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What changed in Nutanix, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Nutanix, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+476 added−523 removedSource: 10-K (2024-09-19) vs 10-K (2023-09-21)

Top changes in Nutanix, Inc.'s 2024 10-K

476 paragraphs added · 523 removed · 365 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+30 added−39 removed29 unchanged
Biggest changeThe Nutanix Cloud Platform’s scale-out architecture, enterprise-grade data services and freedom of infrastructure choice enable customers to standardize on the Nutanix Cloud Platform as a single cloud platform to run a wide variety of their workloads ranging from end-user computing, VDI, enterprise applications, high-performance databases, and analytics applications to container-based modern applications, artificial intelligence ("AI"), machine learning ("ML"), and generative AI workloads. 1 Table of Contents In fiscal 2022, we updated our pricing and packaging to simplify our product portfolio and streamline the products and offerings that we have developed over the years.
Biggest changeNutanix Cloud Platform’s scale-out architecture, enterprise-grade data services and freedom of infrastructure choice enable organizations to standardize on Nutanix Cloud Platform as a single cloud platform to run a wide variety of workloads. 1 Table of Contents Nutanix Cloud Infrastructure (NCI) is a distributed HCI for enterprise IT applications.
We primarily engage our end customers through our global sales force who directly interact with key IT decision makers while also providing sales development, opportunity qualification and support to our channel partners.
We primarily engage with our end customers through our global sales force who directly interact with key IT decision makers while also providing sales development, opportunity qualification and support to our channel partners.
Further corporate governance information, including our corporate governance guidelines, board committee charters and code of business conduct and ethics, is also available on our investor relations website under the heading "Governance Documents." Information contained on or accessible through our websites are neither a part of nor incorporated by reference into this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC, and any references to our websites and the inclusion of our website addresses in this Annual Report on Form 10-K are intended to be inactive textual references only. 11 Table of Contents
Further corporate governance information, including our corporate governance guidelines, board committee charters and code of business conduct and ethics, is also available on our investor relations website under the heading "Governance Documents." Information contained on or accessible through our websites is neither a part of nor incorporated by reference into this Annual Report on Form 10-K or any other report or document we file with or furnish to the SEC, and any references to our websites and the inclusion of our website addresses in this Annual Report on Form 10-K are intended to be inactive textual references only. 10 Table of Contents
We have also developed and announced strategic technology partnerships that bring together best-in-class solutions across the ecosystem into integrated offerings and demonstrated interoperability and support for our customers, including partnerships with Red Hat, Inc., Citrix Systems, Inc., and Intel Corporation.
We have also developed and announced strategic technology partnerships that bring together best-in-class solutions across the ecosystem into integrated offerings and demonstrated interoperability and support for our customers, including partnerships with Citrix Systems, Inc., Intel Corporation, NVIDIA, and Red Hat, Inc.
Information about Segment and Geographic Areas The segment and geographic information required herein is contained in Note 14 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Corporate Information We were incorporated in Delaware in September 2009 as Nutanix, Inc.
Information about Segment and Geographic Areas The segment and geographic information required herein is contained in Note 13 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Corporate Information We were incorporated in Delaware in September 2009 as Nutanix, Inc.
We plan to dedicate significant resources to our continued research and development efforts and 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 enterprise cloud platform.
We plan to dedicate significant resources to our continued research and development efforts and 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.
For more information, see the section titled "Components of Our Results of Operations" included in Part II, Item 7, as well as Note 3 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For more information, see the section titled "Components of Our Results of Operations" included in Part II, Item 7, as well as Note 2 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Distributors handle fulfillment and shipment for certain end customers, but do not hold inventory. Competition We operate in the intensely competitive IT infrastructure market and compete primarily with companies that sell software and hardware to build and operate private clouds, integrated systems and standalone storage and servers, as well as providers of public cloud infrastructure solutions.
Distributors handle fulfillment and shipment for certain end customers, but do not hold inventory. 6 Table of Contents Competition We operate in the intensely competitive IT infrastructure market and compete primarily with companies that sell software and hardware to build and operate private clouds, integrated systems and standalone storage and servers, as well as providers of public cloud infrastructure solutions.
Through the Technology Alliance Partner arm of our Elevate Partner Program, our developer, application, networking and security, data protection, hardware and infrastructure partners receive access to resources that allow them to validate and integrate their products with Nutanix solutions and engage in joint sales training and enablement.
Through the Technology Alliance Partner and AI Partner arms of our Elevate Partner Program, our developer, application, networking and security, data protection, hardware, and infrastructure partners receive access to resources that allow them to validate and integrate their products with Nutanix solutions and engage in joint sales training and enablement.
Our research and development teams primarily consist of distributed systems software and user interface engineers. A large portion of our research and development team is based in San Jose, California. We also maintain research and development centers in India, North Carolina, Washington, Serbia, and Germany.
Our research and development teams primarily consist of distributed systems software and user interface engineers. A large portion of our research and development team is based in San Jose, California. We also maintain research and development centers in India, North Carolina, Washington, Serbia, Germany, and the United Kingdom.
We have developed relationships with a broad range of leading technology companies that help us deliver world-class solutions to our customers.
Ecosystem Partners . We have developed relationships with a broad range of leading technology companies that help us deliver world-class solutions to our customers.
We have never had a work stoppage and we consider our relationship with our employees to be good. 8 Table of Contents We understand the importance of human capital and prioritize building our culture, talent development, compensation and benefits, and diversity and inclusion.
We have never had a work stoppage and we consider our relationship with our employees to be good. We understand the importance of human capital and prioritize building our culture, talent development, compensation and benefits, and diversity and inclusion.
See Item 1A, "Risk Factors," for further discussion of risks related to the potential impact of government regulation on our business. Employees and Human Capital We had approximately 6,450 employees worldwide as of July 31, 2023. None of our employees in the United States are represented by a labor organization or are a party to any collective bargaining arrangement.
See Item 1A, "Risk Factors," for further discussion of risks related to the potential impact of government regulation on our business. Employees and Human Capital We had approximately 7,150 employees worldwide as of July 31, 2024. None of our employees in the United States are represented by a labor organization or are a party to any collective bargaining arrangement.
For fiscal 2024, we are introducing a rebranding of our Culture Principles, developed with input from employees in every function, region, and level of Nutanix.
For fiscal 2024, we introduced a rebranding of our Culture Principles, developed with input from employees in every function, region, and level of Nutanix.
These new Culture Principles are encapsulated as follows: • We Own It • We Work As One Team • We Obsess Over Our Customers’ Success • We Think Long-Term Each of these Culture Principles aligns with our Core Values and represents the beliefs that inform all kinds of decisions at our company – from how we hire, to how we develop our products and services, to how we work with our customers.
These Culture Principles are encapsulated as follows: • We obsess about our customers’ success 9 Table of Contents • We work as one team • We own it • We think long-term Each of these Culture Principles aligns with our Core Values and represents the beliefs that help inform all kinds of decisions at our company – from how we hire, to how we develop our products and services, to how we work with our customers.
Such integrations enable a simpler deployment and consumption experience for our customers in their environments and increases adoption of our enterprise cloud platform.
Such integrations enable a simpler deployment and consumption experience for our customers in their environments and increase adoption of our platform.
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. Growth Strategy Key elements of our growth strategy include: • Continually innovate and maintain technology leadership.
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. Growth Strategy Key elements of our current growth strategy include: • Landing new end customers.
See Item 1A, "Risk Factors," for further discussion of risks related to protecting our intellectual property. Facilities Our corporate headquarters are located in San Jose, California where, under lease agreements that expire through May 2030, we currently lease approximately 333,000 square feet of space.
We also leverage some open source software in most of our products. See Item 1A, "Risk Factors," for further discussion of risks related to protecting our intellectual property. Facilities Our corporate headquarters are located in San Jose, California where, under lease agreements that expire through May 2030, we currently lease approximately 215,000 square feet of space.
("VMware") (which has agreed to be acquired by Broadcom Inc.), that offer a broad range of virtualization, infrastructure and management products to build and operate enterprise and hybrid clouds; • providers of public cloud infrastructure and SaaS-based offerings, such as AWS, Google Cloud, Oracle Cloud, and Microsoft Azure; and • traditional IT systems vendors, such as Dell, HPE, Hitachi Data Systems ("Hitachi"), International Business Machines ("IBM"), Lenovo, Pure Storage, Inc.
We face competition from, among others: • software providers that offer a broad range of virtualization, infrastructure and management products to build and operate enterprise and hybrid clouds, such as VMware by Broadcom; • providers of public cloud infrastructure and SaaS-based offerings, such as AWS, Google Cloud, Oracle Cloud, and Azure; and • traditional IT systems vendors, such as Dell, HPE, Hitachi Data Systems ("Hitachi"), International Business Machines ("IBM"), Lenovo, Pure Storage, Inc.
Delivery of Our Solutions The Nutanix Cloud Platform can be deployed on-premises at the edge or in data centers, running on a variety of qualified hardware platforms, in popular public cloud environments such as AWS and Microsoft Azure through Nutanix Cloud Clusters, or, in the case of our cloud-based software and software-as-a-service ("SaaS") offerings, via hosted service.
Delivery of Our Solutions Nutanix Cloud Platform can be deployed in core data centers, at the edge, or in public clouds, running on a variety of qualified hardware platforms (including our Nutanix-branded NX hardware line), in popular public cloud environments such as Amazon Web Services ("AWS") and Microsoft Azure ("Azure") through NC2, or, in the case of our cloud-based software and software-as-a-service ("SaaS") offerings, via hosted service.
Information contained on or accessible through our website is neither a part of this Annual Report on Form 10-K nor incorporated by reference herein, and any references to our website and the inclusion of our website address in this Annual Report on Form 10-K are intended to be inactive textual references only. 10 Table of Contents Available Information Our website is located at www.nutanix.com and our investors relations website is located at ir.nutanix.com.
Information contained on or accessible through our website is neither a part of this Annual Report on Form 10-K nor incorporated by reference herein, and any references to our website and the inclusion of our website address in this Annual Report on Form 10-K are intended to be inactive textual references only.
Our Elevate Partner Program simplifies engagement for our partner ecosystem using a consistent set of tools, resources, and marketing platforms. Our channel partners include distributors, resellers, managed service providers, telcos and global systems integrators. Arrow Electronics, Inc., a distributor to our end customers, represented 32%, 33% and 32% of our total revenue for fiscal 2021, 2022 and 2023, respectively.
Our Elevate Partner Program simplifies engagement for our partner ecosystem using a consistent set of tools, resources, and marketing platforms. Our channel partners include distributors, resellers, managed service providers, telcos, and global systems integrators. Our top two distributors to our end customers represented 48%, 48% and 47% of our total revenue for fiscal 2022, 2023 and 2024, respectively.
We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near-term. 6 Table of Contents Manufacturing We do not manufacture any hardware. The Nutanix-branded NX series appliances, including those that are delivered by us, are manufactured for us based on our specifications by Super Micro Computer, Inc. ("Supermicro").
We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term. Manufacturing We do not manufacture any hardware. The Nutanix-branded NX series appliances are manufactured by Super Micro Computer, Inc. ("Supermicro").
Government Regulation Our business activities are subject to various federal, state, local and foreign laws, rules and regulations. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations or competitive position as compared to prior periods.
Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations or competitive position as compared to prior periods.
The Nutanix Cloud Platform Leveraging the foundation of our core HCI technology, the Nutanix Cloud Platform delivers a rich set of products, solutions and services to enable our customers to simply run and manage their private cloud and, increasingly, their public and hybrid multicloud environments.
Nutanix Cloud Platform Nutanix Cloud Platform delivers a rich set of software products, solutions and services to enable our customers to simply run and manage their private cloud, public and managed cloud and hybrid multicloud environments.
We file reports with the Securities and Exchange Commission ("SEC"), which maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC.
Available Information Our website is located at www.nutanix.com and our investors relations website is located at ir.nutanix.com. We file reports with the Securities and Exchange Commission ("SEC"), which maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC.
To give our customers even more choice, we engineered our software solutions to run on a variety of server platforms, decoupling our software from our Nutanix-branded hardware appliances and powering a variety of on-premises private cloud deployments; a significant step in our transition from a hardware to a software company.
To provide our customers with more choice, we further engineered our software solutions to run on a variety of server platforms, decoupling our software from Nutanix-branded hardware appliances and powering a variety of on-premises private cloud deployments, as part of our previously-completed transition from a hardware company to a software company.
We believe the principal competitive factors in our market include: • product features and capabilities; • system scalability, performance and resiliency; • management and operations, including provisioning, troubleshooting, analytics, automation, and upgrades; • total cost of ownership over the lifetime of the technology; • customer freedom of choice over, and product interoperability with, third-party applications, infrastructure software, infrastructure systems, and platforms and public clouds; • application mobility across disparate silos of enterprise computing, including public and private cloud infrastructure; and • quality of customer experience, including usability, support and professional services. 7 Table of Contents We are also venturing into a number of markets that are adjacent to our core HCI market, both through the expansion in hybrid multicloud environments as well as through our addition of new functionality in our cloud platform and through portfolio products.
