New Revenue Rules—ASC 606September 5, 2017
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Welcome
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Safe Harbor
Non-GAAP Financial Measures and Other Key Performance MeasuresTo supplement our condensed 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 percentage, non-GAAP operating expenses, non-GAAP net loss, pro forma non-GAAP net loss per share, and free cash flow. In computing these 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, revaluation of contingent consideration, income tax related impact, and other acquisition-related costs), loss on debt extinguishment, and changes in the fair value of our preferred stock warrant liability. Billings is a performance measure which our management believes 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. Free cash flow is a performance measure that our management believes provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures, and we define free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment. 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. Our management believes that these non-GAAP financial and key performance measures 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. 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 percentage, non-GAAP operating expenses, non-GAAP net loss, pro forma non-GAAP net loss per share, and free cash flow are not substitutes for total revenue, gross profit, operating expenses, net loss, net loss per share, or net cash (used in) provided by operating activities, respectively. 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 in the section titled “GAAP to Non-GAAP Reconciliations” and not to rely on any single financial measure to evaluate our business.
Forward Looking StatementsThis presentation contains express and implied forward-looking statements relating to our anticipated future financial results, including but not limited to our guidance on estimated revenues, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP net loss per share for 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 such forward-looking statements depends upon future events, and involves risks, uncertainties and other factors 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: the rapid evolution of the markets in which we compete; our ability to sustain or manage future growth effectively; factors that could result in the significant fluctuation of our future quarterly operating results, including, among other things, our revenue or product mix, 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 to the pricing of certain components of our solutions, and fluctuations in demand and competitive pricing pressures for our solutions; delays in or lack of customer or market acceptance of our new product features or technology; the introduction, or acceleration of adoption of, competing solutions, including public cloud infrastructure; and other risks detailed in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2017, filed with the SEC on June 2, 2017, and amended on July 5, 2017. Additional information will also be set forth in our Form 10-K that will be filed for the fiscal year ended July 31, 2017, which should be read in conjunction with the information in this presentation. Our SEC filings are available on the Investor Relations section of the company’s website at ir.nutanix.com and on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this presentation and, except as required by law, we assume no obligation to update forward-looking statements to reflect actual results or subsequent events or circumstances.
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Overview
ASC 606—Overview• Basic Principles• Overview of Areas Impacted• Example of Software Only Deal
Legacy as Reported vs. 606 Adjusted:• Revenue
• Product • Support
• Non-GAAP Gross Margin %• Non-GAAP Operating Expenses• Key Financial Metrics, GAAP• Key Financial Metrics, Non-GAAP• Balance Sheet• Impact to Q1 FY18 GuidanceGAAP to Non-GAAP Reconciliations
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New Revenue Accounting Standard (606)Global Principles-Based Model
Step 1Identify the contract with the customer
Step 2Identify the separate performance obligations in the contract
Step 3Determine thetransaction price
Step 4Allocate the transaction price to the separate performance obligations
Step 5Recognize revenue when (or as) the entity satisfies a performance obligation
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Q1 FY18 Adoption of ASC 606
Areas Not Impacted� Billings
� Cost of revenue
� Operating cash flow and free cash flow
Areas Impacted� Revenue for software
� Minor changes to operating expenses, related to changes in the timing for accounting for sales incentives paid to our sales employees (commissions)
