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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended October 31, 2024

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: 001-37883

 

NUTANIX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-0989767

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1740 Technology Drive, Suite 150

San Jose, CA 95110

(Address of principal executive offices, including zip code)

 

(408) 216-8360

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.000025 par value per share

 

NTNX

 

Nasdaq Global Select Market

 

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 No ☐

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 No ☐

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

 

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.

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 267,928,246 shares of Class A common stock, $0.000025 par value per share, outstanding.

 


 

 

TABLE OF CONTENTS

 

 

 

PAGE

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1

Financial Statements (Unaudited)

6

 

 

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

48

 

 

 

 

 

Item 4

Controls and Procedures

48

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

Item 1

Legal Proceedings

49

 

 

 

 

 

Item 1A

Risk Factors

49

 

 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

49

 

 

 

 

 

Item 3

Defaults Upon Senior Securities

49

 

 

 

 

 

Item 4

Mine Safety Disclosures

49

 

 

 

 

 

Item 5

Other Information

50

 

 

 

 

 

Item 6

Exhibits

50

 

 

 

 

EXHIBIT INDEX

51

SIGNATURES

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:

our investment in the profitable growth of our business over the long run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on creating operational efficiencies throughout our organization, including go-to-market efficiencies, particularly by generating leverage through partnerships;
continuing our focus on opportunities with major accounts, large deals, and commercial accounts, as well as other sales and marketing initiatives to increase our pipeline growth;
our intent in the long term to grow our global research and development and engineering teams to enhance our solutions, including our newer subscription-based products, improve integration with new and existing ecosystem partners and broaden the range of technologies and features available through our platform;
our continued investment in our growth by strengthening our core offerings, investing in our solution ecosystem, and taking advantage of emerging opportunities around generative artificial intelligence and modern applications across hybrid and mutlicloud environments;
our plan to continue to leverage our relationships with our channel and OEM partners and expand our network of cloud and ecosystem partners;
the recent evolution of our sales pipeline and its expected effect on our ability to land new customers and expand sales to existing customers, which may adversely affect our top-line results;
our expectations regarding our ability to recruit, train and retain sufficient numbers of ramped up sales personnel to support our growth, including how long it takes to ramp up sales personnel, and the expected contribution to revenue growth;
expected sales productivity;
expected increases in costs and expenses, including sales and marketing, research and development, and general and administrative expenses;
our intent to reduce our overall sales and marketing spend as a percentage of revenue, including by improving the efficiency of our demand generation spend, focusing on lower cost renewals, and optimizing headcount in geographies based on market opportunities;
sustaining profitable growth;
fluctuations in hardware revenue and cost of product revenue;
the sufficiency of our cash, cash equivalents and short-term investments and our expected net cash provided by operating activities to meet anticipated cash needs;
our expectations that neither our operating results nor cash flows would be materially affected by any sudden change in interest rates; and
anticipated trends, opportunities and challenges in our business and in the markets in which we operate.

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)

 

 

Page

 

 

Condensed Consolidated Balance Sheets as of July 31, 2024 and October 31, 2024

7

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended October 31, 2023 and 2024

8

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended October 31, 2023 and 2024

9

 

 

Condensed Consolidated Statements of Stockholders' Deficit for the Three Months Ended October 31, 2023 and 2024

10

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2023 and 2024

11

 

 

Notes to Condensed Consolidated Financial Statements

12

 

 

Note 1: Overview and Basis of Presentation

12

Note 2: Revenue, Deferred Revenue and Deferred Commissions

14

Note 3: Fair Value Measurements

16

Note 4: Balance Sheet Components

18

Note 5: Convertible Senior Notes

20

Note 6: Leases

23

Note 7: Commitments and Contingencies

25

Note 8: Stockholders' Equity

25

Note 9: Equity Incentive Plans

25

Note 10: Income Taxes

28

Note 11: Net Income (Loss) Per Share

28

Note 12: Segment Information

29

 

6


NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

As of

 

 

 

July 31,
2024

 

