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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 7, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to   
Commission File Number: 001-37570
Pure Storage, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware27-1069557
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2555 Augustine Dr.
Santa Clara, California 95054
(Address of principal executive offices, including zip code)

(800) 379-7873
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per sharePSTGNew York Stock Exchange LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x     No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x

As of June 9, 2023, the registrant had 307,532,852 shares of its Class A common stock outstanding.


Table of Contents
PURE STORAGE, INC.
FORM 10-Q for the Quarter Ended May 7, 2023
Table of Contents
 
  Page
 
PART I.
 
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II. 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding macroeconomic conditions, including, among other issues, high inflation, rising interest rates, and a slowdown in demand, our ability to sustain or manage our profitability and growth, our expectations regarding demand for our products and services and trends in the external storage market, our expectations that sales prices may decrease or fluctuate over time, our plans to expand and continue to invest internationally, our plans to continue investing in marketing, sales, support and research and development, our shift to subscription services, including as-a-Service offerings, our expectations regarding fluctuations in our revenue and operating results, including the timing and magnitude of large customer orders, our expectations that we may continue to experience losses despite revenue growth, our ability to successfully attract, motivate, and retain qualified personnel and maintain our culture, our expectations regarding our technological leadership and market opportunity, including our ability to continue capturing storage workloads for AI environments, our ability to realize benefits from our investments, including development efforts and acquisitions like Portworx, our ability to innovate and introduce new or enhanced products, our expectations regarding technology and product strategy, specifically customer priorities around sustainability, our competitive position and the effects of competition and industry dynamics, including alternative offerings from incumbent, emerging and public cloud vendors, our sustainability goals and benefits, the potential disruptions to our contract manufacturers or supply chain, our expectations about the impact of, and trends relating to, component pricing, our expectations concerning relationships with third parties, including our partners, customers, suppliers and contract manufacturers, the adequacy of our intellectual property rights, expectations concerning potential legal proceedings and related costs, and the impact of adverse economic conditions on our business, operating results, cash flows and/or financial condition.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors.” These risks are not exhaustive. Other sections of this report include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
Investors should not rely upon forward-looking statements as predictions of future events. We cannot assure investors that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
ii

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data, unaudited)
At the End of
 Fiscal 2023
First Quarter of Fiscal 2024
ASSETS  
Current assets:  
Cash and cash equivalents$580,854 $378,285 
Marketable securities1,001,352 805,715 
Accounts receivable, net of allowance of $1,057 and $1,062
612,491 391,286 
Inventory50,152 51,821 
Deferred commissions, current68,617 68,826 
Prepaid expenses and other current assets161,391 171,824 
Total current assets2,474,857 1,867,757 
Property and equipment, net272,445 302,894 
Operating lease right-of-use assets158,912 155,205 
Deferred commissions, non-current177,239 179,362 
Intangible assets, net49,222 45,064 
Goodwill361,427 361,427 
Restricted cash10,544 9,960 
Other assets, non-current38,814 37,584 
Total assets$3,543,460 $2,959,253 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$67,121 $71,334 
Accrued compensation and benefits232,636 143,204 
Accrued expenses and other liabilities123,749 121,230 
Operating lease liabilities, current33,707 37,995 
Deferred revenue, current718,149 732,433 
Debt, current574,506  
Total current liabilities1,749,868 1,106,196 
Long-term debt 100,000 
Operating lease liabilities, non-current142,473 139,665 
Deferred revenue, non-current667,501 663,237 
Other liabilities, non-current42,385 44,348 
Total liabilities2,602,227 2,053,446 
Commitments and contingencies (Note 7)
Stockholders’ equity:  
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized; no shares issued and outstanding
  
Class A and Class B common stock, par value of $0.0001 per share— 2,250,000 (Class A 2,000,000, Class B 250,000) shares authorized; 304,076 and 306,453 Class A shares issued and outstanding
30 31 
Additional paid-in capital2,493,769 2,521,145 
Accumulated other comprehensive loss(15,504)(10,906)
Accumulated deficit(1,537,062)(1,604,463)
Total stockholders’ equity941,233 905,807 
Total liabilities and stockholders’ equity$3,543,460 $2,959,253 
 
