What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-09-21 compared with 2021-09-21 · 313 added, 306 removed, 1026 unchanged (38% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

2 unchanged sentences

Consolidated Statements of Stockholders’

Equity (Deficit)

Consolidated Statements of Cash Flows

8 unchanged sentences

Equity Incentive Plans

Restructuring Charges

Net Loss Per Share

Segment Information

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

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

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").

and subsidiaries (the "Company") as of July 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' deficit, and cash flows, for each of the three years in the period ended July 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

12 unchanged sentences

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

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.

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 —

18 unchanged sentences

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:

1 unchanged sentence

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

6 unchanged sentences

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

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

and subsidiaries (the “Company”) as of July 31, 2022, based on criteria established in Internal Control —

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

43 unchanged sentences

Operating lease liabilities—current

Convertible senior notes, net—current

Total current liabilities

10 unchanged sentences

authorized as of July 31, 2021 and 2022;

issued and outstanding as of July 31, 2020 and 2021

no shares issued and

outstanding as of July 31, 2021 and 2022

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;

( 1,000,000 Class A, 200,000 Class B) and 1,042,004 ( 1,000,000 Class

A, 42,004 Class B) shares authorized as of July 31, 2021 and 2022,

respectively;

214,210 ( 208,579 Class A and 5,631 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

226,938 ( 226,938 Class A and zero Class B) shares issued and

outstanding as of July 31, 2021 and 2022, respectively (1)

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Accumulated deficit

1 unchanged sentence

Total liabilities and stockholders’

(1) Effective January 3, 2022, all of the then outstanding shares of Nutanix, Inc.

Class B common stock were automatically converted into the same number of shares of Nutanix, Inc.

Class A common stock.

See Note 8 for further details.

See the accompanying notes to the consolidated financial statements.

22 unchanged sentences

common stockholders—basic and diluted (1)

(1) Effective January 3, 2022, all of the then outstanding shares of Nutanix, Inc.

Class B common stock were automatically converted into the same number of shares of Nutanix, Inc.

Class A common stock.

See Note 8 for further details.

See the accompanying notes to the consolidated financial statements.

4 unchanged sentences

Other comprehensive loss, net of tax:

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

Change in unrealized loss on available-for-sale

securities, net of tax

3 unchanged sentences

CONSOLIDATED STATE MENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

Fiscal Year Ended July 31, 2022

Comprehensive

Stockholders’

(Loss) Income

Equity (Deficit)

Income (Loss)

(in thousands)

3 unchanged sentences

Issuance of common stock from ESPP purchase

Issuance of common stock in connection with an

Stock-based compensation

Vesting of early exercised stock options

Other comprehensive income

3 unchanged sentences

Issuance of common stock from ESPP purchase

Repurchase and retirement of common stock

Stock-based compensation

1 unchanged sentence

Balance - July 31, 2021

Adoption of ASU 2020-06

2026 Notes derivative liability reclassification

Issuance of common stock through employee equity

2 unchanged sentences

Repurchase and retirement of common stock

Unwinding of 2023 Notes hedges

Unwinding of 2023 Notes warrants

Stock-based compensation

7 unchanged sentences

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

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

Depreciation and amortization

1 unchanged sentence

Change in fair value of derivative liability

Change in fair value of contingent consideration

Loss on debt extinguishment

Amortization of debt discount and issuance costs

Operating lease cost, net of accretion

Impairment of lease-related assets

Impairment and early exit of lease-related assets

Non-cash interest expense

8 unchanged sentences

Deferred revenue

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

2 unchanged sentences

Sales of investments

Payments for acquisitions, net of cash acquired

Purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Payment of debt in conjunction with acquisitions

Payment of contingent consideration associated with an

Payments of debt extinguishment costs

Proceeds from unwinding of convertible note hedges

Payments for unwinding of warrants

Proceeds from sales of shares through employee equity

5 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and

restricted cash

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

Cash, cash equivalents and restricted cash—beginning of period

9 unchanged sentences

Finance lease liabilities arising from obtaining right-of-use

Vesting of early exercised stock options

Issuance of common stock for business acquisitions

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

8 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' 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.

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 deliver a consistent cloud operating model across edge, private-, hybrid- and multicloud environments for all applications and their data.

Our solutions allow organizations to simply move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure ("VDI") services, container-based modern applications, and analytics applications, between on-premises and public clouds.

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

Principles of Consolidation

4 unchanged sentences

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

Such management estimates and assumptions include, but are not limited to, the best estimate of selling prices for products and related support;

4 unchanged sentences

warranty liability;

purchase commitment liabilities to our OEMs;

purchase commitment liabilities to our contract manufacturers;

sales commissions expense and the period of benefit for deferred commissions;

1 unchanged sentence

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;

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 (the "2026 Notes");

and contingencies and litigation.

1 unchanged sentence

As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

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.

