Nutanix (NTNX) Rises 12% on Q4 Earnings Beat, Strong Guidance
Nutanix NTNX shares rose 12.2% to close at $34.90 during Friday’s extended trading session after the company reported better-than-expected earnings and revenues for the fiscal fourth quarter of 2023 and issued strong sales guidance for fiscal 2024.
The cloud-computing network management software maker reported non-GAAP fourth-quarter fiscal 2023 earnings of 24 cents per share, surpassing the Zacks Consensus Estimate of 15 cents per share. The company had delivered an adjusted loss per share of 17 cents in the year-ago quarter.
Nutanix’s revenues climbed 28% year over year to $494.2 million, beating the Zacks Consensus Estimate of $476 million and the guided range of $470-$480 million.
The top line was primarily driven by growth in NTNX’s core hyper-converged 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.
NTNX noted that the average contract term length declined to 3 years from 3.2 years in the year-ago quarter, primarily due to higher federal businesses that usually have shorter contract term lengths.
During the fiscal fourth quarter, Nutanix’s Annual Contract Value (ACV) billings jumped 44% to $278.7 million.
Nutanix Price, Consensus and EPS Surprise
Nutanix price-consensus-eps-surprise-chart | Nutanix Quote
Top-Line Details
Product revenues (48.7% of revenues) increased 42.5% year over year to $240.5 million. Support, entitlements & other services revenues (51.3% of revenues) grew 17% to $253.7 million.
Subscription revenues (93% of revenues) climbed 31% from the year-ago quarter’s figure to $459.4 million. However, professional services revenues (4.9% of revenues) improved 3.9% to $24.02 million.
Non-Portable Software revenues (2.1% of revenues) decreased 9.3% year over year to $10.3 million. Hardware revenues (0.1% of revenues) increased 3.2% to $351K.
Billings were up 36.9% year over year to $544.8 million. Annual recurring revenues climbed 29.9% to $1.56 billion.
During the fiscal fourth quarter, Nutanix added 500 customers, taking the total number of clients to 24,550.
Operating Details
During the fiscal fourth quarter, Nutanix’s non-GAAP gross margin expanded 320 basis points year over year to 85.8%.
Non-GAAP operating expenses increased 1% year over year to $360.6 million.
Non-GAAP operating income came in at $63.6 million against the year-ago quarter’s loss of $37.8 million.
Balance Sheet & Cash Flow
As of Jul 31, 2023, cash and cash equivalents plus short-term investments were $1.32 billion, down from $1.36 billion at the end of third-quarter fiscal 2023.
During the fourth quarter of fiscal 2023, cash generated through operating activities was $58.3 million and free cash flow was $45.5 million.
Outlook
For the first quarter of fiscal 2024, Nutanix expects ACV billings between $260 million and $270 million. Revenues are estimated between $495 million and $505 million.
Non-GAAP gross margin is estimated to be 84%. Non-GAAP operating margin is expected in the band of 9-11%.
For fiscal 2024, NTNX expects ACV billings between $1.075 billion and $1.095 billion. Revenues are estimated in the range of $2.085-$2.115 billion.
Non-GAAP gross margin is estimated to be 84% for fiscal 2023. Non-GAAP operating margin is projected in the range of 11-12%.
Zacks Rank & Key Picks
Nutanix carries a Zacks Rank #3 (Hold) at present. Shares of NTNX have gained 34% in the year-to-date period.
Some better-ranked stocks from the broader Computer and Technology sector are Asure Software ASUR, Applied Materials AMAT and Adobe ADBE. While Asure Software and Applied Materials sport a Zacks Rank #1 (Strong Buy) each, Adobe carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Asure Software have gained 35% in the year-to-date period. ASUR’s long-term earnings growth rate is currently projected at 27%.
Shares of Applied Materials have climbed 58.1% in the year-to-date period. The long-term earnings growth rate for AMAT is currently projected at 6.1%
Adobe shares have rallied 67.4% in the year-to-date period. ADBE’s long-term earnings growth rate is currently projected at 13.27%.
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