� Minor changes to historical income tax due to increases in foreign income
Periods Covered� Fiscal years 2017 and
2016 have been restated for comparability
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Software-Only Revenue Example—Legacy as Reported vs 606 Adjusted
Areas Not Impacted� Billings and
cash flow
Areas Impacted� Recognition of software-only
revenue will be primarily upfront
� Deferred revenue related to software is eliminated
Legacy as Reported Year 1 Year 2 Year 3
Billings 900 — —
Product Revenue 200 200 200
Support Revenue 100 100 100
Deferred Revenue 600 300 —
ASC 606 Year 1 Year 2 Year 3
Billings 900 — —
Product Revenue 600 — —
Support Revenue 100 100 100
Deferred Revenue 200 100 —
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Legacy As Reported vs. 606 Adjusted
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Total RevenueLegacy as Reported vs. 606 Adjusted
15%13%
10%
15%13%
9%7%
12%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
$445
$767
$503
$846
FY16 FY17
TotalRevenue(AsReported)TotalRevenue(606Adjusted)
In Millions ($)
In Millions ($)
13%
10%
FY16 FY17
Total Revenue (% Change)
Total Revenue (% Change)$88 $103 $115
$140$167 $182 $192
$226
$101 $116 $126$161
$189 $199 $206
$252
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
TotalRevenue(AsReported)TotalRevenue(606Adjusted)
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Product RevenueLegacy as Reported vs. 606 Adjusted
19% 18%
14%
20%18%
14%12%
17%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
$351
$583
$414
$673
FY16 FY17
ProductRevenue(AsReported)ProductRevenue(606Adjusted)
In Millions ($)
In Millions ($)18%
15%
FY16 FY17
Product Revenue (% Change)
Product Revenue (% Change)$70 $81 $90
$109$130 $139 $143
$172$84 $96 $102
$132$154 $158 $160
$201
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
ProductRevenue(AsReported)ProductRevenue(606Adjusted)
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Support RevenueLegacy as Reported vs. 606 Adjusted
-5% -4% -5% -5% -6% -6% -6% -6%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
$94
$184
$90
$173
FY16 FY17
SupportRevenue(AsReported)SupportRevenue(606Adjusted)
In Millions ($)
In Millions ($)
-5% -6%
FY16 FY17
Support Revenue (% Change)
Support Revenue (% Change)$17
$21$25
$31$37
$44$49
$54
$16$21 $24
$29$35
$41$46
$51
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
SupportRevenue(AsReported)SupportRevenue(606Adjusted)
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Non-GAAP Gross Margin %Legacy as Reported vs. 606 Adjusted
60% 63% 62% 61% 61% 60% 58% 58%
66% 68% 66% 66% 65% 63% 61% 63%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
TotalGM%(AsReported) TotalGM%(606Adjusted)
61% 63% 63% 61% 61% 59% 57% 56%
67% 69% 67% 68% 67% 64% 62% 63%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
ProductGM%(AsReported) ProductGM%(606Adjusted)
62% 59%66% 63%
FY16 FY17
Non-GAAPGM%(AsReported) Non-GAAPGM%(606Adjusted)
59% 64% 61% 62% 62% 63% 63% 65%
57% 62% 59% 60% 59% 61% 60% 63%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
SupportGM%(AsReported) SupportGM%(606Adjusted)
Support GM %
Total GM %
Total GM %
Product GM %
See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of Non-GAAP gross margin percentage to GAAP gross profit.
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Non-GAAP Operating ExpensesLegacy as Reported vs. 606 Adjusted
-1% -1% 0% 0% 0% 0% -1%1%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
$420
$645
$419
$645
FY16 FY17
TotalOpEx(AsReported)TotalOpEx(606Adjusted)
$84 $94$111
$128$146 $148
$170 $180
$85 $95$111
$129$146 $148
$171 $182
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
TotalOpEx(AsReported)TotalOpEx(606Adjusted)
In Millions ($) Total OpEx (% Change)
In Millions ($)
0% 0%
FY16 FY17
Total OpEx (% Change)
See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of Non-GAAP operating expenses to GAAP operating expenses.
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Non-GAAP Operating Loss/MarginLegacy as Reported vs. 606 Adjusted
($145)($191)
($85) ($112)
OperatingLoss(AsReported)OperatingLoss(606Adjusted)
($32) ($30)($40) ($43) ($44) ($39)
($59)($48)
($19) ($16)($28) ($22) ($23) ($22)
($44)
($24)
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
TotalOperatingLoss(AsReported)TotalOperatingLoss(606Adjusted)
In Millions ($) Total Operating Margin
In Millions ($)
-36%-29%
-35% -31% -27%21%
-31%-21%
-18%-13%
-22%-14% -12% -11%
-21%-9%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
OperatingMargin%(AsReported)OperatingMargin%(606Adjusted)
-33%-25%
-17% -13%
OperatingMargin(AsReported)OperatingMargin(606Adjusted)
Operating Margin
Non-GAAP metrics shown. See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of GAAP to Non-GAAP metrics.
