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Pure Storage, Inc.

Pure Storage, Inc.PSTGEarnings & Financial Report

NYSE · Industrials · Computer Storage Devices

Pure Storage, Inc. is an American publicly traded technology company headquartered in Santa Clara, California, United States. It develops all-flash data storage hardware and software products. Pure Storage was founded in 2009 and developed its products in stealth mode until 2011. Afterwards, the company grew in revenues by about 50% per quarter and raised more than $470 million in venture capital funding, before going public in 2015. Initially, Pure Storage developed the software for storage ...

What changed in Pure Storage, Inc.'s 10-K — 2023 vs 2024

Top changes in Pure Storage, Inc.'s 2024 10-K

344 paragraphs added · 399 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

66 edited+35 added−29 removed16 unchanged
Our marketing effort consists primarily of product, field, channel, solutions, digital marketing and public relations. Research and Development Our research and development efforts are focused on innovation, building new features and functionality for our existing products and subscription services, developing software, and building new products.
Our marketing effort consists primarily of product, field, channel, solutions, digital marketing and public relations. Research and Development Our research and development efforts are focused on innovation, building new features and functionality for our existing products and subscription services, developing software, and building new solutions.
Flash Software and Integrated Hardware Leadership We pioneered the use of solid-state, All-Flash technology in enterprise storage with a clean-slate approach to building Flash-based systems and have continued to expand our leadership position and technology differentiation across our tightly integrated software and hardware. Our Purity Software was designed from the ground-up to maximize the benefits of solid-state storage.
We pioneered the use of solid-state, All-Flash technology in enterprise storage with a clean-slate approach to building Flash-based systems and have continued to expand our leadership position and technology differentiation across our tightly integrated software and hardware. Purity Operating Software Our Purity Software was designed from the ground-up to maximize the benefits of solid-state storage.
We provide our contract manufacturers with a rolling forecast for anticipated orders, which our contract manufacturers use to build finished products. The product mix and volumes are adjusted based on anticipated demand and actual sales and shipments in prior periods.
We provide our contract manufacturers with a rolling forecast for anticipated orders, which our contract manufacturers use to build finished products. The products mix and volumes are adjusted based on anticipated demand and actual sales and shipments in prior periods.
Cloud Block Store is software-delivered, requires no dedicated hardware running in the public cloud or internet colocation data centers, and is designed to be multi-cloud, presently supporting Amazon Web Services and Microsoft Azure.
Cloud Block Store is software-delivered, requires no dedicated hardware running in the public cloud or internet colocation data centers, and is designed to be multi-cloud, supporting Amazon Web Services and Microsoft Azure.
Our technology partners include application partners such as VMWare, Microsoft, Oracle and SAP, cloud partners such as Microsoft Azure, AWS,Google, and IBM, data protection partners such as Cohesity, Commvault and Veeam and infrastructure partners such as Cisco and NVIDIA.
Our technology partners include application partners such as VMWare, Microsoft, Oracle and SAP, cloud partners such as Microsoft Azure, AWS, Google, and IBM, data protection partners such as Commvault and Veeam, and infrastructure partners such as Cisco and NVIDIA.
We work closely with our contract manufacturers to meet our product delivery requirements and to manage the manufacturing process and quality control. We also utilize a range of training and assessment tools from the Responsible Business Alliance to support continuous improvement in the social, environmental and ethical responsibility of our supply chain.
We work closely with our contract manufacturers to meet our products delivery requirements and to manage the manufacturing process and quality control. We also utilize a range of training and assessment tools from the Responsible Business Alliance to support continuous improvement in the social, environmental and ethical responsibility of our supply chain.
Total Rewards We provide competitive and fair compensation and innovative benefit offerings. We regularly benchmark our programs against the market to ensure we are delivering competitive salaries, variable pay and equity awards as well as health and welfare benefits to employees. We offer a comprehensive and tailored set of benefits to employees and their families.
Total Rewards We provide competitive and fair compensation and inclusive benefit offerings. We regularly benchmark our programs against the market to ensure we are delivering competitive salaries, variable pay and equity awards as well as health and welfare benefits to employees. We offer a comprehensive and tailored set of benefits to employees and their families.
Managing each of these data services in a dynamic, Kubernetes world is complex and time-consuming. With PDS , DevOps engineers can deploy managed, production-grade data services with the click of a button, on and across private and public clouds.
Managing each of these data services in a dynamic, Kubernetes world is complex and time-consuming. With Portworx Data Services , DevOps engineers can deploy managed, production-grade data services with the click of a button, on and across private and public clouds.
Expand All-Flash into new use cases served by disk today We continue to drive industry disruption by further expanding flash into historical disk use cases, leveraging our flash software leadership, currently with QLC. We see a tremendous growth opportunity as Flash economics coupled with the growth in unstructured data disrupt the current hybrid and mechanical disk market.
Expand All-Flash into new use cases served by disk today We continue to drive industry disruption by further expanding flash into historical disk use cases, leveraging our flash software leadership, currently with quad-level cell (QLC) flash. We see a tremendous growth opportunity as flash economics coupled with the growth in unstructured data disrupt the current hybrid and mechanical disk market.
In addition, we work closely with our technology partners through co-marketing and lead-generation activities in an effort to broaden our marketing reach and help us win new customers and retain existing ones. 10 Marketing. Our marketing is focused on building our brand reputation and market awareness, communicating product advantages and demand generation for our sales force and channel partners.
In addition, we work closely with our technology partners through co-marketing and lead-generation activities in an effort to broaden our marketing reach and help us win new customers and retain existing ones. 9 Marketing. Our marketing is focused on building our brand reputation and market awareness, communicating our Platform advantages and demand generation for our sales force and channel partners.
Our Purity software is shared across our products and provides leading enterprise-class data services such as always-on data-reduction, data protection and encryption, as well as a wide range of storage protocols such as block, file and object. The advantages unlocked by our Purity software are significantly amplified by our integrated DirectFlash hardware technology.
Our Purity software is shared across our flash-optimized systems and provides leading enterprise-class data services such as always-on data-reduction, data protection and encryption, as well as a wide range of storage protocols such as block, file and object. The advantages unlocked by our Purity software are significantly amplified by our integrated DirectFlash hardware technology.
Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. 14
Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. 13
Our business growth presents us with the opportunity to attract talent and provide competitive employee value propositions in terms of work environment, pay, benefits, professional development and career growth opportunities that help meet the varying needs of our workforce. Our human capital strategy is developed by our executive committee and led by our Chief Human Resources Officer (CHRO).
Our business growth presents us with the opportunity to attract talent and provide competitive employee value propositions in terms of work environment, pay, benefits, professional development and career growth opportunities that help meet the varying needs of our workforce. Our human capital strategy is developed by our executive committee and led by our Chief Administrative and Legal Officer (CALO).
The entire Portworx suite, inclusive of Portworx Enterprise, PX-Backup, and Portworx Data Services, is available as-a-service. 8 • Portworx Data Services ( PDS ) is the industry’s first Database-as-a-Service Platform for Kubernetes. Modern applications are composed of dozens or even hundreds of microservices, often supported by multiple data services.
The entire Portworx suite, inclusive of Portworx Enterprise, PX-Backup, and Portworx Data Services , is available as-a-service. • Portworx Data Services is the industry’s first Database-as-a-Service Platform for Kubernetes. Today's applications are composed of dozens or even hundreds of microservices, often supported by multiple data services.
We continually remind our employees that they are empowered to report concerns without fear of retaliation through our anonymous speak-up hotline and web portal or through their management chain, HR business partner, or Legal team. 13 Environmental, Social and Governance (ESG) We are committed to advancing our responsible ESG practices and impact across three key pillars: our technology, our operations, and our people.
We continually remind our employees that they are empowered to report concerns without fear of retaliation through our anonymous speak-up hotline and web portal or through their management chain, HR business partner, or Legal team. 12 Environmental, Social and Governance (ESG) We are committed to advancing our responsible ESG practices and impact across four key pillars: our technology, environmental, social, and governance.
We believe the principal competitive factors in the storage market are as follows: • Product and service innovation, features and enhancements, including ease of use, performance, reliability, scalability, and security; • Product and service pricing and total cost of ownership; • Product interoperability with customer networks and backup software; • Product designs that help customers reduce their carbon footprint and contribute to meeting their environmental sustainability and savings goals; 11 • Global sales and distribution capability, including an ability to build and maintain incumbent customer relationships; • Ability to take advantage of improvements in industry standard components; and • Customer support and service.
We believe the principal competitive factors in the storage market are as follows: • Product and service innovation, features and enhancements, including ease of use, performance, reliability, scalability, and security; • Product and service pricing and total cost of ownership; • Product interoperability with customer networks and backup software; • Product designs that help customers reduce their carbon footprint and contribute to meeting their environmental sustainability and savings goals; • Global sales and distribution capability, including an ability to build and maintain incumbent customer relationships; • Ability to take advantage of improvements in industry standard components; and • Customer support and service. 10 We believe we compete favorably with our competitors on these factors as we continue to take market share.
As most modern and new software development is shifting to cloud-native architectures, Portworx is the only data management platform that is able to provide robust enterprise-grade container-storage, coupled with data-protection workflows such as Kubernetes backup, DR and migration, and allows customers true portability between on-premise, hybrid cloud and multi-cloud environments.
As most modern and new software development is shifting to cloud-native architectures, Portworx is the only data management platform that is able to provide robust enterprise-grade container storage, coupled with data-protection workflows such as Kubernetes backup, disaster recovery and migration, and enable portability between on-premise, hybrid cloud and multi-cloud environments.
Today, we are in approximately 58% of Fortune 500 companies, and the loyalty of our customers is reflected in our market-leading, certified customer Net Promoter Score (NPS) of 81.4 as of December 31, 2022. Sales and Marketing Sales. We sell our products and subscription services using a direct sales force and our channel partners.
Today, we are in approximately 60% of Fortune 500 companies, and the loyalty of our customers is reflected in our market-leading, certified customer Net Promoter Score (NPS) of 82 as of December 31, 2023. Sales and Marketing Sales. We sell our products and subscription services using a direct sales force and our channel partners.
With deployment options from the industry’s broadest catalog of databases for SQL, NoSQL, search, streaming, and more, PDS helps developers get started faster. PDS also fully automates Day-2 operations, including monitoring, backups, high availability, DR, migration, auto-scaling, and security.
With deployment options from the industry’s broadest catalog of databases for SQL, NoSQL, search, streaming, and more, Portworx Data Services helps developers get started faster. Portworx Data Services also fully automates Day-2 operations, including monitoring, backups, high availability, disaster recovery, migration, auto-scaling, and security.
Our Portworx software product is the leader in the enterprise Kubernetes/container data space, providing customers a secure solution to both their primary container storage needs, as well as their critical data workflows like backup, DR and migration.
Our Portworx software solution is the leader in the enterprise Kubernetes/container data space, providing customers a secure solution for both their primary container storage needs, as well as their critical data workflows like backup, disaster recovery and migration.
Our products integrate both software and hardware innovations, and accordingly, our research and development teams employ both software and hardware engineers in the design, development, testing, certification and support of our products. Our research and development teams are primarily based in Mountain View, California, Prague, Czech Republic, Bangalore, India, Bellevue, Washington, and Vancouver, Canada.
Our Platform integrates both software and hardware innovations, and accordingly, our research and development teams employ both software and hardware engineers in the design, development, testing, certification and support of our products. Our research and development teams are primarily based in Santa Clara, California, Prague, Czech Republic, Bangalore, India, Bellevue, Washington, and Vancouver, Canada.
Some large-scale cloud providers, known for developing storage systems internally, offer alternatives to our products for a variety of customer workloads. Our market attracts new startups and more highly specialized vendors, as well as other vendors that may continue to acquire or bundle products that compete with our offerings. All of our competitors utilize a broad range of competitive strategies.
Some large-scale cloud providers, known for developing storage systems internally, offer alternatives to our data storage solutions for a variety of customer workloads. Our market attracts new startups and more highly specialized vendors, as well as other vendors that may continue to acquire or bundle products that compete with our offerings.
Item 1. Business. Overview Data is foundational to our customers’ business transformation, and we are focused on delivering innovative and disruptive data storage, products and services that enable customers to maximize the value of their data.
Item 1. Business. Overview Data is foundational to our customers’ business transformation, and we are focused on delivering an innovative and disruptive data storage platform that enables customers to maximize the value of their data.
We employ over 5,100 employees globally - approximately 3,400 in the U.S. and over 1,700 internationally as of the end of fiscal 2023. Our workforce is distributed across over 30 countries and we continue to expand our location strategy to ensure we can obtain the right skills and have a global mindset with diversity of thinking.
We employ nearly 5,600 employees globally - approximately 3,500 in the U.S. and over 2,000 internationally as of the end of fiscal 2024. Our workforce is distributed across over 30 countries and we continue to expand our location strategy to ensure we can obtain the right skills and have a global mindset with diversity of thinking.
We have deployed our products and subscription services to customers across multiple industry verticals and geographies. We define a customer as an entity that purchases our products and services either from one of our channel partners or from us directly. Our enterprise business model supports the largest global organizations, including hyperscalers and managed service providers (MSPs).
We define a customer as an entity that purchases our products and services either from one of our channel partners or from us directly. Our enterprise business model supports the largest global organizations, including hyperscalers and managed service providers (MSPs).
The CHRO delivers human capital reports to our Board of Directors and compensation and talent committee on a quarterly basis. 12 Attracting, Developing and Retaining Talent In fiscal 2023, we grew headcount by approximately 22%, predominantly to advance our innovation, customer experience, and sales coverage.
The CALO delivers human capital reports to our Board of Directors and compensation and talent committee on a quarterly basis. Attracting, Developing and Retaining Talent In fiscal 2024, we grew headcount to advance our innovation, customer experience, and sales coverage.
Diversity, Equity, and Inclusion (DEI) We continue to make strides to advance DEI. We believe that "walking the talk" on DEI is not only the right thing to do, but it results in stronger innovation, improved workplace culture and a stronger bottom line. Some of our efforts on DEI include: • Advancing DEI from the top.
