Q3 FY2023 Earnings May 24, 2023 Safe Harbor Non-GAAP Financial Measures and Other Key Performance Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, this presentation includes the following non-GAAP financial and other key performance measures: non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income per share, free cash flow, Annual Contract Value Billings (or ACV ...

Nutanix, Inc. (NASDAQ:NTNX) Q3 2023 Earnings Conference Call May 24, 2023 4:30 PM ET Company Participants Richard Valera - Vice President of Investor Relations Rajiv Ramaswami - President and Chief Executive Officer Rukmini Sivaraman - Chief Financial Officer Conference Call Participants James Fish - Piper Sandler & Co. Michael Cikos - Needham & Company, LLC Pinjalim Bora - JPMorgan Chase & Co. George Wang - Barclays Meta Marshall - Morgan Stanley Jason Ader - William Blair & Company LLC Wamsi Mohan - Bank ...

Nutanix, Inc. (NASDAQ:NTNX) Q2 2023 Earnings Conference Call March 6, 2023 4:30 PM ET Company Participants Richard Valera - Investor Relations Rajiv Ramaswami - President and Chief Executive Officer Rukmini Sivaraman - Chief Financial Officer Conference Call Participants Pinjalim Bora - JPMorgan Jim Fish - Piper Sandler Mike Cikos - Needham & Company Meta Marshall - Morgan Stanley Ben Bollin - Cleveland Research Matthew Hedberg - RBC Capital Markets Aaron Rakers - Wells Fargo Jason Ader - William Blair ...

Nutanix, Inc. (NASDAQ:NTNX) Q1 2023 Earnings Conference Call November 30, 2022 4:30 PM ET Company Participants Rich Valera - Investor Relations Rajiv Ramaswami - President and Chief Executive Officer Rukmini Sivaraman - Chief Financial Officer Conference Call Participants Jim Fish - Piper Sandler Meta Marshall - Morgan Stanley George Wang - Barclays Dan Bergstrom - RBC Ruplu Bhattacharya - Bank of America Operator Good day and thank you for standing by. Welcome to Nutanix’s Fiscal First Quarter 2023 Confere ...

PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Nutanix provides a leading enterprise cloud platform, transitioning to a subscription model, with strategies focused on innovation, customer growth, and partner engagement - Nutanix provides a leading enterprise cloud platform (Nutanix Cloud Platform) with software solutions and cloud services for consistent cloud operating models across edge, private, hybrid, and multicloud environments[797](index=797&type=chunk) - The company is transitioning to a subscription-based business model, with sales compensation now based on Annual Contract Value (ACV)[799](index=799&type=chunk) Fiscal Year 2022 Subscription Performance | Metric | Value | YoY Change | | :----------------- | :------------- | :--------- | | Subscription Billings | **92% of total billings** | **+3 percentage points** | | Subscription Revenue | **$1.4 billion** | **+15%** | | ACV Billings | **$756.3 million** | **+27%** | - Nutanix's growth strategy focuses on continuous innovation, acquiring new customers, driving follow-on sales to existing customers, enhancing focus on renewals, deepening partner engagement, and balancing growth against operating expenses[822](index=822&type=chunk)[825](index=825&type=chunk)[826](index=826&type=chunk)[827](index=827&type=chunk) [Overview](index=7&type=section&id=Overview) Nutanix offers an enterprise cloud platform unifying operations and data services across cloud environments, pioneering HCI and shifting to subscription models for long-term growth - Nutanix provides a leading enterprise cloud platform that delivers a consistent cloud operating model across edge, private, hybrid, and multicloud environments for all applications and their data[797](index=797&type=chunk) - The company pioneered the hyperconverged infrastructure (HCI) category in 2009, combining compute, storage, and networking into a single on-premises product[798](index=798&type=chunk) - Nutanix is transitioning to a subscription-based business model, with subscription billings reaching **92% of total billings** and subscription revenue growing **15% year-over-year** in fiscal 2022[799](index=799&type=chunk) [The Nutanix Cloud Platform](index=8&type=section&id=The%20Nutanix%20Cloud%20Platform) The Nutanix Cloud Platform, built on HCI, delivers comprehensive products and services for managing private, public, and hybrid multicloud environments, including NCI, NCM, NUS, NDB, and DaaS solutions - The Nutanix Cloud Platform leverages HCI technology to deliver products and services for managing private, public, and hybrid multicloud environments, supported by a unified control plane, APIs, security, and lifecycle management[801](index=801&type=chunk) - Key offerings include Nutanix Cloud Infrastructure (NCI) with AOS and AHV, Flow Virtual Networking and Security, Nutanix Kubernetes Engine, and Nutanix Cloud Clusters (NC2) for public cloud deployments (AWS, Azure)[802](index=802&type=chunk)[803](index=803&type=chunk)[804](index=804&type=chunk)[805](index=805&type=chunk)[807](index=807&type=chunk) - Additional products cover cloud management (NCM), unified storage (NUS) with file and object services, automated database management (NDB), and Desktop-as-a-Service (DaaS) for virtual desktops and applications[808](index=808&type=chunk)[809](index=809&type=chunk)[810](index=810&type=chunk) [Delivery of Our Solutions](index=9&type=section&id=Delivery%20of%20Our%20Solutions) Nutanix solutions are deployed on-premises, at the edge, or in public clouds, offered through non-portable software and subscription term-based licenses, typically including support and entitlements - The Nutanix Cloud Platform can be deployed on-premises, at the edge, in data centers, or in public cloud environments (AWS, Microsoft Azure via Nutanix Cloud Clusters)[811](index=811&type=chunk) - Software-as-a-Service (SaaS) offerings are delivered via hosted service[811](index=811&type=chunk) - Subscription term-based licenses typically range from one to five years and include support and entitlements[811](index=811&type=chunk)[813](index=813&type=chunk) [Our Partners](index=10&type=section&id=Our%20Partners) Nutanix leverages a diverse partner ecosystem, including channel, OEM, ecosystem, and cloud partners, to drive adoption, sales, and hybrid multicloud deployments - Nutanix has established relationships with channel, OEM, ecosystem, and cloud partners to drive adoption and sales[814](index=814&type=chunk) - Key channel partners like Arrow Electronics, Inc. and Tech Data Corporation accounted for **33%** and **15% of total revenue** in fiscal 2022, respectively[815](index=815&type=chunk) - OEM partners (e.g., Dell, Lenovo, IBM, HPE) pre-install Nutanix software on their hardware, and cloud partnerships (AWS, Microsoft Azure) extend Nutanix Cloud Clusters to public cloud environments[816](index=816&type=chunk)[818](index=818&type=chunk) [Our Support Programs](index=11&type=section&id=Our%20Support%20Programs) Nutanix offers various levels of software and hardware support for its NX appliances, alongside professional services for assessment, design, deployment, and optimization of customer environments - Nutanix provides varying levels of software support and hardware support for its Nutanix-branded NX configured-to-order hardware appliances[820](index=820&type=chunk) - Professional services include consulting and implementation for assessment, design, deployment, and optimization of Nutanix environments, typically at initial installation[820](index=820&type=chunk) [Our End Customers](index=11&type=section&id=Our%20End%20Customers) Nutanix serves over 22,000 end customers across diverse industries, including Global 2000 enterprises, supporting a broad range of virtualized and container-based workloads - As of July 31, 2022, Nutanix had over **22,000 end customers**, including approximately **980 Global 2000 enterprises**[821](index=821&type=chunk) - Solutions serve diverse workloads (enterprise applications, databases, VDI, unified communications, big data analytics) and industries (automotive, financial services, healthcare, public sector, etc.)