What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-09-21 compared with 2020-09-23 · 506 added, 607 removed, 826 unchanged (57% of the section changed)

5 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’

Equity (Deficit)

Consolidated Statements of Cash Flows

1 unchanged sentence

Overview and Summary of Significant Accounting Policies

Business Combinations

Revenue, Deferred Revenue and Deferred Commissions

4 unchanged sentences

Stockholders' Equity

Equity Award Plans

Equity Incentive Plans

Net Loss Per Share

Segment Information

Selected Quarterly Financial Data (Unaudited)

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Nutanix, Inc.

To the stockholders and the Board of Directors of Nutanix, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Nutanix, Inc.

and subsidiaries (the "Company") as of July 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, shareholders' equity (deficit), and cash flows, for each of the three years in the period ended July 31, 2020, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of July 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows, for each of the three years in the period ended July 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 23, 2020 expressed an unqualified opinion on the Company's internal control over financial reporting.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 21, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition — Refer to Notes 1 and 3 to the financial statements

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition —

Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

2 unchanged sentences

Product revenue was $705.8 million and support, entitlements, and other services was $688.6 million for the year ended July 31, 2021.

Significant judgment is exercised by the Company in determining revenue recognition for the Company’s customer contracts, and includes the following:

• Determination of whether promised goods or services, such as hardware and software licenses, are capable of being distinct and are distinct in the context of the Company’s customer contracts which leads to whether they should be accounted for as individual or combined performance obligations.

Significant judgment is exercised by the Company in determining revenue recognition for the Company’s customer contracts, and includes the following:

Determination of whether promised goods or services, such as hardware and software licenses, are capable of being distinct and are distinct in the context of the Company’s customer contracts which leads to whether they should be accounted for as individual or combined performance obligations.

Determination of standalone selling prices for each distinct performance obligation and for products and services that are not sold separately.

3 unchanged sentences

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue recognition for the Company’s customer contracts included the following, among others:

We tested the effectiveness of controls related to the identification of distinct performance obligations, determination of the standalone selling prices, and the determination of the timing of revenue recognition.

• We evaluated management’s significant accounting policies related to revenue recognition for reasonableness.

We evaluated management’s significant accounting policies related to revenue recognition for reasonableness.

We selected a sample of recorded revenue transactions and performed the following procedures:

Obtaining and reading customer source documents and the contract for each selection, including master agreements and related amendments to evaluate if relevant contractual terms have been appropriately considered by management.

– Evaluating management’s application of their accounting policy and tested revenue recognition for specific performance obligations by comparing management’s conclusions to the underlying master agreement and any related amendments.

– Testing the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements.

• For a selection of arrangements with original equipment manufacturers (“OEMs”), we confirmed accounts receivable and total billings as of and for the year ended July 31, 2020, respectively, directly with the OEM.

In addition, we confirmed a sample of individual revenue orders for the year ended July 31, 2020, to evaluate the accuracy of management’s records.

• We evaluated the reasonableness of management’s estimate of standalone selling prices for products and services that are not sold separately by performing the following:

– Assessing the appropriateness of the Company’s methodology and mathematical accuracy of the determined standalone selling prices.

– Testing the completeness and accuracy of the source data utilized in management’s calculations.

Evaluating management’s application of their accounting policy and tested revenue recognition for specific performance obligations by comparing management’s conclusions to the underlying contract, master agreement and any related amendments, if applicable.

Testing the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements.

For a selection of arrangements with original equipment manufacturers (“OEMs”), we confirmed accounts receivable and total billings as of and for the year ended July 31, 2021, respectively, directly with the OEM.

In addition, we confirmed a sample of individual revenue orders for the year ended July 31, 2021, to evaluate the accuracy of management’s records.

We evaluated the reasonableness of management’s estimate of standalone selling prices for products and services that are not sold separately by performing the following:

Assessing the appropriateness of the Company’s methodology and mathematical accuracy of the determined standalone selling prices.

Testing the completeness and accuracy of the source data utilized in management’s calculations.

Derivative Liability —

Refer to Notes 1, 3 and 5 to the financial statements

Critical Audit Matter Description

During the year ended July 31, 2021, the Company issued $750.0 million in aggregate principal amount of 2.5% convertible senior notes due in 2026 (the "2026 Notes"), which, if converted, may be settled in cash, shares of common stock, or a combination thereof, at the holder of the notes election.

The Company separated the 2026 Notes between the debt and a liability-classified embedded derivative.

The carrying amount of the debt component was determined using an income approach.

The carrying amount of the liability-classified embedded derivative was determined by subtracting the valuation of the debt component from the fair value of the 2026 Notes.

The liability-classified embedded derivative is marked-to-market on a quarterly basis through the aforementioned methods.

Given the determination of the fair value of the debt and liability-classified embedded derivative components required management to make significant estimates and assumptions regarding the relevant valuation assumptions, auditing the valuation of both components required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having the expertise in the valuation of financial instruments, when performing audit procedures to evaluate management’s judgements and conclusions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of the straight-debt and liability-classified embedded derivative components included the following, among others:

We tested the effectiveness of internal controls over the Company’s determination of the fair value of both the debt and liability-classified embedded derivative components, including controls over the relevant assumptions.

With the assistance of our fair value specialists, we evaluated the valuation methodology and valuation assumptions to assess the Company’s fair value of the debt and liability-classified embedded derivative components.

Additionally, we:

Assessed the source information underlying the valuation assumptions used in the model to determine fair value at inception and quarterly.

Assessed the mathematical accuracy of the valuation model at inception and quarterly.

Developed a range of independent estimates and compared those to the fair value of both the debt and liability-classified embedded derivative components determined by management.

/s/ DELOITTE & TOUCHE LLP

1 unchanged sentence

September 21, 2021

We have served as the Company’s auditor since 2013.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Nutanix, Inc.

To the Stockholders and the Board of Directors of Nutanix, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Nutanix, Inc.

and subsidiaries (the “Company”) as of July 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

and subsidiaries (the "Company") as of July 31, 2021, based on criteria established in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2021, based on criteria established in Internal Control —

Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended July 31, 2021, of the Company and our report dated September 21, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

5 unchanged sentences

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

4 unchanged sentences

NUTANIX, INC.

CONSOLIDATED BALANCE SHEETS

As of July 31,

CONSOLIDATE D BALANCE SHEETS

(in thousands, except per share data)

2 unchanged sentences

Short-term investments

Accounts receivable, net of allowance of $ 379 and $ 804 as of July 31, 2019 and 2020

245,475 242,516

Deferred commissions—current 46,238 68,694

Accounts receivable, net of allowances of $ 804 and $ 892 , respectively

Deferred commissions—current

Prepaid expenses and other current assets

2 unchanged sentences

Operating lease right-of-use assets

Deferred commissions—non-current 107,474 146,834

Deferred commissions—non-current

Intangible assets, net

Goodwill 185,180 185,260

Other assets—non-current 14,441 22,543

Total assets $ 1,786,042 $ 1,768,547

Liabilities and Stockholders’ Equity (Deficit)

Other assets—non-current

Liabilities and Stockholders’

Current liabilities:

2 unchanged sentences

Accrued expenses and other current liabilities

28,797 25,924

Deferred revenue—current 396,667 534,572

Operating lease liabilities—current (1)

Deferred revenue—current

Operating lease liabilities—current

Total current liabilities

Deferred revenue—non-current 513,377 648,869

Operating lease liabilities—non-current (1)

Deferred revenue—non-current

Operating lease liabilities—non-current

Convertible senior notes, net

Other liabilities—non-current (1)

27,547 27,436

Derivative liability

Other liabilities—non-current

Total liabilities

Commitments and contingencies (Note 7)

NUTANIX, INC.

CONSOLIDATED BALANCE SHEETS

Stockholders’ equity (deficit):

Preferred stock, par value of $ 0.000025 per share— 200,000 shares authorized as of July 31, 2019 and 2020;

no shares issued and outstanding as of July 31, 2019 and 2020

Common stock, par value of $ 0.000025 per share— 1,200,000 ( 1,000,000 Class A, 200,000 Class B) shares authorized as of July 31, 2019 and 2020;

188,595 ( 168,155 Class A, 20,440 Class B) and 201,949 ( 186,846 Class A, 15,103 Class B) shares issued and outstanding as of July 31, 2019 and 2020

Stockholders’

Preferred stock, par value of $ 0.000025 per share—

200,000 shares

authorized as of July 31, 2020 and 2021;

issued and outstanding as of July 31, 2020 and 2021

Common stock, par value of $ 0.000025 per share—

( 1,000,000 Class A, 200,000 Class B) shares authorized as of July 31,

2020 and 2021;

201,949 ( 186,846 Class A and 15,103 Class B) and

214,210 ( 208,579 Class A and 5,631 Class B) shares issued and

outstanding as of July 31, 2020 and 2021

Additional paid-in capital

Accumulated other comprehensive income 669 2,030

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders’ equity (deficit) 186,893 ( 274,977 )

Total liabilities and stockholders’ equity (deficit) $ 1,786,042 $ 1,768,547

(1) During the first quarter of fiscal 2020, we adopted Accounting Standards Update ("ASU") No.

2016-02 using the modified retrospective method and elected the transition option that allowed us not to restate the comparative periods in our condensed consolidated financial statements in the year of adoption.

For additional details, refer to Note 1.

Total stockholders’

Total liabilities and stockholders’

See the accompanying notes to the consolidated financial statements.

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEME NTS OF OPERATIONS

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands, except per share data)

Product $ 887,989 $ 832,419 $ 765,822

Support, entitlements and other services

1 unchanged sentence

Cost of revenue:

Product 276,127 143,078 71,312

Support, entitlements and other services

Total cost of revenue

Gross profit 769,427 932,015 1,020,993

Operating expenses:

7 unchanged sentences

Provision for income taxes

Net loss $ ( 297,161 ) $ ( 621,179 ) $ ( 872,883 )

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

$ ( 1.81 ) $ ( 3.43 ) $ ( 4.48 )

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

164,091 181,031 194,719

Net loss per share attributable to Class A and Class B

common stockholders—basic and diluted

Weighted average shares used in computing net loss

per share attributable to Class A and Class B

common stockholders—basic and diluted

See the accompanying notes to the consolidated financial statements.

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEME NTS OF COMPREHENSIVE LOSS

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Net loss $ ( 297,161 ) $ ( 621,179 ) $ ( 872,883 )

Other comprehensive (loss) income, net of tax:

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

( 896 ) 1,671 1,361

Other comprehensive loss, net of tax:

Change in unrealized gain (loss) on available-for-sale

securities, net of tax

Comprehensive loss

1 unchanged sentence

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Additional

Capital Accumulated

CONSOLIDATED STATE MENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

Comprehensive

Income (Loss) Accumulated

Deficit Total

Stockholders’

(Loss) Income

Equity (Deficit)

Shares Amount

(in thousands)

Balance - July 31, 2018

Issuance of common stock through employee equity incentive plans, net of repurchases 14,493 — 33,037 — — 33,037

Issuance of common stock through employee equity

incentive plans

Issuance of common stock from ESPP purchase

Issuance of common stock in connection with business combinations 1,310 — 63,780 — — 63,780

Vesting of early exercised stock options — — 681 — — 681

Issuance of common stock in connection with an

Stock-based compensation

Equity component of convertible senior notes, net — — 148,598 — — 148,598

Purchase of bond hedges related to the convertible senior notes — — ( 143,175 ) — — ( 143,175 )

Sale of warrants related to the convertible senior notes — — 87,975 — — 87,975

Other comprehensive loss — — — ( 896 ) — ( 896 )

Net loss — — — — ( 297,161 ) ( 297,161 )

Vesting of early exercised stock options

Other comprehensive income

Balance - July 31, 2019

Issuance of common stock through employee equity incentive plans 11,272 — 12,187 — — 12,187

Issuance of common stock through employee equity

incentive plans

Issuance of common stock from ESPP purchase

Issuance of common stock in connection with a business combination 2,457 — 103,305 — — 103,305

