UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated Filer |
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Non-accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 30, 2024, the registrant had
TABLE OF CONTENTS
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PART I. |
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Item 1 |
6 |
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Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
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Item 3 |
48 |
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Item 4 |
48 |
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PART II. |
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Item 1 |
49 |
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Item 1A |
49 |
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Item 2 |
49 |
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Item 3 |
49 |
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Item 4 |
49 |
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Item 5 |
50 |
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Item 6 |
50 |
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51 |
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52 |
3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains express and implied 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"), which statements involve substantial risks and uncertainties. Other than statements of historical fact, all statements contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "plan," "intend," "could," "would," "expect," or words or expressions of similar substance or the negative thereof, that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:
4
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs in light of the information currently available to us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for us to predict all risks, 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 materially from those contained or implied in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise or publicly release the results of any revision to these forward-looking statements to reflect new information or the occurrence of unanticipated or subsequent events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.
5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
6
NUTANIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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As of |
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July 31, |
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October 31, |
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(in thousands, except per share data) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net of allowances of $ |
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Deferred commissions—current |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Deferred commissions—non-current |
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Intangible assets, net |
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Goodwill |
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Other assets—non-current |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation and benefits |
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Accrued expenses and other current liabilities |
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Deferred revenue—current |
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Operating lease liabilities—current |
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Total current liabilities |
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Deferred revenue—non-current |
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Operating lease liabilities—non-current |
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Convertible senior notes, net |
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Other liabilities—non-current |
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Total liabilities |
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Stockholders’ deficit: |
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Common stock, par value of $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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See the accompanying notes to condensed consolidated financial statements.
7
NUTANIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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2023 |
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2024 |
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(in thousands, except per share data) |
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Revenue: |
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Product |
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$ |
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$ |
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Support, entitlements and other services |
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Total revenue |
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Cost of revenue: |
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Product |
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Support, entitlements and other services |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Total operating expenses |
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(Loss) income from operations |
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( |
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Other (expense) income, net |
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( |
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(Loss) income before provision for income taxes |
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( |
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Provision for income taxes |
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Net (loss) income |
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$ |
( |
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$ |
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Net (loss) income per share attributable to Class A |
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$ |
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$ |
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Net (loss) income per share attributable to Class A |
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$ |
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$ |
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Weighted average shares used in computing net |
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Weighted average shares used in computing net |
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See the accompanying notes to condensed consolidated financial statements.
8
NUTANIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
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Three Months Ended |
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2023 |
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2024 |
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(in thousands) |
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Net (loss) income |
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$ |
( |
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$ |
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Other comprehensive income, net of tax: |
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Change in unrealized gain on available-for-sale |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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See the accompanying notes to condensed consolidated financial statements.
9
NUTANIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
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Three Months Ended October 31, 2023 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Deficit |
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(in thousands) |
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Balance - July 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock through employee equity |
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— |
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— |
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— |
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Issuance of common stock from ESPP purchase |
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— |
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— |
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— |
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Repurchase and retirement of common stock |
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( |
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— |
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( |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance - October 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Three Months Ended October 31, 2024 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Income |
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Deficit |
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Deficit |
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(in thousands) |
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Balance - July 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock through employee equity |
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— |
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— |
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— |
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Issuance of common stock from ESPP purchase |
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— |
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— |
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— |
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Shares withheld related to net share settlement of |
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( |
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— |
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( |
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— |
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— |
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( |
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Repurchase and retirement of common stock |
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( |
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— |
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( |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance - October 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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See the accompanying notes to condensed consolidated financial statements.
10
NUTANIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended |
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2023 |
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2024 |
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(in thousands) |
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Cash flows from operating activities: |
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Net (loss) income |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Amortization of debt discount and issuance costs |
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Operating lease cost, net of accretion |
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Non-cash interest expense |
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Other |
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( |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Deferred commissions |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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( |
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Accrued compensation and benefits |
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( |
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( |
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Accrued expenses and other liabilities |
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( |
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( |
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Operating leases, net |
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( |
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( |
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Deferred revenue |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Maturities of investments |
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Purchases of investments |
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( |
) |
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( |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Proceeds from sales of shares through employee equity incentive plans |
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Taxes paid related to net share settlement of equity awards |
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( |
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Repurchases of common stock |
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( |
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( |
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Payment of finance lease obligations |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net increase in cash, cash equivalents and restricted cash |
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$ |
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$ |
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Cash, cash equivalents and restricted cash—beginning of period |
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Cash, cash equivalents and restricted cash—end of period |
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$ |
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$ |
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Restricted cash (1) |
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Cash and cash equivalents—end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for income taxes |
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$ |
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$ |
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Supplemental disclosures of non-cash investing and |
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Purchases of property and equipment included in accounts payable |
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$ |
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$ |
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Unpaid taxes related to net share settlement of equity awards included |
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$ |
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$ |
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See the accompanying notes to condensed consolidated financial statements.
