10-Q 1 pstg-20220807.htm 10-Q pstg-20220807
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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 August 7, 2022
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 September 7, 2022, the registrant had 298,918,217 shares of its Class A common stock outstanding.


PURE STORAGE, INC.
FORM 10-Q for the Quarter Ended August 7, 2022
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, including the timing and magnitude of large customer orders, 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, the potential disruptions to our contract manufacturers or supply chain, our expectations regarding inflation, our expectations concerning relationships with third parties, including our partners, customers, suppliers and contract manufacturers, the success of acquired technologies, 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 2022
Second Quarter of Fiscal 2023
ASSETS  
Current assets:  
Cash and cash equivalents$466,199 $652,567 
Marketable securities947,073 709,889 
Accounts receivable, net of allowance of $945 and $1,077
542,144 402,007 
Inventory38,942 52,265 
Deferred commissions, current81,589 70,918 
Prepaid expenses and other current assets116,232 133,360 
Total current assets2,192,179 2,021,006 
Property and equipment, net195,282 219,559 
Operating lease right-of-use assets111,763 172,392 
Deferred commissions, non-current164,718 164,763 
Intangible assets, net62,646 57,537 
Goodwill358,736 361,427 
Restricted cash10,544 10,544 
Other assets, non-current39,447 42,631 
Total assets$3,135,315 $3,049,859 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$70,704 $64,005 
Accrued compensation and benefits205,431 150,924 
Accrued expenses and other liabilities78,511 93,752 
Operating lease liabilities, current35,098 33,872 
Deferred revenue, current562,576 609,549 
Debt, current 573,205 
Total current liabilities952,320 1,525,307 
Long-term debt786,779  
Operating lease liabilities, non-current93,479 150,711 
Deferred revenue, non-current517,296 569,142 
Other liabilities, non-current31,105 43,341 
Total liabilities2,380,979 2,288,501 
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; 292,633 and 298,801 Class A shares issued and outstanding
29 30 
Additional paid-in capital2,470,943 2,392,173 
Accumulated other comprehensive loss(8,365)(20,099)
Accumulated deficit(1,708,271)(1,610,746)
Total stockholders’ equity754,336 761,358 
Total liabilities and stockholders’ equity$3,135,315 $3,049,859 
 
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)
 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2022202320222023
Revenue:  
Product$324,935 $414,603 $574,823 $815,764 
Subscription services171,896 232,169 334,715 451,413 
Total revenue496,831 646,772 909,538 1,267,177 
Cost of revenue:  
Product101,150 134,292 180,214 259,776 
Subscription services55,654 68,912 107,431 137,407 
Total cost of revenue156,804 203,204 287,645 397,183 
Gross profit340,027 443,568 621,893 869,994 
Operating expenses:  
Research and development140,107 165,690 271,488 326,963 
Sales and marketing190,386 206,836 373,882 424,989 
General and administrative43,464 56,679 86,610 108,246 
Total operating expenses373,957 429,205 731,980 860,198 
Income (loss) from operations(33,930)14,363 (110,087)9,796 
Other income (expense), net(7,410)585 (12,137)(5,596)
Income (loss) before provision for income taxes(41,340)14,948 (122,224)4,200 
Provision for income taxes3,925 4,026 7,247 4,813 
Net income (loss)$(45,265)$10,922 $(129,471)$(613)
Net income (loss) per share attributable to common stockholders, basic$(0.16)$0.04 $(0.46)$(0.00)
Net income (loss) per share attributable to common stockholders, diluted$(0.16)$0.03 $(0.46)$(0.00)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic283,931 297,475 282,147 296,659 
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted283,931 312,720 282,147 296,659 

 
See the accompanying notes to condensed consolidated financial statements.
2

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

 
Second Quarter of Fiscal
First Two Quarters of Fiscal
 2022202320222023
Net income (loss)$(45,265)$10,922 $(129,471)$(613)
Other comprehensive loss:  
Unrealized net losses on available-for-sale securities
(1,192)(1,222)(3,411)(11,709)
Less: reclassification adjustment for net gains on available-for-sale securities included in net loss(95)(32)(518)(25)
Change in unrealized net losses on available-for-sale securities(1,287)(1,254)(3,929)(11,734)
Comprehensive income (loss)$(46,552)$9,668 $(133,400)$(12,347)


 See the accompanying notes to condensed consolidated financial statements.
3

PURE STORAGE, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, unaudited)
Second Quarter of Fiscal 2022
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of the first quarter of fiscal 2022283,352 $28 $2,359,895 $4,768 $(1,649,218)$715,473 
Issuance of common stock upon exercise of stock options566 — 3,389 — — 3,389 
Stock-based compensation expense— — 71,021 — — 71,021 
Vesting of restricted stock units3,246 — — — —  
Tax withholding on vesting of equity awards(80)— (1,514)— — (1,514)
Forfeiture of restricted stock(37)— — — —  
Repurchases of common stock(2,313)— (44,373)— — (44,373)
Other comprehensive loss— — — (1,287)— (1,287)
Net loss— — — — (45,265)(45,265)
Balance at the end of the second quarter of fiscal 2022
284,734 $28 $2,388,418 $3,481 $(1,694,483)$697,444 