We believe the principal competitive factors in our market include: • platform features and capabilities; • system scalability, performance and resiliency; • management and operations, including provisioning, troubleshooting, analytics, automation, and upgrades; • total cost of ownership over the lifetime of the technology; • customer freedom of choice over, and product interoperability with, third-party applications, infrastructure software, infrastructure systems, and platforms and public clouds; • application mobility across disparate silos of enterprise computing, including public and private cloud infrastructure; and • quality of customer experience, including ease-of-use, support and professional services.
Employees are required to be conscientious about workplace safety. In compliance with applicable laws, and to promote the concept of a safe workplace, we maintain an Injury and Illness Prevention Program.
In addition, we work with our employees and facilities management at our office locations to ensure that work areas are kept safe and free of hazardous conditions. Employees are required to be conscientious about workplace safety. In compliance with applicable laws, and to promote the concept of a safe workplace, we maintain an Injury and Illness Prevention Program.
Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Our human capital resources objectives include identifying, recruiting, retaining, and incentivizing talent, as well as promoting the development and integration of our existing and new employees, advisors and consultants.
We also focus on compliance with all health and safety laws applicable to our business. To that end, appropriate requirements are implemented, as needed, in order to comply with public health or safety obligations. In addition, we rely upon employees to ensure that work areas are kept safe and free of hazardous conditions.
Health, Wellness, and Safety The health and safety of employees and others on our property are a top priority. We also focus on compliance with all health and safety laws applicable to our business. To that end, appropriate requirements are implemented, as needed, in order to comply with public health or safety obligations.
We recently launched a modernized brand identity and new strategic narrative that highlights our evolution in corporate positioning from being the pioneer and a leader in HCI to now solving the market’s toughest challenges in operating hybrid multicloud environments.
Over the past year, we have focused on raising awareness for our newly updated brand identity and new strategic narrative that highlights our evolution in corporate positioning from being the pioneer and a leader in HCI to now bringing one platform to solve the market’s toughest challenges in operating hybrid multicloud environments.
We will also continue to establish partnerships with cloud and ecosystem partners to provide our customers with freedom of choice. 5 Table of Contents • Invest in growth while balancing growth against operating expenses. We intend to continue investing in our growth, while balancing such growth against our operating expenses.
We also intend to continue to expand our partnerships with OEM, cloud, and ecosystem partners to provide our customers with more freedom of choice. • Driving profitable growth. We intend to continue to invest in our growth, while balancing such growth against our operating expenses. By maintaining this balance, we believe we will be able to sustain profitable growth.
Promoting diversity, equity, inclusion and belonging ("DEIB") in our workforce is among our key corporate objectives, and to further support this objective we have implemented a number of initiatives, including expanding our employee resource groups, continuing our company-wide diversity training and overall education efforts, as well as mentorship programs and forming global, cross-functional DEIB advisory groups.
To further support this objective, we have implemented a number of initiatives, including expanding our employee resource groups, continuing our company-wide diversity training and overall education efforts, as well as developing and implementing allyship, advocacy, and mentorship programs.
We believe that we are positioned favorably against our competitors based on these factors. However, many of our competitors have substantially greater financial, technical and other resources, greater brand recognition, larger sales forces and marketing budgets, a larger existing customer base, broader distribution, and larger and more mature intellectual property portfolios.
However, many of our competitors have substantially greater financial, technical and other resources, greater brand recognition, larger sales forces and marketing budgets, a larger existing customer base, broader distribution, and larger and more mature intellectual property portfolios. Intellectual Property Our success depends in part upon our ability to protect and use our core technology and intellectual property.
We also continue to support the well-being and continued development of our employees by offering well-being days, during which all employees may enjoy private time away from work requirements. 9 Table of Contents Growth and Development We challenge our employees to constantly learn, continuously improve, and eternally evolve -- and to that end we invest resources to foster a learning culture throughout our company and to empower our employees to drive their personal and professional growth by equipping them with onboarding and learning programs.
Growth and Development We challenge our employees to constantly learn, continuously improve, and eternally evolve -- and to that end we invest resources to foster a learning culture throughout our company and to empower our employees to drive their own personal and professional growth by equipping them with onboarding and learning programs.
Our end customers typically deploy our technology initially for a specific project or application deployment. Our sales teams and channel partners then seek to systematically target follow-on sales opportunities to drive additional purchases throughout our broader product portfolio, while also focusing on customer adoption and consumption of their original purchases.
Our end customers typically deploy our technology initially for a specific project or application. Our sales teams and channel partners then target follow-on sales opportunities to drive additional purchases through new applications and products.
These adjacent markets include areas such as cloud disaster recovery, data services for Kubernetes, data governance and compliance, cloud management, files and object storage, and database automation and database-as-a-service. Competitors in these markets include large, sophisticated companies that may have more experience or longer operating histories in these markets as well as new entrants.
These adjacent markets include areas such as Kubernetes management and data and platform services, cloud disaster recovery, data governance and compliance, cloud management, files and object storage, and database automation and database-as-a-service.
We lease all of our facilities and do not own any real property. We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we would lease suitable additional space to accommodate our operations.
We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we would lease suitable additional space to accommodate our operations. Government Regulation Our business activities are subject to various federal, state, local, and foreign laws, rules and regulations.
In addition to specifically tailored packages for each country based on local market practice and the competitive landscape, we also provide a range of globally available support programs such as an Employee Assistance Program, online health engagement and child development support. Health, Wellness, and Safety The health and safety of employees and others on our property are a top priority.
We regularly review our programs and encourage employee feedback about the rewards they value most. We tailor rewards programs specifically based on local market practice and the competitive landscape and we provide a range of globally available support programs such as an Employee Assistance Program, online health engagement, and child development support.
We intend to attract and engage new channel and OEM partners around the globe while also selling our standalone software for deployment on qualified hardware or a hosted service to maximize the availability of our solutions for our customers.
We have established strong partnerships, and driven commercial success with several major channel, OEM, cloud, and ecosystem partners. We intend to continue to attract and engage new channel and OEM partners around the globe while also selling our software for deployment on qualified hardware or hosted services.
We operate a subscription-based business model to provide our customers with the flexibility to choose the licensing that works best for them based on their specific business needs. A subscription-based business model means one in which our products, including associated support and entitlement arrangements, are sold with a defined term.
We operate a subscription-based business model, meaning one in which our products, including associated support and entitlement arrangements, are sold with a defined duration.
Non-portable software licenses for our platform are delivered or sold alongside configured-to-order appliances, with a license term equal to the life of the associated appliance. Our subscription term-based licenses are sold separately, or can also be sold alongside configured-to-order appliances. Our subscription term-based licenses typically have terms ranging from one to five years.
Our subscription term-based licenses are sold separately or can also be sold alongside configured-to-order appliances. Our subscription term-based licenses typically have durations ranging from one to five years. Our cloud-based SaaS subscriptions have durations extending up to five years.
Diversity, Equity, Inclusion and Belonging At Nutanix, we value that our differences make us stronger: our diverse backgrounds, experiences and perspectives when shared, make us a more innovative and resilient team, and we can better delight and serve our customers when our teams reflect the diversity of the businesses and communities we serve.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through stock-based and cash-based compensation awards to drive stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. 8 Table of Contents Diversity, Equity, Inclusion and Belonging At Nutanix, we believe that our differences make us stronger: our diverse backgrounds, experiences and perspectives when shared, make us a more innovative and resilient team, and we can better delight and serve our customers when our teams reflect the diversity of the businesses and communities we serve.
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 enterprise cloud platform to provide a variety of cloud-based services to their customers.
We typically provide these services at the time of initial installation to help the customer with configuration and implementation. 4 Table of Contents Our End Customers We have end customers across a broad range of industries, such as automotive and other transportation, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology, and telecommunications.
We design reward and recognition programs that resonate wherever our talent sits in the world. Our reward packages are carefully crafted to offer physical, mental/emotional, and financial support to our employees and their families. We regularly review our programs and encourage employee feedback about what they value most.
Total Rewards We believe a robust, equitable, and competitive Total Rewards portfolio is essential to attracting and retaining diverse talent that moves Nutanix forward. We design reward and recognition programs that resonate wherever our talent sits in the world. Our reward programs are carefully crafted to offer physical, mental/emotional, and financial support to our employees and their families.
We had a broad and diverse base of over 24,000 end customers as of July 31, 2023, including approximately 1,020 Global 2000 enterprises.
We also sell to service providers, which use Nutanix Cloud Platform to provide a variety of cloud-based services to their customers. We had a broad and diverse base of over 26,000 end customers as of July 31, 2024, including approximately 1,060 Global 2000 enterprises.
Tech Data Corporation, another distributor to our end customers, represented 15%, 15% and 16% of our total revenue for fiscal 2021, 2022 and 2023, respectively. OEM Partners . Our OEM partners typically pre-install our software on hardware appliances and sell to end customers as an appliance. Our OEM partners can also sell our offerings as software-only to our end customers.
OEM Partners . Our OEM partners typically pre-install our software on hardware appliances and sell to end customers as an appliance. Our OEM partners can also sell our offerings as software-only to our end customers. Our software is installed on hardware from Cisco Systems, Inc.
Our enterprise cloud platform typically includes one or more years of support and entitlements, which provides customers with the right to software upgrades and enhancements as well as technical support. Purchases of term-based licenses and SaaS subscriptions have support and entitlements included within the subscription fees and are not sold separately.
Purchases of term-based licenses and SaaS subscriptions have support and entitlements included within the subscription fees and are not sold separately.
Dell Technologies ("Dell"), Lenovo Group Ltd. ("Lenovo"), Fujitsu Technology Solutions GmbH ("Fujitsu"), and Hewlett Packard Enterprise ("HPE") pre-install our software on their hardware to create the Dell XC Series, Lenovo Converged HX Series, Fujitsu XF Series, and HPE DX Series appliances, respectively. HPE also delivers our software with HPE DX Series Servers as a service through the HPE GreenLake offering.
("Cisco"), Dell Technologies ("Dell"), Fujitsu Technology Solutions GmbH ("Fujitsu"), Hewlett Packard Enterprise ("HPE"), and Lenovo Group Ltd. ("Lenovo"), as part of the Cisco Compute Hyperconverged with Nutanix family, Dell XC series (including the recently announced Dell XC Plus), Fujitsu XF series, HPE DX series appliances, and Lenovo Converged HX series, respectively.
These markets are characterized by constant change and rapid innovation. Our main competitors fall into the following categories: • software providers, such as VMware, Inc.
These markets are characterized by constant change and rapid innovation.
Intellectual Property Our success depends in part upon our ability to protect and use our core technology and intellectual property. We rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures and employee nondisclosure and invention assignment agreements to protect our intellectual property rights.
We rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures, and employee nondisclosure and invention assignment agreements to protect our intellectual property rights. As of July 31, 2024, we had 513 U.S. patents that have been issued and 168 non-provisional patent applications pending in the United States. Our issued U.S. patents expire between 2033 and 2044.
We believe this land and expand strategy enables us to quickly expand our footprint within our existing end customer base from follow-on orders that in the aggregate are often multiples of the initial order. • Enhanced focus on renewals .
We believe this land-and-expand strategy will help enable us to expand our footprint within our existing customer base. • Driving renewals and retention in existing end customers. In addition to our land-and-expand strategy, as part of our subscription-based business model, we intend to continue to focus on adoption and renewals among our existing customer base.
We intend to grow our base of end customers by continuing to invest in sales and marketing, leveraging our network of channel partners and OEMs, growing our business internationally, and extending our enterprise cloud platform to address new customer segments. • Continue to drive follow-on sales to existing end customers.
We intend to continue to grow our customer footprint through targeted investments in sales and marketing, our network of channel partners, and strengthening our OEM partnerships. We believe that our evolving platform and product portfolio will help enable us to address a larger customer base. • Expanding sales to existing end customers.
Following an evaluation of our longer-term facilities plans due to our transition to a hybrid work environment, we entered into amendments to these lease agreements to reduce our leased space to approximately 215,000 square feet beginning in June 2024. We also maintain offices in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa.
We also maintain offices in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa. We lease all of our facilities and do not own any real property.
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ITEM 1. Business Overview Nutanix, Inc. ("we," "us," "our" or "Nutanix") provides a leading enterprise cloud platform, which we call the Nutanix Cloud Platform, that consists of software solutions and cloud services that power our customers’ enterprise infrastructure. Our solutions deliver a consistent cloud operating model across edge, private-, hybrid- and multicloud environments for all applications and their data.
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ITEM 1. Business Overview Nutanix, Inc. ("we," "us," "our," or "Nutanix") is a global leader in cloud software, offering organizations a single platform for running applications and managing data, anywhere. Our vision is to make hybrid multicloud deployments simple and free customers to focus on achieving their business outcomes.
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Our solutions allow organizations to simply run and move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure ("VDI") services, container-based modern applications, and analytics applications, between on-premises and public clouds. Our goal is to provide a single, simple, open software platform for all hybrid and multicloud applications and their data.
