Pure Storage Inc

Previous wording

Our data storage platform supports a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and includes mission-critical production, test and development, analytics, disaster recovery, backup and restore, AI and machine learning.

Current wording

Our data storage platform (Platform) supports a wide range of structured and unstructured data, at scale and across any data workloads in hybrid and public cloud environments, and includes mission-critical production, test and development, analytics, disaster recovery, backup and restore, AI and machine learning.

Previous wording

We derive revenue primarily from the sale of our products and services that comprise our data storage platform. Our data storage platform includes our FlashArrayand FlashBlade solutions, and our Evergreen and Portworx subscription services. Subscription services also include our professional services offerings such as installation and implementation consulting services.

Current wording

We derive revenue primarily from the sale of our products and services that comprise our Platform. Our Platform includes our FlashArrayand FlashBlade solutions, and our Evergreen and Portworx subscription services. Subscription services also include our professional services offerings such as installation and implementation consulting services.

Previous wording

We have provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards, capitalized research costs, and tax credits related primarily to research and development. 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.

Current wording

We have provided a full valuation allowance for U.S. deferred tax assets, which includes net operating loss carryforwards, capitalized research costs, and tax credits related primarily to research and development. When considering our historical earnings trend, sufficient positive evidence may become available where we will release all or a portion of the valuation allowance within 12 months. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

Previous wording

The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue (dollars in thousands, unaudited):

Current wording

The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue:

Previous wording

The growth in subscription services revenue during the second quarter and first two quarters of fiscal 2025 compared to the second quarter and first two quarters of fiscal 2024 was largely driven by sales growth of our Evergreen subscription services, including Evergreen//One.

Current wording

The growth in subscription services revenue during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was largely driven by renewals of our Evergreen subscription services across our installed base.

Previous wording

During the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024, total revenue in the United States grew 9% from $494.7 million to $537.7 million while total rest of the world revenue grew 16% from $194.0 million to $226.0 million. During the first two quarters of fiscal 2025 compared to the first two quarters of fiscal 2024, total revenue in the United States grew 11% from $921.8 million to $1.0 billion while total rest of the world revenue grew 21% from $356.2 million to $430.5 million.

Current wording

During the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024, total revenue in the United States grew 5% from $535.5 million to $561.9 million while total rest of the world revenue grew 18% from $227.4 million to $269.2 million. During the first three quarters of fiscal 2025 compared to the first three quarters of fiscal 2024, total revenue in the United States grew 9% from $1.5 billion to $1.6 billion while total rest of the world revenue grew 20% from $583.6 million to $699.7 million.

Previous wording

The following table sets forth our Subscription ARR for the periods presented (dollars in thousands, unaudited):

Current wording

The following table sets forth our Subscription ARR for the periods presented:

Previous wording

Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $2.3 billion at the end of the second quarter of fiscal 2025. Total RPO includes $49.0 million in remaining non-cancelable product orders. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors. Of the $2.3 billion RPO at the end of the second quarter of fiscal 2025, we expect to recognize approximately 48% over the next 12 months, and the remainder thereafter. RPO is expected to increase as our subscription services business grows over time.

Current wording

Total remaining performance obligations (RPO) which is total contracted but not recognized revenue was $2.4 billion at the end of the third quarter of fiscal 2025. Total RPO includes $35.7 million in remaining non-cancelable product orders. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders that are cancelable are excluded from RPO. Cancelable orders will fluctuate depending on numerous factors. Of the $2.4 billion RPO at the end of the third quarter of fiscal 2025, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter. RPO is expected to increase as our subscription services business grows over time.

Previous wording

RPO includes non-cancelable Total Contract Value (TCV) sales for our storage-as-a-service offerings, including Evergreen//One, Evergreen//Flex, and Cloud Block Store consumption and subscription based offerings. TCV sales for our storage-as-a-service offerings is a key business metric we use to evaluate the performance of our consumption and subscription based offerings. TCV sales for these offerings include recurring subscription fees, any non-recurring charges such as initial setup fees, and any other billable services directly tied to the execution of the underlying service contract.

