Pure Storage, Inc. - FORM 8-K - EX-99.1 - August 25, 2021

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Exhibit 99.1
 
Pure Storage Announces Second Quarter Fiscal 2022 Financial Results
Total Q2 revenue grows 23% year-over-year
Subscription Services revenue up 31% year-over-year
Raised FY22 revenue outlook to $2.04 Billion
 
MOUNTAIN VIEW, Calif. – August 25, 2021 – 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 second quarter ended August 1, 2021.

“With revenue growth exceeding 23%, and the highest Q2 operating profit in our history, it’s clear that our long-term strategy to provide customers with modern data services is working,” said Charles Giancarlo, Chairman and CEO, Pure Storage. “We are in a great innovation cycle with our portfolio and our sales momentum and execution have never been stronger.”

Second Quarter Financial Highlights 

•Revenue $496.8 million, up 23% year-over-year
•Subscription services revenue $171.9 million, up 31% year-over-year
•GAAP gross margin 68.4%; non-GAAP gross margin 70.5%
•GAAP operating loss $(33.9) million; non-GAAP operating income $46.6 million
•GAAP operating margin (6.8)%; non-GAAP operating margin 9.4%
•Operating cash flow $123.4 million; free cash flow $95.7 million
•Total cash and investments $1.3 billion
•Deferred revenue $909.8 million, up 26% year-over-year
•Remaining performance obligations (RPO) $1.2 billion, up 25% year-over-year

"Our outstanding financial performance this quarter reflected strong sales execution and our long standing practice of providing leading edge solutions and best-in-class services to our customers," said Kevan Krysler, CFO, Pure Storage. "We saw strength from both our enterprise and commercial customers across our entire solutions portfolio."

Second Quarter Company Highlights and Achievements
•Industry Accolades: FlashArray was named a Gartner Peer Insights Customers’ Choice for Primary Storage Arrays. Pure was named a Kubernetes storage leader in two GigaOm Radar Reports and recognized as leader in Enterprise Flash Array Storage and Object Storage categories by TrustRadius for the second consecutive year.

•Pure achieved the highest total sales for any second quarter in the history of the company, growing more than 30% year-over-year.

•The company saw continued strength and momentum in Subscription Services revenue, up 31% year-over-year with strong growth in Pure as-a-Service, which almost doubled revenues compared to the prior year.

•Success in the large enterprise segment continues to grow, comprising over 50% of sales, with the top 10 customers spending more than $100 million in total.

Pure will host its next Financial Analyst Day on Tuesday, September 28, 2021, beginning at 10:00 am PT / 1:00 pm ET. The event has changed from in-person to live webcast and will feature presentations by Pure's executive leadership team, followed by a live Q&A session.

Details:
•Date: Tuesday, September 28, 2021
•Time: 10:00 am PT / 1:00 pm ET
•To register for the live virtual event, please visit:
https://purestorage.com/company/events/financial-analyst-day-2021.html

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The replay of the event and associated presentation materials will also be available at investor.purestorage.com for at least 90 days following the completion of the event.

Third Quarter and FY22 Guidance

Q3 FY22FY22
Revenue$530 million$2.04 billion
Non-GAAP Operating Income$40 million$150 million

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 to the most directly comparable GAAP measure because certain items that impact this measure are not within Pure’s control and/or cannot be reasonably predicted. Accordingly, a reconciliation of this non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.

Conference Call Information

Pure will host a teleconference to discuss the second quarter fiscal 2022 results at 1:30 pm PT today, August 25, 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 and in addition, for two weeks at (800) 585-8367 (or 416-621-4642 for international callers) with passcode 5535534.

Upcoming Events

Pure is scheduled to participate virtually at the following investor conference:

Deutsche Bank Technology Conference 2021
Date: Friday, September 10, 2021
Pure Presenters: Charles Giancarlo, Chairman and CEO, Kevan Krysler, CFO and Rob Lee, CTO
Pure Participants: Sanjot Khurana, VP of Investor Relations

The presentations will be webcast live and archived on Pure’s Investor Relations website at investor.purestorage.com.

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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

Pure Storage has been named a Leader in the 2020 Gartner Magic Quadrant for Primary Storage Arrays.

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.
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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, the scope and duration of the COVID-19 pandemic and its impact on our business operations, liquidity and capital resources, employees, customers, supply chain, financial results and the economy, our expectations regarding product and technology differentiation, including our new offerings, strategy and adoption of subscription services, growing customer adoption, 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 August 25, 2021, and Pure undertakes no duty to update this information unless required by law.

