SEC Form 10-Q filed by Nutanix Inc.

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 April 30, 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 May 31, 2024, the registrant had 246,640,821 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	34
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4	Controls and Procedures	52
PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	55
	Item 1A	Risk Factors	55
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	56
	Item 3	Defaults Upon Senior Securities	56
	Item 4	Mine Safety Disclosures	56
	Item 5	Other Information	56
	Item 6	Exhibits	56
EXHIBIT INDEX			57
SIGNATURES			58

 

---

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:

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, 2023. 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.

---

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

	Page
Condensed Consolidated Balance Sheets as of July 31, 2023 and April 30, 2024	7
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended April 30, 2023 and 2024	8
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended April 30, 2023 and 2024	9
Condensed Consolidated Statements of Stockholders' Deficit for the Three and Nine Months Ended April 30, 2023 and 2024	10
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2023 and 2024	12
Notes to Condensed Consolidated Financial Statements	13
Note 1: Overview and Basis of Presentation	13
Note 2: Revenue, Deferred Revenue and Deferred Commissions	15
Note 3: Fair Value Measurements	17
Note 4: Balance Sheet Components	19
Note 5: Convertible Senior Notes	22
Note 6: Leases	26
Note 7: Commitments and Contingencies	28
Note 8: Stockholders' Equity	28
Note 9: Equity Incentive Plans	29
Note 10: Income Taxes	31
Note 11: Restructuring Charges	32
Note 12: Net Income (Loss) Per Share	32
Note 13: Segment Information	33
Note 14: Subsequent Event	33

 

---

NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		As of
		July 31, 2023				April 30, 2024
		(in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents		$	512,929			$	598,027
Short-term investments			924,466				1,053,354
Accounts receivable, net of allowances of $733 and $1,619, respectively			157,251				225,301
Deferred commissions—current			120,001				148,435
Prepaid expenses and other current assets			147,087				114,123
Total current assets			1,861,734				2,139,240
Property and equipment, net			111,865				114,785
Operating lease right-of-use assets			93,554				96,895
Deferred commissions—non-current			237,990				204,357
Intangible assets, net			4,893				6,019
Goodwill			184,938				185,235
Other assets—non-current			31,941				28,393
Total assets		$	2,526,915			$	2,774,924
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable		$	29,928			$	40,286
Accrued compensation and benefits			143,679				173,339
Accrued expenses and other current liabilities			109,269				22,486
Deferred revenue—current			823,665				923,559
Operating lease liabilities—current			29,567				23,884
Total current liabilities			1,136,108				1,183,554
Deferred revenue—non-current			771,367				823,891
Operating lease liabilities—non-current			68,940				79,028
Convertible senior notes, net			1,218,165				1,271,966
Other liabilities—non-current			39,754				35,945
Total liabilities			3,234,334				3,394,384
Commitments and contingencies (Note 7)
Stockholders’ deficit:
Preferred stock, par value of $0.000025 per share— 200,000 shares    authorized as of July 31, 2023 and April 30, 2024; no shares    issued and outstanding as of July 31, 2023 and April 30, 2024			—				—
Common stock, par value of $0.000025 per share—1,000,000 Class    A shares authorized as of July 31, 2023 and April 30, 2024;    239,607 and 246,932 Class A shares issued and outstanding as    of July 31, 2023 and April 30, 2024, respectively			6				6
Additional paid-in capital			3,930,668				4,086,671
Accumulated other comprehensive loss			(5,171	)			(3,703	)
Accumulated deficit			(4,632,922	)			(4,702,434	)
Total stockholders’ deficit			(707,419	)			(619,460	)
Total liabilities and stockholders’ deficit		$	2,526,915			$	2,774,924

 

 

See the accompanying notes to condensed consolidated financial statements.

---

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands, except per share data)
Revenue:
Product		$	212,507			$	255,465			$	671,619			$	802,047
Support, entitlements and other services			236,074				269,112				697,066				798,817
Total revenue			448,581				524,577				1,368,685				1,600,864
Cost of revenue:
Product			12,430				8,469				40,452				28,105
Support, entitlements and other services			69,999				71,150				211,277				215,029
Total cost of revenue			82,429				79,619				251,729				243,134
Gross profit			366,152				444,958				1,116,956				1,357,730
Operating expenses:
Sales and marketing			229,261				245,901				695,271				717,926
Research and development			143,016				159,220				434,760				471,596
General and administrative			52,515				51,425				182,728				148,457
Total operating expenses			424,792				456,546				1,312,759				1,337,979
(Loss) income from operations			(58,640	)			(11,588	)			(195,803	)			19,751
Other (expense) income, net			(7,168	)			659				(30,696	)			(2,520	)
(Loss) income before provision for income taxes			(65,808	)			(10,929	)			(226,499	)			17,231
Provision for income taxes			5,161				4,687				14,774				15,905
Net (loss) income		$	(70,969	)		$	(15,616	)		$	(241,273	)		$	1,326
Net (loss) income per share attributable to Class A    common stockholders, basic		$	(0.30	)		$	(0.06	)		$	(1.04	)		$	0.01
Net (loss) income per share attributable to Class A    common stockholders, diluted		$	(0.30	)		$	(0.06	)		$	(1.04	)		$	0.05
Weighted average shares used in computing net    (loss) income per share attributable to Class A    common stockholders, basic			234,735				245,766				231,702				243,688
Weighted average shares used in computing net    (loss) income per share attributable to Class A    common stockholders, diluted			234,735				245,766				231,702				297,055

 

 

See the accompanying notes to condensed consolidated financial statements.

---

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands)
Net (loss) income		$	(70,969	)		$	(15,616	)		$	(241,273	)		$	1,326
Other comprehensive income (loss), net of tax:
Change in unrealized loss on available-for-sale    securities, net of tax			1,518				(4,582	)			1,793				1,468
Comprehensive (loss) income		$	(69,451	)		$	(20,198	)		$	(239,480	)		$	2,794

 

 

See the accompanying notes to condensed consolidated financial statements.

---

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

		Nine Months Ended April 30, 2023
		Common Stock								Additional Paid-In				Accumulated Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Capital				Loss				Deficit				Deficit
		(in thousands)
Balance - July 31, 2022			226,938			$	6			$	3,583,928			$	(6,076	)		$	(4,378,362	)		$	(800,504	)
Issuance of common stock through employee equity    incentive plans			2,172				—				1,975				—				—				1,975
Issuance of common stock from ESPP purchase			998				—				18,947				—				—				18,947
Stock-based compensation			—				—				80,955				—				—				80,955
Other comprehensive loss			—				—				—				(3,642	)			—				(3,642	)
Net loss			—				—				—				—				(99,514	)			(99,514	)
Balance - October 31, 2022			230,108				6				3,685,805				(9,718	)			(4,477,876	)			(801,783	)
Issuance of common stock through employee equity    incentive plans			3,483				—				684				—				—				684
Stock-based compensation			—				—				85,290				—				—				85,290
Other comprehensive income			—				—				—				3,917				—				3,917
Net loss			—				—				—				—				(70,790	)			(70,790	)
Balance - January 31, 2023			233,591				6				3,771,779				(5,801	)			(4,548,666	)			(782,682	)
Issuance of common stock through employee equity    incentive plans			2,566				—				372				—				—				372
Shares withheld related to net share settlement of   equity awards			(413	)			—				(10,214	)			—				—				(10,214	)
Stock-based compensation			—				—				72,908				—				—				72,908
Other comprehensive income			—				—				—				1,518				—				1,518
Net loss			—				—				—				—				(70,969	)			(70,969	)
Balance - April 30, 2023			235,744			$	6			$	3,834,845			$	(4,283	)		$	(4,619,635	)		$	(789,067	)

