PURE STORAGE, INC., 10-Q filed on 6/7/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Apr. 30, 2017
May 31, 2017
Class A
May 31, 2017
Class B
Document Type
10-Q 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Apr. 30, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
Q1 
 
 
Trading Symbol
PSTG 
 
 
Entity Registrant Name
Pure Storage, Inc. 
 
 
Entity Central Index Key
0001474432 
 
 
Current Fiscal Year End Date
--01-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
93,938,912 
114,766,953 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Current assets:
 
 
Cash and cash equivalents
$ 168,757 
$ 183,675 
Marketable securities
367,218 
362,986 
Accounts receivable, net of allowance of $2,000 and $1,744 as of January 31, 2017 and April 30, 2017
132,134 
168,978 
Inventory
39,478 
23,498 
Deferred commissions, current
16,409 
15,787 
Prepaid expenses and other current assets
28,637 
25,157 
Total current assets
752,633 
780,081 
Property and equipment, net
82,293 
81,695 
Intangible assets, net
6,184 
6,560 
Deferred income taxes, non-current
795 
844 
Other assets, non-current
30,970 
30,565 
Total assets
872,875 
899,745 
Current liabilities:
 
 
Accounts payable
51,015 
52,719 
Accrued compensation and benefits
24,714 
39,252 
Accrued expenses and other liabilities
15,981 
21,697 
Deferred revenue, current
159,094 
158,095 
Liability related to early exercised stock options
1,064 
1,362 
Total current liabilities
251,868 
273,125 
Deferred revenue, non-current
152,431 
145,031 
Other liabilities, non-current
3,268 
3,159 
Total liabilities
407,567 
421,315 
Commitments and contingencies (Note 5)
   
   
Stockholders’ equity:
 
 
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized as of January 31, 2017 and April 30, 2017; no shares issued and outstanding as of January 31, 2017 and April 30, 2017
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 as of January 31, 2017 and April 30, 2017; 204,364 (Class A 87,027, Class B 117,337) and 208,119 (Class A 93,271, Class B 114,848) shares issued and outstanding as of January 31, 2017 and April 30, 2017
21 
20 
Additional paid-in capital
1,330,586 
1,281,452 
Accumulated other comprehensive loss
(445)
(562)
Accumulated deficit
(864,854)
(802,480)
Total stockholders’ equity
465,308 
478,430 
Total liabilities and stockholders’ equity
$ 872,875 
$ 899,745 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Accounts receivable, allowance
$ 1,744 
$ 2,000 
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)
Preferred stock, shares outstanding (in shares)
Common stock, par value per share (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized (in shares)
2,250,000,000 
2,250,000,000 
Common stock, shares issued (in shares)
208,119,000 
204,364,000 
Common stock, shares outstanding (in shares)
208,119,000 
204,364,000 
Class A
 
 
Common stock, par value per share (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized (in shares)
2,000,000,000 
2,000,000,000 
Common stock, shares issued (in shares)
93,270,847 
87,027,000 
Common stock, shares outstanding (in shares)
93,270,847 
87,027,000 
Class B
 
 
Common stock, par value per share (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized (in shares)
250,000,000 
250,000,000 
Common stock, shares issued (in shares)
114,848,323 
117,337,000 
Common stock, shares outstanding (in shares)
114,848,323 
117,337,000 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Revenue:
 
 
Product
$ 138,425 
$ 111,738 
Support
44,206 
28,209 
Total revenue
182,631 
139,947 
Cost of revenue:
 
 
Product
46,645 
34,046 
Support
16,903 
12,934 
Total cost of revenue
63,548 
46,980 
Gross profit
119,083 
92,967 
Operating expenses:
 
 
Research and development
65,428 
52,938 
Sales and marketing
96,964 
83,098 
General and administrative
20,096 
21,581 
Total operating expenses
182,488 
157,617 
Loss from operations
(63,405)
(64,650)
Other income (expense), net
1,995 
1,282 
Loss before provision for income taxes
(61,410)
(63,368)
Provision for income taxes
964 
420 
Net loss
$ (62,374)
$ (63,788)
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share)
$ (0.30)
$ (0.34)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted (in shares)
205,783 
189,283 
Condensed Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net loss
$ (62,374)
$ (63,788)
Other comprehensive income:
 
 
Change in unrealized net gain on available-for-sale securities
117 
807 
Comprehensive loss
$ (62,257)
$ (62,981)
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
Net loss
$ (62,374)
$ (63,788)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
Depreciation and amortization
14,825 
10,432 
Stock-based compensation expense
32,219 
22,998 
Other
451 
182 
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
36,571 
28,593 
Inventory
(16,105)
(2,623)
Deferred commissions
(362)
4,141 
Prepaid expenses and other current assets
(3,944)
(2,744)
Accounts payable
(3,982)
166 
Accrued compensation and other liabilities
(19,998)
(11,017)
Deferred revenue
8,398 
20,653 
Net cash provided by (used in) operating activities
(14,301)
6,993 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
Purchases of property and equipment
(12,769)
(24,376)
Purchases of marketable securities
(55,976)
(343,466)
Sales of marketable securities
5,384 
23,327 
Maturities of marketable securities
46,321 
Net decrease in restricted cash
706 
Net cash used in investing activities
(17,040)
(343,809)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
Net proceeds from exercise of stock options
2,257 
3,091 
Proceeds from issuance of common stock under employee stock purchase plan
14,166 
15,079 
Net cash provided by financing activities
16,423 
18,170 
Net decrease in cash and cash equivalents
(14,918)
(318,646)
Cash and cash equivalents, beginning of period
183,675 
604,742 
Cash and cash equivalents, end of period
168,757 
286,096 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
Cash paid for income taxes
790 
1,323 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION
 