Stock-based compensation

Vesting of early exercised stock options — — 183 — — 183

Other comprehensive income — — — 1,671 — 1,671

Net loss — — — — ( 621,179 ) ( 621,179 )

Other comprehensive loss

Balance - July 31, 2020

Issuance of common stock through employee equity incentive plans 10,034 — 7,024 — — 7,024

Issuance of common stock through employee equity

incentive plans

Issuance of common stock from ESPP purchase

Repurchase and retirement of common stock

Stock-based compensation

Other comprehensive income — — — 1,361 — 1,361

Net loss — — — — ( 872,883 ) ( 872,883 )

Other comprehensive loss

Balance - July 31, 2021

3 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Cash flows from operating activities:

Net loss $ ( 297,161 ) $ ( 621,179 ) $ ( 872,883 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

Depreciation and amortization

Stock-based compensation

Amortization of debt discount and issuance cost 14,685 29,313 31,313

Change in fair value of derivative liability

Change in fair value of contingent consideration

Amortization of debt discount and issuance costs

Operating lease cost, net of accretion

Impairment of lease-related assets

Other ( 962 ) ( 2,786 ) 324

Non-cash interest expense

Changes in operating assets and liabilities:

2 unchanged sentences

Prepaid expenses and other assets

( 37,374 ) ( 12,037 ) 10,089

Accounts payable

4 unchanged sentences

Net cash provided by (used in) operating activities

92,540 42,168 ( 159,885 )

Cash flows from investing activities:

Purchases of investments ( 716,417 ) ( 468,144 ) ( 607,194 )

Maturities of investments

Purchases of investments

Sales of investments

Payments for acquisitions, net of cash acquired

Purchases of property and equipment

Payments for business combinations, net of cash and restricted cash acquired ( 22,227 ) ( 19,017 ) —

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from sales of shares through employee equity incentive plans, net of repurchases

72,010 69,210 57,797

Payment of contingent consideration associated with a business combination

— ( 1,040 ) —

Payment of debt in conjunction with business combinations

( 1,696 ) ( 991 ) —

Proceeds from issuance of convertible senior notes, net

563,587 ( 75 ) —

Payments for convertible note hedges

( 143,175 ) — —

Proceeds from issuance of warrants

Payments of offering costs

Payment of debt in conjunction with acquisitions

Payment of contingent consideration associated with an

Proceeds from sales of shares through employee equity

incentive plans

Proceeds from the issuance of convertible notes, net of

issuance costs

Repurchases of common stock

Payment of finance lease obligations

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash (1)

$ 167,601 $ 92,422 $ ( 77,529 )

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Cash, cash equivalents and restricted cash—beginning of period (1)

139,497 307,098 399,520

Cash, cash equivalents and restricted cash—end of period (1)

$ 307,098 $ 399,520 $ 321,991

Net increase (decrease) in cash, cash equivalents and

restricted cash

1,123 2,842 3,254

Cash and cash equivalents—end of period $ 305,975 $ 396,678 $ 318,737

Cash, cash equivalents and restricted cash—beginning of period

Cash, cash equivalents and restricted cash—end of period

Restricted cash (1)

Cash and cash equivalents—end of period

Supplemental disclosures of cash flow information:

Cash paid for income taxes

Supplemental disclosures of non-cash investing and financing information:

Issuance of common stock for business combinations $ 63,780 $ 103,305 $ —

Purchases of property and equipment included in accounts payable and accrued liabilities

$ 13,444 $ 8,074 $ 4,630

Supplemental disclosures of non-cash investing and

financing information:

Purchases of property and equipment included

in accounts payable and accrued and other liabilities

Finance lease liabilities arising from obtaining right-of-use

Vesting of early exercised stock options

(1) During the first quarter of fiscal 2019, we adopted Accounting Standards Update ("ASU") No.

2016-18, which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash.

We adopted the standard retrospectively for the prior period presented.

Our adoption of ASU 2016-18 did not have any significant impact on our consolidated statements of cash flows.

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

Issuance of common stock for business acquisitions

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

See the accompanying notes to the consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OVER VIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

3 unchanged sentences

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

We provide a leading enterprise cloud platform, which we call the Nutanix Cloud Platform, that consists of software solutions and cloud services that power our customers’ hybrid cloud and multicloud strategies.

We seek to provide an enterprise cloud platform that empowers our customers to unify various clouds - private, public, distributed - into one seamless cloud, allowing enterprises to choose the right cloud for each application.

Our enterprise cloud platform allows enterprises to simplify the complexities of a multicloud environment with automation, cost governance and compliance.

We provide 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 run across private-, hybrid- and multicloud environments, and allow organizations to seamlessly "lift and shift" their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure ("VDI") services, cloud native workloads, and analytics applications, between different cloud environments.

Our solutions are primarily sold through channel partners, including distributors, resellers and original equipment manufacturers ("OEMs") (collectively, "Partners"), and delivered directly to our end customers.

3 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

These reclassifications had no impact on the previously reported net loss or accumulated deficit.

Use of Estimates

3 unchanged sentences

useful lives and recoverability of intangible assets and property and equipment;

allowance for doubtful accounts;

allowance for credit losses;

determination of fair value of stock-based awards;

4 unchanged sentences

whether an arrangement is or contains a lease;

the incremental borrowing rate to measure the present value of operating right-of-use assets and lease liabilities;

the incremental borrowing rate to measure the present value of right-of-use assets and lease liabilities;

the inputs used to determine the fair value of the contingent liability associated with the conversion feature of the 2.50% convertible senior notes due 2026;

and contingencies and litigation.

2 unchanged sentences

In response to the ongoing and rapidly evolving COVID-19 pandemic, we considered the impact of the estimated economic implications on our critical and significant accounting estimates, including assessment of collectibility of customer contracts, valuation of accounts receivable, provision for purchase commitments to our OEMs and impairment of long-lived assets, right-of-use assets, and deferred commissions.

Concentration Risk

Credit Risk —Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and accounts receivable.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentration of Risk

Credit Risk —Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents and accounts receivable.

We invest only in high-quality credit instruments and maintain our cash and cash equivalents and available-for-sale investments in fixed income securities.

2 unchanged sentences

We provide credit, in the normal course of business, to a number of companies and perform credit evaluations of our customers.

Concentration of Revenue and Accounts Receivable — We sell our products primarily through our Partners and occasionally directly to end customers.

Concentration of Revenue and Accounts Receivable —

We sell our products primarily through our Partners and occasionally directly to end customers.

For the fiscal years ended July 31, 2019, 2020 and 2021, no end customer accounted for more than 10% of total revenue or accounts receivable.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Revenue Accounts Receivable

as of July 31,

Accounts Receivable

Fiscal Year Ended July 31,

Partners 2018 2019 2020 2019 2020

Partner A 18 % 24 % 29 % 27 % 33 %

Partner B 13 % 13 % 14 % 18 % 16 %

Partner C 10 % 10 % (1)

Partner D 20 % 10 % ( 1 )

as of July 31,

(1) Less than 10%

10 unchanged sentences

The impairment loss will be recorded as a write-down of investments in the consolidated balance sheets and a realized loss within other expense in the consolidated statements of operations.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement

3 unchanged sentences

The carrying amounts reported in the consolidated financial statements for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

The fair value of the 0% Convertible Senior Notes, due in January 2023 (the "2023 Notes") is determined based on the closing trading price per $100 of the 2023 Notes as of the last day of trading for the period.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts.

The fair value of the 0 % convertible senior notes, due 2023, (the "2023 Notes") is determined based on the closing trading price per $ 100 of the 2023 Notes as of the last day of trading for the period.

The fair value of the 2.50 % convertible senior notes, due 2026, (the "2026 Notes") is determined based on a binomial model.

Derivative Liability

We evaluate convertible notes or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of Accounting Standards Codification ("ASC") 815-40, Derivatives and Hedging:

Contracts in Entity’s Own Equity.

The result of this accounting guidance could result in the fair value of a financial instrument being classified as a derivative instrument and recorded at fair market value at each balance sheet date and recorded as a liability.

In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statements of operations as other income or other expense.

Once the criteria for conversion is fixed, the derivative instrument is marked to fair value and reclassified to equity.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses.

Credit is extended to customers based on an evaluation of their financial condition and other factors.

We generally do not require collateral or other security to support accounts receivable.

We perform ongoing credit evaluations of our customers and maintain an allowance for doubtful accounts.

We perform ongoing credit evaluations of our customers and maintain an allowance for credit losses.

The allowance for credit losses is based on the best estimate of the amount of probable credit losses in existing accounts receivable.

We assess credit losses on accounts receivable by taking into consideration past collection experience, the credit quality of the customer, the age of the receivable balance, current and future economic conditions, and forecasts that may affect the collectibility of the reported amount.

In circumstances where we are aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings or substantial downgrading of credit ratings), we record an allowance for credit losses in order to reduce the net recognized receivable to the amount we reasonably believe will be collected.

For all other customers, we record an allowance for credit losses based on the length of time the receivable is past due and our historical experience of collections and write-offs.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The allowance for doubtful accounts is based on the best estimate of the amount of probable credit losses in existing accounts receivable.

We evaluate the collectability of our accounts receivable based on known collection risks and historical experience.

In circumstances where we are aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings or substantial downgrading of credit ratings), we record an allowance for doubtful accounts in order to reduce the net recognized receivable to the amount we reasonably believe will be collected.

For all other customers, we record an allowance for doubtful accounts based on the length of time the receivable is past due and our historical experience of collections and write-offs.

The changes in the allowance for doubtful accounts are as follows:

The changes in the allowance for credit losses are as follows:

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Allowance for doubtful accounts—beginning balance $ 132 $ 815 $ 379

Charged to allowance for doubtful accounts 815 437 822

Recoveries — ( 290 ) ( 22 )

Write-offs ( 132 ) ( 583 ) ( 375 )

Allowance for doubtful accounts—ending balance $ 815 $ 379 $ 804

Allowance for credit losses—beginning balance

Charged to allowance for credit losses

Allowance for credit losses—ending balance

Property and Equipment

2 unchanged sentences

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets.

We determine if an arrangement is or contains a lease at inception by evaluating various factors, including whether a vendor’s right to substitute an identified asset is substantive.

Lease classification is determined at the lease commencement date when the leased assets are made available for our use.

Operating leases are included in operating lease right-of-use assets, operating lease liabilities—current and operating lease liabilities—non-current in our consolidated balance sheet as of July 31, 2020.

We did not have any material financing leases in the periods presented.

Operating lease right-of-use assets ("ROU assets") represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Finance leases are included in property and equipment, net, accrued expenses and other current liabilities and other liabilities—non-current in our consolidated balance sheet as of July 31, 2021.

Right-of-use assets ("ROU assets") represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Lease payments consist primarily of fixed payments under the arrangement, less any lease incentives, such as rent holidays.

42 unchanged sentences

or (ix) a higher discount rate used in the impairment analysis as impacted by an increase in interest rates.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill is tested for impairment by comparing the reporting unit's carrying value, including goodwill, to the fair value of the reporting unit.

3 unchanged sentences

We compare the fair value of our reporting unit with its carrying amount and if the carrying value of the reporting unit exceeds its fair value, an impairment loss will be recognized.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-lived assets, such as property and equipment and finite-lived intangible assets subject to depreciation and amortization, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

11 unchanged sentences

This principle is achieved by applying the following five-step approach:

• Identification of the contract, or contracts, with a customer — A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

• Identification of the performance obligations in the contract — Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on their own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

Identification of the contract, or contracts, with a customer —

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Identification of the performance obligations in the contract —

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on their own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract.

If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

• Determination of the transaction price — The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

• Allocation of the transaction price to the performance obligations in the contract — If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Determination of the transaction price —

The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

Allocation of the transaction price to the performance obligations in the contract —

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price ("SSP").

1 unchanged sentence

If the SSP is not observable through past transactions, we estimate the SSP, taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

• Recognition of revenue when, or as, performance obligations are satisfied — We satisfy performance obligations either over time or at a point in time.