See the accompanying notes to condensed consolidated financial statements.
1

Table of Contents

PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
First Quarter of Fiscal
 20232024
Revenue:  
Product$401,161 $308,963 
Subscription services219,244 280,344 
Total revenue620,405 589,307 
Cost of revenue:  
Product125,484 96,213 
Subscription services68,495 79,747 
Total cost of revenue193,979 175,960 
Gross profit426,426 413,347 
Operating expenses:  
Research and development161,273 185,331 
Sales and marketing218,153 232,446 
General and administrative51,567 67,384 
Total operating expenses430,993 485,161 
Loss from operations(4,567)(71,814)
Other income (expense), net(6,181)11,749 
Loss before provision for income taxes(10,748)(60,065)
Provision for income taxes787 7,336 
Net loss$(11,535)$(67,401)
Net loss per share attributable to common stockholders, basic and diluted$(0.04)$(0.22)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted295,843 305,863 

 
See the accompanying notes to condensed consolidated financial statements.
2

Table of Contents
PURE STORAGE, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands, unaudited)

 
First Quarter of Fiscal
 20232024
Net loss$(11,535)$(67,401)
Other comprehensive (loss) income:  
Unrealized net (losses) gains on available-for-sale securities
(10,487)4,866 
Less: reclassification adjustment for net losses (gains) on available-for-sale securities included in net loss7 (268)
Change in unrealized net (losses) gains on available-for-sale securities(10,480)4,598 
Comprehensive loss$(22,015)$(62,803)


 See the accompanying notes to condensed consolidated financial statements.
3

Table of Contents
PURE STORAGE, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, unaudited)
First Quarter of Fiscal 2023
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of fiscal 2022292,633 $29 $2,470,943 $(8,365)$(1,708,271)$754,336 
Cumulative-effect adjustment from adoption of ASU 2020-06
— — (133,265)— 98,138 (35,127)
Issuance of common stock upon exercise of stock options1,233 — 11,433 — — 11,433 
Stock-based compensation expense— — 75,685 — — 75,685 
Vesting of restricted stock units3,608 1 (1)— —  
Tax withholding on vesting of equity awards(295)— (10,194)— — (10,194)
Common stock issued under employee stock purchase plan2,087 — 19,396 — — 19,396 
Repurchases of common stock(2,134)— (66,420)— — (66,420)
Other comprehensive loss— — — (10,480)— (10,480)
Net loss— — — — (11,535)(11,535)
Balance at the end of the first quarter of fiscal 2023
297,132 $30 $2,367,577 $(18,845)$(1,621,668)$727,094 

First Quarter of Fiscal 2024
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of fiscal 2023304,076 $30 $2,493,769 $(15,504)$(1,537,062)$941,233 
Issuance of common stock upon exercise of stock options790 — 4,619 — — 4,619 
Stock-based compensation expense— — 78,665 — — 78,665 
Vesting of restricted stock units3,670 1 (1)— —  
Tax withholding on vesting of restricted stock units(281)— (6,759)— — (6,759)
Common stock issued under employee stock purchase plan1,069 — 21,219 — — 21,219 
Repurchases of common stock(2,872)— (69,911)— — (69,911)
Issuance of common stock upon conversion of convertible senior notes1 — (456)— — (456)
Other comprehensive income— — — 4,598 — 4,598 
Net loss— — — — (67,401)(67,401)
Balance at the end of the first quarter of fiscal 2024
306,453 $31 $2,521,145 $(10,906)$(1,604,463)$905,807 

See the accompanying notes to condensed consolidated financial statements.
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PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

