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Nutanix (NTNX) Down 5.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·3 mins read

It has been about a month since the last earnings report for Nutanix (NTNX). Shares have lost about 5.2% 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's Earnings and Revenues Beat Estimates in Q3

Nutanix incurred third-quarter fiscal 2020 loss of 69 cents per share, beating the Zacks Consensus Estimate by 18.8%. However, the figure was wider than the year-ago loss of 56 cents.

Revenues increased 11% year over year to $318.3 million and also beat the consensus mark by 1.1%.

Product revenues (57% of revenues) fell 2.2% year over year to $180.8 million, primarily due to an 82.7% slump in hardware revenues, partially offset by 8.6% growth in software revenues.

Support, entitlements & other services revenues (43% of revenues) surged 33.7% to $137.5 million.

Total Contract Value (TCV) revenues increased 18.3% year over year to $314.5 million.

Top Line Details

Subscription revenues (82% of revenues) jumped 54.9% from the year-ago quarter to $261 million. Professional services revenues (3.6% of revenues) grew 34.9% to $11.6 million.

Non-Portable Software revenues (13.2% of revenues) plunged 52.8% year over year to $41.9 million. Moreover, hardware revenues (1.2% of revenues) plummeted 82.7% to $3.8 million.

Billings were up 10.8% year over year to $383.5 million. Software and Support billings were $379.7 million, up 17.1% year over year.

During the fiscal third quarter, the company added 700 new customers, bringing the total client numbers to 16,580.

Operating Details

In the fiscal third quarter, the company’s non-GAAP gross profit of $257 million was up 15.9% year over year. Non-GAAP gross margin was 80.7%, up from the 77.1% reported in the year-ago quarter.

Operating expenses on a non-GAAP basis flared up 19.5% year over year to $390.3 million.

Operating loss on a non-GAAP basis widened to $133.3 million from the year-ago quarter’s $104.8-million loss.

Balance Sheet & Cash Flow

As of Apr 30, 2020, cash and cash equivalents plus short-term investments were $732 million compared with $819 million as of Jan 31, 2020.

Cash outflow from operations was $163.5 million compared with the outflow of $52.5 million witnessed in the previous quarter.

Free cash outflow was $117.5 million compared with the prior quarter’s $73.7 million.

Deferred revenues surged 34% year over year to $1.12 billion at the end of the reported quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -5.88% due to these changes.

VGM Scores

Currently, Nutanix has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth 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 downward for the stock, and the magnitude of these revisions has been net zero. Notably, Nutanix has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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