 

---

 

		Nine Months Ended April 30, 2024
		Common Stock								Additional Paid-In				Accumulated Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Capital				(Loss) Income				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	)
Issuance of common stock through employee equity    incentive plans			3,689				—				1,370				—				—				1,370
Shares withheld related to net share settlement of   equity awards			(1,148	)			—				(53,180	)			—				—				(53,180	)
Repurchase and retirement of common stock			(934	)			—				(15,052	)			—				(26,627	)			(41,679	)
Stock-based compensation			—				—				85,969				—				—				85,969
Other comprehensive income			—				—				—				5,254				—				5,254
Net income			—				—				—				—				32,795				32,795
Balance - January 31, 2024			244,659				6				4,039,779				879				(4,652,346	)			(611,682	)
Issuance of common stock through employee equity    incentive plans			2,756				—				1,413				—				—				1,413
Issuance of common stock from ESPP purchase			1,217				—				34,094				—				—				34,094
Shares withheld related to net share settlement of   equity awards			(926	)			—				(58,440	)			—				—				(58,440	)
Repurchase and retirement of common stock			(774	)			—				(12,467	)			—				(34,472	)			(46,939	)
Stock-based compensation			—				—				82,292				—				—				82,292
Other comprehensive loss			—				—				—				(4,582	)			—				(4,582	)
Net loss			—				—				—				—				(15,616	)			(15,616	)
Balance - April 30, 2024			246,932			$	6			$	4,086,671			$	(3,703	)		$	(4,702,434	)		$	(619,460	)

 

 

See the accompanying notes to condensed consolidated financial statements.

---

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended April 30,
		2023				2024
		(in thousands)
Cash flows from operating activities:
Net (loss) income		$	(241,273	)		$	1,326
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			59,078				54,986
Stock-based compensation			239,153				252,259
Amortization of debt discount and issuance costs			31,767				33,738
Operating lease cost, net of accretion			27,065				24,009
Early exit of lease-related assets			(1,109	)			—
Non-cash interest expense			14,772				15,143
Other			(6,275	)			(14,117	)
Changes in operating assets and liabilities:
Accounts receivable, net			(4,768	)			(49,669	)
Deferred commissions			16,919				5,199
Prepaid expenses and other assets			(33,858	)			37,588
Accounts payable			(5,106	)			10,326
Accrued compensation and benefits			2,356				29,660
Accrued expenses and other liabilities			53,451				(83,857	)
Operating leases, net			(30,134	)			(22,394	)
Deferred revenue			92,056				134,037
Net cash provided by operating activities			214,094				428,234
Cash flows from investing activities:
Maturities of investments			722,983				625,519
Purchases of investments			(711,253	)			(740,034	)
Payments for acquisitions, net of cash acquired			—				(4,500	)
Purchases of property and equipment			(52,603	)			(54,813	)
Net cash used in investing activities			(40,873	)			(173,828	)
Cash flows from financing activities:
Repayment of convertible notes			(145,704	)			—
Proceeds from sales of shares through employee equity incentive plans			23,268				50,660
Taxes paid related to net share settlement of equity awards			(10,214	)			(111,620	)
Repurchases of common stock			—				(106,131	)
Payment of finance lease obligations			(3,711	)			(2,928	)
Net cash used in financing activities			(136,361	)			(170,019	)
Net increase in cash, cash equivalents and restricted cash		$	36,860			$	84,387
Cash, cash equivalents and restricted cash—beginning of period			405,862				515,771
Cash, cash equivalents and restricted cash—end of period		$	442,722			$	600,158
Restricted cash (1)			2,804				2,131
Cash and cash equivalents—end of period		$	439,918			$	598,027
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	21,578			$	20,938
Supplemental disclosures of non-cash investing and    financing information:
Purchases of property and equipment included in accounts payable    and accrued and other liabilities		$	16,214			$	983

 

See the accompanying notes to condensed consolidated financial statements.

---

---

---

---

 

---

---

---

 

---

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and notes thereto and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 filed on September 21, 2023. The last day of our fiscal year is July 31. Our fiscal quarters end on October 31, January 31, April 30 and July 31. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth 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, 2023 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also "Special Note Regarding Forward-Looking Statements" above.

Overview

Nutanix, Inc. ("we," "us," "our" or "Nutanix") provides a leading enterprise cloud platform, which we call Nutanix Cloud Platform, that consists of software solutions and cloud services that power our customers’ enterprise infrastructure. Our solutions deliver a consistent cloud operating model across edge, private-, hybrid- and multicloud environments for all applications and their data. Our solutions allow organizations to simply run and move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure services, modern applications, analytics applications, and artificial intelligence ("AI") workloads, including machine learning ("ML") and generative AI workloads, between on-premises and public clouds. Our goal is to provide a single, simple, open software platform for all hybrid and multicloud applications and their data. We operate a subscription-based business model to provide our customers with the flexibility to choose the licensing that works best for them based on their specific business needs.

Nutanix Cloud Platform can be deployed on-premises in data centers or at the edge, running on a variety of qualified hardware platforms, in popular public cloud environments such as 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 purchased from one of our channel partners or original equipment manufacturers ("OEMs") (collectively, "Partners"). Our subscription term-based licenses typically have terms ranging from one to five years. Our cloud-based SaaS subscriptions have terms extending up to five years.

Our enterprise cloud platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. Purchases of term-based licenses and SaaS subscriptions have support and entitlements included within the subscription fees and are not sold separately. Purchases of non-portable software are typically accompanied by the purchase of separate support and entitlements.

We had a broad and diverse base of over 25,000 end customers as of April 30, 2024, including approximately 1,040 Global 2000 enterprises. We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

Our solutions are primarily sold through our Partners and delivered directly to our end customers. Our solutions serve a broad range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications, big data analytics, and AI workloads, including ML and generative AI workloads, and we support both virtualized and container-based applications. We have end customers across a broad range of industries, such as automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology and telecommunications. We also sell to service providers, who utilize our enterprise cloud platform to provide a variety of cloud-based services to their customers.

---

We continue to invest 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 go-to-market efficiencies. By maintaining this balance, we believe that we can sustain profitable growth. As discussed further in the "Factors Affecting Our Performance" section below, as part of our overall plan to improve our operating cash flow performance, we will continue to take steps to manage our expenses. As a result, our overall spending will fluctuate, and may decline, from quarter to quarter in the near-term.

