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

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to   
Commission File Number: 001-37570
Pure Storage, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware27-1069557
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
650 Castro Street, Suite 400
Mountain View, California 94041
(Address of principal executive offices, including zip code)

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

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

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

As of December 1, 2021, the registrant had 289,947,104 shares of its Class A common stock outstanding.


PURE STORAGE, INC.
FORM 10-Q for the Quarter Ended October 31, 2021
Table of Contents
 
  Page
 
PART I.
 
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II. 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding our ability to sustain or manage our profitability and growth, our expectations regarding demand for our products and services and trends in the external storage market, our expectations that sales prices may decrease or fluctuate over time, our plans to expand and continue to invest internationally, our plans to continue investing in marketing, sales, support and research and development, our shift to subscription services, including as-a-Service offerings, our expectations regarding fluctuations in our revenue and operating results, our expectations that we may continue to experience losses despite revenue growth, our ability to successfully attract, motivate, and retain qualified personnel and maintain our culture, our expectations regarding our technological leadership and market opportunity, our ability to realize benefits from our investments, including development efforts and acquisitions, our ability to innovate and introduce new or enhanced products, our expectations regarding product acceptance and our technologies, products and solutions, our competitive position and the effects of competition and industry dynamics, including alternative offerings from incumbent, emerging and public cloud vendors, our expectations concerning relationships with third parties, including our partners, customers, suppliers and contract manufacturers, the success of the Portworx acquisition and technology, the adequacy of our intellectual property rights, expectations concerning potential legal proceedings and related costs, the impact of adverse economic conditions and the duration and scope of the COVID-19 pandemic and related restrictions and its impact on our business, operating results, cash flows and/or financial condition.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors.” These risks are not exhaustive. Other sections of this report include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
Investors should not rely upon forward-looking statements as predictions of future events. We cannot assure investors that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
ii

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PURE STORAGE, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data, unaudited)
At the End of
 Fiscal 2021
Third Quarter of Fiscal 2022
ASSETS  
Current assets:  
Cash and cash equivalents$337,147 $404,692 
Marketable securities916,388 958,180 
Accounts receivable, net of allowance of $1,033 and $965
460,879 354,179 
Inventory46,733 44,036 
Deferred commissions, current57,183 63,422 
Prepaid expenses and other current assets89,836 102,117 
Total current assets1,908,166 1,926,626 
Property and equipment, net163,041 193,141 
Operating lease right-of-use assets134,668 115,731 
Deferred commissions, non-current130,741 144,898 
Intangible assets, net76,648 66,992 
Goodwill358,736 358,736 
Restricted cash10,544 10,544 
Other assets, non-current36,896 39,088 
Total assets$2,819,440 $2,855,756 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$67,530 $48,708 
Accrued compensation and benefits160,817 122,969 
Accrued expenses and other liabilities61,754 73,884 
Operating lease liabilities, current32,231 35,061 
Deferred revenue, current438,321 499,176 
Total current liabilities760,653 779,798 
Long-term debt755,814 778,366 
Operating lease liabilities, non-current120,361 99,031 
Deferred revenue, non-current405,376 450,574 
Other liabilities, non-current27,230 23,563 
Total liabilities2,069,434 2,131,332 
Commitments and contingencies (Note 7)
Stockholders’ equity:  
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized; no shares issued and outstanding
  
Class A and Class B common stock, par value of $0.0001 per share— 2,250,000 (Class A 2,000,000, Class B 250,000) shares authorized; 278,363 and 290,081 Class A shares issued and outstanding
28 29 
Additional paid-in capital2,307,580 2,447,916 
Accumulated other comprehensive income (loss)7,410 (307)
Accumulated deficit(1,565,012)(1,723,214)
Total stockholders’ equity750,006 724,424 
Total liabilities and stockholders’ equity$2,819,440 $2,855,756 
 
