SEC Filing | Nutanix, Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended April 30, 2019



o	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)

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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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. (Check one):



Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o
Emerging growth company	o	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.	o

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



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

As of May 31, 2019, the registrant had 157,407,982 shares of Class A common stock, $0.000025 par value per share, and 28,550,563 shares of Class B common stock, $0.000025 par value per share, outstanding.

TABLE OF CONTENTS



			PAGE
PART I.		FINANCIAL INFORMATION
	Item 1	Financial Statements (Unaudited)	5
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	49
	Item 4	Controls and Procedures	49

PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	50
	Item 1A	Risk Factors	50
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	79
	Item 3	Defaults Upon Senior Securities	79
	Item 4	Mine Safety Disclosures	79
	Item 5	Other Information	79
	Item 6	Exhibits	79

EXHIBIT INDEX			80
SIGNATURES			81

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), which statements involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, 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," and similar expressions 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 revenue, cost of revenue and operating expenses, as well as changes in the cost of product revenue, component costs, 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 plan, our growth strategy and our ability to effectively manage our growth;


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


•	our ability to develop new solutions, product features and technology and bring them to market in a timely manner;


•	market acceptance of new technology and recently introduced solutions;


•	the interoperability and availability of our solutions with and on third-party hardware platforms;


•	the amount and timing of investments to grow our business and our plans and objectives for future operations, including plans to continue to invest in our global engineering, research and development and sales and marketing teams, and continued investment in sales and marketing programs, and the impact of such investments;


•	our ability to increase sales of our solutions;


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


•	our ability to maintain and strengthen our relationships with our channel partners and OEMs;


•	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;


•	our ability to continue to expand internationally;


•	the effects of increased competition in our market and our ability to compete effectively;


•	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;


•	economic and industry trends, projected growth or trend analysis;


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


•	our plans for, the timing of, and the impact of changes to our business model, including our shift to a more subscription-based model;


•	our expectations concerning future shifts in the mix of whether our solutions are sold as an appliance or as software-only, and in the mix of the types of appliances we sell; 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. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described 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 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 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 to update, revise or publicly release the results of any revision to these forward-looking statements to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed on our forward-looking statements and you should not place undue reliance on our forward-looking statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)



	Page

Condensed Consolidated Balance Sheets as of July 31, 2018 and April 30, 2019	6
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended April 30, 2018 and 2019	7
Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended April 30, 2018 and 2019	8
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended April 30, 2018 and 2019	9
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2018 and 2019	11
Notes to Condensed Consolidated Financial Statements	12
Note 1: Overview and Basis of Presentation	12
Note 2: Business Combination	14
Note 3: Revenue, Deferred Revenue and Deferred Commissions	16
Note 4: Fair Value Measurements	19
Note 5: Balance Sheet Components	20
Note 6: Convertible Senior Notes	23
Note 7: Commitments and Contingencies	26
Note 8: Stockholders' Equity	27
Note 9: Equity Incentive Plans	27
Note 10: Income Taxes	30
Note 11: Net Loss Per Share	31
Note 12: Segment Information	32
Note 13: Related Party Transactions	32

NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	As of
	July 31, 2018			April 30, 2019
	(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	305,975		$	445,119
Short-term investments	628,328			495,633
Accounts receivable, net	258,289			244,445
Deferred commissions—current	33,691			40,309
Prepaid expenses and other current assets	36,818			73,744
Total current assets	1,263,101			1,299,250
Property and equipment, net	85,111			134,562
Deferred commissions—non-current	80,688			98,889
Intangible assets, net	45,366			71,118
Goodwill	87,759			185,180
Other assets—non-current	37,855			12,820
Total assets	$	1,599,880		$	1,801,819

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	65,503		$	82,597
Accrued compensation and benefits	85,398			75,032
Accrued expenses and other current liabilities	31,682			20,019
Deferred revenue—current	275,648			361,432
Total current liabilities	458,231			539,080
Deferred revenue—non-current	355,559			476,830
Convertible senior notes, net	429,598			451,399
Other liabilities—non-current	29,713			29,064
Total liabilities	1,273,101			1,496,373
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, par value of $0.000025 per share— 200,000,000 shares authorized as of July 31, 2018 and April 30, 2019; no shares issued and outstanding as of July 31, 2018 and April 30, 2019	—			—
Common stock, par value of $0.000025 per share—1,200,000,000 (1,000,000,000 Class A, 200,000,000 Class B) shares authorized as of July 31, 2018 and April 30, 2019; 172,858,082 (135,109,672 Class A and 37,748,410 Class B) and 185,900,407 (153,349,844 Class A and 32,550,563 Class B) shares issued and outstanding as of July 31, 2018 and April 30, 2019	4			5
Additional paid-in capital	1,355,907			1,760,083
Accumulated other comprehensive (loss) income	(1,002		)	329
Accumulated deficit	(1,028,130		)	(1,454,971		)
Total stockholders’ equity	326,779			305,446
Total liabilities and stockholders’ equity	$	1,599,880		$	1,801,819

See the accompanying notes to condensed consolidated financial statements.

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands, except share and per share data)
Revenue:
Product	$	221,117		$	184,794		$	663,339		$	646,072
Support, entitlements and other services	68,296			102,830			188,370			290,195
Total revenue	289,413			287,624			851,709			936,267
Cost of revenue:
Product	66,680			29,528			235,059			114,755
Support, entitlements and other services	28,935			45,549			77,706			120,410
Total cost of revenue	95,615			75,077			312,765			235,165
Gross profit	193,798			212,547			538,944			701,102
Operating expenses:
Sales and marketing	169,860			245,703			466,466			655,907
Research and development	81,291			137,982			216,727			371,550
General and administrative	24,929			33,040			56,929			89,167
Total operating expenses	276,080			416,725			740,122			1,116,624
Loss from operations	(82,282		)	(204,178		)	(201,178		)	(415,522		)
Other expense, net	(4,235		)	(3,212		)	(5,285		)	(10,314		)
Loss before (benefit from) provision for income taxes	(86,517		)	(207,390		)	(206,463		)	(425,836		)
(Benefit from) provision for income taxes	(843		)	2,423			3,329			1,005
Net loss	$	(85,674	)	$	(209,813	)	$	(209,792	)	$	(426,841	)
Net loss per share attributable to Class A and Class B common stockholders—basic and diluted	$	(0.51	)	$	(1.15	)	$	(1.30	)	$	(2.38	)
Weighted average shares used in computing net loss per share attributable to Class A and Class B common stockholders—basic and diluted	166,845,544			182,962,921			161,709,365			179,235,498

See the accompanying notes to condensed consolidated financial statements.

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)



	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands)
Net loss	$	(85,674	)	$	(209,813	)	$	(209,792	)	$	(426,841	)
Other comprehensive loss, net of tax:
Change in unrealized (loss) gain on available-for-sale securities, net of tax	(517		)	478			(1,131		)	1,331
Comprehensive loss	$	(86,191	)	$	(209,335	)	$	(210,923	)	$	(425,510	)

See the accompanying notes to condensed consolidated financial statements.

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



	Nine Months Ended April 30, 2018
	Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	(in thousands, except share data)
Balance - July 31, 2017	154,636,520	$	4	$	948,134		$	(106	)	$	(730,969	)	$	217,063
Issuance of common stock through employee equity incentive plans, net of repurchases	3,989,701	—		7,968			—			—			7,968
Issuance of common stock from ESPP purchase	1,261,104	—		17,402			—			—			17,402
Stock-based compensation	—	—		35,515			—			—			35,515
Vesting of early exercised stock options	—	—		249			—			—			249
Other comprehensive loss	—	—		—			(130		)	—			(130		)
Net loss	—	—		—			—			(61,487		)	(61,487		)
Balance - October 31, 2017	159,887,325	4		1,009,268			(236		)	(792,456		)	216,580
Issuance of common stock through employee equity incentive plans	4,178,590			11,419			—			—			11,419
Stock-based compensation	—	—		42,011			—			—			42,011
Equity component of the convertible senior notes, net	—	—		148,598			—			—			148,598
Sale of warrants related to the convertible senior notes	—	—		87,975			—			—			87,975
Cost of the bond hedges related to the convertible senior notes	—	—		(143,175		)	—			—			(143,175		)
Vesting of early exercised stock options	—	—		186			—			—			186
Other comprehensive loss	—	—		—			(484		)	—			(484		)
Net loss	—	—		—			—			(62,631		)	(62,631		)
Balance - January 31, 2018	164,065,915	4		1,156,282			(720		)	(855,087		)	300,479
Issuance of common stock through employee equity incentive plans	3,748,870	—		9,825			—			—			9,825
Issuance of common stock from ESPP purchase	1,156,746	—		21,607			—			—			21,607
Issuance of common stock in connection with a business combination	1,310,790	—		63,780			—			—			63,780
Stock-based compensation	—	—		44,946			—			—			44,946
Vesting of early exercised stock options	—	—		135			—			—			135
Other comprehensive loss	—	—		—			(517		)	—			(517		)
Net loss	—	—		—			—			(85,674		)	(85,674		)
Balance - April 30, 2018	170,282,321	$	4	$	1,296,575		$	(1,237	)	$	(940,761	)	$	354,581



	Nine Months Ended April 30, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income			Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income			Accumulated Deficit			Total Stockholders’ Equity
	(in thousands, except share data)
Balance - July 31, 2018	172,858,082	$	4	$	1,355,907	$	(1,002	)	$	(1,028,130	)	$	326,779
Issuance of common stock through employee equity incentive plans	2,629,079	—		3,680		—			—			3,680
Issuance of common stock from ESPP purchase	1,127,728	—		26,318		—			—			26,318
Issuance of common stock in connection with a business combination	2,451,322	—		102,978		—			—			102,978
Stock-based compensation	—	—		65,925		—			—			65,925
Vesting of early exercised stock options	—	—		70		—			—			70
Other comprehensive loss	—	—		—		(166		)	—			(166		)
Net loss	—	—		—		—			(94,265		)	(94,265		)
Balance - October 31, 2018	179,066,211	4		1,554,878		(1,168		)	(1,122,395		)	431,319
Issuance of common stock through employee equity incentive plans	2,967,649	—		3,341		—			—			3,341
Stock-based compensation	—	—		72,565		—			—			72,565
Vesting of early exercised stock options	—	—		50		—			—			50
Other comprehensive income	—	—		—		1,019			—			1,019
Net loss	—	—		—		—			(122,763		)	(122,763		)
Balance - January 31, 2019	182,033,860	4		1,630,834		(149		)	(1,245,158		)	385,531
Issuance of common stock through employee equity incentive plans	2,980,448	—		3,154		—			—			3,154
Issuance of common stock from ESPP purchase	880,354	1		30,899		—			—			30,900
Issuance of common stock in connection with a business combination	5,745	—		327		—			—			327
Stock-based compensation	—	—		94,832		—			—			94,832
Vesting of early exercised stock options	—	—		37		—			—			37
Other comprehensive income	—	—		—		478			—			478
Net loss	—	—		—		—			(209,813		)	(209,813		)
Balance - April 30, 2019	185,900,407	$	5	$	1,760,083	$	329		$	(1,454,971	)	$	305,446

See the accompanying notes to condensed consolidated financial statements.

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended April 30,
	2018			2019
	(in thousands)
Cash flows from operating activities:
Net loss	$	(209,792	)	$	(426,841	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	36,013			55,740
Stock-based compensation	122,472			233,322
Change in fair value of contingent consideration	(3,371		)	(832		)
Amortization of debt discount and issuance costs	7,654			21,802
Other	(186		)	(1,837		)
Changes in operating assets and liabilities:
Accounts receivable, net	(15,307		)	16,734
Deferred commissions	(29,201		)	(24,819		)
Prepaid expenses and other assets ⁽¹⁾	(5,333		)	(5,095		)
Accounts payable	(6,407		)	18,461
Accrued compensation and benefits	3,700			(10,366		)
Accrued expenses and other liabilities	(1,147		)	(31,180		)
Deferred revenue	170,709			206,735
Net cash provided by operating activities ⁽¹⁾	69,804			51,824
Cash flows from investing activities:
Maturities of investments	147,868			460,563
Purchases of investments	(485,777		)	(324,581		)
Purchases of property and equipment	(46,089		)	(94,815		)
Payments for business combinations, net of cash and restricted cash acquired	(22,792		)	(19,017		)
Net cash (used in) provided by investing activities	(406,790		)	22,150
Cash flows from financing activities:
Proceeds from sales of shares through employee equity incentive plans, net of repurchases	68,186			67,277
Payment of contingent consideration associated with a business combination	—			(1,040		)
Payment of debt in conjunction with business combinations	(1,428		)	(991		)
Proceeds from issuance of convertible senior notes, net	563,937			(75		)
Proceeds from issuance of warrants	87,975			—
Payments for convertible note hedges	(143,175		)	—
Payment of offering costs	(85		)	—
Net cash provided by financing activities	575,410			65,171
Net increase in cash, cash equivalents and restricted cash ⁽¹⁾	$	238,424		$	139,145
Cash, cash equivalents and restricted cash—beginning of period ⁽¹⁾	139,497			307,098
Cash, cash equivalents and restricted cash—end of period ⁽¹⁾	$	377,921		$	446,243
Restricted cash ⁽¹⁾⁽²⁾	1,132			1,124
Cash and cash equivalents—end of period	$	376,789		$	445,119
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	8,038		$	26,731
Supplemental disclosures of non-cash investing and financing information:
Issuance of common stock in connection with business combinations	$	63,780		$	103,305
Purchases of property and equipment included in accounts payable and accrued liabilities	$	9,285		$	11,671
Vesting of early exercised stock options	$	570		$	157
Convertible senior notes offering costs included in accounts payable and accrued liabilities	$	425		$	—

(1)

During the first quarter of fiscal 2019, we adopted Accounting Standards Update ("ASU") No. 2016-18, which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash. We adopted the standard retrospectively for the prior period presented. Our adoption of ASU 2016-18 did not have any significant impact on our condensed consolidated statements of cash flows.


(2)	Included within other assets—non-current in the condensed consolidated balance sheets.

See the accompanying notes to condensed consolidated financial statements.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. OVERVIEW AND BASIS OF PRESENTATION

Organization and Description of Business

Nutanix, Inc. was incorporated in the state of Delaware in September 2009. Nutanix, Inc. is headquartered in San Jose, California, and together with its wholly-owned subsidiaries (collectively, "we," "us," "our" or "Nutanix") has operations throughout North America, Europe, Asia Pacific, the Middle East, Latin America and Africa.

We provide a leading enterprise cloud platform that digitizes the traditional silos of enterprise computing, converging compute, virtualization, storage, networking, desktop, governance and security services into one integrated solution. We primarily sell our products and services to end customers through distributors, resellers and original equipment manufacturers ("OEMs") (collectively, "Partners").

Principles of Consolidation and Significant Accounting Policies

The accompanying condensed consolidated financial statements, which include the accounts of Nutanix, Inc. and its wholly-owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and are consistent in all material respects with those included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2018, filed with the Securities and Exchange Commission ("SEC") on September 24, 2018. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements are unaudited, but include all adjustments of a normal recurring nature necessary for a fair presentation of our quarterly results. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications had no impact on the previously reported net loss or accumulated deficit.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended July 31, 2018.

Use of Estimates

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such management estimates include, but are not limited to, the best estimate of selling prices for products and related support; useful lives of intangible assets and property and equipment; allowance for doubtful accounts; determination of fair value of stock-based awards; accounting for income taxes, including the valuation allowance on deferred tax assets and uncertain tax positions; warranty liability; fair value of contingent consideration in a business combination; sales commissions expense; and contingencies and litigation. Management evaluates these estimates and assumptions on an ongoing basis using historical experience and other factors and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

Concentration of Risk

Concentration of revenue and accounts receivable—We sell our products primarily through our Partners and occasionally directly to end customers. For the three and nine months ended April 30, 2018 and 2019, no end customer accounted for more than 10% of total revenue or accounts receivable.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

For each significant Partner, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, net are as follows:



	Revenue								Accounts Receivable as of
	Three Months Ended April 30,				Nine Months Ended April 30,				Accounts Receivable as of
Partners	2018		2019		2018		2019		July 31, 2018		April 30, 2019
Partner A	⁽¹⁾		⁽¹⁾		10	%	10	%	16	%	⁽¹⁾
Partner B	15	%	10	%	20	%	11	%	13	%	⁽¹⁾
Partner C	18	%	26	%	17	%	23	%	15	%	25	%
Partner D	⁽¹⁾		⁽¹⁾		10	%	⁽¹⁾		⁽¹⁾		⁽¹⁾
Partner E	13	%	13	%	13	%	12	%	12	%	13	%


(1)	Less than 10%

Summary of Significant Accounting Policies

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2018, filed with the SEC on September 24, 2018, that have had a material impact on our condensed consolidated financial statements and related notes.

Recently Adopted Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires us to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new standard was effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including interim reporting periods within those fiscal years. We adopted this ASU effective August 1, 2018 using a modified retrospective approach. The adoption of the new standard did not have a material impact on our condensed consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period amounts shown on the statement of cash flows. The new standard was effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including interim reporting periods within those fiscal years. We adopted the new standard effective August 1, 2018, using the retrospective transition approach. The reclassified restricted cash balances from operating activities to changes in cash, cash equivalents and restricted cash on the condensed consolidated statements of cash flows were not material for any period presented.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to nonemployees with the guidance applicable to grants to employees. Under the new standard, equity-classified share-based payment awards issued to nonemployees will be measured on the grant date, instead of the current requirement to remeasure the awards through the performance completion date. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years. We early adopted the standard effective August 1, 2018, using the prospective approach, and our adoption did not have a material impact on the condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other (Topic 350): Internal-Use Software, which standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years. We early adopted the standard effective August 1, 2018, using the prospective approach, and our adoption did not have a significant impact on our condensed consolidated financial statements.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

In August 2018, the SEC issued Securities Act Release No. 33-10532, which amends certain disclosure requirements, including extending to interim periods the annual requirement to disclose changes in stockholders’ equity. Under the new requirements, registrants must now analyze changes in stockholders’ equity, in the form of a reconciliation, for the current and comparative year-to-date interim periods, with subtotals for each interim period. The final rule was effective in November 2018. We adopted this new guidance during the first quarter of fiscal 2019 and have included a reconciliation of the changes in stockholders' equity in this Quarterly Report on Form 10-Q.

Recently Issued and Not Yet Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of right-of-use lease assets and lease liabilities for all leases, except for short-term leases, on the condensed consolidated balance sheets of lessees. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years. We will adopt the standard effective August 1, 2019 and we intend to elect certain practical expedients, including the transition option that will allow us to not have to restate the comparative periods in our condensed consolidated financial statements in the year of adoption. We currently anticipate that the adoption of this standard will have a material impact on our condensed consolidated balance sheets, given that we had operating lease commitments in excess of $175 million as of April 30, 2019, on an undiscounted basis. We expect that most of our operating lease commitments will be subject to the new standard and will be recognized as lease liabilities and right-of-use assets upon adoption, which will increase our total assets and total liabilities reported. However, we do not anticipate that the adoption of this standard will have a material impact on our condensed consolidated statements of operations, as the expense recognition under the new standard will be similar to current practice. We do not expect the adoption of this standard to have a material impact on our condensed consolidated statements of cash flows.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides companies with an option to reclassify stranded tax effects resulting from the enactment of the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years, and will be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax rate as a result of TCJA is recognized. We have not made a determination as to which alternative method we will use upon adoption of the standard, but we do not expect the adoption of this ASU to have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including interim reporting periods within those fiscal years. We do not expect the adoption of this ASU to have a significant impact on our quarterly or annual disclosures.

Note 2. BUSINESS COMBINATION

Mainframe2, Inc.

On August 24, 2018, we completed the acquisition of Mainframe2, Inc. ("Frame"), a privately held Delaware corporation with its principal offices in San Mateo, California ("Frame Acquisition"). Frame provides a cloud-based Windows desktop and application delivery service. The aggregate preliminary purchase price of approximately $130.0 million consisted of approximately $26.7 million in cash and 1,813,321 shares of our Class A common stock, with an aggregate fair value of approximately $103.3 million. The fair value of the shares of common stock issued was determined to be $56.97 per share, the closing price of our stock on August 24, 2018. Certain portions of the consideration for the acquisition, both cash and shares of our Class A common stock, have been placed in escrow to secure the indemnification obligations of certain Frame security holders.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

We also entered into employee holdback or deferred payment arrangements with certain employees of Frame who joined Nutanix after the acquisition, totaling approximately $43.3 million, of which $6.6 million will be paid in cash ("cash holdback") and $36.7 million will be satisfied by issuing shares of our Class A common stock ("share holdback"). As the earning of the share holdback and payment of the cash holdback are contingent upon the continuous service of the employees, they are being accounted for as post-combination compensation expense over the required service period of three years. The 643,746 shares of our Class A common stock related to the $36.7 million share holdback have a fair value of $56.97 per share, the closing price of our Class A common stock on August 24, 2018, and had been issued at closing and are currently being held in escrow. This holdback is being accounted for as stock-based compensation over the required three-year service period. On September 21, 2018, we filed a Form S-3 registration statement with the SEC for the 2,451,322 shares of our Class A common stock that were issued as partial consideration in the Frame Acquisition.

Acquisition-related costs are expensed as incurred as general and administrative expenses on our condensed consolidated statement of operations. We incurred approximately $1.1 million of acquisition-related costs in connection with the Frame Acquisition, of which approximately $0.4 million was recognized during the nine months ended April 30, 2019.

The following table presents the preliminary aggregate purchase price allocation related to our acquisition of Frame as of April 30, 2019:



	Estimated Fair Value
	(in thousands)
Goodwill	$	97,328
Amortizable intangible assets	38,180
Tangible assets acquired	10,811
Liabilities assumed	(16,293		)
Total consideration	$	130,026

The $38.2 million of amortizable intangible assets includes $31.8 million related to developed technology and $2.2 million related to customer relationships, which will be amortized over an estimated economic life of five years, and $4.2 million related to trade name, which will be amortized over an estimated economic life of four years. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The goodwill recognized in this acquisition is primarily attributable to the synergies expected from the expanded market opportunities with our offerings and the knowledgeable and experienced workforce that joined us as part of the acquisition. Goodwill will not be amortized, but will instead be tested for impairment annually or more frequently if certain indicators of impairment are present. Goodwill is not expected to be deductible for income tax purposes.

The purchase price allocation for Frame reflects various preliminary fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes and goodwill, which are subject to change within the measurement period as preliminary valuations are finalized. Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined. We determined the fair values of the intangible assets with the assistance of a valuation firm. The estimation of the fair value of the intangible assets required the use of valuation techniques and entailed consideration of all the relevant factors that might affect the fair value, such as present value factors and estimates of future revenues and costs.

Our condensed consolidated financial statements for the three and nine months ended April 30, 2019 include the operations of Frame from the date of the acquisition. Pro forma results of operations have not been presented because they are not material to our condensed consolidated financial statements.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 3. REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS

Disaggregation of Revenue and Revenue Recognition

We generate revenue primarily from the sale of our enterprise cloud platform, which can be delivered pre-installed on an appliance that is configured to order or delivered separately to be utilized on a variety of certified hardware platforms. Software delivered on configured to order appliances is not portable to other appliances and has a term equal to the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years. Configured to order appliances, including our Nutanix-branded NX hardware line, are typically sold through Partners and can be purchased from one of our OEMs or directly from Nutanix. Our platform is typically purchased with one or more years of support and entitlements, which includes the right to software upgrades and enhancements as well as technical support. A substantial portion of sales are made through channel partners and OEM relationships. The following table depicts the disaggregation of revenue by revenue type, consistent with how we evaluate our financial performance:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
Subscription	$	80,105	$	168,447	$	216,668	$	452,779
Non-portable software	140,879		88,719		396,986		366,910
Hardware	62,617		21,853		221,454		92,319
Professional services	5,812		8,605		16,601		24,259
Total revenue	$	289,413	$	287,624	$	851,709	$	936,267

Prior to the first quarter of fiscal 2019, we disaggregated revenue into the following categories: software revenue, hardware revenue and support, entitlements and other services revenue. Software revenue included non-portable software and term-based software licenses. Under the new disaggregated revenue categories, included in the table above, term-based software licenses are included within subscription revenue and non-portable software is presented separately. Support, entitlements and other services revenue included software entitlement and support subscriptions and professional services. Under the new disaggregated revenue categories, software entitlement and support subscriptions are included within subscription revenue and professional services revenue is presented separately. There was no change to the presentation of hardware revenue.

Subscription revenue — Subscription revenue is generated from the sales of software entitlement and support subscriptions, subscription term-based licenses and cloud-based software as a service ("SaaS") offerings. We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the majority of which relate to software entitlement and support subscriptions. These offerings represented approximately $62.5 million and $171.8 million of our subscription revenue for the three and nine months ended April 30, 2018 and approximately $96.1 million and $269.7 million of our subscription revenue for the three and nine months ended April 30, 2019, respectively. Revenue from our subscription term-based licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. These subscription term-based licenses represented approximately $17.6 million and $44.9 million of our subscription revenue for the three and nine months ended April 30, 2018 and approximately $72.3 million and $183.1 million of our subscription revenue for the three and nine months ended April 30, 2019, respectively. For the three and nine months ended April 30, 2018, the weighted average term for these subscription term-based licenses was approximately 3.3 years and 3.6 years, respectively. For the three and nine months ended April 30, 2019, the weighted average term for these subscription term-based licenses was approximately 3.9 years and 3.8 years, respectively.

Non-portable software revenue — Non-portable software revenue includes sales of our software operating system when delivered on a configured to order appliance by us or one of our OEMs. The software licenses associated with these sales are typically non-portable and have a term equal to the life of the appliance the software is delivered on. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.

Hardware revenue — In transactions where we deliver the hardware appliance, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Professional services revenue — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

Contracts with multiple performance obligations — Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis. For deliverables that we routinely sell separately, such as software entitlement and support subscriptions on our core offerings, we determine SSP by evaluating the standalone sales over the trailing 12 months. For those that are not sold routinely, we determine SSP based on our overall pricing trends and objectives, taking into consideration market conditions and other factors, including the value of our contracts, the products sold and geographic locations.

Contract balances — The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. A receivable is recognized in the period we deliver goods or provide services, or when our right to consideration is unconditional. In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset. Unbilled accounts receivable, included in accounts receivable, net on the condensed consolidated balance sheets, was not material for any of the periods presented.

Payment terms on invoiced amounts are typically 30 days. The balance of accounts receivable, net of allowance for doubtful accounts, as of July 31, 2018 and April 30, 2019 is presented in the accompanying condensed consolidated balance sheets.

Costs to obtain and fulfill a contract — We capitalize commissions paid to sales personnel and the related payroll taxes when customer contracts are signed. These costs are recorded as deferred commissions in the condensed consolidated balance sheets, current and non-current. We determine whether costs should be deferred based on our sales compensation plans, if the commissions are incremental and would not have been incurred absent the execution of the customer contract. Sales commissions for renewals of customer support subscriptions are not commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit, which may exceed the term of the initial contract. Accordingly, the amortization of deferred costs is recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation and included in sales and marketing expense in the condensed consolidated statements of operations. We determine the estimated period of benefit by evaluating the expected renewals of customer contracts, the duration of relationships with our customers, customer retention data, our technology development lifecycle and other factors. Deferred costs are periodically reviewed for impairment.

Deferred revenue — Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and primarily pertain to support subscriptions and professional services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet date.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Significant changes in the balance of deferred revenue (contract liability) and total deferred commissions (contract asset) for the periods presented are as follows:



	Deferred Revenue			Deferred Commissions
	(in thousands)
Balance as of July 31, 2018	$	631,207		$	114,379
Additions	159,210			33,958
Revenue/commissions recognized	(88,937		)	(26,230		)
Assumed in a business combination	320			—
Balance as of October 31, 2018	701,800			122,107
Additions	176,487			37,280
Revenue/commissions recognized	(98,428		)	(29,353		)
Balance as of January 31, 2019	779,859			130,034
Additions	161,233			38,396
Revenue/commissions recognized	(102,830		)	(29,232		)
Balance as of April 30, 2019	$	838,262		$	139,198

During the three and nine months ended April 30, 2018, we recognized revenue of approximately $49.4 million and $136.8 million pertaining to amounts deferred as of January 31, 2018 and July 31, 2017, respectively. During the three and nine months ended April 30, 2019, we recognized revenue of approximately $89.8 million and $216.3 million pertaining to amounts deferred as of January 31, 2019 and July 31, 2018, respectively.

The majority of our contracted but not invoiced performance obligations are subject to cancellation terms. Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized ("contracted not recognized"), which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods and excludes performance obligations that are subject to cancellation terms. Contracted not recognized revenue was approximately $845.7 million as of April 30, 2019, of which we expect to recognize approximately 43% over the next 12 months, and the remainder thereafter.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 4. FAIR VALUE MEASUREMENTS

The fair value of our financial assets and liabilities measured on a recurring basis is as follows:



	As of July 31, 2018
	Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash equivalents:
Money market funds	$	41,763	$	—	$	—	$	41,763
Commercial paper	—		77,818		—		77,818
U.S. government securities	—		4,985		—		4,985
Short-term investments:
Corporate bonds	—		448,458		—		448,458
Commercial paper	—		120,772		—		120,772
U.S. government securities	—		59,098		—		59,098
Total measured at fair value	$	41,763	$	711,131	$	—	$	752,894
Cash							181,409
Total cash, cash equivalents and short-term investments							$	934,303
Financial Liabilities:
Contingent consideration	$	—	$	—	$	1,872	$	1,872



	As of April 30, 2019
	Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash equivalents:
Money market funds	$	61,373	$	—	$	—	$	61,373
Commercial paper	—		118,773		—		118,773
Short-term investments:
Corporate bonds	—		355,259		—		355,259
Commercial paper	—		96,214		—		96,214
U.S. government securities	—		44,160		—		44,160
Total measured at fair value	$	61,373	$	614,406	$	—	$	675,779
Cash							264,973
Total cash, cash equivalents and short-term investments							$	940,752

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value, with the exception of the 0% Convertible Senior Notes, due in 2023 (the "Notes"). Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes. The carrying values and estimated fair values of financial instruments not recorded at fair value are as follows:



	As of July 31, 2018				As of April 30, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(in thousands)
Convertible senior notes, net	$	429,598	$	685,527	$	451,399	$	657,921

The carrying value of the Notes as of April 30, 2019 was net of the unamortized debt discount of $117.1 million and unamortized debt issuance costs of $6.5 million.

The total estimated fair value of the Notes was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. We consider the fair value of the Notes to be a Level 2 measurement due to the limited trading activity.

A summary of the changes in the fair value of our contingent consideration, characterized as Level 3 in the fair value hierarchy, is as follows:



	Nine Months Ended April 30,
	2018			2019
	(in thousands)
Contingent consideration—beginning balance	$	4,295		$	1,872
Change in fair value ⁽¹⁾	(3,371		)	(832		)
Payment	—			(1,040		)
Contingent consideration—ending balance	$	924		$	—


(1)	Recognized in the condensed consolidated statements of operations within general and administrative expenses.

We remeasured the fair value of our Level 3 contingent consideration liability using a Monte Carlo simulation on projected future payments. The fair value was determined by calculating the net present value of the expected payments using significant inputs that were not observable in the market, including the probability of achieving the milestone, estimated bookings and discount rates. The change in fair value of the contingent consideration was due to the movement of the inputs. During the quarter ended April 30, 2019, the contingent consideration was paid out in full.

Note 5. BALANCE SHEET COMPONENTS

Short-Term Investments

The amortized cost of our short-term investments approximates their fair value. As of July 31, 2018 and April 30, 2019, unrealized gains and losses from our short-term investments were not material. As of July 31, 2018 and April 30, 2019, unrealized losses from securities that were in an unrealized loss position for more than 12 months were not material. Unrealized losses related to our short-term investments are due to interest rate fluctuations, as opposed to credit quality. In addition, unless we need cash to support our current operations, we do not intend to sell and it is not likely that we would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. As a result, at July 31, 2018 and April 30, 2019, there were no other-than-temporary impairments for these investments.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table summarizes the estimated fair value of our investments in marketable debt securities by their contractual maturity dates:



	As of April 30, 2019
	(in thousands)
Due within one year	$	373,305
Due in one to two years	122,328
Total	$	495,633

Property and Equipment, Net

Property and equipment, net consists of the following:



	Estimated Useful Life	As of
	Estimated Useful Life	July 31, 2018			April 30, 2019
	(in months)	(in thousands)
Computer, production, engineering and other equipment	36	$	131,805		$	187,380
Demonstration units	12	53,547			59,254
Leasehold improvements	⁽¹⁾	19,916			42,862
Furniture and fixtures	60	7,636			13,051
Total property and equipment, gross		212,904			302,547
Less: accumulated depreciation		(127,793		)	(167,985		)
Total property and equipment, net		$	85,111		$	134,562


(1)	Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the remaining lease term.

Depreciation expense related to our property and equipment was $11.3 million and $31.9 million for the three and nine months ended April 30, 2018 and $16.4 million and $43.3 million for the three and nine months ended April 30, 2019, respectively.

Goodwill and Intangible Assets, Net

The changes in the carrying value of goodwill during the nine months ended April 30, 2019 were as follows:



	Carrying Amount
	(in thousands)
Balance as of July 31, 2018	$	87,759
Acquired in Frame Acquisition	97,328
Other	93
Balance as of April 30, 2019	$	185,180

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Intangible assets, net consists of the following:



	As of
	July 31, 2018			April 30, 2019
	(in thousands)
Developed technology	$	47,500		$	79,300
Customer relationships	6,650			8,860
Trade name	—			4,170
Total intangible assets, gross	54,150			92,330
Less:
Accumulated amortization of developed technology	(6,956		)	(17,515		)
Accumulated amortization of customer relationships	(1,828		)	(3,002		)
Accumulated amortization of trade name	—			(695		)
Total accumulated amortization	(8,784		)	(21,212		)
Total intangible assets, net	$	45,366		$	71,118

Amortization expense related to our intangible assets is being recognized in the condensed consolidated statements of operations within product cost of revenue for developed technology and sales and marketing expense for customer relationships and trade name.

The estimated future amortization expense of our intangible assets is as follows:



Fiscal Year Ending July 31:	Amount
	(in thousands)
2019 (remaining three months)	$	4,345
2020	17,380
2021	17,380
2022	16,183
2023	10,856
Thereafter	4,974
Total	$	71,118

Other Assets—Non-Current

Other assets—non-current consists of the following:



	As of
	July 31, 2018		April 30, 2019
	(in thousands)
Other tax assets—non-current	$	30,927	$	—
Deferred tax assets—non-current	2,860		3,064
Other	4,068		9,756
Total other assets—non-current	$	37,855	$	12,820

The decrease in other tax assets—non-current from July 31, 2018 to April 30, 2019 was due primarily to the reclassification of an $18.0 million corporate income tax receivable to prepaid expenses and other current assets, as the refund is expected to be received within the next 12 months, as well as the reversal of an uncertain tax position resulting from a change in tax election during the third quarter of fiscal 2019.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Accrued Compensation and Benefits

Accrued compensation and benefits consists of the following:



	As of
	July 31, 2018		April 30, 2019
	(in thousands)
Accrued commissions	$	21,660	$	23,881
Accrued vacation	10,548		14,963
Contributions to ESPP withheld	21,931		8,901
Accrued bonus	12,129		8,110
Payroll taxes payable	9,563		7,382
Other	9,567		11,795
Total accrued compensation and benefits	$	85,398	$	75,032

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consists of the following:



	As of
	July 31, 2018		April 30, 2019
	(in thousands)
Accrued professional services	$	5,838	$	2,593
Income taxes payable	20,863		2,901
Other	4,981		14,525
Total accrued expenses and other current liabilities	$	31,682	$	20,019

The decrease in income taxes payable from July 31, 2018 to April 30, 2019 was due primarily to an $18.0 million estimated corporate income tax payment made during the second quarter of fiscal 2019.

Note 6. CONVERTIBLE SENIOR NOTES

In January 2018, we issued Convertible Senior Notes with a 0% interest rate for an aggregate principal amount of $575.0 million, due in 2023 (the "Notes"), in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act of 1933, as amended. This included $75.0 million in aggregate principal amount of the Notes that we issued resulting from initial purchasers fully exercising their option to purchase additional notes. There are no required principal payments prior to the maturity of the Notes. The total net proceeds from the Notes are as follows:



	Amount
	(in thousands)
Principal amount	$	575,000
Less: initial purchasers' discount	(10,781		)
Less: cost of the bond hedges	(143,175		)
Add: proceeds from the sale of warrants	87,975
Less: other issuance costs	(707		)
Net proceeds	$	508,312

The Notes do not bear any interest and will mature on January 15, 2023, unless earlier converted or repurchased in accordance with their terms. The Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of securities by us.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Each $1,000 of principal of the Notes will initially be convertible into 20.4705 shares of our Class A common stock, which is equivalent to an initial conversion price of approximately $48.85 per share, subject to adjustment upon the occurrence of specified events. Holders of these Notes may convert their Notes at their option at any time prior to the close of the business day immediately preceding October 15, 2022, only under the following circumstances:

during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter, is greater than or equal to 130% of the conversion price on each applicable trading day;


2)	during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the Notes on each such trading day; or


3)	upon the occurrence of certain specified corporate events.