As initially disclosed in May 2023, in connection with our Audit Committee’s previously completed investigation, we had identified control deficiencies that, individually or in the aggregate, constitute a material weakness in our internal control over financial reporting. For more information about our remediation efforts to address the material weakness, refer to Part I, Item 4 of this Quarterly Report on Form 10-Q.

Key Financial and Performance Metrics

We monitor the following key financial and performance metrics:

 

		As of and for the
		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands, except percentages and end customer count)
Total revenue		$	448,581			$	524,577			$	1,368,685			$	1,600,864
Year-over-year percentage increase			11.1	%			16.9	%			14.5	%			17.0	%
Total billings		$	461,914			$	557,285			$	1,460,741			$	1,734,901
Annual contract value ("ACV") billings		$	239,810			$	288,851			$	698,378			$	861,870
Annual recurring revenue ("ARR")		$	1,467,178			$	1,820,207			$	1,467,178			$	1,820,207
Gross profit		$	366,152			$	444,958			$	1,116,956			$	1,357,730
Non-GAAP gross profit		$	376,986			$	453,691			$	1,151,151			$	1,386,247
Gross margin			81.6	%			84.8	%			81.6	%			84.8	%
Non-GAAP gross margin			84.0	%			86.5	%			84.1	%			86.6	%
Operating expenses		$	424,792			$	456,546			$	1,312,759			$	1,337,979
Non-GAAP operating expenses		$	359,797			$	380,415			$	1,053,778			$	1,109,607
Operating (loss) income		$	(58,640	)		$	(11,588	)		$	(195,803	)		$	19,751
Non-GAAP operating income		$	17,189			$	73,276			$	97,373			$	276,640
Operating margin			(13.1	)%			(2.2	)%			(14.3	)%			1.2	%
Non-GAAP operating margin			3.8	%			14.0	%			7.1	%			17.3	%
Net cash provided by operating activities		$	74,497			$	96,353			$	214,094			$	428,234
Free cash flow		$	52,666			$	78,324			$	161,491			$	373,421
Total end customers (1)			24,050				25,860				24,050				25,860

 

---

Disaggregation of Revenue and Billings

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

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands)
Disaggregation of revenue:
Subscription revenue		$	417,516			$	486,620			$	1,271,388			$	1,498,081
Professional services revenue			22,101				26,240				67,821				74,083
Other non-subscription product revenue (1)			8,964				11,717				29,476				28,700
Total revenue		$	448,581			$	524,577			$	1,368,685			$	1,600,864
Disaggregation of billings:
Subscription billings		$	428,959			$	515,920			$	1,364,752			$	1,617,593
Professional services billings			23,991				29,648				66,513				88,608
Other non-subscription product billings (1)			8,964				11,717				29,476				28,700
Total billings		$	461,914			$	557,285			$	1,460,741			$	1,734,901

 

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.

Other non-subscription product revenue — Other non-subscription product revenue includes $8.4 million and $27.0 million of non-portable software revenue for the three and nine months ended April 30, 2023, respectively, $11.1 million and $26.3 million of non-portable software revenue for the three and nine months ended April 30, 2024, respectively, $0.6 million and $2.5 million of hardware revenue for the three and nine months ended April 30, 2023, respectively, and $0.6 million and $2.4 million of hardware revenue for the three and nine months ended April 30, 2024, respectively.

---

Non-GAAP Financial Measures and Key Performance Measures

We regularly monitor total billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow, and total end customers, which are non-GAAP financial measures and key performance measures, to help us evaluate our growth and operational efficiencies, measure our performance, identify trends in our sales activity and establish our budgets. We evaluate these measures because they:

Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period. ACV billings is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the topline growth of our subscription-based business model during our transition to a subscription-based business model because it takes into account variability in term lengths. ARR is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the topline growth of our subscription business because it only includes non-life-of-device contracts and takes into account variability in term lengths. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin are performance measures which we believe provide useful information to investors, as they provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures, such as stock-based compensation expense, that may not be indicative of our ongoing core business operating results. Free cash flow is a performance measure that we believe provides useful information to management and investors about the amount of cash used in or generated by the business after necessary capital expenditures. We use these non-GAAP financial and key performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Total billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow have limitations as analytical tools and they should not be considered in isolation or as substitutes for analysis of our results as reported under generally accepted accounting principles ("GAAP") in the United States. Total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow are not substitutes for total revenue, gross profit, gross margin, operating expenses, operating income (loss), operating margin, or net cash provided by (used in) operating activities, respectively. There is no GAAP measure that is comparable to ACV billings or ARR, so we have not reconciled either ACV billings or ARR numbers included in this Quarterly Report on Form 10-Q to any GAAP measure. In addition, other companies, including companies in our industry, may calculate non-GAAP financial measures and key performance measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures and key performance measures as tools for comparison. We urge you to review the reconciliation of our non-GAAP financial measures and key performance measures to the most directly comparable GAAP financial measures included below and not to rely on any single financial measure to evaluate our business.

We calculate our non-GAAP financial and key performance measures as follows:

Total billings — We calculate total billings by taking the change in deferred revenue less the change in unbilled accounts receivable between the start and end of the period and adding that to total revenue recognized in the same period.

---

ACV billings — We calculate ACV billings as the sum of the ACV for all contracts billed during the period. ACV is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware. We calculate the total annualized value for a contract by dividing the total value of the contract by the number of years in the term of such contract, using, where applicable, an assumed term of five years for life-of-device contracts that do not have a specified term.

ARR — We calculate ARR as the sum of ACV for all subscription contracts in effect as of the end of a specific period. For the purposes of this calculation, we assume that the contract term begins on the date a contract is booked, unless the terms of such contract prevent us from fulfilling our obligations until a later period, and irrespective of the periods in which we would recognize revenue for such contract. ARR excludes all life-of-device contracts.

Non-GAAP gross profit and Non-GAAP gross margin — We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP gross profit and non-GAAP gross margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Non-GAAP operating expenses — We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP operating expenses should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

Non-GAAP operating income and Non-GAAP operating margin — We calculate non-GAAP operating margin as non-GAAP operating income divided by total revenue. We define non-GAAP operating income as operating income (loss) adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP operating income and non-GAAP operating margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Free cash flow — We calculate free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment, which measures our ability to generate cash from our business operations after our capital expenditures.

