~~Table~~Net cash provided by operating activities during the six months ended July 31, 2019 was $55.5 million, which resulted primarily from non-cash charges for stock-based compensation of ~~Contents~~$120.6 million, depreciation and amortization of $43.6 million, amortization of the debt discount and debt issuance costs associated with our Notes of $13.3 million and net cash inflows of $44.0 million from changes in operating assets and liabilities, partially offset by a net loss of $166.4 million. The net cash inflows from changes in operating assets and liabilities were the result of a $71.0 million increase in deferred revenue, a $26.6 million decrease in accounts receivable, a $6.9 million decrease in inventory, and a decrease of $13.4 million in operating lease right-of-use assets, partially offset by a $30.8 million decrease in accounts payable, a $25.7 million decrease in accrued compensation and other liabilities, a $13.1 million decrease in operating lease liabilities, a $3.6 million increase in deferred commissions, and a $0.6 million increase in prepaid expenses and other assets. The increase in deferred revenue and deferred commissions and decrease in inventory were primarily due to new sales order growth during the six months ended July 31, 2019. The decreases in accounts receivable, accounts payable and accrued compensation and other liabilities were primarily attributable to timing of collections and payments.

~~Operating Activities~~

Net cash provided by operating activities during the six months ended July 31, 2018 was $27.1 million, which mainly consisted of a net loss of $124.4 million, adjusted for non-cash charges including stock-based compensation expense of $97.6 million, depreciation and amortization of $33.6 million, amortization of debt discount and debt issuance costs of $7.9 million and net cash inflows of $12.3 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were primarily the result of a $39.1 million increase in deferred revenue, an $11.1 million decrease in prepaid expenses and other assets and a $0.7 million decrease in net accounts receivable, partially offset by an $18.1 million decrease in accounts payable, an $8.9 million increase in inventory, a $7.5 million decrease in accrued compensation and other liabilities, and a $4.2 million increase in deferred commissions. The increase in deferred revenue was primarily due to new sales order growth during the six months ended July 31, 2018. The increase in inventory was primarily due to expanding product portfolio and to support revenue growth. The decreases in prepaid expenses and other assets, accounts receivable, accounts payable and accrued compensation and other liabilities were primarily attributable to timing of collections and payments.

Investing Activities

Net cash used in ~~operating~~investing activities during the six months ended July 31, ~~2017 was $14.5~~2019 of $267.5 million ~~which~~ resulted ~~primarily~~ from a net ~~loss~~purchases of ~~$115.6~~marketable securities of $157.4 million, ~~partially offset by non-cash charges~~capital expenditures of $53.2 million, net cash paid for ~~stock-based compensation expense~~our acquisition of ~~$69.1 million, depreciation and amortization~~Compuverde of ~~$30.0~~$47.9 million and, ~~net cash flow~~intangible assets acquired of $1.2 million from changes in operating assets and liabilities primarily driven by a $24.3 million increase in deferred revenue, partially offset by a $10.5 million increase in inventory and a $9.6 million increase in deferred commission. The increases in deferred revenue and deferred commission were primarily due to new sales order growth during the six months ended July 31, 2017. The increase in inventory was primarily as a result of increased purchases to manage component costs and availability to meet higher demand for our products.$9.0 million.

~~Investing Activities~~

Net cash used in investing activities during the six months ended July 31, 2018 of $425.9 million resulted from capital expenditures of $42.7 million and net purchases of marketable securities of $383.1 million.

Financing Activities

Net cash ~~used in investing~~provided by financing activities during the six months ended July 31, ~~2017~~2019 of ~~$18.2~~$32.6 million ~~resulted~~was primarily attributable to $32.0 million in proceeds from ~~capital expenditures~~issuance of ~~$30.1~~common stock under our employee stock purchase plan (ESPP) and $19.3 million in proceeds from the exercise of stock options, partially offset by ~~net sales~~a $11.6 million repayment of debt assumed in connection with our acquisition of Compuverde and ~~maturities~~$7.2 million in tax withholdings on vesting of ~~marketable securities of $11.9 million.~~

~~Financing Activities~~restricted stock.

Net cash provided by financing activities during the six months ended July 31, 2018 of $526.2 million was ~~primarily~~ attributable to $562.1 million in net proceeds from issuance of ~~the~~our Notes, $29.1 million in proceeds from the exercise of ~~employee~~ stock options and $19.7 million in proceeds from the issuance of common stock under ~~the employee stock purchase plan (ESPP),~~our ESPP, partially offset by a $64.6 million payment to purchase ~~Capped Calls~~capped calls and a $20.0 million common stock repurchase in conjunction with the issuance of the Notes.

Net cash provided by financing activities during the six months July 31, 2017 of $21.0 million was primarily attributed to $14.2 million in proceeds from issuance of common stock under our ESPP and $6.8 million in proceeds from the exercise of stock options.

Contractual Obligations and Commitments

As of January 31, 2018 and July 31, 2018, the aggregate future minimum payments under non-cancelable operating leases was approximately $113.0 million and $153.7 million. In connection with the lease amendment executed in March 2018, we issued an additional letter of credit of $1.5 million.

In April 2018, we issued $575.0 million of 0.125% convertible senior notes due 2023, in a private placement and received proceeds of $562.1 million, after deducting the underwriters' discounts and commissions. The Notes are unsecured obligations that do 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. See further discussionExcept as set forth in Note ~~5 in~~7 of Part I, Item 1 of this Quarterly Report on Form ~~10-Q.~~10-Q, there have been no material changes to our non-cancelable contractual obligations and commitments disclosed in our Annual Report on 10-K for the year ended January 31, 2019.

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Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

~~Please see~~Refer to Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, ~~please~~ see “Critical Accounting Policies and Estimates” in our latest 10-K. There have been no material changes to our critical accounting policies and estimates since our 10-K filed on March 26, ~~2018,~~2019, except for the changes as a result of the adoption of new accounting pronouncements.

Available Information

Our website is located atwww.purestorage.com, and our investor relations website is located atinvestor.purestorage.com. The following filings will be available through our investor relations website free of charge after we file them with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of ~~stockholders, and are also available for download free of charge.~~stockholders. We will also provide a link to the section of the SEC's website atwww.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements, and other ownership related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, social media accounts (Twitter, Facebook and LinkedIn), and blogs as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts and RSS feeds. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading “Corporate Governance.” The content of our websites are not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We have operations both within the United States and internationally, and we are exposed to market risk in the ordinary course of our business.

Interest Rate Risk

Our cash, cash equivalents and marketable securities primarily consist of bank deposits and money market accounts, U.S. government notes and U.S. agency notes, asset-backed securities, and highly rated corporate debt. As of July 31, ~~2018,~~2019, we had cash, cash equivalents and marketable securities of ~~$1,106.7~~$1,182.5 million. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair value of our investments.

We considered the historical volatility of short-term interest rates and determined that it was reasonably possible that an adverse change of 100 basis points could be experienced in the near term. A hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair value of our marketable securities of approximately ~~$7.9~~$9.9 million as of July 31, ~~2018~~2019.

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Foreign Currency Exchange Risk

Our sales contracts are primarily denominated in U.S. dollars with a small number of contracts denominated in foreign currencies. A portion of our operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound and Euro. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. Given the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into any derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency exchange should become more significant.

We considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% for all currencies could be experienced in the near term. These reasonably possible adverse changes in exchange rates of 10% were applied to total monetary assets and liabilities denominated in currencies other than U.S. dollar at July 31, ~~2018~~2019 to compute the adverse impact these changes would

have had on our loss before income taxes in the near term. These changes would have resulted in an adverse impact on loss before provision for income taxes of approximately ~~$3.5~~$4.9 million as of July 31, ~~2018~~2019.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO concluded that, as of July 31, ~~2018,~~2019, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended April 30, 2019, we implemented ~~certain~~changes to our lease accounting related internal controls to ensure ~~we adequately evaluated our contracts and properly assessed~~compliance with the ~~impact of ASC 606 on our financial statements to facilitate such adoption effective February 1, 2018. In addition, we made some changes~~new leasing standards in ~~the first quarter of our fiscal 2018 to certain internal controls to reflect new processes that were implemented as a result of the adoption of ASC 606.~~accordance with Topic 842. Therewere no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarter ended July 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we ~~may be~~are involved in various legal proceedings arising from the normal course of business, and an unfavorable resolution of any of these matters could negatively affect our future results of operations, cash flows or financial position. We are not presently party to any legal proceedings that, in the opinion of management, would have a material adverse effect on our business.

Item 1A. Risk Factors.

Investing in our Class A common stock involves a high degree of risk. Investors should carefully consider the risks and uncertainties described below, together with all of the other information contained in this report, including our consolidated financial statements and the related notes appearing in this quarterly report, before deciding to invest in our Class A common stock. If any of the following risks actually occur, it could harm our business, prospects, operating results and financial condition. In such event, the trading price of our Class A common stock could decline and investors might lose all or part of their investment.

Risks Related to Our Business and Industry

We have experienced rapid growth in prior periods, and we may not be able to sustain or manage future growth effectively.

We have significantly expanded our overall business, customer base, headcount, channel partner relationships and operations in prior periods, and we anticipate that we will continue to expand and experience growth in future periods. For example, we delivered year-over-year revenue growth of ~~37%~~28% for the three months ended July 31, ~~2018,~~2019, and our headcount increased from over ~~1,900~~2,450 to over ~~2,450~~3,300 employees from July 31, ~~2017~~2018 to July 31, ~~2018.~~2019. Our future operating results will depend to a large extent on our ability to successfully sustain our growth and manage our anticipated expansion. To sustain and manage our growth successfully, we believe that we must, among other things, effectively:

maintain and extend our product leadership;

recruit, hire, train and manage qualified personnel, including sales personnel;

maintain and further develop our partner relationships;

enhance and expand our distribution and supply chain infrastructure;

expand our support capabilities;

forecast and control expenses;

enhance and expand our international operations; and

implement, improve and maintain our internal systems, procedures and controls.