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Our mission is to delight customers with an open hybrid multicloud platform with rich data services to run and manage any application, anywhere.
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Founded in 2009, we pioneered the hyperconverged infrastructure ("HCI") category, initially combining the disparate IT silos of compute, storage and networking into a single on-premises product which offered simplicity, lower total cost of ownership, scalability and customer choice. We continued to innovate and developed Acropolis Hypervisor ("AHV") - our native hypervisor designed to run all virtualized applications.
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Our Nutanix Cloud Platform is designed to enable organizations to build a hybrid multicloud infrastructure, providing a consistent cloud operating model with a single platform for running applications and managing data in core data centers, at the edge, and in public clouds, all while supporting a variety of hypervisors and container platforms.
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That transition has continued with the adoption of "cloud" as a mainstream IT paradigm, which has motivated IT professionals to move toward hybrid cloud architectures that allow businesses to simultaneously utilize a private cloud powered by Nutanix software, along with third-party public cloud infrastructures for maximum flexibility.
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Nutanix Cloud Platform supports a wide variety of workloads with varied compute, storage, and network requirements, including business-critical applications, data platforms (including SQL and NoSQL databases and business intelligence applications), general-purpose workloads (including system infrastructure, networking, and security), end-user computing and virtual desktop infrastructure services, enterprise artificial intelligence ("AI") workloads (including machine learning ("ML") and generative AI workloads), and cloud native applications (including modern, containerized applications).
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We continue to transform our software solutions into a comprehensive enterprise cloud platform, based on web-scale engineering principles and with a focus on automation and operational simplicity, which allows our customers to power nearly any scale IT deployment.
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We originally pioneered hyperconverged infrastructure ("HCI") to break down legacy silos by merging compute, storage and networking into a single, easy-to-use, software-defined data center platform. We continued to innovate and developed Nutanix AHV, our native hypervisor that offers enterprise-grade virtualization and built-in Kubernetes support.
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Although today our customers primarily use our enterprise cloud platform to power their on-premises private cloud deployments, our solutions also simplify the complexities of multicloud environments with a single management console for automation, cost governance and compliance.
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To provide our customers with the flexibility to choose their preferred license levels and durations based on their specific business needs, we reshaped our licensing by completing a transition to a subscription-based business model.
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The end result will be an enterprise cloud platform that empowers our customers to unify operations, infrastructure and data services from the edge, to private cloud and public clouds, allowing IT to choose the right cloud for each application.
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In addition to making hybrid multicloud deployments simple, we have a further long-term vision to enable developers to build modern container-based applications once and run them anywhere through Project Beacon, our multi-year effort to provide consistent Kubernetes platform management and data-centric platform services across clouds. Our business is organized into a single operating and reportable segment.
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In fiscal 2023, our subscription billings increased to 93% of total billings, up one percentage point from fiscal 2022, and our subscription revenue reached $1.7 billion, representing a year-over-year increase of 21%. In fiscal 2023, ACV billings was $956.8 million, representing a year-over-year increase of 27%.
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NCI software combines compute, storage, and networking resources from a cluster of servers into a single logical pool with integrated resiliency, security, performance, and simplified administration.
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The description of our products and offerings below are based on our new simplified product portfolio, but will also refer, where noted in parentheses, to the product names that we have used in the past.
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NCI includes the following underlying features and services: • Nutanix AOS is the scale-out storage technology that makes HCI possible, delivering enterprise-grade capabilities via a highly distributed software architecture that runs across clusters of servers.
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Nutanix Cloud Infrastructure (NCI) – Our offerings in hybrid cloud infrastructure combine our core HCI software stack (AOS), native, enterprise-grade hypervisor (AHV), virtual networking, disaster recovery, network and data security and Kubernetes container runtime. AOS . AOS converges virtualization, storage, and networking services into a turnkey solution.
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Nutanix AOS includes integrated snapshots, replication, and disaster recovery that can be used with block, file, and object storage and for both virtual machines and containers. • Nutanix AHV is our mature enterprise hypervisor - a modern and secure virtualization solution designed to power virtual machines and containers for application and cloud native workloads. • Nutanix Data Services for Kubernetes simplifies and unifies provisioning and operating cloud native applications by extending enterprise data services to containerized apps. • Flow Network Security is a stateful, distributed firewall providing microsegmentation to secure network traffic between applications. • Flow Virtual Networking provides rich software-defined networking with multi-tenant isolation, self-service provisioning, and IP address preservation. • Nutanix Cloud Clusters (NC2) enables organizations to run applications on a unified infrastructure platform across on-premises and multiple public clouds, all operated as a single cloud.
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AOS supports major hypervisors, including AHV and VMware ESXi, and uses software running across a scale-out cluster of servers to deliver advanced storage capabilities to all workloads running on the cluster. Building on a distributed data fabric, AOS enables robust enterprise storage services across multiple storage protocols.
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NC2 empowers IT operators to place workloads in their clouds of choice without migration or operational hurdles, delivering flexibility and freedom from cloud lock-in. • Nutanix Central unifies the control of Nutanix's hybrid multicloud infrastructure, providing global visibility and simplified governance through a single console with federated access and seamless navigation across on-premises deployments and public cloud deployments via NC2. • Nutanix Prism is the unified control plane and UI that provides intuitive, consumer-grade management for end-to-end IT infrastructure management and operations.
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Storage capabilities include snapshots and cloning, performance acceleration capabilities, such as data locality and all flash optimizations, storage optimization, such as deduplication, compression and erasure coding, data protection and disaster recovery features, and data security with software-based data encryption.
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Nutanix Cloud Manager (NCM) is a unified management solution for providing intelligent operations, self-service and orchestration, security compliance and visibility, and control of cloud costs.
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Our disaster recovery solutions include long distance data replication between multiple sites, advanced failover orchestration capabilities and support for metro high availability configurations, zero data loss synchronous replication and snapshot-based disaster recovery over any distance. AHV .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Business and Industry • our ability to achieve our business plans, vision, and objectives, including our growth and go-to-market strategies, successfully and in a timely manner; • macroeconomic or geopolitical conditions, industry trends, and technological developments, including disruptions and delays in global supply chains; • the competitive market, including our competitive position and advantages and ability to compete effectively; • our ability to predict future financial performance from our historical financial performance; • our ability to remediate the previously-identified material weakness in our internal controls and maintain an effective system of internal controls; • our ability to address customer needs and expand or maintain our customer base; • our platform, solutions, products, services and technology, including their interoperability and availability with and on third-party platforms and technologies, and current and future product roadmaps, including expanding our AI-related capabilities; • our reliance on key personnel and ability to attract, train, incentivize, retain, and/or ramp to full productivity, qualified employees and key personnel; • our ability to form new or maintain and strengthen existing, strategic alliances and partnerships, as well as our ability to manage any changes thereto; • our reliance on key manufacturers, suppliers or other vendors; • our ability to obtain, maintain, protect, and enforce our intellectual property rights; • any business model transitions (including our transition to a subscription-based business model); • the impact of a pandemic or major public health concern on our business, operations, financial performance, and stock price; • any changes to, or failure to comply with, laws and regulations, as well as the impact of and any regulatory investigations and enforcement actions and other legal proceedings, including any pending or future class action lawsuits; 12 Table of Contents • complex and evolving U.S. and foreign privacy, data use and data protection, content, competition, consumer protection, and other laws and regulations; • the occurrence of security breaches, improper access to or disclosure of our data or user data, and other cyber incidents or undesirable activity on our platform; and • investors’ and other stakeholders’ expectations of our performance relating to environmental, social and governance factors.
Biggest changeThese risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Business and Industry • our ability to achieve our business plans, vision, and objectives, including our growth and go-to-market strategies, successfully and in a timely manner; • macroeconomic or geopolitical conditions, industry trends, and technological developments, including disruptions and delays in global supply chains; • the competitive market, including our competitive position, advantages and ability to compete effectively, and ability to increase our market share; • our ability to capitalize on new opportunities resulting from a change in ownership of one of our main competitors; • our ability to predict future financial performance from our historical financial performance; • our ability to address customer needs and expand or maintain our customer base; • our platform, solutions, products, services, and technology, including their interoperability and availability with and on third-party platforms and technologies, any undetected defects in our solutions, and current and future product roadmaps, including expanding our artificial intelligence-related capabilities; • our ability to form new or maintain and strengthen existing, strategic alliances and partnerships, as well as our ability to manage any changes thereto; • our reliance on key manufacturers, suppliers or other vendors; and • any business model transitions.
Additionally, many foreign countries and governmental bodies, including in Australia, Brazil, the European Economic Area ("EEA"), UK, Switzerland, India, Japan, China, 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.
Additionally, many foreign countries and governmental bodies, including in Australia, Brazil, the European Economic Area ("EEA"), the UK, Switzerland, India, Japan, China, 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.
As a result of these and future data transfer developments, we may experience a reluctance from current or prospective customers in the EEA, UK, Switzerland and other similar countries to use our products and may find it necessary to make changes to our data transfer mechanisms and handling of personal data, including with respect to the provision of our products and services.
As a result of these and future data transfer developments, we may experience a reluctance from current or prospective customers in the EEA, the UK, Switzerland, and other similar countries to use our products and may find it necessary to make changes to our data transfer mechanisms and handling of personal data, including with respect to the provision of our products and services.
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.
Foreign Corrupt Practices Act of 1977, as amended, 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.
Our gross margins may be affected by a variety of factors, including fluctuations in the pricing of our products (including as a result of competitive pricing pressures or increases in component pricing), 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, customer renewal rates and the degree to which renewals drive our top-line growth, changes in the mix between direct versus indirect sales, changes in the mix of products sold, and the timing and amount of recognized and deferred revenue, particularly as a result of our transition to a subscription-based business model.
Our gross margins may be affected by a variety of factors, including fluctuations in the pricing of our products (including as a result of competitive pricing pressures or increases in component pricing), 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, customer renewal rates and the degree to which renewals drive our top-line growth, changes in the mix between direct versus indirect sales, changes in the mix of products sold, and the timing and amount of recognized and deferred revenue, particularly as a result of our subscription-based business model.
Our business depends on manufacturers (including Supermicro and our OEM partners) to produce the hardware appliances on which our software runs (including both our Nutanix-branded NX series appliances and the various third-party appliances that are included on our hardware compatibility list) as well as various products that are beyond our control or the control of such manufacturers, which exposes us to direct and indirect risks beyond our control, including reduced control over quality assurance, product costs, product availability, supply chain disruptions and delays, and potential reputational harm and brand damage.
Our business depends on manufacturers (including Supermicro and our OEM partners) to produce the hardware platforms on which our software runs (including both the Nutanix-branded NX series appliances and the various third-party appliances that are included on our hardware compatibility list) as well as various products that are beyond our control or the control of such manufacturers, which exposes us to direct and indirect risks beyond our control, including reduced control over quality assurance, product costs, product availability, supply chain disruptions and delays, and potential reputational harm and brand damage.
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 recently been critical of existing trade agreements and may impose more stringent export and import controls.
Furthermore, our activities are subject to the U.S. economic sanctions laws and regulations that prohibit the export 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 recently been critical of existing trade agreements and may impose more stringent export and import controls.
Further, the increase in some costs associated with our cloud-based 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 solutions. 21 Table of Contents We believe our plan has certain advantages; however, it also presents a number of risks to us including, but not limited to, the following: • arrangements entered into on a ratable subscription basis may delay when we can recognize revenue, even when compared to similar term-based subscription sales, which we currently recognize upfront, and can require up-front costs, which may be significant; • since revenue is recognized ratably over the term of the customer agreement, any decrease in customer purchases of our ratable subscription-based products and services will not be fully reflected in our operating results until future periods.
Further, the increase in some costs associated with our cloud-based 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 solutions. 19 Table of Contents We believe our plan has certain advantages; however, it also presents a number of risks to us including, but not limited to, the following: • arrangements entered into on a ratable subscription basis may delay when we can recognize revenue, even when compared to similar term-based subscription sales, which we currently recognize upfront, and can require up-front costs, which may be significant; • since revenue is recognized ratably over the term of the customer agreement, any decrease in customer purchases of our ratable subscription-based products and services will not be fully reflected in our operating results until future periods.
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.
If one or more holders elect to convert their 2027 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, as we expand our platform and introduce new cloud-based products that may hold more of our customer's data, any undetected or unresolved errors, defects or security vulnerabilities may 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 customers’ data, any undetected or unresolved errors, defects or security vulnerabilities may result in data unavailability, unauthorized access to, loss, corruption, or other harm to our end-customers' data.
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.
In addition, upon conversion of the 2027 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 2027 Notes being converted.
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.
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.
Factors that could cause fluctuations in the market price of our securities 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 any current and future business model transitions (including our transition to a subscription-based business 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 any failure to meet or exceed these projections; • announcements by us or our competitors of new products and solutions 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 Securities and Exchange Commission; • 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 of or 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 56 Table of Contents • other events or factors which may be outside of our control, such as political and social unrest, terrorist attacks, hostilities, war, malicious human acts, climate change, natural disasters (including extreme weather), pandemics or other major public health concerns, and other similar events, or responses to these events.