Based on the closing price of our Class A common stock of $43.19 on April 30, 2019, the if-converted value of the Notes was lower than the principal amount. The price of our Class A common stock was not greater than or equal to 130% of the conversion price for 20 or more trading days during the 30 consecutive trading days ending on the last trading day of the quarter ended April 30, 2019, the Notes are not convertible for the fiscal quarter commencing after April 30, 2019.

On or after October 15, 2022, holders may convert all or any portion of their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing conditions.

Upon conversion of the Notes, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of Class A common stock, at our election. We intend to settle the principal of the Notes in cash.

The conversion rate will be subject to adjustment in some events, but will not be adjusted for any accrued or unpaid interest. A holder who converts their Notes in connection with certain corporate events that constitute a "make-whole fundamental change" per the indenture governing the Notes are, under certain circumstances, entitled to an increase in the conversion rate. In addition, if we undergo a fundamental change prior to the maturity date, holders may require us to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100% of the principal amount of the repurchased Notes, plus accrued and unpaid interest.

We may not redeem the Notes prior to the maturity date, and no sinking fund is provided for the Notes.

In accounting for the issuance of the Notes, we separated the Notes into liability and equity components. The carrying amount of the liability component of approximately $423.4 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of approximately $151.6 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Notes. The difference between the principal amount of the Notes and the liability component (the "debt discount") is amortized to interest expense using the effective interest method over the term of the Notes. The equity component of the Notes is included in additional paid-in capital in the condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

We incurred transaction costs related to the issuance of the Notes of approximately $11.5 million, consisting of an initial purchasers' discount of $10.8 million and other issuance costs of approximately $0.7 million. In accounting for the transaction costs, we allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the Notes. Transaction costs attributable to the liability component were approximately $8.5 million, recorded as debt issuance costs (presented as contra debt in the condensed consolidated balance sheets), and are being amortized to interest expense over the term of the Notes. The transaction costs attributable to the equity component were approximately $3.0 million and were net with the equity component within stockholders’ equity.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The Notes consisted of the following:



	As of
	July 31, 2018			April 30, 2019
	(in thousands)
Principal amounts:
Principal	$	575,000		$	575,000
Unamortized debt discount ⁽¹⁾	(137,719		)	(117,070		)
Unamortized debt issuance costs ⁽¹⁾	(7,683		)	(6,531		)
Net carrying amount	$	429,598		$	451,399
Carrying amount of equity component ⁽²⁾	$	148,598		$	148,598


(1)	Included in the condensed consolidated balance sheets within convertible senior notes, net and amortized over the remaining life of the Notes using the effective interest rate method. The effective interest rate is 6.62%.


(2)	Included in the condensed consolidated balance sheets within additional paid-in capital, net of $3.0 million in equity issuance costs.

As of April 30, 2019, the remaining life of the Notes was approximately 44 months.

The following table sets forth the total interest expense recognized related to the Notes:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
Interest expense related to amortization of debt discount	$	6,550	$	6,997	$	7,250	$	20,650
Interest expense related to amortization of debt issuance costs	366		390		404		1,152
Total interest expense	$	6,916	$	7,387	$	7,654	$	21,802

Note Hedges and Warrants

Concurrently with the offering of the Notes in January 2018, we entered into convertible note hedge transactions with certain bank counterparties, whereby we have the initial option to purchase a total of approximately 11.8 million shares of our Class A common stock at a conversion price of approximately $48.85 per share, subject to adjustment for certain specified events. The total cost of the convertible note hedge transactions was approximately $143.2 million. In addition, we sold warrants to certain bank counterparties, whereby the holders of the warrants have the initial option to purchase a total of approximately 11.8 million shares of our Class A common stock at a price of $73.46 per share, subject to adjustment for certain specified events. We received approximately $88.0 million in cash proceeds from the sale of these warrants.

Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset any actual dilution from the conversion of the Notes and to effectively increase the overall conversion price from $48.85 to $73.46 per share. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded within stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with the convertible note hedge and warrant transactions of approximately $55.2 million was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheets as of July 31, 2018 and April 30, 2019. The fair value of the note hedges and warrants are not remeasured each reporting period. The amounts paid for the note hedges are tax deductible expenses, while the proceeds received from the warrants are not taxable.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Impact to Earnings per Share

The Notes will have no impact to diluted earnings per share ("EPS") until they meet the criteria for conversion, as discussed above, as we intend to settle the principal amount of the Notes in cash upon conversion. Under the treasury stock method, in periods when we report net income, we are required to include the effect of additional shares that may be issued under the Notes when the price of our Class A common stock exceeds the conversion price. Under this method, the cumulative dilutive effect of the Notes would be approximately 3.9 million shares if the average price of our Class A common stock was $73.46. However, upon conversion, there will be no economic dilution from the Notes, as exercise of the note hedges eliminate any dilution that would have otherwise occurred. The note hedges are required to be excluded from the calculation of diluted earnings per share, as they would be antidilutive under the treasury stock method.

The warrants will have a dilutive effect when the average share price exceeds the warrant strike price of $73.46 per share. As the price of our Class A common stock continues to increase above the warrant strike price, additional dilution would occur at a declining rate so that a $10 increase from the warrant strike price would yield a cumulative dilution of approximately 4.9 million diluted shares for EPS purposes. However, upon conversion, the note hedges would neutralize the dilution from the Notes so that there would only be dilution from the warrants, which would result in an actual dilution of approximately 1.4 million shares at a common stock price of $83.46.

Note 7. COMMITMENTS AND CONTINGENCIES

Operating Leases

We have commitments for future payments related to our office facility leases and other contractual obligations. We lease our office facilities under non-cancelable operating lease agreements expiring through 2026. Certain of these lease agreements have free or escalating rent payments. We recognize rent expense under such agreements on a straight-line basis over the lease term, with any free or escalating rent payments amortized as a reduction or addition of rent expense over the lease term.

Future minimum payments due under operating leases as of April 30, 2019 are as follows:



Fiscal Year Ending July 31:	Amount
	(in thousands)
2019 (remaining three months)	$	9,244
2020	39,122
2021	35,738
2022	33,927
2023	31,386
Thereafter	26,244
Total	$	175,661

Purchase Commitments

In the normal course of business, we make commitments with our contract manufacturers and OEMs to ensure them a minimum level of financial consideration for their investment in our joint solutions. These commitments are based on revenue targets or on-hand inventory and non-cancelable purchase orders for non-standard components. We record a charge related to these items when we determine that it is probable a loss will be incurred and we are able to estimate the amount of the loss. Our historical charges have not been material. As of April 30, 2019, we had up to approximately $53.4 million of non-cancelable purchase commitments pertaining to our normal operations, and up to approximately $135.7 million in the form of guarantees to certain of our contract manufacturers and OEMs.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Legal Proceedings

Beginning on March 29, 2019, several purported securities class actions were filed in the United States District Court for the Northern District of California against us and two of our officers. The complaints generally allege that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. Although the definitions of the class vary slightly, the actions are generally brought on behalf of those who purchased our stock between March 2, 2018, and February 28, 2019, inclusive. The complaints seek monetary damages in an unspecified amount. These cases are in the very early stages and we are not able to determine what, if any, liabilities will attach to these complaints.

We are not currently a party to any other legal proceedings that we believe to be material to our business or financial condition. From time to time, we may become party to various litigation matters and subject to claims that arise in the ordinary course of business.

Note 8. STOCKHOLDERS’ EQUITY

We have two classes of authorized common stock, Class A common stock and Class B common stock. As of April 30, 2019, we had 1,000,000,000 shares of Class A common stock authorized, with a par value of $0.000025 per share, and 200,000,000 shares of Class B common stock authorized, with a par value of $0.000025 per share. As of April 30, 2019, we had 153,349,844 shares of Class A common stock issued and outstanding and 32,550,563 shares of Class B common stock issued and outstanding.

Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders. Holders of Class B common stock are entitled to 10 votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of our Class A common stock upon a sale or transfer. Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of our Class A common stock. Shares issued in connection with an exercise of common stock warrants are converted into shares of our Class B common stock.

Note 9. EQUITY INCENTIVE PLANS

Stock Plans

We have three equity incentive plans, the 2010 Stock Plan ("2010 Plan"), 2011 Stock Plan ("2011 Plan") and 2016 Equity Incentive Plan ("2016 Plan"). Our stockholders approved the 2016 Plan in March 2016 and it became effective in connection with our initial public offering ("IPO"). As a result, at the time of the IPO, we ceased granting additional stock awards under the 2010 Plan and 2011 Plan and both plans were terminated. Any outstanding stock awards under the 2010 Plan and 2011 Plan will remain outstanding, subject to the terms of the applicable plan and award agreements, until such shares are issued under those stock awards, by exercise of stock options or settlement of restricted stock units ("RSUs"), or until those stock awards become vested or expired by their terms.

Under the 2016 Plan, we may grant incentive stock options ("ISOs"), non-statutory stock options ("NSOs"), restricted stock, RSUs and stock appreciation rights to employees, directors and consultants. We initially reserved 22,400,000 shares of our Class A common stock for issuance under the 2016 Plan. The number of shares of Class A common stock available for issuance under the 2016 Plan will also include an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of: 18,000,000 shares, 5% of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board. Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 7,731,826 and 8,642,904 shares, respectively, pursuant to these provisions. As of April 30, 2019, we had reserved a total of 46,199,635 shares for the issuance of equity awards under the Stock Plans, of which 13,827,893 shares were still available for grant.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Restricted Stock Units

Performance RSUs — We grant RSUs that have both service and performance conditions to our executives and employees ("Performance RSUs"). Vesting of Performance RSUs is subject to continuous service and the satisfaction of certain performance targets. While we recognize cumulative stock-based compensation expense for the portion of the awards for which both the service condition has been satisfied and it is probable that the performance conditions will be met, the actual vesting and settlement of Performance RSUs are subject to the performance conditions actually being met.

Market Stock Units — In October 2018, the Compensation Committee of our Board of Directors approved the grant of 100,000 RSUs subject to certain market conditions ("MSUs") to our Chief Executive Officer ("CEO"), with a weighted average grant date fair value per unit of $25.16. The MSUs will vest based upon the achievement of an average stock price of $80 over a performance period of approximately 4.5 years (the “Performance Period”), subject to his continuous service on each vesting date. The average stock price is calculated based on the average closing price of one share of our Class A common stock, as reported on the NASDAQ Stock Market during the 180-day period ending on the last trading day prior to each measurement date (as applicable, the “Average Stock Price”). The Average Stock Price is measured once per quarter during the Performance Period, and:


•	If the Average Stock Price on any given quarterly measurement date does not equal or exceed $80, then none of the MSUs will vest that quarter, and any unvested MSUs will carry over to the next quarter (the “Carryover MSUs”);


•	If the Average Stock Price on any given quarterly measurement date equals or exceeds $80, then 1/18th of the MSUs plus the applicable Carryover MSUs, if any, would vest; and/or


•	If the Average Stock Price never equals or exceeds $80 during the Performance Period, the MSUs would terminate at the end of the Performance Period.

We used a Monte Carlo simulation to calculate the fair value of the award on the grant date. A Monte Carlo simulation requires the use of various assumptions, including the stock price volatility and risk free interest rate as of the valuation date corresponding to the length of time remaining in the performance period and expected dividend yield. We recognize stock-based compensation expense related to these MSUs using the graded vesting attribution method over the Performance Period. As of April 30, 2019, 100,000 MSUs remained outstanding.

Below is a summary of RSU activity, including MSUs, under the Stock Plans:



	Number of Shares		Grant Date Fair Value per Share
Outstanding at July 31, 2018	23,597,499		$	31.20
Granted	8,445,399		$	47.63
Vested	(6,382,260	)	$	28.07
Canceled/forfeited	(2,426,308	)	$	35.03
Outstanding at April 30, 2019	23,234,330		$	37.63

Stock Options

We did not grant any stock options during the nine months ended April 30, 2019. A total of 2,194,303 stock options were exercised during the nine months ended April 30, 2019, with an average exercise price per share of $4.64. As of April 30, 2019, 9,103,232 stock options, with a weighted average exercise price of $5.22 per share, a weighted average remaining contractual life of 4.9 years and an aggregate intrinsic value of $345.7 million, remained outstanding.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Employee Stock Purchase Plan

In December 2015, the Board adopted the 2016 Employee Stock Purchase Plan ("2016 ESPP"), which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016. The 2016 ESPP became effective in connection with our IPO. A total of 3,800,000 shares of Class A common stock were initially reserved for issuance under the 2016 ESPP. The number of shares of Class A common stock available for sale under the 2016 ESPP also includes an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of: 3,800,000 shares, 1% of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board. Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under 2016 ESPP increased by 1,546,365 and 1,728,580 shares, respectively, pursuant to these provisions.

The 2016 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount through payroll deductions of up to 15% of eligible compensation, subject to caps of $25,000 in any calendar year and 1,000 shares on any purchase date. The 2016 ESPP provides for 12-month offering periods, generally beginning in March and September of each year, and each offering period consists of two six-month purchase periods.

On each purchase date, participating employees will purchase Class A common stock at a price per share equal to 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period. If the stock price of our Class A common stock on any purchase date in an offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period.

During the nine months ended April 30, 2019, 2,008,082 shares of common stock were purchased under the 2016 ESPP for an aggregate amount of $57.2 million. As of April 30, 2019, 1,402,959 shares were available for future issuance under the 2016 ESPP.

We use the Black-Scholes option pricing model to determine the fair value of shares purchased under the 2016 ESPP with the following weighted average assumptions on the date of grant:



	Nine Months Ended April 30,
	2018		2019
Expected term (in years)	0.75		0.84
Risk-free interest rate	1.4	%	2.5	%
Volatility	49.8	%	69.0	%
Dividend yield	—	%	—	%

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Stock-Based Compensation

Total stock-based compensation expense recognized in the condensed consolidated statements of operations is as follows:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
Cost of revenue:
Product	$	634	$	953	$	1,888	$	2,523
Support, entitlements and other services	1,951		4,542		6,156		11,072
Sales and marketing	18,051		35,257		47,759		81,325
Research and development	16,474		42,265		49,039		107,953
General and administrative	7,836		11,815		17,630		30,449
Total stock-based compensation expense	$	44,946	$	94,832	$	122,472	$	233,322

As of April 30, 2019, unrecognized stock-based compensation expense related to outstanding stock awards was approximately $791.3 million and is expected to be recognized over a weighted average period of approximately 2.5 years.

Note 10. INCOME TAXES

The income tax benefit $0.8 million and provision of $3.3 million for the three and nine months ended April 30, 2018, respectively, primarily consisted of foreign taxes on our international operations, partially offset by a $3.9 million valuation allowance release in connection with acquisitions. The income tax provisions of $2.4 million and $1.0 million for the three and nine months ended April 30, 2019, respectively, primarily consisted of foreign taxes on our international operations and U.S. state income taxes. The income tax provision for the nine months ended April 30, 2019 was partially offset by a $5.8 million U.S. valuation allowance release in connection with an acquisition and a tax benefit related to the change in tax law. The net deferred tax liabilities recorded in connection with these acquisitions provided an additional source of taxable income to support the realizability of the pre-existing deferred tax assets and as a result, we released a portion of our U.S. valuation allowance. We continue to maintain a valuation allowance for our U.S. Federal and state deferred tax assets.

In December 2017, the U.S. Congress passed, and the President signed, the Tax Cuts and Jobs Act, which includes a broad range of tax reform proposals affecting businesses, including a federal corporate rate reduction from 35% to 21%, effective January 1, 2018, limitations on the deductibility of interest expense and executive compensation, the creation of new minimum taxes, such as the base erosion anti-abuse tax ("BEAT") and Global Intangible Low Taxed Income ("GILTI") tax and a new minimum tax on certain foreign earnings.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allowed us to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. The SAB 118 measurement period ended in December 2018. As such, during the second quarter of fiscal 2019, we completed our analysis based on the current legislative updates related to the TCJA and noted no additional guidance or information that affects the provisional amounts previously recorded. Although our analysis of the tax effects of the TCJA is complete, there may be additional tax effects that could impact our future consolidated financial statements upon the finalization of any laws, regulations or additional TCJA guidance.

In January 2018, the FASB released guidance on the accounting for the GILTI provisions of the TCJA. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. During the second quarter of fiscal 2019, we elected to treat any potential GILTI inclusions as a period cost.

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 11. NET LOSS PER SHARE

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by giving effect to potentially dilutive common stock equivalents outstanding during the period, as their effect would be dilutive. Potentially dilutive common shares include participating securities and shares issuable upon the exercise of stock options, the exercise of common stock warrants, the exercise of convertible preferred stock warrants, the vesting of RSUs and each purchase under the 2016 ESPP, under the treasury stock method.

In loss periods, basic net loss per share and diluted net loss per share are the same, as the effect of potential common shares is antidilutive and therefore excluded.

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical, our undistributed earnings or losses are allocated on a proportionate basis among the holders of both Class A and Class B common stock. As a result, the net income (loss) per share attributed to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.

The computation of basic and diluted net loss per share attributable to Class A and Class B common stockholders is as follows:



	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands, except share and per share data)
Numerator:
Net loss	$	(85,674	)	$	(209,813	)	$	(209,792	)	$	(426,841	)
Denominator:
Weighted average shares—basic and diluted	166,845,544			182,962,921			161,709,365			179,235,498
Net loss per share attributable to common stockholders—basic and diluted	$	(0.51	)	$	(1.15	)	$	(1.30	)	$	(2.38	)

The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows:



	Three and Nine Months Ended April 30,
	2018	2019
Outstanding stock options and RSUs	35,206,318	32,337,562
Employee stock purchase plan	1,341,470	1,657,333
Contingently issuable shares pursuant to business combinations	276,625	748,172
Common stock subject to repurchase	73,360	6,251
Common stock warrants	34,180	34,180
Total	36,931,953	34,783,498

NUTANIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Note 12. SEGMENT INFORMATION

Our chief operating decision maker is a group which is comprised of our Chief Executive Officer and Chief Financial Officer. This group reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, we have a single reportable segment.

The following table sets forth revenue by geographic location based on bill-to location:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
U.S.	$	135,276	$	158,263	$	488,416	$	519,923
Asia Pacific	68,622		66,105		172,774		205,115
Europe, the Middle East and Africa	74,916		52,853		164,089		177,260
Other Americas	10,599		10,403		26,430		33,969
Total revenue	$	289,413	$	287,624	$	851,709	$	936,267

As of July 31, 2018 and April 30, 2019, $130.0 million and $175.1 million, respectively, of our long-lived assets, net were located in the United States.

Note 13. RELATED PARTY TRANSACTIONS

We enter into various transactions with related parties in the normal course of business. During the three and nine months ended April 30, 2018 and 2019, we did not have any material related party transactions.

In connection with the acquisition of PernixData in the first quarter of fiscal 2017, entities affiliated with Lightspeed Venture Partners, which owned approximately 36.7% of our outstanding Convertible Preferred Stock as of July 31, 2016, owned approximately 26.4% of the outstanding capital stock of PernixData immediately prior to the completion of the PernixData acquisition. One member of our Board is affiliated with Lightspeed Venture Partners. As of April 30, 2019, entities affiliated with Lightspeed Venture Partners owned approximately 6.3% of our total outstanding Class A and Class B common stock.

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

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended July 31, 2018 included in our Annual Report on Form 10-K filed on September 24, 2018. The last day of our fiscal year is July 31. Our fiscal quarters end on October 31, January 31, April 30 and July 31. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" in Part II, Item 1A of this Form 10-Q. See also "Special Note Regarding Forward-Looking Statements" above.

Overview

Nutanix, Inc. ("we," "us," "our" or "Nutanix") provides a leading enterprise cloud platform that powers many of the world’s business applications and end user services by providing software solutions that digitize the traditional silos of enterprise computing. Our solution allows our customers to virtualize various clouds - private, public, edge - into one seamless cloud enabling enterprises to choose the right cloud for the right application. Our enterprise cloud platform converges compute, virtualization, storage, networking, desktop, governance and security services into one integrated, simple to consume solution delivered through software. Further, our software and software as a service ("SaaS") solutions allow enterprises to simplify the complexities of a multi-cloud environment with automation, cost governance and compliance. We underpin the platform with unique web-scale engineering and one-click operational simplicity that powers any scale deployment while giving customers the freedom of choice across various hardware platforms, across various virtualization solutions and across major public cloud providers.

Our enterprise cloud platform can be delivered pre-installed on an appliance that is configured to order or delivered separately to be utilized on a variety of certified hardware platforms. Non-portable software is delivered on configured to order appliances and has a term equal to the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years and can be utilized on a Nutanix-certified hardware platform. Configured to order appliances, including our Nutanix-branded NX hardware line, can be purchased from one of our original equipment manufacturers ("OEMs") or directly from Nutanix. Our platform is typically purchased with one or more years of support and entitlements, which includes the right to software upgrades and enhancements as well as technical support.

Product revenue is generated primarily from the sales of our solution and is generally recognized upon transfer of control to the customer. Support, entitlements and other services revenue is primarily derived from the related support and maintenance contracts and is recognized ratably over the term of those support contracts. Historically, we have delivered most of our solutions on an appliance, thus our revenue included the revenue associated with the appliance and the included non-portable software, which lasts for the life of the appliance. However, during fiscal 2018, most of our customers have transitioned to purchasing appliances directly from our OEMs. In addition, we are transitioning to a subscription business model, which includes transitioning our non-portable software sales to subscription term-based licenses, a trend that we expect to continue over the next several quarters.

We had a broad and diverse base of approximately 13,190 end customers as of April 30, 2019, including approximately 780 Global 2000 enterprises. We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments or subsidiaries. Since shipping our first product in fiscal 2012, our end customer base has grown rapidly. The number of end customers grew from approximately 9,690 as of April 30, 2018 to approximately 13,190 as of April 30, 2019. Our platform is primarily sold through channel partners, including distributors, resellers and OEMs, and delivered directly to our end customers. The majority of our sales and marketing investment is used to educate our end customers about the benefits of our solution, particularly as we continue to pursue large enterprises and mission critical workloads. Our solutions serve a broad range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications and big data analytics, and we support both virtualized and non-virtualized applications. We have end customers across a broad range of industries, such as automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology and telecommunications. We also sell to service providers, who utilize our platform to provide a variety of cloud-based services to their customers.

We continue to invest heavily in the growth of our business, including the development of our solutions, build-out of our global sales force and other sales and marketing initiatives. The number of our full-time employees increased from approximately 3,710 as of April 30, 2018 to approximately 4,930 as of April 30, 2019. We have an engineering team focused on distributed systems and IT infrastructure technologies at our San Jose, California headquarters and at our research and development centers in Bangalore, India, Durham, North Carolina, Seattle, Washington and Belgrade, Serbia. We have also expanded our international sales and marketing presence by continuing to build out our global teams and continuing to invest in sales and marketing initiatives, such as additional lead generation spending to increase pipeline growth. We intend to continue to invest in our global engineering team to enhance the functionality of our platform, introduce new products and features and build upon our technology leadership, as well as continue to expand our global sales and marketing teams.

Our total revenue was $851.7 million and $936.3 million for the nine months ended April 30, 2018 and 2019, respectively, an increase of 9.9%. Our software and support revenue was $630.3 million and $843.9 million for the nine months ended April 30, 2018 and 2019, respectively, an increase of 33.9%. Our net losses were $209.8 million and $426.8 million for the nine months ended April 30, 2018 and 2019, respectively. Net cash provided by operating activities was $69.8 million and $51.8 million for the nine months ended April 30, 2018 and 2019, respectively. Free cash flow, which is calculated as net cash provided by operating activities less purchases of property and equipment, was a generation of $23.7 million and use of $43.0 million for the nine months ended April 30, 2018 and 2019, respectively. As of April 30, 2019, we had an accumulated deficit of $1.5 billion.

Key Financial and Performance Metrics

We monitor the following key financial and performance metrics:



	As of and for the
	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands, except percentages)
Total revenue	$	289,413		$	287,624		$	851,709		$	936,267
Year-over-year percentage increase (decrease)	40.7		%	(0.6		)%	43.5		%	9.9		%
Subscription revenue	$	80,105		$	168,447		$	216,668		$	452,779
Software and support revenue	$	226,796		$	265,771		$	630,255		$	843,948
Total billings	$	351,178		$	346,027		$	1,022,418		$	1,143,002
Subscription billings	$	142,965		$	224,312		$	378,444		$	652,692
Software and support billings	$	291,952		$	324,174		$	800,964		$	1,050,683
Gross profit	$	193,798		$	212,547		$	538,944		$	701,102
Adjusted gross profit	$	197,830		$	221,736		$	550,494		$	725,414
Gross margin	67.0		%	73.9		%	63.3		%	74.9		%
Adjusted gross margin	68.4		%	77.1		%	64.6		%	77.5		%
Total deferred revenue	$	539,889		$	838,262		$	539,889		$	838,262
Net cash provided by (used in) operating activities	$	13,292		$	(36,490	)	$	69,804		$	51,824
Free cash flow	$	(804	)	$	(58,922	)	$	23,715		$	(42,991	)
Non-GAAP operating expenses	$	232,398		$	326,516		$	627,397		$	895,083
Total end customers	9,690			13,190			9,690			13,190

Disaggregation of Revenue and Billings

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



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
Disaggregation of revenue:
Subscription revenue	$	80,105	$	168,447	$	216,668	$	452,779
Non-portable software revenue	140,879		88,719		396,986		366,910
Hardware revenue	62,617		21,853		221,454		92,319
Professional services revenue	5,812		8,605		16,601		24,259
Total revenue	$	289,413	$	287,624	$	851,709	$	936,267

Disaggregation of billings:
Subscription billings	$	142,965	$	224,312	$	378,444	$	652,692
Non-portable software billings	139,092		88,719		396,986		366,910
Hardware billings	59,226		21,853		221,451		92,319
Professional services billings	9,895		11,143		25,537		31,081
Total billings	$	351,178	$	346,027	$	1,022,418	$	1,143,002

Subscription — Subscription revenue is generated from the sales of software entitlement and support subscriptions, subscription term-based licenses and cloud-based SaaS offerings. We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the majority of which relate to software entitlement and support subscriptions. These offerings represented approximately $62.5 million and $171.8 million of our subscription revenue for the three and nine months ended April 30, 2018 and approximately $96.1 million and $269.7 million of our subscription revenue for the three and nine months ended April 30, 2019, respectively. Revenue from our subscription term-based licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer. These subscription term-based licenses represented approximately $17.6 million and $44.9 million of our subscription revenue for the three and nine months ended April 30, 2018 and approximately $72.3 million and $183.1 million of our subscription revenue for the three and nine months ended April 30, 2019, respectively. For the three and nine months ended April 30, 2018, the weighted average term for these subscription term-based licenses was approximately 3.3 years and 3.6 years, respectively. For the three and nine months ended April 30, 2019, the weighted average term for these subscription term-based licenses was approximately 3.9 years and 3.8 years, respectively.

Non-portable software — Non-portable software revenue includes sales of our software operating system when delivered on a configured to order appliance by us or one of our OEMs. The software licenses associated with these sales are typically non-portable and have a term equal to the life of the appliance the software is delivered on. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.

Hardware — In transactions where we deliver the hardware appliance, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

Professional services — We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

Non-GAAP Financial Measures and Key Performance Measures

We regularly monitor total billings, subscription billings, professional services billings, software and support billings, adjusted gross profit, adjusted gross margin, free cash flow and non-GAAP operating expenses, which are non-GAAP financial measures and key performance measures, to help us evaluate our growth and operational efficiencies, measure our performance, identify trends in our sales activity and establish our budgets. We evaluate these measures because they:


•	are used by management and the Board of Directors to understand and evaluate our performance and trends, as well as to provide a useful measure for period-to-period comparisons of our core business;


•	are widely used as a measure of financial performance to understand and evaluate companies in our industry; and


•	are used by management to prepare and approve our annual budget and to develop short-term and long-term operational and compensation plans, as well as to assess our actual performance against our goals.

Total billings, subscription billings, professional services billings and software and support billings are performance measures which management believes provide useful information to investors, as they represent the dollar values under binding purchase orders received and billed during a given period. Free cash flow is a performance measure that provides useful information to management and investors about the amount of cash used in or generated by the business after necessary capital expenditures. Adjusted gross profit, adjusted gross margin and non-GAAP operating expenses are performance measures which management believes provide useful information to investors, as they provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures, such as stock-based compensation expense, that may not be indicative of our ongoing core business operating results. We use these non-GAAP financial and key performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Total billings, subscription billings, professional services billings, software and support billings, adjusted gross profit, adjusted gross margin, free cash flow and non-GAAP operating expenses have limitations as analytical tools and they should not be considered in isolation or as substitutes for analysis of our results as reported under generally accepted accounting principles in the United States. Total billings, subscription billings, professional services billings, software and support billings, adjusted gross profit, adjusted gross margin, free cash flow and non-GAAP operating expenses are not substitutes for total revenue, subscription revenue, professional services revenue, software and support revenue, gross profit, gross margin, cash provided by (used in) operating activities, or GAAP operating expenses, respectively. In addition, other companies, including companies in our industry, may calculate non-GAAP financial measures and key performance measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures and key performance measures as tools for comparison. We urge you to review the reconciliation of our non-GAAP financial measures and key performance measures to the most directly comparable GAAP financial measures included below and not to rely on any single financial measure to evaluate our business.

We calculate our non-GAAP measures as follows:

Total billings — We calculate total billings by adding the change in deferred revenue, net of acquisitions, between the start and end of the period to total revenue recognized in the same period.

Subscription billings— We calculate subscription billings by adding the change in subscription deferred revenue, net of acquisitions, between the start and end of the period to subscription revenue recognized in the same period.

Professional services billings— We calculate professional services billings by adding the change in professional services deferred revenue, net of acquisitions, between the start and end of the period to professional services revenue recognized in the same period.

Software and support billings— We calculate software and support billings by adding the change in software and support deferred revenue, net of acquisitions, between the start and end of the period to software and support revenue recognized in the same period. Software and support revenue and billings include software and support, entitlements and other services revenue and billings.

Adjusted gross profit and adjusted gross margin — We calculate adjusted gross margin as adjusted gross profit divided by total revenue. We define adjusted gross profit as gross profit adjusted to exclude stock-based compensation expense and the amortization of acquired intangible assets. Our presentation of adjusted gross profit should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

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

Non-GAAP operating expenses — We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, costs associated with business combinations, such as amortization of acquired intangible assets, revaluation of contingent consideration and other acquisition-related costs, and other non-recurring transactions. Our presentation of non-GAAP operating expenses should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

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



	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands, except percentages)
Total revenue	$	289,413		$	287,624		$	851,709		$	936,267
Change in deferred revenue, net of acquisitions ⁽¹⁾	61,765			58,403			170,709			206,735
Total billings (non-GAAP)	$	351,178		$	346,027		$	1,022,418		$	1,143,002

Gross profit	$	193,798		$	212,547		$	538,944		$	701,102
Stock-based compensation	2,585			5,495			8,044			13,595
Amortization of intangible assets	1,447			3,694			3,506			10,554
Other	—			—			—			163
Adjusted gross profit (non-GAAP)	$	197,830		$	221,736		$	550,494		$	725,414

Gross margin	67.0		%	73.9		%	63.3		%	74.9		%
Stock-based compensation	0.9		%	1.9		%	0.9		%	1.5		%
Amortization of intangible assets	0.5		%	1.3		%	0.4		%	1.1		%
Other	—		%	—		%	—		%	—		%
Adjusted gross margin (non-GAAP)	68.4		%	77.1		%	64.6		%	77.5		%

Net cash provided by (used in) operating activities	$	13,292		$	(36,490	)	$	69,804		$	51,824
Purchases of property and equipment	(14,096		)	(22,432		)	(46,089		)	(94,815		)
Free cash flow (non-GAAP)	$	(804	)	$	(58,922	)	$	23,715		$	(42,991	)

Operating expenses	$	276,080		$	416,725		$	740,122		$	1,116,624
Stock-based compensation	(42,361		)	(89,337		)	(114,428		)	(219,727		)
Amortization of intangible assets	(222		)	(661		)	(625		)	(1,877		)
Change in fair value of contingent consideration	(584		)	37			3,371			832
Acquisition-related costs	(515		)	(200		)	(1,043		)	(721		)
Other	—			(48		)	—			(48		)
Operating expenses (non-GAAP)	$	232,398		$	326,516		$	627,397		$	895,083


(1)	Amount for the nine months ended April 30, 2019 excludes approximately $0.3 million of deferred revenue assumed in an acquisition.

The following table presents a reconciliation of subscription billings, professional services billings and software and support billings to the most directly comparable GAAP financial measures, for each of the periods indicated:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(in thousands)
Subscription revenue	$	80,105	$	168,447	$	216,668	$	452,779
Change in subscription deferred revenue, net of acquisitions ⁽²⁾	62,860		55,865		161,776		199,913
Subscription billings	$	142,965	$	224,312	$	378,444	$	652,692

Professional services revenue	$	5,812	$	8,605	$	16,601	$	24,259
Change in professional services deferred revenue	4,083		2,538		8,936		6,822
Professional services billings	$	9,895	$	11,143	$	25,537	$	31,081

Software revenue	$	158,500	$	162,941	$	441,885	$	553,753
Hardware revenue	62,617		21,853		221,454		92,319
Product revenue	221,117		184,794		663,339		646,072
Support, entitlements and other services revenue	68,296		102,830		188,370		290,195
Total revenue	$	289,413	$	287,624	$	851,709	$	936,267

Total software and support revenue ⁽¹⁾	$	226,796	$	265,771	$	630,255	$	843,948
Change in software and support deferred revenue, net of acquisitions ⁽²⁾⁽³⁾	65,156		58,403		170,709		206,735
Software and support billings ⁽¹⁾	$	291,952	$	324,174	$	800,964	$	1,050,683


(1)	Software and support revenue and billings include software and support, entitlements and other services revenue and billings.


(2)	Amount for the nine months ended April 30, 2019 excludes approximately $0.3 million of deferred revenue assumed in an acquisition.


(3)	Approximately $3.4 million of hardware was included in deferred revenue as of January 31, 2018.

Factors Affecting Our Performance

We believe that our future success will depend on many factors, including those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. See the section titled "Risk Factors" for details. If we are unable to address these challenges, our business and operating results could be adversely affected.

Investment in Growth

We plan to continue to invest in sales and marketing so that we can capitalize on our market opportunity, including growing our sales and marketing teams, expanding our focus on opportunities with major accounts and large deals, which we define as transactions over $500,000, as well as other sales and marketing initiatives, such as additional lead generation spending to increase our pipeline growth. We have significantly increased our sales and marketing personnel, which grew by approximately 30% from April 30, 2018 to April 30, 2019. We estimate, based on past experience, that sales team members typically become fully ramped up around the start of their fourth quarter of employment with us, and as our newer employees ramp up, we expect their increased productivity to contribute to our revenue growth. As of April 30, 2019, we considered approximately 58% of our global sales team members to be fully ramped, while the remaining approximately 42% of our global sales team members are in the process of ramping up. As we shift the focus of some of our new and existing sales team members to major accounts and large deals, it may take longer for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team. We are focused on actively managing this realignment and expect continuing improvement over the coming quarters. We intend to continue to grow our global sales and marketing team and continue investing in sales and marketing initiatives to acquire new end customers and to increase sales to existing end customers.

We also intend to continue to grow our global research and development and engineering teams to enhance our solutions, improve integration with new and existing ecosystem partners and broaden the range of IT infrastructure technologies that we converge into our platform. We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term.

Market Adoption of Our Products

The public cloud has changed IT buyer expectations about the simplicity, agility, scalability and pay-as-you-grow economics of IT resources, which represent a major architectural shift and business model evolution. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our platform, both as compared to traditional datacenter architectures, as well as the public cloud, particularly as we continue to pursue large enterprises and mission critical workloads. The broad nature of the technology shift that our platform represents and the relationships our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles, which we hope to compress and stabilize as market adoption increases, as we gain leverage with our channel partners and as our sales and marketing efforts expand. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our platform.

Leveraging Channel Partners and OEMs

We plan to continue to strengthen and expand our network of channel partners and OEMs to increase sales to both new and existing end customers. We believe that increasing channel leverage by investing aggressively in sales enablement and co-marketing with our partners will extend and improve our engagement with a broad set of end customers. Our business and results of operations will be significantly affected by our success in leveraging and expanding our network of channel partners and OEMs.

Continued Purchases and Upgrades within Existing Customer Base

Our end customers typically deploy our technology for a specific workload initially. After a new end customer's initial order, which includes the product and associated software entitlement and support subscription and services, we focus on expanding our footprint by serving more workloads. We also generate recurring revenue from our software entitlement and support subscription renewals. We view continued purchases and upgrades as critical drivers of our success, as the sales cycles are typically shorter as compared to new end customer deployments, and selling efforts are typically less. As of April 30, 2019, approximately 66% of our end customers who have been with us for 18 months or longer have made a repeat purchase, which is defined as any purchase activity, including software entitlement and support subscription renewals, after the initial purchase. Additionally, as of April 30, 2019, end customers who have been with us for 18 months or longer have total lifetime orders, including the initial order, in an amount that is more than 4.1x greater, or 4.4x greater excluding hardware, on average, than their initial order. This number increases to approximately 10.8x, or 11.7x greater excluding hardware, on average, for Global 2000 end customers who have been with us for 18 months or longer, and to more than 42.7x, on average, for our top 25 end customers as of April 30, 2019. These multiples exclude the effect of one end customer who had a very large and irregular purchase pattern that we believe is not representative of the purchase patterns of all of our other end customers. Our business and operating results will depend on our ability to sell additional products to our existing and future base of end customers.

