Pure Storage (NYSE: PSTG), the IT pioneer that delivers storage as-a-service in a multi-cloud world, today announced financial results for its second quarter ended August 2, 2020.

"We had a solid quarter, reflecting Pure's unmatched technology leadership, simplicity, performance and extraordinary reliability that makes us the right decision during this time," said Charles Giancarlo, Chairman and CEO, Pure Storage. "Pure delivers the Modern Data Experience by providing dynamic storage, a cloud-like experience via APIs, shared services and flexible on-demand consumption. Looking forward, I am confident in our opportunity, long-term strategy and ability to reaccelerate growth upon exiting the global crisis."

Second Quarter Financial Highlights 

• Revenue $403.7 million, up 2% year-over-year
• Subscription services revenue $131.4 million, up 37% year-over-year
• GAAP gross margin 68.0%; non-GAAP gross margin 69.8%
• GAAP operating loss $(64.1) million; non-GAAP operating income $11.2 million
• Operating cash flow was $50.7 million, up $1.9 million year-over-year
• Free cash flow was $25.7 million, up $5.8 million year-over-year
• Total cash and investments of $1.3 billion
• Deferred revenue of $724.8 million, up 2.6% quarter-over-quarter and 19.3% year-over-year
• Remaining performance obligations (RPO) of $956.4 million, up 4.9% quarter-over-quarter and 24.2% year-over-year

"Pure, with its channel partners, continues to deliver solid results during the global economic recession caused by COVID-19," said Kevan Krysler, CFO, Pure Storage. "We are particularly pleased with the sustained strong growth and momentum of our subscription services that offer customers a cloud-like experience with more flexibility and compelling total cost of ownership."

Second Quarter Company Highlights

Pure's second quarter delivered technology enhancements that support modern applications, multi-dimensional performance, differentiated consumption models and simplicity that make the Modern Data Experience a reality for customers.

• Introducing the second generation FlashArray//C - Today we announced the second generation FlashArray//C, delivering even lower effective cost/GB, making it now substantially less expensive than competing legacy hybrid disk arrays. The industry's only all-QLC storage array, FlashArray//C features 24TB and 49TB QLC DirectFlash Modules and fully leverages the broad suite of efficiency and reliability features in FlashArray's Purity software. With FlashArray//C for capacity-oriented workloads, FlashArray//X for performance-centric workloads, and Cloud Block Store in the cloud, customers are able to consolidate tier 1, tier 2 and cloud workloads onto a single platform.
• Delivering rapid recovery at scale - In Q2, Pure announced a partnership with Cohesity to deliver an integrated data recovery solution, Pure FlashRecover™, Powered by Cohesity®. The solution provides all-flash data backup and recovery capabilities that enterprises require for restoring data rapidly in the face of a disaster or ransomware attack. The companies joined forces to develop this solution based on strong demand from their customers to ensure they will always have fast access to their data.
• Strong subscription services momentum - Pure's subscription services saw continued strength and execution with 37% year-over-year growth from existing and new customers. In Q2, Arrow Energy, BidFX, Dizzion Managed Desktop as-a-Service, Lafayette General Hospital and Telstra joined the rapidly growing list of existing Pure as-a-Service customers such as CDK Global and Options IT.

Additionally, the Pure Good Foundation, which has had a substantial impact on communities around the globe, celebrates its fifth anniversary this month. Through its philanthropic efforts and hands-on volunteerism, Pure employees engaged in more than 8,000 volunteer activities over the last five years.

Guidance

Through the first half of the year Pure has delivered solid results through execution, focus, and operating discipline. The core fundamentals of Pure's business are strong, however, the significant global economic contraction caused by COVID-19 continues to create variability. Therefore, consistent with the prior quarter Pure is not providing formal guidance.

Pure's current view of fiscal Q3 outcomes, which should not be viewed as guidance, is that total revenue will be approximately flat sequentially. In Q3, we expect recurring revenue and sales of our Evergreen and unified subscription services will continue to show strong growth. The company continues to exercise solid operating discipline throughout the organization and estimates that operating margin during Q3 will be slightly below break even, near negative 2%.

Conference Call Information

Pure will host a teleconference to discuss the second quarter fiscal 2021 results at 2:00 p.m. PT on August 25, 2020. A live audio broadcast of the conference call will be available at the Pure Storage Investor Relations website at investor.purestorage.com. Pure will also post its supplemental earnings presentation and prepared conference call remarks to the Investor Relations website in advance of the call for reference. A replay will be available following the call on the Pure Storage Investor Relations website or for two weeks at (800) 585-8367 or (416) 621-4642 for international callers with passcode 6089753.

About Pure Storage

Pure Storage (NYSE: PSTG) 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. One of the fastest-growing enterprise IT companies in history, 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 2019 Gartner Magic Quadrant for Primary Storage.

Upcoming Event:

• Pure will be presenting at the Deutsche Bank Virtual Technology Conference on September 15th, at 9:30 a.m. PT. The presentation from the event will be webcast live and all information will be available on the Investor Relations website at investor.purestorage.com.

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 outcomes, 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, 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 captions "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 2, 2020. All information provided in this release and in the attachments is as of August 25, 2020, and we undertake 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, we use 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, free cash flow and free cash flow as a percentage of revenue.

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 company, payroll tax expense related to stock-based activities, amortization of debt discount and debt issuance costs, amortization of intangible assets acquired from acquisitions, restructuring activities, and expenses directly related to the COVID-19 pandemic that may not be indicative of our ongoing core business operating results. We believe 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.