Nutanix Reports Fourth Quarter and Fiscal 2023 Financial Results

Reports 27% YoY ACV Billings Growth and Strong YoY Free Cash Flow Growth for Fiscal 2023

Delivers Outperformance Across All Fourth Quarter Guided Metrics

Nutanix, Inc. (NASDAQ: NTNX), a leader in hybrid multicloud computing, today announced financial results for its fourth quarter and fiscal year ended July 31, 2023.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230831898036/en/

Nutanix Q4 Fiscal 2023 Earnings Summary (Graphic: Business Wire)

Nutanix Q4 Fiscal 2023 Earnings Summary (Graphic: Business Wire)

“Our fourth quarter capped off a fiscal year that showed healthy year-over-year top line growth and sharp year-over-year improvements in profitability and free cash flow,” said Rajiv Ramaswami, President and CEO of Nutanix. “Our consistent execution over the course of the year against an uncertain macro backdrop is a testament to the benefits of our subscription model, as well as the value our customers see in the Nutanix Cloud Platform as they look to modernize their IT footprints and implement hybrid multicloud operating models.”

“Our fiscal year 2023 results demonstrated a good balance of growth and profitability and further strengthened our balance sheet,” said Rukmini Sivaraman, CFO of Nutanix. “In conjunction with our earnings release, we’re pleased to announce that our Board of Directors has authorized the repurchase of up to $350 million of our stock, which we see as a reflection of confidence in the Company’s long-term market opportunity and financial outlook.”

Fourth Quarter Fiscal 2023 Financial Summary

 

Q4 FY’23

Q4 FY’22

Y/Y Change

Annual Contract Value (ACV)1 Billings

$278.7 million

$193.2 million

44%

Annual Recurring Revenue (ARR)2

$1.56 billion

$1.20 billion

30%

Average Contract Term3

3.0 years

3.2 years

(0.2) year

Revenue4

$494.2 million

$385.5 million

28%

GAAP Gross Margin

83.7%

79.3%

440 bps

Non-GAAP Gross Margin

85.8%

82.6%

320 bps

GAAP Operating Expenses

$425.1 million

$439.4 million

(3)%

Non-GAAP Operating Expenses

$360.6 million

$356.2 million

1%

GAAP Operating Loss

$(11.3) million

$(133.8) million

$122.5 million

Non-GAAP Operating Income (Loss)

$63.6 million

$(37.8) million

$101.4 million

GAAP Operating Margin

(2.3)%

(34.7)%

32.4% pts

Non-GAAP Operating Margin

12.9%

(9.8)%

22.7% pts

Net Cash Provided by Operating Activities

$58.3 million

$38.0 million

$20.3 million

Free Cash Flow

$45.5 million

$23.2 million

$22.3 million

Fiscal 2023 Financial Summary

 

FY’23

FY’22

Y/Y Change

Annual Contract Value (ACV)1 Billings

$956.8 million

$756.3 million

27%

Annual Recurring Revenue (ARR)2

$1.56 billion

$1.20 billion

30%

Average Contract Term3

3.0 years

3.2 years

(0.2) year

Revenue4

$1.86 billion

$1.58 billion

18%

GAAP Gross Margin

82.2%

79.7%

250 bps

Non-GAAP Gross Margin

84.6%

83.0%

160 bps

GAAP Operating Expenses

$1.74 billion

$1.72 billion

1%

Non-GAAP Operating Expenses

$1.41 billion

$1.40 billion

1%

GAAP Operating Loss

$(207.2) million

$(458.9) million

$251.7 million

Non-GAAP Operating Income (Loss)

$161.0 million

$(87.2) million

$248.2 million

GAAP Operating Margin

(11.1)%

(29.0)%

17.9% pts

Non-GAAP Operating Margin

8.6%

(5.5)%

14.1% pts

Net Cash Provided by Operating Activities

$272.4 million

$67.5 million

$204.9 million

Free Cash Flow

$207.0 million

$18.5 million

$188.5 million

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

Recent Company Highlights

First Quarter Fiscal 2024 Outlook

 

 

ACV Billings

$260 - $270 million

Revenue

$495 - $505 million

Non-GAAP Gross Margin

~84%

Non-GAAP Operating Margin

9% to 11%

Weighted Average Shares Outstanding (Diluted)

Approximately 290 million

Fiscal 2024 Outlook

 

 

ACV Billings

$1.075 - $1.095 billion

Revenue

$2.085 - $2.115 billion

Non-GAAP Gross Margin

~84%

Non-GAAP Operating Margin

11% to 12%

Free Cash Flow

$280 - $300 million

Supplementary materials to this press release, including our fourth quarter and fiscal 2023 earnings presentation, can be found at https://ir.nutanix.com/company/financial.

