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Nutanix Reports Fourth Quarter and Fiscal 2021 Financial Results - Business Wire

SAN JOSE, Calif.--( BUSINESS WIRE )--Nutanix, Inc. (NASDAQ: NTNX), a leader in hybrid multicloud computing, today announced financial results for its fourth quarter and fiscal year ended July 31, 2021.

“Our fourth quarter was a strong end to an excellent fiscal year, which was marked by consistent execution and solid progress across both financial and strategic objectives,” said Rajiv Ramaswami, President and CEO of Nutanix. “We have entered our fiscal 2022 with good momentum and a solid plan for growth, executing on the model we laid out at Investor Day and delivering on our vision of making clouds invisible.”

“We achieved records across a number of key metrics in the fourth quarter, including ACV billings and revenue, which grew 26 and 19 percent year over year, respectively,” said Duston Williams, CFO of Nutanix. “In fiscal 2022, we expect our growing base of low-cost renewals will drive further improvements in top and bottom line performance.”

Fourth Quarter Fiscal 2021 Financial Summary

Q4 FY’21

Q4 FY’20

Y/Y Change

Annual Contract Value (ACV) 1 Billings

$176.3 million

$139.9 million

26%

Annual Recurring Revenue (ARR)2

$878.7 million

$481.3 million

83%

Run-rate Annual Contract Value (ACV) 3

$1.54 billion

$1.22 billion

26%

Average Contract Term 4

3.4 years

3.8 years

(0.4) year

Revenue 5

$390.7 million

$327.9 million

19%

GAAP Gross Margin

79.9%

79.6%

30 bps

Non-GAAP Gross Margin

82.9%

83.0%

(10) bps

GAAP Operating Expenses

$454.1 million

$432.3 million

5%

Non-GAAP Operating Expenses

$372.5 million

$345.8 million

8%

Free Cash Flow

$(42.2) million

$(13.8) million

$(28.4) million

Fiscal 2021 Financial Summary

FY’21

FY’20

Y/Y Change

Annual Contract Value (ACV) 1 Billings

$594.3 million

$505.2 million

18%

Annual Recurring Revenue (ARR)2

$878.7 million

$481.3 million

83%

Run-rate Annual Contract Value (ACV) 3

$1.54 billion

$1.22 billion

26%

Average Contract Term 4

3.4 years

3.8 years

(0.4) year

Revenue 5

$1.39 billion

$1.31 billion

7%

GAAP Gross Margin

79.1%

78.1%

100 bps

Non-GAAP Gross Margin

82.3%

81.3%

100 bps

GAAP Operating Expenses

$1.76 billion

$1.85 billion

(5)%

Non-GAAP Operating Expenses

$1.43 billion

$1.52 billion

(6)%

Free Cash Flow

$(158.5) million

$(249.4) million

$90.9 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

  • Formed Strategic Partnership with Red Hat to Deliver Open Hybrid Multicloud Solutions: Red Hat and Nutanix announced a strategic partnership to enable a solution for building, scaling and managing cloud-native applications on premises and in hybrid clouds. The collaboration enables installation, interoperability and management of Red Hat OpenShift and Red Hat Enterprise Linux with Nutanix Cloud Platform, including Nutanix AOS and AHV.
  • Expanded Partnership with Hewlett Packard Enterprise (HPE) to Deliver New Database as a Service Offering Through HPE Greenlake: Nutanix and HPE announced an expanded partnership in which Nutanix’s Era multi-database operations and management solution will be bundled with HPE ProLiant servers, as a service through HPE GreenLake, in addition to its core cloud platform which is already a part of the Greenlake solution.
  • Released its Inaugural ESG Report: The report is available in the ESG section of the Nutanix Investor Relations website or can be accessed directly here.
  • Elected Virginia Gambale Chair of the Board : Ms. Gambale has served on the Nutanix Board of Directors since June 2020 and on public company boards for more than 20 years across a variety of industries, including technology.
  • Announced Details for .NEXT 2021: The digital .NEXT user conference, Nutanix’s signature customer experience, will be held September 20 through 23. Registration details can be found at www.nutanix.com/next.