[821](index=821&type=chunk) [Growth Strategy](index=11&type=section&id=Growth%20Strategy) Nutanix's growth strategy focuses on continuous innovation, customer acquisition and retention, enhanced renewals, deepening partner engagement, and balancing growth with operating expenses for profitability - Key elements of the growth strategy include: continually innovating and maintaining technology leadership, investing to acquire new end customers (especially large enterprises), driving follow-on sales to existing customers (land and expand strategy), and enhancing focus on renewals[822](index=822&type=chunk)[823](index=823&type=chunk)[825](index=825&type=chunk) - The company aims to deepen engagement with channel, OEM, cloud, and ecosystem partners to enhance sales leverage and establish additional routes to market[826](index=826&type=chunk) - Nutanix plans to invest in growth while balancing it against operating expenses, with renewals and sales/marketing efficiencies as key drivers for profitable growth[827](index=827&type=chunk) [Sales and Marketing](index=12&type=section&id=Sales%20and%20Marketing) Nutanix employs a global sales force and diverse marketing programs, including online advertising and partner initiatives through the Elevate Partner Program, to expand market reach and generate leads - Sales primarily occur through a global sales force interacting directly with IT decision-makers and supporting channel partners (resellers, distributors, OEMs)[828](index=828&type=chunk) - Marketing programs include online advertising, corporate/third-party events (transformed to hybrid digital due to COVID-19), demand generation, social media, and media/analyst relations[829](index=829&type=chunk) - The Elevate Partner Program offers business development funds, incentives, deal registration, training, and dedicated account support to partners[829](index=829&type=chunk) [Research and Development](index=13&type=section&id=Research%20and%20Development) Nutanix's R&D focuses on enhancing existing technology, developing new solutions, and supporting customer deployments globally, with significant resources dedicated to expanding the enterprise cloud platform - Research and development efforts focus on improving current technology, developing new technologies in current and adjacent markets, and supporting existing customer deployments[831](index=831&type=chunk) - R&D teams are located in San Jose, California, India, North Carolina, Washington, Serbia, and Germany[831](index=831&type=chunk) - Significant resources are planned for R&D to enhance solutions, improve ecosystem partner integration, and broaden the IT infrastructure technologies converged into the enterprise cloud platform, contributing to long-term growth[831](index=831&type=chunk) [Manufacturing](index=13&type=section&id=Manufacturing) Nutanix does not manufacture hardware; its NX series appliances are produced by Super Micro Computer, Inc. based on Nutanix's specifications, with an annually renewing agreement - Nutanix does not manufacture hardware; its NX series appliances are manufactured by Super Micro Computer, Inc. (Supermicro) according to Nutanix's specifications[832](index=832&type=chunk) - Supermicro is responsible for designing, assembling, testing, and procuring components for the NX series appliances[832](index=832&type=chunk) - The agreement with Supermicro renews automatically for successive one-year periods, with an option to terminate upon each annual renewal[832](index=832&type=chunk) [Competition](index=13&type=section&id=Competition) Nutanix competes in a highly competitive IT infrastructure market against software providers, traditional IT vendors, storage array vendors, and public cloud providers, with competition extending to adjacent markets - Nutanix competes in the intensely competitive IT infrastructure market against software providers (VMware), traditional IT systems vendors (Cisco, Dell, HPE, Hitachi, IBM, Lenovo), traditional storage array vendors (Dell, Hitachi, Pure Storage, NetApp), and public cloud/SaaS providers (AWS, Google Cloud, Microsoft Azure)[833](index=833&type=chunk)[886](index=886&type=chunk) - Competitive factors include product features, system scalability, performance, resiliency, management, total cost of ownership, customer freedom of choice, product interoperability, application mobility, and quality of customer experience[836](index=836&type=chunk) - Nutanix is also expanding into adjacent markets like disaster-recovery-as-a-service, cloud management, and database-as-a-service, facing new and established competitors[837](index=837&type=chunk) [Intellectual Property](index=14&type=section&id=Intellectual%20Property) Nutanix protects its intellectual property through patents, trademarks, copyrights, trade secrets, and confidentiality agreements, holding 346 issued U.S. patents and 219 pending applications as of July 31, 2022 - Nutanix relies on patents, trademarks, copyrights, trade secret laws, confidentiality procedures, and employee agreements to protect its intellectual property[838](index=838&type=chunk) - As of July 31, 2022, Nutanix had **346 issued United States patents** (expiring between 2031 and 2040) and **219 non-provisional patent applications pending** in the United States[838](index=838&type=chunk) [Facilities](index=14&type=section&id=Facilities) Nutanix's corporate headquarters are in San Jose, California, with leased space being reduced due to a hybrid work model, and the company maintains leased offices globally - Nutanix's corporate headquarters are in San Jose, California, with current lease agreements for approximately **432,000 square feet** expiring through May 2030[839](index=839&type=chunk) - Due to a transition to a hybrid work environment, leased space will be reduced to approximately **215,000 square feet** starting June 2024[839](index=839&type=chunk) - The company leases all its facilities globally and does not own any real property[839](index=839&type=chunk) [Government Regulation](index=15&type=section&id=Government%20Regulation) Nutanix's business is subject to various federal, state, local, and foreign laws and regulations, including those related to global trade, data protection, and employment, with potential material impacts from future changes or non-compliance - Nutanix's business activities are subject to various federal, state, local, and foreign laws, rules, and regulations[841](index=841&type=chunk) - Compliance with existing or future governmental regulations, including those pertaining to global trade, acquisitions, data protection, data privacy, employment, labor, and taxes, could materially impact the business[841](index=841&type=chunk) [Employees and Human Capital](index=15&type=section&id=Employees%20and%20Human%20Capital) Nutanix had approximately 6,450 employees worldwide as of July 31, 2022, prioritizing human capital through culture, talent development, compensation, diversity, and well-being initiatives - As of July 31, 2022, Nutanix had approximately **6,450 employees worldwide**[842](index=842&type=chunk) - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, with equity and cash incentive plans designed to attract and reward personnel[843](index=843&type=chunk) - The company promotes Diversity, Equity, Inclusion, and Belonging (DEIB) through initiatives like employee resource groups, company-wide diversity training, and mentorship programs[845](index=845&type=chunk) - During the COVID-19 pandemic, Nutanix implemented remote work, quarterly well-being days, workshops, flexible schedules, and mindfulness sessions to support employee health and safety[848](index=848&type=chunk) [Corporate Information](index=16&type=section&id=Corporate%20Information) Nutanix, Inc. was incorporated in Delaware in September 2009, with principal executive offices in San Jose, California, and operates globally across multiple continents - Nutanix, Inc. was incorporated in Delaware in September 2009[851](index=851&type=chunk) - The principal executive offices are located at 1740 Technology Drive, Suite 150, San Jose, California 95110[851](index=851&type=chunk) - The company has operations