Business Wire | Feb 24, 2021 04:02PM EST

Nutanix Reports Second Quarter Fiscal 2021 Financial Results

Feb. 24, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 24, 2021--Nutanix, Inc. (NASDAQ: NTNX), a leader in private cloud, hybrid and multicloud computing, today announced financial results for its second quarter ended January 31, 2021.

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"We delivered a strong quarter across the board, exceeding guidance on all metrics and continuing our momentum with key customer wins and solid execution," said Rajiv Ramaswami, President and CEO of Nutanix. "In my first two months as CEO of Nutanix, my conviction that we have a talented employee base, loyal customers who love the simplicity of our software, and a strong market opportunity ahead of us has only been reinforced."

"We delivered record ACV billings with growth of 14 percent year-over-year, bolstered by the strength of our emerging products," said Duston Williams, CFO of Nutanix. "We continued to make progress on our transition to subscription and maintained our disciplined approach to managing operating expenses, which were lower than expected this quarter. We look forward to continuing to execute on our transformation and are confident Nutanix is well positioned for long-term value creation."

Second Quarter Fiscal 2021 Financial Summary

Q2 FY'21 Q2 FY'20 Y/Y Change

Annual Contract Value (ACV)^1 $159.2 $139.5 14%Billings million million

Run-rate Annual Contract Value $1.38 billion $1.08 billion 28%(ACV)^2

Total Average Contract Term^3 3.4 years 3.9 years (0.5) years

Total Revenue^4 $346.4 $346.8 Flat million million

GAAP Gross Margin 79.5% 78.3% 120 bps

Non-GAAP Gross Margin 82.7% 81.4% 130 bps

GAAP Operating Expenses $431.7 $478.6 (10)% million million

Non-GAAP Operating Expenses $353.5 $396.3 (11)% million million

Free Cash Flow $(28.5) $(73.7) $45.2 million million million

Reconciliations between GAAP and non-GAAP financial measures and key performance measures are provided in the tables of this press release.

Recent Company Highlights

* Appointed Rajiv Ramaswami as President and Chief Executive Officer: Nutanix announced that it appointed Ramaswami to lead the company in its second decade with a focus on driving sustained growth, improving efficiency, and advancing leadership in the hybrid and multicloud categories. Ramaswami has a 30+ year track record of building and scaling businesses in cloud services, software, and network infrastructure for industry leaders including VMware, Broadcom, Cisco, and IBM.

* Promoted Chris Kaddaras to Chief Revenue Officer: Nutanix promoted Kaddaras to Chief Revenue Officer to recognize his significant contributions spearheading the company's Sales team transition to ACV and operationalizing the subscription transformation. Since joining Nutanix in 2016, Kaddaras has built and nurtured a talented and resilient Sales organization, while continuing to drive ACV billings growth in the middle of a significant business model shift.

* Named a Leader in Gartner Magic Quadrant for Hyperconverged Infrastructure Software: For the fourth year in a row Nutanix was named in the Gartner Magic Quadrant for Hyperconverged Infrastructure Software. Nutanix was recognized for its hyperconverged infrastructure software capabilities and was positioned highest in execution of all vendors.

* Delivered Object and File Storage Solutions to Edge, Private and Public Clouds: Nutanix released new hybrid cloud capabilities for its unstructured data storage offerings, Objects and Files, enabling customers to simplify data management and effectively manage costs, moving IT teams even closer to true hybrid and multicloud operating models. The new capabilities include cloud tiering for object storage, hybrid cloud file storage, and simplified disaster recovery for both objects and files.

* Introduced Strengthened Ransomware Protection Features: Nutanix added new features to its cloud platform to help protect against ransomware attacks at a time when they're becoming even more common due to the rise in remote work. These new capabilities build on Nutanix's rich data services for network security, files and objects storage, and business continuity to help enterprises prevent, detect and recover against ransomware attacks across multiple cloud environments.

* Expanded New Customer Base and New Business with Existing Customers: Nutanix continued to add new customers, ending the second quarter of fiscal 2021 with a total of approximately 18,770 end-customers, including about 950 of the Global 2000 after adding about 20 in the quarter. Second quarter customers who continued to invest in Nutanix as part of their transformation journeys included the following Global 2000 companies: Hitachi Systems Power Services, Ltd., Mercedes-Benz do Brasil Ltda., Roche, Saint-Gobain, Total Gas & Power.