First Quarter Fiscal 2022 Outlook

ACV Billings

$172 - $177 million

Non-GAAP Gross Margin

Approximately 81.5%

Non-GAAP Operating Expenses

$365 - $370 million

Weighted Average Shares Outstanding

Approximately 216 million

Supplementary materials to this press release, including our fourth quarter and 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 fourth quarter and fiscal year 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 3574479. 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 3574479.

Definitions and Total Revenue Impact

1 Annual 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. ACV Billings is the sum of New ACV Billings and Renewals ACV Billings.

2 Annual 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.

3 Run-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, the Company 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.

4 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 period.

5Revenue 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.

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), Annual Recurring Revenue (or ARR), and Run-rate Annual Contract Value (or Run-rate ACV). 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, the change in fair value of the derivative liability, the amortization of the 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 provided by (used in) operating activities less purchases of property and equipment. Subscription revenue and subscription 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 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. 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. 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 provided by (used in) operating activities, respectively; subscription revenue is not a substitute for total revenue; and subscription billings is not a substitute for subscription revenue. There is no GAAP measure that is comparable to ACV Billings, ARR, or Run-rate ACV, so we have not reconciled the ACV Billings, ARR, or 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 Provided By (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, strategies, initiatives, vision, objectives, and outlook, including our growth plan and vision of making clouds invisible, 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 expectation that in our fiscal year ending July 31, 2022 our growing base of low-cost renewals will drive further improvements in top and bottom line performance; our plans for, and the timing of, any current and future business model transitions, including our ongoing transition to a subscription-based business model, our ability to manage, complete or realize the benefits of such transitions successfully and in a timely manner, and the short-term and long-term impacts of such transitions 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, 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; 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; 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; 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, 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; 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; 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; 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 and availability of certain components of our solutions, and fluctuations in demand and competitive pricing pressures for our solutions; 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, and our Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2021 and April 30, 2021, filed with the SEC on March 4, 2021 and June 3, 2021, respectively. Additional information will also be set forth in our Annual Report on Form 10-K for the fiscal year ended July 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 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 and a pioneer in hyperconverged infrastructure solutions, making clouds invisible, freeing customers to focus on their business outcomes. Organizations around the world use Nutanix software to leverage a single platform to manage any app at any location for their hybrid multicloud environments. Learn more at www.nutanix.com or follow us on social media @nutanix.

© 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.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

As of

July 31, 2020

July 31, 2021

(in thousands)

Assets

Current assets:

Cash and cash equivalents

$

318,737

$

285,723

Short-term investments

401,041

928,006

Accounts receivable, net

242,516

180,781

Deferred commissions—current

68,694

110,935

Prepaid expenses and other current assets

63,032

56,816

Total current assets

1,094,020

1,562,261

Property and equipment, net

143,172

131,621

Operating lease right-of-use assets

127,326

105,903

Deferred commissions—non-current

146,834

232,485

Intangible assets, net

49,392

32,012

Goodwill

185,260

185,260

Other assets—non-current

22,543

27,954

Total assets

$

1,768,547

$

2,277,496

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable

$

54,029

$

47,056

Accrued compensation and benefits

109,109

162,337

Accrued expenses and other current liabilities

25,924

39,404

Deferred revenue—current

534,572

636,421

Operating lease liabilities—current

36,569

42,670

Total current liabilities

760,203

927,888

Deferred revenue—non-current

648,869

676,502

Operating lease liabilities—non-current

116,794

86,599

Convertible senior notes, net

490,222

1,055,694

Derivative liability

500,175

Other liabilities—non-current

27,436

42,679

Total liabilities

2,043,524

3,289,537

Stockholders’ deficit:

Common stock

5

5

Additional paid-in capital

2,245,180

2,615,317

Accumulated other comprehensive income

2,030

(8

)

Accumulated deficit

(2,522,192

)

(3,627,355

)

Total stockholders’ deficit

(274,977

)

(1,012,041

)

Total liabilities and stockholders’ deficit

$

1,768,547

$

2,277,496

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands, except per share data)

Revenue:

