10q10k10q10k.net

What changed in Pure Storage, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Pure Storage, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+302 added−296 removedSource: 10-K (2023-04-03) vs 10-K (2022-04-07)

Top changes in Pure Storage, Inc.'s 2023 10-K

302 paragraphs added · 296 removed · 227 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

51 edited+27 added−15 removed33 unchanged
Biggest changeThese elements form what we call the Cloud Operating Model. • Our Evergreen Subscription service leverages our Evergreen Storage architecture, allowing us to modernize technology and seamlessly deliver new software and hardware components as customers upgrade and expand their storage needs. • Evergreen subscription services allows us to modernize our customer’s arrays (hardware and software), delivering improvements in software, flash and CPU technology without disruption or downtime. • Renewal pricing for our Evergreen subscription services is “Flat and Fair,” which means that our customers do not need to worry that we will increase the price of these valuable services at renewal. • Evergreen subscription services includes Pure1, our cloud-based management and support offering which allows us to deliver predictive and proactive insights that identify potential issues before they occur and provide intelligent advice on workload, capacity and performance based on machine-learning models.
Biggest changeThis allows us to modernize technology and seamlessly deliver new software and hardware components as customers upgrade and expand their storage needs. • Evergreen subscription services allows us to modernize our customer’s arrays (hardware and software), delivering improvements in software, flash and CPU technology without disruption or downtime. • Renewal pricing for our Evergreen subscription services is “Flat and Fair,” which means that our customers do not need to worry that we will increase the price of these valuable services at renewal. • Evergreen subscription services includes Pure1, our cloud-based management and support offering which allows us to deliver predictive and proactive insights that identify potential issues before they occur and provide intelligent advice on workload, capacity and performance based on machine-learning models. • Our Evergreen subscription services is a key driver of customer satisfaction (reflected in our industry-leading Net Promoter Score). • Evergreen//Flex is a fleet-level Evergreen architecture that offers users the advantage of storage hardware ownership with a lower upfront cost and a flexible pay-as-you-go subscription.
Flash Software and 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.
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.
Our technology partners include application partners such as VMWare, Microsoft, Oracle and SAP, cloud partners such as AWS, Microsoft Azure, 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 Cohesity, Commvault and Veeam and infrastructure partners such as Cisco and NVIDIA.
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, Bellevue, Washington, Prague, Czech Republic, Vancouver, Canada and Bangalore, India.
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.
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. 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. 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.
Our multi-faceted cloud business objectives include: (i) to be a leader in enabling cloud-native applications; (ii) enable portability of data services and applications across on-premise and cloud-environments; (iii) deliver the full cloud operating model - on-premises or in and across public clouds; and (iv) lead the transition from disk to flash in the hyperscalers and cloud providers.
Our multi-faceted cloud business objectives include: (i) to be a leader in enabling cloud-native applications; (ii) enable portability of data services and applications across on-premise and cloud-environments; (iii) deliver the full cloud operating model - on-premises and across public clouds; and (iv) lead the transition from disk to flash in the hyperscalers and cloud providers.
We intend to continue to invest in our channel partners. 9 Technology Alliances. We work closely with technology partners that help us deliver an ecosystem of world-class solutions to our customers and ensure the efficient deployment and support of their environments.
We intend to continue to invest in our channel partners. Technology Alliances. We work closely with technology partners that help us deliver an ecosystem of world-class solutions to our customers and ensure the efficient deployment and support of their environments.
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; 10 • 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 senior 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; 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.
Our Portworx product is the leader in the enterprise 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 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.
We have over 2,000 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 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.
Item 1. Business. Overview Data is foundational to our customers’ digital transformation, and we are focused on delivering innovative and disruptive data storage technologies, 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 innovative and disruptive data storage, products and services that enable customers to maximize the value of their data.
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 is our solution 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. • 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.
We sell our products and subscription services using a direct sales force and our channel partners. Our sales organization is supported by sales engineers with deep technical expertise and responsibility for pre-sales technical support, solutions engineering and technical training. Our channel partners sell and market our products and subscription services in partnership with our direct sales force.
Our sales organization is supported by sales engineers with deep technical expertise and responsibility for pre-sales technical support, solutions engineering and technical training. Our channel partners sell and market our products and subscription services in partnership with our direct sales force.
Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. 13
Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. 14
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. 8 Our announcements in September 2021 of 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 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.
We have developed highly differentiated technology that is the foundation of our portfolio of products and services and create significant and sustainable competitive advantages.
We have developed highly differentiated technology that is the foundation of our portfolio to create significant and sustainable competitive advantages.
Our Product and Services Growth Initiatives Our growth initiatives are driven by two significant secular trends - continued transition from disk to flash, and the cloud-driven adoption of cloud-native applications and the cloud operating model.
Our Strategic Growth Pillars Our growth pillars are driven by two significant secular trends - continued transition from disk to flash, and the cloud-driven adoption of cloud-native applications and the cloud operating model.
This deep integration of hardware and software allows us to deliver even greater 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.
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.
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 more effective storage with less physical equipment, we lower the costs of our systems as well as their environmental footprint.
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 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 one tenth the amount of power, space, cooling and e-waste of magnetic disk, and up to one fifth the amount of power and cooling of competitive all-flash systems, and half their space required.
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.
With Pure as-a-Service , customers have flexibility to choose performance and capacity needs as well as where they consume and pay for their storage needs. • Pure Fusion , anticipated to be generally available in the first half of fiscal 2023, 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.
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.
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. • Portworx Data Services (PDS) , anticipated to be generally available in the first half of fiscal 2023, is the industry’s first Database-as-a-Service Platform for Kubernetes.
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.
Modern applications are composed of dozens or even hundreds of microservices, often supported by multiple data services. 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 PDS , DevOps engineers can deploy managed, production-grade data services with the click of a button, on and across private and public clouds.
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, including wellness programs and parental and adoption leave.
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.
This capability delivers both predictive and proactive recommendations, targeted assessments, and workload planning based on knowledge accumulated across our entire fleet. Pure1 allows us to target and focus the most relevant innovation and improvements to our customers, delivered through Evergreen. Sustainable Technology Our technology differentiators also deliver significant environmental sustainability benefits.
This capability delivers both predictive and proactive recommendations, targeted assessments, and workload planning based on knowledge accumulated across our entire fleet. Pure1 allows us to target and focus the most relevant innovation and improvements to our customers, delivered through Evergreen . Sustainable Technology Energy reduction and minimizing e-waste is a core part of our business strategy.
Changes in the application requirements, data center infrastructure trends and the broader technology landscape result in evolving customer requirements for capacity, performance scalability and enterprise features of storage systems.
Competition We operate in the intensely competitive data storage market that is characterized by constant change and innovation. Changes in the application requirements, data center infrastructure trends and the broader technology landscape result in evolving customer requirements for capacity, performance scalability and enterprise features of storage systems.
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, although we face competition to retain our highly skilled technical and functional employees.
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).
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. 7 Modernizing Applications We are focused on helping customers modernize their applications- whether it is meeting the needs of modern unstructured data applications or supporting container-based cloud-native applications with the most robust and complete Kubernetes data platform. • Portworx is the market leader in cloud-native Kubernetes data management.
Modernizing Applications We are focused on helping customers modernize their applications- whether it is meeting the needs of modern unstructured data applications or supporting container-based cloud-native applications with the most robust and complete Kubernetes data platform. • Portworx by Pure Storage is the market leader in cloud-native Kubernetes data management.
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. We define a customer as an entity that purchases our products and services either from one of our channel partners or from us directly.
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).
Products and Subscription Services Modernizing Infrastructure We are leading the way to modernize storage infrastructure in our relentless pursuit of delivering the All-Flash Data Center. • FlashArray is our solution for block-oriented storage, addressing database, application, virtual machine and other traditional workloads. FlashArray was the industry’s first all-flash array and is driving the industry-wide transition from disk to Flash.
This website reference is provided for convenience only, and the content on the referenced website is not incorporated by reference into this report. 6 Products and Subscription Services Modernizing Infrastructure We are leading the way to modernize storage infrastructure in our relentless pursuit of delivering the All-Flash Data Center. • FlashArray Platform provides solutions for block-oriented storage, addressing database, application, virtual machine and other traditional workloads.
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. 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.
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.
Powered by FlashArray , FlashBlade and Cloud Block Store , Pure as-a-Service unifies on-premises and public-cloud storage services in a single storage subscription service that delivers a true hybrid cloud experience.