In response to the ongoing and continuously evolving COVID-19 pandemic, we considered the impact of the 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 contract manufacturers and impairment of long-lived assets, right-of-use assets, and deferred commissions.

NUTANIX, INC.

1 unchanged sentence

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.

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.

6 unchanged sentences

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:

Accounts Receivable

Accounts Receivable as of

Fiscal Year Ended July 31,

as of July 31,

(1) Less than 10%

9 unchanged sentences

If one of these factors is met, we will record an impairment loss associated with our impaired investment.

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.

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

NUTANIX, INC.

3 unchanged sentences

When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which to transact and the market-based risk.

We apply fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis.

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.

We apply fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis.

The carrying amounts reported in our 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 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.

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

The fair value of the 0.25 % convertible senior notes due 2027 (the "2027 Notes") is determined based on the closing trading price per $ 100 of the 2027 Notes as of the last day of trading for the period.

Convertible Senior Notes

Our convertible senior notes, including any embedded conversion features, are accounted for under the traditional convertible debt accounting model and are treated as a liability, net of unamortized issuance costs.

The carrying amount of the liability is classified as a current liability if we have committed to settle with current assets;

otherwise, it is classified as a long-term liability, as we retain the option to settle conversion requests in shares of our Class A common stock.

The embedded conversion features are not remeasured as long as they do not meet the separation requirement of a derivative;

otherwise, they are classified as derivative instruments and accounted for as such.

Issuance costs are amortized to interest expense using the effective interest rate method over the term of the notes.

In accounting for conversions of the notes, the carrying amount of the converted notes is reduced by the total consideration paid or issued for the respective converted notes and the difference is recorded to additional paid-in capital on our consolidated balance sheets.

In accounting for extinguishments of the notes, the reacquisition price of the extinguished notes is compared to the carrying amount of the respective extinguished notes and a gain or loss is recorded in other expense, net on our consolidated statements of operations.

Derivative Liability

2 unchanged sentences

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.

In the event that the fair value is recorded as a liability, the change in fair value is recorded on our 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.

4 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2 unchanged sentences

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 changes in the allowance for credit losses are as follows:

12 unchanged sentences

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, 2022.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

8 unchanged sentences

Lease costs are recognized on a straight-line basis as operating expenses within our consolidated statements of operations.

We present lease payments within cash flows from operations within the consolidated statements of cash flows.

For our operating leases, we elected to account for lease and non-lease components as a single lease component.

Additionally, we do not record leases on the consolidated balance sheet that have a lease term of 12 months or less at the lease commencement date.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Business Combinations

We account for our acquisitions using the acquisition method.

Goodwill is measured at the acquisition date as the excess of the purchase price over the fair value of the assets acquired and liabilities assumed.

Significant estimates and assumptions are made by management to value such assets and liabilities.

Although we believe that those estimates and assumptions are reasonable and appropriate, they are inherently uncertain and subject to refinement.

Additional information related to the acquisition date fair value of acquired assets and assumed liabilities obtained during the measurement period, not to exceed one year, may result in changes to the recorded values of such assets and liabilities, resulting in an offsetting adjustment to the goodwill associated with the business acquired.

Uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

We continue to collect information and reevaluate these estimates and assumptions quarterly.

We will record any adjustments to our preliminary estimates to goodwill, provided that it is within the one-year measurement period.

Any contingent consideration payable is recognized at fair value at the acquisition date.

Liability-classified contingent consideration is remeasured each reporting period, with changes in fair value recognized in earnings until the contingent consideration is settled.

Acquisition related costs incurred in connection with a business combination, other than those associated with the issuance of debt or equity securities, are expensed as incurred.

We present lease payments within cash flows from operations within our consolidated statements of cash flows.

For our operating leases, we account for lease and non-lease components as a single lease component.

Additionally, we do not record leases on our consolidated balance sheet that have a lease term of 12 months or less at the lease commencement date.

Goodwill, Intangible Assets and Other Long-Lived Assets

68 unchanged sentences

In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset.

Unbilled accounts receivable, included in accounts receivable, net on the consolidated balance sheets, was not material for any of the periods presented.

Unbilled accounts receivable, included in accounts receivable, net on our consolidated balance sheets, was not material for any of the periods presented.

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

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.

The balance of accounts receivable, net of allowance for credit losses, as of July 31, 2021 and 2022 is presented in the accompanying consolidated balance sheets.

3 unchanged sentences

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.

These costs are recorded as deferred commissions in our 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 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.

49 unchanged sentences

Advertising Costs

Advertising costs are charged to sales and marketing expenses as incurred in the consolidated statements of operations.

Advertising costs are charged to sales and marketing expenses as incurred in our consolidated statements of operations.

During the fiscal years ended July 31, 2020, 2021 and 2022 , advertising expense was $ 38.7 million, $ 22.1 million and $ 13.7 million, respectively.

Recently Adopted Accounting Pronouncements

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.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates.

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.

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.

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)

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.