Current wording

RPO includes non-cancelable TCV sales for our storage-as-a-service offerings, including Evergreen//One, Evergreen//Flex, and Cloud Block Store consumption and subscription based offerings. TCV sales for our storage-as-a-service offerings is a key business metric we use to evaluate the performance of our consumption and subscription based offerings. TCV sales for these offerings include recurring subscription fees, any non-recurring charges such as initial setup fees, and any other billable services directly tied to the execution of the underlying service contract. The year-over-year growth in RPO decreased from 31% at the end of fiscal 2024 to 16% at the end of the third quarter of fiscal 2025. Year-over-year growth in RPO has been primarily impacted by lower than expected TCV sales of Evergreen//One due to both extended closing timelines for larger Evergreen//One opportunities and increased conversion to a traditional sale of our higher velocity Evergreen//One opportunities.

Previous wording

The increase in product cost of revenue during the second quarter and first two quarters of fiscal 2025 compared to the second quarter and first two quarters of fiscal 2024 was primarily attributable to higher product sales and product mix, partially offset by lower excess and obsolete inventory charges.

Current wording

The increase in product cost of revenue during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was primarily attributable to higher component costs for our FlashBlade//E, FlashArray//E, and FlashArray//C solutions that enable customers to transition their cost-sensitive workloads from disk to our all-flash solutions, partially offset by lower excess and obsolete inventory charges.

Previous wording

The increase in subscription services cost of revenue during the second quarter and first two quarters of fiscal 2025 compared to the second quarter and first two quarters of fiscal 2024 was primarily attributable to supporting our growing Evergreen subscription installed base, including Evergreen//Oneand Portworx. The increase was also partially impacted by the modification of our fiscal 2024 performance restricted stock units (PRSUs) that resulted in additional stock-based compensation as discussed below.

Current wording

The increase in subscription services cost of revenue during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was primarily attributable to supporting our growing Evergreen subscription installed base, including Evergreen//Oneand Portworx. The increase was also partially impacted by the modification of our fiscal 2024 performance restricted stock units (PRSUs) that resulted in additional stock-based compensation as discussed below. The increase in subscription services cost was partially offset by lower depreciation expense from extending the estimated useful lives of assets for our Evergreen//One offering during the third quarter of fiscal 2025. Our Evergreen//One offering, supported by our own infrastructure, demonstrate a longer estimated life as a result of deriving benefits from our technology and Evergreen support.

Previous wording

The decrease in product gross margin during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was driven by sales strength of our FlashBlade//E, FlashArray//E, and FlashArray//C solutions enabling customers to shift their cost-sensitive workloads from disk to our all-flash solutions. We are expecting a modest, strategic decline in product gross margins during the second half of fiscal 2025.

Current wording

The decrease in product gross margin during the third quarterand first three quartersof fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was primarily driven by increased sales of our FlashBlade//E, FlashArray//E, and FlashArray//C solutions that address customers' cost-sensitive workloads. We are also expecting a modest sequential decline in product gross margins from the third quarter to fourth quarter of fiscal 2025.

Previous wording

The increase in subscription services gross margin during the second quarter of fiscal 2025 was driven primarily by increased automation of our service logistics workflows supporting the delivery of our Evergreen subscription services.

Current wording

The increase in subscription services gross margin during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was driven primarily by increased automation of our service logistics workflows supporting the delivery of our Evergreen subscription services and lower depreciation expense from extending the estimated useful lives of assets for our Evergreen//One offering during the third quarter of fiscal 2025.

Previous wording

During the second quarter and first two quarters of fiscal 2025, we recognized$3.2 million and$31.9 million in stock-based compensation related to a modification of our fiscal 2024 PRSUs in the first quarter of fiscal 2025 that resulted in higher stock-based compensation expense across all functions when compared to the corresponding prior year periods. Refer to Note 11 of Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

During the third quarter and first three quarters of fiscal 2025, we recognized$2.6 million and$34.5 million in stock-based compensation related to a modification of our fiscal 2024 PRSUs in the first quarter of fiscal 2025 that resulted in higher stock-based compensation expense across all functions when compared to the corresponding prior year periods. Refer to Note 11 of Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

In addition, operating expenses in the first two quarters of fiscal 2025 were positively impacted as a result of the workforce alignment that we initiated in the fourth quarter of fiscal 2024.

