What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-09-23 compared with 2019-09-24 · 479 added, 396 removed, 954 unchanged (48% of the section changed)

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

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Segment Information

Related Party Transactions

Selected Quarterly Financial Data (Unaudited)

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

Opinion on the Financial Statements

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

and subsidiaries (the "Company") as of July 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended July 31, 2019, and the related notes (collectively referred to as the "financial statements").

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

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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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.

Valuation of Developed Technology from Mainframe2, Inc.

Acquisition — Refer to Note 2 to the financial statements

Critical Audit Matter Description

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

The Company accounted for this acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including developed technology of $31.8 million related to Frame’s cloud-based Windows desktop and application delivery service.

The determination of the fair value of the developed technology required management to make significant estimates and assumptions related to forecasted revenue growth, cost of sales, and operating expenses as well as the discount rate.

To estimate the fair value of the developed technology, management was required to make significant estimates and assumptions related to the forecasted information.

We identified valuation of the developed technology as a critical audit matter because of the significant judgments made by management to estimate its fair value especially considering the technology is recently developed with limited historical sales information.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasted revenue growth, costs of sales, and operating expenses, as well as the selection of the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasted revenue growth, cost of sales, and operating expenses, as well as the selection of the discount rate for Frame’s developed technology included the following, among others:

We tested the effectiveness of controls over the fair value of developed technology, including managements forecast and operating plan review control over the forecasted revenue growth, cost of sales, and operating expenses.

We further tested management’s control over the valuation report, including key inputs such as forecasts and the discount rate.

With the assistance of our fair value specialists, we evaluated the valuation methodologies and valuation assumptions used by management to develop fair value estimates for developed technology, including:

Testing the mathematical accuracy of the calculation.

Developing a range of independent discount rate estimates and comparing those to the discount rate selected by management.

Assessing the source information underlying the Company’s determination of the discount rate.

Evaluating whether the fair value model being used is appropriate considering the Company’s circumstances and valuation premise identified.

We performed a comparison of management’s forecasted revenue growth, cost of sales, and operating expenses against various other sources, including:

Historical performance of Frame.

Industry data and analyst reports.

Internal communications to management and the Board of Directors.

Forecasted information as well as analyst and industry reports for the Company and certain of its peer companies.

Critical Audit Matter

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

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

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

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

Opinion on Internal Control over Financial Reporting

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

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.

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As of July 31,

(in thousands, except share and per share data)

(in thousands, except per share data)

Current assets:

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

245,475 242,516

Deferred commissions—current 46,238 68,694

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Property and equipment, net 136,962 143,172

Operating lease right-of-use assets (1)

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

Intangible assets, net 66,773 49,392

Goodwill 185,180 185,260

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

Liabilities and Stockholders’ Equity

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

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

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Accrued expenses and other current liabilities (1)

28,797 25,924

Deferred revenue—current 396,667 534,572

Operating lease liabilities—current (1)

Total current liabilities 599,315 760,203

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

Operating lease liabilities—non-current (1)

Convertible senior notes, net 458,910 490,222

Other liabilities—non-current (1)

27,547 27,436

Total liabilities 1,599,149 2,043,524

Commitments and contingencies (Note 8)

Stockholders’ equity:

NUTANIX, INC.

CONSOLIDATED BALANCE SHEETS

Stockholders’ equity (deficit):

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

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Additional paid-in capital 1,835,528 2,245,180

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income 669 2,030

Accumulated deficit ( 1,649,309 ) ( 2,522,192 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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

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

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

For additional details, refer to Note 1.

See the accompanying notes to the consolidated financial statements.

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Fiscal Year Ended July 31,

(in thousands, except share and per share data)

2018 2019 2020

(in thousands, except per share data)

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

Support, entitlements and other services 267,468 403,724 541,860

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Cost of revenue:

Product 276,127 143,078 71,312

Support, entitlements and other services 109,903 161,050 215,377

Total cost of revenue 386,030 304,128 286,689

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

Operating expenses:

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Provision for income taxes 7,447 8,119 17,662

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

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

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

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

164,091 181,031 194,719

See the accompanying notes to the consolidated financial statements.

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

Other comprehensive (loss) income, net of tax:

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

( 896 ) 1,671 1,361

Comprehensive loss $ ( 298,057 ) $ ( 619,508 ) $ ( 871,522 )

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NUTANIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Preferred Stock

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Total

Stockholders’

(Deficit) Equity

(in thousands, except share data)

Balance - July 31, 2016

Conversion of convertible preferred stock to common stock upon IPO

Issuance of class A common stock upon IPO, net of issuance costs

Reclassification of convertible preferred stock warrant liability to APIC upon IPO

Issuance of common stock upon exercise of common stock warrants

Stock-based compensation

Issuance of common stock through employee equity incentive plans, net of repurchases

Issuance of common stock from ESPP purchase

Issuance of common stock in connection with business combinations

Vesting of early exercised stock options

Cumulative effect adjustment from adoption of ASU 2016-09

Other comprehensive loss

Equity (Deficit)

Shares Amount

(in thousands)

Balance - July 31, 2017 154,637 $ 4 $ 948,134 $ ( 106 ) $ ( 730,969 ) $ 217,063

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

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

Balance - July 31, 2018 172,858 4 1,355,907 ( 1,002 ) ( 1,028,130 ) 326,779

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

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

Balance - July 31, 2019 188,595 5 1,835,528 669 ( 1,649,309 ) 186,893

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

Issuance of common stock from ESPP purchase 3,320 — 50,630 — — 50,630

Stock-based compensation — — 351,998 — — 351,998

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

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

Balance - July 31, 2020 201,949 $ 5 $ 2,245,180 $ 2,030 $ ( 2,522,192 ) $ ( 274,977 )

See the accompanying notes to the consolidated financial statements.

