What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-09-21 compared with 2022-09-21 · 292 added, 283 removed, 1056 unchanged (35% of the section changed)

9 unchanged sentences

Overview and Summary of Significant Accounting Policies

Correction to Prior Period Financial Statements

Revenue, Deferred Revenue and Deferred Commissions

8 unchanged sentences

Segment Information

Subsequent Event

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

5 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of July 31, 2023, based on criteria established in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 21, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 21, 2023, expressed an adverse opinion on the Company's internal control over financial reporting.

Basis for Opinion

19 unchanged sentences

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

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

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

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

17 unchanged sentences

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on Internal Control over Financial Reporting

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

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

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

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2022, based on criteria established in Internal Control —

Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended July 31, 2022, of the Company and our report dated September 21, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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

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

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

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

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

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

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

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

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Jose, California

September 21, 2022

NUTANIX, INC.

25 unchanged sentences

Convertible senior notes, net

Derivative liability

Other liabilities—non-current

5 unchanged sentences

authorized as of July 31, 2022 and 2023;

no shares issued and

outstanding as of July 31, 2021 and 2022

no shares issued

and outstanding as of July 31, 2022 and 2023

Common stock, par value of $ 0.000025 per share—

( 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

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

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

1,042,004 ( 1,000,000

Class A, 42,004 Class B) and 1,000,000 Class A shares authorized as

of July 31, 2022 and 2023, respectively;

226,938 and 239,607 Class A

shares issued and outstanding as of July 31, 2022 and 2023,

Additional paid-in capital

3 unchanged sentences

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.

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(in thousands)

Other comprehensive loss, net of tax:

Other comprehensive (loss) income, net of tax:

Change in unrealized loss on available-for-sale

13 unchanged sentences

Issuance of common stock from ESPP purchase

Stock-based compensation

Other comprehensive income

Balance - July 31, 2020

Issuance of common stock through employee equity

incentive plans

Issuance of common stock from ESPP purchase

Repurchase and retirement of common stock

13 unchanged sentences

Balance - July 31, 2022

Issuance of common stock through employee equity

incentive plans

Issuance of common stock from ESPP purchase

Shares withheld related to net share settlement of

equity awards

Stock-based compensation

Other comprehensive income

Balance - July 31, 2023

See the accompanying notes to the consolidated financial statements.

4 unchanged sentences

Cash flows from operating activities:

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

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

operating activities:

Depreciation and amortization

4 unchanged sentences

Operating lease cost, net of accretion

Impairment and early exit of lease-related assets

Early exit of lease-related assets

Gain on Frame divestiture

Non-cash interest expense

13 unchanged sentences

Sales of investments

Proceeds from Frame divestiture

Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

Repayment of convertible notes

Payments of debt extinguishment costs

1 unchanged sentence

Payments for unwinding of warrants

Proceeds from sales of shares through employee equity

incentive plans

Proceeds from the issuance of convertible notes, net of

issuance costs

Proceeds from sales of shares through employee equity incentive

Taxes paid related to net share settlement of equity awards

Proceeds from the issuance of convertible notes, net of issuance

Repurchases of common stock

Payment of finance lease obligations

Net cash provided by financing activities

Net cash provided by (used in) financing activities

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

7 unchanged sentences

financing information:

Purchases of property and equipment included

in accounts payable and accrued and other liabilities

Finance lease liabilities arising from obtaining right-of-use

Purchases of property and equipment included in accounts payable

and accrued and other liabilities

Finance lease liabilities arising from obtaining right-of-use assets

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

11 unchanged sentences

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 allow organizations to simply run and move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure 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.

20 unchanged sentences

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 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.

32 unchanged sentences

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 previously outstanding 0 % convertible senior notes due 2023 (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.

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

38 unchanged sentences

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

Operating leases are included in operating lease right-of-use assets, operating lease liabilities—current and operating lease liabilities—non-current in our consolidated balance sheet as of July 31, 2022.

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.

Operating leases are included in operating lease right-of-use assets, operating lease liabilities—current and operating lease liabilities—non-current in our consolidated balance sheets.