 

October 31,
2024

 

 

 

(in thousands, except per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

655,270

 

 

$

716,604

 

Short-term investments

 

 

339,072

 

 

 

358,846

 

Accounts receivable, net of allowances of $772 and $855, respectively

 

 

229,796

 

 

 

198,582

 

Deferred commissions—current

 

 

159,849

 

 

 

150,975

 

Prepaid expenses and other current assets

 

 

97,307

 

 

 

98,452

 

Total current assets

 

 

1,481,294

 

 

 

1,523,459

 

Property and equipment, net

 

 

136,180

 

 

 

132,455

 

Operating lease right-of-use assets

 

 

109,133

 

 

 

118,593

 

Deferred commissions—non-current

 

 

198,962

 

 

 

188,364

 

Intangible assets, net

 

 

5,153

 

 

 

4,298

 

Goodwill

 

 

185,235

 

 

 

185,235

 

Other assets—non-current

 

 

27,961

 

 

 

28,947

 

Total assets

 

$

2,143,918

 

 

$

2,181,351

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

45,066

 

 

$

44,698

 

Accrued compensation and benefits

 

 

195,602

 

 

 

164,670

 

Accrued expenses and other current liabilities

 

 

24,967

 

 

 

18,968

 

Deferred revenue—current

 

 

954,543

 

 

 

968,642

 

Operating lease liabilities—current

 

 

24,163

 

 

 

23,621

 

Total current liabilities

 

 

1,244,341

 

 

 

1,220,599

 

Deferred revenue—non-current

 

 

918,163

 

 

 

925,743

 

Operating lease liabilities—non-current

 

 

90,359

 

 

 

100,409

 

Convertible senior notes, net

 

 

570,073

 

 

 

570,458

 

Other liabilities—non-current

 

 

49,130

 

 

 

49,438

 

Total liabilities

 

 

2,872,066

 

 

 

2,866,647

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

Common stock, par value of $0.000025 per share—1,000,000 Class
   A shares authorized as of July 31, 2024 and October 31, 2024;
   
265,181 and 267,845 Class A shares issued and outstanding as of
   July 31, 2024 and October 31, 2024, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

4,118,898

 

 

 

4,145,942

 

Accumulated other comprehensive income

 

 

146

 

 

 

559

 

Accumulated deficit

 

 

(4,847,199

)

 

 

(4,831,804

)

Total stockholders’ deficit

 

 

(728,148

)

 

 

(685,296

)

Total liabilities and stockholders’ deficit

 

$

2,143,918

 

 

$

2,181,351

 

 

 

See the accompanying notes to condensed consolidated financial statements.

7


NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
October 31,

 

 

 

2023

 

 

2024

 

 

 

(in thousands, except per share data)

 

Revenue:

 

 

 

 

 

 

Product

 

$

246,922

 

 

$

301,919

 

Support, entitlements and other services

 

 

264,132

 

 

 

289,037

 

Total revenue

 

 

511,054

 

 

 

590,956

 

Cost of revenue:

 

 

 

 

 

 

Product

 

 

10,234

 

 

 

8,370

 

Support, entitlements and other services

 

 

71,725

 

 

 

74,300

 

Total cost of revenue

 

 

81,959

 

 

 

82,670

 

Gross profit

 

 

429,095

 

 

 

508,286

 

Operating expenses:

 

 

 

 

 

 

Sales and marketing

 

 

235,323

 

 

 

253,401

 

Research and development

 

 

151,975

 

 

 

173,959

 

General and administrative

 

 

47,503

 

 

 

53,676

 

Total operating expenses

 

 

434,801

 

 

 

481,036

 

(Loss) income from operations

 

 

(5,706

)

 

 

27,250

 

Other (expense) income, net

 

 

(5,275

)

 

 

9,573

 

(Loss) income before provision for income taxes

 

 

(10,981

)

 

 

36,823

 

Provision for income taxes

 

 

4,872

 

 

 

6,897

 

Net (loss) income

 

