PURE STORAGE, INC., 10-K filed on 3/27/2020
Annual Report
v3.20.1
Document and Entity Information - USD ($)
$ in Billions
12 Months Ended
Feb. 02, 2020
Mar. 23, 2020
Jul. 31, 2019
Document And Entity Information [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Feb. 02, 2020    
Document Transition Report false    
Entity File Number 001-37570    
Entity Registrant Name Pure Storage, Inc.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 27-1069557    
Entity Address, Address Line One 650 Castro Street    
Entity Address, Address Line Two Suite 400    
Entity Address, City or Town Mountain View    
Entity Address, State or Province CA    
Entity Address, Postal Zip Code 94041    
City Area Code 800    
Local Phone Number 379-7873    
Title of 12(b) Security Class A Common Stock, par value $0.0001 per share    
Trading Symbol PSTG    
Security Exchange Name NYSE    
Entity Well-Known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Interactive Data Current Yes    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 3.6
Entity Common Stock, Shares Outstanding (in shares)   267,028,936  
Documents Incorporated by Reference Portions of the registrant’s proxy statement for its 2020 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended February 2, 2020.    
Amendment Flag false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001474432    
Current Fiscal Year End Date --02-02    
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Feb. 02, 2020
Jan. 31, 2019
Current assets:    
Cash and cash equivalents $ 362,635 $ 447,990
Marketable securities 936,518 749,482
Accounts receivable, net of allowance of $660 and $542 at the end of fiscal 2019 and 2020 458,643 378,729
Inventory 38,518 44,687
Deferred commissions, current 37,148 29,244
Prepaid expenses and other current assets 56,930 51,695
Total current assets 1,890,392 1,701,827
Property and equipment, net 122,740 125,353
Operating lease right-of-use assets 112,854  
Deferred commissions, non-current 102,056 85,729
Intangible assets, net 58,257 20,118
Goodwill 37,584 10,997
Restricted cash 15,287 15,823
Other assets, non-current 25,034 13,178
Total assets 2,364,204 1,973,025
Current liabilities:    
Accounts payable 77,651 103,462
Accrued compensation and benefits 106,592 99,910
Accrued expenses and other liabilities 47,223 39,860
Operating lease liabilities, current 27,264  
Deferred revenue, current 356,011 266,584
Total current liabilities 614,741 509,816
Convertible senior notes, net 477,007 449,828
Operating lease liabilities, non-current 92,977  
Deferred revenue, non-current 341,277 269,336
Other liabilities, non-current 8,084 6,265
Total liabilities 1,534,086 1,235,245
Commitments and contingencies (Note 7)
Stockholders’ equity:    
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized at the end of fiscal 2019 and 2020; no shares issued and outstanding at the end of fiscal 2019 and 2020 0 0
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 at the end of fiscal 2019 and 2020; 243,524 and 264,008 Class A shares issued and outstanding at the end of fiscal 2019 and 2020 26 24
Additional paid-in capital 2,107,579 1,820,043
Accumulated other comprehensive income (loss) 5,449 (338)
Accumulated deficit (1,282,936) (1,081,949)
Total stockholders’ equity 830,118 737,780
Total liabilities and stockholders’ equity $ 2,364,204 $ 1,973,025
v3.20.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Feb. 02, 2020
Jan. 31, 2019
Accounts receivable, allowance $ 542 $ 660
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized (in shares) 20,000,000 20,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, shares authorized (in shares) 2,250,000,000 2,250,000,000
Class A common stock    
Common stock, shares authorized (in shares) 2,000,000,000 2,000,000,000
Common stock, par value per share (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares issued (in shares) 264,008,206 243,524,000
Common stock, shares outstanding (in shares) 264,008,000 243,524,000
Class B common stock    
Common stock, shares authorized (in shares) 250,000,000 250,000,000
Common stock, par value per share (in dollars per share) $ 0.0001 $ 0.0001
v3.20.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Feb. 02, 2020
Jan. 31, 2019
Jan. 31, 2018
Revenue:      
Revenue: $ 1,643,440 $ 1,359,824 $ 1,024,762 [1]
Cost of revenue:      
Total cost of revenue 509,886 457,528 353,781 [1]
Gross profit 1,133,554 902,296 670,981 [1]
Operating expenses:      
Research and development 433,662 349,936 279,196 [1]
Sales and marketing 728,022 584,111 464,049 [1]
General and administrative 163,153 137,506 95,170 [1]
Total operating expenses 1,324,837 1,071,553 [1] 838,415
Loss from operations (191,283) (169,257) (167,434) [1]
Other income (expense), net (3,383) (8,016) 11,445 [1]
Loss before provision for income taxes (194,666) (177,273) (155,989) [1]
Provision for income taxes 6,321 1,089 3,889 [1]
Net loss $ (200,987) $ (178,362) $ (159,878) [1]
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share) $ (0.79) $ (0.77) [1] $ (0.76) [1]
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted (in shares) 252,820 232,042 [1] 211,609 [1]
Product      
Revenue:      
Revenue: $ 1,238,654 $ 1,075,586 $ 834,454 [1]
Cost of revenue:      
Cost of revenue: 362,970 352,054 275,242 [1]
Subscription services      
Revenue:      
Revenue: 404,786 284,238 190,308 [1]
Cost of revenue:      
Cost of revenue: $ 146,916 $ 105,474 $ 78,539 [1]
[1]
v3.20.1
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Feb. 02, 2020
Jan. 31, 2019
Jan. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net loss $ (200,987) $ (178,362) $ (159,878) [1]
Other comprehensive income (loss) net of tax:      
Change in unrealized net gain (loss) on available-for-sale securities 5,787 1,579 [2] (1,355) [2]
Comprehensive loss $ (195,200) $ (176,783) [2] $ (161,233) [2]
[1]
[2]
v3.20.1
Consolidated Statements of Stockholders’ Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Restricted Stock
Common Stock
Restricted Stock Units
Common Stock
Restricted Stock Units
Additional Paid-In Capital
Beginning balance (in shares) at Jan. 31, 2017   204,364            
Beginning balance at Jan. 31, 2017 $ 537,201 $ 20 $ 1,281,452 $ (562) $ (743,709)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Issuance of common stock upon exercise of stock options, net of repurchases (in shares)   8,814            
Issuance of common stock upon exercise of stock options 24,581 $ 1 24,580          
Stock-based compensation expense 150,673   150,673          
Vesting of early exercised stock options 1,042   1,042          
Vesting and net issuance of restricted stock units ( in shares)             5,278  
Vesting of restricted stock units 0 $ 1 (1)          
Common stock issued under employee stock purchase plan (in shares)   2,523            
Common stock issued under employee stock purchase plan 22,137   22,137          
Other comprehensive income (loss) (1,355)     (1,355)        
Net loss (159,878) [1]       (159,878)      
Ending balance (in shares) at Jan. 31, 2018   220,979            
Ending balance at Jan. 31, 2018 574,401 $ 22 1,479,883 (1,917) (903,587)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Issuance of common stock upon exercise of stock options, net of repurchases (in shares)   9,397            
Issuance of common stock upon exercise of stock options 47,750 $ 1 47,749          
Stock-based compensation expense 210,645   210,645          
Vesting of early exercised stock options 320   320          
Vesting and net issuance of restricted stock units ( in shares)           2,398 8,378  
Vesting of restricted stock units 0           $ 1 $ (1)
Tax withholding on vesting of restricted stock (632)   (632)          
Common stock issued under employee stock purchase plan (in shares)   3,381            
Common stock issued under employee stock purchase plan 33,444   33,444          
Repurchase of Common Stock (in shares)   (1,009)            
Repurchase of common stock (20,000)   (20,000)          
Purchase of capped calls (64,630)   (64,630)          
Equity component of convertible senior notes, net 133,265   133,265          
Other comprehensive income (loss) 1,579     1,579        
Net loss (178,362)       (178,362)      
Ending balance (in shares) at Jan. 31, 2019   243,524            
Ending balance at Jan. 31, 2019 737,780 $ 24 1,820,043 (338) (1,081,949)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Issuance of common stock upon exercise of stock options, net of repurchases (in shares)   7,770            
Issuance of common stock upon exercise of stock options 42,931 $ 1 42,930          
Stock-based compensation expense 226,705   226,705          
Vesting and net issuance of restricted stock units ( in shares)           624 9,215  
Vesting of restricted stock units             $ 1 $ (1)
Tax withholding on vesting of restricted stock (10,379)   (10,379)          
Common stock issued under employee stock purchase plan (in shares)   3,743            
Common stock issued under employee stock purchase plan 43,298   43,298          
Repurchase of Common Stock (in shares)   (868)            