We believe that "walking the talk" on DEI is not only the right thing to do, but it results in stronger innovation, improved workplace culture and a stronger bottom line. Our DEI initiatives include: • Advancing DEI from the top.
We are empowering our customers to run and operate storage as-a-service, for both traditional and modern applications. We are committed to delivering a hybrid cloud architecture and advancing in the high-growth space of cloud-native applications.
We are empowering our customers to run and operate storage as-a-service, for both traditional and modern applications. We are committed to delivering a hybrid cloud architecture which includes Portworx.
FlashArray was the industry’s first all-flash array and is driving the industry-wide transition from disk to Flash. FlashArray pioneered the approach of software designed from the ground-up for Flash and set the stage for industry leading simplicity, reliability, and rich data services.
FlashArray pioneered the approach of software designed from the ground-up for Flash and set the stage for industry leading simplicity, reliability, and rich data services.
FlashArray has evolved through seven generations of controllers, a 100x increase in density, and a transition to all-NVMe flash - all delivered to customers non-disruptively through our Evergreen service. ◦ FlashArray//C delivers the benefits of NVMe flash, performance and consolidation to simplify Tier-2 storage estates.
FlashArray has evolved through seven generations of controllers, a 100x increase in density, and a transition to all-NVMe flash - all delivered to customers non-disruptively through our Evergreen service. • FlashArray//X delivers next-gen performance for mission critical workloads.
Intellectual Property Our success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secret laws, license agreements, confidentiality procedures, employee disclosure and invention assignment agreements and other contractual rights.
To establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secret laws, license agreements, confidentiality procedures, employee disclosure and invention assignment agreements and other contractual rights. We have over 2,500 issued patents and patent applications in the United States and foreign countries.
Employee listening tools and data sources indicate that our high employee engagement is a key enabler of the positive customer experience and strong net promoter scores. Our Employee Voice Survey is implemented and assessed through a third party vendor. It focuses on measuring employee engagement, organization, team and manager effectiveness, equity, inclusion and belonging, career development and mental health.
Employee listening tools and data sources indicate that our high employee engagement is a key enabler of the positive customer experience and strong net promoter scores. Our employee Pulse of Pure Survey is implemented and assessed through a third party vendor.
Our employee NPS has been consistently high since we started this survey a few years ago. A key tenant of our culture is our commitment to integrity, respect and a safe work environment which is supported by our Speak Up Policy, Code of Conduct, and annual Culture of Compliance survey.
A key tenant of our culture is our commitment to integrity, respect and a safe work environment which is supported by our Speak Up Policy, Code of Conduct, and annual Pure Ethics and Compliance Pulse survey.
Modernizing Operations We are committed to helping customers modernize their operations by delivering modern cloud-oriented services, management and automation to customers across their on-premises, private and public cloud environments.
Cloud Operating Model We deliver modern cloud-oriented services, management and automation to customers across their on-premises, private and public cloud environments.
Portworx , along with Cloud Block Store , allows us to help customers make their hybrid-cloud real by enabling them to run and deploy both traditional and cloud-native apps on-premise and in-cloud with the same process and operations. Pure Fusion and PDS extend our promise to deliver a true hybrid cloud architecture to hybrid environments.
Portworx , along with Cloud Block Store , allows us to help customers operationalize their hybrid-cloud environment by enabling them to run and deploy both traditional and cloud-native apps on-premise and in-cloud with the same process and operations. 4 Pure Fusion and Portworx Data Services delivers a true hybrid cloud architecture to hybrid environments. and Pure Fusion extends the cloud operating model by automating the delivery of our storage offerings with a Kubernetes-delivered control plane.
Pure Fusion extends the cloud operating model by automating the delivery of our storage offerings with a Kubernetes-delivered control plane. PDS creates another first mover advantage as we enable IT departments of our customers to provide and manage sophisticated data services with rapid deployment, scaling, management and self-service onboarding for their line of business users.
Portworx Data Services creates another first mover advantage as we enable IT departments to provide and manage sophisticated data services with rapid deployment, scaling, management and self-service onboarding for their line of business users. 4.
Our vision integrates our foundation of simplicity and reliability with three major market trends that are impacting all organizations large and small: (1) adoption of the cloud operating model everywhere; (2) the increase of modern cloud-native applications; and (3) the shift to modernizing today’s data infrastructure with all-flash.
Our vision of an all-flash data center integrates our foundation of simplicity and reliability with four major market trends that are impacting all organizations large and small: (1) increasing demand to consume data storage as a service; (2) the shift to modernizing today's data infrastructure with all-flash; (3) the increase of modern cloud-native applications; and (4) increasing demand for data storage to support the acceleration in artificial intelligence (AI) adoption while managing rising energy costs.
Pure Fusion is delivered through a Software-as-a-Service (SaaS) management plane and enables storage administrators to unify storage arrays and optimize storage pools. Pure Fusion allows administrators to offer storage through customized storage service classes providing storage consumers on-demand API-access to storage services, while automating previously complex tasks, such as storage provisioning, workload placement, workload mobility, and fleet rebalancing.
Pure Fusion allows administrators to offer storage through customized storage service classes providing storage consumers on-demand API-access to storage services, while automating previously complex tasks, such as storage provisioning, workload placement, workload mobility, and fleet rebalancing. • Evergreen Architecture Our differentiated Evergreen architecture enables our hardware storage systems to not become obsolete or require wholesale replacement like traditional systems.
In 2022, we launched the Inclusive Leadership Index (ILI) to recognize role model behaviors among our leaders at the VP level and above using several defined DEI factors. Annually, the leaders who attain role model results, according to the ILI, are recognized and given the opportunity to share their best practices internally. • Supporting employee community and connection.
Through our Inclusive Leadership Index (ILI) we recognize role model behaviors among our leaders at the VP level and above using several defined DEI factors. Quarterly our leaders review results, and develop actions, as needed, to improve their DEI metrics. • Supporting employee community and connection.
We strive to maximize the potential of our human capital resources by creating a respectful, inclusive work environment with training and development programs that enables our global employees to create products and services that furthers their career goals and our corporate mission. We also have global performance management, and internal mobility programs to enable employee development, growth and performance.
To foster our employees' and our success, we seek to create an environment where people can thrive and do their best work. We strive to maximize our employees' potential by creating a respectful, inclusive work environment with training and development programs that enable our global employees to create products and services that furthers their career goals and our corporate mission.
Evergreen//Flex provides the flexibility and adaptability to move performance and stranded capacity to where data and applications need it most, with the security and control that comes from ownership of the solution.
Evergreen//Flex provides the flexibility and adaptability to move performance and stranded capacity to where data and applications need it most, with the security and control that comes from ownership of the solution. • Cloud Block Store is an enterprise-grade, virtual block storage array that provides customers the flexibility to operate a hybrid cloud model with seamless data mobility across on-premises and public cloud environments.
We believe we compete favorably with our competitors on these factors as we continue to take market share. However, many of our competitors have substantially greater financial, technical and other resources, greater name recognition, larger sales and marketing budgets, broader distribution and larger and more mature intellectual property portfolios.
However, many of our competitors have substantially greater financial, technical and other resources, greater name recognition, larger sales and marketing budgets, broader distribution and larger and more mature intellectual property portfolios. Intellectual Property Our success depends in part upon our ability to protect our core technology and intellectual property.
We have over 2,500 issued patents and patent applications in the United States and foreign countries. We also license technology from third parties when we believe it will facilitate our product offerings or business.
We also license technology from third parties when we believe it will facilitate our product offerings or business.
Our products and subscription services support a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and include mission-critical production, test and development, analytics, disaster recovery (DR), and backup and recovery. Differentiated Technology Innovation and technology leadership is core to our culture, products and services, and future growth strategies.
Our data storage platform supports a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and includes mission-critical production, test and development, analytics, disaster recovery, backup and restore, AI and machine learning.
This deep integration of hardware and software allows us to be a proven leader in all-flash performance, reliability and efficiency from mainstream triple-level cell (TLC) flash and capacity-oriented quad-level cell (QLC) flash that delivers unparalleled density. 5 While QLC can make flash more economical, it requires significantly more sophisticated management, optimization and tuning to use effectively.
With DirectFlash , we build Flash Modules designed to work directly with NAND Flash chips, highly integrated and optimized for our Purity software. This deep integration of hardware and software allows us to be a proven leader in all-flash performance, reliability and efficiency from mainstream triple-level cell (TLC) flash and capacity-oriented QLC flash that delivers unparalleled density.
With Evergreen//One , customers have flexibility to choose performance and capacity needs as well as where they consume and pay for their storage needs. • Pure Fusion brings the simplicity of the cloud operating model anywhere with on-demand consumption and back-end provisioning, delivering an autonomous storage-as-code management platform.
These elements form what we call the Cloud Operating Model delivered through our Pure Fusion , Evergreen architecture and Pure1 cloud management plane. • Pure Fusion Pure Fusion brings the simplicity of the cloud operating model anywhere with on-demand consumption and back-end provisioning, delivering an autonomous storage-as-code management platform.
Our ESG governance model is structured to ensure the appropriate amount of oversight, assessment, and management of ESG risks and opportunities across our organization. Our Board of Directors provides oversight of each pillar through its committees, with the Audit and Risk Committee overseeing Environment, the Compensation and Talent Committee overseeing Social and the Nominating and Corporate Governance Committee overseeing Governance.
Our ESG governance model is structured to ensure the appropriate amount of oversight, assessment, and management of ESG risks and opportunities across our organization and supply chain.
The benefits of QLC delivered by FlashArray//C are only achievable through our DirectFlash integrated hardware and software approach, and places us in a unique and differentiated position to accelerate the transition from disk to flash. ◦ FlashArray//XL , our latest addition to the family, sets a new bar of higher performance, scale and capacity for the most demanding workloads. ◦ FlashArray File Services .delivers enterprise level multi-protocol file storage on FlashArray.
FlashArray//C extends the core technology of FlashArray and DirectFlash technology to incorporate QLC flash to modernize and replace hybrid-flash and Tier-2 disk arrays. The benefits of QLC delivered by FlashArray//C are only achievable through our DirectFlash integrated hardware and software approach, and places us in a unique and differentiated position to accelerate the transition from disk to flash.
We have further extended this leadership by enabling customers to harness the cost efficiency of QLC while taming issues that SSD manufacturers have struggled with for years. In close collaboration with key QLC flash partners, we intend to drive our density roadmap for DirectFlash from the current 48TB to 300TB, building a 5x density advantage over our competition leveraging SSDs.
With DirectFlash , we are leading the industry, and accelerating the transition of disk to flash by replacing low-cost hybrid-flash and disk arrays. In close collaboration with key QLC flash partners, we intend to drive our density roadmap for DirectFlash from the current 75TB to 300TB, building a 5x density advantage over our competition who leverage SSDs.
We support employee wellness through customizable programs and offerings ranging from mental health coaching, therapy, as well as nutrition and exercise programs. Employee wellness is also supported through our flexible time off policy. Our Culture as a Competitive Advantage Our customer-first culture and commitment to innovation create a thriving company that customers, partners, employees and investors love.
We support employee wellness through customizable programs and offerings ranging from mental health coaching, therapy, as well as nutrition and exercise programs. Employee wellness is also supported through our flexible time off policy. • Pay for performance . Managers differentiate rewards based on business impact and how our employees model our values.
File Services delivers simplicity of management to a broad set of scale-up file data workloads including user data and department shares, content repositories such as Picture Archiving and Communication System (PACS) and video data, file-based applications, and now Network File System (NFS) datashares for virtual infrastructure. • Cloud Block Store provides customers with a consistent storage experience and flexibility to operate a hybrid cloud model, leveraging both on-premise and public cloud infrastructure.
File Services delivers simplicity of management to a broad set of scale-up file data workloads including user data and department shares, content repositories such as Picture Archiving and Communication System (PACS) and video data, file-based applications, and now Network File System (NFS) datashares for virtual infrastructure. • FlashBlade provides solutions for managing and processing unstructured data workloads of all types - from the most demanding modern "big data'' applications such as real-time log analytics and commercial High Performance Computing (HPC) to data protection and recovery.
We pioneered the Evergreen upgradable architecture that brings the benefits of the cloud operating model to an on-premises storage purchase. Evergreen//One extends the Evergreen architecture and subscription to deliver storage to customers as capacity and performance SLAs in a much more flexible, optimized and efficient manner.
Evergreen//One extends the Evergreen architecture and subscription to deliver data storage to customers as capacity and performance SLAs in a much more flexible, optimized and efficient manner. We are focused on providing these services through our technology rather than merely creating a financial and professional services construct. 2.
For more information about our key ESG initiatives, our progress on aligning to the Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) as well as other key standards and frameworks, see our ESG report at https://www.purestorage.com/company/corporate-social-responsibility.html. Available Information Our website address is www.purestorage.com.
For more information about our ESG priorities, alignment to Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), United Nations Sustainable Development Goals, and our planned alignment to the Task Force on Climate-related Financial Disclosures (TCFD), please see our fiscal 2023 ESG report at www.purestorage.com/ESG.
For instance, FlashBlade//E , a scale-out unstructured data repository built to handle exponential data growth with industry-leading energy efficiency will be priced at under $0.20 per gigabyte including three years of Evergreen service. Our extended advantage stems from three technology differentiators: Our leadership with direct-to-NAND software, our integrated hardware/software direct flash modules, and our data reduction capabilities.
For instance, our Pure//E family of products delivers flash reliability and efficiency at prices now comparable to traditional hard disk systems. Our extended advantage stems from three technology differentiators: Our leadership with direct-to-NAND software, our integrated hardware/software direct flash modules, and our data reduction capabilities.
Our core technology is also charting the path in the hyperscale and large enterprise environments for mainstream flash adoption which were previously dominated by mechanical / spinning disk. Our Customers Our global customer base is over 11,000 at the end of fiscal 2023. Both large enterprises and smaller organizations with limited IT expertise or budgets benefit from using our technology.