 
Property and equipment purchased but not yet paid
9,685 
9,448 
Vesting of early exercised stock options
$ 298 
$ 176 
Business Overview
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 building a data platform that transforms business through a dramatic increase in performance and reduction in complexity and costs. We are headquartered in Mountain View, California and have wholly owned subsidiaries throughout the world.
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (the SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, 2017.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2018 or any future period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the determination of best estimate of selling price included in multiple-element revenue arrangements, sales commissions, useful lives of intangible assets and property and equipment, fair values of stock-based awards, provision for income taxes, including related reserves, and contingent liabilities, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Restricted Cash
Restricted cash is comprised of cash collateral for a vendor credit card program and letters of credit related to our leases. As of both January 31, 2017 and April 30, 2017, we had restricted cash of $12.7 million, which was included in other assets, non-current, in the condensed consolidated balance sheets.
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 accompanying condensed consolidated balance sheets. We carry these securities at fair value and record unrealized gains and losses in 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 condensed consolidated statements of operations.
Deferred Commissions
Deferred commissions consist of direct and incremental costs paid to our sales force related to customer contracts. The deferred commission amounts are recoverable through the revenue streams that will be recognized under the related customer contracts. Direct sales commissions are deferred when earned and amortized over the same period that revenue is recognized from the related customer contract. Amortization of deferred commissions is included in sales and marketing expense in the condensed consolidated statements of operations.
As of January 31, 2017 and April 30, 2017, we recorded deferred commissions, current, of $15.8 million and $16.4 million, and deferred commissions, non-current, of $14.9 million and $14.7 million, in other assets, non-current, in the condensed consolidated balance sheets. We recognized sales commission expenses of $17.6 million and $20.5 million during the three months ended April 30, 2016 and 2017, respectively.
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), requiring an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 will supersede nearly all existing revenue recognition guidance under U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, deferring the effective date for ASU 2014-09 by one year. The new standard will be effective for us beginning on February 1, 2018 which is the mandatory adoption date and we do not plan to early adopt. This standard may be adopted using either the full or modified retrospective methods. We are evaluating the impact of the new standard on our accounting policies, processes, and system requirements, and have assigned internal resources and engaged third party service providers to assist in our evaluation and system implementation. We have made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. We are also evaluating the potential impact that the implementation of this standard will have on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize all leases with terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The new standard also simplifies the accounting for sale and leaseback transactions. The amendments in this update will be effective for us beginning on February 1, 2019 and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating adoption methods and the impact of this standard on our consolidated financial statements.
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 on February 1, 2020 with early adoption permitted on or after February 1, 2019. We are currently evaluating the impact of this standard on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for us beginning on February 1, 2018 and will be applied on a retrospective basis. Early adoption is permitted. We do not expect the adoption of this standard to have any material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU No 2017-09, Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting, to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. ASU 2017-09 will be effective for us beginning February 1, 2018 and will be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.
Financial Instruments
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 I—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
Level II—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 III—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.
Cash Equivalents, Marketable Securities and Restricted Cash
The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories as of January 31, 2017 and April 30, 2017 (in thousands):
 
 
As of January 31, 2017
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable Securities
 
Restricted Cash
Level 1
 

 
 

 
 

 
 

 
 

 
 
 
 

Money market accounts
$

 
$

 
$

 
$
12,734

 
$

 
$

 
$
12,734

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
148,298

 
22

 
(289
)
 
148,031

 
13,226

 
134,805

 

U.S. government agencies
40,398

 
2

 
(159
)
 
40,241

 

 
40,241

 

Corporate debt securities
185,701

 
242

 
(379
)
 
185,564

 

 
185,564

 

Foreign government bonds
2,377

 
2

 
(3
)
 
2,376

 

 
2,376

 

Total
$
376,774

 
$
268

 
$
(830
)
 
$
388,946

 
$
13,226

 
$
362,986

 
$
12,734


 
As of April 30, 2017
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable
Securities
 
Restricted Cash
Level 1
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market accounts
$

 
$

 
$

 
$
12,732

 
$

 
$

 
$
12,732

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
144,028

 
26

 
(313
)
 
143,741

 
6,324

 
137,417

 

U.S. government agencies
41,576

 
1

 
(147
)
 
41,430

 

 
41,430

 

Corporate debt securities
186,005

 
295

 
(307
)
 
185,993

 

 
185,993

 

Foreign government bonds
2,378

 
2

 
(2
)
 
2,378

 

 
2,378

 

Total
$
373,987

 
$
324

 
$
(769
)
 
$
386,274

 
$
6,324

 
$
367,218

 
$
12,732


 
The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
 
 
As of April 30, 2017
 
Amortized Cost
 
Fair Value
Due within one year
$
162,839

 
$
162,757

Due in one to five years
204,824

 
204,461

Total
$
367,663

 
$
367,218


 
Based on our evaluation of available evidence, we concluded that the gross unrealized losses on our marketable securities as of April 30, 2017 were temporary in nature. The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss as of April 30, 2017, aggregated by investment category (in thousands).
 