FY16 FY17 FY16 FY17
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Key Financial Metrics-QuarterlyLegacy GAAP as Reported vs. 606 Adjusted
As ReportedBillings*
Revenue
Gross Margin %
Operating Expense
Operating Loss
Pro Forma Net Loss Per Share**
Cash Flow—Operations
Free Cash Flow*
Q1’16 Q2’16 Q3’16 Q4’16$128.3 $143.4 $159.5 $206.6
$87.8 $102.7 $114.7 $139.8
60.0% 63.1% 62.2% 61.1%
$89.8 $100.0 $116.0 $133.3
($37.2) ($35.2) ($44.7) ($47.9)
($0.32) ($0.28) ($0.39) ($0.41)
($5.6) $4.5 $2.4 $2.4
($15.3) ($5.9) ($11.0) ($6.5)
Q1’17 Q2’17 Q3’17 Q4’17$239.8 $227.4 $234.1 $289.2
$166.8 $182.2 $191.8 $226.1
58.2% 57.8% 56.6% 56.9%
$233.4 $197.6 $218.2 $217.2
($136.4) ($92.3) ($109.7) ($88.6)
($1.26) ($0.66) ($0.78) ($0.59)
$4.2 $19.8 ($16.0) $5.9
($7.8) $7.1 ($29.2) ($6.5)
606 AdjustedBillings*
Revenue
Gross Margin %
Operating Expense
Operating Loss
Pro Forma Net Loss Per Share**
Cash Flow—Operations
Free Cash Flow*
Q1’16 Q2’16 Q3’16 Q4’16$128.3 $143.4 $159.5 $206.6
$100.5 $116.4 $126.0 $160.5
65.1% 67.4% 65.6% 66.1%
$89.4 $99.1 $115.9 $132.9
($23.9) ($20.6) ($33.4) ($26.7)
($0.21) ($0.16) ($0.29) ($0.24)
($5.6) $4.5 $2.4 $2.4
($15.3) ($5.9) ($11.0) ($6.5)
Q1’17 Q2’17 Q3’17 Q4’17$239.8 $227.4 $234.1 $289.2
$188.6 $199.2 $205.7 $252.5
63.0% 61.4% 59.5% 61.4%
$233.3 $197.8 $217.0 $219.0
($114.5) ($75.4) ($94.5) ($64.0)
($1.09) ($0.54) ($0.67) ($0.43)
$4.2 $19.8 ($16.0) $5.9
($7.8) $7.1 ($29.2) ($6.5)
In millions except gross margin and per share data.*Indicates Non-GAAP metric. See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of GAAP to Non-GAAP metrics. **Pro Forma net loss per share was computed to give effect to the conversion of convertible preferred stock upon closing of our IPO on 10/5/2016, as if the conversion had occurred at the beginning of the period.
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Key Financial Metrics-AnnualLegacy GAAP as Reported vs. 606 Adjusted
Metrics
Billings*
Revenue
Gross Margin %
Operating Expense
Operating Loss
Pro Forma Net Loss Per Share**
Cash Flow—Operations
Free Cash Flow*
FY’16 FY’17
$637.8 $990.5
$444.9 $766.9
61.6% 57.3%
$439.2 $866.5
($165.0) ($427.0)
($1.40) ($3.19)
$3.6 $13.8
($38.7) ($36.4)
FY’16 FY’17
$637.8 $990.5
$503.4 $845.9
66.1% 61.3%
$437.2 $867.0
($104.6) ($348.4)
($0.90) ($2.68)
$3.6 $13.8
($38.7) ($36.4)
Δ FY’16 Δ FY’17
— —
$58.5 $79.0
4.5% 4.0%
($1.9) $0.5
$60.4 $78.5
$0.50 $0.51
— —
— —
Legacy as Reported
606 Adjusted
Delta
In millions except gross margin and per share data.*Indicates Non-GAAP metric. See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of GAAP to Non-GAAP metrics. **Pro Forma net loss per share was computed to give effect to the conversion of convertible preferred stock upon closing of our IPO on 10/5/2016, as if the conversion had occurred at the beginning of the period.