Repurchase of common stock (15,017)   (15,017)          
Other comprehensive income (loss) 5,787     5,787        
Net loss (200,987)       (200,987)      
Ending balance (in shares) at Feb. 02, 2020   264,008            
Ending balance at Feb. 02, 2020 $ 830,118 $ 26 $ 2,107,579 $ 5,449 $ (1,282,936)      
[1]
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Feb. 02, 2020
Jan. 31, 2019
Jan. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net loss $ (200,987) $ (178,362) $ (159,878) [1]
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 89,710 70,878 61,744
Amortization of debt discount and debt issuance costs 27,179 21,031 0
Stock-based compensation expense 226,705 210,645 150,673
Other 1,336 (5,039) 2,054
Changes in operating assets and liabilities, net of effects of acquisitions:      
Accounts receivable, net (79,442) (135,649) (74,505)
Inventory 2,393 (12,289) (12,595)
Deferred commissions (24,231) (27,660) (27,978)
Prepaid expenses and other assets (16,734) (6,972) (23,799)
Operating lease right-of-use assets 26,511    
Accounts payable (18,856) 14,293 29,278
Accrued compensation and other liabilities 20,296 51,810 26,622
Operating lease liabilities (25,377)    
Deferred revenue 161,071 161,737 101,140
Net cash provided by operating activities 189,574 164,423 72,756
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchases of property and equipment (87,847) (100,246) (65,060)
Acquisitions, net of cash acquired (51,594) (13,899) 0
Purchase of other investment 0 (5,000) 0
Purchase of intangible assets (9,000) 0 0
Purchases of marketable securities (795,580) (665,357) (202,656)
Sales of marketable securities 200,251 19,878 66,489
Maturities of marketable securities 419,059 253,280 144,068
Net cash used in investing activities (324,711) (511,344) (57,159)
CASH FLOWS FROM FINANCING ACTIVITIES      
Net proceeds from exercise of stock options 42,899 47,771 24,677
Proceeds from issuance of common stock under employee stock purchase plan 43,298 33,444 22,137
Proceeds from issuance of convertible senior notes, net of issuance costs 0 562,062 0
Payment for purchase of capped calls 0 (64,630) 0
Repayment of debt assumed from acquisition (11,555) (6,101) 0
Tax withholding on vesting of restricted stock (10,379) (632) 0
Repurchases of common stock (15,017) (20,000) 0
Net cash provided by financing activities 49,246 551,914 46,814
Net increase (decrease) in cash, cash equivalents and restricted cash (85,891) 204,993 62,411
Cash, cash equivalents and restricted cash, beginning of year 463,813 258,820 196,409
Cash, cash equivalents and restricted cash, end of year 377,922 463,813 258,820
Cash and cash equivalents 447,990 244,057  
Cash, cash equivalents and restricted cash, end of year 377,922 258,820 258,820
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION      
Cash paid for interest 718 371 0
Cash paid for income taxes 4,824 4,696 3,090
SUPPLEMENTAL DISCLOSURES OF NON-CASH    INVESTING AND FINANCING INFORMATION      
Property and equipment purchased but not yet paid 6,814 13,873 9,940
Acquisition consideration held back to satisfy potential indemnification claims 0 3,725 0
Vesting of early exercised stock options $ 0 $ 320 $ 1,042
[1]
v3.20.1
Business Overview
12 Months Ended
Feb. 02, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business Overview 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 are focused on delivering innovative and disruptive technology and data storage solutions that enable customers to maximize the value of their data. We started with the vision of making flash storage available to enterprise organizations everywhere and established an entirely new customer experience including our innovative Evergreen Storage subscription that radically simplified storage ownership and reduced total cost of ownership for our customers.
Our solutions serve data workloads on-premise, in the cloud, or hybrid environments and include mission-critical production, test/development, analytics, disaster recovery, and backup/recovery.
v3.20.1
Basis of Presentation and Summary of Significant Accounting Policies
12 Months Ended
Feb. 02, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). All intercompany balances and transactions have been eliminated in consolidation.
Change in Fiscal Year End
In September 2019, we adopted a 52/53 week fiscal year consisting of four 13-week quarters commencing with fiscal 2020 ended February 2, 2020. Each quarter will start on a Monday and end on a Sunday. Fiscal year 2021 will start on February 3, 2020 and end on January 31, 2021. The updated calendar will occasionally include a 14-week fourth quarter, which will first occur in fiscal year 2022, starting on November 1, 2021 and ending on February 6, 2022. We will not be required to file a transition report because this change is not deemed a change in fiscal year for purposes of reporting subject to Rule 13a-10 or Rule 15d-10 of the Securities Exchange Act of 1934, as amended, as the change in fiscal year commences within seven days of the prior fiscal year.
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations.
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. 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, valuation of intangible assets and goodwill, and the incremental borrowing rate we use to determine our operating lease liabilities. 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.
Concentration Risk
Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. At the end of fiscal 2019 and 2020, the majority of our cash and cash equivalents have been invested with three financial institutions and such deposits exceed federally insured limits. Management believes that the financial institutions that hold our investments are financially sound and, accordingly, are subject to minimal credit risk. We define a customer as an entity that purchases our products and services from one of our channel partners or from us directly. The majority of our revenue and accounts receivable are derived from the United States across a multitude of industries. We perform ongoing evaluations to determine customer credit. At the end of fiscal 2020, no channel partner represented 10% or more of total accounts receivable. At the end of fiscal 2019, we had one channel partner that represented 10% of total accounts receivable. At the end of fiscal 2019 and 2020, we had one customer that represented 10% and 12% of accounts receivable. No channel partner represented more than 10% of revenue for fiscal 2018 and 2020. One channel partner represented 11% of revenue for fiscal 2019. No customer represented 10% or more of revenue for fiscal 2018, 2019 or 2020. We rely on a limited number of contract manufacturers and suppliers of components for our products. In instances where contract manufacturers and suppliers fail to perform their obligations, we may be unable to find alternative contract manufacturers and suppliers or satisfactorily deliver our products to our customers on time.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and highly liquid investments, primarily money market accounts, purchased with an original maturity of three months or less.
Marketable Securities
We classify our marketable securities as available-for-sale at the time of purchase and reevaluate such classification at each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our securities, including those with maturities beyond twelve months, as current assets in the consolidated balance sheets. We carry these securities at fair value and record unrealized gains and losses, in accumulated other comprehensive income (loss), which is reflected as a component of stockholders' equity. We evaluate our securities to assess whether those with unrealized loss positions are other than temporarily impaired. We consider impairments to be other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses from the sale of marketable securities and declines in value deemed to be other than temporary are determined on the specific identification method. To date, there have been no declines in value deemed to be other than temporary in any of our securities. Realized gains and losses are reported in other income (expense), net in the consolidated statements of operations.
Fair Value of Financial Instruments
The carrying value of our financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximates fair value.
Accounts Receivable and Allowance
Accounts receivable are recorded at the invoiced amount, and stated at realizable value, net of an allowance for doubtful accounts. Credit is extended to customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for doubtful accounts.
We assess the collectability of the accounts by taking into consideration the aging of our trade receivables, historical experience, and management judgment. We write off trade receivables against the allowance when management determines a balance is uncollectible and no longer actively pursues collection of the receivable.
The following table presents the changes in the allowance for doubtful accounts:
 