 
Less than 12 months
 
Greater than 12 months
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
U.S. government treasury notes
$
120,441

 
$
(313
)
 
$

 
$

 
$
120,441

 
$
(313
)
U.S. government agencies
38,679

 
(147
)
 

 

 
38,679

 
(147
)
Corporate debt securities
85,382

 
(301
)
 
2,269

 
(6
)
 
87,651

 
(307
)
Foreign government bonds
878

 
(2
)
 

 

 
878

 
(2
)
Total
$
245,380

 
$
(763
)
 
$
2,269

 
$
(6
)
 
$
247,649

 
$
(769
)

 
Gross realized gains or losses on sale of marketable securities for the three months ended April 30, 2016 and 2017 were not significant.
Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
 
As of
January 31, 2017
 
As of
April 30, 2017
Raw materials
$
3,003

 
$
10,865

Finished goods
20,495

 
28,613

Inventory
$
23,498

 
$
39,478



Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
Test equipment
$
105,955

 
$
116,629

Computer equipment and software
54,521

 
57,453

Furniture and fixtures
4,494

 
4,691

Leasehold improvements
10,332

 
11,438

Total property and equipment
175,302

 
190,211

Less: accumulated depreciation and amortization
(93,607
)
 
(107,918
)
Property and equipment, net
$
81,695

 
$
82,293


 
Depreciation and amortization expense was $10.1 million and $14.4 million for the three months ended April 30, 2016 and 2017.
Intangible Assets, Net
Intangible assets, net, consist of the following (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
Technology patents
$
10,125

 
$
10,125

Accumulated amortization
(3,565
)
 
(3,941
)
Intangible assets, net
$
6,560

 
$
6,184


 
Intangible assets amortization expense was $326,000 and $376,000 for the three months ended April 30, 2016 and 2017. The weighted-average remaining useful life of technology patents is 4.1 years. Due to the defensive nature of these patents, the amortization is included in general and administrative expenses in the condensed consolidated statements of operations.
As of April 30, 2017, expected amortization expense for intangible assets for each of the next five years is as follows (in thousands):
 
Years Ending January 31,
Estimated 
Future
Amortization
Expense
Remainder of 2018
$
1,128

2019
1,504

2020
1,504

2021
1,504

2022
544

Total
$
6,184


Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
 
 
As of January 31, 2017
 
As of April 30, 2017
Sales and use tax payable
$
540

 
$
292

Accrued professional fees
1,765

 
1,018

Accrued marketing
6,718

 
5,041

Accrued travel and entertainment expenses
2,235

 
3,015

Income tax payable
1,135

 
1,271

Other accrued liabilities
9,304

 
5,344

Total accrued expenses and other liabilities
$
21,697

 
$
15,981

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies

Operating Leases
 
During the three months ended April 30, 2017, we extended the lease term of an existing office facility with total additional lease obligations of approximately $2.0 million with the lease expiring through March 2019.
Letters of Credit
As of January 31, 2017 and April 30, 2017, 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 restricted cash in the same amount and mature at various dates through June 2024.
Legal Matters
On September 1, 2016, a purported securities class action entitled Ramsay v. Pure Storage, Inc., et al. was filed in the Superior Court of the State of California (San Mateo County) against us and certain of our officers, directors, investors and underwriters for our initial public offering (IPO), asserting claims under sections 11, 12 and 15 of the Securities Act on behalf of a purported class consisting of purchasers of our common stock pursuant or traceable to our initial public offering, and seeking unspecified compensatory damages and other relief. Substantially identical lawsuits were subsequently filed in the same court, bringing the same claims against the same defendants, captioned Peter Galanis v. Pure Storage, Inc., et al. (filed September 14, 2016), Curtis Wilson v. Pure Storage, Inc., et al. (filed September 15, 2016), Loren Moe v. Pure Storage, Inc., et al. (filed September 23, 2016), and Mason Delahooke and Mahsa Shirazikia v. Pure Storage, Inc., et al. (filed October 5, 2016). On October 27, 2016, the aforementioned actions were consolidated under the caption In re Pure Storage, Inc. Shareholder Litigation. On December 13, 2016, the plaintiffs filed a consolidated complaint. On January 26, 2017, the defendants filed a demurrer (motion to dismiss) to the consolidated complaint on the grounds that the plaintiffs failed to state a claim under the Securities Act. On April 4, 2017, the court sustained the demurrer as to all claims with leave to amend. On May 15, 2017, the plaintiffs filed an amended complaint, again asserting claims under sections 11, 12 and 15 of the Securities Act against us and certain of our officers, directors and underwriters for our IPO. On May 26, 2017 the defendants filed a demurrer (motion to dismiss) to the amended complaint on the grounds that the plaintiffs failed to state a claim under the Securities Act. The second demurrer is scheduled to be heard on July 6, 2017. We believe there is no merit to the allegations and intend to defend ourselves vigorously.
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 may 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 April 30, 2017.
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.
Stockholders' Equity
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. As of April 30, 2017, 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 and Class B common stock. As of April 30, 2017, we had 2,000,000,000 shares of Class A common stock authorized with a par value of $0.0001 per share and 250,000,000 shares of Class B common stock authorized with a par value of $0.0001 per share. As of April 30, 201793,270,847 shares of Class A common stock were issued and outstanding and 114,848,323 shares of Class B common stock were issued and outstanding.
Equity Incentive Plans
Equity Incentive Plans
Equity Incentive Plans
Equity Incentive Plans
We maintain two equity incentive plans: the 2009 Equity Incentive Plan (our 2009 Plan) and the 2015 Equity Incentive Plan (our 2015 Plan). In August 2015, our board of directors adopted, and in September 2015 our stockholders approved, the 2015 Plan, which became effective in connection with our IPO and serves as the successor to our 2009 Plan. Our 2015 Plan provides for grants of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants. We ceased grants of new awards under our 2009 Plan after the effective date of our 2015 Plan, and no new grants will be made from our 2009 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.
We initially reserved 27,000,000 shares of our Class A 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 February of each 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.
The exercise price of stock options will generally not be less than 100% of the fair market value of our common stock on the date of grant, as determined by our board of directors.  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 Employee Stock Purchase Plan
In August 2015, our board of directors adopted and our stockholders approved, the 2015 Employee Stock Purchase Plan (2015 ESPP), which became effective in connection with our IPO. A total of 3,500,000 shares of Class A common stock was initially reserved for issuance under the 2015 ESPP. The number of shares reserved for issuance under our 2015 ESPP increases automatically on the first day of February of each year 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 Class A common stock.
The 2015 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount through payroll deductions (or other payroll contributions) 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). The 2015 ESPP provides for 24 month offering periods beginning March 16th and September 16th of each year, and each offering period consists of four six-month purchase periods, subject to a reset provision. 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). On each purchase date, eligible employees will purchase our Class A common stock at a price per share equal to 85% of the lesser of the fair market value of our Class A common stock (1) on the first trading day of the applicable offering period or (2) the purchase date. Our closing stock price on the new offering date of March 16, 2017 was lower than the closing stock prices for both the offerings that started on March 16, 2016 and September 16, 2016, which triggered an ESPP reset for those offerings. The ESPP reset resulted in a modification charge of approximately $9.0 million, which is being recognized over the new 24-month offering period ending on March 15, 2019. In addition, the original remaining unamortized stock-based compensation expense for each of the offerings is being recognized over the same 24-month offering period ending on March 15, 2019.
We recognized stock-based compensation related to our 2015 ESPP of $4.2 million and $4.1 million during the three months ended April 30, 2016 and 2017. As of April 30, 2017, there was $27.9 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 1.9 years.
Stock Options
A summary of 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 (In Years)
 