Recognition of revenue when, or as, performance obligations are satisfied —

We satisfy performance obligations either over time or at a point in time.

Revenue is recognized at the time the related performance obligation is satisfied with the transfer of a promised good or service to a customer.

For additional details on revenue recognition, refer to Note 2 of Notes to Consolidated Financial Statements.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contracts with multiple performance obligations — Some of our contracts with customers contain multiple performance obligations.

Contracts with multiple performance obligations —

The majority of our contracts with customers contain multiple performance obligations.

For these contracts, we account for individual performance obligations separately if they are distinct.

2 unchanged sentences

For those that are not sold routinely, we determine SSP based on our overall pricing trends and objectives, taking into consideration market conditions and other factors, including the value of our contracts, the products sold and geographic locations.

Contract balances — The timing of revenue recognition may differ from the timing of invoicing to customers.

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts.

Contract balances —

The timing of revenue recognition may differ from the timing of invoicing to customers.

Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses.

A receivable is recognized in the period we deliver goods or provide services, or when our right to consideration is unconditional.

2 unchanged sentences

Payment terms on invoiced amounts are typically 30-45 days.

The balance of accounts receivable, net of allowance for doubtful accounts, as of July 31, 2019 and 2020 is presented in the accompanying consolidated balance sheets.

Costs to obtain and fulfill a contract — We capitalize commissions paid to sales personnel and the related payroll taxes when customer contracts are signed.

The balance of accounts receivable, net of allowance for credit losses, as of July 31, 2020 and 2021 is presented in the accompanying consolidated balance sheets.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Costs to obtain and fulfill a contract —

We capitalize commissions paid to sales personnel and the related payroll taxes when customer contracts are signed.

These costs are recorded as deferred commissions in the consolidated balance sheets, current and non-current.

We determine whether costs should be deferred based on our sales compensation plans, if the commissions are incremental and would not have been incurred absent the execution of the customer contract.

Commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit, which may exceed the term of the initial contract if the commissions expected to be paid upon renewal are not commensurate with that of the original contract.

Accordingly, the amortization of deferred costs is recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation and included in sales and marketing expense in the consolidated statements of operations.

Commissions paid upon the initial acquisition of a contract are recognized over the estimated period of benefit, which may exceed the term of the initial contract if the commissions expected to be paid upon renewal are not commensurate with that of the initial contract.

Accordingly, deferred costs are recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation over the entire period of benefit and included in sales and marketing expense in the consolidated statements of operations.

We determine the estimated period of benefit by evaluating the expected renewals of customer contracts, the duration of relationships with our customers, customer retention data, our technology development lifecycle and other factors.

Deferred costs are periodically reviewed for impairment.

Effective August 1, 2020, we changed our sales compensation plans such that commissions paid on subscription software license renewals are not commensurate with commissions paid on the initial contract.

Accordingly, commissions paid on initial sales of subscription software licenses are now being recognized in a pattern consistent with the revenue recognition for each performance obligation, including those we expect upon renewal, over the entire period of benefit, rather than only the term of the initial contract, thus resulting in less expense being recognized in the initial contract period.

Taxes assessed by a government authority that are both imposed on and concurrent with specific revenue transactions between us and our customers are presented on a net basis in our consolidated statements of operations.

Deferred revenue — Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and primarily pertain to software entitlement and support subscriptions and professional services.

Deferred revenue —

Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and primarily pertain to software entitlement and support subscriptions and professional services.

The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet date.

6 unchanged sentences

With respect to the hardware warranty obligation, we have a warranty agreement with our contract manufacturers under which the OEMs are generally required to replace defective hardware within three years of shipment.

Furthermore, our post-contract customer support ("PCS") agreements provide for the same parts replacement that customers are entitled to under the warranty program, except that replacement parts are delivered according to targeted response times to minimize disruption to the customers’ critical business applications.

critical business applications.

Substantially all customers purchase PCS agreements.

Given the warranty agreement with our OEMs and considering that substantially all products are sold together with PCS agreements, we generally have very limited exposure related to warranty costs and therefore no warranty reserve has been recognized.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Research and Development

1 unchanged sentence

Research and development costs are expensed as incurred.

Currently, we expense the software development costs incurred in the research and development of new products and enhancements to existing products as incurred, as from the inception of the product development, our software products are primarily intended to be marketed and sold to customers on-premises, either standalone and/or with other product offerings.

Stock-Based Compensation

3 unchanged sentences

The fair value of restricted stock units ("RSUs") is determined using the fair value of our common stock on the date of grant.

We grant stock awards with service conditions only and with both service and performance conditions.

We grant stock awards with service conditions only and with both service and performance or market-based conditions.

We recognize stock-based compensation expense for employee stock awards with a service condition only using the straight-line method over the requisite service period of the awards, which is generally the vesting period.

We use the accelerated attribution method to recognize stock-based compensation expense related to employee stock awards that contain both service and performance conditions.

We use the graded vesting attribution method to recognize stock-based compensation expense related to employee stock awards that contain both service and performance or market-based conditions.

The fair value of the 2016 ESPP purchase rights is recognized as expense on a straight-line basis over the offering period.

11 unchanged sentences

Accordingly, we have determined that we operate as a single operating and reportable segment.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We account for income taxes using the asset and liability method.

4 unchanged sentences

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Advertising Costs

2 unchanged sentences

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASC 842, which requires the recognition of ROU assets and lease liabilities on the consolidated balance sheets and additional disclosures around key information about leasing arrangements.

We adopted the standard effective August 1, 2019, using a modified retrospective transition method.

As a result, our consolidated balance sheet as of July 31, 2019 was not restated and continued to be reported under the previous lease standard ("ASC 840"), and is therefore not comparative.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to not reassess whether existing arrangements contain leases, not reassess lease classification and not reassess initial direct costs.

The standard had a material impact on our consolidated balance sheet, but did not have an impact on our consolidated statement of operations or cash flows.

The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

We recognized ROU assets and lease liabilities of $ 120.2 million and $ 142.1 million, respectively, on our consolidated balance sheet on August 1, 2019, which included reclassifying lease incentives, prepaid rent and deferred rent as components of the ROU asset.

The difference between the total ROU assets and total lease liabilities recorded as of August 1, 2019 was due primarily to the derecognition of deferred rent liabilities that were included in accrued expenses and other current liabilities and other liabilities—non-current in our consolidated balance sheet as of July 31, 2019.

The operating lease ROU asset also includes any lease payments made prior to commencement date and excludes lease incentives.

Refer to Note 7 for additional details.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides companies with an option to reclassify stranded tax effects resulting from the enactment of the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings.

We adopted the new standard effective August 1, 2019 and the adoption had no impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarify and amend existing guidance.

The new standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted, including interim reporting periods within those fiscal years.

We early adopted the new standard effective November 1, 2019 and the adoption had no impact in our consolidated financial statements.

Recently Issued and Not Yet Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables.

1 unchanged sentence

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including interim reporting periods within those fiscal years.

ASU 2016-13 is effective for us in the first quarter of fiscal 2021.

We do not expect the adoption of this new standard to have a material impact on our consolidated financial statements and related disclosures.

We adopted this new standard effective August 1, 2020 and the adoption did not have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project.

The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including interim reporting periods within those fiscal years.

ASU 2018-13 is effective for us in the first quarter of fiscal 2021.

We do not expect the adoption of this new standard to have a material impact on our quarterly or annual disclosures.

We adopted this new standard effective August 1, 2020 and the adoption did not have a material impact on our quarterly or annual disclosures.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06").

Recently Issued and Not Yet Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Under ASU 2020-06 the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate.

2 unchanged sentences

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.

As such, we can early adopt this standard beginning in the first quarter of fiscal 2022.

We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements.

BUSINESS COMBINATIONS

We completed one acquisition in fiscal 2019.

We did not complete any acquisitions in fiscal 2020.

The purchase price allocation for the fiscal 2019 acquisition, discussed in detail below, reflects various fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes and goodwill, which were subject to change within the measurement period as preliminary valuations were finalized.

Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined.

We determined the fair values of the intangible assets with the assistance of a valuation firm.

The estimation of the fair value of the intangible assets required the use of valuation techniques and entailed consideration of all the relevant factors that might affect the fair value, such as present value factors and estimates of future revenues and costs.

Our consolidated financial statements for the fiscal years ended July 31, 2019 and 2020 include the operations of the acquired company from the date the deal closed.

Pro forma results of operations have not been presented because they are not material to our consolidated financial statements.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

The goodwill recognized in this acquisition is primarily attributable to the synergies expected from the expanded market opportunities with our offerings and the knowledgeable and experienced workforce that joined us as part of the acquisition.

Goodwill will not be amortized, but will instead be tested for impairment annually, or more frequently if certain indicators of impairment are present.

Mainframe2, Inc.

On August 24, 2018, we completed the acquisition of Mainframe2, Inc.

("Frame"), a privately held Delaware corporation with its principal offices in San Mateo, California ("Frame Acquisition").

Frame provides a cloud-based Windows desktop and application delivery service.

The aggregate purchase price of approximately $ 130.0 million consisted of approximately $ 26.7 million in cash and 1,813,321 shares of our Class A common stock, with an aggregate fair value of approximately $ 103.3 million.

The fair value of the shares of common stock issued was determined to be $ 56.97 per share, the closing price of our stock on August 24, 2018.

Certain portions of the consideration for the acquisition, both cash and shares of our Class A common stock, were placed in escrow to secure the indemnification obligations of certain Frame security holders.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We also entered into employee holdback or deferred payment arrangements with certain employees of Frame who joined Nutanix after the acquisition, totaling approximately $ 43.3 million, of which $ 6.6 million will be paid in cash ("cash holdback") and $ 36.7 million will be satisfied by issuing shares of our Class A common stock ("share holdback").

As the earning of the share holdback and payment of the cash holdback are contingent upon the continuous service of the employees, they are being accounted for as post-combination compensation expense over the required service period of three years .

The 643,746 shares of our Class A common stock related to the $ 36.7 million share holdback have a fair value of $ 56.97 per share, the closing price of our Class A common stock on August 24, 2018, and had been issued at closing and are currently being held in escrow.

This holdback is being accounted for as stock-based compensation over the required three-year service period.

On September 21, 2018, we filed a Form S-3 registration statement with the SEC for the 2,451,322 shares of our Class A common stock that were issued as partial consideration in the Frame Acquisition.

The purchase price allocation primarily included approximately $ 97.3 million of goodwill and $ 38.2 million of intangible assets, including $ 31.8 million related to developed technology and $ 2.2 million related to customer relationships, which are being amortized over an estimated economic life of five years , and $ 4.2 million related to trade name, which is being amortized over an estimated economic life of four years .

Goodwill was not deductible for income tax purposes.

Acquisition-related costs were expensed as incurred as general and administrative expenses on our consolidated statement of operations.

We recognized approximately $ 1.1 million of acquisition-related costs in connection with the Frame Acquisition.

The following table presents the aggregate purchase price allocation related to the Frame acquisition:

As of July 31, 2019

(in thousands)

Amortizable intangible assets

Tangible assets acquired

Liabilities assumed

Total consideration

ASU 2020-06 provides companies with the option to adopt the new standard using either the full retrospective or modified retrospective method.

We will early adopt this new guidance using the modified retrospective method as of August 1, 2021 .

The adoption of this new guidance is estimated to result in an increase in the carrying value of the 2023 Notes by approximately $ 48.0 million to reflect the full principal amount of the convertible notes outstanding, net of issuance costs, a decrease in additional paid-in capital of approximately $ 148.6 million to remove the equity component separately recorded for the conversion feature associated with the 2023 Notes, and a cumulative-effect adjustment of approximately $ 100.6 million to the beginning balance of our accumulated deficit as of August 1, 2021 .

The adoption of this new guidance is expected to reduce non-cash interest expense for the fiscal year ending July 31, 2022 and until the 2023 Notes have been settled.

The remaining debt issuance costs will continue to be amortized.

Additionally, as a result of our adoption of ASU 2020-06, upon the conversion price of the 2026 Notes becoming fixed in September 2021, the embedded conversion option for the 2026 Notes will no longer require bifurcation.