 Fiscal Year Ended
 201820192020
 (in thousands) 
Allowance for doubtful accounts, beginning balance$2,000  $1,062  $660  
Provision, net of cash received482  (79) (80) 
Write-offs(1,420) (323) (38) 
Allowance for doubtful accounts, ending balance$1,062  $660  $542  
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 2019 and 2020, we had restricted cash of $15.8 million and $15.3 million.
Inventory
Inventory consists of finished goods and component parts, which are purchased from contract manufacturers. Product demonstration units, which we regularly sell, are the primary component of our inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the specific identification method for finished goods and weighted-average method for component parts. We account for excess and obsolete inventory by reducing the carrying value to the estimated net realizable value of the inventory based upon management’s assumptions about future demand and market conditions. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of future demand forecasts consistent with excess and obsolete inventory valuations. At the end of fiscal 2020, we did not record any liability related to the above. Inventory write-offs were insignificant for fiscal 2018, 2019 and 2020.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets (test equipment—2 years, computer equipment and software—2 to 3 years, furniture and fixtures—7 years). Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term. Depreciation commences once the asset is placed in service.
Business Combination
We allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of the assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the estimated fair value of the assets acquired and liabilities assumed, with the corresponding offset to goodwill. The results of operations of an acquired business is included in our consolidated financial statements from the date of acquisition. Acquisition-related expenses are expensed as incurred.
Goodwill
Goodwill represents the excess of the purchase price consideration over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed in a business combination. Goodwill is evaluated for impairment annually in the fourth quarter of our fiscal year as a single reporting unit, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We may elect to qualitatively assess whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If we opt not to qualitatively assess, a two-step goodwill impairment test is performed. The first step compares our reporting unit's carrying value, including goodwill, to its fair value calculated based on our enterprise value. If the carrying value exceeds its fair value, the second step compares the carrying value of the goodwill to its implied fair value. If the carrying value exceeds the implied fair value, an impairment loss is recognized for the excess. We did not recognize any impairment of goodwill in any of the periods presented in the consolidated financial statements.
Purchased Intangible Assets
Purchased intangible assets with finite lives are stated at cost, net of accumulated amortization. We amortize our intangible assets on a straight-line basis over an estimated useful life of five to seven years.
Impairment of Long-Lived Assets
We review our long-lived assets, including property and equipment and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If the total of the future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment charge for the amount by which the carrying amount of the asset exceeds its fair market value. There have been no impairment charges recorded in any of the periods presented in the consolidated financial statements. 
Convertible Senior Notes
In accounting for the issuance of our convertible senior notes (the Notes), we separated the Notes into liability and equity components. The carrying amount of the liability component was determined by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was calculated by deducting the fair value of the liability component from the principal amount of the Notes as a whole. The difference between the principal amount of the Notes and the liability component (the debt discount) is amortized to interest expense in the consolidated statements of operations using the effective interest method over the term of the Notes. The equity component of the Notes is included in additional paid-in capital in the consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the issuance of the Notes, we allocated the total amount incurred to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the liability component were netted with the principal amount of the Notes in the consolidated balance sheets and are being amortized to interest expense in the consolidated statements of operations using the effective interest method over the term of the Notes. Transaction costs attributable to the equity component were netted with the equity component of the Notes in additional paid-in capital in the consolidated balance sheets.
Deferred Commissions
Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenue are recognized upon transfer of control to customers and deferred commissions related to subscription services revenue are amortized over an expected useful life of six years. We determine the expected useful life based on an estimated benefit period by evaluating our technology development life cycle, expected customer relationship period and other factors. We classify deferred commissions as current and non-current on our consolidated balance sheets based on the timing of when we expect to recognize the expense. Amortization of deferred commissions is included in sales and marketing expense in the consolidated statements of operations.
Changes in total deferred commissions during the periods presented are as follows (in thousands):
Fiscal Year Ended
20192020
Beginning balance$87,313  $114,973  
Additions131,084  141,147  
Recognition of deferred commissions(103,424) (116,916) 
Ending balance$114,973  $139,204  
During fiscal 2018, 2019 and 2020, we recognized sales commission expenses of $102.9 million, $118.4 million, and $142.5 million, respectively. Of the $139.2 million total deferred commissions balance at the end of fiscal 2020, we expect to recognize approximately 27% as sales commission expense over the next 12 months and the remainder thereafter.
There was no impairment related to capitalized commissions for fiscal 2018, 2019 or 2020.
Operating Leases
We determine if an arrangement contains a lease at inception. Lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in our operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments. The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments. The operating lease right-of-use (ROU) asset is determined based on the lease liability initially established and reduced for any prepaid lease payments and any lease incentives. We have elected to not allocate the contract consideration for operating lease contracts with lease and non-lease components, and account for the lease and non-lease components as a single lease component.
Certain of the operating lease agreements contain rent concession, rent escalation, and option to renew provisions. Rent concession and rent escalation provisions are considered in determining the lease cost. Lease cost is recognized on a straight-line basis over the lease term commencing on the date we have the right to use the leased property. We generally use the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that an extension or termination option will be exercised.
In addition, certain of our operating lease agreements contain tenant improvement allowances from our landlords. These allowances are accounted for as lease incentives and reduce our ROU asset and lease cost over the lease term.
For short-term leases with lease term no longer than twelve months, and do not include an option to purchase the underlying asset that we are reasonably certain to exercise, we recognize rent expense in our consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Deferred Revenue
Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue and performance obligations pertaining to subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates.
Changes in total deferred revenue during the periods presented are as follows (in thousands):
Fiscal Year Ended
20192020
Beginning balance$374,102  $535,920  
Additions448,471  569,816  
Recognition of deferred revenue(286,653) (408,448) 
Ending balance $535,920  $697,288  
During fiscal 2019 and 2020, we recognized $191.1 million and $267.0 million in revenue pertaining to deferred revenue as of the beginning of each period.
Total contracted but not recognized revenue was $880.7 million at the end of fiscal 2020. Contracted but not recognized revenue consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Of the $880.7 million contracted but not recognized revenue at the end of fiscal 2020, we expect to recognize approximately 42% over the next 12 months, and the remainder thereafter.
Revenue Recognition
We generate revenue from two sources: (1) product revenue which includes hardware and embedded software and (2) subscription services revenue which includes Evergreen Storage subscriptions, PaaS offerings, and Cloud Block Store.
Our product revenue is derived from the sale of integrated storage hardware and operating system software. We typically recognize product revenue upon transfer of control to our customers. Products are typically shipped directly by us to customers.
Our subscription services revenue is derived from services we perform in connection with the sale of subscription services and is recognized ratably over the contractual term, which generally ranges from one to six years. The majority of our product solutions are sold with an Evergreen Storage subscription service agreement, which typically commences upon transfer of control of the corresponding products to our customers. Costs for subscription services are expensed when incurred. In addition, our Evergreen Storage subscription services agreement provides our customers who continually maintain active subscription services agreements for three years a controller refresh with each additional three year renewal. The controller refresh represents a separate performance obligation that is included within the Evergreen Storage subscription service agreement and the allocated revenue is recognized upon shipment of the controller.