Finance leases are included in property and equipment, net, accrued expenses and other current liabilities and other liabilities—non-current in our consolidated balance sheets.

NUTANIX, INC.

20 unchanged sentences

Amortization expense is included as a component of cost of product revenue and sales and marketing expense in the accompanying consolidated statements of operations.

Amounts included in sales and marketing expense relate to customer relationships.

Amounts included in sales and marketing expense relate to customer relationships and trade names.

Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually, as of May 1 of each year.

52 unchanged sentences

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

The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis.

The transaction price is allocated to the separate performance obligations on a relative SSP basis.

For deliverables that we routinely sell separately, such as software entitlement and support subscriptions on our core offerings, we determine SSP by evaluating the standalone sales over the trailing 12 months.

3 unchanged sentences

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

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

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

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

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

The balance of unbilled accounts receivable, included in accounts receivable, net on our consolidated balance sheets, was $ 9.5 million and $ 16.3 million as of July 31, 2022 and 2023, respectively.

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

29 unchanged sentences

Research and Development

Our research and development expense consists primarily of product development personnel costs, including salaries and benefits, stock-based compensation and allocated facilities costs.

Our research and development expense consists primarily of product development personnel costs, including salaries and benefits, stock-based compensation and allocated facilities, IT, and recruiting costs.

Research and development costs are expensed as incurred.

32 unchanged sentences

During the fiscal years ended July 31, 2021, 2022 and 2023 , advertising expense was $ 22.1 million, $ 13.7 million and $ 11.6 million, respectively.

Frame Divestiture

In May 2023, we sold our Frame Desktop-as-a-Service business.

As consideration for the sale, the buyer paid $ 7.0 million cash, adjusted by increases for the closing cash balance of the Frame business and the amount by which the closing working capital exceeded the working capital target, and reductions for closing expenses, the amount by which the closing working capital target exceeds the working capital, and any severance expenses associated with Frame employees who were terminated at or following the close of the transaction at the direction of the buyer, and a $ 5.0 million interest-bearing convertible note, which had a fair value of $ 5.7 million as of the closing date of the transaction.

The fair value of all consideration received exceeded the carrying amount of the Frame business upon closing, resulting in a gain of $ 11.0 million, which is included within other expense, net in our consolidated statement of operations for the fiscal year ended July 31, 2023.

Recently Adopted Accounting Pronouncements

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

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

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

3 unchanged sentences

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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 .

1 unchanged sentence

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).

3 unchanged sentences

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

CORRECTION TO PRIOR PERIOD FINANCIAL STATEMENTS

In connection with the completed Audit Committee investigation, as initially disclosed in our Quarterly Report on Form 10-Q filed with the SEC on May 24, 2023, and subsequent to the issuance of the condensed consolidated financial statements for the fiscal quarter ended October 31, 2022, we discovered an error in the reporting of expenses for software licenses and support for each prior period beginning in August 2014, resulting in an immaterial understatement of operating expenses and accrued expenses and other current liabilities for these prior periods.

We have evaluated the materiality of this error and determined that the impact is not material to our previously issued financial statements.

We have determined to prospectively correct our previously issued financial statements to reflect the correction of this error rather than record a cumulative out-of-period adjustment for this error in the current period.

As a result, we have corrected the accompanying consolidated financial statements as of July 31, 2022 and for the fiscal years ended July 31, 2021 and 2022, from amounts previously reported to reflect the correction of this error.

The correction reflects our estimates of future payments for past non-compliant use of third-party software.

Actual amounts may vary materially from these estimates.