 
First Quarter of Fiscal
 20232024
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(11,535)$(67,401)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization22,663 29,690 
Stock-based compensation expense74,571 77,830 
Other947 (1,804)
Changes in operating assets and liabilities:
Accounts receivable, net196,129 221,205 
Inventory(1,699)308 
Deferred commissions15,309 (2,331)
Prepaid expenses and other assets(11,742)(6,095)
Operating lease right-of-use assets7,749 11,001 
Accounts payable(7,419)(3,993)
Accrued compensation and other liabilities(88,963)(89,082)
Operating lease liabilities(8,480)(6,100)
Deferred revenue32,602 10,019 
Net cash provided by operating activities220,132 173,247 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(32,810)(51,424)
Purchases of marketable securities(17,251)(128,788)
Sales of marketable securities 43,040 
Maturities of marketable securities116,175 288,373 
Net cash provided by investing activities66,114 151,201 
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from exercise of stock options11,405 4,630 
  Proceeds from issuance of common stock under employee stock purchase plan19,396 21,219 
  Principal payments on borrowings and finance lease obligations(251,395)(576,780)
  Proceeds from borrowings 100,000 
  Tax withholding on vesting of equity awards(10,194)(6,759)
  Repurchases of common stock(66,420)(69,911)
Net cash used in financing activities(297,208)(527,601)
Net decrease in cash, cash equivalents and restricted cash(10,962)(203,153)
Cash, cash equivalents and restricted cash, beginning of period476,743 591,398 
Cash, cash equivalents and restricted cash, end of period$465,781 $388,245 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
Cash and cash equivalents$455,237 $378,285 
Restricted cash10,544 9,960 
Cash, cash equivalents and restricted cash, end of period$465,781 $388,245 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest$715 $390 
Cash paid for income taxes$1,848 $9,328 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION 
Property and equipment purchased but not yet paid$6,413 $22,036 

See the accompanying notes to condensed consolidated financial statements.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Business Overview
Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are now headquartered in Santa Clara, California and have wholly owned subsidiaries throughout the world.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
We operate using a 52/53 week fiscal year ending on the first Sunday after January 30, which for fiscal 2023 was February 5, 2023 and for fiscal 2024 will be February 4, 2024. The first quarter of fiscal 2023 and 2024 ended on May 8, 2022 and May 7, 2023. Unless otherwise stated, all dates refer to our fiscal year and fiscal quarters.
The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2023.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2024 or any future period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, stock-based compensation, provision for income taxes including related reserves, fair value of equity assumed, intangible and tangible assets acquired and liabilities assumed for business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Restricted Cash
Restricted cash is comprised of cash collateral for letters of credit related to our leases and for a vendor credit card program. At the end of fiscal 2023 and the first quarter of fiscal 2024, we had restricted cash of $10.5 million and $10.0 million.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3. Financial Instruments
Fair Value Measurements
We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Three levels of inputs may be used to measure fair value:
Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.
Cash Equivalents, Marketable Securities and Restricted Cash
We measure our cash equivalents, marketable securities, and restricted cash at fair value on a recurring basis. We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories and their classification within the fair value hierarchy at the end of fiscal 2023 and the first quarter of fiscal 2024 (in thousands):
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 At the End of Fiscal 2023
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable SecuritiesRestricted Cash
Level 1      
Money market accounts$— $— $— $49,733 $39,189 $ $10,544 
Level 2      
U.S. government treasury notes425,977 170 (4,229)421,918 32,008 389,910  
U.S. government agencies23,795  (289)23,506  23,506  
Corporate debt securities527,164 901 (9,300)518,765  518,765  
Foreign government bonds4,797  (44)4,753  4,753  
Asset-backed securities61,371 281 (1,016)60,636  60,636  
Municipal bonds3,950  (168)3,782  3,782  
Total$1,047,054 $1,352 $(15,046)$1,083,093 $71,197 $1,001,352 $10,544 


