A month has gone by since the last earnings report for Nutanix (NTNX). Shares have lost about 24.7% 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 catalysts.
Nutanix Reports Q2 Results
Nutanix incurred second-quarter fiscal 2019 loss of 23 cents per share, narrower than the Zacks Consensus Estimate of 25 cents. However, the figure was wider than the year-ago quarter’s loss of 14 cents.
Revenues increased 17% from the year-earlier quarter to $335.4 million and also beat the Zacks Consensus Estimate of $331 million. This top-line improvement can be attributed to large deal wins and a steady shift to a subscription-based business model. Strong performance in the EMEA region also contributed to this upside.
Product revenues climbed 6.14% year over year to $236.93 million. Support, entitlements & other services revenues soared 54.7% to $98.43 million.
Total software and support revenues surged 42% from the year-ago quarter to $280.7297 million.
Billings were up 16% year over year to $414 million. Software and Support billings rose 37% from the prior-year quarter to $375 million.
New customer bookings represented 25% of total bookings compared with 35% in the comparable quarter last year. Software related bookings from the company’s international regions were 49% of the total software and support bookings compared with 46% in the year-earlier quarter.
The bill to revenue ratio in the quarter under review was 1.23, higher than the year-ago ratio of 1.22.
During the quarter under consideration, Nutanix sealed several large deals on the back of its consistent execution in product, customer support and enterprise selling, which also led to a deeper penetration into existing customers. 57 deals worth more than $1 million and six deals worth above $5 million were signed.
Nutanix now has 17 customers with a lifetime spend of more than $15 million and about 800 customers with a lifetime investment exceeding $1 million.
Subscription revenues were up 112% year over year to $157 million as a result of a continued shift of the business model.
In the reported quarter, the company’s database service offering, Era, was named the Product of the Year by Salesforce.
The company continued to witness a strong adoption of its products including a worthy $5-million plus deal with the U.S. Department of Defense.
Notably, a $5-million deal was also inked in the fiscal second quarter between Nutanix and a major American for-profit operator for healthcare facilities. This win expands the existing customer deployment to bring a new workload, Splunk, on to the Nutanix platform.
Moreover, during the quarter under discussion, a $1-million deal was snapped up with a large Italy-based, Global 500 insurance company.
Nutanix also struck a major deal with a British multinational contract-based food service company. This Global 1000 company will use Nutanix’s Xi IoT solution to power a machine-learning driven computer vision project.
In the fiscal second quarter, the company delivered non-GAAP gross profit of $257.5 million, up from $182.2 million year over year. Non-GAAP gross margin of 76.8% was higher than 63.5% of the same in the year-ago quarter.
Operating loss, however, widened to $39 million from a loss of $20.2 million in the year-ago period.
Balance Sheet & Cash Flow
As of Jan 31, 2019, cash and cash equivalents plus short-term investments were $966 million, slightly up from $965 million in the preceding quarter.
Cash flow from operations was $46.4 million compared with $49.8 million in the previous quarter.
Free cash flow was $32.4 million compared with a flow of $20 million in the prior quarter.
Deferred revenues jumped 63% year over year to $780 million in second-quarter fiscal 2019.
For the third quarter of fiscal 2019, revenues are projected between $290 million and $300 million. The Zacks Consensus Estimate for revenues is pegged at $347.3 million.
Nutanix anticipates billings to be in the range of $360-$370 million.
Non-GAAP gross margin is predicted between 75% and 76%. Moreover, management forecasts operating expenses in the $330-$340 million band.
Nutanix estimates non-GAAP loss per share to be 60 cents, wider than the Zacks Consensus Estimate of a loss of 28 cents.
Nutanix expects a significant impact on third-quarter fiscal 2019 results from imbalance and lead generation spending coupled with a slower-than-expected sales hiring.
The company remains positive about its transition to software-based revenues as the same is likely to expand its margins significantly, going forward.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -59.87% due to these changes.
Currently, Nutanix has a nice Growth Score of B, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Nutanix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Nutanix Inc. (NTNX) : Free Stock Analysis Report
To read this article on Zacks.com click here.