Pure Storage: Strong Fiscal Year Finish Despite Pandemic’s Ups And Downs
Joseph F. Kovar
‘I believe that in this fiscal year our customers will accelerate their investment in digital transformation with renewed confidence of economic recovery. They will be increasingly confident in their ability to deploy new vendors, new systems and software, into new use cases, and Pure will be high on their list,’ says Pure Storage CEO Charles Giancarlo.
Pure Storage overcame the ups and downs of the COVID-19 coronavirus pandemic to end its fiscal year 2021 on a strong note.
For Pure Storage, fiscal 2021 saw record revenue and sales for the year and for its fourth fiscal quarter, said CEO Charles Giancarlo.
Giancarlo, during his opening remarks during Pure Storage’s Wednesday fiscal year 2021 financial analyst conference call, said the Mountain View, Calif.-based company saw record sales in its Pure-as-a-Service offering, its FlashBlade all-flash block storage array line and its FlashArray//C entry-level all-flash arrays based on low-cost QLC NAND.
[Related: 8 Emerging Data Storage Trends To Watch In 2021]
It also included sales of Portworx, which Pure Storage acquired last September, he said.
“The completeness of our product suite accelerated sales growth in our enterprise and cloud segments, in each and every theater and in our major verticals,” he said.
The success Pure Storage saw during the fourth fiscal quarter and full fiscal year 2021 came despite the challenges stemming from nearly a full year of operations during the COVID-19 pandemic, Giancarlo said.
Pure Storage made a commitment early in the COVID-19 coronavirus pandemic to continue making strategic investments in global talent focusing on innovation, including its acquisition of Portworx, customer support and scaling the company, he said.
“We dramatically reduced travel, entertainment and other operating expenses while increasing our investments in talent and critical growth initiatives in anticipation of increasing growth this year, while continuing to deliver operating income and generating positive operating cash flows,” he said.
Pure Storage recently unveiled a planned hybrid approach to returning to the office, with most employees able to work from home part-time, Giancarlo said.
“We believe that the hybrid office model will deliver the best combination of individual and team productivity and allow us to continue to attract and retain the best employees in the industry,” he said.
The pandemic’s effect on Pure Storage’s business largely played out as the company expected, starting with a short business acceleration as customers shifted to work at home and online business, followed by a sharp pullback as customers took stock of their business prospects and new plans for digital transformation, followed by a gradual stabilization based on the new normal, Giancarlo said.
“Now we look forward to a return to more significant economic growth as we expect the effects of COVID will begin to diminish during our fiscal Q2,” he said. “I have increasing confidence that this year will be far better than last. On a macro front, I’m hopeful about the promise of increasingly plentiful and effective vaccines being distributed throughout the world. I believe that in this fiscal year our customers will accelerate their investment in digital transformation with renewed confidence of economic recovery. They will be increasingly confident in their ability to deploy new vendors, new systems and software, into new use cases, and Pure will be high on their list.”
When asked by an analyst about how Pure Storage expects the pandemic to impact business in fiscal year 2022, Giancarlo said the company expects a dissipation of the pandemic effects to happen in the middle of the second fiscal quarter.
“Commercial and midmarket [customers] are still suffering, but we are seeing some light at the end of the tunnel,” he said.
The timing ultimately depends on when customers are willing to return to the office and adopt Pure Storage’s products for new use cases, Giancarlo said. However, he said, he doesn’t mean a customer’s entire staff, just the technical staff.
“We’re still primarily an on-premises vendor, and customer willingness to take on new products depends on customers becoming more comfortable in going to the office,” he said.
During his prepared remarks, Giancarlo said Pure Storage continues to dramatically outpace the industry in innovation and “customer delight” and outlined four reasons customers are increasing their adoption of the company’s technology.
The first is the simplicity of the Pure Storage platform, which Giancarlo said is characterized by seamless upgrades, cloud management, pay-as-you-go consumption models, and both traditional and cloud-native data services.