In fiscal 2023, we included an energy efficiency SLA in Evergreen//One guaranteeing a maximum number of actual watts per tebibyte (TiB). Powered by FlashArray , FlashBlade and Cloud Block Store , Evergreen//One unifies on-premises and public-cloud storage services in a single storage subscription service that delivers a true hybrid cloud experience.
FlashBlade , combined with our multi-year advantage in flash technology and our leadership with Portworx , puts us in a unique position to win at the confluence of the growth of unstructured data and modern applications. Our Customers Our global customer base is over 10,000 at the end of fiscal 2022.
FlashBlade , combined with our multi-year advantage in flash technology and our leadership with Portworx , puts us in a unique position to win at the confluence of the growth of unstructured data and modern applications. 9 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.
Evergreen Architecture Our Evergreen architecture means that our products do not become obsolete or require wholesale replacement like traditional systems. Evergreen allows our arrays to be upgraded non-disruptively, allowing our customers to continuously benefit from the latest hardware and software technology, reducing disruptive, costly and unnecessary product replacements.
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.
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 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.
We work closely with our contract manufacturers to meet our product delivery requirements and to manage the manufacturing process and quality control. Seasonality We generally experience seasonality as sales of our products and subscription services are usually lower during the first quarter of our fiscal year and highest during the last quarter of our fiscal year.
Seasonality We generally experience seasonality as sales of our products and subscription services are usually lower during the first quarter of our fiscal year and highest during the last quarter of our fiscal year. As a result, we expect that our business and results of operations will fluctuate from quarter to quarter.
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 disk. Expand All-Flash into new used 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.
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.
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. We pioneered the Evergreen upgradable architecture that brings the benefits of the cloud operating model to an on-premises storage purchase.
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.
Pure as-a-Service 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. 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.
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.
Our board 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. In addition, the board receives an annual update on ESG practices and our progress in tracking towards our goals.
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.
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 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.
The environmental benefits of this approach are outlined in our inaugural Environmental, Social and Governance (ESG) report, which shows that our arrays are up to 80% more energy efficient than competitive all-flash products. Additionally, two key environmental benefits of our Evergreen architecture include the reduction of both wasted energy and e-waste through non-disruptive upgrades and increased lifespan of our products.
Additionally, two key environmental benefits of our Evergreen architecture include the reduction of both wasted energy and e-waste through non-disruptive upgrades and increased lifespan of our products. For more information about the ESG benefits of our technology, see our ESG report at https://www.purestorage.com/company/corporate-social-responsibility.html.
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. • Cloud Block Store provides customers with a consistent block storage experience and flexibility to operate a hybrid cloud model, leveraging both on-premise and public cloud infrastructure.
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.
Our Culture as a Competitive Advantage A myriad of 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.
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.
Our workforce is distributed over 39 countries and we employ over 4,200 employees globally - approximately 3,000 in the U.S. and over 1,200 internationally as of the end of fiscal 2022.
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.
Our human capital strategy is developed by our executive committee and led by our Chief Human Resources Officer (CHRO). The CHRO delivers human capital reports to our board of directors and compensation and talent committee on a quarterly basis.
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.
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. 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.
In 2022, we published our inaugural ESG report. We remain committed to progressing on each of our key ESG initiatives, creating value with minimal environmental harm. For more information about our key ESG initiatives, see our ESG report at https://www.purestorage.com/company/corporate-social-responsibility.html. 12 Available Information Our website address is www.purestorage.com.
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.
Our enterprise business model supports the largest global organizations, including hyperscalers and managed service providers (MSPs). Today, we are in over 50% of Fortune 500 companies, and the loyalty or our customers is reflected in our market-leading, certified customer Net Promoter Score (NPS) of 85.2 in 2021. Sales and Marketing Sales.
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.
Our Evergreen subscription services is a key driver of customer satisfaction (reflected in our industry-leading Net Promoter Score). • Pure as-a-Service is our service offering built on our Evergreen Storage architecture which allows us to deliver the full cloud operating model to customers through service-level-agreements (SLA).
This latest model brings the modernization of Evergreen//Forever beyond the box, and is an efficient way to run a fleet of storage enabled by an asset utilization model. • Evergreen//One is our service offering built on our Evergreen Storage architecture which allows us to deliver data storage to customers by leveraging a cloud operating model and service-level-agreements (SLAs).
We see a tremendous growth opportunity as Flash economics coupled with the growth in unstructured data disrupt the current hybrid and mechanical disk market. 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, 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.
Removed
In fact, 97% of our arrays purchased six years ago are still in service. For more information about the ESG benefits of our technology, see our ESG report at https://www.purestorage.com/company/corporate-social-responsibility.html. This website reference is provided for convenience only, and the content on the referenced website is not incorporated by reference into this report.
Added
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.
Removed
FlashArray//XL , our latest addition to the family, sets a new bar of higher performance, scale and capacity for the most demanding workloads. 6 • FlashArray//C is our all-QLC flash array, delivering the benefits of NVMe flash, performance and consolidation to simplify Tier-2 storage estates.
Added
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.
Removed
Our focus across four growth initiatives described below enables us to participate in a $60B+ fast growing storage and storage as-a-service Total Addressable Market (TAM). 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.
Added
We continue to invest in and innovate for a carbon-constrained world and are committed to continue delivering products and services that empower our customers to operate sustainably and efficiently while also gaining maximum productivity from their IT investments and reducing costs. Our technology differentiators deliver significant environmental sustainability benefits.
Removed
As a result, we expect that our business and results of operations will fluctuate from quarter to quarter. Competition We operate in the intensely competitive data storage market that is characterized by constant change and innovation.
Added
Our product platforms and solutions when compared to our competitors have significantly lower power consumption and e-waste contributing to our customers' achieving their own Environmental, Social and Governance (ESG) objectives. The environmental benefits of this approach are outlined in our ESG report, which shows that our arrays are more energy efficient than competitive all-flash products.
Removed
Diversity, Equity, and Inclusion (DEI) We acknowledge that our industry and our company have a long journey ahead of us on DEI. Our efforts to attract and retain diverse talent have enabled us to gradually improve gender and ethnic representation in recent years.
Added
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.
Removed
We monitor the career progression ratio of female and under-represented groups versus the overall workforce quarterly to ensure equitable promotion practices. Our performance management process contemplates specific steps to ensure that talent differentiation happens for the groups of impact to our business and we conduct internal pay equity analyses to ensure appropriate pay is provided to everyone.
Added
As part of an unified approach to block and file data management, File Services reduces operational overhead by giving storage administrators policy driven automated management at the director, share, or virtual machine (VM) level.
Removed
Approximately 1,200 of our employees are members of at least one of the six Employee Resource Groups that meet monthly and continue to be the fabric of our inclusive culture.
Added
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.
Removed
We are pleased that our performance in our DEI efforts is trending in the right direction, and we remain committed to sustaining our focus on diverse talent sourcing and hiring to achieve healthy representation in candidate slates and interviewer panels and the talent we employ. 11 Attracting, Developing and Retaining Talent In fiscal 2022, we grew headcount by approximately 10%, predominantly to advance our innovation, customer experience, and sales coverage.
Added
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.
Removed
We are advancing our talent management practices with emphasis on holistic performance management, succession and career planning, and leadership and skills development. Nearly 100% of our employees conduct periodic self-evaluations of their individual goals, strengths, career aspirations, and development focus areas, and engage in periodic touchpoints with their leaders.
Added
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.
Removed
Moreover, we strongly differentiate rewards and are transparent with our employees in terms of how their impact is perceived. In the past year, we continued to expand our learning and development program offerings and remained focused on building our leaders of tomorrow with a suite of digital learning, skills development workshops, coaching and mentoring offerings for all employees globally.
Added
These elements form what we call the Cloud Operating Model delivered through our Evergreen architecture. 7 • Our Evergreen Subscription family of services includes Evergreen//Forever, Evergreen//Flex and Evergreen//One which leverages our Evergreen Storage architecture.
Removed
Our employee engagement scores in November 2021 ranked higher than the top quartile of companies in the high-tech industry, signaling a strong culture of pride, satisfaction, and belonging that drives our employees to stay and recommend us as a great place to work.
Added
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.
Removed
Our bi-annual Employee Voice Survey focuses on measuring employee engagement, organization, team and manager effectiveness, equity, inclusion and belonging, career development and mental health. Our employee NPS has been consistently high since we started this survey a few years ago.
Added
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.
