 302,322

70.1 %

$  245,192

65.4 %

$      4,883

$  250,075

66.7 %

$      5,814

(c)

$      5,555

(c)

204

(d)

279

(d)

269

(e)

24

(g)

24

(g)

Gross profit -- subscriptionservices

$  170,600

69.7 %

$      6,311

$ 176,911

72.3 %

$  129,600

69.0 %

$      5,858

$  135,458

72.1 %

$      8,798

(c)

$      7,189

(c)

250

(d)

321

(d)

520

(e)

3,306

(f)

3,207

(f)

24

(g)

24

(g)

Total grossprofit

$  466,335

69.0 %

$    12,898

$ 479,233

70.9 %

$  374,792

66.6 %

$    10,741

$  385,533

68.5 %

(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 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.

 

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 2023

Third 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)

$     86,979

(c)

$     76,000

(c)

1,479

(d)

4,230

(d)

2,098

(e)

2,631

(e)

551

(f)

3,676

(g)

3,838

(h)

3,739

(h)

382

(i)

Operatingincome (loss)

$     9,133

1.4 %

$     98,070

$  107,203

15.9 %

$   (18,078)

-3.2 %

$     87,533

$   69,455

12.3 %

$     86,979

(c)

$     76,000

(c)

1,479

(d)

4,230

(d)

2,098

(e)

2,631

(e)

551

(f)

3,676

(g)

3,838

(h)

3,739

(h)

382

(i)

803

(j)

7,857

(j)

Net income(loss)

$       (787)

$     98,873

$ 98,086

$   (28,731)

$     95,390

$   66,659

Net income(loss) pershare -- diluted

$      (0.00)

$     0.31

$       (0.10)

$       0.22

Weighted-averageshares used inper sharecalculation --  diluted

300,984

15,431

(k)

316,415

287,462

20,835

(k)

308,297

(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 impairment of right-of-use assets associated with cease-use of a certain facility.

(g)

To eliminate duplicate lease costs during the transition of our corporate headquarters.

(h)

To eliminate amortization expense of acquired intangible assets.

(i)

To eliminate acquisition-related transaction and integration expenses.

(j)

To eliminate amortization expense of debt discount and debt issuance costs related to our long-term debt.

(k)

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

2023

2022

Net cash provided by operating activities

$             154,696

$             127,046

Less: purchases of property and equipment(1)

(39,916)

(25,718)

Free cash flow (non-GAAP)

$             114,780

$             101,328

(1)

Includes capitalized internal-use software costs of $3.7 million and $2.5 million for the third quarter of fiscal 2023 and 2022.

 

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SOURCE Pure Storage



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