MOUNTAIN VIEW, Calif. – November 30, 2022 – 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.”

•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:

◦Magic Quadrant for Primary Storage Arrays: Pure 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: Pure named a leader in the rapidly growing storage market for unstructured data.

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.

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.

Pure is scheduled to participate at the following investor conferences:

Time: 6:35 a.m. PT/ 9:35 a.m. ET

Ajay Singh, Chief Product Officer (CPO)

Time: 11:20 a.m. PT/ 2:20 p.m. ET

Rob Lee, Chief Technology Officer (CTO)

Time: 10:40 a.m. PT/ 1:40 p.m. ET

Date: Thursday, December 8, 2022

Rob 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.

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.

Leader in the 2022 Gartner Magic Quadrant for Primary Storage Arrays

Leader in the 2022 Gartner Magic Quadrant for Distributed File Systems & Object Storage

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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.

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.

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.

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.

Paul Ziots -- Investor Relations, Pure Storage

ir@purestorage.com

 

Rena Fallstrom -- Global Communications, Pure Storage

pr@purestorage.com

###

 

						At the End of
						Third Quarter of Fiscal 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

 

			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 common stockholders, basic and diluted			$	(0.00)					$	(0.10)					$	(0.00)					$	(0.56)
Weighted-average shares used in computing net loss 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

 

			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.

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 -- subscription services						$	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 gross profit						$	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.

(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)
Operating income (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) per share -- diluted			$	(0.00)																							$	0.31											$	(0.10)																				$	0.22
Weighted-average shares used in per share calculation -- 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.

(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).

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