Pure Storage Announces Third Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

Pure Storage (PSTG) reports record sales for FlashBlade portfolio including FB//E, with nearly $400 million of combined annual Evergreen//One and Evergreen//Flex sales. Operating margin annual guidance increased. Third quarter financial highlights include $762.8 million in revenue, 13% year-over-year increase, $309.6 million in subscription services revenue, and $1.3 billion in subscription annual recurring revenue (ARR). The company also returned approximately $22.4 million to stockholders through share repurchases of 0.6 million shares.

Positive

• Record sales for FlashBlade portfolio including FB//E
• Increased operating margin annual guidance
• Subscription annual recurring revenue (ARR) $1.3 billion, up 26% year-over-year
• Returned approximately $22.4 million in Q3 to stockholders through share repurchases of 0.6 million shares

Negative

• Forward-looking statements may differ materially from actual results

Record sales for FlashBlade portfolio including FB//E

Expect nearly $400 Million of Combined Annual Evergreen//One and Evergreen//Flex Sales

Increased Operating Margin Annual Guidance

SANTA CLARA, Calif., Nov. 29, 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 third quarter fiscal 2024 ended November 5, 2023.

"Pure continues to see extraordinary growth in our Evergreen Storage-as-a-Service consumption services providing customers with a Cloud Operating Model for their multi-cloud infrastructure," said Charles Giancarlo, Chairman and CEO, Pure Storage. "And we have raised the bar for data storage management with strong SLAs that guarantee no change management downtime or disruption, and no future data migrations for hardware changes or replacements — all while simplifying data storage operations, optimizing cloud storage, and reducing costs."

Third Quarter Financial Highlights 

• Revenue $762.8 million, an increase of 13% year-over-year
• Subscription services revenue $309.6 million, up 26% year-over-year
• Subscription annual recurring revenue (ARR) $1.3 billion, up 26% year-over-year
• Remaining performance obligations (RPO) $2.0 billion, up 30% year-over-year
• GAAP gross margin 72.5%; non-GAAP gross margin 74.0%
• GAAP operating income $74.2 million; non-GAAP operating income $169.1 million
• GAAP operating margin 9.7%; non-GAAP operating margin 22.2%
• Operating cash flow $158.4 million; free cash flow $113.4 million
• Total cash, cash equivalents, and marketable securities $1.35 billion
• Returned approximately $22.4 million in Q3 to stockholders through share repurchases of 0.6 million shares

"We are pleased to see strengthening demand across our data storage platform, including the growth of our Evergreen//One Storage-as-a-Service offering, while also expanding our operating margin," said Kevan Krysler, Chief Financial Officer, Pure Storage. "Our business strategy continues to focus on continually increasing the value we provide to our customers including our consumption and subscription based offerings."

Third Quarter Company Highlights

• Industry-First Paid Power and Rack Commitment: In Q3, Pure tackled the growing challenges of managing rising electricity costs and rack unit space with the introduction of a first of its kind program which will pay for its customers' power and rack space through an Evergreen//One Storage as-a-Service and Evergreen//Flex subscription, taking responsibility for the associated costs of power and rack unit to run our offerings.
• Storage as-a-Service Innovation: Already a leader in service-level agreement (SLA) guarantees, Pure added three new SLA guarantees for No Data Migration, Zero Data Loss, and Power and Space Efficiency across its family of Evergreen (//Forever, //One, //Flex) offerings.
• General Availability (GA) of FlashArray//E: FlashArray//E has begun shipping, completing the //E family of products. The combination of FlashArray//E and FlashBlade//E starting from 1 PB, taking Pure's all-flash promise to the heart of the now-legacy disk market.
• Leader in Gartner Magic Quadrant for Distributed File Systems & Object Storage: Pure was named a leader for the third consecutive year in the rapidly growing storage market for unstructured data.

Fourth Quarter and FY24 Guidance

Q4 and FY24 revenue and revenue growth rates are reflective of continuing outperformance and increased momentum in Evergreen//One Storage-as-a-Service.