Aggregate
Intrinsic
Value (in thousands)
Balance as of January 31, 2017
56,840,189

 
$
7.15

 
7.0
 
$
315,502

Options granted

 

 
 
 
 

Options exercised
(1,340,121
)
 
1.84

 
 
 
 

Options forfeited/cancelled
(605,324
)
 
12.74

 
 
 
 

Balance as of April 30, 2017
54,894,744

 
$
7.22

 
6.7
 
$
273,338

Vested and exercisable as of April 30, 2017
30,739,000

 
$
4.45

 
6.0
 
$
208,957


 
 
The aggregate intrinsic value of options vested and exercisable as of April 30, 2017 is calculated based on the difference between the exercise price and the closing price of $10.61 of our Class A common stock on April 28, 2017.
As of April 30, 2017, total unrecognized employee compensation cost related to outstanding options was $115.6 million, which is expected to be recognized over a weighted-average period of approximately 2.7 years.

Restricted Stock Units
A summary of the restricted stock unit activity under our 2015 Plan and related information is as follows:
 
 
Number of Restricted Stock Units Outstanding
 
Weighted-
Average
Grant Date
Fair Value
 
Aggregate
Intrinsic
Value (in thousands)
Unvested Balance as of January 31, 2017
8,783,024

 
$
13.06

 
$
99,863

Granted
8,014,950

 
10.19

 

Vested
(794,543
)
 
10.38

 

Forfeited
(376,522
)
 
12.18

 

Unvested Balance as of April 30, 2017
15,626,909

 
$
11.74

 
$
165,802


 
As of April 30, 2017, total unrecognized employee compensation cost related to unvested restricted stock units was $165.3 million, which is expected to be recognized over a weighted-average period of approximately 2.6 years.

During the three months ended April 30, 2017, we granted 827,000 (target number of units) performance stock units with both performance condition and service vesting conditions payable in common shares from 0% to 150% of the target number granted, contingent upon the degree to which the performance condition is met. Management determined it is probable that the performance condition will be satisfied and accordingly, we began recognizing stock-based compensation expense during the three months ended April 30, 2017. Stock-based compensation expense was $468,000 for the three months ended April 30, 2017.
Stock-Based Compensation Expense
The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Cost of revenue—product
$
106

 
$
397

Cost of revenue—support
1,092

 
1,774

Research and development
11,658

 
15,588

Sales and marketing
7,519

 
10,626

General and administrative
2,623

 
3,834

Total stock-based compensation expense
$
22,998

 
$
32,219

Net Loss per Share Attributable to Common Stockholders
Net Loss per Share Attributable to Common Stockholders
Net Loss per Share Attributable to Common Stockholders
Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities.
Basic net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, stock options, unvested restricted stock awards, repurchasable shares from early exercised stock options, and shares subject to ESPP withholding are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.
The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share attributed to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis. We did not present dilutive net loss per share on an if-converted basis because the impact was not dilutive.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Net loss
$
(63,788
)
 
$
(62,374
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
189,283

 
205,783

Net loss per share attributable to common stockholders, basic and diluted
$
(0.34
)
 