3 unchanged sentences

ASU 2020-06 also provides for certain disclosures with regard to convertible instruments and associated fair values.

ASU 2020-06 is effective for us in the first quarter of fiscal 2023.

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

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.

We early adopted the new standard using the modified retrospective method effective August 1, 2021 and have not changed any previously disclosed amounts or provided additional disclosures for the comparative periods.

The adoption of this new guidance resulted 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 accumulated deficit beginning balance as of August 1, 2021 .

The remaining debt issuance costs will continue to be amortized over the term of the 2023 Notes.

The new standard had no impact on the 2026 Notes, as the embedded conversion feature on the 2026 Notes was initially accounted for as a derivative liability.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In May 2021, the FASB issued ASU 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which provides guidance on modifications or exchanges of a freestanding equity-classified written call option (such as warrants).

An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange.

ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration.

The new standard is effective for all entities for fiscal years beginning after December 15, 2021, with early adoption permitted, including interim periods within those fiscal years.

We early adopted the new standard effective August 1, 2021 and the adoption did not have a material impact on our consolidated financial statements.

REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS

5 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9 unchanged sentences

These offerings represented approximately $ 508.8 million, $ 639.3 million and $ 770.4 million of our subscription revenue for fiscal 2020, 2021 and 2022, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upfront —

15 unchanged sentences

Balance as of July 31, 2020

Additions (1)

Revenue/commissions recognized

Balance as of July 31, 2021

Additions (1)

Revenue/commissions recognized

Balance as of July 31, 2022

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Includes both billed and unbilled amounts.

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.

3 unchanged sentences

Contracted not recognized revenue was approximately $ 1.6 billion as of July 31, 2022 , of which we expect to recognize approximately 54 % over the next 12 months, and the remainder thereafter.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FAIR VALUE MEASUREMENTS

6 unchanged sentences

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

Assets Measured at Fair Value on a Recurring Basis

Cash equivalents and short-term investments

3 unchanged sentences

The fair value of these securities is priced by using inputs based on non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

As of July 31, 2021

4 unchanged sentences

Commercial paper

Corporate bonds

Short-term investments:

4 unchanged sentences

Total cash, cash equivalents and short-term

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31, 2022

4 unchanged sentences

Commercial paper

Corporate bonds

Short-term investments:

5 unchanged sentences

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 and the 2026 Notes (collectively, the "Notes").

We report our financial instruments at fair value, with the exception of the 2023 Notes, the 2026 Notes and the 2027 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.

3 unchanged sentences

(in thousands)

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.

2027 Notes (2)

(1) Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method.

For additional information on our adoption of ASU 2020-06, refer to Note 1 and Note 5.

(2) The 2027 Notes were issued in September 2021.

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

The carrying value of the 2023 Notes as of July 31, 2022 was net of unamortized debt issuance costs of $ 0.2 million.

The carrying value of the 2026 Notes as of July 31, 2021 and 2022 included $ 8.9 million and $ 28.0 million, respectively, of non-cash interest expense that was converted to the principal balance, net of unamortized debt discounts of $ 203.6 million and $ 169.4 million, respectively, and unamortized debt issuance costs of $ 23.3 million and $ 19.4 million, respectively.

The carrying value of the 2027 Notes as of July 31, 2022 was net of unamortized debt issuance costs of $ 8.0 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 valuation due to the limited trading activity.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

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.

The total estimated fair value of the 2027 Notes was determined based on the closing trading price per $ 100 of the 2027 Notes as of the last day of trading for the period.

We consider the fair value of the 2027 Notes to be a Level 2 valuation due to the limited trading activity.

Derivative Liability

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

The conversion feature of the 2026 Notes represented an embedded derivative at inception.

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

As such, the initial fair value of the derivative instrument was recorded as a liability in our 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 was recorded at its estimated fair value at the end of each reporting period and as of September 15, 2021, when the conversion price became fixed, with the change in fair value recognized within other expense, net in our consolidated statements of operations.

On September 15, 2021, the conversion price of the 2026 Notes became fixed and the bifurcated liability was no longer accounted for as a separate derivative because the conversion features are now considered indexed to our own equity and meet the equity classification conditions.

We estimated the fair value of the derivative liability as of September 15, 2021 to be $ 698.2 million, which was reclassified to equity on that date.

The following table shows the change in the estimated fair value of the derivative liability through October 31, 2021.

There was no change to the estimated fair value of the derivative liability subsequent to October 31, 2021, as it was reclassified to equity.

Three Months Ended October 31, 2021

(in thousands)

Derivative liability at issuance of the 2026 Notes

Derivative liability at July 31, 2021

Change in fair value

Derivative liability, end of period

Derivative liability at September 15, 2021

Reclass to equity upon conversion price becoming fixed

Derivative liability at October 31, 2021

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

September 24, 2020

July 31, 2021

September 15, 2021

Conversion ratio (1)

3 unchanged sentences

Discount rate (2)

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

(1) The conversion ratio was calculated based on the achievement 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.