Product

$

179,075

$

202,946

$

765,822

$

705,804

Support, entitlements and other services

148,799

187,774

541,860

688,560

Total revenue

327,874

390,720

1,307,682

1,394,364

Cost of revenue:

Product (1)(2)

13,413

15,793

71,312

55,287

Support, entitlements and other services (1)

53,558

62,726

215,377

236,619

Total cost of revenue

66,971

78,519

286,689

291,906

Gross profit

260,903

312,201

1,020,993

1,102,458

Operating expenses:

Sales and marketing (1)(2)

264,453

270,789

1,160,389

1,052,508

Research and development (1)

135,338

140,658

553,978

556,950

General and administrative (1)

32,464

42,642

135,547

153,782

Total operating expenses

432,255

454,089

1,849,914

1,763,240

Loss from operations

(171,352

)

(141,888

)

(828,921

)

(660,782

)

Other expense, net

(9,757

)

(211,610

)

(26,300

)

(354,991

)

Loss before provision for income taxes

(181,109

)

(353,498

)

(855,221

)

(1,015,773

)

Provision for income taxes

4,239

4,684

17,662

18,487

Net loss

$

(185,348

)

$

(358,182

)

$

(872,883

)

$

(1,034,260

)

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

$

(0.93

)

$

(1.68

)

$

(4.48

)

$

(5.01

)

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

200,150

212,612

194,719

206,475

_________________________________________

(1)

Includes the following stock-based compensation expense:

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Product cost of revenue

$

1,397

$

1,569

$

5,334

$

6,023

Support, entitlements and other services cost of revenue

6,164

6,598

22,014

24,460

Sales and marketing

33,878

29,814

126,015

122,815

Research and development

39,768

36,109

153,252

150,856

General and administrative

11,654

15,517

45,383

54,391

Total stock-based compensation expense

$

92,861

$

89,607

$

351,998

$

358,545

(2)

Includes the following amortization of intangible assets:

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Product cost of revenue

$

3,695

$

3,694

$

14,777

$

14,776

Sales and marketing

650

651

2,603

2,604

Total amortization of intangible assets

$

4,345

$

4,345

$

17,380

$

17,380

NUTANIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Fiscal Year Ended July 31,

2020

2021

(in thousands) 

Cash flows from operating activities:

Net loss

$

(872,883

)

$

(1,034,260

)

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

Depreciation and amortization

93,773

94,373

Stock-based compensation

351,998

358,545

Change in fair value of derivative liability

269,265

Amortization of debt discount and issuance costs

31,313

63,859

Operating lease cost, net of accretion

30,374

34,757

Impairment of lease-related assets

3,002

1,420

Non-cash interest expense

16,074

Other

324

6,380

Changes in operating assets and liabilities:

Accounts receivable, net

4,334

64,483

Deferred commissions

(61,816

)

(127,891

)

Prepaid expenses and other assets

10,089

4,057

Accounts payable

(16,574

)

(5,762

)

Accrued compensation and benefits

18,765

50,916

Accrued expenses and other liabilities

3,400

14,824

Operating leases, net

(28,394

)

(37,582

)

Deferred revenue

272,410

126,732

Net cash used in operating activities

(159,885

)

(99,810

)

Cash flows from investing activities:

Maturities of investments

645,828

784,176

Purchases of investments

(607,194

)

(1,392,737

)

Sales of investments

75,413

70,055

Purchases of property and equipment

(89,488

)

(58,647

)

Net cash provided by (used in) investing activities

24,559

(597,153

)

Cash flows from financing activities:

Proceeds from sales of shares through employee equity incentive plans

57,797

65,766

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

723,617

Repurchases of common stock

(125,079

)

Payment of finance lease obligations

(459

)

Net cash provided by financing activities

57,797

663,845

Net decrease in cash, cash equivalents and restricted cash

$

(77,529

)

$

(33,118

)

Cash, cash equivalents and restricted cash—beginning of period

399,520

321,991

Cash, cash equivalents and restricted cash—end of period

$

321,991

$

288,873

Restricted cash (1)

3,254

3,150

Cash and cash equivalents—end of period

$

318,737

$

285,723

Supplemental disclosures of cash flow information:

Cash paid for income taxes

$

16,625

$

16,639

Supplemental disclosures of non-cash investing and financing information:

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

$

4,630

$

12,832

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

$

$

8,299

_________________________________________

(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,

2020

2021

2020

2021

(in thousands)

Total revenue

$

327,874

$

390,720

$

1,307,682

$

1,394,364

Change in deferred revenue

60,636

38,768

272,410

126,732

Total billings

$

388,510

$

429,488

$

1,580,092

$

1,521,096

Disaggregation of Revenue and Billings

(Unaudited)

 

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Disaggregation of revenue:

Subscription revenue

$

284,777

$

352,178

$

1,030,180

$

1,243,621

Non-portable software revenue

29,539

12,945

208,158

71,390

Hardware revenue

1,403

3,234

23,455

6,259

Professional services revenue

12,155

22,363

45,889

73,094

Total revenue

$

327,874

$

390,720

$

1,307,682

$

1,394,364

Disaggregation of billings:

Subscription billings

$

340,633

$

390,290

$

1,276,413

$

1,354,155

Non-portable software billings

29,539

12,945

208,158

71,390

Hardware billings

1,403

3,234

23,455

6,259

Professional services billings

16,935

23,019

72,066

89,292

Total billings

$

388,510

$

429,488

$

1,580,092

$

1,521,096

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, Annual Recurring Revenue and Run-rate Annual Contract Value

(Unaudited)

 

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Annual Contract Value Billings (ACV Billings)

$

139,942

$

176,251

$

505,179

$

594,292

Annual Recurring Revenue (ARR)

$

481,250

$

878,733

$

481,250

$

878,733

Run-rate Annual Contract Value (Run-rate ACV)

$

1,219,965

$

1,535,360

$

1,219,965

$

1,535,360

Reconciliation of Subscription and Professional Services Revenue to Subscription and Professional

Services Billings

(Unaudited)

 

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Subscription revenue

$

284,777

$

352,178

$

1,030,180

$

1,243,621

Change in subscription deferred revenue

55,856

38,112

246,233

110,534

Subscription billings

$

340,633

$

390,290

$

1,276,413

$

1,354,155

Professional services revenue

$

12,155

$

22,363

$

45,889

$

73,094

Change in professional services deferred revenue

4,780

656

26,177

16,198

Professional services billings

$

16,935

$

23,019

$

72,066

$

89,292

Reconciliation of GAAP to Non-GAAP Profit Measures

(Unaudited)

 

GAAP

Non-GAAP Adjustments

Non-GAAP

Three Months Ended July 31, 2021

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Three

Months Ended July 31, 2021

(in thousands, except percentages and per share data)

Gross profit

$

312,201

$

8,167

$

3,694

$

(274

)

$

$

$

$

$

323,788

Gross margin

79.9

%

2.1

%

1.0

%

(0.1

)%

82.9

%

Operating expenses:

Sales and marketing

270,789

(29,814

)

(651

)

240,324

Research and development

140,658

(36,109

)

1,128

105,677

General and administrative

42,642

(15,517

)

(622

)

26,503

Total operating expenses

454,089

(81,440

)

(651

)

1,128

(622

)

372,504

Loss from operations

(141,888

)

89,607

4,345

(1,402

)

622

(48,716

)

Net loss

$

(358,182

)

$

89,607

$

4,345

$

(1,402

)

$

622

$

187,912

$

22,424

$

(756

)

$

(55,430

)

Weighted shares outstanding, basic and diluted

212,612

212,612

Net loss per share, basic and diluted

$

(1.68

)

$

0.42

$

0.02

$

(0.01

)

$

-

$

0.88

$

0.11

$

-

$

(0.26

)

_________________________________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Recovery of lease-related asset impairment charges

(4)

Other

(5)

Change in fair value of derivative liability

(6)

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

(7)

Income tax effect primarily related to stock-based compensation expense

GAAP

Non-GAAP Adjustments

Non-GAAP

Fiscal Year Ended July 31, 2021

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Fiscal Year Ended July 31, 2021

(in thousands, except percentages and per share data)