Changes in Product Mix and Transition to Subscription

Shifts in the mix of whether our solutions are sold with or without an appliance, or on a subscription basis, could result in fluctuations in our billings, revenue and gross margin. Sales where customers separately procure an appliance typically reflect higher gross margins and lower revenue in a given period, since the sale does not include the revenue or cost of the hardware components in an appliance. Subscription sales consist of subscription term-based licenses and offerings with ongoing performance obligations, including software entitlement and support subscriptions and cloud-based SaaS offerings. Since revenue is recognized as performance obligations are delivered, sales in this manner may reflect lower revenue in a given period. In addition, our shift to selling more subscription term-based licenses may impact our billings and revenue, as these licenses generally have an average term of less than four years, while those with a duration equal to the life of the associated appliance have an estimated life of approximately five years.

Historically, we have delivered most of our solutions on an appliance, thus our revenue included the revenue associated with the appliance and the included non-portable software, which lasts for the life of the appliance. However, starting in the first quarter of fiscal 2018, more of our customers began buying appliances directly from our OEMs, or in some cases, purchasing separately sold subscription term-based licenses. We expect to continue to see increases in the sales of our solutions without hardware appliances and sales of subscription term-based licenses, which will be reflected in further corresponding changes to our billings, revenue and gross margin.

Revenue for our solutions, whether or not sold on an appliance by us or as a subscription term-based license, is generally recognized upon transfer of control to the customer. For additional information on revenue recognition, see Note 3 of Part I, Item 1 of this Quarterly Report on Form 10-Q.

Components of Our Results of Operations

Revenue

We generate revenue primarily from the sale of our enterprise cloud platform, which can be delivered pre-installed on an appliance that is configured to order or delivered separately to be utilized on a variety of certified hardware platforms. Non-portable software is delivered on configured to order appliances and has a term equal to the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years and can be utilized on a Nutanix-certified hardware platform. Configured to order appliances, including our Nutanix-branded NX hardware line, can be purchased from one of our OEMs or directly from Nutanix. Our platform is typically purchased with one or more years of support and entitlements, which includes the right to software upgrades and enhancements as well as technical support. A substantial portion of our sales are made through channel partners and OEM relationships.

Product revenue — Product revenue consists of software and hardware revenue. A majority of our product revenue is generated from the sale of our enterprise cloud operating system. We also sell renewals of previously purchased software licenses and SaaS offerings. Revenue from our software products is generally recognized upon transfer of control to the customer, which is typically upon shipment for sales including a hardware appliance, or upon making the software available to the customer when not sold with an appliance. In transactions where we deliver the hardware appliance, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

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

Cost of Revenue

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

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

Operating Expenses

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

Sales and marketing — Sales and marketing expense consists primarily of personnel costs. Sales and marketing expense also includes sales commissions, costs for promotional activities and other marketing costs, travel costs and costs associated with demonstration units, including depreciation and allocated costs. Commissions are deferred and recognized as we recognize the associated revenue. We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our global sales and marketing organizations. Sales and marketing expense may fluctuate as a percentage of total revenue.

Research and development — Research and development ("R&D") expense consists primarily of personnel costs, as well as other direct and allocated costs. We have devoted our product development efforts primarily to enhancing the functionality and expanding the capabilities of our solutions. R&D costs are expensed as incurred. We expect R&D expense to increase in absolute dollars as we continue to invest in our future products and services, although R&D expense may fluctuate as a percentage of total revenue.

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

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income and expense, which includes the amortization of the debt discount and issuance costs associated with our 0% Convertible Senior Notes, due in 2023 (the "Notes"), interest income related to our short-term investments and foreign currency exchange gains or losses. During the three and nine months ended April 30, 2018, we recognized $6.9 million and $7.7 million, respectively, of interest expense related to the amortization of the debt discount and issuance costs associated with the Notes. During the three and nine months ended April 30, 2019, we recognized $7.4 million and $21.8 million, respectively, of interest expense related to the amortization of the debt discount and issuance costs associated with the Notes.

Provision for Income Taxes

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

Results of Operations

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



	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2019			2018			2019
	(in thousands)
Revenue:
Product	$	221,117		$	184,794		$	663,339		$	646,072
Support, entitlements and other services	68,296			102,830			188,370			290,195
Total revenue	289,413			287,624			851,709			936,267
Cost of revenue:
Product ⁽¹⁾⁽²⁾	66,680			29,528			235,059			114,755
Support, entitlements and other services ⁽¹⁾	28,935			45,549			77,706			120,410
Total cost of revenue	95,615			75,077			312,765			235,165
Gross profit	193,798			212,547			538,944			701,102
Operating expenses:
Sales and marketing ⁽¹⁾⁽²⁾	169,860			245,703			466,466			655,907
Research and development ⁽¹⁾	81,291			137,982			216,727			371,550
General and administrative ⁽¹⁾	24,929			33,040			56,929			89,167
Total operating expenses	276,080			416,725			740,122			1,116,624
Loss from operations	(82,282		)	(204,178		)	(201,178		)	(415,522		)
Other expense, net	(4,235		)	(3,212		)	(5,285		)	(10,314		)
Loss before provision for (benefit from) income taxes	(86,517		)	(207,390		)	(206,463		)	(425,836		)
Provision for (benefit from) income taxes	(843		)	2,423			3,329			1,005
Net loss	$	(85,674	)	$	(209,813	)	$	(209,792	)	$	(426,841	)

⁽¹⁾ Includes stock-based compensation expense as follows:
Product cost of revenue	$	634		$	953		$	1,888		$	2,523
Support, entitlements and other services cost of revenue	1,951			4,542			6,156			11,072
Sales and marketing	18,051			35,257			47,759			81,325
Research and development	16,474			42,265			49,039			107,953
General and administrative	7,836			11,815			17,630			30,449
Total stock-based compensation expense	$	44,946		$	94,832		$	122,472		$	233,322

⁽²⁾ Includes amortization of intangible assets as follows:
Product cost of revenue	$	1,447		$	3,694		$	3,506		$	10,554
Sales and marketing	222			661			625			1,877
Total amortization of intangible assets	$	1,669		$	4,355		$	4,131		$	12,431



	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2019		2018		2019
	(as a percentage of total revenue)
Revenue:
Product	76.4	%	64.2	%	77.9	%	69.0	%
Support, entitlements and other services	23.6	%	35.8	%	22.1	%	31.0	%
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue:
Product	23.0	%	10.3	%	27.6	%	12.2	%
Support, entitlements and other services	10.0	%	15.8	%	9.1	%	12.9	%
Total cost of revenue	33.0	%	26.1	%	36.7	%	25.1	%
Gross profit	67.0	%	73.9	%	63.3	%	74.9	%
Operating expenses:
Sales and marketing	58.7	%	85.4	%	54.8	%	70.1	%
Research and development	28.1	%	48.0	%	25.4	%	39.7	%
General and administrative	8.6	%	11.5	%	6.7	%	9.5	%
Total operating expenses	95.4	%	144.9	%	86.9	%	119.3	%
Loss from operations	(28.4	)%	(71.0	)%	(23.6	)%	(44.4	)%
Other expense, net	(1.5	)%	(1.1	)%	(0.6	)%	(1.1	)%
Loss before provision for (benefit from) income taxes	(29.9	)%	(72.1	)%	(24.2	)%	(45.5	)%
Provision for (benefit from) income taxes	(0.3	)%	0.8	%	0.4	%	0.1	%
Net loss	(29.6	)%	(72.9	)%	(24.6	)%	(45.6	)%

Comparison of the Three and Nine Months Ended April 30, 2018 and 2019

Revenue



	Three Months Ended April 30,				Change					Nine Months Ended April 30,				Change
	2018		2019		$			%		2018		2019		$			%
	(in thousands, except percentages)
Product	$	221,117	$	184,794	$	(36,323	)	(16	)%	$	663,339	$	646,072	$	(17,267	)	(3	)%
Support, entitlements and other services	68,296		102,830		34,534			51	%	188,370		290,195		101,825			54	%
Total revenue	$	289,413	$	287,624	$	(1,789	)	(1	)%	$	851,709	$	936,267	$	84,558		10	%



	Three Months Ended April 30,				Change					Nine Months Ended April 30,				Change
	2018		2019		$			%		2018		2019		$		%
	(in thousands, except percentages)
U.S.	$	135,276	$	158,263	$	22,987		17	%	$	488,416	$	519,923	$	31,507	6	%
Asia Pacific	68,622		66,105		(2,517		)	(4	)%	172,774		205,115		32,341		19	%
Europe, the Middle East and Africa	74,916		52,853		(22,063		)	(29	)%	164,089		177,260		13,171		8	%
Other Americas	10,599		10,403		(196		)	(2	)%	26,430		33,969		7,539		29	%
Total revenue	$	289,413	$	287,624	$	(1,789	)	(1	)%	$	851,709	$	936,267	$	84,558	10	%

The decrease in product revenue for the three and nine months ended April 30, 2019 was due primarily to the decrease in hardware revenue from transactions where the hardware was not sold by us. We estimate that if we had sold the hardware in these transactions, our product revenue would have been approximately $52 million and $74 million higher for the three and nine months ended April 30, 2018 and approximately $92 million and $307 million higher for the three and nine months ended April 30, 2019, respectively. In addition, our product revenue has been impacted by our continued transition to selling subscription term-based licenses, as these licenses generally have an average term of less than four years, while those with a duration equal to the life of the associated appliance have an estimated life of approximately five years.

Support, entitlements and other services revenue increased in the three and nine months ended April 30, 2019, as compared to the respective prior year periods, in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts.

Cost of Revenue and Gross Margin



	Three Months Ended April 30,						Change					Nine Months Ended April 30,						Change
	2018			2019			$			%		2018			2019			$			%
	(in thousands, except percentages)
Cost of product revenue	$	66,680		$	29,528		$	(37,152	)	(56	)%	$	235,059		$	114,755		$	(120,304	)	(51	)%
Product gross margin	69.8		%	84.0		%						64.6		%	82.2		%
Cost of support, entitlements and other services revenue	$	28,935		$	45,549		$	16,614		57	%	$	77,706		$	120,410		$	42,704		55	%
Support, entitlements and other services gross margin	57.6		%	55.7		%						58.7		%	58.5		%
Total gross margin	67.0		%	73.9		%						63.3		%	74.9		%

Cost of product revenue

Cost of product revenue decreased for the three and nine months ended April 30, 2019, as compared to the respective prior year periods, due primarily to the decreases in hardware revenue, reflecting our shift to software-only transactions, which have a higher margin as compared to hardware sales.

Product gross margin increased by 14.2 and 17.6 percentage points for the three and nine months ended April 30, 2019, respectively, as compared to the prior year periods. The gross margin increases were due primarily to a higher mix of software revenue as we continue to focus more on software-only transactions.

Cost of support, entitlements and other services revenue

Cost of support, entitlements and other services revenue increased for the three and nine months ended April 30, 2019, as compared to the respective prior year periods, due to higher personnel costs relating to growth in our global customer support organization. The increase in personnel costs was driven primarily by a 43% increase in our customer support, entitlements and other services headcount from April 30, 2018 to April 30, 2019.

Support, entitlements and other services gross margin decreased by 1.9 and 0.2 percentage points for the three and nine months ended April 30, 2019, as compared to the respective prior year periods, due primarily to higher costs related to the ramp up for new products, specifically cloud services.

Operating Expenses

Sales and marketing



	Three Months Ended April 30,						Change				Nine Months Ended April 30,						Change
	2018			2019			$		%		2018			2019			$		%
	(in thousands, except percentages)
Sales and marketing	$	169,860		$	245,703		$	75,843	45	%	$	466,466		$	655,907		$	189,441	41	%
Percent of total revenue	58.7		%	85.4		%					54.8		%	70.1		%

Sales and marketing expense increased for the three and nine months ended April 30, 2019, as compared to the respective prior year periods, due primarily to higher personnel-related costs, including stock-based compensation expense, as our sales and marketing headcount increased by 30% from April 30, 2018 to April 30, 2019. Additionally, as part of our efforts to penetrate and expand in global markets, we continue to increase our sales and marketing activities related to lead generation, brand awareness, promotions, trade shows and partner programs.

Research and development



	Three Months Ended April 30,						Change				Nine Months Ended April 30,						Change
	2018			2019			$		%		2018			2019			$		%
	(in thousands, except percentages)
Research and development	$	81,291		$	137,982		$	56,691	70	%	$	216,727		$	371,550		$	154,823	71	%
Percent of total revenue	28.1		%	48.0		%					25.4		%	39.7		%

R&D expense increased for the three and nine months ended April 30, 2019, as compared to the respective prior year periods, due primarily to higher personnel-related costs, including stock-based compensation expense, as R&D headcount increased by 33% from April 30, 2018 to April 30, 2019 in an effort to continue the expansion of our product development activities, including new products. This increase includes additional headcount and stock-based compensation expense related to employees who joined Nutanix through acquisitions.

General and administrative



	Three Months Ended April 30,						Change				Nine Months Ended April 30,						Change
	2018			2019			$		%		2018			2019			$		%
	(in thousands, except percentages)
General and administrative	$	24,929		$	33,040		$	8,111	33	%	$	56,929		$	89,167		$	32,238	57	%
Percent of total revenue	8.6		%	11.5		%					6.7		%	9.5		%

G&A expense increased for the three and nine months ended April 30, 2019, as compared to the respective prior year periods. The increase was due primarily to higher personnel-related costs, including stock-based compensation expense, as G&A headcount increased by 32% from April 30, 2018 to April 30, 2019 in order to support our growing business, as well as higher legal and other outside services costs.

Other Expense, Net



	Three Months Ended April 30,						Change				Nine Months Ended April 30,						Change
	2018			2019			$		%		2018			2019			$			%
	(in thousands, except percentages)
Other expense, net	$	(4,235	)	$	(3,212	)	$	1,023	(24	)%	$	(5,285	)	$	(10,314	)	$	(5,029	)	95	%

The fluctuations in other expense, net for the three and nine months ended April 30, 2018 were primarily related to foreign currency losses, partially offset by interest earned on short-term investments. For the nine months ended April 30, 2018, the increase was also due to the amortization of the debt discount and issuance costs for the Notes, as the Notes were issued during the second quarter of fiscal 2018. Other expense, net for the three and nine months ended April 30, 2019 was primarily related to interest expense associated with the amortization of the debt discount and issuance costs for the Notes, partially offset by interest earned on short-term investments.

(Benefit from) Provision for Income Taxes



	Three Months Ended April 30,					Change				Nine Months Ended April 30,				Change
	2018			2019		$		%		2018		2019		$			%
	(in thousands, except percentages)
(Benefit from) provision for income taxes	$	(843	)	$	2,423	$	3,266	(387	)%	$	3,329	$	1,005	$	(2,324	)	(70	)%

The income tax provision for the three months ended April 30, 2019, as compared to the income tax benefit for the three months ended April 30, 2018, was due primarily to an increase in foreign taxes, as we continued our global expansion, partially offset by a tax benefit related to the change in tax law. The decrease in the income tax provision for the nine months ended April 30, 2019, as compared to the prior year period, was due primarily to a U.S. valuation allowance release in the first quarter of fiscal 2019 related to a business combination and a tax benefit related to the change in tax law, partially offset by an increase in foreign taxes, as we continued our global expansion.

In December 2017, the U.S. Congress passed, and the President signed, the Tax Cuts and Jobs Act ("TCJA"), which includes a broad range of tax reform proposals affecting businesses. For additional details, refer to Note 10 of Part I, Item 1 of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

As of April 30, 2019, we had $445.1 million of cash and cash equivalents, $1.1 million of restricted cash and $495.6 million of short-term investments, which were held for general corporate purposes. Our cash, cash equivalents and short-term investments primarily consist of bank deposits, money market accounts and highly rated debt instruments of the U.S. government and its agencies and debt instruments of highly rated corporations. We do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.

In January 2018, we issued Convertible Senior Notes with a 0% interest rate for an aggregate principal amount of $575.0 million. There are no required principal payments prior to the maturity of the Notes. For additional information, see Note 6 of Part I, Item 1 of this Quarterly Report on Form 10-Q.

We believe that our cash and cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings and the continuing market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Cash Flows

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



	Nine Months Ended April 30,
	2018			2019
	(in thousands)
Net cash provided by operating activities	$	69,804		$	51,824
Net cash (used in) provided by investing activities	(406,790		)	22,150
Net cash provided by financing activities	575,410			65,171
Net increase in cash, cash equivalents and restricted cash	$	238,424		$	139,145

During the first quarter of fiscal 2019, we retrospectively adopted Accounting Standards Update ("ASU") 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Our statement of cash flows for the nine months ended April 30, 2018 has been adjusted to conform to the new standard. Our adoption of ASU 2016-18 did not have a material impact our statements of cash flows. For additional information on this new standard, see Note 1 of Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cash Flows from Operating Activities

Net cash provided by operating activities was $51.8 million for the nine months ended April 30, 2019, a decrease of $18.0 million as compared to the nine months ended April 30, 2018. The decrease in cash provided by operating activities for the nine months ended April 30, 2019 was due primarily to higher operating expenses as we continue to invest in the long-term growth of our business.

Cash Flows from Investing Activities

Net cash used in investing activities of $406.8 million for the nine months ended April 30, 2018 included $485.8 million of short-term investment purchases, $46.1 million of purchases of property and equipment, as we continued to invest in the long-term growth of our business, and $22.8 million of payments for business combinations, partially offset by $147.9 million of maturities of short-term investments.

Net cash provided by investing activities of $22.2 million for the nine months ended April 30, 2019 included $460.6 million of maturities of short-term investments, partially offset by $324.6 million of short-term investment purchases, $94.8 million of purchases of property and equipment, and $19.0 million payment for a business combination, net of cash and restricted cash acquired.

Cash Flows from Financing Activities

Net cash provided by financing activities of $575.4 million for the nine months ended April 30, 2018 primarily consisted of $563.9 million of net proceeds from the Notes, after deducting the initial purchasers' discount and debt issuance costs, $88.0 million of proceeds from the sale of the warrants in connection with the Notes and $68.2 million of net proceeds from the sale of shares through employee equity incentive plans, partially offset by $143.2 million of cash used to purchase bond hedges in connection with the Notes.

Net cash provided by financing activities of $65.2 million for the nine months ended April 30, 2019 primarily consisted of $67.3 million of net proceeds from the sale of shares through employee equity incentive plans, partially offset by $1.0 million payment of an acquisition-related contingent consideration and a $1.0 million payment of debt in conjunction with an acquisition completed during the first quarter of fiscal 2019.

Contractual Obligations

The following table summarizes our contractual obligations as of April 30, 2019:



	Payments Due by Period
	Total		Less than 1 Year		1 Year to 3 Years		3 to 5 Years		More than 5 Years
	(in thousands)
Principal amount payable on convertible senior notes ⁽¹⁾	$	575,000	$	—	$	—	$	575,000	$	—
Operating lease obligations	175,661		39,003		70,673		60,461		5,524
Other purchase commitments ⁽²⁾	53,384		53,384		—		—		—
Guarantees with contract manufacturers and OEMs	135,725		62,850		72,875		—		—
Total	$	939,770	$	155,237	$	143,548	$	635,461	$	5,524


(1)	For additional information regarding our convertible senior notes, refer to Note 6 of Part I, Item 1 of this Quarterly Report on Form 10-Q.


(2)	Purchase obligations pertaining to our normal operations.

As of April 30, 2019, payments related to our above outstanding non-cancelable lease obligations will be made through 2026.

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

As of April 30, 2019, we had accrued liabilities related to uncertain tax positions, which are reflected on our condensed consolidated balance sheet. These accrued liabilities are not reflected in the contractual obligations disclosed in the table above, as it is unclear when these liabilities will be paid.

Off-Balance Sheet Arrangements

As of April 30, 2019, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

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

There have been no material changes to our critical accounting policies and estimates as compared to those described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2018.

Recent Accounting Pronouncements

See Note 1 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Foreign Currency Risk

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

A hypothetical 10% decrease in the U.S. dollar against other currencies would result in an increase in our operating loss of approximately $22.4 million and $30.6 million for the nine months ended April 30, 2018 and 2019, respectively. The increase in this hypothetical change is due to an increase in our expenses denominated in foreign currencies due to of our continued global expansion. This analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.

Interest Rate Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report. Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the nine months ended April 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the “Legal Proceedings” subheading in Note 7 of Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, before making a decision to invest in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially harmed. In that event, the price of our Class A common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business and Industry

We have a history of losses and we may not be able to achieve or maintain profitability in the future.

We have incurred net losses in all periods since our inception, and we expect that we will continue to incur net losses for the foreseeable future. We experienced net losses of $379.6 million, $297.2 million and $426.8 million for fiscal 2017, fiscal 2018 and the nine months ended April 30, 2019, respectively. As of April 30, 2019, we had an accumulated deficit of $1.5 billion. In addition to the investments we expect to continue to make to grow our business, we also incur and expect to continue incurring significant additional legal, accounting and other expenses as a public company. If we fail to increase our revenue and manage our expenses, we may not achieve or sustain profitability in the future.

The markets in which we compete are rapidly evolving, which make it difficult to forecast end customer adoption rates and demand for our solutions.

The markets in which we compete are rapidly evolving. Accordingly, our future financial performance will depend in large part on the allocation of spending in traditional IT markets and on our ability to adapt to new market demands. Currently, sales of our solutions are dependent in large part upon replacement of spending in traditional markets, including x86 servers, storage systems and virtualization software. In addition, as we develop new solutions designed to address new market demands, such as Nutanix Xi Cloud Services, sales of our solutions will in part be dependent on capturing new spending in these markets, including hybrid cloud services. If these markets experience a shift in customer demand, or if customers in these markets focus their new spending on, or shift their existing spending to, public cloud solutions more quickly or more extensively than expected, our solutions may not compete as effectively, if at all. It is also difficult to predict end customer demand or adoption rates for our solutions or the future growth of our market.

If end customers do not adopt our solutions, our ability to grow our business and operating results may be adversely affected.

Traditional IT infrastructure architecture is entrenched in the datacenters of many of our end customers because of their historical financial investment in existing IT infrastructure architecture and the existing knowledge base and skillsets of IT administrators. As a result, our sales efforts often involve extensive efforts to educate our end customers as to the benefits and capabilities of our solutions, particularly as we continue to pursue large organizations as end customers. If we fail to achieve market acceptance of our solutions, our ability to grow our business and our operating results will be adversely affected.

A shift in our relationships with our OEMs could adversely affect our results of operations.

Our relationships with our original equipment manufacturers ("OEMs") continue to shift as industry dynamics change, and our OEMs may be less willing to partner with us as an OEM or otherwise as such shifts occur. For example, Dell Technologies ("Dell") is not just an OEM, but also a competitor of ours, and accounted for 11% and 8% of our total billings in fiscal 2017 and fiscal 2018, respectively. Dell owns EMC Corporation ("EMC"), as well as a majority of outstanding voting power in VMware Inc. ("VMware") and could combine the Dell, EMC and VMware product portfolios into unified offerings optimized for their platforms, which would compete directly with our core solutions. Also, Dell may be more likely to promote and sell its own solutions, including those from EMC’s complementary product portfolio, over our products, or cease selling or promoting our products entirely. If Dell decides to sell its own solutions over our products, that could adversely impact our OEM sales and harm our business, operating results and prospects, and our stock price could decline.

Further, since OEM sales, including sales made by Dell, are generally recognized upon delivery under Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASC 606"), which we adopted as of August 1, 2017, any reduction in OEM sales by any of our OEMs will have an increased impact on our reported revenue and gross margins in future periods, potentially making it more difficult for us to forecast revenue and gross margins in future quarters. Under ASC 606, revenue from Dell accounted for approximately 10% and 9% of our total revenue in fiscal 2017 and fiscal 2018, respectively.

Our financial performance, including revenue growth, in recent periods may not be indicative of our future performance.

We have experienced significant revenue growth in recent periods with total revenue of $845.9 million, $1.2 billion, $851.7 million and $936.3 million for fiscal 2017, fiscal 2018 and the nine months ended April 30, 2018 and 2019, respectively. While we have recently experienced significant revenue growth, you should not consider such revenue growth as indicative of our future performance and we may not achieve similar revenue growth in future periods. For example, we recently announced initiatives to increase pipeline growth through additional investments in sales and marketing activities, including increased lead generation spending, and the hiring of additional sales people. However, the returns on these initiatives may not be as high or may take longer to realize than expected, and may impact our revenue growth and profitability in the near future.

In addition, we have started to transition toward a subscription-based model and our revenue may be impacted in the short term. The revenue associated with certain subscription purchases, such as with Nutanix Xi Cloud Services, will be recognized over the term of the subscription resulting in less upfront revenue as compared to our historical software-only transactions. Also, the revenue we recognize from subscription sales, even if recognized upfront, may in some instances have a lower total dollar value than those associated with licenses for the life of the device because they may be of a shorter term than the life of the device. This may also make it difficult to rapidly increase our revenue in any period through additional sales.

Following our transition to software-only sales and due to the ongoing transition toward a subscription-based model, our success will also depend heavily on the ability of our sales team to adjust their strategy to focus on software-only and subscription-based sales. Furthermore, our customers may not understand these changes to our product sales, and investors, industry and financial analysts may have difficulty understanding the changes to our business and consumption model, resulting in changes in financial estimates or failure to meet investor expectations. As our business changes, the transitions may make it more difficult to accurately project our operating results or plan for future growth. Accordingly, you should not rely on our revenue growth for any prior periods as an indication of our future revenue or revenue growth.

We have experienced rapid growth in recent periods and we may not be able to sustain or manage any future growth effectively.

We have expanded our overall business and operations significantly in recent periods. Our employee headcount increased significantly since our inception, and we may have significant headcount increases in the future. We anticipate that our operating expenses will increase in the foreseeable future as we scale our business, including in developing and improving our solutions, expanding our sales and marketing capabilities and global coverage, and in providing general and administrative resources to support our growth. As we continue to rapidly grow our business, we must effectively integrate, develop and motivate a large number of new employees, as well as existing employees who are promoted or moved into new roles, while maintaining the effectiveness of our business execution. The failure to manage these changes could significantly delay the achievement of our strategic objectives. In particular, our success depends heavily on our ability to ramp new sales teams in a fast and effective manner. We must also continue to improve and expand our IT and financial infrastructure, management systems and product management and sales processes. We expect that our future growth will continue to place a significant strain on our management, operational and financial resources. We may incur costs associated with future growth prior to realizing the anticipated benefits, and the return on these investments may be lower, or may develop more slowly than we expect. For example, we recently announced initiatives to increase pipeline growth through additional investments in sales and marketing activities, such as increased lead generation spending, and the hiring of additional sales people. The return on these initiatives may not be as high or may take longer to realize than expected and may impact our revenue growth and profitability in the near future.

If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities. We also may fail to satisfy end customers’ requirements, maintain product quality, execute on our business plan or respond to competitive pressures, any of which could adversely affect our business, operating results, financial condition and prospects.

We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability in the near term.

Part of our business strategy is to primarily focus on our long-term growth. As a result, our profitability may be lower in the near term than it would be if our strategy was to maximize short-term profitability. Expenditures related to expanding our research and development efforts, sales and market efforts, infrastructure and other such investments may not ultimately grow our business or cause long-term profitability. If we are ultimately unable to achieve profitability at the level anticipated by analysts and our stockholders, our stock price may decline.

The enterprise IT market is rapidly changing and expanding, and we expect competition to continue to intensify in the future from both established competitors and new market entrants.

We operate in the intensely competitive enterprise infrastructure market and compete primarily with companies that sell software to build and operate enterprise clouds, integrated systems, and standalone storage and servers, as well as providers of public cloud infrastructure solutions. These markets are characterized by constant change and rapid innovation. Our main competitors fall into the following categories:


•	software providers, such as Red Hat and VMware, that offer a broad range of virtualization, infrastructure and management products to build and operate enterprise clouds;

•

traditional IT systems vendors, such as Cisco Systems, Inc. ("Cisco"), Dell, Hewlett Packard Enterprise Company ("HPE"), Hitachi Data Systems Corporation ("Hitachi"), International Business Machines Corporation ("IBM"), and Lenovo Group Ltd., that offer integrated systems that include bundles of servers, storage and networking solutions, as well as a broad range of standalone server and storage products;


•	traditional storage array vendors, such as Dell, Hitachi and NetApp, Inc. ("NetApp"), which typically sell centralized storage products; and


•	providers of public cloud infrastructure, such as Amazon.com, Inc. ("Amazon"), Google Inc. and Microsoft Corporation.

In addition, we compete against vendors of hyperconverged infrastructure and software-defined storage products, such as Cisco, HPE, Dell, VMware, and many smaller emerging companies. As our market grows, we expect it will continue to attract new companies as well as existing larger vendors. For example, NetApp recently released its first hyperconverged solution. Some of our competitors may also expand their product offerings, acquire competing businesses, sell at lower prices, bundle with other products, provide closed technology platforms, partner with other companies to develop joint solutions, or otherwise attempt to gain a competitive advantage. For example, HPE acquired SimpliVity Corporation and Cisco acquired Springpath, Inc., both of which were emerging hyperconverged vendors, in order to bolster their own hyperconverged product lines. VMware and Amazon also announced a partnership to offer a joint solution that may directly compete with our products. Furthermore, as we expand our product offerings, we may expand into new markets and we may encounter additional competitors in such markets. Additionally, as companies increasingly offer competing solutions, they may be less willing to cooperate with us as an OEM or otherwise. For example, IBM recently announced its intent to acquire Red Hat and they may begin to prioritize selling Red Hat products instead of our products in its global consulting business. A joint Dell and VMware offering would also compete directly with our core solutions and Dell may be incentivized to sell its own solutions over our products.

Many of our existing competitors have, and some of our potential competitors may have, competitive advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources, stronger brand awareness and name recognition, larger intellectual property portfolios and broader global presence and distribution networks. Furthermore, some of our competitors supply a wide variety of products to, and have well-established relationships with, our current and prospective end customers. Some of these competitors have in the past and may in the future take advantage of their existing relationships with end customers, distributors or resellers to provide incentives to such current or prospective end customers that make their products more economically attractive or to interfere with our ability to offer our solutions to our end customers. Our competitors may also be able to offer products or functionality similar to ours at a more attractive price, such as by integrating or bundling their solutions with their other product offerings or those of technology partners or establishing cooperative relationships with other competitors, technology partners or other third parties. Potential end customers may prefer to purchase from their existing suppliers rather than a new supplier, especially given the significant investments that they have historically made in their legacy infrastructures. Some of our competitors may also have stronger or broader relationships with technology partners than we do, which could make their products more attractive than ours. As a result, we cannot assure you that our solutions will compete favorably, and any failure to do so could adversely affect our business, operating results and prospects.

Our relatively limited operating history makes it difficult to evaluate our current business and prospects, and may increase the risk of your investment.

We began selling our products in October 2011. We have relatively limited historical financial data, and we operate in a rapidly evolving market. Our relatively limited operating history makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth. Furthermore, we transitioned our business to focus on more software-only transactions, and are in the process of shifting to a software as a service and software as a subscription model in the longer-term, which may make it more difficult to project our business growth and margins. In addition, the rapidly evolving nature of the enterprise IT infrastructure market, as well as other factors beyond our control, reduces our ability to accurately forecast quarterly or annual performance. Our solutions may never reach widespread adoption, and changes or advances in technologies could adversely affect the demand for our solutions. A reduction in demand for hybrid cloud technology caused by lack of customer acceptance, technological challenges, competing technologies and solutions or otherwise would result in lower revenue growth rates or decreased revenue, either of which could negatively impact our business, operating results and prospects. Any predictions about future revenue and expenses may not be as accurate as they would be if we had a longer operating history. We have encountered and will continue to encounter risks and difficulties associated with rapid growth and expansion and a relatively limited operating history. If we do not address these risks successfully, our business and operating results would be adversely affected, and our stock price could decline.

Developments or improvements in enterprise IT infrastructure technologies may materially and adversely affect the demand for our solutions.

Significant developments in enterprise IT infrastructure technologies, such as advances in storage, virtualization, containers, management software and public cloud and hybrid cloud infrastructure solutions, may materially and adversely affect our business, operating results and prospects in ways we do not currently anticipate. For example, improvements in hybrid cloud technologies, such as improvements in orchestration and automation tools, could emerge as a preferred alternative to our solutions, especially if they are introduced to the market before ours are. Any failure by us to develop new or enhanced technologies or processes, to react to changes or advances in existing technologies or to correctly anticipate these changes or advances as we create and invest in our product roadmap, could materially delay our development and introduction of new solutions, which could result in the loss of competitiveness of our solutions, decreased revenue and a loss of market share to competitors. In addition, public cloud infrastructure offers alternatives to the on-premise infrastructure deployments that our platform currently supports. Various factors could cause the rate of adoption of public cloud infrastructure to increase, including continued or accelerated decreases in the price of public cloud offerings and improvements in the ability of public cloud providers to deliver reliable performance, enhanced security, better application compatibility and more precise infrastructure control. Any of these factors could make our platform less competitive as compared to the public cloud, and could materially and adversely affect the demand for our solutions.

If other IT vendors do not cooperate with us to ensure that our solutions interoperate with their products, including by providing us with early access to their new products or information about their new products, our product development efforts may be delayed or impaired, which could adversely affect our business, operating results and prospects.

Our solutions provide a platform on which software applications and hypervisors from different software providers run. As a result, our solutions must interoperate with our end customers’ existing hardware and software infrastructure, specifically their networks, servers, software and operating systems, as well as the applications that they run on this infrastructure, which may be manufactured and provided by a wide variety of vendors and OEMs. In addition to ensuring that our solutions interoperate with these hardware and software products initially, we must occasionally update our software to ensure that our solutions continue to interoperate with new or updated versions of these hardware and software products. Current or future providers of hardware, software applications, hypervisors or data management tools could make changes that would diminish the ability of our solutions to interoperate with them, and significant additional time and effort may be necessary to ensure the continued compatibility of our solutions, which might not be possible at all. Even if our solutions are compatible with those of other providers, if they do not certify or support our solutions for their systems or cooperate with us to coordinate troubleshooting and hand off of support cases, end customers may be reluctant to buy our solutions, which could decrease demand for our solutions and harm our ability to achieve a return on the investments and resources that we have dedicated to ensuring compatibility. Developing solutions that interoperate properly requires substantial partnering, capital investment and employee resources, as well as the cooperation of the vendors or developers of the software applications and hypervisors both with respect to product development and product support. Vendors may not provide us with early or any access to their technology and products, assist us in these development efforts, certify our solutions, share with or sell to us any APIs, formats, or protocols we may need, or cooperate with us to support end customers. If they do not provide us with the necessary access, assistance or proprietary technology on a timely basis or at all, we may experience product development delays or be unable to ensure the compatibility of our solutions with such new technology or products. To the extent that vendors develop products that compete with ours, they have in the past, and may again in the future, withhold their cooperation, decline to share access, certify our solutions or sell or make available to us their proprietary APIs, protocols or formats or engage in practices to actively limit the functionality, or compatibility, and certification of our products. If any of the foregoing occurs, our product development efforts may be delayed or impaired, our solutions could become less attractive to end customers resulting in a decline in sales, and our business, operating results and prospects may be adversely affected.

If we fail to successfully execute on our planned transition to selling more cloud services, which would be sold on a subscription-basis, our results of operations could be adversely affected.

We are beginning to transition portions of our business from on-premise products generating revenue through software licenses based on the life of the device, to selling our products and services as cloud-based offerings on a subscription business model. This shift requires a considerable investment of technical, financial, legal and sales resources and will continue to divert resources and increase costs, especially in cost of license and other revenues, in any given period. We also intend to make investments in the supporting infrastructure for such cloud-based offerings and may not recoup the costs of such investments. Such investments of resources may also not improve our long-term growth and results of operations. Further, the increase in some costs associated with our cloud services may be difficult to predict over time, especially in light of our lack of historical experience with the costs of delivering cloud-based versions of our applications.

We believe a subscription-based revenue model has certain advantages over our current business model, however, it also presents a number of risks to us including the following:


•	arrangements entered into on a subscription basis may delay when we can recognize revenue and can require up-front costs, which may be significant;


•	since revenue is recognized over the term of the customer agreement in certain transactions, any decrease in customer purchases of our subscription-based products and services will not be fully reflected in our operating results until future periods. This will also make it difficult for us to rapidly increase our revenue through additional subscription sales in any one period;


•	subscription-based revenue arrangements are under short-term agreements. Accordingly, our customers generally have no long-term obligation to us and may cancel their subscription at any time, even if our customers are satisfied with our subscription products;


•	customers in a subscription arrangement may elect not to renew their contract upon expiration, or they may attempt to renegotiate pricing or other contractual terms at the point of, or prior to, renewal on terms that are less favorable to us;


•	investors, industry and financial analysts may have difficulty understanding the shift in our business model, resulting in changes in financial estimates or failure to meet investor expectations; and


•	there is no assurance that the solutions we offer on a subscription basis, including new revenue models or new products that we may introduce, will receive broad marketplace acceptance.

