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Nutanix (NTNX) Q4 Earnings and Revenues Surpass Estimates

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Nutanix Inc. (NTNX - Free Report) reported fourth-quarter fiscal 2018 loss of 11 cents per share, which was narrower than the Zacks Consensus Estimate of 22 cents as well as the year-ago quarter’s loss of 17 cents.

Revenues increased 20% from the year-ago quarter to $303.7 million and surpassed the Zacks Consensus Estimate of $298 million. The increase can be attributed to growth in Software and support business.

Nutanix reported revenues of $289.4 million in fiscal 2018, which increased 37% year over year. Software and support revenues grew 47% while software and support billings increased 54% in fiscal 2018.

Nutanix Inc. Price, Consensus and EPS Surprise

Nutanix Inc. Price, Consensus and EPS Surprise | Nutanix Inc. Quote

Quarter Details

Product revenues climbed 11% year over year to $224.7 million. Support & other services revenues surged 55% to $79.1 million.

Total software and support revenues grew 49% from the year-ago quarter to $267.9 million.

Billings were up 37% year over year to $395.1 million. Software and Support billings surged 66% from the year-ago quarter to $359.2 million.

The bill to revenue ratio in the quarter was 1.3, exceeding the company’s previous estimate of approximately 1.25.

Nutanix added 1,000 customers, taking total end-customer count to 10,610 at the end of the reported quarter.

Nitanix added 46 deals worth more than $1 million in the quarter, out of which nine were more than $3 million and two were worth more than $5 million. The company also made the largest deal in its history worth more than $20 million in the quarter.

The U.S. federal business was also strong this quarter, contributing five deals worth more than $1 million.

New customer bookings represented 30% of total bookings. Software related bookings from the company’s international regions were 40% of total software and support bookings compared with 38% in the year-ago quarter.

Margin

In the fourth quarter, the company reported non-GAAP gross margin of 77.7% compared with 62.6% in the year-ago quarter.

Research & Development (R&D) expenses, as percentage of revenues, increased 440 basis points (bps) to 23.6%. Sales & Marketing (S&M) expenses grew 660 bps to 54.5% and general & administrative (G&A) expenses rose 120 bps to 6.1%.

Operating loss narrowed to $19.7 million from a loss of $23.9 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Jul 31, 2018, cash and cash equivalents and short-term investments were $934.3 million, up from $923 million reported in the previous quarter.

Cash flow from operations was $22.7 million compared with $13.3 million in the previous quarter.

Free cash flow was $6.5 million compared with an outflow of $0.8 million in the previous quarter.

Deferred revenues surged 71% to $631.2 million in fourth-quarter 2018.

Guidance

For the first quarter of fiscal 2019, revenues are projected between $295 million and $310 million.

Nutanix anticipates billings to be in the range of $370 to $390 million.

Non-GAAP gross margin is projected between 78% and 79%. Moreover, management forecasts operating expenses to be in the range of $280-$290 million.

Nutanix forecasts non-GAAP net loss per share between 26 cents and 28 cents for the quarter. The company's estimated loss for the first quarter is wider than the Zacks Consensus Estimate and this does not bode well.

The company expects to increase spending significantly in fiscal 2019. Management intends to spend more on core products as well as on its expanding product portfolio, which includes Xi, Beam, Epoch, Era, Flow, Sherlock and Frame, its newest offering.

Zacks Rank & Stocks to Consider

Nutanix currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Computer and Technology sector are Microsoft (MSFT - Free Report) , Qualys, Inc. (QLYS - Free Report) and Fortinet, Inc. (FTNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Microsoft, Qualys and Fortinet is projected to be 12.3%, 8% and 16.8%, respectively.

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