Nutanix Inc

Previous wording

Nutanix, Inc. ("we," "us," "our" or "Nutanix") provides a leading enterprise cloud platform, which we call the Nutanix Cloud Platform, that consists of software solutions and cloud services that power our customers’ enterprise infrastructure. Our solutions deliver a consistent cloud operating model across edge, private-, hybrid- and multicloud environments for all applications and their data. Our solutions allow organizations to simply run and move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure services, modern applications, analytics applications, and artificial intelligence ("AI") workloads, including machine learning ("ML") and generative AI workloads, between on-premises and public clouds. Our goal is to provide a single, simple, open software platform for all hybrid and multicloud applications and their data. We operate a subscription-based business model to provide our customers with the flexibility to choose the licensing that works best for them based on their specific business needs.

Current wording

Nutanix, Inc. ("we," "us," "our" or "Nutanix") provides a leading enterprise cloud platform, which we call Nutanix Cloud Platform, that consists of software solutions and cloud services that power our customers’ enterprise infrastructure. Our solutions deliver a consistent cloud operating model across edge, private-, hybrid- and multicloud environments for all applications and their data. Our solutions allow organizations to simply run and move their workloads, including enterprise applications, high-performance databases, end-user computing and virtual desktop infrastructure services, modern applications, analytics applications, and artificial intelligence ("AI") workloads, including machine learning ("ML") and generative AI workloads, between on-premises and public clouds. Our goal is to provide a single, simple, open software platform for all hybrid and multicloud applications and their data. We operate a subscription-based business model to provide our customers with the flexibility to choose the licensing that works best for them based on their specific business needs.

Previous wording

The Nutanix Cloud Platform can be deployed on-premises in data centers or at the edge, running on a variety of qualified hardware platforms, in popular public cloud environments such as AWS and Microsoft Azure through Nutanix Cloud Clusters, or, in the case of our cloud-based software and software-as-a-service ("SaaS") offerings, via hosted service. Our subscription term-based licenses are sold separately, or can also be sold alongside configured-to-order servers. Our subscription term-based licenses typically have terms ranging from one to five years. Our cloud-based SaaS subscriptions have terms extending up to five years. Configured-to-order servers, including our Nutanix-branded NX hardware line, can be purchased from one of our channel partners, original equipment manufacturers ("OEMs") or, in limited cases, directly from Nutanix.

Current wording

Nutanix Cloud Platform can be deployed on-premises in data centers or at the edge, running on a variety of qualified hardware platforms, in popular public cloud environments such as AWS and Microsoft Azure through Nutanix Cloud Clusters, or, in the case of our cloud-based software and software-as-a-service ("SaaS") offerings, via hosted service. Our subscription term-based licenses are sold separately, or can also be sold alongside configured-to-order servers purchased from one of our channel partners or original equipment manufacturers ("OEMs") (collectively, "Partners"). Our subscription term-based licenses typically have terms ranging from one to five years. Our cloud-based SaaS subscriptions have terms extending up to five years.

Previous wording

We had a broad and diverse base of over 25,000 end customers as of January 31, 2024, including approximately 1,030 Global 2000 enterprises. We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

Current wording

We had a broad and diverse base of over 25,000 end customers as of April 30, 2024, including approximately 1,040 Global 2000 enterprises. We define the number of end customers as the number of end customers for which we have received an order by the last day of the period, excluding partners to which we have sold products for their own demonstration purposes. A single organization or customer may represent multiple end customers for separate divisions, segments or subsidiaries, and the total number of end customers may contract due to mergers, acquisitions, or other consolidation among existing end customers.

Previous wording

Our solutions are primarily sold through channel partners and OEMs, and delivered directly to our end customers. Our solutions serve a broad range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications, big data analytics, and AI workloads, including ML and generative AI workloads, and we support both virtualized and container-based applications. We have end customers across a broad range of industries, such as automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology and telecommunications. We also sell to service providers, who utilize our enterprise cloud platform to provide a variety of cloud-based services to their customers.

Current wording

Our solutions are primarily sold through our Partners and delivered directly to our end customers. Our solutions serve a broad range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications, big data analytics, and AI workloads, including ML and generative AI workloads, and we support both virtualized and container-based applications. We have end customers across a broad range of industries, such as automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology and telecommunications. We also sell to service providers, who utilize our enterprise cloud platform to provide a variety of cloud-based services to their customers.

