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Nutanix's (NTNX) Q1 Earnings and Revenues Beat Estimates

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Nutanix (NTNX - Free Report) incurred first-quarter fiscal 2020 loss of 71 cents per share, narrower than the Zacks Consensus Estimate of a loss of 75 cents. However, the figure was wider than the year-ago quarter’s loss of 13 cents.

Revenues increased 0.5% year over year to $314.8 million and beat the consensus mark of $305 million. However, the company’s ongoing transition to a subscription-based model and decline in hardware revenues were an overhang on the top line.

Product revenues (61.1% of total revenues) fell 14.2% year over year to $192.4 million, primarily due to 63.7% decline in hardware revenues and 8.2% in software revenues.

Support, entitlements & other services revenues (38.9%) soared 37.6% to $122.3 million.

Nutanix Inc. Price, Consensus and EPS Surprise

Nutanix Inc. Price, Consensus and EPS Surprise

Nutanix Inc. price-consensus-eps-surprise-chart | Nutanix Inc. Quote

Quarterly Details

Subscription revenues (69%) jumped 72% from the year-ago quarter to $217.9 million. Professional Services revenues (3%) grew 33.3% to $9.6 million.

Non-Portable Software revenues (24.7%) plunged 47.1% year over year to $77.6 million. Moreover, hardware revenues (3.1%) were down 70.2% to $9.7 million.

Software and support revenues, also referred to as TCV (total contract value) revenues jumped 9% year over year to $305 million. Of the bookings, 65% was from America, 19% from EMEA and 16% from Asia Pacific and Japan.

Billings were down 0.9% year over year to $380 million. Software and Support billings were up 5% to $370.3 million.

Subscription billings accounted for 73% of total billings, up from 71% in the previous quarter.

During the quarter, Nutanix secured deals worth more than $500,000.

At the end of the quarter, Nutanix had 14,960 customers (including 840 Global 2000). The company added 780 customers in the reported quarter.

Nutanix now has almost 1000 customers, with a lifetime spend of more than $1 million.

The company’s hypervisor, AHV, experienced a 47% increase in adoption on a rolling four-quarter basis.

Notably, 97% of customers were retained during the quarter.   

Margin

In the fiscal first quarter, the company delivered a non-GAAP gross profit of $252.1 million, up 2.4% year over year. Non-GAAP gross margin expanded 150 basis points (bps) to 80.1%.

Operating expenses on a non-GAAP basis jumped 42% year over year to $386.3 million.

Operating loss on a non-GAAP basis widened to $134.2 million from a loss of $25.9 million.

Balance Sheet & Cash Flow

As of Oct 31, 2019, cash and cash equivalents plus short-term investments were $889 million compared with $934.3 million in the previous quarter.

Cash outflow from operations was $26.2 million compared with an outflow of $9.7 million in the previous quarter.

Free cash outflow was $44.4 million compared with an outflow of $33.3 million in the prior quarter.

Deferred revenues surged 39% year over year to $975.3 million at the end of the reported quarter.

Guidance

For the second quarter of fiscal 2020, TCV revenues are projected between $330 million and $335 million. Nutanix anticipates TCV billings of $410-$420 million.

Non-GAAP gross margin is anticipated to be around 80%. Moreover, management forecasts operating expenses of $400-$410 million.

Nutanix estimates non-GAAP loss per share to be 70 cents, in line with the Zacks Consensus Estimate.

For the full year of fiscal 2020, Nutanix expects TCV billings between $1.65 billion and $1.75 billion. Moreover, TCV revenues are anticipated to lie between $1.30 billion and $1.40 billion.

Non-GAAP gross margin of approximately 80%, and non-GAAP operating expenses between $1.65 billion and $1.70 billion are expected for the full fiscal year.

Zacks Rank and Stocks to Consider

Nutanix currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Alteryx, Inc. (AYX - Free Report) , Cirrus Logic, Inc. (CRUS - Free Report) and Fortinet, Inc. (FTNT - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Cirrus Logic and Fortinet is currently pegged at 39.85%, 15% and 14%, respectively.

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