Removed
Through our Speak Up Policy, Code of Conduct, and Culture of Compliance survey, employees are empowered to use their voice and be transparent without fear of retaliation. Total Rewards We provide competitive and fair compensation and innovative benefit offerings.
Added
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.
Removed
Readying Ourselves for the Future of Work Looking to a post-COVID world, we are shifting to a hybrid workforce where offices will offer more collaborative spaces and working from home will become part of the regular week.
Added
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.
Removed
Senior management sponsors the integration of ESG priorities throughout our business operations. Our Head of Social Impact and Sustainability, along with an Environmental Steering Committee composed of cross-functional stakeholders, meets monthly to discuss and communicate business priorities, communications and disclosures related to Sustainability and ESG. In 2021, we embarked on quantifying our greenhouse gas (GHG) footprint.

… 13 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

98 edited+17 added−22 removed172 unchanged
Biggest changeThese supply chain challenges may adversely affect our relationships with current and prospective customers and our results of 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. • If we fail to develop and introduce new or enhanced products successfully, our ability to attract and retain customers could be harmed and reduce our revenue. • If we fail to manage our transition to subscription offerings successfully, our revenues and results of operation may be harmed. • Our products are highly technical and may contain defects or bugs, which could cause data unavailability, loss, breach or corruption that might, in turn, result in liability and harm to our reputation and business. • The rapidly evolving market for data storage products makes it difficult to forecast demand for our products. • Our business may be harmed by trends in the overall external storage market. • We face intense competition from established companies and new entrants. • Many of our competitors have long-standing relationships with key decision makers at current and prospective customers, which may inhibit our ability to compete. • We intend to continue focusing on revenue growth and increasing our market penetration and international presence by investing heavily in our business, which may put pressure on near-term profitability. • Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty. • 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. • The sales prices of our products and services may fluctuate or decline, which may reduce our gross profits, revenue growth, and adversely impact our financial results. 14 Risks Related to Our Business and Industry Our business, operating results, and cash flows may be adversely impacted by a rising rate of inflation.
Biggest changeSome of the principal risks associated with our business include the following: • Our business, operating results, and cash flows may be adversely impacted by uncertain macroeconomic conditions, including, among other issues, high inflation, rising interest rates, the current banking crisis and a slowdown in demand. • Our sales cycles can be long, unpredictable and expensive, particularly during a global economic slowdown, making it difficult for us to predict future sales. • We face intense competition from established companies and new entrants. • If we do not manage the supply of our products and their components efficiently, our results of operation could be adversely affected. • If we fail to develop and introduce new or enhanced products successfully, our ability to attract and retain customers could be harmed. • If we fail to execute our transition to subscription offerings successfully, our revenues and results of operation may be harmed. • If our security measures are compromised, or the security, confidentiality, integrity or availability of our information technology or data is compromised, our business could experience a material adverse impact. • Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty. • 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. • The sales prices of our products and services may fluctuate or decline, which may reduce our gross profits, revenue growth, and adversely impact our financial results. 15 Risks Related to Our Business and Industry Our business, operating results, and cash flows may be adversely impacted by uncertain macroeconomic conditions, including, among other issues, high inflation, rising interest rates, the current banking crisis and a slowdown in demand.
A variety of factors may cause our gross margins to fluctuate and make them difficult to predict, including, but not limited to: • sales and marketing initiatives, discount levels, rebates and competitive pricing; • changes in customer, geographic or product mix, including mix of product configurations; • the cost of components, including flash and DRAM, and freight; • new product introductions and enhancements with higher product costs; • excess inventory levels or purchase obligations as a result of changes in demand forecasts or product transitions; • an increase in product returns, order rescheduling and cancellations; • the timing of technical support service contracts and contract renewals; • inventory stocking requirements to mitigate supply chain constraints, accommodate unforeseen demand or support new product introductions; and • inflation and other adverse economic pressures.
A variety of factors may cause our gross margins to fluctuate and make them difficult to predict, including, but not limited to: • sales and marketing initiatives, discount levels, rebates and competitive pricing; • changes in customer, geographic or product mix, including mix of product configurations; • the cost of components, including flash and DRAM, and freight; • new product introductions and enhancements with higher product costs; • excess inventory levels or purchase obligations as a result of changes in demand forecasts or product transitions; • an increase in product returns, product warranty, order rescheduling and cancellations; • the timing of technical support service contracts and contract renewals; • inventory stocking requirements to mitigate supply chain constraints, accommodate unforeseen demand or support new product introductions; and • inflation and other adverse economic pressures.
If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. 27 Third-party claims that we infringe their intellectual property rights could be costly and harm our business.
If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Third-party claims that we infringe their intellectual property rights could be costly and harm our business.
Our competitors may have: • greater name and brand recognition and longer operating histories; • larger sales and marketing and customer support budgets and resources; • broader distribution and established relationships with distribution partners and customers; • the ability to bundle storage products with other products and services to address customers’ requirements; 17 • greater resources to make acquisitions; • larger and more mature product and intellectual property portfolios; and • substantially greater financial, technical and other resources.
Our competitors may have: • greater name and brand recognition and longer operating histories; • larger sales and marketing and customer support budgets and resources; • broader distribution and established relationships with distribution partners and customers; • the ability to bundle storage products with other products and services to address customers’ requirements; • greater resources to make acquisitions; • larger and more mature product and intellectual property portfolios; and • substantially greater financial, technical and other resources.
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. 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 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.
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.
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.
Customers may choose to implement technological solutions to comply with such regulations that impact the performance and competitiveness of our products and solutions. 29 Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions.
Customers may choose to implement technological solutions to comply with such regulations that impact the performance and competitiveness of our products and solutions. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. 31 We may still incur substantially more debt or take other actions that would diminish our ability to make payments on the Notes when due.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. We may still incur substantially more debt or take other actions that would diminish our ability to make payments on the Notes when due.
In addition, errors or failures in the products of third-party technology vendors may be attributed to us and may harm our reputation. 20 We could face claims for product liability, tort or breach of warranty. We may not be able to enforce provisions in our contracts relating to warranty disclaimers and liability limitations.
In addition, errors or failures in the products of third-party technology vendors may be attributed to us and may harm our reputation. We could face claims for product liability, tort or breach of warranty. We may not be able to enforce provisions in our contracts relating to warranty disclaimers and liability limitations.
If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion of the Notes. Servicing our debt will require a significant amount of cash.
If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion of the Notes. 32 Servicing our debt will require a significant amount of cash.
Risks Related to Our Operating Results or Financial Condition We intend to continue focusing on revenue growth and increasing our market penetration and international presence by investing heavily in our business, which may put pressure on near-term profitability.
Risks Related to Our Operating Results or Financial Condition We intend to continue focusing on revenue growth and increasing our market penetration and international presence by investing in our business, which may put pressure on near-term profitability.
These challenges related to acquisitions or investments could harm our business and financial condition. 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. 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.
Furthermore, any of our trademarks may be challenged by others or invalidated through administrative process or litigation. 28 Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and difficult.
Furthermore, any of our trademarks may be challenged by others or invalidated through administrative process or litigation. Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and difficult.
If our customers do not renew their agreements or renew on less favorable terms, our revenue may grow more slowly than expected, if at all. 23 We expect that revenue from subscription services will increase as a percentage of total revenue over time, and because we recognize this revenue over the term of the relevant contract period, downturns or upturns in sales of subscription services are not immediately reflected in full in our results of operations.
If our customers do not renew their agreements or renew on less favorable terms, our revenue may grow more slowly than expected, if at all. 24 We expect that revenue from subscription services will increase as a percentage of total revenue over time, and because we recognize this revenue over the term of the relevant contract period, downturns or upturns in sales of subscription services are not immediately reflected in full in our results of operations.
Some of the factors, many of which are beyond our control, affecting our volatility may include: 32 • 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 impact of the COVID 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; • 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.
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.
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.
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. 34 General Risk Factors Adverse economic conditions may harm our revenues and profitability.
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.
We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We have over 2,000 issued patents and patent applications in the United States and foreign countries.
We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We have over 2,500 issued patents and patent applications in the United States and foreign countries.
Our ability to provide effective support is largely dependent on our ability to attract, train and retain qualified personnel, as well as to engage with qualified support partners that provide a similar level of customer support. In addition, our sales process is highly dependent on our product and business reputation and on recommendations from our existing customers.
