Nutanix: Fiscal 2Q19 Financial Results
Huge loss never stopping but firm continuing to grow rapidly
This is a Press Release edited by StorageNewsletter.com on March 6, 2019 at 2:25 pm| (in $ million) | 2Q18 | 2Q19 | 6 mo. 18 | 6 mo. 19 |
| Revenue | 286.7 | 335.4 | 562.3 | 648.6 |
| Growth | 17% | 15% | ||
| Net income (loss) | (62.6) | (122.8) | (124.1) | (217.0) |
- Continued Shift to Recurring Revenue Model with 57% of Billings from Subscriptions
- Subscription Revenue Up 112% Y/Y to $157 Million
- 21% of Deals Include Offerings Beyond Core HCI
- Record AHV adoption of 40%
Nutanix, Inc. announced financial results for its second quarter of fiscal 2019, ended January 31, 2019.
2FQ19 Financial Highlights
• Revenue: $335.4 million (at 76.8% non-GAAP gross margin), up from $286.7 million (at 63.5% non-GAAP gross margin) in 2FQ18
• Billings: $413.4 million, up from $355.9 million in 2FQ18
• Software and Support Revenue: $297.4 million, growing 42% Y/Y from $208.7 million in 2FQ18
• Software and Support Billings: $375.5 million, growing 37% Y/Y from $274.5 million in 2FQ18
• Gross Margin: GAAP gross margin of 74.4%, up from 62.2% from 2FQ18; Non-GAAP gross margin of 76.8%, up from 63.5% in 2FQ18
• Net Loss: GAAP net loss of $122.8 million, compared to a GAAP net loss of $62.6 million in 2FQ18; Non-GAAP net loss of $40.4 million, compared to a non-GAAP net loss of $23.2 million in 2FQ18
• Net Loss Per Share: GAAP net loss per share of $0.68, compared to a GAAP net loss per share of $0.39 in 2FQ18; Non-GAAP net loss per share of $0.23, compared to a non-GAAP net loss per share of $0.14 in 2FQ18
• Cash and Short-term Investments: $965.9 million, up from $918.3 million in 2FQ18
• Deferred Revenue: $779.9 million, up 63% from 2FQ18
• Operating Cash Flow: $38.5 million, compared to $46.4 million in 2FQ18
• Free Cash Flow: Use of $4.1 million, compared to the generation of $32.4 million in 2FQ18
“Our product portfolio is coming together really well as we double down on simplicity and reliability. On a trailing four quarter basis, Q2 saw a record 40% adoption of AHV, and 21% of deals included essentials and enterprise product offerings beyond the core,” said Dheeraj Pandey, chairman, founder. “We also saw growing momentum toward a recurring revenue model, delivering 57% of billings from subscriptions this quarter. And we are also pleased to announce the promotion of Chris Kaddaras to lead our sales organization in the Americas region in addition to his existing EMEA responsibilities.”
“We were pleased with our large deal activity and our progress in moving toward a subscription model,” said Duston Williams, CFO. “Looking ahead, our third quarter guidance reflects the impact of inadequate marketing spending for pipeline generation and slower than expected sales hiring. We took a critical look at these areas and have taken actions to address them.“
Recent company Highlights
• Expanded Customer Base: Nutanix ended 2FQ19 with 12,410 end-customers, adding 920 new end-customers during the quarter. Customer wins included Apache Corporation, GS Energy Corporation, Harris Corporation, IHG, Komatsu America Corp., and Nedbank.
• Continued Momentum in $1 Million+ Customers: Number of customers with at least $1 million in lifetime spend reached 779 during 2FQ19, growing 44% year-over-year. Six customers purchased at least $5 million of products and services during the quarter as they continued their datacenter modernization journey with Nutanix.
• Launched You Decide Campaign to Expand Brand Reach into Market: This new campaign promotes expanded customer choice in server vendor, hypervisor and cloud provider. It is designed to increase lead generation returns by highlighting the financial, operational and personal benefits of the company’s platform.
• Received 2018 Product of the Year for Nutanix Era: CRN honored Nutanix Era as the winner of the publication’s Hyperconverged Infrastructure category for its 2018 Product of the Year Awards. This award recognizes products and services that demonstrate best-in-breed technological innovation, financial opportunity for partners, and customer demand.
• Recognized by Forbes on its Just 100: Forbes recognized the company on its Just 100 list, which honors America’s best corporate citizens among the Russell 1000 based on positive employee treatment, customer treatment and job creation.
• Named a Leader in the Gartner Magic Quadrant for Hyperconverged Infrastructure: This placement for the second time in a row is validation of continued dominance in the market it pioneered and its vision to deliver a hybrid cloud experience so IT teams can seamlessly deliver applications across platforms.
For 3FQ19, the firm expects:
• Revenue between $290 million and $300 million;
• Billings between $360 million and $370 million;
• Non-GAAP gross margin between 75% and 76%;
• Non-GAAP operating expenses between $330 million and $340 million; and
• Non-GAAP net loss per share of approximately $0.60, using approximately 183 million weighted shares outstanding
Comments
Nutanix 2Q19 revenue surpasses estimates, being at the top end of company's guidance of $325 million to $335 million, finally growing 17% Y/Y.
It incurred loss of 23 cents per share, narrower than the Zacks Consensus Estimate of 25 cents. However, the figure was wider than the year-ago quarter's loss of 14 cents. Sales also beat the Zacks Consensus Estimate of $331 million.
This September, the company will be 10-year old, but never was profitable, accumulating deficit as high as $604 million since inception in September 2009
Software and support revenue was $297 million for the quarter, up 42% Y/Y and 6% from the prior quarter.
Continued shift to a recurring revenue model resulted in 57% of billings coming from subscription, up from 38% in the year ago period and 51% for the former quarter, and subscription revenue is up 112% Y/Y to $157 million.
Subscription revenue now account for 47% of total revenue. In 2Q19, $57 million in bookings were based on new term based subscription licensing methodology, up from $20 million in 1Q19 and almost 50% of the these $57 million came from existing customers who had previously purchased non-portable licenses. In the quarter, 500 customers purchased term based licenses and approximately 40% came from large enterprises.
The company said to remain on track to have recurring subscription business representing 70% to 75% of total billings in three to five quarters.
Customer growth
In the most recent quarter, software and support bookings from international regions were 49% of total software and support bookings, up from 46% one year ago. This international performance was driven by EMEA region recording 28% of total bookings. This region also had a record number of large deals greater than $1 million. But the firm was disappointed to miss its pipeline targets. Generally speaking, it said 2FQ19 was a quarter that should afford it to build backlog and that did not happen this year.
Globally, largest deal worth more than $5 million was recorded with an American for-profit operator for healthcare facilities. Over time, company's software now runs across its facilities and this customer has a lifetime spend of more than $20 million.
Nutanix had a record number of deals greater than $500,000 and a record number of deals greater than $5 million during the quarter. Deals greater than $500,000 averaged 1.2 million, up from 1 million in 2Q18. About one-third of total 2FQ18 bookings came from customers booking deals greater than $1 million and almost 20% of total large deals came from new customers.
For next fiscal quarter, the company is not optimistic with revenue down sequentially from 11% to 14%. According to CFO, this guidance reflects the impact of inadequate marketing spending for pipeline generation and slower than expected sales hiring but the company has taken actions to address them.
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