$
(0.30
)


The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Stock options to purchase common stock
68,407

 
55,895

Restricted stock units
1,375

 
11,722

Early exercised stock options
2,666

 
390

Employee stock purchase plan
364

 
336

Total
72,812

 
68,343

Income Taxes
Income Taxes
Income Taxes
Our provision for income taxes was primarily due to taxes on international operations and state income taxes. The difference between the provision for income taxes that would be derived by applying the statutory rate to our loss before income taxes and the provision for income taxes recorded was primarily attributable to changes in our valuation allowance, non-deductible stock-based compensation expense and the tax rate differential between the U.S. and foreign countries.
As of April 30, 2017, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended January 31, 2017.
Segment Information
Segment Information
Segment Information
Our chief operating decision maker is a group which is comprised of our Chief Executive Officer, our Chief Financial Officer, and our President. This group reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. We have one business activity and there are no segment managers who are held accountable for operations or operating results. Accordingly, we have a single reportable segment.
The following table sets forth revenue by geographic area based on the billing address of our customers (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
United States
$
111,227

 
$
146,494

Rest of the world
28,720

 
36,137

Total revenue
$
139,947

 
$
182,631


 
Long-lived assets by geographic area are summarized as follows (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
United States
$
78,692

 
$
79,491

Rest of the world
3,003

 
2,802

Total long-lived assets
$
81,695

 
$
82,293

Basis of Presentation and Summary of Significant Accounting Policies (Policies)
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (the SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, 2017.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2018 or any future period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the determination of best estimate of selling price included in multiple-element revenue arrangements, sales commissions, useful lives of intangible assets and property and equipment, fair values of stock-based awards, provision for income taxes, including related reserves, and contingent liabilities, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Restricted Cash
Restricted cash is comprised of cash collateral for a vendor credit card program and letters of credit related to our leases.
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 accompanying condensed consolidated balance sheets. We carry these securities at fair value and record unrealized gains and losses in 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 condensed consolidated statements of operations.
Deferred Commissions
Deferred commissions consist of direct and incremental costs paid to our sales force related to customer contracts. The deferred commission amounts are recoverable through the revenue streams that will be recognized under the related customer contracts. Direct sales commissions are deferred when earned and amortized over the same period that revenue is recognized from the related customer contract. Amortization of deferred commissions is included in sales and marketing expense in the condensed consolidated statements of operations.
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), requiring an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 will supersede nearly all existing revenue recognition guidance under U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, deferring the effective date for ASU 2014-09 by one year. The new standard will be effective for us beginning on February 1, 2018 which is the mandatory adoption date and we do not plan to early adopt. This standard may be adopted using either the full or modified retrospective methods. We are evaluating the impact of the new standard on our accounting policies, processes, and system requirements, and have assigned internal resources and engaged third party service providers to assist in our evaluation and system implementation. We have made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. We are also evaluating the potential impact that the implementation of this standard will have on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires lessees to recognize all leases with terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The new standard also simplifies the accounting for sale and leaseback transactions. The amendments in this update will be effective for us beginning on February 1, 2019 and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating adoption methods and the impact of this standard on our consolidated financial statements.
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 on February 1, 2020 with early adoption permitted on or after February 1, 2019. We are currently evaluating the impact of this standard on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for us beginning on February 1, 2018 and will be applied on a retrospective basis. Early adoption is permitted. We do not expect the adoption of this standard to have any material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU No 2017-09, Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting, to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. ASU 2017-09 will be effective for us beginning February 1, 2018 and will be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.
Financial Instruments (Tables)
The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories as of January 31, 2017 and April 30, 2017 (in thousands):
 
 
As of January 31, 2017
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable Securities
 
Restricted Cash
Level 1
 

 
 

 
 

 
 

 
 

 
 
 
 

Money market accounts
$

 
$

 
$

 
$
12,734

 
$

 
$

 
$
12,734

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
148,298

 
22

 
(289
)
 
148,031

 
13,226

 
134,805

 

U.S. government agencies
40,398

 
2

 
(159
)
 
40,241

 

 
40,241

 

Corporate debt securities
185,701

 
242

 
(379
)
 
185,564

 

 
185,564

 

Foreign government bonds
2,377

 
2

 
(3
)
 
2,376

 

 
2,376

 

Total
$
376,774

 
$
268

 
$
(830
)
 
$
388,946

 
$
13,226

 
$
362,986

 
$
12,734


 
As of April 30, 2017
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable
Securities
 
Restricted Cash
Level 1
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market accounts
$

 
$

 
$

 
$
12,732

 
$

 
$

 
$
12,732

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
144,028

 
26

 
(313
)
 
143,741

 
6,324

 
137,417

 

U.S. government agencies
41,576

 
1

 
(147
)
 
41,430

 

 
41,430

 

Corporate debt securities
186,005

 
295

 
(307
)
 
185,993

 

 
185,993

 

Foreign government bonds
2,378

 
2

 
(2
)
 
2,378

 

 
2,378

 

Total
$
373,987

 
$
324

 
$
(769
)
 
$
386,274

 
$
6,324

 
$
367,218

 
$
12,732

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
 
 
As of April 30, 2017
 
Amortized Cost
 
Fair Value
Due within one year
$
162,839

 
$
162,757

Due in one to five years
204,824

 
204,461

Total
$
367,663

 
$
367,218

The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss as of April 30, 2017, aggregated by investment category (in thousands).
 