Third Quarter Fiscal 2021 Outlook



ACV Billings $150 - $155 million

Non-GAAP Gross Margin Approximately 81%

Non-GAAP Operating Expenses $365 - $370 million

Weighted Average Shares Outstanding Approximately 207 million

Supplementary materials to this press release, including our second quarter fiscal year 2021 earnings presentation, can be found at https://ir.nutanix.com/company/financial.

Webcast and Conference Call Information

Nutanix executives will discuss the company's second quarter fiscal 2021 financial results on a conference call at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. To listen to the call via telephone, dial 1-833-227-5841 from within the United States or 1-647-689-4068 from outside the United States. The conference ID is 4194788. This call will be webcast live and available to all interested parties on our Investor Relations website at ir.nutanix.com. Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on our Investor Relations website. A telephonic replay will be available for one week and can be accessed by calling 1-800-585-8367 or 1-416-621-4642, and entering the conference ID 4194788.

Definitions and Total Revenue Impact

1Annual Contract Value, or ACV, is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware. The total annualized value for a contract is calculated by dividing the total value of the contract by the number of years in the term of such contract, using, where applicable, an assumed term of five years for contracts that do not have a specified term. ACV Billings for any given period is defined as the sum of the ACV for all contracts billed during the given period.

2Run-rate ACV at the end of any period is the sum of ACV for all contracts that are in effect as of the end of that period. For the purposes of this calculation, Nutanix assumes that the contract term begins on the date a contract is booked, irrespective of the periods in which the company would recognize revenue for such contract.

3Total Average Contract Term represents the dollar-weighted term, calculated on a billings basis, across all subscription and life-of-device contracts, using an assumed term of five years for life-of-device licenses, executed in the quarter.

4Total Revenue was negatively impacted by a year-over-year decline in the average contract term associated with Nutanix's ongoing transition to a subscription-based business model.

5New ACV with respect to any given contract is defined as (i) if the contract is (A) with a new customer, the aggregate value of such contract excluding professional services, or (B) with an existing customer, the aggregate value of any upsell / expansion under such contract excluding professional services, in each case divided by (ii) the number of years in the term of such contract, using an assumed term of five years for life-of-device licenses.

Non-GAAP Financial Measures and Other Key Performance Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial and other key performance measures: billings, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net loss, non-GAAP net loss per share, free cash flow, subscription revenue, subscription billings, Annual Contract Value Billings (or ACV Billings), New Annual Contract Value (or New ACV), Run-rate Annual Contract Value (or Run-rate ACV), and professional services billings. In computing these non-GAAP financial measures and key performance measures, we exclude certain items such as stock-based compensation and the related income tax impact, costs associated with our acquisitions (such as amortization of acquired intangible assets, income tax-related impact, and other acquisition-related costs), impairment of operating lease-related assets, change in fair value of derivative liability, amortization of debt discount and issuance costs, non-cash interest expense, other non-recurring transactions and the related tax impact, and the revenue and billings associated with pass-through hardware sales. Billings is a performance measure which we believe provides useful information to investors because it represents the amounts under binding purchase orders received by us during a given period that have been billed, and we calculate billings by adding the change in deferred revenue between the start and end of the period to total revenue recognized in the same period. Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net loss, and non-GAAP net loss per share are financial measures which we believe provide useful information to investors because they provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures such as stock-based compensation expense that may not be indicative of our ongoing core business operating results. Free cash flow is a performance measure that we believe provides useful information to our management and investors about the amount of cash generated by the business after necessary capital expenditures, and we define free cash flow as net cash used in operating activities less purchases of property and equipment. Subscription revenue, subscription billings, and professional services billings are performance measures that we believe provide useful information to our management and investors as they allow us to better track the growth of the subscription-based portion of our business, which is a critical part of our business plan. ACV Billings, New ACV, and Run-rate ACV are performance measures that we believe provide useful information to our management and investors as they allow us to better track the topline growth of our business during our transition to a subscription-based business model because they take into account variability in term lengths. We use these non-GAAP financial and key performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. However, these non-GAAP financial and key performance measures have limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Billings, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net loss, non-GAAP net loss per share, and free cash flow are not substitutes for total revenue, gross margin, operating expenses, net loss, net loss per share, or net cash (used in) provided by operating activities, respectively; subscription revenue is not a substitute for total revenue; and subscription and professional services billings are not substitutes for subscription and professional services revenue, respectively. There is no GAAP measure that is comparable to ACV Billings, New ACV or Run-rate ACV, so we have not reconciled the ACV Billings, New ACV and Run-rate ACV numbers included in this press release to any GAAP measure. In addition, other companies, including companies in our industry, may calculate non-GAAP financial measures and key performance measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures and key performance measures as tools for comparison. We urge you to review the reconciliation of our non-GAAP financial measures and key performance measures to the most directly comparable GAAP financial measures included below in the tables captioned "Reconciliation of Revenue to Billings," "Disaggregation of Revenue and Billings," "Reconciliation of Subscription and Professional Services Revenue to Subscription and Professional Services Billings," "Reconciliation of GAAP to Non-GAAP Profit Measures," and "Reconciliation of GAAP Net Cash Used In Operating Activities to Non-GAAP Free Cash Flow," and not to rely on any single financial measure to evaluate our business.

