PURE STORAGE, INC., 10-Q filed on 6/8/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Apr. 30, 2018
May 31, 2018
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Apr. 30, 2018  
Document Fiscal Year Focus 2019  
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  
Class A    
Entity Common Stock, Shares Outstanding (in shares)   173,431,705
Class B    
Entity Common Stock, Shares Outstanding (in shares)   57,454,048
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Apr. 30, 2018
Jan. 31, 2018
[1]
Current assets:    
Cash and cash equivalents $ 735,140 $ 244,057
Marketable securities 362,817 353,289
Accounts receivable, net of allowance of $1,062 and $999 as of January 31, 2018 and April 30, 2018 195,926 243,001
Inventory 38,540 34,497
Deferred commissions, current 20,122 21,088
Prepaid expenses and other current assets 35,652 47,552
Total current assets 1,388,197 943,484
Property and equipment, net 94,280 89,142
Intangible assets, net 4,681 5,057
Deferred income taxes, non-current 1,175 1,060
Restricted cash 16,499 14,763
Deferred commissions, non-current 65,922 66,225
Other assets, non-current 5,305 4,264
Total assets 1,576,059 1,123,995
Current liabilities:    
Accounts payable 63,994 84,420
Accrued compensation and benefits 30,778 59,898
Accrued expenses and other liabilities 25,629 26,829
Deferred revenue, current 199,622 191,229
Liability related to early exercised stock options 0 320
Total current liabilities 320,023 362,696
Convertible senior notes, net 430,253 0
Deferred revenue, non-current 188,992 182,873
Other liabilities, non-current 5,171 4,025
Total liabilities 944,439 549,594
Commitments and contingencies (Note 6)
Stockholders’ equity:    
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized as of January 31, 2018 and April 30, 2018; no shares issued and outstanding as of January 31, 2018 and April 30, 2018 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 as of January 31, 2018 and April 30, 2018; 220,979 (Class A 129,502, Class B 91,477) and 229,596 (Class A 164,207, Class B 65,389) shares issued and outstanding as of January 31, 2018 and April 30, 2018 23 22
Additional paid-in capital 1,602,121 1,479,883
Accumulated other comprehensive loss (2,633) (1,917)
Accumulated deficit (967,891) (903,587)
Total stockholders’ equity 631,620 574,401
Total liabilities and stockholders’ equity $ 1,576,059 $ 1,123,995
[1] *Prior period information has been adjusted to reflect the adoption impact of Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606), which we adopted on February 1, 2018.
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Apr. 30, 2018
Jan. 31, 2018
[1]
Accounts receivable, allowance $ 999 $ 1,062
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, 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) 229,596,000 220,979,000
Common stock, shares outstanding (in shares) 229,596,000 220,979,000
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) 164,207,114 129,502,000
Common stock, shares outstanding (in shares) 164,207,114 129,502,000
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) 65,389,256 91,477,000
Common stock, shares outstanding (in shares) 65,389,256 91,477,000
[1] *Prior period information has been adjusted to reflect the adoption impact of Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606), which we adopted on February 1, 2018.
v3.8.0.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Apr. 30, 2018
Apr. 30, 2017
[1]
Revenue:    
Product $ 195,449 $ 142,850
Support subscription 60,496 39,795
Total revenue 255,945 182,645
Cost of revenue:    
Product 66,420 46,645
Support subscription 23,210 16,903
Total cost of revenue 89,630 63,548
Gross profit 166,315 119,097
Operating expenses:    
Research and development 78,492 65,428
Sales and marketing 122,367 91,763
General and administrative 27,330 20,096
Total operating expenses 228,189 177,287
Loss from operations (61,874) (58,190)
Other income (expense), net (999) 1,995
Loss before provision for income taxes (62,873) (56,195)
Provision for income taxes 1,431 964
Net loss $ (64,304) $ (57,159) [2],[3]
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share) $ (0.29) $ (0.28)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted (in shares) 223,768 205,783
[1] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
[2] * Prior period information has been adjusted to reflect the adoption impact of ASC 606 and ASU 2016-18, which we adopted on February 1, 2018
[3] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2018
Apr. 30, 2017
[3]
Statement of Comprehensive Income [Abstract]    
Net loss $ (64,304) $ (57,159) [1],[2]
Other comprehensive income (loss):    
Change in unrealized net gain (loss) on available-for-sale securities (716) 117