 
Less than 12 months
 
Greater than 12 months
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
U.S. government treasury notes
$
120,441

 
$
(313
)
 
$

 
$

 
$
120,441

 
$
(313
)
U.S. government agencies
38,679

 
(147
)
 

 

 
38,679

 
(147
)
Corporate debt securities
85,382

 
(301
)
 
2,269

 
(6
)
 
87,651

 
(307
)
Foreign government bonds
878

 
(2
)
 

 

 
878

 
(2
)
Total
$
245,380

 
$
(763
)
 
$
2,269

 
$
(6
)
 
$
247,649

 
$
(769
)
Balance Sheet Components (Tables)
Inventory consists of the following (in thousands):
 
As of
January 31, 2017
 
As of
April 30, 2017
Raw materials
$
3,003

 
$
10,865

Finished goods
20,495

 
28,613

Inventory
$
23,498

 
$
39,478

Property and equipment, net, consists of the following (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
Test equipment
$
105,955

 
$
116,629

Computer equipment and software
54,521

 
57,453

Furniture and fixtures
4,494

 
4,691

Leasehold improvements
10,332

 
11,438

Total property and equipment
175,302

 
190,211

Less: accumulated depreciation and amortization
(93,607
)
 
(107,918
)
Property and equipment, net
$
81,695

 
$
82,293

Intangible assets, net, consist of the following (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
Technology patents
$
10,125

 
$
10,125

Accumulated amortization
(3,565
)
 
(3,941
)
Intangible assets, net
$
6,560

 
$
6,184

As of April 30, 2017, expected amortization expense for intangible assets for each of the next five years is as follows (in thousands):
 
Years Ending January 31,
Estimated 
Future
Amortization
Expense
Remainder of 2018
$
1,128

2019
1,504

2020
1,504

2021
1,504

2022
544

Total
$
6,184

Accrued expenses and other liabilities consist of the following (in thousands):
 
 
As of January 31, 2017
 
As of April 30, 2017
Sales and use tax payable
$
540

 
$
292

Accrued professional fees
1,765

 
1,018

Accrued marketing
6,718

 
5,041

Accrued travel and entertainment expenses
2,235

 
3,015

Income tax payable
1,135

 
1,271

Other accrued liabilities
9,304

 
5,344

Total accrued expenses and other liabilities
$
21,697

 
$
15,981

Equity Incentive Plans (Tables)
A summary of 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 (In Years)
 
Aggregate
Intrinsic
Value (in thousands)
Balance as of January 31, 2017
56,840,189

 
$
7.15

 
7.0
 
$
315,502

Options granted

 

 
 
 
 

Options exercised
(1,340,121
)
 
1.84

 
 
 
 

Options forfeited/cancelled
(605,324
)
 
12.74

 
 
 
 

Balance as of April 30, 2017
54,894,744

 
$
7.22

 
6.7
 
$
273,338

Vested and exercisable as of April 30, 2017
30,739,000

 
$
4.45

 
6.0
 
$
208,957

A summary of the restricted stock unit activity under our 2015 Plan and related information is as follows:
 
 
Number of Restricted Stock Units Outstanding
 
Weighted-
Average
Grant Date
Fair Value
 
Aggregate
Intrinsic
Value (in thousands)
Unvested Balance as of January 31, 2017
8,783,024

 
$
13.06

 
$
99,863

Granted
8,014,950

 
10.19

 

Vested
(794,543
)
 
10.38

 

Forfeited
(376,522
)
 
12.18

 

Unvested Balance as of April 30, 2017
15,626,909

 
$
11.74

 
$
165,802

The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Cost of revenue—product
$
106

 
$
397

Cost of revenue—support
1,092

 
1,774

Research and development
11,658

 
15,588

Sales and marketing
7,519

 
10,626

General and administrative
2,623

 
3,834

Total stock-based compensation expense
$
22,998

 
$
32,219

Net Loss per Share Attributable to Common Stockholders (Tables)
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Net loss
$
(63,788
)
 
$
(62,374
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
189,283

 
205,783

Net loss per share attributable to common stockholders, basic and diluted
$
(0.34
)
 
$
(0.30
)
The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
Stock options to purchase common stock
68,407

 
55,895

Restricted stock units
1,375

 
11,722

Early exercised stock options
2,666

 
390

Employee stock purchase plan
364

 
336

Total
72,812

 
68,343

Segment Information (Tables)
The following table sets forth revenue by geographic area based on the billing address of our customers (in thousands):
 
 
Three Months Ended 
 April 30,
 
2016
 
2017
United States
$
111,227

 
$
146,494

Rest of the world
28,720

 
36,137

Total revenue
$
139,947

 
$
182,631

Long-lived assets by geographic area are summarized as follows (in thousands):
 
 
As of
January 31, 2017
 
As of
April 30, 2017
United States
$
78,692

 
$
79,491

Rest of the world
3,003

 
2,802

Total long-lived assets
$
81,695

 
$
82,293

Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details) (USD $)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2017
Accounting Policies [Abstract]
 
 
 