Factors that could cause fluctuations in the market price of our securities 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 any current and future business model transitions, 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 any failure to meet or exceed these projections; • announcements by us or our competitors of new products and solutions 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 Securities and Exchange Commission; • rumors and market speculation involving us or other companies in our industry; 47 Table of Contents • 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 of or 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 which may be outside of our control, such as political and social unrest, terrorist attacks, hostilities, war, malicious human acts, climate change, natural disasters (including extreme weather), pandemics or other major public health concerns, and other similar events, or responses to these events.
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 and upon conversion of the Notes. We have also registered the offer and sale of all shares of our Class A common stock that we may issue under our equity compensation plans.
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 and upon conversion of the 2027 Notes. We have also registered the offer and sale of all shares of our Class A common stock that we may issue under our equity compensation plans.
The conversion of some or all of our Notes, to the extent we deliver shares upon conversion thereof, will dilute the ownership interests of existing stockholders, reduce our earnings per share and potentially have an adverse effect on the price of our securities.
The conversion of some or all of the 2027 Notes, to the extent we deliver shares upon conversion thereof, will dilute the ownership interests of existing stockholders, reduce our earnings per share and potentially have an adverse effect on the price of our securities.
Servicing the Notes may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the Notes in cash, to repay the Notes at maturity, or to repurchase the Notes upon a fundamental change.
Servicing the 2027 Notes may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the 2027 Notes in cash, to repay the 2027 Notes at maturity, or to repurchase the 2027 Notes upon a fundamental change.
In addition, as we continue to develop new solutions designed to address new market demands, sales of our solutions will in part depend on capturing new spending in these markets, including public cloud and hybrid cloud services.
In addition, as we continue to develop new solutions designed to address new market demands, sales of our solutions will in part depend on capturing new spending in these markets, including public cloud, hybrid cloud and cloud native services.
The loss of the services of any of our executive officers or key employees, and any failure to have in place and execute an effective succession plan for key executives, could disrupt our business and have a significant negative impact on our operating results, prospects and future growth. 24 Table of Contents In addition, our success and growth also depend substantially on our ability to continue to attract, hire, integrate, train, retain, and adequately incentivize qualified and highly skilled personnel, in particular, in sales and engineering.
The loss of the services of any of our executive officers or key employees, and any failure to have in place and execute an effective succession plan for key executives, could disrupt our business and have a significant negative impact on our operating results, prospects and future growth. 36 Table of Contents In addition, our success and growth also depend substantially on our ability to continue to attract, hire, integrate, train, retain, and adequately incentivize qualified and highly skilled personnel, in particular, in sales and engineering.
If we are unable to have appliances or replacement products shipped in a timely manner, end customers may seek to cancel their contracts with us, we may suffer reputational harm, and our business, operating results and prospects may be adversely affected. 34 Table of Contents 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.
If we are unable to have appliances or replacement products shipped in a timely manner, end customers may seek to cancel their contracts with us, we may suffer reputational harm, and our business, operating results and prospects may be adversely affected. 27 Table of Contents 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.
In addition, the stock prices of many companies in the high technology industry have declined significantly after those companies have failed to meet, or in some cases failed to significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts.
The stock prices of many companies in the high technology industry have declined significantly after those companies have failed to meet, or in some cases failed to significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts.
These provisions include: • a classified Board of Directors with three-year staggered terms (which will be phased out starting with our 2023 annual meeting of stockholders so that our Board of Directors will be fully declassified by our 2025 annual meeting of stockholders), 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; 58 Table of Contents • 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; • 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 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.
These provisions include: • a classified Board of Directors with three-year staggered terms (which is being phased out so that our Board of Directors will be fully declassified by our 2025 annual meeting of stockholders), which could delay the ability of stockholders to change the membership of a majority of our Board of Directors; 50 Table of Contents • 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; • 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; • 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 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.
We are subject to risks associated with having significant worldwide operations, including, but not limited to: • 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, including the results and impact of the United Kingdom's separation from the European Union, commonly known as "Brexit"; • 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; • the potential impact of tariffs or other trade restrictions imposed by, or threatened to be imposed by, the U.S. government, such as the tariffs imposed on Chinese imports to the United States; • 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; 44 Table of Contents • 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.
We are subject to risks associated with having significant worldwide operations, including, but not limited to: • 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, including the results and impact of the United Kingdom's separation from the European Union, commonly known as "Brexit"; • 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; • the potential impact of tariffs or other trade restrictions imposed by, or threatened to be imposed by, the U.S. government, such as the tariffs imposed on Chinese imports to the United States; • 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 U.S.
Any of these developments could extend the lead times, increase the costs of the 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. 33 Table of Contents We generally maintain minimal inventory for repairs and a number of evaluation and demonstration units, and generally acquire components only as needed.
Any of these developments could extend the lead times, increase the costs of the 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. 26 Table of Contents We generally maintain minimal inventory for repairs and a number of evaluation and demonstration units, and generally acquire components only as needed.
In addition, even if holders of a series 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 such series of Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders of the 2027 Notes do not elect to convert their 2027 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such 2027 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as a significant portion of our revenue from additional sales must be recognized over the applicable subscription term. Our gross margins are impacted by a variety of factors and may be subject to variation from period to period.
Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as a significant portion of our revenue from additional sales must be recognized over the applicable subscription duration. Our gross margins are impacted by a variety of factors and may be subject to variation from period to period.
From time to time, we release earnings guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance includes forward-looking statements based on projections prepared by our management.
From time to time, we release earnings guidance in our earnings conference calls, earnings releases, investor presentations, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance includes forward-looking statements based on projections prepared by our management.
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 applicable series of Notes.
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 2027 Notes.
In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our Class A common stock could depress the price of our securities. 57 Table of Contents We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value.
In addition, the existence of the 2027 Notes may encourage short selling by market participants because the conversion of the 2027 Notes could be used to satisfy short positions, or anticipated conversion of the 2027 Notes into shares of our Class A common stock could depress the price of our securities. 49 Table of Contents We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value.
Our continued focus on growth may negatively impact our ability to achieve or maintain profitability in the near term. We intend to continue balancing our growth against our operating expenses. However, maintaining this balance may negatively impact our ability to achieve, or subsequently maintain, profitability on a GAAP basis in the near term.
We intend to continue balancing our growth against our operating expenses. However, maintaining this balance may negatively impact our ability to achieve, or subsequently maintain, profitability on a GAAP basis in the near term.
Some of those key assumptions relate to the macroeconomic environment, including inflation and interest rates, which are inherently difficult to predict. 30 Table of Contents We generally state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.
Some of those key assumptions relate to the macroeconomic environment, including inflation and interest rates, which are inherently difficult to predict. We generally state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.
It is also difficult to predict end customer demand or adoption rates for our solutions or the future growth of our market. In addition, we have estimated the size of our total addressable market based on internally generated data and assumptions, as well as data published by third parties, which we have not independently verified.
It is also difficult to predict end customer demand or adoption rates for our solutions or the future growth of our market. In addition, we have estimated the size of our total addressable and serviceable available markets based on internally generated data and assumptions, as well as data published by third parties, which we have not independently verified.
For example, 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. Further, both our corporate headquarters and our main contract manufacturers are located in the San Francisco Bay Area, a region known for seismic activity.
For example, 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. Further, both our corporate headquarters and our contract manufacturer are located in the San Francisco Bay Area, a region known for seismic activity.
Our failure to repurchase Notes of a series at a time when the repurchase is required by the applicable indenture or to pay cash upon conversions of such Notes or at their maturity as required by the applicable indenture would constitute a default under such indenture.
Our failure to repurchase the 2027 Notes at a time when the repurchase is required by the applicable indenture or to pay cash upon conversions of such 2027 Notes or at their maturity as required by the applicable indenture would constitute a default under such indenture.
This choice of forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
This choice of forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. 51 Table of Contents Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
As part of these efforts, we recently introduced GPT-in-a-Box, which addresses the challenges that enterprises face when adopting generative AI and AI/ML applications by providing our full-stack software-defined AI-ready platform with services designed to facilitate customers’ deployment of their generative AI workloads.
As part of these efforts, we offer GPT-in-a-Box, which addresses the challenges that enterprises face when adopting generative AI and AI/ML applications by providing our full-stack software-defined AI-ready platform with services designed to facilitate customers’ deployment of their generative AI workloads.
Holders of each series of 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 applicable maturity date at a repurchase price equal to 100% of the principal amount of such Notes to be repurchased, plus accrued and unpaid special interest, if any.
Holders of the 2027 Notes will have the right to require us to repurchase all or a portion of their 2027 Notes upon the occurrence of a fundamental change before the applicable maturity date at a repurchase price equal to 100% of the principal amount of such 2027 Notes to be repurchased, plus accrued and unpaid special interest, if any.
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.
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. 35 Table of Contents • The licenses under which we license certain types of open source software may require that, if we modify and distribute 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 under the same terms.
If we fail to successfully execute on our plan to sell more cloud services, which would be sold on a ratable subscription-basis, our results of operations could be adversely affected.
If we fail to successfully execute on our plan to sell more cloud services, which are sold on a ratable subscription-basis, our results of operations could be adversely affected.
Federal Trade Commission ("FTC") and various state, local and foreign bodies, data protection authorities, and agencies. The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, use, storage, disclosure and transfer of personal information of individuals, including end customers and employees.
Federal Trade Commission ("FTC") and various state, local and foreign bodies, data protection authorities, and agencies. 40 Table of Contents The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, use, storage, disclosure, and transfer of personal information of individuals, including end customers and employees.
Our business, operations and performance are dependent in part on worldwide market, economic and financial conditions and events that may be outside of our control, such as global, regional, and local economic developments, fiscal, monetary and tax policies, high inflation, rising interest rates, recession, political and social unrest, terrorist attacks, hostilities or the perception that hostilities may be imminent, military conflict, war, including the ongoing war in Ukraine and related sanctions as well as measures taken in response to such sanctions, malicious human acts, climate change, natural disasters (including extreme weather), pandemics or other major public health concerns and other similar events, and the impact these conditions and events have on the overall demand for enterprise computing infrastructure solutions 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.
Our business, operations and performance are dependent in part on worldwide market, economic and financial conditions and events that may be outside of our control, such as global, regional, and local economic developments, fiscal, monetary and tax policies, high inflation, rising interest rates, recession, political and social unrest, uncertainty surrounding the 2024 U.S. elections, terrorist attacks, hostilities or the perception that hostilities may be imminent, military conflict, war, including the ongoing war in Ukraine and related sanctions as well as measures taken in response to such sanctions, the ongoing military conflict in the Middle East, malicious human acts, climate change, natural disasters (including extreme weather), pandemics or other major public health concerns, and other similar events, and the impact these conditions and events have on the overall demand for enterprise computing infrastructure solutions 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.
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.
Our financial statements could fail to reflect adequate reserves to cover such a contingency. 44 Table of Contents 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.
Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made. 50 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We also expect that there will continue to be new proposed laws, regulations, industry standards, and case law concerning privacy, data protection and information security in the United States, the European Economic Area and other jurisdictions, and we cannot yet determine the impact these developments may have on our business.
We also expect that there will continue to be new proposed laws, regulations, industry standards, and case law concerning privacy, data protection and information security in the United States, the EEA and other jurisdictions, and we cannot yet determine the impact these developments may have on our business.
Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable. 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. 49 Table of Contents Our international operations may subject us to potential adverse tax consequences.
Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable. 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.
If we fail to manage our relationships with such manufacturers effectively, or if such manufacturers experience delays, disruptions or increased manufacturing lead times, component lead-time disruptions, capacity constraints or quality control problems in their operations or are unable to address our or our end customers’ requirements for or concerns about 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, or willingness, to consume our software may be materially impacted or delayed, which will adversely affect our business and operating results, competitive position, brand and reputation, as well as our relationships with affected customers. 32 Table of Contents In particular, we rely substantially on Supermicro to manufacture, as well as assemble and test, the Nutanix-branded NX series appliances, including those that are delivered by us.
If we fail to manage our relationships with such manufacturers effectively, or if such manufacturers experience delays, disruptions or increased manufacturing lead times, component lead-time disruptions, capacity constraints, or quality control problems in their operations or are unable to address our or our end customers’ requirements for or concerns about 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, or willingness, to consume our software may be materially impacted or delayed, which could adversely affect our business and operating results, competitive position, brand and reputation, as well as our relationships with affected customers. 25 Table of Contents In particular, we rely substantially on Supermicro to manufacture, as well as assemble and test, the Nutanix-branded NX series appliances.
If financial or industry analysts do not publish research or reports about our business, if they have difficulty understanding the changes to our business model, or if they issue inaccurate or unfavorable research regarding our securities, our stock price and trading volume could decline.
If financial or industry analysts do not publish research or reports about our business, if they have difficulty understanding our business model, or if they issue inaccurate or unfavorable research regarding our securities, our stock price and trading volume could decline.