Forward-Looking Statements

This press release contains express and implied forward-looking statements, including, but not limited to, statements regarding: our business plans, initiatives, objectives and outlook, including the actions we have taken to manage operating expenses and changes to the Company's leadership structure and composition; our ability to execute such plans, initiatives and objectives successfully and in a timely manner, and the benefits and impact of such plans, initiatives and objectives, including our ability to continue executing on our business model transformation, manage our Chief Executive Officer transition, manage our expenses and decrease our cash usage in future periods, drive long-term value creation and sustained growth, and improve efficiency; the competitive market, including our competitive position and our projections about our market share and opportunity; our customer needs and our response to those needs; the benefits and capabilities of our platform, solutions, products, services and technology, including the interoperability and availability of our solutions with and on third-party platforms; our plans and expectations regarding new products, services, product features and technology, including those that are still under development or in process; our plans and timing for, and the success and impact of, our transition to a subscription-based business model and any changes in our guidance metrics; the timing and potential impact of the COVID-19 pandemic on the global market environment and the IT industry, as well as on our business, operations and financial results, including the changes we have made or anticipate making in response to the COVID-19 pandemic, our ability to manage our business during the pandemic, and the position we anticipate being in following the pandemic; and our guidance on estimated ACV Billings, non-GAAP gross margin, non-GAAP operating expenses and weighted average shares outstanding for any future fiscal periods. These forward-looking statements are not historical facts and instead are based on our current expectations, estimates, opinions, and beliefs. Consequently, you should not rely on these forward-looking statements. The accuracy of these forward-looking statements depends upon future events and involves risks, uncertainties, and other factors, including factors that may be beyond our control, that may cause these statements to be inaccurate and cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by such statements, including, among others: failure to successfully implement or realize the full benefits of, or unexpected difficulties or delays in successfully implementing or realizing the full benefits of, our business plans, initiatives and objectives; the timing, breadth, and impact of the COVID-19 pandemic on our business, operations, and financial results, as well as the impact on our customers, partners, and end markets; failure to successfully manage or realize the benefits of our Chief Executive Officer succession; failure to timely and successfully meet our customer needs; delays in or lack of customer or market acceptance of our new products, services, product features or technology; delays or unexpected accelerations in the transition to a subscription-based business model; the rapid evolution of the markets in which we compete; our ability to achieve, sustain and/or manage future growth effectively; factors that could result in the significant fluctuation of our future quarterly operating results, including, among other things, anticipated changes to our revenue and product mix, including changes as a result of our transition to a subscription-based business model, which will slow revenue growth during such transition and make forecasting future performance more difficult, the timing and magnitude of orders, shipments and acceptance of our solutions in any given quarter, our ability to attract new and retain existing end-customers, changes in the pricing of certain components of our solutions, and fluctuations in demand and competitive pricing pressures for our solutions; the introduction, or acceleration of adoption of, competing solutions, including public cloud infrastructure; and other risks detailed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2020, filed with the U.S. Securities and Exchange Commission, or the SEC, on September 23, 2020. Additional information will also be set forth in our Quarterly Report on Form 10-Q that will be filed for the fiscal quarter ended January 31, 2021 which should be read in conjunction with this press release and the financial results included herein. Our SEC filings are available on the Investor Relations section of the company's website at ir.nutanix.com and on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this press release and, except as required by law, we assume no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any of these forward-looking statements to reflect actual results or subsequent events or circumstances.

About Nutanix

Nutanix is a global leader in cloud software and a pioneer in hyperconverged infrastructure solutions, making computing invisible anywhere. Organizations around the world use Nutanix software to leverage a single platform to manage any app at any location for their private, hybrid and multicloud environments. Learn more at www.nutanix.com or follow us on Twitter @nutanix.