Previous wording

We continue to invest in the growth of our business over the long-run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on go-to-market efficiencies. By maintaining this balance, we believe we can sustain profitable growth. As discussed further in the "Factors Affecting Our Performance" section below, as part of our overall efforts to improve our operating cash flow performance, we have proactively taken steps to manage our expenses. As a result, our overall spending on such efforts will fluctuate, and may decline, from quarter to quarter in the near-term.

Current wording

We continue to invest in the profitable growth of our business over the long-run, including the development of our solutions and investing in sales and marketing to capitalize on our market opportunities, while improving our operating cash flow performance by focusing on go-to-market efficiencies. By maintaining this balance, we believe that we can sustain profitable growth. As discussed further in the "Factors Affecting Our Performance" section below, as part of our overall plan to improve our operating cash flow performance, we will continue to take steps to manage our expenses. As a result, our overall spending will fluctuate, and may decline, from quarter to quarter in the near-term.

Previous wording

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. These offerings represented approximately $224.2 million and $437.6 million of our subscription revenue for the three and six months ended January 31, 2023, respectively, and $252.6 million and $506.0 million of our subscription revenue for the three and six months ended January 31, 2024, respectively.

Current wording

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. These offerings represented approximately $226.1 million and $663.8 million of our subscription revenue for the three and nine months ended April 30, 2023, respectively, and $254.8 million and $760.8 million of our subscription revenue for the three and nine months ended April 30, 2024, respectively.

Previous wording

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. These subscription software licenses represented approximately $226.7 million and $416.3 million of our subscription revenue for the three and six months ended January 31, 2023, respectively, and $279.4 million and $505.5 million of our subscription revenue for the three and six months ended January 31, 2024, respectively.

Current wording

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. These subscription software licenses represented approximately $191.4 million and $607.6 million of our subscription revenue for the three and nine months ended April 30, 2023, respectively, and $231.8 million and $737.3 million of our subscription revenue for the three and nine months ended April 30, 2024, respectively.

Previous wording

Other non-subscription product revenue —Other non-subscription product revenue includes $10.9 million and $18.7 million of non-portable software revenue for the three and six months ended January 31, 2023, respectively, $7.0 million and $15.2 million of non-portable software revenue for the three and six months ended January 31, 2024, respectively, $1.2 million and $1.8 million of hardware revenue for the three and six months ended January 31, 2023, respectively, and $1.2 million and $1.8 million of hardware revenue for the three and six months ended January 31, 2024, respectively.

Current wording

Other non-subscription product revenue —Other non-subscription product revenue includes $8.4 million and $27.0 million of non-portable software revenue for the three and nine months ended April 30, 2023, respectively, $11.1 million and $26.3 million of non-portable software revenue for the three and nine months ended April 30, 2024, respectively, $0.6 million and $2.5 million of hardware revenue for the three and nine months ended April 30, 2023, respectively, and $0.6 million and $2.4 million of hardware revenue for the three and nine months ended April 30, 2024, respectively.

Previous wording

Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period. ACV billings is a performance measure that we believe provides useful information to our management and investors as they allow us to better track the topline growth of our 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 only includes non-life-of-device contracts and takes into account variability in term lengths. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin are performance measures which we believe provide useful information to investors, as 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 management and investors about the amount of cash used in or generated by the business after necessary capital expenditures. 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.

Current wording

Total billings is a performance measure which we believe provides useful information to our management and investors, as it represents the dollar value under binding purchase orders received and billed during a given period. 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 subscription-based business model 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 only includes non-life-of-device contracts and takes into account variability in term lengths. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin are performance measures which we believe provide useful information to investors, as 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 management and investors about the amount of cash used in or generated by the business after necessary capital expenditures. 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.

Previous wording

ACV billings— We calculate ACV billings as the sum of the ACV for all contracts billed during the period. ACV is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware. We calculate the total annualized value for a contract 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.

Current wording

ACV billings— We calculate ACV billings as the sum of the ACV for all contracts billed during the period. ACV is defined as the total annualized value of a contract, excluding amounts related to professional services and hardware. We calculate the total annualized value for a contract 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 life-of-device contracts that do not have a specified term.