Our subscription services also include the right to receive unspecified software updates and upgrades on a when-and-if-available basis, software bug fixes, replacement parts and other services related to the underlying infrastructure, as well as access to our cloud-based management and support platform. We also sell professional services such as installation and implementation consulting services and the related revenue is recognized as services are performed.
We recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. This is achieved through applying the following five-step approach:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
When applying this five-step approach, we apply judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience and/or published credit and financial information pertaining to the customer. To the extent a customer contract includes multiple promised goods or services, we determine whether promised goods or services should be accounted for as a separate performance obligation. The transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer. We allocate the transaction price to each performance obligation for contracts that contain multiple performance obligations based on a relative standalone selling price which is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
Warranty
We generally provide a three-year warranty on hardware and a 90-day warranty on our software embedded in the hardware. Our hardware warranty provides for parts replacement for defective components and our software warranty provides for bug fixes. Our Evergreen Storage subscription agreement provides for the same parts replacement that customers are entitled to under our warranty program, except that replacement parts are delivered according to targeted response times to minimize disruption to our customers’ critical business applications. Substantially all customers purchase Evergreen Storage subscription agreements.
Therefore, given that substantially all our product sales are sold together with Evergreen Storage subscription agreements, we generally do not have exposure related to warranty costs and no warranty reserve has been recorded.
Research and Development
Research and development costs are expensed as incurred. Research and development costs consist primarily of personnel costs including stock-based compensation expense, expensed prototype, to the extent there is no alternative use for that equipment, consulting services, depreciation of equipment used in research and development and allocated overhead costs.
Software Development Costs
We expense software development costs before technological feasibility is reached. We have determined that technological feasibility is reached shortly before the release of our products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products have not been significant and accordingly, all software development costs have been expensed as incurred.
Software development costs also include costs incurred related to our hosted applications used to deliver our support services. Capitalization begins when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable the project will be completed and the software will be used to perform the intended function. Total costs related to our hosted applications incurred to date have been insignificant and as a result no software development costs were capitalized during fiscal 2018, 2019 or 2020.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expenses were $10.3 million, $10.7 million and $13.3 million for fiscal 2018, 2019 and 2020, respectively.
Stock-Based Compensation
Stock-based compensation includes expenses related to restricted stock units (RSUs), restricted stock, stock options and purchase rights issued to employees under our employee stock purchase plan (ESPP). RSUs and restricted stock are measured at the fair market value of the underlying stock at the grant date. We determine the fair value of purchase rights issued to employees under our ESPP and our stock options under our equity plans on the date of grant utilizing the Black-Scholes option pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions regarding a number of subjective variables. These variables include the expected common stock price volatility over the term of the awards, the expected term of the awards, risk-free interest rates and expected dividend yield. 
We recognize stock-based compensation expense for stock-based awards on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (generally the vesting period of the award). We account for forfeitures as they occur. For stock-based awards granted to employees with a performance condition, we recognize stock-based compensation expense for these awards under the accelerated attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied.
Income Taxes
We account for income taxes using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance to amounts that are more likely than not to be realized.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
New Accounting Pronouncements Adopted in Fiscal 2020
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (ASC 842) and subsequent amendments to the initial guidance (collectively, Topic 842). ASC 842 requires lessees to generally recognize on its balance sheet operating and financing lease liabilities and corresponding ROU assets at the commencement date, and to recognize the associated lease expenses in the consolidated statement of operations in a manner similar to that required under historical accounting rules.
On February 1, 2019, we adopted ASC 842 using the modified retrospective approach by electing to use the optional transition method which allows us to continue to apply the guidance of ASC 840, including disclosure requirements, in the comparative periods presented. We elected the package of transition expedients, which allowed us to carry forward our historical lease classifications, our assessment of whether any existing leases as of the date of adoption are or contain leases, and our assessment of indirect costs for any leases that existed prior to adoption of the new standard. We elected to take the practical expedient to keep leases with an initial term of 12 months or less off the consolidated balance sheet and recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the lease term. We recognized operating ROU assets of $124.5 million and lease liabilities of $130.6 million on our consolidated balance sheet as of February 1, 2019, which included reclassifying prepaid rent and deferred rent as a component of the ROU asset. Topic 842 did not have a material impact on our consolidated statements of operations and cash flows. Refer to Note 8 for additional disclosures.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 and requires certain disclosures about stranded tax effects. We adopted this standard on February 1, 2019 and the adoption had no impact on our consolidated financial statements.
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. We adopted this guidance in the first quarter of fiscal 2020.
Recent Accounting Pronouncements Not Yet Effective
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities to require that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down. The measurement of credit losses for newly recognized financial assets and subsequent changes in the allowance for credit losses are recorded in the statements of operations. The amendments in this update will be effective for us beginning February 3, 2020. The adoption of this standard is not expected to have a material impact to our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) which amended its conceptual framework to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-13 eliminates such disclosures around the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The guidance also adds new disclosure requirements for Level 3 measurements. ASU 2018-13 is effective for us beginning on February 3, 2020. The adoption of this standard will not have a material impact to our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). ASC 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software. This standard will be effective for us beginning February 3, 2020 and should be applied either retrospectively or prospectively. We plan to adopt this new accounting standard prospectively, and the adoption is not expected to have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740) (ASU 2019-12). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for us beginning on February 1, 2021. Early adoption of the amendments is permitted. We are currently evaluating the impact of ASU 2019-12 on our consolidated financial statements.
Reclassifications
Certain amounts in prior periods have been reclassified to conform with current period presentation in our consolidated balance sheets and in significant components of our deferred tax assets and liabilities in Note 13.
v3.20.1
Financial Instruments
12 Months Ended
Feb. 02, 2020
Fair Value Disclosures [Abstract]  
Financial Instruments Financial Instruments
Fair Value Measurements
We measure our cash equivalents, marketable securities and restricted cash at fair value on a recurring basis. 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.
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.
In addition to our cash equivalents, marketable securities and restricted cash, we measure the fair value of our Notes on a quarterly basis for disclosure purposes. We consider the fair values of the Notes at the end of fiscal 2019 and 2020 to be a Level 2 measurement due to its limited trading activity. Refer to Note 6 for the net carrying amounts and estimated fair values of our Notes at the end of fiscal 2019 and 2020.
Cash Equivalents, Marketable Securities and Restricted Cash
The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories at the end of fiscal 2019 and 2020 (in thousands):
 At the End of Fiscal 2019
 Amortized Cost Gross Unrealized GainsGross Unrealized LossesFair ValueCash EquivalentsMarketable SecuritiesRestricted Cash
Level 1    
Money market accounts$—  $—  $—  $43,038  $27,215  $—  $15,823  
Level 2    
U.S. government treasury notes315,329  208  (315) 315,222  34,129  281,093  —  
U.S. government agencies69,114  17  (154) 68,977  9,983  58,994  —  
Corporate debt securities363,860  534  (757) 363,637  —  363,637  —  
Foreign government bonds7,965  36  —  8,001  —  8,001  —  
Asset-backed securities37,664  105  (12) 37,757  —  37,757  —  
       Total $793,932  $900  $(1,238) $836,632  $71,327  $749,482  $15,823  
 