(c) 2021 Nutanix, Inc. All rights reserved. Nutanix, the Nutanix logo, and all Nutanix product and service names mentioned herein are registered trademarks or trademarks of Nutanix, Inc. in the United States and other countries. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holder(s). This press release contains links to external websites that are not part of Nutanix.com. Nutanix does not control these sites and disclaims all responsibility for the content or accuracy of any external site. Our decision to link to an external site should not be considered an endorsement of any content on such a site.

NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

As of

July 31, January 31, 2020 2021

(in thousands, except per share data)

Assets

Current assets:

Cash and cash equivalents $ 318,737 $ 298,701

Short-term investments 401,041 990,138

Accounts receivable, net 242,516 164,868

Deferred commissions-current 68,694 92,025

Prepaid expenses and other current assets 63,032 69,994

Total current assets 1,094,020 1,615,726

Property and equipment, net 143,172 131,971

Operating lease right-of-use assets 127,326 121,066

Deferred commissions-non-current 146,834 191,180

Intangible assets, net 49,392 40,702

Goodwill 185,260 185,260

Other assets-non-current 22,543 25,547

Total assets $ 1,768,547 $ 2,311,452

Liabilities and Stockholders' Deficit

Current liabilities:

Accounts payable $ 54,029 $ 52,459

Accrued compensation and benefits 109,109 151,014

Accrued expenses and other current 25,924 26,130 liabilities

Deferred revenue-current 534,572 578,664

Operating lease liabilities-current 36,569 41,309

Total current liabilities 760,203 849,576

Deferred revenue-non-current 648,869 667,627

Operating lease liabilities-non-current 116,794 107,784

Convertible senior notes, net 490,222 1,011,725

Derivative liability - 397,290

Other liabilities-non-current 27,436 35,842

Total liabilities 2,043,524 3,069,844

Stockholders' deficit:

Common stock 5 5

Additional paid-in capital 2,245,180 2,386,579

Accumulated other comprehensive income 2,030 557

Accumulated deficit (2,522,192 ) (3,145,533 )

Total stockholders' deficit (274,977 ) (758,392 )

Total liabilities and stockholders' $ 1,768,547 $ 2,311,452 deficit

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Revenue:

Product $ 213,547 $ 174,798 $ 405,991 $ 330,550

Support,entitlements and 133,220 171,584 255,544 328,586 other services

Total revenue 346,767 346,382 661,535 659,136

Cost of revenue:

Product ^(1)(2) 20,676 13,784 41,909 26,598

Support,entitlements and 54,547 57,170 105,515 112,315 other services ^(1)

Total cost of 75,223 70,954 147,424 138,913 revenue

Gross profit 271,544 275,428 514,111 520,223

Operating expenses:

Sales and marketing 304,936 261,071 596,774 518,361 ^(1)(2)

Research and 139,088 135,571 277,294 271,375 development ^(1)

General and 34,579 35,034 67,439 68,808 administrative ^(1)

Total operating 478,603 431,676 941,507 858,544 expenses

Loss from (207,059 ) (156,248 ) (427,396 ) (338,321 )operations

Other expense, net (5,863 ) (126,001 ) (10,903 ) (204,733 )

Loss beforeprovision for (212,922 ) (282,249 ) (438,299 ) (543,054 )income taxes

Provision for 4,642 5,141 8,565 9,384 income taxes

Net loss $ (217,564 ) $ (287,390 ) $ (446,864 ) $ (552,438 )

Net loss per shareattributable toClass A and Class B (1.13 ) (1.42 ) $ (2.34 ) $ (2.72 )common $ $stockholders-basicand diluted

Weighted averageshares used incomputing net lossper shareattributable to 192,727 202,520 191,199 202,798 Class A and Class Bcommonstockholders-basicand diluted

_________________________________________________(1)

Includes the following stock-based compensation expense:

_________________________________________________(1) Includes the following stock-based compensation expense:

Three Months Ended January 31,

Six Months Ended January 31,

2020

2021

2020

2021

(in thousands)

Product cost of revenue

$

1,458

$

1,659

$

2,570

$

3,163

Support, entitlements and other services cost of revenue

5,140

5,764

9,891

11,525

Sales and marketing

31,185

30,031

58,960

62,258

Research and development

36,459

36,058

74,022

73,945

General and administrative

11,373

10,942

21,598

22,761

Total stock-based compensation expense

$

85,615

$

84,454

$

167,041

$

173,652

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Product cost of revenue $ 1,458 $ 1,659 $ 2,570 $ 3,163