The following tables summarize the effects of the correction:

As of July 31, 2022

As Previously Reported

(in thousands)

Consolidated Balance Sheet:

Accrued expenses and other current liabilities

Total current liabilities

Total liabilities

Accumulated deficit

Total stockholders’

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Year Ended July 31, 2021

As Previously Reported

(in thousands)

Consolidated Statement of Operations:

Sales and marketing

Research and development

Total operating expenses

Loss from operations

Loss before provision for income taxes

Net loss per share attributable to Class A and

Class B common stockholders—basic and

Fiscal Year Ended July 31, 2022

As Previously Reported

(in thousands)

Consolidated Statement of Operations:

Sales and marketing

Research and development

Total operating expenses

Loss from operations

Loss before provision for income taxes

Net loss per share attributable to Class A and

Class B common stockholders—basic and

Fiscal Year Ended July 31, 2021

As Previously Reported

(in thousands)

Consolidated Statement of Comprehensive Loss:

Comprehensive loss

Fiscal Year Ended July 31, 2022

As Previously Reported

(in thousands)

Consolidated Statement of Comprehensive Loss:

Comprehensive loss

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As Previously Reported

(in thousands)

Consolidated Statement of Stockholders' Deficit:

Accumulated Deficit as of:

July 31, 2020

July 31, 2021

July 31, 2022

Total Stockholders' Deficit as of:

July 31, 2020

July 31, 2021

July 31, 2022

Fiscal Year Ended July 31, 2021

As Previously Reported

(in thousands)

Consolidated Statement of Cash Flows:

Accrued expenses and other liabilities

Fiscal Year Ended July 31, 2022

As Previously Reported

(in thousands)

Consolidated Statement of Cash Flows:

Accrued expenses and other liabilities

REVENUE, DEFERRED REVENUE AND DEFERRED COMMISSIONS

11 unchanged sentences

Total revenue

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subscription revenue —

3 unchanged sentences

These offerings represented approximately $ 639.3 million, $ 770.4 million and $ 905.8 million of our subscription revenue for fiscal 2021, 2022 and 2023, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upfront —

25 unchanged sentences

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

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

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)

Contracted not recognized revenue was approximately $ 1.8 billion as of July 31, 2023 , of which we expect to recognize approximately 54 % over the next 12 months, and the remainder thereafter.

FAIR VALUE MEASUREMENTS

12 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.

Convertible note receivable

In May 2023, we sold our Frame Desktop-as-a-Service business.

As part of the consideration for the sale, we received a $ 5.0 million interest-bearing convertible note.

We have elected the fair value option for the convertible note and will record the changes in its fair value at each reporting period.

As of July 31, 2023 , the fair value of the convertible note was determined to be approximately $ 5.7 million.

We consider this convertible note to be classified within Level III.

The fair value is determined by considering the convertible note’s principal and accrued interest, as well as the convertible note’s option to convert into equity securities, using inputs including debt yields, volatility data, and the value of the underlying equity into which the convertible note could be converted.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

5 unchanged sentences

Commercial paper

Corporate bonds

Short-term investments:

3 unchanged sentences

Total measured at fair value

Total cash, cash equivalents and short-term

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total cash, cash equivalents and short-term investments

As of July 31, 2023

(in thousands)

Financial Assets:

Financial Assets, Current:

Cash equivalents:

Money market funds

Government securities

Commercial paper

4 unchanged sentences

Total measured at fair value

Total cash, cash equivalents and short-term

Total cash, cash equivalents and short-term investments

Financial Assets, Non-Current:

Convertible note receivable

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

5 unchanged sentences

(in thousands)

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.

In January 2023, we settled the 2023 Notes in full at maturity with a cash payment of $ 145.7 million.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The carrying value of the 2026 Notes as of July 31, 2022 and 2023 included $ 28.0 million and $ 47.6 million, respectively, of non-cash interest expense that was converted to the principal balance, net of unamortized debt discounts of $ 169.4 million and $ 132.8 million, respectively, and unamortized debt issuance costs of $ 19.4 million and $ 15.2 million, respectively.

The carrying value of the 2027 Notes as of July 31, 2022 and 2023 was net of unamortized debt issuance costs of $ 8.0 million and $ 6.5 million, respectively.

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 considered the fair value of the 2023 Notes to be a Level II valuation due to the limited trading activity.

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

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

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

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

The Level III 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.

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

Derivative Liability

2 unchanged sentences

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.

The derivative liability was considered a Level III 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 July 31, 2021

Change in fair value

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:

July 31, 2021

September 15, 2021

Conversion ratio (1)

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

Risk-free rate

Discount rate (2)

(1) The conversion ratio was 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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BALANCE SHEET COMPONENTS

4 unchanged sentences

As of July 31, 2022 and 2023, unrealized gains and losses from our short-term investments were not material and were not the result of a decline in credit quality.