$

(15,853

)

 

$

29,926

 

Net (loss) income per share attributable to Class A
   common stockholders, basic

 

$

(0.07

)

 

$

0.11

 

Net (loss) income per share attributable to Class A
   common stockholders, diluted

 

$

(0.07

)

 

$

0.10

 

Weighted average shares used in computing net
   (loss) income per share attributable to Class A
   common stockholders, basic

 

 

241,490

 

 

 

266,556

 

Weighted average shares used in computing net
   (loss) income per share attributable to Class A
   common stockholders, diluted

 

 

241,490

 

 

 

288,829

 

 

 

See the accompanying notes to condensed consolidated financial statements.

8


NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended
October 31,

 

 

 

2023

 

 

2024

 

 

 

(in thousands)

 

Net (loss) income

 

$

(15,853

)

 

$

29,926

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Change in unrealized gain on available-for-sale
   securities, net of tax

 

 

796

 

 

 

413

 

Comprehensive (loss) income

 

$

(15,057

)

 

$

30,339

 

 

 

See the accompanying notes to condensed consolidated financial statements.

9


NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

 

 

Three Months Ended October 31, 2023

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

 

 

(in thousands)

 

Balance - July 31, 2023

 

 

239,607

 

 

$

6

 

 

$

3,930,668

 

 

$

(5,171

)

 

$

(4,632,922

)

 

$

(707,419

)

Issuance of common stock through employee equity
   incentive plans

 

 

3,274

 

 

 

 

 

 

547

 

 

 

 

 

 

 

 

 

547

 

Issuance of common stock from ESPP purchase

 

 

653

 

 

 

 

 

 

13,233

 

 

 

 

 

 

 

 

 

13,233

 

Repurchase and retirement of common stock

 

 

(482

)

 

 

 

 

 

(7,774

)

 

 

 

 

 

(9,739

)

 

 

(17,513

)

Stock-based compensation

 

 

 

 

 

 

 

 

83,998

 

 

 

 

 

 

 

 

 

83,998

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

796

 

 

 

 

 

 

796

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,853

)

 

 

(15,853

)

Balance - October 31, 2023

 

 

243,052

 

 

$

6

 

 

$

4,020,672

 

 

$

(4,375

)

 

$

(4,658,514

)

 

$

(642,211

)

 

 

 

 

Three Months Ended October 31, 2024

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

 

 

(in thousands)

 

Balance - July 31, 2024

 

 

265,181

 

 

$

7

 

 

$

4,118,898

 

 

$

146

 

 

$

(4,847,199

)

 

$

(728,148

)

Issuance of common stock through employee equity
   incentive plans

 

 

3,621

 

 

 

 

 

 

747

 

 

 

 

 

 

 

 

 

747

 

Issuance of common stock from ESPP purchase

 

 

811

 

 

 

 

 

 

27,365

 

 

 

 

 

 

 

 

 

27,365

 

Shares withheld related to net share settlement of
  equity awards

 

 

(1,428

)

 

 

 

 

 

(84,248

)

 

 

 

 

 

 

 

 

(84,248

)

Repurchase and retirement of common stock

 

 

(340

)

 

 

 

 

 

(5,569

)

 

 

 

 

 

(14,531

)

 

 

(20,100

)

Stock-based compensation

 

 

 

 

 

 

 

 

88,749

 

 

 

 

 

 

 

 

 

88,749

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

413

 

 

 

 

 

 

413

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,926

 

 

 

29,926

 

Balance - October 31, 2024

 

 

267,845

 

 

$

7

 

 

$

4,145,942

 

 

$

559

 

 

$

(4,831,804

)

 

$

(685,296

)

 

 

See the accompanying notes to condensed consolidated financial statements.