Second Quarter of Fiscal 2023
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of the first quarter of fiscal 2023297,132 $30 $2,367,577 $(18,845)$(1,621,668)$727,094 
Issuance of common stock upon exercise of stock options624 — 3,828 — — 3,828 
Stock-based compensation expense— — 84,140 — — 84,140 
Vesting of restricted stock units3,542 — — — —  
Tax withholding on vesting of restricted stock units(110)— (2,793)— — (2,793)
Repurchases of common stock(2,387)— (60,579)— — (60,579)
Other comprehensive loss— — — (1,254)— (1,254)
Net income— — — — 10,922 10,922 
Balance at the end of the second quarter of fiscal 2023
298,801 $30 $2,392,173 $(20,099)$(1,610,746)$761,358 

See the accompanying notes to condensed consolidated financial statements.

4

PURE STORAGE, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, unaudited)
First Two Quarters of Fiscal 2022
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated 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 options1,897 — 11,284 — — 11,284 
Stock-based compensation expense— — 132,785 — — 132,785 
Vesting of restricted stock units6,327 — — — —  
Tax withholding on vesting of equity awards(305)— (6,564)— — (6,564)
Forfeiture of restricted stock(37)— — — —  
Common stock issued under employee stock purchase plan2,185 — 17,726 — — 17,726 
Repurchases of common stock(3,696)— (74,393)— — (74,393)
Other comprehensive loss— — — (3,929)— (3,929)
Net loss— — — — (129,471)(129,471)
Balance at the end of the second quarter of fiscal 2022
284,734 $28 $2,388,418 $3,481 $(1,694,483)$697,444 

First Two Quarters of Fiscal 2023
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at the end of fiscal 2022292,633 $29 $2,470,943 (8,365)$(1,708,271)$754,336 
Cumulative-effect adjustment from adoption of ASU 2020-06
— — (133,265)— 98,138 (35,127)
Issuance of common stock upon exercise of stock options1,857 — 15,261 — — 15,261 
Stock-based compensation expense— — 159,825 — — 159,825 
Vesting of restricted stock units7,150 1 (1)— —  
Tax withholding on vesting of equity awards(405)— (12,987)— — (12,987)
Common stock issued under employee stock purchase plan2,087 — 19,396 — — 19,396 
Repurchases of common stock(4,521)— (126,999)— — (126,999)
Other comprehensive loss— — — (11,734)— (11,734)
Net loss— — — — (613)(613)
Balance at the end of the second quarter of fiscal 2023
298,801 $30 $2,392,173 $(20,099)$(1,610,746)$761,358 

See the accompanying notes to condensed consolidated financial statements.
5

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

 First Two Quarters of Fiscal
 20222023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(129,471)$(613)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization38,099 46,549 
Amortization of debt discount and debt issuance costs15,154 1,603 
Stock-based compensation expense131,763 158,135 
Other6,516 1,428 
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net102,506 140,007 
Inventory(3,242)(12,492)
Deferred commissions(8,041)10,626 
Prepaid expenses and other assets(24,955)(15,563)
Operating lease right-of-use assets14,818 16,820 
Accounts payable(9,267)(6,529)
Accrued compensation and other liabilities(40,952)(37,824)
Operating lease liabilities(14,205)(21,442)
Deferred revenue66,117 98,807 
Net cash provided by operating activities144,840 379,512 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(55,499)(57,994)
Acquisition, net of cash acquired (1,989)
Purchases of marketable securities(317,371)(17,251)
Sales of marketable securities114,038  
Maturities of marketable securities169,770 240,993 
Net cash (used in) provided by investing activities(89,062)163,759 
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from exercise of stock options11,163 15,264 
  Proceeds from issuance of common stock under employee stock purchase plan17,726 19,396 
  Principal payments on borrowings and finance lease obligations(605)(251,577)
  Tax withholding on vesting of equity awards(6,564)(12,987)
  Repurchases of common stock(74,393)(126,999)
Net cash used in financing activities(52,673)(356,903)
Net increase in cash, cash equivalents and restricted cash3,105 186,368 
Cash, cash equivalents and restricted cash, beginning of period347,691 476,743 
Cash, cash equivalents and restricted cash, end of period$350,796 $663,111 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
Cash and cash equivalents$340,252 $652,567 
Restricted cash10,544 10,544 
Cash, cash equivalents and restricted cash, end of period$350,796 $663,111 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest$2,520 $742 
Cash paid for income taxes$6,050 $4,817 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION 
Property and equipment purchased but not yet paid$7,402 $11,187 