End customers may choose not to renew their subscription agreements or support and entitlement agreements, or purchase additional solutions, 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.
End customers may choose not to renew their subscription agreements or support and entitlement agreements, or purchase additional solutions, because of several factors, such as dissatisfaction with our platform, solutions, support, or prices (including relative to competitive offerings), reductions in our end customers’ spending levels or other causes outside of our control.
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 July 31, 2023, approximately 58% of our full-time employees were located outside of the United States.
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 July 31, 2024, approximately 59% of our full-time employees were located outside of the United States.
Any of these events could adversely affect our business, operating results, financial condition and prospects. 37 Table of Contents The success of our business depends in part on our ability to protect and enforce our intellectual property rights.
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.
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.
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.
While cloud-based offerings currently make up a small portion of our business, this shift has required and will continue to require a considerable investment of resources and will continue to divert resources and increase costs, especially in cost of license and other revenues, in any given period.
While cloud-based offerings currently make up a small portion of our business, selling these offerings has required, and will continue to require, a considerable investment of resources and will continue to divert resources and increase costs, especially in cost of license and other revenues, in any given period.
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 but not limited to: • 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. 35 Table of Contents In addition, we could face legal claims for breach of contract, product liability, tort or breach of warranty.
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 but not limited to: • lost revenue or lost OEM or other channel partners or end customers; • delays in developing and deploying patches and other remedial measures to adequately address vulnerabilities, if any; • 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. 28 Table of Contents In addition, we could face legal claims for breach of contract, product liability, tort, or breach of warranty.
We derive a significant portion of our revenue from end customers and channel partners outside the United States. We derived approximately 46%, 44% and 44% of our total revenue from our international customers based on bill-to-location for fiscal 2021, 2022, and 2023, respectively.
We derive a significant portion of our revenue from end customers and channel partners outside the United States. We derived approximately 44%, 44% and 45% of our total revenue from our international customers based on bill-to location for fiscal 2022, 2023, and 2024, respectively.
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.
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.
This may adversely impact our business, financial condition, and operating results. 41 Table of Contents In the United States, more states are adopting their own data protection legislation, creating a complex privacy landscape from state to state.
This may adversely impact our business, financial condition, and operating results. In the United States, more states are adopting their own data protection legislation, creating a complex privacy landscape from state to state.
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.
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 and what license applies to the open source software could be subject to error.
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.
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, MIT License, Apache License, and other open source licenses.
The global macroeconomic environment has been, and may continue to be, inconsistent, challenging and unpredictable due to pandemics, international trade disputes or tensions, tariffs, including those imposed by the U.S. government on Chinese imports to the United States, restrictions on sales and technology transfers, rising interest and inflation rates, uncertainties related to changes in public policies such as domestic and international regulations and fiscal and monetary stimulus measures, taxes, or international trade agreements, actual or potential government shutdowns, elections and any related political instability, geopolitical turmoil and civil unrests, instability in the global credit markets, uncertainties regarding the effects of the United Kingdom’s separation from the European Union, commonly known as "Brexit," and other disruptions to global and regional economies and markets.
The global macroeconomic environment has been, and may continue to be, inconsistent, challenging and unpredictable due to pandemics, international trade disputes or tensions, tariffs, including those imposed by the U.S. government on Chinese imports to the United States, restrictions on sales and technology transfers, rising interest and inflation rates, uncertainties related to changes in public policies such as domestic and international regulations and fiscal and monetary stimulus measures, taxes, or international trade agreements, actual or potential government shutdowns, elections and any related political instability, geopolitical turmoil and civil unrests, instability in the global credit markets, and other disruptions to global and regional economies and markets.
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; • increased expectations from foreign customers and other stakeholders about our performance relating to environmental, social and governance factors (such as climate-related performance), and requirements to comply with foreign sustainability standards or initiatives, including new sustainability standards or initiatives in the European Union; • 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 and regulatory compliance costs associated with multiple international locations, including costs related to additional regulatory reviews or audits, financial accounting and reporting obligations and international cybersecurity requirements; • 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. 45 Table of Contents As we expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks.
Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), the United Kingdom Bribery Act of 2010 ("UK 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, including without limitation any new or evolving laws and regulations relating to the use of data in AI; • increased expectations from foreign customers and other stakeholders about our performance relating to environmental, social and governance factors (such as climate-related performance), and requirements to comply with foreign sustainability standards or initiatives, including new sustainability standards or initiatives in the European Union; • reduced or uncertain protection for intellectual property rights in some countries; 30 Table of Contents • 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 and regulatory compliance costs associated with multiple international locations, including costs related to additional regulatory reviews or audits, financial accounting and reporting obligations and international cybersecurity requirements; • 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.
For example, following our earnings release in February 2019, the price of our Class A common stock fell significantly and, as a result, multiple class action securities lawsuits were filed against us, as well as multiple shareholder derivative claims.
For example, following our earnings release in February 2019, the price of our Class A common stock fell significantly and, as a result, multiple class action securities lawsuits were filed against us, as well as multiple shareholder derivative claims, and following our earnings release in March 2023, a class action securities lawsuit was filed against us, as well as a shareholder derivative claim.
Our business and growth depend on our ability to attract and retain qualified personnel, including our management team and other key personnel, and the inability to attract, hire, integrate, train, retain, or motivate qualified personnel could harm our business and growth.
Risks Related to Employee Matters Our business and growth depend on our ability to attract and retain qualified personnel, including our management team and other key personnel, and the inability to attract, hire, integrate, train, retain, or motivate qualified personnel could harm our business and growth.
As we grow and evolve, we may find it difficult to maintain the beneficial aspects of our corporate culture globally. These difficulties may be further amplified by our decision to shift to a hybrid-first workplace, which could have a negative impact on our workplace culture and on the execution of our business plans and operations.
As we grow and evolve, we may find it difficult to maintain the beneficial aspects of our corporate culture globally. These difficulties may be further amplified by our hybrid-first work model and our globally distributed workforce, which could have a negative impact on our workplace culture and on the execution of our business plans and operations.
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. 23 Table of Contents Large organizations often undertake a significant evaluation process that results in a lengthy sales cycle.
These risks include: • 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; • 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; and • more stringent requirements in our support service contracts, including demand for quicker support response times and penalties for any failure to meet support requirements.
Adverse or uncertain macroeconomic or geopolitical conditions or reduced IT spending may adversely impact our business, revenues and profitability.
Adverse or uncertain macroeconomic or geopolitical conditions or reduced IT spending by our end customers may adversely impact our business, revenues and profitability.
Further, expenditures related to expanding our research and development efforts, sales and marketing efforts, our transition to a subscription-based business model, infrastructure and other such investments may not ultimately grow our business, billings or revenue or result in future profitability.
Further, expenditures related to expanding our research and development efforts, sales and marketing efforts, infrastructure and other such investments may not ultimately grow our business, billings or revenue or result in future profitability.
Factors that are difficult to predict and that could cause our operating results to fluctuate include, but are not limited to: • the timing and magnitude of orders (including the start dates thereof), shipments and acceptance of our solutions in any quarter; • our ability to attract new end customers and retain, and increase sales to, 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 focus on software-only sales and our transition to a subscription-based business 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 lengths of our contract terms; 29 Table of Contents • the mix of solutions sold, including the mix between software-only and appliance sales and the mix between subscription-based and non-subscription-based transactions, 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 a subscription-based model; • 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 incurred as a result of granting equity awards to attract, retain, and motivate employees and key personnel; • 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 other events that may be outside of our control, such as political and social unrest, terrorist attacks, hostilities, war, malicious human acts, climate change, natural disasters (including extreme weather), supply chain disruption or shortages, pandemics or other major public health concerns, and other similar events; and • future accounting pronouncements and changes in accounting policies.
Factors that are difficult to predict and that could cause our operating results to fluctuate include, but are not limited to: • the timing and magnitude of orders (including the start dates thereof), shipments and acceptance of our solutions in any quarter; • subscription renewal rates with end customers and the duration thereof; 23 Table of Contents • the timing of subscription renewals, such as subscription renewals that occur earlier than expected, which may have the effect of moving expected bookings and revenue from future periods to the current period; • our ability to attract new end customers and retain and increase sales to 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; • 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 lengths of our contract durations; • the mix of solutions sold, and the mix of revenue between product and support, entitlements and other services; • 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 incurred as a result of granting equity awards to attract, retain, and motivate employees and key personnel; • 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 other events that may be outside of our control, such as political and social unrest, terrorist attacks, hostilities, war, malicious human acts, climate change, natural disasters (including extreme weather), supply chain disruption or shortages, pandemics or other major public health concerns, and other similar events; and • future accounting pronouncements and changes in accounting policies.
In addition, we are in a period of transition to 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 addition, we recently transitioned to a subscription-based business model, 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.
Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. 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.
Moreover, others may independently develop technologies that are competitive to ours and reduce our sales or market advantages, or infringe our intellectual property. A reduction in our market advantages or 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.
Moreover, we will be required to repay the Notes of a series in cash at their maturity unless earlier converted or repurchased.
Moreover, we will be required to repay the 2027 Notes in cash at their maturity unless earlier converted or repurchased.
Epidemics, pandemics, other outbreaks of novel diseases or other major public health concerns could cause disruptions in our or our end customers’ or channel partners’ businesses, our suppliers’ and manufacturers’ operations or the global economy as a whole.
Epidemics, pandemics such as the COVID-19 pandemic, other outbreaks of novel diseases or other major public health concerns could also cause disruptions in our or our end customers’ or channel partners’ businesses, our supply chain, our suppliers’ and manufacturers’ operations, or the global economy as a whole.
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. 28 Table of Contents Substantially all of our sales to government entities have been made indirectly through our channel partners.
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.
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. Certain European Union and other jurisdictions have introduced anti-hybrid provisions.
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.
Risks Related to Ownership of Our Securities • any volatility and decline in the market price and/or trading volume of our securities, including as a result of financial or industry analyst reports or a lack thereof; • any dilutive impact of actual or perceived sales of substantial amounts of our securities in the public markets and/or the conversion of our outstanding convertible notes; • any limitations on the ability of holders of our securities to influence corporate matters due to certain provisions of our organizational documents or under Delaware law; • restrictions on our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees; and • our plans regarding payment of any future dividends. 13 Table of Contents Risks Related to Our Business and Industry We have a history of losses, and we may not be able to maintain profitability on a non-GAAP basis or achieve profitability on a GAAP basis in the future.
Risks Related to Ownership of our Securities • any volatility and decline in the market price and/or trading volume of our securities, including as a result of financial or industry analyst reports or a lack thereof; • any dilutive impact of actual or perceived sales of substantial amounts of our securities in the public markets and/or the conversion of our outstanding convertible notes; • any limitations on the ability of holders of our securities to influence corporate matters due to certain provisions of our organizational documents or under Delaware law; • restrictions on our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees; and • our plans regarding payment of any future dividends.
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. 60 Table of Contents Item 1B. Unresolved Staff Comments Not Applicable.
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.
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.
These factors and the legacy relationships that 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.
These macroeconomic challenges and uncertainties have, and may continue to, put pressure on global economic conditions and overall IT spending and may cause our end customers to modify spending priorities or delay or abandon purchasing decisions, thereby lengthening sales cycles and potentially lowering prices for our solutions, and may make it difficult for us to forecast our sales and operating results and to make decisions about future investments, any of which could materially harm our business, operating results and financial condition. 14 Table of Contents The markets in which we compete are rapidly evolving, which make it difficult to forecast end customer adoption rates and demand for our solutions.
These macroeconomic challenges and uncertainties have, and may continue to, put pressure on global economic conditions and overall IT spending and may cause our end customers to modify spending priorities or delay or abandon purchasing decisions, thereby lengthening sales cycles and potentially lowering prices for our solutions, and may make it difficult for us to forecast our sales and operating results and to make decisions about future investments, any of which could materially harm our business, operating results and financial condition.
Accordingly, the effect of significant downturns in sales, our failure to achieve our internal sales targets, a decline in the market acceptance of our services, or a decrease in retention rates may not be fully reflected in our operating results until future periods.
However, any such decline will negatively affect our revenue for future quarters. Accordingly, the effect of significant downturns in sales, our failure to achieve our internal sales targets, a decline in the market acceptance of our services, or a decrease in retention rates may not be fully reflected in our operating results until future periods.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes, has had, and may continue to have, a material effect on our reported financial results. On August 1, 2021, we adopted Accounting Standards Update ("ASU") 2020-06.
The accounting method for the 2027 Notes, which may be settled in cash, has had, and may continue to have, a material effect on our reported financial results. On August 1, 2021, we adopted Accounting Standards Update 2020-06.
Moreover, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition, such as VMware’s pending acquisition by Broadcom Inc.
Moreover, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition, such as the acquisition of VMware by Broadcom in November 2023.
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.
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. Government contracts may require the maintenance of certain security clearances for facilities and employees.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are located in San Jose, California where, under lease agreements that expire through May 2030, we currently lease approximately 333,000 square feet of space.