If we fail to properly execute on our transition to selling our products and services, including our cloud-based offerings, on a subscription business model our business and operating results would be adversely affected, and our stock price could decline.

If we fail to develop or introduce new or enhanced solutions on a timely or cost-effective basis, our ability to attract and retain end customers could be impaired and our brand, reputation and competitive position could be harmed.

We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. We will need to continue to create valuable software solutions and integrate these solutions across hardware platforms. To compete successfully, we must design, develop, market and sell new or enhanced solutions that provide increasingly higher levels of performance, capacity, scalability, security, application mobility, and reliability and meet the cost expectations of our end customers. The introduction of new products by our competitors, the market acceptance of products based on new or alternative technologies, or the emergence of new industry standards could render our existing or future solutions obsolete or less attractive to end customers. Any failure to anticipate or develop new or enhanced solutions or technologies in a timely or cost-effective manner in response to technological shifts, could result in decreased revenue and harm to our business and prospects. Any new feature or application that we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve broad market acceptance and investments in research and development or efforts to optimize our engineering cost structure may not be successful. In particular, if we fail to timely release new products, technology or services that we previously announced, our brand and reputation could be harmed. If we fail to introduce new or enhanced solutions that meet the needs of our end customers or penetrate new markets in a timely fashion, we will lose market share and our business, operating results and prospects will be adversely affected.

If we are not successful in executing our strategy to increase sales of our solutions to new and existing large organizations, service providers, and government entities, our operating results may suffer.

Our growth strategy is dependent in large part upon increasing sales of our solutions to new and existing large enterprises, service providers and government entities, particularly when such sales result in large orders for our solutions. Sales to these end customers involve risks that may not be present, or that are present to a lesser extent, with sales to smaller end customers, which can act as a disincentive to our sales team to pursue these larger end customers. These risks include:


•	competition from companies that traditionally target larger enterprises, service providers and government entities and that may have pre-existing relationships or purchase commitments from such end customers;


•	increased purchasing power and leverage held by large end customers in negotiating contractual arrangements with us;


•	more stringent requirements in our support service contracts, including demand for quicker support response times and penalties for any failure to meet support requirements; and


•	longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end customer that elects not to purchase our solutions.

Large organizations often undertake a significant evaluation process that results in a lengthy sales cycle. Although we have a channel sales model, our sales representatives typically engage in direct interaction with our prospective end customers as well as our distributors and resellers. We typically provide evaluation products to these end customers and may spend substantial time, effort and money in our sales efforts to these prospective end customers. In addition, product purchases by large organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. Finally, large organizations typically have longer implementation cycles, require greater product functionality and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility. If we fail to realize an expected sale from a large end customer in a particular quarter or at all, our business and operating results could be adversely affected. All of these factors can add further risk to business conducted with these end customers.

Our growth depends on our existing end customers making additional purchases of software licenses and software upgrades and renewing and upgrading their support and entitlement agreements, and the failure of our end customers to do so could harm our business and operating results.

Our future success depends in part on purchases by our existing end customers of additional software licenses and appliances as well as renewals and upgrades to their support and entitlement agreements. If our end customers do not purchase additional software licenses or appliances or software upgrades, or renew or upgrade their support and entitlement agreements, our revenue may decline and our operating results may be harmed. In order for us to maintain or improve our operating results, we depend on our existing end customers renewing support and entitlement agreements or purchasing additional appliances. End customers may choose not to renew their support and entitlement agreements or purchase additional appliances because of several factors, including dissatisfaction with our prices or features relative to competitive offerings, reductions in our end customers’ spending levels or other causes outside of our control. If our existing end customers do not purchase new solutions, or renew or upgrade their support and entitlement agreements, our revenue may grow more slowly than expected or may decline, and our business and operating results may be adversely affected.

We rely on our key personnel, and our Chief Executive Officer in particular, to grow our business, and the loss of one or more such key employees or the inability to attract and retain qualified personnel could harm our business.

Our success and future growth depends to a significant degree on the skills and continued services of our executive officers and key personnel. In particular, we are highly dependent on the services of Dheeraj Pandey, our Chief Executive Officer and Chairman, who is critical to the development of our technology, future vision and strategic direction. We do not have life insurance policies that cover any of our executive officers or other key employees. The loss of the services of Mr. Pandey or any of our key employees or executive officers could disrupt our business and negatively impact our operating results, prospects and future growth. Our future success also depends on our ability to continue to attract, integrate and retain highly skilled personnel, especially skilled sales and engineering employees. Competition for highly skilled personnel is frequently intense, especially in the San Francisco Bay Area, where we are headquartered. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. We cannot assure you that we will be able to successfully attract or retain qualified personnel. Our inability to attract and retain the necessary personnel could adversely affect our business, operating results and financial condition.

If we do not effectively expand and train our sales force, we may be unable to add new end customers or increase sales to our existing end customers and our business will be adversely affected.

Although we have a channel sales model, our sales representatives typically engage in direct interaction with our prospective end customers. Therefore, we continue to be substantially dependent on our sales force to obtain new end customers and sell additional solutions to our existing end customers. There is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. New hires require significant training and may take significant time before they achieve full productivity; we estimate based on past experience that sales team members typically do not fully ramp and are not fully productive until around the time of the start of their fourth quarter of employment with us. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. Hiring sales personnel in new countries also requires additional set up, upfront and ongoing costs that we may not recover if the sales personnel fail to achieve full productivity. In addition, as a result of our rapid growth, a large percentage of our sales force is new to our company and our solutions and therefore less effective than our more seasoned employees. Moreover, as we transition our business to focus on software-only transactions and more cloud-based services on a subscription basis, we are also re-training our seasoned sales employees, who have historically focused on appliance sales and selling software licenses for the life of the device, in order to maintain or increase their productivity.

If our new sales employees do not become fully productive on the timelines that we have projected, or if we are not successful in training our more seasoned sales employees as we focus on software-only and subscription-based sales, our revenue will not increase at anticipated levels and our ability to achieve long term projections may be negatively impacted. If we are unable to hire, train and maintain sufficient numbers of effective sales personnel, or our new or existing sales personnel are not successful in obtaining new end customers or increasing sales to our existing customer base, our business, operating results and prospects will be adversely affected.

If we do not effectively structure our sales force to focus on the end customers that will primarily drive our growth strategy, our business will be adversely affected.

As indicated above, our growth is dependent in large part on increasing our sales to large enterprises, particularly when those sales result in large orders for our solutions. In fiscal 2017, we started to segment our sales force to focus on these major accounts and large deals and continue to further refine this segmentation as our business changes. This process, which we anticipate will continue for the foreseeable future, has involved hiring new, and promoting existing members of our sales team into, global account manager roles that will focus exclusively on large sales to major accounts. We anticipate that the sales cycles associated with major accounts will be longer than our traditional sales cycles, which will increase the time it will take our new global account managers to become fully productive. The new sales processes and leadership structures for these global sales teams may also take longer than anticipated to implement, further impacting productivity. In addition, as our organization focuses more heavily on major accounts and large deals, the productivity of our traditional sales teams may be impacted. For example, we experienced what we believe was a short-term decrease in sales productivity of our North American sales teams, as well as a reduction in the number of large deals executed during the quarter ended January 31, 2017, due to the continued segmentation of our sales teams. Additionally, we have transitioned our business to focus primarily on software-only transactions, and are in the process of transitioning to a subscription-based business. These potential fluctuations in sales productivity make it more difficult to accurately project our operating results or plan for future growth. If we are unable to effectively manage these changes or implement our news sales structure in a timely manner, or if our decision to segment our sales force is not successful in obtaining large sales of our solutions, our growth and ability to achieve long-term projections may be negatively impacted, and our business and operating results will be adversely affected.

We rely primarily on indirect sales channels for the distribution of our solutions, and disruption within these channels could adversely affect our business, operating results and cash flows.

We primarily sell our solutions through indirect sales channels, including channel partners, such as distributors, our OEMs, value added resellers and system integrators. Our OEMs in turn distribute our solutions through their own networks of channel partners with whom we have no direct relationships.

We rely, to a significant degree, on our channel partners to select, screen and maintain relationships with their distribution networks and to distribute our solutions in a manner that is consistent with applicable law, regulatory requirements and our quality standards. If our channel partners or a partner in their distribution network violates applicable law or regulatory requirements or misrepresents the functionality of our solutions, our reputation could be damaged and we could be subject to potential liability. Additionally, if we are unable to establish relationships with strong channel partners in key growth regions, our ability to sell our solutions in these regions may be adversely affected. Our agreements with our channel partners are non-exclusive, meaning our channel partners may offer end customers the products of several different companies, including products that compete with ours. If our channel partners do not effectively market and sell our solutions, choose to use greater efforts to market and sell their own products or those of our competitors, or fail to meet the needs of our end customers, our business, operating results and prospects may be adversely affected. Our channel partners may cease marketing our solutions with limited or no notice and with little or no penalty. The loss of a substantial number of our channel partners, together with our inability to replace them, or the failure to recruit additional channel partners or establish an alternative distribution network could materially and adversely affect our business and operating results. For example, sales through Carahsoft Technology Corp. and Promark Technology Inc. to our end customers represented 10% and 20%, respectively, of our total revenue for the nine months ended April 30, 2018 and 10% and 11%, respectively, for the nine months ended April 30, 2019. In addition, if a channel partner offers its own products or services that are competitive to our solutions, is acquired by a competitor or reorganizes or divests its reseller business units, our revenue derived from that partner may be adversely impacted or eliminated altogether.

Recruiting and retaining qualified channel partners and training them in the use of our technologies require significant time and resources. If we fail to devote sufficient resources to support and expand our network of channel partners, our business may be adversely affected. Maintaining strong indirect sales channels for our products and effectively leveraging our channel partners and OEMs is important to our growth strategy, and the failure to effectively manage these relationships may lead to higher costs and reduced revenue. Also, in certain international markets, we are in the process of transitioning our distribution model from contracting directly with hundreds of individual resellers to contracting with a smaller number of larger global distributors. Although we believe that this transition will make our sales channels more efficient and broader reaching in the long term in these markets, there is no guarantee that this new distribution model will increase our sales in the short term or allow us to sustain our gross margins. Any potential delays or confusion during the transition process to our new partners may negatively affect our relationship with our existing end customers and channel partners and may cause us to lose prospective end customers or additional business from existing end customers. Upon completion of the transition to the new sales model, we will be more reliant on fewer channel partners, which may reduce our contact with our end customers making it more difficult for us to establish brand awareness, ensure proper delivery and installation of our software, support ongoing end customer requirements, estimate end customer demand, respond to evolving end customer needs and obtain subscription renewals from end customers.

All of our sales to government entities have been made indirectly through our channel partners. Government entities may have statutory, contractual or other legal rights to terminate contracts with our channel partners for convenience or due to a default, and, in the future, if the portion of government contracts that are subject to renegotiation or termination at the election of the government are material, any such termination or renegotiation may adversely impact our future operating results. Additionally, we sometimes rely on our channel partners to satisfy certain regulatory obligations that we would otherwise have to satisfy if we sold directly to the government entities, and our channel partners may be unable or unwilling to satisfy these obligations in the future. In the event of such termination or change, it may be difficult for us to arrange for another channel partner to sell our solutions to these government entities in a timely manner, and we could lose sales opportunities during the transition. Governments routinely investigate and audit government contractors’ (including subcontractors') administrative processes, and any unfavorable audit could result in the government refusing to continue buying our solutions, our channel partners changing their business models or refusing to continue to sell our solutions under current models, a reduction of revenue or fines, or civil or criminal liability if the audit uncovers improper or illegal activities.

If our indirect distribution channel is disrupted, particularly if we are reliant on a fewer number of channel partners, or if we are required to directly satisfy certain regulatory obligations imposed by government entities as a result of our efforts to expand our sales to government entities, we may be required to devote more time and resources to distribute our solutions directly and support our end customers, which may not be as effective and could lead to higher costs, reduced revenue and growth that is slower than expected.

Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. If our revenue or operating results in any particular period fall below investor expectations, the price of our Class A common stock would likely decline. Factors that are difficult to predict and that could cause our operating results to fluctuate include:


•	the timing and magnitude of orders, shipments and acceptance of our solutions in any quarter;


•	our ability to attract new and retain existing end customers;


•	disruptions in our sales channels or shifts in our relationships with important channel partners and OEMs;


•	the timing of revenue recognition for our sales, the impact of which is heightened by our shift toward software-only sales and shift to a subscription-based model;


•	reductions in end customers’ budgets for information technology purchases;


•	delays in end customers’ purchasing cycles or deferments of end customers’ purchases in anticipation of new products or updates from us or our competitors;


•	fluctuations in demand and competitive pricing pressures for our solutions;


•	the mix of solutions sold, including the mix between appliance and software-only sales and the mix of the types of appliances that we sell, and the mix of revenue between products and support, entitlements and other services, which will depend in part on whether we are successful in executing our strategy to transition our business to focus on more software-only transactions;


•	our ability to develop, introduce and ship in a timely manner new solutions and product enhancements that meet customer requirements, and market acceptance of such new solutions and product enhancements;


•	the timing of product releases or upgrades or announcements by us or our competitors;


•	any change in the competitive dynamics of our markets, including consolidation or partnerships among our competitors or partners, new entrants or discounting of prices;


•	the amount and timing of expenses to grow our business and the extent to which we are able to take advantage of economies of scale or to leverage our relationships with OEM or channel partners;


•	the costs associated with acquiring new businesses and technologies and the follow-on costs of integrating and consolidating the results of acquired businesses;


•	the amount and timing of stock-based compensation expenses;


•	our ability to control the costs of our solutions and their key components, or to pass along any cost increases to our end customers;


•	general economic, industry and market conditions; and


•	future accounting pronouncements and changes in accounting policies, including our ability to implement the new procedures and processes necessary to accurately recognize our revenue under the new ASC 606 revenue recognition standard.

The occurrence of any one of these risks could negatively affect our operating results in any particular quarter, which could cause the price of our Class A common stock to decline.

Our gross margins are impacted by a variety of factors and may be subject to variation from period to period.

Our gross margins may be affected by a variety of factors, including shifts in the mix of whether our solutions are sold as an appliance or as software-only, fluctuations in the pricing of our products, including as a result of competitive pricing pressures or increases in component pricing, and the degree to which we are successful in selling the value of incremental feature improvements and upgrades, changes in the cost of components of our hardware appliances, changes in the mix between direct versus indirect sales, changes in the mix of products sold, including whether they are sold as appliances or as software-only, and the timing and amount of recognized and deferred revenue, particularly given that our recognition of revenue from sales of software-only licenses has changed following our adoption of ASC 606. For example, during fiscal 2017 and the majority of fiscal 2018, the prices of DRAM and NAND components increased due to supply constraints, which caused a negative impact on our gross margin. While the pricing of DRAM and NAND components continues to decrease and we expect there to be less impact to our gross margins going forward as our solutions are increasingly being sold on a software-only basis, the pricing of components may continue to impact our gross margins. If we are unable to manage these factors effectively, our gross margins may decline, and fluctuations in gross margin may make it difficult to manage our business and to achieve or maintain profitability, which could adversely affect our business and operating results.

Our sales cycles can be long and unpredictable and our sales efforts require considerable time and expense. As a result, it can be difficult for us to predict when, if ever, a particular customer will choose to purchase our solutions, which may cause our operating results to fluctuate significantly.

Our sales efforts involve educating our end customers about the uses and benefits of our solutions, including their technical capabilities and cost saving potential. End customers often undertake an evaluation and testing process that can result in a lengthy sales cycle. Increasing competition and the emergence of new hyperconverged infrastructure product offerings often result in customers evaluating multiple vendors at the same time, which can further lengthen the sales cycle. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. Platform purchases are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. The broad nature of the technology shift that our solutions represent and the legacy relationships our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles, which make it difficult for us to predict when end customers may purchase solutions from us. The unpredictable nature of our sales cycles may be increased in future periods as we focus our sales efforts more heavily on major accounts and large deals. Our business and operating results will be significantly affected by the degree to which and speed with which organizations adopt our solutions.

Because we depend on manufacturers of hardware to timely and cost-effectively produce and ship the hardware on which we run our software, we are susceptible to delays and pricing fluctuations, which would cause our business to be adversely affected.

We rely on manufacturers to produce the hardware appliances on which our software runs, which exposes us to risks, including reduced control over quality assurance, product costs, product supply and timing and potential reputational harm. Furthermore, our orders represent a relatively small percentage of the overall orders received by such hardware manufacturers from their customers. Therefore, fulfilling our orders may not be a priority in guiding their business decisions and operational commitments. If we fail to manage our relationships with these manufacturers effectively, or if any of them experience delays or increased manufacturing lead times, component lead-time disruptions, capacity constraints or quality control problems in their operations or are unable to meet our requirements for timely delivery, our ability to sell our solutions to our end customers could be severely impaired due to the lack of availability of certified hardware appliances, and our customers' ability to consume out software will be delayed, which will adversely affect our business and operating results, competitive position and reputation.

In particular, we rely substantially on Super Micro Computer, Inc. ("Super Micro") and Flextronics Systems Limited ("Flextronics") to assemble and test the Nutanix-branded NX series appliances, including those that are delivered by us. Our agreement with Super Micro automatically renews in May 2019 for successive one-year periods thereafter, with the option to terminate upon each annual renewal, and does not contain any minimum long-term commitment to manufacture NX-branded appliances. Our agreement with Flextronics expires in November 2020 and automatically renews for successive one-year periods thereafter, with the option to terminate upon each annual renewal. The agreement does not contain any minimum long-term commitment to manufacture NX-branded appliances and any orders are fulfilled only after a purchase order has been delivered and accepted. If we are required to change the manufacturer of our NX-branded appliances, we may lose revenue, incur increased costs and damage our channel partner and end customer relationships. We may also decide to switch or bring on additional contract manufacturers in order to better meet our needs. Switching to or bringing on a new contract manufacturer and commencing production is expensive and time-consuming and may cause delays in order fulfillment at our existing contract manufacturers or cause other disruptions.

Our agreements with Super Micro and Flextronics do not contain any price assurances, and any increases in component costs, without a corresponding increase in the price of our solutions, could harm our gross margins. Furthermore, we may need to increase our component purchases, manufacturing capacity and internal test and quality functions if we experience increased demand. The inability of Super Micro, Flextronics or other manufacturers to produce adequate supplies of hardware appliances could cause a delay in customers’ ability to consume our software and our order fulfillment, and our business, operating results and prospects would be adversely affected. As of April 30, 2019, we had approximately $135.7 million in the form of guarantees to our contract manufacturers related to certain components.

There are a limited number of suppliers, and in some cases single-source suppliers, for several key components in the NX-branded appliances, and any disruption in the availability or quality of these components could delay shipments of the NX-branded appliances and damage our channel partner or end customer relationships.

We rely on a limited number of suppliers, and in some cases single-source suppliers, for several key hardware components of the Nutanix-branded NX series appliances. These components are generally purchased on a purchase order basis through Super Micro or Flextronics and we do not have long-term supply contracts with our suppliers. Our reliance on key suppliers exposes us to risks, including reduced control over product quality, production and component costs, timely delivery and capacity. It also exposes us to the potential inability to obtain an adequate supply of required components because we do not have long-term supply commitments, and replacing some of these components would require a lengthy product qualification process. Furthermore, we extensively test and qualify the components that are used in NX-branded appliances to ensure that they meet certain quality and performance specifications. If our supply of certain components is disrupted or delayed, or if we need to replace existing suppliers, there can be no assurance that additional supplies or components can serve as adequate replacements for the existing components, will be available when required or that supplies will be available on terms that are favorable to us, and we may be required to modify our solutions to interoperate with the replacement components. Any of these developments could extend our lead times, increase the costs of our components or costs of product development, cause us to miss market windows for product launch and adversely affect our business, operating results and financial condition.

We generally maintain minimal inventory for repairs and a number of evaluation and demonstration units, and generally acquire components only as needed. We do not enter into long-term supply contracts for these components. As a result, our ability to respond to channel partner or end customer orders efficiently may be constrained by the then-current availability, terms and pricing of these components. The technology industry has experienced component shortages and delivery delays in the past, and we may experience shortages or delays of critical components in the future as a result of strong demand in the industry, component availability constraints, or other factors. If we or our suppliers inaccurately forecast demand for our solutions or we ineffectively manage our enterprise resource planning processes, our suppliers may have inadequate inventory, which could increase the prices we must pay for substitute components or result in our inability to meet demand for our solutions, as well as damage our channel partner or end customer relationships.

If the suppliers of the components of our hardware appliances increase prices of components, experience delays, disruptions, capacity constraints, quality control problems in their manufacturing operations or adverse changes to their financial condition, our ability to ship appliances to our channel partners or end customers in a timely manner and at competitive prices could be impaired and our competitive position, reputation, and operating results could be adversely affected. For example, during fiscal 2017 and the majority of fiscal 2018, the prices of DRAM and NAND components increased due to supply constraints. Qualifying a new component is expensive and time-consuming. If we are required to change key suppliers or assume internal manufacturing operations, we may lose revenue and damage our channel partner or end customer relationships which could adversely impact our revenue and operating results.

We enter into arrangements with our suppliers that could require us to purchase certain minimum levels of inventory, which could result in us incurring losses with respect to such inventory, and may negatively impact our business and operating results.

We enter into arrangements with our suppliers whereby the supplier will purchase certain quantities of components and allocate them exclusively for our use in our products. If we are unable to use the inventory within a specified period, we may be required to purchase the inventory, or to pay the supplier the difference between the price at which the supplier purchased the inventory and the price at which the supplier is ultimately able to sell the inventory to a third party. As a result, if we inaccurately or mistakenly forecast our need for any such components, or if the market price of any such components decreases after the components are purchased by a supplier, we may suffer losses with respect to such inventory, and our business and operating results could be adversely affected.

We rely upon third parties for the warehousing and delivery of appliances and replacement parts for support, and we therefore have less control over these functions than we otherwise would.

We outsource the warehousing and delivery of appliances to a third-party logistics provider for worldwide fulfillment. In addition, some of our support offerings commit us to replace defective parts in our appliances as quickly as four hours after the initial customer support call is received, which we satisfy by storing replacement parts inventory in various third-party supply depots in strategic worldwide locations. As a result of relying on third parties, we have reduced control over shipping and logistics transactions and costs, quality control, security and the supply of replacement parts for support. Consequently, we may be subject to shipping disruptions and unanticipated costs as well as failures to provide adequate support for reasons that are outside of our direct control. If we are unable to have appliances or replacement products shipped in a timely manner, end customers may cancel their contracts with us, we may suffer reputational harm and our business, operating results and prospects may be adversely affected.

Our ability to sell our solutions is dependent in part on ease of use and the quality of our technical support, and any failure to offer high-quality technical support would harm our business, operating results and financial condition.

Once our solutions are deployed, our end customers depend on our support organization to resolve any technical issues relating to our solutions. Furthermore, because of the emerging nature of our solutions, our support organization often provides support for and troubleshoots issues for products of other vendors running on our solutions, even if the issue is unrelated to our solutions. There is no assurance that we can solve issues unrelated to our solutions, or that vendors whose products run on our solutions will not challenge our provision of technical assistance to their products. Our ability to provide effective support is largely dependent on our ability to attract, train and retain personnel who are not only qualified to support our solutions, but also well versed in some of the primary applications and hypervisors that our end customers run on our solutions. Furthermore, as we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training and documentation in languages other than English. In addition, as we continue to expand our product portfolio to include additional solutions our ability to provide high-quality support will become more difficult and will involve more complexity. Any failure to maintain high-quality installation and technical support, or a market perception that we do not maintain high-quality support, could harm our reputation, adversely affect our ability to sell our solutions to existing and prospective end customers, and could harm our business, operating results and financial condition.

Our solutions are highly technical and may contain undetected defects, which could cause data unavailability, unauthorized access to, loss, or corruption that might, in turn, result in liability to our end customers and harm to our reputation and business.

Our solutions are highly technical and complex and are often used to store information critical to our end customers’ business operations. Our solutions may contain undetected errors, defects or security vulnerabilities that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our end customers’ data. In addition, as we expand our platform and introduce new cloud-based products that may hold more of our customer's data, such as Xi Leap, any undetected or unresolved errors, defects or security vulnerabilities may result in material losses or corruption of our end-customers' data. Some errors or defects in our solutions may only be discovered after they have been installed and used by end customers. We previously conducted an in-field replacement of equipment manufactured by our previous outsourced manufacturer, and may be required to do so again in the future. In addition, we may make certain commitments to our OEMs regarding the time frames within which we will correct any security vulnerabilities in our software. If any hardware or software errors, defects or security vulnerabilities are discovered in our solutions after commercial release, a number of negative effects in our business could result, including:


•	lost revenue or lost OEM or other channel partners or end customers;


•	increased costs, including warranty expense and costs associated with end customer support as well as development costs to remedy the errors or defects;


•	delays, cancellations, reductions or rescheduling of orders or shipments;


•	product returns or discounts; and


•	damage to our reputation and brand.

In addition, we could face legal claims for breach of contract, product liability, tort or breach of warranty. While many of our contracts with end customers contain provisions relating to warranty disclaimers and liability limitations, these provisions might not be upheld or might not provide adequate protection if we face such legal claims. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of us and our solutions. In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all. These product-related issues could result in claims against us and our business could be adversely impacted.

Our business depends, in part, on sales to government organizations, and significant changes in the contracting or fiscal policies of such government organizations could have an adverse effect on our business and operating results.

We derive a portion of our revenue from contracts with federal, state, local and foreign governments, and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts. However, demand is often unpredictable from government organizations, and there can be no assurance that we will be able to maintain or grow our revenue from the public sector. Government agencies are subject to budgetary processes and expenditure constraints that could lead to delays or decreased capital expenditures in IT spending, particularly in light of continued uncertainties about government spending levels, such as the recent U.S. federal government shutdown which began in December 2018, and recent changes to, or failure to appoint new, government leaders. The budget and approval process for government agencies also experiences a longer sales cycle relative to our other end customers. If government organizations reduce or shift their capital spending patterns, our business, operating results and prospects may be harmed. Factors that could impede our ability to maintain or increase the amount of revenue derived from government contracts, include:


•	public sector budgetary cycles and funding authorizations;


•	changes in fiscal or contracting policies;


•	decreases in available government funding;


•	changes in government programs or applicable requirements;


•	the adoption of new laws or regulations or changes to existing laws or regulations;


•	potential delays or changes in the government appropriations or other funding authorization processes; and


•	higher expenses associated with, or delays caused by, diligence and qualifying or maintaining qualification as a government vendor.

The occurrence of any of the foregoing could cause governments and governmental agencies to delay or refrain from purchasing our solutions in the future or otherwise have an adverse effect on our business, operating results and prospects.

Third-party claims that we are infringing intellectual property, whether successful or not, could subject us to costly and time-consuming litigation or expensive licenses, and our business could be harmed.

A number of companies, both within and outside of the enterprise computing infrastructure industry, hold a large number of patents covering aspects of storage, servers and virtualization products. In addition to these patents, participants in this industry typically also protect their technology through copyrights and trade secrets. As a result, there is frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. We have received, and in the future may receive, inquiries from other intellectual property holders and may become subject to claims that we infringe their intellectual property rights, particularly as we expand our presence in the market and face increasing competition. Based upon our review of these claims, we believe we have meritorious defenses to the allegations, although there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us. In addition, parties may claim that the names and branding of our solution infringe their trademark rights in certain countries or territories. If such a claim were to prevail, we may have to change the names and branding of our solution in the affected territories and we could incur other costs.

We currently have a number of agreements in effect pursuant to which we have agreed to defend, indemnify and hold harmless our end customers, suppliers and channel and other partners from damages and costs which may arise from the infringement by our solutions of third-party patents or other intellectual property rights. The scope of these indemnity obligations varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. A claim that our solutions infringe a third party’s intellectual property rights, even if untrue, could harm our relationships with our end customers and/or channel partners, may deter future end customers from purchasing our solutions and could expose us to costly litigation and settlement expenses. Even if we are not a party to any litigation between a customer and a third party relating to infringement by our solutions, an adverse outcome in any such litigation could make it more difficult for us to defend our solutions against intellectual property infringement claims in any subsequent litigation in which we are a named party. Any of these results could harm our brand and operating results.

Our defense of intellectual property rights claims brought against us or our end customers, suppliers and channel partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force us to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. An adverse determination also could invalidate our intellectual property rights and prevent us from offering our solutions to our end customers and may require that we procure or develop substitute solutions that do not infringe, which could require significant effort and expense. We may have to seek a license for the technology, which may not be available on acceptable terms or at all, and as a result may significantly increase our operating expenses or require us to restrict our business activities in one or more respects. Any of these events could adversely affect our business, operating results, financial condition and prospects.

The success of our business depends in part on our ability to protect and enforce our intellectual property rights.

We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions and covenants, to establish and protect our proprietary rights, all of which provide only limited protection. We cannot assure you that any patents will be issued with respect to our currently pending patent applications in a manner that gives us adequate defensive protection or competitive advantages, if at all, or that any patents issued to us will not be challenged, invalidated or circumvented. We have filed for patents in the United States and in certain international jurisdictions, but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights, or may be difficult to enforce in practice. Our currently issued patents and any patents that may be issued in the future with respect to pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property.

Protecting against the unauthorized use of our intellectual property, solutions and other proprietary rights is expensive and difficult, particularly internationally. Litigation may be necessary in the future to enforce or defend our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could result in substantial costs and diversion of management resources, either of which could harm our business, operating results and financial condition. Further, many of our current and potential competitors have the ability to dedicate substantially greater resources to defending intellectual property infringement claims and to enforcing their intellectual property rights than we have. Attempts to enforce our rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us, or result in a holding that invalidates or narrows the scope of our rights, in whole or in part. Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our solutions are available. An inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business, operating results, financial condition and prospects.

We may become subject to claims that our employees have wrongfully disclosed or we have wrongfully used proprietary information of our employees’ former employers. These claims may be costly to defend and if we do not successfully do so, our business could be harmed.

Many of our employees were previously employed at current or potential competitors. Although we have processes to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may in the future become subject to claims that these employees have divulged, or we have used, proprietary information of these employees’ former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to develop new solutions and features for existing solutions, which could severely harm our business. Even if we are successful in defending against these claims, litigation efforts are costly, time-consuming and a significant distraction to management.

If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"), the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"), and the rules and regulations of the NASDAQ Stock Market. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the Securities and Exchange Commission ("SEC"), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Class A common stock.

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, we have expended and anticipate that we will continue to expend significant resources and undertake various actions, including incurring accounting-related costs and implementing new internal controls and procedures, and providing significant management oversight. In addition, our independent registered public accounting firm is also required to formally attest to the effectiveness of our internal control over financial reporting and may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, or an adverse report from our independent auditors, could increase our operating costs and could materially impair our ability to operate our business and could have a material and adverse effect on our operating results and could cause a decline in the price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Stock Market.

Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose end customers in the public sector or negatively impact our ability to contract with the public sector.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, antitrust laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages and civil and criminal penalties or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in third-party professional fees. Enforcement actions and sanctions could harm our business, operating results and financial condition.

In addition, we must comply with laws and regulations relating to the formation, administration and performance of contracts with the public sector, including U.S. federal, state and local governmental organizations, which affect how we and our channel partners do business with governmental agencies. Selling our solutions to the U.S. government, whether directly or through channel partners, also subjects us to certain regulatory and contractual requirements. Failure to comply with these requirements by either us or our channel partners could subject us to investigations, fines and other penalties, which could have an adverse effect on our business, operating results, financial condition and prospects. As an example, the U.S. Department of Justice ("DOJ") and the General Services Administration ("GSA") have in the past pursued claims against and financial settlements with IT vendors under the False Claims Act and other statutes related to pricing and discount practices and compliance with certain provisions of GSA contracts for sales to the federal government. The DOJ and GSA continue to actively pursue such claims. Violations of certain regulatory and contractual requirements could also result in us being suspended or debarred from future government contracting. Any of these outcomes could have an adverse effect on our revenue, operating results, financial condition and prospects.

These laws and regulations impose added costs on our business, and failure to comply with these or other applicable regulations and requirements, including noncompliance in the past, could lead to claims for damages from our channel partners, penalties, termination of contracts, loss of exclusive rights in our intellectual property, and temporary suspension or permanent debarment from government contracting. Any such damages, penalties, disruptions or limitations in our ability to do business with the public sector could have an adverse effect on our business and operating results.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could adversely affect our business and operating results. Compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

Personal privacy, data protection and information security are significant issues in the United States and the other jurisdictions where we offer our solutions. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission ("FTC") and various state, local and foreign bodies and agencies.

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of personal information of individuals, including end customers and employees. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws to the online collection, use and dissemination of data. Additionally, many foreign countries and governmental bodies, including in Australia, the European Union, India, Japan and numerous other jurisdictions in which we operate or conduct our business, have laws and regulations concerning the collection and use of personal information obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Such laws and regulations may require companies to implement new privacy and security policies, permit individuals to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use personal information for certain purposes. In addition, a foreign government could require that any personally identifiable information collected in a country not be disseminated outside of that country, and we are not currently equipped to comply with such a requirement.

We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For example, California recently enacted the California Consumer Privacy Act ("CCPA") that will, among other things, require covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information, when it goes into effect on January 1, 2020. The CCPA recently was amended, and it is possible that it will be amended again before it goes into effect. We cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Additionally, the General Data Protection Regulation ("GDPR"), which became effective in May 2018, superseded prior EU data protection legislation, imposes more stringent EU data protection requirements, provides an enforcement authority which substantially increases compliance costs, and imposes large penalties for noncompliance. Moreover, as a result of current and proposed data protection and privacy laws aimed at using personal data for marketing purposes, including the ePrivacy Regulation to replace the ePrivacy Directive in the European Union, we face an increased difficulty in marketing to current and potential customers, which impacts our ability to spread awareness of our products and services and, in turn, grow a customer base in some regions. There also remains significant uncertainty surrounding the regulatory framework for the future of personal data transfers from the European Union to the United States. As we begin to offer more cloud-based services, we will increasingly be positioned as a data processor, which imposes additional obligations under the foregoing and other laws and regulations relating to privacy and data protection, and may increase our liability exposure by operation of law, contract, or penalties for noncompliance. Additionally, we expect that existing laws, regulations and standards may be interpreted in new manners in the future. Current or future laws, regulations, standards and other obligations, as well as changes in the interpretation of existing laws, regulations, standards and other obligations could impair our or our customers’ ability to collect, use or disclose information relating to individuals, which could decrease demand for our solutions, require us to restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

Although we are working to comply with those federal, state and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our solutions. As such, we cannot assure ongoing compliance with all such laws or regulations, industry standards, contractual obligations and other legal obligations. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal information or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business and operating results.

Failure to comply with anticorruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act of 2010 ("U.K. Bribery Act"), and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct activities. We face significant risks if we fail to comply with the FCPA and other anticorruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any advantage. In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. In addition, we use various third parties to sell our solutions and conduct our business abroad. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We continue to update and implement our FCPA/anti-corruption compliance program and no assurance can be given that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

Any violation of the FCPA, other applicable anticorruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have a material and adverse effect on our reputation, business, operating results and prospects. In addition, responding to any enforcement action may result in a materially significant diversion of management’s attention and resources and significant defense costs and other third-party professional fees.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.

Our solutions are subject to U.S. export controls, including the Export Administration Regulations and economic sanctions administered by the Office of Foreign Assets Control, and we incorporate encryption technology into certain of our solutions. These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of an encryption registration.

Furthermore, our activities are subject to the U.S. economic sanctions laws and regulations that prohibit the shipment of certain products and services without the required export authorizations, including to countries, governments and persons targeted by U.S. embargoes or sanctions. Additionally, the U.S. government has been critical of existing trade agreements and may impose more stringent export and import controls. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities even if the export license ultimately may be granted. While we take precautions to prevent our solutions from being exported in violation of these laws, including obtaining authorizations for our encryption products, implementing IP address blocking and screenings against U.S. government and international lists of restricted and prohibited persons, we cannot guarantee that the precautions we take will prevent violations of export control and sanctions laws. Violations of U.S. sanctions or export control laws can result in significant fines or penalties and possible incarceration for responsible employees and managers could be imposed for criminal violations of these laws.

We also note that if our channel partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties. We presently incorporate export control compliance requirements into our channel partner agreements; however, no assurance can be given that our channel partners will be able to comply with such requirements.

Also, various countries, in addition to the United States, regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our solutions or could limit our end customers’ ability to implement our solutions in those countries. Changes in our solutions or future changes in export and import regulations may create delays in the introduction of our solutions in international markets, prevent our end customers with international operations from deploying our solutions globally or, in some cases, prevent the export or import of our solutions to certain countries, governments, or persons altogether. From time to time, various governmental agencies have proposed additional regulation of encryption technology, including the escrow and government recovery of private encryption keys. Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls stemming from U.S. government policies, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential end customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would adversely affect our business, operating results and prospects.