At that time, the carrying amount of the derivative liability will be reclassified to shareholders’

deficit within the consolidated balance sheet.

The remaining debt discount that arose from the original bifurcation will continue to be amortized over the term of the notes.

REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS

1 unchanged sentence

We generate revenue primarily from the sale of our enterprise cloud platform, which can be delivered pre-installed on an appliance that is configured to order or delivered separately to be utilized on a variety of certified hardware platforms.

Software can be delivered separately or on a configured-to-order appliance.

When the software is not portable to other appliances, it generally has a term equal to the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years .

Configured-to-order appliances, including our Nutanix-branded NX hardware line, are typically sold through Partners and can be purchased from one of our OEMs or in some cases directly from Nutanix.

Our enterprise cloud platform is typically purchased with one or more years of support and entitlements, which includes the right to software upgrades and enhancements as well as technical support.

When the software license is not portable to other appliances, it can be used over the life of the associated appliance, while subscription term-based licenses typically have a term of one to five years .

Configured-to-order appliances, including our Nutanix-branded NX hardware line, can be purchased from one of our OEMs or in limited cases, directly from Nutanix.

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.

A substantial portion of sales are made through channel partners and OEM relationships.

3 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Subscription $ 330,645 $ 648,415 $ 1,030,180

Non-portable software

Hardware 257,314 105,321 23,455

Professional services

Total revenue

Prior to the first quarter of fiscal 2019, we disaggregated revenue into the following categories:

software revenue, hardware revenue and support, entitlements and other services revenue.

Software revenue included non-portable software and term-based software licenses.

Under the new disaggregated revenue categories, included in the table above, term-based software licenses are included within subscription revenue and non-portable software is presented separately.

Support, entitlements and other services revenue included software entitlement and support subscriptions and professional services.

Under the new disaggregated revenue categories, software entitlement and support subscriptions are included within subscription revenue and professional services revenue is presented separately.

There was no change to the presentation of hardware revenue.

Subscription revenue — Subscription revenue 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.

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.

These offerings represented approximately $ 376.4 million, $ 508.8 million and $ 639.3 million of our subscription revenue for fiscal 2019, 2020 and 2021, 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.

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 subscription software licenses represented approximately $ 272.0 million, $ 521.3 million and $ 604.3 million of our subscription revenue for fiscal 2019, 2020 and 2021, respectively.

Non-portable software revenue — Non-portable software revenue includes sales of our enterprise cloud platform when delivered on a configured-to-order appliance by us or one of our OEM partners.

The software licenses associated with these sales are typically non-portable and have a term equal to the life of the appliance on which the software is delivered.

Non-portable software revenue —

Non-portable software revenue includes sales of our enterprise cloud platform when delivered on a configured-to-order appliance by us or one of our OEM partners.

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.

Hardware revenue — In transactions where we deliver the hardware appliance, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis.

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.

Hardware revenue is generally recognized upon transfer of control to the customer.

Professional services revenue — We also sell professional services with our products.

Professional services revenue —

We also sell professional services with our products.

We recognize revenue related to professional services as they are performed.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Deferred Revenue Deferred Commissions

(in thousands)

Balance as of July 31, 2019

Additions 682,241 158,062

Revenue/commissions recognized

Assumed in a business combination 320 —

Balance as of July 31, 2020

Additions 815,257 233,917

Revenue/commissions recognized

Balance as of July 31, 2021

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fiscal year ended July 31, 2020 , we recognized revenue of approximately $ 371.8 million pertaining to amounts deferred as of July 31, 2019.

During the fiscal year ended July 31, 2021 , we recognized revenue of approximately $ 488.2 million pertaining to amounts deferred as of July 31, 2020.

The majority of our contracted but not invoiced performance obligations are subject to cancellation terms.

Many of our contracted but not invoiced performance obligations are subject to cancellation terms.

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized ("contracted not recognized"), which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods and excludes performance obligations that are subject to cancellation terms.

2 unchanged sentences

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value as follows:

• Level I — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

• Level II — Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities;

• Level III — Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Level I —

Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level II —

Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities;

Level III —

Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

8 unchanged sentences

As of July 31, 2020

Level I Level II Level III Total

(in thousands)

3 unchanged sentences

Commercial paper

government securities — 119,933 — 119,933

Corporate bonds — 9,996 — 9,996

Short-term investments:

3 unchanged sentences

Total measured at fair value

Total cash, cash equivalents and short-term investments

Total cash, cash equivalents and short-term

As of July 31, 2021

Level I Level II Level III Total

(in thousands)

3 unchanged sentences

Commercial paper

Corporate bonds

Short-term investments:

3 unchanged sentences

Total measured at fair value

Total cash, cash equivalents and short-term investments

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total cash, cash equivalents and short-term

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value, with the exception of the 2023 Notes.

We report our financial instruments at fair value, with the exception of the 2023 Notes and the 2026 Notes (collectively, the "Notes").

Financial instruments that are not recorded at fair value on a recurring basis are measured at fair value on a quarterly basis for disclosure purposes.

The carrying values and estimated fair values of financial instruments not recorded at fair value are as follows:

As of July 31, 2019 As of July 31, 2020

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

As of July 31, 2020

As of July 31, 2021

(in thousands)

Convertible senior notes, net $ 458,910 $ 527,275 $ 490,222 $ 529,385

The carrying value of the 2023 Notes as of July 31, 2020 and 2021 was net of the unamortized debt discount of $ 80.3 million and $ 48.6 million, respectively, and unamortized debt issuance costs of $ 4.5 million and $ 2.7 million, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The carrying value of the 2026 Notes as of July 31, 2021 includes $ 8.9 million of non-cash interest expense that was converted to the principal balance, net of the unamortized debt discount of $ 203.6 million and unamortized debt issuance costs of $ 23.3 million.

The total estimated fair value of the 2023 Notes was determined based on the closing trading price per $ 100 of the 2023 Notes as of the last day of trading for the period.

We consider the fair value of the 2023 Notes to be a Level 2 measurement due to the limited trading activity.

We consider the fair value of the 2023 Notes to be a Level 2 valuation due to the limited trading activity.

The total estimated fair value of the 2026 Notes is based on a binomial model.

We consider the fair value of the 2026 Notes to be a Level 3 valuation, as the 2026 Notes are not publicly traded.

The Level 3 inputs used are the same as those used to determine the estimated fair value of the associated derivative liability, as detailed below.

Derivative Liability

The conversion feature of the 2026 Notes represents an embedded derivative.

The 2026 Notes are not considered to be conventional debt and we determined that the embedded conversion feature was required to be bifurcated from the host debt and accounted for as a derivative liability, as the 2026 Notes were convertible into a variable number of shares until the conversion price became fixed in September 2021, based on the level of achievement of the associated financial performance metric.

As such, the initial fair value of the derivative instrument was recorded as a liability in the consolidated balance sheet with the corresponding amount recorded as a discount to the 2026 Notes upon issuance.

The derivative liability is considered a Level 3 valuation and is recorded at its estimated fair value at the end of each reporting period, with the change in fair value recognized within other expense, net in the consolidated statements of operations.

The following table shows the estimated fair value of the derivative liability as of the issuance of the 2026 Notes and the change in fair value from issuance through July 31, 2021:

Fiscal Year Ended

July 31, 2021

(in thousands)

Derivative liability at issuance of the 2026 Notes

Change in fair value

Derivative liability, end of period

We estimated the fair value of the derivative liability using a binomial model, with the following valuation inputs:

September 24, 2020

July 31, 2021

Conversion ratio (1)

Conversion price of $ 26.63 with a 37.552 conversion rate per $1,000

Conversion price of $ 27.75 with a 36.036 conversion rate per $1,000

Risk-free rate

Discount rate (2)

(1) The conversion ratio was estimated based on the latest forecast of the associated financial performance metric.

(2) The discount rate was estimated based on the implied rate for the 2023 Notes as well as a credit analysis.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BALANCE SHEET COMPONENTS

1 unchanged sentence

The amortized cost of our short-term investments approximates their fair value.

As of July 31, 2019 and 2020, unrealized gains and losses from our short-term investments were not material.

As of July 31, 2019 and 2020, unrealized losses from securities that were in an unrealized loss position for more than 12 months were not material.

Unrealized losses related to our short-term investments are due to interest rate fluctuations, as opposed to credit quality.

As a result, at July 31, 2019 and 2020, we did not record any other-than-temporary impairments for these investments.

Unrealized losses related to our short-term investments are generally due to interest rate fluctuations, as opposed to credit quality.

However, we review individual securities that are in an unrealized loss position in order to evaluate whether or not they have experienced or are expected to experience credit losses that would result in a decline in fair value.

As of July 31, 2020 and 2021, unrealized gains and losses from our short-term investments were not material and were not the result of a decline in credit quality.

As a result, at July 31, 2020 and 2021, we did not record any credit losses for these investments.

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

3 unchanged sentences

Due in one to two years

Total $ 401,041

Prepaid Expenses and Other Current Assets

3 unchanged sentences

Prepaid operating expenses

Tenant improvement allowance receivables — 8,557

VAT receivables

Prepaid income taxes 19,690 —

Tenant improvement allowance receivables

Other current assets

Total prepaid expenses and other current assets

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The decrease in prepaid expenses and other current assets from July 31, 2019 to July 31, 2020 was due primarily to the receipt of an $ 18.0 million corporate income tax refund in the first quarter of fiscal 2020, partially offset by the addition of $ 8.6 million of tenant improvement allowances, which are recorded within prepaid expenses and other current assets on the consolidated balance sheet as of July 31, 2020 as a result of our adoption of ASC 842 during the first quarter of fiscal 2020.

Property and Equipment, Net

Property and equipment, net consists of the following:

Useful Life As of July 31,

(in months) (in thousands)

As of July 31,

(in thousands)

Computer, production, engineering and other equipment

1 unchanged sentence

Leasehold improvements

46,520 65,557

Furniture and fixtures

1 unchanged sentence

accumulated depreciation (2)

( 183,169 ) ( 251,225 )

Total property and equipment, net

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(2) Includes a $ 1.2 million write-off related to the impairment of certain leasehold improvements for the fiscal quarter ended January 31, 2020.

For additional information on this lease-related impairment, refer to Note 7.

(2) Includes a $ 1.2 million write-off related to the impairment of certain leasehold improvements during the fiscal year ended July 31, 2020 and a $ 0.9 million write-off related to the impairment of certain leasehold improvements during the fiscal year ended July 31, 2021.

For additional information on these lease-related impairments, refer to Note 6.

Depreciation expense related to our property and equipment was $ 60.8 million, $ 76.4 million and $ 76.5 million for the fiscal years ended July 31, 2019, 2020 and 2021, respectively.

4 unchanged sentences

Developed technology

$ 79,300 $ 79,300

Customer relationships

Total intangible assets, gross

92,330 92,330

Accumulated amortization of developed technology

( 21,210 ) ( 35,987 )

Accumulated amortization of customer relationships

( 3,392 ) ( 4,953 )

Accumulated amortization of trade name

( 955 ) ( 1,998 )

Total accumulated amortization

( 25,557 ) ( 42,938 )

Total intangible assets, net

$ 66,773 $ 49,392

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in the net book value of intangible assets, net are as follows:

1 unchanged sentence

(in thousands)

Intangible assets, net—beginning balance

$ 45,366 $ 66,773

Acquired intangible assets

Intangible assets, net—beginning balance

Amortization of intangible assets (1)

( 16,773 ) ( 17,381 )

Intangible assets, net—ending balance

$ 66,773 $ 49,392

Intangible assets, net—ending balance

(1) Represents amortization expense related to intangible assets recognized during the year in the consolidated statements of operations, within product cost of revenue and sales and marketing expense .