Biggest changeItem 2. Properties Our corporate headquarters are located in San Jose, California where, under lease agreements that expire through May 2030, we currently lease approximately 215,000 square feet of space. We also maintain offices in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa. We lease all of our facilities and do not own any real property.
We lease all of our facilities and do not own any real property. We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we would lease suitable additional space to accommodate our operations.
We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we would lease suitable additional space to accommodate our operations.
Removed
Following an evaluation of our longer-term facilities plans due to our transition to a hybrid work environment, we entered into amendments to these lease agreements to reduce our leased space to approximately 215,000 square feet beginning in June 2024. We also maintain offices in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information set forth under the "Legal Proceedings" subheading in Note 8 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Biggest changeItem 3. Legal Proceedings The information set forth under the "Legal Proceedings" subheading in Note 7 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFiscal Year 7/31/18 7/31/19 7/31/20 7/31/21 7/31/22 7/31/23 Nutanix, Inc. $ 100.00 $ 46.43 $ 45.39 $ 73.68 $ 30.95 $ 61.77 Nasdaq Composite Index $ 100.00 $ 107.74 $ 143.06 $ 196.76 $ 167.33 $ 195.47 Nasdaq Computer Index $ 100.00 $ 109.50 $ 162.42 $ 234.00 $ 197.59 $ 250.79 63 Table of Contents The information on the above graph shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act, and shall not be incorporated by reference into any registration statement or other document filed by us with the SEC, whether made before or after the date of this Annual Report on Form 10-K, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Biggest changeFiscal Year 7/31/19 7/31/20 7/31/21 7/31/22 7/31/23 7/31/24 Nutanix, Inc. $ 100.00 $ 97.75 $ 158.68 $ 66.65 $ 133.04 $ 222.51 Nasdaq Composite Index $ 100.00 $ 132.78 $ 182.62 $ 155.31 $ 181.43 $ 224.29 Nasdaq Computer Index $ 100.00 $ 148.33 $ 213.70 $ 180.46 $ 229.05 $ 302.45 The information on the above graph shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act, and shall not be incorporated by reference into any registration statement or other document filed by us with the SEC, whether made before or after the date of this Annual Report on Form 10-K, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing. 60 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders, which will be filed no later than 120 days after the end of our fiscal year ended July 31, 2024.
The graph assumes an initial investment of $100 on July 31, 2018 in the common stock of Nutanix, Inc., the NASDAQ Composite Index and NASDAQ Computer Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
The graph assumes an initial investment of $100 on July 31, 2019 in the common stock of Nutanix, Inc., the NASDAQ Composite Index and NASDAQ Computer Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
Any future determination to declare dividends will be made at the discretion of our Board of Directors, subject to applicable laws and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. Unregistered Sales of Equity Securities and Use of Proceeds None.
Any future determination to declare dividends will be made at the discretion of our Board of Directors, subject to applicable laws and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant.
Fiscal 2022 Fiscal 2023 Fiscal Quarter: High Low High Low First quarter $ 43.95 $ 33.10 $ 27.40 $ 15.21 Second quarter $ 36.28 $ 24.71 $ 33.32 $ 25.09 Third quarter $ 28.47 $ 22.14 $ 29.52 $ 23.42 Fourth quarter $ 26.34 $ 13.75 $ 30.55 $ 23.94 Holders of Record As of July 31, 2023, there were 72 holders of record of our Class A common stock.
Fiscal 2023 Fiscal 2024 Fiscal Quarter: High Low High Low First quarter $ 27.40 $ 15.21 $ 38.92 $ 29.11 Second quarter $ 33.32 $ 25.09 $ 56.94 $ 36.54 Third quarter $ 29.52 $ 23.42 $ 65.98 $ 54.43 Fourth quarter $ 30.55 $ 23.94 $ 73.37 $ 47.91 Holders of Record As of July 31, 2024, there were 51 holders of record of our Class A common stock.
For more information on the share repurchase program, refer to Note 15 of Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K. 62 Table of Contents Stock Performance Graph The following graph shows a comparison from July 31, 2018 through July 31, 2023 of the cumulative total return for our Class A common stock based on the closing price on the last day of each respective period.
This table excludes shares withheld from stock awards to settle employee tax withholding obligations related to the vesting of such awards. 59 Table of Contents Stock Performance Graph The following graph shows a comparison from July 31, 2019 through July 31, 2024 of the cumulative five-year total shareholder return for our Class A common stock based on the closing price on the last day of each respective period.
Removed
Purchases of Equity Securities by the Issuer There were no purchase of equity securities by the issuer during the fiscal year ended July 31, 2023. Following the end of fiscal 2023, our Board of Directors authorized the repurchase of up to $350.0 million of our Class A common stock.
Added
Unregistered Sales of Equity Securities and Use of Proceeds None. 58 Table of Contents Purchases of Equity Securities by the Issuer The following table summarizes the share repurchase activity for the three months ended July 31, 2024: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands, except per share amounts) May 1 - 31, 2024 393 $ 63.67 393 $ 218,913 June 1 - 30, 2024 — $ — — $ 218,913 July 1 - 31, 2024 — $ — — $ 218,913 Total 393 393 (1) In August 2023, our Board of Directors authorized the repurchase of up to $350.0 million of our Class A common stock.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item is incorporated herein by reference to our definitive proxy statement for our 2023 annual meeting of stockholders, which will be filed no later than 120 days after the end of our fiscal year ended July 31, 2023.
Added
We may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act in accordance with applicable securities laws and other restrictions.
Added
The timing and amount of share repurchases will depend upon prevailing stock prices, business and market conditions, corporate and regulatory requirements, alternative investment opportunities and other factors. The authorization has no expiration date and may be modified, suspended or discontinued at any time and does not obligate us to repurchase any minimum number of shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The following table presents a reconciliation of total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow to the most directly comparable GAAP financial measures, for each of the periods indicated: Fiscal Year Ended July 31, 2021 2022 2023 (in thousands, except percentages) Total revenue $ 1,394,364 $ 1,580,796 $ 1,862,895 Change in deferred revenue 126,732 127,845 142,687 Total billings (non-GAAP) $ 1,521,096 $ 1,708,641 $ 2,005,582 Gross profit $ 1,102,458 $ 1,259,640 $ 1,530,708 Stock-based compensation 30,483 38,225 34,577 Amortization of intangible assets 14,776 13,579 9,870 Restructuring charges — 218 230 Impairment of lease-related assets 13 — — Non-GAAP gross profit $ 1,147,730 $ 1,311,662 $ 1,575,385 Gross margin 79.1 % 79.7 % 82.2 % Stock-based compensation 2.2 % 2.4 % 1.9 % Amortization of intangible assets 1.0 % 0.9 % 0.5 % Restructuring charges — — — Impairment of lease-related assets — — — Non-GAAP gross margin 82.3 % 83.0 % 84.6 % Operating expenses $ 1,764,569 $ 1,718,492 $ 1,737,858 Stock-based compensation (328,062 ) (305,021 ) (277,168 ) Amortization of intangible assets (2,604 ) (2,604 ) (827 ) Restructuring charges — (10,957 ) (5,073 ) Impairment / early exit of lease-related assets (1,407 ) (597 ) (1,726 ) Litigation settlement accrual and legal fees (2,407 ) (432 ) (38,675 ) Non-GAAP operating expenses $ 1,430,089 $ 1,398,881 $ 1,414,389 Loss from operations $ (662,111 ) $ (458,852 ) $ (207,150 ) Stock-based compensation 358,545 343,246 311,745 Amortization of intangible assets 17,380 16,183 10,697 Restructuring charges — 11,175 5,303 Impairment / early exit of lease-related assets 1,420 597 1,726 Litigation settlement accrual and legal fees 2,407 432 38,675 Non-GAAP (loss) income from operations $ (282,359 ) $ (87,219 ) $ 160,996 Operating margin (47.5 )% (29.0 )% (11.1 )% Stock-based compensation 25.7 % 21.8 % 16.6 % Amortization of intangible assets 1.2 % 1.0 % 0.6 % Restructuring charges — 0.7 % 0.3 % Impairment / early exit of lease-related assets 0.1 % — 0.1 % Litigation settlement accrual and legal fees 0.2 % — 2.1 % Non-GAAP operating margin (20.3 )% (5.5 )% 8.6 % Net cash (used in) provided by operating activities $ (99,810 ) $ 67,543 $ 272,403 Purchases of property and equipment (58,647 ) (49,058 ) (65,404 ) Free cash flow (non-GAAP) $ (158,457 ) $ 18,485 $ 206,999 72 Table of Contents NUTANIX, INC.
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The following table presents a reconciliation of total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow to the most directly comparable GAAP financial measures, for each of the periods indicated: Fiscal Year Ended July 31, 2022 2023 2024 (in thousands, except percentages) Total revenue $ 1,580,796 $ 1,862,895 $ 2,148,816 Change in deferred revenue 127,845 142,687 258,940 Total billings (non-GAAP) $ 1,708,641 $ 2,005,582 $ 2,407,756 Gross profit $ 1,259,640 $ 1,530,708 $ 1,824,704 Stock-based compensation 38,225 34,577 34,107 Amortization of intangible assets 13,579 9,870 3,392 Restructuring charges 218 230 — Non-GAAP gross profit $ 1,311,662 $ 1,575,385 $ 1,862,203 Gross margin 79.7 % 82.2 % 84.9 % Stock-based compensation 2.4 % 1.9 % 1.6 % Amortization of intangible assets 0.9 % 0.5 % 0.2 % Restructuring charges — — — Non-GAAP gross margin 83.0 % 84.6 % 86.7 % Operating expenses $ 1,718,492 $ 1,737,858 $ 1,817,141 Stock-based compensation (305,021 ) (277,168 ) (299,726 ) Amortization of intangible assets (2,604 ) (827 ) (317 ) Restructuring (charges) reversals (10,957 ) (5,073 ) 194 Early exit of lease-related assets (597 ) (1,726 ) — Litigation settlement accrual and legal fees (432 ) (38,675 ) (1,971 ) Other — — (225 ) Non-GAAP operating expenses $ 1,398,881 $ 1,414,389 $ 1,515,096 (Loss) income from operations $ (458,852 ) $ (207,150 ) $ 7,563 Stock-based compensation 343,246 311,745 333,833 Amortization of intangible assets 16,183 10,697 3,709 Restructuring charges (reversals) 11,175 5,303 (194 ) Early exit of lease-related assets 597 1,726 — Litigation settlement accrual and legal fees 432 38,675 1,971 Other — — 225 Non-GAAP (loss) income from operations $ (87,219 ) $ 160,996 $ 347,107 Operating margin (29.0 )% (11.1 )% 0.4 % Stock-based compensation 21.8 % 16.6 % 15.5 % Amortization of intangible assets 1.0 % 0.6 % 0.2 % Restructuring charges (reversals) 0.7 % 0.3 % — Early exit of lease-related assets — 0.1 % — Litigation settlement accrual and legal fees — 2.1 % 0.1 % Other — — — Non-GAAP operating margin (5.5 )% 8.6 % 16.2 % Net cash provided by operating activities $ 67,543 $ 272,403 $ 672,931 Purchases of property and equipment (49,058 ) (65,404 ) (75,252 ) Free cash flow (non-GAAP) $ 18,485 $ 206,999 $ 597,679 68 Table of Contents NUTANIX, INC.
Net cash provided by financing activities of $103.6 million for fiscal 2022 consisted of $88.7 million of proceeds from the issuance of the 2027 Notes in the subscription transactions that closed in September 2021, net of issuance costs, $67.8 million of proceeds from the sale of shares through employee equity incentive plans, and $39.9 million of proceeds from the termination of portions of the convertible note hedge transactions previously entered into in connection with the 2023 Notes, partially offset by $58.6 million of repurchases of our Class A common stock, $18.4 million of payments for the termination of portions of the warrant transactions previously entered into in connection with the 2023 Notes, and $14.7 million of debt extinguishment costs.
Cash Flows from Financing Activities Net cash provided by financing activities of $103.6 million for fiscal 2022 consisted of $88.7 million of proceeds from the issuance of the 2027 Notes in the subscription transactions that closed in September 2021, net of issuance costs, $67.8 million of proceeds from the sale of shares through employee equity incentive plans, and $39.9 million of proceeds from the termination of portions of the convertible note hedge transactions previously entered into in connection with the 2023 Notes, partially offset by $58.6 million of repurchases of our Class A common stock, $18.4 million of payments for the termination of portions of the warrant transactions previously entered into in connection with the 2023 Notes, and $14.7 million of debt extinguishment costs.
Non-GAAP Financial Measures and Key Performance Measures We regularly monitor total billings, subscription billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow, and total end customers, 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.
Non-GAAP Financial Measures and Key Performance Measures We regularly monitor total billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow, and total end customers, 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.
Non-GAAP gross profit and Non-GAAP gross margin — We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, and costs associated with other non-recurring transactions.