Gross profit

$

1,102,458

$

30,483

$

14,776

$

13

$

$

$

$

$

1,147,730

Gross margin

79.1

%

2.2

%

1.0

%

82.3

%

Operating expenses:

Sales and marketing

1,052,508

(122,815

)

(2,604

)

927,089

Research and development

556,950

(150,856

)

(1,407

)

404,687

General and administrative

153,782

(54,391

)

(2,407

)

96,984

Total operating expenses

1,763,240

(328,062

)

(2,604

)

(1,407

)

(2,407

)

1,428,760

Loss from operations

(660,782

)

358,545

17,380

1,420

2,407

(281,030

)

Net loss

$

(1,034,260

)

$

358,545

$

17,380

$

1,420

$

2,407

$

269,265

$

79,933

$

743

$

(304,567

)

Weighted shares outstanding, basic and diluted

206,475

206,475

Net loss per share, basic and diluted

$

(5.01

)

$

1.74

$

0.08

$

0.01

$

0.01

$

1.30

$

0.39

$

-

$

(1.48

)

_________________________________________

(1)

Stock-based compensation expense

(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 Ended July 31, 2020

(1)

(2)

(3)

(4)

(5)

Three Months Ended July 31, 2020

(in thousands, except percentages and per share data)

Gross profit

$

260,903

$

7,561

$

3,695

$

$

$

$

272,159

Gross margin

79.6

%

2.3

%

1.1

%

83.0

%

Operating expenses:

Sales and marketing

264,453

(33,878

)

(650

)

229,925

Research and development

135,338

(39,768

)

95,570

General and administrative

32,464

(11,654

)

(520

)

20,290

Total operating expenses

432,255

(85,300

)

(650

)

(520

)

345,785

Loss from operations

(171,352

)

92,861

4,345

520

(73,626

)

Net loss

$

(185,348

)

$

92,861

$

4,345

$

520

$

8,023

$

605

$

(78,994

)

Weighted shares outstanding, basic and diluted

200,150

200,150

Net loss per share, basic and diluted

$

(0.93

)

$

0.47

$

0.02

$

-

$

0.04

$

0.01

$

(0.39

)

_________________________________________

(1)

Stock-based compensation expense

(2)

Amortization of intangible assets

(3)

Other

(4)

Amortization of debt discount and debt issuance costs

(5)

Income tax effect primarily related to stock-based compensation expense

GAAP

Non-GAAP Adjustments

Non-GAAP

Fiscal Year Ended July 31, 2020

(1)

(2)

(3)

(4)

(5)

(6)

Fiscal Year Ended July 31, 2020

(in thousands, except share and per share data)

Gross profit

$

1,020,993

$

27,348

$

14,777

$

537

$

$

$

$

1,063,655

Gross margin

78.1

%

2.1

%

1.1

%

81.3

%

Operating expenses:

Sales and marketing

1,160,389

(126,015

)

(2,603

)

1,031,771

Research and development

553,978

(153,252

)

(2,465

)

398,261

General and administrative

135,547

(45,383

)

(1,499

)

88,665

Total operating expenses

1,849,914

(324,650

)

(2,603

)

(2,465

)

(1,499

)

1,518,697

Loss from operations

(828,921

)

351,998

17,380

3,002

1,499

(455,042

)

Net loss

$

(872,883

)

$

351,998

$

17,380

$

3,002

$

1,499

$

31,313

$

1,845

$

(465,846

)

Weighted shares outstanding, basic and diluted

194,719

194,719

Net loss per share, basic and diluted

$

(4.48

)

$

1.80

$

0.09

$

0.02

$

0.01

$

0.16

$

0.01

$

(2.39

)

_________________________________________

(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 Provided By (Used In) Operating Activities to Non-GAAP Free Cash Flow

(Unaudited)

 

Three Months Ended July 31,

Fiscal Year Ended July 31,

2020

2021

2020

2021

(in thousands)

Net cash provided by (used in) operating activities

$

3,630

$

(24,630

)

$

(159,885

)

$

(99,810

)

Purchases of property and equipment

(17,415

)

(17,536

)

(89,488

)

(58,647

)

Free cash flow

$

(13,785

)

$

(42,166

)

$

(249,373

)

$

(158,457

)