2 unchanged sentences

(in thousands)

2021 $ 17,380

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in the carrying amount of goodwill are as follows:

2 unchanged sentences

Balance at July 31, 2019

Acquired in Frame Acquisition 97,328

Balance at July 31, 2020

Balance at July 31, 2021

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrued Compensation and Benefits

6 unchanged sentences

Payroll taxes payable

Accrued benefits 6,819 8,426

Accrued bonus

Other 5,112 10,301

Accrued benefits

Total accrued compensation and benefits

5 unchanged sentences

Accrued professional services

Other 16,150 13,215

Total accrued expenses and other current liabilities

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

CONVERTIBLE SENIOR NOTES

In January 2018, we issued Convertible Senior Notes with a 0 % interest rate for an aggregate principal amount of $ 575.0 million, due in 2023, in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.

In January 2018, we issued the 2023 Notes with a 0 % interest rate for an aggregate principal amount of $ 575.0 million, due in 2023, in a private placement to qualified institutional buyers pursuant to Rule144A under the Securities Act.

This included $ 75.0 million in aggregate principal amount of the 2023 Notes that we issued resulting from initial purchasers fully exercising their option to purchase additional notes.

7 unchanged sentences

other issuance costs

Net proceeds $ 508,312

The 2023 Notes do not bear any interest and will mature on January 15, 2023, unless earlier converted or repurchased in accordance with their terms.

The 2023 Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of securities by us.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Each $ 1,000 of principal of the 2023 Notes will initially be convertible into 20.4705 shares of our Class A common stock, which is equivalent to an initial conversion price of approximately $ 48.85 per share, subject to adjustment upon the occurrence of specified events.

7 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon conversion of the 2023 Notes, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of Class A common stock, at our election.

9 unchanged sentences

The equity component of the 2023 Notes is included in additional paid-in capital in the consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We incurred transaction costs related to the issuance of the 2023 Notes of approximately $ 11.5 million, consisting of an initial purchasers' discount of $ 10.8 million and other issuance costs of approximately $ 0.7 million.

1 unchanged sentence

Transaction costs attributable to the liability component were approximately $ 8.5 million, recorded as debt issuance costs (presented as contra debt in the consolidated balance sheets), and are being amortized to interest expense over the term of the 2023 Notes.

The transaction costs attributable to the equity component were approximately $ 3.0 million and were net with the equity component within stockholders’ equity.

The transaction costs attributable to the equity component were approximately $ 3.0 million and were net with the equity component within stockholders’

The 2023 Notes consisted of the following:

2 unchanged sentences

Principal amounts:

$ 575,000 $ 575,000

Unamortized debt discount (1)

( 109,956 ) ( 80,298 )

Unamortized debt issuance costs (1)

( 6,134 ) ( 4,480 )

Net carrying amount

$ 458,910 $ 490,222

Carrying amount of equity component (2)

$ 148,598 $ 148,598

(1) Included in the consolidated balance sheets within "convertible senior notes, net" and amortized over the remaining life of the 2023 Notes using the effective interest rate method.

2 unchanged sentences

As of July 31, 2021 , the remaining life of the 2023 Notes was approximately 17 months .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the total interest expense recognized related to the 2023 Notes:

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Interest expense related to amortization of debt discount

Interest expense related to amortization of debt issuance costs 776 1,549 1,654

Interest expense related to amortization of debt issuance

Total interest expense

5 unchanged sentences

Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset any actual dilution from the conversion of the 2023 Notes and to effectively increase the overall conversion price from $ 48.85 to $ 73.46 per share.

As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded within stockholders’ equity and are not accounted for as derivatives.

As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded within stockholders’

equity and are not accounted for as derivatives.

The net cost incurred in connection with the convertible note hedge and warrant transactions of approximately $ 55.2 million was recorded as a reduction to additional paid-in capital in the consolidated balance sheets as of July 31, 2020 and 2021.

1 unchanged sentence

The amounts paid for the note hedges were tax deductible expenses, while the proceeds received from the warrants were not taxable.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Impact to Earnings per Share

The 2023 Notes will have no impact to diluted earnings per share ("EPS") until they meet the criteria for conversion, as discussed above, as we intend to settle the principal amount of the 2023 Notes in cash upon conversion.

The 2023 Notes will have no impact on diluted earnings per share ("EPS") until they meet the criteria for conversion, as discussed above, as we intend to settle the principal amount of the 2023 Notes in cash upon conversion.

Under the treasury stock method, in periods when we report net income, we are required to include the effect of additional shares that may be issued under the 2023 Notes when the price of our Class A common stock exceeds the conversion price.

5 unchanged sentences

However, upon conversion, the note hedges would neutralize the dilution from the 2023 Notes so that there would only be dilution from the warrants, which would result in an actual dilution of approximately 1.4 million shares at a common stock price of $ 83.46 .

We have operating leases for offices, research and development facilities and datacenters.

Our leases have remaining lease terms of one year to approximately nine years , some of which include options to renew or terminate.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In August 2020, we entered into an investment agreement (the "Investment Agreement") with BCPE Nucleon (DE) SVP, LP, an entity affiliated with Bain Capital, LP ("Bain") relating to the issuance and sale to Bain of $ 750.0 million in aggregate principal amount of the 2026 Notes.

The total net proceeds from this offering were approximately $ 723.7 million, after deducting $ 26.3 million of debt issuance costs.

The 2026 Notes bear interest at a rate of 2.5 % per annum, with such interest to be paid in kind ("PIK") on the 2026 Notes held by Bain through an increase in the principal amount of the 2026 Notes, and paid in cash on any 2026 Notes transferred to entities that are not affiliated with Bain.

Interest on the 2026 Notes will accrue from the date of issuance (September 24, 2020) and be added to the principal amount on a semi-annual basis (March 15 and September 15 of each year, beginning on March 15, 2021).

The 2026 Notes mature on September 15, 2026, subject to earlier conversion, redemption or repurchase.

Pursuant to the Investment Agreement, and subject to certain exceptions, Bain will be restricted from transferring or entering into an agreement that transfers the economic consequences of ownership of the 2026 Notes or converting the 2026 Notes prior to the earlier of (i) the one-year anniversary of the original issue date of the 2026 Notes or (ii) immediately prior to the consummation of a change of control or entry into a definitive agreement for a transaction that, if consummated, would result in a change of control or fundamental change, as defined in the indenture governing the 2026 Notes.

Exceptions to such restrictions on transfer include, among others:

(a) transfers to affiliates of Bain, (b) transfers to us or any of our subsidiaries, (c) transfers to a third party where the net proceeds of such sale are solely used to satisfy a margin call or repay a permitted loan, or (d) transfers in connection with certain merger and acquisition events.

The 2026 Notes will be convertible into our shares of Class A common stock based on an initial conversion rate of 36.036 shares of common stock per $ 1,000 principal amount of the 2026 Notes, which is equal to an initial conversion price of $ 27.75 per share, subject to customary anti-dilution and other adjustments, including in connection with any make-whole adjustments as a result of certain extraordinary transactions.

In September 2021, the one-year anniversary of the 2026 Notes, the conversion price was subject to a one-time adjustment, on a sliding scale in the range of $ 25.25 to $ 27.75 per share based on the level of achievement of certain financial milestones.

As a result, in September 2021, the conversion price became fixed at $ 27.75 per share.

On or after September 15, 2025, the 2026 Notes will be redeemable by us in the event that the closing sale price of our Class A common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice, for cash, at a redemption price of 100 % of the principal amount of such 2026 Notes, plus any accrued and unpaid interest to, but excluding, the redemption date.

With certain exceptions, upon a change of control or a fundamental change, the holders of the 2026 Notes may require us to repurchase all or part of the principal amount of the 2026 Notes at a repurchase price equal to 100 % of the principal amount of the 2026 Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

In addition, we will, in certain circumstances, increase the conversion rate for any 2026 Notes converted in connection with a change of control or a fundamental change.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with accounting guidance on embedded conversion features, we valued and bifurcated the conversion option associated with the 2026 Notes from the respective host debt instrument, which is treated as a debt discount, and initially recorded the conversion option of $ 230.9 million as a derivative liability in our consolidated balance sheet, with the corresponding amount recorded as a discount to the 2026 Notes to be amortized over the term of the 2026 Notes using the effective interest method.

The 2026 Notes consisted of the following:

As of July 31, 2021

(in thousands)

Principal amounts:

Non-cash interest expense converted to principal

Unamortized debt discount (conversion feature) (1)

Unamortized debt issuance costs (1)

Net carrying amount

(1) Included in the consolidated balance sheets within convertible senior notes, net and amortized over the remaining life of the 2026 Notes using the effective interest rate method.

The effective interest rate is 7.05 % .

As of July 31, 2021 , the remaining life of the 2026 Notes was approximately 5.1 years.

The following table sets forth the total interest expense recognized related to the 2026 Notes:

Fiscal Year Ended July 31, 2021

(in thousands)

Interest expense related to amortization of debt discount

Interest expense related to amortization of debt issuance costs

Non-cash interest expense

Total interest expense

Non-cash interest expense is related to the 2.5 % PIK interest that we accrued from the issuance of the 2026 Notes through July 31, 2021 and was recognized within other expense, net in the consolidated statement of operations and other liabilities–non-current in the consolidated balance sheet.

The accrued PIK interest will be converted to the principal balance of the 2026 Notes at each payment date and will be convertible to shares at maturity or when converted.

Impact to Earnings per Share

The 2026 Notes will have no impact on diluted EPS until the average price of our Class A common stock is greater than the conversion price, discussed above, as we intend to settle the principal amount of the 2026 Notes in cash upon conversion.

Under the treasury stock method, in periods when we report net income, we are required to include the effect of additional shares that may be issued under the 2026 Notes when the price of our Class A common stock exceeds the conversion price.

During the fiscal year ended July 31, 2021 , the average price of our Class A common stock exceeded the conversion price of the 2026 Notes.

However, in periods during which we report a net loss, basic net loss per share and diluted net loss per share are the same, as the effect of potential common shares is antidilutive, and the potential impact of the 2026 Notes is therefore excluded.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have operating leases for offices, research and development facilities and datacenters and finance leases for certain datacenter equipment.

Our leases have remaining lease terms of one year to approximately eight years , some of which include options to renew or terminate.

We do not include renewal options in the lease terms for calculating our lease liability, as we are not reasonably certain that we will exercise these renewal options at the time of the lease commencement.

Our lease agreements do not contain any residual value guarantees or restrictive covenants.

Total operating lease cost was $ 39.1 million for the fiscal year ended July 31, 2020, excluding short-term lease costs, variable lease costs and sublease income, each of which were not material.

Total operating lease cost was $ 39.1 million and $ 42.6 million for the fiscal years ended July 31, 2020 and 2021 , respectively, excluding short-term lease costs, variable lease costs and sublease income, each of which were not material.

Variable lease costs primarily include common area maintenance charges.

Total lease expense recognized prior to our adoption of ASC 842 was $ 19.0 million and $ 37.0 million for the fiscal years ended July 31, 2018 and 2019, respectively.

During the second quarter of fiscal 2020, we ceased using certain office spaces in Bangalore, India.

Total lease expense recognized prior to our adoption of ASC 842 was $ 37.0 million for the fiscal year ended July 31, 2019.

Total finance lease cost was $ 0.7 million for the fiscal year ended July 31, 2021.

We had no finance leases during the fiscal year ended July 31, 2020.

During fiscal 2020, we ceased using certain office spaces internationally.

As the carrying value of the related right-of-use assets exceeded fair value, we recorded a $ 3.0 million impairment in our consolidated statements of operations for the fiscal year ended July 31, 2020.

Of the $ 3.0 million impairment, approximately $ 1.8 million relates to the impairment of the operating lease right-of-use assets and approximately $ 1.2 million relates to the impairment of leasehold improvements.

Of the $ 3.0 million impairment, approximately $ 1.8 million relates to the impairment of our operating lease right-of-use assets and approximately $ 1.2 million relates to the impairment of leasehold improvements.

During fiscal 2021, we recorded additional impairment charges related to certain of our international office spaces, as well as an impairment charge related to an office space in the United States.

We recorded a $ 1.4 million net impairment in our consolidated statement of operations for the fiscal year ended July 31, 2021.