throughout North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa[851](index=851&type=chunk) [Available Information](index=17&type=section&id=Available%20Information) Nutanix makes its SEC filings and important company information, including earnings call webcasts, available free of charge on its investor relations website and social media channels - Nutanix's SEC filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, are available free of charge on its investor relations website (ir.nutanix.com)[853](index=853&type=chunk) - The company uses its investor relations website and social media as channels for distributing important company information, such as earnings call webcasts and financial performance news[853](index=853&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Nutanix faces significant risks from the COVID-19 pandemic, business model transitions, intense competition, reliance on key personnel and partners, intellectual property, regulatory compliance, and convertible notes, which could materially harm its financial condition - The COVID-19 pandemic continues to pose significant risks, including supply chain disruptions, reduced IT spending, lengthened sales cycles, and potential liquidity issues for customers[866](index=866&type=chunk)[868](index=868&type=chunk) - Nutanix has a history of net losses and may not achieve or maintain profitability in the future, with net losses of **$872.9 million**, **$1.0 billion**, and **$797.5 million** for fiscal 2020, 2021, and 2022, respectively[873](index=873&type=chunk) - The ongoing transition to a subscription-based business model may compress topline results, impact revenue recognition, and requires maintaining high customer renewal rates[896](index=896&type=chunk)[898](index=898&type=chunk)[900](index=900&type=chunk) - The company faces intense competition from established IT vendors and public cloud providers, with many competitors having greater resources and market presence[886](index=886&type=chunk)[889](index=889&type=chunk) - Reliance on third-party manufacturers (e.g., Supermicro) and suppliers for hardware components exposes Nutanix to supply chain disruptions, delays, and pricing fluctuations[947](index=947&type=chunk)[951](index=951&type=chunk)[955](index=955&type=chunk) - Compliance with complex and evolving global regulations, particularly concerning privacy (GDPR, CCPA, CPRA), data protection, anti-corruption (FCPA, U.K. Bribery Act), and export controls, could lead to fines, penalties, and reputational harm[990](index=990&type=chunk)[994](index=994&type=chunk)[996](index=996&type=chunk)[1000](index=1000&type=chunk)[1002](index=1002&type=chunk)[1005](index=1005&type=chunk) [Summary Risk Factors](index=18&type=section&id=Summary%20Risk%20Factors) Nutanix's business and securities are subject to risks including the COVID-19 pandemic's impact, challenges in achieving business objectives, macroeconomic conditions, competitive market pressures, business model transitions, and regulatory compliance - Key risks include the impact of the COVID-19 pandemic, ability to achieve business plans and growth strategies, macroeconomic/geopolitical conditions, competitive market, and ability to predict future financial performance[857](index=857&type=chunk) - Other significant risks involve business model transitions (subscription-based), customer needs, platform interoperability, reliance on key personnel and manufacturers, intellectual property rights, regulatory compliance (privacy, data protection), and security breaches[857](index=857&type=chunk)[859](index=859&type=chunk) - Risks also relate to servicing outstanding convertible notes and potential volatility and dilution in the market price of Nutanix's securities[860](index=860&type=chunk)[861](index=861&type=chunk) [Risks Related to Our Business and Industry](index=20&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) This section details risks from the COVID-19 pandemic, a history of net losses, subscription model transition, intense competition, reliance on third-party manufacturers, international operations, and evolving global regulations - The COVID-19 pandemic has caused and may continue to cause significant disruptions to supply chains, reduced IT spending, lengthened sales cycles, and increased cybersecurity risks[866](index=866&type=chunk)[868](index=868&type=chunk) - Nutanix has incurred net losses in all periods since inception, with **$797.5 million in fiscal 2022**, and may not achieve or sustain profitability[873](index=873&type=chunk) - The ongoing transition to a subscription-based business model negatively impacts total billings and revenue in the short term due to shorter contract terms and ratable revenue recognition for SaaS[898](index=898&type=chunk) - Reliance on third-party manufacturers (e.g., Supermicro) for hardware appliances exposes Nutanix to supply chain disruptions, component shortages, and quality control issues[947](index=947&type=chunk)[951](index=951&type=chunk)[955](index=955&type=chunk) - International operations, which accounted for **44% of total revenue in fiscal 2022**, expose the company to political/economic instability, trade restrictions, foreign legal requirements, and currency fluctuations[1007](index=1007&type=chunk)[1009](index=1009&type=chunk)[1230](index=1230&type=chunk) [Risks Related to Our Convertible Notes](index=57&type=section&id=Risks%20Related%20to%20Our%20Convertible%20Notes) Nutanix's outstanding convertible senior notes pose significant financial risks, including substantial cash requirements for conversions or repayments, potential liquidity impacts from conditional conversion features, and counterparty credit risk from related hedge transactions - As of July 31, 2022, Nutanix had **$145.7 million of 2023 Notes**, **$750.0 million of 2026 Notes**, and **$575.0 million of 2027 Notes** outstanding[1041](index=1041&type=chunk) - Servicing these notes may require significant cash for conversions, maturity repayments, or repurchases upon a fundamental change, and the company's ability to generate sufficient cash flows is uncertain[1042](index=1042&type=chunk)[1045](index=1045&type=chunk) - The conditional conversion feature of the notes, if triggered, could adversely affect liquidity and may require reclassification of debt as a current liability, materially reducing net working capital[1047](index=1047&type=chunk) - Convertible note hedge and warrant transactions related to the 2023 Notes may affect the value of Class A common stock and expose the company to counterparty credit risk[1050](index=1050&type=chunk)[1054](index=1054&type=chunk) [Risks Related to Ownership of Our Securities](index=59&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Securities) The market price of Nutanix's securities is highly volatile and can decline due to various factors, with potential dilution from stock sales and charter provisions making acquisitions difficult, and no anticipated dividends - The market price of Nutanix's securities is volatile and can decline due to factors like overall stock market fluctuations, changes in analyst estimates, competitive developments, and litigation[1055](index=1055&type=chunk)[1057](index=1057&type=chunk)[1059](index=1059&type=chunk) - Sales of substantial amounts of Class A common stock, including those from equity compensation plans or convertible note conversions, could dilute ownership interests and depress stock prices[1060](index=1060&type=chunk)[1061](index=1061&type=chunk)[1063](index=1063&type=chunk) - Provisions in charter documents and Delaware law (e.g., classified Board, preferred stock issuance, restrictions on stockholder action) could make company acquisition more difficult and limit stockholder influence[1066](index=1066&type=chunk)[1068](index=1068&type=chunk)[1069](index=1069&type=chunk) - Nutanix does not intend to pay dividends in the foreseeable future, meaning investor returns depend on stock price appreciation[1070](index=1070&type=chunk) [Item 1B. Unresolved Staff Comments](index=64&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item states that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[1072](index=1072&type=chunk) [Item 2. Properties](index=64&type=section&id=Item%202.