Support, entitlements and other 5,140 5,764 9,891 11,525 services cost of revenue

Sales and marketing 31,185 30,031 58,960 62,258

Research and development 36,459 36,058 74,022 73,945

General and administrative 11,373 10,942 21,598 22,761

Total stock-based compensation $ 85,615 $ 84,454 $ 167,041 $ 173,652 expense

(2)

Includes the following amortization of intangible assets:



(2) Includes the following amortization of intangible assets:

Three Months Ended January 31,

Six Months Ended January 31,

2020

2021

2020

2021

(in thousands)

Product cost of revenue

$

3,694

$

3,694

$

7,388

$

7,388

Sales and marketing

651

651

1,302

1,302

Total amortization of intangible assets

$

4,345

$

4,345

$

8,690

$

8,690

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Product cost of revenue $ 3,694 $ 3,694 $ 7,388 $ 7,388

Sales and marketing 651 651 1,302 1,302

Total amortization of intangible $ 4,345 $ 4,345 $ 8,690 $ 8,690 assets

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended January 31,

2020 2021

(in thousands)

Cash flows from operating activities:

Net loss $ (446,864 ) $ (552,438 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 45,540 47,087

Stock-based compensation 167,041 173,652

Change in fair value of derivative liability - 166,380

Amortization of debt discount and issuance costs 15,398 28,796

Operating lease cost, net of accretion 14,539 16,930

Impairment of lease-related assets 3,002 2,822

Non-cash interest expense - 6,615

Other (236 ) 4,354

Changes in operating assets and liabilities:

Accounts receivable, net (1,848 ) 79,173

Deferred commissions (35,422 ) (67,677 )

Prepaid expenses and other assets 9,064 (9,217 )

Accounts payable (3,428 ) (2,602 )

Accrued compensation and benefits 20,085 39,593

Accrued expenses and other liabilities 974 2,100

Operating leases, net (13,039 ) (16,523 )

Deferred revenue 146,540 61,325

Net cash used in operating activities (78,654 ) (19,630 )

Cash flows from investing activities:

Maturities of investments 299,380 260,852

Purchases of investments (416,636 ) (859,576 )

Sales of investments 24,147 2,999

Purchases of property and equipment (39,451 ) (25,168 )

Net cash used in investing activities (132,560 ) (620,893 )

Cash flows from financing activities:

Proceeds from sales of shares through employee 26,486 21,904 equity incentive plans

Proceeds from the issuance of convertible notes, - 723,617 net of issuance costs

Repurchases of common stock - (125,079 )

Net cash provided by financing activities 26,486 620,442

Net decrease in cash, cash equivalents and $ (184,728 ) $ (20,080 )restricted cash

Cash, cash equivalents and restricted 399,520 321,991 cash-beginning of period

Cash, cash equivalents and restricted cash-end of $ 214,792 $ 301,911 period

Restricted cash ^(1) 3,099 3,210

Cash and cash equivalents-end of period $ 211,693 $ 298,701

Supplemental disclosures of cash flow information:

Cash paid for income taxes $ 11,195 $ 8,999

Supplemental disclosures of non-cash investing andfinancing

information:

Purchases of property and equipment included inaccounts payable and $ 13,997 $ 7,621

accrued and other liabilities

Finance lease liabilities arising from obtaining $ - $ 1,960 right-of-use assets

_________________________________________________

(1)

Included within other assets-non-current in the condensed consolidated balance sheets.

_________________________________________________

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

Reconciliation of Revenue to Billings

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Total revenue $ 346,767 $ 346,382 $ 661,535 $ 659,136

Change in deferred 81,310 39,131 146,540 61,325 revenue

Total billings $ 428,077 $ 385,513 $ 808,075 $ 720,461

Disaggregation of Revenue and Billings

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Disaggregation of revenue:

Subscription revenue $ 266,544 $ 305,946 $ 484,440 $ 584,111

Non-portable software 59,131 21,661 136,702 41,704 revenue

Hardware revenue 8,542 1,321 18,266 2,050

Professional services 12,550 17,454 22,127 31,271 revenue

Total revenue $ 346,767 $ 346,382 $ 661,535 $ 659,136



Disaggregation of billings:

Subscription billings $ 339,142 $ 339,168 $ 614,680 $ 633,091

Non-portable software 59,131 21,661 136,702 41,704 billings

Hardware billings 8,542 1,321 18,266 2,050

Professional services 21,262 23,363 38,427 43,616 billings

Total billings $ 428,077 $ 385,513 $ 808,075 $ 720,461

Subscription - Subscription revenue includes any performance obligation which has a defined term, and is generated from the sales of software entitlement and support subscriptions, subscription software licenses and cloud-based Software as a Service, or SaaS offerings.