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.

Contacts
Sanjot Khurana -- Investor Relations, Pure Storage
ir@purestorage.com
 
Rena Fallstrom -- Public Relations, Pure Storage
pr@purestorage.com

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PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
At the End of
Second Quarter of Fiscal 2022
Fiscal 2021
 
Assets 
Current assets: 
Cash and cash equivalents$340,252 $337,147 
Marketable securities944,285 916,388 
Accounts receivable, net of allowance of $960 and $1,033
358,460 460,879 
Inventory47,169 46,733 
Deferred commissions, current58,003 57,183 
Prepaid expenses and other current assets111,390 89,836 
Total current assets1,859,559 1,908,166 
Property and equipment, net184,048 163,041 
Operating lease right-of-use-assets122,638 134,668 
Deferred commissions, non-current137,962 130,741 
Intangible assets, net68,279 76,648 
Goodwill358,736 358,736 
Restricted cash 10,544 10,544 
Other assets, non-current41,918 36,896 
Total assets$2,783,684 $2,819,440 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$54,686 $67,530 
Accrued compensation and benefits126,589 160,817 
Accrued expenses and other liabilities53,043 61,754 
Operating lease liabilities, current34,482 32,231 
Deferred revenue, current485,927 438,321 
Total current liabilities754,727 760,653 
Long-term debt770,662 755,814 
Operating lease liabilities, non-current106,693 120,361 
Deferred revenue, non-current423,887 405,376 
Other liabilities, non-current30,271 27,230 
Total liabilities2,086,240 2,069,434 
Stockholders’ equity:  
Common stock and additional paid-in capital2,388,446 2,307,608 
Accumulated other comprehensive income3,481 7,410 
Accumulated deficit(1,694,483)(1,565,012)
Total stockholders' equity697,444 750,006 
Total liabilities and stockholders' equity$2,783,684 $2,819,440 

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PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2022202120222021
 
Revenue:  
Product$324,935 $272,309 $574,823 $519,248 
Subscription services171,896 131,414 334,715 251,594 
Total revenue496,831 403,723 909,538 770,842 
Cost of revenue:  
Product (1)
101,150 84,731 180,214 154,016 
Subscription services(1)
55,654 44,266 107,431 85,275 
Total cost of revenue156,804 128,997 287,645 239,291 
Gross profit340,027 274,726 621,893 531,551 
Operating expenses:  
Research and development (1)
140,107 114,652 271,488 227,098 
Sales and marketing (1)
190,386 171,434 373,882 344,867 
General and administrative (1)
43,464 44,471 86,610 85,596 
Restructuring and other (2)
— 8,288 — 22,990 
Total operating expenses373,957 338,845 731,980 680,551 
Loss from operations(33,930)(64,119)(110,087)(149,000)
Other income (expense), net(7,410)1,603 (12,137)(1,813)
Loss before provision for income taxes(41,340)(62,516)(122,224)(150,813)
Income tax provision3,925 2,451 7,247 4,748 
Net loss$(45,265)$(64,967)$(129,471)$(155,561)
Net loss per share attributable to common stockholders, basic and diluted$(0.16)$(0.25)$(0.46)$(0.59)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted283,931 264,799 282,147 263,867 


(1) Includes stock-based compensation expense as follows:
Cost of revenue -- product$1,566 $990 $2,913 $1,986 
Cost of revenue -- subscription services5,137 3,686 9,543 7,078 
Research and development35,125 29,839 65,546 58,550 
Sales and marketing18,358 16,848 35,166 33,120 
General and administrative10,243 10,089 18,595 19,412 
Total stock-based compensation expense$70,429 $61,452 $131,763 $120,146 

(2) Includes expenses related to restructuring and incremental expenses directly related to COVID-19
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PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2022202120222021
 