See the accompanying notes to condensed consolidated financial statements.
6


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

Note 1. Business Overview
Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Mountain View, California and have wholly owned subsidiaries throughout the world.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
We operate using a 52/53 week fiscal year ending on the first Sunday after January 30, which for fiscal 2022 was February 6, 2022 and for fiscal 2023 will be February 5, 2023. The second quarter of fiscal 2022 and 2023 ended on August 1, 2021 and August 7, 2022. Unless otherwise stated, all dates refer to our fiscal year and fiscal quarters.
The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2022.
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 2023 or any future period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, stock-based compensation, provision for income taxes including related reserves, fair value of equity assumed, intangible and tangible assets acquired and liabilities assumed for business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Restricted Cash
Restricted cash is comprised of cash collateral for letters of credit related to our leases and for a vendor credit card program. At the end of fiscal 2022 and the second quarter of fiscal 2023, we had restricted cash of $10.5 million.
7


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply revenue guidance to recognize and measure contract assets and contract liabilities acquired in a business combination on the acquisition date, instead of measuring them at fair value. We early adopted this guidance in the second quarter of fiscal 2023 on a prospective basis. The adoption of this standard did not have a material impact 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 requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS) which results in the inclusion of the effect of share settlement for instruments that may be settled in cash or shares. We adopted the standard as of February 7, 2022 using the modified retrospective basis. Adoption resulted in an adjustment of $133.3 million to reclassify the remaining balance of the conversion feature recorded in additional paid-in capital to convertible senior notes (the Notes) of $35.2 million and accumulated deficit of $98.1 million on the condensed consolidated balance sheet. Accordingly, we no longer carry an equity component of the Notes. There was no impact to diluted EPS as the inclusion of potential shares of common stock related to the Notes was anti-dilutive. For further information, see Note 6, Debt, and Note 11, Net Income (Loss) per Share Attributable to Common Stockholders.
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 2022 and the second quarter of fiscal 2023 (in thousands):
9


PURE STORAGE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 At the End of Fiscal 2022
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable SecuritiesRestricted Cash
Level 1      
Money market accounts$— $— $— $29,275 $18,731 $ $10,544 
Level 2      
U.S. government treasury notes336,303 512 (2,176)334,639  334,639  
U.S. government agencies49,153 49 (193)49,009  49,009  
Corporate debt securities491,728 384 (4,731)487,381 200 487,181  
Foreign government bonds12,333 37 (17)12,353  12,353  
Asset-backed securities60,361 111 (453)60,019  60,019  
Municipal bonds3,950  (78)3,872  3,872  
Total$953,828 $1,093 $(7,648)$976,548 $18,931 $947,073 $10,544 


 
At the End of the Second Quarter of Fiscal 2023
 Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
Cash EquivalentsMarketable
Securities
Restricted Cash
Level 1
Money market accounts$— $— $— $259,665 $249,121 $ $10,544 
Level 2       
U.S. government treasury notes240,405 2 (4,930)235,477  235,477  
U.S. government agencies31,788 6 (466)31,328  31,328  
Corporate debt securities407,433 2 (11,530)395,905  395,905  
Foreign government bonds4,800  (68)4,732  4,732  
Asset-backed securities39,800  (1,123)38,677  38,677  
Municipal bonds3,950  (180)3,770  3,770  
Total$728,176 $10 $(18,297)$969,554 $249,121 $709,889 $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 Second Quarter of Fiscal 2023
 Amortized CostFair Value
Due within one year$361,702 $357,361 
Due in one to five years366,474 352,528 
Total$728,176 $709,889 
 
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 the rising interest rate environment driven by current market conditions that has resulted in higher credit spreads. 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 or non-credit impairment charges recorded in the second quarter and the first two quarters of fiscal 2022 and 2023.
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 2022 and the second quarter of fiscal 2023, aggregated by investment category (in thousands):
At the End 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$193,359 $(2,176)$ $ $193,359 $(2,176)
U.S. government agencies24,388 (193)  24,388 (193)
Corporate debt securities374,223 (4,708)1,182 (23)375,405 (4,731)
Foreign government bonds4,098 (17)  4,098 (17)
Asset-backed securities37,608 (453)  37,608 (453)
Municipal bonds3,872 (78)  3,872 (78)
Total$637,548 $(7,625)$1,182 $(23)$638,730 $(7,648)

At the End of the Second Quarter of Fiscal 2023
 Less than 12 monthsGreater than 12 monthsTotal
 Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. government treasury notes$213,567 $(4,289)$19,827 $(641)$233,394 $(4,930)
U.S. government agencies23,322 (466)  23,322 (466)
Corporate debt securities372,210 (10,651)20,974 (879)393,184 (11,530)
Foreign government bonds4,732 (68)  4,732 (68)
Asset-backed securities37,938 (1,092)739 (31)38,677 (1,123)
Municipal bonds1,429 (81)2,341 (99)3,770 (180)
Total$653,198 $(16,647)$43,881 $(1,650)$697,079 $(18,297)
 
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 Notes on a quarterly basis for disclosure purposes. We consider the fair value of the Notes at the end of the second quarter of fiscal 2023 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 second quarter of fiscal 2023.
Note 4. Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
At the End of
Fiscal 2022
Second Quarter of Fiscal 2023
Raw materials$15,734 $25,608 
Finished goods23,208 26,657 
Inventory$38,942 $52,265 
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 
At the End of
 Fiscal 2022
Second Quarter of Fiscal 2023
Test equipment$