Non-GAAP gross profit and Non-GAAP gross margin — We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, and costs associated with certain other non-recurring transactions.
For additional information regarding the securities class actions, refer to Note 8 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding the securities class actions, refer to Note 7 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Total billings, subscription billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow are not substitutes for total revenue, subscription revenue, gross profit, gross margin, operating expenses, operating loss, operating margin, or net cash provided by (used in) operating activities, respectively.
Total billings, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow are not substitutes for total revenue, gross profit, gross margin, operating expenses, operating income (loss), operating margin, or net cash provided by (used in) operating activities, respectively.
For more information on the share repurchase program, refer to Note 15 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For more information on the share repurchase program, refer to Note 8 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income and expense, which includes the amortization of the debt discount and debt issuance costs associated with our previously outstanding 0% convertible senior notes due 2023 (the "2023 Notes"), our 2.50% convertible senior notes due 2026 (the "2026 Notes") and our 0.25% convertible senior notes due 2027 (the "2027 Notes"), changes in the fair value of the derivative liability associated with the 2026 Notes, non-cash interest expense on the 2026 Notes, the amortization of the debt discount on the 2026 Notes, interest expense on the 2027 Notes, debt extinguishment costs, interest income related to our short-term investments, and foreign currency exchange gains or losses.
Other Income (Expense), Net Other income (expense), net consists primarily of interest income and expense, which includes the amortization of the debt discount and debt issuance costs associated with our previously outstanding 0% convertible senior notes due 2023 (the "2023 Notes"), our previously outstanding 2.50% convertible senior notes due 2026 (the "2026 Notes") and our outstanding 0.25% convertible senior notes due 2027 (the "2027 Notes"), changes in the fair value of the derivative liability associated with the 2026 Notes, non-cash interest expense on the 2026 Notes, the amortization of the debt discount on the 2026 Notes, interest expense related to the conversion of the 2026 Notes in full, interest expense on the 2027 Notes, debt extinguishment costs, interest income related to our short-term investments, and foreign currency exchange gains or losses.
These accrued liabilities are not reflected in the contractual obligations disclosed in the table above, as it is uncertain if or when such amounts will ultimately be settled. Uncertain tax positions are further discussed in Note 13 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
These accrued liabilities are not reflected in the contractual obligations disclosed in the table above, as it is uncertain if or when such amounts will ultimately be settled. Uncertain tax positions are further discussed in Note 12 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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 July 31, 2023, we had accrued liabilities related to uncertain tax positions, which are reflected on our consolidated balance sheet.
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 July 31, 2024, we had accrued liabilities related to uncertain tax positions, which are reflected on our consolidated balance sheet.
Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 88 Table of Contents NUTANIX, INC.
Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 83 Table of Contents NUTANIX, INC.
We define non-GAAP operating income (loss) as operating loss adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain litigation matters, and costs associated with other non-recurring transactions.
We define non-GAAP operating income (loss) as operating income (loss) adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain other non-recurring transactions.
In January 2023, we settled the 2023 Notes in full at maturity with a cash payment of $145.7 million. For additional information, see Note 6 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
In January 2023, we settled the 2023 Notes in full at maturity with a cash payment of $145.7 million. For additional information, see Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) For additional information regarding our operating leases, refer to Note 7 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (3) Purchase obligations and other commitments pertaining to our daily business operations.
(2) For additional information regarding our operating leases, refer to Note 6 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (3) Purchase obligations and other commitments pertaining to our daily business operations.
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. 71 Table of Contents NUTANIX, INC.
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. 67 Table of Contents NUTANIX, INC.
We calculate the total annualized value for a contract by dividing the total value of the contract by the number of years in the term of such contract, using, where applicable, an assumed term of five years for contracts that do not have a specified term.
We calculate the total annualized value for a contract by dividing the total value of the contract by the number of years in the term of such contract, using, where applicable, an assumed term of five years for life-of-device contracts that do not have a specified term.
For additional information regarding our convertible senior notes, refer to Note 6 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information regarding our convertible senior notes, refer to Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Refer to Note 1 and Note 3 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on revenue recognition.
Refer to Note 1 and Note 2 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on revenue recognition.
Recent Accounting Pronouncements Refer to "Recent Accounting Pronouncements" in Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 90 Table of Contents
Recent Accounting Pronouncements Refer to "Recent Accounting Pronouncements" in Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 85 Table of Contents
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. Our solutions are primarily sold through channel partners and OEMs and delivered directly to our end customers.
A single organization or customer may represent multiple end customers for separate divisions, segments, or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers. Our solutions are primarily sold through our channel partners or original equipment manufacturers ("OEMs") and delivered directly to our end customers.
The increase in G&A expense was also due to an increase in personnel-related costs resulting from growth in our G&A headcount, which grew 13% from July 31, 2022 to July 31, 2023.
The increase in G&A expense was also due to an increase in personnel-related costs resulting from the 13% growth in our G&A headcount from July 31, 2022 to July 31, 2023.
We calculate our non-GAAP financial and key performance measures as follows: Total billings — We calculate total billings by adding the change in deferred revenue and the change in unbilled accounts receivable between the start and end of the period to total revenue recognized in the same period.
We calculate our non-GAAP financial and key performance measures as follows: Total billings — We calculate total billings by taking the change in deferred revenue less the change in unbilled accounts receivable between the start and end of the period and adding that to total revenue recognized in the same period.
As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we continue our transition toward a subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team.
As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we operate our subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team.
The increases in cash generated from operating activities for fiscal 2022 and fiscal 2023 were due primarily to decreases in our net loss from operations.
The increases in cash generated from operating activities for fiscal 2023 and fiscal 2024 were due primarily to decreases in our net loss from operations.
Our reliance on manufacturers, including our channel and OEM partners, to produce the hardware appliances on which our software runs exposes us to supply chain delays, which impair our ability to provide services to end customers in a timely manner.
Our reliance on manufacturers, including our channel and OEM partners, to produce the hardware platforms on which our software runs exposes us to supply chain delays, which could impair our ability to provide services to end customers in a timely manner.
As of July 31, 2023, approximately 74% 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 renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase.
As of July 31, 2024, approximately 76% 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 renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase.
Net cash used in financing activities of $112.7 million for fiscal 2023 consisted of $145.7 million used to repay the 2023 Notes at maturity, $10.2 million of taxes paid related to the net share settlement of equity awards, and $3.3 million of payments for finance lease obligations, partially offset by $46.5 million of proceeds from the sale of shares through employee equity incentive plans. 87 Table of Contents NUTANIX, INC.
Net cash used in financing activities of $112.7 million for fiscal 2023 consisted of $145.7 million used to repay the 2023 Notes at maturity, $10.2 million of taxes paid related to the net share settlement of equity awards, and $3.3 million of payments for finance lease obligations, partially offset by $46.5 million of proceeds from the sale of shares through employee equity incentive plans.
There are no required principal payments on the 2027 Notes prior to their maturity. For additional information, see Note 6 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 85 Table of Contents NUTANIX, INC.
There are no required principal payments on the 2027 Notes prior to their maturity. For additional information, see Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 80 Table of Contents NUTANIX, INC.
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, particularly as we operate a subscription-based business model; • 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. 69 Table of Contents NUTANIX, INC.
We evaluate these measures because they: • are used by management and our 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, particularly as we operate a subscription-based business model; • 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.
Support, entitlements and other services revenue increased year-over-year for both fiscal 2022 and fiscal 2023 in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals. 81 Table of Contents NUTANIX, INC.
Support, entitlements and other services revenue increased year-over-year for both fiscal 2023 and fiscal 2024 in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals. 76 Table of Contents NUTANIX, INC.
The overall decrease in sales and marketing expense was partially offset by higher travel and event-related costs, as meetings and events continue to transition from virtual to in-person.
The overall decrease in sales and marketing expense was partially offset by higher travel and event-related costs, as meetings and events transitioned from virtual to in-person.
We expect R&D expense, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our future products and services, including our newer subscription-based products, although R&D expense may fluctuate as a percentage of total revenue and, on an absolute basis, from quarter to quarter. 77 Table of Contents NUTANIX, INC.
We expect R&D expense, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our future products and services, including our newer subscription-based products, although R&D expense may fluctuate as a percentage of total revenue and on an absolute basis from quarter to quarter.
Additionally, 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 7.8x greater, on average, than their initial order.
Additionally, 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 8.7x greater, on average, than their initial order.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal Year Ended July 31, 2021 2022 2023 (as a percentage of total revenue) Revenue: Product 50.6 % 47.9 % 49.0 % Support, entitlements and other services 49.4 % 52.1 % 51.0 % Total revenue 100.0 % 100.0 % 100.0 % Cost of revenue: Product 3.9 % 3.5 % 2.7 % Support, entitlements and other services 17.0 % 16.8 % 15.1 % Total cost of revenue 20.9 % 20.3 % 17.8 % Gross profit 79.1 % 79.7 % 82.2 % Operating expenses: Sales and marketing 75.5 % 61.9 % 49.6 % Research and development 40.0 % 36.2 % 31.2 % General and administrative 11.0 % 10.5 % 12.5 % Total operating expenses 126.5 % 108.6 % 93.3 % Loss from operations (47.4 )% (28.9 )% (11.1 )% Other expense, net (25.5 )% (20.3 )% (1.4 )% Loss before provision for income taxes (72.9 )% (49.2 )% (12.5 )% Provision for income taxes 1.3 % 1.2 % 1.1 % Net loss (74.2 )% (50.4 )% (13.6 )% 80 Table of Contents NUTANIX, INC.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal Year Ended July 31, 2022 2023 2024 (as a percentage of total revenue) Revenue: Product 47.9 % 49.0 % 49.7 % Support, entitlements and other services 52.1 % 51.0 % 50.3 % Total revenue 100.0 % 100.0 % 100.0 % Cost of revenue: Product 3.5 % 2.7 % 1.7 % Support, entitlements and other services 16.8 % 15.1 % 13.4 % Total cost of revenue 20.3 % 17.8 % 15.1 % Gross profit 79.7 % 82.2 % 84.9 % Operating expenses: Sales and marketing 61.9 % 49.6 % 45.5 % Research and development 36.2 % 31.2 % 29.7 % General and administrative 10.5 % 12.5 % 9.3 % Total operating expenses 108.6 % 93.3 % 84.5 % (Loss) income from operations (28.9 )% (11.1 )% 0.4 % Other expense, net (20.3 )% (1.4 )% (5.1 )% Loss before provision for income taxes (49.2 )% (12.5 )% (4.7 )% Provision for income taxes 1.2 % 1.1 % 1.1 % Net loss (50.4 )% (13.6 )% (5.8 )% 75 Table of Contents NUTANIX, INC.
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, upon making the software available to the customer when not sold with an appliance or as services are performed with 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 server from a partner, upon making the software available to the customer when not sold with a server, or as services are performed with SaaS offerings.
Our presentation of non-GAAP gross profit and non-GAAP gross margin 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 these non-GAAP financial measures.
Our presentation of non-GAAP gross profit and non-GAAP gross margin 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 these non-GAAP financial measures. 66 Table of Contents NUTANIX, INC.
We recognize revenue from software entitlement and support contracts ratably over the contractual service period, which typically commences upon transfer of control of the corresponding products to the customer. We recognize revenue related to professional services as they are performed. 76 Table of Contents NUTANIX, INC.
We recognize revenue from software entitlement and support contracts ratably over the contractual service period, which typically commences upon transfer of control of the corresponding products to the customer. We recognize revenue related to professional services as they are performed.
This number increases to approximately 25.8x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of July 31, 2023.
This number increases to approximately 30.8x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of July 31, 2024.
Total billings, subscription billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow 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 ("GAAP") in the United States.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total billings, ACV billings, ARR, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow 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 ("GAAP") in the United States.
For the purposes of this calculation, we assume that the contract term begins on the date a contract is booked, unless the terms of such contract prevent us from fulfilling our obligations until a later period, and irrespective of the periods in which we would recognize revenue for such contract.
For the purposes of this calculation, we assume that the contract term begins on the date a contract is booked, unless the terms of such contract prevent us from fulfilling our obligations until a later period, and irrespective of the periods in which we would recognize revenue for such contract. ARR excludes all life-of-device contracts.
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. 75 Table of Contents NUTANIX, INC.
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.
These offerings represented approximately $639.3 million, $770.4 million and $905.8 million of our subscription revenue for fiscal 2021, 2022 and 2023, respectively. • Upfront — Revenue from our subscription software licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer.
These offerings represented approximately $770.4 million, $905.8 million and $1.0 billion of our subscription revenue for fiscal 2022, 2023 and 2024, respectively. • Upfront — Revenue from our subscription software licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer.
For additional information on revenue recognition, see Note 3 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and "Critical Accounting Estimates" later in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section. 74 Table of Contents NUTANIX, INC.
For additional information on revenue recognition, see Note 2 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and "Critical Accounting Estimates" later in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section.
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. As of July 31, 2023, we had accounts receivable of $157.3 million, net of allowances of $0.7 million.
