SANTA CLARA, Calif. – August 30, 2023 – 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 second quarter fiscal 2024 ended August 6, 2023.

"Customers have responded enthusiastically to Pure’s new ability to satisfy all of their data storage needs on a single, consistent, flash data storage and management platform," said Charles Giancarlo, Chairman and CEO, Pure Storage. "With the introduction of Pure’s //E family of products, customers can now store cost sensitive bulk data with the benefits of all flash.”

Second Quarter Financial Highlights 

•Revenue $688.7 million, an increase of 6.5% year-over-year

•Subscription services revenue $288.9 million, up 24% year-over-year

•Subscription annual recurring revenue (ARR) $1.2 billion, up 27% year-over-year

•Remaining performance obligations (RPO) $1.9 billion, up 26% year-over-year

•GAAP gross margin 70.7%; non-GAAP gross margin 72.8%

•GAAP operating loss $(6.2) million; non-GAAP operating income $111.8 million

•GAAP operating margin (0.9)%; non-GAAP operating margin 16.2%

•Operating cash flow $101.6 million; free cash flow $46.5 million

•Total cash, cash equivalents, and marketable securities $1.2 billion

•Returned approximately $22.0 million in Q2 to stockholders through share repurchases of 0.6 million shares

"We were very pleased with record sales across our FlashBlade portfolio, and doubling sales of our Evergreen//One subscription offering this quarter,” said Kevan Krysler, CFO, Pure Storage. "With our Purity software working directly with raw flash, we have established substantial differentiated advantages and business value for our customers, while at the same time expanding our margins."

Second Quarter Company Highlights

•Platform Innovation: Pure expanded the Pure//E™ family of products with the all-new FlashArray//E™, meeting the needs of the secondary storage market at prices competitive to 7200 RPM hard disk systems, with a fraction of the power, space, and operational costs. Pure introduced a new ransomware SLA guarantee for Evergreen//One™ and enhanced AIOps capabilities, offering customers advanced data resilience, enabling organizations to benefit from a comprehensive data protection strategy. In addition, Pure introduced the next generation FlashArray//X™ and FlashArray//C™ models, delivering the largest ever performance, efficiency, and security advancements to customers.

•Awards in AI and Cloud-Native Software: AIRI//S, Pure’s next-gen AI-ready infrastructure, was recognized by AI Breakthrough Awards as the Best AI Solution for Big Data. Portworx by Pure Storage was recognized as a leader in kubernetes storage by GigaOm for the fourth consecutive year.

•New Global Headquarters: Pure opened its new global corporate headquarters in Santa Clara, California to provide state-of-the-art support to employees and customers as the company’s industry-leading innovations continue to drive strong growth. Pure was also recognized by Fortune’s Best Workplaces in the Bay Area and was again certified as a Great Place to Work®.

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, reconciliations of these non-GAAP financial measures guidance to the corresponding GAAP measures are not available without unreasonable effort.

Pure will host a teleconference to discuss the second quarter fiscal 2024 results at 2:00 pm PT today, August 30, 2023. 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 1-800-770-2030 (or +44 647 362 9199 for international callers) with passcode 5667482.

Additionally, Pure is scheduled to participate at the following investor conference or event:

Date: Tuesday, September 5, 2023

Time: 11:30 a.m. PT / 2:30 p.m. ET

Kevan Krysler, CFO and Rob Lee, CTO

The presentation 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 the highest Net Promoter Score in the industry, 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