Our Customers Our global customer base is over 12,500 at the end of fiscal 2024. Both large enterprises and smaller organizations with limited IT expertise or budgets benefit from using our technology. We have deployed our products and subscription services to customers across multiple industry verticals and geographies.
Because of our highly sophisticated Flash management software requiring less NAND, we drive significant efficiency advantages over SSDs by eliminating over-provisioning, extending endurance and requiring far less common equipment. Modern unstructured data workloads, including artificial intelligence/machine learning (AI/ML), genomics, Internet of Things (IoT), self-driving vehicles, and analytics, are some of the largest generators of data.
Because our highly sophisticated flash management software requires less NAND, we drive significant efficiency advantages over SSDs by eliminating over-provisioning, extending endurance, requiring far less common equipment and reducing environmental impact. 3. Deliver hybrid cloud architecture and data services for modern applications We are extending our leadership position in delivering the cloud operating model and enabling cloud-native applications.
FlashBlade was the industry's first all-flash array optimized for modern unstructured file and object applications, and enables performance at multi-Petabyte scale. FlashBlade is a scale-out system built on hardware and software technology that FlashArray also shares, combining integrated software-defined networking that delivers revolutionary performance and simplicity.
FlashBlade is a scale-out system built on Purity and DirectFlash Modules, combining integrated software-defined networking that delivers revolutionary performance and simplicity.
With DirectFlash , we deliver the performance and density benefits of QLC flash, without compromising on efficiency, reliability or performance consistency. With DirectFlash , we are leading the industry, allowing us to accelerate the transition of disk to flash by replacing low-cost hybrid-flash and disk arrays.
While QLC can make flash more economical, it requires significantly more sophisticated management, optimization and tuning to use effectively. With DirectFlash , we deliver the performance and density benefits of QLC flash, without compromising on efficiency, reliability or performance consistency.
Our four strategic growth pillars are described below. Grow our subscription services business and drive differentiation with as-a-Service and Cloud operating model We are leading in the storage as-a-service market. We are outperforming the market because we are focused on providing these services through our technology rather than merely creating a financial and professional services construct.
Grow our subscription services business and drive differentiation with as-a-Service and Cloud operating model We are leading in the storage as-a-service market by leveraging our Evergreen upgradable architecture that brings the benefits of the cloud operating model to an on-premises storage purchase.
Priced at under $0.20 per gigabyte including three years of Evergreen service with consumption up to five times less power than the hard disk systems that it will replace, FlashBlade//E provides an acquisition cost that is competitive to disk with lower operational costs.
FlashBlade//E provides the benefits of all-flash at an acquisition cost that is comparable to disk-based alternatives with lower operational costs, including up to five times less power consumption. Cloud-Native Storage • Portworx by Pure Storage is the market leader in cloud-native Kubernetes data management.
DirectFlash allows us to build the most efficient and densest flash modules which has a direct effect on both cost and power efficiency - by providing higher capacity storage on a smaller hardware footprint, we lower the costs of our systems as well as their environmental footprint.
Our technology differentiators such as DirectFlash , provide significant environmental sustainability benefits by offering the most efficient and densest flash modules, leading to higher capacity storage with a smaller hardware footprint.
They meet regularly and work through VP and director level leaders who lead our internal ESG committees responsible for assessing, managing and progressing the integration of ESG priorities throughout our business operations. In fiscal 2023, we continued quantifying our greenhouse gas (GHG) emissions across scope 1, 2, and 3 and made a commitment to set Science Based Targets (SBTi).
Our ESG executive sponsors are the Chief Financial Officer, Chief Administrative and Legal Officer and Chief Technology Officer. They meet at least quarterly and work through VP and director level leaders who lead our internal ESG committees responsible for assessing, managing and progressing the integration of ESG principles and practices throughout our business operations and supply chain.
By focusing on All-Flash, our Purity software is able to deliver superior performance, reliability, cost, density and environmental sustainability efficiencies. • Performance - Purity optimizes how data is placed and accessed on Flash to dramatically reduce the overheads and inefficiencies introduced by solid state drives (SSDs), allowing us to drive both higher performance and greater predictability. • Reliability - Purity also makes it possible to optimize the use of Flash in our systems.
By focusing on All-Flash, our Purity software is able to deliver (1) superior performance by optimizing how data is placed and accessed on Flash, (2) reliability through optimizing the use of Flash in our systems, (3) density via our designed-for-flash algorithms, data structures and data reduction capabilities, and (4) environmental sustainability efficiencies through our integrated hardware and software thereby enabling our systems to use the same amount of data storage with significantly less power, space and e-waste.
Cloud Block Store is based upon the same Purity software that powers FlashArray in on-premise environments, enabling customers to easily implement hybrid cloud workflows. • FlashBlade Platform provides solutions for unstructured data workloads of all types - from the most demanding modern "big data'' applications such as real-time and log analytics, artificial intelligence (AI), commercial High Performance Computing (HPC) to data protection and recovery.
Cloud Block Store is based upon the same Purity software that powers FlashArray in on-premise environments, enabling customers to easily implement hybrid cloud workflows. • Cloud Block Store for Azure VMware Solution (AVS) - In August 2023, we expanded our strategic partnership with Microsoft with the introduction of Cloud Block Store for AVS .
In addition, our Board of Directors receives an annual update on ESG practices and our progress in tracking towards our goals. Our ESG executive sponsors are the Chief Financial Officer, Chief Legal Officer and Chief Technology Officer.
Our Board of Directors provides ESG oversight through its committees, with the Audit and Risk Committee overseeing environmental, the Compensation and Talent Committee overseeing social and the Nominating and Corporate Governance Committee overseeing governance. In addition, our Board of Directors receives an annual update on our ESG policies, programs and year over year progress towards our goals.
FlashBlade's scale, simplicity, and multiple protocols allows customers to consolidate a diverse set of modern workloads while benefiting from cost-effective all-flash performance. ◦ FlashBlade//S , the next generation of the product, was introduced in fiscal 2023 with a new architecture that disaggregates resources to allow customers to scale in any direction, enabling a more diverse set of workloads. ◦ FlashBlade//E , a scale-out unstructured data repository that will be generally available by the end of April 2023, is built to handle exponential data growth with industry-leading energy efficiency.
FlashBlade's scale, simplicity, and multiple protocols allows customers to consolidate a diverse set of modern workloads while benefiting from cost-effective all-flash performance. • FlashBlade//S , a flexible all-QLC system that delivers scalable and sustained high performance to handle the most demanding workloads including computational analytics and AI, image search and recognition, electronic design automation, media special effects, high performance computing and data protection. 7 • FlashBlade//E , released in April 2023 as the first product in our Pure//E family, is a scale-out unstructured data repository for 4 PB or more of data that makes the management of unstructured data growth more efficient, reliable, and sustainable with an user experience and economics that enable organizations to eliminate the last remnants of disk in their data center.
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We have developed highly differentiated technology that is the foundation of our portfolio to create significant and sustainable competitive advantages.
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Our Strategic Growth Pillars Our four strategic growth pillars, driven by the above four market trends, are as follows: 1.
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This translates directly into high reliability and durability as well as longer service lifetimes of our arrays. • Efficiency - Designed-for-flash algorithms and data structures allow us to deliver significantly higher storage efficiency from Flash than magnetic disk-based software by reducing over-provisioning or wasted Flash that would otherwise be needed.
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Meet the customer demand for AI with our energy efficient Data Storage Platform AI adoption is accelerating across industries, yet most organizations lack the necessary infrastructure to handle the high-performance data demands and energy requirements essential for maximizing its benefits.
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Our Purity software also delivers data reduction (e.g., compression and deduplication) creating significant savings and efficiencies for our customers. • Environmental Benefits - Our Flash-optimized integrated hardware and software enables our products to deliver the same amount of data storage requiring significantly less power, space, cooling and e-waste when compared to both magnetic disk and competitive all-flash systems.
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We deliver unrivaled efficiency and performance at every step of the AI process, from data curation to model training to inference regardless of where customers sit in their AI adoption journey. Data Storage Platform Our data storage platform is revolutionizing the storage industry.
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With DirectFlash , we build Flash Modules designed to work directly with NAND Flash chips, highly integrated and optimized for our Purity software.
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We have built a unified data storage and management platform (Platform) comprised of highly differentiated all-flash technology, products and subscription services that helps organizations reduce the complexity, increase reliability, and reduce costs of their data infrastructure.
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Our increasing density roadmap for DirectFlash also substantially expands our cost and power efficiency advantages when compared to both disk and SSDs. Evergreen Architecture Our differentiated Evergreen architecture means that our products do not become obsolete or require wholesale replacement like traditional systems.
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Key benefits achieved through the adoption of our Platform include: • Simplified Infrastructure - Our Platform reduces the complexity and risks of traditional data infrastructure as our Purity Operating Software enables our customers to unify the majority of their fragmented block, file and object storage workloads onto a single storage and management environment that is simple to deploy, run and manage.
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Evergreen allows our arrays to be upgraded non-disruptively, enabling our customers to continuously benefit from the latest hardware and software technology, significantly reducing costly and unnecessary product replacements and associated e-waste.
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We use Purity Operating Software on all of our storage solutions and Cloud Block Store to deliver a consistent experience whether deployed in a cloud, on-premises or hybrid cloud environment.
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Several key technology elements are required to deliver on our Evergreen promise: • Future-proof Hardware - We design and build our hardware platforms for higher reliability and longer service lifetimes to provide our customers the maximum benefit of Flash.
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This single Platform environment makes accessing data easier and faster which is proving critical in an environment driven by AI that requires infrastructure that can handle high-performance data demands. • Operating like a Cloud - Powered by Purity , Pure1 cloud management, Evergreen architecture and Pure Fusion , the Platform operates like a cloud, delivering on-demand, self-service storage and managed data services backed by service level agreement (SLA) guarantees.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Finally, governments may require certain products to be manufactured in the United States and other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies.
Finally, governments may require certain products to be manufactured in the United States and other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell to certain governmental agencies.
The threats to information systems and information may include: traditional computer “hackers,” social engineering schemes (for example, attempts to induce fraudulent invoice payments or divert money to us), software bugs, malicious code (such as viruses and worms), personnel misconduct or error, faulty password management, theft, denial-of-service attacks (such as credential stuffing), advanced persistent threat intrusions, as well as attacks from nation-state and nation-state supported actors.
The threats to information systems and information may include: traditional computer “hackers,” social engineering schemes (for example, attempts to induce fraudulent invoice payments or divert money from us), software bugs, malicious code (such as viruses and worms), personnel misconduct or error, faulty password management, theft, denial-of-service attacks (such as credential stuffing), advanced persistent threat intrusions, as well as attacks from nation-state and nation-state supported actors.
Any intellectual property rights claim against us or our customers, suppliers, and channel partners, with or without merit, could be time-consuming and expensive to litigate or settle, could divert management’s resources and attention from operating our business and could force us to acquire intellectual property rights and licenses, which may involve substantial royalty payments.
Any intellectual property rights claim against us or our customers, suppliers, and channel partners, with or without merit, could be time-consuming and expensive to litigate or settle, divert management’s resources and attention from operating our business and force us to acquire intellectual property rights and licenses, which may involve substantial royalty payments.
These and potentially other future privacy regulations may require us to make further changes to our policies and procedures in the future beyond what we have already done. Our business could be impacted, to some extent, by the United Kingdom's exit from the European Union and related changes in law and regulation.
These and potentially other future privacy regulations may require us to make further changes to our policies and procedures beyond what we have already done. Our business could be impacted, to some extent, by the United Kingdom's exit from the European Union and related changes in law and regulation.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that our stockholders may deem advantageous.
These provisions: • establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time; • authorize the issuance of “blank check” preferred stock that our Board of Directors could issue to increase the number of outstanding shares to discourage a takeover attempt; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit stockholders from calling a special meeting of our stockholders; • provide that the Board of Directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions: • establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time; 32 • authorize the issuance of “blank check” preferred stock that our Board of Directors could issue to increase the number of outstanding shares to discourage a takeover attempt; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit stockholders from calling a special meeting of our stockholders; • provide that the Board of Directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
We anticipate that our operating costs and expenses will continue to increase in absolute terms. Even if we achieve or maintain significant revenue growth, we may experience losses, forgoing near-term profitability on a U.S. GAAP basis. Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty.
We anticipate that our operating expenses will continue to increase in absolute terms. Even if we achieve or maintain significant revenue growth, we may experience losses, forgoing near-term profitability on a U.S. GAAP basis. Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty.
The enhancement of all-flash storage products by incumbent vendors and changes or advances in alternative technologies or adoption of cloud storage offerings that do not utilize our storage platform could adversely affect the demand for our products. 16 Offerings from large public cloud providers are expanding quickly and serve as alternatives to our products for a variety of customer workloads.
The enhancement of all-flash storage products by incumbent vendors and changes or advances in alternative technologies or adoption of cloud storage offerings that do not utilize our Platform could adversely affect the demand for our Platform. Offerings from large public cloud providers are expanding quickly and serve as alternatives to our Platform for a variety of customer workloads.
Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at current levels or execute on our business strategy. Our long-term success depends, in part, on sales outside of the United States, which subjects us to costs and risks associated with international operations.
Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at current levels or execute on our business strategy. 26 Our long-term success depends, in part, on sales outside of the United States, which subjects us to costs and risks associated with international operations.
In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results and financial condition. 30 Governmental regulations affecting the import or export of products could negatively affect our revenue.
In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results and financial condition. Governmental regulations affecting the import or export of products could negatively affect our revenue.
Our business may be harmed by trends in the overall external storage market. Despite ongoing data growth, the external storage market in which we compete has not experienced substantial growth in the past few years due to a combination of technology transitions, increased storage efficiency, competitive pricing dynamics and changing economic and business environments.
Our business may be harmed by trends in the overall data storage market. Despite ongoing data growth, the data storage market in which we compete has not experienced substantial growth in the past few years due to a combination of technology transitions, increased storage efficiency, competitive pricing dynamics and changing economic and business environments.
If we fail to maintain compatibility of our products with these infrastructure components, our customers may not be able to fully utilize our products, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our products, which may harm our business, operating results and financial condition.