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

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

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

Depreciation and amortization 50,302 77,612 93,773

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Change in fair value of contingent consideration ( 2,423 ) ( 832 ) —

Change in fair value of convertible preferred stock warrant liability

Loss on debt extinguishment

Operating lease cost, net of accretion — — 30,374

Impairment of lease-related assets — — 3,002

Other ( 962 ) ( 2,786 ) 324

Changes in operating assets and liabilities:

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Prepaid expenses and other assets (1)

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

Accounts payable ( 16,469 ) 13,508 ( 16,574 )

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Accrued expenses and other liabilities 34,295 ( 17,454 ) 3,400

Operating leases, net — — ( 28,394 )

Deferred revenue 262,027 278,517 272,410

Net cash provided by operating activities (1)

Net cash provided by (used in) operating activities (1)

92,540 42,168 ( 159,885 )

Cash flows from investing activities:

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Purchases of property and equipment ( 62,372 ) ( 118,452 ) ( 89,488 )

Payments for business combinations, net of cash acquired

Net cash used in investing activities

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

Net cash (used in) provided by investing activities ( 503,555 ) ( 16,850 ) 24,559

Cash flows from financing activities:

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

Payment of contingent consideration associated with a business acquisition

72,010 69,210 57,797

Payment of contingent consideration associated with a business combination

— ( 1,040 ) —

Payment of debt in conjunction with business combinations

( 1,696 ) ( 991 ) —

Proceeds from issuance of convertible senior notes, net

563,587 ( 75 ) —

Payments for convertible note hedges

( 143,175 ) — —

Proceeds from issuance of warrants

Payments of offering costs

Proceeds from initial public offering, net of underwriting discounts and commissions

Repayment of senior notes

Debt extinguishment costs

Net cash provided by financing activities 578,616 67,104 57,797

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

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

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

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

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

NUTANIX, INC.

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

139,497 307,098 399,520

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

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

Restricted cash (1)(2)

1,123 2,842 3,254

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

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Cash paid for income taxes $ 10,116 $ 28,999 $ 16,625

Cash paid for interest

Supplemental disclosures of non-cash investing and financing information:

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

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

Vesting of early exercised stock options $ 681 $ 183 $ —

Offering costs included in accounts payable

Conversion of convertible preferred stock to common stock, net of issuance costs

Reclassification of convertible preferred stock warrant liability to additional paid-in capital

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

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

We provide a leading enterprise cloud platform that digitizes the traditional silos of enterprise computing, converging compute, virtualization, storage, networking, desktop, governance and security services into one integrated solution.

We primarily sell our products and services to end customers through distributors, resellers and original equipment manufacturers ("OEMs") (collectively, "Partners").

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

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

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

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.

Principles of Consolidation

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

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

useful lives of intangible assets and property and equipment;

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

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

allowance for doubtful accounts;

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warranty liability;

fair value of contingent consideration in a business combination;

sales commissions expense;

purchase commitment liabilities to our OEMs;

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

whether an arrangement is or contains a lease;

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

and contingencies and litigation.

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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.

Concentration Risk

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

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

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

For the fiscal years ended July 31, 2018, 2019 and 2020, no end customer accounted for more than 10% of total revenue or accounts receivable.

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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

Revenue Accounts Receivable

as of July 31,

Fiscal Year Ended July 31,

Partners 2018 2019 2020 2019 2020

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

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

Partner C 10 % 10 % (1)

Partner D 20 % 10 % ( 1 )

(1) Less than 10%

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

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

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

Accounts Receivable and Allowance for Doubtful Accounts

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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Charged to allowance for doubtful accounts 815 437 822

Recoveries — ( 290 ) ( 22 )

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

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

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

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

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

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

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

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

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

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

Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation.

Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance, property taxes and utilities.

We use an estimate of our incremental borrowing rate ("IBR") based on the information available at the lease commencement date in determining the present value of lease payments, unless the implicit rate is readily determinable.

In determining the appropriate IBR, we consider information including, but not limited to, our credit rating, the lease term and the currency in which the arrangement is denominated.

For leases which commenced prior to our adoption of Accounting Standards Update ("ASU") 2016-02, Leases ("ASC 842"), we used the IBR as of August 1, 2019.

Our lease terms may include renewal options, which are not included 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.

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

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The excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recognized as goodwill.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible assets consist of identifiable intangible assets, including developed technology, customer relationships and trade names, resulting from business combinations.

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

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

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.

Such goodwill and other intangible assets may also be tested for impairment between annual tests in the presence of impairment indicators such as, but not limited to:

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There have been no indicators of impairment of goodwill, intangible assets or other long-lived assets and we did not record any impairment losses during fiscal 2017 , 2018 or 2019 .

There have been no indicators of impairment of goodwill, intangible assets or other long-lived assets and we did not record any material impairment losses during fiscal 2018, 2019 or 2020.

Revenue Recognition

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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For additional details on revenue recognition, refer to Note 3 of Notes to Consolidated Financial Statements.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 SSP basis.

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

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

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Deferred costs are periodically reviewed for impairment.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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Allocated costs consist of certain facilities, depreciation and amortization, recruiting and information technology costs allocated based on headcount.

We generally provide a one -year warranty on hardware and a 90 -day warranty on software licenses.

We generally provide a one -year warranty on hardware sold by us and a 90 -day warranty on software licenses.

The hardware warranty provides for parts replacement for defective components and the software warranty provides for bug fixes.

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

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

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

Substantially all customers purchase PCS agreements.

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Research and Development

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To date, we have not undertaken any hedging transactions related to foreign currency exposure.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our chief operating decision maker is a group which is comprised of our Chief Executive Officer and Chief Financial Officer.

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Advertising Costs

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Recently Adopted Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory, which requires us to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

The new standard was effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including interim reporting periods within those fiscal years.