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Key Financial Metrics-QuarterlyLegacy Non-GAAP as Reported vs. 606 Adjusted
As ReportedBillings
Revenue*
Non-GAAP Gross Margin %
Non-GAAP Operating Expense
Non-GAAP Operating Loss
Pro Forma Non-GAAP Net Loss Per Share**
Cash Flow—Operations*
Free Cash Flow
Q1’16 Q2’16 Q3’16 Q4’16$128.3 $143.4 $159.5 $206.6
$87.8 $102.7 $114.7 $139.8
60.5% 63.4% 62.5% 61.3%
$84.8 $95.4 $111.3 $128.9
($31.7) ($30.3) ($39.7) ($43.2)
($0.27) ($0.26) ($0.33) ($0.39)
($5.6) $4.5 $2.4 $2.4
($15.3) ($5.9) ($11.0) ($6.5)
Q1’17 Q2’17 Q3’17 Q4’17$239.8 $227.4 $234.1 $289.2
$166.8 $182.2 $191.8 $226.1
60.9% 59.8% 58.4% 58.3%
$146.0 $147.7 $171.0 $180.2
($44.4) ($38.8) ($59.0) ($48.4)
($0.37) ($0.28) ($0.42) ($0.33)
$4.2 $19.8 ($16.0) $5.9
($7.8) $7.1 ($29.2) ($6.5)
606 AdjustedBillings
Revenue*
Non-GAAP Gross Margin %
Non-GAAP Operating Expense
Non-GAAP Operating Loss
Pro Forma Non-GAAP Net Loss Per Share**
Cash Flow—Operations*
Free Cash Flow
Q1’16 Q2’16 Q3’16 Q4’16$128.3 $143.4 $159.5 $206.6
$100.5 $116.4 $126.0 $160.5
65.5% 67.7% 65.8% 66.3%
$84.4 $94.5 $111.2 $128.5
($18.5) ($15.7) ($28.3) ($22.0)
($0.16) ($0.14) ($0.24) ($0.21)
($5.6) $4.5 $2.4 $2.4
($15.3) ($5.9) ($11.0) ($6.5)
Q1’17 Q2’17 Q3’17 Q4’17$239.8 $227.4 $234.1 $289.2
$188.6 $199.2 $205.7 $252.5
65.4% 63.2% 61.2% 62.6%
$145.8 $147.9 $169.7 $182.0
($22.5) ($21.9) ($43.8) ($23.9)
($0.20) ($0.16) ($0.32) ($0.17)
$4.2 $19.8 ($16.0) $5.9
($7.8) $7.1 ($29.2) ($6.5)
In millions except gross margin and per share data.*Indicates GAAP metric; otherwise non-GAAP metrics are shown. See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of GAAP to Non-GAAP metrics.**Pro Forma net loss per share was computed to give effect to the conversion of convertible preferred stock upon closing of our IPO on 10/5/2016, as if the conversion had occurred at the beginning of the period.
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Key Financial Metrics-AnnualLegacy Non-GAAP as Reported vs. 606 Adjusted
Metrics
Billings
Revenue*
Non-GAAP Gross Margin %
Non-GAAP Operating Expense
Non-GAAP Operating Loss
Pro Forma Non-GAAP Net Loss Per Share**
Cash Flow—Operations*
Free Cash Flow
FY’16 FY’17
$637.8 $990.5
$444.9 $766.9
61.9% 59.2%
$420.5 $645.0
($144.9) ($190.6)
($1.25) ($1.40)
$3.6 $13.8
($38.7) ($36.4)
FY’16 FY’17
$637.8 $990.5
$503.4 $845.9
66.3% 63.1%
$418.6 $645.5
($84.6) ($112.1)
($0.75) ($0.85)
$3.6 $13.8
($38.7) ($36.4)
Δ FY’16 Δ FY’17
— —
$58.5 $79.0
4.4% 3.8%
($1.9) $0.5
$60.3 $78.5
$0.50 $0.55
— —
— —
Legacy as Reported
606 Adjusted
Delta
In millions except gross margin and per share data.*Indicates GAAP metric; otherwise non-GAAP metrics are shown. See “GAAP to Non-GAAP Reconciliations” section of this presentation for reconciliation of GAAP to Non-GAAP metrics.**Pro Forma net loss per share was computed to give effect to the conversion of convertible preferred stock upon closing of our IPO on 10/5/2016, as if the conversion had occurred at the beginning of the period.
