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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Pure Storage, Inc.
(Exact Name of Registrant as Specified in its Charter)

 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x     No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

As of September 8, 2023, the registrant had 311,956,031 shares of its Class A common stock outstanding.

 

						Page
Note About Forward-Looking Statements						ii
PART I.			FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited)			1
			Condensed Consolidated Balance Sheets			1
			Condensed Consolidated Statements of Operations			2
			Condensed Consolidated Statements of Comprehensive Income (Loss)			3
			Condensed Consolidated Statements of Stockholders' Equity			4
			Condensed Consolidated Statements of Cash Flows			6
			Notes to Condensed Consolidated Financial Statements			7
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			35
Item 4.			Controls and Procedures			36
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			37
Item 1A.			Risk Factors			37
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 3.			Defaults Upon Senior Securities			59
Item 4.			Mine Safety Disclosures			59
Item 5.			Other Information			59
Item 6.			Exhibits			60
Signatures

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will” or the negative of these terms or other similar expressions.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding macroeconomic conditions, including, among other issues, high inflation, rising interest rates, and a slowdown in demand, our ability to sustain or manage our profitability and growth, our expectations regarding demand for our products and services and trends in the external storage market, our ability to expand market share, our expectations that sales prices may decrease or fluctuate over time, our plans to expand and continue to invest internationally, our plans to continue investing in marketing, sales, support and research and development, our shift to subscription services, including as-a-Service offerings, our expectations regarding fluctuations in our revenue and operating results, including the timing and magnitude of large customer orders, our expectations that we may continue to experience losses despite revenue growth, our ability to successfully attract, motivate, and retain qualified personnel and maintain our culture, our expectations regarding our technological leadership and market opportunity, including our ability to continue capturing storage workloads for AI environments, our ability to realize benefits from our investments, including development efforts and acquisitions like Portworx, our ability to innovate and introduce new or enhanced products, our expectations regarding technology and product strategy and technology differentiation, specifically customer priorities around sustainability, our sustainability goals and the benefits to our customers of using our products, our competitive position and the effects of competition and industry dynamics, including alternative offerings from incumbent, emerging and public cloud vendors, the potential disruptions to our contract manufacturers or supply chain, our expectations about the impact of, and trends relating to, component pricing, our expectations concerning relationships with third parties, including our partners, customers, suppliers and contract manufacturers, the adequacy of our intellectual property rights, expectations concerning potential legal proceedings and related costs, and the impact of adverse economic conditions on our business, operating results, cash flows and/or financial condition.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors.” These risks are not exhaustive. Other sections of this report include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

Investors should not rely upon forward-looking statements as predictions of future events. We cannot assure investors that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

			Second Quarter of Fiscal												First Two Quarters of Fiscal
			2023						2024						2023						2024
Revenue:
Product			$	414,603					$	399,738					$	815,764					$	708,701
Subscription services			232,169						288,933						451,413						569,277
Total revenue			646,772						688,671						1,267,177						1,277,978
Cost of revenue:
Product			134,292						120,605						259,776						216,818
Subscription services			68,912						81,473						137,407						161,220
Total cost of revenue			203,204						202,078						397,183						378,038
Gross profit			443,568						486,593						869,994						899,940
Operating expenses:
Research and development			165,690						182,492						326,963						367,823
Sales and marketing			206,836						232,732						424,989						465,178
General and administrative			56,679						60,831						108,246						128,215
Impairment and other			—						16,766						—						16,766
Total operating expenses			429,205						492,821						860,198						977,982
Income (loss) from operations			14,363						(6,228)						9,796						(78,042)
Other income (expense), net			585						6,686						(5,596)						18,435
Income (loss) before provision for income taxes			14,948						458						4,200						(59,607)
Provision for income taxes			4,026						7,573						4,813						14,909
Net income (loss)			$	10,922					$	(7,115)					$	(613)					$	(74,516)
Net income (loss) per share attributable to common stockholders, basic			$	0.04					$	(0.02)					$	(0.00)					$	(0.24)
Net income (loss) per share attributable to common stockholders, diluted			$	0.03					$	(0.02)					$	(0.00)					$	(0.24)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic			297,475						309,510						296,659						307,687
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted			312,720						309,510						296,659						307,687

 

Pure Storage, Inc. (the Company, we, us, or other similar pronouns) was originally incorporated in the state of Delaware in October 2009 under the name OS76, Inc. In January 2010, we changed our name to Pure Storage, Inc. We are headquartered in Santa Clara, California and have wholly owned subsidiaries throughout the world.