19 unchanged sentences

VAT receivables

Tenant improvement allowance receivables

Other current assets

Total prepaid expenses and other current assets

The increase in other current assets from July 31, 2021 to July 31, 2022 was due primarily to the addition of a receivable for the estimated recovery of our settlement offer and certain legal fees and professional expenses payable under our applicable insurance policies related to certain litigation matters, as well as the addition of tenant improvement allowances receivable within the next 12 months.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment, Net

9 unchanged sentences

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 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.

(2) Includes 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 this lease-related impairment, refer to Note 6.

Depreciation expense related to our property and equipment was $ 76.4 million, $ 76.5 million and $ 69.3 million for the fiscal years ended July 31, 2020, 2021 and 2022, respectively.

11 unchanged sentences

Total intangible assets, net

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.

Amortization expense related to our intangible assets is being recognized in our 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:

4 unchanged sentences

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 .

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

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

1 unchanged sentence

(in thousands)

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Carrying Amount

(in thousands)

Balance at July 31, 2019

Balance at July 31, 2020

Balance at July 31, 2021

There was no change in the carrying amount of goodwill during the fiscal years ended July 31, 2021 or 2022.

Accrued Compensation and Benefits

4 unchanged sentences

Accrued vacation

Contributions to ESPP withheld

Payroll taxes payable

Accrued bonus

Accrued wages and taxes

Contributions to ESPP withheld

Accrued benefits

Accrued bonus

Total accrued compensation and benefits

11 unchanged sentences

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.

There are no required principal payments prior to the maturity of the 2023 Notes.

The total net proceeds from the 2023 Notes are as follows:

There are no required principal payments on the 2023 Notes prior to their maturity.

The total net proceeds from the issuance of the 2023 Notes were as follows:

(in thousands)

6 unchanged sentences

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.

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.

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

Holders of these 2023 Notes may convert their 2023 Notes at their option at any time prior to the close of the business day immediately preceding October 15, 2022, only under the following circumstances:

5 unchanged sentences

As such, the 2023 Notes are not convertible for the fiscal quarter commencing after July 31, 2022.

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)

On or after October 15, 2022, holders may convert all or any portion of their 2023 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing conditions.

Upon conversion of the 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.

4 unchanged sentences

We may not redeem the 2023 Notes prior to the maturity date, and no sinking fund is provided for the 2023 Notes.

In accounting for the issuance of the 2023 Notes, we separated the 2023 Notes into liability and equity components.

The carrying amount of the liability component of approximately $ 423.4 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature.

The carrying amount of the equity component of approximately $ 151.6 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2023 Notes.

The difference between the principal amount of the 2023 Notes and the liability component (the "debt discount") is amortized to interest expense using the effective interest method over the term of the 2023 Notes.

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.

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.

In accounting for the transaction costs, we allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the 2023 Notes.

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’

On September 22, 2021, we consummated privately negotiated exchanges with certain holders of the outstanding 2023 Notes, pursuant to which such holders exchanged approximately $ 416.5 million in aggregate principal amount of 2023 Notes for $ 477.3 million in aggregate principal amount of 2027 Notes.

We also entered into privately negotiated transactions with certain holders of the 2023 Notes pursuant to which we repurchased approximately $ 12.8 million in aggregate principal amount of 2023 Notes for cash.

Following the closing of these exchanges and repurchases, approximately $ 145.7 million in aggregate principal amount of 2023 Notes remains outstanding with terms unchanged.

The 2023 Notes consisted of the following:

6 unchanged sentences

Carrying amount of equity component (2)

(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.

The effective interest rate is 6.62 %.

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

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

As of July 31, 2021, the effective interest rate was 6.62 %.

As of July 31, 2022, the effective interest rate was 0.41 %.

(2) Included in our consolidated balance sheets as of July 31, 2021 within additional paid-in capital, net of $ 3.0 million in equity issuance costs.

As of July 31, 2022 , the remaining life of the 2023 Notes was approximately 5 months .

15 unchanged sentences

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.

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 our consolidated balance sheets as of July 31, 2021 and 2022.

The fair value of the note hedges and warrants are not remeasured each reporting period.

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

Impact to Earnings per Share

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.

Under this method, the cumulative dilutive effect of the 2023 Notes would be approximately 3.9 million shares if the average price of our Class A common stock was $ 73.46 .

However, upon conversion, there will be no economic dilution from the 2023 Notes, as exercise of the note hedges eliminate any dilution that would have otherwise occurred.

The note hedges are required to be excluded from the calculation of diluted earnings per share, as they would be antidilutive under the treasury stock method.

In September 2021, in connection with the exchange and repurchase transactions described above, we terminated portions of the convertible note hedge transactions and warrant transactions previously entered into with certain financial institutions in connection with the issuance of the 2023 Notes.

The net effect of these unwind transactions was a $ 21.5 million cash payment received, consisting of an $ 18.4 million payment for the warrant unwind and the receipt of $ 39.9 million from the hedge unwind.