Our ability to provide effective technical services is largely dependent on our ability to attract, train and retain qualified personnel, as well as to engage with qualified support partners that provide a similar level of customer support. In addition, our sales process is highly dependent on our product and business reputation and on recommendations from our existing customers.
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. 24 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. 25 Cyberattacks, malicious internet-based activity and online and offline fraud are prevalent and continue to increase.
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; 22 • the impact of inflation on labor and other costs, other adverse economic conditions and the impact of public health epidemics or pandemics, such as the COVID-19 pandemic; 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 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.
Any of these activities could adversely affect the value of our common stock. Risks Related to Our Common Stock The trading price of our common stock has been and may continue to be highly volatile, and an active, liquid, and orderly market for our common stock may not be sustained.
Any of these activities could adversely affect the value of our common stock. 33 Risks Related to Our Common Stock The trading price of our common stock has been and may continue to be volatile, and an active, liquid, and orderly market for our common stock may not be sustained.
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, such as the COVID-19 pandemic; • establishing relationships with channel partners in international locations; 26 • 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 and customs; • 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 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.
The introduction 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. 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 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.
Although our products are designed to be interoperable with existing servers and systems, we may need to provide customized installation and configuration support to our customers before our products become fully operational in their environments.
Although our products are designed to be interoperable with existing servers and systems, we may need to provide customized installation and configuration services to our customers before our products become fully operational in their environments.
Any failure to maintain or a market perception that we do not maintain, high-quality installation and technical 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 products to existing and prospective customers and our business.
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, such as the COVID-19 pandemic.
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 trading price of our common stock has been, and will likely continue to be, highly volatile. Since shares of our common stock were sold in our initial public offering in October 2015 at a price of $17.00 per share, our closing stock price has ranged from $8.76 to $36.00, through March 29, 2022.
The trading price of our common stock has been, and will likely continue to be, highly volatile. Since shares of our common stock were sold in our initial public offering in October 2015 at a price of $17.00 per share, our closing stock price has ranged from $8.76 to $36.00, through March 24, 2023.
Our revenue from subscription services has been increasing as a percentage of total revenue over time. We are also increasing the number of our subscription-based offerings, such as Pure as-a-Service , though it is more difficult to predict the rate at which customers will adopt, and the rate at which our revenue will grow from these new offerings.
Our revenue from subscription services has been increasing as a percentage of total revenue over time. We are also increasing the number of our subscription-based offerings, such as Evergreen//One , though it is more difficult to predict the rate at which customers will adopt, and the rate at which our revenue will grow from these new offerings.
If any new legislation and/or regulations are implemented, if existing trade agreements are renegotiated or terminated, or if tariffs are imposed on foreign-sourced or U.S. goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with such changes.
As new legislation and/or regulations are implemented, existing trade agreements are renegotiated or terminated, and trade restrictions and tariffs are imposed on foreign-sourced or U.S. goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with such changes.
Changes in the application requirements, data center infrastructure trends and the broader technology landscape result in evolving customer requirements for capacity, scalability and other enterprise features of storage systems. Our future financial performance depends on our ability to adapt to competitive dynamics and emerging customer demands and trends.
The market for data storage products is rapidly evolving. Changes in the application requirements, data center infrastructure trends and the broader technology landscape result in evolving customer requirements for capacity, scalability and other enterprise features of storage systems. Our future financial performance depends on our ability to adapt to competitive dynamics and emerging customer demands and trends.
Additionally, most of our prospective customers have existing storage products supplied by our competitors who have an advantage in retaining the customer because, among other things, the incumbent vendor already understands the customer’s IT infrastructure, user demands and needs, or the customer is concerned about actual or perceived costs of switching to a new vendor and technology, particularly during the uncertainty created by COVID-19.
Additionally, most of our prospective customers have existing storage products supplied by our competitors who have an advantage in retaining the customer because, among other things, the incumbent vendor already understands the customer’s IT infrastructure, user demands and needs, or the customer is concerned about actual or perceived costs of switching to a new vendor and technology.
The repurchase authorization has no fixed end date. 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 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.
If we fail to obtain required import or export approval for our products or its various components, 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 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 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 Pure as-a-Service 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 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 .
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 U.S. tax reform, could expose us to potentially adverse tax consequences.
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.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the amounts payable under the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the amounts payable under the Notes, or to make cash payments in connection with any conversion of the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
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. 15 Further, some of the components in our products are sourced from component suppliers outside the United States, including from China.
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.
The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies, especially encryption technology. From time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring the escrow of imports or exports.
The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies, especially encryption technology, as well as laws relating to forced labor and conflict minerals. From time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring the escrow of imports or exports.
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 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.
If we are unable to attract, motivate and retain qualified sales, engineering and other key employees, including our management or if they are unable to work effectively or at all due to the COVID-19 pandemic, our business and operating results could suffer. If we fail to adequately expand and optimize our sales force, our growth will be impeded.
If we are unable to attract, motivate and retain qualified sales, engineering and other key employees, including our management or if they are unable to work effectively, our business and operating results could suffer. If we fail to adequately expand and optimize our sales force, our growth will be impeded.
In addition, man-made factors, such as acts of war, terrorism or malicious computer viruses, and public health epidemics or pandemics, such as the COVID-19 pandemic or the Russian invasion of Ukraine, could cause disruptions in our or our customers’ businesses or the economy as a whole.
In addition, man-made factors, such as acts of war, terrorism or malicious computer viruses, and public health epidemics or pandemics, could cause disruptions in our or our customers’ businesses or the economy as a whole.
We must adapt our sales processes for new sales and marketing approaches, including those required by our shift to subscription services and the changes resulting from the pandemic.
We must adapt our sales processes for new sales and marketing approaches, including those required by our shift to subscription services and the changes resulting from evolving economic and budgetary constraints.
For example, the global macroeconomic environment could be negatively affected by the Russian invasion of Ukraine and the related sanctions and disruptions, the growth rate in the economy of the European Union, China, or the United States, trade relations between the United States and China, the impact of public health epidemics or pandemics, such as the COVID-19 pandemic, political uncertainty in the Middle East and other geopolitical events.
For example, the global macroeconomic environment could be negatively affected by the current banking crisis and interest rate hikes, the Russian invasion of Ukraine and the related sanctions and disruptions, the growth rate in the economy of the European Union, China, or the United States, trade relations between the United States and China, the impact of public health epidemics or pandemics, political uncertainty in the Middle East and other geopolitical events.
We typically enter into non-exclusive, written agreements with our channel partners. These agreements generally have a one-year, self-renewing term, have no minimum sales commitment and do not prohibit our channel partners from offering products and services that compete with ours.
These agreements generally have a one-year, self-renewing term, have no minimum sales commitment and do not prohibit our channel partners from offering products and services that compete with ours.
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 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.
If we fail to manage our relationships with these contract manufacturers effectively, or if these contract manufacturers experience delays, disruptions, capacity constraints or quality control problems, including due to the COVID-19 pandemic or the Russian invasion of Ukraine, our ability to timely ship products to our customers will be impaired, potentially on short notice, and our competitive position, reputation and financial results could be harmed.
If we fail to manage our relationships with these contract manufacturers effectively, or if these contract manufacturers experience delays, disruptions, capacity constraints or quality control problems, our ability to timely ship products to our customers will be impaired, potentially on short notice, and our competitive position, reputation and financial results could be harmed.
For example, we delivered year-over-year revenue growth of 29% for fiscal 2022 and our headcount increased from over 3,400 at the end of fiscal 2020 to over 3,800 employees at the end of fiscal 2021, and to over 4,200 employees at the end of fiscal 2022.
For example, we delivered year-over-year revenue growth of 26% for fiscal 2023 and our headcount increased from over 3,800 at the end of fiscal 2021 to over 4,200 employees at the end of fiscal 2022, and to over 5,100 employees at the end of fiscal 2023.
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.
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.
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. Sales to U.S. federal, state, local and foreign governmental agencies may in the future account for a significant portion of our revenue and sales to governmental agencies impose additional challenges and risks to our sales efforts.
Sales to U.S. federal, state, local and foreign governmental agencies may in the future account for a significant portion of our revenue and sales to governmental agencies impose additional challenges and risks to our sales efforts.
We have experienced inflation, global economic uncertainty, civil unrest and political and fiscal challenges in the United States and abroad and may continue to experience these events in the future, which can arise suddenly and affect the rate of information technology spending and could adversely affect our customers' ability or willingness to purchase our products and services.