We expect that our future growth will continue to place a significant strain on our managerial, administrative, operational, financial and other resources. We will incur costs associated with this future growth prior to realizing the anticipated benefits, and the return on these investments may be lower, may develop more slowly than we expect or may never materialize. Investors should not consider our revenue growth in prior quarterly or annual periods as indicative of our future performance. In future periods, we domay not ~~expect to~~ achieve similar percentage revenue growth rates as we have achieved in some past periods. If we are unable to maintain adequate revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. If we are unable to manage our growth successfully, we may not be able to take advantage of market opportunities or release new products or enhancements in a timely manner, and we may fail to satisfy customers’ expectations, maintain product quality, execute on our business plan or adequately respond to competitive pressures, each of which could adversely impact our growth and affect our business and operating results.

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We intend to continue focusing on revenue growth and increasing our market penetration and international presence by investing heavily in our business, and this may put pressure on near-term profitability.

Our strategy is to continue investing in marketing, sales, support and research and development. We believe ~~our decision~~continuing to ~~continue investing~~invest heavily in our business ~~will be~~is critical to our future success and ~~to meet~~meeting our growth objectives. We anticipate that our operating costs and expenses will continue to increase in absolute terms. ~~In addition, we expect to continue incurring significant legal, accounting and other expenses in order to operate effectively as a public company.~~ Even if we achieve or maintain significant revenue growth, we may continue to experience losses, forgoing near-term profitability on a U.S. GAAP basis.

We have not achieved profitability for any year since our inception. We incurred a net loss of ~~$159.9~~$178.4 million for the year ended January 31, ~~2018,~~2019, and ~~$124.4~~$166.4 million for the six months ended July 31, ~~2018,~~2019, and we had an accumulated deficit of ~~$903.6~~$1,081.9 million as of January 31, ~~2018~~2019 and ~~$1,028.0~~$1,248.3 million as of July 31, ~~2018.~~2019. Our operating expenses largely are based on anticipated revenue, and a high percentage of our expenses are, and will continue to be, fixed in the short term. If we fail to adequately increase revenue and manage costs, we may not achieve or maintain profitability in the future. As a result, our business could be harmed, and our operating results could suffer.

Our revenue growth rate in recent periods may not be indicative of our future performance.

We were founded in October 2009, but have generated substantially all of our revenue in our last three fiscal years. Investors should not consider our revenue growth in prior quarterly or annual periods as indicative of our future performance. In future periods, we do not expect to achieve similar percentage revenue growth rates as we have achieved in some past periods. If we are unable to maintain adequate revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability.

The market for ~~all-flash~~data storage products is rapidly evolving, which makes it difficult to forecast ~~customer adoption rates and~~ demand for our products.

The market for ~~all-flash~~data storage products is rapidly evolving. Our future financial performance ~~will depend on the continued growth of this market and~~depends on our ability to adapt to competitive dynamics and emerging customer demands and trends. Incumbent vendors promote storage products retrofitted with flash, which may reduce the perceived value of purpose-built, all-flash products. It is difficult to predict with any precision customer adoption rates of flash, customer demand for our products or the future growth rate and size of our addressable market.

~~Our products may never reach mass adoption, and changes~~Changes or advances in alternative technologies or adoption of cloud storage offerings not utilizing our storage platform could adversely affect the demand for our products. For instance, offerings from large public cloud providers are expanding quickly and may serve as alternatives to our products for a variety of customer workloads. Since these providers are known for developing storage systems internally, this trend could reduce the demand for storage systems developed by original equipment manufacturers, such as us. Further, although flash storage has a number of advantages as compared to other data storage alternatives, flash storage has certain limitations as well, including more limited methods for data recovery and reduced performance gains for certain uses, such as sequential input/output transactions. A slowing in or reduced demand for ~~all-flash~~our data storage products caused by technological challenges, alternative technologies and products or any other reason would result in a lower revenue growth rate or decreased revenue, either of which would negatively impact our business and operating results.

We face intense competition from established companies and new entrants.

We face intense competition from a number of established companies that sell competitive storage products. These competitors include Dell EMC, HP Enterprise, Hitachi Vantara, IBM, ~~Lenovo,~~ NetApp and others. Our competitors may have:

greater name and brand recognition and longer operating histories;

larger sales and marketing and customer support budgets and resources;

broader distribution and established relationships with distribution partners and customers;

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the ability to bundle storage products with other products and services to address customers’ requirements;

greater resources to make acquisitions;

larger and more mature product and intellectual property portfolios; and

substantially greater financial, technical and other resources.

We also compete against ~~some large public~~ cloud providers and vendors ~~that offer~~of hyperconverged products, which combine compute, networking and storage. These providers are growing and expanding their product offerings, potentially displacing some demand for our products. ~~Acquisitions by competitors have introduced new competitive dynamics. For example,~~In addition, some of our competitors offer bundled products and services in order to reduce the initial cost of their storage products. ~~Some~~Further, some of our competitors offer their storage products either at significant discounts or even for free in competing against us and in response to our efforts to market the overall benefits and technological merits of our products and programs.

Many competitors have developed or acquired competing ~~all-flash~~ storage technologies. For example, several of our competitors have introduced ~~all-flash~~data storage products with ~~performance-focused designs and/~~features or ~~with~~ data reduction technologies that directly compete with our products, or have introduced business programs that attempt to compete with our innovative programs, such as our Evergreen Storage model. We expect our competitors to continue to improve the performance of their products, reduce their prices and introduce new features, services and technologies that may, or that they may claim to, offer greater value compared to our products. In addition, our competitors may develop enhancements to, or future generations of, competitive products that may render our products or technologies obsolete or less competitive. These and other competitive pressures may prevent us from competing successfully against current or future competitors.

Our business may be harmed by trends in the overall external storage market.

Despite ongoing data growth, the external storage market in which we compete has not experienced ~~overall~~substantial growth in the past few years due to a combination of technology transitions, increased storage efficiency, and changing economic and business environments. Customers are rethinking how they consume IT, increasing spending toward public cloud, software as a service, hyperconverged and converged infrastructure and software-defined storage. Any failure on our part to successfully update our product offerings or to adapt our sales programs to meet changing customer demands could harm our business, operating results and financial condition. The future impact of these trends on both short-term and long-term growth of the overall external storage market is uncertain. Reductions in the overall external storage market, or the specific markets in which we compete would harm our business and operating results.

Many of our competitors have long-standing relationships with key decision makers at current and prospective customers, which may inhibit our ability to compete.

Many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at our current and prospective customers. Our competitors often leverage these existing relationships to discourage customers from evaluating or purchasing our products. Additionally, most of our prospective customers have existing storage products supplied by our competitors, who have an advantage in retaining the customer because, among other things, they already understand the customer’s IT infrastructure, user demands and needs. In the event that we are unable to successfully sell our products to new customers or persuade our customers to continue purchasing our products, we will not be able to maintain or increase our market share and revenue, which could adversely affect our business and operating results.

Our ability to increase our revenue depends on our ability to attract, motivate and retain sales, engineering and other key personnel, including our management team, and any failure to attract, motivate and retain these employees could harm our business, operating results and financial condition.

Our ability to increase our revenue depends on our ability to attract, motivate and retain qualified sales, engineering and other key employees, including our management. These positions may require candidates with specific backgrounds in software and the storage industry, and competition for employees with such expertise is intense. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. To the extent that we are successful in hiring to fill these positions,

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we need a significant amount of time to train new employees before they become effective and efficient in performing their jobs. From time to time, there may be changes in our management team, which could create short term uncertainty. Members of our management team, including our executive officers, are generally employed on an at-will basis, which means that they could terminate their employment with us at any time. If we are unable to attract, motivate and retain

qualified sales, engineering and other key employees, including our management, our business and operating results could suffer.

If we fail to adequately expand and optimize our sales force, our growth will be impeded.

We need to continue to expand and optimize our sales organization in order to grow our customer base and our business. We plan to continue to expand and train our sales force, both domestically and internationally. We must design and implement effective sales incentive programs, and it can take time before ~~our~~new sales representatives are fully trained and productive. If we are unable to hire, develop and retain qualified sales personnel or if new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of these investments or increase our revenue.

If we fail to develop and introduce new or enhanced products successfully, our ability to attract and retain customers could be harmed.

We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. To compete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performance, capacity and reliability and that meet the expectations of our customers, which is a complex and uncertain process. We believe that we must continue to dedicate significant resources to our research and development efforts to maintain or expand our competitive position. Our investments may take longer to generate revenue or may generate less revenue than we anticipate. The introduction of new products by our competitors, or the emergence of alternative technologies or industry standards could render our existing or future products obsolete or less competitive.

As we introduce new or enhanced products, we must successfully manage product launches and transitions to the next generations of our products, and encourage our customers to adopt new products and features. For example, we ~~started shipments~~announced our suite of ~~our~~ ~~FlashBlade~~ ~~and~~ ~~FlashArray//X~~ ~~products, and introduced new software features~~Cloud Data Services last year. If we are not able to successfully manage the development and release of new or enhanced products, our business, operating results and financial condition could be harmed. Similarly, if we fail to introduce new or enhanced products, such as new or improved software features, that meet our customers' needs in a timely or cost-effective fashion, we may lose market share and our operating results could be adversely affected.

If we fail to successfully maintain or grow our relationships with ~~channel~~ partners, our business, operating results and financial condition could be harmed.

Our future success is highly dependent upon our ability to establish and maintain successful relationships with our ~~channel partners.~~partners, including value-added resellers, service providers and systems integrators. In addition to selling our products, our partners may offer installation, post-sale service and support in their local markets. In markets where we rely on partners more heavily, we have less contact with our customers and less control over the sales process and the quality and responsiveness of our partners. As a result, it may be more difficult for us to ensure the proper delivery and installation of our products or the quality or responsiveness of the support and services being offered. Any failure on our part to effectively identify, train and manage our channel partners and to monitor their sales activity, as well as the customer support and services provided to our customers, could harm our business, operating results and financial condition.