See the accompanying notes to condensed consolidated financial statements.
1


PURE STORAGE, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
Third Quarter of Fiscal
First Three Quarters of Fiscal
 2021202220212022
Revenue:  
Product$274,470 $374,913 $793,718 $949,736 
Subscription services136,149 187,827 387,743 522,542 
Total revenue410,619 562,740 1,181,461 1,472,278 
Cost of revenue:  
Product86,661 129,721 240,677 309,935 
Subscription services47,442 58,227 132,717 165,658 
Total cost of revenue134,103 187,948 373,394 475,593 
Gross profit276,516 374,792 808,067 996,685 
Operating expenses:  
Research and development122,981 147,808 350,079 419,296 
Sales and marketing172,282 193,172 517,149 567,054 
General and administrative46,467 51,890 132,063 138,500 
Restructuring and other  22,990  
Total operating expenses341,730 392,870 1,022,281 1,124,850 
Loss from operations(65,214)(18,078)(214,214)(128,165)
Other income (expense), net(4,887)(7,953)(6,700)(20,090)
Loss before provision for income taxes(70,101)(26,031)(220,914)(148,255)
Provision for income taxes4,121 2,700 8,869 9,947 
Net loss$(74,222)$(28,731)$(229,783)$(158,202)
Net loss per share attributable to common stockholders, basic and diluted$(0.28)$(0.10)$(0.87)$(0.56)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted269,144 287,462 265,626 283,918 

 
See the accompanying notes to condensed consolidated financial statements.
2

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

 
Third Quarter of Fiscal
First Three Quarters of Fiscal
 2021202220212022
Net loss$(74,222)$(28,731)$(229,783)$(158,202)
Other comprehensive income (loss):  
Unrealized net (losses) gains on available-for-sale securities
(2,869)(3,710)4,736 (7,121)
Less: reclassification adjustment for net gains on available-for-sale securities included in net loss(257)(78)(1,126)(596)
Change in unrealized net (losses) gains on available-for-sale securities(3,126)(3,788)3,610 (7,717)
Comprehensive loss$(77,348)$(32,519)$(226,173)$(165,919)


 See the accompanying notes to condensed consolidated financial statements.
3

PURE STORAGE, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, unaudited)
Third Quarter of Fiscal 2021
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of the second quarter of fiscal 2021267,776 $27 $2,172,391 $12,185 $(1,438,497)$746,106 
Issuance of common stock upon exercise of stock options678 — 4,019 — — 4,019 
Stock-based compensation expense— — 59,734 — — 59,734 
Vesting of restricted stock units2,990 —  — —  
Tax withholding on vesting of restricted stock(86)— (1,239)— — (1,239)
Forfeiture of restricted stock(87)— — — —  
Common stock issued under employee stock purchase plan2,129 — 16,418 — — 16,418 
Repurchases of common stock(1,360)— (21,411)— — (21,411)
Equity awards assumed in an acquisition— — 8,802 — — 8,802 
Other comprehensive loss— — — (3,126)— (3,126)
Net loss— — — — (74,222)(74,222)
Balance at the end of the third quarter of fiscal 2021
272,040 $27 $2,238,714 $9,059 $(1,512,719)$735,081 

Third Quarter of Fiscal 2022
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of the second quarter of fiscal 2022284,734 $28 $2,388,418 $3,481 $(1,694,483)$697,444 
Issuance of common stock upon exercise of stock options2,086 — 22,289 — — 22,289 
Stock-based compensation expense— — 76,616 — — 76,616 
Vesting of restricted stock units3,548 1 (1)— —  
Tax withholding on vesting of equity awards(81)— (2,106)— — (2,106)
Forfeiture of restricted stock(25)— — — —  
Common stock issued under employee stock purchase plan2,180 — 18,915 — — 18,915 
Repurchases of common stock(2,361)— (56,215)— — (56,215)
Other comprehensive loss— — — (3,788)— (3,788)
Net loss— — — — (28,731)(28,731)
Balance at the end of the third quarter of fiscal 2022
290,081 $29 $2,447,916 $(307)$(1,723,214)$724,424 

See the accompanying notes to condensed consolidated financial statements.

4

PURE STORAGE, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, unaudited)
First Three Quarters of Fiscal 2021
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of fiscal 2020264,008 $26 $2,107,579 $5,449 $(1,282,936)$830,118 
Issuance of common stock upon exercise of stock options4,991 1 25,644 — — 25,645 
Stock-based compensation expense— — 179,884 — — 179,884 
Vesting of restricted stock units8,445 1 (1)— —  
Tax withholding on vesting of restricted stock(305)— (4,080)— — (4,080)
Cancellation and forfeiture of restricted stock(317)— — — —  
Common stock issued under employee stock purchase plan3,714 — 32,439 — — 32,439 
Repurchases of common stock(8,496)(1)(111,553)— — (111,554)
Equity awards assumed in an acquisition— — 8,802 — — 8,802 
Other comprehensive income— — — 3,610 — 3,610 
Net loss— — — — (229,783)(229,783)
Balance at the end of the third quarter of fiscal 2021
272,040 $27 $2,238,714 $9,059 $(1,512,719)$735,081 

