SEC Filing | Nutanix, Inc

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10-Q

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 January 31, 2022


☐	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 February 28, 2022, the registrant had 220,566,121 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	37

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	57

	Item 4	Controls and Procedures	57

PART II.		OTHER INFORMATION

	Item 1	Legal Proceedings	58

	Item 1A	Risk Factors	58

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	58

	Item 3	Defaults Upon Senior Securities	58

	Item 4	Mine Safety Disclosures	58

	Item 5	Other Information	58

	Item 6	Exhibits	58

EXHIBIT INDEX			59
SIGNATURES			60

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express and implied forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve substantial risks and uncertainties. Other than statements of historical fact, all statements contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "plan," "intend," "could," "would," "expect," or words or expressions of similar substance or the negative thereof, that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

•

our future billings, revenue, cost of revenue and operating expenses, as well as changes in the cost of product revenue, component costs, contract terms, product gross margins and support, entitlements and other services revenue and changes in research and development, sales and marketing and general and administrative expenses;

•

our business plans, strategies, initiatives, objectives and outlook, as well as our ability to execute such plans, strategies, initiatives and objectives successfully and in a timely manner, and the benefits and impact of such plans, initiatives and objectives on our business, operations, and financial results, including any impact on our revenue and product mix, average contract term lengths and discounting behavior;

•

our plans for, and the timing of, any current and future business model transitions, including our ongoing transition to a subscription-based business model, our ability to manage, complete or realize the benefits of such transitions successfully and in a timely manner, and the short-term and long-term impacts of such transitions on our business, operations and financial results;

•

the timing, evolution and potential impact of the COVID-19 pandemic on the global market environment and the IT industry, as well as on our business, operations and financial results, including changes we have made or anticipate making in response to the COVID-19 pandemic, our ability to manage our business during the pandemic, and the position we anticipate being in following the pandemic;

•

the benefits and capabilities of our platform, solutions, products, services and technology, including the interoperability and availability of our solutions with and on third-party platforms;

•

our plans and expectations regarding new solutions, products, services, product features and technology, including those that are still under development or in process;

•

our growth strategy, our ability to effectively achieve and manage our growth, and the amount, timing and impact of any investments to grow our business, including any plans to increase or decrease investments in our global engineering, research and development and sales and/or marketing teams;

•

our go-to-market strategy and the impact of any adjustments thereto, including any adjustments to our go-to-market cost structure, in particular, our sales compensation structure, and our plans regarding pricing and packaging of our product portfolio;

•

the success and impact of our customer, partner, industry, analyst, investor and employee events on our business, including on future pipeline generation;

•

the impact of our decision to use new or different metrics, or to make adjustments to the metrics we use, to supplement our financial reporting;

•

our reliance on key personnel;

•

anticipated trends, growth rates and challenges in our business and in the markets in which we operate, including the segmentation and productivity of our sales team;

•

market acceptance of new technology and recently introduced solutions;

•

our ability to increase sales of our solutions, particularly to large enterprise customers;

•

our ability to attract new end customers and retain and grow sales from our existing end customers;

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•

our ability to maintain and strengthen existing strategic alliances and partnerships, including our relationships with our channel partners and original equipment manufacturers, and to develop any new strategic alliances and partnerships, and the impact of any changes to such relationships on our business, operations and financial results;

•

the effects of seasonal trends on our results of operations;

•

our expectations concerning relationships with third parties, including our ability to compress and stabilize sales cycles;

•

our ability to maintain, protect and enhance our intellectual property;

•

our exposure to and ability to guard against cyber attacks and other actual or perceived security breaches;

•

our ability to continue to expand internationally;

•

the competitive market, including our ability to compete effectively, the competitive advantages of our products, and the effects of increased competition in our market;

•

anticipated capital expenditures;

•

future acquisitions or investments in complementary companies, products, services or technologies and the ability to successfully integrate completed acquisitions;

•

our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally, including recent changes in global tax laws;

•

macroeconomic and industry trends, projected growth or trend analysis;

•

the impact of events that may be outside of our control, such as political and social unrest, terrorist attacks, hostilities, malicious human acts, climate change, natural disasters (including extreme weather), pandemics or other major public health concerns, and other similar events;

•

our ability to attract and retain qualified employees and key personnel; and

•

the sufficiency of cash balances to meet cash needs for at least the next 12 months.