10


NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended
October 31,

 

 

 

2023

 

 

2024

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(15,853

)

 

$

29,926

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

18,187

 

 

 

18,180

 

Stock-based compensation

 

 

83,998

 

 

 

88,749

 

Amortization of debt discount and issuance costs

 

 

11,055

 

 

 

386

 

Operating lease cost, net of accretion

 

 

7,872

 

 

 

6,919

 

Non-cash interest expense

 

 

5,017

 

 

 

 

Other

 

 

(4,044

)

 

 

(817

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

23,656

 

 

 

52,453

 

Deferred commissions

 

 

5,098

 

 

 

19,472

 

Prepaid expenses and other assets

 

 

60,696

 

 

 

(1,999

)

Accounts payable

 

 

3,953

 

 

 

(4,454

)

Accrued compensation and benefits

 

 

(7,421

)

 

 

(35,906

)

Accrued expenses and other liabilities

 

 

(89,029

)

 

 

(4,727

)

Operating leases, net

 

 

(7,791

)

 

 

(6,871

)

Deferred revenue

 

 

50,079

 

 

 

440

 

Net cash provided by operating activities

 

 

145,473

 

 

 

161,751

 

Cash flows from investing activities:

 

 

 

 

 

 

Maturities of investments

 

 

248,980

 

 

 

91,648

 

Purchases of investments

 

 

(278,178

)

 

 

(110,011

)

Purchases of property and equipment

 

 

(13,020

)

 

 

(9,831

)

Net cash used in investing activities

 

 

(42,218

)

 

 

(28,194

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from sales of shares through employee equity incentive plans

 

 

13,783

 

 

 

28,113

 

Taxes paid related to net share settlement of equity awards

 

 

 

 

 

(79,274

)

Repurchases of common stock

 

 

(17,513

)

 

 

(20,100

)

Payment of finance lease obligations

 

 

(637

)

 

 

(964

)

Net cash used in financing activities

 

 

(4,367

)

 

 

(72,225

)

Net increase in cash, cash equivalents and restricted cash

 

$

98,888

 

 

$

61,332

 

Cash, cash equivalents and restricted cash—beginning of period

 

 

515,771

 

 

 

655,662

 

Cash, cash equivalents and restricted cash—end of period

 

$

614,659

 

 

$

716,994

 

Restricted cash (1)

 

 

2,197

 

 

 

390

 

Cash and cash equivalents—end of period

 

$

612,462

 

 

$

716,604

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

8,134

 

 

$

9,296

 

Supplemental disclosures of non-cash investing and
   financing information:

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable
   and accrued and other liabilities

 

$

15,013

 

 

$

4,517

 

Unpaid taxes related to net share settlement of equity awards included
   in accrued expenses and other liabilities

 

$

 

 

$

16,788

 

 

(1)
Included within other assets—non-current in the condensed consolidated balance sheets.

 

See the accompanying notes to condensed consolidated financial statements.

11


Table of Contents

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


Table of Contents

 

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 2.50% convertible senior notes due 2026 (the "2026 Notes"); and contingencies and litigation. Management evaluates these estimates and assumptions on an ongoing basis using historical experience and other factors and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

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 10% of total revenue or accounts receivable.

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:

 

 

 

Revenue

 

 

Accounts Receivable as of

 

 

 

Three Months Ended
October 31,

 

 

July 31,
2024

 

 

October 31,
2024

 

Partners

 

2023

 

 

2024

 

 

 

 

 

 

 

Partner A

 

(1)

 

 

 

13

%

 

 

16

%

 

 

13

%

Partner B

 

(1)

 

 

(1)

 

 

(1)

 

 

 

11

%

Partner C

 

(1)

 

 

(1)

 

 

(1)

 

 

 

10

%

Partner D

 

 

15

%

 

 

15

%

 

 

10

%

 

(1)

 

Partner E

 

 

13

%

 

 

12

%

 

(1)

 

 

(1)

 

Partner F

 

 

29

%

 

 

28

%

 

 

12

%

 

(1)

 

 

(1)
Less than 10%

Summary of Significant Accounting Policies

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, filed with the SEC on September 19, 2024, that have had a material impact on our condensed consolidated financial statements.

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.

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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 one to five years. Our cloud-based SaaS subscriptions generally have durations extending up to five years.