Comprehensive loss $ (65,020) $ (57,042)
[1] * Prior period information has been adjusted to reflect the adoption impact of ASC 606 and ASU 2016-18, which we adopted on February 1, 2018
[2] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
[3] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
v3.8.0.1
Condensed Consolidated Statements of Cash Flows
$ in Thousands
3 Months Ended
Apr. 30, 2018
USD ($)
Apr. 30, 2017
USD ($)
[1]
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (64,304) $ (57,159) [2],[3]
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 16,417 14,825
Amortization of debt discount and debt issuance costs 1,455 0
Stock-based compensation expense 43,955 32,219
Other 152 451
Changes in operating assets and liabilities:    
Accounts receivable, net 47,143 36,571
Inventory (4,429) (16,105)
Deferred commissions 1,269 (1,367)
Prepaid expenses and other current assets 11,111 (3,944)
Accounts payable (18,802) (3,982)
Accrued compensation and other liabilities (29,881) (24,194)
Deferred revenue 14,510 8,384
Net cash provided by (used in) operating activities 18,596 (14,301)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchases of property and equipment (22,296) (12,769)
Purchases of marketable securities (81,702) (55,976)
Sales of marketable securities 10,454 5,384
Maturities of marketable securities 61,023 46,321
Net cash used in investing activities (32,521) (17,040)
CASH FLOWS FROM FINANCING ACTIVITIES    
Net proceeds from exercise of stock options 9,614 2,257
Proceeds from issuance of common stock under employee stock purchase plan 19,698 14,166
Proceeds from issuance of convertible senior notes, net of issuance costs 562,062 0
Payment for purchase of capped calls (64,630) 0
Repurchase of common stock (20,000) 0
Net cash provided by financing activities 506,744 16,423
Net increase (decrease) in cash, cash equivalents and restricted cash 492,819 (14,918)
Cash, cash equivalents and restricted cash, beginning of period 258,820 196,409
Cash, cash equivalents and restricted cash, end of period 751,639 181,491
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:    
Cash and cash equivalents 735,140 168,757
Restricted cash 16,499 12,734
Cash, cash equivalents and restricted cash, end of period 751,639 181,491
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Cash paid for income taxes 1,839 790
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION    
Property and equipment purchased but not yet paid 8,316 9,685
Vesting of early exercised stock options $ 320 $ 298
[1] * Prior period information has been adjusted to reflect the adoption impact of ASC 606 and ASU 2016-18, which we adopted on February 1, 2018
[2] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
[3] * Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.
v3.8.0.1
Business Overview
3 Months Ended
Apr. 30, 2018
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.
We empower innovators to build a better world with data. Our data platform replaces storage systems designed for mechanical disk with all-flash systems optimized end-to-end for solid-state memory. Our Pure1 cloud-based support and management platform simplifies storage administration, while real-time scanning enables us to find and fix issues before they have an impact. Our business model replaces the traditional forklift upgrade cycle with Evergreen Storage subscriptions to hardware and software innovation, support and maintenance.
v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies
3 Months Ended
Apr. 30, 2018
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 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, 2018.
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 2019 or any future period. Certain prior period amounts have been adjusted as a result of adoption of new accounting pronouncements. Refer to "Recently Adopted Accounting Pronouncements" below for further information.
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, property and equipment and deferred sales commissions, 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 related to our leases and for a vendor corporate credit card program. As of January 31, 2018 and April 30, 2018, we had restricted cash of $14.8 million and $16.5 million on 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 incremental costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenues are recognized upon transfer of control to customers and deferred commissions related to support subscription 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 condensed 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 condensed consolidated statements of operations.
Changes in total deferred commissions during the period presented are as follows (in thousands):