We operate using a 52/53 week fiscal year ending on the first Sunday after January 30, which for fiscal 2023 was February 5, 2023 and for fiscal 2024 will be February 4, 2024. The second quarter of fiscal 2023 and 2024 ended on August 7, 2022 and August 6, 2023. Unless otherwise stated, all dates refer to our fiscal year and fiscal quarters.

The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for fiscal 2023.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss) and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year 2024 or any future period.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations when the price at which the performance obligation sold separately or observable past transactions are not available, useful lives of intangible assets and property and equipment, the period of benefit for deferred contract costs for commissions, stock-based compensation, provision for income taxes including related reserves, fair value of equity assumed, intangible and tangible assets acquired and liabilities assumed for business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Restricted cash is comprised of cash collateral for letters of credit related to our leases and for a vendor credit card program. At the end of fiscal 2023 and the second quarter of fiscal 2024, we had restricted cash of $10.5 million and $10.0 million.

We define fair value as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Three levels of inputs may be used to measure fair value:

•Level 1 - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2 - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

We measure our cash equivalents, marketable securities, and restricted cash at fair value on a recurring basis. We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of our marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. The following tables summarize our cash equivalents, marketable securities and restricted cash by significant investment categories and their classification within the fair value hierarchy at the end of fiscal 2023 and the second quarter of fiscal 2024 (in thousands):

 

			At the End of Fiscal 2023
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Cash Equivalents						Marketable Securities						Restricted Cash
Level 1
Money market accounts			$	—					$	—					$	—					$	49,733					$	39,189					$	—					$	10,544
Level 2
U.S. government treasury notes			425,977						170						(4,229)						421,918						32,008						389,910						—
U.S. government agencies			23,795						—						(289)						23,506						—						23,506						—
Corporate debt securities			527,164						901						(9,300)						518,765						—						518,765						—
Foreign government bonds			4,797						—						(44)						4,753						—						4,753						—
Asset-backed securities			61,371						281						(1,016)						60,636						—						60,636						—
Municipal bonds			3,950						—						(168)						3,782						—						3,782						—
Total			$	1,047,054					$	1,352					$	(15,046)					$	1,083,093					$	71,197					$	1,001,352					$	10,544

 

The amortized cost and estimated fair value of our marketable securities are shown below by contractual maturity (in thousands):

Unrealized losses on our marketable securities have not been recorded into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis. The decline in fair value of our marketable securities is largely due to the rising interest rate environment driven by current market conditions that has resulted in higher credit spreads. The credit ratings associated with our marketable securities are highly rated and the issuers continue to make timely principal and interest payments. As a result, there were no credit or non-credit impairment charges recorded in the second quarter and the first two quarters of fiscal 2023 and 2024.

The following table presents gross unrealized losses and fair values for those investments that were in a continuous unrealized loss position at the end of fiscal 2023 and the second quarter of fiscal 2024, aggregated by investment category (in thousands):

 Realized gains or losses on sale of marketable securities were not significant for all periods presented.

Inventory consists of the following (in thousands):

Property and equipment, net consists of the following (in thousands):

 

			At the End of
			Fiscal 2023						Second Quarter of Fiscal 2024
Test equipment			$	315,290					$	347,310
Computer equipment and software			262,574						288,831
Furniture and fixtures			9,693						9,882
Leasehold improvements			71,235						92,782
Capitalized software development costs			15,806						25,663
Total property and equipment			674,598						764,468
Less: accumulated depreciation and amortization			(402,153)						(438,685)
Property and equipment, net			$	272,445					$	325,783

Depreciation and amortization expense related to property and equipment was $19.5 million and $27.2 million for the second quarter of fiscal 2023 and 2024, and $38.8 million and $53.8 million for the first two quarters of fiscal 2023 and 2024.

Intangible assets, net consist of the following (in thousands):

 

			At the End of
			Fiscal 2023																		Second Quarter of Fiscal 2024
			Gross Carrying Value						Accumulated Amortization						Net Carrying Amount						Gross Carrying Value						Accumulated Amortization						Net Carrying Amount
Technology patents			$	19,125					$	(14,826)					$	4,299					$	19,125					$	(15,467)					$	3,658
Developed technology			83,211						(43,366)						39,845						83,211						(49,978)						33,233
Customer relationships			6,459						(2,166)						4,293						6,459						(2,626)						3,833
Trade name			3,623						(2,838)						785						3,623						(3,441)						182
Intangible assets, net			$	112,418					$	(63,196)					$	49,222					$	112,418					$	(71,512)					$	40,906

 

 Intangible assets amortization expense was $4.1 million for the second quarter of fiscal 2023 and 2024, and $8.2 million and $8.3 million for the first two quarters of fiscal 2023 and 2024. At the end of the second quarter of fiscal 2024, the weighted-average remaining amortization period was 1.3 years for technology patents, 2.5 years for developed technology, 4.2 years for customer relationships, and 0.2 years for trade name. We record amortization of technology patents in general and administrative expenses due to their defensive nature, developed technology in cost of product revenue, and customer relationships and trade name in sales and marketing expenses in the condensed consolidated statements of operations.