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Balance Sheet Legacy GAAP as Reported vs. 606 Adjusted
Impact of cumulative change in commissions expense
Assets As Reported (7/31/17) Adjusted ASC 606 (8/1/17)Cash and cash equivalents $138.4 $138.4Short-term investments $210.7 $210.7Accounts receivable—net of allowance $178.9 $178.9Deferred commission, current $27.7 ($3.9) $23.8
Prepaid expenses and other current assets $28.4 $28.4Total current assets $584.0 ($3.9) $580.2
Property and equipment—net $58.1 $58.1Deferred commission, current $33.7 $16.0 $49.7Intangible assets—net $26.0 $26.0Goodwill $16.7 $16.7Other non-current assets $7.6 $7.6
Total Assets $726.1 $12.1 $738.2
Liabilities & Equity As Reported (7/31/17) Adjusted ASC 606 (8/1/17)Accounts payable $73.7 $73.7Accrued compensation and benefits $57.5 $57.5
Accrued expenses and other current liabilities $9.4 $0.3 $9.7Deferred revenue, current $233.5 ($63.4) $170.1
Total current liabilities $374.2 ($63.1) $311.1Deferred revenue, non-current $292.6 ($93.7) $198.9Early exercised stock option liability $0.9 $0.9Other liabilities, non-current $10.3 $10.3
Total Liabilities $677.9 ($156.8) $521.1Equity (deficit) $48.2 $168.9 $217.1Total liabilities & equity $726.1 ($12.1) $738.2
A
A
BC
C
A Impact of cumulative change in income tax expenseB Impact of cumulative change in revenueC
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Q1 FY18 Financial Outlook
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In millions except gross margin and per share data.All forward-looking non-GAAP financial measures contained in this slide exclude stock-based compensation expense, and may also exclude, as applicable, other special items. We have not reconciled guidance for non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP loss per share to their most directly comparable GAAP measures because such items that impact these measures are not within our control and are subject to constant change. While the actual amounts of such items will have a significant impact on our non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP loss per share, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.
Q1 FY18 Financial OutlookAs Previously Provided vs. 606 Adjusted
Revenue
Non-GAAP Gross Margin %
Non-GAAP Operating Expenses
Wtd. Avg. Shares Outstanding
Non-GAAP Net Loss Per Share
Low High
$240.0 $250.0
58.0%
$195.0 $200.0
156.0
($0.37)
Low High
$260.0 $270.0
60.0% 61.0%
$197.0 $202.0
156.0
($0.27)
Q1 FY18 Outlook(As Prev. Provided)
Q1 FY18 Outlook(606 Adjusted)
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GAAP to Non-GAAP Reconciliations
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2017 GAAP to Non-GAAP ReconciliationQ1 Q2 Q3 Q4 FY 2017