	Q4FY24	FY24
Revenue	$782M	$2.82B
Non-GAAP Operating Income	$150M	$450M
Non-GAAP Operating Margin	19 %	16 %

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 third quarter fiscal 2024 results at 2:00 pm PT today, November 29, 2023. A live audio broadcast of the conference call will be available on the Pure Storage Investor Relations website. Pure will also post its earnings presentation and prepared remarks to this website concurrent with this release.

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 1-647-362-9199 for international callers) with passcode 5667482.

Additionally, Pure is scheduled to participate at the following investor conferences:

UBS Global Technology Conference
Date: Thursday, November 30, 2023
Time: 7:55 a.m. PT / 10:55 a.m. ET
Chief Technology Officer Rob Lee

Barclays Global Technology Conference
Date: Wednesday, December 6, 2023
Time: 12:45 p.m. PT / 3:45 p.m. ET
Chairman and CEO Charles Giancarlo, and CFO Kevan Krysler

The presentations 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 2023 Gartner Magic Quadrant for Primary Storage
Leader in the 2023 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, demand for our products and subscription services, including Evergreen//One, our technology and product strategy, specifically customer priorities around sustainability, the benefits to our customers of using our products, our ability to perform during 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, our expectations regarding our product and technology differentiation, including FlashBlade//E and FlashArray//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 November 29, 2023, and Pure undertakes no duty to update this information unless required by law.

Key Business Metrics

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.

Sales, or bookings, of Pure's Evergreen//One and Evergreen//Flex offerings is an operating metric, representing the value of orders received and/or expected to be received during the fiscal year.

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
		Third Quarter of Fiscal 2024		Fiscal 2023
Assets
Current assets:
Cash and cash equivalents		$           529,191		$           580,854
Marketable securities		821,868		1,001,352
Accounts receivable, net of allowance of $1,178 and $1,057		636,324		612,491
Inventory		46,211		50,152
Deferred commissions, current		74,303		68,617
Prepaid expenses and other current assets		139,129		161,391
Total current assets		2,247,026		2,474,857
Property and equipment, net		337,559		272,445
Operating lease right-of-use-assets		126,558		158,912
Deferred commissions, non-current		190,614		177,239
Intangible assets, net		36,868		49,222
Goodwill		361,427		361,427
Restricted cash		9,960		10,544
Other assets, non-current		45,497		38,814
Total assets		$        3,355,509		$        3,543,460
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$           101,092		$             67,121
Accrued compensation and benefits		149,705		232,636
Accrued expenses and other liabilities		141,241		123,749
Operating lease liabilities, current		44,301		33,707
Deferred revenue, current		801,562		718,149
Debt, current		—		574,506
Total current liabilities		1,237,901		1,749,868
Long-term debt		100,000		—
Operating lease liabilities, non-current		122,388		142,473
Deferred revenue, non-current		694,945		667,501
Other liabilities, non-current		51,820		42,385
Total liabilities		2,207,054		2,602,227
Stockholders' equity:
Common stock and additional paid-in capital		2,699,676		2,493,799
Accumulated other comprehensive loss		(10,032)		(15,504)
Accumulated deficit		(1,541,189)		(1,537,062)
Total stockholders' equity		1,148,455		941,233
Total liabilities and stockholders' equity		$        3,355,509		$        3,543,460

 