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

Webcast and Conference Call Information

Nutanix executives will discuss the Company’s fourth quarter and fiscal 2023 financial results on a conference call today at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Interested parties may access the conference call by registering at this link to receive dial in details and a unique PIN number. The conference call will also be webcast live on the Nutanix Investor Relations website at ir.nutanix.com. An archived replay of the webcast will be available on the Nutanix Investor Relations website at ir.nutanix.com shortly after the call.

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.

2Annual Recurring Revenue, or ARR, for any given period, is defined as the sum of ACV for all non life-of-device contracts in effect as of the end of a specific period. For the purposes of this calculation, we assume that the contract term begins on the date a contract is booked, unless the terms of such contract prevent us from fulfilling our obligations until a later period, and irrespective of the periods in which we would recognize revenue for such contract.

3Average 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 period.

4Revenue was negatively impacted by a year-over-year decline in the average contract term, including as a result of Nutanix’s transition to a subscription-based business model.

Non-GAAP Financial Measures and Other Key Performance Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, this press release includes the following non-GAAP financial and other key performance measures: non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow, Annual Contract Value Billings (or ACV Billings), Annual Recurring Revenue (or ARR), and Average Contract Term. In computing non-GAAP financial 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), costs related to the impairment and early exit of operating lease-related assets, restructuring charges, litigation settlement accruals and legal fees related to certain litigation matters, the change in fair value of the derivative liability, the amortization of the debt discount and issuance costs, interest expense related to convertible senior notes, losses on debt extinguishment, gains on divestitures, and other non-recurring transactions and the related tax impact. Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin 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 provided by (used in) operating activities less purchases of property and equipment. ACV Billings is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the topline growth of our business during our transition to a subscription-based business model because it takes into account variability in term lengths. ARR is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the topline growth of our subscription business because it takes 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. Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, and free cash flow are not substitutes for gross margin, operating expenses, operating income or loss, operating margin, or net cash provided by (used in) operating activities, respectively. There is no GAAP measure that is comparable to ACV Billings, ARR, or Average Contract Term, so we have not reconciled the ACV Billings, ARR, or Average Contract Term data 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 GAAP to Non-GAAP Profit Measures” and “Reconciliation of GAAP Net Cash Provided By Operating Activities to Non-GAAP Free Cash Flow,” and not to rely on any single financial measure to evaluate our business. This press release also includes the following forward-looking non-GAAP financial measures as part of our first quarter fiscal 2024 outlook and/or our fiscal 2024 outlook: non-GAAP gross margin, non-GAAP operating margin, and free cash flow. We are unable to reconcile these forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures without unreasonable efforts, as we are currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact the GAAP financial measures for these periods but would not impact the non-GAAP financial measures.

Forward-Looking Statements

This press release contains express and implied forward-looking statements, including, but not limited to, statements regarding: our business plans, strategies, initiatives, vision, objectives, and outlook (including our growth plan) as well as our ability to execute thereon successfully and in a timely manner and the benefits and impact thereof on our business, operations, and financial results (including our first quarter fiscal 2024 outlook, our fiscal 2024 outlook, and our plans for share repurchases); the impact of our transition to a subscription-based business model, our ability to manage, complete or realize the benefits of such transition successfully and in a timely manner, and the short-term and long-term impacts of such transition on our business, operations and financial results; the competitive market, including our competitive position and ability to compete effectively, the competitive advantages of our products, our projections about our market share and opportunity, and the effects of increased competition in our market; our ability to attract new end customers and retain and grow sales from our existing end customers; our customer needs and our response to those needs; our ability to form new, and maintain and strengthen existing, strategic alliances and partnerships and address macroeconomic supply chain shortages, including our relationships with our channel partners and original equipment manufacturers, and the impact of any changes to such relationships on our business, operations and financial results; 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 solutions, products, services, product features and technology, including those that are still under development or in process; our plans regarding, and the timing and success of, our customer, partner, industry, analyst, investor and employee events and the impact thereof on our business, operations, and financial results; and our decision to use new or different metrics, or to make adjustments to the metrics we use, to supplement our financial reporting, and the impact thereof.