 
Three Months Ended 
 April 30, 2018
Beginning balance as of January 31, 2018 (as adjusted)
$
87,313

Additions
15,421

Recognition of deferred commissions
(16,690
)
Ending balance as of April 30, 2018
$
86,044


Of the $86.0 million total deferred commissions balance as of April 30, 2018, we expect to recognize approximately 23% as commission expense over the next 12 months and the remainder thereafter.
There was no impairment loss in relation to capitalized commissions for the three months ended April 30, 2017 and 2018.
Deferred Revenue
Deferred revenue primarily consists of amounts that have been invoiced but that have not yet been recognized as revenue and consists of performance obligations pertaining to support subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet dates.
Changes in total deferred revenue during the three months ended April 30, 2018 are as follows (in thousands):
 
Three Months Ended 
 April 30, 2018
Beginning balance as of January 31, 2018 (as adjusted)
$
374,102

Additions
75,271

Recognition of deferred revenue
(60,759
)
Ending balance as of April 30, 2018
$
388,614


During the three months ended April 30, 2017, we recognized $43.0 million in revenue pertaining to deferred revenue as of January 31, 2017. During the three months ended April 30, 2018, we recognized $55.6 million in revenue pertaining to deferred revenue as of January 31, 2018.
Of the $388.6 million remaining performance obligations as of April 30, 2018, we expect to recognize approximately 51% as revenue over the next 12 months and the remainder thereafter.
Substantially all of our contracted but not invoiced performance obligations are subject to cancellation and, therefore, are not considered in our remaining performance obligations.
Revenue Recognition
We derive revenue from two sources: (1) product revenue which includes hardware and embedded software and (2) support subscription revenue which includes customer support, hardware maintenance, and software upgrades on a when-and-if-available basis.
Our product revenue is derived from the sale of storage hardware and operating system software that is integrated into the hardware. We typically recognize product revenue upon transfer of control to our customers. Products are typically shipped directly by us to customers, and our channel partners do not stock our inventory.
Our support subscription revenue is derived from the sale of support subscription, which includes the right to receive unspecified software upgrades and enhancements on a when-and-if-available basis, bug fixes, parts replacement services related to the hardware, as well as access to our cloud-based management and support platform. Revenue related to support subscription is recognized ratably over the contractual term, which generally ranges from one to six years and represents our performance obligations period. The vast majority of our products are sold with support subscription agreements, which typically commence upon transfer of control of the corresponding products to our customers. Costs to service the support subscription are expensed as incurred. In addition, our Evergreen Storage program provides our customers who continually maintain active support subscription agreements for three years with an included controller refresh with each additional three year support subscription renewal. In accordance with revenue recognition guidance, the controller refresh represents an additional performance obligation and the allocated revenue is recognized in the period in which these controllers are shipped.
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 are capable of being distinct in the context of the contract to be accounted for as a combined performance obligation. We allocate transaction price to each performance obligation for contracts that contain multiple performance obligations based on a relative standalone selling price, taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations.
Recently Adopted Accounting Pronouncements
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 or ASC 606), 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. ASC 606 supersedes nearly all existing revenue recognition guidance under U.S. GAAP upon its effective date. The standard permits two methods of adoptions: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of applying the standard recognized at the date of application (cumulative catch-up transition method).
We adopted the standard using the full retrospective method beginning February 1, 2018, for the year ending January 31, 2019, and our historical financial information for the years ended January 31, 2017 and 2018 has been adjusted to conform to the new standard.
The most significant impact of the standard related to the removal of limitation on contingent revenue, resulting in an increase in product revenue and a decrease in support subscription revenue. In addition, the adoption of ASC 606 also resulted in differences in the timing of recognition of sales commissions. While the adoption of the standard changes certain line items within the net cash flow from operating activities, it had no impact to the net cash provided by or used in operating, investing, or financing activities on our condensed consolidated statements of cash flows.
The following line items on our condensed consolidated balance sheet as of January 31, 2018 have been adjusted to reflect the adoption of ASC 606 (in thousands):
 
As of January 31, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
Assets
 
 
 
 
 
Deferred commissions, current
$
22,437

 
$
(1,349
)
 
$
21,088

Deferred commissions, non-current
20,288

 
45,937

 
66,225

Total deferred commissions
$
42,725

 
$
44,588

 
$
87,313

Liabilities
 
 
 
 
 
Deferred revenue, current
$
209,377

 
$
(18,148
)
 
$
191,229

Deferred revenue, non-current
196,632

 
(13,759
)
 
182,873

Total deferred revenue
$
406,009

 
$
(31,907
)
 
$
374,102

Stockholders' equity
 
 
 
 
 
Accumulated deficit
$
(980,082
)
 
$
76,495

 
$
(903,587
)

The following line items on our unaudited condensed consolidated statement of operations for the three months ended April 30, 2017 have been adjusted to reflect the adoption of ASC 606 (in thousands, except per share data):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Revenue:
 
 
 
 
 
Product
$
138,425

 
$
4,425

 
$
142,850

Support subscription
44,206

 
(4,411
)
 
39,795

Total revenue
$
182,631

 
$
14

 
$
182,645

 
 
 
 
 
 
Gross profit
$
119,083

 
$
14

 
$
119,097

Sales and marketing
$
96,964

 
$
(5,201
)
 
$
91,763

Total operating expenses
$
182,488

 
$
(5,201
)
 
$
177,287

Loss from operations
$
(63,405
)
 
$
5,215

 
$
(58,190
)
Loss before provision for income taxes
$
(61,410
)
 
$
5,215

 
$
(56,195
)
Net loss
$
(62,374
)
 
$
5,215

 
$
(57,159
)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.30
)
 
$
0.02

 
$
(0.28
)

Unaudited revenue by geographic location based on bill-to location, which reflects the adoption impact of ASC 606, are as follows (in thousands):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Revenue:
 
 
 
 
 
United States
$
146,494

 
$
11

 
$
146,505

Rest of the world
36,137

 
3

 
36,140

Total revenue
$
182,631

 
$
14

 
$
182,645



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 restricted cash. We adopted ASU 2016-18 effective February 1, 2018 on a retrospective basis. Upon adoption, restricted cash are 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. The adoption of this standard did not impact our net cash flow from operating activities or financing activities presented on our consolidated statements of cash flows.
The following line items in our unaudited condensed consolidated statement of cash flows for the three months ended April 30, 2017 have been adjusted to reflect the adoption of ASU 2016-18 and ASC 606 (in thousands):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Net loss (1)
$
(62,374
)
 
$
5,215

 
$
(57,159
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
Deferred commissions (1)
$
(362
)
 
$
(1,005
)
 
$
(1,367
)
Accrued compensation and other liabilities (1)
$
(19,998
)
 
$
(4,196
)
 
$
(24,194
)
Deferred revenue (1)
$
8,398

 
$
(14
)
 
$
8,384

Cash used in operating activities
$
(14,301
)
 
$

 
$
(14,301
)
Cash, cash equivalents and restricted cash, beginning of period (2)
$
183,675