Our ~~channel~~ partners may choose to discontinue offering our products and services or may not devote sufficient attention and resources toward selling our products and services. We typically enter into non-exclusive, written agreements with our channel partners. These agreements generally have a one-year, self-renewing term, have no minimum sales commitment and do not prohibit our channel partners from offering products and services that compete with ours. Additionally, our competitors provide incentives to our existing and potential channel partners to use, purchase or offer their products and services or to prevent or reduce sales of our products and services. The occurrence of any of these events could harm our business, operating results and financial condition.

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~~Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty.~~

Our gross margins fluctuate from period to period due primarily to product costs, customer mix and product mix. A variety of factors may cause our gross margins to fluctuate and make them difficult to predict, including:

~~demand for our products;~~

~~sales and marketing initiatives, discount levels, rebates and competitive pricing;~~

~~changes in customer, geographic or product mix, including mix of product configurations;~~

~~the cost of components, including NAND and DRAM flash, and freight;~~

~~new product introductions and enhancements, potentially with initial sales at relatively small volumes and higher product costs;~~

~~the timing and amount of revenue recognized and deferred, including impact from the adoption of ASC 606;~~

~~excess inventory levels or purchase commitments as a result of changes in demand forecasts or product transitions;~~

~~an increase in product returns, order rescheduling and cancellations;~~

~~the timing of technical support service contracts and contract renewals;~~

~~inventory stocking requirements to mitigate supply constraints, accommodate unforeseen demand or support new product introductions; and~~

~~product quality and serviceability issues.~~

If we are unable to manage these factors effectively, our gross margins may decline, and fluctuations in gross margins may make it difficult to manage our business and achieve or maintain profitability, which could materially harm our business, operating results and financial condition.

~~Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.~~

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our results on a period-to-period basis may not be meaningful. Factors that are difficult to predict and that could cause our operating results to fluctuate include:

~~the timing and magnitude of orders, shipments and acceptance of our products in any quarter, including product returns, order rescheduling and cancellations by our customers;~~

~~fluctuations in demand and prices for our products;~~

~~seasonality in our business or the markets we serve;~~

~~our ability to control the costs of the components we use in our hardware products;~~

~~our ability to timely adopt subsequent generations of components into our hardware products;~~

~~disruption in our supply chains, component availability and related procurement costs;~~

~~reductions in customers’ budgets for IT purchases;~~

~~changes in industry standards in the data storage industry;~~

~~our ability to develop, introduce and ship in a timely manner new products and product enhancements that meet customer requirements;~~

~~our ability to effectively manage product transitions as we introduce new products;~~

~~any change in the competitive dynamics of our markets, including new entrants or discounting of product prices;~~

~~our ability to control costs, including our operating expenses; and~~

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~~future accounting pronouncements and changes in accounting policies, including our ability to implement the new processes necessary to accurately recognize our revenue under ASC 606 going forward.~~

~~The occurrence of any one of these risks could negatively affect our operating results in any particular quarter.~~

Our sales cycles can be long and unpredictable and our sales efforts require considerable time and expense, making it difficult for us to predict future sales.

Our sales efforts involve educating our customers about the use and benefits of our products. Larger customers often undertake an evaluation process that can result in a lengthy sales cycle. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. In addition, product purchases are frequently subject to budget constraints, multiple approvals and unplanned administrative and other delays. A substantial portion of our quarterly sales typically occurs during the last several weeks of the quarter, which we believe largely reflects customer buying patterns of products similar to ours and other products in the technology industry generally. Since we do not recognize revenue from a sale until control is transferred and the performance obligations are satisfied, a substantial portion of our sales late in a quarter may negatively impact the recognition of the associated revenue. Furthermore, our products come with a 30-day money back guarantee, allowing a customer to return a product within 30 days of receipt if the customer is not satisfied with its purchase for any reason. These factors, among others, make it difficult for us to predict when customers will purchase our products, which may adversely affect our operating results and cause our operating results to fluctuate. In addition, if sales expected from a specific customer for a particular quarter are not realized in that quarter or at all, our operating results may suffer.

Our gross margins are impacted by a variety of factors and vary from period to period, making them difficult to predict with certainty.

demand for our products;

sales and marketing initiatives, discount levels, rebates and competitive pricing;

changes in customer, geographic or product mix, including mix of product configurations;

the cost of components, including NAND flash and DRAM, and freight;

new product introductions and enhancements, potentially with initial sales at relatively small volumes and higher product costs;

excess inventory levels or purchase obligations as a result of changes in demand forecasts or product transitions;

an increase in product returns, order rescheduling and cancellations;

the timing of technical support service contracts and contract renewals;


•	inventory stocking requirements to mitigate supply constraints, accommodate unforeseen demand or support new product introductions; and

product quality and serviceability issues.

Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.

Our operating results may fluctuate due to a variety of factors, a portion of which are outside of our control. As a result, comparing our results on a period-to-period basis may not be meaningful. Factors that are difficult to predict and that could cause our operating results to fluctuate include:

the timing and magnitude of orders, shipments and acceptance of our products in any quarter, including product returns, order rescheduling and cancellations by our customers;

fluctuations in demand and prices for our products;

seasonality in our business or the markets we serve;

our ability to control the costs of the components we use in our hardware products;

our ability to timely adopt subsequent generations of components into our hardware products;

disruption in our supply chains, component availability and related procurement costs;

reductions in customers’ budgets for IT purchases;

changes in industry standards in the data storage industry;

our ability to develop, introduce and ship in a timely manner new products and product enhancements that meet customer requirements;

our ability to effectively manage product transitions as we introduce new products;

any change in the competitive dynamics of our markets, including new entrants or discounting of product prices;

our ability to control costs, including our operating expenses; and

future accounting pronouncements and changes in accounting policies.

The occurrence of any one of these risks could negatively affect our operating results in any particular quarter.

Our company culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed.

We believe that our company culture has been a critical contributor to our ~~success has been our company~~success. Our culture ~~which we believe~~ fosters innovation, creativity, teamwork, passion for customers and focus on execution, ~~as well as facilitating~~and facilitates critical knowledge transfer and knowledge sharing. In particular, we believe that the difference between our sales, support and engineering cultures, relative to those of incumbent vendors, is a key competitive advantage and differentiator for our customers and partners. As we grow and change, we may find it difficult to maintain these important aspects of our company culture, which could limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at current levels or execute on our business strategy.

Our long-term success depends, in part, on sales outside of the United States, which is susceptible to costs and risks associated with international operations.

We maintain operations outside of the United States, which we have been expanding and intend to continue to expand in the future. ~~Conducting~~As a company headquartered in United States, conducting and expanding international operations subjects us to new costs and risks that we domay not generally face in the United States. These include:

exposure to foreign currency exchange rate risk;

difficulties in collecting payments internationally, and managing and staffing international operations;

establishing relationships with channel partners in international locations;

increased travel, infrastructure and legal compliance costs associated with international locations;

burdens of complying with a wide variety of laws associated with international operations, including taxes and customs;

significant fines, penalties and collateral consequences if we or our partners fail to comply with anti-bribery laws;

heightened risk of improper, unfair or corrupt business practices in certain geographies;

potentially adverse tax consequences, including repatriation of earnings;

increased financial accounting and reporting burdens and complexities;

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political, social and economic instability abroad, terrorist attacks and security concerns in general; and

reduced or varied protection for intellectual property rights in some countries.

The occurrence of any one of these risks could negatively affect our international operations and, consequently, our business, operating results and financial condition generally.

The sales prices of our products and services may fluctuate or decline, which may reduce our gross profits, revenue growth, and adversely impact our financial results.

The sales prices of our products and services may fluctuate or decline for a variety of reasons, including competitive pricing pressures, discounts, cost of components, a change in our mix of products and services, and the introduction of competing products or services or promotional programs. Competition continues to increase in the markets in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors may reduce the price of products or services that compete with ours or may bundle them with other products and services. Additionally, although we price our products and services predominantly in U.S. dollars, currency fluctuations in certain countries and regions may negatively impact actual prices that partners and customers are willing to pay in those countries and regions. Furthermore, we anticipate that the prices for our products will decrease over product life cycles. If we are required to decrease our prices to be competitive and are not able to offset this decrease by increases in the volume of sales or the sales of new products with higher margins, our gross margins and operating results could be adversely affected.

We derive the majority of our revenue from ~~a single family of~~our FlashArray products, and a decline in demand for these products would cause our revenue to grow more slowly or to decline.

Our FlashArray ~~family of~~ products ~~has~~have historically accounted for the majority of our revenue and will continue to comprise a significant portion of our revenue for the foreseeable future. As a result, our revenue could be reduced by any decline or fluctuation in demand for ~~our~~these products, regardless of the reason. If ~~the market for all-flash storage products grows more slowly than anticipated or if~~ demand for our core products slows or declines, we may not be able to increase our revenue or achieve and maintain profitability.

If we are unable to sell renewals of our support subscription services to our customers, our future revenue and operating results will be harmed.

Existing customers may not renew their support subscription agreements after the initial period, and given our limited operating history, we may not be able to accurately predict our renewal rates. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their available budget and the level of their satisfaction with our products, customer support and pricing compared to that offered by our competitors. If our customers renew their contracts, they may renew on terms that are less economically beneficial to us. If our customers do not renew their agreements or renew on less favorable terms, our revenue may grow more slowly than expected, if at all.

We expect that revenue from subscription agreements will increase as a percentage of total revenue over time, and because we recognize this revenue over the term of the relevant contract period, downturns or upturns in sales of subscriptions are not immediately reflected in full in our results of operations.

We expect that our revenue from support subscription agreements will increase as a percentage of total revenue over time. We are also increasing the number of our subscription-based offerings, such as ES2 although it is more difficult to predict the rate at which customers will adopt, and the rate at which our revenue will grow from, these new offerings. We recognize subscription revenue ratably over the term of the relevant period. As a result, much of the subscription revenue we report each quarter is derived from agreements that we sold in prior quarters. Consequently, a decline in new or renewed subscription agreements in any one quarter will not be fully reflected in revenue in that quarter but will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales of subscriptions is not reflected in full in our results of operations until future periods. It is also difficult for us to rapidly increase our subscription revenue through additional sales in any period, as revenue from renewals must be recognized ratably over the applicable service period.