 
At the End of the First Quarter of Fiscal 2024
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable
Securities
Restricted Cash
Level 1
Money market accounts$— $— $— $28,305 $18,345 $ $9,960 
Level 2       
U.S. government treasury notes253,286 634 (2,885)251,035  251,035  
U.S. government agencies18,991 18 (95)18,914  18,914  
Corporate debt securities479,168 1,049 (7,091)473,126  473,126  
Foreign government bonds1,590  (31)1,559  1,559  
Asset-backed securities57,826 275 (838)57,263  57,263  
Municipal bonds3,950  (132)3,818  3,818  
Total$814,811 $1,976 $(11,072)$834,020 $18,345 $805,715 $9,960 
 
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
 
At the End of the First Quarter of Fiscal 2024
 Amortized CostFair Value
Due within one year$358,506 $353,414 
Due in one to five years456,305 452,301 
Total$814,811 $805,715 
Unrealized losses on our marketable securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The decline in fair value of our marketable securities is largely due to the rising interest rate environment driven by current market conditions that has resulted in higher credit spreads. The credit ratings associated with our marketable securities are highly rated and the issuers continue to make timely principal and interest payments. As a result, there were no credit or non-credit impairment charges recorded in the first quarter of fiscal 2023 and 2024.
The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss position at the end of fiscal 2023 and the first quarter of fiscal 2024, aggregated by investment category (in thousands):
At the End of Fiscal 2023
Less than 12 monthsGreater than 12 monthsTotal
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. government treasury notes$250,046 $(130)$127,976 $(4,099)$378,022 $(4,229)
U.S. government agencies5,194 (5)18,312 (284)23,506 (289)
Corporate debt securities99,446 (330)277,717 (8,970)377,163 (9,300)
Foreign government bonds3,200 (5)551 (39)3,751 (44)
Asset-backed securities3,060 (25)22,221 (991)25,281 (1,016)
Municipal bonds  3,782 (168)3,782 (168)
Total$360,946 $(495)$450,559 $(14,551)$811,505 $(15,046)

At the End of the First Quarter of Fiscal 2024
 Less than 12 monthsGreater than 12 monthsTotal
 Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. government treasury notes$21,981 $(40)$100,205 $(2,845)$122,186 $(2,885)
U.S. government agencies999 (1)14,505 (94)15,504 (95)
Corporate debt securities90,761 (363)242,140 (6,728)332,901 (7,091)
Foreign government bonds1,000  559 (31)1,559 (31)
Asset-backed securities6,626 (15)20,034 (823)26,660 (838)
Municipal bonds  3,818 (132)3,818 (132)
Total$121,367 $(419)$381,261 $(10,653)$502,628 $(11,072)
 Realized gains or losses on sale of marketable securities were not significant for all periods presented.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4. Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
At the End of
Fiscal 2023
First Quarter of Fiscal 2024
Raw materials$24,896 $22,919 
Finished goods25,256 28,902 
Inventory$50,152 $51,821 
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 
At the End of
 Fiscal 2023
First Quarter of Fiscal 2024
Test equipment$315,290 $331,828 
Computer equipment and software262,574 273,515 
Furniture and fixtures9,693 9,529 
Leasehold improvements71,235 90,699 
Capitalized software development costs15,806 19,557 
Total property and equipment674,598 725,128 
Less: accumulated depreciation and amortization(402,153)(422,234)
Property and equipment, net$272,445 $302,894 
Depreciation and amortization expense related to property and equipment was $19.3 million and $26.6 million for the first quarter of fiscal 2023 and 2024.
Intangible Assets, Net
Intangible assets, net consist of the following (in thousands):
 
At the End of
 Fiscal 2023
First Quarter of Fiscal 2024
Gross Carrying ValueAccumulated AmortizationNet Carrying AmountGross Carrying ValueAccumulated AmortizationNet Carrying Amount
Technology patents$19,125 $(14,826)$4,299 $19,125 $(15,146)$3,979 
Developed technology83,211 (43,366)39,845 83,211 (46,672)36,539 
Customer relationships6,459 (2,166)4,293 6,459 (2,397)4,062 
Trade name3,623 (2,838)785 3,623 (3,139)484 
Intangible assets, net$112,418 $(63,196)$49,222 $112,418 $(67,354)$45,064 
 