The following table depicts the disaggregation of revenue by revenue type, consistent with how we evaluate our financial performance:

 

 

 

Three Months Ended
October 31,

 

 

 

2023

 

 

2024

 

 

 

(in thousands)

 

Subscription

 

$

479,478

 

 

$

560,696

 

Professional services

 

 

22,835

 

 

 

27,285

 

Other non-subscription product

 

 

8,741

 

 

 

2,975

 

Total revenue

 

$

511,054

 

 

$

590,956

 

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.

Ratable We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the substantial majority of which relate to software entitlement and support subscriptions. These offerings represented approximately $253.5 million of our subscription revenue for the three months ended October 31, 2023 and $274.4 million of our subscription revenue for the three months ended October 31, 2024.
Upfront — Revenue from our subscription software licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. These subscription software licenses represented approximately $226.0 million of our subscription revenue for the three months ended October 31, 2023 and $286.3 million of our subscription revenue for the three months ended October 31, 2024.

Professional services revenue — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other non-subscription product revenue — Other non-subscription product revenue includes approximately $8.1 million of non-portable software revenue for the three months ended October 31, 2023, $1.9 million of non-portable software revenue for the three months ended October 31, 2024, $0.6 million of hardware revenue for the three months ended October 31, 2023, and $1.1 million of hardware revenue for the three months ended October 31, 2024.

Non-portable software revenue — Non-portable software revenue includes sales of our platform when delivered on a configured-to-order server by us or one of our OEM partners. The software licenses associated with these sales are typically non-portable and can be used over the life of the server on which the software is delivered. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.
Hardware revenue — In the infrequent transactions where the hardware platform is purchased directly from Nutanix, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

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 $41.1 million and $53.4 million as of July 31, 2024 and October 31, 2024, respectively.

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.

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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:

 

 

 

Deferred
Revenue

 

 

Deferred
Commissions

 

 

 

(in thousands)

 

Balance as of July 31, 2024

 

$

1,872,706

 

 

$

358,811

 

Additions (1)

 

 

612,635

 

 

 

39,274

 

Revenue/commissions recognized

 

 

(590,956

)

 

 

(58,746

)

Balance as of October 31, 2024

 

$

1,894,385

 

 

$

339,339

 

 

(1)
Includes both billed and unbilled amounts.

During the three months ended October 31, 2023, we recognized revenue of approximately $244.2 million pertaining to amounts deferred as of July 31, 2023. During the three months ended October 31, 2024, we recognized revenue of approximately $272.2 million pertaining to amounts deferred as of July 31, 2024.

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 $2.1 billion as of October 31, 2024, of which we expect to recognize approximately 52% over the next 12 months, and the remainder thereafter.

NOTE 3. FAIR VALUE MEASUREMENTS

The fair value of our financial assets measured on a recurring basis is as follows:

 

 

 

As of July 31, 2024

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

 

 

(in thousands)

 

Financial Assets, Current:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

352,295

 

 

$

 

 

$

 

 

$

352,295

 

U.S. Government securities

 

 

 

 

 

99

 

 

 

 

 

 

99

 

Commercial paper

 

 

 

 

 

1,747

 

 

 

 

 

 

1,747

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

 

 

 

233,065

 

 

 

 

 

 

233,065

 

Commercial paper

 

 

 

 

 

33,770

 

 

 

 

 

 

33,770

 

U.S. Government securities

 

 

 

 

 

72,237

 

 

 

 

 

 

72,237

 

Total measured at fair value

 

$

352,295

 

 

$

340,918

 

 

$

 

 

$

693,213

 

Cash

 

 

 

 

 

 

 

 

 

 

 

301,129

 

Total cash, cash equivalents and short-term investments

 

 

 

 

 

 

 

 

 

 

$

994,342

 

Financial Assets, Non-Current:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note receivable

 

$

 

 

$

 

 

$

5,150

 

 

$

5,150

 

 

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NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

 

 

As of October 31, 2024