The second is strong customer adoption of Pure Storage’s subscription services, including its Evergreen service for continual technology upgrades and its Pure-as-a-Service offerings, Giancarlo said.
Pure Storage delivers an enterprise-class utility with flexible storage consumption, a cloud experience on-premises, an easy path to move data to the cloud at any time, and spending aligned with actual consumption, he said.
“This year we’ve continued to advance our subscription services platform, reducing complexity by eliminating additional licenses and support costs and introducing a service catalog with transparent pricing,” he said. “This quarter, our subscription services grew over 30 percent from one year ago. ... Given the significant customer benefits with our subscription services, we have created enhancements to our field compensation for these offers going forward.”
The third was Pure Storage’s acquisition of Portworx, a developer of technology for delivering Kubernetes-based containerized, cloud-native applications, Giancarlo said.
“We saw significant growth of in-cloud deployments of Portworx this quarter, with particular growth through our IBM partnership given our best-in-class support for Red Hat OpenShift and IBM Cloud Pak for Data,” he said. “The integration of Portworx into Pure has been one of the best that I have ever experienced, and we are just beginning to leverage Pure’s [go-to-market] engine to drive Portworx.
Pure Storage earlier this month also expanded its reach with major software updates to its flagship Purity Software on both FlashBlade and FlashArray to improve performance, add comprehensive ransomware protection and security, and broaden file capabilities to serve more markets and use cases, he said.
The fourth is sustainability, with Pure Storage focusing on how to reduce energy and cooling costs, maintenance and data center footprint, said Giancarlo. The company estimates that, over the past eight years, it has helped businesses save over 4 billion kilowatt hours in energy use with the greenhouse gas emissions equivalent to over 7 billion miles of automobile travel, and eliminated 96 percent of data center rack space compared with the legacy equivalent of 19,000 racks or over 10,000 tons of legacy gear not deployed, he said.
During the question-and-answer period, when asked by an analyst about sales of Pure Storage’s entry-level FlashArray//C line, Giancarlo called it the fastest-growing product line the company has ever introduced, and said the price-per-bit of QLC NAND is falling faster than that of hard drive-based media, leading to a convergence between the two.
“As those costs converge, you’ll see more and more of that market move to FlashArray//C,” he said.
For its fourth fiscal quarter 2021, which ended Jan. 31, Pure Storage reported revenue of $502.7 million, up 2.2 percent over the $492.0 million the company reported for its fourth fiscal quarter 2020.
That included product revenue of $350.4 million, down 6.9 percent over last year, and subscription services revenue of $152.3 million, up 31.9 percent.
Its loss on a GAAP basis was $52.3 million, or 19 cents per share, significantly higher than last year’s loss of $4.7 million, or 2 cents per share. On a non-GAAP basis, Pure Storage reported net income of $38.8 million, or 13 cents per share.
For all of fiscal 2021, Pure Storage reported total revenue of $1.68 billion, up slightly from its fiscal 2020 revenue of $1.64 billion. This included product revenue of $1.14 billion, down 8.1 percent over last year, and subscriptions services revenue of $540.1 million, up 33.4 percent.
For the year, Pure Storage reported a GAAP loss of $282.1 million, or $1.05 per share, up from the loss it recorded last year of $201.0 million, or 79 cents per share.
Looking forward, Pure Storage expects first fiscal quarter 2022 revenue of $405 million along with a non-GAAP operating loss of $20 million. For all of fiscal year 2022, the company expects 14 percent to 15 percent growth in total revenue and non-GAAP operating income of about $90 million.
Pure Storage fourth fiscal quarter non-GAAP earnings per share beat analysts’ expectations by 4 cents per share, while its GAAP earnings per share were in line with analysts’ expectations, according to Seeking Alpha. The company’s revenue for the quarter beat expectations by about 2.2 percent.
Pure Storage shares rose slightly to $25.74 per share at the close of the market, but in after-market trading rose to as high as $27.83 per share before settling to around $27 a share a couple of hours later.