Restricted cash
$ 12,732,000 
 
$ 12,734,000 
Deferred commissions, current
16,409,000 
 
15,787,000 
Deferred income taxes, non-current
14,700,000 
 
14,900,000 
Sales commission expenses
$ 20,500,000 
$ 17,600,000 
 
Financial Instruments - Summary of Cash Equivalents, Marketable Securities and Restricted Cash by Significant Investment Categories (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
$ 373,987 
$ 376,774 
Gross Unrealized Gains
324 
268 
Gross Unrealized Losses
(769)
(830)
Fair Value
386,274 
388,946 
Cash Equivalents
6,324 
13,226 
Marketable Securities
367,218 
362,986 
Restricted Cash
12,732 
12,734 
Money market accounts |
Level 1
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
12,732 
12,734 
Cash Equivalents
Marketable Securities
Restricted Cash
12,732 
12,734 
U.S. government treasury notes |
Level 2
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
144,028 
148,298 
Gross Unrealized Gains
26 
22 
Gross Unrealized Losses
(313)
(289)
Fair Value
143,741 
148,031 
Cash Equivalents
6,324 
13,226 
Marketable Securities
137,417 
134,805 
Restricted Cash
U.S. government agencies |
Level 2
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
41,576 
40,398 
Gross Unrealized Gains
Gross Unrealized Losses
(147)
(159)
Fair Value
41,430 
40,241 
Cash Equivalents
Marketable Securities
41,430 
40,241 
Restricted Cash
Corporate debt securities |
Level 2
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
186,005 
185,701 
Gross Unrealized Gains
295 
242 
Gross Unrealized Losses
(307)
(379)
Fair Value
185,993 
185,564 
Cash Equivalents
Marketable Securities
185,993 
185,564 
Restricted Cash
Foreign government bonds |
Level 2
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Amortized Cost
2,378 
2,377 
Gross Unrealized Gains
Gross Unrealized Losses
(2)
(3)
Fair Value
2,378 
2,376 
Cash Equivalents
Marketable Securities
2,378 
2,376 
Restricted Cash
$ 0 
$ 0 
Financial Instruments - Schedule of Amortized Cost and Estimated Fair Value of Marketable Securities by Contractual Maturity (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Investments, Debt and Equity Securities [Abstract]
 
Due within one year, Amortized Cost
$ 162,839 
Due in one to five years, Amortized Cost
204,824 
Total, Amortized Cost
367,663 
Due within one year, Fair Value
162,757 
Due in one to five years, Fair Value
204,461 
Total, Fair Value
$ 367,218 
Financial Instruments - Schedule of Gross Unrealized Losses and Fair Values for Investments that were in Continuous Unrealized Loss Position for Less Than 12 Months, Aggregated by Investments Category (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Fair Value
 
Less than 12 months
$ 245,380 
Greater than 12 months
2,269 
Total
247,649 
Unrealized Loss
 
Less than 12 months
(763)
Greater than 12 months
(6)
Total
(769)
U.S. government treasury notes
 
Fair Value
 
Less than 12 months
120,441 
Greater than 12 months
Total
120,441 
Unrealized Loss
 
Less than 12 months
(313)
Greater than 12 months
Total
(313)
U.S. government agencies
 
Fair Value
 
Less than 12 months
38,679 
Greater than 12 months
Total
38,679 
Unrealized Loss
 
Less than 12 months
(147)
Greater than 12 months
Total
(147)
Corporate debt securities
 
Fair Value
 
Less than 12 months
85,382 
Greater than 12 months
2,269 
Total
87,651 
Unrealized Loss
 
Less than 12 months
(301)
Greater than 12 months
(6)
Total
(307)
Foreign government bonds
 
Fair Value
 
Less than 12 months
878 
Greater than 12 months
Total
878 
Unrealized Loss
 
Less than 12 months
(2)
Greater than 12 months
Total
$ (2)
Balance Sheet Components - Schedule of Inventory (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Balance Sheet Components Disclosure [Abstract]
 
 
Raw materials
$ 10,865 
$ 3,003 
Finished goods
28,613 
20,495 
Inventory
$ 39,478 
$ 23,498 
Balance Sheet Components - Schedule of Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Property Plant And Equipment [Line Items]
 
 
Total property and equipment
$ 190,211 
$ 175,302 
Less: accumulated depreciation and amortization
(107,918)
(93,607)
Property and equipment, net
82,293 
81,695 
Test equipment
 
 
Property Plant And Equipment [Line Items]
 
 
Total property and equipment
116,629 
105,955 
Computer equipment and software
 
 
Property Plant And Equipment [Line Items]
 
 
Total property and equipment
57,453 
54,521 
Furniture and fixtures
 
 
Property Plant And Equipment [Line Items]
 
 
Total property and equipment
4,691 
4,494 
Leasehold improvements
 
 
Property Plant And Equipment [Line Items]
 
 
Total property and equipment
$ 11,438 
$ 10,332 
Balance Sheet Components - Additional Information (Details) (USD $)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Balance Sheet Components Disclosure [Abstract]
 
 
Depreciation and amortization
$ 14,400,000 
$ 10,100,000 
Intangible assets amortization expense
$ 376,000 
$ 326,000 
Balance Sheet Components - Schedule of Intangible Assets, Net (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Finite Lived Intangible Assets [Line Items]
 
 
Intangible assets, net
$ 6,184 
$ 6,560 
Technology patents
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Technology patents
10,125 
10,125 
Accumulated amortization
(3,941)
(3,565)
Intangible assets, net
$ 6,184 
$ 6,560 
Balance Sheet Components - Schedule of Expected Amortization Expenses for Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Balance Sheet Components Disclosure [Abstract]
 