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, 2021 and in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. 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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)


	Page

Condensed Consolidated Balance Sheets as of July 31, 2021 and January 31, 2022	7

Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2021 and 2022	8

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended January 31, 2021 and 2022	9

Condensed Consolidated Statements of Stockholders' Deficit for the Three and Six Months Ended January 31, 2021 and 2022	10

Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2021 and 2022	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	18
Note 4: Balance Sheet Components	21
Note 5: Convertible Senior Notes	23
Note 6: Leases	29
Note 7: Commitments and Contingencies	31
Note 8: Stockholders' Equity	31
Note 9: Equity Incentive Plans	32
Note 10: Income Taxes	35
Note 11: Net Loss Per Share	35
Note 12: Segment Information	36

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NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	As of
	July 31, 2021			January 31, 2022
	(in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	285,723		$	400,749
Short-term investments		928,006			891,026
Accounts receivable, net of allowances of $892 and $668, respectively		180,781			159,938
Deferred commissions—current		110,935			109,607
Prepaid expenses and other current assets		56,816			60,404
Total current assets		1,562,261			1,621,724
Property and equipment, net		131,621			117,609
Operating lease right-of-use assets		105,903			91,519
Deferred commissions—non-current		232,485			247,144
Intangible assets, net		32,012			23,866
Goodwill		185,260			185,260
Other assets—non-current		27,954			28,468
Total assets	$	2,277,496		$	2,315,590
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	47,056		$	46,900
Accrued compensation and benefits		162,337			149,989
Accrued expenses and other current liabilities		39,404			37,589
Deferred revenue—current		636,421			703,803
Operating lease liabilities—current		42,670			43,585
Convertible senior notes, net—current		—			145,160
Total current liabilities		927,888			1,127,026
Deferred revenue—non-current		676,502			683,068
Operating lease liabilities—non-current		86,599			66,016
Convertible senior notes, net		1,055,694			1,126,461
Derivative liability		500,175			—
Other liabilities—non-current		42,679			38,636
Total liabilities		3,289,537			3,041,207
Commitments and contingencies (Note 7)
Stockholders’ deficit:
Preferred stock, par value of $0.000025 per share— 200,000 shares authorized as of July 31, 2021 and January 31, 2022; no shares issued and outstanding as of July 31, 2021 and January 31, 2022		—			—
Common stock, par value of $0.000025 per share—1,200,000 (1,000,000 Class A, 200,000 Class B) and 1,042,004 (1,000,000 Class A, 42,004 Class B) shares authorized as of July 31, 2021 and January 31, 2022, respectively; 214,210 (208,579 Class A and 5,631 Class B) and 220,539 (220,539 Class A and zero Class B) shares issued and outstanding as of July 31, 2021 and January 31, 2022, respectively (1)		5			5
Additional paid-in capital		2,615,317			3,382,214
Accumulated other comprehensive loss		(8	)		(2,435	)
Accumulated deficit		(3,627,355	)		(4,105,401	)
Total stockholders’ deficit		(1,012,041	)		(725,617	)
Total liabilities and stockholders’ deficit	$	2,277,496		$	2,315,590

(1)

Effective January 3, 2022, all of the then outstanding shares of Nutanix, Inc. Class B common stock were automatically converted into the same number of shares of Nutanix, Inc. Class A common stock. See Note 8 for further details.

