A month has gone by since the last earnings report for Nutanix (NTNX). Shares have lost about 3.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Nutanix's Q1 Earnings and Revenues Beat Estimates
Nutanix 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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Nutanix has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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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