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Nutanix (NTNX) Down 29.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Nutanix (NTNX - Free Report) . Shares have lost about 29.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Nutanix due for a breakout? 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 drivers.

Nutanix Reports Q4 Results

Nutanix 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.

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 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.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Nutanix has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Nutanix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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