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, strategies, initiatives, vision, and objectives; our ability to achieve, sustain and/or manage future growth effectively; delays or unexpected accelerations in our current and future business model transitions; our ability to resolve the third-party software usage matter within estimates; our ability to remediate the previously disclosed material weakness; matters arising out of the previously disclosed completed Audit Committee investigation (including litigation and regulatory risks); the rapid evolution of the markets in which we compete, including the introduction, or acceleration of adoption of, competing solutions, including public cloud infrastructure; failure to timely and successfully meet our customer needs; delays in or lack of customer or market acceptance of our new solutions, products, services, product features or technology; macroeconomic or geopolitical uncertainty, including supply chain issues; 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, 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 and availability of certain components of our solutions, and fluctuations in demand and competitive pricing pressures for our solutions, attrition among sales representatives or other employees; issues related to strategic alliances and partnerships; our ability to make share repurchases, including the possibility that the share repurchase program may be suspended or discontinued; and other risks detailed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022 filed with the U.S. Securities and Exchange Commission, or the SEC, on September 21, 2022, our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2022 filed with the SEC on December 7, 2022, our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2023 filed with the SEC on May 24, 2023, and our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2023 filed with the SEC on June 2, 2023. Additional information will also be set forth in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023, 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 our 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, offering organizations a single platform for running apps and data across clouds. With Nutanix, companies can reduce complexity and simplify operations, freeing them to focus on their business outcomes. Building on its legacy as the pioneer of hyperconverged infrastructure, Nutanix is trusted by companies worldwide to power hybrid multicloud environments consistently, simply, and cost-effectively. Learn more at www.nutanix.com or follow us on social media @nutanix.

© 2023 Nutanix, Inc. All rights reserved. Nutanix, the Nutanix logo, and all Nutanix product and service names mentioned herein are registered trademarks or unregistered trademarks of Nutanix, Inc. in the United States and other countries. Other brand names and marks 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.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

As of

 

 

 

July 31,

2022

 

 

July 31,

2023

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

402,850

 

 

$

512,929

 

Short-term investments

 

 

921,429

 

 

 

924,466

 

Accounts receivable, net

 

 

124,559

 

 

 

157,251

 

Deferred commissions—current

 

 

115,356

 

 

 

120,001

 

Prepaid expenses and other current assets

 

 

93,787

 

 

 

147,087

 

Total current assets

 

 

1,657,981

 

 

 

1,861,734

 

Property and equipment, net

 

 

113,440

 

 

 

111,865

 

Operating lease right-of-use assets

 

 

118,740

 

 

 

93,554

 

Deferred commissions—non-current

 

 

252,234

 

 

 

237,990

 

Intangible assets, net

 

 

15,829

 

 

 

4,893

 

Goodwill

 

 

185,260

 

 

 

184,938

 

Other assets—non-current

 

 

22,265

 

 

 

31,941

 

Total assets

 

$

2,365,749

 

 

$

2,526,915

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

44,931

 

 

$

29,928

 

Accrued compensation and benefits

 

 

149,811

 

 

 

143,679

 

Accrued expenses and other current liabilities

 

 

59,568

 

 

 

109,269

 

Deferred revenue—current

 

 

720,993

 

 

 

823,665

 

Operating lease liabilities—current

 

 

39,801

 

 

 

29,567

 

Convertible senior notes, net—current

 

 

145,456

 

 

 

 

Total current liabilities

 

 

1,160,560

 

 

 

1,136,108

 

Deferred revenue—non-current

 

 

724,545

 

 

 

771,367

 

Operating lease liabilities—non-current

 

 

89,782

 

 

 

68,940

 

Convertible senior notes, net

 

 

1,156,205

 

 

 

1,218,165

 

Other liabilities—non-current

 

 

35,161

 

 

 

39,754

 

Total liabilities

 

 

3,166,253

 

 

 

3,234,334

 

Stockholders’ deficit:

 

 

 

 

 

 

Common stock

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

3,583,928

 

 

 

3,930,668

 

Accumulated other comprehensive income

 

 

(6,076

)

 

 

(5,171

)

Accumulated deficit

 

 

(4,378,362

)

 

 

(4,632,922

)

Total stockholders’ deficit

 

 

(800,504

)

 

 

(707,419

)

Total liabilities and stockholders’ deficit

 

$

2,365,749

 

 

$

2,526,915

 

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands, except per share data)

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

168,751

 

 

$

240,495

 

 

$

757,623

 

 

$

912,114

 

Support, entitlements and other services

 

 

216,789

 

 

 

253,715

 

 

 

823,173

 

 

 

950,781

 

Total revenue

 

 

385,540

 

 

 

494,210

 

 

 

1,580,796

 

 

 

1,862,895

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product (1)(2)

 

 

12,546

 

 

 

10,655

 

 

 

55,602

 

 

 

51,107

 

Support, entitlements and other services (1)

 

 

67,346

 

 

 

69,803

 

 

 

265,554

 

 

 

281,080

 

Total cost of revenue

 

 

79,892

 

 

 

80,458

 

 

 

321,156

 

 

 

332,187

 

Gross profit

 

 

305,648

 

 

 