 
Remainder of 2018
$ 1,128 
 
2019
1,504 
 
2020
1,504 
 
2021
1,504 
 
2022
544 
 
Intangible assets, net
$ 6,184 
$ 6,560 
Balance Sheet Components - Schedule of Accrued Expenses and Other Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Balance Sheet Components Disclosure [Abstract]
 
 
Sales and use tax payable
$ 292 
$ 540 
Accrued professional fees
1,018 
1,765 
Accrued marketing
5,041 
6,718 
Accrued travel and entertainment expenses
3,015 
2,235 
Income tax payable
1,271 
1,135 
Other accrued liabilities
5,344 
9,304 
Total accrued expenses and other liabilities
$ 15,981 
$ 21,697 
Commitments and Contingencies - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
Apr. 30, 2017
Jan. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
 
 
Total operating lease obligations
$ 2.0 
 
Outstanding letters of credit
$ 7.7 
$ 7.7 
Stockholders' Equity - Additional Information (Details) (USD $)
Apr. 30, 2017
class
Jan. 31, 2017
Oct. 31, 2015
Class Of Stock [Line Items]
 
 
 
Preferred stock, shares authorized (in shares)
20,000,000 
20,000,000 
20,000,000 
Preferred stock, shares issued (in shares)
 
Preferred stock, shares outstanding (in shares)
 
Number of classes of stock
 
 
Common stock, shares authorized (in shares)
2,250,000,000 
2,250,000,000 
 
Common stock, par value per share (in dollars per share)
$ 0.0001 
$ 0.0001 
 
Common stock, shares issued (in shares)
208,119,000 
204,364,000 
 
Common stock, shares outstanding (in shares)
208,119,000 
204,364,000 
 
Class A
 
 
 
Class Of Stock [Line Items]
 
 
 
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)
93,270,847 
87,027,000 
 
Common stock, shares outstanding (in shares)
93,270,847 
87,027,000 
 
Class B
 
 
 
Class Of Stock [Line Items]
 
 
 
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 
 
Common stock, shares issued (in shares)
114,848,323 
117,337,000 
 
Common stock, shares outstanding (in shares)
114,848,323 
117,337,000 
 
Equity Incentive Plans - Additional Information (Details) (USD $)
0 Months Ended 1 Months Ended 3 Months Ended
Mar. 16, 2016
Aug. 31, 2015
period
Apr. 30, 2017
Apr. 30, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Number of equity incentive plans
 
 
 
Total stock-based compensation expense
 
 
$ 32,219,000 
$ 22,998,000 
Compensation cost, weighted average term
 
 
2 years 8 months 
 
2015 Equity Incentive Plan
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Equity awards of vest expire period (no later than)
 
 
10 years 
 
2015 Equity Incentive Plan |
Minimum
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Purchase price as percentage of fair market value of common stock
 
 
100.00% 
 
Equity awards of vest period
 
 
2 years 
 
2015 Equity Incentive Plan |
Maximum
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Equity awards of vest period
 
 
4 years 
 
2015 Equity Incentive Plan |
Class A
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Shares initially reserved for issuance (in shares)
 
 
27,000,000 
 
Increase in shares reserved by percentage of capital stock
 
 
5.00% 
 
2015 Employee Stock Purchase Plan
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Employee stock purchase plan offering period
24 months 
 
 
 
Number of purchase periods
 
 
 
Purchase period, term
 
6 months 
 
 
Modification charge related to the ESPP reset
9,000,000 
 
 
 
Total stock-based compensation expense
 
 
4,100,000 
4,200,000 
Unrecognized stock-based compensation expense
 
 
27,900,000 
 
Compensation cost, weighted average term
 
 
1 year 10 months 24 days 
 
2015 Employee Stock Purchase Plan |
Class A
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
Increase in shares reserved by percentage of capital stock
 
1.00% 
 
 
Purchase price as percentage of fair market value of common stock
 
85.00% 
 
 
Shares reserved for future issuance (in shares)
 
3,500,000 
 
 
Payroll deductions percentage
 
30.00% 
 
 
Share cap for ESPP at purchase date (in shares)
 
3,000 
 
 
Calendar year gap for ESPP contribution amount
 
$ 25,000 
 
 
Equity Incentive Plans - Stock Options (Details) (USD $)
3 Months Ended 12 Months Ended
Apr. 30, 2017
Jan. 31, 2017
Apr. 28, 2017
Class A
Options Outstanding, Number of Shares
 
 
 
Beginning balance (in shares)
56,840,189 
 
 
Options granted (in shares)
 
 
Options exercised (in shares)
(1,340,121)
 
 
Options forfeited/cancelled (in shares)
(605,324)
 
 
Ending balance (in shares)
54,894,744 
56,840,189 
 
Options Outstanding, Number of Shares, Vested and exercisable (in shares)
30,739,000 
 
 
Options Outstanding, Weighted Average Exercise Price
 
 
 
Beginning balance (in dollars per share)
$ 7.15 
 
 
Options granted (in dollars per share)
$ 0.00 
 
 
Options exercised (in dollars per share)
$ 1.84 
 
 
Options forfeited/cancelled (in dollars per share)
$ 12.74 
 
 
Ending balance (in dollars per share)
$ 7.22 
$ 7.15 
 
Weighted Average Exercise Price, Vested and exercisable (in dollars per share)
$ 4.45 
 
 
Weighted- Average Remaining Contractual Life
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