Our products are highly technical and may contain defects, which could cause data unavailability, loss or corruption that might, in turn, result in liability and harm to our reputation and business.

Our products are highly technical and complex and are often used to store information critical to our customers’ business operations. Our products may contain errors, defects or security vulnerabilities that could result in data unavailability, loss, corruption or other harm to our customers. Some errors in our products may only be discovered after they have been installed and used by customers. Any errors, defects or security vulnerabilities in our products could result in a loss of revenue, injury to our reputation, loss of customers or increased service and warranty costs, any of which could adversely affect our business and operating results. In addition, errors or failures in the products of third-party technology vendors may be attributed to us and may harm our reputation.

We could face claims for product liability, tort or breach of warranty. Many of our contracts with customers contain provisions relating to warranty disclaimers and liability limitations, which may be difficult to enforce. Defending a lawsuit, regardless of its merit, would be costly and might divert management’s attention and adversely affect the market’s perception of us and our products. Our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all. These product-related issues could result in claims against us, and our business, operating results and financial condition could be harmed.

Our brand name and our business may be harmed by the marketing strategies of our competitors.

~~Because of the early stage of our business, we~~We believe that building and maintaining brand recognition and customer goodwill is critical to our success. Our efforts in this area have, on occasion, been hampered by the marketing efforts of our competitors, which have included negative or misleading statements about us and our products. If we are unable to effectively respond to the marketing efforts of our competitors and protect our brand and customer goodwill now or in the future, our business will be adversely affected.

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Our products must interoperate with third party operating systems, software applications and hardware, and if we are unable to ensure that our products interoperate with third party software and hardware, we may lose or fail to increase our market share and may experience reduced demand for our products.

Our products must interoperate with our customers’ ~~existing~~ infrastructure, specifically ~~their~~ networks, servers, software and operating systems, which are ~~manufactured~~offered by a wide variety of vendors. When new or updated versions of these operating systems or applications are introduced, we must sometimes develop updated versions of our software so that our products interoperate properly. For example, our Pure1 cloud-based management and support includes connectors to virtualization platforms, allowing our customers to manage our products within native management tools, such as VMware and OpenStack. We may not deliver or maintain interoperability quickly, cost-effectively or at all. These efforts require capital investment and engineering resources. If we fail to maintain compatibility of our products with these infrastructure components, our customers may not be able to fully utilize our products, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our products, which may harm our business, operating results and financial condition.

Our products must conform to industry standards in order to be accepted by customers in our markets.

Generally, our products comprise only a part of a data center. The servers, network, software and other components and systems of a data center must comply with established industry standards in order to interoperate and function efficiently together. We depend on companies that provide other systems in a data center to conform to prevailing industry standards. These companies are often significantly larger and more influential in driving industry standards than we are. Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers. If larger companies do not conform to the same industry standards that we do, or if competing standards emerge, sales of our products could be adversely affected, which may harm our business.

Our ability to successfully market and sell our products is dependent in part on ease of use and the quality of our support offerings, and any failure to offer high-quality installation and technical support could harm our business.

Once our products are deployed ~~within~~by our ~~customers’ data centers,~~customers, customers depend on our support organization to resolve technical issues relating to our products. Our ability to provide effective support is largely dependent on our ability to

attract, train and retain qualified personnel, as well as to engage with qualified support partners that provide a similar level of customer support. In addition, our sales process is highly dependent on our product and business reputation and on recommendations from our existing customers. Although our products are designed to be interoperable with existing servers and systems, we may need to provide customized installation and configuration support to our customers before our products become fully operational in their environments. Any failure to maintain, or a market perception that we do not maintain, high-quality installation and technical support could harm our reputation, our ability to sell our products to existing and prospective customers and our business.

We rely on contract manufacturers to manufacture our products, and if we fail to manage our relationships with our contract manufacturers successfully, our business could be negatively impacted.

We rely on a limited number of contract manufacturers to manufacture our products. Our reliance on contract manufacturers reduces our control over the assembly process, and exposes us to risks, such as reduced control over quality assurance, costs and product supply. If we fail to manage our relationships with these contract manufacturers effectively, or if these contract manufacturers experience delays, disruptions, capacity constraints or quality control problems, our ability to timely ship products to our customers ~~could~~will be impaired, potentially on short notice and our competitive position, reputation and ~~reputation~~financial results could be harmed. If we are required, for whatever reason, to change contract manufacturers or assume internal manufacturing operations, we may lose revenue, incur increased costs and damage our customer relationships. Qualifying a new contract manufacturer and commencing production is expensive and time-consuming. We may need to increase our component purchases, contract manufacturing capacity and internal test and quality functions if we experience increased demand. The inability of our contract manufacturers to provide us with adequate supplies of high-quality products could cause a delay in our order fulfillment, and our business, operating results and financial condition may be harmed.

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We rely on a limited number of suppliers, and in some cases single-source suppliers, and any disruption or termination of our supply arrangements could delay shipments of our products and could harm our relationships with current and prospective customers.

We rely on a limited number of suppliers, and in some cases, on single-source suppliers, for several key components of our products, and we have not generally entered into agreements for the long-term purchase of these components. For example, the CPUs utilized in our products are supplied by Intel Corporation (Intel), and neither we nor our contract manufacturers have an agreement with Intel for the procurement of these CPUs. Instead, we purchase the CPUs either directly from Intel or through a reseller on a purchase order basis. Intel or its resellers could stop selling to us at any time or could raise their prices without notice.

This reliance on a limited number of suppliers and the lack of any guaranteed sources of supply exposes us to several risks, including:

the inability to obtain an adequate supply of key components, including solid-state drives;

price volatility for the components of our products;

failure of a supplier to meet our quality or production requirements;

failure of a supplier of key components to remain in business or adjust to market conditions; and

consolidation among suppliers, resulting in some suppliers exiting the industry or discontinuing the manufacture of components.

Further, some of the components in our products are sourced from component suppliers outside the United States. The portion of our products that are sourced outside the United States may subject us to additional logistical risks or risks associated with complying with local rules and regulations in foreign countries. Significant changes to existing international trade agreements could lead to sourcing or logistics disruption resulting from import delays or the imposition of increased tariffs on our sourcing partners. For example, there have been discussions regarding potential significant changes to U.S trade polices, legislation, treaties and tariffs, and the United States and Chinese governments have ~~recently had discussions regarding potential~~announced import tariffs by both countries. If any new legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or terminated, or if tariffs are imposed on foreign-sourced or U.S. goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with

such changes. Such operational changes could have a material adverse effect on our business, financial condition, results of operations or cash flows.

As a result of these risks, we cannot assure investors that we will be able to obtain enough of these key components in the future or that the cost of these components will not increase. If our supply of components is disrupted or delayed, or if we need to replace our existing suppliers, there can be no assurance that additional components will be available when required or that components will be available on terms that are favorable to us, which could extend our lead times, increase the costs of our components and harm our business, operating results and financial condition. We may not be able to continue to procure components at reasonable prices, which may require us to enter into longer-term contracts with component suppliers to obtain components at competitive prices. Any of the foregoing disruptions could increase our costs and decrease our gross margins, harming our business, operating results and financial condition.

Managing the supply of our products and their components is complex. Insufficient supply and inventory may result in lost sales opportunities or delayed revenue, while excess inventory may harm our gross margins.

Our third-party contract manufacturers procure components and build our products based on our forecasts, and we generally do not hold inventory for a prolonged period of time. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and analyses from our sales and marketing organizations, adjusted for overall market conditions. In order to reduce manufacturing lead times and plan for adequate component supply, from time to time we may issue orders for components and products that are non-cancelable and non-returnable. Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to make accurate forecasts and effectively manage the supply of our products and components. We have, in the past, had to write off inventory in connection with transitions to new product models. If we ultimately determine that we have excess supply, we may have to reduce our prices and write down or write off excess or obsolete inventory, which in turn could result in lower gross margins. Alternatively, insufficient supply levels may lead to shortages that result in delayed revenue, reduced product margins or loss of sales opportunities altogether. If we are unable to effectively manage our supply and inventory, our results of operations could be adversely affected.

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~~If we are unable to sell renewals of our support subscription services to our customers, our future revenue and operating results will be harmed.~~

We expect that revenue from support subscription agreements will increase as a percentage of total revenue over time, and because we recognize this revenue over the term of the relevant contract period, downturns or upturns in sales of support subscriptions are not immediately reflected in full in our results of operations.

We expect that revenue from support subscription agreements will increase as a percentage of total revenue over time. We recognize support subscription revenue ratably over the term of the relevant service period. As a result, much of the support subscription revenue we report each quarter is derived from support subscription agreements that we sold in prior quarters. Consequently, a decline in new or renewed support subscription agreements in any one quarter will not be fully reflected in revenue in that quarter but will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales of support subscriptions is not reflected in full in our results of operations until future periods. It is also difficult for us to rapidly increase our support subscription revenue through additional sales in any period, as revenue from renewals must be recognized ratably over the applicable service period.

Adverse economic conditions ~~or reduced data center spending~~ may harm our revenues and profitability.

Our operations and performance depend in part on worldwide economic conditions and the ~~impact these conditions have on levels~~economic health of ~~spending on data center technology.~~our current and prospective customers. Global economic uncertainty and political and fiscal challenges in the United States and abroad can arise suddenly and affect the rate of information technology spending and could adversely ~~impact data center spending. Our business depends on~~affect our customers' ability or willingness to purchase our products and services. For example, in 2019, the ~~overall demand for data center infrastructure~~growth rate in the economy of the European Union, China, or the United States, trade relations between the United States and onChina, political uncertainty in the Middle East and other geopolitical events could directly or indirectly affect our business. Additionally, the United Kingdom's exit from the European Union remains subject to the successful conclusion of a final withdrawal agreement between the parties. In the absence of such an agreement, there would be no transitional provisions and any exit from the European Union could lead to adverse economic ~~health of our current and prospective customers.~~consequences. Weak economic conditions would likely adversely impact our business, operating results and financial condition in a number of ways, including by reducing sales, lengthening sales cycles and lowering prices of our products and services.