If we fail to maintain compatibility of our products with these infrastructure components, our customers may not be able to fully utilize our Platform, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our Platform, which may harm our business, operating results and financial condition.
Our culture fosters innovation, creativity, teamwork, passion for customers and focus on execution, and facilitates critical knowledge transfer and knowledge sharing. In particular, we believe that the difference between our sales, support and engineering cultures and those of incumbent vendors, is a key competitive advantage and differentiator for our customers and partners.
Our culture fosters innovation, creativity, teamwork, passion for customers and focus on execution, and facilitates critical knowledge sharing. In particular, we believe that the difference between our sales, support and engineering cultures and those of incumbent vendors, is a key competitive advantage and differentiator for our customers and partners.
In addition, failure to comply with such regulations could result in penalties, costs and restrictions on export privileges, which could harm our business, operating results and financial condition. We may acquire other businesses which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our operating results.
In addition, failure to comply with such regulations could result in penalties, costs and restrictions on export privileges, which could harm our business, operating results and financial condition. 30 We may acquire other businesses which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our operating results.
The sales prices of our products and services may fluctuate or decline for a variety of reasons, including competitive pricing pressures, discounts, the introduction of competing products or services or promotional programs, a change in our mix of products and services, cost of components, supply chain constraints and inflation and other adverse economic conditions.
The sales prices of our offerings may fluctuate or decline for a variety of reasons, including competitive pricing pressures, discounts, the introduction of competing products or services or promotional programs, a change in our mix of products and services, cost of components, supply chain constraints, inflation and other adverse economic conditions.
Although our Board of Directors has authorized a share repurchase program, this program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. The share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves.
Although our Board of Directors has authorized a share repurchase program, this program does not obligate us to repurchase any specific dollar amount or number of shares. The share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves.
Additionally, our competitors provide incentives to our existing and potential channel partners to use, purchase or offer their products and services or to prevent or reduce sales of our products and services. The occurrence of any of these events could harm our business, operating results and financial condition.
Additionally, our competitors may provide incentives to our existing and potential channel partners to use, purchase or offer their products and services or to prevent or reduce sales of our products and services. The occurrence of any of these events could harm our business, operating results and financial condition.
To the extent that these disruptions result in delays or cancellations of customer orders or the deployment of our products, our business, operating results and financial condition could be harmed. Item 1B. Unresolved Staff Comments. Not applicable.
To the extent that these disruptions result in delays or cancellations of customer orders or the deployment of our products, our business, operating results and financial condition could be harmed. 33 Item 1B. Unresolved Staff Comments. Not applicable.
If securities analysts do not publish research or reports about our business, or if they downgrade our stock, the price of our stock could decline. The trading market for our common stock will likely be influenced by research and reports that securities or industry analysts publish about us or our business.
If securities analysts do not publish research or reports about our business, or if they downgrade our stock, our stock price could decline. The trading market for our common stock will likely be influenced by research and reports that securities or industry analysts publish about us or our business.
The occurrence of any one of these risks could negatively affect our international operations and, consequently, our business, operating results and financial condition generally. Our international operations, as well as tax law changes, could expose us to potentially adverse tax consequences.
The occurrence of any of these risks could negatively affect our international operations and, consequently, our business, operating results and financial condition generally. Our international operations, as well as tax law changes, could expose us to potentially adverse tax consequences.
We may also be the subject of phishing attacks, viruses, malware installation, server malfunction, software or hardware failures, loss of data or other computer assets, adware and other similar issues.
We may also be the subject of phishing attacks, malware installation, server malfunction, software or hardware failures, loss of data or other computer assets, adware and other similar issues.
These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business and adversely affect our reputation or otherwise adversely affect our business. 26 If we are unable to attract, motivate and retain sales, engineering and other key personnel, including our management team, we may not be able to increase our revenue and our business, operating results and financial condition could be harmed.
These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business and adversely affect our reputation or otherwise adversely affect our business. 25 If we are unable to attract, motivate and retain sales, engineering and other key personnel, including our management team, we may not be able to increase our revenue and our business, operating results and financial condition could be harmed.
We face intense competition from a number of established companies that sell competitive storage products, including Dell EMC, HP Enterprise, Hitachi Vantara, IBM, NetApp and others.
We face intense competition from a number of established companies that sell competitive storage products, including Dell EMC, HP Enterprise, Hitachi Vantara, IBM, and NetApp.
Macroeconomic concerns and the pandemic have impacted our sales efforts, such as by shifting customer priorities and reducing in-person meetings or events. In addition, product purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative and other delays. Some of our customers make large concentrated purchases to complete or upgrade specific data storage deployments.
Macroeconomic concerns and the pandemic have impacted our sales efforts, such as by shifting customer priorities and reducing in-person meetings and events. In addition, purchases are frequently subject to our customers' budget constraints, multiple approvals and unplanned administrative and other delays. Some of our customers make large concentrated purchases to complete or upgrade specific data storage deployments.
These business models are relatively new to the storage market and will continue to evolve, and we may not be able to compete effectively, drive continued revenue growth or maintain the profitability with these business models. These business models require different accounting of our customer transactions, such as changing how we recognize revenue and capitalize commissions, among other things.
Our subscription offerings are relatively new to the storage market and will continue to evolve, and we may not be able to compete effectively, drive continued revenue growth or maintain profitability with these business models. Our subscription offerings require different accounting of our customer transactions, such as changing how we recognize revenue and capitalize commissions, among other things.
If we are required to decrease our prices to be competitive and are not able to offset this decrease by increases in the volume of sales or the sales of new products with higher margins, our gross margins and operating results could be adversely affected. 23 We have experienced growth in prior periods, and we may not be able to sustain future growth effectively or at all.
If we are required to decrease our prices to be competitive and are not able to offset this decrease by increases in the volume of sales or the sales of new products with higher margins, our gross margins and operating results could be adversely affected. 22 We have experienced growth in prior periods, and we may not be able to sustain future growth effectively or at all.
If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. 34 We have never paid dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. We have never paid dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.
Such operational changes could have a material adverse effect on our business, financial condition, results of operations or cash flows. As a result of these risks, we cannot assure investors that we will be able to obtain a sufficient supply of these key components in the future or that the cost of these components will not increase.
Such operational changes could have a material adverse effect on our business, financial condition, results of operations or cash flows. 17 As a result of these risks, we cannot assure investors that we will be able to obtain a sufficient supply of key product components in the future or that the cost of these components will not increase.
Additionally, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, disruptions in our services, loss of data, loss of income, significant extra expense to restore data or systems, reputational loss and the diversion of funds.
Additionally, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and could lead to significant interruptions, delays, or outages in our operations, disruptions in our services, loss of data, loss of income, significant extra expense to restore data or systems, reputational loss and the diversion of funds.
In order to reduce manufacturing lead times and plan for adequate component supply, from time to time we may issue orders for components and products that are non-cancelable and non-returnable. Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to make accurate forecasts and effectively manage the supply of our products and components.
In order to reduce manufacturing lead times and plan for adequate component supply, we may issue orders for components and products that are non-cancelable and non-returnable. Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to make accurate forecasts and effectively manage the supply of our products and components.
Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our products.
Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our Platform.
These claims could result in litigation and could require us to make our software source code freely available, seek licenses from third parties in order to continue offering our products for certain uses or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement.
These claims could result in litigation and could require us to make our software source code freely available, seek licenses from third parties in order to continue offering our Platform for certain uses or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement.
Our sales efforts involve educating our customers about the use and benefits of our products and often involves an evaluation process that can result in a lengthy sales cycle, particularly for larger customers and especially in an economic slowdown. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales.
Our sales efforts involve educating our customers about the use and benefits of our Platform and often involves an evaluation process that can result in a lengthy sales cycle, particularly for larger customers and especially in an economic slowdown. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales.
If we are unable to manage these factors effectively, our gross margins may decline, and fluctuations in gross margins may make it difficult to manage our business and achieve or maintain profitability, which could materially harm our business, operating results and financial condition. 22 Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
If we are unable to manage these factors effectively, our gross margins may decline, and fluctuations in gross margins may make it difficult to manage our business and achieve or maintain profitability, which could materially harm our business, operating results and financial condition. 21 Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
Risks Related to Our Operations If our security measures, or those maintained on our behalf, are compromised now, or in the future, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, products, communications or data is compromised, limited, or fails, our business could experience a material adverse impact, including without limitation, a material interruption to our operations, harm to our reputation, a loss of customers, significant fines, penalties and liabilities, or breach or triggering of data protection laws, privacy policies or other obligations.
Risks Related to Our Operations If our security measures, or those maintained on our behalf, are compromised, or the security, confidentiality, integrity or availability of our information technology, software, services, networks, products, communications or data is compromised, limited, or fails, our business could experience a material adverse impact, including without limitation, a material interruption to our operations, harm to our reputation, a loss of customers, significant fines, penalties and liabilities, or breach or triggering of data protection laws, privacy policies or other obligations.
Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our products, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal activities.
Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our Platform, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal activities.
Our products must conform to industry standards in order to be accepted by customers in our markets. Generally, our products comprise only a part of an IT environment. The servers, network, software and other components and systems deployed by our customers must comply with established industry standards in order to interoperate and function efficiently together.
Our Platform must conform to industry standards in order to be accepted by customers. Generally, our products comprise only a part of an IT environment. The servers, network, software and other components and systems deployed by our customers must comply with established industry standards in order to interoperate and function efficiently together.
This reliance on a limited number of suppliers and the lack of any guaranteed sources of supply exposes us to several risks, including: • the inability to obtain an adequate supply of key components, including flash; • price volatility for the components of our products; • failure of a supplier to meet our quality or production requirements; • failure of a supplier of key components to remain in business or adjust to market conditions; and • consolidation among suppliers, resulting in some suppliers exiting the industry, discontinuing the manufacture of components or increasing the price of components.
Our reliance on a limited number of suppliers and the lack of any guaranteed sources of supply exposes us to several risks, including: • the inability to obtain, or delay in obtaining, an adequate supply of key components, including flash; • price volatility for the components of our products; • failure of a supplier to meet our quality or production requirements; • failure of a supplier of key components to remain in business or adjust to market conditions; and • consolidation among suppliers, resulting in some suppliers exiting the industry, discontinuing the manufacture of components or increasing the price of components.
We may also incur unexpected costs associated with replacing defective hardware or ensuring that hardware remains interoperable and upgradable. Any of these errors, defects, bugs or security vulnerabilities may leave us, our products and our customers susceptible to exploitation, including by malicious actors.
We may also incur unexpected costs replacing defective hardware or ensuring that hardware remains interoperable and upgradable. Any of these errors, defects, bugs or security vulnerabilities may leave us, our products and our customers susceptible to exploitation, including by malicious actors.
In connection with these types of transactions, we may issue additional equity securities that would dilute our stockholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures and become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
In connection with these types of transactions, we may issue additional equity securities that dilute our stockholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures and become subject to adverse tax consequences, substantial impairment or deferred compensation charges.
Our products are highly technical and complex and are often used to store information critical to our customers’ business operations. Our products may contain errors, defects or security vulnerabilities that could result in data unavailability, loss, corruption or other harm to our customers.
Our products and software are highly technical and complex and are often used to store information critical to our customers’ business operations. Our Platform may contain errors, defects or security vulnerabilities that could result in data unavailability, loss, corruption or other harm to our customers.
We and our suppliers have operations in locations, including our headquarters in California, that are subject to earthquakes, fires, floods and other natural catastrophic events, such as severe weather and geological events, which could disrupt our operations or the operations of our customers and suppliers.
We and our suppliers have operations in locations, including our headquarters in California, that are subject to earthquakes, fires, floods and other natural catastrophic events, such as climate change, severe weather and geological events, which could disrupt our operations or the operations of our customers and suppliers.
Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, and to interruption by man-made factors such as war, computer viruses or terrorism or by the impact of public health epidemics or pandemics.
General Risk Factors Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, and to interruption by man-made factors such as war, computer viruses or terrorism or by the impact of public health epidemics or pandemics.
The agreement governing our senior secured revolving Credit Facility limits our ability, among other things, to: incur additional secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and incur liens.
The agreement governing our Credit Facility limits our ability, among other things, to incur additional secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and incur liens.
These challenges related to acquisitions or investments could harm our business and financial condition. 31 Risks Related to Our Credit Facility and Notes Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue business strategies.
These challenges related to acquisitions or investments could harm our business and financial condition. Risks Related to Our Credit Facility Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue business strategies.
In addition, our senior secured revolving Credit Facility contains financial and other restrictive covenants that limit our ability to engage in activities that may be in our long term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our senior secured revolving Credit Facility is outstanding.
In addition, our Credit Facility contains financial and other restrictive covenants that limit our ability to engage in activities that may be in our long term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our Credit Facility is outstanding.
If we fail to obtain required import or export approval for our products or its various components, or to timely provide requested documentation, our international and domestic sales could be harmed and our revenue may be adversely affected.
If we fail to obtain required import or export approval for our products or their various components, or to timely provide requested documentation, our international and domestic sales could be harmed and our revenue may be adversely affected.
Any failure to maintain or a market perception that we do not maintain, high-quality technical services and support could harm our reputation, our ability to sell our products to existing and prospective customers and our business.
Any failure to maintain or a market perception that we do not maintain, high-quality technical services and support could harm our reputation, our ability to sell our Platform to existing and prospective customers and our business.
As a result, it may be more difficult for us to ensure the proper delivery and installation of our products or the quality or responsiveness of the support and services being offered.
As a result, it may be more difficult for us to ensure the proper delivery and installation of our Platform or the quality or responsiveness of the support and services being offered.
We depend on companies that provide other systems in this ecosystem to conform to prevailing industry standards. These companies are often significantly larger and more influential in driving industry standards than we are. Some industry standards may not be widely adopted or implemented uniformly and competing standards may emerge that may be preferred by our customers.
We depend on companies that provide other systems in this ecosystem to conform to prevailing industry standards. These companies are often significantly larger and more influential in driving industry standards than we are. Some industry standards may not be widely adopted or implemented uniformly and competing standards may emerge that our customers prefer.