As a result, at July 31, 2021 and 2022, we did not record any credit losses for these investments.

As a result, as of July 31, 2022 and 2023, we did not record any credit losses for these investments.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

11 unchanged sentences

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)

The increase in prepaid expenses and other current assets from July 31, 2022 to July 31, 2023 was due primarily to the insurance receivable and settlement payment made to escrow related to our securities class action lawsuit.

For additional details on this legal proceeding, refer to Note 8.

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 $ 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 $ 76.5 million, $ 69.3 million and $ 63.3 million for the fiscal years ended July 31, 2021, 2022 and 2023, respectively.

12 unchanged sentences

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:

3 unchanged sentences

Amortization of intangible assets (1)

Divestiture of Frame intangible assets

Intangible assets, net—ending balance

3 unchanged sentences

(in thousands)

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

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, 2021

Balance at July 31, 2022

Adjustment for Frame divestiture

Balance at July 31, 2023

Accrued Compensation and Benefits

5 unchanged sentences

Payroll taxes payable

Accrued bonus

Accrued benefits

Accrued wages and taxes

Contributions to ESPP withheld

Accrued benefits

Accrued bonus

Total accrued compensation and benefits

3 unchanged sentences

(in thousands)

Litigation settlement reserves

Software usage liability

Income taxes payable

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The increase in accrued expenses and other current liabilities from July 31, 2022 to July 31, 2023 was due primarily to an increase in the litigation settlement reserve related to our securities class action lawsuit.

For additional details on this legal proceeding, refer to Note 8.

CONVERTIBLE SENIOR NOTES

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

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

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)

Principal amount

initial purchasers' discount

cost of the bond hedges

proceeds from the sale of warrants

other issuance costs

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

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

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:

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

2) during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price per $ 1,000 principal amount of 2023 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our Class A common stock and the conversion rate for the 2023 Notes on each such trading day;

3) upon the occurrence of certain specified corporate events.

Based on the closing price of our Class A common stock of $ 15.13 on July 31, 2022 , the if-converted value of the 2023 Notes was lower than the principal amount.

The price of our Class A common stock was not greater than or equal to 130 % of the conversion price for 20 or more trading days during the 30 consecutive trading days ending on the last trading day of the quarter ended July 31, 2022.

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

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.

We intend to settle the principal of the 2023 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 2023 Notes in connection with certain corporate events that constitute a "make-whole fundamental change" per the indenture governing the 2023 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 2023 Notes at a repurchase price equal to 100 % of the principal amount of the repurchased 2023 Notes, plus accrued and unpaid interest.

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

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.

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

In January 2023, we settled the 2023 Notes in full at maturity with a cash payment of $ 145.7 million.

The 2023 Notes consisted of the following:

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Principal amounts:

Unamortized debt discount (1)

Unamortized debt issuance costs (1)

Repayment of convertible senior notes

Net carrying amount

Carrying amount of equity component (2)

(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 .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The effective interest rate was 0.41 %.

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

2 unchanged sentences

Interest expense related to amortization of debt discount

Interest expense related to amortization of debt issuance

Interest expense related to amortization of debt issuance costs

Total interest expense

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note Hedges and Warrants

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We received approximately $ 88.0 million in cash proceeds from the sale of these warrants.

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

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

equity and are not accounted for as derivatives.

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.

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.

As the price of our Class A common stock continues to increase above the warrant strike price, additional dilution would occur at a declining rate so that a $ 10 increase from the warrant strike price would yield a cumulative dilution of approximately 0.4 million diluted shares for EPS purposes.

However, upon conversion, the note hedges would neutralize the dilution from the 2023 Notes so that there would only be dilution from the warrants, which would result in an actual dilution of approximately 2.1 million shares at a common stock price of $ 83.46 .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

In January 2023, the convertible note hedges and warrant transactions expired concurrently with the expiration of the 2023 Notes.

No settlement is required as the stock has remained below the strike price throughout the unwind settlement averaging period.