Previous wording

ARR— We calculate ARR 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.

Current wording

ARR— We calculate ARR as the sum of ACV for all subscription 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. ARR excludes all life-of-device contracts.

Previous wording

Non-GAAP gross profit and Non-GAAP gross margin— We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, and costs associated with other non-recurring transactions. Our presentation of non-GAAP gross profit and non-GAAP gross margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Current wording

Non-GAAP gross profit and Non-GAAP gross margin— We calculate non-GAAP gross margin as non-GAAP gross profit divided by total revenue. We define non-GAAP gross profit as gross profit adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP gross profit and non-GAAP gross margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Previous wording

Non-GAAP operating expenses— We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain litigation matters, and costs associated with other non-recurring transactions. Our presentation of non-GAAP operating expenses should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

Current wording

Non-GAAP operating expenses— We define non-GAAP operating expenses as total operating expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP operating expenses should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of this non-GAAP financial measure.

Previous wording

Non-GAAP operating income (loss) and Non-GAAP operating margin— We calculate non-GAAP operating margin as non-GAAP operating income (loss) divided by total revenue. We define non-GAAP operating income (loss) as operating loss adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain litigation matters, and costs associated with other non-recurring transactions. Our presentation of non-GAAP operating income (loss) and non-GAAP operating margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Current wording

Non-GAAP operating income and Non-GAAP operating margin— We calculate non-GAAP operating margin as non-GAAP operating income divided by total revenue. We define non-GAAP operating income as operating income (loss) adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, impairment of lease-related assets, litigation settlement accruals and legal fees related to certain non-ordinary course litigation matters, and costs associated with certain non-recurring transactions. Our presentation of non-GAAP operating income and non-GAAP operating margin should not be construed as implying that our future results will not be affected by any recurring expenses or any unusual or non-recurring items that we exclude from our calculation of these non-GAAP financial measures.

Previous wording

Investment in Sales and Marketing – Our ability to achieve billings and revenue growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth. As part of our investment in our growth over the long-run, we plan to invest in sales and marketing, including investing in our sales and marketing teams and continuing our focus on opportunities with major accounts, large deals, and commercial accounts, as well as other sales and marketing initiatives to increase our pipeline growth. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, our overall sales and marketing expense may fluctuate. We estimate, based on past experience, that our average sales team members typically become fully ramped up around the start of their fourth quarter of employment with us, and as our newer employees ramp up, we expect their increased productivity to contribute to our revenue growth. As of January 31, 2024, we considered approximately 87% of our global sales team members to be fully ramped, while the remaining approximately 13% of our global sales team members are in the process of ramping up. As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we operate our subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team. As part of our overall efforts to improve our free cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners and OEMs, including supporting new OEMs, and optimizing headcount in geographies based on market opportunities.

Current wording

Investment in Sales and Marketing – Our ability to achieve billings and revenue growth depends, in large part, on our ability to capitalize on our market opportunity, including our ability to recruit, train and retain sufficient numbers of ramped sales personnel to support our growth. As part of our investment in our growth over the long-run, we plan to invest in sales and marketing, including investing in our sales and marketing teams and continuing our focus on opportunities with major accounts, large deals, and commercial accounts, as well as other sales and marketing initiatives to increase our pipeline growth. As we continue to recruit additional sales representatives, it will take time to train and ramp them to full productivity. As a result, our overall sales and marketing expense may fluctuate. We estimate, based on past experience, that our average sales team members typically become fully ramped up around the start of their fourth quarter of employment with us, and as our newer employees ramp up, we expect their increased productivity to contribute to our revenue growth. As of April 30, 2024, we considered approximately 81% of our global sales team members to be fully ramped, while the remaining approximately 19% of our global sales team members are in the process of ramping up. As we continue to focus some of our newer and existing sales team members on major accounts and large deals, and as we operate our subscription-based business model, it may take longer, potentially significantly, for these sales team members to become fully productive, and there may also be an impact to the overall productivity of our sales team. As part of our overall efforts to improve our free cash flow performance, we have also proactively taken steps to increase our go-to-market productivity and over time, we intend to reduce our overall sales and marketing spend as a percentage of revenue. These measures include improving the efficiency of our demand generation spend, focusing on lower cost renewals, increasing leverage of our channel partners and OEMs, including supporting new OEMs, and optimizing headcount in geographies based on market opportunities.