We have experienced global economic uncertainty, inflation, rising interest rates, financial distress caused by recent or potential bank failures and the associated banking crisis, civil unrest and political and fiscal challenges in the United States and abroad and may continue to experience these events in the future, which can arise suddenly and affect the rate of information technology spending and could adversely affect our customers' ability or willingness to purchase our products and services.
As we grow and change or are required to adapt to changes in business operations as a result of the COVID-19 pandemic, we may find it difficult to maintain these important aspects of our company culture, which could limit our ability to innovate and operate effectively.
As we grow and change or are required to adapt to changes in business operations, including expectations around work location, we may find it difficult to maintain these important aspects of our company culture, which could limit our ability to innovate and operate effectively.
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 .
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.
All of our employees, including members of our management team and executive officers, are generally employed on an at-will basis, which means that they could terminate their employment with us at any time.
From time to time, there may be changes in our management team, which could create short term uncertainty. All of our employees, including members of our management team and executive officers, are generally employed on an at-will basis, which means that they could terminate their employment with us at any time.
We cannot guarantee that our share repurchase program will enhance shareholder value, and share repurchases could affect the price of our common stock. Since August 2019, our board of directors has authorized a total of $600.0 million in share repurchases, funded from available working capital, including up to $250.0 million authorized in March 2022.
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 have experienced growth in prior periods, and we may not be able to sustain future growth effectively or at all. We have significantly expanded our overall business, customer base, headcount, channel partner relationships and operations in prior periods, and we anticipate that we will continue to expand and experience growth in future periods.
We have significantly expanded our overall business, customer base, headcount, channel partner relationships and operations in prior periods, and we anticipate that we will continue to expand and experience growth in future periods.
We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. 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 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.
Customers are rethinking how they consume IT, increasing spending toward the public cloud, software as a service, hyperconverged and converged infrastructure and software-defined storage. 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 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. 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.
Any failure on our part to effectively identify, train and manage our channel partners and to monitor their sales activity, as well as the customer support and services provided to our customers, could harm our business, operating results and financial condition. 18 Our partners may choose to discontinue offering our products and services or may not devote sufficient attention and resources toward selling our products and services.
Any failure on our part to effectively identify, train and manage our channel partners and to monitor their sales activity, as well as the customer support and services provided to our customers, could harm our business, operating results and financial condition.
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. Our operating results may fluctuate due to a variety of factors, a portion of which are outside of our control. As a result, comparing our results on a period-to-period basis may not be meaningful.
Our operating results may fluctuate due to a variety of factors, a portion of which are outside of our control. As a result, comparing our results on a period-to-period basis may not be meaningful.
Our products are highly technical and may contain defects or bugs, which could cause data unavailability, loss, breach or corruption that might, in turn, result in liability and harm to our reputation and business. Our products are highly technical and complex and are often used to store information critical to our customers’ business operations.
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.
If we are not able to successfully manage the development and release of new or enhanced products, our business, operating results and financial condition could be harmed.
As we introduce new or enhanced products, we must successfully manage product launches and transitions to the next generations of our products and encourage our customers to adopt new products and features. If we are not able to successfully manage the development and release of new or enhanced products, our business, operating results and financial condition could be harmed.
As a result, investors may only receive a return on their investment in our common stock if the market price of our common stock increases. 33 Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the price of our common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the price of our common stock.
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. Our business may be harmed by trends in the overall external storage market.
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.
We believe that building and maintaining brand recognition and customer goodwill is critical to our success. Our efforts in this area have, on occasion, been hampered by the marketing efforts of our competitors, which have included negative or misleading statements about us and our products.
Our efforts in this area have, on occasion, been hampered by the marketing efforts of our competitors, which have included negative or misleading statements about us and our products.
In markets where we rely on partners more heavily, we have less contact with our customers and less control over the sales process and the quality and responsiveness of our partners.
In addition to selling our products, our partners may offer installation, post-sale service and support in their local markets. In markets where we rely on partners more heavily, we have less contact with our customers and less control over the sales process and the quality and responsiveness of our partners.
Our products may contain errors, defects or security vulnerabilities that could result in data unavailability, loss, corruption or other harm to our customers. 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 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.
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 . We face intense competition from established companies and new entrants.
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.
We may not be able to re-engineer our products to avoid infringement, and we may have to seek a license for the infringed technology, which may not be available on reasonable terms or at all, may significantly increase our operating expenses or may require us to restrict our business activities in one or more respects.
An adverse determination also could invalidate our intellectual property rights, prevent us from manufacturing and selling our products and may require that we procure or develop substitute products that do not infringe, which could require significant effort and expense. 28 We may not be able to re-engineer our products to avoid infringement, and we may have to seek a license for the infringed technology, which may not be available on reasonable terms or at all, may significantly increase our operating expenses or may require us to restrict our business activities in one or more respects.
Weak economic conditions would likely adversely impact our business, operating results and financial condition in a number of ways, including by reducing sales, lengthening sales cycles and lowering prices of our products and services.
Weak economic conditions would likely adversely impact our business, operating results and financial condition in a number of ways, including by reducing sales, lengthening sales cycles and lowering prices of our products and services. The majority of our cash and cash equivalents are primarily invested with large financial institutions that we believe are stable and of high quality.
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. 19 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.
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.
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 continue to experience losses, forgoing near-term profitability on a U.S.
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.
While we actively monitor and manage our supply chain, we cannot anticipate the potential impact that new or current restrictions due to COVID-19, manufacturing constraints or the Russian invasion of Ukraine, may have on the manufacturing and shipment of our products.
While we actively monitor and manage our supply chain, we cannot anticipate the potential impact that a variety of factors, such as COVID-19 restrictions, may have on the manufacturing and shipment of our products.
Additionally, although we price our products and services predominantly in U.S. dollars, currency fluctuations in certain countries and regions may negatively impact actual prices that partners and customers are willing to pay in those countries and regions. Furthermore, we anticipate that the prices for our products will decrease over product life cycles.
Larger competitors may reduce the price of products or services that compete with ours or may bundle them with other products and services. Additionally, although we price our products and services predominantly in U.S. dollars, currency fluctuations in certain countries and regions may negatively impact actual prices that partners and customers are willing to pay in those countries and regions.
Our third-party contract manufacturers procure components and build our products based on our forecasts, and we generally do not hold inventory for a prolonged period of time. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and analyses from our sales and marketing organizations, adjusted for overall market conditions.
These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and analyses from our sales and marketing organizations, adjusted for overall market conditions.
Future changes to U.S. and global tax laws may adversely impact our effective tax rate. Our intercompany relationships are, and after the implementation of any changes to our corporate structure will continue to be, subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions.
Our intercompany relationships are, and after the implementation of any changes to our corporate structure will continue to be, subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
We can borrow, repay and re-borrow funds under this Credit Facility at any time, subject to customary borrowing conditions, for general corporate purposes and working capital. 30 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 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.
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).
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). We can borrow, repay and re-borrow funds under this Credit Facility at any time, subject to customary borrowing conditions, for general corporate purposes and working capital.
If we are unable to successfully sell our products to new customers or persuade our customers to continue purchasing our products, we will not be able to maintain or increase our market share and revenue, which would adversely affect our business and operating results. Our brand name and our business may be harmed by the marketing strategies of our competitors.
If we are unable to successfully sell our products to new customers or persuade our customers to continue purchasing our products, we will not be able to maintain or increase our market share and revenue, which would adversely affect our business and operating results. 17 We rely on contract manufacturers to manufacture our products, and if we fail to manage our relationships with our contract manufacturers successfully, our business could be negatively impacted.
Continued market acceptance of subscription offerings will be dependent on our ability to create a seamless customer experience and to optimally price our products in light of marketplace conditions, our costs and customer demand. Subscription offerings will cause us to incur incremental operational, technical, legal and other costs.
In addition, these business models may require compliance with additional regulatory, legal and trade licensing requirements in some countries. Continued market acceptance of subscription offerings will be dependent on our ability to create a seamless customer experience and to optimally price our products in light of marketplace conditions, our costs and customer demand.

… 57 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeWe 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.
Biggest changeWe 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

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−1 removed0 unchanged
Biggest changeThe 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. 35 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.