We sell our products to governmental agencies through our channel partners, and these agencies may have statutory, contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our future results of operations.
We sell our offerings to governmental agencies through our channel partners, and these agencies may have statutory, contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our results of operations.
Similarly, if we fail to introduce new or enhanced products, such as new or improved software features, that meet our customers' needs in a timely or cost-effective fashion, we may lose market share and our operating results could be adversely affected.
Similarly, if we fail to introduce new or enhanced Platform offerings, such as new or improved software features, that meet our customers' needs in a timely or cost-effective fashion, we may lose market share and our operating results could be adversely affected.
Some errors in our products may only be discovered after they have been installed and used by customers. We have, from time to time, identified vulnerabilities in our products.
Some errors in our Platform may only be discovered after they have been installed and used by customers. We have, from time to time, identified vulnerabilities in our Platform.
We cannot guarantee that our share repurchase program will enhance shareholder value, and share repurchases could affect the price of our common stock. Our Board of Directors has periodically authorized share repurchases, funded from available working capital, including up to $250.0 million authorized in March 2023. The repurchase authorization has no fixed end date.
We cannot guarantee that our share repurchase program will enhance shareholder value, and share repurchases could affect the price of our common stock. Our Board of Directors has periodically authorized share repurchases, funded from available working capital, including up to $250.0 million authorized in February 2024. The repurchase authorization has no fixed end date.
As a company headquartered in the United States, conducting and expanding international operations subjects us to costs and risks that we may not generally face in the United States, including: • exposure to foreign currency exchange rate risk; • difficulties in collecting payments internationally; • managing and staffing international operations; • public health pandemics or epidemics; • establishing relationships with channel partners in international locations; 27 • increased travel, infrastructure and legal compliance costs associated with international locations; • requirements to comply with a wide variety of laws and regulations associated with international operations, including taxes, customs and licensing requirements; • significant fines, penalties and collateral consequences if we or our partners fail to comply with anti-bribery laws; • heightened risk of improper, unfair or corrupt business practices in certain geographies; • potentially adverse tax consequences, including repatriation of earnings; • increased financial accounting and reporting burdens and complexities; • political, social and economic instability abroad, terrorist attacks, war and security concerns in general; and • reduced or varied protection for intellectual property rights in some countries.
As a company headquartered in the United States, conducting and expanding international operations subjects us to costs and risks that we may not face in the United States, including: • exposure to foreign currency exchange rate risk; • difficulties in collecting payments internationally; • managing and staffing international operations; • establishing relationships with channel partners in international locations; • increased travel, infrastructure and legal compliance costs associated with international locations; • requirements to comply with a wide variety of laws and regulations associated with international operations, including taxes, customs and licensing requirements; • significant fines, penalties and collateral consequences if we or our partners fail to comply with anti-bribery laws; • heightened risk of improper, unfair or corrupt business practices in certain geographies; • potentially adverse tax consequences, including repatriation of earnings; • increased financial accounting and reporting burdens and complexities; • political, social and economic instability abroad, terrorist attacks, war (such as the conflicts in Israel and Ukraine) and security concerns in general; and • reduced or varied protection for intellectual property rights in some countries.
Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their available budget and the level of their satisfaction with our products, customer support and pricing compared to that offered by our competitors. If our customers renew their contracts, they may renew on terms that are less economically beneficial to us.
Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their available budget and the level of their satisfaction with our Platform, customer support and pricing compared to our competitors. If our customers renew their contracts, they may renew on terms that are less economically beneficial to us.
Factors that are difficult to predict and that could cause our operating results to fluctuate include: • the timing and magnitude of orders, shipments and acceptance of our products in any quarter, including product returns, order rescheduling and cancellations by our customers; • the impact on timing and amount of revenue recognized resulting from the cancellation of unfulfilled orders by our customers or our inability to fulfill orders; • fluctuations or seasonality in demand and prices for our products; • our ability to control the costs of the components we use or to timely adopt subsequent generations of components; • disruption in our supply chains, shipping logistics, component availability and related procurement costs; • reductions in customers’ budgets for IT purchases; • changes in industry standards in the data storage industry; • our ability to develop, introduce and ship new products and product enhancements that meet customer requirements and to effectively manage product transitions; • changes in the competitive dynamics of our markets, including new entrants or discounting of product prices; • our ability to control or mitigate costs, including our operating expenses, to support business growth and our continued expansion; • the impact of inflation on labor and other costs, other adverse economic conditions and the impact of public health epidemics or pandemics; and • future accounting pronouncements and changes in accounting policies.
Factors that are difficult to predict and that could cause our operating results to fluctuate include: • the timing and magnitude of orders, shipments and acceptance of our products in any quarter, including product returns, order rescheduling and cancellations by our customers; • the impact on timing and amount of revenue recognized resulting from the cancellation of unfulfilled orders by our customers or our inability to fulfill orders; • fluctuations or seasonality in demand and prices for our products; • our ability to control the costs of the components we use or to timely adopt subsequent generations of components; • disruption in our supply chains, shipping logistics, component availability and related procurement costs; • reductions in customers’ budgets for IT purchases; • changes in industry standards in the data storage industry; • our ability to develop, introduce and ship new Platform offerings that meet customer requirements and to effectively manage product transitions; • changes in the competitive dynamics of our markets, including new entrants or price discounting; • our ability to control or mitigate costs, including our operating expenses, to support business growth and our continued expansion; • the impact on our revenue mix from changes in our customers' purchasing behavior due to their cost of capital; • the impact of inflation on labor and other costs, other adverse economic conditions and the impact of public health epidemics or pandemics; and • future accounting pronouncements and changes in accounting policies.
If larger companies do not conform to the same industry standards that we do, or if competing standards emerge, sales of our products could be adversely affected, which may harm our business. 21 Our ability to successfully market and sell our products is dependent in part on ease of use and the quality of our customer experience offerings, and any failure to offer high-quality technical services and support could harm our business.
If larger companies do not conform to the same industry standards that we do, or if competing standards emerge, sales of our Platform could be adversely affected, which may harm our business. 20 Our ability to successfully market and sell our Platform is dependent in part on ease of use and the quality of our customer experience, and any failure to offer high-quality technical services and support could harm our business.
Some of the factors, many of which are beyond our control, affecting our volatility may include: • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of technology companies in general and of companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • issuance or new or updated research or reports by securities analysts, including the publication of unfavorable reports or change in recommendation or downgrading of our common stock; • actual or anticipated developments in our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both; • general economic conditions and trends, including the lingering impact of the pandemic; • major catastrophic events; • sales of large blocks of our stock; or • departures of key personnel.
Some of the factors, many of which are beyond our control, affecting our volatility may include: • price and volume fluctuations in the overall stock market from time to time; 31 • significant volatility in the market price and trading volume of technology companies in general and of companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • issuance or new or updated research or reports by securities analysts, including the publication of unfavorable reports or change in recommendation or downgrading of our common stock; • actual or anticipated developments in our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both; • general economic conditions and trends, including the impact of interest rates on the overall stock market and the market for technology company stocks; • major catastrophic events; • sales of large blocks of our stock; or • departures of key personnel.
Since these providers are known for developing storage systems internally, this trend reduces the demand for storage systems developed by original equipment manufacturers, such as us. It is difficult to predict with any precision customer adoption rates of new offerings, customer demand for our products or the future growth rate and size of our addressable market.
Since these providers are known for developing storage systems internally, this trend reduces the demand for storage systems developed by original equipment manufacturers, such as us. It is difficult to predict customer adoption rates of new offerings, customer demand for our Platform or the future growth rate and size of our addressable market.
If our supply of components is disrupted or delayed, or if we need to replace our existing suppliers, there can be no assurance that additional components will be available when required or that components will be available on terms that are favorable to us, which could extend our lead times, increase the costs of our components and harm our business, operating results and financial condition.
If our component supply is disrupted or delayed, or if we need to replace our suppliers, there can be no assurance that additional components will be available when required or that components will be available on favorable terms, which could extend our manufacturing lead times, increase the costs of our components and harm our business, operating results and financial condition.
If we are unable to manage our growth successfully, we may not be able to take advantage of market opportunities or release new products or enhancements in a timely manner, and we may fail to satisfy customers’ expectations, maintain product quality, execute on our business plan or adequately respond to competitive pressures, each of which could adversely impact our growth and affect our business and operating results.
If we are unable to manage our growth successfully, we may not be able to take advantage of market opportunities or release new Platform offerings in a timely manner, and we may fail to satisfy customer expectations, maintain product quality, execute on our business plan or adequately respond to competitive pressures, each of which could adversely impact our growth and affect our business and operating results.
If any of these types of security breaches were to occur and we were unable to protect our products, systems and data, or if we were perceived to have such a security incident, our relationships with our business partners and customers could be materially damaged, our reputation and brand could be materially harmed, use of our products could decrease and we could be exposed to a risk of loss or litigation , including, without limitation, class action litigation, and other possible liabilities.
If any of these types of security incidents occurs and we are unable to protect our products, systems and data, or if we are perceived to have such a security incident, our relationships with our business partners and customers could be materially damaged, our reputation and brand could be materially harmed, use of our products could decrease and we could be exposed to a risk of loss or litigation , including, without limitation, class action litigation, and other possible liabilities.
In several recent situations where the price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock.
In several recent situations where the price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the issuer.
Many competitors have developed or acquired competing storage technologies with features or data reduction technologies that directly compete with our products or have introduced business programs designed, among other things, to compete with our innovative programs, such as our Evergreen Storage model.
Many of our competitors have developed or acquired storage technologies with features or data reduction technologies that directly compete with our Platform or have introduced business programs designed, among other things, to compete with our innovative programs, such as our Evergreen Storage model.
Risks Related to Our Products and Subscription Services Offerings If we fail to develop and introduce new or enhanced products successfully, our ability to attract and retain customers could be harmed. We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence.
Risks Related to Our Platform If we fail to develop and introduce new or enhanced storage offerings successfully, our ability to attract and retain customers could be harmed. We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence.
We believe that we must continue to dedicate significant resources to our research and development efforts and innovate business models such as Evergreen//One to maintain or expand our competitive position. We continue to expand our large capacity data storage products to compete directly with hard disk systems.
We believe that we must continue to dedicate significant resources to our research and development efforts and innovate business models such as Evergreen//One to improve our competitive position. We continue to expand our large capacity data storage offerings to compete directly with hard disk systems.
As a consequence, our quarterly revenue and operating results may fluctuate from quarter to quarter. A substantial portion of our quarterly sales typically occurs during the last several weeks of the quarter, which we believe largely reflects customer buying patterns of products similar to ours and other products in the technology industry generally.
As a result, our revenue and operating results have and may continue to fluctuate from quarter to quarter. A substantial portion of our quarterly sales typically occurs during the last several weeks of the quarter, which we believe largely reflects customer buying patterns of products similar to ours and other technology products generally.
We intend to continue to make investments to support our business growth and may require additional funds to support business initiatives, including the need to develop new products or enhance our existing products, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds.
We intend to continue investing in our business growth and may require additional funds to support business initiatives, including the need to develop new Platform offerings or enhance our existing Platform offerings, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds.
Additionally, we design and sell products that allow our customers to store their data. The security of our own networks and the intrusion protection features of our products are both critical to our operations and business strategy. 25 Cyberattacks, malicious internet-based activity and online and offline fraud are prevalent and continue to increase.
Additionally, we design and sell products that allow our customers to store their data. The security of our own networks and the intrusion protection features of our products are both critical to our operations and business strategy. Cyberattacks, malicious internet-based activity and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect.
We made changes to our data protection compliance program in relation to data privacy regulations and will continue to monitor the implementation and evolution of global data protection regulations, but if we are not compliant with such privacy regulations, we may be subject to significant fines and our business may be harmed.
We have modified our data protection compliance program in response to data privacy regulations and will continue to monitor the implementation and evolution of global data protection regulations, but if we are not compliant with such privacy regulations, we may be subject to significant fines and our business may be harmed.
The future impact of these trends on both the short-term and long-term growth of the overall external storage market is uncertain. Reductions in the overall external storage market or the specific markets in which we compete would harm our business and operating results . The evolving market for data storage products makes it difficult to forecast demand for our products.
The impact of these trends on future growth of the overall data storage market is uncertain. Reductions in the overall data storage market or the specific markets in which we compete would harm our business and operating results . 15 The evolving market for data storage products makes it difficult to forecast demand for our Platform.
To compete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performance, capacity, functionality and reliability and that meet the expectations of our customers, which is a complex and uncertain process.
To compete successfully, we must design, develop, market and sell new or enhanced storage offerings that provide increasingly higher levels of performance, capacity, functionality and reliability and meet our customers' expectations, which is a complex and uncertain process.
If we fail to execute our transition to subscription offerings successfully, our revenues and results of operation may be harmed. We are now offering all of our products and services on a subscription basis, including our hardware and software products through Evergreen//One and Cloud Data Services .
If we fail to execute our transition to subscription offerings successfully, our revenues and results of operation may be harmed. We offer our Platform on a subscription basis, including our hardware and software products through Evergreen//One and Cloud Data Services .
We expect our competitors to continue to improve their products, reduce their prices and introduce new features, services and technologies that may, or may claim to, offer greater value compared to our products. In addition, these developments may render our products or technologies obsolete or less competitive.
We expect our competitors to continue to improve their products, reduce their prices and introduce new offerings that may, or may claim to, offer greater value compared to our Platform. These developments may render our products or technologies obsolete or less competitive.
These and other competitive pressures may prevent us from competing successfully against our current or future competitors. Many of our competitors have long-standing relationships with key decision makers at current and prospective customers, which may inhibit our ability to compete.
These and other competitive pressures may prevent us from competing successfully against our competitors. 16 Many of our competitors have long-standing relationships with key decision makers at current and prospective customers, which may inhibit our ability to compete. Many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at our current and prospective customers.
If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition. 35 General Risk Factors Adverse economic conditions may harm our revenues, profitability and financial condition.
If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition.