Third-party claims that we infringe their intellectual property rights could be costly and harm our business.

There is a substantial amount of intellectual property litigation in the ~~flash-based~~data storage industry, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our technology. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. We have been, and may in the future be, subject to claims that we infringe upon the intellectual property rights of other intellectual property holders, particularly as we grow and face increasing competition.

Any intellectual property rights claim against us or our customers, suppliers, and channel partners, with or without merit, could be time-consuming and expensive to litigate or settle, could divert management’s resources and attention from operating our business and could force us to acquire intellectual property rights and licenses, which may involve substantial royalty payments. Further, a party making such a claim, if successful, could secure a judgment that requires

us to pay substantial damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. An adverse determination also could invalidate our intellectual property rights and prevent us from manufacturing and selling our products and may require that we procure or develop substitute products that do not infringe, which could require significant effort and expense. We may not be able to re-engineer our products successfully to avoid infringement, and we may have to seek a license for the infringed technology, which may not be available on reasonable terms or at all, may significantly increase our operating expenses or may require us to restrict our business activities in one or more respects. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. Any of these events could harm our business and financial condition.

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We currently have a number of agreements in effect pursuant to which we have agreed to defend, indemnify and hold harmless our customers, suppliers and channel partners from damages and costs which may arise from the infringement by our products of third-party patents, trademarks or other proprietary rights. The scope of these indemnity obligations varies but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. Our insurance may not cover intellectual property infringement claims. A claim that our products infringe a third party’s intellectual property rights could harm our relationships with our customers, deter future customers from purchasing our products and expose us to costly litigation and settlement expenses. Even if we are not a party to any litigation between a customer and a third party relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our products against intellectual property infringement claims in any subsequent litigation in which we are a named party. Any of these results could harm our brand and financial condition.

The success of our business depends in part on our ability to protect and enforce our intellectual property rights.

We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We have over ~~700~~800 issued patents and patent applications in the United States and foreign countries. We cannot assure investors that future patents issued to us, if any, will give us the protection that we seek, if at all, or that any patents issued to us will not be challenged, invalidated, circumvented or held to be unenforceable. Our issued patents and any patents that may issue in the future may not provide sufficiently broad protection or may not be enforceable. Changes to the patent laws in the United States and other jurisdictions could also diminish the value of our patents and patent applications or narrow the scope of our patent protection. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies competitive to ours or infringe our intellectual property. Furthermore, any of our trademarks may be challenged by others or invalidated through administrative process or litigation.

Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and difficult. Litigation may be necessary in the future to enforce or defend our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could result in substantial costs and diversion of management’s resources and attention, either of which could harm our business, operating results and financial condition. Further, many of our current and potential competitors have the ability to dedicate substantially greater resources than us to defend intellectual property infringement claims and enforce their intellectual property rights. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our products are available. An inability to adequately protect and enforce our intellectual property and other proprietary rights could harm our business and financial condition.

Our use of open source software could impose limitations on our ability to commercialize our products.

We use open source software in our products and expect to continue to use open source software in the future. Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our products. From time to time, we may face claims from third parties

claiming ownership of, or demanding release of, the open source software or derivative works that we have developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, seek licenses from third parties in order to continue offering our products for certain uses or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may be required to discontinue providing some of our software in the event re-engineering cannot be accomplished on a timely basis, any of which could harm our business, operating results and financial condition.

If we or our products suffer a cybersecurity or other security breach, we may lose customers and incur significant liabilities.

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In the ordinary course of business, we store sensitive data on our internal systems, networks and servers, which may include intellectual property, our proprietary business information and that of our customers, suppliers and business partners and sales data, which may, on occasion, include personally identifiable information. Additionally, we design and sell products that allow our customers to store our customers’ data. The security of our own networks and the intrusion protection features of our products are both critical to our operations and business strategy.

We devote significant resources to network security, data encryption and other security measures to protect our systems and data, but these security measures cannot provide absolute security. For example, we use encryption and authentication technologies to secure the transmission and storage of data and prevent third party access to data or accounts, but these security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management or other irregularities. Any destructive or intrusive breach of our internal systems could result in the information stored on our networks being accessed, publicly disclosed, lost or stolen.

Additionally, an effective attack on our products could disrupt the proper functioning of our products, allow unauthorized access to sensitive, proprietary or confidential information of ours or our customers, disrupt or temporarily interrupt customers’ operations or cause other destructive outcomes, including the theft of information sufficient to engage in fraudulent transactions. The risk that these types of events could seriously harm our business is likely to increase as we expand our network of channel partners, resellers and authorized service providers and operate in more countries. The economic costs to us to eliminate or alleviate cyber or other security problems, viruses, worms, malicious software systems and security vulnerabilities could be significant and may be difficult to anticipate or measure because the damage may differ based on the identity and motive of the programmer or hacker, which are often difficult to identify. If any of these types of security breaches, actual or perceived, were to occur and we were to be unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged, our reputation and brand could be materially harmed, use of our products could decrease and we could be exposed to a risk of loss or litigation and possible liability.

We may acquire other businesses which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our operating results.

We may, from time to time, acquire complementary products, technologies or businesses. For example, in ~~August 2018~~April 2019, we acquired ~~StorReduce, Inc.~~Compuverde AB. We also may enter into relationships with other businesses in order to expand our product offerings, which could involve preferred or exclusive licenses, additional channels of distribution or discount pricing or investments in other companies. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to third-party or government approvals, which are beyond our control. Consequently, we can make no assurance that these transactions, once undertaken and announced, will close.

These kinds of acquisitions or investments may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of acquired companies, particularly if the key personnel of the acquired business choose not to work for us, and we may have difficulty retaining the customers of any acquired business. Acquisitions may also disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for development of our business. Any acquisition or investment could expose us to unknown liabilities. Moreover, we cannot assure investors that the anticipated benefits of any acquisition or investment ~~would~~will be realized. In connection

with these types of transactions, we may issue additional equity securities that would dilute our stockholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures and become subject to adverse tax consequences, substantial depreciation or deferred compensation charges. These challenges related to acquisitions or investments could harm our business and financial condition.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new products or enhance our existing products, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing in the future could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to support our business growth and to respond to business challenges could be significantly limited and our prospects and financial condition could be harmed.

We are exposed to the credit risk of some of our customers, which could harm our business, operating results and financial condition.

Most of our sales are made on an open credit basis. We monitor individual customer payment capability when we grant open credit arrangements and may limit these open credit arrangements based on perceived creditworthiness. We also maintain allowances we believe are adequate to cover exposure for doubtful accounts. Although we have programs in place that are designed to monitor and mitigate these risks, we cannot assure investors these programs

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will be effective in managing our credit risks, especially as we expand our business internationally. If we are unable to adequately control these risks, our business, operating results and financial condition could be harmed.

Sales to U.S. federal, state and local governments are subject to a number of challenges and risks that may adversely impact our business.

Sales to U.S. federal, state and local governmental agencies may in the future account for a significant portion of our revenue.

Selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a ~~sale.~~ sale;

Government certification requirements applicable to our products may change and in doing so restrict our ability to sell into the U.S. federal government sector until we have attained the revised ~~certification.~~ certification;

Government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, including in connection with an extended federal government shutdown, with funding reductions or delays adversely affecting public sector demand for our products and ~~services.~~ services;

We sell our products to governmental agencies through our channel partners, and these agencies may have statutory, contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our future results of ~~operations.~~ operations; and

Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our products, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal ~~activities.~~ activities

Finally, governments may require certain products to be manufactured in the United States and other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies.

We need to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, and the failure to do so could have a material adverse effect on our business and stock price.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. We are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act (Section 404). Our independent registered public accounting firm also needs to attest to the effectiveness of our internal control over financial reporting. We continue to take steps to develop our finance and accounting function, such as ~~continue to hire~~hiring additional personnel and ~~to implement~~implementing additional tools and improvements to policies and procedures. Our compliance with Section 404 may require us to continue to incur substantial expense and expend significant management efforts. If we are unable to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm notes or identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the price of our Class A common stock could decline and we could be subject to sanctions or investigations by the SEC, or other regulatory authorities, which would require additional financial and management resources.

Our international operations, as well as U.S. tax reform, could expose us to potentially adverse tax consequences.

The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The new legislation decreased 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. ~~In the absence of~~Regulations have been issued to provide interpretive guidance on ~~various uncertainties and ambiguities in the application~~certain provisions of ~~these provisions, we will use what we believe are reasonable interpretations and assumptions in applying~~ the Tax Act, but ~~it is possible that the Internal Revenue Service could issue subsequent guidance or take positions on audit that differ from our prior interpretations~~there are still uncertainties as regulations have not been issued for all provisions, and ~~assumptions, which~~certain proposed regulations have not been finalized. The issuance of additional proposed and final regulations could have a material adverse effect on our cash tax liabilities, results of operations, and financial condition.

We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Given the passage

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of the Tax Act and other global tax developments, we continue to evaluate our corporate structure and intercompany relationships. Future changes to U.S. and global tax laws may adversely impact our effective tax rate.

Our intercompany relationships are, and after the implementation of any changes to our corporate structure will continue to be, subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

Failure to comply with governmental laws and regulations could harm our business.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. For example, the European Union has adopted certain directives to facilitate the recycling of electrical and electronic equipment sold in the European Union, including the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment directive and the Waste Electrical and Electronic Equipment directive.