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. As of July 31, 2024, we had accounts receivable of $229.8 million, net of allowances of $0.8 million.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Investment in Research and Development and Engineering – We also intend, in the long term, to grow our global research and development and engineering teams to enhance our solutions, including our newer subscription-based products, improve integration with new and existing ecosystem partners and broaden the range of technologies and features available through our platform.
Investment in Research and Development and Engineering – We also intend, in the long term, to grow our global research and development and engineering teams to enhance our solutions, including our newer subscription-based products, improve integration with new and existing ecosystem partners and broaden the range of technologies and features available through our platform.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) We had a broad and diverse base of over 24,000 end customers as of July 31, 2023, including approximately 1,020 Global 2000 enterprises.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) We had a broad and diverse base of over 26,000 end customers as of July 31, 2024, including approximately 1,060 Global 2000 enterprises.
Free cash flow is a performance measure that we believe provides useful information to management and investors about the amount of cash used in or generated by the business after necessary capital expenditures. 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.
Free cash flow is a performance measure that we believe provides useful information to management and investors about the amount of cash generated by the business after capital expenditures. 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. 65 Table of Contents NUTANIX, INC.
The software licenses associated with these sales are typically non-portable and can be used over the life of the appliance on which the software is delivered. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.
The software licenses associated with these sales are typically non-portable and can be used over the life of the server on which the software is delivered. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer. 64 Table of Contents NUTANIX, INC.
Net cash used in investing activities of $54.2 million for fiscal 2022 consisted of $1.1 billion of short-term investment purchases and $49.1 million of purchases of property and equipment, partially offset by $1.1 billion of maturities of short-term investments and $18.0 million of sales of short-term investments. 86 Table of Contents NUTANIX, INC.
Cash Flows from Investing Activities Net cash used in investing activities of $54.2 million for fiscal 2022 consisted of $1.1 billion of short-term investment purchases and $49.1 million of purchases of property and equipment, partially offset by $1.1 billion of maturities of short-term investments and $18.0 million of sales of short-term investments.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Subscription revenue — Subscription revenue includes any performance obligation which has a defined term and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based SaaS offerings. • Ratable — We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the substantial majority of which relate to software entitlement and support subscriptions.
Subscription revenue — Subscription revenue includes any performance obligation which has a defined term and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based software-as-a-service ("SaaS") offerings. • Ratable — We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the substantial majority of which relate to software entitlement and support subscriptions.
Investment in Sales and Marketing – Our ability to achieve billings and revenue growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth.
Investment in Sales and Marketing – Our ability to drive top-line growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth.
Cost of support, entitlements and other services revenue Cost of support, entitlements and other services revenue increased year-over-year for both fiscal 2022 and fiscal 2023 due primarily to higher personnel-related costs, resulting from growth in our global customer support organization.
Cost of support, entitlements and other services revenue Cost of support, entitlements and other services revenue increased year-over-year for both fiscal 2023 and fiscal 2024 due primarily to higher personnel-related costs, resulting from growth in our global customer support organization. Higher outside services costs also contributed to the increase for fiscal 2024.
ACV billings is a performance measure that we believe provides useful information to our management and investors as they allow us to better track the topline growth of our business during our transition to a subscription-based business model because it takes into account variability in term lengths.
ACV billings is a performance measure that we believe has provided useful information to our management and investors during our transition to a subscription-based business model as it has allowed us to better track the top-line growth of business during the transition because it takes into account variability in term lengths.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Cost of Revenue Cost of product revenue — Cost of product revenue consists of costs paid to third-party OEM partners, 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 Revenue Cost of product revenue — Cost of product revenue consists of costs paid to OEM partners, 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.
Hardware revenue — In transactions where the hardware appliance is purchased directly from Nutanix, 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.
In the infrequent transactions where the hardware is purchased directly from Nutanix, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis.
As of July 31, 2023, we considered approximately 80% of our global sales team members to be fully ramped, while the remaining approximately 20% of our global sales team members are in the process of ramping up.
As of July 31, 2024, we considered approximately 79% of our global sales team members to be fully ramped, while the remaining approximately 21% of our global sales team members are in the process of ramping up.
Non-GAAP operating expenses — We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain litigation matters, and costs associated with other non-recurring transactions.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Non-GAAP operating expenses — We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain other non-recurring transactions.
ARR is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the topline growth of our subscription business because it only includes non-life-of-device contracts and takes into account variability in term lengths.
ARR is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the top-line growth of our subscription business because it takes into account variability in term lengths.
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, unless they meet the criteria for capitalization.
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, unless they meet the criteria for capitalization.
Components of Our Results of Operations Revenue We generate revenue primarily from the sale of our enterprise cloud platform, which can be deployed on a variety of qualified hardware platforms or, in the case of our cloud-based SaaS offerings, via hosted service or delivered pre-installed on an appliance that is configured to order.
Components of Our Results of Operations Revenue We generate revenue primarily from the sale of our Nutanix Cloud Platform, sold primarily as subscription term-based licenses, and which can be deployed on a variety of qualified hardware platforms or, in the case of our cloud-based SaaS offerings, via hosted service or delivered pre-installed on a server that is configured to order.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ACV billings — We calculate ACV billings as the sum of the ACV for all contracts billed during the period. ACV is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware.
ACV billings — We calculate ACV billings as the sum of the ACV for all contracts billed during the period. ACV is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period.
Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period.
We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term.
We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term. 69 Table of Contents NUTANIX, INC.
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.
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 expect sales and marketing expense to continue, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our growth.
Commissions are deferred and recognized as we recognize the associated revenue. We expect sales and marketing expense to continue, in the long term, to increase in absolute dollars as part of our long-term plans to invest in our growth.
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. Sales and marketing — Sales and marketing expense consists primarily of personnel costs.
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. 72 Table of Contents NUTANIX, INC.
These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners, and optimizing headcount in geographies based on market opportunities. 73 Table of Contents NUTANIX, INC.
These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners and OEMs, including supporting new OEMs, and optimizing headcount in geographies based on market opportunities.
Investment in Profitable Growth We continue to invest in our growth over the long-run, while improving our operating cash flow performance by focusing on go-to-market efficiencies. By maintaining this balance, we believe we can sustain profitable growth.
Investment in Profitable Growth We continue to invest in our growth over the long run, while improving our operating cash flow performance by focusing on creating operational efficiencies throughout our organization, including go-to-market efficiencies, particularly by generating leverage through partnerships. By maintaining this balance, we believe we can sustain profitable growth.
Furthermore, our transition to a subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models.
Furthermore, our subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models. Such concerns and/or confusion can slow adoption and renewal rates among our current and future customer base.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Net cash used in investing activities of $49.8 million for fiscal 2023 consisted of $955.3 million of short-term investment purchases and $65.4 million of purchases of property and equipment, partially offset by $965.0 million of maturities of short-term investments and $5.9 million in proceeds from the Frame divestiture.
Net cash used in investing activities of $49.8 million for fiscal 2023 consisted of $955.3 million of short-term investment purchases and $65.4 million of purchases of property and equipment, partially offset by $965.0 million of maturities of short-term investments and $5.9 million in proceeds from the Frame divestiture. 81 Table of Contents NUTANIX, INC.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Operating Expenses Sales and marketing Fiscal Year Ended July 31, Change Fiscal Year Ended July 31, Change 2021 2022 $ % 2022 2023 $ % (in thousands, except percentages) Sales and marketing $ 1,052,779 $ 979,075 $ (73,704 ) (7 )% $ 979,075 $ 924,696 $ (54,379 ) (6 )% Percent of total revenue 75.5 % 61.9 % 61.9 % 49.6 % Sales and marketing expense decreased year-over-year for fiscal 2022 due primarily to lower marketing costs resulting from decreased spending and increased efficiencies, as well as lower personnel-related costs, driven by the 2% decrease in sales and marketing headcount from July 31, 2021 to July 31, 2022.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Operating Expenses Sales and marketing Fiscal Year Ended July 31, Change Fiscal Year Ended July 31, Change 2022 2023 $ % 2023 2024 $ % (in thousands, except percentages) Sales and marketing $ 979,075 $ 924,696 $ (54,379 ) (6 )% $ 924,696 $ 977,286 $ 52,590 6 % Percent of total revenue 61.9 % 49.6 % 49.6 % 45.5 % Sales and marketing expense decreased year-over-year for fiscal 2023 due primarily to lower personnel-related costs, driven by the 8% decrease in sales and marketing headcount from July 31, 2022 to July 31, 2023, as well as lower marketing costs.
The fair value of stock options and RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally four years.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The fair value of stock options and RSUs with a service condition is recognized as expense on a straight-line basis over the requisite service period, which is generally four years.
Cash Flows The following table summarizes our cash flows for the periods presented: Fiscal Year Ended July 31, 2021 2022 2023 (in thousands) Net cash (used in) provided by operating activities $ (99,810 ) $ 67,543 $ 272,403 Net cash used in investing activities (597,153 ) (54,189 ) (49,785 ) Net cash provided by (used in) financing activities 663,845 103,635 (112,709 ) Net (decrease) increase in cash, cash equivalents and restricted cash $ (33,118 ) $ 116,989 $ 109,909 Cash Flows from Operating Activities Net cash used in operating activities was $99.8 million for fiscal 2021 and net cash provided by operating activities was $67.5 million and $272.4 million for fiscal 2022 and fiscal 2023, respectively, representing improvements of $167.4 million and $204.9 million, respectively, as compared to the respective prior year periods.
Cash Flows The following table summarizes our cash flows for the periods presented: Fiscal Year Ended July 31, 2022 2023 2024 (in thousands) Net cash provided by operating activities $ 67,543 $ 272,403 $ 672,931 Net cash (used in) provided by investing activities (54,189 ) (49,785 ) 529,589 Net cash provided by (used in) financing activities 103,635 (112,709 ) (1,062,629 ) Net increase in cash, cash equivalents and restricted cash $ 116,989 $ 109,909 $ 139,891 Cash Flows from Operating Activities Net cash provided by operating activities was $67.5 million, $272.4 million and $672.9 million for fiscal 2022, 2023 and 2024, respectively, representing improvements of $204.9 million and $400.5 million, respectively, as compared to the respective prior year periods.
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.
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.
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.
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.
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 certain foreign net operating losses due to the uncertainty of the ultimate realization of the future benefits of those assets. 78 Table of Contents NUTANIX, INC.
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 certain foreign net operating losses due to the uncertainty of the ultimate realization of the future benefits of those assets. Beginning in fiscal 2023, provisions in the U.S.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Our business and operating results will depend on our ability to retain and sell additional solutions to our existing and future base of end customers. Our ability to obtain new and retain existing customers will in turn depend in part on a number of factors.
Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Customer Acquisition, Retention and Expansion Our business and operating results will depend on our ability to obtain new end customers and retain and sell additional solutions to our existing base of end customers.
For stock-based awards granted to employees with a performance condition, we recognize stock-based compensation expense using the graded vesting attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied. The fair value of the 2016 ESPP purchase rights is recognized as expense on a straight-line basis over the offering period.
For stock-based awards granted to employees with a performance condition, we recognize stock-based compensation expense using the graded vesting attribution method over the requisite service period when management determines it is probable that the performance condition will be satisfied.
We continue to invest in the growth of our business over the long-run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on go-to-market efficiencies. By maintaining this balance, we believe we can sustain profitable growth.
We continue to invest in the profitable growth of our business over the long run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on creating operational efficiencies throughout our organization, including go-to-market efficiencies, particularly by generating leverage through partnerships.
These factors include our ability to effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, competition, our costs and customer demand.
These factors include our ability to: execute on our business plans, vision, and objectives (including our growth and go-to-market strategies), respond to competitive pressures, effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, our ability to respond to competitive pressures, manage our costs, and anticipate and manage customer demand.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe increase in this hypothetical change in fiscal 2023 is due to an increase in our expenses denominated in foreign currencies due to the continued growth of our business internationally. 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.
Biggest changeThis 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.
Our expenses are generally denominated in the currencies where our operations are located. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative instruments.
Our expenses are generally denominated in the currencies of the countries where our operations are located. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative instruments.
Therefore, we do not expect our operating results or cash flows to be materially affected by a sudden change in interest rates. 91 Table of Contents
Therefore, we do not expect our operating results or cash flows to be materially affected by any sudden change in interest rates. 86 Table of Contents
Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. Foreign Currency Risk Our 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 market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. Foreign Currency Risk Our consolidated results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our sales contracts are denominated in U.S. dollars.
A hypothetical 10% decrease in the U.S. dollar against other currencies would result in an increase in our operating loss of approximately $51.3 million, $58.5 million and $60.8 million for fiscal 2021, 2022 and 2023, respectively.
A hypothetical 10% decrease in the U.S. dollar against other currencies would result in an increase in our operating loss of approximately $58.5 million, $60.8 million and $70.4 million for fiscal 2022, 2023 and 2024, respectively. The increase in this hypothetical change in fiscal 2024 is due to an increase in our expenses denominated in foreign currencies.

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