PURE STORAGE, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data, unaudited)
	Third Quarter of Fiscal				First Three Quarters of Fiscal
	2024		2023		2024		2023
Revenue:
Product	$         453,277		$         431,281		$      1,161,978		$      1,247,045
Subscription services	309,561		244,769		878,838		696,182
Total revenue	762,838		676,050		2,040,816		1,943,227
Cost of revenue:
Product (1)	126,770		135,546		343,588		395,322
Subscription services (1)	83,321		74,169		244,541		211,576
Total cost of revenue	210,091		209,715		588,129		606,898
Gross profit	552,747		466,335		1,452,687		1,336,329
Operating expenses:
Research and development (1)	182,100		180,008		549,923		506,971
Sales and marketing (1)	231,707		212,140		696,885		637,129
General and administrative (1)	64,729		65,054		192,944		173,300
Impairment and other (2)	—		—		16,766		—
Total operating expenses	478,536		457,202		1,456,518		1,317,400
Income (loss) from operations	74,211		9,133		(3,831)		18,929
Other income (expense), net	5,184		(2,814)		23,619		(8,410)
Income before provision for income taxes	79,395		6,319		19,788		10,519
Income tax provision	9,006		7,106		23,915		11,919
Net income (loss)	$           70,389		$              (787)		$           (4,127)		$           (1,400)
Net income (loss) per share attributable to common stockholders, basic	$              0.22		$             (0.00)		$             (0.01)		$             (0.00)
Net income (loss) per share attributable to common stockholders, diluted	$              0.21		$             (0.00)		$             (0.01)		$             (0.00)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic	314,153		300,984		309,842		298,101
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted	330,255		300,984		309,842		298,101
(1) Includes stock-based compensation expense as follows:
Cost of revenue -- product	$             1,443		$             2,984		$             7,056		$             7,454
Cost of revenue -- subscription services	6,849		5,814		19,347		16,978
Research and development	43,908		42,390		126,225		120,482
Sales and marketing	19,209		18,441		55,883		54,740
General and administrative	16,557		17,350		46,732		45,460
Total stock-based compensation expense	$           87,966		$           86,979		$         255,243		$         245,114
(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)
	Third Quarter of Fiscal				First Three Quarters of Fiscal
	2024		2023		2024		2023
Cash flows from operating activities
Net income (loss)	$               70,389		$                   (787)		$                (4,127)		$                (1,400)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	31,647		25,719		91,560		72,268
Stock-based compensation expense	87,966		86,979		255,243		245,114
Lease impairment and abandonment charges	—		—		16,766		—
Other	(2,814)		(558)		(5,843)		2,473
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net	(111,190)		(33,791)		(23,959)		106,216
Inventory	818		(3,849)		5,278		(16,341)
Deferred commissions	(9,501)		549		(19,061)		11,175
Prepaid expenses and other assets	20,044		(40,601)		19,686		(56,164)
Operating lease right-of-use assets	6,763		9,253		26,398		26,073
Accounts payable	7,533		29,065		33,844		22,536
Accrued compensation and other liabilities	4,767		20,085		(52,757)		(17,739)
Operating lease liabilities	(7,454)		(6,897)		(20,587)		(28,339)
Deferred revenue	59,464		69,529		110,856		168,336
Net cash provided by operating activities	158,432		154,696		433,297		534,208
Cash flows from investing activities
Purchases of property and equipment (1)	(45,062)		(39,916)		(151,591)		(97,910)
Acquisition, net of cash acquired	—		—		—		(1,989)
Purchases of marketable securities	(105,108)		(74,878)		(351,725)		(92,129)
Sales of marketable securities	3,747		—		52,495		—
Maturities of marketable securities	109,196		111,302		495,899		352,295
Net cash provided by (used in) investing activities	(37,227)		(3,492)		45,078		160,267
Cash flows from financing activities
Net proceeds from exercise of stock options	3,056		3,867		32,904		19,131
Proceeds from issuance of common stock under employee stock purchase plan	23,870		20,569		45,089		39,965
Principal payments on borrowings and finance lease obligations	(7,515)		(4,568)		(584,582)		(256,145)
Proceeds from borrowings	6,890		—		106,890		—
Tax withholding on vesting of equity awards	(4,755)		(3,143)		(16,582)		(16,130)
Repurchases of common stock	(22,460)		(24,565)		(114,341)		(151,564)
Net cash used in financing activities	(914)		(7,840)		(530,622)		(364,743)
Net increase (decrease) in cash, cash equivalents and restricted cash	120,291		143,364		(52,247)		329,732
Cash, cash equivalents and restricted cash, beginning of period	418,860		663,111		591,398		476,743
Cash, cash equivalents and restricted cash, end of period	$             539,151		$             806,475		$             539,151		$             806,475