Total end customers — We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

---

The following table presents a reconciliation of total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow to the most directly comparable GAAP financial measures, for each of the periods indicated:

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands, except percentages)
Total revenue		$	448,581			$	524,577			$	1,368,685			$	1,600,864
Change in deferred revenue			13,333				32,708				92,056				134,037
Total billings (non-GAAP)		$	461,914			$	557,285			$	1,460,741			$	1,734,901
Gross profit		$	366,152			$	444,958			$	1,116,956			$	1,357,730
Stock-based compensation			8,396				7,967				26,186				25,891
Amortization of intangible assets			2,438				766				7,779				2,626
Restructuring charges			—				—				230				—
Non-GAAP gross profit		$	376,986			$	453,691			$	1,151,151			$	1,386,247
Gross margin			81.6	%			84.8	%			81.6	%			84.8	%
Stock-based compensation			1.9	%			1.6	%			1.9	%			1.6	%
Amortization of intangible assets			0.5	%			0.1	%			0.6	%			0.2	%
Restructuring charges			—				—				—				—
Non-GAAP gross margin			84.0	%			86.5	%			84.1	%			86.6	%
Operating expenses		$	424,792			$	456,546			$	1,312,759			$	1,337,979
Stock-based compensation			(64,512	)			(74,325	)			(212,967	)			(226,368	)
Amortization of intangible assets			(169	)			(99	)			(716	)			(218	)
Restructuring (charges) reversals			—				—				(5,073	)			194
Early exit of lease-related assets			—				—				(1,726	)			—
Litigation settlement accrual and legal fees			(314	)			(1,707	)			(38,499	)			(1,755	)
Other			—				—				—				(225	)
Non-GAAP operating expenses		$	359,797			$	380,415			$	1,053,778			$	1,109,607
(Loss) income from operations		$	(58,640	)		$	(11,588	)		$	(195,803	)		$	19,751
Stock-based compensation			72,908				82,292				239,153				252,259
Amortization of intangible assets			2,607				865				8,495				2,844
Restructuring charges (reversals)			—				—				5,303				(194	)
Early exit of lease-related assets			—				—				1,726				—
Litigation settlement accrual and legal fees			314				1,707				38,499				1,755
Other			—				—				—				225
Non-GAAP income from operations		$	17,189			$	73,276			$	97,373			$	276,640
Operating margin			(13.1	)%			(2.2	)%			(14.3	)%			1.2	%
Stock-based compensation			16.2	%			15.7	%			17.5	%			15.8	%
Amortization of intangible assets			0.6	%			0.2	%			0.6	%			0.2	%
Restructuring charges (reversals)			—				—				0.4	%			—
Early exit of lease-related assets			—				—				0.1	%			—
Litigation settlement accrual and legal fees			0.1	%			0.3	%			2.8	%			0.1	%
Other			—				—				—				—
Non-GAAP operating margin			3.8	%			14.0	%			7.1	%			17.3	%
Net cash provided by operating activities		$	74,497			$	96,353			$	214,094			$	428,234
Purchases of property and equipment			(21,831	)			(18,029	)			(52,603	)			(54,813	)
Free cash flow (non-GAAP)		$	52,666			$	78,324			$	161,491			$	373,421

 

---

Factors Affecting Our Performance

We believe that our future success will depend on many factors, including those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. See the section titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 and the section titled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q for details. If we are unable to address these challenges, our business and operating results could be materially and adversely affected.

Investment in Profitable Growth

We continue to invest in our growth over the long-run, while improving our operating cash flow performance by focusing on go-to-market efficiencies. By maintaining this balance, we believe we can sustain profitable growth.

Investment in Sales and Marketing – Our ability to achieve billings and revenue growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth. As part of our investment in our growth over the long-run, we plan to invest in sales and marketing, including investing in our sales and marketing teams and 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. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, our overall sales and marketing expense may fluctuate. We estimate, based on past experience, that our average sales team members typically become fully ramped up around the start of their fourth quarter of employment with us, and as our newer employees ramp up, we expect their increased productivity to contribute to our revenue growth. As of April 30, 2024, we considered approximately 81% of our global sales team members to be fully ramped, while the remaining approximately 19% of our global sales team members are in the process of ramping up. As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we operate our subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team. As part of our overall efforts to improve our free cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners and OEMs, including supporting new OEMs, and optimizing headcount in geographies based on market opportunities.

Investment in Research and Development and Engineering – We also intend, 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. We continue to invest in our growth by strengthening our core offerings, investing in our solution ecosystem, and taking advantage of emerging opportunities around generative AI and modern applications across hybrid and mutlicloud environments.

We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term.

Our Subscription-Based Business Model

We operate a subscription-based business model to provide our customers with the flexibility to choose the licensing that works best for them 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 term. Subscription-based sales consist of subscription term-based licenses and offerings with ongoing performance obligations, including software entitlement and support subscriptions and cloud-based SaaS offerings. Revenue from subscription term-based licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. Accordingly, any decline in average contract durations associated with our subscription term-based licenses would negatively impact our topline results. Revenue from software entitlement and support subscription and cloud-based SaaS offerings is recognized ratably over the contractual service period. Accordingly, any decline in new or renewed subscriptions in any one fiscal quarter may not be fully or immediately reflected in our revenue for that fiscal quarter. For additional information on revenue recognition, see Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

---

Market Adoption of Our Products

Hybrid and multicloud paradigms, as well as trends in generative AI and modern applications, have affected IT buyer expectations about the simplicity, agility, scalability, portability and pay-as-you-grow economics of IT resources. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our enterprise cloud platform. This includes our newer products outside of our core hyperconverged infrastructure offering, both as compared to traditional datacenter architectures as well as the public cloud, particularly as we continue to pursue large enterprises and mission critical workloads. The broad nature of the technology shift that our enterprise cloud platform represents and the relationships our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our enterprise cloud platform.

Leveraging Partners

We plan to continue to leverage our relationships with our channel and OEM partners and expand our network of cloud and ecosystem partners, all of which help to drive the adoption and sale of our solutions with our end customers. We sell our solutions primarily through our partners, and our solutions primarily run on hardware platforms that our customers often choose to purchase from our channel or OEM partners. We believe that increasing channel leverage, particularly as we expand our focus on opportunities in commercial accounts, by investing in sales enablement and co-marketing with our channel and OEM partners in the long term will extend and improve our engagement with a broad set of end customers. Our reliance on manufacturers, including our channel and OEM partners, to produce the hardware platforms on which our software runs exposes us to supply chain delays, which could impair our ability to provide services to end customers in a timely manner. Our business and results of operations will be significantly affected by our success in leveraging our relationships with our channel and OEM partners and expanding our network of cloud and ecosystem partners.

Customer Acquisition, Retention and Expansion

Our business and operating results will depend on our ability to obtain new end customers and retain and sell additional solutions to our existing base of end customers. Our ability to obtain new end customers and retain and sell additional solutions to existing customers will in turn depend in part on a number of factors. These factors include our ability to: execute on our business plans, vision, and objectives (including our growth and go-to-market strategies), respond to competitive pressures, effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, our ability to respond to competitive pressures, manage our costs, and anticipate and manage customer demand. Furthermore, our subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models. Such concerns and/or confusion can slow adoption and renewal rates among our current and future customer base.

Our end customers typically deploy our technology for a specific workload initially. After a new end customer's initial order, which includes the product and associated software entitlement and support subscription and services, we focus on expanding our footprint by serving more workloads. We also generate recurring revenue from our software entitlement and support subscription renewals, and given our subscription-focused business model, software and support renewals are having an increasing significance for our future revenue streams as existing subscriptions come up for renewal. We view continued purchases and upgrades as critical drivers of our success, as the sales cycles are typically shorter as compared to new end customer deployments, and selling efforts are typically less. As of April 30, 2024, approximately 75% of our end customers who have been with us for 18 months or longer have made a repeat purchase, which is defined as any purchase activity, including renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase. Additionally, end customers who have been with us for 18 months or longer have total lifetime orders, including the initial order, in an amount that is more than 8.4x greater, on average, than their initial order. This number increases to approximately 29.0x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of April 30, 2024. These multiples exclude the effect of one end customer who had a very large and irregular purchase pattern that we believe is not representative of the purchase patterns of all of our other end customers.