 
$
12,734

 
$
196,409

Cash, cash equivalents and restricted cash, end of period (2)
$
168,757

 
$
12,734

 
$
181,491

_____________________________________________________
(1) Adjustment pertaining to the adoption of ASC 606.
(2) Adjustment pertaining to the adoption of ASU 2016-18.
Recent Accounting Pronouncements Not Yet Adopted
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 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 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 and requires certain disclosures about stranded tax effects. This standard will be effective for us beginning February 1, 2019 and should be applied either in the period of adoption or retrospectively. Early adoption is permitted. We do not expect this standard to have any impact on our consolidated financial statements.
v3.8.0.1
Financial Instruments
3 Months Ended
Apr. 30, 2018
Investments, Debt and Equity Securities [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 the Notes on a quarterly basis for disclosure purposes. We consider the fair value of the Notes at April 30, 2018 to be a Level 2 measurement due to limited trading activity of the Notes. Refer to Note 5 for further information.
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, 2018 and April 30, 2018 (in thousands):
 
 
As of January 31, 2018
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable Securities
 
Restricted Cash
Level 1
 

 
 

 
 

 
 

 
 

 
 
 
 

Money market accounts
$

 
$

 
$

 
$
32,057

 
$
17,294

 
$

 
$
14,763

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
131,643

 

 
(651
)
 
130,992

 
10,172

 
120,820

 

U.S. government agencies
47,229

 

 
(333
)
 
46,896

 

 
46,896

 

Corporate debt securities
186,506

 
116

 
(1,049
)
 
185,573

 

 
185,573

 

Total
$
365,378

 
$
116

 
$
(2,033
)
 
$
395,518

 
$
27,466

 
$
353,289

 
$
14,763


 
As of April 30, 2018
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Cash Equivalents
 
Marketable
Securities
 
Restricted Cash
Level 1
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market accounts
$

 
$

 
$

 
$
24,747

 
$
8,248

 
$

 
$
16,499

Level 2
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government treasury notes
146,112

 
1

 
(774
)
 
145,339

 
10,419

 
134,920

 

U.S. government agencies
40,674

 

 
(390
)
 
40,284

 

 
40,284

 

Corporate debt securities
189,083

 
76

 
(1,546
)
 
187,613

 

 
187,613

 

Total
$
375,869

 
$
77

 
$
(2,710
)
 
$
397,983

 
$
18,667

 
$
362,817

 
$
16,499


 
The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):
 
 
As of April 30, 2018
 
Amortized Cost
 
Fair Value
Due within one year
$
208,672

 
$
207,951

Due in one to five years
156,778

 
154,866

Total
$
365,450

 
$
362,817


 
The gross unrealized losses on our marketable securities as of April 30, 2018 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, 2018, 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
$
93,195

 
$
(323
)
 
$
40,159

 
$
(451
)
 
$
133,354

 
$
(774
)
U.S. government agencies
16,216

 
(190
)
 
24,069

 
(200
)
 
40,285

 
(390
)
Corporate debt securities
119,622

 
(1,188
)
 
33,349

 
(358
)
 
152,971

 
(1,546
)
Total
$
229,033

 
$
(1,701
)
 
$
97,577

 
$
(1,009
)
 
$
326,610

 
$
(2,710
)

 
Realized gains or losses on sale of marketable securities were not significant for all periods presented.
v3.8.0.1
Balance Sheet Components
3 Months Ended
Apr. 30, 2018
Balance Sheet Components Disclosure [Abstract]  
Balance Sheet Components
Balance Sheet Components
Inventory
Inventory consists of the following (in thousands):
 
As of
January 31, 2018
 
As of
April 30, 2018
Raw materials
$
1,181

 
$
124

Finished goods
33,316

 
38,416

Inventory
$
34,497

 
$
38,540


Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
 
 
As of
January 31, 2018
 
As of
April 30, 2018
Test equipment
$
142,311

 
$
148,444

Computer equipment and software
72,329

 
82,102

Furniture and fixtures
5,363

 
5,611

Leasehold improvements
15,032

 
18,134

Total property and equipment
235,035

 
254,291

Less: accumulated depreciation and amortization
(145,893
)
 
(160,011
)
Property and equipment, net
$
89,142

 
$
94,280


 
Depreciation and amortization expense was $14.4 million and $16.0 million for the three months ended April 30, 2017 and 2018.
Intangible Assets, Net
Intangible assets, net, consist of the following (in thousands):
 
 
As of
January 31, 2018
 
As of
April 30, 2018
Technology patents
$
10,125

 
$
10,125

Accumulated amortization
(5,068
)
 
(5,444
)
Intangible assets, net
$
5,057

 
$
4,681


 
Intangible assets amortization expense was $0.4 million for three months ended April 30, 2017 and 2018. The weighted-average remaining useful life of technology patents is 3.1 years. Due to the defensive nature of these patents, the amortization expense is included in general and administrative expenses in the condensed consolidated statements of operations.
As of April 30, 2018, future expected amortization expense for intangible assets is as follows (in thousands):
 
Years Ending January 31,
Estimated 
Future
Amortization
Expense
Remainder of 2019
$
1,128

2020
1,504

2021
1,504

2022
545

Total
$
4,681


Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
 
 
As of
January 31, 2018
 
As of
April 30, 2018
Taxes payable
$
4,052

 
$
3,790

Accrued marketing
5,928

 
4,703

Accrued travel and entertainment expenses
4,386

 
4,119

Other accrued liabilities
12,463

 
13,017

Total accrued expenses and other liabilities
$
26,829

 
$
25,629

v3.8.0.1
Convertible Senior Notes
3 Months Ended
Apr. 30, 2018
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 (the 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 Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $26.27 per share of Class A 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 ending on July 31, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A 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 Class A 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 Class A common stock, or a combination of cash and shares of our Class A 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 Class A 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.