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

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

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

Interest on the 2026 Notes 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).

Interest on the 2026 Notes has accrued from the date of issuance, September 24, 2020, and is added to the principal amount, in the case of the 2026 Notes held by Bain, or paid in cash, in the case of the 2026 Notes held by entities that are not affiliated with Bain, as applicable, on a semi-annual basis (on March 15 and September 15 of each year).

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

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.

The 2026 Notes are convertible at an initial conversion rate of 36.036 shares of Class A 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.

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

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

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.

For each $ 1,000 principal amount of 2026 Notes a holder elects to convert, we have initially elected to pay cash with respect to the first $ 1,000 of conversion value and deliver shares of Class A common stock with respect to any conversion value in excess of $ 1,000 .

Pursuant to the indenture governing the 2026 Notes, we may elect to change such default settlement method with respect to any conversion of 2026 Notes held by Bain by delivering written notice to Bain at least five trading days prior to the effective time of such settlement election.

Additionally, if Bain elects to convert any 2026 Notes it holds upon our delivery of a notice of redemption, Bain will have the right to elect whether such conversion is settled in cash, shares of our Class A common stock or a combination thereof.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On or after September 15, 2025, the 2026 Notes will be redeemable by us, at our option, 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.

A holder who converts their 2026 Notes in connection with certain corporate events that constitute a "make-whole fundamental change" (as defined in the indenture governing the 2026 Notes) is, under certain circumstances, entitled to an increase in the conversion rate.

In addition, if we undergo a "fundamental change" (as defined in the indenture governing the 2026 Notes) prior to the maturity date, holders of the 2026 Notes may require us to repurchase for cash all or a portion of their 2026 Notes at a repurchase price equal to 100 % of the principal amount of the repurchased 2026 Notes, plus accrued and unpaid interest thereon.

The 2026 Notes consisted of the following:

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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, 2023 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.

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon the conversion price of the 2026 Notes becoming fixed, subject to customary anti-dilution and other adjustments, 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").

In September 2021, we issued $ 575 million in aggregate 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.

1 unchanged sentence

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

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

2 unchanged sentences

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;

(1) during any fiscal quarter, 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) if we call the 2027 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

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

1 unchanged sentence

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.

The conversion rate will be subject to adjustment in certain 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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

"make-whole fundamental change" (as defined in 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" (as defined in the indenture governing the 2027 Notes) prior to the maturity date, holders of the 2027 Notes 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 thereon.

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

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

The 2027 Notes consisted of the following:

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

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

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

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

2 unchanged sentences

Variable lease costs primarily include common area maintenance charges.

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.

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

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

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

Total finance lease cost was $ 0.7 million, $ 2.4 million, and $ 3.9 million for the fiscal years ended July 31, 2021, 2022 and 2023, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

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

During fiscal 2023, we signed agreements to early exit certain office spaces in the United States and the Netherlands.

The reductions in the lease terms resulted in decreases to the carrying amounts of the operating lease liabilities and the operating lease right-of-use assets on our consolidated balance sheet as of July 31, 2023.

In addition, we recorded $ 1.7 million of expense in our consolidated statement of operations for the fiscal year ended July 31, 2023.

Supplemental balance sheet information related to leases is as follows:

As of July 31,

(in thousands)

8 unchanged sentences

Weighted average discount rate:

As of July 31,

(in thousands)

11 unchanged sentences

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

8 unchanged sentences

Finance leases

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The undiscounted cash flows for our lease liabilities as of July 31, 2023 were as follows:

7 unchanged sentences

As of July 31, 2023 , we had additional operating lease commitments of approximately $ 3.0 million on an undiscounted basis for certain office leases that have not yet commenced.

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

These operating leases will commence during fiscal 2024, with lease terms of approximately five years .

COMMITMENTS AND CONTINGENCIES

36 unchanged sentences

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.

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

On September 1, 2022, California Ironworkers Field Pension Trust filed a third amended complaint (which amends the Amended Complaint, the "Third 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, the "First Amended Complaint").

On November 14, 2022, the defendants filed a motion to dismiss the Third Amended Complaint and the First Amended Complaint.