413,752

 

 

 

1,259,640

 

 

 

1,530,708

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing (1)(2)

 

 

252,600

 

 

 

229,425

 

 

 

979,075

 

 

 

924,696

 

Research and development (1)

 

 

144,268

 

 

 

146,201

 

 

 

572,999

 

 

 

580,961

 

General and administrative (1)

 

 

42,547

 

 

 

49,473

 

 

 

166,418

 

 

 

232,201

 

Total operating expenses

 

 

439,415

 

 

 

425,099

 

 

 

1,718,492

 

 

 

1,737,858

 

Loss from operations

 

 

(133,767

)

 

 

(11,347

)

 

 

(458,852

)

 

 

(207,150

)

Other (expense) income, net

 

 

(11,273

)

 

 

4,261

 

 

 

(320,830

)

 

 

(26,435

)

Loss before provision for income taxes

 

 

(145,040

)

 

 

(7,086

)

 

 

(779,682

)

 

 

(233,585

)

Provision for income taxes

 

 

6,297

 

 

 

6,201

 

 

 

19,264

 

 

 

20,975

 

Net loss

 

$

(151,337

)

 

$

(13,287

)

 

$

(798,946

)

 

$

(254,560

)

Net loss per share attributable to Class A and Class B common stockholders—basic and diluted (3)

 

$

(0.67

)

 

$

(0.06

)

 

$

(3.62

)

 

$

(1.09

)

Weighted average shares used in computing net loss per share attributable to Class A and Class B common stockholders—basic and diluted (3)

 

 

225,398

 

 

 

237,832

 

 

 

220,529

 

 

 

233,247

 

____________________

(1)

Includes the following stock-based compensation expense:

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Product cost of revenue

 

$

1,850

 

 

$

1,863

 

 

$

7,379

 

 

$

7,966

 

Support, entitlements and other services cost of revenue

 

 

7,282

 

 

 

6,528

 

 

 

30,846

 

 

 

26,611

 

Sales and marketing

 

 

23,617

 

 

 

19,333

 

 

 

104,592

 

 

 

82,758

 

Research and development

 

 

34,050

 

 

 

31,957

 

 

 

143,759

 

 

 

139,073

 

General and administrative

 

 

13,349

 

 

 

12,911

 

 

 

56,670

 

 

 

55,337

 

Total stock-based compensation expense

 

$

80,148

 

 

$

72,592

 

 

$

343,246

 

 

$

311,745

 

(2)

Includes the following amortization of intangible assets:

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Product cost of revenue

 

$

3,367

 

 

$

2,091

 

 

$

13,579

 

 

$

9,870

 

Sales and marketing

 

 

651

 

 

 

111

 

 

 

2,604

 

 

 

827

 

Total amortization of intangible assets

 

$

4,018

 

 

$

2,202

 

 

$

16,183

 

 

$

10,697

 

(3)

Effective January 3, 2022, all of the then outstanding shares of Nutanix, Inc. Class B common stock were automatically converted into the same number of shares of Nutanix, Inc. Class A common stock.

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Fiscal Year Ended July 31,

 

 

2022

 

2023

 

 

(in thousands)

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(798,946

)

 

$

(254,560

)

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

 

 

 

 

Depreciation and amortization

 

 

87,952

 

 

 

76,388

 

Stock-based compensation

 

 

343,246

 

 

 

311,745

 

Change in fair value of derivative liability

 

 

198,038

 

 

 

 

Loss on debt extinguishment

 

 

64,910

 

 

 

 

Amortization of debt discount and issuance costs

 

 

40,233

 

 

 

42,636

 

Operating lease cost, net of accretion

 

 

36,905

 

 

 

35,357

 

Early exit of lease-related assets

 

 

597

 

 

 

(1,040

)

Gain on Frame divestiture

 

 

 

 

 

(10,957

)

Non-cash interest expense

 

 

19,270

 

 

 

19,757

 

Other

 

 

9,282

 

 

 

(11,388

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

60,998

 

 

 

(25,885

)

Deferred commissions

 

 

(24,170

)

 

 

9,599

 

Prepaid expenses and other assets

 

 

(36,166

)

 

 

(59,243

)

Accounts payable

 

 

(1,461

)

 

 

(9,600

)

Accrued compensation and benefits

 

 

(19,674

)

 

 

(6,027

)

Accrued expenses and other liabilities

 

 

5,457

 

 

 

53,191

 

Operating leases, net

 

 

(46,773

)

 

 

(40,257

)

Deferred revenue

 

 

127,845

 

 

 

142,687

 

Net cash provided by operating activities

 

 

67,543

 

 

 

272,403

 

Cash flows from investing activities:

 

 

 