%20Properties) Nutanix's corporate headquarters are in San Jose, California, with leased space being reduced due to a hybrid work model, and the company maintains leased offices globally - Corporate headquarters are in San Jose, California, with current lease agreements for approximately **432,000 square feet** expiring through May 2030[1072](index=1072&type=chunk) - Leased space will be reduced to approximately **215,000 square feet** starting June 2024, reflecting a transition to a hybrid work environment[1072](index=1072&type=chunk) - Nutanix maintains leased offices in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa, and does not own any real property[1072](index=1072&type=chunk) [Item 3. Legal Proceedings](index=64&type=section&id=Item%203.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 7 of the Notes to Consolidated Financial Statements - Information regarding legal proceedings is incorporated by reference from Note 7 of the Notes to Consolidated Financial Statements[1073](index=1073&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Nutanix - This item is not applicable[1074](index=1074&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=65&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Nutanix Class A common stock trades on NASDAQ under 'NTNX', with market price fluctuations, 92 holders of record as of July 31, 2022, no anticipated cash dividends, and a repurchase of 1.4 million shares in September 2021 - Nutanix Class A common stock trades publicly on the NASDAQ Stock Market under the ticker symbol 'NTNX' since September 30, 2016[1076](index=1076&type=chunk) Class A Common Stock High and Low Sale Prices (Fiscal 2021-2022) | Fiscal Quarter | Fiscal 2021 High ($) | Fiscal 2021 Low ($) | Fiscal 2022 High ($) | Fiscal 2022 Low ($) | | :------------- | :------------------- | :------------------ | :------------------- | :------------------ | | First Quarter | 28.71 | 20.84 | 43.95 | 33.10 | | Second Quarter | 33.86 | 23.36 | 36.28 | 24.71 | | Third Quarter | 35.07 | 25.65 | 28.47 | 22.14 | | Fourth Quarter | 39.95 | 26.54 | 26.34 | 13.75 | - As of July 31, 2022, there were **92 holders of record** of Class A common stock[1078](index=1078&type=chunk) - Nutanix has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain funds for business operations and expansion[1079](index=1079&type=chunk)[1070](index=1070&type=chunk) - In September 2021, Nutanix repurchased **1.4 million shares** of Class A common stock for approximately **$58.5 million**[1082](index=1082&type=chunk) [Item 6. [Reserved]](index=68&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=69&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Nutanix's financial condition, operations, and cash flows for fiscal 2022, highlighting the subscription model transition, increased revenue, reduced net loss, and positive operating cash flow, along with key metrics and accounting policies - Nutanix is transitioning to a subscription-based business model, which impacts revenue recognition and growth metrics[1094](index=1094&type=chunk)[1137](index=1137&type=chunk) Key Financial and Performance Metrics (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------------------------- | :------------------- | :------------------- | :------------------- | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | | Subscription Revenue | 1,030,180 | 1,243,621 | 1,433,773 | | Total Billings | 1,580,092 | 1,521,096 | 1,708,641 | | Subscription Billings | 1,276,413 | 1,354,155 | 1,563,560 | | ACV Billings | 505,179 | 594,292 | 756,326 | | ARR | 481,250 | 878,733 | 1,202,438 | | Run-rate ACV | 1,219,965 | 1,535,360 | 1,797,423 | | Gross Profit | 1,020,993 | 1,102,458 | 1,259,640 | | Net Loss | (872,883) | (1,034,260) | (797,538) | | Net Cash (used in) provided by Operating Activities | (159,885) | (99,810) | 67,543 | | Free Cash Flow | (249,373) | (158,457) | 18,485 | | Total End Customers | 17,360 | 20,130 | 22,600 | - Net cash provided by operating activities improved significantly to **$67.5 million** in fiscal 2022, up from negative cash flows in prior years, primarily due to decreased net loss from operations[1200](index=1200&type=chunk) [Overview](index=69&type=section&id=Overview) Nutanix provides a leading enterprise cloud platform globally, transitioning to a subscription-based model, and served over 22,000 end customers, including 980 Global 2000 enterprises, as of July 31, 2022 - Nutanix provides a leading enterprise cloud platform that delivers a consistent cloud operating model across edge, private-, hybrid- and multicloud environments[1090](index=1090&type=chunk) - The platform is deployed on-premises, in public clouds (AWS, Microsoft Azure), or as cloud-based SaaS offerings, with subscription term-based licenses typically ranging from one to five years[1091](index=1091&type=chunk) - As of July 31, 2022, Nutanix had over **22,000 end customers**, including approximately **980 Global 2000 enterprises**[1095](index=1095&type=chunk) [Impact of the COVID-19 Pandemic](index=71&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic caused significant global disruptions, impacting Nutanix's operations, supply chains, and IT spending, while also increasing demand for virtual desktop solutions and leading to adaptive cost management - The COVID-19 pandemic caused significant disruptions globally, impacting Nutanix's workforce, operations, and financial performance[1100](index=1100&type=chunk) - Adverse effects included curtailed demand, reduced IT spending, delays in purchases, lengthened sales cycles, supply chain disruptions, and increased cybersecurity risks[1101](index=1101&type=chunk) - Nutanix adapted by implementing remote work, virtual events, and proactive cost management, leading to reduced operating expenses, though some cost savings are temporary[1101](index=1101&type=chunk)[1103](index=1103&type=chunk) - A positive impact was increased demand for virtual desktop, desktop-as-a-service, and end-user computing solutions[1101](index=1101&type=chunk) [Key Financial and Performance Metrics](index=73&type=section&id=Key%20Financial%20and%20Performance%20Metrics) Nutanix monitors various financial and performance metrics, including revenue, billings, ARR, gross profit, operating expenses, and cash flow, to evaluate growth and operational efficiencies during its subscription model transition - Nutanix monitors various key financial and performance metrics to evaluate growth, operational efficiencies, and performance trends, especially during its transition to a subscription-based business model[1107](index=1107&type=chunk)[1115](index=1115&type=chunk) Key Financial and Performance Metrics (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------------------------- | :------------------- | :------------------- | :------------------- | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | | Year-over-year percentage increase | 5.8 % | 6.6 % | 13.4 % | | Subscription Revenue | 1,030,180 | 1,243,621 | 1,433,773 | | Total Billings | 1,580,092 | 1,521,096 | 1,708,641 | | Subscription Billings | 1,276,413 | 1,354,155 | 1,563,560 | | Annual Contract Value ("ACV") Billings | 505,179 | 594,292 | 756,326 | | Annual Recurring Revenue ("ARR") | 481,250 | 878,733 | 1,202,438 | | Run-rate ACV | 1,219,965 | 1,535,360 | 1,797,423 | | Gross Profit | 1,020,993 | 1,102,458 | 1,259,640 | | Non-GAAP Gross Profit | 1,063,655 | 1,147,730 | 1,311,662 | | Gross Margin | 78.1 % | 79.1 % | 79.7 % | | Non-GAAP Gross Margin | 81.3 % | 82.3 % | 83.0 % | | Operating Expenses | 1,849,914 | 1,763,240 | 1,717,084 | | Non-GAAP Operating Expenses | 1,518,697 | 1,428,760 | 1,397,473 | | Total Deferred Revenue | 1,183,441 | 1,312,923 | 1,445,538 | | Net Cash (used in) provided by Operating Activities | (159,885) | (99,810) | 67,543 | | Free Cash Flow | (249,373) | (158,457) | 18,485 | | Total End Customers | 17,360 | 20,130 | 22,600 | [Disaggregation of Revenue and