We adopted this ASU effective August 1, 2018 using a modified retrospective approach.

The adoption of the new standard did not have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230):

Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents.

Therefore, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period amounts shown on the statement of cash flows.

The new standard was effective for fiscal years beginning after December 15, 2017, with early adoption permitted, including interim reporting periods within those fiscal years.

We adopted the new standard effective August 1, 2018, using the retrospective transition approach.

The reclassified restricted cash balances from operating activities to changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows were not material for any period presented.

In January 2018, the FASB released guidance on the accounting for the GILTI provisions of the TCJA.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

During the second quarter of fiscal 2019, we elected to treat any potential GILTI inclusions as a period cost.

Our adoption of this guidance has not had a material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to nonemployees with the guidance applicable to grants to employees.

Under the new standard, equity-classified share-based payment awards issued to nonemployees will be measured on the grant date, instead of the current requirement to remeasure the awards through the performance completion date.

The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years.

We early adopted the standard effective August 1, 2018, using the prospective approach, and our adoption did not have a material impact on the consolidated financial statements.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other (Topic 350):

Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

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

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

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

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

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

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

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

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

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

Refer to Note 7 for additional details.

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

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

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

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

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

We early adopted the standard effective August 1, 2018, using the prospective approach, and our adoption did not have a material impact on our consolidated financial statements.

In August 2018, the SEC issued Securities Act Release No.

33-10532, which amends certain disclosure requirements, including extending to interim periods the annual requirement to disclose changes in stockholders’ equity.

Under the new requirements, registrants must now analyze changes in stockholders’ equity, in the form of a reconciliation, for the current and comparative year-to-date interim periods, with subtotals for each interim period.

The final rule was effective in November 2018.

We adopted this new guidance during the first quarter of fiscal 2019 and have included a reconciliation of the changes in stockholders' equity in our Quarterly Reports on Form 10-Q.

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

Recently Issued and Not Yet Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases ("ASC 842"), which requires lessees to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets, and to recognize on the statement of operations the expenses in a manner similar to current practice.

The new standard, including related amendments subsequently issued by the FASB, is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years.

We intend to elect the package of transition expedients and the transition option that allows us not to restate the comparative periods in our consolidated financial statements in the year of adoption.

In addition, we intend to elect to account for lease and non-lease components as a single lease component.

We also intend to make an accounting policy election not to record leases that, at the lease commencement date, have a lease term of 12 months or less on the balance sheet.

We have substantially completed our review of existing vendor arrangements for embedded leases and we expect that all of our operating leases, except those with a lease term of 12 months or less, disclosed in Note 7 will be subject to the new standard.

The present value of these operating lease commitments will be recognized as right-of-use assets and lease liabilities at the later to occur of (i) the adoption date of August 1, 2019 or (ii) the time we take possession of the leased asset, which will have a material impact on our consolidated balance sheets.

We have made significant progress in validating the accuracy of the new ASC 842 reports generated from our existing lease accounting system and are in the process of finalizing our accounting policy and disclosures.

We expect the adoption of this standard to result in the recognition of right-of-use assets between $ 115 million and $ 125 million and lease liabilities between $ 140 million and $ 150 million .

As of the adoption date, we have additional operating lease commitments of approximately $ 32 million on an undiscounted basis for certain office leases that have not yet commenced.

We do not anticipate that the adoption of this standard will have a material impact on our consolidated statements of operations or our consolidated statements of cash flows, as the expense recognition under this new standard will be similar to current practice.

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

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

The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted, including interim reporting periods within those fiscal years.

ASU 2018-02 is effective for us in

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the first quarter of fiscal 2020.

The implementation of this new standard will 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):

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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.

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

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

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

BUSINESS COMBINATIONS

We completed two acquisitions in fiscal 2018 and one acquisition in fiscal 2019 .

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

We completed one acquisition in fiscal 2019.

We did not complete any acquisitions in fiscal 2020.

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

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

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

Our consolidated financial statements for the fiscal years ended July 31, 2018 and 2019 include the operations of the acquired companies from the dates the deals closed.

Pro forma results of operations have not been presented because they are not material to our consolidated financial statements, either individually or in the aggregate.

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

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

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

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

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

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

Fiscal 2018 Acquisitions

Minjar Acquisition

On March 16, 2018, we completed the acquisition of Minjar, Inc.

("Minjar"), a privately held Delaware corporation with its offices in Bangalore, India ("Minjar Acquisition").

Minjar was a cloud technology solutions company, and the acquisition was expected to complement and enhance our products, allowing us to offer customers new capabilities to better manage their multi-cloud deployments.

At the close of the acquisition, all outstanding shares of Minjar capital stock and all in-the-money options and warrants to purchase Minjar capital stock were purchased or canceled in exchange for an aggregate purchase price of approximately $ 19.3 million , consisting of $ 18.8 million in cash and approximately $ 0.5 million of holdback liability.

The holdback liability represents deferred payments to Minjar's former key employees to be released in installments during the two years following the date of acquisition.

As the release of these deferred payments was not contingent upon the future and continued service, the $ 0.5 million holdback liability, which approximated fair value, was considered as part of the purchase price.

Certain portions of the consideration for the acquisition had been placed in escrow to secure the indemnification obligations of certain Minjar security holders.

In addition to the $ 19.3 million purchase price, we also entered into employee holdback or deferred payment arrangements with former employees of Minjar who joined us after the acquisition, totaling approximately $ 4.4 million .

As payment of these deferred payments is contingent upon the continuous service of the employees, they are being accounted for as compensation over the required service period of two years.

The purchase price allocation primarily included $ 18.0 million of goodwill, $ 7.0 million of intangible assets, which primarily consisted of $ 5.6 million related to developed technology and $ 1.4 million related to customer relationships, both of which are being amortized over an estimated economic life of five years , and $ 5.7 million of deferred income tax and other tax liabilities.