In accounting for the issuance of 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 condensed 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 condensed 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 condensed consolidated balance sheets and are being amortized to interest expense in the condensed 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 condensed consolidated balance sheets. We recorded total debt issuance costs of $12.9 million, of which approximately $9.8 million was allocated to the Notes and approximately $3.1 million was allocated to additional paid-in capital.

The Notes consisted of the following (in thousands):
 
As of
April 30, 2018
Liability:
 
Principal
$
575,000

Less: debt discount, net of amortization
(134,976
)
Less: debt issuance costs, net of amortization
(9,772
)
Net carrying amount of the Notes
$
430,252

 
 
Stockholders' equity:
 
Allocated value of the conversion feature
$
136,333

Less: debt issuance costs
(3,068
)
Additional paid-in capital
$
133,265



The total estimated fair value of the Notes as of April 30, 2018 was approximately $595.2 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. 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 Class A common stock of $20.23 on April 30, 2018, the if-converted value of the Notes of $442.7 million was less than its principal amount.     

The following table sets forth total interest expense recognized related to the Notes for the three months ended April 30, 2018 (in thousands):
 
Three Months Ended April 30, 2018
Amortization of debt discount
$
1,357

Amortization of debt issuance costs
98

Total amortization of debt discount and debt issuance costs
1,455

Contractual interest expense
43

Total interest expense related to the Notes
$
1,498

 
 
Effective interest rate of the liability component
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 Class A 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 Class A 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 condensed 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 have impact on our diluted earnings per share until the average market price of our Class A 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 Class A 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.
v3.8.0.1
Commitments and Contingencies
3 Months Ended
Apr. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

Operating Leases
 
As of January 31, 2018 and April 30, 2018, the aggregate future minimum payments under non-cancelable operating leases were approximately $113.0 million and $154.9 million.
Letters of Credit
In connection with the lease amendment executed in March 2018, we issued a letter of credit of $1.5 million. As of January 31, 2018 and April 30, 2018, we had outstanding letters of credit in the aggregate amount of $9.6 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 condensed consolidated balance sheet as of April 30, 2018.
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.
v3.8.0.1
Stockholders' Equity
3 Months Ended
Apr. 30, 2018
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. As of April 30, 2018, 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, 2018, 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, 2018164,207,114 shares of Class A common stock were issued and outstanding and 65,389,256 shares of Class B common stock were issued and outstanding.
Repurchase of Common Stock
Concurrent with the issuance of the Notes (see Note 5), we repurchased and retired 1,008,573 shares, or $20.0 million, of our Class A common stock at $19.83 per share, which was equal to the closing price per share of our Class A 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 condensed consolidated balance sheet.
v3.8.0.1
Equity Incentive Plans
3 Months Ended
Apr. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [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). 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 initial public offering (IPO) and serves as the successor to the 2009 Plan. The 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 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 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), resulting in a modification. 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 on (1) the first trading day of the applicable offering period or (2) the purchase date. There was an ESPP reset in the three months ended April 30, 2017 that resulted in a total modification charge of $9.0 million, which is recognized over the new offering period ending March 15, 2019.
We recognized stock-based compensation expense related to our 2015 ESPP of $4.1 million and $6.7 million during the three months ended April 30, 2017 and 2018. As of April 30, 2018, there was $32.6 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 1.1 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, 2018
46,359,949

 
$
7.75

 
6.3
 
$
574,224

Options exercised
(2,193,658
)
 
4.40

 
 
 
 

Options forfeited/canceled
(1,019,718
)
 
8.25

 
 
 
 

Balance as of April 30, 2018
43,146,573

 
$
7.91

 
6.1
 
$
531,452

Vested and exercisable as of April 30, 2018
28,635,271

 
$
5.66

 
5.6
 
$
417,279


 
 
The aggregate intrinsic value of options vested and exercisable as of April 30, 2018 is calculated based on the difference between the exercise price and the closing price of $20.23 of our Class A common stock on April 30, 2018.
As of April 30, 2018, total unrecognized employee compensation cost related to outstanding options was $60.4 million, which is expected to be recognized over a weighted-average period of approximately 2.2 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, 2018
17,682,646

 
$
12.60

 
$
356,117

Granted
6,364,772

 
20.06

 


Vested
(2,013,408
)
 
11.70

 


Forfeited
(437,921
)
 
13.68

 


Converted
(1,142,838
)
 
11.86

 
 
Unvested balance as of April 30, 2018
20,453,251

 
$
15.01

 
$
413,588



As of April 30, 2018, total unrecognized employee compensation cost related to unvested restricted stock units was $275.7 million, which is expected to be recognized over a weighted-average period of approximately 3.1 years.