At the end of the second quarter of fiscal 2024, future expected amortization expense for intangible assets is as follows (in thousands):

As of the end of fiscal 2023 and the second quarter of fiscal 2024, goodwill was $361.4 million. There were no impairments to goodwill for any period during fiscal 2023 and 2024.

Accrued expenses and other liabilities consist of the following (in thousands):

_________________________________

(1) Primarily consists of warranty reserves and accruals related to our inventory and inventory purchase commitments with our contract manufacturers.

Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts.

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

Of the $255.4 million total deferred commissions balance at the end of the second quarter of fiscal 2024, we expect to recognize approximately 28% as commission expense over the next 12 months and the remainder thereafter.

There was no impairment related to capitalized commissions for the second quarter and first two quarters of fiscal 2023 and 2024.

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services.

Changes in total deferred revenue during the periods presented are as follows (in thousands):

Total remaining performance obligations (RPO) which is contracted but not recognized revenue was $1.9 billion at the end of the second quarter of fiscal 2024. RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. Product orders are generally cancelable until delivery has occurred, and as such, unfulfilled product orders are excluded from RPO. Of the $1.9 billion RPO at the end of the second quarter of fiscal 2024, we expect to recognize approximately 47% over the next 12 months, and the remainder thereafter.

In August 2020, we entered into a Credit Agreement with a consortium of financial institutions and lenders that provides for a five-year, senior secured revolving credit facility of $300.0 million (Credit Facility). Proceeds from the Credit Facility may be used for general corporate purposes and working capital. The Credit Facility expires, absent default or early termination by us, on the earlier of (i) August 24, 2025 or (ii) 91 days prior to the stated maturity of the Notes unless, on such date and each subsequent day until the Notes are paid in full, the sum of our cash, cash equivalents and marketable securities and the aggregate unused commitments then available to us exceed $625.0 million.

In March 2023, we amended the Credit Facility to transition LIBOR to the Secured Overnight Financing Rate (SOFR) effective April 1, 2023. The annual interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% or term SOFR (based on one, three or six-month interest periods), subject to a floor of 0%, plus a margin ranging from 1.50% to 2.25%. Interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on term SOFR (or at each three-month interval if the interest period is longer than three months). We are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25% to 0.40% per annum, payable quarterly in arrears.

In April 2023, we borrowed $100.0 million under the Credit Facility which remained outstanding at the end of the second quarter of fiscal 2024. The outstanding loan bore weighted-average interest at an annual rate of 6.53% and 6.49% based on a one-month term SOFR period resulting in interest expense of $1.7 million and $2.1 million during the second quarter and first two quarters of fiscal 2024.

In April 2018, we issued $575.0 million of 0.125% convertible senior notes (the Notes) due April 15, 2023, in a private placement to qualified institutional buyers. The Notes were senior unsecured obligations and interest was payable semi-annually in arrears on April 15 and October 15 of each year. In April 2023, we repaid the entire principal balance with approximately $575.0 million in cash and 1,065 shares of our common stock.

The Notes consisted of the following (in thousands):

Prior to repayment, the effective interest rate on the Notes was 0.6%. The following table sets forth total interest expense recognized related to the Notes (in thousands):

In connection with the issuance of the Notes, we entered into capped call transactions with certain of the underwriters and their affiliates (the Capped Calls), which gave us the option to purchase up to a total of 21.9 million shares of our common stock to offset the economic dilution in excess of the principal amount upon conversion of the Notes at maturity up to a cap of $39.66 per share. The Capped Calls were not exercised and expired in April 2023.

From time to time, we have become involved in claims and other legal matters arising in the normal course of business. We investigate these claims as they arise. Although claims are inherently unpredictable, we currently are not aware of any matters that we expect to have a material adverse effect on our business, financial position, results of operations or cash flows. Accordingly, no material loss contingency has been recorded on our condensed consolidated balance sheet as of the end of the second quarter of fiscal 2024.

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any liabilities related to such obligations in the condensed consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

We lease office facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

In June 2022, we entered into an eight-year sublease through July 2030 for a new headquarters facility in Santa Clara, California with total lease payments of $100.2 million that include rent escalation and abatement clauses. The sublease of space with total lease payments of $89.4 million commenced in August 2022. Additional space with lease payments of $10.8 million will commence in May 2024 and end in July 2030, and are excluded from our future lease payments disclosure below.