Goodwill was not deductible for income tax purposes.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We recognized approximately $ 0.8 million of acquisition-related costs, which were expensed as incurred, as general and administrative expenses in the consolidated statement of operations.

Netsil Acquisition

On March 22, 2018, we completed the acquisition of Netsil Inc.

("Netsil"), a privately held Delaware corporation headquartered in San Francisco, California ("Netsil Acquisition").

This acquisition represented an opportunity for us to accelerate our ability to deliver native multi-cloud operations with the addition of application discovery and operations management.

The aggregate purchase price of approximately $ 67.5 million consisted of approximately $ 3.7 million in cash and 1,206,364 unregistered shares of our Class A common stock with an aggregate fair value of approximately $ 63.8 million .

The fair value of the shares of common stock issued was determined to be $ 52.87 per share, the closing price of our stock on March 22, 2018.

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

We also entered into employee holdback or deferred payment arrangements with the founders of Netsil who joined us after the acquisition, whereby we issued 104,426 unregistered shares of our Class A common stock to the founders subject to their continuous employment with us for two years.

The fair value of the Class A common stock issued pursuant to the holdback arrangements was approximately $ 5.5 million , or $ 52.87 per share, the closing price of our Class A common stock on March 22, 2018.

This holdback is being accounted for as stock-based compensation over the required 2 -year service period.

The purchase price allocation primarily included $ 53.1 million of goodwill, $ 19.0 million of intangible assets, primarily related to developed technology, which is being amortized over an estimated economic life of seven years , $ 2.6 million of deferred income tax liabilities and $ 1.4 million of assumed debt.

Goodwill was not deductible for income tax purposes.

We recognized approximately $ 0.6 million of acquisition-related costs, which were expensed as incurred, as general and administrative expenses in the consolidated statement of operations.

Fiscal 2019 Acquisition

Mainframe2, Inc.

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

Goodwill was not deductible for income tax purposes.

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

We recognized approximately $ 1.1 million of acquisition-related costs in connection with the Frame Acquisition, of which approximately $ 0.4 million was recognized during the fiscal year ended July 31, 2019 .

The following table presents the aggregate purchase price allocation related to the acquisitions completed during fiscal 2018 and fiscal 2019 :

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

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

As of July 31, 2019

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

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

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

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

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:

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

Non-portable software 543,952 449,131 208,158

Hardware 257,314 105,321 23,455

Professional services 23,546 33,276 45,889

Total revenue $ 1,155,457 $ 1,236,143 $ 1,307,682

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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These subscription software licenses represented approximately $ 86.7 million, $ 272.0 million and $ 521.3 million of our subscription revenue for fiscal 2018, 2019 and 2020, respectively.

For fiscal 2017 , 2018 and 2019 , the weighted average term for these subscription term-based licenses was approximately 2.9 years , 3.7 years and 3.8 years , respectively.

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

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

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

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

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

Deferred Revenue

Deferred Commissions

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Deferred Revenue Deferred Commissions

(in thousands)

Balance as of July 31, 2018 $ 631,207 $ 114,379

Additions 682,241 158,062

Revenue/commissions recognized ( 403,724 ) ( 118,729 )

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Balance as of July 31, 2019 910,044 153,712

Additions 815,257 233,917

Revenue/commissions recognized ( 541,860 ) ( 172,101 )

Assumed in a business combination

Balance as of July 31, 2020 $ 1,183,441 $ 215,528

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fiscal year ended July 31, 2019, we recognized revenue of approximately $ 275.0 million pertaining to amounts deferred as of July 31, 2018.

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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 $ 941.4 million as of July 31, 2019 , of which we expect to recognize approximately 44 % over the next 12 months, and the remainder thereafter.

Contracted not recognized revenue was approximately $ 1.2 billion as of July 31, 2020, of which we expect to recognize approximately 46 % over the next 12 months, and the remainder thereafter.

FAIR VALUE MEASUREMENTS

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As of July 31, 2019

Level I Level II Level III Total

(in thousands)

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government securities — 119,933 — 119,933

Corporate bonds — 9,996 — 9,996

Short-term investments:

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Total cash, cash equivalents and short-term investments

Financial Liabilities:

Contingent consideration

As of July 31, 2020

Level I Level II Level III Total

(in thousands)

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Commercial paper — 8,999 — 8,999

government securities

Corporate bonds

Short-term investments:

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Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value, with the exception of the 0 % Convertible Senior Notes, due in 2023 (the "Notes").

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

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

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

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

As of July 31, 2018

As of July 31, 2019

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

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

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

(in thousands)

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

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

Fiscal Year Ended July 31,

(in thousands)

Contingent consideration—beginning balance

Change in fair value (1)

Contingent consideration—ending balance

Recognized in the consolidated statements of operations within general and administrative expenses.

We remeasured the fair value of our Level 3 contingent consideration liability using a Monte Carlo simulation on projected future payments.

The fair value was determined by calculating the net present value of the expected payments using significant inputs that were not observable in the market, including the probability of achieving the milestone, estimated bookings and discount rates.

The change in fair value of the contingent consideration was due to the movement of the inputs.

During the quarter ended April 30, 2019, the contingent consideration was paid out in full.

BALANCE SHEET COMPONENTS

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

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

In addition, unless we need cash to support our current operations, we do not intend to sell and it is not likely that we would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.