Billings](index=73&type=section&id=Disaggregation%20of%20Revenue%20and%20Billings) Nutanix disaggregates revenue and billings into subscription, non-portable software, hardware, and professional services, with subscription revenue being the largest and growing component, recognized ratably or upfront Disaggregation of Revenue (Fiscal Years 2020-2022) | Revenue Type | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------- | :------------------- | :------------------- | :------------------- | | Subscription Revenue | 1,030,180 | 1,243,621 | 1,433,773 | | Non-portable Software Revenue | 208,158 | 71,390 | 49,694 | | Hardware Revenue | 23,455 | 6,259 | 5,585 | | Professional Services Revenue | 45,889 | 73,094 | 91,744 | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | Disaggregation of Billings (Fiscal Years 2020-2022) | Billings Type | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------- | :------------------- | :------------------- | :------------------- | | Subscription Billings | 1,276,413 | 1,354,155 | 1,563,560 | | Non-portable Software Billings | 208,158 | 71,390 | 49,694 | | Hardware Billings | 23,455 | 6,259 | 5,585 | | Professional Services Billings | 72,066 | 89,292 | 89,802 | | Total Billings | 1,580,092 | 1,521,096 | 1,708,641 | - Subscription revenue includes ratable recognition for software entitlement/support and SaaS offerings, and upfront recognition for subscription software licenses[1112](index=1112&type=chunk)[1113](index=1113&type=chunk) [Non-GAAP Financial Measures and Key Performance Measures](index=74&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Measures) Nutanix uses non-GAAP financial measures and key performance indicators to evaluate growth and operational efficiencies during its subscription model transition, for internal management, budgeting, and compensation - Nutanix monitors non-GAAP financial measures and key performance measures to evaluate growth, operational efficiencies, and performance, particularly during the transition to a subscription-based business model[1115](index=1115&type=chunk) - These measures include total billings, subscription billings, ACV billings, ARR, run-rate ACV, non-GAAP gross profit/margin, non-GAAP operating expenses, and free cash flow[1115](index=1115&type=chunk) - Non-GAAP measures exclude items like stock-based compensation, amortization of acquired intangibles, and impairment of lease-related assets to provide supplemental information[1122](index=1122&type=chunk)[1123](index=1123&type=chunk) Reconciliation of GAAP to Non-GAAP Financial Measures (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------------------------- | :------------------- | :------------------- | :------------------- | | Total Revenue (GAAP) | 1,307,682 | 1,394,364 | 1,580,796 | | Change in deferred revenue | 272,410 | 126,732 | 127,845 | | **Total Billings (Non-GAAP)** | **1,580,092** | **1,521,096** | **1,708,641** | | Gross Profit (GAAP) | 1,020,993 | 1,102,458 | 1,259,640 | | Stock-based compensation | 27,348 | 30,483 | 38,225 | | Amortization of intangible assets | 14,777 | 14,776 | 13,579 | | **Non-GAAP Gross Profit** | **1,063,655** | **1,147,730** | **1,311,662** | | Gross Margin (GAAP) | 78.1 % | 79.1 % | 79.7 % | | **Non-GAAP Gross Margin** | **81.3 %** | **82.3 %** | **83.0 %** | | Operating Expenses (GAAP) | 1,849,914 | 1,763,240 | 1,717,084 | | Stock-based compensation | (324,650) | (328,062) | (305,021) | | Amortization of intangible assets | (2,603) | (2,604) | (2,604) | | **Non-GAAP Operating Expenses** | **1,518,697** | **1,428,760** | **1,397,473** | | Net Cash (used in) provided by Operating Activities (GAAP) | (159,885) | (99,810) | 67,543 | | Purchases of property and equipment | (89,488) | (58,647) | (49,058) | | **Free Cash Flow (Non-GAAP)** | **(249,373)** | **(158,457)** | **18,485** | [Factors Affecting Our Performance](index=78&type=section&id=Factors%20Affecting%20Our%20Performance) Nutanix's performance is influenced by strategic investments, the subscription model transition, market adoption, partner relationships, sales force productivity, and customer retention and expansion through a 'land and expand' strategy - Future success depends on balancing investments in long-term growth with improving operating cash flow through go-to-market efficiencies[1132](index=1132&type=chunk) - Investment in sales and marketing focuses on recruiting, training, and retaining sales personnel, particularly for major accounts and large deals, while also aiming to reduce spend as a percentage of revenue[1133](index=1133&type=chunk) - The transition to a subscription-based business model impacts billings, revenue, and cash flow due to shorter average contract terms and changes in sales compensation[1137](index=1137&type=chunk) - Market adoption of Nutanix's enterprise cloud platform, especially newer products, is crucial, with efforts focused on educating the market and stabilizing sales cycles[1141](index=1141&type=chunk) - Customer retention and expansion are critical, with **73% of long-term customers** making repeat purchases, and Global 2000 customers showing significantly higher lifetime orders[1143](index=1143&type=chunk) [Components of Our Results of Operations](index=81&type=section&id=Components%20of%20Our%20Results%20of%20Operations) Nutanix's revenue sources, cost of revenue, operating expenses, other income (expense), and income tax provision are detailed, with personnel costs being a major component and a full valuation allowance on U.S. deferred tax assets - Revenue is generated from the sale of the enterprise cloud platform, including subscription term-based licenses (1-5 years), non-portable software, hardware, and professional services[1146](index=1146&type=chunk)[1148](index=1148&type=chunk)[1149](index=1149&type=chunk) - Cost of product revenue includes OEM costs, hardware costs, and personnel, while cost of support, entitlements, and other services revenue includes global customer support personnel and operating costs[1152](index=1152&type=chunk) - Operating expenses consist of sales and marketing, research and development, and general and administrative expenses, with personnel costs (wages, benefits, bonuses, commissions) being the largest component[1153](index=1153&type=chunk)[1154](index=1154&type=chunk)[1155](index=1155&type=chunk)[1157](index=1157&type=chunk) - Other income (expense), net, includes interest income/expense, changes in derivative liability fair value, debt extinguishment costs, and foreign currency exchange gains/losses[1158](index=1158&type=chunk) - Provision for income taxes primarily relates to foreign jurisdictions, with a full valuation allowance on U.S. federal and state net operating losses and deferred tax assets[1159](index=1159&type=chunk) [Results of Operations](index=84&type=section&id=Results%20of%20Operations) Nutanix's total revenue increased by 13% in fiscal 2022 to $1.58 billion, driven by service and product revenue growth, with improved gross margin, decreased operating expenses, and a reduced net loss of $797.5 million Consolidated Results of Operations (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :--------------------------------------- | :------------------- | :------------------- | :------------------- | | Product Revenue | 765,822 | 705,804 | 757,623 | | Support, entitlements and other services | 541,860 | 688,560 | 823,173 | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | | Total Cost of Revenue | 286,689 | 291,906 | 321,156 | | Gross Profit | 1,020,993 | 1,102,458 | 1,259,640 | | Sales and Marketing | 1,160,389 | 1,052,508 | 978,704 | | Research and Development | 553,978 | 556,950 | 571,962 | | General and Administrative | 135,547 | 153,782 | 166,418 | | Total Operating Expenses | 1,849,914 | 1,763,240 | 1,717,084 | | Loss from Operations | (828,921) | (660,782) | (457,444) | | Other Expense, Net | (26,300) | (354,991) | (320,830) | | Net Loss | (872,883) | (1,034,260) | (797,538) | - Total revenue increased by **13% year-over-year** in fiscal 2022, driven by a **20% increase** in support, entitlements, and other services revenue and