Nutanix Reports Second Quarter Fiscal 2019 Financial Results

–Continued Shift to Recurring Revenue Model with 57% of Billings
from Subscriptions

–Subscription Revenue Up 112% YoY to $157 Million

–21% of Deals Include Offerings Beyond Core HCI1

–Record AHV adoption of 40%1

SAN JOSE, Calif.–(BUSINESS WIRE)–Nutanix,
Inc.
(NASDAQ: NTNX),
a leader in enterprise cloud computing, today announced financial
results
for its second quarter of fiscal 2019, ended January 31,
2019.

Q2 Fiscal 2019 Financial Highlights

  • Revenue: $335.4 million (at 76.8% non-GAAP gross margin), up
    from $286.7 million (at 63.5% non-GAAP gross margin) in the second
    quarter of fiscal 2018
  • Billings: $413.4 million, up from $355.9 million in the second
    quarter of fiscal 2018
  • Software and Support Revenue: $297.4 million, growing 42%
    year-over-year from $208.7 million in the second quarter of fiscal 2018
  • Software and Support Billings: $375.5 million, growing 37%
    year-over-year from $274.5 million in the second quarter of fiscal 2018
  • Gross Margin: GAAP gross margin of 74.4%, up from 62.2% in the
    second quarter of fiscal 2018; Non-GAAP gross margin of 76.8%, up from
    63.5% in the second quarter of fiscal 2018
  • Net Loss: GAAP net loss of $122.8 million, compared to a GAAP
    net loss of $62.6 million in the second quarter of fiscal 2018;
    Non-GAAP net loss of $40.4 million, compared to a non-GAAP net loss of
    $23.2 million in the second quarter of fiscal 2018
  • Net Loss Per Share: GAAP net loss per share of $0.68, compared
    to a GAAP net loss per share of $0.39 in the second quarter of fiscal
    2018; Non-GAAP net loss per share of $0.23, compared to a non-GAAP net
    loss per share of $0.14 in the second quarter of fiscal 2018
  • Cash and Short-term Investments: $965.9 million, up from $918.3
    million in the second quarter of fiscal 2018
  • Deferred Revenue: $779.9 million, up 63% from the second
    quarter of fiscal 2018
  • Operating Cash Flow: $38.5 million, compared to $46.4 million
    in the second quarter of fiscal 2018
  • Free Cash Flow: Use of $4.1 million, compared to the generation
    of $32.4 million in the second quarter of fiscal 2018

Reconciliations between GAAP and non-GAAP financial measures and key
performance measures are provided in the tables of this press release.

Our product portfolio is coming together really well as we double down
on simplicity and reliability. On a trailing four quarter basis, Q2 saw
a record 40 percent adoption of AHV, and 21 percent of deals included
Essentials and Enterprise product offerings beyond the Core,” said
Dheeraj Pandey, Chairman, Founder and CEO of Nutanix. “We also saw
growing momentum toward a recurring revenue model, delivering 57 percent
of billings from subscriptions this quarter. And we are also pleased to
announce the promotion of Chris Kaddaras to lead our sales organization
in the Americas region in addition to his existing EMEA
responsibilities.”

We were pleased with our large deal activity and our progress in moving
toward a subscription model,” said Duston Williams, CFO of Nutanix.
Looking ahead, our third quarter guidance reflects the impact of
inadequate marketing spending for pipeline generation and slower than
expected sales hiring. We took a critical look at these areas and have
taken actions to address them.”

Recent Company Highlights

  • Expanded Customer Base: Nutanix ended Q2 FY’19 with 12,410
    end-customers, adding 920 new end-customers during the quarter.
    Customer wins included Apache Corporation, GS Energy Corporation,
    Harris Corporation, IHG, Komatsu America Corp., and Nedbank.
  • Continued Momentum in $1 Million+ Customers: Our number of
    customers with at least $1 million in lifetime spend reached 779
    during Q2 FY’19, growing 44% year-over-year. Six customers purchased
    at least $5 million of products and services during the quarter as
    they continued their datacenter modernization journey with Nutanix.
  • Launched “You Decide” Campaign to Expand Brand Reach into Market: This
    new campaign promotes expanded customer choice in server vendor,
    hypervisor and cloud provider. It is designed to increase lead
    generation returns by highlighting the financial, operational and
    personal benefits of the Nutanix platform.
  • Received 2018 Product of the Year for Nutanix Era: CRN honored
    Nutanix Era as the winner of the publication’s Hyperconverged
    Infrastructure category for its 2018 Product of the Year Awards. This
    award recognizes products and services that demonstrate best-in-breed
    technological innovation, financial opportunity for partners, and
    customer demand.
  • Recognized by Forbes on its Just 100: Forbes recognized Nutanix
    on its Just 100 list, which honors America’s best corporate citizens
    among the Russell 1000 based on positive employee treatment, customer
    treatment and job creation.
  • Named a Leader in the Gartner Magic Quadrant for Hyperconverged
    Infrastructure
    2: Nutanix believes its
    placement as a Leader for the second time in a row is strong
    validation of its continued dominance in the market it pioneered and
    its vision to deliver a true hybrid cloud experience so IT teams can
    seamlessly deliver applications across platforms.

Q3 Fiscal 2019 Financial Outlook

For the third quarter of fiscal 2019, Nutanix expects:

  • Revenue between $290 million and $300 million;
  • Billings between $360 million and $370 million;
  • Non-GAAP gross margin between 75% and 76%;
  • Non-GAAP operating expenses between $330 million and $340 million; and
  • Non-GAAP net loss per share of approximately $0.60, using
    approximately 183 million weighted shares outstanding

1Based on a trailing four-quarter average.