Of the $ 1.4 million impairment, approximately $ 0.5 million relates to the impairment of our operating lease right-of-use assets and approximately $ 0.9 million relates to the impairment of leasehold improvements.

Additional charges related to asset impairments may be recorded in the future.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental balance sheet information related to leases is as follows:

July 31, 2020

As of July 31,

(in thousands)

3 unchanged sentences

Operating lease right-of-use assets, net

Operating lease liabilities—current

Operating lease liabilities—non-current

Operating lease liabilities—current

Operating lease liabilities—non-current

Total operating lease liabilities

1 unchanged sentence

Weighted average discount rate:

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31, 2021

(in thousands)

Finance leases:

Finance lease right-of-use assets, gross (1)

Accumulated amortization (1)

Finance lease right-of-use assets, net (1)

Finance lease liabilities—current (2)

Finance lease liabilities—non-current (3)

Total finance lease liabilities

Weighted average remaining lease term (in years):

Weighted average discount rate:

(1) Included in the consolidated balance sheets within property and equipment, net.

(2) Included in the consolidated balance sheets within accrued expenses and other current liabilities.

(3) Included in the consolidated balance sheets within other liabilities—non-current.

Supplemental cash flow and other information related to leases is as follows:

1 unchanged sentence

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Cash paid for amounts included in the measurement of

lease liabilities:

Operating cash flows from operating leases

Financing cash flows from finance leases

Lease liabilities arising from obtaining right-of-use assets:

Operating leases

Finance leases

The undiscounted cash flows for our operating lease liabilities as of July 31, 2021 were as follows:

1 unchanged sentence

(in thousands)

2021 $ 43,874

Thereafter 3,414

Total lease payments

3 unchanged sentences

Long-term lease obligations

As of July 31, 2020, we have additional operating lease commitments of approximately $ 11.1 million on an undiscounted basis for certain office leases that have not yet commenced.

These operating leases will commence during fiscal 2021 and fiscal 2022, with lease terms of two to six years .

As of July 31, 2021 , we had additional operating lease commitments of approximately $ 2.5 million on an undiscounted basis for certain office leases that have not yet commenced.

These operating leases will commence during fiscal 2022, with lease terms of approximately two to three years .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2019, the following table summarizes the future minimum payments due under our operating leases as of July 31, 2019, reported under ASC 840:

Fiscal Year Ending July 31:

(in thousands)

2020 $ 39,540

Thereafter 3,511

Total $ 197,227

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

In the normal course of business, we make commitments with our OEMs to ensure them a minimum level of financial consideration for their investment in our joint solutions.

These commitments are based on revenue targets or on-hand inventory and non-cancelable purchase orders for non-standard components.

These commitments are based on performance targets or on-hand inventory and non-cancelable purchase orders for non-standard components.

We record a charge related to these items when we determine that it is probable a loss will be incurred and we are able to estimate the amount of the loss.

5 unchanged sentences

Other guarantees or indemnification arrangements include guarantees of product and service performance.

We have also agreed to indemnify our directors, executive officers and certain other officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as a director or officer of our company or that person’s services provided to any other company or enterprise at our request.

We maintain director and officer insurance coverage that may enable us to recover a portion of any future amounts paid.

3 unchanged sentences

Legal Proceedings

Securities Class Actions .

Beginning on March 29, 2019, several purported securities class actions were filed in the United States District Court for the Northern District of California against us and two of our officers.

2 unchanged sentences

The action was brought on behalf of those who purchased or otherwise acquired our stock between November 30, 2017 and May 30, 2019, inclusive.

The defendants subsequently filed a motion to dismiss the Original Complaint, and the court granted that motion on March 9, 2020, while providing the lead plaintiff leave to amend.

The defendants subsequently filed a motion to dismiss the Original Complaint, which the court granted on March 9, 2020, while providing the lead plaintiff leave to amend.

On April 17, 2020, the lead plaintiff filed a second amended complaint (the "Current Complaint"), again naming us and two of our officers as defendants.

1 unchanged sentence

The Current Complaint seeks monetary damages in an unspecified amount.

On May 22, 2020, the Company and the individual defendants filed a motion to dismiss the Current Complaint, which was denied on September 11, 2020.

The litigation is still in early stages, and we plan to continue to vigorously defend against the allegations and we are not able to determine what, if any, liabilities will attach to the Current Complaint.

On September 11, 2020, the court denied our motion to dismiss the Current Complaint and held that the lead plaintiff adequately stated a claim with respect to certain statements regarding our new customer growth and sales productivity.

On January 27, 2021, lead plaintiff, Shimon Hedvat, filed a motion to (i) withdraw as lead plaintiff and (ii) substitute proposed new lead plaintiffs and approve their appointment of a new co-lead counsel.

On March 1, 2021, the court granted the lead plaintiff’s motion to withdraw as lead plaintiff but denied without prejudice his motion to substitute proposed new lead plaintiffs.

The court also reopened the lead plaintiff selection process, allowing any putative class member interested in serving as the new lead plaintiff to file a lead plaintiff application.

Following the lead plaintiff selection hearing on April 28, 2021, on June 10, 2021 the court appointed California Ironworkers Field Pension Trust as lead plaintiff and approved its appointment of counsel.

On May 28, 2021, one of the movants for lead plaintiff, John P.

Norton on behalf of the Norton Family Living Trust UAD 11/15/2002, filed a separate class action complaint in the Northern District of California on behalf of a class of persons or entities who transacted in publicly traded call options and/or put options on Nutanix stock during the period from November 30, 2017 and May 30, 2019, containing allegations substantively the same as those alleged in the Current Complaint (the "Options Class Action").

On September 8, 2021, the court appointed the Norton Family Living Trust UAD 11/15/2002 as the lead plaintiff in the Options Class Action.

The litigation is still in the early stages, and we plan to continue to vigorously defend against the allegations and we are not able to determine what, if any, liabilities will attach to the Current Complaint or the Options Class Action.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Shareholder Derivative Actions.

Beginning on July 1, 2019, several shareholder derivative complaints were filed in each of the U.S.

District Court for the Northern District of California, the Superior Court of California for the County of San Mateo and the Superior Court of California for the County of Santa Clara, naming (i) fourteen of Nutanix’s current and former officers and directors as defendants and (ii) the Company as a nominal defendant.

The complaints generally alleged claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment, all based on the same general underlying allegations that are contained in the securities class actions described above.

District Court for the North District of California consolidated the federal actions and, on March 6, 2020, the plaintiffs filed a stipulation designating a lead plaintiff and deeming the lead plaintiff’s original complaint as the designated complaint in the matter.

The Superior Court complaints additionally alleged insider trading and violation of California Corporations Code Section 25402, and the Santa Clara County Superior Court complaints further included additional claims for "abuse of control" and "gross mismanagement." In August 2019, the Superior Court of California for the County of Santa Clara consolidated the Santa Clara derivative actions into a single action and, in January 2020, the court stayed the consolidated Santa Clara action in deference to the federal derivative actions described above.

On March 8, 2021, pursuant to the parties’

stipulation, the matter was dismissed, and with prejudice with respect to plaintiffs’

standing to pursue derivative claims based on allegations of demand futility.

On September 17, 2019, the Superior Court of California for the County of San Mateo granted the plaintiff’s request for voluntary dismissal without prejudice.

On January 7, 2020, the U.S.

District Court for the Northern District of California consolidated the federal actions and, on March 6, 2020, the plaintiffs filed a stipulation designating a lead plaintiff and deeming the lead plaintiff’s original complaint as the designated complaint in the matter.

On April 22, 2020, (i) the individual defendants filed a motion to dismiss the designated complaint on the grounds that it fails to state a claim, and (ii) we filed a motion to dismiss the designated complaint on the grounds that the plaintiffs failed to make a demand on our Board of Directors before filing the designated complaint.

In response, the plaintiffs filed an amended complaint on June 17, 2020.

The defendants filed motions to dismiss the amended complaint on July 17, 2020.

A hearing on the motions to dismiss is scheduled for September 23, 2020.

In August 2019, the Superior Court of California for the County of Santa Clara consolidated the Santa Clara derivative actions into a single action and, in January 2020, the court stayed the consolidated Santa Clara action in deference to the federal derivative actions described above.

On September 17, 2019, the Superior Court of California for the County of San Mateo granted the plaintiff’s request for voluntary dismissal without prejudice.

The remaining derivative cases are in the very early stages and we are not able to determine what, if any, liabilities will attach to those complaints.

In response, the plaintiffs filed an amended complaint on June 17, 2020, which defendants moved to dismiss.

On October 5, 2020, the court granted the motions to dismiss the amended complaint, while providing the plaintiffs leave to amend their complaint.

In lieu of filing an amended complaint, the stockholders in the federal derivative actions have made a demand on our Board of Directors to investigate the allegations underlying the securities class action matters, and the parties subsequently filed a stipulation with the court to have the federal derivative lawsuit dismissed.

On December 22, 2020, pursuant to the parties’

stipulation, the matter was dismissed in toto and with prejudice with respect to plaintiffs’

standing to pursue derivative claims based on allegations of demand futility.

We are not currently a party to any other legal proceedings that we believe to be material to our business or financial condition.

From time to time, we may become party to various litigation matters and subject to claims that arise in the ordinary course of business.

STOCKHOLDERS’ EQUITY

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCKHOLDERS’

We have two classes of authorized common stock, Class A common stock and Class B common stock.

1 unchanged sentence

As of July 31, 2021 , we had 208.6 million shares of Class A common stock issued and outstanding and 5.6 million shares of Class B common stock issued and outstanding.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders.

4 unchanged sentences

Shares issued in connection with an exercise of common stock warrants are converted into shares of our Class B common stock.

Share Repurchase

In August 2020, our Board of Directors authorized the repurchase of up to $ 125.0 million of our Class A common stock.

Repurchases were made through open market purchases or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.

The repurchase program did not obligate us to acquire any particular amount of our common stock and could have been suspended at any time at our discretion.

During the fiscal year ended July 31, 2021 , we repurchased 5.2 million shares of common stock in open market transactions at an average price of $ 24.15 per share, for an aggregate purchase price of $ 125.0 million.

As of July 31, 2021 , there is no remaining authorization and the program has expired.

Common Stock Reserved for Issuance

6 unchanged sentences

Shares reserved for future employee stock purchase plan awards

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

EQUITY INCENTIVE PLANS

2 unchanged sentences

As a result, at the time of the IPO, we ceased granting additional stock awards under the 2010 Plan and 2011 Plan and both plans were terminated.

Any outstanding stock awards under the 2010 Plan and 2011 Plan will remain outstanding, subject to the terms of the applicable plan and award agreements, until such shares are issued under those stock awards, by exercise of stock options or settlement of restricted stock units ("RSUs"), or until those stock awards become vested or expired by their terms.

Any outstanding stock awards under the 2010 Plan and 2011 Plan will remain outstanding, subject to the terms of the applicable plan and award agreements, until such shares are issued under those stock awards, by exercise of stock options or settlement of RSUs, or until those stock awards become vested or expired by their terms.

Under the 2016 Plan, we may grant incentive stock options, non-statutory stock options, restricted stock, RSUs and stock appreciation rights to employees, directors and consultants.

5 unchanged sentences

On August 1, 2021, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 10.7 million shares pursuant to the automatic increase provisions.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Units

Performance RSUs — We have granted RSUs that have both service and performance conditions to our executives and employees ("Performance RSUs").

Performance RSUs —

We have granted RSUs that have both service and performance conditions to our executives and employees ("Performance RSUs").

Vesting of Performance RSUs is subject to continuous service and the satisfaction of certain performance targets.

While we recognize cumulative stock-based compensation expense for the portion of the awards for which both the service condition has been satisfied and it is probable that the performance conditions will be met, the actual vesting and settlement of Performance RSUs are subject to the performance conditions actually being met.

Market Stock Units — In October 2018, the Compensation Committee of our Board of Directors approved the grant of 100,000 RSUs subject to certain market conditions ("MSUs") to our Chief Executive Officer, with a weighted average grant date fair value per unit of $ 25.16 .