 At the End of Fiscal 2020
 Amortized Cost Gross Unrealized GainsGross Unrealized LossesFair ValueCash EquivalentsMarketable SecuritiesRestricted Cash
Level 1    
Money market accounts$—  $—  $—  $26,355  $11,068  $—  $15,287  
Level 2
U.S. government treasury notes323,751  2,146  —  325,897  —  325,897  —  
U.S. government agencies53,930  317  (3) 54,244  —  54,244  —  
Corporate debt securities452,318  3,954  (1) 456,271  3,001  453,270  —  
Foreign government bonds14,994  147  —  15,141  —  15,141  —  
Asset-backed securities87,267  699  —  87,966  —  87,966  —  
Total$932,260  $7,263  $(4) $965,874  $14,069  $936,518  $15,287  

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
At the End of Fiscal 2020
 Amortized CostFair Value
Due within one year$418,950  $420,769  
Due in one to five years504,689  510,079  
Due in five years to ten years5,620  5,670  
  Total$929,259  $936,518  
Based on our evaluation of available evidence, we concluded that the gross unrealized losses on our investments at the end of fiscal 2019 and 2020 were temporary in nature. We do not intend to sell these investments and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. 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 2019 and 2020, aggregated by investment category (in thousands):

At the End of Fiscal 2019
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
U.S. government treasury notes$156,529  $(98) $40,413  $(217) $196,942  $(315) 
U.S. government agencies24,892  (20) 23,600  (134) 48,492  (154) 
Corporate debt securities83,577  (152) 96,914  (605) 180,491  (757) 
Asset-backed securities11,194  (12) —  —  11,194  (12) 
Total$276,192  $(282) $160,927  $(956) $437,119  $(1,238) 

At the End of Fiscal 2020
Less than 12 monthsGreater than 12 monthsTotal
 Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
U.S. government treasury notes$—  $—  $1,000  $—  $1,000  $—  
U.S. government agencies4,998  (3) —  —  4,998  (3) 
Corporate debt securities 9,691  (1) —  —  9,691  (1) 
     Total$14,689  $(4) $1,000  $—  $15,689  $(4) 
Realized gains or losses on sale of marketable securities were not significant for all periods presented.
v3.20.1
Business Combinations
12 Months Ended
Feb. 02, 2020
Business Combinations [Abstract]  
Business Combinations Business Combinations
Compuverde
In April 2019, we acquired Compuverde AB (Compuverde), a privately-held developer of file software solutions for enterprises and cloud providers based in Sweden. Acquisition-related costs were $0.5 million and expensed as incurred.
The purchase consideration was $47.9 million in cash (net of cash acquired) after repayment of $11.6 million of debt assumed. The purchase price was allocated as follows: $38.4 million in developed technology which is being amortized over seven years, $26.6 million of goodwill, $11.7 million in net liabilities assumed, and $5.4 million in deferred tax liability. The deferred tax liability was primarily a result of the difference in the book basis and tax basis related to the developed technology. Goodwill is primarily attributable to the assembled workforce and synergies from integrating Compuverde's technology with our data platform to expand our file capabilities and is not expected to be deductible for tax purposes.
In addition, cash payments to former shareholders of Compuverde totaling $15.9 million are being made over a two-year period and recognized as operating expense.
Restricted stock units in the amount of $3.0 million were issued to Compuverde employees in June 2019, subject to continuous employment and are being recognized as stock-based compensation over the related vesting period.
The results of Compuverde have been included in our consolidated statements of operations since the acquisition date, including revenue and net loss, and are not material. Pro forma results of operations have not been presented because the acquisition is not material to our results of operations.
StorReduce
In August 2018, we completed the acquisition of StorReduce, Inc. (StorReduce), a privately-held, cloud-first software-defined storage solution for managing large-scale unstructured data. Acquisition-related costs were immaterial and were expensed as incurred.
The purchase consideration was $20.5 million in cash (net of cash acquired) after repayment of $6.1 million of debt assumed and payment of $1.1 million in transaction fees on behalf of StorReduce.
The purchase price was allocated as follows: $17.7 million in developed technology which is being amortized over seven years, $11.0 million of goodwill, $4.5 million in net liabilities assumed, and $3.7 million in deferred tax liabilities. The deferred tax liability was primarily a result of the difference in the book basis and tax basis related to the developed technology. Goodwill is primarily attributable to the assembled workforce and synergies from integrating StorReduce's technology with our storage portfolio and is not deductible for income tax purposes. We held back approximately $3.7 million in cash to satisfy potential indemnification claims. This amount was paid out in August 2019.
In addition, we granted 622,482 RSUs to former StorReduce employees with a total grant date fair value of $13.6 million, subject to continuous employment. These awards are being recognized as stock-based compensation over the related vesting period.
The results of StorReduce have been included in our consolidated statements of operations since the acquisition date, including revenue and net loss, and are not material. Pro forma results of operations have not been presented because the acquisition is not material to our results of operations.
v3.20.1
Balance Sheet Components
12 Months Ended
Feb. 02, 2020
Balance Sheet Components Disclosure [Abstract]  
Balance Sheet Components Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
At the End of Fiscal
20192020
Raw materials$3,349  $2,974  
Finished goods41,338  35,544  
Inventory$44,687  $38,518  
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
 At the End of Fiscal
 20192020
Test equipment$170,930  $205,555  
Computer equipment and software117,330  141,387  
Furniture and fixtures6,980  8,324  
Leasehold improvements34,286  40,356  
Total property and equipment329,526  395,622  
Less: accumulated depreciation and amortization(204,173) (272,882) 
Property and equipment, net$125,353  $122,740  
Depreciation and amortization expense related to property and equipment was $60.2 million, $68.3 million and $80.4 million for fiscal 2018, 2019 and 2020, respectively.
Intangible Assets, Net
Intangible assets, net consist of the following (in thousands):
 