a **7% increase** in product revenue[1170](index=1170&type=chunk) - Total gross margin improved to **79.7%** in fiscal 2022, up from **79.1%** in fiscal 2021, primarily due to a higher mix of software revenue[1174](index=1174&type=chunk)[1175](index=1175&type=chunk) - Sales and marketing expense decreased by **7%** in fiscal 2022 due to lower marketing costs and headcount-related costs, partially offset by severance and increased commissions[1180](index=1180&type=chunk) - Net loss decreased to **$797.5 million** in fiscal 2022 from **$1.03 billion** in fiscal 2021[1163](index=1163&type=chunk) [Liquidity and Capital Resources](index=90&type=section&id=Liquidity%20and%20Capital%20Resources) As of July 31, 2022, Nutanix had $402.9 million in cash, $3.0 million in restricted cash, and $921.4 million in short-term investments, with outstanding convertible senior notes and sufficient liquidity for the next 12 months Cash, Cash Equivalents, and Short-Term Investments (as of July 31, 2022) | Asset | Amount ($ millions) | | :------------------------ | :------------------ | | Cash and Cash Equivalents | 402.9 | | Restricted Cash | 3.0 | | Short-Term Investments | 921.4 | - Nutanix has outstanding convertible senior notes: **$145.7 million of 0% notes due 2023**, **$750.0 million of 2.50% notes due 2026**, and **$575.0 million of 0.25% notes due 2027**[1193](index=1193&type=chunk)[1194](index=1194&type=chunk)[1041](index=1041&type=chunk) - The company intends to settle the principal amount of the **2023 Notes in cash** upon their maturity in January 2023[1193](index=1193&type=chunk) - Cash and cash equivalents, along with short-term investments, are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months[1195](index=1195&type=chunk) [Cash Flows](index=91&type=section&id=Cash%20Flows) Nutanix's operating cash flow turned positive in fiscal 2022, providing $67.5 million, while investing activities used cash for investments and property, and financing activities were driven by note issuance and equity plans Summary of Cash Flows (Fiscal Years 2020-2022) | Cash Flow Activity | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------------------------------------- | :------------------- | :------------------- | :------------------- | | Net cash (used in) provided by operating activities | (159,885) | (99,810) | 67,543 | | Net cash provided by (used in) investing activities | 24,559 | (597,153) | (54,189) | | Net cash provided by financing activities | 57,797 | 663,845 | 103,635 | | Net (decrease) increase in cash, cash equivalents and restricted cash | (77,529) | (33,118) | 116,989 | - Net cash provided by operating activities was **$67.5 million** for fiscal 2022, an improvement of **$167.4 million** from fiscal 2021, primarily due to decreases in net loss from operations[1200](index=1200&type=chunk) - Net cash used in investing activities was **$54.2 million** in fiscal 2022, mainly from short-term investment purchases and property/equipment purchases, partially offset by maturities and sales of investments[1201](index=1201&type=chunk) - Net cash provided by financing activities was **$103.6 million** in fiscal 2022, driven by proceeds from 2027 Notes and employee equity plans, offset by stock repurchases and debt extinguishment costs[1203](index=1203&type=chunk) [Material Cash Requirements and Other Obligations](index=92&type=section&id=Material%20Cash%20Requirements%20and%20Other%20Obligations) As of July 31, 2022, Nutanix's material cash requirements included $1.5 billion for convertible senior notes, $7.8 million for interest, $160.8 million for operating leases, $88.7 million for other commitments, and $82.3 million in guarantees Material Cash Requirements and Other Obligations (as of July 31, 2022) | Obligation Type | Total ($ thousands) | Less than 1 Year ($ thousands) | 1 Year to 3 Years ($ thousands) | 3 to 5 Years ($ thousands) | More than 5 Years ($ thousands) | | :--------------------------------------- | :------------------ | :----------------------------- | :------------------------------ | :------------------------- | :------------------------------ | | Principal amount payable on convertible senior notes | 1,498,701 | 145,704 | — | 777,997 | 575,000 | | Interest on convertible senior notes | 7,823 | 475 | — | 7,348 | — | | Operating leases (undiscounted basis) | 160,847 | 44,089 | 49,802 | 28,202 | 38,754 | | Other commitments | 88,679 | 80,242 | 6,050 | 2,387 | — | | Guarantees with contract manufacturers | 82,275 | 82,275 | — | — | — | | **Total** | **1,838,325** | **352,785** | **55,852** | **815,934** | **613,754** | - Nutanix makes commitments with contract manufacturers based on revenue targets or non-cancelable purchase orders, with guarantees totaling approximately **$82.3 million** as of July 31, 2022[1208](index=1208&type=chunk)[1207](index=1207&type=chunk) - Accrued liabilities for uncertain tax positions are not included in the contractual obligations table due to uncertainty regarding settlement timing[1209](index=1209&type=chunk) [Critical Accounting Policies and Estimates](index=92&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Nutanix's financial statements rely on critical accounting estimates for revenue recognition, income taxes, stock-based compensation, derivative liabilities, and impairment assessments, which are continuously evaluated and can materially impact results - Critical accounting estimates include revenue recognition for multiple performance obligations, income taxes (valuation allowance, uncertain tax positions), stock-based compensation, derivative liability fair value, and impairment assessment of goodwill and intangible assets[1211](index=1211&type=chunk)[1214](index=1214&type=chunk)[1216](index=1216&type=chunk)[1217](index=1217&type=chunk)[1220](index=1220&type=chunk)[1222](index=1222&type=chunk) - Revenue recognition involves significant judgment in identifying distinct performance obligations and allocating transaction prices based on standalone selling prices (SSP)[1214](index=1214&type=chunk)[1215](index=1215&type=chunk) - The fair value of stock options and ESPP purchase rights is estimated using the Black-Scholes-Merton model, while derivative liabilities are valued using a binomial model, both requiring subjective assumptions[1217](index=1217&type=chunk)[1219](index=1219&type=chunk)[1220](index=1220&type=chunk)[1221](index=1221&type=chunk) - Goodwill and other intangible assets are tested for impairment annually or more frequently if indicators arise, with fair value determined based on enterprise value[1222](index=1222&type=chunk)[1223](index=1223&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=96&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Nutanix is exposed to market risks from foreign currency exchange rate fluctuations and interest rate changes, with foreign currency expenses posing a significant vulnerability, while its liquid investment portfolio limits interest rate impact - Nutanix's primary market risk exposures are fluctuations in foreign currency exchange rates and interest rates[1229](index=1229&type=chunk) - A hypothetical **10% decrease** in the U.S. dollar against other currencies would have increased operating loss by approximately **$58.5 million** for fiscal 2022, due to foreign currency denominated expenses[1231](index=1231&type=chunk) - The company's investment portfolio consists of highly liquid, short-term securities, and an immediate **10% change** in interest rates is not expected to materially affect its fair market value, operating results, or cash flows[1232](index=1232&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=97&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Nutanix's audited consolidated financial statements for fiscal 2022, including balance sheets, statements of operations, comprehensive loss, stockholders' deficit, and cash flows, along with detailed notes on accounting policies and financial components [Report of Independent Registered Public Accounting Firm](index=98&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on Nutanix's consolidated