The amounts paid and received as part of the unwind transactions were recorded to additional paid-in capital within our consolidated balance sheet.

The note hedges are required to be excluded from the calculation of diluted earnings per share ("EPS"), as they would be antidilutive.

In periods when 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 2023 Notes is therefore excluded.

The warrants will have a dilutive effect when the average share price exceeds the warrant strike price of $ 73.46 per share.

3 unchanged sentences

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.

In September 2020, we issued $ 750.0 million in aggregate principal amount of the 2026 Notes to BCPE Nucleon (DE) SVP, LP, an entity affiliated with Bain Capital, LP ("Bain").

The total net proceeds from this offering were approximately $ 723.72 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).

Interest on the 2026 Notes has accrued from the date of issuance (September 24, 2020) and is added to the principal amount on a semi-annual basis (on 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.

The 2026 Notes are 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 issuance of the 2026 Notes, the conversion price was subject to a one-time adjustment, based on the level of achievement of certain financial milestones and as a result, 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.

1 unchanged sentence

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.

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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2026 Notes consisted of the following:

6 unchanged sentences

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.

(1) Included in our 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 % .

7 unchanged sentences

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.

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, 2022 and was recognized within other expense, net in our consolidated statement of operations and other liabilities–non-current in our 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.

Upon the conversion price of the 2026 Notes becoming fixed in September 2021, the embedded conversion option for the 2026 Notes no longer required bifurcation because the conversion features are now considered indexed to our own equity and meet the equity classification conditions.

The carrying amount of the derivative liability of $ 698.2 million as of that date was reclassified to additional paid-in capital within our consolidated balance sheet.

The remaining debt discount that arose from the original bifurcation continues to be amortized over the term of the 2026 Notes.

In September 2021, we issued $ 575 million principal amount of 0.25 % convertible senior notes due 2027 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 did not receive any cash proceeds from the Exchange Transactions.

The net cash proceeds from the Subscription Transactions was approximately $ 88.4 million after deducting the offering expenses for both the Exchange Transactions and the Subscription Transactions.

We used (i) approximately $ 14.7 million of the net cash proceeds from the Subscription Transactions to repurchase approximately $ 12.8 million principal amount of the 2023 Notes 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)

The 2027 Notes bear interest at a rate of 0.25 % per annum, and pay interest semi-annually in arrears on each April 1 and October 1, commencing on April 1, 2022.

The 2027 Notes will mature on October 1, 2027, unless earlier converted, redeemed or repurchased.

The 2027 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of Class A common stock, at our election.

Each $ 1,000 of principal of the 2027 Notes is initially convertible into 17.3192 shares of our Class A common stock, which is equivalent to an initial conversion price of approximately $ 57.74 per share, subject to customary anti-dilution adjustments.

Holders of these 2027 Notes may convert their 2027 Notes at their option at any time prior to the close of the business day immediately preceding July 1, 2027, only under the following circumstances:

(1) during any fiscal quarter after January 31, 2022, and only during such fiscal quarter, if the closing price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on, and including, the last trading day of the preceding fiscal quarter is greater than or equal to 130 % of the then applicable conversion price for the Notes per share of common stock;

(2) during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $ 1,000 principal amount of 2027 Notes for such trading day was less than 98 % of the product of the closing price of our common stock and the then applicable conversion rate on each such trading day;

(3) upon the occurrence of certain specified corporate events.

Upon conversion of the 2027 Notes, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of Class A common stock, at our election.

We intend to settle the principal of the 2027 Notes in cash.

The conversion rate will be subject to adjustment in some events, but will not be adjusted for any accrued or unpaid interest.

A holder who converts their 2027 Notes in connection with certain corporate events that constitute a "make-whole fundamental change" per the indenture governing the 2027 Notes are, under certain circumstances, entitled to an increase in the conversion rate.

In addition, if we undergo a fundamental change prior to the maturity date, holders may require us to repurchase for cash all or a portion of their 2027 Notes at a repurchase price equal to 100 % of the principal amount of the repurchased 2027 Notes, plus accrued and unpaid interest.

In accounting for the exchange of convertible notes, we evaluated whether the transaction should be treated as a modification or extinguishment transaction.

The partial exchange of the 2023 Notes and issuance of the 2027 Notes were deemed to have substantially different terms due to the significant difference between the value of the conversion option immediately prior to and after the exchange, and consequently, the 2023 Notes partial exchange was accounted for as a debt extinguishment.

The $ 64.9 million difference between the total reacquisition price paid and the net carrying amount of the 2023 Notes is recognized as a debt extinguishment loss within other expense, net in our consolidated statement of operations.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2027 Notes consisted of the following:

As of July 31, 2022

(in thousands)

Principal amounts:

Unamortized debt issuance costs (1)

Net carrying amount

(1) Included in our consolidated balance sheets within convertible senior notes, net and amortized over the remaining life of the 2027 Notes using the effective interest rate method.

