Nutanix: Fiscal 4Q19 Financial Results

Nutanix, Inc. announced financial results for its fourth quarter and fiscal year ended July 31, 2019.

4FQ19 Financial Highlights
• Revenue: $299.9 million, down from $303.7 million in 4FQ18, reflecting the reduction of pass-thru hardware from $35.9 million in 4FQ18 to $13.0 million in 4FQ19, and the revenue compression from the company’s ongoing transition to subscription
• Billings: $371.7 million, down from $395.1 million in 4FQ18, reflecting the reduction of pass-thru hardware from $35.9 million in 4FQ18 to $13.0 million in 4FQ19, and the billings compression from the company’s ongoing transition to subscription
• Software and Support Revenue: $286.9 million, up 7% Y/Y from $267.9 million in 4FQ18, reflecting the revenue compression from the company’s ongoing transition to subscription
• Software and Support Billings: $358.7 million, down slightly Y/Y from $359.2 million in 4FQ18, reflecting the billings compression from the company’s ongoing transition to subscription
• Gross Margin: GAAP gross margin of 77.0%, up from 75.9% in 4FQ18; Non-GAAP gross margin of 80.0%, up from 77.7% in 4FQ18
• Net Loss: GAAP net loss of $194.3 million, compared to a GAAP net loss of $87.4 million in 4FQ18; Non-GAAP net loss of $105.8 million, compared to a non-GAAP net loss of $19.0 million in 4FQ18
• Net Loss Per Share: GAAP net loss per share of $1.04, compared to a GAAP net loss per share of $0.51 in 4FQ18; Non-GAAP net loss per share of $0.57, compared to a non-GAAP net loss per share of $0.11 in 4FQ18
• Cash and Short-term Investments: $908.8 million, down from $934.3 million in 4FQ18
• Deferred Revenue: $910.0 million, up 44% from 4FQ18
• Operating Cash Flow: Use of $9.7 million, compared to generation of $22.7 million in 4FQ18
• Free Cash Flow: Use of $33.3 million, compared to generation of $6.5 million in 4FQ18

FY19 Financial Highlights
• Revenue: $1.24 billion, up from $1.16 billion in FY18, reflecting the reduction of pass-thru hardware from $257.3 million in fiscal 2018 to $105.3 million in FY19, and the revenue compression from the company’s ongoing transition to subscription
• Billings: $1.51 billion, up from $1.42 billion in FY18, reflecting the reduction of pass-thru hardware from $257.3 million in fiscal 2018 to $105.3 million in FY19, and the billings compression from the company’s ongoing transition to subscription
• Software and Support Revenue: $1.13 billion, up 26% Y/Y from $898.1 million in FY18, reflecting the revenue compression from the company’s ongoing transition to subscription
• Software and Support Billings: $1.41 billion, up 21% Y/Y from $1.16 billion in FY18, reflecting the billings compression from the company’s ongoing transition to subscription
• Gross Margin: GAAP gross margin of 75.4%, up from 66.6% in FY18; Non-GAAP gross margin of 78.1%, up from 68.1% in FY18
• Net Loss: GAAP net loss of $621.2 million, compared to a GAAP net loss of $297.2 million in FY18; Non-GAAP net loss of $272.9 million, compared to a non-GAAP net loss of $101.5 million in FY18
• Net Loss Per Share: GAAP net loss per share of $3.43, compared to a GAAP net loss per share of $1.81 in fiscal 2018; Non-GAAP net loss per share of $1.51, compared to a non-GAAP net loss per share of $0.62 in FY18
• Operating Cash Flow: Generation of $42.2 million, compared to generation of $92.5 million in FY18
• Free Cash Flow: Use of $76.3 million, compared to generation of $30.2 million in FY18

“We delivered a solid fourth quarter and believe our performance reflects our execution improvements and the meaningful progress we have made transitioning our business to a subscription model,” said Dheeraj Pandey, chairman, founder and CEO. “We are encouraged by our record gross margins, strengthening pipeline, progress in sales hiring, and recent large customer wins. We have a strong set of tenured sales leaders in place and continue to lead the industry as an innovator with technology at the forefront of hybrid cloud transformation.”

“We are pleased by our Q4 results, and that the actions we have taken to strengthen lead generation and enhance sales execution are generating positive results. Our subscription transition continues to be ahead of schedule with subscriptions growing from 52% of total billings in the 4FQ18 to 71% in 4FQ19,” said Duston Williams, CFO. “In addition, 26%1 of our deals included a product outside our core offering, as new and existing customers increasingly look to Nutanix to guide them on their journey to hybrid cloud.”

Recent company Highlights
• Continued Accelerated Shift to Subscription Recurring Revenue Model: 4FQ19 subscription billings increased to 71% of total billings, up 6% points from 3FQ19, and subscription revenue reached $195.6 million in 4FQ19, representing 65% of total revenue.
• Expanded Customer Base: Nutanix ended 4FQ19 with 14,180 end-customers, adding 990 new customers in the quarter, including 31 from the Global 2000. 4FQ19 customer wins included Boardriders, Inc., Daiwa Institute of Research Ltd., Freeport-McMoRan, ICICI Bank, ING Bank Australia Limited, Johns Hopkins University Applied Physics Laboratory, and Noble Energy, Inc.
• Availability of DX Platform with HPE: Shortly after the close of 4FQ19, the HPE Proliant DX platform, based on Nutanix software, became available to customers.
• Appointed New Sales Leader in EMEA: Promoted longtime Nutanix sales leader Sammy Zoghlami to SVP sales in the EMEA Region.
• Continued AHV Penetration: The company saw the number of NX nodes sold utilizing AHV grow to 47%, up from 35% as of 4FQ18.
• Nutanix Xi Government Cloud Listed as FedRAMP In Process on FedRAMP Marketplace: The company achieved new In Process designation for its Xi Government Cloud solutions, a step toward a full FedRAMP Moderate Authorization, which will enable federal government agencies to take advantage of our Xi Government Cloud solutions.
• Certified as Great Place To Work: The firm was certified as a Great Place to Work in 2019 by a Great Place to Work Institute survey of US-based employees. 87% of those surveyed highlighted the company as a great place to work, with more than 90% noting that when employees join Nutanix, they are made to feel welcome by the culture.

For 1FQ20, Nutanix expects:
• Software and support revenue between $290 million and $300 million;
• Software and support billings between $360 million and $370 million;
• Total hardware to be 3% or less of total billings;
• Non-GAAP gross margin of approximately 80%;
• Non-GAAP operating expenses between $385 million and $390 million; and
• Non-GAAP net loss per share of approximately $0.75, using approximately 190 million weighted shares outstanding.