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
 Intangible assets amortization expense was $4.1 million and $4.2 million for the first quarter of fiscal 2023 and 2024. At the end of the first quarter of fiscal 2024, the weighted-average remaining amortization period was 1.4 years for technology patents, 2.8 years for developed technology, 4.4 years for customer relationships, and 0.4 years for trade name. We record amortization of technology patents in general and administrative expenses due to their defensive nature, developed technology in cost of product revenue, and customer relationships and trade name in sales and marketing expenses in the condensed consolidated statements of operations.
At the end of the first quarter of fiscal 2024, future expected amortization expense for intangible assets is as follows (in thousands):
Fiscal Years EndingEstimated Future
Amortization Expense
Remainder of 2024$12,052 
202515,425 
202612,830 
20273,107 
20281,054 
Thereafter596 
Total$45,064 
Goodwill
As of the end of fiscal 2023 and the first quarter of fiscal 2024, goodwill was $361.4 million. There were no impairments to goodwill during the first quarter of fiscal 2023 and 2024.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
At the End of
 Fiscal 2023
First Quarter of Fiscal 2024
Taxes payable $16,615 $9,873 
Accrued marketing14,228 10,674 
Accrued cloud and outside services7,644 4,799 
Supply chain-related accruals (1)
23,545 29,158 
Accrued service logistics and professional services7,927 6,414 
Acquisition earn-out and deferred consideration3,556 4,428 
Finance lease liabilities, current5,432 5,499 
Customer deposits from contracts with customers17,824 17,613 
Other accrued liabilities26,978 32,772 
Total accrued expenses and other liabilities$123,749 $121,230 
_________________________________
(1) Primarily consist of warranty reserves and accruals related to our inventory and inventory purchase commitments with our contract manufacturers.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 5. Deferred Revenue and Commissions
Deferred Commissions
Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts.
Changes in total deferred commissions during the periods presented are as follows (in thousands):
First Quarter of Fiscal
20232024
Beginning balance
$246,307 $245,856 
Additions26,484 35,101 
Recognition of deferred commissions(41,793)(32,769)
Ending balance$230,998 $248,188 
Of the $248.2 million total deferred commissions balance at the end of the first quarter of fiscal 2024, we expect to recognize approximately 28% as commission expense over the next 12 months and the remainder thereafter.
There was no impairment related to capitalized commissions for the first quarter of fiscal 2023 and 2024.
Deferred Revenue
Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services.
Changes in total deferred revenue during the periods presented are as follows (in thousands):
First Quarter of Fiscal
20232024
Beginning balance
$1,079,872 $1,385,650 
Additions244,580 280,268 
Recognition of deferred revenue(211,979)(270,248)
Ending balance$1,112,473 $1,395,670 
Revenue recognized during the first quarter of fiscal 2023 and 2024 from deferred revenue at the beginning of each respective period was $197.1 million and $244.7 million.
Remaining Performance Obligations
Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $1.8 billion at the end of the first quarter of fiscal 2024. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such unfulfilled product orders are excluded from RPO. Of the $1.8 billion RPO at the end of the first quarter of fiscal 2024, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 6. Debt
Convertible Senior Notes
In April 2018, we issued $575.0 million in principal amount of 0.125% convertible senior notes (the Notes) due April 15, 2023, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act and received proceeds of $562.1 million, after deducting the underwriters’ discounts and commissions. The Notes were senior unsecured obligations and governed by an indenture (the Indenture) between us, as the issuer, and U.S. Bank National Association, as trustee. The Indenture did not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. Interest was payable semi-annually in arrears on April 15 and October 15 of each year.
In April 2023, we repaid the entire principal balance with approximately $575.0 million in cash and 1,065 shares of our common stock.
The Notes consisted of the following (in thousands):
At the End of
Fiscal 2023
First Quarter of Fiscal 2024
Liability:
Principal$575,000 $ 
Less: debt issuance costs, net of amortization(494) 
Net carrying amount of the Notes$574,506 $ 
The following table sets forth total interest expense recognized related to the Notes for the first quarter of fiscal 2023 and 2024 (in thousands):
First Quarter of Fiscal
20232024
Amortization of debt issuance costs$648 $494 
Contractual interest expense179 136 
Total interest expense related to the Notes$827 $630 