11
NOTE 1. OVERVIEW AND BASIS OF PRESENTATION
Organization and Description of Business
Nutanix, Inc. was incorporated in the state of Delaware in September 2009. Nutanix, Inc. is headquartered in San Jose, California, and together with its wholly-owned subsidiaries (collectively, "we," "us," "our," or "Nutanix"), has operations throughout North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa.
We are a global leader in cloud software, offering organizations a single platform for running applications and managing data, anywhere. Our vision is to make hybrid multicloud deployments simple and free customers to focus on achieving their business outcomes. Our mission is to delight customers with an open hybrid multicloud platform with rich data services to run and manage any application, anywhere.
Our Nutanix Cloud Platform is designed to enable organizations to build a hybrid multicloud infrastructure, providing a consistent cloud operating model with a single platform for running applications and managing data in core data centers, at the edge, and in public clouds, all while supporting a variety of hypervisors and container platforms. Nutanix Cloud Platform supports a wide variety of workloads with varied compute, storage, and network requirements, including business-critical applications, data platforms (including SQL and NoSQL databases and business intelligence applications), general-purpose workloads (including system infrastructure, networking, and security), and end-user computing and virtual desktop infrastructure services, as well as enterprise artificial intelligence ("AI") workloads (including machine learning and generative AI workloads) and cloud native applications (including modern, containerized applications).
Our business is organized into a single operating and reportable segment. Our subscription-based business model provides our customers with the flexibility to choose their preferred license levels and durations based on their specific business needs. A subscription-based business model means one in which our products, including associated support and entitlement arrangements, are sold with a defined duration. Our solutions are primarily sold through channel partners and original equipment manufacturers ("OEMs") (collectively, "Partners") and delivered directly to our end customers.
Principles of Consolidation and Significant Accounting Policies
The accompanying condensed consolidated financial statements, which include the accounts of Nutanix, Inc. and its wholly-owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and are consistent in all material respects with those included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, filed with the Securities and Exchange Commission ("SEC") on September 19, 2024. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements are unaudited, but include all adjustments of a normal recurring nature necessary for a fair presentation of our quarterly results. The consolidated balance sheet as of July 31, 2024 is derived from audited financial statements; however, it does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024.
12
NUTANIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Use of Estimates
The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such management estimates and assumptions include, but are not limited to, the best estimate of selling prices for products and related support; useful lives and recoverability of intangible assets and property and equipment; allowance for credit losses; determination of fair value of stock-based awards; accounting for income taxes, including the valuation allowance on deferred tax assets and uncertain tax positions; purchase commitment liabilities to our contract manufacturers; sales commissions expense and the period of benefit for deferred commissions; whether an arrangement is or contains a lease; the incremental borrowing rate to measure the present value of right-of-use assets and lease liabilities; the inputs used to determine the fair value of the contingent liability associated with the conversion feature of the previously outstanding
Concentration of Risk
Concentration of revenue and accounts receivable — We sell our products primarily through our Partners and occasionally directly to end customers. For the three months ended October 31, 2023 and 2024, no end customer accounted for more than
For each significant Partner, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, net are as follows:
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Revenue |
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Accounts Receivable as of |
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Three Months Ended |
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July 31, |
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October 31, |
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Partners |
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2023 |
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2024 |
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||||
Partner A |
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(1) |
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% |
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% |
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% |
||||
Partner B |
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(1) |
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(1) |
|
|
(1) |
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% |
||||
Partner C |
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(1) |
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(1) |
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(1) |
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% |
||||
Partner D |
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% |
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% |
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% |
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(1) |
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||||
Partner E |
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|
% |
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% |
|
(1) |
|
|
(1) |
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||||
Partner F |
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|
% |
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% |
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% |
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(1) |
|
Summary of Significant Accounting Policies
Recently Issued and Not Yet Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the "FASB") issued accounting standards update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. The amendments in this update are effective for annual periods beginning after December 15, 2023, with early adoption permitted and requires application on a fully retrospective basis. This new ASU will be effective for us beginning with our Form 10-K for fiscal 2025. We are currently evaluating the impact this new standard will have on our disclosures.
13
NUTANIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. This new ASU will be effective for us beginning in fiscal 2026. We are currently evaluating the impact this new standard will have on our disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the statement of operations. This new ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. This new ASU will be effective for us beginning in fiscal 2028. We are currently evaluating the impact this new standard will have on our disclosures.