Our international operations expose us to additional risks, and failure to manage those risks could adversely affect our business, operating results and cash flows.

We derive a significant portion of our revenue from end customers and channel partners outside the United States. We derived approximately 42%, 44%, 43% and 44% of our total revenue from our international customers based on bill-to-location for fiscal 2017 and fiscal 2018 and the nine months ended April 30, 2018 and 2019, respectively. We are continuing to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As of April 30, 2019, approximately 48% of our full-time employees were located outside of the United States. We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant management attention and financial resources. We are subject to risks associated with having significant worldwide operations, including:


•	business practices may differ from those in the United States and may require us in the future to include terms other than our standard terms in customer, channel partner, employee, consultant and other contracts;


•	political, economic and social instability or uncertainty around the world;


•	potential changes in trade relations arising from policy initiatives implemented by, or statements made by, the U.S. government, which has been critical of existing and proposed trade agreements, such as the newly imposed tariffs for Chinese imports to the U.S.;


•	greater difficulty in enforcing contracts, judgments and arbitration awards in international courts, and in collecting accounts receivable and longer payment and collection periods;


•	greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;


•	risks associated with trade restrictions and foreign legal requirements, including the importation, certification and localization of our solutions required in foreign countries;


•	greater risk of a failure of foreign employees, partners, distributors and resellers to comply with both U.S. and foreign laws, including antitrust regulations, the FCPA, the U.K. Bribery Act, U.S. or foreign sanctions regimes and export or import control laws, and any trade regulations ensuring fair trade practices;


•	heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;


•	requirements to comply with foreign privacy, data protection and information security laws and regulations and the risks and costs of noncompliance;


•	reduced or uncertain protection for intellectual property rights in some countries;


•	impediments to the flow of foreign exchange capital payments and receipts due to exchange controls instituted by certain foreign governments;


•	increased expenses incurred in establishing and maintaining corporate entities, office space, and equipment for our international operations;


•	difficulties in managing and staffing international offices and increased travel, infrastructure and legal compliance costs associated with multiple international locations;


•	greater difficulty in identifying, attracting and retaining local experienced personnel, and the costs and expenses associated with such activities;


•	the challenge of managing a development team in geographically disparate locations;


•	management communication and integration problems resulting from cultural and geographic dispersion;


•	differing employment practices and labor relations issues;


•	fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business; and


•	treatment of revenue from international sources for tax purposes and changes in tax laws, regulations or official interpretations, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions.

As we expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. These factors and other factors could harm our ability to gain future international revenue and, consequently, materially impact our business, operating results and financial condition. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.

A number of our solutions incorporate software provided under open source licenses which may restrict or impose certain obligations on how we use or distribute our solutions or subject us to various risks and challenges, which could result in increased development expenses, delays or disruptions to the release or distribution of those solutions, inability to protect our intellectual property rights and increased competition.

Certain significant components of our solutions incorporate or are based upon open source software, and we may incorporate open source software into other solutions in the future. Such open source software is generally licensed under open source licenses, including, for example, the GNU General Public License, the GNU Lesser General Public License, "Apache-style" licenses, "BSD-style" licenses and other open source licenses. The use of open source software subjects us to a number of risks and challenges, including:


•	If open source software programmers, most of whom we do not employ, do not continue to develop and enhance open source technologies, our development expenses could increase and our product release and upgrade schedules could be delayed.

•

Open source software is open to further development or modification by anyone. As a result, others may develop such software to be competitive with our platform and may make such competitive software available as open source. It is also possible for competitors to develop their own solutions using open source software, potentially reducing the demand for, and putting price pressure on, our solutions.

•

The licenses under which we license certain types of open source software may require that, if we modify the open source software we receive, we are required to make such modified software and other related proprietary software of ours publicly available without cost and on the same terms. Accordingly, we monitor our use of open source software in an effort to avoid subjecting our proprietary software to such conditions and others we do not intend. Although we believe that we have complied with our obligations under the various applicable licenses for open source software that we use, our processes used to monitor how open source software is used could be subject to error. In addition, there is little or no legal precedent governing the interpretation of terms in most of these licenses. Therefore, any improper usage of open source could result in unanticipated obligations regarding our solutions and technologies, which could have an adverse impact on our intellectual property rights and our ability to derive revenue from solutions incorporating the open source software.


•	If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur legal expenses defending against such allegations, or engineering expenses in developing a substitute solution.

If we are unable to successfully address the challenges of integrating offerings based upon open source technology into our business, our business and operating results may be adversely affected and our development costs may increase.

Adverse economic conditions or reduced IT spending may adversely impact our revenues and profitability.

Our operations and performance depend in part on worldwide economic conditions and the impact these conditions have on levels of spending on enterprise computing technology. Our business depends on the overall demand for enterprise computing infrastructure and on the economic health and general willingness of our current and prospective end customers to purchase our solutions and to continue spending on IT in general. Weak economic conditions, or a reduction in enterprise computing spending, would likely adversely affect our business, operating results and financial condition in a number of ways, including by reducing sales, lengthening sales cycles and lowering prices for our solutions.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results.

Our sales contracts are denominated in U.S. dollars, and therefore, substantially all of our revenue is not subject to foreign currency risk. However, a relative strengthening of the U.S. dollar could increase the real cost of our solutions to our end customers outside of the United States, which could adversely affect our financial condition and operating results. In addition, an increasing portion of our operating expenses is incurred outside the United States, is denominated in foreign currencies such as the Euro, the Pound Sterling, the Indian Rupee, the Canadian Dollar and the Australian Dollar, and is subject to fluctuations due to changes in foreign currency exchange rates. If we become more exposed to currency fluctuations and are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative instruments.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results.

We do not collect sales and use, value added or similar taxes in all jurisdictions in which we have sales, and we have been advised that such taxes are not applicable to our products and services in certain jurisdictions. Sales and use, value added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, to us or our end customers for the past amounts, and we may be required to collect such taxes in the future. If we are unsuccessful in collecting such taxes from our end customers, we could be held liable for such costs, which may adversely affect our operating results.

Our international operations may subject us to potential adverse tax consequences.

We are expanding our international operations and staff to better support our growth into the international markets. Our corporate structure and associated transfer pricing policies contemplate the business flows and future growth into the international markets, and consider the functions, risks and assets of the various entities involved in the intercompany transactions. The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to the intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Changes in global tax laws could increase our worldwide tax rate and could have a material adverse effect on our business, cash flow, results of operations or financial conditions.

In December 2017, the U.S. Congress passed and the President signed legislation commonly referred to as the Tax Cuts and Jobs Act ("TCJA"), which includes a broad range of tax reform proposals affecting businesses, including a federal corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive compensation; creation of new minimum taxes such as the base erosion anti-abuse tax, Global Intangible Low Taxed Income; and a new minimum tax on certain foreign earnings. In addition, international organizations such as the Organization for Economic Cooperation and Development, have published Base Erosion and Profit Shifting, action plans that, if adopted by countries where we do business, could increase our tax obligations in these countries. We will continue to assess the ongoing impact of these current and pending changes to global tax legislation and the impact on the Company's future financial statements upon the finalization of laws, regulations, and additional guidance. In addition, we have continued to evaluate our corporate structure. Any changes to the taxation of undistributed foreign earnings could change our plans regarding reinvestment of such earnings. Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the taxation of our activities could increase our worldwide effective tax rate and have an adverse effect on our operating results, cash flow or financial condition.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and interruptions by man-made problems, such as network security breaches, computer viruses or terrorism.

A significant natural disaster, such as an earthquake, fire, flood or significant power outage could have an adverse impact on our business and operating results. Despite the implementation of network security measures, our networks also may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our solutions. Both our corporate headquarters and our main contract manufacturers are located in the San Francisco Bay Area, a region known for seismic activity. In addition, natural disasters, acts of terrorism or war could cause disruptions in our or our end customers’ or channel partners’ businesses, our suppliers’ and manufacturers’ operations or the economy as a whole. We also rely on IT systems to communicate among our workforce and with third parties. Any disruption to our communications, whether caused by a natural disaster or by man-made problems, such as power disruptions, could adversely affect our business. We do not have a formal disaster recovery plan or policy in place and do not currently require that our manufacturing partners have such plans or policies in place. To the extent that any such disruptions result in delays or cancellations of orders or impede our suppliers’ or our manufacturers’ ability to timely deliver our solutions and product components, or the deployment of our solutions, our business, operating results and financial condition would be adversely affected. We do maintain what we believe are commercially reasonable levels of business interruption insurance. However, such insurance may not adequately cover our losses in the event of a significant disruption in our business.

If we are the victim of a cyber attack or other cyber security incident and our networks, computer systems or software solutions are breached or unauthorized access to customer data otherwise occurs, our business operations may be interrupted, our reputation may be damaged and we may incur significant liabilities.

Cyber attacks designed to gain access to sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high-profile electronic security breaches leading to the unauthorized release of sensitive customer information have occurred at a number of large companies in recent years. Companies in our industry have reported that they have been subject to cyber attacks, including attacks potentially from nation-state actors, and we could be subject to similar attacks. Computer malware, viruses, social engineering (predominantly spear phishing attacks), and general hacking have become more prevalent in our industry, particularly against cloud services, and companies like us can suffer security breaches from a variety of causes, whether due to third-party action, employee error, malfeasance or otherwise. As we transition to offering more cloud-based solutions, such as Nutanix Xi Cloud Services, we may increasingly be the target of cyber threats. Because the techniques used and vulnerabilities exploited to obtain unauthorized access or to sabotage systems change frequently, and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or vulnerabilities or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. If any unauthorized access to or security breach of our solutions occurs, or is believed to have occurred, such an event or perceived event could result in the loss of data, loss of intellectual property or trade secrets, loss of business, severe reputational or brand damage adversely affecting end customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, and penalties for violation of privacy, data protection and other applicable laws, regulations or contractual obligations. We may also be subject to significant costs for remediation that may include liability for stolen assets or information and repair of system damage that may have been caused or incentives offered to end customers or other business partners in an effort to maintain business relationships after a breach and other liabilities. Additionally, any such event or perceived event could impact our reputation, harm customer confidence, hurt our sales and expansion into new markets or cause us to lose existing end customers. We could be required to expend significant capital and other resources to alleviate problems caused by such actual or perceived breaches and to remediate our systems, we could be exposed to a risk of loss, litigation or regulatory action and possible liability, and our ability to operate our business may be impaired. Additionally, actual, potential or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

In addition, if the security measures of our end customers are compromised, even without any actual compromise of our own systems or of our solutions used by such end customers, we may face negative publicity or reputational harm if our end customers or anyone else incorrectly attributes the blame for such security breaches to us or our solutions. If end customers believe that our solutions do not provide adequate security for the storage of personal or other sensitive or proprietary information or the transmission of such information over the internet, our business will be harmed. End customers’ concerns about security or privacy may deter them from using our solutions for activities that involve personal or other sensitive information, which may significantly affect our business and operating results.

We have expanded and may further expand through acquisitions of, or investments in, other companies, each of which may divert our management’s attention, resulting in additional dilution to our stockholders and consumption of resources that are necessary to sustain and grow our business.

Our business strategy may, from time to time, include acquiring other complementary products, technologies or businesses. For example, in August 2018 we acquired Mainframe2, Inc., in March 2018 we acquired Minjar, Inc. and Netsil Inc., in August 2016, we acquired Calm.io Pte. Ltd. and in September 2016, we acquired PernixData, Inc. We also may enter into relationships with other businesses in order to expand our solutions, which could involve preferred or exclusive licenses, additional channels of distribution or discount pricing or investments in other companies. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to third-party approvals, such as government regulatory approvals, which are beyond our control. Consequently, we can make no assurance that these transactions once undertaken and announced, will close.

These kinds of acquisitions or investments may result in unforeseen expenditures and operating and integration difficulties, especially if the acquisitions or investments are more complex in structure and scope, including due to the geographic location of the acquired company. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of companies that we may acquire, particularly if the key personnel of the acquired business choose not to work for us. We may have difficulty retaining the customers of any acquired business or the acquired technologies or research and development expectations may prove unsuccessful. Acquisitions may also disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for development of our business. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. Any acquisition or investment could expose us to unknown liabilities. Moreover, we cannot assure you that the anticipated benefits of any acquisition or investment would be realized or that we would not be exposed to unknown liabilities. In connection with these types of transactions, we may issue additional equity securities that would dilute our stockholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures, and become subject to adverse tax consequences, substantial depreciation or deferred compensation charges. These challenges related to acquisitions or investments could adversely affect our business, operating results, financial condition and prospects.

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our solutions.

We are subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") that will require us to perform due diligence and disclose and report whether our solutions contain conflict minerals. Although the SEC has recently provided guidance with respect to a portion of the conflict mineral filing requirements that may somewhat reduce our reporting practices, we have incurred and expect to incur additional costs to comply with these disclosure requirements, and the requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products.

Risks Related to the Notes

We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change before the maturity date at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. Moreover, we will be required to repay the Notes in cash at their maturity unless earlier converted or repurchased. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted or at their maturity.

In addition, our ability to repurchase Notes or to pay cash upon conversions of Notes or at their maturity may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture or to pay cash upon conversions of Notes or at their maturity as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. Moreover, the occurrence of a fundamental change under the indenture could constitute an event of default under any such agreement. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness or to pay cash amounts due upon conversion, upon required repurchase or at maturity of the Notes.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders of Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options ("ASC 470-20"), an entity must separately account for the liability and equity components of the convertible debt instruments, such as the Notes, that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date and the value of the equity component would be treated as debt discount for the purpose of accounting for the debt component of the Notes. As a result, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes. We will report larger net losses (or lower net income) in our financial results because ASC 470-20 will require interest to include the amortization of the debt discount, which could adversely affect our reported or future financial results or the trading price of our Class A common stock.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of Class A common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share could be adversely affected.

The convertible note hedge and warrant transactions may affect the value of the Notes and our Class A common stock.

In connection with the pricing of the Notes, we entered into convertible note hedge transactions with one or more of the initial purchasers of the Notes and/or their respective affiliates or other financial institutions, or the option counterparties. We also entered into warrant transactions with the option counterparties pursuant to which we will sell warrants for the purchase of our Class A common stock. The convertible note hedge transactions are expected generally to reduce the potential dilution upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of any Notes. The warrant transactions could separately have a dilutive effect to the extent that the market price per share of our Class A common stock exceeds the strike price of the warrants.

The option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes or following any repurchase of Notes by us on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the market price of our Class A common stock. In addition, if any such convertible note hedge and warrant transactions fail to become effective, the option counterparties may unwind their hedge positions with respect to our Class A common stock, which could adversely affect the value of our Class A common stock.

The potential effect, if any, of these transactions and activities on the market price of our Class A common stock will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our Class A common stock.

We are subject to counterparty risk with respect to the convertible note hedge transactions.

The option counterparties will be financial institutions or affiliates of financial institutions, and we will be subject to the risk that one or more of such option counterparties may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. If any option counterparty becomes subject to bankruptcy or other insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in our Class A common stock market price and in the volatility of the market price of our Class A common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and dilution with respect to our Class A common stock. We can provide no assurance as to the financial stability or viability of any option counterparty.

Risks Related to Ownership of Our Class A Common Stock

The market price of our Class A common stock may be volatile and may decline.

The market price of our Class A common stock has fluctuated and may continue to fluctuate substantially. The market price of our Class A common stock depends on a number of factors, including those described in this "Risk Factors" section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the market price of our Class A common stock include the following:


•	price and volume fluctuations in the overall stock market from time to time;


•	volatility in the market prices and trading volumes of high technology stocks;


•	changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;


•	changes in financial estimates by any analysts who follow our company, including as a result of our plan to transition our business to focus on more software-only transactions and our announced plan to transition toward a subscription-based model, or our failure to meet these estimates or the expectations of investors;


•	the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;


•	announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;


•	public analyst or investor reaction to our press releases, other public announcements and filings with the SEC;


•	rumors and market speculation involving us or other companies in our industry;


•	actual or anticipated changes or fluctuations in our operating results;


•	actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;


•	actual or threatened litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;


•	developments or disputes concerning our intellectual property or our solutions, or third-party proprietary rights;


•	rumored, announced or completed acquisitions of businesses or technologies by us or our competitors;


•	new laws or regulations or new interpretations of existing laws or regulations applicable to our business;


•	changes in accounting standards, policies, guidelines, interpretations or principles;


•	any major changes in our management or our Board of Directors;


•	general economic conditions and slow or negative growth of our markets; and


•	other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our Class A common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action litigation has often been instituted against that company. Securities litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, operating results and financial condition.

Sales of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could reduce the price that our Class A common stock might otherwise attain and may dilute your voting power and your ownership interest in us.

Sales of a substantial number of shares of our Class A common stock in the public markets, particularly sales by our directors, executive officers and significant stockholders, or the perception that these sales could occur, could adversely affect the market price of our Class A common stock.

We have reserved a substantial number of shares of our Class A common stock for issuance upon vesting or exercise of our equity compensation plans, upon conversion of the Notes and in relation to warrant transactions we entered into in connection with the pricing of the Notes.

In addition, certain holders of our Class B common stock are entitled to rights with respect to registration of these shares under the Securities Act of 1933, as amended, pursuant to our Amended and Restated Investors’ Rights Agreement. If such holders exercise their registration rights and sell a large number of shares, they could adversely affect the market price for our Class A common stock. We have also registered the offer and sale of all shares of Class A and Class B common stock that we may issue under our equity compensation plans.

We may also issue our shares of Class A common stock or additional securities convertible into shares of our Class A common stock from time to time in connection with a financing, acquisition, investments or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline.

The dual class structure of our common stock as contained in our charter documents has the effect of concentrating voting control with a limited number of stockholders that held our stock prior to our IPO, including our directors, executive officers, and employees and their affiliates, and significant stockholders, which will limit your ability to influence corporate matters.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. As of April 30, 2019, stockholders who hold shares of Class B common stock, including our investors and our directors, executive officers, and employees, and their affiliates, together hold a significant majority of the voting power of our outstanding capital stock. As a result, for the foreseeable future, such stockholders will have significant influence over the management and affairs of our company and over the outcome of all matters submitted to our stockholders for approval, including the election of directors and significant corporate transactions, such as a merger, consolidation or sale of substantially all of our assets.

In addition, the holders of Class B common stock collectively will continue to control all matters submitted to our stockholders for approval even if their stock holdings represent less than 50% of the outstanding shares of our common stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock so long as the shares of Class B common stock represent at least 9.1% of all outstanding shares of our Class A and Class B common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable future, and, as a result, the market price of our Class A common stock could be adversely affected. These holders of our Class B common stock may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests, and, unless earlier converted at the election of the holders of 67% of our outstanding Class B common stock, our amended and restated certificate of incorporation provides for a dual class stock structure for 17 years following the completion of our IPO.

Future transfers, whether or not for value, by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers affected for estate planning purposes. The conversion of shares of our Class B common stock into shares of our Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If one or more significant holders of our Class B common stock decides to convert or sell their shares, it could result in a different group of Class B common stock holders having the power to exert significant influence over our company, which may or may not align with the strategy and direction set by our management. Any such changes could adversely affect the market price of our Class A common stock.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified Board members.

We are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the NASDAQ Stock Market and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Act. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly now that we are no longer an "emerging growth company," as defined in the Jumpstart Our Business Startups Act. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting. In order to improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects. Although we have already hired additional employees to help comply with these requirements, we may need to further expand our legal and finance departments in the future, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed. As a result of our required public disclosures of information, our business and financial condition are more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, results of operations and prospects could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition, results of operations and prospects.

In addition, as a result of our disclosure obligations as a public company, we will have reduced strategic flexibility and will be under pressure to focus on short-term results, which may adversely affect our ability to achieve long-term profitability.

If financial or industry analysts do not publish research or reports about our business, if they have a difficulty understanding the changes to our business model, or if they issue inaccurate or unfavorable research regarding our Class A common stock, our stock price and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. In addition, we are in a period of transition to focus our business on more software-only transactions in the short term and a subscription-based business model in the long term, which analysts may not have historically reflected, or may not accurately in the future reflect, in their research. The foregoing factors could affect analysts' ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts who cover us issue an inaccurate or unfavorable opinion regarding our stock price, our stock price would likely decline. In addition, the stock prices of many companies in the high technology industry have declined significantly after those companies have failed to meet, or often times significantly exceeded, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet (or significantly exceed) our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Class A common stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our Board of Directors or current management and may adversely affect the market price of our Class A common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions, including effecting changes in our management. These provisions include:


•	our amended and restated certificate of incorporation provides for a dual class common stock structure for 17 years following the completion of our IPO;


•	a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;


•	the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;


•	upon the conversion of our Class A common stock and Class B common stock into a single class of common stock, the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;


•	upon the conversion of our Class A common stock and Class B common stock into a single class of common stock, a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;


•	the requirement that a special meeting of stockholders may be called only by the chairman of our Board of Directors, our lead independent director, our president, our secretary or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

•

the requirement for the affirmative vote of holders of at least 66 2⁄3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;


•	the ability of our Board of Directors, by majority vote, to amend our amended and restated bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and


•	advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.

We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.

We have never declared or paid any cash dividends on our Class A common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our Class A common stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

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

None.

Purchases of Equity Securities by the Issuer

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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

EXHIBIT INDEX



		Incorporated by Reference
Number	Exhibit Title	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation	10-Q	001-37883	3.1	12/8/2016
3.2	Amended and Restated Bylaws	S-1/A	333-208711	3.4	5/27/2016
10.1	Memorandum of Understanding by and between Nutanix, Inc. and Flextronics Telecom Systems Limited, executed on March 13, 2017†					X
10.2	Original Equipment Manufacturer (OEM) Purchase Agreement, dated as of May 16, 2014, by and between the Registrant and Super Micro Computer Inc., as amended by Amendment One to Original Equipment Manufacturer (OEM) Purchase Agreement, dated as of November 13, 2017 and Amendment Two to Original Equipment Manufacturer (OEM) Purchase Agreement dated as of October 31, 2018†					X
10.3	Manufacturing Services Agreement, by and between Nutanix, Inc. and Flextronics Telecom Systems Limited, entered into on November 1, 2017, as amended by Amendment One to Manufacturing Services Agreement dated as of December 19, 2017†					X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*					X
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XRBL tags are embedded within the Inline XBRL document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.	XBRL Taxonomy Extension Definition					X
101.	XBRL Taxonomy Extension Label Linkbase					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document					X

† Certain portions of this exhibit (indicated by "[***]") have been omitted as Registrant determined the omitted information (i) is not material and (ii) would be competitively harmful to Registrant if publicly disclosed.

* These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Nutanix, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.

SIGNATURES

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



Date: June 5, 2019		/s/ Duston M. Williams
		Duston M. Williams
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit

Form 10-Q

Exhibit 10.1

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED, AND THE EXCLUDED TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS [***].

MEMORANDUM OF UNDERSTANDING

This binding Memorandum of Understanding (the “MOU”) is made effective as of December 1^st, 2016 (the “Effective Date”) by and between Nutanix, Inc. with offices at 1740 Technology Drive, Suite 150, San Jose, California 95110 (“Nutanix”) and Flextronics Telecom Systems Limited, a corporation organized under the laws of Mauritius with offices at Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius (“Flextronics”).

WHEREAS, Flextronics and Nutanix (each individually a “Party” and collectively the “Parties”) have entered into discussions to establish the terms and conditions for a business relationship between the Parties; and

WHEREAS, the Parties have established April 15th, 2017 as the target date (“Target Date”) for execution of a definitive master services agreement (“MSA”) that will govern the terms and conditions of such a business relationship following essentially the terms stated in this MOU; and

WHEREAS, the Parties desire to enter into this MOU to (i) set forth the terms, conditions and parameters of that non-exclusive business relationship that shall apply until such time that the MSA is signed and (ii) to establish the parameters of the non-exclusive business relationship for the MSA; and

WHEREAS, the business relationship between Nutanix and Flextronics requires Flextronics to, among other things, (i) procure Components (defined in section 2f below), parts, and raw material, and/or (ii) manufacture, assemble, test, inspect, configure and ship certain mutually-agreed upon Nutanix products (including any prototypes and preproduction units of the Nutanix products) (collectively, the “Products”) at prices that the Parties have agreed to. The procurement functions described in subsection (i) of this paragraph and the manufacturing and assembly functions described in subsection (ii) of this paragraph collectively shall be referred to as the “Services”.

THEREFORE, (i) the Parties shall work to implement an MSA under the following terms and (ii) until such time as an MSA has been executed, the following terms shall apply:


1.	The Parties will work in good faith to finalize and execute an MSA by the target date listed above.


2.	Flextronics shall perform the Services for Nutanix starting as of the execution of this MOU. The performance of the Services shall be subject to the following provisions:

Each month Nutanix shall provide to Flextronics an updated rolling forecast of its proposed purchases of Products for the next six (6) months. Flextronics should use such forecasts to plan for the procurement of Components and the manufacture of the Products. Except for Nutanix’ component inventory liability pursuant to section 2g below, such forecasts shall not be considered binding until Nutanix issues a purchase order for Products. Should Flextronics procure more Components than are needed to meet the 6 month forecast, Nutanix shall have no liability for the Components that are the subject of such excess procurement, unless such excess purchases were agreed for in writing (email is sufficient), e.g. in order to meet minimum order quantities, risk buys, etc.

Nutanix shall issue purchase orders for Product(s) to Flextronics. Flextronics will accept Nutanix purchase orders and provide a date of shipment of the Product(s) via electronic data interchange within two (2) hours. For the purpose of clarity, Flextronics does not have the right to reject a purchase order that is consistent with this MOU (including the then current pricing), or within Nutanix’s credit limit.

In acknowledging a purchase orders from Nutanix, Flextronics shall indicate the expected ship date for the Product. Flextronics shall make commercially reasonable efforts to meet the following lead times: for Products in which all the components are available in the supermarket, the lead time shall be delivery of the Product within [***] of receipt of the purchase order; and for orders which will be new builds, the lead time for delivery of the Product shall be within [***] of receipt of the purchase order.


d.	The shipment and risk of loss for the distribution of the Products shall be [***]. Nutanix will provide Flextronics with any requested documentation and any necessary information, documentation or required assistance in order to determine the export license requirements for Nutanix products.


e.	Nutanix may reschedule or cancel any purchase order up to the time of shipment.

Nutanix has provided Flextronics with a bill of materials (“BOM”) of third party components, raw materials, and parts (“Components”) to be included in the Products by Flextronics as part of the performance of the Services. Flextronics has agreed to provide line item pricing on the costed BOMs related to the Products. The fees charged by Flextronics to Nutanix for the Services performed for each Product shall be the [***]. The [***] shall be the Transformation Costs related to the Products (“Transformation Costs” are described further in Section 3 below). All prices are in U.S. Dollars, and Nutanix shall make all payments in US Dollars within [***] of the date of the invoice. If any [***]. If a Product has been shipped and it does not operate in conformance with the written specifications for the Product due to a breach of Flextronics’s warranty pursuant to Exhibit A (“DOA Product”), then Nutanix shall notify Flextronics of such DOA Product within [***] of the shipment date and Flextronics shall replace the DOA Product with a new Product. In such a situation, Flextronics shall be responsible for all freight charges related to return of the DOA Product and the shipment of the new Product.


g.	Component Inventory.


i.	Flextronics will manage availability of Components (inventory, SMI, CRP, etc.) sufficient to achieve [*] of the Nutanix monthly forecast. In addition, with [] notice that Nutanix intends to order sufficient Products, Flextronics shall manage availability of Components (inventory, SMI, CRP, etc.) sufficient to achieve [**] of the Nutanix monthly forecast.


ii.	For Component demand greater than forecasted by Nutanix, Flextronics will use commercially reasonable efforts to prioritize Nutanix’ Component demand.


iii.	Nutanix agrees to purchase any Products (finished goods) and unique Nutanix work in process (“WIP”) that has been held by Flextronics for more than [***], or pay Flextronics to tear down such WIP and restock Components.

iv.

Nutanix and Flextronics shall jointly agree in writing on all Nutanix unique Components and non-cancellable and non-returnable Components (collectively “Custom Components”). For Custom Components that have been held by Flextronics for more than [***]. For any Custom Components that have been held by Flextronics between [***]. Nutanix will purchase any Custom Components held by Flextronics for more than [***]. Once a month, Nutanix and Flextronics will review the inventory report and determine inventory aging. Flextronics shall obtain Nutanix’s written approval prior to purchasing any Custom Components that exceed the applicable monthly forecasts.

Certain exceptional items, including but not limited to expedited freight, will be agreed upon in advance and in writing and will be charged separately by Flextronics and paid by Nutanix. The Parties have agreed that the [***] for the Transformation Costs shall be valid until [***] based on the forecasted sales by Flextronics to Nutanix beginning on [***] of a minimum of [***]. Transformation Costs include the following:

[***]

A revaluation process will be used in connection with quarterly pricing reviews between the Parties. The parties agree that material price will be reviewed and adjusted on a quarterly basis, and product quotes will be updated accordingly. For the term of this MOU, Component price changes will be identified and implemented as part of the revaluation process for Products. Any purchase order in backlog from Nutanix priced at the [***] pricing will be repriced to the new standard priced BOM plus the Transformation Costs described in this MOU. Any adjustments to the cost of Components due to a revaluation process must be completed before purchase orders are revalued. The Parties shall

settle any price adjustment(s) at the beginning of the next Nutanix fiscal quarter as part of the revaluation process.

The Parties agree that time is of the essence in the performance of the Services. In the event that a Flextronics committed order is delayed by more than [***] from the committed shipment date due to reasons solely within Flextronics’s control, which shall include delays caused by subcontractors or suppliers selected by Flextronics, (“Late Delivery”), Nutanix shall be allowed to cancel such order at Nutanix’s sole discretion. [***].


6.	Non-Recurring Expenses (“NRE”): Based on the current assumptions and based on information provided by Nutanix, the NREs for setting up the Nutanix business in Milpitas are as described below and Nutanix shall issue a purchase order for the amounts listed below [***] of the execution of this MOU:


•	For EDI setup: [***]; and


•	For Manufacturing Test Setup: [***].

For purposes of this MOU, the Product Warranty shall be as described in Exhibit A “Warranty”.


7.	This MOU shall continue to be in effect until it is terminated by either Party or until the Parties execute the MSA. The MOU may be terminated for any reason by either Party upon one hundred eighty days written notice to the other Party.


8.	Excluding payment obligations, neither Party shall be liable to the other Party if it is unable to perform its obligations for any cause beyond the reasonable control of the Party. Each Party will bear its own expenses incurred in connection with this MOU and the proposed engagement between the Parties.


9.	The Parties will make commercially reasonable efforts to ensure that the time from execution of this MOU to first shipment of Products is approximately [***].

10.

FOR PURPOSES OF THIS MOU, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES INCLUDING, BUT NOT LIMITED TO LOST PROFITS, LOSS OF DATA, OR LOSS OF REVENUE ARISING OUT OF OR RELATING TO THIS MOU OR THE SALE OF PRODUCTS HEREUNDER, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE. IN ADDITION, IN NO EVENT SHALL EITHER PARTY’S LIABILITY FOR ALL CLAIMS ARISING OUT OF OR RELATING TO THIS MOU EXCEED [***], EXCEPT FOR NUTANIX’S PAYMENT OBLIGATIONS FOR PRODUCT AND COMPONENTS HEREUNDER AND FLEXTRONICS’S WARRANTY OBLIGATIONS UNDER SECTION 1.1 c) OF EXHIBIT A.

11.

Neither Party may assign this MOU in whole or in part without the express written consent of the other Party except to each party’s respective affiliates. Such consent shall not be unreasonably withheld. Any permitted assignment of this MOU shall be binding upon and enforceable by and against the Parties’ successors and assigns, provided that any unauthorized assignment shall be null and void and constitute a breach of this MOU. This MOU shall be governed by and interpreted in accordance with the laws of the state of California. Any dispute, claim or controversy arising from or related in any way to this MOU or the interpretation, application, breach, termination or validity thereof, will be submitted for resolution by binding arbitration in accordance with the Comprehensive Arbitration Rules & Procedures of JAMS. The arbitration will be held in Santa Clara County, California and it shall be conducted in the English language. Judgment on any award in arbitration may be entered in any court of competent jurisdiction. Notwithstanding the above, each Party shall have the right to file in the Santa Clara, California state court or the federal courts in and for the Northern District of California an application for temporary or preliminary injunctive relief, writ of attachment, writ of possession, temporary protective order, and/or appointment of a receiver on the grounds that the arbitration award to which the applicant may be entitled may be rendered ineffectual in the absence of such relief. IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW.

12.

New Product Introduction (“NPI”) cost structure: Post go-live and from time to time, Nutanix may decide to develop and ask Flextronics to produce new products. Flextronics would charge Nutanix for certain costs associated with the NPI including but not limited to the cost of acquisition for any required equipment or tooling needed in production, or for any certifications required to support the new product. The parties agree to a [***] Transformation Cost (as described in item #4 above) or [***] the transformation rate for manufacturing, to convert existing part numbers to new top level assemblies (“TLA”). This charge does not include Components which will be priced separately. The parties agree that the number of NPI’s would not exceed [***] TLAs per quarter and the number of NPI Products to be tested would be [***].

13.

Engineering Change Orders (“ECO”) price structure: Flextronics will support up to [***] ECOs per month within the current transformation cost noted in sections 3 and 13. The parties agree that for any volume above the [***] ECO processing charge would be utilized for each 2 hours’ effort in processing these additional ECO’s. Any inventory impacts or assembly cost impacts would be priced separately on each ECO.


14.	Refurbishment price structure: The Parties agree to [***] per unit for refurbishment of a Product. This charge is to receive in, test, inspect and re-pack these Products. Any replacement parts not under warranty, additional labor and/or packaging will be priced separately.

IN WITNESS WHEREOF, the Parties hereto have duly executed this binding and enforceable MOU as of the date of the last written below.


Nutanix Inc.	Flextronics Telecom Systems Ltd.

By: ___________________________ By: _________________________

Name: _______________________ Name: ______________________

Title: ________________________ Title: ________________________

Date: _________________________ Date: ________________________

Exhibit A -Warranty


1.	WARRANTY

1.1Express Limited Warranty. As the sole and exclusive warranty and Nutanix’s sole and exclusive remedy with respect to a breach by Flextronics of such warranty, the following shall apply.

(a)Flextronics warrants that the Products shall have been manufactured in accordance with the applicable Specifications and shall be free from defects in workmanship for a period of [***] from the date of shipment. As used herein, “Specifications” means the written manufacturing/assembly specifications and instructions for the Products provided by Nutanix to Flextronics.

(b)The above warranty does not apply to, and Flextronics makes no representations or warranties whatsoever with respect to any of: (i) Components (excluding “Production Materials” defined below) to the extent expressly set forth in the MOU or services provided by vendors on the Nutanix approved vendor list; (ii) defects resulting from adherence to the Specifications, or any instructions provided by or on behalf of Nutanix; (iii) the design of the Products; (iv) Product that has been abused, damaged, altered or misused or mishandled (including improper storage or installation or improper handling in accordance with static sensitive electronic device handling requirements) by any person or entity after title passes to Nutanix; (v) first articles, prototypes, pre-production units, test units or other similar units; (vi) defects resulting from tooling, designs or instructions produced or supplied by Nutanix, including any defective test equipment or test software provided by Nutanix; or (vii) the compliance of Components (excluding Production Materials) or Products with any safety or Environmental Regulations or other laws. “Production Materials” means the glue, solder and other materials used to integrate the Components into the Products.

(c)Upon any failure of a Product to comply with this express limited warranty, Flextronics’s sole obligation, and Nutanix’s sole remedy, is for Flextronics, at Flextronics’s option, to promptly repair or replace such unit and return it to Nutanix, freight prepaid. In the event that such Product cannot be repaired or replaced using commercially reasonable efforts, Flextronics shall credit the price paid by the Nutanix to Flextronics for such unit.

(d)Flextronics warrants environmental compliance of all Production Materials used to create the Products. Flextronics does not warrant Components, but will pass through environmental warranties from its suppliers to the degree allowed in its supplier agreements. In addition, Flextronics will review certificates of conformity from vendors of Components, excluding Customer Controlled Components and Customer Consigned Components; provided that Flextronics’s sole obligation with respect to such Components is to review the applicable certificate of conformity. Flextronics will maintain appropriate records to allow traceability of all Products and/or Components. Flextronics will undertake to immediately inform Nutanix of any material changes that come to its attention affecting environmental compliance. For the purpose of this MOU, “Customer Controlled Components” means Components provided to Flextronics by Nutanix or by vendors with whom Nutanix has a direct commercial relationship with in connection to that Component. In addition, “Customer Consigned Components” means Components that are provided to Flextronics by Nutanix and which Flextronics stores on behalf of Nutanix.

(e)Epidemic Failure. Notwithstanding the above, should failures of the Product be the result of an Epidemic Failure, ,the parties shall mutually agree whether Flextronics shall either repair or replace Products subject to such Epidemic Failure. In addition, Flextronics shall credit Nutanix for reasonable direct costs that are incurred by Nutanix as a result of an Epidemic Failure. Such remedies for Epidemic Failure shall be in addition to any other remedies Nutanix may have under this MOU. An “Epidemic Failure” is defined as failure of more than [***] of the Products that occur [***] and where there is a single root cause of the failure which is a result of a breach of Flextronics’s warranty under Section 1.1 of this Exhibit A.