In March 2017, we granted 750,000 performance stock units (net of 77,000 canceled units), at a target percentage of 100%, with both performance 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. In the three months ended April 30, 2018, a total of 780,000 shares was earned based on the performance condition achieved and these shares will be subject to service conditions through the vesting periods. Stock-based compensation expense for these performance stock units was $0.5 million and $0.7 million for the three months ended April 30, 2017 and 2018, recognized on an accelerated attribution method.

In August 2017, we granted 464,744 performance stock units, at a target percentage of 100%, with both performance 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. The performance condition for these performance stock units was set in March 2018 and accordingly, established the grant date for these awards from an accounting perspective and for determining the grant date fair value.

Restricted Stock

During the three months ended April 30, 2018, we converted certain restricted stock units and performance stock units that were previously granted into 1,375,210 shares of restricted stock for corporate tax benefit purposes. Of the 1,375,210 shares of restricted stock, 697,116 shares are performance restricted stock and 678,094 shares are subject to service vesting conditions only. The conversion did not change the fair value or vesting conditions and therefore no modification accounting is required.

During the three months ended April 30, 2018, we issued 1,933,861 shares of performance restricted stock, at the maximum performance percentage of 180%, with performance vesting conditions payable in common shares, contingent upon the degree to which the performance condition is met. The shares may be earned from 0% to 180%. Actual shares earned may be lower than the aggregate maximum number dependent on the degree to which the performance condition is met, and cannot be higher than the aggregate maximum number. Any portion of shares that are not earned will be canceled.

All unvested restricted shares are subject to repurchase. Stock-based compensation expense for performance restricted stock is recognized on an accelerated attribution method. In the three months ended April 30, 2018, we recognized $3.5 million in stock-based compensation expense relating to restricted stock. As of April 30, 2018, total unrecognized employee compensation cost related to unvested restricted stock was $36.9 million, which is expected to be recognized over a weighted-average period of approximately 2.9 years.
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,
 
2017
 
2018
Cost of revenue—product
$
397

 
$
608

Cost of revenue—support subscription
1,774

 
2,684

Research and development
15,588

 
21,090

Sales and marketing
10,626

 
13,940

General and administrative
3,834

 
5,633

Total stock-based compensation expense
$
32,219

 
$
43,955



The tax benefit related to stock-based compensation expense for all periods presented was not material.
v3.8.0.1
Net Loss per Share Attributable to Common Stockholders
3 Months Ended
Apr. 30, 2018
Earnings Per Share [Abstract]  
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 potentially dilutive common stock equivalents including our outstanding stock options, common stock related to unvested early exercised stock options, common stock related to unvested restricted stock units and restricted stock awards, convertible senior notes to the extent dilutive, and common stock issuable pursuant to the ESPP.     For purposes of calculating basic and diluted net loss per share attributable to common shareholders, these potentially dilutive common stock equivalents 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.
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,
 
2017
 
2018
 
(As Adjusted*)
 
 
Net loss
$
(57,159
)
 
$
(64,304
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
205,783

 
223,768

Net loss per share attributable to common stockholders, basic and diluted
$
(0.28
)
 
$
(0.29
)


* Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.

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,
 
2017
 
2018
Stock options to purchase common stock
55,895

 
44,996

Restricted stock units
11,722

 
18,999

Restricted stock and early exercised stock options
390

 
1,685

Employee stock purchase plan
336

 
470

Total
68,343

 
66,150

v3.8.0.1
Income Taxes
3 Months Ended
Apr. 30, 2018
Income Tax Disclosure [Abstract]  
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, 2018, 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, 2018.
The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The new legislation decreases the U.S. corporate federal income tax rate from 35% to 21% effective January 1, 2018.
The Tax Act also includes a number of other provisions including the elimination of loss carrybacks and limitations on the use of future losses, limitations on the deductibility of executive compensation, limitation or modification on the deductibility of certain business expenses, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and the introduction of a base erosion and anti-abuse tax. Under the Tax Act, the Global Intangible Low-Taxed Income (GILTI) provision taxes foreign income in excess of a deemed return on tangible assets of foreign corporations. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules -- the period cost method, or (ii) account for GILTI in a company’s measurement of deferred taxes -- the deferred method. Because of the complexity of the new tax rules, we have not yet made an accounting policy election and are continuing to assess the impact of the Tax Act during the one-year measurement period from the Tax Act enactment date as allowed by Staff Accounting Bulletin No. 118 (SAB 118) issued in connection with the Tax Act. We expect to complete the accounting for the tax effects of the Tax Act in calendar year 2018.
v3.8.0.1
Segment Information
3 Months Ended
Apr. 30, 2018
Segment Reporting [Abstract]  
Segment Information
Segment Information
Our chief operating decision maker is a group 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.
Disaggregation of Revenue
The following table depicts the disaggregation of revenue by geographic area based on the billing address of our customers and is consistent with how we evaluate our financial performance (in thousands):
 
 
Three Months Ended 
 April 30,
 
2017
 
2018
 
(As Adjusted*)
 
 
United States
$
146,505

 
$
184,918

Rest of the world
36,140

 
71,027

Total revenue
$
182,645

 
$
255,945


* Prior period information has been adjusted to reflect the adoption impact of ASC 606, which we adopted on February 1, 2018.

