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Nutanix: Fiscal 3Q17 Financial Results

Record revenue of $192 million up 67% Y/Y and 5% Q/Q, with $112 million loss

(in $ million) 3Q16 3Q17 9 mo. 16 9 mo. 17
Revenue 114.7 191.8 305.1 540.8
Growth   67%   77%
Net income (loss) (46.8) (112.0) (118.6) (367.4)

Nutanix, Inc. announced financial results for its third quarter of fiscal 2017, ended April 30, 2017.

Third Quarter Fiscal Year 2017 Financial Highlights
    •    Revenue: $191.8 million, growing 67% year-over-year from $114.7 million in the third quarter of fiscal 2016
    •    Billings: $234.1 million, growing 47% year-over-year from $159.5 million in the third quarter of fiscal 2016
    •    Net Loss: GAAP net loss of $112.0 million, compared to a GAAP net loss of $46.8 million in the third quarter of fiscal 2016; Non-GAAP net loss of $60.8 million, compared to a non-GAAP net loss of $40.4 million in the third quarter of fiscal 2016
    •    Net Loss Per Share: GAAP net loss per share of $0.78, compared to a pro forma GAAP net loss per share of $0.39 in the third quarter of fiscal 2016; Non-GAAP net loss per share of $0.42, compared to a pro forma non-GAAP net loss per share of $0.33 in the third quarter of fiscal 2016
    •    Cash and Short-term Investments: $350.3 million, up 83% from the third quarter of fiscal 2016
    •    Deferred Revenue: $463.0 million, up 102% from the third quarter of fiscal 2016
    •    Operating Cash Flow: $(16.0) million, compared to $2.4 million in the third quarter of fiscal 2016, reflecting a $(9.6) million outflow of operating cash related to the purchase of ESPP shares
    •    Free Cash Flow: $(29.2) million, compared to $(11.0) million in the third quarter of fiscal 2016, also reflecting a $(9.6) million outflow of operating cash related to the purchase of ESPP shares

We continue to execute on our strategy of building a cloud OS that provides our customers maximum choice of hardware platforms. We recently established a partnership with IBM to bring to market the industry’s first hyperconverged solution on Power Systems, and introduced support for HPE ProLiant and Cisco UCS blade servers,” said Dheeraj Pandey, CEO. “Our third quarter results reflect our continued focus on the Global 2000 as well as a measurable improvement in the number of larger deals in the quarter, particularly in North America.”

Recent company Highlights
    •    Customer Growth: The firm ended the third quarter of fiscal 2017 with 6,172 end-customers, adding approximately 790 new end-customers during the quarter. Third quarter customer wins included Caterpillar Inc., KYOCERA Communication Systems Co., Ltd., MobileIron, SAIC Volkswagen, Société Générale, and Sprint.
    •    Added Support for New Hardware Platforms: The company announced plans to expand the supported hardware platforms for its enterprise cloud OS Software to include HPE ProLiant rackmount servers and Cisco UCS B-Series blade servers, allowing customers greater choice of hardware.
    •    Partnered with IBM for New HCI Solution: New partnership with IBM will bring a hyperconverged solution combining Nutanix’s software and IBM Power Systems targeting high-performance workloads and one-click private clouds for large enterprises.
    •    Expanded Economic Consumption Model with Nutanix Go: It offers qualified U.S. customers a new pricing model that enables enterprises to build their cloud, from hardware to software, using operating budgets. This economic model allows customers to break free of long-term capital budget commitments and align with the purchasing experience of the public cloud.
    •    Increased Number of $1 Million+ Deals: 34 customers with over $1 million in the quarter as a result of an increased focus on large deals.

Q4 Fiscal 2017 Financial Outlook
    •    Revenues between $215 and $220 million;
    •    Non-GAAP gross margin of approximately 58%;
    •    Non-GAAP net loss per share of $0.38, using 152 million weighted shares outstanding.

Comments

One of the strongest force in hyperconverged solutions with Dell EMC and HPE, Nutanix, now with 2.672 employees, continues to grow rapidly but never was profitable with loss continuing to be huge ($112 million for the quarter, with revenue at $192 million up 5% sequentially - the lowest percentage since 1FQ13 - and 67% Y/Y) in a global market estimated to reach approximately $8.5 billion in 2020.

For the 23rd consecutive quarter, dating back to firm's first period of shipments, Nutanix delivered record revenue in 3FQ17 above target range ($180 and $190 million) and could reach around $758 million for the fiscal year and milestone of $1 billion for next one.

It billed $234 million for the quarter representing a 47% increase from a year ago and a 3% increase from the prior quarter.

Here are some figures on customers:

  • - Total of 6,172 total, up 98% Y/Y, and including 521 Global 2000 customers
  • - 790 new ones in the quarter including 50 new Global 2000 clients
  • - 34 with over $1 million contract in the quarter and 2 greater than $5 million
  • - 13 deals in most recent quarter greater than $2 million in bookings for a total of $45 million compared to only four greater than $2 million in the former quarter, 10 of them either including no VDI or other workloads in addition to VDI, 4 being large government agencies, 3 to new customers and 2 largest deals at $7 million each. (Comparatively, there was only one Global 2000 customer included in the 2FQ17 deal greater than $2 million in bookings)
  • - Largest one crossing $50 million in lifetime sales
  • - 269 with lifetime bookings of $1 million to $3 million, 40 with $3 million to $5 million, 32 with more than $5 million
  • - 71% of bookings from repeat customers
  • - 38% of bookings from international customers, this percentage being 48% in 2FQ17 and 33% in 3FQ16.

50% of quarter's new customer workloads are considered tier-1 business-critical applications including Microsoft's SQL server, Oracle, SAP, Microsoft Exchange, Hadoop and Splunk.

Firm's software was initially filled with Nutanix sourced industry standard x86 server. Since then, it increased hardware platform choice adding Dell, HPE ProLiant servers, Lenovo and Cisco UCS C-Series servers.

Dell OEM business accounted for over 20% of company's ending backlog. On a sequential basis, Dell bookings declined this quarter but Lenovo bookings increased sharply.

AHV hypervisor adoption continued to increase its 23% of nodes sold using company's own built-in hypervisor, up from 21% last quarter and 9% a year ago based on a rolling full quarter average.

CFO Duston Williams commented on silicon products integrated into systems: "As expected, DRAM and NAND related SSD costs continued to rise causing our product cost to increase by about 8% during the quarter. Looking to 4FQ17, we expect significant additional DRAM cost increases, while SSD cost increases should start to abate."

FY revenue of Nutanix in $ million

FY Revenue Y/Y growth
2012 7 NA
2013 31 364%
2014 127 316%
2015 241 90%
2016 445 84%
2017* 758 70%

* projection

To read the earnings call transcript

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