Current wording

In addition, operating expenses in the first three quarters of fiscal 2025 were positively impacted as a result of the workforce alignment that we initiated in the fourth quarter of fiscal 2024.

Previous wording

The increase in research and development expense during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily driven by an increase in employee compensation and related costs, including stock-based compensation, and, to a lesser extent, an increase in equipment purchases and facilities-related costs.

Current wording

The increase in research and development expense during the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was primarily driven by an increase in employee compensation and related costs, including stock-based compensation, and an increase in data center and cloud services costs.

Previous wording

The increase in research and development expense during the first two quarters of fiscal 2025 compared to the first two quarters of fiscal 2024 was primarily driven by higher stock-based compensation.

Current wording

The increase in research and development expense during the first three quarters of fiscal 2025 compared to the first three quarters of fiscal 2024 was primarily driven by higher stock-based compensation, and, to a lesser extent, an increase in data center and cloud services costs, and higher depreciation expense from equipment purchases.

Previous wording

The increase in sales and marketing expense during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily due toan increase in employee compensation and related costs, including stock-based compensation.

Current wording

The increase in sales and marketing expense during the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was primarily due toan increase in employee compensation and related costs, including stock-based compensation, and, to a lesser extent, higher costs for sales and marketing events.

Previous wording

The increase in sales and marketing expense during the first two quarters of fiscal 2025 compared to the first two quarters of fiscal 2024 was primarily due to a$38.1 million increase in employee compensation and related costs, including stock-based compensation, partially offset by a$4.5 million decrease in costs for sales and marketing events.

Current wording

The increase in sales and marketing expense during the first three quarters of fiscal 2025 compared to the first three quarters of fiscal 2024 was primarily due to a$58.8 million increase in employee compensation and related costs, including stock-based compensation.

Previous wording

The increase in general and administrative expense during the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily driven by an increase in employee compensation and related costs, including stock-based compensation.

Current wording

The increase in general and administrative expense during the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was primarily driven by an increase in employee compensation and related costs.

Previous wording

The increase in general and administrative expense during the first two quarters of fiscal 2025 compared to the first two quarters of fiscal 2024, was primarily driven by higher stock-based compensation, partially offset by a decrease in outside services costs.

Current wording

The increase in general and administrative expense during the first three quarters of fiscal 2025 compared to the first three quarters of fiscal 2024, was primarily driven by higher stock-based compensation, partially offset by a decrease in outside services costs.

Previous wording

During the first two quarters of fiscal 2025, we recognized $15.9 million of restructuring and impairment costs. We recognized $9.5 million in incremental restructuring costs primarily associated with one-time severance and other termination benefits related to a workforce alignment plan that was initiated in the fourth quarter of fiscal 2024. We also recognized $6.4 million in incremental abandonment and impairment charges related to certain leases associated with our former corporate headquarters that we ceased use in the second quarter of fiscal 2024. The incremental impairment charge was due to a revision to the underlying sublease assumptions during the first quarter of fiscal 2025.

Current wording

During the first three quarters of fiscal 2025, we recognized $15.9 million of restructuring and impairment costs. We recognized $9.5 million in incremental restructuring costs primarily associated with one-time severance and other termination benefits related to a workforce alignment plan that was initiated in the fourth quarter of fiscal 2024. We also recognized $6.4 million in incremental abandonment and impairment charges related to certain leases associated with our former corporate headquarters. The incremental impairment charge was due to a revision to the underlying sublease assumptions during the first quarter of fiscal 2025.

Previous wording

The increase in other income (expense), net during the second quarter and first two quarters of fiscal 2025 compared to the second quarter and first two quarters of fiscal 2024 was primarily due to an increase in interest income from a higher interest rate environment, and, to a lesser extent, by higher net foreign exchange gains as the U.S. dollar weakened relative to certain foreign currencies.

Current wording

The increase in other income (expense), net during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was primarily due to an increase in interest income from a larger balance in cash, cash equivalents and marketable securities and a higher interest rate environment, and, to a lesser extent, by higher net foreign exchange gains as the U.S. dollar weakened relative to certain foreign currencies.

Previous wording

The increase in provision for income taxes during the second quarter and first two quarters of fiscal 2025 compared to the second quarter and first two quarters of fiscal 2024 was primarily due to an increase in foreign income taxes.