---

More recently, our sales pipeline has evolved to include a higher mix of larger deal opportunities. Because larger deal opportunities often take longer to close and require more levels of review from the customer's executive team, involve greater competition, and have greater variability in timing, outcome and deal structure, this recent trend is expected to drive greater variability in our new and expansion business, and our topline results may be adversely affected.

Components of Our Results of Operations

Revenue

We generate revenue primarily from the sale of our enterprise cloud software platform, sold primarily as subscription term-based licenses, and which can be deployed on a variety of qualified hardware platforms or, in the case of our cloud-based SaaS offerings, via hosted service or delivered pre-installed on a server that is configured to order. Non-portable software licenses are delivered or sold alongside configured-to-order servers and can be used over the life of the associated server.

Our subscription term-based licenses are sold separately, or can be sold alongside configured-to-order servers. Our subscription term-based licenses typically have a term of one to five years. Our cloud-based SaaS subscriptions have terms extending up to five years.

Configured-to-order servers, including our Nutanix-branded NX hardware line, can be purchased from one of our channel partners, OEMs or, in limited cases, directly from Nutanix. Our enterprise cloud platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. Our platform is primarily sold through channel partners and OEMs. Revenue is recognized net of sales tax and withholding tax.

Product revenue — Product revenue primarily consists of software revenue. A majority of our product revenue is generated from the sale of our enterprise cloud operating system. We also sell renewals of previously purchased software licenses and SaaS offerings. Revenue from our software products is generally recognized upon transfer of control to the customer, which is typically upon shipment for sales including a server from a partner, upon making the software available to the customer when not sold with a server or as services are performed with SaaS offerings. In the infrequent transactions where the hardware 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.

Support, entitlements and other services revenue — We generate our support, entitlements and other services revenue primarily from software entitlement and support subscriptions, which include the right to software upgrades and enhancements as well as technical support. The majority of our product sales are sold in conjunction with software entitlement and support subscriptions, with terms ranging from one to five years. Occasionally, we also sell professional services with our products. We recognize revenue from software entitlement and support contracts ratably over the contractual service period, which typically commences upon transfer of control of the corresponding products to the customer. We recognize revenue related to professional services as they are performed.

Cost of Revenue

Cost of product revenue — Cost of product revenue consists of costs paid to third-party OEM partners, hardware costs, personnel costs associated with our operations function, consisting of salaries, benefits, bonuses and stock-based compensation, cloud-based costs associated with our SaaS offerings, and allocated costs, consisting of certain facilities, depreciation and amortization, recruiting and information technology costs allocated based on headcount.

Cost of support, entitlements and other services revenue — Cost of support, entitlements and other services revenue includes personnel and operating costs associated with our global customer support organization, as well as allocated costs. We expect our cost of support, entitlements and other services revenue to increase in absolute dollars as our support, entitlements and other services revenue increases.

---

Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. The largest component of our operating expenses is personnel costs. Personnel costs consist of wages, benefits, bonuses and, with respect to sales and marketing expenses, sales commissions.

Sales and marketing — Sales and marketing expense consists primarily of personnel costs. Sales and marketing expense also includes sales commissions, costs for promotional activities and other marketing costs, travel costs and costs associated with demonstration units, including depreciation and allocated costs. Commissions are deferred and recognized as we recognize the associated revenue. We expect sales and marketing expense to continue, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our growth. However, as part of our overall efforts to improve our operating cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, our sales and marketing expense may fluctuate.

Research and development — Research and development ("R&D") expense consists primarily of personnel costs, as well as other direct and allocated costs. We have devoted our product development efforts primarily to enhancing the functionality and expanding the capabilities of our solutions. R&D costs are expensed as incurred, unless they meet the criteria for capitalization. We expect R&D expense, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our future products and services, including our newer subscription-based products, although R&D expense may fluctuate as a percentage of total revenue and, on an absolute basis, from quarter to quarter.

General and administrative — General and administrative ("G&A") expense consists primarily of personnel costs, which include our executive, finance, human resources and legal organizations. G&A expense also includes outside professional services, which consists primarily of legal, accounting and other consulting costs, as well as insurance and other costs associated with being a public company and allocated costs. We expect G&A expense, in the long term, to increase in absolute dollars, particularly due to additional legal, accounting, insurance and other costs associated with our growth, although G&A expense may fluctuate as a percentage of total revenue and, on an absolute basis, from quarter to quarter.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income and expense, which includes the amortization of the debt discount and debt issuance costs associated with our previously outstanding 0% convertible senior notes due 2023 (the "2023 Notes"), our 2.50% convertible senior notes due 2026 (the "2026 Notes") and our 0.25% convertible senior notes due 2027 (the "2027 Notes"), non-cash interest expense on the 2026 Notes, the amortization of the debt discount on the 2026 Notes, interest expense on the 2027 Notes, interest income related to our short-term investments, and foreign currency exchange gains or losses.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes for certain foreign jurisdictions in which we conduct business and state income taxes in the United States. We have recorded a full valuation allowance related to our federal and state net operating losses and other net deferred tax assets and a partial valuation allowance related to certain foreign net operating losses due to the uncertainty of the ultimate realization of the future benefits of those assets.

---

Results of Operations

The following tables set forth our condensed consolidated results of operations in dollars and as a percentage of total revenue for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(in thousands)
Revenue:
Product		$	212,507			$	255,465			$	671,619			$	802,047
Support, entitlements and other services			236,074				269,112				697,066				798,817
Total revenue			448,581				524,577				1,368,685				1,600,864
Cost of revenue:
Product (1)(2)			12,430				8,469				40,452				28,105
Support, entitlements and other services (1)			69,999				71,150				211,277				215,029
Total cost of revenue			82,429				79,619				251,729				243,134
Gross profit			366,152				444,958				1,116,956				1,357,730
Operating expenses:
Sales and marketing (1)(2)			229,261				245,901				695,271				717,926
Research and development (1)			143,016				159,220				434,760				471,596
General and administrative (1)			52,515				51,425				182,728				148,457
Total operating expenses			424,792				456,546				1,312,759				1,337,979
(Loss) income from operations			(58,640	)			(11,588	)			(195,803	)			19,751
Other (expense) income, net			(7,168	)			659				(30,696	)			(2,520	)
(Loss) income before provision for income taxes			(65,808	)			(10,929	)			(226,499	)			17,231
Provision for income taxes			5,161				4,687				14,774				15,905
Net (loss) income		$	(70,969	)		$	(15,616	)		$	(241,273	)		$	1,326
(1) Includes stock-based compensation expense as    follows:
Product cost of revenue		$	1,831			$	1,576			$	6,103			$	5,201
Support, entitlements and other services cost of revenue			6,565				6,391				20,083				20,690
Sales and marketing			19,383				18,901				63,425				61,110
Research and development			32,003				38,719				107,116				117,664
General and administrative			13,126				16,705				42,426				47,594
Total stock-based compensation expense		$	72,908			$	82,292			$	239,153			$	252,259
(2) Includes amortization of intangible assets as follows:
Product cost of revenue		$	2,438			$	766			$	7,779			$	2,626
Sales and marketing			169				99				716				218
Total amortization of intangible assets		$	2,607			$	865			$	8,495			$	2,844