 

Maturities of investments

 

 

1,058,116

 

 

 

965,040

 

Purchases of investments

 

 

(1,081,246

)

 

 

(955,330

)

Sales of investments

 

 

17,999

 

 

 

 

Proceeds from Frame divestiture

 

 

 

 

 

5,909

 

Purchases of property and equipment

 

 

(49,058

)

 

 

(65,404

)

Net cash used in investing activities

 

 

(54,189

)

 

 

(49,785

)

Cash flows from financing activities:

 

 

 

 

Proceeds from sales of shares through employee equity incentive plans

 

 

67,826

 

 

 

46,501

 

Taxes paid related to net share settlement of equity awards

 

 

 

 

 

(10,214

)

Repayment of convertible notes

 

 

 

 

 

(145,704

)

Payments of debt extinguishment costs

 

 

(14,709

)

 

 

 

Proceeds from unwinding of convertible note hedges

 

 

39,880

 

 

 

 

Payments for unwinding of warrants

 

 

(18,390

)

 

 

 

Proceeds from the issuance of convertible notes, net of issuance costs

 

 

88,687

 

 

 

 

Repurchases of common stock

 

 

(58,570

)

 

 

 

Payment of finance lease obligations

 

 

(1,089

)

 

 

(3,292

)

Net cash provided by (used in) financing activities

 

 

103,635

 

 

 

(112,709

)

Net increase in cash, cash equivalents and restricted cash

 

$

116,989

 

 

$

109,909

 

Cash, cash equivalents and restricted cash—beginning of period

 

 

288,873

 

 

 

405,862

 

Cash, cash equivalents and restricted cash—end of period

 

$

405,862

 

 

$

515,771

 

Restricted cash (1)

 

 

3,012

 

 

 

2,842

 

Cash and cash equivalents—end of period

 

$

402,850

 

 

$

512,929

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for income taxes

 

$

20,353

 

 

$

30,781

 

Supplemental disclosures of non-cash investing and financing information:

 

 

 

 

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

 

$

17,139

 

 

$

15,754

 

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

 

$

10,491

 

 

$

13,240

 

____________________

(1)

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

Reconciliation of Revenue to Billings

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Total revenue

 

$

385,540

 

 

$

494,210

 

 

$

1,580,796

 

 

$

1,862,895

 

Change in deferred revenue

 

 

12,580

 

 

 

50,631

 

 

 

127,845

 

 

 

142,687

 

Total billings

 

$

398,120

 

 

$

544,841

 

 

$

1,708,641

 

 

$

2,005,582

 

Disaggregation of Revenue and Billings

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Disaggregation of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription revenue

 

$

350,632

 

 

$

459,460

 

 

$

1,433,773

 

 

$

1,730,848

 

Non-portable software revenue

 

 

11,447

 

 

 

10,379

 

 

 

49,694

 

 

 

37,382

 

Hardware revenue

 

 

340

 

 

 

351

 

 

 

5,585

 

 

 

2,824

 

Professional services revenue

 

 

23,121

 

 

 

24,020

 

 

 

91,744

 

 

 

91,841

 

Total revenue

 

$

385,540

 

 

$

494,210

 

 

$

1,580,796

 

 

$

1,862,895

 

Disaggregation of billings:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription billings

 

$

364,113

 

 

$

504,191

 

 

$

1,563,560

 

 

$

1,868,943

 

Non-portable software billings

 

 

11,447

 

 

 

10,379

 

 

 

49,694

 

 

 

37,382

 

Hardware billings

 

 

340

 

 

 

351

 

 

 

5,585

 

 

 

2,824

 

Professional services billings

 

 

22,220

 

 

 

29,920

 

 

 

89,802

 

 

 

96,433

 

Total billings

 

$

398,120

 

 

$

544,841

 

 

$

1,708,641

 

 

$

2,005,582

 

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 Annual Recurring Revenue

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Annual Contract Value Billings (ACV Billings)

 

$

193,197

 

 

$

278,699

 

 

$

756,326

 

 

$

956,810

 

Annual Recurring Revenue (ARR)

 

$

1,202,438

 

 

$

1,561,981

 

 

$

1,202,438

 

 

$

1,561,981

 

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

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

Subscription revenue

 

$

350,632

 

 

$

459,460

 

 

$

1,433,773

 

 

$

1,730,848

 

Change in subscription deferred revenue

 

 

13,481

 

 

 

44,731

 

 

 

129,787

 

 

 

138,095

 

Subscription billings

 

$

364,113

 

 

$

504,191

 

 

$

1,563,560

 

 

$

1,868,943

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional services revenue

 

$

23,121

 

 

$

24,020

 

 

$

91,744

 