1.2No Representations or Other Warranties. FLEXTRONICS MAKES NO OTHER REPRESENTATIONS OR WARRANTIES ON THE PERFORMANCE OF THE SERVICES, OR THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS MOU OR COMMUNICATION WITH NUTANIX, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

Exhibit

Form 10-Q

Exhibit 10.2

CONFIDENTIAL

Original Equipment Manufacturer (OEM) Purchase Agreement

Agreement No.

This Original Equipment Manufacturer (OEM) Purchase Agreement (“Agreement”) is made and entered into by and between SUPER MICRO COMPUTER INC. (“Supplier”), a Delaware corporation having its principal place of business at 980 Rock Avenue, San Jose, CA 95131 and NUTANIX, INC. (“OEM”), a Delaware corporation and an original equipment manufacturer having its principal place of business at 1740 Technology Drive, Suite 150, San Jose, California, 95110, United States.

TERMS AND CONDITIONS



1.	TERM OF AGREEMENT

This Agreement is effective as of May 16, 2014 (“Effective Date”) and will continue thereafter until terminated in accordance with this Agreement.



2.	PRODUCTS

Under the terms of this Agreement OEM may purchase servers and computer components listed on Exhibit A as updated in writing by the parties hereto on a quarterly basis (“Product(s)”) as an original equipment manufacturer. Additional Products may be ordered by mutual agreement.



3.	PRICE

The current prices (“Prices”) for Product purchased hereunder are listed on Exhibit A and will be updated in writing by the parties hereto on a quarterly basis (“Price List”). Prices include drop shipment handling fee; there shall be no additional drop shipment handling fee. Both parties shall proactively plan and implement cost reduction plan on quarterly basis. Supplier agrees to make reasonable commercial efforts to reduce cost on a continuing basis to make the price more competitive in the market.



4.	PURCHASE ORDERS

4.1 OEM may order Products by submitting written purchase orders or orders via XML to Supplier (each an “Order”). Purchase orders will contain, at a minimum; (i) Product part number, (ii) Product quantity, (iii) requested delivery dates, (iv) Product Price, and (v) delivery address. OEM’s tax exemption certificate number to be provided as a blanket for all production items, if applicable. Orders containing the information listed in this Section 4.1 will be accepted by Supplier [***].

4.2 All Orders will be exclusively governed by the terms and conditions of this Agreement, notwithstanding any contrary terms and conditions contained on any OEM purchase order or Supplier acknowledgment thereof.



5.	LIMITED USE

In order to control the quality of Products and any after sales service, OEM may use the Products solely for integration into systems or subsystems designed by OEM and or assembled for OEM for sale or lease in its regular course of business. OEM expressly agrees that it will use Product ordered only for this purpose.



6.	NON-BINDING FORECAST

To assist Supplier with respect to planning, OEM may, from time-to-time, provide Supplier with a quarterly non-binding forecast and a six-month rolling non-binding forecast [***].

[***]



7.	RESCHEDULES AND CANCELLATIONS

OEM may reschedule or cancel any Order provided that Supplier receives written notice prior to later of: (i) date the Products with respect to such Order are shipped; or (ii) the deliver date specified on such Order. OEM’s liability with respect to any canceled or rescheduled Orders is set forth in Section 9.



8.	[INTENTIONALLY LEFT BLANK]



9.	INVENTORY LIABILITY

9.1 OEM shall have no liability for any inventory other than non-standard material, defined as those finished goods, WIP [***] and raw material set forth in Exhibit C (“Non-Standard Material”). Inventory liability for Non-Standard Material shall be as follows:

a. [***]

b. Obsolete Inventory: OEM shall take receipt of Non-Standard Material inventory that is: (i) aged inventory for a period of [***], and (ii) is not included in the monthly forecast (the “Obsolete Inventory”). [***]

9.2 Supplier will undertake reasonable efforts to reduce Excess Inventory and Obsolete Inventory through open order cancellations, return for credit programs, reworks or allocation to alternative programs (if available and appropriate) for a period not to exceed thirty days beyond end customer demand change.

9.3 Both parties shall meet monthly regarding Excess Inventory and Obsolete Inventory to determine the best method to mitigate OEM’s potential inventory liability. Inventory liability for Non-Standard Material will be evaluated monthly or as mutually agreed by the parties.



10.	PAYMENT

10.1 [***]

10.2 [***]



11.	TAXES

OEM will be responsible for all taxes with respect to Orders for Products placed by OEM (except Supplier’s income taxes), unless OEM provides Supplier with tax exemption documentation required by the applicable taxing authority.



12.	DELIVERY TERMS

12.1 Title. Title to the Products and all risk of loss or damage thereto will pass to OEM according to the following delivery term: [***].

12.2 Time. Supplier will use commercially reasonable efforts to ship Products from its warehouse by the shipment date specified on the Order, provided that the date of shipment will be [***]. Supplier will use best commercial efforts to make shipment within no more than [***] from Order date for any other inventory, or inform OEM within 24 hours from the date of the placement of the Order if Supplier cannot make the shipment within [***] from Order date.



13.	SHORTAGE

In the event of a shortage of any Products, Supplier will first fulfill OEM’s Order in quantities equal to the order rate as measured by the monthly order rate during the preceding three-month period (the “Order Rate”). Supplier will use its best commercial efforts to satisfy OEM’s demand in excess of the Order Rate.



14.	ENVIRONMENTAL COMPLIANCE

Supplier represents and warrants that no Products sold by or otherwise transferred by Supplier to OEM contain: lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyls (PBBs), polybrominated biphenyl ethers (PBDE), or any other hazardous substances the use of which is restricted under EU Directive 2011/65/EU (8 June 2011) (RoHS Recast); chemicals restricted under the Montreal Protocol on ozone-depleting substances or the law of the countries into which Product is shipped; or other materials restricted by applicable law unless expressly agreed otherwise by OEM in writing in advance. From time to time, OEM may request evidence of Supplier’s compliance with EU Directive 2011/65/EU, and Supplier shall make best efforts to provide this information in a timely manner.



15.	INCOMING INSPECTION AND ACCEPTANCE

OEM may conduct incoming inspection testing to confirm that the Product conforms to any mutually agree upon specification. Product found to be nonconforming or otherwise fails to operate (“DOA”) within the greater of: (i) initial 45 days period from the delivery date, or (ii) the period set forth in the warranty table on Exhibit B, may be returned by OEM to Supplier for replacement. Supplier will replace the Products within fifteen (15) business days. Product returned by OEM must be in Supplier’s standard packaging or similar packaging agreed to by the parties. Transportation charges associated with the replacement (a) to be shipped from OEM to Supplier will be borne by OEM and reimbursed by the Supplier, (b) to be shipped back to OEM, or original delivery destination (as directly by OEM) will be borne by Supplier.



16.	EPIDEMIC FAILURES

Epidemic Failures. For purposes of this Agreement, “Epidemic Failure Event” shall mean the Product failures (i) having a similar cause related to a particular component, verified by the supplier, and by OEM, or an independent third party on behalf of OEM, (ii) occurring at any time during the applicable warranty period (as set forth in Section 17) with respect to the particular Product (iii) resulting from defects in materials, workmanship, manufacturing process or design or failure to conform with the Specifications, (iv) [***]. Upon occurrence of an Epidemic Failure Event, the remedies of this Section 16 shall apply to the entire Product population affected by the root cause failure until corrective action is complete. Supplier’s obligation to ensure that components meet the Specification include, but are not limited to, incoming quality control, sub-tier audits, statistical process control, control of workmanship, outgoing quality inspection and all other relevant elements of quality set forth in this Agreement.

Notwithstanding the foregoing, this Section 16 shall apply or be enforced with respect to third party components listed below only during the respective warranty period set forth in Section 17:

[***]

Upon occurrence of an Epidemic Failure Event, OEM shall promptly notify Supplier, and shall provide, if known and as may then exist, a description of the failure, and the suspected lot numbers, serial numbers or other identifiers, and delivery dates, of the failed Products. OEM shall make available to Supplier, samples of the failed Products for testing and analysis. Upon receipt of product from OEM, Supplier shall promptly provide its preliminary findings regarding the cause of the failure. The parties shall cooperate and work together to determine the root cause. Thereafter, Supplier shall promptly provide the results of its root cause corrective analysis, its proposed plan for the identification of and the repair and/or replacement of the affected Products, and such other appropriate information. Supplier shall recommend a corrective action program which identifies the affected units for repair or replacement, and which minimizes disruption to the end user. OEM and Supplier shall consider, evaluate and determine the corrective action program.

Upon occurrence of an Epidemic Failure Event, Supplier shall: (a) at OEM’s option: (i) either repair and/or replace the affected Products; or (ii) provide a credit or payment to OEM in an amount equal to (a) the cost to OEM for qualified, replacement Products acceptable to OEM; and (b) all labor, equipment and processing costs incurred by OEM or third parties in the implementation of the corrective action program, including test procedures, test equipment, the testing of Products, the cost of repairing and/or replacing the affected Products; and (c) reasonable freight, transportation, customs, duties, insurance,

storage, handling and other incidental shipping costs incurred by OEM in connection with the repair and/or replacement of the affected Products.



17.	LIMITED WARRANTY AND DISCLAIMER

17.1 Supplier hereby represents and warrants that the Product(s) will conform to the Product specification and documentation during the periods set forth in Exhibit B under the heading “Super Micro Limited Warranty.”

17.2 EXCEPT FOR THE WARRANTIES SET FORTH IN THIS AGREEMENT, THE FOREGOING STATES THE SOLE WARRANTY AND EXCEPT AS SET FORTH IN WRITING IN THIS AGREEMENT, SUPPLIER MAKES NO PERFORMANCE REPRESENTATIONS, WARRANTIES, OR GUARANTEES, EITHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE PRODUCTS AND ANY SERVICES COVERED BY OR FURNISHED PURSUANT TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY (A) OF MERCHANTABILITY, (B) OF FITNESS FOR A PARTICULAR PURPOSE, OR (C) ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE. THE PROVISIONS OF THE FOREGOING LIMITED WARRANTY AND WARRANTY DISCLAIMER ARE REFLECTED IN THE PRODUCT PRICES.

17.3 Stored Data. OEM will be responsible for saving or backing up data contained in any Product returned to Supplier for in-warranty or out-of-warranty repairs or service. SUPPLIER WILL HAVE NO RESPONSIBILITY FOR SUCH DATA AND WILL HAVE NO LIABILITY ARISING OUT OF ANY DAMAGE TO OR LOSS OF SUCH DATA WHILE THE PRODUCT IS IN SUPPLIER’S POSSESSION.



18.	LIMITATION OF LIABILITY

[***]



19.	INDEMNIFICATION

19.1 Subject to Section 19.2 below, each Party agrees to defend, indemnify and hold the other Party its officers, directors, agents, distributors, resellers, customers and employees harmless from and against any and all claims, damages, costs, expenses (including, but not limited to, reasonable attorney’s fee and costs) or liabilities that may result, in whole or in part, from, with respect to each party’s obligations to the other party: its gross negligence, willful misconduct, or infringement of intellectual property rights of any third party; and with respect to Supplier’s obligations to OEM: damage to personal property or personal injury resulting from the Products.

19.2 Each indemnifying party’s obligations as stated in this Section 19 are subject to the following condition and exclusion: the indemnified party must give the indemnifying party prompt notice of the claim, sole control of its defense, and all reasonable cooperation.

19.3 Limitations. Notwithstanding the foregoing, neither party shall have any obligation hereunder for claims, actions or demands under this Section 19 to the extent resulting from each party’s use of the other’s product, component or software in a combination which violates the intellectual property rights of third parties.



20.	NOTICE

Any notice required or permitted under the terms of this Agreement, or when any statute or law requiring the giving of notice, may be delivered (i) by registered airmail or registered courier service, or (ii) by electronic mail, if properly posted and sent to the relevant party at the address set forth below or to such changed address as may be given by either party to the other by such written notice. Any such notice shall be deemed to have been given upon receipt or upon the tenth (10th) day after having been dispatched in the manner provided above, whichever is earlier.

For Supplier: Super Micro Computer, Inc.

980 Rock Avenue

San Jose, CA 95131

Phone: ________________________

Facsimile: ________________________



For OEM:		Nutanix, Inc.
		1740 Technology Drive, Suite 150
		San Jose, California 95110
Attn:		Legal Counsel
Phone:		855-NUTANIX (688-2649)
Facsimile:		408-916-4039
21.		CONFIDENTIAL INFORMATION

21.1 During the Term of the Agreement, OEM and Supplier may, each as “Recipient,” receive or have access to certain information of the other party, each as “Discloser,” that is identified as Confidential Information, including, though not limited to, information or data concerning the Discloser’s Products or Product plans, business operations, strategies, customers and related business information. Either Party’s quotes or other pricing information shall be considered Confidential Information regardless of whether it is separately identified as such. Recipient will protect the confidentiality of Confidential Information with the same degree of care as Recipient uses for its own similar information, but no less than a reasonable degree of care. Confidential Information may be used only by those employees of Recipient who have a need to know such information for the purposes of this Agreement. OEM and Supplier each acknowledge that all Supplier software, technical manufacturing information and forecasts are deemed Confidential Information, which will be protected for a term of five (5) years from the date of disclosure. Further, Supplier agrees that it shall make no use of any software provided to Supplier by OEM other than as explicitly set forth herein.

21.2 Exclusions. The foregoing confidentiality obligations will not apply to any information that is (a) already known by Recipient prior to its first disclosure by Discloser and not otherwise subject to a duty of confidentiality, (b) independently developed by Recipient prior to or independent of the disclosure without use of Discloser’s Confidential Information, (c) publicly available through no fault of Recipient, (d) rightfully received from a third party with no duty of confidentiality, (e) disclosed by Recipient with Discloser’s prior written approval, or (f) disclosed under operation of law.



22.	INTELLECTUAL PROPERTY

22.1 Under the terms of this Agreement, neither party hereto acquires any right to any of the other party’s trademarks, patents, service marks, trade names, copyrights, commercial symbols, goodwill, or other form of intellectual or commercial property of Supplier, nor any physical media on which it is delivered or stored regardless of location, and may not use such property or rights in any manner other than as explicitly set forth herein. Each party hereto acknowledges that it does not have and will not have any right to enhance or reverse engineer the Product except (i) in connection with OEM’s support and testing efforts and making modification and additions to software, (ii) as authorized by Supplier, or (iii) as explicitly stated herein.

22.2 Software Products. Each party acknowledges that any software products provided to it by the other party hereunder (“Software Product”) constitutes only discrete copies of software, the media in which it is stored, and related documentation, as shipped to OEM. Nothing herein transfers any right, title or interest in the software or any intellectual property rights therein from one party to the other. Supplier’s use or distribution of the OEM’s Software Products requires and is subject to a separate software license agreement.



23.	PRODUCT DISCONTINUANCE; SUPPLY CONTINUITY; END OF LIFE

23.1 Supplier may discontinue manufacture of any Product of Supplier in its sole discretion (“Product Discontinuance”), by providing OEM with [***] prior written notice. OEM may continue to place Orders and purchase Products from Supplier during the [***] notice period according to the terms and conditions, including but not limited to pricing, Orders, and delivery dates, available prior to the Product Discontinuance notice. Following any termination of the Agreement, OEM may continue to

place orders for Products for a period of [***] from the date of termination (the “Supply Continuity Period”). During such period the terms and conditions of this Agreement, including but not limited to the payment of fees, shall continue with respect to orders placed during the Supply Continuity Period.

23.2 Supplier may discontinue the availability of third party supplied components (such as drives and memory) by providing OEM with [***] prior written notice (an “End of Life Notice”). OEM may continue to place Orders and purchase Products from Supplier during the End of Life Notice according to the terms and conditions, including but not limited to pricing, Orders, and delivery dates, available prior to the End of Life Notice. Notwithstanding the foregoing, OEM may place “Last-Time-Buy” Orders.



24.	ARBITRATION

The parties shall settle any controversy arising out of this Agreement by arbitration in Santa Clara County, California in accordance with the rules of the American Arbitration Association. A single arbitrator shall be agreed upon by the parties or, if the parties cannot agree upon an arbitrator within thirty (30) days, then the parties agree that a single arbitrator shall be appointed by the American Arbitration Association. The arbitrator may award attorneys’ fees and costs as part of the award. The award of the arbitrator shall be binding and may be entered as a judgment in any court of competent jurisdiction. Notwithstanding anything to the contrary, nothing in this Section shall prevent either party from seeking specific performance, including but not limited to injunctive relief in a court of competent jurisdiction.



25.	TERMINATION

25.1 Term. The term of this Agreement shall commence on the Effective Date and continue for a period of three (3) years (“Initial Term”) and shall thereafter be automatically renewed for additional one (1) year period unless either party gives written Notice of termination at least one-hundred and eighty (180) days before the anniversary of the Initial Term or of any renewal term, as applicable.

25.2 Payment Breach. Except as otherwise provided herein, Supplier may suspend acceptance of Orders in the event OEM fails to cure any breach of a payment obligation hereunder within [***] of written notice from Supplier describing the breach provided such suspension terminates upon the earlier of: (i) resolution of the payment dispute; or (ii) executive management of the parties agree to meet to resolve the payment dispute.

25.3 Termination for Cause. Either party may terminate this Agreement at any time if: (i) the commencement of a proceeding that will lead to the dissolution of the other party’s corporate entity or the cessation of its business operations without an assignment to a surviving entity, (ii) the other party commits a material breach of this Agreement which remains uncured more than [***] after written notice of such breach from the non-breaching party, or (iv) the other party commits a breach of a material obligation hereunder which by its nature is incurable.

25.4 Effect of Termination or Expiration. In the event of a termination or expiration of this Agreement, the provisions of this Agreement will continue to apply to all Orders placed by OEM prior to the effective date of such termination of expiration, except for any Order, or portion thereof, canceled pursuant to “Termination for Cause.”. Termination or expiration of this Agreement will not, however, relieve or release either party from making payments which may be owing to the other party under the terms of this Agreement.



26.	EXPORT REGULATION COMPLIANCE

Each party acknowledges and agrees that its respective exports of any Product or any Proprietary Information shall comply with the United States Export Administration Act as amended from time to time, with the Export Administration Regulations promulgated from time to time hereunder, all other export laws and regulations of the United States and all amendments, modifications or additions thereto, including all laws and regulations relating to re-export.



27.	RELATIONSHIP OF PARTIES

The relationship of Supplier and OEM established by this Agreement is that of independent contractor. Nothing contained in this Agreement may be construed to (i) give either party the power to direct and control the day to day activities of the other, (ii) constitute the parties as partners, joint ventures, co-owners or otherwise participants in a joint or common undertaking, or (iii) allow OEM to create or assume any obligation on behalf of Supplier for any purpose whatsoever. All financial obligations associated with OEM’s business are the sole responsibility of OEM.



28.	GOVERNING LAW

This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California excluding its conflict of law rules and principles. The parties agree that the proper and exclusive jurisdiction and venue of any legal action brought in connection with this Agreement shall be in the Federal or State courts located in Santa Clara County in the State of California. The United Nations Convention on Contracts for International Sale of Goods does not apply to this Agreement.



29.	FORCE MAJEURE

Neither party will be liable to the other for its failure to perform any of its obligations hereunder during any period in which such performance is delayed by circumstances beyond its reasonable control including, but not limited to earthquake, fire, flood, war, embargo, strike, and riot, the intervention of any governmental authority or any other similar situation or circumstances which is beyond such party’s control and renders such party unable to secure materials and transportation facilities (a “Force Majeure Event”). If a Force Majeure continues for more than ten (10) days, the party injured by the inability of the other to perform will have the right to (a) immediately terminate this Agreement by providing written notice, or (b) treat this Agreement as suspended during the delay and reduce any commitment in proportion to the duration of the delay,. The party claiming a Force Majeure Event shall use best efforts to mitigate or eliminate the impact of such “Force Majeure” and shall attempt to resume the performance of obligations delayed or impeded by such event.



30.	ASSIGNMENT

OEM may not assign or otherwise transfer its rights or obligations under this Agreement without prior written consent of Supplier, which will not be unreasonably withheld. The foregoing notwithstanding, OEM may assign this Agreement in the case of a merger or acquisition involving the majority of OEM’s assets. The assignee’s ability to place Orders according to this Agreement will be limited to Orders with respect to the OEM’s products (and updated versions of the same) as of the date of such assignment.



31.	ATTORNEY FEES

In the event of any litigation or arbitration hereunder, the arbitrator or court will award costs and reasonable attorney’s fees to the prevailing party.



32.	SEVERABILITY

The terms of this Agreement are severable. If any term is held invalid, illegal, or unenforceable for any reason whatsoever, such term will be enforced to the fullest extent permitted by applicable law, and the validity, legality, and enforceability of the remaining terms will not in any way be affected or impaired thereby.



33.	ENTIRE AGREEMENT

This Agreement and its Exhibits constitute the entire agreement of the parties with respect to the subject matter hereof, and supersedes and replaces all prior oral or written agreements, representations and understandings of the parties with respect to such subject matter. Except as expressly provided for herein, this Agreement may be changed only by written amendment signed by the parties.



34.	SURVIVAL

Except as stated to the contrary herein, all obligations herein which by their terms or nature survive termination of this Agreement will continue thereafter until fully performed.

IN WITNESS WHEREOF, the parties have executed this agreement effective as of the date first written above.




Supplier:		OEM:
Super Micro Computer, Inc		NUTANIX INC.

By:	/s/ Robert Aeschliman	By:	/s/ Kenneth Long
Name:	Robert Aeschliman	Name:	Kenneth Long
Title:	General Counsel	Title:	VP of Accounting

EXHIBIT A

PRODUCT AND PRICE LIST

[PROVIDED QUARTERLY]

EXHIBIT B

WARRANTY

Warranty Coverage Table:

Supermicro Standard Warranty Remedies for OEM Product (coverage dates calculated from date of invoice)

Eligible Items:

Products set forth on Exhibit A, as updated from time-to-time.


•	Three-year labor¹ ^:


•	Three-year parts2 [***]


•	One-year Advance parts replacement services [***]


•	120 days parts DOA cross ship³


•	One-year parts²


•	120 days parts DOA cross ship³ [***]


•	Return within 30 days return for credit⁴


•	Five-year parts² [***]


•	120 days parts DOA cross ship³


•	Return within 30 days return for credit⁴


•	Five-year parts²


•	120 days parts DOA cross ship³ [***]


•	Return within 30 days return for credit⁴


•	Three-year parts²


•	120 days parts DOA cross ship³ [***]


•	Return within 30 days return for credit⁴

FUSION IO Warranty terms does not include advance cross shipment. Add Fusion IO Support agreement:

F11-GNR-1T65-CS-3YR

SNS, FUSION-IO IOSCALE, [***]

1650GB MLC, GOLD NON-

RETURN SUPPORT, 3YR


1.	Labor coverage includes any labor costs incurred for repairs by Supermicro during coverage period.


2.	Parts coverage includes any material and parts costs incurred for repairs by Supermicro during coverage period.


3.	In the event a product is dead on arrival (“DOA”), Supermicro shall directly ship to Nutanix, at’s direction, a replacement product during the coverage period, which shall begin on the date of Supermicro’s invoice.

Supermicro shall refund a credit for the current value of the product if said product is returned under the following criteria: (i) the product is returned for refund during thirty (30) day from Supermicro’s invoice date; and (ii) Supermicro is unable to repair or replace the product. The date of return shall be the date Customer ships product to Supermicro as long as the refund request is made within the thirty (30) day period described in this section.

Remark: Out of Warranty

If returned products are: a) within the warranty period, b) accompanied by the proper Return Materials Authorization (“RMA”) and c) defective as determined by Supermicro; Supermicro will, at its option: 1) repair the defective product within 15 working days, or 2) issue a credit to Nutanix for the current value of the product. Supermicro has no obligation to repair or replace parts beyond the three-year warranty period; however, Supermicro may repair or replace provided that 1) Nutanix pays

for the cost of obtaining the part(s) and 2) the part(s) are available for purchase. Unless otherwise agreed to in writing by the parties all repairs will be performed with new parts.

EXHIBIT C

[***]

This EXHIBIT C is incorporated as part of the Original Equipment Manufacturer (OEM) Purchase Agreement (“Agreement”) which together with this EXHIBIT C, and other cited Exhibits, Schedules and Addendums, form the entirety of the Agreements, entered into as of the first date written below, by and between Super Micro Computer, Inc. (“SMCI”), a Delaware corporation, having a principal place of business at 980 Rock Avenue, San Jose, CA 95131 and NUTANIX INC. (“OEM”), a Delaware Corporation, having a principal place of business at 1740 TECHNOLOGY DR. SUITE 400, SAN JOSE, CA, 95110. The terms and conditions set forth in this EXHIBIT C will be construed and governed by the terms and conditions set forth in the Agreement.

[PROVIDED PERIODICALLY]

IN WITNESS WHEREOF, the parties have executed this agreement effective as of the date first written above.



Supplier:			OEM:
Super Micro Computer, Inc

By:			By:
Name:			Name:
Title:			Title:

AMENDMENT ONE TO ORIGINAL EQUIPMENT MANUFACTURER (OEM) PURCHASE AGREEMENT

This Amendment One (“Amendment”) to the Original Equipment Manufacturer Purchase Agreement (“Agreement”) by and between SUPER MICRO COMPUTER INC. (“Supplier”) and NUTANIX, INC. (“OEM”) is entered into as of November 13, 2017 (“Amendment Effective Date”). Collectively Supplier and OEM are referred to as the “Parties”.

RECITALS

A. The Parties entered into the Agreement as of May 16, 2014.

B The parties now desire to amend the Agreement to add Nutanix Netherlands B.V. as a party to the Agreement and to add terms and conditions around the “Software at Scale” program (further defined below).

NOW THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree as follows:


1.	The Parties agree that Nutanix Netherlands B.V., an entity affiliated with Nutanix, Inc., should be added to the Agreement as a party. Therefore all references to “OEM” in the Agreement, as amended, shall include both Nutanix, Inc. and Nutanix Netherlands, B.V.


2.	A new paragraph is added to the end of Section 2 as follows:

In addition to the purchase of Product(s) by OEM, Exhibit D, “Software at Scale” describes the process and the terms under which Supplier shall sell Software at Scale Products (as defined in Exhibit D). For additional clarity, the term “Product(s)” shall not include Software at Scale Products.


3.	Section 8 of the Agreement is deleted in its entirety and replaced with the following:

8. APPOINTMENT AS [***]. Supplier [***] such appointment, as a [***] for Supplier with [***] and the [***]. The services performed as [***] includes the following:


a.	Life Cycle [*] will [] and provide such []. For the purpose of clarity, no [] shall be [**] to them.


b.	[*]. Supplier shall use commercially reasonable efforts to [] manufacturing as part of the forecasting mechanism described in Section 6 of the Agreement [**].


c.	[*]. OEM [] of Software at Scale Products as part of performing [] be solely [] Software at Scale Hardware (as defined in Exhibit D). OEM [] the Software at Scale Hardware and []. However, OEM [] that [] the Software at Scale Hardware utilizing [**].


4.	A new Exhibit D is added to the Agreement as attached to this Amendment.


5.	No other changes are made to the Agreement, and following the Amendment Effective Date, all references to the “Agreement” shall mean the Agreement as amended by this Amendment.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Amendment Effective Date.

NUTANIX INC. NUTANIX NETHERLANDS, B.V.

By: /s/ Duston Williams By: /s/ Kenneth Long

Title: CFO Title: Managing Director 1

Date: November 13, 2017 Date: November 13, 2017

By: /s/ Servais Willie Ngabo

Title: Managing Director 2

Date: November 13, 2017

ACKNOWLEDGED AND AGREED:

SUPER MICRO COMPUTER, INC.

By: /s/ Cenly Chon

Title: VP, Sales, Strategic Accounts

Date: 11/10/2017

EXHIBIT D

SOFTWARE AT SCALE

This EXHIBIT D is incorporated as part of the Agreement which together with this EXHIBIT D, and other cited Exhibits, Schedules, and Addendums, form the entirety of the Agreements entered into as of the Amendment Effective Date. Capitalized terms not defined below have the definitions set forth in the Agreement.


1.	INTRODUCTION

This Exhibit D shall enable Supplier to sell Software at Scale Hardware [***] (defined below) and OEM to license software [***]. Such program shall be referred to as “Software at Scale”. To facilitate such sales of Software at Scale Products, [***] in accordance with the terms of Section 4.

The goal of the Software at Scale program is that the End Customer (defined below) [***] purchasing the Software at Scale Products and includes the following characteristics:


•	[*] will be made by the [*].


•	The Parties shall enable the End Customer to [***] with Products contemplated under the Agreement as of the Effective Date of the Agreement.


•	The Supplier shall [*] and OEM shall provide the software license [*] to the End Customer.


•	Supplier may impose any qualifications to do business [*] and may choose to [*], at its sole discretion.


•	Provided that the End Customer purchases Nutanix support, OEM shall support the hardware and software [***] as set forth in Section 6 of this Exhibit D.


•	OEM has no involvement or responsibility for any associated [*] and therefore, is not qualified for any promotion program for its customers related to its [*].


2.	DEFINITIONS. Capitalized terms in this Exhibit D shall have the meanings set forth below.


a.	“[*]” means another entity in the sales channel for the [] and not use the [**].


b.	“End Customer” means the last entity who purchases the Software at Scale Products for their own use and not for resale to another entity.


c.	”Software at Scale [*]” means [*] as described in this Agreement.


d.	“Software at Scale Hardware” means the [***].


e.	“Software at Scale Products” means [*] as part of the Software at Scale program. These Software at Scale Products shall be designated with the suffix [*].


f.	“Territory” means the United States of America.

3. INVENTORY LIABILITY FOR SOFTWARE AT SCALE PRODUCTS

OEM shall provide forecasts for Products that include [***]. For the purpose of clarity, this Exhibit D does not modify either Party’s obligations with regard to inventory liability as described in the Agreement, [***] of the Agreement. As [***] are accepted, the [***].

4. APPOINTMENT AS [***]


a.	Non-Exclusive Appointment. Supplier [*], and [] such appointment, to act as an [**] during the term of Agreement (as described in Section 1 of the Agreement), solely in accordance with the terms and conditions of this Agreement.


b.	OEM Marketing Obligations as [*]. OEM shall, at its own expense, market the Software at Scale program including, advertising, promoting, and soliciting the sale of the Software at Scale Products [*] consistent with good business practice. OEM is not qualified for Supplier’s marketing promotion program.


c.	OEM Obligations to Provide Quotes [*]. For expediency purposes, []. For the purpose of clarity, the Parties agree that the sales quotes [] are not binding until agreed to in writing [*]. Supplier may reject any such quotes before they become an Order in its sole discretion.

5. SUPPLIER OBLIGATIONS


a.	Supplier shall fulfill any [*] that it [*] as part of the processes outlined in this Exhibit D.


b.	Supplier shall provide End Customers (through the sales channel) with a standard [*] portion of the [] consistent with or equivalent to the [**].


c.	As part of fulfilling any Software at Scale Orders, Supplier shall also meet the following requirements in a timely fashion such that an [***]. At a minimum, Supplier shall:


i.	[***];


ii.	Maintain a [*] on time ship rate for all Software at Scale Products shipped based on a [*] lead time;


iii.	[***]; and


iv.	Manage transportation and return material authorization [***] as they arise.

6. END CUSTOMER SUPPORT

OEM separately sells product support for Product(s) and Software at Scale Products shipped to End Customers. Provided that the End Customer has purchased Nutanix support from OEM, either directly or indirectly, OEM shall provide such support to the [***]. To facilitate such support, upon shipment of the Software at Scale Hardware, Supplier shall provide OEM with all serial number information so that OEM can provide such support.

AMENDMENT TWO TO ORIGINAL EQUIPMENT MANUFACTURER (OEM) PURCHASE AGREEMENT

This Amendment Two (“Amendment Two”) to the Original Equipment Manufacturer Purchase Agreement (“Agreement”) by and between SUPER MICRO COMPUTER INC. (“Supplier”) and NUTANIX, INC. (“OEM”) is entered into as of October 31, 2018 (“Amendment Effective Date”). Collectively Supplier and OEM are referred to as the “Parties”.

RECITALS

A. The Parties entered into the Agreement as of May 16, 2014.

B The parties now desire to amend the Agreement to delete the existing Exhibit C and replace it with a new Exhibit C.

NOW THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree as follows:


1.	The Parties agree that Exhibit C is deleted in its entirety and replaced with the following:

CONFIDENTIAL

EXHIBIT C

NON-STANDARD MATERIAL

This EXHIBIT C is incorporated as part of the Original Equipment Manufacturer (OEM) Purchase Agreement ("Agreement") which together with this EXHIBIT C, and other cited Exhibits, Schedules and Addendums, form the entirety of the Agreements, entered into as of the first date written below, by and between Super Micro Computer, Inc. ("SMCI"), a Delaware corporation, having a principal place of business at 980 Rock Avenue, San Jose, CA 95131 and NUTANIX INC., a Delaware Corporation, having a principal place of business at 1740 TECHNOLOGY DR. SUITE 400, SAN JOSE, CA, 95110 and NUTANIX NETHERLANDS B.V. incorporated and registered in The Netherlands with its registered office at Scorpius 100, 2132 LR Hoofddorp, The Netherlands (collectively Nutanix Inc. and Nutanix Netherlands, B.V. are referred to as “OEM”). The terms and conditions set forth in this EXHIBIT C will be construed and governed by the terms and conditions set forth in the Agreement.


1.	As stated in Section 9.1 of the Agreement, OEM has no inventory liability inventory other than the Non-Standard Material, which is described in the spreadsheet attached to this Amendment 2.


2.	Where a component in the list of Non-Standard Material is listed in the “Nutanix Liability” column as being “[*] of On Hand Value & On Order to Lead Time”, Nutanix shall only have liability of [*] of the price of the relevant Non-Standard Material component.


3.	No other changes are made to the Agreement, and following the Amendment Two Effective Date, all references to the “Agreement” shall mean the Agreement as amended by this Amendment Two.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the Amendment Effective Date.

NUTANIX INC.

By: /s/ David Sangster

Title: EVP, Engineering & Operations Nutanix

Date: October 31, 2018

NUTANIX NETHERLANDS, B.V.

By: /s/ Kenneth Long

Title: Director

Date: October 31, 2018

NUTANIX NETHERLANDS, B.V.

By: /s/ Servais Willie Ngabo

Title: Managing Director

Date: October 31, 2018

ACKNOWLEDGED AND AGREED

SUPER MICRO COMPUTER INC.

By: Cenly Chen

Title: VP of Sales

Date: 10/31/2018

CONFIDENTIAL



Supermicro Part Number	Nutanix Part Number	Lead Time (Work Days)	Nutanix Liability	Cost $

[***]

Exhibit

Form 10-Q

Exhibit 10.3

TABLE OF CONTENTS



1.DEFINITIONS		2
2.SCOPE OF AGREEMENT		5
3.MANUFACTURING SERVICES		5
4.NUTANIX DEMAND FORECAST		6
5.ORDERS		6
6.PRICING		7
7.DELIVERY, REJECTION AND ACCEPTANCE		10
8.PAYMENT		10
9.CANCELLATION AND RE-SCHEDULING		11
10.ENGINEERING CHANGE ORDER MANAGEMENT		11
11.QUALITY		12
12.MATERIALS MANAGEMENT		13
13.COMPONENT LIABILITY		15
14.SOFTWARE AT SCALE		16
15.WARRANTIES		16
16.ADMINISTRATION AND DISPUTES		17
17.INTELLECTUAL PROPERTY		19
18.LIMITATION OF LIABILITY.		19
19.INDEMNIFICATION		20
20.CONFIDENTIAL INFORMATION		21
21.TERM AND TERMINATION		21
22.GENERAL		22
EXHIBIT A: FLEXTRONICS WARRANTY		26
EXHIBIT B - RETURN MATERIALS AUTHORIZATION (“RMA”) PROCESS		27
EXHIBIT C - MANUFACTURING TEST REQUIREMENTS		28
EXHIBIT D - QUALITY PLAN		29
EXHIBIT E - SOFTWARE AT SCALE		30
EXHIBIT F - PRODUCT LIST		31
EXHIBIT G - L10/SHIP AND DEBIT PROCESS		37
EXHIBIT H - NUTANIX/FLEXTRONICS NDA		38

MANUFACTURING SERVICES AGREEMENT

This Manufacturing Services Agreement (“Agreement”) is entered into this 1st day of November 2017 (“Effective Date”), by and between Nutanix Inc., and Nutanix Netherlands B.V. (collectively “Nutanix”), and Flextronics Telecom Systems, Ltd and its Affiliates (“Flextronics”). This Agreement replaces in its entirety the Memorandum of Understanding between the Parties with an effective date of December 1^st, 2016.

Flextronics agrees to manufacture and deliver Products pursuant to Specifications to meet Nutanix purchase orders for the consideration listed herein as follows:


1.	DEFINITIONS

1.1

Affiliates means, with respect to a party, any corporation or other business entity Controlled by, Controlling or under common Control with that party, whereby Control means the direct or indirect ownership of more than 50% (fifty percent) of the equity interest in such corporation or business entity, or the ability in fact to control the management decisions of such corporation or business entity. An entity will be deemed an Affiliate only so long as such Control exists.