Changes in applicable laws, regulations and standards could harm our business, operating results and financial condition. For example, we have ~~a presence~~been subject to the EU General Data Protection Regulation, or GDPR, since May 2018. The GDPR may requires us to make further change our policies and procedures in the ~~European Union, including in United Kingdom, and our~~future beyond what we have already done. Our business could be impacted, to some extent, by the United Kingdom's exit from the European

Union and related changes in law and regulation. We made changes to our data protection compliance program to prepare for the GDPR and will continue to monitor the implementation and evolution of global data protection regulations, but if we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be harmed. In addition, the ~~European Union has adopted~~California Consumer Privacy Act places additional requirements on the ~~General Data Protection Regulation, which went into effect in May 2018~~handling of personal data. The potential effects of this legislation are far-reaching and ~~contains numerous requirements~~may require us to modify our data processing practices and ~~changes, including more robust obligations on data processors~~policies and ~~heavier documentation requirements for data protection compliance programs by companies.~~to incur substantial costs and expenses. Customers may choose to implement technological solutions to comply with such regulations that impact the performance and competitiveness of our products and solutions.

Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results and financial condition could be harmed. Even the perception of privacy concerns, whether or not valid, may harm our reputation and inhibit competitiveness and adoption of our products by current and future customers. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results and financial condition.

Governmental regulations affecting the import or export of products could negatively affect our revenue.

The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies, especially encryption technology. From time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring the escrow of imports or exports. If we fail to obtain required import or export approval for our products, our international and domestic sales could be harmed and our revenue may be adversely affected. In many cases, we rely on vendors and channel partners to handle logistics associated with the import and export of our products, so our visibility and control over these matters may be limited. In addition, failure to comply with such regulations could result in penalties, costs and restrictions on export privileges, which could harm our business, operating results and financial condition.

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, and to interruption by man-made factors such as computer viruses or terrorism.

We and our suppliers have operations in locations, including our headquarters in California, that are subject to earthquakes, fires, floods and other natural catastrophic events, such as severe weather and geological events, which could disrupt our operations or the operations of our customers and suppliers. Our customers affected by a natural disaster could postpone or cancel orders of our products, which could negatively impact our business. Moreover, should any

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of our key suppliers fail to deliver components to us as a result of a natural disaster, we may be unable to purchase these components in necessary quantities or may be forced to purchase components in the open market at significantly higher costs. We may also be forced to purchase components in advance of our normal supply chain demand to avoid potential market shortages. Our business interruption insurance may be insufficient to compensate us for losses due to a significant natural disaster or due to man-made factors. Any natural catastrophic events may also prevent our employees from being able to reach our offices in any jurisdiction around the world, and therefore impede our ability to conduct business as usual.

In addition, acts of terrorism or malicious computer viruses could cause disruptions in our or our customers’ businesses or the economy as a whole. To the extent that these disruptions result in delays or cancellations of customer orders or the deployment of our products, our business, operating results and financial condition could be harmed.

Risks Related to Our Notes

We may not have the ability to raise the funds necessary to settle conversions of the Notes or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase

date. In addition, if a make-whole fundamental change (as defined in the indenture for the Notes) occurs prior to the maturity date of the Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Upon a conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted.

In addition, our ability to repurchase or to pay cash upon conversion of the Notes may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase the Notes at a time when the repurchase is required by the indenture governing the Notes or to pay cash upon conversion of the Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion of the Notes.

Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the amounts payable under the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may still incur substantially more debt or take other actions that would diminish our ability to make payments on the Notes when due.

We and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in our future debt instruments, some of which may be secured debt. We are not restricted under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt

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or taking a number of other actions that could have the effect of diminishing our ability to make payments on the Notes when due. Furthermore, the indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes and the indenture. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders of the Notes.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than by paying cash in lieu of delivering any fractional share), we may settle all or a portion of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

Under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

The capped call transactions may affect the value of the Notes and our common stock.

In connection with the Notes, we entered into capped call transactions with certain financial institutions (the option counterparties). The capped call transactions are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes, with such reduction and/or offset subject to a cap.

In connection with establishing their initial hedges of the capped call transactions, the option counterparties and/or their respective affiliates purchased shares of our Class A common stock and/or entered into various derivative transactions with respect to our Class A common stock. This activity could have increased (or reduced the size of any decrease in) the market price of our Class A common stock or the Notes at that time.

In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock in secondary market transactions (and are likely to do so during any observation period related to a conversion of notes or following any repurchase of notes by us on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the price of our Class A common stock or the Notes.

The potential effect, if any, of these transactions and activities on the price of our Class A common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our Class A common stock.

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Risks Related to Our Common Stock

The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who hold our Class B common stock, including our executive officers, employees and directors and their affiliates, which limits investors’ ability to influence the outcome of important transactions, including a change in control.

Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. Stockholders who hold shares of our Class B common stock, including our executive officers, employees and directors and their affiliates, collectively hold the majority of the voting power of our outstanding capital stock. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock will therefore be able to control all matters submitted to our stockholders for approval so long as the shares of our Class B common stock represent at least 10% of all outstanding shares of our Class A common stock and Class B common stock. These holders of our Class B common stock may also have interests that differ from investors and may vote in a way with which investors disagree and which may be adverse to investors’ interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our Class A common stock.

Future transfers by holders of our Class B common stock will generally result in those shares converting into shares of our Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of shares of our Class B common stock into shares of our Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, Dr. Dietzen and Messrs. Colgrove and Hatfield retain a significant portion of their holdings of our Class B common stock for an extended period of time, they could control a significant portion of the voting power of our capital stock for the foreseeable future. As board members, Dr. Dietzen and Mr. Colgrove each owe a fiduciary duty to our stockholders and must act in good faith and in a manner they reasonably believe to be in the best interests of our stockholders. However, as stockholders, Dr. Dietzen and Messrs. Colgrove and Hatfield are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.

The trading price of our Class A common stock has been and may continue to be highly volatile, and an active, liquid, and orderly market for our Class A common stock may not be sustained.

The trading price of our Class A common stock has been, and will likely continue to be, highly volatile. Since shares of our Class A common stock were sold in our initial public offering in October 2015 at a price of $17.00 per share, our closing stock price has ranged from $9.40 to ~~$26.82,~~$28.66, through August ~~30, 2018.~~23, 2019. Some of the factors, many of which are beyond our control, affecting our volatility may include:

price and volume fluctuations in the overall stock market from time to time;

significant volatility in the market price and trading volume of technology companies in general and of companies in our industry;

actual or anticipated changes in our results of operations or fluctuations in our operating results;

whether our operating results meet the expectations of securities analysts or investors;

issuance or new or updated research or reports by securities analysts, including the publication of unfavorable reports or change in recommendation or downgrading of our Class A common stock;

actual or anticipated developments in our competitors’ businesses or the competitive landscape generally;

litigation involving us, our industry or both;

general economic conditions and trends;

major catastrophic events;

sales of large blocks of our stock; or

departures of key personnel.

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In several recent situations where the price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our business, operating results and financial condition.

We cannot guarantee that our recently announced share repurchase program will enhance shareholder value, and share repurchases could affect the price of our common stock.

In August 2019, our board of directors authorized a $150.0 million share repurchase program which will be funded from available working capital. The repurchase authorization has no fixed end date. Although our board of directors has authorized a share repurchase program, this program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. The share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves. In addition, it may be suspended or terminated at any time, which may negatively impact the price of our Class A common stock.

If securities analysts do not publish research or reports about our business, or if they downgrade our stock, the price of our stock could decline.

The trading market for our Class A common stock will likely be influenced by research and reports that securities or industry analysts publish about us or our business. In the event securities or industry analysts cover our company and one or more of these analysts downgrades our stock, lowers their price target, or publishes unfavorable or inaccurate research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

We have never paid dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. As a result, investors may only receive a return on their investment in our Class A common stock if the market price of our common stock increases.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the price of our Class A common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our Class A common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

provide for a dual class common stock structure, so that certain stockholders will have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets and which could discourage others from initiating any potential merger, takeover or other change of control transaction that other stockholders may view as beneficial;

establish a classified board of directors so that not all members of our board of directors are elected at one time;

authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

prohibit stockholders from calling a special meeting of our stockholders;

provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay, or prevent a change of control of our company.

Any provision of our amended and restated certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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Item 6. Exhibits.

Incorporation By Reference

Exhibit

Number

Description

Form

SEC File No.

Exhibit

Filing Date

Description

Form

SEC File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation.

10-Q

001-37570

3.1

12/11/2015

Amended and Restated Certificate of Incorporation.

10-Q

001-37570

��

3.1

12/11/2015

3.2

Bylaws.

S-1

333-206312

3.4

9/9/2015

Amended and Restated Bylaws.

S-1

333-206312

3.4

9/9/2015

4.1

Form of Class A Common Stock Certificate of the Company.

S-1

333-206312

4.1

9/9/2015

Form of Class A Common Stock Certificate of the Company.

S-1

333-206312

4.1

9/9/2015

4.2

Indenture dated as of April 9, 2018 by and between Pure Storage, Inc. and U.S. Bank National Association, as Trustee

8-K

001-37570

4.1

4/10/2018

Indenture dated as of April 9, 2018 by and between Pure Storage, Inc. and U.S. Bank National Association, as Trustee

8-K

001-37570

4.1

4/10/2018

4.3

Form of Global Note, representing Pure Storage, Inc.'s 0.125% Convertible Senior Notes due 2023 (included as Exhibit A to the Indenture incorporated by reference as Exhibit 4.2 hereto)

8-K

001-37570

4.2

4/10/2018

Form of Global Note, representing Pure Storage, Inc.'s 0.125% Convertible Senior Notes due 2023 (included as Exhibit A to the Indenture incorporated by reference as Exhibit 4.2 hereto)

8-K

001-37570

4.2

4/10/2018

4.4

Reference is made to Exhibits 3.1 and 3.2

10.1*

Pure Storage, Inc. Amended and Restated 2015 Employee Stock Purchase Plan

31.1*

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1

Form of Confirmation for Capped Call Transactions.

8-K

001-37570

99.1

4/10/2018

Form of Confirmation for Capped Call Transactions.