A slowing or reduction in demand for our data storage products caused by technological challenges, alternative technologies and products or any other reason would result in a lower revenue growth rate or decreased revenue, either of which would negatively impact our business and operating results. We face intense competition from established companies and new entrants.
Reduced demand for our Platform caused by technological challenges, alternative technologies and products or any other reason would result in a lower revenue growth rate or decreased revenue, either of which would negatively impact our business and operating results. We face intense competition from established companies and others.
Some customers are shifting spending toward the public cloud and software as a service, as well as other storage deployment models. Any failure on our part to accurately predict trends, successfully update our product offerings or to adapt our sales programs to meet changing customer demands and priorities could harm our business, operating results and financial condition.
Some customers are shifting spending toward the public cloud and software as a service, as well as other storage deployment models. If we fail to accurately predict trends, successfully update our product offerings or adapt our sales programs to meet changing customer demands and priorities, our business, operating results and financial condition could be harmed.
If we are unable to effectively respond to the marketing efforts of our competitors and protect our brand and customer goodwill now or in the future, our business will be adversely affected. 19 Sales to U.S. federal, state, local and foreign governments are subject to a number of challenges and risks that may adversely impact our business.
If we are unable to effectively respond to our competitors' marketing efforts and protect our brand and customer goodwill now or in the future, our business will be adversely affected. 18 Sales to governments are subject to a number of challenges and risks that may adversely impact our business.

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Item 2. Properties

Properties — owned and leased real estate

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We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations. 36
We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations.
Item 2. Properties. Our corporate headquarters are located in Mountain View, California. We also maintain offices in multiple locations in the United States and internationally in Africa, Asia, Australia, Europe, and North and South America. We lease all of our facilities and do not own any real property.
Item 2. Properties. Our corporate headquarters are located in Santa Clara, California. We also maintain offices in multiple locations in the United States and internationally in Africa, Asia, Australia, Europe, and North and South America. We lease all of our facilities and do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. The information set forth under the "Legal Matters" subheading in Note 8 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Item 3. Legal Proceedings. The information set forth under the "Legal Matters" subheading in Note 7 of our Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
In addition, we may from time to time, be involved in various legal proceedings arising from the normal course of business, and an unfavorable resolution of any of these matters could materially affect our future results of operations, cash flows or financial position. Item 4. Mine Safety Disclosures. Not applicable. 37 PART II
In addition, we may from time to time, be involved in various legal proceedings arising from the normal course of business, and an unfavorable resolution of any of these matters could materially affect our future results of operations, cash flows or financial position. Item 4. Mine Safety Disclosures. Not applicable. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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In March 2023, our Board of Directors authorized additional share repurchases of up to $250.0 million of our outstanding common stock. See "Liquidity and Capital Resources—Share Repurchase Program" included under Part II, Item 7 in this Annual Report.
In March 2024, our Board of Directors authorized additional share repurchases of up to $250.0 million of our outstanding common stock. See "Liquidity and Capital Resources—Share Repurchase Program" included under Part II, Item 7 in this Annual Report.
The following graph compares the cumulative total return to stockholders on our common stock relative to the cumulative total returns of the NYSE Composite Index and NYSE Arca Tech 100 Index for the five years ended February 5, 2023.
The following graph compares the cumulative total return to stockholders on our common stock relative to the cumulative total returns of the NYSE Composite Index and NYSE Arca Tech 100 Index for the five years ended February 4, 2024.
The graph assumes that $100 (with reinvestment of all dividends) was invested in our common stock and in each index on January 31, 2018 and assumes the reinvestment of any dividends. The returns shown are based on historical results and are not intended to suggest future performance. 39 Item 6. [Reserved] 40
The graph assumes that $100 (with reinvestment of all dividends) was invested in our common stock and in each index on January 31, 2019 and assumes the reinvestment of any dividends. The returns shown are based on historical results and are not intended to suggest future performance. 37 Item 6. [Reserved] 38
Market Information for Common Stock Our Class A common stock, which we refer to as our "common stock", trades publicly on the New York Stock Exchange (NYSE) under the ticker symbol “PSTG.” Holders of Record As of March 24, 2023, there were 37 holders of record of our common stock.
Market Information for Common Stock Our Class A common stock, which we refer to as our "common stock", trades publicly on the New York Stock Exchange (NYSE) under the ticker symbol “PSTG.” Holders of Record As of March 26, 2024, there were 36 holders of record of our common stock.
The following table summarizes our shares of restricted common stock that were delivered by certain employees upon vesting of equity awards to satisfy tax withholding requirements for the fourth quarter of fiscal 2023 (in thousands except for price per share): Period Average Price per Share Delivered Total Number of Shares Delivered to Satisfy Tax Withholding Requirements Approximate Dollar Value of Shares Delivered to Satisfy Tax Withholding Requirements November 7, 2022 - December 4, 2022 $ 28.36 4 $ 112 December 5, 2022 - January 1, 2023 $ 27.52 122 $ 3,359 January 2, 2023 - February 5, 2023 $ — — $ — 38 Trading Plans Our insider trading policy permits directors, officers, and other employees covered under the policy to establish, subject to certain conditions and limitations set forth in the policy, written trading plans which are intended to comply with Rule 10b5-1 under the Exchange Act, which permits automatic trading of our common stock or trading of our common stock by an independent person (such as a stockbroker) who is not aware of material, nonpublic information at the time of the trade.
The following table summarizes our shares of restricted common stock that were delivered by certain employees to satisfy tax withholding requirements of equity awards for the fourth quarter of fiscal 2024 (in thousands except for price per share): Period Average Price per Share Delivered Total Number of Shares Delivered to Satisfy Tax Withholding Requirements Approximate Dollar Value of Shares Delivered to Satisfy Tax Withholding Requirements November 6, 2023 - December 3, 2023 $ — — $ — December 4, 2023 - December 31, 2023 $ 36.71 133 $ 4,897 January 1, 2024 - February 4, 2024 $ 37.28 230 $ 8,504 36 Trading Plans Our insider trading policy permits directors, officers, and other employees covered under the policy to establish, subject to certain conditions and limitations set forth in the policy, written trading plans which are intended to comply with Rule 10b5-1 under the Exchange Act, which permits automatic trading of our common stock or trading of our common stock by an independent person (such as a stockbroker) who is not aware of material, nonpublic information at the time of the trade.
Purchases of Equity Securities by the Issuer The following table summarizes our stock repurchase activity for the fourth quarter of fiscal 2023 (in thousands except for price per share): Period Average Price Paid per Share Total Number of Shares Purchased as Part of Share Repurchase Program (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (1) November 7, 2022 - December 4, 2022 $ — — $ 98,544 December 5, 2022 - January 1, 2023 $ 28.13 1,581 $ 54,066 January 2, 2023 - February 5, 2023 $ 27.33 841 $ 31,088 (1) In March 2022, our Board of Directors authorized additional share repurchases of up to $250.0 million of our outstanding common stock under our share repurchase program.
Purchases of Equity Securities by the Issuer The following table summarizes our stock repurchase activity for the fourth quarter of fiscal 2024 (in thousands except for price per share): Period Average Price Paid per Share Total Number of Shares Purchased as Part of Share Repurchase Program (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (1) November 6, 2023 - December 3, 2023 $ 32.96 15 $ 166,323 December 4, 2023 - December 31, 2023 $ 34.73 273 $ 156,838 January 1, 2024 - February 4, 2024 $ 38.67 296 $ 145,372 (1) In March 2023, our Board of Directors authorized additional share repurchases of up to $250.0 million of our outstanding common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that the assets will not be realized based on our history of losses. 43 Results of Operations Basis of Presentation We operate using a 52/53 week fiscal year ending on the first Sunday after January 30.
We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that the assets will not be realized based on our history of losses. Results of Operations Basis of Presentation We operate using a 52/53 week fiscal year ending on the first Sunday after January 30.
We expect our research and development expenses to increase in absolute dollars and it may decrease as a percentage of revenue. 42 Sales and Marketing . Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses as well as allocated overhead.
We expect our research and development expenses to increase in absolute dollars and it may decrease as a percentage of revenue. Sales and Marketing . Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses as well as allocated overhead.
Cost of subscription services revenue primarily consists of personnel costs associated with delivering our subscription and professional services, part replacements, allocated overhead costs and depreciation of infrastructure used to deliver our subscription services. We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases.
We expect our cost of product revenue to increase in absolute dollars as our product revenue increases. Cost of subscription services revenue primarily consists of personnel costs associated with delivering our subscription and professional services, part replacements, allocated overhead costs and depreciation of infrastructure used to deliver our subscription services.
Financing Activities Net cash used in financing activities of $431.2 million during fiscal 2023 was primarily driven by our repayment of the $250.0 million outstanding under the Credit Facility, share repurchases of $219.1 million, and $19.6 million in tax withholdings on vesting of equity awards, partially offset by $40.0 million of proceeds from issuance of common stock under our employee stock purchase plan (ESPP), and $24.8 million of proceeds from the exercise of stock options.
Net cash used in financing activities of $431.2 million during fiscal 2023 was primarily driven by our repayment of the $250.0 million outstanding under the Credit Facility, share repurchases of $219.1 million, and $19.6 million in tax withholdings on vesting of equity awards, partially offset by proceeds of $40.0 million from issuance of common stock under our ESPP, and $24.8 million from the exercise of stock options.
Recent Accounting Pronouncements Refer to “Recent Accounting Pronouncements” in Note 2 of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 53
Recent Accounting Pronouncements Refer to “Recent Accounting Pronouncements” in Note 2 of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 48
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 LIBOR (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%.
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 LIBOR (or at each three-month interval, if the interest period is longer than three months).
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).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Investors should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Investors should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Our future capital requirements will depend on many factors including our sales growth, the timing and extent of capital spending to support development efforts, growth of our Evergreen//One offering, the addition or closure of office space, construction of our new headquarters facility, the timing of new product introductions, and our share repurchases.
Our future capital requirements will depend on many factors including our sales growth, the timing and extent of capital spending to support development efforts, growth of our Evergreen//One offering, the addition or closure of office space, ongoing construction of our new headquarters facility, the timing of new product introductions, workforce realignment restructuring activities, and our share repurchases.
Product orders are generally cancelable until delivery has occurred, and as such unfulfilled product orders are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors. Of the $1.8 billion RPO at the end of fiscal 2023, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.
Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors. Of the $2.3 billion RPO at the end of fiscal 2024, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.
Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, data center and cloud services costs, third-party engineering and contractor support costs, as well as allocated overhead.
Operating expenses also include allocated overhead costs for employee benefits, facilities, and certain information technology costs. Research and Development . Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, data center and cloud services costs, third-party engineering and contractor support costs, as well as allocated overhead.
Components of Results of Operations Revenue We derive revenue primarily from the sale of our storage infrastructure products, FlashArray and FlashBlade, and subscription services which include our portfolio of Evergreen offerings and Portworx . Subscription services also include our professional services offerings such as installation and implementation consulting services.
Components of Results of Operations Revenue We derive revenue primarily from the sale of our products and services that comprise our data storage platform. Our data storage platform includes our FlashArray and FlashBlade solutions , and our Evergreen and Portworx subscription services. Subscription services also include our professional services offerings such as installation and implementation consulting services.
Our marketable securities generally consist of highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, asset-backed securities, and municipal bonds.
Our cash and cash equivalents primarily consist of bank deposits and money market accounts. Our marketable securities generally consist of highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, asset-backed securities, and municipal bonds.
Our products and subscription services support a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and include mission-critical production, test and development, analytics, disaster recovery, and backup and recovery.
Our data storage platform supports a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and includes mission-critical production, test and development, analytics, disaster recovery, backup and restore, AI and machine learning.
Fiscal 2021 and 2023 were both 52-week years that ended on January 31, 2021 and February 5, 2023, respectively. Fiscal 2022 was a 53-week year that ended on February 6, 2022. Unless otherwise stated, all dates refer to our fiscal years.
Fiscal 2023 and 2024 were both 52-week years that ended on February 5, 2023 and February 4, 2024, respectively. Unless otherwise stated, all dates refer to our fiscal years.
During fiscal 2023, we repurchased and retired 7.8 million shares of common stock at an average purchase price of $27.95 per share for an aggregate repurchase price of $218.9 million.
During fiscal 2024, we repurchased and retired 4.7 million shares of common stock at an average purchase price of $28.96 per share for an aggregate repurchase price of $135.7 million.
Convertible Senior Notes In April 2018, we issued $575.0 million of 0.125% convertible senior notes due 2023 (the Notes), in a private placement and received proceeds of $562.1 million, after deducting the underwriters' discounts and commissions.
We were in compliance with all covenants under the Credit Facility at the end of fiscal 2024. 45 Convertible Senior Notes In April 2018, we issued $575.0 million of 0.125% convertible senior unsecured notes (the Notes) in a private placement and received proceeds of $562.1 million, after deducting the underwriters' discounts and commissions.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income related to cash, cash equivalents and marketable securities, interest expense related to our debt and gains (losses) from foreign currency transactions Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes in the United States.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income related to cash, cash equivalents and marketable securities, interest expense related to our debt and gains (losses) from foreign currency transactions.
The increase in subscription services cost of revenue was primarily attributable to supporting our growing Evergreen subscription installed base, including Evergreen//One , and Portworx .
The decrease in product cost of revenue was primarily attributable to lower product sales and lower component costs, partially offset by higher excess and obsolete inventory charges. The increase in subscription services cost of revenue was primarily attributable to supporting our growing Evergreen subscription installed base, including Evergreen//One and Portworx .
Our cost of product revenue also includes allocated overhead costs , inventory write-offs and product warranty costs, amortization of intangible assets pertaining to developed technology and capitalized internal-use software, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs. We expect our cost of product revenue to increase in absolute dollars as our product revenue increases.
Personnel costs consist of salaries, bonuses and stock-based compensation expense. Our cost of product revenue also includes allocated overhead costs, adjustments to inventory and purchase commitments, product warranty costs, amortization of intangible assets pertaining to developed technology and capitalized internal-use software, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs.
