Pure Storage(PSTG) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements for Q1 FY2026, covering balance sheets, operations, comprehensive loss, equity, and cash flows Condensed Consolidated Balance Sheets Total assets decreased to $3.81 billion from $3.96 billion as of May 4, 2025, with liabilities and stockholders' equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | End of Fiscal 2025 | End of Q1 Fiscal 2026 | | :--- | :--- | :--- | | Total current assets | $2,567,279 | $2,400,227 | | Total assets | $3,963,942 | $3,810,365 | | Total current liabilities | $1,596,541 | $1,494,511 | | Total liabilities | $2,657,467 | $2,566,310 | | Total stockholders' equity | $1,306,475 | $1,244,055 | Condensed Consolidated Statements of Operations Q1 FY2026 total revenue grew 12.3% to $778.5 million, driven by subscription services, with net loss improving to $14.0 million Q1 Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 Fiscal 2025 | Q1 Fiscal 2026 | Change (%) | | :--- | :--- | :--- | :--- | | Product Revenue | $347,384 | $372,144 | 7.1% | | Subscription Services Revenue | $346,095 | $406,341 | 17.4% | | Total Revenue | $693,479 | $778,485 | 12.3% | | Gross Profit | $495,706 | $536,153 | 8.2% | | Loss from Operations | $(41,774) | $(31,171) | (25.4%) | | Net Loss | $(35,009) | $(13,995) | (60.0%) | | Net Loss Per Share | $(0.11) | $(0.04) | (63.6%) | Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss for Q1 FY2026 significantly improved to $13.1 million from $36.8 million, driven by a smaller net loss and unrealized gains Comprehensive Loss Summary (in thousands) | Metric | Q1 Fiscal 2025 | Q1 Fiscal 2026 | | :--- | :--- | :--- | | Net loss | $(35,009) | $(13,995) | | Change in unrealized net gains (losses) on available-for-sale securities | $(1,802) | $877 | | Comprehensive loss | $(36,811) | $(13,118) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $1.24 billion from $1.31 billion, primarily due to $119.9 million in common stock repurchases and net loss - The company repurchased and retired approximately 2.5 million shares of its common stock for an aggregate price of $119.9 million during the first quarter of fiscal 2026[23] Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $283.9 million, while investing activities used $111.8 million, and financing activities shifted to a $149.8 million outflow Cash Flow Summary (in thousands) | Activity | Q1 Fiscal 2025 | Q1 Fiscal 2026 | | :--- | :--- | :--- | | Net cash provided by operating activities | $221,500 | $283,936 | | Net cash used in investing activities | $(48,395) | $(111,782) | | Net cash provided by (used in) financing activities | $24,974 | $(149,762) | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, financial components, and significant events, including a new $500 million unsecured credit facility in June 2025 - Total remaining performance obligations (RPO) were $2.7 billion at the end of Q1 FY2026, with approximately 48% expected to be recognized as revenue over the next 12 months[69] - In June 2025, the company entered into a new five-year, $500 million senior unsecured revolving credit facility, terminating and repaying the previous $300 million facility[131] - During Q1 FY2026, the company repurchased and retired approximately 2.5 million shares of common stock for $119.9 million. At the end of the quarter, $151.6 million remained available for future repurchases[98] - In February 2024, the company initiated a workforce realignment plan, reducing headcount by nearly 250 employees and incurring restructuring costs of $27.9 million, of which $9.9 million was recognized in Q1 FY2025[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2026 financial results, noting a 12% revenue increase to $778.5 million, improved net loss, and shifts in gross margins Revenue Performance (in thousands) | Revenue Type | Q1 Fiscal 2025 | Q1 Fiscal 2026 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $347,384 | $372,144 | $24,760 | 7% | | Subscription services revenue | $346,095 | $406,341 | $60,246 | 17% | | Total revenue | $693,479 | $778,485 | $85,006 | 12% | - Subscription Annual Recurring Revenue (ARR) grew 18% year-over-year to $1.71 billion at the end of Q1 FY2026[158] - Total Remaining Performance Obligations (RPO) grew 17% year-over-year to $2.7 billion at the end of Q1 FY2026[160] Gross Margin Performance | Margin Type | Q1 Fiscal 2025 | Q1 Fiscal 2026 | | :--- | :--- | :--- | | Product gross margin | 71% | 62% | | Subscription services gross margin | 72% | 75% | | Total gross margin | 71% | 69% | - Net cash provided by operating activities increased to $283.9 million in Q1 FY2026, up from $221.5 million in Q1 FY2025, driven by lower net loss and improved working capital management[183][184] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its $1.6 billion in marketable securities and foreign currency volatility, without using derivatives - Interest Rate Risk: A hypothetical 1.00% (100 basis points) increase in interest rates would result in a decrease of approximately $8.8 million in the fair value of the company's marketable securities[198] - Foreign Currency Risk: A hypothetical adverse 10% change in foreign exchange rates would result in an adverse impact of approximately $6.8 million on income before income taxes[200] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of May 4, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the first quarter of fiscal 2026[201] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[202] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings deemed to have a material adverse effect on its business or financial position - The company is not presently party to any legal proceedings that, in the opinion of management, would have a material adverse effect on its business[205] Item 1A. Risk Factors The company faces risks from macroeconomic conditions, intense competition, supply chain reliance, subscription model transition, security breaches, and new product adoption - The business is subject to risks from uncertain macroeconomic conditions, tariffs, and trade policies which can affect customer demand and costs[208][209] - The company faces intense competition from established companies and cloud providers, which may have greater resources, brand recognition, and existing customer relationships[218][220] - Significant resources are being devoted to developing solutions for hyperscalers, including a design win with Meta, but there is no assurance this will lead to successful sales[214][215] - Reliance on a limited number of suppliers, including single-source suppliers, for key components exposes the company to risks of supply disruption, price volatility, and quality control issues[223] - A compromise of security measures could lead to data loss, reputational harm, loss of customers, and significant liabilities[254][255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 FY2026, the company repurchased 2.5 million shares for $119.9 million, with $151.6 million remaining for future repurchases Q1 FY2026 Stock Repurchase Activity (in thousands, except price) | Period | Average Price Paid per Share | Total Shares Repurchased | Value of Shares Remaining for Repurchase | | :--- | :--- | :--- | :--- | | Feb 3 - Mar 2, 2025 | $63.35 | 434 | $244,013 | | Mar 3 - Mar 30, 2025 | $49.77 | 954 | $196,516 | | Mar 31 - May 4, 2025 | $40.66 | 1,104 | $151,642 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities for the period - No defaults upon senior securities were reported for the period[302] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures for the period - No mine safety disclosures were reported for the period[303] Item 5. Other Information On June 10, 2025, the company entered a new $500 million senior unsecured revolving credit facility, and no directors or officers adopted or terminated Rule 10b5-1 trading plans - On June 10, 2025, the company entered into a new $500 million senior unsecured revolving credit facility, replacing its existing one. The new agreement matures on June 10, 2030[304][305] - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the first quarter of fiscal 2026[309] Item 6. Exhibits This section lists exhibits filed with the 10-Q report, including the new Credit Agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed with this report include the new Credit Agreement (Exhibit 10.12) and CEO/CFO certifications (Exhibits 31.1, 31.2, 32.1)[311]