At the End of Fiscal
 20192020
 Gross Carrying ValueAccumulated AmortizationNet Carrying AmountGross Carrying ValueAccumulated AmortizationNet Carrying Amount
Technology patents$10,125  $(6,572) $3,553  $19,125  $(8,933) $10,192  
Developed technology17,700  (1,135) 16,565  56,100  (8,035) 48,065  
Intangible assets, net$27,825  $(7,707) $20,118  $75,225  $(16,968) $58,257  
In fiscal 2020, we acquired a portfolio of technology patents for $9.0 million with a useful life of 7 years. Intangible assets amortization expense was $1.5 million, $2.6 million and $9.3 million for fiscal 2018, 2019 and 2020, respectively. At the end of fiscal 2020, the weighted-average remaining amortization period was 3.7 years for technology patents and 6 years for developed technology. Amortization of technology patents is included in general and administrative expenses due to their defensive nature and amortization of developed technology is included in cost of product revenue in the consolidated statements of operations.
At the end of fiscal 2020, future expected amortization expense for intangible assets is as follows (in thousands):
Fiscal Years Ending Estimated Future
Amortization
Expense
2021$10,804  
20229,846  
20239,300  
20249,300  
20259,300  
Thereafter9,707  
Total$58,257  
Goodwill
The change in the carrying amount of goodwill is as follows (in thousands):

Amount
Balance as of the end of fiscal 2019$10,997  
Goodwill acquired26,587  
Balance as of the end of fiscal 2020$37,584  
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
 
 At the End of Fiscal
 20192020
Taxes payable $7,146  $9,012  
Accrued marketing6,173  7,679  
Accrued travel and entertainment expenses3,570  3,829  
Acquisition consideration3,725  6,149  
Other accrued liabilities19,246  20,554  
Total accrued expenses and other liabilities$39,860  $47,223  
v3.20.1
Convertible Senior Notes
12 Months Ended
Feb. 02, 2020
Debt Disclosure [Abstract]  
Convertible Senior Notes Convertible Senior Notes
In April 2018, we issued $575.0 million in principal amount of 0.125% convertible senior notes due 2023, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act and received proceeds of $562.1 million, after deducting the underwriters’ discounts and commissions. The Notes are governed by an indenture (the Indenture) between us, as the issuer, and U.S. Bank National Association, as trustee. The Notes are our senior unsecured obligations. The Indenture does not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The Notes mature on April 15, 2023 unless repurchased or redeemed by us or converted in accordance with their terms prior to the maturity date. Interest is payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018.
The Notes are convertible for up to 21,884,155 shares of our common stock at an initial conversion rate of approximately 38.0594 shares of common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $26.27 per share of common stock, subject to adjustment. Holders of the Notes may surrender their Notes for conversion at their option at any time prior to the close of business on the business day immediately preceding October 15, 2022, only under the following circumstances:
during any fiscal quarter commencing after the fiscal quarter ended on July 31, 2018 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of
the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day;
during the five business day period after any five consecutive trading day period (the measurement period), in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the Notes on each such trading day;
if we call any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
upon the occurrence of specified corporate events.
On or after October 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time regardless of the foregoing circumstances. Upon conversion, holders will receive cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We intend to settle the principal of the Notes in cash.
The conversion price will be subject to adjustment in some events. Following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, we will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or during the related redemption period in certain circumstances. Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” per the Indenture, holders of the Notes may require us to repurchase for cash all or a portion of the Notes at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid contingent interest.
We may not redeem the Notes prior to April 20, 2021. We may redeem for cash all or any portion of the Notes, at our option, on or after April 20, 2021 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending not more than two trading days immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.
Upon the issuance of the Notes, we recorded total debt issuance costs of $12.9 million, of which $9.8 million was allocated to the Notes and $3.1 million was allocated to additional paid-in capital.

The Notes consisted of the following (in thousands):
At the End of Fiscal
20192020
Liability:
Principal$575,000  $575,000  
Less: debt discount, net of amortization(116,722) (91,378) 
Less: debt issuance costs, net of amortization(8,450) (6,615) 
Net carrying amount of the Notes$449,828  $477,007  
Stockholders' equity recorded at issuance:
Allocated value of the conversion feature$136,333  
Less: debt issuance costs(3,068) 
Additional paid-in capital$133,265  
The total estimated fair values of the Notes at the end of fiscal 2019 and 2020 were $558.2 million and $582.6 million. The fair values were determined based on the closing trading price per $100 of the Notes as of the last day of trading of fiscal 2019 and 2020. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates. Based on the closing price of our common stock of $17.80 on the last day
of fiscal 2020, the if-converted value of the Notes of $389.5 million was less than its principal amount. At the end of fiscal 2020, the remaining term of the Notes is 38 months.
The following table sets forth total interest expense recognized related to the Notes (in thousands):

Fiscal Year Ended
20192020
Amortization of debt discount$19,611  $25,344  
Amortization of debt issuance costs1,420  1,835  
Total amortization of debt discount and debt issuance costs21,031  27,179  
Contractual interest expense584  718  
Total interest expense related to the Notes$21,615  $27,897  
Effective interest rate of the liability component5.6 %5.6 %
In connection with the offering of the Notes, we paid $64.6 million to enter into capped call transactions with certain of the underwriters and their affiliates (the Capped Calls), whereby we have the option to purchase a total of 21,884,155 shares of our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of the Notes, as the case may be, with such reduction or offset subject to a cap initially equal to $39.66 per share (which represents a premium of 100% over the last reported sales price of our common stock on April 4, 2018), subject to certain adjustments (the Cap Price). The cost of the Capped Calls was accounted for as a reduction to additional paid-in capital on the consolidated balance sheet. The Capped Calls are intended to reduce or offset potential dilution of our common stock upon any conversion of the Notes, subject to a cap based on the Cap Price.
Impact on Earnings Per Share
The Notes will not impact our diluted earnings per share until the average market price of our common stock exceeds the conversion price of $26.27 per share, as we intend to settle the principal amount of the Notes in cash upon conversion. We are required under the treasury stock method to compute the potentially dilutive shares of common stock related to the Notes for periods we report net income. However, upon conversion, there will be no economic dilution from the Notes until the average market price of our common stock exceeds the Cap Price of $39.66 per share, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the Cap Price. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be anti-dilutive under the treasury stock method.
v3.20.1
Commitments and Contingencies
12 Months Ended
Feb. 02, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Operating Leases
At the end of fiscal 2020, we had various non-cancelable operating lease commitments for office facilities. Refer to Note 8—Leases for additional information regarding lease commitments.
Contractual Purchase Obligations
At the end of fiscal 2019 and 2020, we had $21.4 million and $36.6 million of non-cancelable contractual purchase obligations related to certain software service and other contracts.
Convertible Senior Notes
The repayment of our Notes with an aggregate principal amount of $575.0 million is due on April 15, 2023. Refer to Note 6 for further information regarding our Notes.
Letters of Credit
During fiscal 2020 in connection with a lease executed in January 2019, we issued a letter of credit of $0.5 million. At the end of fiscal 2019 and 2020, we had outstanding letters of credit in the aggregate amount of $10.8
million and $11.5 million, in connection with our facility leases. The letters of credit are collateralized by restricted cash and mature on various dates through August 2029.
Legal Matters
From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, we have not recorded any loss contingency on our consolidated balance sheet as of the end of fiscal 2020.
Indemnification
Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.
v3.20.1
Leases
12 Months Ended
Feb. 02, 2020
Leases [Abstract]  
Leases Leases
We lease office facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. During fiscal 2020, we amended an existing office facility lease to extend the lease term and add office space resulting in additional lease payments of $19.4 million and also executed a data center lease resulting in additional lease payments of approximately $22.4 million. The components of lease costs were as follows (in thousands):