 

---

 

		Three Months Ended April 30,								Nine Months Ended April 30,
		2023				2024				2023				2024
		(as a percentage of total revenue)
Revenue:
Product			47.4	%			48.7	%			49.1	%			50.1	%
Support, entitlements and other services			52.6	%			51.3	%			50.9	%			49.9	%
Total revenue			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenue:
Product			2.8	%			1.6	%			3.0	%			1.8	%
Support, entitlements and other services			15.6	%			13.6	%			15.4	%			13.4	%
Total cost of revenue			18.4	%			15.2	%			18.4	%			15.2	%
Gross profit			81.6	%			84.8	%			81.6	%			84.8	%
Operating expenses:
Sales and marketing			51.1	%			46.9	%			50.8	%			44.8	%
Research and development			31.9	%			30.4	%			31.8	%			29.5	%
General and administrative			11.7	%			9.8	%			13.4	%			9.3	%
Total operating expenses			94.7	%			87.1	%			96.0	%			83.6	%
(Loss) income from operations			(13.1	)%			(2.3	)%			(14.4	)%			1.2	%
Other (expense) income, net			(1.6	)%			0.1	%			(2.2	)%			(0.2	)%
(Loss) income before provision for income taxes			(14.7	)%			(2.2	)%			(16.6	)%			1.0	%
Provision for income taxes			1.2	%			0.9	%			1.1	%			1.0	%
Net (loss) income			(15.9	)%			(3.1	)%			(17.7	)%			0.0	%

 

---

Comparison of the Three and Nine Months Ended April 30, 2023 and 2024

Revenue

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Product		$	212,507			$	255,465			$	42,958				20	%		$	671,619			$	802,047			$	130,428				19	%
Support, entitlements    and other services			236,074				269,112				33,038				14	%			697,066				798,817				101,751				15	%
Total revenue		$	448,581			$	524,577			$	75,996				17	%		$	1,368,685			$	1,600,864			$	232,179				17	%

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
U.S.		$	233,835			$	283,842			$	50,007				21	%		$	764,972			$	882,790			$	117,818				15	%
Europe, the Middle    East and Africa			124,248				147,065				22,817				18	%			346,065				423,566				77,501				22	%
Asia Pacific			77,742				82,502				4,760				6	%			226,047				258,763				32,716				14	%
Other Americas			12,756				11,168				(1,588	)			(12	)%			31,601				35,745				4,144				13	%
Total revenue		$	448,581			$	524,577			$	75,996				17	%		$	1,368,685			$	1,600,864			$	232,179				17	%

 

The increases in product revenue for the three and nine months ended April 30, 2024, as compared to the prior year periods, were due primarily to increases in software revenue resulting from growth in software renewals due to an increased adoption of our products. For both the three and nine months ended April 30, 2023, the total average contract duration was approximately 3.0 years. For the three and nine months ended April 30, 2024, the total average contract duration was approximately 3.0 years and 2.9 years, respectively. Total average contract duration represents the dollar-weighted term across all subscription and life-of-device contracts billed during the period, using an assumed term of five years for licenses without a specified term, such as life-of-device licenses.

Support, entitlements and other services revenue increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals.

Cost of Revenue and Gross Margin

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Cost of product revenue		$	12,430			$	8,469			$	(3,961	)			(32	)%		$	40,452			$	28,105			$	(12,347	)			(31	)%
Product gross margin			94.2	%			96.7	%											94.0	%			96.5	%
Cost of support,    entitlements and    other services revenue		$	69,999			$	71,150			$	1,151				2	%		$	211,277			$	215,029			$	3,752				2	%
Support, entitlements    and other services    gross margin			70.3	%			73.6	%											69.7	%			73.1	%
Total gross margin			81.6	%			84.8	%											81.6	%			84.8	%

 

Cost of product revenue

Cost of product revenue decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to a decrease in amortization expense resulting from acquired intangible assets starting to reach the end of their useful lives. Slight fluctuations in hardware revenue and cost of product revenue are anticipated, as we expect to continue selling small amounts of hardware for the foreseeable future.

Product gross margin increased by 2.5 percentage points for both the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to product revenue increasing while cost of product revenue decreases.

---

Cost of support, entitlements and other services revenue

Cost of support, entitlements and other services revenue increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs and outside services costs, resulting from growth in our global customer support organization.

Support, entitlements and other services gross margin increased by 3.3 percentage points and 3.4 percentage points for the three and nine months ended April 30, 2024, respectively, as compared to the prior year periods, due primarily to support, entitlements and other services revenue growing at a higher rate than personnel-related costs.

Operating Expenses

Sales and marketing

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Sales and marketing		$	229,261			$	245,901			$	16,640				7	%		$	695,271			$	717,926			$	22,655				3	%
Percent of total revenue			51.1	%			46.9	%											50.8	%			44.8	%

Sales and marketing expense increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs, including commissions expense, resulting from growth in our sales and marketing headcount, partially offset by decreases in outside services and allocated costs.

Research and development

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Research and development		$	143,016			$	159,220			$	16,204				11	%		$	434,760			$	471,596			$	36,836				8	%
Percent of total revenue			31.9	%			30.4	%											31.8	%			29.5	%

Research and development expense increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs resulting from growth in our R&D headcount, partially offset by decreases in technical costs.

General and administrative

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
General and administrative		$	52,515			$	51,425			$	(1,090	)			(2	)%		$	182,728			$	148,457			$	(34,271	)			(19	)%
Percent of total revenue			11.7	%			9.8	%											13.4	%			9.3	%

General and administrative expense decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to a decrease in legal costs, in particular, for the nine months ended April 30, 2024, related to the litigation settlement accrual and legal fees as a result of the February 2023 settlement of two securities class actions. The decreases were partially offset by higher personnel-related costs, including stock-based compensation expense, resulting from growth in our G&A headcount, as well as an increase in technical costs related to software licenses.

---

Other (Expense) Income, Net

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Interest income, net		$	11,179			$	18,796			$	(7,617	)			(68	)%		$	25,637			$	51,831			$	(26,194	)			(102	)%
Amortization of debt    discount and issuance    costs and interest    expense			(16,189	)			(16,876	)			687				4	%			(47,806	)			(49,874	)			2,068				4	%
Other			(2,158	)			(1,261	)			(897	)			(42	)%			(8,527	)			(4,477	)			(4,050	)			(47	)%
Other (expense) income, net		$	(7,168	)		$	659			$	(7,827	)			(109	)%		$	(30,696	)		$	(2,520	)		$	(28,176	)			(92	)%

Other (expense) income, net decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to increases in interest income on our investments.