Previous wording

The public cloud and, more recently, hybrid cloud paradigms, have changed IT buyer expectations about the simplicity, agility, scalability, portability and pay-as-you-grow economics of IT resources, which represent a major architectural shift and business model evolution. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our enterprise cloud platform. This includes our newer products outside of our core hyperconverged infrastructure offering, both as compared to traditional datacenter architectures as well as the public cloud, particularly as we continue to pursue large enterprises and mission critical workloads. The broad nature of the technology shift that our enterprise cloud platform represents and the relationships our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our enterprise cloud platform.

Current wording

Hybrid and multicloud paradigms, as well as trends in generative AI and modern applications, have affected IT buyer expectations about the simplicity, agility, scalability, portability and pay-as-you-grow economics of IT resources. A key focus of our sales and marketing efforts is creating market awareness about the benefits of our enterprise cloud platform. This includes our newer products outside of our core hyperconverged infrastructure offering, both as compared to traditional datacenter architectures as well as the public cloud, particularly as we continue to pursue large enterprises and mission critical workloads. The broad nature of the technology shift that our enterprise cloud platform represents and the relationships our end customers have with existing IT vendors sometimes lead to unpredictable sales cycles. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our enterprise cloud platform.

Previous wording

Our business and operating results will depend on our ability to retain and sell additional solutions to our existing and future base of end customers. Our ability to obtain new and retain existing customers will in turn depend in part on a number of factors. These factors include our ability to effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, competition, our costs and customer demand. Furthermore, our subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models. Such concerns and/or confusion can slow adoption and renewal rates among our current and future customer base.

Current wording

Our business and operating results will depend on our ability to obtain new end customers and retain and sell additional solutions to our existing base of end customers. Our ability to obtain new end customers and retain and sell additional solutions to existing customers will in turn depend in part on a number of factors. These factors include our ability to: execute on our business plans, vision, and objectives (including our growth and go-to-market strategies), respond to competitive pressures, effectively maintain existing and future customer relationships, continue to innovate by adding new functionality and improving usability of our solutions in a manner that addresses our end customers’ needs and requirements, and optimally price our solutions in light of marketplace conditions, our ability to respond to competitive pressures, manage our costs, and anticipate and manage customer demand. Furthermore, our subscription-based business model and product transitions may cause concerns among our customer base, including concerns regarding changes to pricing over time, and may also result in confusion among new and existing end customers, for example, regarding our pricing models. Such concerns and/or confusion can slow adoption and renewal rates among our current and future customer base.

Previous wording

Our end customers typically deploy our technology for a specific workload initially. After a new end customer's initial order, which includes the product and associated software entitlement and support subscription and services, we focus on expanding our footprint by serving more workloads. We also generate recurring revenue from our software entitlement and support subscription renewals, and given our subscription-focused business model, software and support renewals will have an increasing significance for our future revenue streams as existing subscriptions come up for renewal. We view continued purchases and upgrades as critical drivers of our success, as the sales cycles are typically shorter as compared to new end customer deployments, and selling efforts are typically less. As of January 31, 2024, approximately 75% of our end customers who have been with us for 18 months or longer have made a repeat purchase, which is defined as any purchase activity, including renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase. Additionally, end customers who have been with us for 18 months or longer have total lifetime orders, including the initial order, in an amount that is more than 8.2x greater, on average, than their initial order. This number increases to approximately 28.0x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of January 31, 2024. These multiples exclude the effect of one end customer who had a very large and irregular purchase pattern that we believe is not representative of the purchase patterns of all of our other end customers.