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters and recorded an impairment charge to operating lease right-of-use assets of $15.9 million and an abandonment charge of $0.9 million related to these leases, which are presented in Impairment and Other in the condensed consolidated statement of operations. The impairment charge represents the amount that the carrying value of the assets exceeded their estimated fair values, which were determined by utilizing an undiscounted cash flow approach that incorporated a sublease assumption.

We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term of three years and contain a bargain purchase option at the end of the respective lease term. It is reasonably certain that the bargain purchase option will be exercised.

The components of lease costs during the periods presented were as follows (in thousands):

____________________________________

(1) Variable lease cost predominantly included common area maintenance charges.

Supplemental information related to leases is as follows (in thousands):

____________________________________

(1) Included in the condensed consolidated balance sheets within property and equipment, net.

(2) Included in the condensed consolidated balance sheets within accrued expenses and other liabilities.

(3) Included in the condensed consolidated balance sheets within other liabilities, non-current.

Supplemental cash flow information related to leases is as follows (in thousands):

Future lease payments under our non-cancelable leases at the end of the second quarter of fiscal 2024 were as follows (in thousands):

We have 20.0 million authorized shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our Board of Directors. At the end of the second quarter of fiscal 2024, there were no shares of preferred stock issued or outstanding.

We have two classes of authorized common stock, Class A common stock, which we refer to as our "common stock", and Class B common stock. At the end of the second quarter of fiscal 2024, we had 2.0 billion authorized shares of Class A common stock and 250.0 million authorized shares of Class B common stock, with each class having a par value of $0.0001 per share. At the end of the second quarter of fiscal 2024, 311.8 million shares of Class A common stock were issued and outstanding.

In March 2023, our Board of Directors authorized the repurchase of up to an additional $250.0 million of our common stock. During the second quarter of fiscal 2024, we repurchased and retired approximately 0.6 million shares of common stock at an average purchase price of $36.89 per share for an aggregate repurchase price of $22.0 million. During the first two quarters of fiscal 2024, we repurchased and retired approximately 3.5 million shares of common stock at an average purchase price of $26.48 per share for an aggregate repurchase price of $91.8 million. At the end of the second quarter of fiscal 2024, $189.3 million remained available for future share repurchases under our current repurchase authorization.

We maintain two equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan serves as the successor to our 2009 Plan and provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants. Our equity awards generally vest over a two to four year period and expire no later than ten years from the date of grant.

We net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax withholding obligations. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our condensed consolidated statements of cash flows.

Under our Amended and Restated 2015 Employee Stock Purchase Plan (2015 ESPP), our Board of Directors (or a committee thereof) has the authority to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date, a dollar cap of $7,500 per purchase period, or $25,000 in any calendar year (as determined under applicable tax rules). The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting of four 6-month purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.

Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. An ESPP reset occurred during the first quarter of fiscal 2024 that resulted in a modification charge of $16.7 million, which is being recognized over the new offering period ending March 15, 2025.

Stock-based compensation expense related to our 2015 ESPP was $4.9 million and $6.5 million during the second quarter of fiscal 2023 and 2024, and $11.8 million and $12.6 million during the first two quarters of fiscal 2023 and 2024. At the end of the second quarter of fiscal 2024, total unrecognized stock-based compensation cost related to our 2015 ESPP was $42.3 million, which is expected to be recognized over a weighted-average period of 1.6 years.

A summary of the stock option activity under our equity incentive plans and related information is as follows:

 

			Options Outstanding
			Number of Shares						Weighted- Average Exercise Price						Weighted- Average Remaining Contractual Life (In Years)						Aggregate Intrinsic Value (in thousands)
Balance at the end of fiscal 2023			9,268,498						$	10.90					2.7						$	176,674
Options exercised			(3,400,405)						8.79
Options forfeited			(1,778)						1.90
Balance at the end of the second quarter of fiscal 2024			5,866,315						$	12.12					2.4						$	149,619
Vested and exercisable at the end of the second quarter of fiscal 2024			5,779,285						$	12.20					2.3						$	146,519

 

The aggregate intrinsic value of options vested and exercisable at the end of the second quarter of fiscal 2024 is calculated based on the difference between the exercise price and the closing price of $37.55 of our common stock on the last day of the second quarter of fiscal 2024.

Stock-based compensation expense recognized related to stock options was $1.3 million and $0.5 million during the second quarter of fiscal 2023 and 2024, and $2.8 million and $1.2 million during the first two quarters of fiscal 2023 and 2024.

At the end of the second quarter of fiscal 2024, total unrecognized employee stock-based compensation cost related to outstanding options was $1.2 million, which is expected to be recognized over a weighted-average period of 0.7 years.

A summary of the RSU and PRSU activity under our equity incentive plans and related information is as follows: