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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended January 31, 2023

OR

 

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

 

For the transition period from to

Commission File Number: 001-37883

 

NUTANIX, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-0989767

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1740 Technology Drive, Suite 150

San Jose, CA 95110

(Address of principal executive offices, including zip code)

 

(408) 216-8360

(Registrant's telephone number, including area code)

 

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

 

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.000025 par value per share

 

NTNX

 

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

 

Accelerated Filer

 

Non-accelerated Filer

 

Smaller Reporting Company

 

 

 

 

Emerging Growth Company

 

 

 


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 30, 2023, the registrant had 235,744,027 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

60

 

 

 

 

 

Item 1A

Risk Factors

60

 

 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

61

 

 

 

 

 

Item 3

Defaults Upon Senior Securities

61

 

 

 

 

 

Item 4

Mine Safety Disclosures

61

 

 

 

 

 

Item 5

Other Information

62

 

 

 

 

 

Item 6

Exhibits

62

 

 

 

 

EXHIBIT INDEX

63

SIGNATURES

64

 

3


Table of Contents

 

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 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 plans to implement remedial measures in response to the material weakness identified by management;
our plans to implement recommendations arising out of or relating to our Audit Committee’s completed investigation;
our ability to maintain and strengthen existing strategic alliances and partnerships and address macroeconomic supply chain shortages, 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 grow our business 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, geopolitical, and industry trends and environment, 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, war, 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, 2022 and in Part II, Item 1A of 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.

5


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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

 

Page

 

 

Condensed Consolidated Balance Sheets as of July 31, 2022 and January 31, 2023

7

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2022 and 2023

8

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended January 31, 2022 and 2023

9

 

 

Condensed Consolidated Statements of Stockholders' Deficit for the Three and Six Months Ended January 31, 2022 and 2023

10

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2022 and 2023

12

 

 

Notes to Condensed Consolidated Financial Statements

13

 

 

Note 1: Overview and Basis of Presentation

13

Note 2: Correction to Prior Period Financial Statements

14

Note 3: Revenue, Deferred Revenue and Deferred Commissions

16

Note 4: Fair Value Measurements

19

Note 5: Balance Sheet Components

21

Note 6: Convertible Senior Notes

23

Note 7: Leases

28

Note 8: Commitments and Contingencies

30

Note 9: Stockholders' Equity

31

Note 10: Equity Incentive Plans

32

Note 11: Income Taxes

34

Note 12: Restructuring Charges

34

Note 13: Net Loss Per Share

35

Note 14: Segment Information

36

 

6


Table of Contents

 

NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

As of

 

 

 

July 31,
2022

 

 

January 31,
2023

 

 

 

(in thousands, except per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

402,850

 

 

$

406,601

 

Short-term investments

 

 

921,429

 

 

 

904,763

 

Accounts receivable, net of allowances of $644 and $472, respectively

 

 

124,559

 

 

 

155,258

 

Deferred commissions—current

 

 

115,356

 

 

 

109,363

 

Prepaid expenses and other current assets

 

 

93,787

 

 

 

115,763

 

Total current assets

 

 

1,657,981

 

 

 

1,691,748

 

Property and equipment, net

 

 

113,440

 

 

 

112,584

 

Operating lease right-of-use assets

 

 

118,740

 

 

 

106,711

 

Deferred commissions—non-current

 

 

252,234

 

 

 

239,117

 

Intangible assets, net

 

 

15,829

 

 

 

9,941

 

Goodwill

 

 

185,260

 

 

 

185,260

 

Other assets—non-current

 

 

22,265

 

 

 

26,134

 

Total assets

 

$

2,365,749

 

 

$

2,371,495

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

44,931

 

 

$

44,070

 

Accrued compensation and benefits

 

 

149,811

 

 

 

138,343

 

Accrued expenses and other current liabilities

 

 

59,568

 

 

 

108,258

 

Deferred revenue—current

 

 

720,993

 

 

 

787,495

 

Operating lease liabilities—current

 

 

39,801

 

 

 

34,101

 

Convertible senior notes, net—current

 

 

145,456

 

 

 

 

Total current liabilities

 

 

1,160,560

 

 

 

1,112,267

 

Deferred revenue—non-current

 

 

724,545

 

 

 

738,816

 

Operating lease liabilities—non-current

 

 

89,782

 

 

 

80,585

 

Convertible senior notes, net

 

 

1,156,205

 

 

 

1,186,764

 

Other liabilities—non-current

 

 

35,161

 

 

 

35,745

 

Total liabilities

 

 

3,166,253

 

 

 

3,154,177

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

Preferred stock, par value of $0.000025 per share— 200,000 shares
   authorized as of July 31, 2022 and January 31, 2023;
no shares issued
   and outstanding as of July 31, 2022 and January 31, 2023

 

 

 

 

 

 

Common stock, par value of $0.000025 per share—1,042,004 (1,000,000 
   Class A,
42,004 Class B) and 1,000,000 Class A shares authorized as
   of July 31, 2022 and January 31, 2023, respectively;
226,938 and
   
233,591 Class A shares issued and outstanding as of July 31, 2022
   and January 31, 2023, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

3,583,928

 

 

 

3,771,779

 

Accumulated other comprehensive loss

 

 

(6,076

)

 

 

(5,801

)

Accumulated deficit

 

 

(4,378,362

)

 

 

(4,548,666

)

Total stockholders’ deficit

 

 

(800,504

)

 

 

(782,682

)

Total liabilities and stockholders’ deficit

 

$

2,365,749

 

 

$

2,371,495

 

 

See the accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
January 31,

 

 

Six Months Ended
January 31,

 

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

 

(in thousands, except per share data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

209,151

 

 

$

250,538

 

 

$

389,256

 

 

$

459,112

 

Support, entitlements and other services

 

 

203,930

 

 

 

235,957

 

 

 

402,342

 

 

 

460,992

 

Total revenue

 

 

413,081

 

 

 

486,495

 

 

 

791,598

 

 

 

920,104

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

15,096

 

 

 

15,506

 

 

 

29,317

 

 

 

28,022

 

Support, entitlements and other services

 

 

64,873

 

 

 

71,299

 

 

 

132,098

 

 

 

141,278

 

Total cost of revenue

 

 

79,969

 

 

 

86,805

 

 

 

161,415

 

 

 

169,300

 

Gross profit

 

 

333,112

 

 

 

399,690

 

 

 

630,183

 

 

 

750,804

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

241,726

 

 

 

229,788

 

 

 

491,852

 

 

 

466,010

 

Research and development

 

 

141,870

 

 

 

142,301

 

 

 

286,397

 

 

 

291,744

 

General and administrative

 

 

44,291

 

 

 

84,109

 

 

 

84,319

 

 

 

130,213

 

Total operating expenses

 

 

427,887

 

 

 

456,198

 

 

 

862,568

 

 

 

887,967

 

Loss from operations

 

 

(94,775

)

 

 

(56,508

)

 

 

(232,385

)

 

 

(137,163

)

Other expense, net

 

 

(15,332

)

 

 

(10,112

)

 

 

(293,881

)

 

 

(23,528

)

Loss before provision for income taxes

 

 

(110,107

)

 

 

(66,620

)

 

 

(526,266

)

 

 

(160,691

)

Provision for income taxes

 

 

5,309

 

 

 

4,170

 

 

 

9,356

 

 

 

9,613

 

Net loss

 

$

(115,416

)

 

$

(70,790

)

 

$

(535,622

)

 

$

(170,304

)

Net loss per share attributable to Class A and Class B
   common stockholders—basic and diluted
(1)

 

$

(0.53

)

 

$

(0.31

)

 

$

(2.47

)

 

$

(0.74

)

Weighted average shares used in computing net loss
   per share attributable to Class A and Class B
   common stockholders—basic and diluted
(1)

 

 

218,808

 

 

 

231,924

 

 

 

217,153

 

 

 

230,229

 

 

(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 9 for further details.

 

 

See the accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

 

 

Three Months Ended
January 31,

 

 

Six Months Ended
January 31,

 

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

 

(in thousands)

 

Net loss

 

$

(115,416

)

 

$

(70,790

)

 

$

(535,622

)

 

$

(170,304

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(1,776

)

 

 

3,917

 

 

 

(2,427

)

 

 

275

 

Comprehensive loss

 

$

(117,192

)

 

$

(66,873

)

 

$

(538,049

)

 

$

(170,029

)

 

 

See the accompanying notes to condensed consolidated financial statements.

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Table of Contents

 

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

 

 

 

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

)

 

$

(3,636,283

)

 

$

(1,020,969

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(420,206

)

 

 

(420,206

)

Balance - October 31, 2021

 

 

216,959

 

 

 

5

 

 

 

3,292,255

 

 

 

(659

)

 

 

(3,999,622

)

 

 

(708,021

)

Issuance of common stock through employee equity
   incentive plans

 

 

3,580

 

 

 

 

 

 

1,914

 

 

 

 

 

 

 

 

 

1,914

 

Stock-based compensation

 

 

 

 

 

 

 

 

88,045

 

 

 

 

 

 

 

 

 

88,045

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1,776

)

 

 

 

 

 

(1,776

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115,416

)

 

 

(115,416

)

Balance - January 31, 2022

 

 

220,539

 

 

$

5

 

 

$

3,382,214

 

 

$

(2,435

)

 

$

(4,115,038

)

 

$

(735,254

)

 

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Six Months Ended January 31, 2023

 

 

 

Common Stock