Current wording

Our end customers typically deploy our technology for a specific workload initially. After a new end customer's initial order, which includes the product and associated software entitlement and support subscription and services, we focus on expanding our footprint by serving more workloads. We also generate recurring revenue from our software entitlement and support subscription renewals, and given our subscription-focused business model, software and support renewals are having an increasing significance for our future revenue streams as existing subscriptions come up for renewal. We view continued purchases and upgrades as critical drivers of our success, as the sales cycles are typically shorter as compared to new end customer deployments, and selling efforts are typically less. As of April 30, 2024, approximately 75% of our end customers who have been with us for 18 months or longer have made a repeat purchase, which is defined as any purchase activity, including renewals of term-based licenses or software entitlement and support subscription renewals, after the initial purchase. Additionally, end customers who have been with us for 18 months or longer have total lifetime orders, including the initial order, in an amount that is more than 8.4x greater, on average, than their initial order. This number increases to approximately 29.0x, on average, for Global 2000 end customers who have been with us for 18 months or longer as of April 30, 2024. These multiples exclude the effect of one end customer who had a very large and irregular purchase pattern that we believe is not representative of the purchase patterns of all of our other end customers.

Previous wording

Comparison of the Three and Six Months Ended January 31, 2023 and 2024

Current wording

Comparison of the Three and Nine Months Ended April 30, 2023 and 2024

Previous wording

The increases in product revenue for the three and six months ended January 31, 2024, as compared to the prior year periods, were due primarily to increases in software revenue resulting from growth in software renewals due to an increased adoption of our products, partially offset by the impact of the shorter average contract durations. For both the three and six months ended January 31, 2023, the total average contract duration was approximately 3.0 years. For the three and six months ended January 31, 2024, the total average contract duration was approximately 2.8 years and 2.9 years, respectively. Total average contract duration represents the dollar-weighted term across all subscription and life-of-device contracts billed during the period, using an assumed term of five years for licenses without a specified term, such as life-of-device licenses.

Current wording

The increases in product revenue for the three and nine months ended April 30, 2024, as compared to the prior year periods, were due primarily to increases in software revenue resulting from growth in software renewals due to an increased adoption of our products. For both the three and nine months ended April 30, 2023, the total average contract duration was approximately 3.0 years. For the three and nine months ended April 30, 2024, the total average contract duration was approximately 3.0 years and 2.9 years, respectively. Total average contract duration represents the dollar-weighted term across all subscription and life-of-device contracts billed during the period, using an assumed term of five years for licenses without a specified term, such as life-of-device licenses.

Previous wording

Support, entitlements and other services revenue increased for the three and six months ended January 31, 2024, as compared to the prior year periods, in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals.

Current wording

Support, entitlements and other services revenue increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, in conjunction with the growth of our end customer base and the related software entitlement and support subscription contracts and renewals.

Previous wording

Cost of product revenue decreased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to a decrease in amortization expense resulting from acquired intangible assets starting to reach the end of their useful lives. Slight fluctuations in hardware revenue and cost of product revenue are anticipated, as we expect to continue selling small amounts of hardware for the foreseeable future.

Current wording

Cost of product revenue decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to a decrease in amortization expense resulting from acquired intangible assets starting to reach the end of their useful lives. Slight fluctuations in hardware revenue and cost of product revenue are anticipated, as we expect to continue selling small amounts of hardware for the foreseeable future.

Previous wording

Product gross margin increased by 3.1 percentage points and 2.5 percentage points for the three and six months ended January 31, 2024, respectively, as compared to the prior year periods, due primarily to product revenue growing at a higher rate than cost of product revenue.

Current wording

Product gross margin increased by 2.5 percentage points for both the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to product revenue increasing while cost of product revenue decreases.

Previous wording

Cost of support, entitlements and other services revenue increased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs, resulting from growth in our global customer support organization.

Current wording

Cost of support, entitlements and other services revenue increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs and outside services costs, resulting from growth in our global customer support organization.

Previous wording

Support, entitlements and other services gross margin increased by 3.0 percentage points and 3.4 percentage points for the three and six months ended January 31, 2024, respectively, as compared to the prior year periods, due primarily to support, entitlements and other services revenue growing at a higher rate than personnel-related costs.

Current wording

Support, entitlements and other services gross margin increased by 3.3 percentage points and 3.4 percentage points for the three and nine months ended April 30, 2024, respectively, as compared to the prior year periods, due primarily to support, entitlements and other services revenue growing at a higher rate than personnel-related costs.

Previous wording

Sales and marketing expense increased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs, including commissions expense, resulting from growth in our sales and marketing headcount, partially offset by decreases in outside services costs.