Biggest changeIn 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
Removed
Item 4. Mine Safety Disclosures. Not applicable. 36 PART II
Added
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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed5 unchanged
Biggest changePurchases of Equity Securities by the Issuer The following table summarizes our stock repurchase activity for the fourth quarter of fiscal 2022 (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 1, 2021 - November 28, 2021 $ 28.02 980 $ 42,045 November 29, 2021 - December 26, 2021 $ 31.90 427 $ 28,436 December 27, 2021 - February 6, 2022 $ 27.73 1,025 $ — (1) In February 2021, our board of directors authorized additional share repurchases of up to $200.0 million of our outstanding common stock under our share repurchase program.
Biggest changePurchases 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.
In March 2022, 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 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.
The graph assumes that $100 (with reinvestment of all dividends) was invested in our common stock and in each index on January 31, 2017 and assumes the reinvestment of any dividends. The returns shown are based on historical results and are not intended to suggest future performance. 38 Item 6. [Reserved] 39
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 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 6, 2022.
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.
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 29, 2022, there were 38 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 24, 2023, there were 37 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 2022 (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 1, 2021 - November 28, 2021 $ — — $ — November 29, 2021 - December 26, 2021 $ 32.09 68 $ 2,165 December 27, 2021 - February 6, 2022 $ — — $ — 37 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 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.

Item 7. Management's Discussion & Analysis

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

65 edited+30 added−31 removed22 unchanged
Biggest changeOther Income (Expense), Net Fiscal Year Ended Change Fiscal Year Ended Change 2020 2021 $ 2021 2022 $ (in thousands) Other income (expense), net $ (3,383) $ (9,127) $ (5,744) $ (9,127) $ (30,098) $ (20,971) % of Total revenue — % (1) % (1) % (1) % Other income (expense), net decreased during fiscal 2022 compared to fiscal 2021 primarily attributable to an increase in net foreign exchange losses as the U.S. dollar strengthened relative to certain foreign currencies, a decrease in interest income resulting from a lower interest rate environment, and higher interest expense due to borrowings under our revolving credit facility.
Biggest changeOther income (expense), net decreased during fiscal 2022 compared to fiscal 2021 primarily attributable to an increase in net foreign exchange losses as the U.S. dollar strengthened relative to certain foreign currencies, a decrease in interest income on marketable securities resulting from a lower interest rate environment, and higher interest expense due to borrowings under the revolving credit facility. 48 Provision for Income Taxes Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) Provision for income taxes $ 11,916 $ 14,763 $ 2,847 24 % $ 14,763 $ 18,737 $ 3,974 27 % % of Total revenue 1 % 1 % 1 % 1 % Provision for income taxes increased during fiscal 2023 compared to fiscal 2022 primarily due to an increase in U.S. state income taxes arising as a result of research and development capitalization under IRC Section 174.
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 revolving credit facility, $59.4 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 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.
See further discussion about our Notes in Note 7 in Part II, Item 8 of this report. 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).
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).
(2) Represents aggregate future minimum lease payments under non-cancelable operating and finance leases. (3) Includes primarily non-cancelable inventory purchase commitments, software service and sponsorship contracts, and hosting arrangements. Purchase orders are not included as they represent authorizations to purchase rather than binding agreements.
(2) Represents aggregate future minimum lease payments under non-cancelable operating and finance leases. (3) Includes primarily non-cancelable inventory purchase commitments, software service contracts, and hosting arrangements. Purchase orders are not included as they represent authorizations to purchase rather than binding agreements.
Marketing programs consist of advertising, events, corporate communications and brand-building activities. We expect our sales and marketing expenses to increase in absolute dollars and it may slightly decrease as a percentage of revenue as we continue to realize efficiencies from scaling our business. General and Administrative.
Marketing programs consist of advertising, events, corporate communications and brand-building activities. We expect our sales and marketing expenses to increase in absolute dollars and it may decrease as a percentage of revenue as we continue to realize efficiencies from scaling our business. General and Administrative.
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.
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 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. 41 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. 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 our research and development expenses to increase in absolute dollars and it may slightly 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.
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.
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’ digital transformation, and we are focused on delivering innovative and disruptive data storage technologies, 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. 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.
The decline in product gross margin for fiscal 2022 compared to fiscal 2021 was impacted by the sale of FlashArray//C to a larger hyperscaler customer, and to a lesser extent higher component and logistics costs due to supply chain environment, as well as increased sales of FlashArray//C and FlashBlade products which generally have a modestly lower gross margin compared to our other FlashArray products.
The decline in product gross margin for fiscal 2022 compared to fiscal 2021 was impacted by the sale of FlashArray//C to a large hyperscaler, and to a lesser extent higher component and logistics costs due to supply chain environment, as well as increased sales of FlashArray//C and FlashBlade products which generally have a modestly lower gross margin compared to our other FlashArray products.
Remaining Performance Obligations Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $1.4 billion at the end of fiscal 2022. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods.
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.
Fiscal 2020 and 2021 were both 52-week years that ended on February 2, 2020 and January 31, 2021, 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 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.
During fiscal 2021, we repurchased and retired 9,526,556 shares of common stock at an average purchase price of $14.17 per share for an aggregate repurchase price of $135.0 million. During fiscal 2022, we repurchased and retired 8,489,168 shares of common stock at an average purchase price of $23.56 per share for an aggregate repurchase price of $200.0 million.
During fiscal 2021, we repurchased and retired 9.5 million shares of common stock at an average purchase price of $14.17 per share for an aggregate repurchase price of $135.0 million. During fiscal 2022, we repurchased and retired 8.5 million shares of common stock at an average purchase price of $23.56 per share for an aggregate repurchase price of $200.0 million.
Operating expenses also include allocated overhead costs for employee benefits and facilities-related 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.
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.
The Notes are unsecured obligations that do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries.
The Notes are unsecured obligations that do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The Notes will mature on April 15, 2023.
Contract values are established prior to any adjustments made in accordance with ASC 606. 42 The following table sets forth our Subscription ARR for the periods presented (dollars in thousands): At the End of Year-over-Year Growth Fiscal 2021 Fiscal 2022 % Subscription annual recurring revenue $ 647,917 $ 848,776 31 % 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.
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.
Investing Activities Net cash used in investing activities during fiscal 2022 of $153.3 million was driven by capital expenditures of $102.3 million, and net purchases of marketable securities of $50.4 million.
Investing Activities 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. Net cash used in investing activities during fiscal 2022 of $153.3 million was driven by capital expenditures of $102.3 million, and net purchases of marketable securities of $50.4 million.
General and administrative expenses consist primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, IT and fees for third-party professional services as well as amortization of intangible assets pertaining to defensive technology patents and allocated overhead. We expect our general and administrative expenses to increase in absolute dollars.
General and administrative expenses consist primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, facilities, IT and fees for third-party professional services as well as amortization of intangible assets pertaining to defensive technology patents and allocated overhead.
Recent Accounting Pronouncement Refer to “Recent Accounting Pronouncement” in Note 2 of our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 52
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
During fiscal 2021 compared to fiscal 2020, total revenue in the United States grew slightly by 1% to $1.2 billion and total rest of the world revenue grew by 7% from $458.5 million to $488.8 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 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.
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 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.
The increase in product cost of revenue was primarily attributable to increased sales. Other factors include higher component and logistics costs due to supply chain environment, and an increase in the amortization of acquired intangible assets. The increase in subscription services cost of revenue was primarily attributable to supporting our growing installed base including PaaS and Portworx .
The increase in product cost of revenue was primarily attributable to increased sales. Other factors include higher component and logistics costs due to supply chain environment, and an increase in the amortization of acquired intangible assets.
Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance. See "Risk Factors" in Part I, Item 1A. for additional details.
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.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Our estimates and judgments are based on historical experience, forecasted events and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe the accounting policy below has the most significant impact on our consolidated financial statements and require management's most difficult, subjective, or complex judgments.
Changes in total deferred revenue during the periods presented are as follows (in thousands): Fiscal Year Ended 2021 2022 Beginning balance $ 697,288 $ 843,697 Additions 703,800 937,510 Recognition of deferred revenue (557,391) (701,335) Ending balance $ 843,697 $ 1,079,872 Revenue recognized during fiscal 2021 and 2022 from deferred revenue at the beginning of each respective period was $353.1 million and $442.7 million.
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.
The letters of credit are collateralized by restricted cash and mature on various dates through August 2029. 49 Share Repurchase Program In August 2019, our board of directors approved a stock repurchase program to repurchase up to $150.0 million of our common stock and in February 2021, an additional $200.0 million of our common stock, both of which were completed by the end of fiscal 2022.
Share Repurchase Program In August 2019, our Board of Directors approved a stock repurchase program to repurchase up to $150.0 million of our common stock and in February 2021, an additional $200.0 million of our common stock, both of which were completed by the end of fiscal 2022.