financial statements and internal control over financial reporting for fiscal 2022, identifying revenue recognition as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion on Nutanix's consolidated financial statements for the fiscal year ended July 31, 2022, stating they are presented fairly in all material respects in conformity with U.S. GAAP[1244](index=1244&type=chunk) - An unqualified opinion was also expressed on the effectiveness of the company's internal control over financial reporting as of July 31, 2022[1245](index=1245&type=chunk)[1256](index=1256&type=chunk) - Revenue recognition was identified as a critical audit matter due to significant management judgments in identifying distinct performance obligations, determining standalone selling prices, and timing of revenue recognition[1250](index=1250&type=chunk)[1251](index=1251&type=chunk) [Consolidated Balance Sheets](index=103&type=section&id=Consolidated%20Balance%20Sheets) As of July 31, 2022, Nutanix reported total assets of $2.37 billion, total liabilities of $3.16 billion, and a total stockholders' deficit of $790.17 million, with significant current assets and liabilities Consolidated Balance Sheet Highlights (as of July 31, 2021 and 2022) | Metric | July 31, 2021 ($ thousands) | July 31, 2022 ($ thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | 285,723 | 402,850 | | Short-term investments | 928,006 | 921,429 | | Total current assets | 1,562,261 | 1,657,981 | | Total assets | 2,277,496 | 2,365,749 | | Deferred revenue—current | 636,421 | 720,993 | | Convertible senior notes, net—current | — | 145,456 | | Total current liabilities | 927,888 | 1,150,224 | | Total liabilities | 3,289,537 | 3,155,917 | | Total Stockholders' Deficit | (1,012,041) | (790,168) | [Consolidated Statements of Operations](index=104&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal 2022, Nutanix reported total revenue of $1.58 billion, a gross profit of $1.26 billion, total operating expenses of $1.72 billion, and a net loss of $797.5 million, resulting in a net loss per share of $(3.62) Consolidated Statements of Operations Highlights (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :--------------------------------------- | :------------------- | :------------------- | :------------------- | | Product Revenue | 765,822 | 705,804 | 757,623 | | Support, entitlements and other services | 541,860 | 688,560 | 823,173 | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | | Total Cost of Revenue | 286,689 | 291,906 | 321,156 | | Gross Profit | 1,020,993 | 1,102,458 | 1,259,640 | | Total Operating Expenses | 1,849,914 | 1,763,240 | 1,717,084 | | Loss from Operations | (828,921) | (660,782) | (457,444) | | Other Expense, Net | (26,300) | (354,991) | (320,830) | | Net Loss | (872,883) | (1,034,260) | (797,538) | | Net Loss Per Share (Basic and Diluted) | (4.48) | (5.01) | (3.62) | | Weighted Average Shares (Basic and Diluted) | 194,719 | 206,475 | 220,529 | [Consolidated Statements of Comprehensive Loss](index=105&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Nutanix reported a comprehensive loss of $803.6 million for fiscal 2022, comprising a net loss of $797.5 million and an other comprehensive loss of $6.07 million from unrealized losses on available-for-sale securities Consolidated Statements of Comprehensive Loss (Fiscal Years 2020-2022) | Metric | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :-------------------------------------------------------- | :------------------- | :------------------- | :------------------- | | Net Loss | (872,883) | (1,034,260) | (797,538) | | Change in unrealized loss on available-for-sale securities, net of tax | 1,361 | (2,038) | (6,068) | | Comprehensive Loss | (871,522) | (1,036,298) | (803,606) | [Consolidated Statements of Stockholders' Deficit](index=106&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Deficit) As of July 31, 2022, Nutanix reported a total stockholders' deficit of $(790.17) million, reflecting changes from ASU 2020-06 adoption, derivative liability reclassification, equity issuances, and stock repurchases Consolidated Statements of Stockholders' Deficit Highlights (Fiscal Years 2020-2022) | Metric | July 31, 2019 ($ thousands) | July 31, 2020 ($ thousands) | July 31, 2021 ($ thousands) | July 31, 2022 ($ thousands) | | :-------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Additional Paid-In Capital | 1,835,528 | 2,245,180 | 2,615,317 | 3,583,928 | | Accumulated Other Comprehensive Income (Loss) | 669 | 2,030 | (8) | (6,076) | | Accumulated Deficit | (1,649,309) | (2,522,192) | (3,627,355) | (4,368,026) | | Total Stockholders' Deficit | 186,893 | (274,977) | (1,012,041) | (790,168) | | Adoption of ASU 2020-06 | — | — | (48,013) | — | | 2026 Notes derivative liability reclassification | — | — | — | 698,213 | | Issuance of common stock through employee equity incentive plans | 7,024 | 15,601 | 6,480 | 6,480 | | Repurchase and retirement of common stock | — | (125,079) | (58,570) | (58,570) | - Effective January 3, 2022, all outstanding Class B common stock automatically converted into Class A common stock, resulting in a single class of outstanding common stock[1452](index=1452&type=chunk) [Consolidated Statements of Cash Flows](index=107&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For fiscal year 2022, Nutanix generated $67.5 million in net cash from operating activities, used $54.2 million in investing activities, and provided $103.6 million in financing activities, resulting in a net increase in cash Consolidated Statements of Cash Flows (Fiscal Years 2020-2022) | Cash Flow Activity | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------------------------------------- | :------------------- | :------------------- | :------------------- | | Net cash (used in) provided by operating activities | (159,885) | (99,810) | 67,543 | | Net cash provided by (used in) investing activities | 24,559 | (597,153) | (54,189) | | Net cash provided by financing activities | 57,797 | 663,845 | 103,635 | | Net (decrease) increase in cash, cash equivalents and restricted cash | (77,529) | (33,118) | 116,989 | - Cash paid for income taxes increased to **$20.35 million** in fiscal 2022 from **$16.64 million** in fiscal 2021[1275](index=1275&type=chunk) - Finance lease liabilities arising from obtaining right-of-use assets were **$4.53 million** in fiscal 2022[1438](index=1438&type=chunk) [Note 1: Overview and Summary of Significant Accounting Policies](index=109&type=section&id=Note%201%3A%20Overview%20and%20Summary%20of%20Significant%20Accounting%20Policies) Nutanix's financial statements adhere to U.S. GAAP, requiring estimates for revenue, taxes, stock-based compensation, and fair value, with key policies covering investments, convertible notes, leases, and goodwill, operating as a single segment - Nutanix, Inc. provides an enterprise cloud platform globally, with solutions primarily sold through channel partners and OEMs[1279](index=1279&type=chunk) - Financial statements are prepared in conformity with U.S. GAAP, requiring management estimates for areas like revenue recognition, intangible asset recoverability, stock-based awards, and income taxes[1281](index=1281&type=chunk) - Key accounting policies include classifying highly liquid investments as cash equivalents or marketable securities (available-for-sale), fair value measurement (Level I, II, III hierarchy), and accounting for convertible senior notes as liabilities[1288](index=1288&type=chunk)[1289](index=1289&type=chunk)[1292](index=1292&type=chunk)[1293](index=1293&type=chunk) - The company adopted ASU 2020-06 (Accounting for Convertible Instruments) and ASU 2021-04 (Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options) effective August 1, 2021[1336](index=1336&type=chunk)[1339](index=1339&type=chunk) Concentration of Revenue and Accounts Receivable by Partner (Fiscal Years 2020-2022) | Partners | 2020 Revenue (%) | 2021 Revenue (%) | 2022 Revenue (%) | 2021 A/R (%) | 2022 A/R (%) | | :---------- | :--------------- | :--------------- | :--------------- | :----------- | :----------- | | Partner