Current wording

Sales and marketing expense increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs, including commissions expense, resulting from growth in our sales and marketing headcount, partially offset by decreases in outside services and allocated costs.

Previous wording

Research and development expense increased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs resulting from growth in our R&D headcount, partially offset by decreases in technical costs.

Current wording

Research and development expense increased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to higher personnel-related costs resulting from growth in our R&D headcount, partially offset by decreases in technical costs.

Previous wording

General and administrative expense decreased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to a decrease in the litigation settlement accrual and legal fees as a result of the February 2023 settlement of two securities class actions, partially offset by higher personnel-related costs, including stock-based compensation expense.

Current wording

General and administrative expense decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to a decrease in legal costs, in particular, for the nine months ended April 30, 2024, related to the litigation settlement accrual and legal fees as a result of the February 2023 settlement of two securities class actions. The decreases were partially offset by higher personnel-related costs, including stock-based compensation expense, resulting from growth in our G&A headcount, as well as an increase in technical costs related to software licenses.

Previous wording

Other income (expense), net decreased for the three and six months ended January 31, 2024, as compared to the prior year periods, due primarily to increases in foreign exchange gains as well as interest income on our investments.

Current wording

Other (expense) income, net decreased for the three and nine months ended April 30, 2024, as compared to the prior year periods, due primarily to increases in interest income on our investments.

Previous wording

The increases in the income tax provision for the three and six months ended January 31, 2024, as compared to the prior year periods, were due primarily to higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions, as we continued to grow our business internationally, as well as higher U.S. state income taxes, partially offset by excess tax benefits on stock options and restricted stock units exercised in the current period. We continue to maintain a full valuation allowance on our U.S. federal and state deferred tax assets and a partial valuation allowance related to certain foreign net operating losses.

Current wording

The decrease in the income tax provision for the three months ended April 30, 2024, as compared to the prior year period, was due primarily to foreign excess tax benefits on stock options and restricted stock units exercised in the current period, partially offset by higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions. The increase in the income tax provision for the nine months ended April 30, 2024, as compared to the prior year period, was due primarily to higher foreign taxes as a result of higher taxable earnings in foreign jurisdictions, as we continued to grow our business internationally, as well as higher U.S. state income taxes, partially offset by foreign excess tax benefits on stock options and restricted stock units exercised in the current periods. We continue to maintain a full valuation allowance on our U.S. federal and state deferred tax assets and a partial valuation allowance related to certain foreign net operating losses.

Previous wording

Our principal sources of liquidity were cash, cash equivalents, and marketable securities and net accounts receivable. As of January 31, 2024, we had $679.2 million of cash and cash equivalents, $2.1 million of restricted cash and $964.7 million of short-term investments, which were held for general corporate purposes. Our cash, cash equivalents and short-term investments primarily consist of bank deposits, money market accounts and highly rated debt instruments of the U.S. government and its agencies and debt instruments of highly rated corporations. As of January 31, 2024, we had accounts receivable of $189.0 million, net of allowances of $1.1 million.

Current wording

Our principal sources of liquidity were cash, cash equivalents, and marketable securities and net accounts receivable. As of April 30, 2024, we had $598.0 million of cash and cash equivalents, $2.1 million of restricted cash and $1,053.4 million of short-term investments, which were held for general corporate purposes. Our cash, cash equivalents and short-term investments primarily consist of bank deposits, money market accounts and highly rated debt instruments of the U.S. government and its agencies and debt instruments of highly rated corporations. As of April 30, 2024, we had accounts receivable of $225.3 million, net of allowances of $1.6 million.

Previous wording

In September 2020, we issued $750.0 million in aggregate principal amount of 2.50% convertible senior notes due 2026 to BCPE Nucleon (DE) SPV, LP, an entity affiliated with Bain Capital, LP. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

In September 2020, we issued $750.0 million in aggregate principal amount of 2.50% convertible senior notes due 2026 to BCPE Nucleon (DE) SPV, LP, an entity affiliated with Bain Capital, LP. For additional information, see Note 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. On June 6, 2024, BCPE Nucleon (DE) SPV, LP delivered a notice of conversion to convert $817.6 million aggregate principal amount of the 2026 Notes, representing all of the outstanding principal amount of the 2026 Notes. Under the terms of the indenture governing the 2026 Notes, we are required to settle the conversion by paying $817.6 million in cash and delivering approximately 16.9 million shares of Class A common stock. We expect to use a portion of our existing cash, cash equivalents and short-term investments to settle the cash portion of the conversion, which is expected to occur during the fiscal quarter ending July 31, 2024.