Long-Lived Assets by Geographic Area
Long-lived assets by geographic area are summarized as follows (in thousands):
 
 
As of
January 31, 2018
 
As of
April 30, 2018
United States
$
85,430

 
$
90,203

Rest of the world
3,712

 
4,077

Total long-lived assets
$
89,142

 
$
94,280

v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Apr. 30, 2018
Accounting Policies [Abstract]  
Principles of Consolidation
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
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, 2018.
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 2019 or any future period. Certain prior period amounts have been adjusted as a result of adoption of new accounting pronouncements. Refer to "Recently Adopted Accounting Pronouncements" below for further information.
Use of Estimates
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, property and equipment and deferred sales commissions, 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
Restricted cash is comprised of cash collateral related to our leases and for a vendor corporate credit card program.
Marketable Securities
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
Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenues are recognized upon transfer of control to customers and deferred commissions related to support subscription 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 condensed 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 condensed consolidated statements of operations.
Deferred Revenue
Deferred Revenue
Deferred revenue primarily consists of amounts that have been invoiced but that have not yet been recognized as revenue and consists of performance obligations pertaining to support subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet dates.
Revenue Recognition
Revenue Recognition
We derive revenue from two sources: (1) product revenue which includes hardware and embedded software and (2) support subscription revenue which includes customer support, hardware maintenance, and software upgrades on a when-and-if-available basis.
Our product revenue is derived from the sale of storage hardware and operating system software that is integrated into the hardware. We typically recognize product revenue upon transfer of control to our customers. Products are typically shipped directly by us to customers, and our channel partners do not stock our inventory.
Our support subscription revenue is derived from the sale of support subscription, which includes the right to receive unspecified software upgrades and enhancements on a when-and-if-available basis, bug fixes, parts replacement services related to the hardware, as well as access to our cloud-based management and support platform. Revenue related to support subscription is recognized ratably over the contractual term, which generally ranges from one to six years and represents our performance obligations period. The vast majority of our products are sold with support subscription agreements, which typically commence upon transfer of control of the corresponding products to our customers. Costs to service the support subscription are expensed as incurred. In addition, our Evergreen Storage program provides our customers who continually maintain active support subscription agreements for three years with an included controller refresh with each additional three year support subscription renewal. In accordance with revenue recognition guidance, the controller refresh represents an additional performance obligation and the allocated revenue is recognized in the period in which these controllers are shipped.
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 are capable of being distinct in the context of the contract to be accounted for as a combined performance obligation. We allocate transaction price to each performance obligation for contracts that contain multiple performance obligations based on a relative standalone selling price, taking into account available information such as market conditions and internally approved pricing guidelines related to performance obligations.
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted
Recently Adopted Accounting Pronouncements
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 or ASC 606), 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. ASC 606 supersedes nearly all existing revenue recognition guidance under U.S. GAAP upon its effective date. The standard permits two methods of adoptions: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of applying the standard recognized at the date of application (cumulative catch-up transition method).
We adopted the standard using the full retrospective method beginning February 1, 2018, for the year ending January 31, 2019, and our historical financial information for the years ended January 31, 2017 and 2018 has been adjusted to conform to the new standard.
The most significant impact of the standard related to the removal of limitation on contingent revenue, resulting in an increase in product revenue and a decrease in support subscription revenue. In addition, the adoption of ASC 606 also resulted in differences in the timing of recognition of sales commissions. While the adoption of the standard changes certain line items within the net cash flow from operating activities, it had no impact to the net cash provided by or used in operating, investing, or financing activities on our condensed consolidated statements of cash flows.
The following line items on our condensed consolidated balance sheet as of January 31, 2018 have been adjusted to reflect the adoption of ASC 606 (in thousands):
 
As of January 31, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
Assets
 
 
 
 
 
Deferred commissions, current
$
22,437

 
$
(1,349
)
 
$
21,088

Deferred commissions, non-current
20,288

 
45,937

 
66,225

Total deferred commissions
$
42,725

 
$
44,588

 
$
87,313

Liabilities
 
 
 
 
 
Deferred revenue, current
$
209,377

 
$
(18,148
)
 
$
191,229

Deferred revenue, non-current
196,632

 
(13,759
)
 
182,873

Total deferred revenue
$
406,009

 
$
(31,907
)
 
$
374,102

Stockholders' equity
 
 
 
 
 
Accumulated deficit
$
(980,082
)
 
$
76,495

 
$
(903,587
)

The following line items on our unaudited condensed consolidated statement of operations for the three months ended April 30, 2017 have been adjusted to reflect the adoption of ASC 606 (in thousands, except per share data):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Revenue:
 
 
 
 
 
Product
$
138,425

 
$
4,425

 
$
142,850

Support subscription
44,206

 
(4,411
)
 
39,795

Total revenue
$
182,631

 
$
14

 
$
182,645

 
 