 

$

91,841

 

Change in professional services deferred revenue

 

 

(901

)

 

 

5,900

 

 

 

(1,942

)

 

 

4,592

 

Professional services billings

 

$

22,220

 

 

$

29,920

 

 

$

89,802

 

 

$

96,433

 

Reconciliation of GAAP to Non-GAAP Profit Measures

(Unaudited)

 

 

GAAP

 

Non-GAAP Adjustments

 

Non-GAAP

 

 

Three Months Ended July 31, 2023

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

Three Months Ended July 31, 2023

 

 

(in thousands, except percentages and per share data)

 

Gross profit

 

$

413,752

 

 

$

8,391

 

 

$

2,091

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

424,234

 

Gross margin

 

 

83.7

%

 

 

1.7

%

 

 

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85.8

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

229,425

 

 

 

(19,333

)

 

 

(111

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

209,981

 

Research and development

 

 

146,201

 

 

 

(31,957

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114,244

 

General and administrative

 

 

49,473

 

 

 

(12,911

)

 

 

 

 

 

(176

)

 

 

 

 

 

 

 

 

 

 

 

36,386

 

Total operating expenses

 

 

425,099

 

 

 

(64,201

)

 

 

(111

)

 

 

(176

)

 

 

 

 

 

 

 

 

 

 

 

360,611

 

(Loss) income from operations

 

 

(11,347

)

 

 

72,592

 

 

 

2,202

 

 

 

176

 

 

 

 

 

 

 

 

 

 

 

 

63,623

 

Operating margin

 

 

(2.3

)%

 

 

14.8

%

 

 

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.9

%

Net (loss) income

 

$

(13,287

)

 

$

72,592

 

 

$

2,202

 

 

$

176

 

 

$

16,307

 

 

$

(10,957

)

 

$

503

 

 

$

67,536

 

Weighted shares outstanding, basic

 

 

237,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

237,832

 

Weighted shares outstanding, diluted (7)

 

 

237,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

286,033

 

Net (loss) income per share, basic

 

$

(0.06

)

 

$

0.31

 

 

$

0.01

 

 

$

-

 

 

$

0.07

 

 

$

(0.05

)

 

$

-

 

 

$

0.28

 

Net (loss) income per share, diluted

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.24

 

____________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Litigation settlement accrual and legal fees

(4)

Amortization of debt discount and issuance costs and interest expense related to convertible senior notes

(5)

Gain on Frame divestiture

(6)

Income tax effect primarily related to stock-based compensation expense

(7)

Includes 48,201 potentially dilutive shares related to convertible senior notes and the issuance of shares under employee equity incentive plans

 

GAAP

 

Non-GAAP Adjustments

 

Non-GAAP

 

 

Fiscal Year Ended July 31, 2023

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

(7)

 

(8)

 

Fiscal Year Ended July 31, 2023

 

 

(in thousands, except percentages and per share data)

 

Gross profit

 

$

1,530,708

 

 

$

34,577

 

 

$

9,870

 

 

$

 

 

$

230

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

1,575,385

 

Gross margin

 

 

82.2

%

 

 

1.9

%

 

 

0.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

924,696

 

 

 

(82,758

)

 

 

(827

)

 

 

 

 

 

(3,283

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

837,828

 

Research and development

 

 

580,961

 

 

 

(139,073

)

 

 

 

 

 

 

 

 

(1,661

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

440,227

 

General and administrative

 

 

232,201

 

 

 

(55,337

)

 

 

 

 

 

(1,726

)

 

 

(129

)

 

 

(38,675

)

 

 

 

 

 

 

 

 

 

 

 

136,334

 

Total operating expenses

 

 

1,737,858

 

 

 

(277,168

)

 

 

(827

)

 

 

(1,726

)

 

 

(5,073

)

 

 

(38,675

)

 

 

 

 

 

 

 

 

 

 

 

1,414,389

 

(Loss) income from operations

 

 

(207,150

)

 

 

311,745

 

 

 

10,697

 

 

 

1,726

 

 

 

5,303

 

 

 

38,675

 

 

 

 

 

 

 

 

 

 

 

 

160,996

 

Operating margin

 

 

(11.1

)%

 

 

16.6

%

 

 

0.6

%

 

 

0.1

%

 

 

0.3

%

 

 

2.1

%

 

 

 

 

 

 

 

 

 

 

 

8.6

%

Net (loss) income

 

$

(254,560

)

 

$

311,745

 

 

$

10,697

 

 

$

1,726

 

 

$

5,303

 

 

$

38,675

 

 

$

64,112

 

 

$

(10,957

)

 

$

2,219

 

 

$

168,960

 

Weighted shares outstanding, basic

 