On February 9, 2023, the plaintiffs and the defendants agreed to a mediator’s recommendation to settle these actions for a total of $ 71.0 million, which is accrued as of July 31, 2023 and included within accrued expenses and other current liabilities on our consolidated balance sheet.

On May 19, 2023, the court granted its preliminary approval of the settlement and the notice to class members.

In June 2023, the $ 31.1 million of settlement funds were deposited in escrow and are included within prepaid expenses and other current assets on our consolidated balance sheet as of July 31, 2023.

A final settlement hearing is scheduled for October 4, 2023.

The settlement accrual is partially offset by a receivable of $ 39.9 million for amounts recoverable under our applicable insurance policies, which is included within prepaid expenses and other current assets on our consolidated balance sheet as of July 31, 2023.

During the fiscal year ended July 31, 2023, we recorded charges of $ 38.7 million for the settlement and applicable legal fees, net of our insurance receivable.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On April 14, 2023, a purported federal securities class action complaint was filed in the United States District Court for the Northern District of California against us, two of our current officers, and a former officer.

The complaint generally alleges that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5.

The court has appointed a lead plaintiff for the putative class in this action, consisting of those who purchased or otherwise acquired our securities between September 21, 2021 and March 6, 2023, inclusive.

In addition, on May 5, 2023, a purported stockholder derivative complaint was filed in the United States District Court for the Northern District of California, naming our current directors as defendants and our company as a nominal defendant.

The complaint generally alleges violations of Section 14(a) of the Exchange Act and breach of fiduciary duties, and aiding and abetting breach of fiduciary duties, based on similar underlying allegations contained in the purported federal securities class action complaint described above.

The court has ordered that all proceedings in this stockholder derivative action be stayed pending the court's decision on any motion to dismiss in the federal securities class action.

These cases are in their very early stages, and we are not able to determine what, if any, liabilities will attach to these complaints.

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

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

STOCKHOLDERS’

2 unchanged sentences

As a result, as of July 31, 2023 , 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.

In December 2022, our stockholders approved an amendment and restatement of our Amended and Restated Certificate of Incorporation, which includes the removal of all provisions related to Class B common stock.

As of July 31, 2023 , we had 1.0 billion shares of Class A common stock authorized, with a par value of $ 0.000025 per share.

As of July 31, 2023 , we had 239.6 million shares of Class A 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.

Share Repurchase

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

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

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

During the fiscal year ended July 31, 2021, we repurchased 5.2 million shares of 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 6.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common Stock Reserved for Issuance

6 unchanged sentences

Shares reserved for future employee stock purchase plan awards

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

EQUITY INCENTIVE PLANS

5 unchanged sentences

We initially reserved 22.4 million shares of our Class A common stock for issuance under the 2016 Plan.

The number of shares of Class A common stock available for issuance under the 2016 Plan will also include an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of:

The number of shares of Class A common stock available for issuance under the 2016 Plan also includes an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of:

18.0 million shares, 5 % of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board.

7 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

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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Market Stock Units

In connection with his hiring, in December 2020, the Compensation Committee of our Board of Directors approved the grant of 0.7 million RSUs subject to certain market conditions ("MSUs") to our President and CEO.

In October 2021, August 2022, and August 2023, the Compensation Committee of our Board of Directors granted approximately 0.4 million, 1.3 million, and 0.8 million MSUs, respectively, to certain of our executives.

These MSUs have a weighted average grant date fair value per unit of approximately $ 46.20 , $ 27.89 , and $ 47.09 , respectively, 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, 2.9 years, and 2.9 years, respectively, subject to continuous service on each vesting date.

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

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Fiscal Year Ended July 31,

Weighted Average

Grant Date Fair Value per Share

Weighted Average

Grant Date Fair Value per Share

(in thousands)

Outstanding at beginning of period

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

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

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

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

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

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

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Cash received from option exercises was $ 15.1 million, $ 6.5 million and $ 3.7 million for the fiscal years ended July 31, 2021, 2022 and 2023 , 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.

The total grant date fair value of stock options vested was not material for the fiscal years ended July 31, 2021 and 2022.