The effective interest rate is 0.52 %.

As of July 31, 2022, the remaining life of the 2027 Notes was approximately 5.2 years .

The following table sets forth the total interest expense recognized related to the 2027 Notes:

Fiscal Year Ended July 31,

(in thousands)

Contractual interest expense

Interest expense related to amortization of debt issuance costs

Total interest expense

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

2 unchanged sentences

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

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.

Total operating lease cost was $ 39.1 million, $ 42.6 million and $ 43.3 million for the fiscal years ended July 31, 2020, 2021 and 2022 , 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 $ 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.

Total finance lease cost was $ 0.7 million and $ 2.4 million for the fiscal years ended July 31, 2021 and 2022, respectively.

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

2 unchanged sentences

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.

During fiscal 2021, we recorded additional impairment charges related to certain 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.

1 unchanged sentence

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During fiscal 2022, we signed agreements to early exit certain office spaces in the United States.

The reduction in the lease term resulted in a decrease to the carrying amount of the operating lease liability and the operating lease right-of-use asset on our consolidated balance sheet as of July 31, 2022.

In addition, we recorded $ 0.6 million of expense in our consolidated statement of operations for the fiscal year ended July 31, 2022.

Supplemental balance sheet information related to leases is as follows:

10 unchanged sentences

Weighted average discount rate:

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31,

9 unchanged sentences

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.

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

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

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

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

8 unchanged sentences

Finance leases

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The undiscounted cash flows for our lease liabilities as of July 31, 2022 were as follows:

Fiscal Year Ending July 31:

6 unchanged sentences

As of July 31, 2022 , we had additional operating lease commitments of approximately $ 7.3 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)

These operating leases will commence during fiscal 2023, with lease terms of approximately three to eight years .

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

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.

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

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

1 unchanged sentence

Our historical charges have not been material.

As of July 31, 2021 , we had up to approximately $ 72.7 million of non-cancelable purchase obligations and other commitments pertaining to our daily business operations, and up to approximately $ 48.0 million in the form of guarantees to certain of our OEMs.

As of July 31, 2022, we had up to approximately $ 88.7 million of non-cancelable purchase obligations and other commitments pertaining to our daily business operations, and up to approximately $ 82.3 million in the form of guarantees to certain of our contract manufacturers.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantees and Indemnifications

4 unchanged sentences

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

The fair value of liabilities related to indemnifications and guarantee provisions are not material and have not had any material impact on the consolidated financial statements to date.

The fair value of liabilities related to indemnifications and guarantee provisions are not material and have not had any material impact on our consolidated financial statements to date.

NUTANIX, INC.

7 unchanged sentences

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.

The Current Complaint alleges the same class period, includes many of the same factual allegations as the Original Complaint, and again alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5.

The Current Complaint seeks monetary damages in an unspecified amount.

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

The Amended Complaint alleges the same class period, includes many of the same factual allegations as the Original Complaint, and again alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5.

The Amended Complaint sought monetary damages in an unspecified amount.

On September 11, 2020, the court denied the defendants' motion to dismiss the Amended 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.

3 unchanged sentences

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.

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, 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.

Norton on behalf of the Norton Family Living Trust UAD 11/15/2002, filed a separate class action complaint (the "Options 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 Amended Complaint (the "Options Class Action") and naming the same defendants.

On September 8, 2021, the court appointed the John P.

Norton on behalf of the Norton Family Living Trust UAD 11/15/2002 as the lead plaintiff in the Options Class Action.

On April 26, 2022, the parties met for mediation, which did not result in a settlement.

On September 1, 2022, California Ironworkers Field Pension Trust filed a third amended complaint (which amends the Amended Complaint) and John P.

Norton on behalf of the Norton Family Living Trust UAD 11/15/2002 filed an amended complaint (which amends the Options Class Action Complaint).

We plan to continue to vigorously defend against these actions.

We recorded an accrual for estimated loss contingencies associated with this matter in an amount equal to a settlement offer we made at the mediation.

The accrual does not reflect our views of the merits of claims in these actions.

In addition, we recorded a corresponding receivable for the estimated recovery in respect of our settlement offer and certain legal fees and professional expenses payable under our applicable insurance policies.

The accrual and estimated recovery may change in the future due to new developments, and the actual liability and recovery may vary significantly from current estimates.

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

3 unchanged sentences

STOCKHOLDERS’

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

As of July 31, 2021 , we had one billion shares of Class A common stock authorized, with a par value of $ 0.000025 per share, and 200 million shares of Class B common stock authorized, with a par value of $ 0.000025 per share.

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.

Effective January 3, 2022, all of our then outstanding shares of Class B common stock, par value $ 0.000025 per share, were automatically converted into the same number of shares of the Company’s Class A common stock, par value $ 0.000025 per share, pursuant to the terms of our Amended and Restated Certificate of Incorporation.

No additional shares of Class B common stock will be issued following such conversion.