The MSUs will vest based upon the achievement of an average stock price of $ 80 over a performance period of approximately 4.5 years (the "Performance Period"), subject to his continuous service on each vesting date.

The average stock price is calculated based on the average closing price of one share of our Class A common stock, as reported on the Nasdaq Stock Market during the 180-day period ending on the last trading day prior to each measurement date (as applicable, the "Average Stock Price").

The Average Stock Price is measured once per quarter during the Performance Period, and:

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

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

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

In December 2019, the Compensation Committee of our Board of Directors approved the grant of 200,000 additional MSUs to our Chief Executive Officer, with a weighted average grant date fair value per unit of $ 20.80 .

The MSUs will vest based upon the achievement of an average stock price of $ 65 over a performance period of approximately 4.5 years (the "Second Performance Period"), subject to his continuous service on each vesting date.

In February 2020, the Compensation Committee of our Board of Directors approved the grant of 75,000 MSUs to our Executive Vice President of Worldwide Sales, with a weighted average grant date fair value per unit of $ 20.80 .

The MSUs will vest based upon the achievement of an average stock price of $ 65 over a performance period of approximately 3.9 years (the "Second Performance Period"), subject to his continuous service on each vesting date.

The Second Average Stock Price is measured once per quarter during the Second Performance Period, and:

• If the Second Average Stock Price on any given quarterly measurement date does not equal or exceed $ 65 , then none of the MSUs will vest that quarter, and any unvested MSUs will carry over to the next quarter (the "Carryover MSUs");

• If the Second Average Stock Price on any given quarterly measurement date equals or exceeds $ 65 , then 1/18th of the MSUs plus the applicable Carryover MSUs, if any, would vest;

• If the Second Average Stock Price never equals or exceeds $ 65 during the Second Performance Period, the MSUs would terminate at the end of the Second Performance Period.

We used Monte Carlo simulations to calculate the fair value of these awards on the grant date.

A Monte Carlo simulation requires the use of various assumptions, including the stock price volatility and risk-free interest rate as of the valuation date corresponding to the length of time remaining in the performance period and expected dividend yield.

We recognize stock-based compensation expense related to these MSUs using the graded vesting attribution method over the Performance Period or Second Performance Period, as applicable.

As of July 31, 2020, 375,000 MSUs remained outstanding.

Market Stock Units —

Due to the departure of our former Chief Executive Officer (“CEO”) in December 2020, the 300,000 RSUs subject to certain market conditions ("MSUs") that were previously granted in October 2018 and December 2019 were forfeited.

In connection with his hiring, in December 2020, the Compensation Committee of our Board of Directors approved the grant of 703,117 MSUs to our new CEO.

These MSUs have a weighted average grant date fair value per unit of $ 35.69 and will vest up to 133 % based upon the achievement of certain stock price targets over a performance period of approximately 4.0 years, subject to his continuous service on each vesting date.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In order to align with the MSUs granted to our new CEO, in December 2020, the Compensation Committee of our Board of Directors modified the vesting conditions for the 75,000 MSUs previously granted to another of our executives.

These modified MSUs have a weighted average grant date fair value per unit of $ 27.54 and will vest based upon the achievement of a modified stock price target over the original performance period of approximately 3.9 year s, subject to continuous service on each vesting date.

The incremental compensation cost resulting from this modification was not material.

We used Monte Carlo simulations to calculate the fair value of these awards on the grant date, or modification date, as applicable.

We recognize stock-based compensation expense related to these MSUs using the graded vesting attribution method over the respective performance periods.

As of July 31, 2021 , 423,915 MSUs remained outstanding.

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

Fiscal Year Ended July 31,

Shares Grant Date Fair Value per Share Number of

Shares Grant Date Fair Value per Share

(in thousands) (in thousands)

(in thousands)

Outstanding at beginning of period

Granted 11,204 $ 42.23 13,502 $ 27.31

Released ( 8,717 ) $ 30.15 ( 8,807 ) $ 33.86

Forfeited ( 3,948 ) $ 33.86 ( 4,199 ) $ 34.82

Outstanding at end of period

The aggregate grant date fair value of RSUs, including MSUs, vested was $ 262.8 million, $ 298.2 million and $ 317.4 million for the fiscal years ended July 31, 2019, 2020 and 2021, respectively.

Stock Options

The Board determines the period over which stock options become exercisable and stock options generally vest over a four-year period.

Stock options generally expire 10 years from the date of grant.

The term of an ISO grant to a 10% stockholder will not exceed five years from the date of the grant.

Stock options generally expire 10 year s from the date of grant.

The term of an ISO grant to a 10% stockholder will not exceed five year s from the date of the grant.

The exercise price of an ISO will not be less than 100 % of the estimated fair value of the shares of common stock underlying the stock option (or 110 % of the estimated fair value in the case of an ISO granted to a 10% stockholder) on the date of grant.

The exercise price of an NSO is determined by the Board at the time of grant and is generally not less than 100 % of the estimated fair value of the shares of common stock underlying the stock option on the date of grant.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Below is a summary of stock option activity under the Stock Plans:

Fiscal Year Ended July 31,

Shares Weighted Average

Price Weighted

Life Aggregate

Value Number of

Shares Weighted Average

Price Weighted

Life Aggregate

(in thousands) (in years) (in thousands) (in thousands) (in years) (in thousands)

(in thousands)

Outstanding at beginning of period

11,333 $ 5.12 5.6 $ 496,022 8,740 $ 5.20 4.6 $ 153,000

Options granted

2 unchanged sentences

Outstanding at end of period

8,740 $ 5.20 4.6 $ 153,000 7,546 $ 5.10 3.6 $ 129,010

Exercisable at end of period

8,721 $ 5.18 4.6 $ 152,837 7,545 $ 5.09 3.7 $ 129,004

Vested and expected to vest at end of period

8,740 $ 5.20 4.6 $ 153,000 7,546 $ 5.10 3.6 $ 129,010

Stock options exercisable as of July 31, 2020 includes 7.0 million vested options and 0.5 million unvested options with an early exercise provision.

As of July 31, 2021, there were no unvested options with an early exercise provision.

There were no options granted during fiscal 2020 or 2021.

3 unchanged sentences

The total grant date fair value of stock options vested was $ 4.4 million, $ 1.0 million and $ 0.2 million for the fiscal years ended July 31, 2019, 2020 and 2021, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Stock Purchase Plan

2 unchanged sentences

On December 13, 2019, during our 2019 Annual Meeting of Stockholders, our stockholders approved certain amendments to the Original 2016 ESPP.

Under the amended and restated Original 2016 ESPP ("2016 ESPP"), the maximum number of shares of Class A common stock available for sale is 11.5 million shares, representing an increase of 9.2 million shares.

Under the amended and restated 2016 ESPP, the maximum number of shares of Class A common stock available for sale is 11.5 million shares, representing an increase of 9.2 million shares.

The 2016 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount through payroll deductions of up to 15 % of eligible compensation, subject to caps of $ 25,000 in any calendar year and 1,000 shares on any purchase date.

4 unchanged sentences

As of July 31, 2021 , 5.2 million shares were available for future issuance under the 2016 ESPP.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ended July 31,

2018 2019 2020

Expected term (in years)

Risk-free interest rate

Volatility 49.8 % 69.0 % 73.4 %

Dividend yield

2 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Cost of revenue:

Product $ 2,580 $ 3,535 $ 5,334

Support, entitlements and other services

4 unchanged sentences

As of July 31, 2021 , unrecognized stock-based compensation expense related to outstanding stock awards was approximately $ 610.1 million and is expected to be recognized over a weighted average period of approximately 2.5 years .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NET LOSS PER SHARE

7 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting.

3 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands, except per share data)

Net loss $ ( 297,161 ) $ ( 621,179 ) $ ( 872,883 )

Weighted average shares—basic and diluted 164,091 181,031 194,719

Net loss per share attributable to common stockholders—basic and diluted

$ ( 1.81 ) $ ( 3.43 ) $ ( 4.48 )

Weighted average shares—basic and diluted

Net loss per share attributable to common stockholders—

basic and diluted

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

As of July 31,

2018 2019 2020

Fiscal Year Ended July 31,

(in thousands)

1 unchanged sentence

Employee stock purchase plan

Contingently issuable shares pursuant to business combinations 277 749 506

Common stock subject to repurchase 47 — —

Common stock issuable upon the conversion of convertible debt

Contingently issuable shares pursuant to acquisitions

Common stock warrants

Total 36,599 33,318 35,052

Shares that will be issued in connection with our stock awards and shares that will be purchased under the employee stock purchase plan are generally automatically converted into shares of our Class A common stock.

Shares issued in connection with an exercise of the common stock warrants are converted into shares of our Class B common stock and are voluntarily convertible into shares of Class A common stock at the option of the holder.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common stock issuable upon the conversion of convertible debt represents the antidilutive impact of the conversion of the 2026 Notes, as the average price of our common stock during the fiscal year ended July 31, 2021 was higher than the conversion price of $ 27.75 .

Loss before provision for income taxes by fiscal year consisted of the following:

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Domestic $ ( 201,666 ) $ ( 658,938 ) $ ( 905,840 )

Foreign ( 88,048 ) 45,878 50,619

Loss before provision for income taxes

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Provision for income taxes by fiscal year consisted of the following:

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

federal $ 2,059 $ ( 1,998 ) $ 175

State and local

Foreign 8,541 17,270 18,033

Total current taxes

federal ( 3,387 ) ( 4,949 ) 80

State and local

Foreign 523 ( 1,746 ) ( 705 )

Total deferred taxes

4 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

1 unchanged sentence

Change in valuation allowance

Non-deductible item on fair value remeasurement of

derivative liability

Stock-based compensation

4 unchanged sentences

Transfer pricing adjustments

tax reform impact 93,352 — —

Intangible asset migration

Other 591 709 1,155

Total $ 7,447 $ 8,119 $ 17,662

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fiscal year ended July 31, 2018, our provision for income taxes was primarily attributable to the alternative minimum tax in the U.S.

related to the migration of certain intangible assets and foreign tax provisions in certain foreign jurisdictions in which we conduct business, partially offset by a partial valuation allowance release in the U.S.

due to acquisitions completed during fiscal 2018.

During the fiscal year ended July 31, 2019, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business, partially offset by a partial valuation release in the U.S.

due to an acquisition completed during fiscal 2019 and a tax benefit related to the change in tax law.

During the fiscal year ended July 31, 2020, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted by the United States government.

However, the CARES Act did not have a material impact on our provision for income taxes for the fiscal year ended July 31, 2020.

In June 2020, the U.S.

Supreme Court denied certiorari in the case of Altera Corp.

Commissioner ("Altera").

We have concluded that the law remains unsettled and continue to record unrecognized tax benefits as we exclude stock-based compensation costs from our cost sharing arrangements.

Any potential impact of a final adverse decision would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

We will continue to monitor developments and the potential effect on our consolidated financial statements and tax filings.

During the fiscal years ended July 31, 2020 and 2021, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

NUTANIX, INC.

5 unchanged sentences

Net operating loss carryforward

Tax credit carryforward 109,921 152,330

Deferred revenue

Leases — 48,270

Tax credit carryforward

Intangible assets

Stock-based compensation expense 27,493 24,177

Accruals and reserves

Stock-based compensation

Property and equipment

Other assets 24,258 29,022

Total deferred tax assets

1 unchanged sentence

Deferred commission expense

Leases — ( 44,502 )

Acquisition-related

Property and equipment

Foreign branch taxes ( 4,607 ) ( 5,175 )

Prepaid expenses

Other ( 1,621 ) ( 1,991 )

Foreign branch taxes

Total deferred tax liabilities

29 unchanged sentences

Decreases related to prior year tax positions

Settlements with tax authorities ( 721 ) —

Balance at the end of the year

During the fiscal year ended July 31, 2021, the net increase in unrecognized tax positions was primarily attributable to federal and state research and development credits and intercompany charges.