* Ratable - We recognize revenue from software entitlement and support subscriptions and SaaS offerings ratably over the contractual service period, the substantial majority of which relate to software entitlement and support subscriptions. * Upfront - Revenue from our subscription software licenses is generally recognized upfront upon transfer of control to the customer, which happens when we make the software available to the customer.

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. 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. Revenue from our non-portable software products is generally recognized upon transfer of control to the customer.

Hardware - In transactions where we deliver the hardware appliance, we consider ourselves to be the principal in the transaction and we record revenue and costs of goods sold on a gross basis. We consider the amount allocated to hardware revenue to be equivalent to the cost of the hardware procured. Hardware revenue is generally recognized upon transfer of control to the customer.

Professional services - We also sell professional services with our products. We recognize revenue related to professional services as they are performed.

Annual Contract Value Billings and Run-rate Annual Contract Value

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Annual ContractValue Billings $ 139,529 $ 159,208 $ 256,965 $ 285,956 (ACV Billings)

Run-rate AnnualContract Value $ 1,080,931 $ 1,384,823 $ 1,080,931 $ 1,384,823 (Run-rate ACV)

Reconciliation of Subscription and Professional Services Revenue to Subscription and Professional Services Billings

(Unaudited)

Three Months Ended January 31,

Six Months Ended January 31,

2020

2021

2020

2021

(in thousands)

Subscription revenue

$

266,544

$

305,946

$

484,440

$

584,111

Change in subscription deferred revenue

72,598

33,222

130,240

48,980

Subscription billings

$

339,142

$

339,168

$

614,680

$

633,091

Professional services revenue

$

12,550

$

17,454

$

22,127

$

31,271

Change in professional services deferred revenue

8,712

5,909

16,300

12,345

Professional services billings

$

21,262

$

23,363

$

38,427

$

43,616

Reconciliation of Subscription and Professional Services Revenue toSubscription and Professional Services Billings

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Subscription revenue $ 266,544 $ 305,946 $ 484,440 $ 584,111

Change in subscription 72,598 33,222 130,240 48,980 deferred revenue

Subscription billings $ 339,142 $ 339,168 $ 614,680 $ 633,091



Professional services $ 12,550 $ 17,454 $ 22,127 $ 31,271 revenue

Change in professionalservices deferred 8,712 5,909 16,300 12,345 revenue

Professional services $ 21,262 $ 23,363 $ 38,427 $ 43,616 billings

Reconciliation of GAAP to Non-GAAP Profit Measures

(Unaudited)

GAAP Non-GAAP Adjustments Non-GAAP

Three Months Three Ended Months January (1) (2) (3) (4) (5) (6) Ended 31, 2021 January 31, 2021

(in thousands, except percentages and per share data)

Gross profit $ 275,428 $ 7,423 $ 3,694 $ - $ - $ - $ - $ 286,545

Gross margin 79.5 % 2.1 % 1.1 % - - - - 82.7 %

Operating expenses:

Sales and 261,071 (30,031 ) (651 ) - - - - 230,389 marketing

Research and 135,571 (36,058 ) - - - - - 99,513 development

General and 35,034 (10,942 ) - (467 ) - - - 23,625 administrative

Total operating 431,676 (77,031 ) (651 ) (467 ) - - - 353,527 expenses

Loss from (156,248 ) 84,454 4,345 467 - - - (66,982 )operations

Net loss $ (287,390 ) $ 84,454 $ 4,345 $ 467 $ 101,640 $ 21,751 $ 609 $ (74,124 )

Weighted sharesoutstanding, basic 202,520 202,520 and diluted

Net loss pershare, basic and $ (1.42 ) $ 0.42 $ 0.02 $ - $ 0.50 $ 0.11 $ - $ (0.37 )diluted

_________________________________________________

(1)

Stock-based compensation

(2)

Amortization of intangible assets

(3)

Other

(4)

Change in fair value of derivative liability

(5)

Amortization of debt discount and issuance costs and non-cash interest expense

(6)

Income tax effect primarily related to stock-based compensation expense

_________________________________________________

(1) Stock-based compensation

(2) Amortization of intangible assets

(3) Other

(4) Change in fair value of derivative liability

(5) Amortization of debt discount and issuance costs and non-cash interest expense