 

233,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

233,247

 

Weighted shares outstanding, diluted (9)

 

 

233,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

281,787

 

Net (loss) income per share, basic

 

$

(1.09

)

 

$

1.33

 

 

$

0.05

 

 

$

0.01

 

 

$

0.02

 

 

$

0.17

 

 

$

0.27

 

 

$

(0.05

)

 

$

0.01

 

 

$

0.72

 

Net (loss) income per share, diluted

 

$

(1.09

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.60

 

____________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Costs related to early exit of existing leases

(4)

Restructuring charges

(5)

Litigation settlement accrual and legal fees

(6)

Amortization of debt discount and issuance costs and interest expense related to convertible senior notes

(7)

Gain on Frame divestiture

(8)

Income tax effect primarily related to stock-based compensation expense

(9)

Includes 48,540 potentially dilutive shares related to convertible senior notes and the issuance of shares under employee equity incentive plans

 

 

GAAP

 

Non-GAAP Adjustments

 

Non-GAAP

 

 

Three Months Ended July 31, 2022

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

Three Months Ended July 31, 2022

 

 

(in thousands, except percentages and per share data)

 

Gross profit

 

$

305,648

 

 

$

9,132

 

 

$

3,367

 

 

$

 

 

$

218

 

 

$

 

 

$

 

 

$

318,365

 

Gross margin

 

 

79.3

%

 

 

2.4

%

 

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

82.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

252,600

 

 

 

(23,617

)

 

 

(651

)

 

 

 

 

 

(10,281

)

 

 

 

 

 

 

 

 

218,051

 

Research and development

 

 

144,268

 

 

 

(34,050

)

 

 

 

 

 

 

 

 

(633

)

 

 

 

 

 

 

 

 

109,585

 

General and administrative

 

 

42,547

 

 

 

(13,349

)

 

 

 

 

 

(597

)

 

 

(43

)

 

 

 

 

 

 

 

 

28,558

 

Total operating expenses

 

 

439,415

 

 

 

(71,016

)

 

 

(651

)

 

 

(597

)

 

 

(10,957

)

 

 

 

 

 

 

 

 

356,194

 

Loss from operations

 

 

(133,767

)

 

 

80,148

 

 

 

4,018

 

 

 

597

 

 

 

11,175

 

 

 

 

 

 

 

 

 

(37,829

)

Operating margin

 

 

(34.7

)%

 

 

20.8

%

 

 

1.0

%

 

 

0.2

%

 

 

2.9

%

 

 

 

 

 

 

 

 

(9.8

)%

Net loss

 

$

(151,337

)

 

$

80,148

 

 

$

4,018

 

 

$

597

 

 

$

11,175

 

 

$

15,524

 

 

$

1,033

 

 

$

(38,842

)

Weighted shares outstanding, basic and diluted

 

 

225,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

225,398

 

Net loss per share, basic and diluted

 

$

(0.67

)

 

$

0.36

 

 

$

0.02

 

 

$

-

 

 

$

0.05

 

 

$

0.07

 

 

$

-

 

 

$

(0.17

)

____________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Costs related to early exit of existing leases

(4)

Restructuring charges

(5)

Amortization of debt discount and issuance costs and interest expense related to convertible senior notes

(6)

Income tax effect primarily related to stock-based compensation expense

 

 

GAAP

 

Non-GAAP Adjustments

 

Non-GAAP

 

 

Fiscal Year Ended July 31, 2022

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

(7)

 

(8)

 

(9)

 

Fiscal Year Ended July 31, 2022

 

 

(in thousands, except percentages and per share data)

 

Gross profit

 

$

1,259,640

 

 

$

38,225

 

 

$

13,579

 

 

$

 

 

$

218

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

1,311,662

 

Gross margin

 

 

79.7

%

 

 

2.4

%

 

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83.0

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

979,075

 

 

 

(104,592

)

 

 

(2,604

)

 

 

 

 

 

(10,281

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

861,598

 

Research and development

 

 

572,999

 

 

 

(143,759

)

 

 

 

 

 

 

 

 

(633

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

428,607

 

General and administrative

 

 

166,418

 

 

 

(56,670

)

 

 

 

 

 

(597

)

 

 

(43

)

 

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108,676

 

Total operating expenses

 

 

1,718,492

 

 

 

(305,021

)

 

 

(2,604

)

 

 

(597

)

 

 

(10,957

)

 

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,398,881

 

Loss from operations

 

 

(458,852

)

 

 

343,246

 

 

 

16,183

 

 

 

597

 

 

 

11,175

 

 

 

432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(87,219

)

Operating margin

 

 

(29.0

)%

 

 

21.8

%

 

 