As a result, as of July 31, 2022 , we had one class of outstanding common stock consisting of Class A common stock.

As of July 31, 2022 , we had 1.0 billion shares of Class A common stock authorized, with a par value of $ 0.000025 per share, and 42.0 million shares of Class B common stock authorized, with a par value of $ 0.000025 per share.

As of July 31, 2022 , we had 226.9 million shares of Class A common stock issued and outstanding and no shares of Class B common stock issued and outstanding.

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

Holders of Class B common stock are entitled to 10 votes for each share of Class B common stock held on all matters submitted to a vote of stockholders.

Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical.

Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of our Class A common stock upon a sale or transfer.

Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of our Class A common stock.

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

Share Repurchase

2 unchanged sentences

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.

During the fiscal year ended July 31, 2021, we repurchased 5.2 million shares of Class A 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 was no remaining authorization and the program had expired.

In September 2021, we used approximately $ 58.5 million of the net cash proceeds from the issuance of $ 97.7 million in aggregate principal amount of 2027 Notes to repurchase 1.4 million shares of Class A common stock in open market transactions at an average price of $ 42.77 per share.

For additional details on these transactions, refer to Note 5.

Common Stock Reserved for Issuance

12 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 RSUs, or until those stock awards become vested or expired by their terms.

Any outstanding stock awards under the 2010 Plan and 2011 Plan 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.

10 unchanged sentences

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 —

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.

Market Stock Units

In connection with his hiring, in December 2020, the Compensation Committee of our Board of Directors approved the grant of 703,117 RSUs subject to certain market conditions ("MSUs") to our President and 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.

1 unchanged sentence

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.

In order to align with the MSUs granted to our President and 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 individual who was then serving as one of our executives.

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

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

Following the individual's resignation during the second quarter of fiscal 2022, his remaining unvested MSUs were cancelled.

In October 2021, the Compensation Committee of our Board of Directors approved the grant of approximately 0.4 million MSUs to certain of our executives.

These MSUs have a weighted average grant date fair value per unit of $ 46.20 and will vest up to 200 % of the target number of MSUs based upon our total shareholder return relative to the total shareholder return of companies in the Nasdaq Composite Index over a performance period of approximately 2.8 years, subject to continuous service on each vesting date.

Additional MSUs have been granted with similar terms, but were not material.

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

1 unchanged sentence

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.

As of July 31, 2022 , approximately 1.1 million MSUs remained outstanding.

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

1 unchanged sentence

(in thousands)

Outstanding at beginning of period

21 unchanged sentences

Exercisable at end of period

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.

The aggregate intrinsic value of stock options exercised during the fiscal years ended July 31, 2020, 2021 and 2022 was $ 23.4 million, $ 90.5 million and $ 35.0 million, respectively.

1 unchanged sentence

Cash received from option exercises was $ 6.9 million, $ 15.1 million and $ 6.5 million for the fiscal years ended July 31, 2020, 2021 and 2022 , respectively.

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.

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

The total grant date fair value of stock options vested was not material for the fiscal year ended July 31, 2022.

We did no t grant any stock options during the fiscal years ended July 31, 2020, 2021 or 2022.

Employee Stock Purchase Plan

In December 2015, the Board adopted the 2016 Employee Stock Purchase Plan, which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016 ("Original 2016 ESPP").

The Original 2016 ESPP became effective in connection with our IPO.

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 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.

On December 13, 2019, our stockholders approved certain amendments to the Original 2016 ESPP.

Under the amended and restated Original 2016 ESPP (the "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.

12 unchanged sentences

Stock-Based Compensation

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

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

Fiscal Year Ended July 31,

7 unchanged sentences

As of July 31, 2022 , unrecognized stock-based compensation expense related to outstanding stock awards was approximately $ 583.4 million and is expected to be recognized over a weighted average period of approximately 2.5 years.

RESTRUCTURING CHARGES

In August 2022, we announced a plan to reduce our global headcount by approximately 270 employees, which represents approximately 4 % of our total employees, following a review of our business structure and after taking other cost-cutting measures to reduce expenses.

The headcount reduction is part of our ongoing efforts to drive towards profitable growth.

We estimate that we will recognize pre-tax restructuring charges in the range of approximately $ 20.0 million to $ 25.0 million, consisting primarily of one-time severance and other termination benefit costs.

During fiscal 2022, we recognized restructuring charges of $ 11.2 million, which consisted primarily of severance and other termination benefit costs directly related to this reduction in force.

Of the $11.2 million recognized, $ 0.2 million is included within support, entitlements and other services cost of revenue, $ 10.3 million is included within sales and marketing expense, $ 0.6 million is included within research and development expense, and $ 0.1 million is included within general and administrative expense on our consolidated statement of operations.

We expect that the majority of the remaining charges will be recognized during the first quarter of fiscal 2023.