8-K

001-37570

99.1

4/10/2018

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

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101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

+ Indicates management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PURE STORAGE, INC.

Date:	~~September 4, 2018~~August 30, 2019	By:	/s/ CHARLES GIANCARLO
			Charles Giancarlo
			Chief Executive Officer and Director (Principal Executive Officer)

Date:	~~September 4, 2018~~August 30, 2019	By:	/s/ TIMOTHY RIITTERS
			Timothy Riitters
			Chief Financial Officer (Principal Financial and Accounting Officer)

6063



Delaware		27-1069557
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a small reporting company)	Smaller reporting company	o☐
			Emerging growth company	o☐



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per share	PSTG	New York Stock Exchange LLC



		Page
Note About Forward-Looking Statements		ii
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of January 31, ~~2018~~2019 and July 31, ~~2018~~2019	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, ~~2017~~2018 and ~~2018~~2019	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended July 31, ~~2017~~2018 and ~~2018~~2019	4
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended July 31, 2018 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, ~~2017~~2018 and ~~2018~~2019	57
	Notes to Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2527
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3739
Item 4.	Controls and Procedures	3840
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3941
Item 1A.	Risk Factors	3941
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5759
Item 3.	Defaults Upon Senior Securities	5759
Item 4.	Mine Safety Disclosures	5759
Item 5.	Other Information	5760
Item 6.	Exhibits	5861
Signatures		6063



	As of January 31, 2019			As of July 31, 2019

ASSETS
Current assets:
Cash and cash equivalents	$	447,990		$	268,938
Marketable securities	749,482			913,521
Accounts receivable, net of allowance of $660 and $614 as of January 31, 2019 and July 31, 2019	378,729			352,617
Inventory	44,687			35,820
Deferred commissions, current	29,244			31,273
Prepaid expenses and other current assets	51,695			47,776
Total current assets	1,701,827			1,649,945
Property and equipment, net	125,353			131,048
Operating lease right-of-use assets	—			114,339
Deferred commissions, non-current	85,729			87,295
Intangible assets, net	20,118			63,659
Goodwill	10,997			36,420
Deferred income taxes, non-current	1,060			939
Restricted cash	15,823			15,425
Other assets, non-current	12,118			16,904
Total assets	$	1,973,025		$	2,115,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	103,462		$	64,582
Accrued compensation and benefits	99,910			70,753
Accrued expenses and other liabilities	39,860			44,690
Operating lease liabilities, current	—			26,005
Deferred revenue, current	266,584			308,523
Total current liabilities	509,816			514,553
Convertible senior notes, net	449,828			463,118
Operating lease liabilities, non-current	—			94,941
Deferred revenue, non-current	269,336			298,740
Deferred tax liabilities, non-current	—			5,697
Other liabilities, non-current	6,265			1,386
Total liabilities	1,235,245			1,378,435
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, par value of $0.0001 per share— 20,000 shares authorized as of January 31, 2019 and July 31, 2019; no shares issued and outstanding as of January 31, 2019 and July 31, 2019	—			—
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, 2019 and July 31, 2019; 243,524 and 255,752 Class A shares issued and outstanding as of January 31, 2019 and July 31, 2019	24			26
Additional paid-in capital	1,820,043			1,982,407
Accumulated other comprehensive income (loss)	(338		)	3,409
Accumulated deficit	(1,081,949		)	(1,248,303		)
Total stockholders’ equity	737,780			737,539
Total liabilities and stockholders’ equity	$	1,973,025		$	2,115,974



	As of January 31, 2018			As of July 31, 2018
	(As Adjusted*)
ASSETS
Current assets:
Cash and cash equivalents	$	244,057		$	370,457
Marketable securities	353,289			736,205
Accounts receivable, net of allowance of $1,062 and $957 as of January 31, 2018 and July 31, 2018	243,001			242,409
Inventory	34,497			41,673
Deferred commissions, current	21,088			23,521
Prepaid expenses and other current assets	47,552			36,071
Total current assets	943,484			1,450,336
Property and equipment, net	89,142			101,718
Intangible assets, net	5,057			4,305
Deferred income taxes, non-current	1,060			1,534
Restricted cash	14,763			15,778
Deferred commissions, non-current	66,225			67,948
Other assets, non-current	4,264			4,610
Total assets	$	1,123,995		$	1,646,229
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	84,420		$	68,058
Accrued compensation and benefits	59,898			51,654
Accrued expenses and other liabilities	26,829			27,049
Deferred revenue, current	191,229			213,100
Liability related to early exercised stock options	320			—
Total current liabilities	362,696			359,861
Convertible senior notes, net	—			436,687
Deferred revenue, non-current	182,873			200,147
Other liabilities, non-current	4,025			5,140
Total liabilities	549,594			1,001,835
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 July 31, 2018; no shares issued and outstanding as of January 31, 2018 and July 31, 2018	—			—
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 July 31, 2018; 220,979 (Class A 129,502, Class B 91,477) and 235,412 (Class A 204,052, Class B 31,360) shares issued and outstanding as of January 31, 2018 and July 31, 2018	22			24
Additional paid-in capital	1,479,883			1,675,210
Accumulated other comprehensive loss	(1,917		)	(2,826		)
Accumulated deficit	(903,587		)	(1,028,014		)
Total stockholders’ equity	574,401			644,394
Total liabilities and stockholders’ equity	$	1,123,995		$	1,646,229


	Three Months Ended July 31,						Six Months Ended July 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2017			2018			2017			2018			2018			2019			2018			2019
	(As Adjusted*)						(As Adjusted*)
Revenue:
Product	$	179,669		$	241,137		$	322,519		$	436,586		$	241,137		$	300,128		$	436,586		$	538,869
Support subscription	45,001			67,747			84,796			128,243			67,747			96,199			128,243			184,158
Total revenue	224,670			308,884			407,315			564,829			308,884			396,327			564,829			723,027

Cost of revenue:
Product	57,252			78,262			103,897			144,682			78,262			92,870			144,682			169,462
Support subscription	19,199			24,457			36,102			47,667			24,457			35,138			47,667			68,859
Total cost of revenue	76,451			102,719			139,999			192,349			102,719			128,008			192,349			238,321

Gross profit	148,219			206,165			267,316			372,480			206,165			268,319			372,480			484,706

Operating expenses:
Research and development	69,361			84,031			134,789			162,523			84,031			107,020			162,523			212,095
Sales and marketing	117,552			143,749			209,315			266,116			143,749			186,188			266,116			352,814
General and administrative	22,162			33,591			42,258			60,921			33,591			40,016			60,921			82,126
Total operating expenses	209,075			261,371			386,362			489,560			261,371			333,224			489,560			647,035

Loss from operations	(60,856		)	(55,206		)	(119,046		)	(117,080		)	(55,206		)	(64,905		)	(117,080		)	(162,329		)
Other income (expense), net	3,266			(4,032		)	5,261			(5,031		)	(4,032		)	(652		)	(5,031		)	(2,468		)
Loss before provision for income taxes	(57,590		)	(59,238		)	(113,785		)	(122,111		)	(59,238		)	(65,557		)	(122,111		)	(164,797		)
Provision for income taxes	821			885			1,785			2,316
Income tax provision													885			461			2,316			1,557
Net loss	$	(58,411	)	$	(60,123	)	$	(115,570	)	$	(124,427	)	$	(60,123	)	$	(66,018	)	$	(124,427	)	$	(166,354	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.28	)	$	(0.26	)	$	(0.56	)	$	(0.55	)	$	(0.26	)	$	(0.26	)	$	(0.55	)	$	(0.67	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	209,193			229,359			207,515			226,609			229,359			251,298			226,609			248,366



	Three Months Ended July 31, 2018
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance as of April 30, 2018	229,596		$	23	$	1,602,121		$	(2,633	)	$	(967,891	)	$	631,620
Issuance of common stock upon exercise of stock options	3,691		1		19,435			—			—			19,436
Stock-based compensation expense	—		—		53,654			—			—			53,654
Vesting of restricted stock units	2,104		—		—			—			—			—
Issuance of restricted stock	21		—		—			—			—			—
Other comprehensive loss	—		—		—			(193		)	—			(193		)
Net loss	—		—		—			—			(60,123		)	(60,123		)
Balance as of July 31, 2018	235,412		$	24	$	1,675,210		$	(2,826	)	$	(1,028,014	)	$	644,394

	Three Months Ended July 31, 2019
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance as of April 30, 2019	252,853		$	25	$	1,924,947		$	1,289		$	(1,182,285	)	$	743,976
Issuance of common stock upon exercise of stock options	655		—		2,502			—			—			2,502
Stock-based compensation expense	—		—		56,460			—			—			56,460
Vesting of restricted stock units	2,277		1		(1		)	—			—			—
Net issuance of restricted stock	(33	)	—		—			—			—			—
Tax withholding on vesting of restricted stock	—		—		(1,501		)	—			—			(1,501		)
Other comprehensive income	—		—		—			2,120			—			2,120
Net loss	—		—		—			—			(66,018		)	(66,018		)
Balance as of July 31, 2019	255,752		$	26	$	1,982,407		$	3,409		$	(1,248,303	)	$	737,539



	Six Months Ended July 31, 2018
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance as of January 31, 2018	220,979		22		1,479,883			(1,917		)	(903,587		)	574,401
Issuance of common stock upon exercise of stock options	5,884		1		29,065			—			—			29,066
Stock-based compensation expense	—		—		97,609			—			—			97,609
Vesting of early exercised stock options	—		—		320			—			—			320
Vesting of restricted stock units	4,117		—		—			—			—			—
Common stock issued under employee stock purchase plan	2,111		—		19,698			—			—			19,698
Issuance of restricted stock	3,330		1		—			—			—			1
Repurchase of common stock	(1,009	)	—		(20,000		)	—			—			(20,000		)
Purchase of capped calls	—		—		(64,630		)	—			—			(64,630		)
Equity component of convertible senior notes, net	—		—		133,265			—			—			133,265
Other comprehensive loss	—		—		—			(909		)	—			(909		)
Net loss	—		—		—			—			(124,427		)	(124,427		)
Balance as of July 31, 2018	235,412		$	24	$	1,675,210		$	(2,826	)	$	(1,028,014	)	$	644,394

