It has been about a month since the last earnings report for Nutanix (
NTNX Quick Quote NTNX - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nutanix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Nutanix Q2 Loss Narrower Than Estimated, Revenues Beat
Nutanix reported a non-GAAP second-quarter fiscal 2022 loss of 3 cents per share, significantly narrower than the Zacks Consensus Estimate of a loss of 21 cents. The figure was narrower than the year-ago quarter’s loss of 37 cents per share.
Nutanix reported revenues of $413.1 million, beating the Zacks Consensus Estimate of $407.8 million. The top line improved 19% from the year-earlier quarter’s figure of $346.4 million. NTNX noted that the average contract term length declined to 3.1 year from 3.4 years in the year-ago quarter, primarily due to higher federal business, which usually have shorter contract term length.
During the fiscal second quarter, Nutanix’s Annual Contract Value (ACV) billings jumped 37% to $217.9 million.
Product revenues (50.6% of revenues) increased 19.7% year over year to $209.2 million. Support, entitlements & other services revenues (49.4% of revenues) grew 18.9% to $203.9 million.
The top line was primarily driven by growth in NTNX’s core hyperconverged infrastructure software and the solid adoption of its new capabilities. Nutanix continues to witness a strong adoption of its hybrid multi-cloud solutions across Fortune 100 and Global 2000 companies.
Subscription revenues (90.7% of revenues) rose 22.5% from the year-ago quarter’s figure to $374.7 million. Professional services revenues (5.3% of revenues) jumped 26.3% to $22.1 million.
Non-Portable Software revenues (3.5% of revenues) plunged 33.2% year over year to $14.5 million. Hardware revenues (0.5% of revenues) increased 38.5% to $1.8 million.
Billings were up 20.5% year over year to $464.5 million. Nutanix’s run-rate ACV grew 21% year over year to $1.68 billion. Annual Recurring Revenue (ARR) climbed 55% to $1.04 billion.
During the fiscal second quarter, Nutanix added 700 customers, bringing the total number of clients to 21,400.
During the fiscal second quarter, Nutanix’s non-GAAP gross margin expanded 110 basis points (bps) year over year to 83.8%.
Non-GAAP operating expenses decreased 2% year over year to $347.3 million.
Balance Sheet & Cash Flow
As of Jan 31, 2022, cash and cash equivalents plus short-term investments were $1.29 billion, up from $1.28 billion at the end of first-quarter fiscal 2022.
During the second quarter of fiscal 2022, cash generated through operating activities was $25.8 million and free cash flow was $17.2 million. During the first six months of fiscal 2022, Nutanix generated $32.7 million of cash from operating activities and a free cash flow of $15.3 million.
For third-quarter fiscal 2022, Nutanix expects ACV billings between $195 million and $200 million. Revenues are estimated between $395 million and $400 million.
Non-GAAP gross margin is estimated to be approximately 82%. Non-GAAP operating expenses are expected in the range of $365-$370 million.
Nutanix raised guidance for the full fiscal. NTNX now expects ACV billings between $760 million and $765 million compared with the previously guided range of $740-$750 million. Revenues are now estimated in the range of $1.625-$1.630 billion compared with the prior range of $1.62-$1.63 billion.
Non-GAAP gross margin is now estimated to be 82.5% compared with the earlier guidance of 82%. Non-GAAP operating expenses are now projected in the range of $1.465-$1.470 billion compared with the previous estimate of $1.48-$1.49 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 16.08% due to these changes.
Currently, Nutanix has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nutanix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.