First Three Quarters of Fiscal 2022
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of fiscal 2021278,363 $28 $2,307,580 $7,410 $(1,565,012)$750,006 
Issuance of common stock upon exercise of stock options3,983 — 33,573 — — 33,573 
Stock-based compensation expense— — 209,401 — — 209,401 
Vesting of restricted stock units9,875 1 (1)— —  
Tax withholding on vesting of equity awards(386)— (8,670)— — (8,670)
Forfeiture of restricted stock(62)— — — —  
Common stock issued under employee stock purchase plan4,365 — 36,641 — — 36,641 
Repurchases of common stock(6,057)— (130,608)— — (130,608)
Other comprehensive loss— — — (7,717)— (7,717)
Net loss— — — — (158,202)(158,202)
Balance at the end of the third quarter of fiscal 2022
290,081 $29 $2,447,916 $(307)$(1,723,214)$724,424 

See the accompanying notes to condensed consolidated financial statements.
5

PURE STORAGE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

 
First Three Quarters of Fiscal
 20212022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(229,783)$(158,202)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization49,811 59,605 
Amortization of debt discount and debt issuance costs21,525 23,011 
Stock-based compensation expense179,755 207,763 
Impairment of long-lived assets7,505 471 
Other4,111 8,576 
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable, net83,220 106,788 
Inventory(4,724)38 
Deferred commissions(12,885)(20,395)
Prepaid expenses and other assets(37,606)(12,283)
Operating lease right-of-use assets21,434 22,061 
Accounts payable8,566 (14,256)
Accrued compensation and other liabilities(9,737)(35,251)
Operating lease liabilities(20,444)(22,094)
Deferred revenue57,860 106,054 
Net cash provided by operating activities118,608 271,886 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(73,643)(81,217)
Acquisition, net of cash acquired(339,806) 
Purchases of marketable securities(454,391)(502,438)
Sales of marketable securities132,207 146,934 
Maturities of marketable securities324,780 303,158 
Other(5,000)(600)
Net cash used in investing activities(415,853)(134,163)
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from exercise of stock options25,677 33,743 
  Proceeds from issuance of common stock under employee stock purchase plan32,439 36,641 
  Proceeds from borrowings, net of issuance costs251,892  
  Repayments of borrowing (870)
  Principal payments on finance lease obligations (414)
  Tax withholding on vesting of equity awards(4,080)(8,670)
  Repurchases of common stock(111,554)(130,608)
Net cash provided by (used in) financing activities194,374 (70,178)
Net (decrease) increase in cash, cash equivalents and restricted cash(102,871)67,545 
Cash, cash equivalents and restricted cash, beginning of period377,922 347,691 
Cash, cash equivalents and restricted cash, end of period$275,051 $415,236 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
Cash and cash equivalents$263,702 $404,692 
Restricted cash11,349 10,544 
Cash, cash equivalents and restricted cash, end of period$275,051 $415,236 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest$1,062 $3,932 
Cash paid for income taxes$8,911 $10,051 
Cash paid for amounts included in the measurement of operating lease liabilities$27,336 $27,379 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION 
Property and equipment purchased but not yet paid$10,644 $6,413 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$53,289 $3,594 
Fair value of equity awards assumed in an acquisition$8,802 $ 

See the accompanying notes to condensed consolidated financial statements.
6


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Business Overview
Organization and Description of Business
Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Mountain View, California and have wholly owned subsidiaries throughout the world.
Data is foundational to our customers' digital transformation and we deliver innovative and disruptive technology and data storage solutions that enable customers to maximize the value of their data.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
In September 2019, we adopted a 52/53 week fiscal year consisting of four 13-week quarters ending on the first Sunday after January 30, which for fiscal 2021 was January 31, 2021 and for fiscal 2022 will be February 6, 2022. The third quarter of fiscal 2021 and 2022 ended on November 1, 2020 and October 31, 2021. Unless otherwise stated, all dates refer to our fiscal year and fiscal periods.
The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
There were no material changes in the third quarter of fiscal 2022 to our significant accounting policies as described in our Annual Report on Form 10-K for fiscal 2021.
Unaudited Interim Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2021.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2022 or any future period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment from the ongoing COVID-19 pandemic. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, stock-based compensation, provision for income taxes including related reserves, and the fair value of equity assumed, intangible and tangible assets acquired and liabilities assumed for business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
7