Previous wording

Due to investments in our business as well as the potential cash flow impacts resulting from our subscription-based business model, our operating and free cash flow may continue to fluctuate during the next 12 months. Notwithstanding that fact, we believe that our cash and cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for working capital, including share repurchases, and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, the continuing market acceptance of our products, our end customers and partners, and the economy, and the timing of and extent to which our customers transition to shorter-term contracts or request to only pay for the initial term of multi-year contracts as a result of our subscription-based business model.

Current wording

Due to investments in our business as well as the potential cash flow impacts resulting from our subscription-based business model, our operating and free cash flow may continue to fluctuate during the next 12 months. Notwithstanding that fact, we believe that our cash, cash equivalents and short-term investments and net cash provided by operating activities will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, and share repurchases (if any) for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, the continuing market acceptance of our products, our end customers and partners, and the economy, and the timing of and extent to which our customers transition to shorter-term contracts or request to only pay for the initial term of multi-year contracts as a result of our subscription-based business model.

Previous wording

Net cash provided by operating activities was $331.9 million for the six months ended January 31, 2024, compared to $139.6 million for the six months ended January 31, 2023. The increase in cash provided by operating activities for the six months ended January 31, 2024 was due primarily to the increase in our net income from operations.

Current wording

Net cash provided by operating activities was $428.2 million for the nine months ended April 30, 2024, compared to $214.1 million for the nine months ended April 30, 2023. The increase in cash provided by operating activities for the nine months ended April 30, 2024 was due primarily to the increase in our net income from operations.

Previous wording

Net cash used in investing activities of $10.6 million for the six months ended January 31, 2023 included $509.0 million of short-term investment purchases and $30.8 million of purchases of property and equipment, partially offset by $529.1 million of maturities of short-term investments.

Current wording

Net cash used in investing activities of $40.9 million for the nine months ended April 30, 2023 included $711.3 million of short-term investment purchases and $52.6 million of purchases of property and equipment, partially offset by $723.0 million of maturities of short-term investments.

Previous wording

Net cash used in investing activities of $67.3 million for the six months ended January 31, 2024 included $455.3 million of short-term investment purchases, $36.8 million of purchases of property and equipment and $4.5 million of cash paid for acquisitions, partially offset by $429.2 million of maturities of short-term investments.

Current wording

Net cash used in investing activities of $173.8 million for the nine months ended April 30, 2024 included $740.0 million of short-term investment purchases, $54.8 million of purchases of property and equipment and $4.5 million of cash paid for acquisitions, partially offset by $625.5 million of maturities of short-term investments.

Previous wording

Net cash used in financing activities of $125.2 million for the six months ended January 31, 2023 included $145.7 million used to repay the 2023 Notes at maturity and $2.3 million of payments for finance lease obligations, partially offset by $22.9 million of proceeds from the sale of shares through employee equity incentive plans.

Current wording

Net cash used in financing activities of $136.4 million for the nine months ended April 30, 2023 included $145.7 million used to repay the 2023 Notes at maturity, $10.2 million of taxes paid related to the net share settlement of equity awards, and $3.7 million of payments for finance lease obligations, partially offset by $23.3 million of proceeds from the sale of shares through employee equity incentive plans.

Previous wording

Net cash used in financing activities of $99.0 million for the six months ended January 31, 2024 included $59.2 million of repurchases of our Class A common stock, $53.2 million of taxes paid related to the net share settlement of equity awards and $1.8 million of payments for finance lease obligations, partially offset by $15.2 million of proceeds from the sale of shares through employee equity incentive plans.

Current wording

Net cash used in financing activities of $170.0 million for the nine months ended April 30, 2024 included $111.6 million of taxes paid related to the net share settlement of equity awards, $106.1 million of repurchases of our Class A common stock, and $2.9 million of payments for finance lease obligations, partially offset by $50.7 million of proceeds from the sale of shares through employee equity incentive plans.