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended January 31,						Six Months Ended January 31,
	2021			2022			2021			2022
	(in thousands, except per share data)
Revenue:
Product	$	174,798		$	209,151		$	330,550		$	389,256
Support, entitlements and other services		171,584			203,930			328,586			402,342
Total revenue		346,382			413,081			659,136			791,598
Cost of revenue:
Product		13,784			15,096			26,598			29,317
Support, entitlements and other services		57,170			64,873			112,315			132,098
Total cost of revenue		70,954			79,969			138,913			161,415
Gross profit		275,428			333,112			520,223			630,183
Operating expenses:
Sales and marketing		261,071			241,633			518,361			491,666
Research and development		135,571			141,608			271,375			285,874
General and administrative		35,034			44,291			68,808			84,319
Total operating expenses		431,676			427,532			858,544			861,859
Loss from operations		(156,248	)		(94,420	)		(338,321	)		(231,676	)
Other expense, net		(126,001	)		(15,332	)		(204,733	)		(293,881	)
Loss before provision for income taxes		(282,249	)		(109,752	)		(543,054	)		(525,557	)
Provision for income taxes		5,141			5,309			9,384			9,356
Net loss	$	(287,390	)	$	(115,061	)	$	(552,438	)	$	(534,913	)
Net loss per share attributable to Class A and Class B common stockholders—basic and diluted (1)	$	(1.42	)	$	(0.53	)	$	(2.72	)	$	(2.46	)
Weighted average shares used in computing net loss per share attributable to Class A and Class B common stockholders—basic and diluted (1)		202,520			218,808			202,798			217,153

(1)

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended January 31,						Six Months Ended January 31,
	2021			2022			2021			2022
	(in thousands)
Net loss	$	(287,390	)	$	(115,061	)	$	(552,438	)	$	(534,913	)
Other comprehensive loss, net of tax:
Change in unrealized loss on available-for-sale securities, net of tax		(323	)		(1,776	)		(1,473	)		(2,427	)
Comprehensive loss	$	(287,713	)	$	(116,837	)	$	(553,911	)	$	(537,340	)

See the accompanying notes to condensed consolidated financial statements.

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NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)


	Six Months Ended January 31, 2021
	Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Income			Deficit			Deficit
	(in thousands)
Balance - July 31, 2020		201,949		$	5	$	2,245,180		$	2,030		$	(2,522,192	)	$	(274,977	)
Issuance of common stock through employee equity incentive plans		3,117			—		1,631			—			—			1,631
Issuance of common stock from ESPP purchase		1,456			—		18,070			—			—			18,070
Repurchase and retirement of common stock		(5,176	)		—		(54,176	)		—			(70,903	)		(125,079	)
Stock-based compensation		—			—		89,198			—			—			89,198
Other comprehensive loss		—			—		—			(1,150	)		—			(1,150	)
Net loss		—			—		—			—			(265,048	)		(265,048	)
Balance - October 31, 2020		201,346			5		2,299,903			880			(2,858,143	)		(557,355	)
Issuance of common stock through employee equity incentive plans		2,892			—		2,222			—			—			2,222
Stock-based compensation		—			—		84,454			—			—			84,454
Other comprehensive loss		—			—		—			(323	)		—			(323	)
Net loss		—			—		—			—			(287,390	)		(287,390	)
Balance - January 31, 2021		204,238		$	5	$	2,386,579		$	557		$	(3,145,533	)	$	(758,392	)

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	Six Months Ended January 31, 2022
	Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Loss			Deficit			Deficit
	(in thousands)
Balance - July 31, 2021		214,210		$	5	$	2,615,317		$	(8	)	$	(3,627,355	)	$	(1,012,041	)
Adoption of ASU 2020-06		—			—		(148,598	)		—			100,585			(48,013	)
2026 Notes derivative liability reclassification		—			—		698,213			—			—			698,213
Issuance of common stock through employee equity incentive plans		2,809			—		1,352			—			—			1,352
Issuance of common stock from ESPP purchase		1,309			—		28,786			—			—			28,786
Repurchase and retirement of common stock		(1,369	)		—		(14,852	)		—			(43,718	)		(58,570	)
Unwinding of 2023 Notes hedges		—			—		39,880			—			—			39,880
Unwinding of 2023 Notes warrants		—			—		(18,390	)		—			—			(18,390	)
Stock-based compensation		—			—		90,547			—			—			90,547
Other comprehensive loss		—			—		—			(651	)		—			(651	)
Net loss		—			—		—			—