Letters of Credit At the end of fiscal 2021 and 2022, we had outstanding letters of credit in the aggregate amount of $6.7 million in connection with our facility leases.
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.
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.
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.
Repurchases may be made at management’s discretion from time to time on the open market through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.
The authorization allows us to repurchase shares of our common stock opportunistically and will be funded from available working capital. Repurchases may be made at management’s discretion from time to time on the open market through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing.
The increase in subscription services gross margin for fiscal 2022 compared to fiscal 2021 was driven by increased sales of unified subscription services, PaaS and Cloud Block Store , higher renewals in Evergreen Storage subscriptions, and increasing economies of scale. Cost of revenue increased by $25.4 million, or 5%, for fiscal 2021 compared to fiscal 2020.
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.
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.
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.
RPO is expected to increase as our subscription services business grows over time. 43 Cost of Revenue and Gross Margin Fiscal Year Ended Change Fiscal Year Ended Change 2020 2021 $ % 2021 2022 $ % (in thousands) Product cost of revenue $ 359,238 $ 348,986 $ (10,252) (3) % $ 348,986 $ 471,565 $ 122,579 35 % Product stock based compensation 3,732 4,001 269 7 % 4,001 6,334 2,333 58 % Total expenses $ 362,970 $ 352,987 $ (9,983) (3) % $ 352,987 $ 477,899 $ 124,912 35 % % of Product revenue 29 % 31 % 31 % 33 % Subscription services cost of revenue $ 132,513 $ 167,289 $ 34,776 26 % $ 167,289 $ 209,190 $ 41,901 25 % Subscription services stock based compensation 14,403 14,979 576 4 % 14,979 21,240 6,261 42 % Total expenses $ 146,916 $ 182,268 $ 35,352 24 % $ 182,268 $ 230,430 $ 48,162 26 % % of Subscription services revenue 36 % 34 % 34 % 31 % Total cost of revenue $ 509,886 $ 535,255 $ 25,369 5 % $ 535,255 $ 708,329 $ 173,074 32 % % of Revenue 31 % 32 % 32 % 32 % Product gross margin 71 % 69 % 69 % 67 % Subscription services gross margin 64 % 66 % 66 % 69 % Total gross margin 69 % 68 % 68 % 68 % Cost of revenue increased by $173.1 million, or 32%, for fiscal 2022 compared to fiscal 2021.
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.
Net cash used in investing activities during fiscal 2020 of $324.7 million resulted from net purchases of marketable securities of $176.3 million, capital expenditures of $87.8 million, net cash paid for acquisitions of $51.6 million, and intangible assets acquired of $9.0 million. 50 Financing Activities Net cash used in financing activities of $127.8 million during fiscal 2022 was primarily driven by share repurchases of $200.2 million, and $10.8 million in tax withholdings on vesting of equity awards, partially offset by $48.7 million of proceeds from the exercise of stock options, and $36.6 million of proceeds from issuance of common stock under our employee stock purchase plan (ESPP).
Net cash used in financing activities of $127.8 million during fiscal 2022 was primarily driven by share repurchases of $200.2 million, and $10.8 million in tax withholdings on vesting of equity awards, partially offset by $48.7 million of proceeds from the exercise of stock options, and $36.6 million of proceeds from issuance of common stock under our ESPP.
Subscription services revenue also include our professional services offerings such as installation and implementation consulting services. Provided that all other revenue recognition criteria have been met, we typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations.
Provided that all other revenue recognition criteria have been met, we typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. For Evergreen//Flex , product revenue is recognized upon the commencement of the underlying subscription services.
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 2020 2021 $ % 2021 2022 $ % (in thousands) Product revenue $ 1,238,654 $ 1,144,098 $ (94,556) (8) % $ 1,144,098 $ 1,442,338 $ 298,240 26 % Subscription services revenue 404,786 540,081 135,295 33 % 540,081 738,510 198,429 37 % Total revenue $ 1,643,440 $ 1,684,179 $ 40,739 2 % $ 1,684,179 $ 2,180,848 $ 496,669 29 % 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.
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.
Our future capital requirements will depend on many factors including our sales growth, the timing and extent of spending to support development efforts, the expansion of international operation activities, the addition or closure of office space, the timing of new product introductions and the continuing market acceptance of our products and services, the volume and timing of our share repurchases, and the timing and settlement election of the Notes.
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.
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.
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.
General and administrative expense increased by $19.3 million, or 12%, during fiscal 2021 compared to fiscal 2020.
General and administrative expense increased by $7.5 million, or 4%, during fiscal 2022 compared to fiscal 2021.
Sales and Marketing Fiscal Year Ended Change Fiscal Year Ended Change 2020 2021 $ % 2021 2022 $ % (in thousands) Sales and marketing $ 660,462 $ 650,766 $ (9,696) (1) % $ 650,766 $ 727,562 $ 76,796 12 % Stock based compensation 67,560 65,248 (2,312) (3) % 65,248 71,439 6,191 9 % Total expenses $ 728,022 $ 716,014 $ (12,008) (2) % $ 716,014 $ 799,001 $ 82,987 12 % % of Total revenue 44 % 43 % 43 % 37 % Sales and marketing expense increased by $83.0 million, or 12%, during fiscal 2022 compared to fiscal 2021, primarily due to an increase of $62.7 million in employee compensation and related costs, which included a $24.7 million increase in sales commission expense, and a $14.3 million increase in marketing and travel spend due to the gradual reduction in COVID-19 restrictions.
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.
Off-Balance Sheet Arrangements Through the end of fiscal 2022 , 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.
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).
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 Evergreen Storage subscription , our unified subscription that includes Pure as-a-Service and Cloud Block Store, and Portworx .
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.
Provision for income taxes increased during fiscal 2021 compared to fiscal 2020 primarily attributable to an increase in foreign income taxes and the release of the valuation allowance related to unrealized gains on available-for-sale securities from fiscal 2020. 47 Liquidity and Capital Resources At the end of fiscal 2022, we had cash, cash equivalents and marketable securities of $1.4 billion.
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.
Personnel costs consist of salaries, bonuses and stock-based compensation expense. Our cost of product revenue also includes allocated overhead costs , inventory write-offs, amortization of intangible assets pertaining to developed technology, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs.
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.
Net cash provided by operating activities during fiscal 2020 was primarily driven by cash collections related to the sales of our product and subscription services, partially offset by payments to our contract manufacturers, employee compensation, and general corporate operating expenditures.
Key factors driving the increase included cash collections from sales of our product and subscription services and improved operating leverage, partially offset by payments to our contract manufacturers, employee compensation, and general corporate operating expenditures.
We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases. Operating Expenses Our 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 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 .
Subscription ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations and is not intended as a substitute for any of these items.
Subscription ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations and is not intended as a substitute for any of these items. Subscription ARR is calculated as the total annualized contract value of all active customer subscription agreements at the end of a fiscal quarter, plus on-demand revenue for the quarter multiplied by four.
To the extent a customer contract includes multiple promised goods or services, we determine whether promised goods or services should be accounted for as a separate performance obligation. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer.
Revenue is recognized when, or as, control of the promised products or subscription services is transferred to the customer at the transaction price. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer.
The increase was primarily driven by a $56.5 million increase in employee compensation and related costs, including a $9.6 million increase in stock-based compensation expense, and a $10.1 million increase in data center and cloud services costs.
The increase was primarily driven by a $79.6 million increase in employee compensation and related costs, which included a $19.4 million increase in stock-based compensation expense. The remainder of the increase was primarily attributable to a $20.6 million increase in office and facilities-related costs and an $8.7 million increase in data center and cloud services costs.
In addition, we expensed $9.9 million relating to the cease use of certain lease facilities and recognized $12.2 million in one-time involuntary termination benefit costs related to workforce realignment plans.
Restructuring and Other During fiscal 2021, we recognized $31.0 million of restructuring and other costs related to one-time involuntary termination benefit costs associated with workforce realignment plans, the cease use of certain lease facilities, and incremental costs directly related to the COVID-19 pandemic.
The increase in subscription services revenue was primarily driven by increases in sales of our Evergreen Storage subscription services, and our unified subscription that includes PaaS and Cloud Block Store , as well as increased recognition of deferred subscription services revenue contracts.
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.
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 and have increased year over year.
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.