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Restricted Cash
Restricted cash is comprised of cash collateral for letters of credit related to our leases and for a vendor credit card program. At the end of fiscal 2021 and the third quarter of fiscal 2022, we had restricted cash of $10.5 million.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) which refines the scope of Topic 848 and clarifies some of its guidance. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. The standard will be effective for us beginning February 7, 2022 and can be applied on either a fully retrospective or modified retrospective basis. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
Note 3. Financial Instruments
Fair Value Measurements
We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Three levels of inputs may be used to measure fair value:
Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.
8


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Cash Equivalents, Marketable Securities and Restricted Cash
We measure our cash equivalents, marketable securities, and restricted cash at fair value on a recurring basis. We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories and their classification within the valuation hierarchy at the end of fiscal 2021 and the third quarter of fiscal 2022 (in thousands):
9


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 At the End of Fiscal 2021
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable SecuritiesRestricted Cash
Level 1      
Money market accounts$— $— $— $49,984 $39,440 $ $10,544 
Level 2      
U.S. government treasury notes339,253 3,241 (1)342,493 15,340 327,153  
U.S. government agencies56,729 516  57,245  57,245  
Corporate debt securities425,115 4,176 (33)429,258  429,258  
Foreign government bonds21,486 307  21,793  21,793  
Asset-backed securities79,924 1,015  80,939  80,939  
Total$922,507 $9,255 $(34)$981,712 $54,780 $916,388 $10,544 


 
At the End of the Third Quarter of Fiscal 2022
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable
Securities
Restricted Cash
Level 1
Money market accounts$— $— $— $24,339 $13,795 $ $10,544 
Level 2       
U.S. government treasury notes335,607 1,250 (417)336,440  336,440  
U.S. government agencies50,147 170 (21)50,296  50,296  
Corporate debt securities484,325 1,263 (950)484,638  484,638  
Foreign government bonds14,885 112 (6)14,991  14,991  
Asset-backed securities69,273 277 (160)69,390  69,390  
Municipal bonds2,440  (15)2,425  2,425  
Total$956,677 $3,072 $(1,569)$982,519 $13,795 $958,180 $10,544 
 
10


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
 
At the End of the Third Quarter of Fiscal 2022
 Amortized CostFair Value
Due within one year$386,849 $388,804 
Due in one to five years565,898 565,486 
Due in five to ten years3,930 3,890 
Total$956,677 $958,180 
 
Unrealized losses on our debt securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The decline in fair value of our debt securities is largely due to changes in credit spreads as a result of market conditions. The credit ratings associated with our debt securities are mostly unchanged, are highly rated and the issuers continue to make timely principal and interest payments. As a result, there were no credit losses in the third quarter and the first three quarters of fiscal 2021 and 2022.
The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss position at the end of fiscal 2021 and the third quarter of fiscal 2022, aggregated by investment category (in thousands):
At the End of Fiscal 2021
Less than 12 monthsGreater than 12 monthsTotal
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. government treasury notes$8,301 $(1)$ $ $8,301 $(1)
Corporate debt securities32,996 (33)  32,996 (33)
Total$41,297 $(34)$ $ $41,297 $(34)

At the End of the Third Quarter of Fiscal 2022
 Less than 12 monthsGreater than 12 monthsTotal
 Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. government treasury notes$206,574 $(417)$ $ $206,574 $(417)
U.S. government agencies14,559 (21)  14,559 (21)
Corporate debt securities271,555 (950)  271,555 (950)
Foreign government bonds1,823 (6)  1,823 (6)
Asset-backed securities26,718 (160)  26,718 (160)
Municipal bonds2,425 (15)  2,425 (15)
Total$523,654 $(1,569)$ $ $523,654 $(1,569)
 
Realized gains or losses on sale of marketable securities were not significant for all periods presented.
11


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Fair Value Measurements of Other Financial Instruments
We measure the fair value of our convertible senior notes (the Notes) on a quarterly basis for disclosure purposes. We consider the fair value of the Notes at the end of the third quarter of fiscal 2022 to be a Level 2 measurement due to its limited trading activity. Refer to Note 6 for the carrying amount and estimated fair value of our Notes at the end of the third quarter of fiscal 2022.
Note 4. Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
At the End of
Fiscal 2021
Third Quarter of Fiscal 2022
Raw materials$4,991 $10,609 
Finished goods41,742 33,427 
Inventory$46,733 $44,036 
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 
At the End of
 Fiscal 2021
Third Quarter of Fiscal 2022
Test equipment$238,069 $265,005