BillingsRevenue $188.6 $199.2 $205.7 $252.5 $845.9Changeindeferredrevenue 51.3 28.2 28.4 36.7 144.6Totalbillings $239.8 $227.4 $234.1 $289.2 $990.5ReconciliationofGAAPtoNon-GAAPGrossprofit- GAAP $118.8 $122.4 $122.5 $154.9 $518.6Grossmargin- GAAP 63% 61% 60% 61% 61%Stock-basedcompensationexpense 4.3 3.2 3.1 2.8 13.5Amortizationofintangibles 0.2 0.4 0.4 0.4 1.3Grossprofit- Non-GAAP $123.3 $126.0 $126.0 $158.1 $533.4Grossmargin- Non-GAAP 65% 63% 61% 63% 63%Salesandmarketing- GAAP $128.6 $111.4 $126.7 $134.3 $501.0Stock-basedcompensationexpense (33.9) (15.5) (15.7) (13) (78.1)Amortizationofintangibles (0.2) (0.2) (0.3) (0.2) (0.9)Salesandmarketing- Non-GAAP $94.5 $95.6 $110.7 $121.0 $422.0Researchanddevelopment- GAAP $75.3 $70.9 $74.6 $67.8 $228.6Stock-basedcompensationexpense (34.0) (28.8) (27.0) (19.2) (109.0)Researchanddevelopment- Non-GAAP $41.3 $42.2 $47.6 $48.6 $179.6Generalandadministrative- GAAP $29.4 $15.5 $15.6 $16.9 $77.3Stock-basedcompensationexpense (18.5) (5.1) (4.5) (2.8) (30.9)Changeinfairvalueofcontingentconsideration (0.2) (0.3) 0.3 (1.8) (1.9)Acquisitionrelatedcosts (0.7) - - - (0.7)Generalandadministrative- Non-GAAP $10.0 $10.1 $11.4 $12.4 $43.9Operatingexpenses- GAAP $233.3 $197.8 $216.9 $219.0 $866.9Stock-basedcompensationexpense (86.4) (49.4) (47.3) (35) (218.0)Changeinfairvalueofcontingentconsideration (0.2) (0.3) 0.3 (1.8) (1.9)Acquisitionrelatedcosts (0.7) - - - (0.9)Amortizationofintangibles (0.2) (0.2) (0.3) (0.2) (0.7)Operatingexpenses- Non-GAAP $145.8 $147.8 $169.7 $182.0 $645.5Lossfromoperations- GAAP $(114.5) $(75.4) $(94.5) $(64.0) $ (348.4)OperatingMargin- GAAP (61)% (38)% (46)% (25)% (41)%Stock-basedcompensationexpense 90.7 52.6 50.4 37.8 231.5Changeinfairvalueofcontingentconsideration 0.2 0.3 (0.3) 1.8 1.9Acquisitionrelatedcosts 0.7 - - - 0.7Amortizationofintangibles 0.4 0.6 0.6 0.6 2.2Lossfromoperations- Non-GAAP $(22.5) $(21.9) $(43.8) $(23.8) $(112.1)OperatingMargin- Non-GAAP (12)% (11)% (21)% (9)% (13)%Netloss- GAAP $(140.3) $(76.4) $(96.8) $(66.1) $(379.6)Stock-basedcompensationexpense 90.7 52.6 50.4 37.8 231.5Changeinfairvalueofcontingentconsideration 0.2 0.3 (0.3) 1.8 1.9Acquisitionrelatedcosts 0.7 - - - 0.7Amortizationofintangibles 0.4 0.6 0.6 0.6 2.2Lossondebtextinguishment 3.3 - - - 3.3WarrantMtM 21.1 - - - 21.1Incometax-relatedadjustments (2.1) (0.2) 0.5 (0.1) (1.8)Netloss- Non-GAAP $(26.0) $(23.0) $(45.7) $(26.0) $(120.7)Netcash(usedin)providedbyoperatingactivities $4.2 $19.8 $(16.0) $5.9 $13.8PurchasesofPPE (11.9) (12.7) $(13.2) (12.4) $(50.2)Freecashflow $ (7.8) $7.1 $(29.2) $(6.5) $(36.4)Free cashflowmargin (4)% 4% (14)% (3)% (4)%ProformabasicanddilutedEPS- GAAP $ (1.09) $(0.54) $(0.67) $(0.43) $(2.68)Stock-basedcompensationexpense 0.71 0.37 0.35 0.25 1.61Changeinfairvalueofcontingentconsideration 0.00 0.00 0.00 0.00 0.01Acquisitionrelatedcosts 0.01 0.00 0.00 0.00 0.00Amortizationofintangibles 0.00 0.01 0.01 0.01 0.02Lossondebtextinguishment 0.03 0.00 0.00 0.00 0.02WarrantMtM 0.16 0.00 0.00 0.00 0.15Incometax-relatedadjustments (0.02) 0.00 0.00 0.00 (0.01)ProformabasicanddilutedEPS- Non-GAAP $ (0.20) $(0.16) $(0.32) $(0.17) $(0.85)
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2016 GAAP to Non-GAAP ReconciliationQ1 Q2 Q3 Q4 FY 2016
BillingsRevenue $100.5 $116.4 $126.0 $160.5 $503.4Changeindeferredrevenue 27.7 27.0 33.5 46.1 134.4Totalbillings $128.3 $143.4 $159.5 $206.6 $637.8ReconciliationofGAAPtoNon-GAAPGrossprofit- GAAP $65.4 $78.5 $82.6 $106.1 $332.6Grossmargin- GAAP 65% 67% 66% 66% 66%Stock-basedcompensationexpense 0.4 0.3 0.3 0.3 1.3Grossprofit- Non-GAAP $65.8 $78.8 $82.9 $106.4 $334.0Grossmargin- Non-GAAP 66% 68% 66% 66% 66%Salesandmarketing- GAAP $58.1 $65.2 $75.8 $87.4 $286.6Stock-basedcompensationexpense (2.1) (2.0) (2.0) (1.9) (8.0)Salesandmarketing- Non-GAAP $56.0 $63.2 $73.7 $85.5 $278.6Researchanddevelopment- GAAP $23.8 $26.0 $31.4 $35.1 $116.4Stock-basedcompensationexpense (1.6) (1.6) (1.5) (1.5) (6.2)Researchanddevelopment- Non-GAAP $22.2 $24.4 $29.9 $33.6 $110.1Generalandadministrative- GAAP $7.4 $7.8 $8.8 $10.3 $34.3Stock-basedcompensationexpense (1.3) (1.0) (1.2) (1.0) (4.4)Generalandadministrative- Non-GAAP $6.1 $6.8 $7.6 $9.3 $29.8Operatingexpenses- GAAP $89.3 $99.1 $115.9 $132.8 $437.2Stock-basedcompensationexpense (5.0) (4.6) (4.7) (4.4) (18.7)Operatingexpenses- Non-GAAP $84.3 $94.5 $111.2 $128.4 $418.6Lossfromoperations- GAAP $(23.9) $(20.8) $(33.3) $(26.7) $ (104.6)OperatingMargin- GAAP (24)% (18)% (26)% (17)% (21)%Stock-basedcompensationexpense 5.4 4.9 5.1 4.7 20.1Lossfromoperations- Non-GAAP $ (18.6) $(15.7) $(28.3) $(22.0) $(84.6)OperatingMargin- Non-GAAP (18)% (13)% (22)% (14)% (17)%Netloss- GAAP $(25.3) $(18.6) $(35.5) $(28.8) $(108.2)Stock-basedcompensationexpense 5.4 4.9 5.1 4.7 20.1WarrantMtM 0.7 (2.6) 1.3 (1.4) (2.0)Netloss- Non-GAAP $(19.2) $(16.4) $(29.1) $(25.5) $(90.2)Netcash(usedin)providedbyoperatingactivities $(5.6) $4.4 $2.4 $2.4 $3.6PurchasesofPPE (9.6) (10.4) $(13.4) (8.9) (42.3)Freecashflow $ (15.3) $(5.9) $(11.0) $(6.5) $(38.7)Free cashflowmargin (15)% (5)% (9)% (4)% (8)%ProformabasicanddilutedEPS- GAAP $ (0.21) $(0.16) $(0.29) $(0.24) $(0.90)Stock-basedcompensationexpense 0.05 0.04 0.04 0.04 0.17WarrantMtM 0.00 (0.02) 0.01 (0.01) (0.02)ProformabasicanddilutedEPS- Non-GAAP $ (0.16) $(0.14) $(0.24) $(0.21) $(0.75)
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