Provision for Income Taxes

 

		Three Months Ended April 30,								Change								Nine Months Ended April 30,								Change
		2023				2024				$				%				2023				2024				$				%
		(in thousands, except percentages)
Provision for income taxes		$	5,161			$	4,687			$	(474	)			(9	)%		$	14,774			$	15,905			$	1,131				8	%

The decrease in the income tax provision for the three months ended April 30, 2024, as compared to the prior year period, was due primarily to foreign excess tax benefits on stock options and restricted stock units exercised in the current period, partially offset by higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions. The increase in the income tax provision for the nine months ended April 30, 2024, as compared to the prior year period, was due primarily to higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions, as we continued to grow our business internationally, as well as higher U.S. state income taxes, partially offset by foreign excess tax benefits on stock options and restricted stock units exercised in the current periods. We continue to maintain a full valuation allowance on our U.S. federal and state deferred tax assets and a partial valuation allowance related to certain foreign net operating losses.

Liquidity and Capital Resources

Our principal sources of liquidity were cash, cash equivalents, and marketable securities and net accounts receivable. As of April 30, 2024, we had $598.0 million of cash and cash equivalents, $2.1 million of restricted cash and $1,053.4 million of short-term investments, which were held for general corporate purposes. Our cash, cash equivalents and short-term investments primarily consist of bank deposits, money market accounts and highly rated debt instruments of the U.S. government and its agencies and debt instruments of highly rated corporations. As of April 30, 2024, we had accounts receivable of $225.3 million, net of allowances of $1.6 million.

In January 2023, we settled the 2023 Notes in full at maturity with a cash payment of $145.7 million. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In September 2020, we issued $750.0 million in aggregate principal amount of 2.50% convertible senior notes due 2026 to BCPE Nucleon (DE) SPV, LP, an entity affiliated with Bain Capital, LP. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. On June 6, 2024, BCPE Nucleon (DE) SPV, LP delivered a notice of conversion to convert $817.6 million aggregate principal amount of the 2026 Notes, representing all of the outstanding principal amount of the 2026 Notes. Under the terms of the indenture governing the 2026 Notes, we are required to settle the conversion by paying $817.6 million in cash and delivering approximately 16.9 million shares of Class A common stock. We expect to use a portion of our existing cash, cash equivalents and short-term investments to settle the cash portion of the conversion, which is expected to occur during the fiscal quarter ending July 31, 2024.

---

In September 2021, we issued convertible senior notes with a 0.25% interest rate for an aggregate principal amount of $575.0 million due 2027, of which $477.3 million in principal amount was issued in exchange for approximately $416.5 million principal amount of the 2023 Notes and the remaining $97.7 million in principal amount was issued for cash. There are no required principal payments on the 2027 Notes prior to their maturity. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Due to investments in our business as well as the potential cash flow impacts resulting from our subscription-based business model, our operating and free cash flow may continue to fluctuate during the next 12 months. Notwithstanding that fact, we believe that our cash, cash equivalents and short-term investments and net cash provided by operating activities will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, and share repurchases (if any) for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, the continuing market acceptance of our products, our end customers and partners, and the economy, and the timing of and extent to which our customers transition to shorter-term contracts or request to only pay for the initial term of multi-year contracts as a result of our subscription-based business model.

Capital Return

In August 2023, our Board of Directors authorized the repurchase of up to $350.0 million of our Class A common stock. Repurchases will be funded from available working capital and may be made at management’s discretion from time to time. The authorization has no fixed expiration date and does not obligate us to repurchase any specified number or dollar value of shares. The program may be modified, suspended or discontinued at any time. For more information on the share repurchase program, refer to Note 8 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Cash Flows

The following table summarizes our cash flows for the periods presented:

 

		Nine Months Ended April 30,
		2023				2024
		(in thousands)
Net cash provided by operating activities		$	214,094			$	428,234
Net cash used in investing activities			(40,873	)			(173,828	)
Net cash used in financing activities			(136,361	)			(170,019	)
Net increase in cash, cash equivalents and restricted cash		$	36,860			$	84,387

 

Cash Flows from Operating Activities

Net cash provided by operating activities was $428.2 million for the nine months ended April 30, 2024, compared to $214.1 million for the nine months ended April 30, 2023. The increase in cash provided by operating activities for the nine months ended April 30, 2024 was due primarily to the increase in our net income from operations.

Cash Flows from Investing Activities

Net cash used in investing activities of $40.9 million for the nine months ended April 30, 2023 included $711.3 million of short-term investment purchases and $52.6 million of purchases of property and equipment, partially offset by $723.0 million of maturities of short-term investments.

Net cash used in investing activities of $173.8 million for the nine months ended April 30, 2024 included $740.0 million of short-term investment purchases, $54.8 million of purchases of property and equipment and $4.5 million of cash paid for acquisitions, partially offset by $625.5 million of maturities of short-term investments.

---

Cash Flows from Financing Activities

Net cash used in financing activities of $136.4 million for the nine months ended April 30, 2023 included $145.7 million used to repay the 2023 Notes at maturity, $10.2 million of taxes paid related to the net share settlement of equity awards, and $3.7 million of payments for finance lease obligations, partially offset by $23.3 million of proceeds from the sale of shares through employee equity incentive plans.

Net cash used in financing activities of $170.0 million for the nine months ended April 30, 2024 included $111.6 million of taxes paid related to the net share settlement of equity awards, $106.1 million of repurchases of our Class A common stock, and $2.9 million of payments for finance lease obligations, partially offset by $50.7 million of proceeds from the sale of shares through employee equity incentive plans.

Material Cash Requirements and Other Obligations

The following table summarizes our material cash requirements and other obligations as of April 30, 2024:

 

		Payments Due by Period
		Total				Less than 1 Year				1 Year to 3 Years				3 to 5 Years				More than 5 Years
		(in thousands)
Principal amount payable on convertible senior notes (1)		$	1,395,361			$	116			$	820,245			$	575,000			$	—
Operating leases (undiscounted basis) (2)			121,007				29,754				40,764				35,469				15,020
Other commitments (3)			109,039				99,943				7,445				1,651				—
Guarantees with contract manufacturers			76,663				76,663				—				—				—
Total		$	1,702,070			$	206,476			$	868,454			$	612,120			$	15,020

 

From time to time, in the normal course of business, we make commitments with our contract manufacturers to ensure them a minimum level of financial consideration for their investment in our joint solutions. These commitments are based on revenue targets or on-hand inventory and non-cancelable purchase orders for non-standard components. We record a charge related to these items when we determine that it is probable a loss will be incurred and we are able to estimate the amount of the loss. Our historical charges have not been material.

As of April 30, 2024, we had accrued liabilities related to uncertain tax positions, which are reflected on our condensed consolidated balance sheet. These accrued liabilities are not reflected in the contractual obligations disclosed in the table above, as it is uncertain if or when such amounts will ultimately be settled.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change the results from those reported.