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

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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, the benefits to our customers of using our products, our ability to adjust to current macro conditions and expand market share, our sustainability goals and benefits, the timing and magnitude of large orders, the impact of inflation, economic or supply chain disruptions, demand for our products and subscription services, including Evergreen//One, our expectations regarding our product and technology differentiation, including FlashBlade//E, 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 5, 2023. All information provided in this release and in the attachments is as of August 30, 2023, 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 issuance costs related to debt, amortization of intangible assets acquired from acquisitions, acquisition-related transaction and integration expenses, and costs associated with the exit of certain operations and closing of certain leased facilities 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
						Second Quarter of Fiscal 2024						Fiscal 2023
Assets
Current assets:
Cash and cash equivalents						$	408,900					$	580,854
Marketable securities						819,777						1,001,352
Accounts receivable, net of allowance of $1,062 and $1,057						525,260						612,491
Inventory						47,498						50,152
Deferred commissions, current						71,344						68,617
Prepaid expenses and other current assets						168,283						161,391
Total current assets						2,041,062						2,474,857
Property and equipment, net						325,783						272,445
Operating lease right-of-use-assets						133,066						158,912
Deferred commissions, non-current						184,073						177,239
Intangible assets, net						40,906						49,222
Goodwill						361,427						361,427
Restricted cash						9,960						10,544
Other assets, non-current						37,645						38,814
Total assets						$	3,133,922					$	3,543,460
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable						$	98,008					$	67,121
Accrued compensation and benefits						165,394						232,636
Accrued expenses and other liabilities						128,842						123,749
Operating lease liabilities, current						41,697						33,707
Deferred revenue, current						769,871						718,149
Debt, current						—						574,506
Total current liabilities						1,203,812						1,749,868
Long-term debt						100,000						—
Operating lease liabilities, non-current						132,191						142,473
Deferred revenue, non-current						667,172						667,501
Other liabilities, non-current						44,419						42,385
Total liabilities						2,147,594						2,602,227
Stockholders’ equity:
Common stock and additional paid-in capital						2,610,513						2,493,799
Accumulated other comprehensive loss						(12,607)						(15,504)
Accumulated deficit						(1,611,578)						(1,537,062)
Total stockholders' equity						986,328						941,233
Total liabilities and stockholders' equity						$	3,133,922					$	3,543,460

 

			Second Quarter of Fiscal												First Two Quarters of Fiscal
			2024						2023						2024						2023
Revenue:
Product			$	399,738					$	414,603					$	708,701					$	815,764
Subscription services			288,933						232,169						569,277						451,413
Total revenue			688,671						646,772						1,277,978						1,267,177
Cost of revenue:
Product (1)			120,605						134,292						216,818						259,776
Subscription services (1)			81,473						68,912						161,220						137,407
Total cost of revenue			202,078						203,204						378,038						397,183
Gross profit			486,593						443,568						899,940						869,994
Operating expenses:
Research and development (1)			182,492						165,690						367,823						326,963
Sales and marketing (1)			232,732						206,836						465,178						424,989
General and administrative (1)			60,831						56,679						128,215						108,246
Impairment and other (2)			16,766						—						16,766						—
Total operating expenses			492,821						429,205						977,982						860,198
Income (loss) from operations			(6,228)						14,363						(78,042)						9,796
Other income (expense), net			6,686						585						18,435						(5,596)
Income (loss) before provision for income taxes			458						14,948						(59,607)						4,200
Income tax provision			7,573						4,026						14,909						4,813
Net income (loss)			$	(7,115)					$	10,922					$	(74,516)					$	(613)
Net income (loss) per share attributable to common stockholders, basic			$	(0.02)					$	0.04					$	(0.24)					$	(0.00)
Net income (loss) per share attributable to common stockholders, diluted			$	(0.02)					$	0.03					$	(0.24)					$	(0.00)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic			309,510						297,475						307,687						296,659
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted			309,510						312,720						307,687						296,659

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

Cost of revenue -- product			$	2,958					$	2,607					$	5,613					$	4,470
Cost of revenue -- subscription services			6,851						5,808						12,498						11,164
Research and development			44,085						41,575						82,317						78,092
Sales and marketing			19,493						17,954						36,674						36,299
General and administrative			16,060						15,620						30,175						28,110
Total stock-based compensation expense			$	89,447					$	83,564					$	167,277					$	158,135

(2) Lease impairment and abandonment charges associated with cease-use of our former corporate headquarters

 