(6) Income tax effect primarily related to stock-based compensation expense

GAAP

Non-GAAP Adjustments

Non-GAAP

Six Months Ended January 31, 2021

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Six Months Ended January 31, 2021

(in thousands, except percentages and per share data)

Gross profit

$

520,223

$

14,688

$

7,388

$

287

$

-

$

-

$

-

$

-

$

542,586

Gross margin

78.9

%

2.2

%

1.1

%

0.1

%

-

-

-

-

82.3

%

Operating expenses:

Sales and marketing

518,361

(62,258

)

(1,302

)

-

-

-

-

-

454,801

Research and development

271,375

(73,945

)

-

(2,535

)

-

-

-

-

194,895

General and administrative

68,808

(22,761

)

-

-

(973

)

-

-

-

45,074

Total operating expenses

858,544

(158,964

)

(1,302

)

(2,535

)

(973

)

-

-

-

694,770

Loss from operations

(338,321

)

173,652

8,690

2,822

973

-

-

-

(152,184

)

Net loss

$

(552,438

)

$

173,652

$

8,690

$

2,822

$

973

$

166,380

$

35,411

$

1,002

$

(163,508

)

Weighted shares outstanding, basic and diluted

202,798

202,798

Net loss per share, basic and diluted

$

(2.72

)

$

0.86

$

0.04

$

0.01

$

-

$

0.82

$

0.18

$

-

$

(0.81

)

GAAP Non-GAAP Adjustments Non-GAAP

Six Months Six Months Ended (1) (2) (3) (4) (5) (6) (7) Ended January 31, January 31, 2021 2021

(in thousands, except percentages and per share data)

Gross profit $ 520,223 $ 14,688 $ 7,388 $ 287 $ - $ - $ - $ - $ 542,586

Gross margin 78.9 % 2.2 % 1.1 % 0.1 % - - - - 82.3 %

Operating expenses:

Sales and marketing 518,361 (62,258 ) (1,302 ) - - - - - 454,801

Research and 271,375 (73,945 ) - (2,535 ) - - - - 194,895 development

General and 68,808 (22,761 ) - - (973 ) - - - 45,074 administrative

Total operating 858,544 (158,964 ) (1,302 ) (2,535 ) (973 ) - - - 694,770 expenses

Loss from operations (338,321 ) 173,652 8,690 2,822 973 - - - (152,184 )

Net loss $ (552,438 ) $ 173,652 $ 8,690 $ 2,822 $ 973 $ 166,380 $ 35,411 $ 1,002 $ (163,508 )

Weighted sharesoutstanding, basic 202,798 202,798 and diluted

Net loss per share, $ (2.72 ) $ 0.86 $ 0.04 $ 0.01 $ - $ 0.82 $ 0.18 $ - $ (0.81 )basic and diluted

_________________________________________________

(1)

Stock-based compensation

(2)

Amortization of intangible assets

(3)

Impairment of lease-related assets

(4)

Other

(5)

Change in fair value of derivative liability

(6)

Amortization of debt discount and issuance costs

(7)

Income tax effect primarily related to stock-based compensation expense

_________________________________________________

(1) Stock-based compensation

(2) Amortization of intangible assets

(3) Impairment of lease-related assets

(4) Other

(5) Change in fair value of derivative liability

(6) Amortization of debt discount and issuance costs

(7) Income tax effect primarily related to stock-based compensation expense

GAAP Non-GAAP Adjustments Non-GAAP

Three Months Three Months Ended (1) (2) (3) (4) (5) (6) Ended January January 31, 2020 31, 2020

(in thousands, except percentages and per share data)

Gross profit $ 271,544 $ 6,598 $ 3,694 $ 537 $ - $ - $ - $ 282,373

Gross margin 78.3 % 1.8 % 1.1 % 0.2 % - - - 81.4 %

Operating expenses:

Sales and 304,936 (31,185 ) (651 ) - - - - 273,100 marketing

Research and 139,088 (36,459 ) - (2,465 ) - - - 100,164 development

General and 34,579 (11,373 ) - - (154 ) - - 23,052 administrative

Total operating 478,603 (79,017 ) (651 ) (2,465 ) (154 ) - - 396,316 expenses

Loss from (207,059 ) 85,615 4,345 3,002 154 - - (113,943 )operations

Net loss $ (217,564 ) $ 85,615 $ 4,345 $ 3,002 $ 154 $ 7,763 $ 405 $ (116,280 )