The increase in subscription services revenue was largely driven by increases in sales of our Evergreen subscription services, including Evergreen//One , as well as recognition of revenue from previously contracted Evergreen subscription services .
As such, we expect continued growth of our Evergreen//One sales will negatively impact, in the near term, both product revenue growth and total revenue growth rates. The increase in subscription services revenue was largely driven by increases in sales of our Evergreen subscription services, including Evergreen//One , as well as recognition of revenue from previously contracted Evergreen subscription services .
During fiscal 2022 compared to fiscal 2021, total revenue in the United States grew by 32% from $1.2 billion to $1.6 billion and total rest of the world revenue grew by 23% from $488.8 million to $600.8 million. Subscription Annual Recurring Revenue (ARR) We use Subscription ARR as a key business metric to evaluate the performance of our subscription services.
During fiscal 2024 compared to fiscal 2023, total revenue in the United States remained consistent at approximately $2.0 billion while total rest of the world revenue grew by 9% from $781.7 million to $851.3 million. Subscription Annual Recurring Revenue (ARR) We use Subscription ARR as a key business metric to evaluate the performance of our subscription services.
Off-Balance Sheet Arrangements Through the end of fiscal 2023 , we did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes. 52 Critical Accounting Policy and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP).
Off-Balance Sheet Arrangements Through the end of fiscal 2024 , we did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes.
Our vision integrates our foundation of simplicity and reliability with three major market trends that are impacting all organizations large and small: (1) adoption of the cloud operating model everywhere; (2) the increase of modern cloud-native applications; and (3) the shift to modernizing today’s data infrastructure with all-flash.
Our vision of an all-flash data center integrates our foundation of simplicity and reliability with four major market trends that are impacting all organizations large and small: (1) increasing demand to consume data storage as a service; (2) the shift to modernizing today's data infrastructure with all-flash; (3) the increase of modern cloud-native applications; and (4) increasing demand for data storage to support the acceleration in artificial intelligence (AI) adoption while managing rising energy costs.
Operating Expenses Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Salaries and personnel-related costs, including stock-based compensation expense, are the most significant component of each category of operating expenses. Operating expenses also include allocated overhead costs for employee benefits and facilities-related costs. Research and Development .
We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases. Operating Expenses Operating expenses consist of research and development, sales and marketing and general and administrative expenses. Salaries and personnel-related costs, including stock-based compensation expense, are the most significant component of each category of operating expenses.
To recognize revenue for the products and subscription services for which control has been transferred, we allocate the transaction price for the contract among the identified performance obligations on a relative standalone selling price (SSP) basis.
Transaction price may be adjusted for variable consideration which we estimate by applying the expected value or most likely estimate and subsequently update at each reporting period as additional information becomes available. 47 To recognize revenue for the products and subscription services for which control has been transferred, we allocate the transaction price for the contract among the identified performance obligations on a relative standalone selling price (SSP) basis.
We expect our general and administrative expenses to increase in absolute dollars and it may decrease as a percentage of revenue as we continue to drive operational excellence.
We expect our general and administrative expenses to increase in absolute dollars and it may decrease as a percentage of revenue. Restructuring, Impairment and Other. Restructuring, impairment and other consist primarily of employee severance and termination benefits, and certain lease impairment and abandonment charges.
The preparation of these financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. A summary of significant accounting policies applicable to our consolidated financial statements is included in Note 2 of our Notes to Consolidated Financial Statements in Part II, Item 8.
A summary of significant accounting policies applicable to our consolidated financial statements is included in Note 2 of our Notes to Consolidated Financial Statements in Part II, Item 8.
We were in compliance with all covenants under the Credit Facility at the end of fiscal 2023. Letters of Credit At the end of fiscal 2022 and 2023, we had outstanding letters of credit in the aggregate amount of $6.7 million and $8.0 million in connection with our facility leases.
Letters of Credit At the end of fiscal 2023 and 2024, we had outstanding letters of credit in the aggregate amount of $8.0 million and $7.7 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.
See further discussion about our Notes in Note 7 in Part II, Item 8 of this report. 50 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).
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.
We are a global leader in data storage and management with a mission to redefine the storage experience by simplifying how people consume and interact with data.
Overview Data is foundational to our customers’ business transformation, and we are focused on delivering an innovative and disruptive data storage platform that enables customers to maximize the value of their data. We are a global leader in data storage and management with a mission to redefine the storage experience by simplifying how people consume and interact with data.
We have recorded no U.S. federal current income tax and provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards and tax credits related primarily to research and development.
Our foreign subsidiaries' sales and marketing expenses are expected to increase over time as we grow, resulting in higher pre-tax foreign earnings and higher foreign income taxes. 40 We have provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards, capitalized research costs, and tax credits related primarily to research and development.
In March 2022, our Board of Directors authorized the repurchase of up to an additional $250.0 million of our common stock, of which $31.1 million remaining as of the end of fiscal 2023. In March 2023, our Board of Directors authorized the repurchase of up to an additional $250.0 million of our common stock.
Share Repurchase Program In March 2023, our Board of Directors authorized $250.0 million to repurchase shares of our common stock, of which $145.4 million remained available at the end of fiscal 2024. In February 2024, our Board of Directors authorized an additional $250.0 million to repurchase shares of our common stock, increasing the total authorization amount to $395.4 million.
Net cash provided by financing activities of $200.2 million during fiscal 2021 was primarily driven by $251.9 million of net proceeds from borrowings primarily under our Credit Facility, $59.3 million of proceeds from the exercise of stock options, and $32.4 million of proceeds from issuance of common stock under our ESPP, partially offset by share repurchases of $135.2 million and $8.3 million in tax withholdings on vesting of equity awards.
Net cash used in investing activities during fiscal 2023 of $221.4 million was driven by capital expenditures of $158.1 million, and net purchases of marketable securities of $61.3 million. 46 Financing Activities Net cash used in financing activities of $560.2 million during fiscal 2024 was primarily driven by cash outflows related to the repayment of the principal amount of the Notes of approximately $575.0 million, share repurchases of $135.8 million, and tax withholdings on equity awards of $30.0 million, partially offset by proceeds from borrowing under the Credit Facility of $100.0 million, issuance of common stock under our employee stock purchase plan (ESPP) of $45.1 million, and exercise of stock options of $39.8 million.
We generally recognize revenue from subscription services ratably over the contractual service period and professional services as delivered. We expect our subscription services revenue to increase and continue to grow faster than our product revenue as more customers choose to consume our storage solutions as a service and our existing subscription customers renew and expand their consumption and service levels.
We expect our subscription services revenue to increase and continue to grow faster than our product revenue as more customers choose to consume our storage solutions as a service and our existing subscription customers renew and expand their consumption and service levels. 39 Cost of Revenue Cost of product revenue primarily consists of costs paid to our third-party contract manufacturers, which includes the costs of our raw material components, and personnel costs associated with our supply chain operations.
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 that commenced on September 30, 2020. During March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced that it will cease publication of LIBOR by June 2023.
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 April 2023, we borrowed $100.0 million under the Credit Facility to fund the repayment of the Notes.
Remaining Performance Obligations Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $1.8 billion at the end of fiscal 2023. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods.
Total RPO includes $77.5 million in non-cancelable product orders that we expect to fulfill subsequent to 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.
We believe our existing cash, cash equivalents, marketable securities and the revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months, including the cash settlement of the principal balance of our convertible senior notes in April 2023 as discussed below.
We believe our existing cash, cash equivalents, marketable securities and revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months. The following table sets forth our non-cancelable contractual obligations and commitments associated with agreements that are enforceable and legally binding at the end of fiscal 2024.
Provision for income taxes increased during fiscal 2022 compared to fiscal 2021 primarily attributable to an increase in foreign income taxes. 49 Liquidity and Capital Resources At the end of fiscal 2023, we had cash, cash equivalents and marketable securities of $1.6 billion. Our cash and cash equivalents primarily consist of bank deposits and money market accounts.
Provision for Income Taxes Fiscal Year Ended Change 2023 2024 $ % (in thousands) Provision for income taxes $ 18,737 $ 29,275 $ 10,538 56 % Provision for income taxes increased during fiscal 2024 compared to fiscal 2023 primarily due to an increase in U.S. income taxes driven by IRC Section 174 capitalization, as well as an increase in profits generated in foreign jurisdictions. 44 Liquidity and Capital Resources At the end of fiscal 2024, we had cash, cash equivalents and marketable securities of $1.5 billion.
Our foreign subsidiaries earn a profit margin based upon transfer pricing principles which require an arm’s length return. Our foreign subsidiaries' sales and marketing expenses are expected to increase over time as we grow, resulting in higher pre-tax foreign earnings and higher foreign income taxes.
Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and current federal and state income taxes in the United States. Our foreign subsidiaries earn a profit margin based upon transfer pricing principles which require an arm’s length return.
Contract values are established prior to any adjustments made in accordance with ASC 606. 44 The following table sets forth our Subscription ARR for the periods presented (dollars in thousands): At the End of Year-over-Year Growth Fiscal 2022 Fiscal 2023 % Subscription annual recurring revenue $ 848,776 $ 1,101,301 30 % 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.
The following table sets forth our Subscription ARR for the periods presented (dollars in thousands): At the End of Year-over-Year Growth Fiscal 2023 Fiscal 2024 % Subscription annual recurring revenue $ 1,101,301 $ 1,373,506 25 % 41 Remaining Performance Obligations Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $2.3 billion at the end of fiscal 2024.
The slight increase in subscription services gross margin for fiscal 2023 compared to fiscal 2022 was driven by increased sales of Evergreen//One , higher renewals in Evergreen subscriptions, and increasing economies of scale. Cost of revenue increased by $173.1 million, or 32%, for fiscal 2022 compared to fiscal 2021.
Lower material pricing, including flash, has also favorably impacted gross margins. 42 The increase in subscription services gross margin for fiscal 2024 compared to fiscal 2023 was driven by higher subscription services revenue growth from sales of Evergreen//One and higher renewals in Evergreen subscriptions coupled with continued focus on operational efficiencies.
See also the section titled “Note Regarding Forward-Looking Statements” in this report. Our fiscal year end is the first Sunday after January 30. Overview Data is foundational to our customers’ business transformation, and we are focused on delivering innovative and disruptive data storage, products and services that enable customers to maximize the value of their data.
See also the section titled “Note Regarding Forward-Looking Statements” in this report. Our fiscal year end is the first Sunday after January 30. The following discussion of our financial condition and results of operations covers fiscal 2024 and fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023.
Sales and Marketing Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) Sales and marketing $ 650,766 $ 727,562 $ 76,796 12 % $ 727,562 $ 811,102 $ 83,540 11 % Stock-based compensation 65,248 71,439 6,191 9 % 71,439 72,507 1,068 1 % Total expenses $ 716,014 $ 799,001 $ 82,987 12 % $ 799,001 $ 883,609 $ 84,608 11 % % of Total revenue 43 % 37 % 37 % 32 % Sales and marketing expense increased by $84.6 million, or 11%, during fiscal 2023 compared to fiscal 2022, primarily due to an increase of $51.0 million in employee compensation and related costs and a $34.0 million increase in marketing and travel spend.
Sales and Marketing Fiscal Year Ended Change 2023 2024 $ % (in thousands) Sales and marketing $ 811,102 $ 870,275 $ 59,173 7 % Stock-based compensation 72,507 74,746 2,239 3 % Total expenses $ 883,609 $ 945,021 $ 61,412 7 % % of Total revenue 32 % 33 % Sales and marketing expense increased by $61.4 million, or 7%, during fiscal 2024 compared to fiscal 2023, primarily due to an increase of $55.4 million in employee compensation and related costs relating to increasing sales capacity and a $6.0 million increase in outside services associated with our sales and marketing events.
The increase in subscription services gross margin for fiscal 2022 compared to fiscal 2021 was driven by increased sales of Evergreen//One and higher renewals in Evergreen subscriptions, and increasing economies of scale. 46 Operating Expenses Research and Development Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) Research and development $ 363,247 $ 439,671 $ 76,424 21 % $ 439,671 $ 530,834 $ 91,163 21 % Stock-based compensation 117,220 142,264 25,044 21 % 142,264 161,694 19,430 14 % Total expenses $ 480,467 $ 581,935 $ 101,468 21 % $ 581,935 $ 692,528 $ 110,593 19 % % of Total revenue 29 % 27 % 27 % 25 % Research and development expense increased by $110.6 million, or 19%, during fiscal 2023 compared to fiscal 2022, as we continue to innovate and develop technologies to enhance and expand our solutions portfolio.
Operating Expenses Research and Development Fiscal Year Ended Change 2023 2024 $ % (in thousands) Research and development $ 530,834 $ 569,470 $ 38,636 7 % Stock-based compensation 161,694 167,294 5,600 3 % Total expenses $ 692,528 $ 736,764 $ 44,236 6 % % of Total revenue 25 % 26 % Research and development expense increased by $44.2 million, or 6%, during fiscal 2024 compared to fiscal 2023, as we continue to innovate and develop technologies to enhance and expand our platform portfolio.
The following table sets forth our non-cancelable contractual obligations and commitments associated with agreements that are enforceable and legally binding at the end of fiscal 2023. Obligations under contracts that we can cancel without a significant penalty are not included.
Obligations under contracts that we can cancel without a significant penalty are not included.
Payment Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Debt obligations (1) $ 580,091 $ 577,363 $ 2,728 $ — $ — Future lease commitments (2) 238,297 51,059 93,570 44,991 48,677 Purchase obligations (3) 445,048 317,846 98,100 29,102 — Total $ 1,263,436 $ 946,268 $ 194,398 $ 74,093 $ 48,677 _________________________________ (1) Consists of (i) principal and interest payments on our convertible senior notes due April 2023, (ii) unused commitment fees on our August 2020 revolving credit facility based on rates in effect on February 5, 2023, and (iii) principal and interest on a five year loan.