The increase in subscription services gross margin for fiscal 2021 compared to fiscal 2020 was driven by increased renewals in Evergreen Storage subscriptions and increased sales of unified subscription services, PaaS and Cloud Block Store . 44 Operating Expenses Research and Development Fiscal Year Ended Change Fiscal Year Ended Change 2020 2021 $ % 2021 2022 $ % (in thousands) Research and development $ 326,004 $ 363,247 $ 37,243 11 % $ 363,247 $ 439,671 $ 76,424 21 % Stock based compensation 107,658 117,220 9,562 9 % 117,220 142,264 25,044 21 % Total expenses $ 433,662 $ 480,467 $ 46,805 11 % $ 480,467 $ 581,935 $ 101,468 21 % % of Total revenue 26 % 29 % 29 % 27 % Research and development expense increased by $101.5 million, or 21%, during fiscal 2022 compared to fiscal 2021, primarily driven by a $71.0 million increase in employee compensation and related costs, which included a $25.0 million increase in stock-based compensation expense.
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.
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. 40 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 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.
In March 2022, our board of directors authorized the repurchase of up to an additional $250.0 million of our common stock. The authorization allows us to repurchase shares of our common stock opportunistically and will be funded from available working capital.
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.
The remainder of the increase was primarily attributable to a $7.2 million increase in outside services expenses and a $4.2 million increase in subscription costs. 45 General and Administrative Fiscal Year Ended Change Fiscal Year Ended Change 2020 2021 $ % 2021 2022 $ % (in thousands) General and administrative $ 129,801 $ 141,581 $ 11,780 9 % $ 141,581 $ 144,295 $ 2,714 2 % Stock based compensation 33,352 40,896 7,544 23 % 40,896 45,686 4,790 12 % Total expenses $ 163,153 $ 182,477 $ 19,324 12 % $ 182,477 $ 189,981 $ 7,504 4 % % of Total revenue 10 % 11 % 11 % 9 % General and administrative expense increased by $7.5 million, or 4%, during fiscal 2022 compared to fiscal 2021.
Sales and marketing expense increased by $83.0 million, or 12%, during fiscal 2022 compared to fiscal 2021, primarily due to an increase of $62.7 million in employee compensation and related costs, which included a $24.7 million increase in sales commission expense, and a $14.3 million increase in marketing and travel spend due to the gradual reduction in COVID-19 restrictions. 47 General and Administrative Fiscal Year Ended Change Fiscal Year Ended Change 2021 2022 $ % 2022 2023 $ % (in thousands) General and administrative $ 141,581 $ 144,295 $ 2,714 2 % $ 144,295 $ 177,455 $ 33,160 23 % Stock-based compensation 40,896 45,686 4,790 12 % 45,686 60,541 14,855 33 % Total expenses $ 182,477 $ 189,981 $ 7,504 4 % $ 189,981 $ 237,996 $ 48,015 25 % % of Total revenue 11 % 9 % 9 % 9 % General and administrative expense increased by $48.0 million, or 25%, during fiscal 2023 compared to fiscal 2022 primarily due to employee compensation and related costs driven by increased headcount as we continue to scale and support the growth of our business.
Critical Accounting Policy and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.
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.
Net cash provided by financing activities of $49.2 million during fiscal 2020 was due to $43.3 million of proceeds from issuance of common stock under our ESPP and $42.9 million of proceeds from the exercise of stock options, partially offset by repurchases of our common stock for $15.0 million under the share repurchase program, the repayment of $11.6 million of debt assumed in connection with our acquisition of Compuverde, and $10.4 million in tax withholdings on vesting of restricted stock.
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.
We believe our existing cash, cash equivalents and marketable securities 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 2022.
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.
Payment Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Debt obligations (1) $ 844,835 $ 6,111 $ 586,144 $ 252,580 $ — Future lease commitments (2) 150,613 40,172 64,031 28,623 17,787 Purchase obligations (3) 289,019 236,959 50,406 1,654 — Total $ 1,284,467 $ 283,242 $ 700,581 $ 282,857 $ 17,787 _________________________________ (1) Consists of (i) principal and interest payments on our convertible senior notes due 2023, (ii) principal, interest, and unused commitment fees on our August 2020 revolving credit facility based on debt outstanding and rates in effect at February 6, 2022, 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) $ 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.
The following table summarizes our cash flows for the periods presented (in thousands): Fiscal Year Ended 2020 2021 2022 Net cash provided by operating activities $ 189,574 $ 187,641 $ 410,127 Net cash used in investing activities (324,711) (418,109) (153,283) Net cash provided (used) by financing activities 49,246 200,237 (127,792) Operating Activities Net cash provided by operating activities during fiscal 2022 was primarily driven by cash collections from sales of our product and subscription services and improved operating leverage, partially offset by payments to our contract manufacturers, employee compensation, and general corporate operating expenditures.
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.
The decrease in product revenue during fiscal 2021 compared to fiscal 2020 was largely driven by headwinds caused by the COVID-19 pandemic, despite sales growth from our FlashBlade and FlashArray//C offerings and purchases from new customers.
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 .
We allocate the transaction price to each performance obligation for contracts that contain multiple performance obligations based on a relative standalone selling price (SSP).
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.
The increase in subscription services revenue was largely driven by increases in sales of both our Evergreen Storage subscription services, and our unified subscription that includes PaaS and Cloud Block Store , as well as increased Portworx revenue . Total revenue increased in fiscal 2021 by $40.7 million, or 2%, compared to fiscal 2020.
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 .
Upon conversion, holders will receive cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We currently intend to settle the principal of the Notes in cash.
Accordingly, we currently intend to settle the principal amount of the Notes, or $575.0 million, with cash from a combination of sources, including our existing cash, cash equivalents, marketable securities and the revolving credit facility.
The increase was primarily driven by an increase of $21.4 million in employee compensation and related costs, including a $7.5 million increase in stock-based compensation expense related, in part, to certain performance restricted stock awards, partially offset by a $3.7 million decrease in office and facilities related costs.
Research and development expense increased by $101.5 million, or 21%, during fiscal 2022 compared to fiscal 2021, primarily driven by a $71.0 million increase in employee compensation and related costs, which included a $25.0 million increase in stock-based compensation expense.
Removed
COVID-19, Supply Chain and Inflation We continue to actively monitor, evaluate and respond to developments relating to the COVID-19 pandemic. During fiscal 2022, our operating margin benefited, in part from reduced travel, limited physical marketing events, and slower hiring while we navigated through the various challenges that arose from COVID-19 restrictions.
Added
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 .
Removed
We expect our operating expenses will increase in fiscal 2023 as a result of business operations beginning to normalize from COVID-19, and due to the overall effects of inflation. Expected increases in operating expenses include higher wages and personnel related costs, costs impacting our supply chain such as material and logistics costs, and increased travel.
Added
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.
Removed
We generally recognize revenue from subscription services ratably over the contractual service period and professional services as delivered.
Added
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.
Removed
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.
Added
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.
Removed
Subscription ARR is calculated as the total annualized contract value of all active customer subscription agreements, including our Evergreen Storage subscription contracts, at the end of the fiscal quarter, plus on-demand revenue during the current fiscal quarter ended multiplied by four.
Added
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.
Removed
Of the $1.4 billion contracted but not recognized revenue at the end of fiscal 2022, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.
Added
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.
Removed
The decrease in product cost of revenue was primarily attributable to the corresponding decline in product revenue due to headwinds caused by the COVID-19 pandemic, partially offset by increased costs in our manufacturing operations associated with increased headcount and an increase in the amortization of acquired intangible assets.
Added
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.
Removed
The increase in subscription services cost of revenue was primarily attributable to higher costs in our customer support organization. The decline in product gross margin for fiscal 2021 compared to fiscal 2020 was primarily attributable to lower component costs for certain key raw materials that we use for our solutions and increased sales of larger FlashArray systems in fiscal 2021.

… 46 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed6 unchanged
Biggest changeAt the end of fiscal 2021 and 2022, we had cash, cash equivalents and marketable securities of $1.3 billion and $1.4 billion. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments.
Biggest changeAt 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.
A portion of our operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound and Euro. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations.
A portion of our operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound, Euro and Yen. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations.
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 2022 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 2023 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 $10.0 million as of the end of fiscal 2022. 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 $8.5 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.
These changes would have resulted in an adverse impact on loss before provision for income taxes of approximately $4.1 million at the end of fiscal 2022. 53
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

Other PSTG 10-K year-over-year comparisons