There were no stock options that vested during the fiscal year ended July 31, 2023.

We did no t grant any stock options during the fiscal years ended July 31, 2021, 2022 or 2023.

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

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.

Our stockholders subsequently approved amendments to the Original 2016 ESPP in December 2019 and December 2022 (as amended, the "2016 ESPP").

Under the 2016 ESPP, the maximum number of shares of Class A common stock available for sale is 13.8 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.

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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.

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

This headcount reduction was part of our efforts to drive toward profitable growth.

As of July 31, 2023 , we recognized total restructuring charges of approximately $ 16.5 million, which consisted primarily of one-time severance and other termination benefit costs directly related to this reduction in force.

Of the approximately $ 16.5 million recognized, $ 0.4 million is included within support, entitlements and other services cost of revenue, $ 13.6 million is included within sales and marketing expense, $ 2.3 million is included within research and development expense, and $ 0.2 million is included within general and administrative expense on our consolidated statements of operations.

During the fiscal quarter ended July 31, 2023 , we did not make any cash payments.

During the fiscal year ended July 31, 2023, we made cash payments of approximately $ 15.8 million.

As of July 31, 2023 , we had a remaining restructuring liability of approximately $ 0.6 million, included within accrued compensation and benefits in our consolidated balance sheet.

We do not expect to record any material future charges related to this reduction in force.

NUTANIX, INC.

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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.

Our Convertible Preferred Stock is considered a participating security.

Participating securities do not have a contractual obligation to share in our losses.

As such, for the periods we incur net losses, there is no impact on the calculated net loss per share attributable to common stockholders in applying the two-class method.

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period.

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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:

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Contingently issuable shares pursuant to acquisitions

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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.

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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.

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State income taxes

Transfer pricing adjustments

Tax impact of Frame divestiture

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fiscal years ended July 31, 2021, 2022 and 2023, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

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Deferred revenue

Interest expense carryforward

Intangible assets

Capitalized research expenses

Accruals and reserves

Stock-based compensation

Interest expense carryforward

Property and equipment

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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.

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As of July 31, 2023 , we had approximately $ 2.7 billion of federal net operating loss carryforwards and $ 1.7 billion of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in fiscal 2024.

In addition, we had approximately $ 124.0 million of federal research credit carryforwards, $ 96.4 million of state research credit carryforwards and $ 12.1 million of foreign tax credit carryforwards.

In addition, we had approximately $ 144.1 million of federal research credit carryforwards, $ 111.4 million of state research credit carryforwards and $ 29.5 million of foreign tax credit carryforwards available to reduce future tax liability.

The federal credits will begin to expire in fiscal 2030 and the state credits can be carried forward indefinitely.

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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, 2023 , we held an aggregate of $ 262.5 million in cash and cash equivalents in our foreign subsidiaries, of which $ 110.9 million was denominated in U.S.

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We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries, as such earnings are to be reinvested offshore indefinitely.

The income tax liability would be insignificant if these earnings were to be repatriated.

The income tax benefit and provision for the fiscal year ended July 31, 2022 are based on the assumption that foreign undistributed earnings are indefinitely reinvested.

We will continue to evaluate whether or not to continue to assert indefinite reinvestment on part or all of our foreign undistributed earnings.

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.

It is not practical to estimate the withholding tax liability if these earnings were to be repatriated.

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.

The impact of the mandatory capitalization requirement for the fiscal year ended July 31, 2023 was fully offset by our tax attributes carryover and full valuation allowance position.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act ("IRA") of 2022, which, among other things, implemented a 15% minimum tax on book income for certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy.

The provisions of the IRA had no impact on our income tax provision for the fiscal year ended July 31, 2023.

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,

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Decreases related to prior year tax positions

Lapse of statute of limitations/Settlements

Lapse of statute of limitations/Settlements/Other

Balance at the end of the year

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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

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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:

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Total long-lived assets

SUBSEQUENT EVENT

Share Repurchase

In August 2023, our Board of Directors authorized the repurchase of up to $ 350.0 million of our Class A common stock.

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

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

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