As a result, at July 31, 2018 and 2019 , there were no other-than-temporary impairments for these investments.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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Due in one to two years 102,967

Total $ 401,041

Prepaid Expenses and Other Current Assets

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Prepaid operating expenses $ 37,864 $ 31,690

Prepaid income taxes

Tenant improvement allowance receivables — 8,557

VAT receivables 5,068 8,381

Prepaid income taxes 19,690 —

Other current assets 12,043 14,404

Total prepaid expenses and other current assets $ 74,665 $ 63,032

The increase in prepaid expenses and other current assets from July 31, 2018 to July 31, 2019 was due primarily to the reclassification of an $ 18.0 million corporate income tax receivable from other assets—non-current to prepaid expenses and other current assets, as the refund was expected to be received within the next 12 months, as well as an increase in prepayments for sales and marketing events and higher expenses related to subscription contract renewals.

The $ 18.0 million corporate income tax receivable was received in August 2019.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Property and Equipment, Net

Property and equipment, net consists of the following:

As of July 31,

(in thousands)

Useful Life As of July 31,

(in months) (in thousands)

Computer, production, engineering and other equipment 36 $ 200,762 $ 245,245

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Leasehold improvements (1)

46,520 65,557

Furniture and fixtures 60 12,868 17,026

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accumulated depreciation (2)

( 183,169 ) ( 251,225 )

Total property and equipment, net $ 136,962 $ 143,172

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

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

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

Depreciation expense related to our property and equipment was $ 43.7 million, $ 60.8 million and $ 76.4 million for the fiscal years ended July 31, 2018, 2019 and 2020, respectively.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets, Net

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Developed technology

$ 79,300 $ 79,300

Customer relationships

Total intangible assets, gross

92,330 92,330

Accumulated amortization of developed technology

( 21,210 ) ( 35,987 )

Accumulated amortization of customer relationships

( 3,392 ) ( 4,953 )

Accumulated amortization of trade name

( 955 ) ( 1,998 )

Total accumulated amortization

( 25,557 ) ( 42,938 )

Total intangible assets, net

$ 66,773 $ 49,392

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Intangible assets, net—beginning balance

$ 45,366 $ 66,773

Acquired intangible assets

Amortization of intangible assets (1)

( 16,773 ) ( 17,381 )

Intangible assets, net—ending balance

$ 66,773 $ 49,392

(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.

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(in thousands)

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2021 $ 17,380

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

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Balance at July 31, 2018

Acquired in Netsil Acquisition

Acquired in Minjar Acquisition

Balance at July 31, 2018

Acquired in Frame Acquisition 97,328

Balance at July 31, 2019

Other Assets—Non-Current

Other assets—non-current consists of the following:

As of July 31,

(in thousands)

Other tax assets—non-current

Deferred tax assets—non-current

Total other assets—non-current

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

Balance at July 31, 2020

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrued Compensation and Benefits

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Accrued commissions $ 31,703 $ 33,503

Contributions to ESPP withheld

Accrued vacation 15,475 24,006

Accrued bonus

Contributions to ESPP withheld 20,778 16,563

Payroll taxes payable 8,504 10,742

Accrued benefits 6,819 8,426

Accrued bonus 11,413 5,568

Other 5,112 10,301

Total accrued compensation and benefits $ 99,804 $ 109,109

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrued Expenses and Other Current Liabilities

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Accrued professional services 2,996 3,006

Other 16,150 13,215

Total accrued expenses and other current liabilities $ 28,797 $ 25,924

The decrease in income taxes payable during the fiscal year ended July 31, 2019 was due primarily to an $ 18.0 million estimated corporate income tax payment made during the second quarter of fiscal 2019, partially offset by additional foreign corporate income tax accruals recorded during fiscal 2019.

CONVERTIBLE SENIOR NOTES

In January 2018, we issued Convertible Senior Notes with a 0 % interest rate for an aggregate principal amount of $ 575.0 million , due in 2023 (the "Notes"), in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

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

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.

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other issuance costs ( 707 )

Net proceeds $ 508,312

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3) upon the occurrence of certain specified corporate events.

Based on the closing price of our Class A common stock of $ 22.19 on July 31, 2020, 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, 2019 , the Notes are not convertible for the fiscal quarter commencing after July 31, 2019 .

As such, the 2023 Notes are not convertible for the fiscal quarter commencing after July 31, 2020.

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.

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2023 Notes consisted of the following:

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Principal amounts:

$ 575,000 $ 575,000

Unamortized debt discount (1)

( 109,956 ) ( 80,298 )

Unamortized debt issuance costs (1)

( 6,134 ) ( 4,480 )

Net carrying amount

$ 458,910 $ 490,222

Carrying amount of equity component (2)

$ 148,598 $ 148,598

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

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

COMMITMENTS AND CONTINGENCIES

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

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

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

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

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

Variable lease costs primarily include common area maintenance charges.

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

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

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

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Supplemental balance sheet information related to leases is as follows:

July 31, 2020

(in thousands)

Operating leases:

We have commitments for future payments related to our office facility leases and other contractual obligations.

We lease our office facilities under non-cancelable operating lease agreements expiring through 2026.

Certain of these lease agreements have free or escalating rent payments.

We recognize rent expense under such agreements on a straight-line basis over the lease term, with any free or escalating rent payments amortized as a reduction or addition of rent expense over the lease term.

Future minimum payments due under operating leases as of July 31, 2019 are as follows:

Operating lease right-of-use assets, gross

Accumulated amortization

Operating lease right-of-use assets, net

Operating lease liabilities—current

Operating lease liabilities—non-current

Total operating lease liabilities

Weighted average remaining lease term (in years):

Weighted average discount rate:

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

Fiscal Year Ended July 31, 2020

(in thousands)

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

Operating cash flows from operating leases

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

Operating leases

The undiscounted cash flows for our operating lease liabilities as of July 31, 2020 were as follows:

Fiscal Year Ending July 31:

(in thousands)

Rent expense incurred under operating leases was $ 12.7 million , $ 19.0 million and $ 37.0 million for the fiscal years ended July 31, 2017 , 2018 and 2019 , respectively.