1.2	Approved Vendor List or AVL means the list of vendors approved to sell Components to Flextronics for inclusion in Products.


1.3	Arena means the Nutanix operated system which stores information about the Products including but not limited to the Approved Vendor List and the Specifications. Nutanix shall ensure that Flextronics has adequate access to Arena.


1.4	Bill of Materials or BOM means the list of Components that make up a particular Product.

1.5

Components shall mean all Components and other materials included in Products provided by third parties and approved in writing by Nutanix. Components shall be either Standard, Non-Standard or Custom Components. Nutanix and Flextronics shall jointly agree in writing as part of the Quarterly Pricing process, on all Nutanix “Standard”, “Non-Standard or Custom Components product type designations”.


1.5.1	Standard Components - shall mean ‘off the shelf,’ generally available Components that meet the standard cancellation terms (i.e. Components that can be rescheduled, cancelled, or returned by Flextronics at any time without notice or liability). Nutanix shall have no component inventory liability for Standard Components.


1.5.2	Non-Standard Components means Components that are Nutanix controlled Components or that may not be Nutanix specific items, but for which Flextronics cannot cancel or return without notice or liability. Nutanix shall have component inventory liability for Non-Standard Components per Section 13.


1.5.3	Custom Components means Nutanix specific items such as bezels, Nutanix-designed packaging, labels, cables and any other Nutanix specific items. Custom Components also include Components that may not be Nutanix specific items, but for which Flextronics cannot cancel or return without notice or liability. Nutanix shall have component inventory liability for Custom Components per Section 13.


1.6	Component Standard Price means the price for each Component as agreed to between the parties during the quarterly pricing process as described in Section 6.


1.7	Costed Bill of Materials means the Bill of Materials or “BOM” that includes the Component Standard Prices for each Component of the Product.

1.8

Counterfeit Component(s) means an unlawful or unauthorized reproduction, substitution, or alteration of a Component that has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified electronic part from the original manufacturer. Unlawful or unauthorized substitutions include used electronic parts represented as new, or the false identification of grade, serial number, lot number, date code, or performance characteristics.


1.9	Delivery means Flextronics’s successful delivery of the Product(s) to the Nutanix carrier at Flextronics’ manufacturing site.


1.10	Demand Forecast shall mean a projection of Nutanix’s Product mix and volume requirements over a [***] period or such other period designated by the parties. The Demand Forecast will be provided frequently, but no less than on a monthly basis.


1.11	End Customer means Nutanix or Nutanix’s customer that will receive the Products as indicated on an Order.


1.12	Epidemic Failure means the failure of more than [*] of the Products that occur within [*] from the date of shipment and where there is a single root cause of the failure which is a result of a breach of the Flextronics warranty attached hereto as Exhibit A.

1.13

Gold Material means Products or Components utilized solely for test purposes. Flextronics will manage dedicated Gold Material to test the Products in accordance with the terms of Exhibit C and will be held by Flextronics at [***]-unit cost. Nutanix shall consign Gold Material and be responsible for the replacement and maintenance of Gold Material. Flextronics is responsible for Risk of Loss of Gold Material.

1.14

Intellectual Property means all industrial and other intellectual property rights comprising or relating to: (a) Patents; (b) Trademarks; (c) internet domain names, whether or not Trademarked, registered by any authorized private registrar or Governmental Authority, or web addresses, web pages, or website and URLs; (d) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights and copyrightable works, software and firmware, application programming interfaces, architecture, files, records, schematics, data, data files, databases, and any other specifications and documentation; (e) Trade Secrets; and (f) all industrial and other intellectual property rights, and all rights, interests and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the foregoing, however arising, in each case whether registered or unregistered and including all registrations and applications for, and renewals or extensions of, such rights or forms of protection pursuant to the laws of any jurisdiction throughout any part of the world.

1.15

Lead Time means the time required for Flextronics to assemble the Products after it has received an Order from Nutanix. For Products in which all the Components are in the supermarket the Lead Time shall be Delivery of the Product within [***] of receipt of the Order; and for Orders which will be a new build, the Lead Time for Delivery of the Product to the End Customer shall be [***] from receipt of the Order.


1.16	Manufacturing Facility shall mean Flextronics’s manufacturing facility approved in advance by authorized Nutanix personnel.


1.17	New Product Introduction or “NPI” means Nutanix’s launch and/or commercialization of a new or newly converted product within a Nutanix product family


1.18	Nutanix Consigned Material means any raw material, tooling and fixtures, test equipment, or Product provided by Nutanix in connection with the assembly by Flextronics of the Product.


1.19	Order shall mean any order placed by Nutanix, including a purchase order for Products and/or Services placed by Nutanix.


1.20	PPV or Purchase Price Variance means the difference between the Component Standard Price and the actual unit price paid by Flextronics for the Component.


1.21	Prices shall mean the prices for Products and shall equal the Component Standard Prices in the Product(s) plus the Transformation Costs.


1.22	Product(s) means the Nutanix products or systems that are marketed and sold to End Customers, (an initial list of which is listed in Exhibit F and which shall be updated from time to time by Nutanix). Flextronics agrees to procure Components, assemble, test and package these Products in accordance with the product Specifications provided by Nutanix and the terms of this Agreement.


1.23	QBR means a Quarterly Business Review held jointly between Nutanix and Flextronics.


1.24	Quality Plan means the Quality System and Product Quality Requirements provided by Nutanix to Flextronics and in accordance with Exhibit D.


1.25	Quarterly Pricing Process means a quarterly meeting or series of meetings in which the price for the Product shall be established by looking at the price of the Components individually as further described in Section 6.8 herein.


1.26	Quarterly Settlement Process means a quarterly meeting or series of meetings between Nutanix and Flextronics in which the parties will resolve any price issues from the previous quarter for the Products or Components and as further described in Section 6.10 herein.


1.27	Rejected Product(s) shall mean any Products that either (i) failed functional or cosmetic testing during the manufacturing process at Flextronics and are rejected by Nutanix or (ii) returned to Flextronics as field failures by the End Customer pursuant to this Agreement.


1.28	Return Material Authorization or RMA means the authorization by Nutanix for Flextronics to engage in the return process of a Product(s) as further described in Exhibit B.


1.29	Services shall mean the Component procurement and system integration services performed by Flextronics for the final assembly, test, and packaging for creation and Delivery of the Products.


1.30	Software means the object code version of the software provided by Nutanix for integration into a Product.


1.31	Specifications mean the manufacturing, assembly and testing specifications related to the Products as agreed by the Parties and supplemented by the parties in writing from time to time.


1.32	Supermarket means test WIP held in a location pending an Order for assembling.


1.33	Top Level Assembly or “TLA” means: the highest level of component assembly for the Product based on Specifications or through NPI.


1.34	L10: Ship and debit products that will be purchased as a completely configured, ready to ship product by a designated 3^rd party supplier.


2.	SCOPE OF AGREEMENT

2.1

This Agreement constitutes the entire integrated agreement between the parties with respect to Products purchased and or Services supplied hereunder and supersedes all prior written or oral understandings or agreements relating to the same including, but not limited to, the Memorandum of Understanding between the parties with an effective date of December 1, 2016. In the event of any conflict between these terms and the terms on the face of any Order, the terms of this Agreement will govern. The parties agree that all pre-printed terms on any Order, Order Acknowledgment or other forms submitted by either party shall be void and of no effect.


2.2	No modification of this Agreement will be binding on either party unless set forth in writing and specifically referencing this Agreement and signed by an authorized agent of each party.


3.	MANUFACTURING SERVICES

3.1

Services. Flextronics shall perform the Services in accordance with (a) the terms of this Agreement; (b) using personnel of required skill, experience and qualifications; (c) in a timely, workmanlike and professional manner; and (d) in accordance with the industry standards; and (e) to the reasonable satisfaction of Nutanix. In performing the Services, Flextronics shall ensure the Products meet the Specifications. The Parties agree that time is of the essence in performance and completion of the Services.

3.2

Capacity. Flextronics shall provide sufficient capacity at the applicable Manufacturing Facility to manufacture Products to meet the Demand Forecast. If Flextronics believes that it will not have sufficient capacity at the applicable Manufacturing Facility to satisfy this requirement, Flextronics will immediately notify Nutanix and use commercially reasonable efforts to remedy the issue; provided, however, Flextronics understands and agrees that Flextronics may not manufacture Products at such other Manufacturing Facilities without Nutanix’s prior written approval.


3.3	Software Load. As part of performing the Services, Flextronics shall load the Software onto Products in accordance with the Specifications. Nutanix shall provide to Flextronics the required Software versions, files and other material needed to load the Software onto the Products and Flextronics shall take all reasonable steps to ensure the security of the Software.


3.4	Use of Subcontractors. Flextronics may perform portions of the Services using subcontractors provided that Nutanix has agreed in writing to the use of such subcontractors. Flextronics shall remain jointly and severally liable for the acts and omissions of its subcontractors and any breach of this Agreement by subcontractors shall be considered a breach of the Agreement by Flextronics.


3.5	Exchange of Electronic Data. The parties will enable various types of electronic data exchange to facilitate Orders and other communications.

3.6

Nutanix Personnel Access. Flextronics shall reasonably permit Nutanix personnel access to the Manufacturing Facilities in which the Services are being performed. Flextronics shall permit Nutanix personnel to inspect the manufacturing lines and testing facilities used for the Products. In addition, Flextronics shall provide Nutanix personnel with a work area within the Manufacturing Facility during the visit of such Nutanix personnel. As further described in the applicable section(s), Flextronics will also allow Nutanix reasonable access for the purpose of performing inventory counts.


3.7	Testing. Flextronics shall perform testing Services on each of the Products it provides to the End Customer (“Test” or “Testing”). The exact Test requirements for Flextronics’s performance of the Services are defined in Exhibit C, “Manufacturing Test Requirements Specification” and as may be updated from time to time by Nutanix.


3.8	Non-Recurring Expenses. For certain portions of the Services, Nutanix may be required to pay non-recurring expenses (“NRE”) to Flextronics. Such NRE shall be agreed upon by the parties in writing.


4.	NUTANIX DEMAND FORECAST


4.1	Each calendar month, Nutanix will provide to Flextronics a rolling Demand Forecast for Products for the following [***].

4.2

Flextronics shall respond to the Demand Forecast with a commitment to meet the Demand Forecast noting any exceptions to the requested Demand Forecast. Flextronics shall provide a monthly capacity analysis report detailing Manufacturing Facility capacity available for Nutanix with reference to Nutanix’s monthly Demand Forecast and Component availability for the period outlined in such Demand Forecast. Flextronics shall provide for an overall Product Manufacturing capacity upside of [***] which may be exercised by Nutanix upon [***] days prior notice to Flextonics. This [***] upside may be exercised [***] by Nutanix, unless more frequently agreed to by Flextronics.


4.3	Should Flextronics procure more Components than are needed to meet the Demand Forecast, Nutanix shall have no liability for the Components that are the subject of such excess procurement, unless such excess purchases were agreed upon in writing (including by email) in order to meet minimum order quantities, risk buys, etc.


4.4	Except to the extent that Flextronics is entitled to procure Components under Section 12 below and for the purposes of Section 13 below, Nutanix will not be bound by the Nutanix Demand Forecast or other sales information it may provide to Flextronics.


5.	ORDERS


5.1	Nutanix shall submit Orders and Flextronics shall accept such Orders within [***] of receipt of the Order and provide an estimated ship date for the Order at the time of such acceptance. For the purpose of clarity, Flextronics does not have the right to reject an Order that is consistent with this Agreement or within Nutanix’s credit limit.


5.2	Orders will include the description and Price per unit of Product; the quantities ordered, delivery information, and any other such information as the parties agree to from time to time. Orders will be issued in writing and delivered by e-mail, facsimile, electronic data exchange means or by other methods that the parties agree to from time to time.

5.3

Flextronics shall fill accepted Orders within the Lead Time. The parties agree that time is of the essence in the performance of the Services. In the event that a Flextronics committed order is delayed by more than [***] from the committed shipment date due to reasons solely within Flextronics control, which shall include delays caused by subcontractors and suppliers selected by Flextronics (“Late Delivery”), Nutanix shall be allowed to cancel such order at Nutanix’s sole discretion. Any materials liability for Nutanix that occurred as a result of a Late Delivery of an order which was then cancelled by Nutanix shall be considered a direct damage (with Flextronics being liable to Nutanix for such direct damage) under the Agreement. Repeated and uncured Late Delivery shall be deemed a material breach of the Agreement.


5.4	Orders are cancelable and reschedulable per Section 9.


6.	PRICING


6.1	Product pricing shall be in U.S. Dollars on the Order, unless otherwise agreed in writing between the parties, and are exclusive of applicable duties, sales or use taxes, but are inclusive of all other charges including charges for labeling, packaging and crating, any inspection fees, and all other taxes.


6.2	Flextronics agrees to provide Nutanix with a detailed costed Bill of Materials (“BOM”) with respect to each Product showing a breakdown of the Component Standard Price,


6.3	The pricing of the Products will consist of the Component Standard Prices that make up the Costed Bill of Materials for a particular Product that has been ordered plus a Transformation Cost (“TC”). The TC is inclusive of all direct labor, and all indirect overheads such as profit, warranty and SG&A.

6.4

Transformation Cost for Production Units. The parties have agreed that the TC for production volumes shall be [***] and shall be valid until [***] based on the forecasted sales by Flextronics to Nutanix beginning on [***]. The parties also agree that the TC for production volumes shall be [***]. After this period has lapsed, the Transformation Cost shall be agreed to by the parties on an annual basis. Certain exceptional items, including but not limited to expedited freight, will be agreed upon in advance and in writing and will be charged separately by Flextronics and paid by Nutanix.

6.10.1BOM-material mark-up;


•	Fully burdened manufacturing assembly costs (to include Ongoing Reliability Testing (ORT) and Out of Box Audit (OBA));

•Fully burdened test costs;

•Selling, general and administrative expenses; and

•Operating margin.


6.5	Transformation Price for Prototypes. At the time of execution of the Agreement, the parties agree that the TC for NPI activities is [***] to convert existing part numbers to new TLAs. This charge does not include Components which will be priced separately. There is no established limit to count of products in NPI.


6.6	During NPI activities, if the same physical product is returned to any steps previously completed successfully, such product will be considered to be in a new iteration cycle and the [***] of the standard cost of product will apply. This excludes debug related reprocessing. Any hardware changes in the iteration cycles will be charged separately.


6.7	Test Development: The [***] does not include test development requests. Test development requests will be quoted on a case-by-case basis, based on Statement of Work received with the request. Development work will continue after written approval via email.


6.8	RMA: The Parties agree to [***] per unit for refurbishment of a Product. This charge is to receive in, test, inspect and re-pack such Products, as described in section 15.5.1.


6.9	L10 Pricing: L10 ship and debit process shall be as described in Exhibit G and Nutanix shall pay a [***] adder per L10 system.


6.10	Quarterly Pricing Process

6.10.1

For the Quarterly Pricing Process, the Parties agree to meet at least once during the Nutanix fiscal quarter (Nutanix’s fiscal year is August 1 through July 31) and review prices of the Products and the individual Components and establish Component Standard Prices for the following fiscal quarter. Prices will be adjusted to reflect any; (i) substantial increase or decrease in volume; (ii) change in market conditions or end user sales price of Products; and (iii) pass through of Price adjustments for Components passed

on to Flextronics. As part of the Quarterly Pricing Process, the parties will discuss ways to reduce the overall Price of the Bill of Materials.


6.10.2	Any Product price increases due to increased Prices on Flextronics controlled Components will not be effective until they have been: (a) reviewed in detail with Nutanix; (b) agreed upon by Nutanix and Flextronics in writing; such agreement shall not be unreasonably delayed or withheld.

6.10.3

In the event of an agreed-upon price increase, Flextronics will fill, at the lower purchase price, all Orders placed prior to the effective date of the agreed-upon price increase unless those Orders require Components purchased at the agreed upon price increase. In the case that Component pricing is responsible for the price increase, it is assumed that Component inventory at Flextronics at the lower price (purchased within a reasonable required lead time to meet Nutanix’s demand) is such that all Orders placed prior to the effective date of the agreed-upon price increase can be fulfilled. If inventory is not sufficient for Flextronics to fill, at the lower purchase price, all Orders placed prior to the effective date of the agreed-upon price increase (and inventory was in fact purchased within a reasonable required lead time to meet Nutanix’s demand), then Flextronics and Nutanix will set a mutually agreed-upon cut-in date for the agreed-upon price increase for the balance.


6.11	Nutanix Audit Rights. Nutanix has the right to verify compliance with this Agreement by Flextronics, including but not limited to compliance with this Section 6. Any audit undertaken by Nutanix shall be at Nutanix’s expense as follows:

6.11.1

Subject at all times to Flextronics confidentiality obligations to its Component suppliers, not more than twice per calendar year, Nutanix may provide Flextronics at least thirty (30) days’ notice of its intent to verify Flextronics’s compliance with its obligations during the immediately preceding twelve (12) calendar months. Nutanix will engage a mutually agreed independent auditor, such agreement not to be unreasonably withheld, which will be subject to a confidentiality obligation. Verification will take place during normal business hours and in a manner that does not interfere unreasonably with Flextronics’s operations. Flextronics must promptly provide the independent auditor with any information necessary to complete the verification, including evidence of Prices for Nutanix controlled Components, as designated at the time of purchase, which Flextronics procured to perform the Services. Nutanix Controlled Components shall be Components for which the pricing is determined directly between Nutanix and the relevant supplier

6.11.2

If the verification reveals any prices for Nutanix controlled Components procured by Flextronics were misstated on a Bill of Materials, the parties will promptly settle the misstated amounts, such amounts will be paid to the damaged party within [***] of such settlement. By exercising the rights and procedures described above, Nutanix does not waive its rights to enforce this agreement or to protect its intellectual property by any other means permitted by law.

6.12

Quarterly Settlement Process. Each Nutanix fiscal quarter, the parties will meet and compare the Component Standard Prices with the actual prices paid by Flextronics for Components. The goal of this process is to settle the differences between the Component Standard Prices and the market Prices for the relevant Component. Further, as part of this Quarterly Settlement Process, the parties may agree to resolve other pricing and expense issues. The parties shall resolve any such issues as described below:

6.13

Component and Product Revaluation Process: Flextronics and Nutanix shall review all Component and Product price changes (increases or decreases) quarterly. Where the prices of Components have increased (”buy up”) there shall be offset against the value of inventory where the prices of Components have decreased (“buy down”). In the event the buy up value exceeds the buy down value, Flex shall issue a purchase order to Nutanix for the delta difference in values. In the event the buy down value exceeds the buy up value, Nutanix shall issue a purchase order to Flex. The parties will use best efforts to issue an applicable purchase order within [***] of the agreed-to reconciliation.


6.14	PPV: The parties shall review PPV as part of the quarterly Settlement Process. Based on the mutual agreement from the quarterly settlement process, the parties agree to issue credits to each other. PPV may occur as a result of one of the following events:


(i)	Component manufacturer or supplier charges Flextronics a price different, higher than the Component Standard Price for that Component;


(ii)	regular price changes for Component(s) that traditionally occur on a calendar basis and result in a price difference from the Component Standard Price.

6.15

Freight Expedites. To fulfill Orders within the Lead Time, Flextronics may need to expedite receipt of inbound Components and/or shipment of Products to End Customers. Flextronics may expedite these shipments only with the prior written approval of Nutanix. Should the reason for any expedite be as a result of an act or omission of Flextronics, Flextronics shall take financial responsibility for such expedite. The parties shall review these expedited freight Prices as part of the Quarterly Settlement Process and determine how these Prices should be allocated.


7.	DELIVERY, REJECTION AND ACCEPTANCE


7.1	On-Time Shipment. Flextronics shall make commercially reasonable efforts to meet the target goal of [*] on-time Delivery, defined as the shipment of Product by Flextronics within a maximum window of [*] based on the Lead Time. Flextronics shall use its commercial best efforts to Deliver Products in accordance with the Lead Time.

7.2

Title. All Products delivered to Nutanix shall be [***]. Title and risk to all Products shall pass to Nutanix upon Flextronics’s tendered delivery to common carrier or Nutanix designee. As part of providing the Services, Flextronics shall load the products on the collecting vehicle and bear the risk of loss for such Products in the course of such loading process at no additional cost to Nutanix.


7.3	Packaging. Flextronics will handle, pack, mark and ship Products in accordance with written instructions communicated to Flextronics, or if no instructions are provided or such instructions are silent in a particular area, Flextronics will handle and ship in accordance with Flextronics’s normal practice provided that such practice is consistent with industry standards.

7.4

Delivery Documentation. Each Delivery of Products must be accompanied by Flextronics’s delivery document, located in a clearly marked ship-to label, in the format described in Arena attached to each appropriate shipping carton. Each delivery document must at a minimum clearly state the following data: (a) Nutanix Order number; (b) End-Customer PO number, (c) Nutanix Product number, (d) serial numbers where appropriate, (e) the quantity shipped

7.5

Delivery Schedules. In the event that Flextronics has reason to believe that any shipment of Product to the End Customer may not meet Delivery (and without waiver of any rights by either party), Flextronics shall provide advance notification to Nutanix, along with detailed proposed solutions and recovery plans. To the extent such delay is not attributable to Nutanix, Flextronics shall bear any additional expenses including material expediting costs, premium transportation costs or labor overtime, associated with meeting the specified Delivery date or minimize the lateness of such deliveries.


7.6	Rejected Product. Rejected Product may be returned to Flextronics. The parties will follow Flextronics’s Return Material Authorization (RMA) process for the return of Rejected Products.


7.7	Acceptance. In the absence of earlier notification of rejection, Nutanix will be deemed to have accepted the Products [***] after Delivery.


8.	PAYMENT


8.1	Terms of payment are [***] from date of invoice. All dollar amounts in the Agreement are in US Dollars. All payments will be made in U.S. Dollars.

8.2

As full consideration for the performance of the Services, Nutanix shall pay Flextronics the undisputed amount stated on invoices from Flextronics to Nutanix. Applicable taxes and other charges such as shipping costs, duties, customs, tariffs, imposts, and government-imposed surcharges (where appropriate) shall be stated separately on Flextronics’ invoice. Payment shall not constitute acceptance; Acceptance is covered in Section 7.7 above. All duties and taxes assessable upon the Products and Components prior to receipt by Nutanix of the Products shall be borne by Flextronics. Flextronics shall invoice Nutanix for all Products delivered and all Services actually performed. If any [***].

8.3

If Nutanix disputes the accuracy of an invoice (a "Billing Dispute"), Nutanix will, not later than [***] following the date of such invoice, notify Flextronics in writing of the nature of the Billing Dispute. Nutanix may withhold payment of the disputed amount and such payment will not be considered past due during Flextronics's investigation. Flextronics will make commercially reasonable efforts to completely resolve the Billing Dispute within [***] following the date on which Flextronics received Nutanix's initial billing inquiry. This section in no way limits the audit rights for Nutanix which are stated in Section 6.11 above.


8.4	Nutanix will be responsible for all taxes with respect to Orders placed by Nutanix (except Flextronics’s income taxes), unless Nutanix provides Flextronics with tax exemption documentation required by the applicable taxing authority.


9.	CANCELLATION AND RE-SCHEDULING


9.1	Flextronics agrees the following cancellation terms:

9.1.1

Nutanix may cancel or reschedule any Orders in its sole discretion at any time before the actual shipment of the Order at no additional cost to Nutanix. If Nutanix directs Flextronics to disassemble the Product that is the subject of such cancellation such disassembly shall be subject to a flat fee of [***]. In case of rework conversions (tested components in the Supermarket that are required to be converted before consumption) of CTO orders, Nutanix shall pay Flextronics a flat fee of [***]. Cost for material, if any, will be charged separately.


9.1.2	To assist Flextronics with capacity planning, Nutanix will make commercially reasonable efforts to provide adequate, advance notice of cancellations


9.1.3	In instances where business conditions mandate Nutanix’s cancellation of Product, Flextronics will exercise commercially reasonable efforts to de-book, re-schedule or otherwise dispose of Components on backlog so as to minimize liability passed on to Nutanix.


10.	ENGINEERING CHANGE ORDER MANAGEMENT


10.1	Flextronics or Nutanix may at any time propose changes to the relevant Specification, manufacturing process or any other process described in Exhibit D by a written Engineering Change Notice (“ECN”).


10.2	The recipient of an ECN will use all reasonable efforts to confirm receipt within [*] and to provide a detailed response within [*] of receipt.


10.3	Flextronics will advise Nutanix of the likely impact of an ECN (including, but not limited to, scheduling and Prices) on the provision of any relevant Order. For significant Product changes, Flextronics shall review the

impact on the Demand Forecast and shall replace or rework the Demand Forecast or Product inventory as directed by Nutanix.


10.4	Any ECNs relating to personal and product safety will be implemented without delay.


10.5	Until an ECN and any associated impact on any relevant Order have been agreed in writing, the parties will continue to perform their obligations under the relevant Order without taking account of that ECN.


10.6	In the event Nutanix initiates an ECN, Flextronics will support up to [*] ECOs per month within the current transformation cost noted in sections 3 and 13. The parties agree that for any volume above the [] processing charge would be utilized for each [**] in processing these additional ECO’s. Any inventory impacts or assembly cost impacts will be priced separately on each ECO.


10.7	In the event Flextronics initiates an ECN, Nutanix shall not be liable for such costs unless otherwise agreed in writing, such agreement not to be unreasonably withheld.


10.8	Mandatory ECN’s shall be applied as specified by Nutanix in each individual ECN instruction. All line and field Rejected Products shall be repaired and upgraded to the latest mandatory ECN level.


11.	QUALITY


11.1	Product quality is a material term of this Agreement


11.2	Quality Program. Flextronics agrees to maintain objective quality programs for all Products and commits to achieve agreed-to quality goals as set forth in Exhibit D.


11.3	Epidemic Failures. Epidemic failures as defined in Section 1.12 above may be identified by Nutanix, Nutanix’s designated service provider, Flextronics’s or Nutanix’s test procedures, or may appear as End-Customer-reported failures.


11.3.1	Upon occurrence of an Epidemic Failure, Nutanix may invoke a production line shutdown ("Stop Ship”) until root cause is determined.


11.3.2	Flextronics shall promptly notify Nutanix and shall provide, if known, a description of the failure, and the suspected lot numbers, serial numbers or other identifiers, and Delivery dates, of the failed Products.

11.3.3

Nutanix shall make available to Flextronics, samples of the failed Products for Testing and analysis. Upon receipt of such failed Product from Nutanix, Flextronics shall promptly provide its preliminary findings regarding the cause of the failure. The parties shall cooperate and work together to determine the root cause. Thereafter, Flextronics shall promptly provide the results of its root cause corrective analysis, its proposed plan for the identification of and the repair and/or replacement of the affected Products, and such other appropriate information. Flextronics shall recommend a corrective action program which identifies the affected Products for repair or replacement and which minimizes disruption to the End Customer. Nutanix and Flextronics shall consider, evaluate and determine the corrective action program.

11.3.4

Should failures of the Product be the result of an Epidemic Failure, the parties shall mutually agree whether Flextronics shall either repair or replace Products subject to such Epidemic Failure. In addition, Flextronics shall credit Nutanix for reasonable direct costs that are incurred by Nutanix as a result of an Epidemic Failure. Such remedies for Epidemic Failure shall be in addition to any other remedies Nutanix may have under this Agreement.


11.3.5	Product Hazard. In the event either Flextronics or Nutanix becomes aware of any information that reasonably supports a conclusion that a defect may exist in any Product covered by this Agreement and

the defect may cause death or bodily injury to any person or property damage (a “Hazard”), the Party becoming aware of this information shall immediately notify the other of the Hazard. In all events, notification to the other Party shall precede notice to any governmental agency, unless required by law. Flextronics and Nutanix shall promptly exchange all relevant data and then, as promptly as possible, meet to review and discuss the information, tests and conclusions relating to the Hazard. At this meeting, the Parties shall discuss the basis for any action, including a recall, and the origin or causation of the Hazard. Each Party shall, on request, provide to the other reasonable assistance in (a) determining how best to deal with the Hazard; and (b) preparing for and making any presentation before any governmental agency which may have jurisdiction over Hazards involving Products.


11.4	Advanced Replacement Components. Should Flextronics receive a notice that a Component in a Product has failed, Flextronics shall use commercially reasonable efforts to make a replacement Component available as soon as possible but no longer than [***] after receiving the original, failed Component and at no additional charge to Nutanix.


12.	MATERIALS MANAGEMENT


12.1	Procurement. Flextronics is authorized to purchase materials using industry standard purchasing practices including, but not limited to, acquisition of material recognizing minimum order quantities, ABC buy policy and long lead time Component management to meet the Demand Forecast and Product Order requirements.


12.2	AVL. Flextronics shall procure all Components according to the AVL as may be referred to as “Sourcing” in Arena.


12.3	Component Lead Time. The parties shall review Component lead-time no less frequently than quarterly, or more frequently if requested by Nutanix in writing. Updates shall be made to Flextronics’s MRP system no less than weekly for the purposes of avoiding excess or insufficient inventory of Components.


12.4	Component Suppliers. Nutanix may designate Component suppliers (“Component Suppliers”) from whom Flextronics is required to procure Components to integrate into the Products. Flextronics agrees that it is responsible for contracting the Component Suppliers and Nutanix is not responsible for any transactions between Flextronics and Component Suppliers.


12.5	Counterfeit Components. Flextronics shall establish and maintain an acceptable Counterfeit Component detection and avoidance system.


12.5.1	Any Counterfeit Components discovered in the Products must be immediately replaced at Flextronics’s expense even if such detection occurs after the warranty period described in Section 15; provided that these Components were procured by a supplier solely selected by Flextronics.


12.5.2	Nutanix will have no liability for Counterfeit Components procured by Flextronics unless Nutanix directed Flextronics to procure such Components from a specific supplier. Flextronics shall advise Nutanix at the earliest possible time if Flextronics reasonably suspects a particular Component may be Counterfeit.


12.5.3	In addition to any other remedies Nutanix may have under this Agreement and at law, any Counterfeit Components discovered in the Products shall be treated as an Epidemic Failure in accordance with section 11.3, provided that Flextronics is in breach of its Express Limited Warranty under section 1.1 of Exhibit A.


12.6	Upside. Except in end-of-life situations, the parties shall use their respective commercially reasonable efforts to secure Components supply coverage to achieve [***] of the Demand Forecast. These efforts shall include, but not be limited to, improvements in forecasting accuracy, negotiating and implementation of Vendor

Managed Inventory (VMI) programs, implementing manufacturing cycle time reductions through lean programs, and/or reducing supplier lead-times.

12.7

Flextronics will review with Nutanix prior to entering into any binding (non-cancelable) contractual agreement for Custom Components beyond those required by the Demand Forecast and notify Nutanix in writing of such non-cancelable contractual agreements and the applicable lead times that vary from the standard lead time listed in Flextronics’s MRP system. Unless otherwise agreed (and such agreement not to be unreasonably delayed or withheld) Nutanix shall have no responsibility, financial or otherwise, for excess or obsolete inventory or long lead materials acquired by Flextronics which are in excess of these requirements.

12.8

Component Change Notification Should Flextronics be notified that a Component may no longer be available from the manufacturer of the Component then Flextronics may discontinue the availability of Components by providing Nutanix with [***] prior written notice (an “End of Life Notice”) unless otherwise mutually agreed upon in writing. Nutanix may continue to place Orders for Products that utilize the Components for [***] after the End of Life Notice is issued under the same terms and conditions available prior to the End of Life Notice being issued. If an End of Life Notice has been issued, Flextronics will seek to reduce Component liability to what is required solely to satisfy pending Orders.


12.9	Shortages or Lead Time changes. Flextronics will promptly notify Nutanix in writing of any shortage in available supply of Components or if there is a longer lead-time for a specific Component.

12.10

PPV Approval. Prior written approval shall be required before the purchase of any Components where there is a Purchase Price Variance. Upon receipt of an approval request for PPV, Nutanix will endeavor to provide such approval within [***] so as not to disrupt the supply chain of Components. Flextronics will provide Nutanix with a PPV report on a weekly basis and all supporting documents will be presented to Nutanix as part of the Quarterly Settlement Process.


12.11	FIFO. Flextronics shall maintain a “first-in, first-out” inventory system, and shall ensure that all new Product and repaired Product (except in instances where it is not commercially or technically practicable) is shipped at the latest Product revision

12.12

Consigned Material. Flextronics shall act in a commercially reasonable and prudent manner in its handling and storage of Nutanix Consigned Material so as to minimize any loss or damage. Flextronics shall segregate Nutanix Consigned Material from other materials in Flextronics possession to ensure that at all times the Nutanix Consigned Material is clearly marked as being the property of Nutanix. Flextronics shall provide counts of the Nutanix Consigned Material as part of the quarterly review process or more frequently as mutually agreed by both parties. Flextronics assumes full liability for any losses of Nutanix Consigned Material in Flextronics’s possession


12.13	In the event that Nutanix (or a third party on behalf of Nutanix) purchases Components from Flextronics, the Parties shall from time to time agree on the appropriate adder to the Component Standard Price for such purchases as a compensation for Flextronic’s handling costs. While the adder percentage is in negotiation, material shall not be held from shipment.


12.14	Inventory inspection. On or around the first day of each Nutanix fiscal quarter, Nutanix shall be allowed to perform an on-site physical inventory inspection. Any discrepancy that is discovered during such inspection shall be discussed as part of the QBR.


13.	COMPONENT LIABILITY


13.1	Both Parties desire to effectively manage all Components, demand, and material inventory such that the inventory will be completely consumed by the end-of-support of the Products and Nutanix will consequently have limited material liability for unused Components.


13.2	Nutanix shall have no liability for Components except for Non-Standard or Custom Components except as noted above.


13.3	The Non-Standard and Custom Components for which Nutanix has liability under this Agreement shall be reviewed no less frequently than on a quarterly basis and both parties shall work together with the aim of converting as many Components as reasonably practical from Non-Standard and Custom Components to Standard Components


13.4	Inventory liability for Products on the Exhibit F Product list shall be as follows:


13.4.1	For finished Products, the current Price for the Product at issue; Nutanix agrees to purchase any Products (finished goods) and unique Nutanix work in process.


13.4.2	Nutanix will incur Inventory liability for (“WIP”), including supermarket inventory, that has been held by Flextronics for more than [***] or Nutanix may choose to pay Flextronics to tear down such WIP and restock Components at an agreed charge per unit as set forth in Section 9.1.1.


13.4.3	Flextronics shall exercise commercially reasonable mitigation efforts to reduce Nutanix’s Inventory Liability for finished Products and WIP.


13.5	If, after employing commercially reasonable practices in accordance with the demand signal per the Nutanix provided Demand Forecast, Components are in excess, the Inventory liability for Non-Standard and Custom Components that are excess or obsolete shall be as follows:

13.5.1

Excess Inventory. For Non-Standard or Custom Components that have been held by Flextronics for more than [***] for the carrying of such Non-Standard or Custom Components. For any Non-Standard or Custom Components that have been held by Flextronics [***]. Nutanix will purchase any Non-Standard or Custom Components held by Flextronics for more than [***]. Once a month, Nutanix and Flextronics will review the inventory report and determine inventory aging. Flextronics shall obtain Nutanix’s written approval prior to purchasing any Non-Standard or Custom Components that exceed the applicable monthly forecasts.


13.5.2	Obsolete Inventory: Any Non-Standard or Custom Components are obsolete (“Obsolete Inventory”) when they are no longer forecasted, or have a disposition of ‘scrap’ within an ECN. With regard to Obsolete Components, Flextronics shall:

(a)Provide to Nutanix within [***] following the date the Component is determined to be obsolete (the “Obsolesce Date”), a notice of the potential Price (by part number); and

(b)For a period of [***] from the Obsolesce Date, upon review by Nutanix, use commercially reasonable efforts to:


(i)	Cancel outstanding orders for such Non-Standard and/or Custom Components


(ii)	Return, return for credit, or sell such Non-Standard and/or Custom Components back to the original supplier or to a third party;


(iii)	Use Obsolete Components for the manufacture of other products for other Flextronics customers; or

(iv)Rework for alternate configuration of Products.

(c)After such a [***] period for any remaining Obsolete Inventory:


(i)	Flextronics will, at Nutanix’s option, deliver to Nutanix (or if Nutanix so requests, otherwise dispose of) all Obsolete Inventory then held by Flextronics; and


(ii)	Flextronics shall be entitled to invoice Nutanix for the current standard Prices of the Obsolete Inventory.


13.6	Flextronics shall measure Excess Inventory or Obsolete Inventory monthly, but the parties shall resolve any Excess or Obsolete Inventory issues as part of the Quarterly Settlement Process.


13.7	Flextronics will undertake reasonable efforts to reduce Excess Inventory and Obsolete Inventory through open order cancellations, return for credit programs, reworks or allocation to alternative programs (if available and appropriate).


13.8	Both parties shall meet quarterly regarding Excess Inventory and Obsolete Inventory to determine the best method to mitigate Nutanix’s potential inventory liability. Inventory liability for Non-Standard and Custom Components will be evaluated monthly or as mutually agreed by the parties.


