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Why Is Nutanix (NTNX) Up 0.4% Since Last Earnings Report?

Zacks Equity Research
·5 mins read

A month has gone by since the last earnings report for Nutanix (NTNX). Shares have added about 0.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nutanix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Nutanix Surpasses Q4 Earnings & Revenue Estimates

Nutanix incurred fourth-quarter fiscal 2020 loss of 39 cents per share, beating the Zacks Consensus Estimate by 41.8%. Moreover, the figure was narrower than the year-ago quarter’s loss of 57 cents.

Revenues increased 9.3% year over year to $327.9 million and also beat the consensus mark by 2.1%.

Top-Line Details

Product revenues (54.6% of revenues) fell 3.9% year over year to $179.1 million. Support, entitlements & other services revenues (45.4% of revenues) surged 31.1% to $148.8 million.

Subscription revenues (86.9% of revenues) jumped 45.6% from the year-ago quarter to $284.8 million. Professional services revenues (3.7% of revenues) grew 34.8% to $12.2 million.

Non-Portable Software revenues (9% of revenues) plunged 64.1% year over year to $29.5 million. Moreover, hardware revenues (0.4% of revenues) plummeted 89.2% to $1.4 million.

Software and Support revenues were $326.5 million, up 14% year over year.

Billings were up 4.5% year over year to $388.5 million. Software and Support billings were $387.1 million, up 7.9% year over year.

Annual Contract Value billings were $139.9 million, up 13% year over year.

During the fiscal fourth quarter, the company added 780 new customers, bringing the total number of clients to 17,360. The company added 10 Global 2000 customers bringing the total count to 910. Global 2000 customers continued to be approximately 30% of Nutanix’s business.

Notable customer wins in the reported quarter included AIB Group, Cadence Design Systems, Dongfeng Renault, MayBank Singapore, QBE Insurance, and more.

Moreover, the company launched Nutanix Hybrid Cloud Infrastructure on Amazon Web Services (“AWS”), the cloud arm of Amazon.

Nutanix added several new capabilities to its Desktop-as-a-Service solution, Xi Frame, including enhanced onboarding for on-premises desktop workloads on Nutanix AHV. The company also expanded support for user-profile management and the ability to convert Windows Apps into Progressive Web Apps and increased regional support to 69 regions across Microsoft Azure, GCP and AWS.

The company also launched new solutions that allow IT teams to deploy, upgrade and troubleshoot their cloud infrastructure while working from anywhere. These solutions are delivered through Nutanix Foundation Central, Insights and Lifecycle Manager - all of which are available as part of Nutanix software at no additional cost to customers.

Operating Details

In the fiscal fourth quarter, Nutanix’s non-GAAP gross margin expanded 300 basis points (bps) year over year to 83%.

Sales & marketing, on a non-GAAP basis as percentage of revenues, declined 550 bps year over year to 70.1%. Research & development expenses as percentage of revenues fell 310 bps to 29.1%. Moreover, general & administrative expenses as percentage of revenues declined 90 bps to 6.2%.

Operating expenses on a non-GAAP basis as percentage of revenues declined 940 bps to 105.5%.

As a result, non-GAAP operating loss narrowed from $104.6 million to $73.6 million in the reported quarter.

Balance Sheet & Cash Flow

As of Jul 31, 2020, cash and cash equivalents plus short-term investments were $719.8 million compared with $732 million as of Apr 30, 2020.

Cash flow from operations was $3.6 million compared with the outflow of $163.5 million in the previous quarter.

Free-cash outflow was $13.8 million compared with the prior quarter’s $17.5 million.

Deferred revenues surged 30% year over year to $1.18 billion at the end of the reported quarter.

Debt Deal With Bain Capital

Nutanix announced that Bain Capital Private Equity has agreed to invest $750 million in convertible notes. The company plans to use the investment to support its growth initiatives.

Moreover, in connection with the investment, David Humphrey and Max de Groen, managing directors of Bain Capital, will join the Nutanix’s board of directors following the close of this transaction, which is expected to occur in late September.

Management Change

Nutanix also announced that Chairman and CEO Dheeraj Pandey plans to retire from the management team upon the selection and appointment of the next CEO.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.65% due to these changes.

VGM Scores

At this time, Nutanix has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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