Weighted sharesoutstanding, 192,727 192,727 basic anddiluted

Net loss pershare, basic and $ (1.13 ) $ 0.44 $ 0.03 $ 0.02 $ - $ 0.04 $ - $ (0.60 )diluted

_________________________________________________

(1)

Stock-based compensation

(2)

Amortization of intangible assets

(3)

Impairment of lease-related assets

(4)

Other

(5)

Amortization of debt discount and debt issuance costs

(6)

Income tax effect primarily related to stock-based compensation expense

_________________________________________________

(1) Stock-based compensation

(2) Amortization of intangible assets

(3) Impairment of lease-related assets

(4) Other

(5) Amortization of debt discount and debt issuance costs

(6) Income tax effect primarily related to stock-based compensation expense

GAAP

Non-GAAP Adjustments

Non-GAAP

Six Months Ended January 31, 2020

(1)

(2)

(3)

(4)

(5)

(6)

Six Months Ended January 31, 2020

(in thousands, except share and per share data)

Gross profit

$

514,111

$

12,461

$

7,388

$

537

$

-

$

-

$

-

$

534,497

Gross margin

77.7

%

1.9

%

1.1

%

0.1

%

-

-

-

80.8

%

Operating expenses:

Sales and marketing

596,774

(58,960

)

(1,302

)

-

-

-

-

536,512

Research and development

277,294

(74,022

)

-

(2,465

)

-

-

-

200,807

General and administrative

67,439

(21,598

)

-

-

(507

)

-

-

45,334

Total operating expenses

941,507

(154,580

)

(1,302

)

(2,465

)

(507

)

-

-

782,653

Loss from operations

(427,396

)

167,041

8,690

3,002

507

-

-

(248,156

)

Net loss

$

(446,864

)

$

167,041

$

8,690

$

3,002

$

507

$

15,398

$

618

$

(251,608

)

Weighted shares outstanding, basic and diluted

191,199

191,199

Net loss per share, basic and diluted

$

(2.34

)

$

0.87

$

0.05

$

0.02

$

-

$

0.08

$

-

$

(1.32

)

GAAP Non-GAAP Adjustments Non-GAAP

Six Months Six Months Ended (1) (2) (3) (4) (5) (6) Ended January January 31, 2020 31, 2020

(in thousands, except share and per share data)

Gross profit $ 514,111 $ 12,461 $ 7,388 $ 537 $ - $ - $ - $ 534,497

Gross margin 77.7 % 1.9 % 1.1 % 0.1 % - - - 80.8 %

Operating expenses:

Sales and 596,774 (58,960 ) (1,302 ) - - - - 536,512 marketing

Research and 277,294 (74,022 ) - (2,465 ) - - - 200,807 development

General and 67,439 (21,598 ) - - (507 ) - - 45,334 administrative

Total operating 941,507 (154,580 ) (1,302 ) (2,465 ) (507 ) - - 782,653 expenses

Loss from (427,396 ) 167,041 8,690 3,002 507 - - (248,156 )operations

Net loss $ (446,864 ) $ 167,041 $ 8,690 $ 3,002 $ 507 $ 15,398 $ 618 $ (251,608 )

Weighted sharesoutstanding, 191,199 191,199 basic anddiluted

Net loss pershare, basic and $ (2.34 ) $ 0.87 $ 0.05 $ 0.02 $ - $ 0.08 $ - $ (1.32 )diluted

_________________________________________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Impairment of lease-related assets

(4)

Other

(5)

Amortization of debt discount and issuance costs

(6)

Income tax effect primarily related to stock-based compensation expense

_________________________________________________

(1) Stock-based compensation expense

(2) Amortization of intangible assets

(3) Impairment of lease-related assets

(4) Other

(5) Amortization of debt discount and issuance costs

(6) Income tax effect primarily related to stock-based compensation expense

Reconciliation of GAAP Net Cash Used In Operating Activities to Non-GAAP FreeCash Flow

(Unaudited)

Three Months Ended Six Months Ended January 31, January 31,

2020 2021 2020 2021

(in thousands)

Net cash used in operating $ (52,491 ) $ (15,557 ) $ (78,654 ) $ (19,630 )activities

Purchases of property and (21,248 ) (12,916 ) (39,451 ) (25,168 )equipment

Free cash flow $ (73,739 ) $ (28,473 ) $ (118,105 ) $ (44,798 )

View source version on businesswire.com: https://www.businesswire.com/news/home/20210224005922/en/

CONTACT: Investor Contact: Tonya Chin ir@nutanix.com

CONTACT: Media Contact: Jennifer Massaro pr@nutanix.com