14.	SOFTWARE AT SCALE


14.1	Should the parties intend to engage in future transactions to effect the sale of Software at Scale products, such transactions shall be mutually agreed upon in an executed document which may replace Exhibit E attached hereto.


15.	WARRANTIES


15.1	Flextronics EXPRESS LIMITED WARRANTY is incorporated herein and attached hereto as Exhibit A


15.2	Repaired Products returned to Nutanix shall be covered under the remaining portion of the original warranty period, provided however, that the specific repair shall be subject to a ninety (90) day workmanship warranty even if the original workmanship warranty period expires sooner.


15.3	Flextronics warrants that Nutanix will acquire good and marketable title to the Products upon Delivery to Nutanix.


15.4	Omitted.

15.5

No Representations or Other Warranties. EXCEPT AS OTHERWISE EXPRESSLY STATED OR INCORPORATED BY REFERENCE IN THIS SECTION 15, FLEXTRONICS MAKES NO OTHER REPRESENTATIONS OR WARRANTIES ON THE PERFORMANCE OF THE SERVICES, OR THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH NUTANIX, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.


15.6	Field Returns

15.6.1

For Products failing in the field, Nutanix may ship Rejected Product directly to Flextronics in accordance with Flextronics standard Return Material Authorization (“RMA”) process. The Parties agree to [***] for refurbishment of a Product that is outside of the warranty period. This charge is to receive in, test, inspect, and re-pack these Products. For any replacement parts required to complete a field return, but not under warranty, additional labor and/or packaging is not included in the [***] price and will be priced separately and agreed upon by the parties.


15.6.2	Flextronics will analyze any such RMA Product and, if a breach of warranty is found ("Defect"), then Flextronics will repair or replace at no cost to Nutanix the RMA Product within [***] of receipt by Flextronics of the RMA Product and all required associated documentation.


15.6.3	Flextronics may repair Field Rejected Product, no more than [***] and return such Products to Nutanix.


15.6.4	Flextronics is responsible for all freight and insurance charges (for transfer between The End Customer and Flextronics premises) associated with verified defects on in-warranty Product. Nutanix will be

responsible for all such freight and insurance charges associated with No Trouble Found (“NTF”) returns or defects not covered by the Express Limited Warranty.


15.7	Out of Warranty Repairs


15.7.1	Flextronics will make available an out-of-warranty repair service to Nutanix and to End-Customer’s for at least [***] after Delivery of the last unit of Product from a volume production run at a mutually agreeable commercially reasonable price using the rates described in Section 6.7 herein. This obligation is conditioned on the required Components being commercially available.

15.7.2

At the end of the Product life cycle, Nutanix and Flextronics shall mutually collaborate on a periodic forecast of requirements for service parts for such Products based upon agreed-to lead times for the service parts. If a Component vendor cannot support the Product for [***], Flextronics shall notify Nutanix of opportunities to procure these parts on behalf of Nutanix and inventory such parts at Nutanix’s expense or Nutanix shall purchase the parts directly from the Component vendor based on Nutanix’s buy requirements.


16.	ADMINISTRATION AND DISPUTES


16.1	For each Product shipment to the End-Customer, Flextronics will provide a copy of the applicable shipping documentation to Nutanix including reference to the relevant Order, quantity shipped, and shipping documentation. This may be done via e-mail, facsimile, or electronic data interchange.

16.2

Flextronics will (at a minimum) on a weekly basis provide to Nutanix; (i) an open Order status report which includes the status of all open Orders; (ii) an in-transit Order status report which includes the status of all Orders in transit detailing quantity, ship date, carrier and air waybill number; (iii) a projected ship plan for the following [***]; (iv) an inventory of Products at each Flextronics manufacturing location where Nutanix Products are manufactured; and (v) Purchase Price Variance (PPV) report.

16.3

Nutanix's designated Flextronics Business Manager will conduct Quarterly Business Reviews (QBRs with the Flextronics-Nutanix account management team. Nutanix and Flextronics will determine the location and times for these meetings. The Parties will ensure appropriate participants from functional areas capable of addressing the items on the QBR agenda will be in attendance. Typical agenda items will include:


•	Review Flextronics's performance over the past quarter, including KPIs such as on time ship, lead time and product quality


•	Review Price reduction plans and opportunities


•	Review action items and resolution


•	Identify opportunities and areas of improvement


•	Agree on commitments, set target dates, and define responsible persons to follow through


•	Review appropriate Flextronics reports


•	Review Flextronics quality and reliability improvement plans


•	Review the accuracy of Nutanix's forecasting process


•	Resolve any outstanding payment issues

16.4

In the event of any dispute arising from or regarding the subject matter of this Agreement, the Parties agree to negotiate in good faith to find an equitable resolution to the disputed matter. To this end, the Party seeking to initiate a lawsuit or arbitration proceeding must formally request in writing that the other Party designate a senior executive employee with authority to bind that Party to meet to resolve the dispute within [***] in the offices of the other Party or other location agreed to by the Parties. During these discussions, each Party shall honor the other’s reasonable requests for non-privileged and relevant information. The Parties may agree to include an independent mediator in the discussions. If the dispute is not resolved within [***] from the end of the period set forth above, then either Flextronics or Nutanix may commence legal, equitable or other action. The requirements set forth above are a condition precedent to initiating a legal, equitable or other

action. This provision is not applicable to joinder of parties or cross claims either Party may make in any proceeding, lawsuit, litigation or controversy that was not initiated by such Party.

16.5

Neither Party may assign this Agreement in whole or in part without the express written consent of the other Party except to each party’s respective affiliates. Such consent shall not be unreasonably withheld. Any permitted assignment of this Agreement shall be binding upon and enforceable by and against such party’s successors and assigns, provided that any unauthorized assignment shall be null and void and constitute a breach of this Agreement. This Agreement shall be governed by and interpreted in accordance with the laws of the state of California. Any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, will be submitted for resolution by binding arbitration in accordance with the Comprehensive Arbitration Rules & Procedures of JAMS. The arbitration will be held in Santa Clara County, California and it shall be conducted in the English language. Judgment on any award in arbitration may be entered in any court of competent jurisdiction. Notwithstanding the above, each Party shall have the right to file in the Santa Clara, California state court or the federal courts in and for the Northern District of California an application for temporary or preliminary injunctive relief, writ of attachments, writ of possession, temporary protective order, and/or appointment of a receiver on the grounds that the arbitration award to which the applicant may be entitled may be rendered ineffectual in the absence of such relief. IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW.


17.	INTELLECTUAL PROPERTY

17.1

All existing Intellectual Property owned by or licensed to Nutanix (including, but not limited to, Product designs, manufacturing, and/or test processes) will continue to be owned by, or exclusively licensed to Nutanix (“Nutanix Intellectual Property”). Nutanix hereby grants to Flextronics under Nutanix’s Intellectual Property rights, a limited, nonexclusive, worldwide, non-transferable, non-royalty bearing license to use the Nutanix Intellectual Property, including the Software, solely in conjunction with the performance of the Services. All other rights to the Nutanix Intellectual Property, including but not limited to the Software, are reserved to Nutanix. All existing Intellectual Property owned by or licensed to Flextronics will continue to be owned by, or exclusively licensed to, Flextronics and accordingly Nutanix is licensed to use such of it as may be necessary for Nutanix to meet its obligations and exercise its rights pursuant to this Agreement.

17.2

With respect to Intellectual Property created through the performance of the Agreement, Nutanix shall own all Intellectual Property relating to; (i) the design and specifications of the Products; (ii) any Testing requirements, processes, or policies created or supplied by Nutanix for the purposes of facilitating the Services or assembly of the Product; or (iii) any manufacturing procedures, processes, or policies created or supplied by Nutanix for the purposes of facilitating the Services or assembly of the Product. Flextronics shall own all Intellectual Property relating to the manufacturing process.


17.3	Except as provided above in this Section 17 nothing in this Agreement grants or can be capable of granting to a party (whether directly or by implication, estoppel or otherwise) any rights to any Intellectual Property owned by or licensed to the other party or any affiliate of that other party.

17.4

Nutanix Trademarks. Nutanix grants to Flextronics a limited, non-exclusive, non-assignable, non-transferable, royalty free license to affix and apply the Nutanix Trademarks to the Products as directed by Nutanix for the sole purpose of performing the Services. Flextronics shall not use Nutanix Trademarks for any other purpose and only in such manner as to preserve all rights of Nutanix. Flextronics acquires no right to Nutanix Trademarks by its use and all uses by Flextronics of the Nutanix Trademarks will inure to Nutanix’s sole benefit. As used herein, “Nutanix Trademarks” means those trademarks, trade names, service marks, slogans, designs, distinctive advertising, labels, logos, and other trade-identifying symbols as are or have been developed

and used by Nutanix or any of its subsidiaries or affiliate companies and which Nutanix owns or has the right to use.


18.	LIMITATION OF LIABILITY.

18.1

EXCEPT FOR; (A) NUTANIX’S PAYMENT OBLIGATIONS FOR PRODUCT AND COMPONENTS HEREUNDER; (B) FLEXTRONICS WARRANTY OBLIGATIONS UNDER SECTION 1.1c OF EXHIBIT A; OR (C) EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 19 OR BREACH OF ITS RESPECTIVE CONFIDENTIALITY OBLIGATIONS HEREUNDER, IN NO EVENT SHALL EITHER PARTY’S LIABILITY FOR ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED [***].

18.2

FOR PURPOSES OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF DATA, OR LOSS OF REVENUE ARISING OUT OF OR RELATING TO THIS AGREEEMNT OR THE SALE OF PRODUCTS HEREUNDER, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.


19.	INDEMNIFICATION

19.1

Indemnity by Nutanix. Nutanix shall fully defend Flextronics and its Affiliates, officers, directors, employees and agents (“Flextronics Indemnitees”) from and against any third party claims, actions, suits, legal proceedings and demands arising out of or related to; (a) infringement by the Products, including but not limited to Specifications or Software of any Intellectual Property Rights of a third party; (b) damage to any tangible property, personal injury, or death, resulting or claimed to have resulted from any alleged defect in the Products, including but not limited to Specifications or Software; and shall indemnify and hold harmless the Flextronics Indemnitees for all liabilities, damages, losses, judgments, settlements, costs and pay expenses as incurred in defense of such claims, including without limitation, attorney fees.

19.2

Notwithstanding the terms above, Nutanix shall have no liability for any claims of any kind to the extent that they result from: (a) modifications to the Nutanix Specifications or Software made by Flextronics without Nutanix’s written agreement, if a claim would not have occurred but for such modifications; or (b) the combination, operation or use of the Software by Flextronics with equipment, devices, software or data not approved by Nutanix, if a claim would not have occurred but for such combination, operation or use.

19.3

Indemnity by Flextronics. Flextronics shall fully defend Nutanix and its Affiliates, officers, directors, employees and agents (“Nutanix Indemnitees”) from and against any third party claims, actions, suits, legal proceedings and demands arising out of or related to; (a) infringement based on any aspect of performing the Services that is not specifically required in writing by Nutanix in its specified designs, processes or other instructions or any deviations from such requirements by Flextronics or its agents of any Intellectual Property rights of a third party; (b) damage to any tangible property, personal injury, or death, resulting or claimed to have resulted by a breach of Flextronics of this Agreement; and shall indemnify and hold harmless the Nutanix Indemnitees for all liabilities, damages, losses, judgments, settlements, Prices and pay expenses as incurred in defense of such claims, including without limitation, attorney fees.

19.4

If either Party becomes aware of a claim under which it could seek indemnification (“Indemnification Claim”), the Party seeking indemnification (the “Indemnitee”) shall; (a) promptly notify the Party from which indemnification is sought (the “Indemnitor”) of such claim; (b) provide commercially reasonable assistance and cooperate with the Indemnitor in the defense thereof; and (c) grant the Indemnitor sole control of the defense and settlement of the claim, including but not limited to the selection of outside counsel. The Indemnitee

may participate in the defense of the claim and employ counsel at its own expense. The Indemnitor shall not settle a claim without the Indemnitees’ consent if such settlement imposes a payment or other obligation on the Indemnitee or seeks to impose any limitation on Indemnitee’s business, other than to discontinue using the infringing or allegedly infringing item, or requires the Indemnitee to admit fault or liability.

19.5

If the Indemnitee is unable to lawfully exercise the rights and licenses granted to it under this Agreement as a result of a claim, the Indemnitor shall, at its own expense, procure for Indemnitee the right to exercise the rights and licenses granted to it under this Agreement or modify the subject of the Indemnification Claim such that it is no longer infringing; provided that if indemnifying party is unable to accomplish either of the foregoing despite its reasonable commercial efforts, then either Party may terminate this Agreement.

THIS SECTION SETS FORTH EACH PARTY’S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO INDEMNIFICATION CLAIMS AS DEFINED IN THIS SECTION 19.


20.	CONFIDENTIAL INFORMATION


20.1	The parties will comply with the provisions of the Non-Disclosure Agreement entered into by and between Flextronics and Nutanix on August 31, 2016 attached hereto as Exhibit G.


21.	TERM AND TERMINATION


21.1	The term of this Agreement shall commence on the Effective Date and continue for a period of three (3) years (“Initial Term”) and shall thereafter be automatically renewed for additional one (1) year periods unless either party gives written Notice of termination at least one-hundred and eighty (180) days before the anniversary of the Initial Term or any renewal term, as applicable.

21.2

Effect of Termination or Expiration. In the event of a termination or expiration of this Agreement, the provisions of this Agreement will continue to apply to all Orders placed by Nutanix prior to the effective date of such termination or expiration except for any Order, or portion thereof, canceled pursuant to “Termination for Cause”. Termination or expiration of this Agreement will not, however, relieve or release either party from making payments or any other obligations which it may have to the other party under the terms of this Agreement.


21.3	Termination for Cause. Either party may terminate this Agreement immediately for cause by giving written notice to the other party in the event the other party:


21.3.1	becomes insolvent or unable to meet its obligations as they become due or files or has filed against a petition under the bankruptcy laws;


21.3.2	ceases to function as a going concern or to conduct its operations in the normal course of business;


21.3.3	except in the instances of a merger or acquisition, assigns or transfers, either voluntarily or by operation of law, any rights or obligations under this Agreement without consent of the party seeking to terminate; or


21.3.4	materially breaches an obligation under this Agreement and such breach is not remedied within thirty (30) days of written notice of such breach.


22.	GENERAL


22.1	Costs. Except as specifically provided herein, each party will be solely responsible for its costs and expenses related to this Agreement and the activities contemplated by this Agreement, including but not limited to engineering work.


22.2	Interpretation. Unless otherwise indicated, all references to “in writing” or “written approval” shall include written communications via electronic mail. Unless otherwise indicated, the words “include”, “includes” and “including” shall be deemed in each case to be followed by the words “without limitation.”


22.3	Freedom of Action. This Agreement shall in no way preclude either Party from independently developing, having developed, or acquiring, marketing, offering to sell or selling any products or services, nor shall it in any way preclude either Party from entering into any similar agreement with any third party.


22.4	Obligations. There is no obligation for either party to purchase Products or Services under this Agreement unless a valid Order is issued.


22.5	Force Majeure. Neither party will be in default or liable for any delay or failure to comply with material aspects of this Agreement due to forces beyond their reasonable control, including but not limited to acts of god, provided such party immediately notifies the other and implements a reasonable mitigation plan and takes reasonable mitigating actions in response thereto.

22.6

Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the state of California. Except for any dispute, claim, or controversy related to the intellectual property rights of a party, any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, will be submitted for resolution by binding arbitration in accordance with the Comprehensive Arbitration Rules & Procedures of JAMS. The arbitration will be held in Santa Clara County, California and it shall be conducted in the English language. Judgment on any award in arbitration may be entered in any court of competent jurisdiction. Notwithstanding the above, each Party shall have the right to file in the Santa Clara, California state court or the federal courts in and for the Northern District of California an application for temporary or preliminary injunctive relief, writ of attachment, writ of possession, temporary protective order, and/or appointment of a receiver on the grounds that the arbitration award to which the applicant may be entitled may be rendered ineffectual in the absence of such relief. The Parties exclude application of the 1980 United Nations Convention on Contracts for the International Sale of Goods, if applicable.


22.7	EXCEPT AS OTHERWISE DESCRIBED HEREIN, IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW.

22.8

Regulatory Approvals. Nutanix is responsible for the Product’s compliance with all applicable UL, CSA, FCC, and other approvals, standards and regulations. Nutanix will designate Flextronics’s appropriate manufacturing location as the manufacturing location for the purposes of such approvals. Flextronics will cooperate with public and private regulatory organizations to allow periodic factory inspections at mutually agreeable times to maintain such approvals. Should the Products fail to meet the applicable approvals, standards or regulations due to a failure in Flextronics’s manufacturing process to comply with such approvals, standards or regulations, (a) Flextronics may cease production, (b) Flextronics will follow Nutanix’s reasonable direction to institute the required changes and (c) Flextronics may require a delay in manufacturing, without being in breach of this Agreement, until applicable qualifications are met.

22.9

Import/Export Regulations: Each party shall comply with all applicable import, export and re-export control laws and regulations, including the U.S. Export Administration Regulations, the International Traffic in Arms Regulations, and the sanctions maintained by the Treasury Department’s Office of Foreign Assets Control. Each party represents and warrants that items will not be exported, re-exported, or transferred directly or indirectly to any location, entity, government or person prohibited by the applicable laws or regulations of any jurisdiction, without prior authorization from the relevant government authorities. As necessary and reasonably requested, each party will provide export information such as the Export Classification Control Number

(ECCN), Harmonized Tariff Regulations (HTS) codes, Country of Origin, or Commodity Classification Automated Tracking System (CCATS) for hardware components


22.10	Data Privacy. Each Party will comply with all applicable data privacy laws and otherwise protect personal data and will not use, disclose, or transfer across borders personal data except as necessary to perform under this Agreement.


22.11	Relationship of the parties. Each Party is an independent contractor and neither Party is an agent, servant, representative, partner, joint venture, or employee of the other or has any authority to assume or create any obligation or liability of any kind on behalf of the other.

22.12

Publicity. Except as otherwise set forth herein, neither Party shall publicize the existence of this Agreement nor refer to the other Party in connection with any promotion or publication without the prior written approval of such Party. Further, neither Party shall disclose the terms and conditions of this Agreement to any third party, including but not limited to any financial terms, except as required by law or with the prior written consent of the non- disclosing party.


22.13	Notices. Any and all written notices, communications, and deliveries between Nutanix and Flextronics with reference to this Agreement shall be effective as of and deemed made on the date of mailing if sent by registered or certified mail, or by overnight courier, to the address of the other party as follows:

IN THE CASE OF Flextronics:

6201 America Center Drive, San Jose, CA 95002

WITH A COPY TO: [Omitted]

IN THE CASE OF NUTANIX:

1740 Technology Drive, Suite 150

San Jose, CA 95110

Attention: Nutanix Legal

WITH A COPY TO: [Omitted]


22.14	Severability. Should any provision herein be held by a court of competent jurisdiction to be illegal, invalid, or unenforceable, such provision shall be modified to reflect the intentions of the parties. All other terms and conditions shall remain in full force and effect.

22.15

Waiver. No amendment, modification, or waiver of any provision of this Agreement shall be effective unless set forth in a writing executed by an authorized representative of each party. No failure or delay by either party in exercising any right, power, or remedy will operate as a waiver of any such right, power, or remedy. No waiver of any provision of this Agreement shall constitute a continuing waiver or a waiver of any similar provision unless expressly set forth in a writing signed by an authorized representative of each party.


22.16	Amendment: This Agreement may be amended by the parties in an executed document and on a mutually agreeable basis.


22.17	Days: Whenever a reference is made herein to "days", the reference means business days, not calendar days, unless the reference is specifically to "calendar days". Business days shall mean a day that the relevant Flextronics manufacturing site normally operates


22.18	FCPA. Each party acknowledges that it is familiar with the Foreign Corrupt Practices Act (“FCPA”) of the United States, the UK Bribery Act 2010 and all applicable local laws relating to anti-corruption or anti-bribery (the “Anti-corruption Laws”). Each party agrees not to violate the Anti-Corruption Laws with respect to the subject of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.


NUTANIX, INC.	FLEXTRONICS TELECOM SYSTEMS, LTD.


By:_____________________________	By:______________________________


Name:___________________________	Name:____________________________


Title:____________________________	Title:_____________________________


Date:____________________________	Date:_____________________________

NUTANIX NETHERLANDS, B.V.

By:_____________________________

Name:___________________________

Title: Managing Director A

Date:____________________________

By:_____________________________

Name:___________________________

Title: Managing Director B

Date:____________________________

EXHIBIT A: FLEXTRONICS WARRANTY


1.	WARRANTY

1.1Express Limited Warranty. As the sole and exclusive warranty and Nutanix’s sole and exclusive remedy with respect to a breach by Flextronics of such warranty, the following shall apply: In the case of a conflict between this Express Limited Warranty and any term of the Agreement, the Express Limited Warranty shall control.

(a)Flextronics warrants that the Products shall have been manufactured in accordance with the applicable Specifications and shall be free from defects in workmanship for a period of [***] from the date of shipment. Flextronics will pass through to Nutanix any transferable Component warranties, indemnities and remedies provided to Flextronics by the manufacturers of the Components, including any warranties and indemnities for intellectual property infringement. As used herein, “Specifications” means the written manufacturing/assembly specifications and instructions for the Products provided by Nutanix to Flextronics.

(b)The above warranty does not apply to, and Flextronics makes no representations or warranties whatsoever with respect to any of the following: (i); any, (a) Components (excluding “Production Materials” defined below) , (b); or services provided by vendors on the Nutanix approved vendor list; (ii) defects resulting from adherence to the Specifications, or any instructions provided by or on behalf of Nutanix; (iii) the design of the Products; (iv) Product that has been abused, damaged, altered or misused or mishandled (including improper storage or installation or improper handling in accordance with static sensitive electronic device handling requirements) by any person or entity after title passes to Nutanix; (v) first articles, prototypes, pre-production units, test units or other similar units; (vi) defects resulting from tooling, designs or instructions produced or supplied by Nutanix, including any defective test equipment or test software provided by Nutanix; or (vii) the compliance of Components (excluding Production Materials) or Products with any safety or Environmental Regulations or other laws. “Production Materials” means the glue, solder and other materials used to integrate the Components into the Products.

(c)Upon any failure of a Product to comply with this express limited warranty, Flextronics’s sole obligation, and Nutanix’s sole remedy, is for Flextronics, at Flextronics’s option or upon mutual agreement, for Flextronic’s to either promptly repair or replace such unit and return it to Nutanix, freight prepaid. In the event that such Product cannot be repaired or replaced using commercially reasonable efforts, Flextronics shall credit the price paid by the Nutanix to Flextronics for such unit.

(d)Flextronics warrants environmental compliance of all Production Materials used to create the Products. Flextronics does not warrant Components, but will pass through environmental warranties from its suppliers to the degree allowed in its supplier agreements. In addition, Flextronics will review certificates of conformity from vendors of Components, excluding Customer Controlled Components and Customer Consigned Components; provided that Flextronics’s sole obligation with respect to such Components is to review the applicable certificate of conformity. Flextronics will maintain appropriate records to allow traceability of all Products and/or Components. Flextronics will undertake to immediately inform Nutanix of any material changes that come to its attention affecting environmental compliance. For the purpose of this Agreement, “Customer Controlled Components” means Components provided to Flextronics by Nutanix or by vendors with whom Nutanix has a direct commercial relationship with in connection to that Component. In addition, “Customer Consigned Components” means Components that are provided to Flextronics by Nutanix and which Flextronics stores on behalf of Nutanix as further described in the Agreement.

(e)Epidemic Failure. Notwithstanding the above, should failures of the Product be the result of an Epidemic Failure, the parties shall mutually agree whether Flextronics shall either repair or replace Products subject to such Epidemic Failure. In addition, Flextronics shall credit Nutanix for reasonable direct costs that are incurred by Nutanix as a result of an Epidemic Failure. Such remedies for Epidemic Failure shall be in addition to any other remedies Nutanix may have under this Agreement. An “Epidemic Failure” is defined as failure of more than [***] of the Products that occur within [***] from the date of shipment and where there is a single root cause of the failure which is a result of a breach of Flextronics’s warranty under Section 1.1 of this Exhibit A.

1.2No Representations or Other Warranties. EXCEPT AS MAY OTHERWISE BE EXPLICITLY STATED IN THIS EXHIBIT A OR THE AGREEMENT, FLEXTRONICS MAKES NO OTHER REPRESENTATIONS OR WARRANTIES ON THE PERFORMANCE OF THE SERVICES, OR THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH NUTANIX, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

EXHIBIT B - RETURN MATERIALS AUTHORIZATION (“RMA”) PROCESS

[OMITTED]

EXHIBIT C - Manufacturing Test Requirements

The purpose of this Exhibit C is to specify the standards and requirements that Flextronics must meet for general manufacturing test and process for the Products. The following Nutanix documents maintained and updated in Arena will be used and followed for Manufacturing Test requirements for products tested in Flex.

[OMITTED]

EXHIBIT D - Quality Plan

[OMITTED]

EXHIBIT E - Software at Scale Program

[RESERVED]

EXHIBIT F - Product List

The purpose of this Exhibit F is to list the snapshot of products that are in the manufacturing portfolio of Flex. New revisions to existing products or new products get added on an ongoing basis.



Nutanix Item Number	Description
[***]	[***]
[***]	[***]
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[***]	[***]



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[***]	[***]
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[***]	[***]



[***]	[***]
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[***]	[***]
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[***]	[***]
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[***]	[***]
[***]	[***]
[***]	[***]

EXHIBIT G - L10/Ship and Debit Process

Based on the diagram Nutanix diagram below, Flextronics will treat L10 platforms as ship and debit products that will be purchased as a completely configured, ready to ship product by a designated 3^rd party supplier. Flextronics will place orders for specific platform configurations that Nutanix signals via EDI. Flextronics will place the order to designated L10 supplier once an EDI signal is received. Designated L10 supplier will ship a complete turnkey platform configuration, at lead-time, to Flextronics. The purpose of this process is to allow products manufactured by Flex and a designated 3^rd party supplier to be shipped together.

[***]

EXHIBIT H - Nutanix/Flextronics NDA

[OMITTED]

AMENDMENT #1 TO MANUFACTURING SERVICES AGREEMENT

This Amendment # 1 (“Amendment #1”) to the Manufacturing Services Agreement (“Agreement”) by and between Flextronics Telecom Systems, Ltd and its Affiliates (“Flextronics”) and Nutanix Inc., and Nutanix Netherlands, B.V. (collectively “Nutanix”) is entered into as of December 19, 2017 (“Amendment #1 Effective Date”). Collectively, Flextronics and Nutanix are referred to as the “Parties”.

RECITALS

A. The Parties entered into the Agreement as of November 11, 2017.

B The parties now desire to amend the Agreement to add terms and conditions around the “Software at Scale” program (further defined below).

NOW THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree as follows:


2.9	The definition of “Software” in Section 1.30 is deleted and replaced with the following:

Software means the object version of the software provided by Nutanix for integration into a Product or a Software at Scale Product. For the purpose of clarity, any firmware or BIOS technology provided by Nutanix shall be considered Software.


3.9	The definition of “Specifications” in Section 1.31 is deleted and replaced with the following:

Specifications mean the manufacturing, assembly and testing specifications related to the Products and the Software at Scale Products as agreed by the Parties and supplemented by the Parties in writing from time to time.


4.9	A new Section 5.5 is added to the Agreement as follows:

In addition to the purchase of Product(s) by Nutanix, Exhibit E, “Software at Scale” describes the process and the terms under which Flextronics may manufacture and sell Software at Scale Hardware (as defined in Exhibit E). Except as specifically stated herein, the term “Product(s)” shall not include Software at Scale Products. Notwithstanding the above, Section 18 (Limitation of Liability) of this Agreement shall apply in relation to Software at Scale Products and Software at Scale Hardware. A new Section 5.6 is added to the Agreement as follows:

5.6 LICENSE. Nutanix hereby grants Flextronics and its Affiliates a non-exclusive, world-wide, royalty free and fully paid up, non-sublicensable and non-transferable license for the term of this Agreement or until such license is revoked by Nutanix in writing with 60 days prior written notice, under all of Nutanix’s Intellectual Property Rights to copy, make, sell offer for sale, distribute and import, Software at Scale Hardware (as defined in Exhibit E) solely in connection with fulfilling purchase orders for Software at Scale Hardware [***] as further outlined in Exhibit E.


5.9	A new Section 5.7 is added to the Agreement as follows:

5.7 APPOINTMENT AS [***]. Flextronics [***] and [***] such appointment, as a [***] for Flextronics with [***] and the [***]. The services performed as [***] include the following:

5.7.1 Order [***]. As further described in Exhibit E, Nutanix will, [***] Flextronics, [***] to and orders [***] for [***] and [***] information to Flextronics.

5.7.2 [***]. Flextronics shall use commercially reasonable efforts to [***].

5.7.3 [***]. Nutanix [***] of Software at Scale Hardware as part of performing [***] be solely [***] Software at Scale Hardware (as defined in Exhibit E). Nutanix [***] the Software at Scale Hardware and [***] Software at Scale Hardware related to [***]. However, Nutanix [***] the Software at Scale Hardware utilizing a [***]


6.9	Section 14 is deleted in its entirety and replaced with the following:

14. Software at Scale

The Parties intend to pursue transactions related to the Software at Scale Program. The details of the Software at Scale Program are outlined in Exhibit E to this Agreement.


7.9	An additional section is added to the end of Section 19.1 as follows:

With regard to the Software at Scale Products, Nutanix shall fully defend the Flextronics Indemnitees from and against any third party claims, actions, suits, legal proceedings and demands arising out of or related to; (a) infringement by the Software and/or the Specifications of any Intellectual Property Rights of a third party; (b) damage to any tangible property, personal injury, or death, resulting or claimed to have resulted from any alleged defect in the Specifications or Software; and shall indemnify and hold harmless the Flextronics Indemnitees for all liabilities, damages, losses, judgments, settlements, costs and pay expenses as incurred in defense of such claims, including without limitation, attorney fees. For the purpose of clarity, with respect to Software at Scale Products only, Nutanix shall have no indemnity obligation under this Section 19.1 for any third party claims, actions, suits, legal proceedings and demands arising out of (i) an infringement by the Components or the Software at Scale Hardware or (ii) damage to any tangible property, personal injury, or death, resulting or claimed to have resulted from a defect in the Components or the Software at Scale Hardware.


8.9	An additional sentence is added to the end of Section 19.2 as follows:

In addition, Nutanix shall have no liability for the combination of Software at Scale Products with equipment, devices, software or data not provided by Nutanix, if a claim would not have occurred but for such combination, operation or use.


9.9	An additional sentence is added to the end of Section 19.3

Flextronics indemnity obligations under this Section 19.3 shall not apply in relation to Software at Scale Products.


10.9	Exhibit E is deleted in its entirety and replaced with the following Exhibit E as attached to this Amendment #1.


11.9	The Parties previously entered into an Amendment dated November 11, 2017 regarding the subject matter of this Amendment #1. This Amendment #1 supersedes in its entirety the Amendment and the Amendment shall be of no further force and effect.


12.9	No other changes are made to the Agreement, and following the Amendment Effective Date, all references to the “Agreement” shall mean the Agreement as amended by this Amendment #1.

[SIGNATURES FOLLOW ON NEXT PAGE]

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the Amendment Effective Date.

CONFIDENTIAL

NUTANIX, INC. FLEXTRONICS TELECOM SYSTEMS, LTD.

By: /s/ Kenneth Long By: /s/ Manny Marimuthu

Name: Kenneth Long Name: Manny Marimuthu

Title: VP VAO and Corporate Controller Title: Director

Date: December 20, 2017 Date: 21/12/2017

NUTANIX NETHERLANDS, B.V.

By: /s/ Kenneth Walter Long III

Name:Kenneth Walter Long III

Title: Managing Director A

Date: December 20, 2017

By: /s/ Servais Willie Ngabo

Name: Servais Willie Ngabo

Title: Managing Director B

Date: December 20, 2017

EXHIBIT E- SOFTWARE AT SCALE


2.10	INTRODUCTION

This Exhibit E shall enable Flextronics to sell Software at Scale Hardware [***] (defined below) and Nutanix to license software [***], to allow [***]. Such program shall be referred to as “Software at Scale”. To facilitate such sales of Software at Scale Products, [***] in accordance with the terms of Section 4 of this Amendment #1.

The goal of the Software at Scale program is that the Software at Scale Customer (as defined below) [***] purchasing the Software at Scale Products [***]. The Software at Scale Program includes the following characteristics:


2.11	[*] for Software at Scale Hardware will be [*].


3.11	The Parties shall enable the Software at Scale Customer to experience a [***] with Products contemplated under the Agreement.


4.11	Flextronics shall directly sell Software at Scale Hardware to [*] and Nutanix shall provide the software license [*] to the End Customer.


5.11	Flextronics may impose any qualifications to do business [*] and may choose [] or to reject specific [] from any [*].


6.11	Provided that the End Customer purchases after sales support from Nutanix, Nutanix shall support the hardware and software in [***] as set forth in Section 6 of this Exhibit E.


7.11	Nutanix has no involvement or responsibility for any [*] other than in the performance of [*].


3.10	DEFINITIONS. Capitalized terms in this Exhibit E shall have the meanings set forth below.


a.	[*] means another entity in the sales channel [*].


b.	“Software at Scale Customer” or “End Customer” means the last entity who purchases the Software at Scale Products for their own use and not for resale to another entity.


c.	“Software at Scale [*]” means [] for Software at Scale Hardware which [] as described in section [] of the Agreement and [**] below.


d.	“Software at Scale Hardware” means the [***] of certain Products that have been designated by Nutanix to be part of the Software at Scale Program.


e.	“Software at Scale Products” means [*] sold by Flextronics []. These Software at Scale Products shall be designated with the suffix [**].


f.	“Territory” means the world.

3. INVENTORY LIABILITY FOR SOFTWARE AT SCALE PRODUCTS

Nutanix shall only provide Demand Forecasts for Products [***]. For the purpose of clarity, this Exhibit E does not modify either Party’s obligations with regard to inventory liability as described in the Agreement, [***] of the Agreement. As Software at Scale Orders [***] are accepted by Flextronics, [***]. If a Software at Scale Order is cancelled after being accepted by Flextronics, [***].

4. APPOINTMENT AS [***]


2.13	Non-Exclusive Appointment. Flextronics hereby [*], and [] such appointment, to [**] during the term of the Agreement solely in accordance with the terms and conditions of this Agreement.


3.13	Nutanix Marketing Obligations as [*]. Nutanix shall, at its own expense, market the Software at Scale program including, advertising, promoting, and soliciting the sale of the Software at Scale Products [*] consistent with good business practice.


4.13	Nutanix Obligations to Provide Quotes [*]. For expediency purposes, [] for Software at Scale Orders []. For the purpose of clarity, the Parties agree that the sales quotes [] are not binding. [**].


5.13	Once Nutanix has received a confirmation on a Software at Scale Order [*]. In the event that Flextronics decides to reject a [*].

5. FLEXTRONICS OBLIGATIONS


2.14	Flextronics shall be responsible for 1) its own [*] with regard to any Software at Scale Hardware [*] and, 2) the fulfillment of any Software at Scale Order that it thereby agrees to as part of the processes outlined in this Exhibit E.


3.14	Flextronics shall provide Software at Scale Customers (through the sales channel) with a [*] Software at Scale Hardware portion of the [] consistent with the [**] of the Agreement.


4.14	As part of fulfilling any Software at Scale Orders, Flextronics shall also meet the following requirements in a timely fashion. At a minimum, Flextronics shall:


i.	[***] Software at Scale Hardware;


ii.	Maintain a [*] on time ship rate for all Software at Scale Hardware shipped based on a seven [*] lead time; and


iii.	[***] Software at Scale Hardware.

6. END CUSTOMER SUPPORT

Nutanix separately sells product support for Product(s) and Software at Scale Products shipped to Software at Scale Customers and End Customers. Provided that the End Customer has purchased Nutanix support from Nutanix, either directly or indirectly, Nutanix shall provide such support to the [***]. To facilitate such support, upon shipment of the Software at Scale Hardware, Flextronics shall provide Nutanix with all serial number information so that Nutanix can provide such support.

Exhibit

Form 10-Q

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dheeraj Pandey, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Nutanix, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: June 5, 2019		/s/ Dheeraj Pandey
		Dheeraj Pandey
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Exhibit

Form 10-Q

Exhibit 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Duston M. Williams, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Nutanix, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: June 5, 2019		/s/ Duston M. Williams
		Duston M. Williams
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit

Form 10-Q

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dheeraj Pandey, certify pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Nutanix, Inc. for the quarter ended April 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Nutanix, Inc.



Date: June 5, 2019		/s/ Dheeraj Pandey
		Dheeraj Pandey
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Exhibit

Form 10-Q

Exhibit 32.2

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Duston M. Williams, certify pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Nutanix, Inc. for the quarter ended April 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Nutanix, Inc.



Date: June 5, 2019		/s/ Duston M. Williams
		Duston M. Williams
		Chief Financial Officer
		(Principal Financial Officer)