1.0

%

 

 

 

 

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5.5

)%

Net loss

 

$

(798,946

)

 

$

343,246

 

 

$

16,183

 

 

$

597

 

 

$

11,175

 

 

$

432

 

 

$

198,038

 

 

$

60,731

 

 

$

64,910

 

 

$

786

 

 

$

(102,848

)

Weighted shares outstanding, basic and diluted

 

 

220,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

220,529

 

Net loss per share, basic and diluted

 

$

(3.62

)

 

$

1.56

 

 

$

0.07

 

 

$

-

 

 

$

0.05

 

 

$

-

 

 

$

0.90

 

 

$

0.28

 

 

$

0.29

 

 

$

-

 

 

$

(0.47

)

____________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Costs related to early exit of existing leases

(4)

Restructuring charges

(5)

Other

(6)

Change in fair value of derivative liability

(7)

Amortization of debt discount and issuance costs and interest expense related to convertible senior notes

(8)

Loss on debt extinguishment

(9)

Income tax effect primarily related to stock-based compensation expense and release of acquisition-related unrecognized tax positions

Reconciliation of GAAP Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow

(Unaudited)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

2023

 

2022

 

2023

 

 

(in thousands)

 

Net cash provided by operating activities

 

$

38,004

 

 

$

58,309

 

 

$

67,543

 

 

$

272,403

 

Purchases of property and equipment

 

 

(14,779

)

 

 

(12,801

)

 

 

(49,058

)

 

 

(65,404

)

Free cash flow

 

$

23,225

 

 

$

45,508

 

 

$

18,485

 

 

$

206,999

 

Correction to Prior Period Financial Statements

(Unaudited)

The prior period amounts included in the tables above reflect the corrections made as a result of the previously disclosed investigation related to third-party software usage. Prior period amounts have been corrected as follows:

 

 

As of July 31, 2022

 

 

As Previously Reported

 

Adjustments

 

As Corrected

 

 

(in thousands)

 

Consolidated Balance Sheet:

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

$

49,232

 

 

$

10,336

 

 

$

59,568

 

Total current liabilities

 

$

1,150,224

 

 

$

10,336

 

 

$

1,160,560

 

Total liabilities

 

$

3,155,917

 

 

$

10,336

 

 

$

3,166,253

 

Accumulated deficit

 

$

(4,368,026

)

 

$

(10,336

)

 

$

(4,378,362

)

Total stockholders’ deficit

 

$

(790,168

)

 

$

(10,336

)

 

$

(800,504

)

 

 

Three Months Ended July 31, 2022

 

 

As Previously Reported

 

Adjustments

 

As Corrected

 

 

(in thousands)

Consolidated Statement of Operations:

 

 

 

 

 

 

Sales and marketing

 

$

252,508

 

 

$

92

 

 

$

252,600

 

Research and development

 

$

144,013

 

 

$

255

 

 

$

144,268

 

Total operating expenses

 

$

439,068

 

 

$

347

 

 

$

439,415

 

Loss from operations

 

$

(133,420

)

 

$

(347

)

 

$

(133,767

)

Loss before provision for income taxes

 

$

(144,693

)

 

$

(347

)

 

$

(145,040

)

Net loss

 

$

(150,990

)

 

$

(347

)

 

$

(151,337

)

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

 

$

(0.67

)

 

$

 

 

$

(0.67

)

 

 

Fiscal Year Ended July 31, 2022

 

 

As Previously Reported

 

Adjustments

 

As Corrected

 

 

(in thousands)

Consolidated Statement of Operations:

 

 

 

 

 

 

Sales and marketing

 

$

978,704

 

 

$

371

 

 

$

979,075

 

Research and development

 

$

571,962

 

 

$

1,037

 

 

$

572,999

 

Total operating expenses

 

$

1,717,084

 

 

$

1,408

 

 

$

1,718,492

 

Loss from operations

 

$

(457,444

)

 

$

(1,408

)

 

$

(458,852

)

Loss before provision for income taxes

 

$

(778,274

)

 

$

(1,408

)

 

$

(779,682

)

Net loss

 

$

(797,538

)

 

$

(1,408

)

 

$

(798,946

)

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

 

$

(3.62

)

 

$

 

 

$

(3.62

)

 

 

Fiscal Year Ended July 31, 2022

 

 

As Previously Reported

 

Adjustments

 

As Corrected

 

 

(in thousands)

Consolidated Statement of Cash Flows:

 

 

 

 

 

 

Net loss

 

$

(797,538

)

 

$

(1,408

)

 

$

(798,946

)

Accrued expenses and other liabilities

 

$

4,049

 

 

$

1,408

 

 

$

5,457

 

 

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