Effective interest rate of the liability component0.6 %0.6 %
In connection with the offering of the Notes, we paid $64.6 million to enter into capped call transactions with certain of the underwriters and their affiliates (the Capped Calls), which gave us the option to purchase up to a total of 21,884,155 shares of our common stock to offset the dilution and/or any cash payments in excess of the principal amount upon conversion of the Notes at maturity, with such offset subject to a cap of $39.66 per share (which represented a premium of 100% over the last reported sales price of our common stock on April 4, 2018), subject to certain adjustments. The cost of the Capped Calls was accounted for as a reduction to additional paid-in capital on the condensed consolidated balance sheet. The Capped Calls were not exercised and expired in April 2023.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Revolving Credit Facility
In August 2020, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for a five-year, senior secured revolving credit facility of $300.0 million (Credit Facility). Proceeds from the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility expires, absent default or early termination by us, on the earlier of (i) August 24, 2025 or (ii) 91 days prior to the stated maturity of the Notes unless, on such date and each subsequent day until the Notes are paid in full, the sum of our cash, cash equivalents and marketable securities and the aggregate unused commitments then available to us exceed $625.0 million.
In March 2023, we amended the Credit Facility to transition LIBOR to the Secured Overnight Financing Rate (SOFR) effective April 1 2023. The annual interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% or term SOFR (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 1.50% to 2.25%. Interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on term SOFR (or at each three-month interval if the interest period is longer than three months). We are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25% to 0.40% per annum, payable quarterly in arrears.
In February 2022, we repaid, in full, the $250.0 million outstanding under the Credit Facility. Prior to repayment, the outstanding loan bore weighted-average interest at an annual rate of 1.61% based on a one-month LIBOR period resulting in interest expense of $0.3 million during the first quarter of fiscal 2023.
In April 2023, we borrowed $100.0 million under the Credit Facility which remained outstanding at the end of the first quarter of fiscal 2024. The outstanding loan bore weighted-average interest at an annual rate of 6.38% based on a one-month term SOFR period resulting in interest expense of $0.4 million during the first quarter of fiscal 2024.
Loans under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter: a Consolidated Leverage Ratio not to exceed 4.5:1 and an Interest Coverage Ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of the first quarter of fiscal 2024.
Note 7. Commitments and Contingencies
Letters of Credit
At the end of fiscal 2023 and the first quarter of fiscal 2024, we had outstanding letters of credit in the aggregate amount of $8.0 million in connection with our facility leases. The letters of credit are collateralized by either restricted cash or the Credit Facility and mature on various dates through September 2030.
Legal Matters
From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, no material loss contingency has been recorded on our condensed consolidated balance sheet as of the end of the first quarter of fiscal 2024.
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PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Indemnification
Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.
Note 8. Leases
We lease office facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.
In June 2022, we entered into an eight-year sublease through July 2030 for a new headquarters facility in Santa Clara, California with total lease payments of $100.2 million that include rent escalation and abatement clauses. The sublease of space with total lease payments of $89.4 million commenced in August 2022. Additional space with lease payments of $10.8 million will commence in May 2024 and end in July 2030 and therefore are excluded from our future lease payments disclosure below.
We also lease certain engineering test equipment under financing agreements. These finance leases are three years and contain a bargain purchase option at the end of the respective lease term. It is reasonably certain that the bargain purchase option will be exercised.
The components of lease costs during the periods presented were as follows (in thousands):
First Quarter of Fiscal
20232024
Fixed operating lease cost$10,318 $14,001 
Variable lease cost (1)
1,890 2,084 
Short-term lease cost (12 months or less)852 1,058 
Finance lease cost:
Amortization of finance lease right-of-use assets468 1,100 
Interest on finance lease liabilities40