Current wording

The increase in provision for income taxes during the third quarter and first three quarters of fiscal 2025 compared to the third quarter and first three quarters of fiscal 2024 was primarily due to an increase in foreign income taxes.

Previous wording

At the end of the second quarter of fiscal 2025, we had cash, cash equivalents and marketable securities of $1.8 billion. 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.

Current wording

At the end of the third quarter of fiscal 2025, 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. 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, and asset-backed securities.

Previous wording

We believe our existing cash, cash equivalents, marketable securities and the revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months. 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, the timing of new product introductions, our share repurchases, and cash payments for tax withholding obligations for equity awards held by employees. We may continue to enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property and other licensing rights. We may enter into equipment financing arrangements and seek additional equity or debt financing in the future.

Current wording

We believe our existing cash, cash equivalents, marketable securities and the revolving credit facility will be sufficient to fund our operating and capital needs for at least the next 12 months. Our future capital requirements will depend on many factors including our sales growth, the timing and extent of capital spending to support development efforts including investments to scale operations to support our recent design win with a major hyperscaler, growth of our Evergreen//One offering, the addition or closure of office space, the timing of new product introductions, our share repurchases, and cash payments for tax withholding obligations for equity awards held by employees. We may continue to enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property and other licensing rights. We may enter into equipment financing arrangements and seek additional equity or debt financing in the future.

Previous wording

In April 2023, we borrowed $100.0 million under the Credit Facility. The outstanding loan bore weighted-average interest at an annual rate of approximately 6.49% and 6.83% during the second quarter and first two quarters of fiscal 2025 based on a one-month term SOFR period with interest expense not material during either period.

Current wording

In April 2023, we borrowed $100.0 million under the Credit Facility. The outstanding loan bore weighted-average interest at an annual rate of approximately 6.62% and 6.76% during the third quarter and first three quarters of fiscal 2025 based on a one-month term SOFR period with interest expense not material during either period.

Previous wording

Loans under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter: a Consolidated Leverage Ratio not to exceed 4.5:1 and an Interest Coverage Ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of the second quarter of fiscal 2025.

Current wording

Loans under the Credit Facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter: a consolidated leverage ratio not to exceed 4.5:1 and an interest coverage ratio not to be less than 3:1. We were in compliance with all covenants under the Credit Facility at the end of the third quarter of fiscal 2025.

Previous wording

At the end of the second quarter of fiscal 2025, we had outstanding letters of credit in the aggregate amount of $7.7 million in connection with our facility leases. The letters of credit are collateralized by either restricted cash or the Credit Facility and mature on various dates through September 2030.

Current wording

At the end of the third quarter of fiscal 2025, we had outstanding letters of credit in the aggregate amount of $7.2 million in connection with our facility leases. The letters of credit are collateralized by either restricted cash or the Credit Facility and mature on various dates through September 2030.

Previous wording

There were no share repurchases of our common stock during the first two quarters of fiscal 2025. $395.4 million remained under our share repurchase authorization as of the end of the second quarter of fiscal 2025.

Current wording

During the third quarter and first three quarters of fiscal 2025, we repurchased and retired approximately 3.6 million shares of our common stock at an average purchase price of $50.53 per share for an aggregate repurchase price of $182.0 million. Approximately $213.4 million remained under our share repurchase authorization as of the end of the third quarter of fiscal 2025.

Previous wording

Net cash provided by operating activities during the first two quarters of fiscal 2024 and 2025 was primarily driven by cash collections from sales of our product and subscription services, partially offset by payments to our contract manufacturers, employee compensation, and general corporate operating expenditures. The year-over-year increase in net cash provided by operating activities was primarily driven by increased sales of our product and subscription services, including improved timing of collections.

Current wording

Net cash provided by operating activities during the first three quarters of fiscal 2024 and 2025 was primarily driven by cash collections from sales of our product and subscription services, partially offset by payments to our contract manufacturers, employee compensation, payment for software technology that we licensed, and general corporate operating expenditures. The year-over-year increase in net cash provided by operating activities was primarily driven by increased sales of our product and subscription services, including improved timing of collections.

Previous wording

Net cash used in investing activities during the first two quarters of fiscal 2025 was driven by $108.9 million in capital expenditures relating to test equipment for new product innovation, and equipment supporting our growing Evergreen//Oneoffering as well as the continued construction of our new headquarters facility, and net purchases of $24.0 million in marketable securities.

