Pure Storage Announces First Quarter Fiscal 2019 Financial Results

Pure Storage (NYSE: PSTG), the all-flash storage platform that helps innovators build a better world with data, today announced financial results for its first quarter ended April 30, 2018.

Key quarterly financial highlights include:

  • Revenue: $255.9 million, up 40% Y/Y, exceeding the high end of our guidance;
  • Operating margin: -24.2% GAAP; -6.0% non-GAAP, up 7.7 ppts and 7.9 ppts Y/Y, respectively;
  • Operating cash flow: $18.6 million, free cash flow without ESPP impact: $8.6 million.

“Pure has delivered another strong quarter as we lead the industry in delivering new data-centric architectures that enable enterprises to succeed both today and tomorrow,” said Pure Storage CEO Charles Giancarlo. “The combination of our innovative business model, first-to-market technology innovations, and focus on customer success drove continued momentum in Q1.”

Approximately 300 new customers joined Pure Storage in the quarter, increasing the total to more than 4,800 organizations. New customer wins in the quarter include: ALDI International, Barnes & Noble Education, Inc., U.S. Department of Energy, Paige.AI, and Panasonic Taiwan.

“Q1 marked a great start to fiscal 2019, growing 40% year-over-year in revenue and exceeding our operating margin goal,” said Tim Riitters, CFO of Pure Storage. “We are focused on driving industry-leading growth and profitability in our business.”

New Revenue Accounting Standard

Pure Storage adopted ASC 606, the new standard related to revenue recognition effective February 1, 2018. Prior period financial information in this press release has been adjusted to reflect the adoption of this new standard. Please also refer to our earnings presentation on investor.purestorage.com for further information.

First Quarter Fiscal 2019 Financial Highlights

The following tables summarize our consolidated financial results for the fiscal quarters ended April 30, 2018 and 2017 (in millions except percentages, per share amounts and headcount, unaudited):

GAAP Quarterly Financial Information
Three Months Ended
April 30, 2018
Three Months Ended
April 30, 2017
Y/Y Change
Gross Margin65.0%65.2%-0.2 ppts
Product Gross Margin66.0%67.3%-1.3 ppts
Support Subscription Gross Margin61.6%57.5%4.1 ppts
Operating Loss-$61.9-$58.2-$3.7
Operating Margin-24.2%-31.9%7.7 ppts
Net Loss-$64.3-$57.2-$7.1
Net Loss per Share (Basic and Diluted)-$0.29-$0.28-$0.01
Weighted-Average Shares223.8205.818.0
Non-GAAP Quarterly Financial Information
Three Months Ended
April 30, 2018
Three Months
Ended April 30, 2017
Y/Y Change
Gross Margin66.3%66.4%-0.1 ppts
Product Gross Margin66.3%67.6%-1.3 ppts
Support Subscription Gross Margin66.3%62.1%4.2 ppts
Operating Loss-$15.3-$25.3$10.0
Operating Margin-6.0%-13.9%7.9 ppts
Net Loss-$16.2-$24.3$8.1
Net Loss per Share-$0.07-$0.12$0.05
Weighted-Average Shares223.8205.818.0

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

Financial Outlook

Pure Storage’s second quarter fiscal 2019 guidance is as follows:

  • Revenue in the range of $296 million to $304 million
  • Non-GAAP gross margin in the range of 63.5% to 66.5%
  • Non-GAAP operating margin in the range of -7.0% to -3.0%

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

  • Revenue in the range of $1.320 billion to $1.370 billion
  • Non-GAAP gross margin in the range of 63.5% to 66.5%
  • Non-GAAP operating margin in the range of 0% to 4%

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 and any applicable anti-dilutive share count impact of the 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 such 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 first quarter fiscal 2019 results at 2:00 p.m. (PT) on May 21, 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 two hours after the call ends on Monday, May 21, 2018, through June 4, 2018. The replay will be accessible by calling (800) 585-8367 or (416) 621-4642 (for international callers), with conference ID 9572519. The call runs 24 hours per day, including weekends.

2018 Annual Meeting of Stockholders

Pure Storage will hold its 2018 annual meeting of stockholders on Thursday, June 21, 2018 at 10:00 a.m. (PT). The meeting will be held virtually, via live webcast at www.virtualshareholdermeeting.com/PSTG2018. The record date for the meeting was April 25, 2018, and only stockholders of record on that date are eligible to participate in the meeting. Other interested persons may listen to the live webcast of the meeting and can view the 2018 proxy statement and Annual Report on Form 10-K at investor.purestorage.com.

Upcoming Events

Pure Storage will host an investor session at its annual conference, Pure//Accelerate 2018, on May 23, 2018 at 2:00 p.m. (PT). The event will be a live webcast on the investor relations website at investor.purestorage.com. Pure Storage will also be participating in financial conferences on June 6th,7th, and 12th of 2018.

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 outlook for the second 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, including, 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 available in our Annual Report on Form 10-K for the year ended January 31, 2018. All information provided in this release and in the attachments is as of May 21, 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 loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net 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. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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 and amortization of debt discount and debt issuance costs 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 (used in) operating activities to free cash flow and free cash flow without ESPP impact,” included at the end of this release.

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