As of July 31, 2020, if uncertain tax positions are fully recognized in the future, it would result in a $ 14.5 million impact to our effective tax rate, and the remaining amount would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

As of July 31, 2021 , if uncertain tax positions are fully recognized in the future, it would result in a $ 15.5 million impact to our effective tax rate, primarily relating to positions in foreign jurisdictions, and the remaining amount would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

We recognize interest and/or penalties related to income tax matters as a component of income tax expense.

As of July 31, 2020, we had recognized $ 3.1 million accrued interest and penalties related to uncertain tax positions.

As of July 31, 2021 , we had recognized $ 4.8 million of accrued interest and penalties related to uncertain tax positions.

We file income tax returns in the U.S.

6 unchanged sentences

We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations.

A final determination of Altera is possible within the next 12 months.

If the Altera opinion stands, it would result in a $ 36.2 million reduction of our gross unrecognized tax benefits.

There is no impact to our effective tax rate and this would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

Other than Altera, we do not anticipate a significant impact to the unrecognized tax benefits within the next 12 months.

We do not anticipate a significant impact to the gross unrecognized tax benefits within the next 12 months related to these years.

NUTANIX, INC.

6 unchanged sentences

Fiscal Year Ended July 3 1 ,

2018 2019 2020

(in thousands)

$ 648,805 $ 682,340 706,110

Europe, the Middle East and Africa

Asia Pacific 240,247 271,712 265,092

Other Americas

Total revenue

As of July 31, 2019 and 2020, $ 161.9 million and $ 136.7 million, respectively, of our long-lived assets, net were located in the United States.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following sets forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended July 31, 2020.

The information for each of these quarters has been prepared on a basis consistent with our audited annual consolidated financial statements included elsewhere in this report and, in the opinion of management, includes all adjustments of a normal, recurring nature that are necessary for the fair presentation of the results of operations for these periods in accordance with U.S.

This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this report.

These historical quarterly operating results are not necessarily indicative of the results that may be expected for a full fiscal year or any future period.

Three Months Ended

October 31, 2018 January 31, 2019 April 30, 2019 July 31, 2019 October 31, 2019 January 31, 2020 April 30, 2020 July 31, 2020

(unaudited, in thousands, except per share amounts)

Product $ 224,346 $ 236,932 $ 184,794 $ 186,347 $ 192,444 $ 213,547 $ 180,756 $ 179,075

Support, entitlements and other services

88,937 98,428 102,830 113,529 122,324 133,220 137,517 148,799

Total revenue 313,283 335,360 287,624 299,876 314,768 346,767 318,273 327,874

Cost of revenue:

Product (2)(3)

39,261 45,966 29,528 28,323 21,233 20,676 15,990 13,413

Support, entitlements and other services (2)

34,845 40,016 45,549 40,640 50,968 54,547 56,304 53,558

Total cost of revenue 74,106 85,982 75,077 68,963 72,201 75,223 72,294 66,971

Gross profit 239,177 249,378 212,547 230,913 242,567 271,544 245,979 260,903

Operating expenses:

Sales and marketing (2)(3)

196,497 213,707 245,703 253,843 291,838 304,936 299,162 264,453

Research and development (2)

110,531 123,037 137,982 129,169 138,206 139,088 141,346 135,338

General and administrative (2)

27,339 28,788 33,040 30,420 32,860 34,579 35,644 32,464

Total operating expenses 334,367 365,532 416,725 413,432 462,904 478,603 476,152 432,255

Loss from operations ( 95,190 ) ( 116,154 ) ( 204,178 ) ( 182,519 ) ( 220,337 ) ( 207,059 ) ( 230,173 ) ( 171,352 )

Other expense, net ( 2,703 ) ( 4,399 ) ( 3,212 ) ( 4,705 ) ( 5,040 ) ( 5,863 ) ( 5,640 ) ( 9,757 )

Loss before (benefit from) provision for income taxes

( 97,893 ) ( 120,553 ) ( 207,390 ) ( 187,224 ) ( 225,377 ) ( 212,922 ) ( 235,813 ) ( 181,109 )

(Benefit from) provision for income taxes

( 3,628 ) 2,210 2,423 7,114 3,923 4,642 4,858 4,239

Net loss $ ( 94,265 ) $ ( 122,763 ) $ ( 209,813 ) $ ( 194,338 ) $ ( 229,300 ) $ ( 217,564 ) $ ( 240,671 ) $ ( 185,348 )

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

$ ( 0.54 ) $ ( 0.68 ) $ ( 1.15 ) $ ( 1.04 ) $ ( 1.21 ) $ ( 1.13 ) $ ( 1.23 ) $ ( 0.93 )

(1) Basic and diluted earnings per share are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted per share amounts may not equal annual basic and diluted per share amounts.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Includes stock-based compensation as follows:

Three Months Ended

October 31, 2018 January 31, 2019 April 30, 2019 July 31, 2019 October 31, 2019 January 31, 2020 April 30, 2020 July 31, 2020

(unaudited, in thousands)

Product cost of sales $ 698 $ 872 $ 953 $ 1,012 $ 1,112 $ 1,458 $ 1,367 $ 1,397

Support, entitlements and other services cost of sales

3,157 3,373 4,542 4,254 4,751 5,140 5,959 6,164

Sales and marketing 22,606 23,462 35,257 26,426 27,775 31,185 33,177 33,878

Research and development 31,009 34,679 42,265 32,566 37,563 36,459 39,462 39,768

General and administrative 8,455 10,179 11,815 9,149 10,225 11,373 12,131 11,654

Total $ 65,925 $ 72,565 $ 94,832 $ 73,407 $ 81,426 $ 85,615 $ 92,096 $ 92,861

(3) Includes amortization of intangible assets as follows:

Three Months Ended

October 31, 2018 January 31, 2019 April 30, 2019 July 31, 2019 October 31, 2019 January 31, 2020 April 30, 2020 July 31, 2020

(unaudited, in thousands)

Product cost of sales $ 3,168 $ 3,692 $ 3,694 $ 3,694 $ 3,694 $ 3,694 $ 3,694 $ 3,695

Sales and marketing 550 666 661 651 651 651 651 650

Total $ 3,718 $ 4,358 $ 4,355 $ 4,345 $ 4,345 $ 4,345 $ 4,345 $ 4,345

SUBSEQUENT EVENTS

Issuance and Sale of Convertible Senior Notes

On August 26, 2020, we entered into an investment agreement (the "Investment Agreement") with BCPE Nucleon (DE) SPV, LP ("Bain") relating to the issuance and sale to Bain of $ 750 million in an initial aggregate principal amount of 2.50 % Convertible Senior Notes due 2026 (the "2026 Notes").

The transactions contemplated by the Investment Agreement (the "Transaction") are expected to close on or prior to September 24, 2020, subject to satisfaction of the customary closing conditions set forth in the Investment Agreement (the date on which the closing occurs, the "Closing").

The 2026 Notes will be governed by an indenture (the "Indenture") between the us and U.S.

Bank National Association, as trustee.

The 2026 Notes will bear interest at a rate of 2.50 % per annum, with such interest to be paid in kind on the 2026 Notes held by Bain through an increase in the principal amount of the 2026 Notes, and in cash on the 2026 Notes transferred to entities not affiliated with Bain.

Interest on the 2026 Notes will accrue from the date of issuance and be added to the principal amount on a semi-annual basis thereafter.

The 2026 Notes will mature on September 15, 2026, subject to earlier conversion, redemption or repurchase.

The 2026 Notes are convertible at the option of the holder at any time until the close of business on the scheduled trading day immediately preceding the maturity date, subject to all applicable conversion restrictions.

The 2026 Notes will be convertible into shares of our Class A Common Stock ("Common Stock") based on an initial conversion rate of 36.0360 shares of Common Stock per $1,000 principal amount of the 2026 Notes (which is equal to an initial conversion price of $ 27.75 per share), in each case subject to customary anti-dilution and other adjustments, including in connection with any make-whole adjustment (as described in the Indenture) as a result of certain extraordinary transactions.

In addition, at the one-year anniversary of the date of the 2026 Notes, depending on the achievement of financial milestones, the conversion price may be subject to an additional, one-time adjustment, to an amount in the range of $ 25.25 to $ 27.75 per share.

The following table sets forth long-lived assets, which primarily include property and equipment, net, by geographic location:

As of July 31,

(in thousands)

United States

International

Total long-lived assets

SUB SEQUENT EVENTS

Exchange and Subscription Transactions for 0.25% Convertible Senior Notes Due 2027

On September 15, 2021, we announced that we entered into privately negotiated exchange and/or subscription agreements with certain holders of the 2023 Notes and certain new investors pursuant to which we will issue $ 575 million principal amount of 0.25% convertible senior notes due 2027 (the "2027 Notes") consisting of (i) approximately $ 477.3 million principal amount of 2027 Notes in exchange for approximately $ 416.5 million principal amount of the 2023 Notes (the "Exchange Transactions") and (ii) approximately $ 97.7 million principal amount of 2027 Notes for cash (the "Subscription Transactions").

We also entered into privately negotiated transactions with certain holders of the 2023 Notes pursuant to which we will repurchase approximately $ 12.8 million principal amount of the 2023 Notes for cash (the "Note Repurchases").

Following the closing of the Exchange Transactions and the Note Repurchases, approximately $ 145.7 million in aggregate principal amount of 2023 Notes will remain outstanding with terms unchanged.

The Exchange Transactions, the Subscription Transactions and the Note Repurchases are expected to close concurrently on or about September 22, 2021, subject to customary closing conditions.

We will not receive any cash proceeds from the Exchange Transactions.

In exchange for issuing the balance of the 2027 Notes pursuant to the Exchange Transactions, we will receive and cancel the exchanged 2023 Notes.

We estimate that net cash proceeds from the Subscription Transactions will be approximately $ 88.4 million after deducting estimated offering expenses for both the Exchange Transactions and the Subscription Transactions.

We intend to use (i) approximately $ 14.7 million of the net cash proceeds from the Subscription Transactions for the Note Repurchases and (ii) approximately $ 58.5 million of the net cash proceeds from the Subscription Transactions to repurchase approximately 1.4 million shares of our Class A common stock.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On or after September 15, 2025, the 2026 Notes will be redeemable by us, at our option, for cash, shares of Common Stock, or a combination of both at the election of the holder of the 2026 Notes, for all or any portion of the 2026 Notes in the event that the closing sale price per share of our Common Stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which we provide the redemption notice in accordance with the Indenture, during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2026 Notes, plus any accrued and unpaid interest to, but excluding, the redemption date.

With certain exceptions, upon a Fundamental Change (as defined in the Indenture), which includes, among other things, change of control of Nutanix or the failure of our Common Stock to be listed on a certain stock exchange, the holders of the 2026 Notes may require that we repurchase all or part of their 2026 Notes in principal amount of $1,000 or an integral multiple thereof at purchase price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to, but excluding, the Fundamental Change repurchase date.

The Indenture will include customary "events of default," which may result in the acceleration of the maturity of the 2026 Notes under the Indenture.

The Indenture will also include customary covenants for convertible notes of this type.

Stock Repurchase Program

In August 2020, our Board of Directors authorized the repurchase of up to $ 125.0 million of our Class A common stock.

Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.

The repurchase program does not obligate us to acquire any particular amount of our common stock, and may be suspended at any time at our discretion.

CEO Succession Plan

On August 27, 2020, our Board of Directors announced that it has initiated a CEO succession plan to identify a candidate to succeed Dheeraj Pandey, given Mr.

Pandey’s plans to retire as Chief Executive Officer.

Pandey intends to continue as Chairman of the Board and Chief Executive Officer until his successor has been selected and appointed.

The exchange of $ 416.5 million in principal amount of the 2023 Notes is currently expected to result in the recognition of a loss on the extinguishment of debt instead of a debt modification.

We are continuing to evaluate the accounting treatment of the exchange, which is expected to have a material impact on our consolidated financial statements.

Bond Hedge and Warrant Unwind Transactions

In connection with the Exchange Transactions and the Note Repurchases, we have agreed to terminate corresponding portions of the convertible note hedge and warrant transactions we previously entered into with certain financial institutions in connection with the issuance of the 2023 Notes.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data