2021 $ 43,874

Thereafter 3,414

Total lease payments 171,474

imputed interest ( 18,111 )

Total lease obligation 153,363

current lease obligations ( 36,569 )

Long-term lease obligations $ 116,794

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ending July 31:

(in thousands)

2020 $ 39,540

Thereafter 3,511

Total $ 197,227

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

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

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

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

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Our historical charges have not been material.

As of July 31, 2019 , we had up to approximately $ 64.8 million of non-cancelable purchase obligations and other commitments pertaining to our normal operations, and up to approximately $ 144.9 million in the form of guarantees to certain of our contract manufacturers and OEMs.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31, 2020, we had up to approximately $ 62.5 million of non-cancelable purchase obligations and other commitments pertaining to our daily business operations, and up to approximately $ 81.2 million in the form of guarantees to certain of our OEMs.

Guarantees and Indemnifications

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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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Proceedings

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The initial complaints generally alleged 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.

In July 2019, the court consolidated the actions into a single action, and appointed a lead plaintiff who, per the court-approved schedule, filed a consolidated amended complaint on September 9, 2019.

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

The consolidated amended complaint seeks monetary damages in an unspecified amount.

This case is in the very early stages and we are not able to determine what, if any, liabilities will attach to these complaints.

In July 2019, the court consolidated the actions into a single action, and appointed a lead plaintiff, who then filed a consolidated amended complaint (the "Original Complaint").

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

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

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

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

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 officer and directors as defendants and (ii) the Company as a nominal defendant.

The complaints generally allege 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 allege insider trading and violation of California Corporations Code Section 25402 and the Santa Clara County Superior Court complaints further include additional claims for "abuse of control" and "gross mismanagement." The defendants have not responded to any of the derivative actions to date.

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

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." On January 7, 2020, the U.S.

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

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

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

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

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

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

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

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

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

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

As of July 31, 2019 , we had 1,000,000,000 shares of Class A common stock authorized with a par value of $ 0.000025 per share and 200,000,000 shares of Class B common stock authorized with a par value of $ 0.000025 per share.

As of July 31, 2019 , we had 168,155,308 shares of Class A common stock issued and outstanding and 20,440,006 shares of Class B common stock issued and outstanding.

As of July 31, 2020, 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, 2020, we had 186.8 million shares of Class A common stock issued and outstanding and 15.1 million shares of Class B common stock issued and outstanding.

NUTANIX, INC.

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As of July 31, 2020

(in thousands)

Shares reserved for future equity grants 12,724

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Shares reserved for future employee stock purchase plan awards 9,169

Shares underlying outstanding common stock warrants

EQUITY INCENTIVE PLANS

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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.

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

We initially reserved 22,400,000 shares of our Class A common stock for issuance under the 2016 Plan.

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

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

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:

18,000,000 shares, 5 % of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board.

Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 7,731,826 and 8,642,904 shares, respectively, pursuant to these provisions.

As of July 31, 2019 , we had reserved a total of 43,504,728 shares for the issuance of equity awards under the Stock Plans, of which 12,594,167 shares were still available for grant.

On August 1, 2019, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 9,429,765 shares pursuant to the automatic increase provisions.

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.

Accordingly, on August 1, 2018 and 2019, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 8.6 million and 9.4 million shares, respectively, pursuant to these provisions.

As of July 31, 2020, we had reserved a total of 42.9 million shares for the issuance of equity awards under the Stock Plans, of which 12.7 million shares were still available for grant.

On August 1, 2020, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 10.1 million shares pursuant to the automatic increase provisions.

NUTANIX, INC.

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Restricted Stock Units

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

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

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

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

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

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

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

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

We used a Monte Carlo simulation to calculate the fair value of the award on the grant date.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ended July 31,

Grant Date Fair Value per Share

Shares Grant Date Fair Value per Share Number of

Shares Grant Date Fair Value per Share

(in thousands) (in thousands)

Outstanding at beginning of period 23,597 $ 31.20 22,136 $ 36.72

Granted 11,204 $ 42.23 13,502 $ 27.31

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

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

Outstanding at end of period 22,136 $ 36.72 22,632 $ 32.70

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ended July 31,

Weighted Average

(in thousands)

Shares Weighted Average

Price Weighted

Life Aggregate

Value Number of

Shares Weighted Average

Price Weighted

Life Aggregate

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

Outstanding at beginning of period

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

Options granted — $ — — $ —

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Outstanding at end of period

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

Exercisable at end of period

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

Vested and expected to vest at end of period

Stock options exercisable as of July 31, 2018 includes 9,660,757 vested options and 1,498,288 unvested options with an early exercise provision.

Stock options exercisable as of July 31, 2019 includes 8,048,364 vested options and 672,629 unvested options with an early exercise provision.

The weighted average grant date fair value per share for stock options granted during the fiscal year ended July 31, 2017 was $ 6.41 .

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

Stock options exercisable as of July 31, 2019 includes 8.0 million vested options and 0.7 million unvested options with an early exercise provision.

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.

There were no options granted during fiscal 2019 or 2020.

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The total grant date fair value of stock options vested was $ 11.5 million, $ 4.4 million and $ 1.0 million for the fiscal years ended July 31, 2018, 2019 and 2020, respectively.

The number of shares vested and expected to vest included in the table above excludes 47,691 shares of early exercised stock options as of July 31, 2018 .

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Stock Purchase Plan

In December 2015, the Board adopted the 2016 ESPP, which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016.

The 2016 ESPP became effective in connection with our IPO.

A total of 3,800,000 shares of Class A common stock were initially reserved for issuance under the 2016 ESPP.

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

3,800,000 shares, 1 % of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board.

Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under 2016 ESPP increased by 1,546,365 and 1,728,580 shares, respectively, pursuant to these provisions.

On August 1, 2019, the number of shares of Class A common stock available for issuance under the 2016 ESPP increased by 1,885,953 shares pursuant to the automatic increase provisions.

