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Pure Storage Announces Second Quarter Fiscal 2024 Financial Results

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Pure Storage announces record sales quarter for FlashBlade portfolio, doubled subscription sales year-over-year for Evergreen//One, and increased operating margin annual guidance. Q2 revenue reached $688.7 million, a 6.5% YoY increase. Subscription services revenue grew by 24% YoY to $288.9 million. Subscription ARR reached $1.2 billion, a 27% YoY increase. RPO increased by 26% YoY to $1.9 billion. GAAP gross margin was 70.7% and non-GAAP gross margin was 72.8%. GAAP operating loss was $(6.2) million, while non-GAAP operating income was $111.8 million. Operating cash flow was $101.6 million and free cash flow was $46.5 million. Total cash, cash equivalents, and marketable securities amounted to $1.2 billion. Pure Storage returned $22.0 million to stockholders through share repurchases of 0.6 million shares.
Positive
  • Record sales quarter for FlashBlade portfolio
  • Doubled subscription sales year-over-year for Evergreen//One
  • Increased operating margin annual guidance
Negative
  • None.

Record sales quarter for FlashBlade portfolio

Doubled subscription sales year-over-year for Evergreen//One

Increased operating margin annual guidance

SANTA CLARA, Calif., Aug. 30, 2023 /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 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®.

Third Quarter and FY24 Guidance


Q3FY24

FY24

Revenue

$760M

Mid to High Single Digit Y/Y

Growth

Non-GAAP Operating Income

$135M

Non-GAAP Operating Margin

17.8 %

15.5 %

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.

Conference Call Information

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:

Goldman Sachs Communacopia + Technology Conference
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.

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 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.

Analyst Recognition
Leader in the 2022 Gartner Magic Quadrant for Primary Storage
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. 

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, 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.

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 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.

 

PURE STORAGE, INC.

Condensed Consolidated Balance Sheets

(in thousands, unaudited)




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

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)



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

 

PURE STORAGE, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)



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.

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 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.

(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):


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.

(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 amortization expense of acquired intangible assets.

(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).

Reconciliation from net cash provided by operating activities to free cash flow (in thousands except percentages, unaudited):


Second Quarter of Fiscal


2024


2023

Net cash provided by operating activities

$               101,618


$             159,380

Less: purchases of property and equipment (1)

(55,105)


(25,184)

Free cash flow (non-GAAP)

$                  46,513


$             134,196


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

 

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SOURCE Pure Storage

FAQ

What were Pure Storage's Q2 revenue and revenue growth?

Pure Storage's Q2 revenue reached $688.7 million, representing a 6.5% year-over-year increase.

How much did subscription services revenue grow in Q2?

Subscription services revenue grew by 24% year-over-year to $288.9 million in Q2.

What was the subscription annual recurring revenue (ARR) in Q2?

The subscription annual recurring revenue (ARR) reached $1.2 billion, showing a 27% year-over-year increase in Q2.

What was the remaining performance obligations (RPO) in Q2?

The remaining performance obligations (RPO) amounted to $1.9 billion, reflecting a 26% year-over-year increase in Q2.

What were the GAAP and non-GAAP gross margins in Q2?

The GAAP gross margin was 70.7%, while the non-GAAP gross margin was 72.8% in Q2.

What were the GAAP and non-GAAP operating incomes in Q2?

The GAAP operating loss was $(6.2) million, and the non-GAAP operating income was $111.8 million in Q2.

What was the operating cash flow in Q2?

The operating cash flow was $101.6 million in Q2.

What was the free cash flow in Q2?

The free cash flow was $46.5 million in Q2.

How much cash, cash equivalents, and marketable securities did Pure Storage have in Q2?

Pure Storage had a total of $1.2 billion in cash, cash equivalents, and marketable securities in Q2.

How much did Pure Storage return to stockholders in Q2?

Pure Storage returned approximately $22.0 million to stockholders through share repurchases of 0.6 million shares in Q2.

Pure Storage, Inc.

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