Current wording

Net cash used in investing activities during the first three quarters of fiscal 2025 was driven by $170.6 million in capital expenditures relating to test equipment for new product innovation, equipment supporting our growing Evergreen//Oneoffering, investments to scale operations to support our recent design win with a major hyperscaler, and construction costs related to our headquarters facility, partially offset by net proceeds from our marketable securities of $84.5 million.

Previous wording

Net cash provided by investing activities during the first two quarters of fiscal 2024 was driven by net maturities of $188.8 million in marketable securities, partially offset by $106.5 million in capital expenditures relating to test equipment for new product innovation, and equipment supporting our growing Evergreen//Oneoffering, as well as the construction of our new headquarters facility.

Current wording

Net cash provided by investing activities during the first three quarters of fiscal 2024 was driven by net proceeds from our marketable securities of $191.7 million, partially offset by $151.6 million in capital expenditures relating to test equipment for new product innovation, and equipment supporting our growing Evergreen//Oneoffering, as well as the construction of our headquarters facility.

Previous wording

Net cash used in financing activities during the first two quarters of fiscal 2025 was primarily driven by tax withholding remittances on vesting of equity awards of $86.7 million, partially offset by proceeds from the issuance of common stock from employee stock purchase plan (ESPP) of $25.3 million, and the exercise of stock options of $17.8 million. The year-over-year increase in tax withholding remittances on vesting of equity awards was due to extending the net-share settlement of equity awards to satisfy tax withholding obligations to the majority of our employees in June 2024 whereas previously, shares were sold to cover such tax withholding obligations.

Current wording

Net cash used in financing activities during the first three quarters of fiscal 2025 was primarily driven by cash outflows related to share repurchases of $182.0 million and tax withholding remittances on vesting of equity awards of $141.6 million, partially offset by proceeds from the issuance of common stock from employee stock purchase plan (ESPP) of $51.7 million, and the exercise of stock options of $21.2 million. The year-over-year increase in tax withholding remittances on vesting of equity awards was due to extending the net-share settlement of equity awards to satisfy tax withholding obligations to the majority of our employees in June 2024 whereas previously, shares were sold to cover such tax withholding obligations.

Previous wording

Net cash used in financing activities during the first two quarters of fiscal 2024 was primarily driven by cash outflows related to the repayment of the principal amount of the Notes of approximately $575.0 million, share repurchases of $91.9 million and tax withholding on vested equity awards of $11.8 million. These cash outflows were partially offset by proceeds from borrowing under the Credit Facility of $100.0 million, the exercise of stock options of $29.8 million, and the issuance of common stock from ESPP of $21.2 million.

Current wording

Net cash used in financing activities during the first three quarters of fiscal 2024 was primarily driven by cash outflows related to the repayment of the principal amount of the Notes of approximately $575.0 million, share repurchases of $114.3 million and tax withholding on vested equity awards of $16.6 million. These cash outflows were partially offset by proceeds from borrowing under the Credit Facility of $100.0 million, the issuance of common stock from ESPP of $45.1 million, and the exercise of stock options of $32.9 million.

Previous wording

We deem an accounting policy to be critical if the nature of the estimate or assumption it incorporates is subject to material level of judgment related to matters that are highly uncertain and changes in those estimates and assumptions are reasonably likely to materially impact our condensed consolidated financial statements. Refer to Note 2 of Part I, Item I of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, see “Critical Accounting Policy and Estimates” in our latest Form 10-K for our fiscal year ended February 4, 2024. There have been no material changes to our critical accounting policies and estimates since this Form 10-K was filed on April 1, 2024.

Current wording

We deem an accounting policy to be critical if the nature of the estimate or assumption it incorporates is subject to material level of judgment related to matters that are highly uncertain and changes in those estimates and assumptions are reasonably likely to materially impact our condensed consolidated financial statements. Refer to Note 2 of Part I, Item I of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, see “Critical Accounting Policy and Estimates” in our latest Form 10-K for our fiscal year ended February 4, 2024. There have been no material changes to our critical accounting policies and estimates since this Form 10-K filed on April 1, 2024.