	Six Months Ended July 31, 2019
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance as of January 31, 2019	243,524		24		1,820,043			(338		)	(1,081,949		)	737,780
Issuance of common stock upon exercise of stock options	3,863		1		19,290			—			—			19,291
Stock-based compensation expense	—		—		118,206			—			—			118,206
Vesting of restricted stock units	4,327		1		(1		)	—			—			—
Net issuance of restricted stock	1,065		—		—			—			—			—
Tax withholding on vesting of restricted stock	—		—		(7,173		)	—			—			(7,173		)
Common stock issued under employee stock purchase plan	2,973		—		32,042			—			—			32,042
Other comprehensive income	—		—		—			3,747			—			3,747
Net loss	—		—		—			—			(166,354		)	(166,354		)
Balance as of July 31, 2019	255,752		$	26	$	1,982,407		$	3,409		$	(1,248,303	)	$	737,539


•	Identification of the performance obligations in the contract


•	Recognition of revenue when, or as, we satisfy a performance obligation



	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	)



	Three Months Ended July 31, 2017									Six Months Ended July 31, 2017
	As Previously Reported			Adjustment			As Adjusted			As Previously Reported			Adjustment			As Adjusted
Revenue:
Product	$	175,013		$	4,656		$	179,669		$	313,438		$	9,081		$	322,519
Support subscription	49,448			(4,447		)	45,001			93,654			(8,858		)	84,796
Total revenue	$	224,461		$	209		$	224,670		$	407,092		$	223		$	407,315

Gross profit	$	148,010		$	209		$	148,219		$	267,093		$	223		$	267,316
Sales and marketing	$	120,633		$	(3,081	)	$	117,552		$	217,597		$	(8,282	)	$	209,315
Total operating expenses	$	212,156		$	(3,081	)	$	209,075		$	394,644		$	(8,282	)	$	386,362
Loss from operations	$	(64,146	)	$	3,290		$	(60,856	)	$	(127,551	)	$	8,505		$	(119,046	)
Loss before provision for income taxes	$	(60,880	)	$	3,290		$	(57,590	)	$	(122,290	)	$	8,505		$	(113,785	)
Net loss	$	(61,701	)	$	3,290		$	(58,411	)	$	(124,075	)	$	8,505		$	(115,570	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.29	)	$	0.01		$	(0.28	)	$	(0.60	)	$	0.04		$	(0.56	)


•	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



FORM	10-Q


	As of January 31, 2018															As of January 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cash Equivalents		Marketable Securities		Restricted Cash		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	$	—	$	—	$	—		$	43,038	$	27,215	$	—	$	15,823
Level 2
U.S. government treasury notes	131,643		—		(651		)	130,992		10,172		120,820		—		315,329		208		(315		)	315,222		34,129		281,093		—
U.S. government agencies	47,229		—		(333		)	46,896		—		46,896		—		69,114		17		(154		)	68,977		9,983		58,994		—
Corporate debt securities	186,506		116		(1,049		)	185,573		—		185,573		—		363,860		534		(757		)	363,637		—		363,637		—
Foreign government bonds																7,965		36		—			8,001		—		8,001		—
Asset-backed securities																37,664		105		(12		)	37,757		—		37,757		—
Total	$	365,378	$	116	$	(2,033	)	$	395,518	$	27,466	$	353,289	$	14,763	$	793,932	$	900	$	(1,238	)	$	836,632	$	71,327	$	749,482	$	15,823



	As of July 31, 2019
	Amortized Cost		Fair Value
Due within one year	$	336,156	$	336,736
Due in one to five years	572,777		576,785
Total	$	908,933	$	913,521



	As of July 31, 2018
	Amortized Cost		Fair Value
Due within one year	$	373,160	$	372,316
Due in one to five years	365,867		363,889
Total	$	739,027	$	736,205


•	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.



	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	$	27,887	$	(30	)	$	9,737	$	(28	)	$	37,624	$	(58	)
U.S. government agencies	5,215		(7		)	9,183		(15		)	14,398		(22		)
Corporate debt securities	38,856		(28		)	43,245		(83		)	82,101		(111		)
Asset-backed securities	9,399		(11		)	—		—			9,399		(11		)
Total	$	81,357	$	(76	)	$	62,165	$	(126	)	$	143,522	$	(202	)



	As of January 31, 2019		As of July 31, 2019
Raw materials	$	3,349	$	2,623
Finished goods	41,338		33,197
Inventory	$	44,687	$	35,820



	As of January 31, 2019			As of July 31, 2019
Test equipment	$	170,930		$	191,846
Computer equipment and software	117,330			135,178
Furniture and fixtures	6,980			7,732
Leasehold improvements	34,286			37,866
Total property and equipment	329,526			372,622
Less: accumulated depreciation and amortization	(204,173		)	(241,574		)
Property and equipment, net	$	125,353		$	131,048



	As of January 31, 2019							As of July 31, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Amount		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
Technology patents	$	10,125	$	(6,572	)	$	3,553	$	19,125	$	(7,538	)	$	11,587
Developed technology	17,700		(1,135		)	16,565		56,100		(4,028		)	52,072
Intangible assets, net	$	27,825	$	(7,707	)	$	20,118	$	75,225	$	(11,566	)	$	63,659



Fiscal Years Ending January 31,	Estimated Future Amortization Expense
Remainder of 2020	$	5,402
2021	10,804
2022	9,846
2023	9,300
2024	9,300
Thereafter	19,007
Total	$	63,659



Fiscal Years Ending January 31,	Estimated Future Amortization Expense
Remainder of 2019	$	752
2020	1,504
2021	1,504
2022	545
Total	$	4,305



	As of January 31, 2019		As of July 31, 2019
Taxes payable	$	7,146	$	4,967
Accrued marketing	6,173		11,005
Accrued travel and entertainment expenses	3,570		3,055
Acquisition consideration held back	3,725		3,725
Other accrued liabilities	19,246		21,938
Total accrued expenses and other liabilities	$	39,860	$	44,690



	As of July 31, 2019
Liability:
Principal	$	575,000
Less: debt discount, net of amortization	(104,329		)
Less: debt issuance costs, net of amortization	(7,553		)
Net carrying amount of the Notes	$	463,118

Stockholders' equity:
Allocated value of the conversion feature	$	136,333
Less: debt issuance costs	(3,068		)
Additional paid-in capital	$	133,265



	Three Months Ended July 31, 2018			Six Months Ended July 31, 2018
Amortization of debt discount	$	6,000		$	7,357
Amortization of debt issuance costs	434			532
Total amortization of debt discount and debt issuance costs	6,434			7,889
Contractual interest expense	181			224
Total interest expense related to the Notes	$	6,615		$	8,113

Effective interest rate of the liability component	5.6		%	5.6		%



	Three Months Ended		Six Months Ended
	July 31, 2019		July 31, 2019
Fixed operating lease cost	$	8,228	$	16,711
Variable lease cost ⁽¹⁾	2,242		4,342
Short-term lease cost (12 months or less)	1,484		2,345
Total lease cost	$	11,954	$	23,398



Fiscal Years Ending January 31,	Operating Leases
The remainder of 2020	$	16,579
2021	33,269
2022	26,781
2023	21,478
2024	15,434
Thereafter	31,236
Total future lease payments	144,777
Less: imputed interest	(23,831		)
Present value of lease liabilities	$	120,946



Cash paid for amounts included in the measurement of lease liabilities (in thousands)	$	16,167
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	3,449
Weighted-average remaining lease term (years)	5.28
Weighted-average discount rate	6.46		%



Year Ending January 31,	Operating Leases
2020	$	31,297
2021	28,573
2022	24,381
2023	20,440
2024	14,780
Thereafter	30,096
Total	$	149,567



	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	(5,884,173	)	4.94
Options forfeited/canceled	(1,191,720	)	9.36
Balance as of July 31, 2018	39,284,056		$	8.12	5.9	$	531,664
Vested and exercisable as of July 31, 2018	26,675,832		$	6.00	5.4	$	417,651


	Number of Restricted Stock Units Outstanding		Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)		Number of RSUs 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
Unvested balance as of January 31, 2019							21,917,550		$	17.94	$	392,515
Granted	7,751,921		20.79				8,792,982		19.81
Vested	(4,117,282	)	12.50				(4,352,885	)	16.38
Forfeited	(858,561	)	14.18				(1,324,694	)	18.47
Converted	(1,142,838	)	11.86
Unvested balance as of July 31, 2018	19,315,886		$	15.87	$	418,359
Unvested balance as of July 31, 2019							25,032,953		$	18.84	$	378,999



	Number of Restricted Stock Outstanding		Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Unvested balance as of January 31, 2019	2,267,569		$	18.70	$	40,612
Granted	1,399,688		20.30
Vested	(843,321	)	19.85
Unvested balance as of July 31, 2019	2,823,936		$	19.25	$	42,754



	As of January 31, 2019		As of July 31, 2019

United States	$	120,876	$	121,454
Rest of the world	4,477		9,594
Total long-lived assets	$	125,353	$	131,048


⁽¹⁾	Includes stock-based compensation expense as ~~follows:~~follows (in thousands):



	Three Months Ended July 31,				Change				Six Months Ended July 31,				Change
	2017		2018		$		%		2017		2018		$		%
(dollars in thousands, unaudited)	(As Adjusted*)								(As Adjusted*)
Product revenue	$	179,669	$	241,137	$	61,468	34	%	$	322,519	$	436,586	$	114,067	35	%
Support subscription revenue	45,001		67,747		22,746		51	%	84,796		128,243		43,447		51	%
Total revenue	$	224,670	$	308,884	$	84,214	37	%	$	407,315	$	564,829	$	157,514	39	%