(1) Includes capitalized internal-use software costs of $5.1 million and $3.7 million for the third quarter of fiscal 2024 and 2023 and $15.7 million and $10.5 million for the first three 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):

		Third Quarter of Fiscal 2024												Third 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)
						$      1,443		(c)										$      2,984		(c)
						75		(d)										46		(d)
						—												251		(e)
						3,306		(f)										3,306		(f)
Gross profit -- product		$  326,507		72.0 %		$      4,824				$ 331,331		73.1 %		$  295,735		68.6 %		$      6,587				$  302,322		70.1 %
						$      6,849		(c)										$      5,814		(c)
						329		(d)										204		(d)
						—												269		(e)
						—												24		(g)
Gross profit -- subscription services		$  226,240		73.1 %		$      7,178				$ 233,418		75.4 %		$  170,600		69.7 %		$      6,311				$  176,911		72.3 %
						$      8,292		(c)										$      8,798		(c)
						404		(d)										250		(d)
						—												520		(e)
						3,306		(f)										3,306		(f)
						—												24		(g)
Total gross profit		$  552,747		72.5 %		$    12,002				$ 564,749		74.0 %		$  466,335		69.0 %		$    12,898				$  479,233		70.9 %

(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):

	Third Quarter of Fiscal 2024												Third 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)
					$     87,966		(c)										$     86,979		(c)
					580		(d)										1,479		(d)
					2,604		(e)										2,098		(e)
					—												3,676		(f)
					3,718		(g)										3,838		(g)
Operating income	$   74,211		9.7 %		$     94,868				$  169,079		22.2 %		$     9,133		1.4 %		$     98,070			$  107,203		15.9 %
					$     87,966		(c)										$     86,979		(c)
					580		(d)										1,479		(d)
					2,604		(e)										2,098		(e)
					—												3,676		(f)
					3,718		(g)										3,838		(g)
					153		(h)										803		(h)
Net income (loss)	$   70,389				$     95,021				$  165,410				$        (787)				$     98,873			$  98,086
Net income (loss) per share -- diluted	$       0.21								$        0.50				$       (0.00)							$      0.31
Weighted- average shares used in per share calculation --  diluted	330,255				—				330,255				300,984				15,431		(i)	316,415

(a) GAAP operating margin is defined as GAAP operating income 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 duplicate lease costs during the transition of our corporate headquarters.

(g) To eliminate amortization expense of acquired intangible assets.

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

(i) 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):

	Third Quarter of Fiscal
	2024		2023
Net cash provided by operating activities	$               158,432		$             154,696
Less: purchases of property and equipment (1)	(45,062)		(39,916)
Free cash flow (non-GAAP)	$               113,370		$             114,780

(1) Includes capitalized internal-use software costs of $5.1 million and $3.7 million for the third quarter of fiscal 2024 and 2023.

 

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SOURCE Pure Storage

FAQ

What are the third quarter financial highlights for Pure Storage (PSTG)?

The third quarter financial highlights include $762.8 million in revenue, 13% year-over-year increase, $309.6 million in subscription services revenue, and $1.3 billion in subscription annual recurring revenue (ARR).

What is the revenue guidance for the fourth quarter and fiscal year 2024 for Pure Storage (PSTG)?

The revenue guidance for the fourth quarter is $782 million and $2.82 billion for fiscal year 2024.

What are the company highlights for Pure Storage (PSTG) in the third quarter?

The company highlights include record sales for FlashBlade portfolio, increased operating margin annual guidance, and the return of approximately $22.4 million to stockholders through share repurchases.

What are the future guidance and growth rates for Pure Storage (PSTG)?

The future guidance for Q4 and FY24 revenue and revenue growth rates are reflective of continuing outperformance and increased momentum in Evergreen//One Storage-as-a-Service.