---

There have been no material changes to our critical accounting policies and estimates as compared to those described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023.

Recent Accounting Pronouncements

See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.

---

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have operations both within the United States and internationally and we are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates.

Foreign Currency Risk

Our condensed consolidated results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our sales contracts are denominated in U.S. dollars. Our expenses are generally denominated in the currencies of the countries where our operations are located. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative instruments. In the event our foreign sales and expenses increase, our operating results may be more significantly affected by foreign currency exchange rate fluctuations, which can affect our operating income or loss. The effect of a hypothetical 10% change in foreign currency exchange rates on our non-U.S. dollar monetary assets and liabilities would not have had a material impact on our historical condensed consolidated financial statements. Foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our condensed consolidated financial statements.

A hypothetical 10% decrease in the U.S. dollar against other currencies would result in an increase in our operating loss of approximately $18.2 million and $50.5 million for the nine months ended April 30, 2023 and 2024, respectively. The decrease in this hypothetical change is due to a decrease in our expenses denominated in foreign currencies. This analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.

Interest Rate Risk

Our investment objective is to conserve capital and maintain liquidity to support our operations; therefore, we generally invest in highly liquid securities, consisting primarily of bank deposits, money market funds, commercial paper, U.S. government securities and corporate bonds. Such fixed and floating interest-earning instruments carry a degree of interest rate risk. The fair market value of fixed income securities may be adversely impacted by a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. Therefore, we do not expect our operating results or cash flows to be materially affected by any sudden change in interest rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act")). As initially disclosed in our Annual Report on Form 10-K/A filed with the SEC on May 24, 2023, our management identified a material weakness in our internal control over financial reporting. As described below, while our management, with the oversight of the Audit Committee of our Board of Directors, has made significant progress toward remediating this material weakness, our management determined that this material weakness has not yet been fully remediated, as we are still in the process of testing the applicable remediated controls. Accordingly, based on our management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of April 30, 2024. Notwithstanding this material weakness, our management concluded that our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in conformity with U.S. GAAP.

Previously Identified Material Weakness in Internal Control Over Financial Reporting

Based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Framework"), our management identified control deficiencies, as previously disclosed, that, individually or in the aggregate, constitute a material weakness in our internal control over financial reporting. While our management, with the oversight of the Audit Committee of our Board of Directors, has made significant progress toward remediating the material weakness, the material weakness has not been fully remediated as of April 30, 2024.

---

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified by management primarily relates to design deficiencies in the information and communication component of the COSO Framework, that also impacted the design and operating effectiveness of elements of the risk assessment and other components. In particular, we determined that our controls were not designed and operating effectively to provide the information necessary for our risk assessment process to identify non-compliant use of third-party software as a risk of material misstatement in our financial reporting and we did not effectively reinforce the importance of raising concerns about perceived unethical conduct in a timely manner. These control deficiencies, individually or in the aggregate, create a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis, and constitute a material weakness in our internal control over financial reporting.

This material weakness resulted in an immaterial error in the reporting of expenses for software licenses and support for each prior period beginning in August 2014, which we have corrected prospectively as we issue future financial statements. We have evaluated the materiality of this error and determined that the impact is not material to our previously issued financial statements.

Status of Remediation Efforts to Address Material Weakness

Our management and the Audit Committee of our Board of Directors are committed to remediating the material weakness and strengthening our overall internal control over financial reporting. To this end, our management, with oversight from the Audit Committee, has implemented all of the remedial measures outlined in the remediation plan initially disclosed in our Annual Report on Form 10-K/A filed with the SEC on May 24, 2023. Specifically, we have implemented the below remedial measures as outlined in the remediation plan. Our management believes that the remediation measures described below will remediate the material weakness and strengthen our overall internal control over financial reporting. While we have implemented all of the remedial measures described below, we are still in the process of testing the applicable remediated controls. Accordingly, our management determined that this material weakness has not yet been fully remediated as of April 30, 2024. The remedial measures implemented to date are as follows:

The material weakness will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As our management continues to evaluate and work to enhance our internal control over financial reporting, our management may take additional measures to address control deficiencies or we may modify some of the remediation measures described above.

---

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

---

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the "Legal Proceedings" subheading in Note 7 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

You should carefully consider the risks and uncertainties 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, 2023, which is incorporated herein by reference, together with the additional risk factor set forth below and all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations", before making a decision to invest in our Class A common stock. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. Other than the additional risk factor set forth below, there have been no material changes from the risks and uncertainties previously disclosed under the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023.

Our settlement of the conversion of all of the 2026 Notes will require us to use a significant portion of our liquidity, dilute the voting power and ownership interest of existing stockholders, and may depress the price of our securities.

On June 6, 2024, BCPE Nucleon (DE) SPV, LP delivered a notice of conversion to convert $817.6 million aggregate principal amount of the 2026 Notes, representing all of the outstanding principal amount of the 2026 Notes. Under the terms of the indenture governing the 2026 Notes, we are required to settle the conversion by paying $817.6 million in cash and delivering approximately 16.9 million shares of Class A common stock. We expect to use a portion of our existing cash, cash equivalents and short-term investments to settle the cash portion of the conversion, which is expected to occur during the fiscal quarter ending July 31, 2024. We expect to deliver the shares in late July 2024, following required regulatory approvals. Accordingly, settlement of the conversion will require us to use a significant portion of our liquidity, dilute the voting power and ownership interest of existing stockholders, and potentially have an adverse effect on the price of our securities, including our Class A common stock.

---

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

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table summarizes the share repurchase activity for the three months ended April 30, 2024:

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)				Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
		(in thousands, except per share amounts)
February 1 - 29, 2024			380			$	57.70				380			$	268,913
March 1 - 31, 2024			—			$	—				—			$	268,913
April 1 - 30, 2024			394			$	63.47				394			$	243,913
Total			774								774

 

This table excludes shares withheld from stock awards to settle employee withholding obligations related to the vesting of such awards.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended April 30, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

Item 6. Exhibits

See the Exhibit Index below for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

 

---

EXHIBIT INDEX

 

		Incorporated by Reference
Number	Exhibit Title	Form	File No.	Exhibit	Filing Date	Filed Herewith
10.1†	Amendment Two to Original Equipment Manufacturer (OEM) Purchase Agreement, dated as of October 31, 2018, by and between the Registrant and Super Micro Computer Inc.					X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XRBL tags are embedded within the Inline XBRL document					X
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents					X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)					X

 

† Certain confidential information contained in this Exhibit was omitted by means of marking such portions with brackets because the identified confidential information is both (i) not material and (ii) the type of information that the registrant treats as private or confidential. This Exhibit is being refiled upon expiration of confidential treatment previously granted by the Securities and Exchange Commission.

 

* These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are

not incorporated by reference in any filing of Nutanix, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as

amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.

---

SIGNATURES

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

 

		NUTANIX, INC.
Date: June 10, 2024		/s/ Rukmini Sivaraman
		Rukmini Sivaraman
		Chief Financial Officer
		(Principal Financial Officer)

 

---