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

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

The 2016 ESPP provides for 12 -month offering periods, generally beginning in March and September of each year, and each offering period consists of two six-month purchase periods.

The first offering period began in September 2016.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On each purchase date, participating employees will purchase Class A common stock at a price per share equal to 85 % of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period.

If the stock price of our Class A common stock on any purchase date in an offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period.

During the fiscal year ended July 31, 2019 , 2,008,082 shares of common stock were purchased under the 2016 ESPP for an aggregate amount of $ 57.2 million .

As of July 31, 2019 , 1,402,959 shares were available for future issuance under the 2016 ESPP.

During the fiscal year ended July 31, 2020, 3.3 million shares of common stock were purchased under the 2016 ESPP for an aggregate amount of $ 50.6 million.

As of July 31, 2020, 9.2 million shares were available for future issuance under the 2016 ESPP.

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

Fiscal Year Ended July 31,

2018 2019 2020

Expected term (in years) 0.75 0.84 0.92

Risk-free interest rate 1.4 % 2.5 % 0.1 %

Volatility 49.8 % 69.0 % 73.4 %

Dividend yield — % — % — %

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Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

Cost of revenue:

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

Support, entitlements and other services 8,945 15,326 22,014

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Total stock-based compensation expense $ 177,868 $ 306,729 $ 351,998

Stock-based compensation expense for the fiscal year ended July 31, 2017 included cumulative stock-compensation expense related to stock awards with performance conditions, for which vesting was deemed probable in the first quarter of fiscal 2017 upon the successful completion of our IPO.

Prior to fiscal 2017, no expense was recognized related to these stock awards, as vesting was not deemed probable.

The cumulative stock-based compensation expense recorded in the first quarter of fiscal 2017 related to the portion of the awards for which the relevant service condition had been satisfied and we have continued to recognize the expense over the remaining service period.

Stock-based compensation expense related to stock awards without performance conditions is recognized on a straight-line basis over the requisite service period.

As of July 31, 2020, unrecognized stock-based compensation expense related to outstanding stock awards was approximately $ 689.9 million and is expected to be recognized over a weighted average period of approximately 2.5 years.

Determination of Fair Value

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option pricing model.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the expected term, expected volatility of our common stock, risk-free interest rate and expected dividend yield.

The fair value of our stock options was estimated using the following weighted average assumptions:

Fiscal Year Ended July 31, 2017

Fair value of common stock

Expected term (in years)

Risk-free interest rate

Dividend yield

We did not grant any stock options during fiscal 2018 or 2019.

The fair value of each grant of stock options was determined using the Black-Scholes option pricing model and the assumptions discussed below.

Each of these inputs is subjective and generally requires significant judgment to determine.

Fair Value of Common Stock — Prior to our IPO, the fair value of the common stock underlying our stock options was determined by our Board.

The Board, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date.

Subsequent to our IPO, we use the market closing price for our Class A common stock as reported on the NASDAQ Stock Market on the date of grant.

Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding.

For option grants that are considered to be "plain vanilla," we determine the expected term using the simplified method as provided by the Securities and Exchange Commission.

The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.

Risk-Free Interest Rate — The risk-free interest rate is based on U.S.

Treasury yield curve in effect at the time of grant for zero-coupon U.S.

Treasury notes with maturities approximately equal to the option’s expected term.

Expected Volatility — Since we do not have a long trading history of our common stock, the expected volatility was derived from the average historical stock volatilities of several unrelated public companies within the industry that we consider to be comparable to our business over a period equivalent to the expected term of the stock option grants.

Dividend Rate — The expected dividend was assumed to be zero , as we have never paid dividends and have no current plans to do so.

NET LOSS PER SHARE

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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.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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Fiscal Year Ended July 31,

(in thousands, except share and per share data)

2018 2019 2020

(in thousands, except per share data)

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

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

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

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

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

As of July 31,

2018 2019 2020

(in thousands)

Outstanding stock options and RSUs 34,930 30,876 30,178

Employee stock purchase plan 1,311 1,659 4,368

Common stock subject to repurchase

Contingently issuable shares pursuant to business combinations 277 749 506

Common stock subject to repurchase 47 — —

Common stock warrants 34 34 —

Total 36,599 33,318 35,052

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

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

Loss before provision for income taxes $ ( 289,714 ) $ ( 613,060 ) $ ( 855,221 )

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

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

State and local 429 312 79

Foreign 8,541 17,270 18,033

Total current taxes 11,029 15,584 18,287

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

State and local ( 718 ) ( 770 ) —

Foreign 523 ( 1,746 ) ( 705 )

Total deferred taxes ( 3,582 ) ( 7,465 ) ( 625 )

4 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

tax reform impact

federal income tax at statutory rate $ ( 75,779 ) $ ( 128,680 ) $ ( 179,514 )

Change in valuation allowance 25,274 142,273 145,244

Stock-based compensation ( 73,631 ) ( 23,378 ) 30,913

Effect of foreign operations 26,117 14,305 12,676

Change in valuation allowance

Transfer pricing adjustments

Intangible asset migration

Non-deductible expenses 2,115 4,651 5,393

Change in unrecognized tax benefit 653 727 1,709

State income taxes ( 290 ) ( 458 ) 79

Warrant revaluation

During the fiscal year ended July 31, 2017, our provision for income taxes was primarily attributable to foreign tax provisions in certain foreign jurisdictions in which we conduct business.

Transfer pricing adjustments 4,584 ( 3 ) 7

tax reform impact 93,352 — —

Intangible asset migration 4,461 ( 2,027 ) —

Other 591 709 1,155

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3 unchanged sentences

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

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

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

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

In June 2020, the U.S.

Supreme Court denied certiorari in the case of Altera Corp.

Commissioner ("Altera").