 
 
 
 
Gross profit
$
119,083

 
$
14

 
$
119,097

Sales and marketing
$
96,964

 
$
(5,201
)
 
$
91,763

Total operating expenses
$
182,488

 
$
(5,201
)
 
$
177,287

Loss from operations
$
(63,405
)
 
$
5,215

 
$
(58,190
)
Loss before provision for income taxes
$
(61,410
)
 
$
5,215

 
$
(56,195
)
Net loss
$
(62,374
)
 
$
5,215

 
$
(57,159
)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.30
)
 
$
0.02

 
$
(0.28
)

Unaudited revenue by geographic location based on bill-to location, which reflects the adoption impact of ASC 606, are as follows (in thousands):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Revenue:
 
 
 
 
 
United States
$
146,494

 
$
11

 
$
146,505

Rest of the world
36,137

 
3

 
36,140

Total revenue
$
182,631

 
$
14

 
$
182,645



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 restricted cash. We adopted ASU 2016-18 effective February 1, 2018 on a retrospective basis. Upon adoption, restricted cash are 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. The adoption of this standard did not impact our net cash flow from operating activities or financing activities presented on our consolidated statements of cash flows.
The following line items in our unaudited condensed consolidated statement of cash flows for the three months ended April 30, 2017 have been adjusted to reflect the adoption of ASU 2016-18 and ASC 606 (in thousands):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Net loss (1)
$
(62,374
)
 
$
5,215

 
$
(57,159
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
Deferred commissions (1)
$
(362
)
 
$
(1,005
)
 
$
(1,367
)
Accrued compensation and other liabilities (1)
$
(19,998
)
 
$
(4,196
)
 
$
(24,194
)
Deferred revenue (1)
$
8,398

 
$
(14
)
 
$
8,384

Cash used in operating activities
$
(14,301
)
 
$

 
$
(14,301
)
Cash, cash equivalents and restricted cash, beginning of period (2)
$
183,675

 
$
12,734

 
$
196,409

Cash, cash equivalents and restricted cash, end of period (2)
$
168,757

 
$
12,734

 
$
181,491

_____________________________________________________
(1) Adjustment pertaining to the adoption of ASC 606.
(2) Adjustment pertaining to the adoption of ASU 2016-18.
Recent Accounting Pronouncements Not Yet Adopted
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 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 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 and requires certain disclosures about stranded tax effects. This standard will be effective for us beginning February 1, 2019 and should be applied either in the period of adoption or retrospectively. Early adoption is permitted. We do not expect this standard to have any impact on our consolidated financial statements.
Fair Value Measurements
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 the Notes on a quarterly basis for disclosure purposes. We consider the fair value of the Notes at April 30, 2018 to be a Level 2 measurement due to limited trading activity of the Notes. Refer to Note 5 for further information.
v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Apr. 30, 2018
Accounting Policies [Abstract]  
Deferred Commissions and Deferred Revenue
Changes in total deferred revenue during the three months ended April 30, 2018 are as follows (in thousands):
 
Three Months Ended 
 April 30, 2018
Beginning balance as of January 31, 2018 (as adjusted)
$
374,102

Additions
75,271

Recognition of deferred revenue
(60,759
)
Ending balance as of April 30, 2018
$
388,614

Changes in total deferred commissions during the period presented are as follows (in thousands):

 
Three Months Ended 
 April 30, 2018
Beginning balance as of January 31, 2018 (as adjusted)
$
87,313

Additions
15,421

Recognition of deferred commissions
(16,690
)
Ending balance as of April 30, 2018
$
86,044

Schedule of Recently Adopted Accounting Pronouncements
The following line items in our unaudited condensed consolidated statement of cash flows for the three months ended April 30, 2017 have been adjusted to reflect the adoption of ASU 2016-18 and ASC 606 (in thousands):
 
Three Months Ended 
 April 30, 2017
 
As Previously Reported
 
Adjustment
 
As Adjusted
Net loss (1)
$
(62,374
)
 
$
5,215

 
$
(57,159
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
Deferred commissions (1)
$
(362
)
 
$
(1,005
)
 
$
(1,367
)
Accrued compensation and other liabilities (1)
$
(19,998
)
 
$
(4,196
)
 
$
(24,194
)
Deferred revenue (1)
$
8,398

 
$
(14
)
 
$
8,384

Cash used in operating activities
$
(14,301
)
 
$

 
$
(14,301
)
Cash, cash equivalents and restricted cash, beginning of period (2)
$
183,675

 
$
12,734

 
$
196,409

Cash, cash equivalents and restricted cash, end of period (2)
$
168,757

 
$
12,734

 
$
181,491

_____________________________________________________
(1) Adjustment pertaining to the adoption of ASC 606.
(2) Adjustment pertaining to the adoption of ASU 2016-18.
The following line items on our condensed consolidated balance sheet as of January 31, 2018 have been adjusted to reflect the adoption of ASC 606 (in thousands):
 
As of January 31, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
Assets
 
 
 
 
 
Deferred commissions, current
$
22,437

 
$
(1,349
)
 
$
21,088

Deferred commissions, non-current
20,288