As of July 31, 2022, we had not made any cash payments related to this restructuring and the $ 11.2 million of restructuring charges accrued is included within accrued compensation and benefits in our consolidated balance sheet.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NET LOSS PER SHARE

We adopted ASU 2020-06 on August 1, 2021 using the modified retrospective method, applicable to our convertible senior notes outstanding as of adoption.

We have not changed any previously disclosed amounts or provided additional disclosures for comparative periods.

ASU 2020-06 requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

Under the if-converted method, shares related to our convertible senior notes, to the extent dilutive, are assumed to be converted into common stock at the beginning of the period.

Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities.

4 unchanged sentences

Diluted net income (loss) per share is computed by giving effect to potentially dilutive common stock equivalents outstanding during the period, as their effect would be dilutive.

Potentially dilutive common shares include participating securities and shares issuable upon the exercise of stock options, the exercise of common stock warrants, the exercise of convertible preferred stock warrants, the vesting of RSUs and each purchase under the 2016 ESPP, under the treasury stock method.

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

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.

As the liquidation and dividend rights are identical, our undistributed earnings or losses are allocated on a proportionate basis among the holders of both Class A and Class B common stock.

As a result, the net income (loss) per share attributed to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.

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

Prior to this conversion, the rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock were identical, except with respect to voting.

As the liquidation and dividend rights were identical, our undistributed earnings or losses were allocated on a proportionate basis among the holders of both Class A and Class B common stock.

As a result, the net income (loss) per share attributed to common stockholders was the same for both Class A and Class B common stock on an individual or combined basis.

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

Fiscal Year Ended July 31,

3 unchanged sentences

basic and diluted

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

3 unchanged sentences

Employee stock purchase plan

Common stock issuable upon the conversion of convertible debt

Common stock issuable upon the conversion of the Notes

Contingently issuable shares pursuant to acquisitions

Common stock warrants

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.

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 .

Effective as of the January 3, 2022 conversion described above, outstanding options previously denominated in shares of Class B common stock represent the right to acquire the same number of shares of Class A common stock upon exercise.

Common stock issuable upon the conversion of convertible debt represents the antidilutive impact of the 2023 Notes, 2026 Notes and 2027 Notes under the if-converted method.

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

2 unchanged sentences

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:

6 unchanged sentences

Provision for income taxes

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The income tax provision differs from the amount of income tax determined by applying the applicable U.S.

9 unchanged sentences

Effect of foreign operations

Research and development tax credits

Non-deductible expenses

2 unchanged sentences

Transfer pricing adjustments

Intangible asset migration

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 years ended July 31, 2020, 2021 and 2022, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

3 unchanged sentences

Net operating loss carryforward

Deferred revenue

Tax credit carryforward

Deferred revenue

Interest expense carryforward

Intangible assets

5 unchanged sentences

Deferred commission expense

Acquisition-related

Property and equipment

Convertible notes

Prepaid expenses

Foreign branch taxes

Property and equipment

Acquisition-related

Total deferred tax liabilities

1 unchanged sentence

Net deferred tax assets

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Management believes that based on available evidence, both positive and negative, it is more likely than not that the U.S.

deferred tax assets will not be utilized and as such, a full valuation allowance has been recorded.

The valuation allowance for deferred tax assets was $ 918.7 million as of July 31, 2021.

The valuation allowance for deferred tax assets was $ 1.0 billion as of July 31, 2022.

The net increase in the total valuation allowance for the fiscal years ended July 31, 2021 and 2022 was $ 206.6 million and $ 83.9 million, respectively.

6 unchanged sentences

If an ownership change occurred, utilization of the net operating loss and tax credit carryforwards could be significantly reduced.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31, 2022 , we held an aggregate of $ 165.9 million in cash and cash equivalents in our foreign subsidiaries, of which $ 73.1 million was denominated in U.S.

5 unchanged sentences

In the event we determine not to continue to assert the permanent reinvestment of part or all of our foreign undistributed earnings, such a determination could result in the accrual and payment of additional foreign, state and local taxes.

The 2017 Tax Cuts and Jobs Act requires research and development expenditures incurred for the tax year beginning after December 31, 2021 to be capitalized and amortized ratably over five years for domestic research and 15 years for international research.

The mandatory capitalization requirement should have no material impact on our income tax provision for the fiscal year ended July 31, 2023 due to our tax attributes carryover and full valuation allowance position.

On August 16, 2022, President Biden signed the Inflation Reduction Act, which includes a new minimum tax on certain large corporations and an excise tax on stock buybacks.

We do not anticipate this legislation to have a material impact on our consolidated financial statements.

We recognize uncertain tax positions in our financial statements if that position will more likely than not be sustained on audit, based on the technical merits of the position.

A reconciliation of our unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Year Ended July 31,

4 unchanged sentences

Decreases related to prior year tax positions

Lapse of statute of limitations/Settlements

Balance at the end of the year

12 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SEGMENT INFORMATION

8 unchanged sentences

Total revenue

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4 unchanged sentences

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)

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