Cash flows from operating activities  
Net loss$(45,265)$(64,967)$(129,471)$(155,561)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization19,273 16,464 38,099 31,597 
Amortization of debt discount and debt issuance costs7,751 7,189 15,154 14,125 
Stock-based compensation expense70,429 61,452 131,763 120,146 
Impairment of long-lived assets— 7,505 — 7,505 
Other3,895 267 6,516 1,972 
Changes in operating assets and liabilities:
Accounts receivable, net(30,874)(17,545)102,506 91,896 
Inventory266 3,105 (3,242)1,735 
Deferred commissions(10,090)(2,324)(8,041)(5,483)
Prepaid expenses and other assets5,452 (20,091)(24,955)(26,389)
Operating lease right-of-use assets7,237 7,475 14,818 14,181 
Accounts payable15,087 (6,796)(9,267)(21,090)
Accrued compensation and other liabilities43,885 46,426 (40,952)(3,217)
Operating lease liabilities (7,308)(6,145)(14,205)(13,071)
Deferred revenue43,654 18,691 66,117 27,463 
Net cash provided by operating activities123,392 50,706 144,840 85,809 
Cash flows from investing activities
Purchases of property and equipment(27,670)(24,994)(55,499)(48,776)
Purchases of marketable securities(145,808)(193,076)(317,371)(291,237)
Sales of marketable securities28,501 73,694 114,038 91,351 
Maturities of marketable securities 104,030 110,799 169,770 206,174 
Net cash used in investing activities(40,947)(33,577)(89,062)(42,488)
Cash flows from financing activities
Net proceeds from exercise of stock options3,147 12,383 11,163 21,658 
Proceeds from issuance of common stock under employee stock purchase plan— — 17,726 16,021 
Proceeds from borrowings— — — 4,950 
Repayments of borrowings(261)— (605)— 
Tax withholding on vesting of equity awards(1,514)(1,467)(6,564)(2,841)
Repurchases of common stock(44,373)(20,024)(74,393)(90,143)
Net cash used in financing activities(43,001)(9,108)(52,673)(50,355)
Net increase (decrease) in cash, cash equivalents and restricted cash39,444 8,021 3,105 (7,034)
Cash, cash equivalents and restricted cash, beginning of period311,352 362,867 347,691 377,922 
Cash, cash equivalents and restricted cash, end of period$350,796 $370,888 $350,796 $370,888 




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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):
 
Second Quarter of Fiscal 2022
Second 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)
$1,566 (c)$990 (c)
63 (d)15 (d)
— 297 (e)
3,067 (f)2,003 (f)
Gross profit --product$223,785 68.9 %$4,696  $228,481 70.3 %$187,578 68.9 %$3,305  $190,883 70.1 %
   $5,137 (c)    $3,686 (c)  
196 (d)47 (d)
24 (g)— 
Gross profit -- subscription services$116,242 67.6 %$5,357  $121,599 70.7 %$87,148 66.3 %$3,733  $90,881 69.2 %
   $6,703 (c)    $4,676 (c)  
259 (d)62 (d)
— 297 (e)
3,067 (f)2,003 (f)
24 (g)— 
Total gross profit$340,027 68.4 %$10,053  $350,080 70.5 %$274,726 68.0 %$7,038  $281,764 69.8 %


(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 hazard pay premiums directly related to COVID-19 pandemic.
(f) To eliminate amortization expense of acquired intangible assets.
(g) To eliminate payments to former shareholders of acquired company.

















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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 2022
Second 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)
$70,429 (c)$61,452 (c)
4,229 (d)2,009 (d)
2,081 (e)1,259 (e)
— 306 (f)
— 8,279 (g)
3,600 (h)2,003 (h)
171 (i)— 
Operating Income (loss)$(33,930)-6.8 %$80,510  $46,580 9.4 %$(64,119)-15.9 %$75,308  $11,189 2.8 %
   $70,429 (c)    $61,452 (c) 
4,229 (d)2,009 (d)
   2,081 (e)    1,259 (e) 
— 306 (f)
— 8,279 (g)
3,600 (h)2,003 (h)
171 (i)— 
7,751 (j)7,189 (j)
Net income (loss)$(45,265) $88,261 $42,996  $(64,967) $82,497  $17,530  
Net income (loss) per share -- diluted $(0.16)   $0.14  $(0.25)   $0.06  
Weighted-average shares used in per share calculation -- diluted283,931  16,286 (k)300,217  264,799  17,698 (k)282,497 

(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 marketing commitments no longer deemed to have value and hazard pay premiums directly related to COVID-19 pandemic.
(g) To eliminate restructuring expenses related to (1) impairment of long-lived assets associated with the cease-use of certain facilities and (2) workforce reduction.
(h) To eliminate amortization expense of acquired intangible assets.
(i) To eliminate acquisition-related 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).





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Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):
 
Second Quarter of Fiscal
 20222021
Net cash provided by operating activities$123,392 $50,706 
Less: purchases of property and equipment(27,670)(24,994)
Free cash flow (non-GAAP)$95,722 $25,712 

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Pure Storage, Inc. Reports