A | 29 | 32 | 33 | 35 | 26 | | Partner B | 14 | 15 | 15 | 23 | 11 | | Partner C | <10 | 10 | 11 | <10 | <10 | [Note 2: Revenue, Deferred Revenue and Deferred Commissions](index=113&type=section&id=Note%202%3A%20Revenue%2C%20Deferred%20Revenue%20and%20Deferred%20Commissions) Nutanix disaggregates revenue into subscription, non-portable software, hardware, and professional services, with subscription revenue being the largest component, and reports deferred revenue of $1.45 billion as of July 31, 2022 - Revenue is disaggregated into subscription, non-portable software, hardware, and professional services[1340](index=1340&type=chunk) - Subscription revenue is recognized ratably for software entitlement/support and SaaS offerings, and upfront for subscription software licenses[1343](index=1343&type=chunk)[1345](index=1345&type=chunk) Disaggregation of Revenue (Fiscal Years 2020-2022) | Revenue Type | FY2020 ($ thousands) | FY2021 ($ thousands) | FY2022 ($ thousands) | | :---------------------- | :------------------- | :------------------- | :------------------- | | Subscription | 1,030,180 | 1,243,621 | 1,433,773 | | Non-portable Software | 208,158 | 71,390 | 49,694 | | Hardware | 23,455 | 6,259 | 5,585 | | Professional Services | 45,889 | 73,094 | 91,744 | | Total Revenue | 1,307,682 | 1,394,364 | 1,580,796 | Deferred Revenue and Deferred Commissions (as of July 31, 2020-2022) | Metric | July 31, 2020 ($ thousands) | July 31, 2021 ($ thousands) | July 31, 2022 ($ thousands) | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Deferred Revenue | 1,183,441 | 1,312,923 | 1,445,538 | | Deferred Commissions | 215,528 | 343,420 | 367,590 | - Contracted but not recognized revenue was approximately **$1.6 billion** as of July 31, 2022, with **54%** expected to be recognized over the next 12 months[1348](index=1348&type=chunk) [Note 3: Fair Value Measurements](index=121&type=section&id=Note%203%3A%20Fair%20Value%20Measurements) Nutanix measures financial assets and liabilities using a three-tier fair value hierarchy, with cash equivalents as Level I, short-term investments as Level II, and certain convertible notes as Level 3, reclassifying a derivative liability to equity - Fair value measurements are categorized into Level I (unadjusted quoted prices in active markets), Level II (observable inputs other than quoted prices), and Level III (unobservable inputs)[1351](index=1351&type=chunk) Fair Value of Financial Assets (as of July 31, 2022) | Financial Assets | Level I ($ thousands) | Level II ($ thousands) | Level III ($ thousands) | Total ($ thousands) | | :------------------------ | :-------------------- | :--------------------- | :---------------------- | :------------------ | | Money market funds | 227,796 | — | — | 227,796 | | Commercial paper | — | 27,927 | — | 27,927 | | Corporate bonds | — | 409,024 | — | 409,024 | | U.S. Government securities | — | 317,738 | — | 317,738 | | Total measured at fair value | 227,796 | 949,356 | — | 1,177,152 | - The 2023 and 2027 Notes are Level 2 valuations, while the 2026 Notes are a Level 3 valuation based on a binomial model[1360](index=1360&type=chunk)[1362](index=1362&type=chunk) - The derivative liability for the 2026 Notes was reclassified to equity at an estimated fair value of **$698.2 million** on September 15, 2021, when its conversion price became fixed[1364](index=1364&type=chunk) [Note 4: Balance Sheet Components](index=118&type=section&id=Note%204%3A%20Balance%20Sheet%20Components) This note details Nutanix's balance sheet components, including short-term investments, prepaid expenses, property and equipment, intangible assets, goodwill, and accrued liabilities, with changes reflecting litigation recovery and amortization Short-Term Investments by Contractual Maturity (as of July 31, 2022) | Maturity Period | Amount ($ thousands) | | :-------------------- | :------------------- | | Due within one year | 770,454 | | Due in one to two years | 150,975 | | Total | 921,429 | - Prepaid expenses and other current assets increased from **$56.8 million** in fiscal 2021 to **$93.79 million** in fiscal 2022, primarily due to a receivable for litigation settlement recovery and tenant improvement allowances[1372](index=1372&type=chunk) Property and Equipment, Net (as of July 31, 2021 and 2022) | Category | July 31, 2021 ($ thousands) | July 31, 2022 ($ thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Computer, production, engineering, etc. | 300,583 | 341,536 | | Demonstration units | 68,992 | 61,914 | | Leasehold improvements | 62,676 | 61,443 | | Furniture and fixtures | 16,518 | 16,508 | | Total property and equipment, gross | 448,769 | 481,401 | | Less: accumulated depreciation | (317,148) | (367,961) | | Total property and equipment, net | 131,621 | 113,440 | - Intangible assets, net, decreased from **$32.01 million** in fiscal 2021 to **$15.83 million** in fiscal 2022, with estimated future amortization of **$10.86 million** in fiscal 2023[1378](index=1378&type=chunk)[1381](index=1381&type=chunk)[1383](index=1383&type=chunk) - Goodwill carrying amount remained unchanged in fiscal 2021 and 2022[1384](index=1384&type=chunk) [Note 5: Convertible Senior Notes](index=127&type=section&id=Note%205%3A%20Convertible%20Senior%20Notes) Nutanix has three series of convertible senior notes: 0% due 2023, 2.50% due 2026, and 0.25% due 2027. The 2023 Notes, with $145.7 million outstanding, mature in January 2023 and will be settled in cash. The 2026 Notes, issued in September 2020, bear PIK interest and have a fixed conversion price of $27.75 per share. The 2027 Notes, issued in September 2021, bear 0.25% interest and have an initial conversion price of $57.74 per share. The conversion feature of the 2026 Notes was reclassified to equity in September 2021. Debt extinguishment costs of $64.9 million were recognized in fiscal 2022 due to the exchange of 2023 Notes for 2027 Notes - As of July 31, 2022, **$145.7 million** in aggregate principal amount of **0% convertible senior notes due 2023** remained outstanding, with maturity in January 2023, to be settled in cash[1397](index=1397&type=chunk)[1399](index=1399&type=chunk) - The **2.50% convertible senior notes due 2026**, issued in September 2020, bear paid-in-kind (PIK) interest and have a fixed conversion price of **$27.75 per share**[1410](index=1410&type=chunk)[1411](index=1411&type=chunk) - The **0.25% convertible senior notes due 2027**, issued in September 2021, have an initial conversion price of **$57.74 per share** and mature in October 2027[1421](index=1421&type=chunk)[1423](index=1423&type=chunk) - The embedded conversion option for the 2026 Notes was reclassified to additional paid-in capital (**$698.2 million**) in September 2021 after its conversion price became fixed[1420](index=1420&type=chunk) - Debt extinguishment costs of **$64.9 million** were recognized in fiscal 2022 due to the exchange of 2023 Notes for 2027 Notes[1425](index=1425&type=chunk) [Note 6: Leases](index=133&type=section&id=Note%206%3A%20Leases) Nutanix holds operating leases for facilities and finance leases for equipment, with total lease costs of $43.3 million for operating and $2.4 million for finance leases in fiscal 2022, and recorded impairment charges for office spaces - Nutanix has operating leases for offices, R&D facilities, and datacenters, and finance leases for datacenter equipment, with remaining terms of one to eight years[1431](index=1431&type=chunk) Total Lease Costs (Fiscal Years 2020-2022) | Lease Type | FY2020 ($ millions) | FY2021 ($ millions) | FY

Nutanix, Inc. (NASDAQ:NTNX) Q4 2022 Earnings Conference Call August 31, 2022 4:30 PM ET Company Participants Rich Valera - VP, IR Rajiv Ramaswami - President and CEO Rukmini Sivaraman - CFO Conference Call Participants James Fish - Piper Sandler Rod Hall - Goldman Sachs Pinjalim Bora - JP Morgan Dave Nwokonko - Morgan Stanley Mike Cikos - Needham Dan Bergstrom - RBC Capital Markets George Wang - Barclays Jake Wilhelm - Wells Fargo Erik Suppiger - JMP Ben Bollin - Cleveland Research Ruplu Bhattacharya - Bank ...