Fiscal Year Ended
2020
Fixed operating lease cost$33,800  
Variable lease cost (1)
8,097  
Short-term lease cost (12 months or less)5,537  
Total lease cost$47,434  
(1) Variable lease cost predominantly included common area maintenance charges.
Rent expense recognized under our operating leases prior to adoption of ASC 842 was $19.4 million and $25.6 million for fiscal 2018 and 2019.
Future lease payments under our non-cancelable operating leases at the end of fiscal 2020 were as follows (in thousands):

Fiscal Years EndingOperating Leases
2021$34,411  
202228,489  
202323,507  
202417,782  
202514,471  
Thereafter27,581  
Total future lease payments$146,241  
Less: imputed interest(26,000) 
Present value of lease liabilities$120,241  
Future lease payments in the above table do not include leases that have not commenced with total undiscounted cash flows of $30.3 million. These leases will commence in fiscal 2021 with lease terms ranging from 5 to 12 years.
Future lease payments under our non-cancelable operating leases at the end of fiscal 2019 were as follows (in thousands):
Fiscal Years EndingOperating Leases
2020$31,297  
202128,573  
202224,381  
202320,440  
202414,780  
Thereafter30,096  
Total$149,567  
Supplemental cash flow information related to our operating leases for fiscal year 2020 as well as the weighted-average remaining lease term and weighted-average discount rate at the end of fiscal 2020 were as follows:

Cash paid for amounts included in the measurement of lease liabilities (in thousands)$32,785  
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$14,937  
Weighted-average remaining lease term (in years)5.58
Weighted-average discount rate6.5%  
v3.20.1
Stockholders' Equity
12 Months Ended
Feb. 02, 2020
Equity [Abstract]  
Stockholders’ Equity Stockholders’ Equity
Preferred Stock
We have 20,000,000 authorized shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our board of directors. At the end of fiscal 2020, there were no shares of preferred stock issued or outstanding.
Class A and Class B Common Stock
We have two classes of authorized common stock, Class A common stock, which we refer to as our "common stock", and Class B common stock. We have 2,000,000,000 authorized shares of Class A common stock and 250,000,000 authorized shares of Class B common stock, with each class having a par value of $0.0001 per share.
In December 2018, all outstanding shares of our Class B common stock automatically converted into the same number of shares of our Class A common stock pursuant to the terms of our amended and restated certificate of incorporation, which provided that each share of our Class B common stock would convert automatically into Class A common stock when the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock. No additional Class B shares can be issued following such conversion. At the end of fiscal 2020, 264,008,206 shares of Class A common stock were issued and outstanding.
Common Stock Reserved for Issuance
At the end of fiscal 2020, we had reserved shares of common stock for future issuance as follows:
Shares underlying outstanding stock options26,822,243  
Shares underlying outstanding restricted stock units25,434,597  
Shares reserved for future equity awards14,661,413  
Shares reserved for future employee stock purchase plan awards7,652,778  
Total74,571,031  
Share Repurchase Program
In August 2019, our board of directors approved the repurchase of up to $150.0 million of our common stock. The authorization allows us to repurchase shares of our common stock opportunistically and will be funded from available working capital. Repurchases may be made at management’s discretion from time to time on the open market through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The share repurchase program does not obligate us to acquire any of our common stock, has no end date, and may be suspended or discontinued by us at any time without prior notice. We will record the difference between cash paid for stock repurchases and underlying par value as a reduction to additional paid-in capital, to the extent the repurchases does not cause this balance to be reduced below zero, at which point the difference will be recorded as a reduction to accumulated deficit. During fiscal 2020, we repurchased and retired 867,657 shares of common stock at an average purchase price of $17.29 per share for an aggregate repurchase price of $15.0 million. At the end of fiscal 2020, $135.0 million remained available for future share repurchases under our current repurchase authorization.
Repurchase of Common Stock in connection with the Notes
Concurrent with the issuance of the Notes (see Note 6), we repurchased and retired 1,008,573 shares, or $20.0 million, of our common stock at $19.83 per share, which was equal to the closing price per share of our common stock on April 4, 2018, the date of the pricing of the offering of the Notes. The repurchased shares were recorded as a reduction of additional paid-in capital on the consolidated balance sheet.
v3.20.1
Equity Incentive Plans
12 Months Ended
Feb. 02, 2020
Share-based Payment Arrangement [Abstract]  
Equity Incentive Plans Equity Incentive Plans
Equity Incentive Plans
We maintain two equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan became effective in connection with our initial public offering (IPO) in October 2015 and serves as the successor to our 2009 Plan. The 2015 Plan provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants. No new awards have been issued under our 2009 Plan after the effective date of our 2015 Plan. Outstanding awards granted under our 2009 Plan will remain subject to the terms of our 2009 Plan and applicable award agreements, until such outstanding awards that are stock options are exercised, terminated or expired by their terms.
Starting in December 2018, we net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax withholding obligations. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our consolidated statements of cash flows.
We initially reserved 27,000,000 shares of our common stock for issuance under our 2015 Plan. The number of shares reserved for issuance under our 2015 Plan increases automatically on the first day of each fiscal year through 2025, in an amount equal to 5% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31.
Our equity awards generally vest over a two to four year period and expire no later than ten years from the date of grant.
2015 Amended and Restated Employee Stock Purchase Plan
Our 2015 Employee Stock Purchase Plan became effective in connection with our IPO and was amended and restated in fiscal 2019 (2015 ESPP). A total of 3,500,000 shares of common stock was initially reserved for issuance under the 2015 ESPP and an additional 5,000,000 shares of common stock were added in connection with the amendment and restatement. The number of shares reserved for issuance under our 2015 ESPP increases automatically on the first day of February of each of 2016 through 2025, in an amount equal to the lesser of (i) 1% of the total number of shares of our capital stock outstanding as of the immediately preceding January 31, and (ii) 3,500,000 shares of common stock.
Our board of directors (or a committee thereof) has the authority under the 2015 ESPP to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date or $25,000 in any calendar year (as determined under applicable tax rules). In February 2019, we amended the offering terms under the 2015 ESPP, on a prospective basis, to include an additional dollar cap of $7,500 per purchase period. The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting of four 6 months purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.
Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated ongoing offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. During fiscal 2018 and 2020, multiple ESPP resets resulted in total modification charges of $9.0 million and $13.6 million, respectively, to be recognized over the new offering periods. There was no ESPP reset during fiscal 2019.
During fiscal 2018, 2019 and 2020, we recognized $18.3 million, $35.4 million and $24.5 million, of stock-based compensation expense related to our 2015 ESPP. At the end of fiscal 2020, there was $27.6 million of unrecognized stock-based compensation expense related to our 2015 ESPP which is expected to be recognized over a weighted-average period of approximately 1.6 years.
Stock Options
A summary of the stock option activity under our equity incentive plans and related information is as follows:
 