			Second Quarter of Fiscal												First Two Quarters of Fiscal
			2024						2023						2024						2023
Cash flows from operating activities
Net income (loss)			$	(7,115)					$	10,922					$	(74,516)					$	(613)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			30,223						23,886						59,913						46,549
Stock-based compensation expense			89,447						83,564						167,277						158,135
Lease impairment and abandonment charges			16,766						—						16,766						—
Other			(1,225)						2,084						(3,029)						3,031
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net			(133,974)						(56,122)						87,231						140,007
Inventory			4,152						(10,793)						4,460						(12,492)
Deferred commissions			(7,229)						(4,683)						(9,560)						10,626
Prepaid expenses and other assets			5,737						(3,821)						(358)						(15,563)
Operating lease right-of-use assets			8,634						9,071						19,635						16,820
Accounts payable			30,304						890						26,311						(6,529)
Accrued compensation and other liabilities			31,558						51,139						(57,524)						(37,824)
Operating lease liabilities			(7,033)						(12,962)						(13,133)						(21,442)
Deferred revenue			41,373						66,205						51,392						98,807
Net cash provided by operating activities			101,618						159,380						274,865						379,512
Cash flows from investing activities
Purchases of property and equipment (1)			(55,105)						(25,184)						(106,529)						(57,994)
Acquisition, net of cash acquired			—						(1,989)						—						(1,989)
Purchases of marketable securities			(117,829)						—						(246,617)						(17,251)
Sales of marketable securities			5,708						—						48,748						—
Maturities of marketable securities			98,330						124,818						386,703						240,993
Net cash provided by (used in) investing activities			(68,896)						97,645						82,305						163,759
Cash flows from financing activities
Net proceeds from exercise of stock options			25,218						3,859						29,848						15,264
Proceeds from issuance of common stock under employee stock purchase plan			—						—						21,219						19,396
Principal payments on borrowings and finance lease obligations			(287)						(182)						(577,067)						(251,577)
Proceeds from borrowings			—						—						100,000						—
Tax withholding on vesting of equity awards			(5,068)						(2,793)						(11,827)						(12,987)
Repurchases of common stock			(21,970)						(60,579)						(91,881)						(126,999)
Net cash used in financing activities			(2,107)						(59,695)						(529,708)						(356,903)
Net increase (decrease) in cash, cash equivalents and restricted cash			30,615						197,330						(172,538)						186,368
Cash, cash equivalents and restricted cash, beginning of period			388,245						465,781						591,398						476,743
Cash, cash equivalents and restricted cash, end of period			$	418,860					$	663,111					$	418,860					$	663,111

(1) Includes capitalized internal-use software costs of $5.3 million and $3.9 million for the second quarter of fiscal 2024 and 2023 and $10.6 million and $6.8 million for the first two quarters of fiscal 2024 and 2023.

The following table presents non-GAAP gross margins by revenue source before certain items (in thousands except percentages, unaudited):

						Second Quarter of Fiscal 2024																																				Second Quarter of Fiscal 2023
						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)
																		$	2,958					(c)																														$	2,607					(c)
																		135						(d)																														64						(d)
																		402						(e)																														—
																		3,306						(f)																														3,252						(f)
Gross profit --product						$	279,133					69.8		%				$	6,801											$	285,934					71.5		%				$	280,311					67.6		%				$	5,923											$	286,234					69.0		%
																		$	6,851					(c)																														$	5,808					(c)
																		481						(d)																														265						(d)
																		413						(e)																														—
																		5						(g)																														24						(g)
Gross profit -- subscription services						$	207,460					71.8		%				$	7,750											$	215,210					74.5		%				$	163,257					70.3		%				$	6,097											$	169,354					72.9		%
																		$	9,809					(c)																														$	8,415					(c)
																		616						(d)																														329						(d)
																		815						(e)																														—
																		3,306						(f)																														3,252						(f)
																		5						(g)																														24						(g)
Total gross profit						$	486,593					70.7		%				$	14,551											$	501,144					72.8		%				$	443,568					68.6		%				$	12,020											$	455,588					70.4		%

(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.

(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):

			Second Quarter of Fiscal 2024																																				Second Quarter of Fiscal 2023
			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)
															$	89,447					(c)																														$	83,564					(c)
															876						(d)																														1,780						(d)
															4,507						(e)																														2,518						(e)
															3,837						(f)																														3,785						(f)
															2,617						(g)																														—
															16,766						(h)																														—
Operating income (loss)			$	(6,228)					-0.9		%				$	118,050											$	111,822					16.2		%				$	14,363					2.2		%				$	91,647								$	106,010					16.4		%
															$	89,447					(c)																														$	83,564					(c)
															876						(d)																														1,780						(d)
															4,507						(e)																														2,518						(e)
															3,837						(f)																														3,785						(f)
															2,617						(g)																														—
															16,766						(h)																														—
															153						(i)																														802						(i)
															—																																				(1,767)						(j)
Net income (loss)			$	(7,115)											$	118,203											$	111,088											$	10,922											$	90,682								$	101,604
Net income (loss) per share -- diluted			$	(0.02)																							$	0.34											$	0.03																				$	0.32
Weighted-average shares used in per share calculation -- diluted			309,510												17,060						(k)						326,570												312,720												—									312,720

(a) GAAP operating margin is defined as GAAP operating 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.

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

(h) To eliminate lease impairment and abandonment charges associated with cease-use of our former corporate headquarters.

(i) To eliminate amortization expense of debt issuance costs related to our debt.

(j) To eliminate net gain from legal settlements in connection with facilities abandoned in the second quarter of fiscal 2021.

(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 $5.3 million and $3.9 million for the second quarter of fiscal 2024 and 2023.