NOTE 2. REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS
Disaggregation of Revenue and Revenue Recognition
Nutanix Cloud Platform can be deployed in core data centers, at the edge, or in public clouds, running on a variety of qualified hardware platforms (including out Nutanix-branded NX hardware line), in popular public cloud environments such as Amazon Web Services ("AWS") and Microsoft Azure through Nutanix Cloud Clusters, or, in the case of our cloud-based software and software-as-a-service ("SaaS") offerings, via hosted service. Our subscription term-based licenses are sold separately, or can also be sold alongside configured-to-order servers. Our subscription term-based licenses typically have durations ranging from to
The following table depicts the disaggregation of revenue by revenue type, consistent with how we evaluate our financial performance:
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Three Months Ended |
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2023 |
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2024 |
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(in thousands) |
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Subscription |
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$ |
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$ |
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||
Professional services |
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Other non-subscription product |
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Total revenue |
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$ |
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$ |
|
Subscription revenue — Subscription revenue includes any performance obligation which has a defined term and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based SaaS offerings.
Professional services revenue — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.
14
NUTANIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Other non-subscription product revenue — Other non-subscription product revenue includes approximately $
Contracts with multiple performance obligations — The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis. For deliverables that we routinely sell separately, such as software entitlement and support subscriptions on our core offerings, we determine SSP by evaluating the standalone sales over the trailing 12 months. For those that are not sold routinely, we determine SSP based on our overall pricing trends and objectives, taking into consideration market conditions and other factors, including the value of our contracts, the products sold and geographic locations.
Contract balances — The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses. A receivable is recognized in the period in which we deliver goods or provide services, or when our right to consideration is unconditional. In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset. The balance of unbilled accounts receivable, included in accounts receivable, net on the condensed consolidated balance sheets, was $
Our customers are typically invoiced upfront, including invoices for multi-year subscriptions, with payment terms of 30-45 days. We assess credit losses on accounts receivable by taking into consideration past collection experience, the credit quality of the customer, the age of the receivable balance, current and future economic conditions, and forecasts that may affect the collectability of the reported amount. The balance of accounts receivable, net of allowance for credit losses, as of July 31, 2024 and October 31, 2024 is presented in the accompanying condensed consolidated balance sheets.
Costs to obtain and fulfill a contract — We capitalize commissions paid to sales personnel and the related payroll taxes when customer contracts are signed. These costs are recorded as deferred commissions in the condensed consolidated balance sheets, current and non-current. We determine whether costs should be deferred based on our sales compensation plans if the commissions are incremental and would not have been incurred absent the execution of the customer contract. Commissions paid upon the initial acquisition of a contract are recognized over the estimated period of benefit, which may exceed the term of the initial contract if the commissions expected to be paid upon renewal are not commensurate with that of the initial contract. Accordingly, deferred costs are recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation over the entire period of benefit and included in sales and marketing expense in the condensed consolidated statements of operations. We determine the estimated period of benefit by evaluating the expected renewals of customer contracts, the duration of relationships with our customers, customer retention data, our technology development lifecycle and other factors. Deferred costs are periodically reviewed for impairment.
Taxes assessed by a government authority that are both imposed on and concurrent with specific revenue transactions between us and our customers are presented on a net basis in our condensed consolidated statements of operations.
15
NUTANIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Deferred revenue — Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and primarily pertains to software entitlement and support subscriptions and professional services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet date.
Significant changes in the balance of deferred revenue (contract liability) and deferred commissions (contract asset) for the periods presented are as follows:
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Deferred |
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Deferred |
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(in thousands) |
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Balance as of July 31, 2024 |
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$ |
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$ |
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Additions (1) |
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Revenue/commissions recognized |
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( |
) |
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( |
) |
Balance as of October 31, 2024 |
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$ |
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$ |
|
During the three months ended October 31, 2023, we recognized revenue of approximately $
Many of our contracted but not invoiced performance obligations are subject to cancellation terms. Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized ("contracted not recognized"), which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods and excludes performance obligations that are subject to cancellation terms. Contracted not recognized revenue was approximately $
NOTE 3. FAIR VALUE MEASUREMENTS
The fair value of our financial assets measured on a recurring basis is as follows:
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As of July 31, 2024 |
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Level I |
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Level II |
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Level III |
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Total |
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(in thousands) |
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Financial Assets, Current: |
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Cash equivalents: |
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Money market funds |
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$ |
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$ |
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$ |
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$ |
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U.S. Government securities |
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Commercial paper |
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Short-term investments: |
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Corporate bonds |
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Commercial paper |
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U.S. Government securities |
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Total measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
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$ |
|
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Cash |
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Total cash, cash equivalents and short-term investments |
|
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$ |
|
||||
Financial Assets, Non-Current: |
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|
||||
Convertible note receivable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
16
NUTANIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
As of October 31, 2024 |
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