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

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In December 2017, the U.S.

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

Additionally, in December 2017, the SEC staff issued Staff Accounting Bulletin No.

118 ("SAB 118"), which allowed us to record provisional amounts during a measurement period not to extend beyond one year from the enactment date.

We completed our accounting for income tax effects of the TCJA during the second quarter of fiscal 2019 and did not have any significant adjustments to our provisional amounts.

Although our analysis of the tax effects of the TCJA is complete, there may be additional tax effects that could impact our future consolidated financial statements upon the finalization of any laws, regulations or additional TCJA guidance.

We have elected to record taxes associated with our GILTI as period costs when incurred.

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

5 unchanged sentences

Deferred revenue 71,859 122,236

Leases — 48,270

Intangible assets 35,764 31,119

1 unchanged sentence

Accruals and reserves 14,825 13,401

Property and equipment 633 2,234

Other assets 24,258 29,022

Total deferred tax assets 579,330 834,899

1 unchanged sentence

Deferred commission expense ( 35,814 ) ( 50,344 )

Leases — ( 44,502 )

Acquisition-related ( 11,515 ) ( 8,003 )

2 unchanged sentences

Prepaid expenses ( 2,303 ) ( 2,140 )

Other ( 1,621 ) ( 1,991 )

Total deferred tax liabilities ( 65,034 ) ( 117,784 )

5 unchanged sentences

The net increase in the total valuation allowance for the fiscal years ended July 31, 2019 and 2020 was $ 282.8 million and $ 202.3 million, respectively.

As of July 31, 2019 , we had approximately $ 1.4 billion of federal net operating loss carryforwards and $ 764.3 million of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in fiscal 2029.

As of July 31, 2020, we had approximately $ 1.9 billion of federal net operating loss carryforwards and $ 1.1 billion of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in fiscal 2029.

In addition, we had approximately $ 97.2 million of federal research credit carryforwards, $ 65.5 million of state research credit carryforwards and $ 26.0 million of foreign tax credit carryforwards.

1 unchanged sentence

The foreign credits will begin to expire in fiscal 2027.

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

1 unchanged sentence

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, 2020, we held an aggregate of $ 173.7 million in cash and cash equivalents in our foreign subsidiaries, of which $ 114.7 million was denominated in U.S.

15 unchanged sentences

Balance at the end of the year $ 81,250 $ 85,257

During the fiscal year ended July 31, 2019 , the net decrease in uncertain tax positions was primarily attributable to a tax election made during the third quarter of fiscal 2019, as well as the change in tax law, partially offset by uncertain tax positions related to an acquisition during fiscal 2019.

During the fiscal year ended July 31, 2020, the net increase in unrecognized tax positions was primarily attributable to federal and state research and development credits and intercompany charges.

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

8 unchanged sentences

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the provision for income taxes.

We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations and do not anticipate a significant impact to the gross unrecognized tax benefits within the next 12 months related to these years.

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

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

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

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

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

NUTANIX, INC.

6 unchanged sentences

Fiscal Year Ended July 31,

2018 2019 2020

(in thousands)

$ 648,805 $ 682,340 706,110

Europe, the Middle East and Africa 224,392 238,356 277,489

Asia Pacific 240,247 271,712 265,092

Other Americas 42,013 43,735 58,991

1 unchanged sentence

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

RELATED-PARTY TRANSACTIONS

We enter into various transactions with related parties in the normal course of business.

During the fiscal years ended July 31, 2017 , 2018 and 2019 , we did not have any material related party transactions.

In connection with the acquisition of PernixData in the first quarter of fiscal 2017, entities affiliated with Lightspeed Venture Partners, which owned approximately 36.7 % of our outstanding Convertible Preferred Stock as of July 31, 2016, owned approximately 26.4 % of the outstanding capital stock of PernixData immediately prior to the completion of the PernixData acquisition.

One member of our Board is affiliated with Lightspeed Venture Partners.

As of July 31, 2019 , entities affiliated with Lightspeed Venture Partners owned approximately 2.3 % of our total outstanding Class A and Class B common stock.

NUTANIX, INC.

6 unchanged sentences

Three Months Ended

October 31, 2017

January 31, 2018

April 30, 2018

July 31, 2018

October 31, 2018

January 31, 2019

April 30, 2019

July 31, 2019

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

(unaudited, in thousands, except per share amounts)

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

Support, entitlements and other services

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

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

1 unchanged sentence

Product (2)(3)

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

Support, entitlements and other services (2)

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

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

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

Operating expenses:

Sales and marketing (2)(3)

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

Research and development (2)

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

General and administrative (2)

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

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

1 unchanged sentence

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

Loss before provision for income taxes

Provision for (benefit from) income taxes

Loss before (benefit from) provision for income taxes

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

(Benefit from) provision for income taxes

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

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

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

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

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

4 unchanged sentences

Three Months Ended

October 31, 2017

January 31, 2018

April 30, 2018

July 31, 2018

October 31, 2018

January 31, 2019

April 30, 2019

July 31, 2019

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

(unaudited, in thousands)

1 unchanged sentence

Support, entitlements and other services cost of sales

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

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

1 unchanged sentence

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

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

(3) Includes amortization of intangible assets as follows:

Three Months Ended

October 31, 2017

January 31, 2018

April 30, 2018

July 31, 2018

October 31, 2018

January 31, 2019

April 30, 2019

July 31, 2019

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

(unaudited, in thousands)

1 unchanged sentence

Sales and marketing 550 666 661 651 651 651 651 650

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

SUBSEQUENT EVENTS

Issuance and Sale of Convertible Senior Notes

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

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

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

Bank National Association, as trustee.

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

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

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

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

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

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

NUTANIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

Stock Repurchase Program

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

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

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

CEO Succession Plan

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

Pandey’s plans to retire as Chief Executive Officer.

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

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