Nutanix(NTNX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company achieved substantial revenue and net income growth, strengthening its balance sheet and operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 31, 2024 | January 31, 2025 | | :--- | :--- | :--- | | Total current assets | $1,481,294 | $2,335,394 | | Total assets | $2,143,918 | $2,988,990 | | Total current liabilities | $1,244,341 | $1,317,554 | | Total liabilities | $2,872,066 | $3,796,664 | | Total stockholders' deficit | ($728,148) | ($807,674) | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Jan 31, 2024 | Three Months Ended Jan 31, 2025 | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $565,233 | $654,721 | $1,076,287 | $1,245,677 | | Gross profit | $483,677 | $569,433 | $912,772 | $1,077,719 | | Income from operations | $37,045 | $65,438 | $31,339 | $92,688 | | Net income | $32,795 | $56,427 | $16,942 | $86,353 | | Diluted EPS | $0.12 | $0.19 | $0.09 | $0.30 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | | :--- | :--- | :--- | | Net cash provided by operating activities | $331,881 | $383,421 | | Net cash used in investing activities | ($67,319) | ($375,455) | | Net cash (used in) provided by financing activities | ($98,977) | $408,847 | | Net increase in cash, cash equivalents and restricted cash | $165,585 | $416,813 | Note 2: Revenue, Deferred Revenue and Deferred Commissions Subscription revenue and total deferred revenue significantly increased, indicating a strong future revenue pipeline Disaggregation of Revenue (in thousands) | Revenue Type | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | | :--- | :--- | :--- | | Subscription | $1,011,461 | $1,185,114 | | Professional services | $47,843 | $55,315 | | Other non-subscription product | $16,983 | $5,248 | | Total revenue | $1,076,287 | $1,245,677 | - Total deferred revenue increased from $1.87 billion as of July 31, 2024, to $2.02 billion as of January 31, 2025[54] - As of January 31, 2025, contracted but not yet recognized revenue was approximately $2.34 billion, with 52% expected to be recognized in the next 12 months[56] Note 5: Convertible Senior Notes The company issued $862.5 million in 2029 convertible notes, using proceeds for debt and share repurchases - In December 2024, Nutanix issued $862.5 million in aggregate principal amount of 0.50% convertible senior notes due 2029[85] - Approximately $95.5 million of the proceeds were used to repurchase $75.0 million of outstanding 2027 Notes, incurring an inducement expense of $11.3 million[76][86] - Approximately $200.0 million of net proceeds from the 2029 Notes offering were used to repurchase 3.1 million shares of Class A common stock[86][106] Note 9: Equity Incentive Plans Stock-based compensation expense increased, with a significant amount of unrecognized expense remaining for future periods Stock-Based Compensation Expense (in thousands) | Period | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | | :--- | :--- | :--- | | Total stock-based compensation expense | $169,967 | $182,177 | - As of January 31, 2025, unrecognized stock-based compensation expense was approximately $711.9 million, to be recognized over a weighted average of 2.3 years[124] Note 13: Subsequent Event Subsequent to quarter-end, the company secured a new $500.0 million senior secured revolving credit facility - On February 12, 2025, Nutanix entered into a credit agreement for a $500.0 million senior secured revolving credit facility, maturing in February 2030[131] Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights 16% revenue growth driven by product adoption and renewals, with strong ARR and free cash flow Key Financial and Performance Metrics (in thousands, except percentages) | Metric | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | | :--- | :--- | :--- | | Total revenue | $1,076,287 | $1,245,677 | | Annual recurring revenue ("ARR") | $1,737,364 | $2,059,506 | | Non-GAAP operating income | $203,364 | $279,510 | | Non-GAAP operating margin | 18.9% | 22.4% | | Free cash flow | $295,097 | $338,983 | - The company's end customer base grew to over 27,000 as of January 31, 2025[139] - For the six months ended January 31, 2025, the total average contract duration was approximately 3.0 years, a slight increase from 2.9 years in the prior year period[201] Results of Operations Total revenue increased 16% to $1.25 billion, with improved gross margin and nearly tripled operating income despite rising expenses Revenue Comparison (in thousands) | Revenue Type | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | Change % | | :--- | :--- | :--- | :--- | | Product | $546,582 | $656,106 | 20% | | Support, entitlements and other services | $529,705 | $589,571 | 11% | | Total revenue | $1,076,287 | $1,245,677 | 16% | Operating Expense Comparison (in thousands) | Expense Category | Six Months Ended Jan 31, 2024 | Six Months Ended Jan 31, 2025 | Change % | | :--- | :--- | :--- | :--- | | Sales and marketing | $472,025 | $514,783 | 9% | | Research and development | $312,376 | $356,744 | 14% | | General and administrative | $97,032 | $113,504 | 17% | | Total operating expenses | $881,433 | $985,031 | 12% | Liquidity and Capital Resources The company maintains a strong liquidity position of $1.74 billion, bolstered by financing activities and a remaining $198.9 million share repurchase authorization - Principal sources of liquidity as of January 31, 2025, include $1.07 billion in cash and cash equivalents and $670.7 million in short-term investments[217] - Net cash from financing activities was $408.8 million for the six months ended Jan 31, 2025, driven by 2029 Notes issuance, partially offset by share and 2027 Notes repurchases[231] - As of January 31, 2025, approximately $198.9 million remained available for future share repurchases under the August 2023 authorization[105] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and interest rate changes, impacting operating loss and convertible note fair value - A hypothetical 10% decrease in the U.S. dollar against other currencies would increase operating loss by approximately $36.2 million for the six months ended January 31, 2025[242] - The company's convertible notes have fixed annual interest rates, but their fair value is affected by changes in interest rates and the company's stock price[245] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period[246] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[248] PART II. OTHER INFORMATION Risk Factors New risks include increased indebtedness from notes and credit facilities, impacting debt servicing, cash for conversions, and operational flexibility due to covenants - A new risk factor was added concerning the ability to service and repay debt, including the $500.0 million of 2027 Notes, $862.5 million of 2029 Notes, and any borrowings under the new Credit Agreement[251] - The company may not have sufficient cash to settle conversions of the Notes, repay them at maturity, or repurchase them upon a fundamental change, which could lead to a default[254] - The new revolving credit facility contains financial and other covenants that may restrict actions, and failure to comply could result in acceleration of debt obligations[258] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately 3.1 million shares for $200.0 million via privately negotiated transactions, funded by 2029 Notes proceeds Issuer Purchases of Equity Securities (Three Months Ended Jan 31, 2025) | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid Per Share | | :--- | :--- | :--- | | November 2024 | 0 | $— | | December 2024 | 3,087 | $64.78 | | January 2025 | 0 | $— | - The December 2024 repurchase of approximately 3.1 million shares for approximately $200.0 million was executed outside the existing share repurchase program and funded by 2029 Notes offering proceeds[262]