 Options Outstanding
 Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(in thousands)
Balance at the end of fiscal 201935,465,543  $8.34  5.4$339,591  
Options exercised(7,770,157) 5.53    
Options forfeited/canceled(873,143) 13.91    
Balance at the end of fiscal 202026,822,243  $8.97  3.9$237,803  
Vested and exercisable at the end of fiscal 202023,665,389  $8.12  4.4$229,523  
The aggregate intrinsic value of options vested and exercisable at the end of fiscal 2020 is calculated based on the difference between the exercise price and the closing price of $17.80 of our common stock on the last day of fiscal 2020. The aggregate intrinsic value of options exercised during fiscal 2018, 2019 and 2020 was $104.9 million, $165.0 million and $106.6 million.
During fiscal 2018, 2019 and 2020, we recognized $49.0 million, $32.0 million and $15.8 million, of stock-based compensation expense related to stock options. The weighted-average grant date fair value of options granted was $5.57 per share for fiscal year 2018 and no options were granted in fiscal 2019 and 2020. The total
grant date fair value of options vested during fiscal 2018, 2019 and 2020 was $42.5 million, $45.6 million and $34.2 million.
At the end of fiscal 2020, total unamortized stock-based compensation expense related to our employee stock options was $11.0 million, which is expected to be recognized over a weighted-average period of approximately 1.4 years.
Determination of Fair Value
The fair value of stock options granted to employees and to be purchased under ESPP is estimated on the grant date using the Black-Scholes option pricing model. This valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation including the fair value of the underlying common stock, expected term, the expected volatility of the common stock, a risk-free interest rate and expected dividend yield.
We estimate the fair value of employee stock options and ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:
 
 Fiscal Year Ended
 201820192020
Employee Stock Options   
Expected term (in years)6.1n/an/a
Expected volatility47 %n/an/a
Risk-free interest rate1.9 %n/an/a
Dividend rate—  n/an/a
Fair value of common stock$12.84n/an/a
Employee Stock Purchase Plan     
Expected term (in years)
0.5 - 2.0
0.5 - 2.0
0.5 - 2.0
Expected volatility
35% - 39%
44% - 47%
42% - 47%
Risk-free interest rate
0.9% - 1.4%
2% - 2.8%
1.7% - 2.5%
Dividend rate—  —  —  
Fair value of common stock
$10.39 - $14.65
$20.62 - $27.66
$17.76 - $20.87
 
The assumptions used in the Black-Scholes option pricing model were determined as follows.
Fair Value of Common Stock—We use the market closing price of our common stock as reported on the New York Stock Exchange to determine the fair value of our common stock at each grant date.
Expected Term—The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options and ESPP purchase rights.
Expected Volatility—Starting in fiscal 2019, the expected volatility for ESPP purchase rights is based on the historical volatility of our common stock for a period equivalent to the expected term of the ESPP purchase rights. Prior to fiscal 2019, since we had limited trading history of our common stock, the expected volatility was derived from the average historical stock volatilities of several public companies within the same industry that we considered to be comparable to our business over a period equivalent to the expected term of the stock option grants and ESPP purchase rights.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock option grants and ESPP purchase rights.
Dividend Rate—We have never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero.
RSUs
A summary of the RSU activity under our 2015 Plan and related information is as follows:
Number of RSUs OutstandingWeighted-Average Grant Date Fair ValueAggregate Intrinsic Value
(in thousands)
Unvested balance at the end of fiscal 201921,917,550  $17.94  $392,515  
Granted15,780,796  18.91  
Vested(9,241,583) 17.12  
Forfeited(3,022,166) 18.93  
Unvested balance at the end of fiscal 202025,434,597  $18.72  $452,736  
The aggregate fair value, as of the respective vesting dates, of RSUs that vested during fiscal years 2018, 2019 and 2020 was $75.5 million, $184.8 million and $164.1 million.
During fiscal 2018, 2019 and 2020, we recognized $83.4 million, $119.9 million and $161.8 million in stock-based compensation expense related to RSUs. At the end of fiscal 2020, total unrecognized employee compensation cost related to unvested RSUs was $435.2 million, which is expected to be recognized over a weighted-average period of approximately 3.0 years.
Restricted Stock
During fiscal 2020, we granted an aggregate of 1,399,688 shares of performance restricted stock as follows:
1,291,194 shares were issued at the target percentage of 100%, with both performance and service vesting conditions payable in common shares, from 0% to 160% of the target number granted, contingent upon the degree to which the performance condition is met. A total of 930,678 shares were earned at the end of fiscal 2020 based on the performance condition achieved and these shares are subject to service conditions through the vesting periods. The remaining shares will be canceled in fiscal 2021.
108,494 shares were issued based on the actual attainment of some performance restricted stock issued in fiscal 2018 and 2019.
A summary of the restricted stock activity under our 2015 Plan and related information is as follows:
 Number of Restricted Stock OutstandingWeighted-
Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
(in thousands)
Unvested balance at the end of fiscal 20192,267,569  $18.70  $40,612  
Granted1,399,688  20.30  
Vested(1,284,638) 18.97  
Forfeited/canceled(255,413) 19.93  
Unvested balance at the end of fiscal 20202,127,206  $19.58  $37,864  
All unvested shares of restricted stock are subject to cancellation to the extent vesting conditions are not met. The aggregate fair value of restricted stock that vested during fiscal years 2019 and 2020 was $3.6 million and $24.2 million.
During fiscal 2019 and 2020, we recognized $23.3 million and $24.6 million in stock-based compensation expense related to restricted stock. At the end of fiscal 2020, total unrecognized employee compensation cost related to unvested restricted stock was $14.2 million, which is expected to be recognized over a weighted-average period of approximately 1.8 years.
Stock-Based Compensation Expense
The following table summarizes the components of stock-based compensation expense recognized in the consolidated statements of operations (in thousands):
 Fiscal Year Ended
 201820192020
Cost of revenue—product$1,630  $2,951  $3,732  
Cost of revenue—subscription services9,050