Payment Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Debt obligations (1) $ 117,897 $ 11,057 $ 106,840 $ — $ — Future lease commitments (2) 206,088 59,660 65,193 49,008 32,227 Purchase obligations (3) 417,235 298,368 103,046 15,821 — Total $ 741,220 $ 369,085 $ 275,079 $ 64,829 $ 32,227 _________________________________ (1) Consists of (i) principal, interest, and unused commitment fees on our August 2020 revolving credit facility based on rates in effect on February 4, 2024, and (ii) principal and interest on a four year loan and a five year loan.
The increase was primarily driven by an increase of $16.4 million in employee compensation and related costs driven by increased headcount, partially offset by a $8.5 million decrease in office and facilities-related costs primarily attributable to the exit of certain facilities in fiscal 2021.
The increase was primarily driven by a $26.1 million increase in employee compensation and related costs and a $19.0 million increase in equipment depreciation and facilities-related costs.
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 rate for SOFR borrowings will be equal to 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%.
The Credit Facility expires, absent default or early termination by us, on August 24, 2025. In March 2023, we amended the Credit Facility to transition LIBOR to the Secured Overnight Financing Rate (SOFR) effective April 1, 2023.
Since the end of fiscal 2023, we have repurchased $31.1 million of additional shares. 51 The following table summarizes our cash flows for the periods presented (in thousands): Fiscal Year Ended 2021 2022 2023 Net cash provided by operating activities $ 187,641 $ 410,127 $ 767,234 Net cash used in investing activities (418,109) (153,283) (221,413) Net cash provided by (used in) financing activities 200,237 (127,792) (431,166) Operating Activities Net cash provided by operating activities substantially increased year-over-year during both fiscal 2022 and 2023.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Fiscal Year Ended 2023 2024 Net cash provided by operating activities $ 767,234 $ 677,722 Net cash provided by (used in) investing activities (221,413) 3,246 Net cash used in financing activities (431,166) (560,235) Operating Activities The year-over-year decrease in net cash provided by operating activities was impacted by lower revenue growth and growth of our Evergreen//One sales that include flexible payment terms, employee compensation payments, and timing of certain vendor payments and receipt of rebates.
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Recent Developments • In May 2022, we released Pure Fusion for general availability which enables enterprises and managed service providers (MSPs) to implement a cloud operating model by automating and orchestrating their data storage environment and offer storage services to customers and developers through application programming interfaces (APIs), dramatically accelerating developer workflow. • In June 2022, we introduced a number of new portfolio and service offerings at our annual user conference, Pure//Accelerate® techfest22: • The new FlashBlade//S family of products, built with a new modular architecture that shares components with Pure's industry leading FlashArray .
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Discussions of fiscal 2022 items and year-over-year comparisons between fiscal 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended February 5, 2023, that was filed with the SEC on April 3, 2023.
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The highly flexible, all-QLC system combines performance and cost effectiveness to address the demands of unstructured data and modern application growth. • Expansion of the Evergreen family: To advance our leadership in delivering Storage-as-a-Service (STaaS) while supporting customers wherever they are in their journey to embracing flexible delivery models, we expanded our portfolio of Evergreen offerings with the introduction of Evergreen//Flex.
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We generally recognize revenue from the fair value of subscription services provided ratably over the contractual service period or on a consumption basis for usage above a minimum usage commitment and professional services as delivered.
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Our portfolio of Evergreen offerings include: ▪ Evergreen//Forever : Formerly known as Evergreen Gold ▪ Evergreen//Flex , a fleet-level Evergreen subscription, which gives customers a utilization-based consumption model and flexibility to deploy and shift capacity across their fleet over time ▪ Evergreen//One : Formerly known as Pure as-a-Service • In March 2023, we announced FlashBlade//E , a scale-out unstructured data repository built to handle exponential data growth with industry-leading energy efficiency.
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Year Over Year Comparisons Revenue Fiscal Year Ended Change 2023 2024 $ % (in thousands) Product revenue $ 1,792,153 $ 1,622,869 $ (169,284) (9) % Subscription services revenue 961,281 1,207,752 246,471 26 % Total revenue $ 2,753,434 $ 2,830,621 $ 77,187 3 % Total revenue increased in fiscal 2024 by $77.2 million, or 3%, compared to fiscal 2023.
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FlashBlade//E is anticipated to be generally available by the end of April 2023 and will be priced at under $0.20 per gigabyte. 41 Uncertain Macro Environment We continue to actively monitor, evaluate and respond to the current uncertain macro environment. We have experienced longer sales cycle and progression for opportunities, most notably with our U.S. enterprise customers.
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The decrease in product revenue during fiscal 2024 compared to fiscal 2023 was attributable to increasing sales of our Evergreen//One consumption and subscription based offering, as well as macro-economic conditions. Revenue for Evergreen//One is recognized over time and included in subscription services revenue.
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The macro environment remains unpredictable and our past results may not be indicative of future performance. See "Risk Factors" in Part I, Item 1A for additional details.
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Contract values are established prior to any adjustments made in accordance with ASC 606.
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Cost of Revenue Cost of product revenue primarily consists of costs paid to our third-party contract manufacturers, which includes the costs of our raw material components, and personnel costs associated with our supply chain operations. Personnel costs consist of salaries, bonuses and stock-based compensation expense.
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RPO is expected to increase as our subscription services business grows over time. Our RPO includes non-cancelable Total Contract Value (TCV) sales for our Evergreen//One and Evergreen//Flex consumption and subscription based offerings. TCV sales for Evergreen//One and Evergreen//Flex offerings is a key business metric we use to evaluate the performance of our consumption and subscription based offerings.
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Year Over Year Comparisons The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue (in thousands): Revenue Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) Product revenue $ 1,144,098 $ 1,442,338 $ 298,240 26 % $ 1,442,338 $ 1,792,153 $ 349,815 24 % Subscription services revenue 540,081 738,510 198,429 37 % 738,510 961,281 222,771 30 % Total revenue $ 1,684,179 $ 2,180,848 $ 496,669 29 % $ 2,180,848 $ 2,753,434 $ 572,586 26 % Total revenue increased in fiscal 2023 by $572.6 million, or 26%, compared to fiscal 2022, driven by demand from enterprise, commercial and public sector customers across our entire product and solutions portfolio and key geographies.
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TCV sales for these offerings include recurring subscription fees, any non-recurring charges such as initial setup fees, and any other billable services directly tied to the execution of the underlying service contract. We expect in fiscal 2025 TCV sales for our Evergreen//One and Evergreen//Flex consumption and subscription based offerings will grow approximately 50 percent.
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The increase in product revenue during fiscal 2023 compared to fiscal 2022 was driven by increased sales from our entire portfolio of FlashArray and FlashBlade products , including FlashArray//C , FlashArray//XL and FlashBlade//S .
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Cost of Revenue and Gross Margin Fiscal Year Ended Change 2023 2024 $ % (in thousands) Product cost of revenue $ 559,548 $ 462,760 $ (96,788) (17) % Product stock-based compensation 10,245 9,670 (575) (6) % Total expenses $ 569,793 $ 472,430 $ (97,363) (17) % % of Product revenue 32 % 29 % Subscription services cost of revenue $ 263,365 $ 311,588 $ 48,223 18 % Subscription services stock-based compensation 22,630 25,412 2,782 12 % Total expenses $ 285,995 $ 337,000 $ 51,005 18 % % of Subscription services revenue 30 % 28 % Total cost of revenue $ 855,788 $ 809,430 $ (46,358) (5) % % of Revenue 31 % 29 % Product gross margin 68 % 71 % Subscription services gross margin 70 % 72 % Total gross margin 69 % 71 % Cost of revenue decreased by $46.4 million, or 5%, for fiscal 2024 compared to fiscal 2023.
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Total revenue increased in fiscal 2022 by $496.7 million, or 29%, compared to fiscal 2021, driven by sales to new and existing enterprise, commercial and public sector customers, with particular strength in the United States, across our entire product and solutions portfolio and key geographies.
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Foundational to our strong product gross margins are the advantages created from our Purity software architecture that works natively with raw flash. One of the key advantages is we directly source our raw flash, both TLC and lower cost QLC.
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The increase in product revenue during fiscal 2022 compared to fiscal 2021 was driven by increased sales from our entire portfolio of FlashArray and FlashBlade solutions , including sales of FlashArray//C to a large hyperscaler customer, and repeat sales to existing customers.
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QLC flash represents the majority of the capacity we ship and is also a contributor to our higher product gross margin expansion when comparing fiscal 2024 to fiscal 2023.
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The increase in subscription services revenue was largely driven by increases in sales of our Evergreen subscription services, including Evergreen//One , as well as increased Portworx revenue.
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Product and customer mix also was a driver in the year-over-year increase in product gross margins, including, sales of our FlashBlade//S solutions which have a higher gross margin when compared to our older generation FlashBlade solutions.
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During fiscal 2023 compared to fiscal 2022, total revenue in the United States grew by 25% from $1.6 billion to $2.0 billion and total rest of the world revenue grew by 30% from $600.8 million to $781.7 million.
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General and Administrative Fiscal Year Ended Change 2023 2024 $ % (in thousands) General and administrative $ 177,455 $ 197,938 $ 20,483 12 % Stock-based compensation 60,541 54,305 (6,236) (10) % Total expenses $ 237,996 $ 252,243 $ 14,247 6 % % of Total revenue 9 % 9 % Restructuring, Impairment and Other During fiscal 2024, we recognized $33.6 million of restructuring, impairment and other costs related to severance and other termination benefits related to workforce realignment, and the cease use of our former corporate headquarters in Mountain View, California. 43 Other Income (Expense), Net Fiscal Year Ended Change 2023 2024 $ (in thousands) Other income (expense), net $ 8,295 $ 37,035 $ 28,740 Other income (expense), net increased during fiscal 2024 compared to fiscal 2023 primarily due to an increase in interest income due to a higher interest rate environment and, to a lesser extent, a decrease in net foreign exchange losses as the U.S. dollar weakened relative to certain foreign currencies and a decrease in interest expense following the full repayment of the convertible senior notes in April 2023.
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The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates.
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These increases were partially offset by an increase in interest expense on the outstanding balance on our revolving credit facility.
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Changes in total deferred revenue during the periods presented are as follows (in thousands): Fiscal Year Ended 2022 2023 Beginning balance $ 843,697 $ 1,079,872 Additions 937,510 1,248,417 Recognition of deferred revenue (701,335) (942,639) Ending balance $ 1,079,872 $ 1,385,650 Revenue recognized during fiscal 2022 and 2023 from deferred revenue at the beginning of each respective period was $442.7 million and $567.8 million.
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The outstanding loan bore weighted-average interest at an annual rate of approximately 6.73% based on a one-month term SOFR period resulting in interest expense of $5.5 million during fiscal 2024.
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RPO is expected to increase as our subscription services business grows over time. 45 Cost of Revenue and Gross Margin Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) Product cost of revenue $ 348,986 $ 471,565 $ 122,579 35 % $ 471,565 $ 559,548 $ 87,983 19 % Product stock-based compensation 4,001 6,334 2,333 58 % 6,334 10,245 3,911 62 % Total expenses $ 352,987 $ 477,899 $ 124,912 35 % $ 477,899 $ 569,793 $ 91,894 19 % % of Product revenue 31 % 33 % 33 % 32 % Subscription services cost of revenue $ 167,289 $ 209,190 $ 41,901 25 % $ 209,190 $ 263,365 $ 54,175 26 % Subscription services stock-based compensation 14,979 21,240 6,261 42 % 21,240 22,630 1,390 7 % Total expenses $ 182,268 $ 230,430 $ 48,162 26 % $ 230,430 $ 285,995 $ 55,565 24 % % of Subscription services revenue 34 % 31 % 31 % 30 % Total cost of revenue $ 535,255 $ 708,329 $ 173,074 32 % $ 708,329 $ 855,788 $ 147,459 21 % % of Revenue 32 % 32 % 32 % 31 % Product gross margin 69 % 67 % 67 % 68 % Subscription services gross margin 66 % 69 % 69 % 70 % Total gross margin 68 % 68 % 68 % 69 % Cost of revenue increased by $147.5 million, or 21%, for fiscal 2023 compared to fiscal 2022.
Added
In April 2023, we repaid the entire principal balance with approximately $575.0 million in cash and 1,065 shares of our common stock. See further discussion about our Notes in Note 6 in Part II, Item 8 of this report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Interest Rate Risk Our cash, cash equivalents and marketable securities primarily consist of bank deposits and money market accounts, highly rated debt instruments of the U.S. government, its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, and asset-backed securities.
Interest Rate Risk Our cash, cash equivalents and marketable securities primarily consist of bank deposits and money market accounts, highly rated debt instruments of the U.S. government and its agencies, debt instruments of highly rated corporations, debt instruments issued by foreign governments, and asset-backed securities.
These reasonably possible adverse changes in exchange rates of 10% were applied to total monetary assets and liabilities denominated in currencies other than U.S. dollar at the end of fiscal 2023 to compute the adverse impact these changes would have had on our loss before income taxes in the near term.
These reasonably possible adverse changes in exchange rates of 10% were applied to total monetary assets and liabilities denominated in currencies other than U.S. dollar at the end of fiscal 2024 to compute the adverse impact these changes would have had on our loss before income taxes in the near term.
A hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair value of our marketable securities of approximately $8.5 million as of the end of fiscal 2023. Foreign Currency Exchange Risk Our sales contracts are primarily denominated in U.S. dollars with a proportionally small number of contracts denominated in foreign currencies.
A hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair value of our marketable securities of approximately $8.6 million as of the end of fiscal 2024. Foreign Currency Exchange Risk Our sales contracts are primarily denominated in U.S. dollars with a proportionally small number of contracts denominated in foreign currencies.
At the end of fiscal 2022 and 2023, we had cash, cash equivalents and marketable securities of $1.4 billion and $1.6 billion. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments.
At the end of fiscal 2023 and 2024, we had cash, cash equivalents and marketable securities of $1.6 billion and $1.5 billion. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments.
These changes would have resulted in an adverse impact on loss before provision for income taxes of approximately $9.0 million at the end of fiscal 2023. 54
These changes would have resulted in an adverse impact on income before provision for income taxes of approximately $12.3 million at the end of fiscal 2024. 49

Other PSTG 10-K year-over-year comparisons