2The Gartner reference(s) described herein, (the “Gartner
Reference(s)”) represent(s) research opinion or viewpoints published, as
part of a syndicated subscription service, by Gartner, Inc. (“Gartner”),
and are not representations of fact. Each Gartner Reference speaks as of
its original publication date (and not as of the date of this press
release) and the opinions expressed in the Gartner Reference(s) are
subject to change without notice. Gartner does not endorse any vendor,
product or service depicted in its research publications, and does not
advise technology users to select only those vendors with the highest
ratings or other designation. Gartner research publications consist of
the opinions of Gartner’s research organization and should not be
construed as statements of fact. Gartner disclaims all warranties,
expressed or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose.

Supplementary materials to this earnings release, including the
company’s second quarter fiscal 2019 investor presentation, can be found
at https://ir.nutanix.com/company/financial.

All forward-looking non-GAAP financial measures contained in the section
titled “Q3 Fiscal 2019 Financial Outlook” exclude stock-based
compensation expense and amortization of intangible assets and may also
exclude, as applicable, other special items. The company has not
reconciled guidance for billings, non-GAAP gross margin, non-GAAP
operating expenses and non-GAAP loss per share to their most directly
comparable GAAP measures because such items that impact these measures
are not within its control and are subject to constant change. While the
actual amounts of such items will have a significant impact on the
company’s billings, non-GAAP gross margin, non-GAAP operating expenses
and non-GAAP loss per share, a reconciliation of the non-GAAP financial
measure guidance to the corresponding GAAP measures is not available
without unreasonable effort.

Webcast and Conference Call Information

Nutanix executives will discuss the company’s second quarter fiscal 2019
financial results on a conference call at 4:30 p.m. Eastern Time/1:30
p.m. Pacific Time today. To listen to the call via telephone, dial
1-833-227-5841 in the United States or 1-647-689-4068 from outside the
United States. The conference ID is 6887822. This call will be webcast
live and available to all interested parties on our Investor Relations
website at ir.nutanix.com.
Shortly after the conclusion of the conference call, a replay of the
audio webcast will be available on the Nutanix Investor Relations
website. A telephonic replay will be available for one week by calling
1-800-585-8367 or 1-416-621-4642, and entering the conference ID 6887822.

Non-GAAP Financial Measures and Other Key Performance Measures

To supplement our condensed consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the following
non-GAAP financial and other key performance measures: billings,
non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net loss,
non-GAAP net loss per share, free cash flow, software and support
revenue, software and support billings, and subscription and
professional services billings. In computing these non-GAAP financial
measures and key performance measures, we exclude certain items such as
stock-based compensation and the related income tax impact, costs
associated with our acquisitions (such as amortization of acquired
intangible assets, revaluation of contingent consideration, income
tax-related impact, and other acquisition-related costs), amortization
of debt discount and issuance costs, other non-recurring transactions
and the related tax impact, and the revenue and billings associated with
pass-through hardware sales. Billings is a performance measure which our
management believes provides useful information to investors because it
represents the amounts under binding purchase orders received by us
during a given period that have been billed, and we calculate billings
by adding the change in deferred revenue between the start and end of
the period to total revenue recognized in the same period. Free cash
flow is a performance measure that our management believes provides
useful information to management and investors about the amount of cash
generated by the business after necessary capital expenditures, and we
define free cash flow as net cash (used in) provided by operating
activities less purchases of property and equipment. Non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP net loss, and non-GAAP net
loss per share are financial measures which our management believes
provide useful information to investors because they provide meaningful
supplemental information regarding our performance and liquidity by
excluding certain expenses and expenditures such as stock-based
compensation expense that may not be indicative of our ongoing core
business operating results. Software and support revenue and software
and support billings are performance measures that our management
believes provide useful information to our management and investors as
it allows us to better track the true growth of our software business by
excluding the amounts attributable to the pass-through hardware sales
that we use to deliver our solutions. Subscription and professional
services billings are performance measures that our management believes
provide useful information to our management and investors as it allows
us to better track the growth of the subscription-based portion of our
business, which is a critical part of our business plan. We use these
non-GAAP financial and key performance measures for financial and
operational decision-making and as a means to evaluate period-to-period
comparisons. However, these non-GAAP financial and key performance
measures have limitations as analytical tools and you should not
consider them in isolation or as substitutes for analysis of our results
as reported under GAAP. Billings, non-GAAP gross margin, non-GAAP
operating expenses, non-GAAP net loss, non-GAAP net loss per share, and
free cash flow are not substitutes for total revenue, gross margin,
operating expenses, net loss, net loss per share, or net cash (used in)
provided by operating activities, respectively, software and support
revenue and software and support billings are not substitutes for total
revenue, and subscription and professional services billings are not a
substitute for subscription and professional services revenue. In
addition, other companies, including companies in our industry, may
calculate non-GAAP financial measures and key performance measures
differently or may use other measures to evaluate their performance, all
of which could reduce the usefulness of our non-GAAP financial measures
and key performance measures as tools for comparison. We urge you to
review the reconciliation of our non-GAAP financial measures and key
performance measures to the most directly comparable GAAP financial
measures included below in the tables captioned “Reconciliation of
Revenue to Billings,” “Disaggregation of Revenue and Billings,”
Reconciliation of Subscription and Professional Services Revenue to
Subscription and Professional Services Billings,” “Reconciliation of
Software and Support Revenue to Software and Support Billings,”
Reconciliation of GAAP to Non-GAAP Profit Measures,” and
Reconciliation of GAAP Net Cash Provided By Operating Activities to
Non-GAAP Free Cash Flow,” and not to rely on any single financial
measure to evaluate our business.

Forward-Looking Statements

This press release contains express and implied forward-looking
statements, including, but not limited to, statements regarding our
business plans and objectives, the benefits and capabilities of our
platform, products, services and technology, our continued investment in
talent, technology, and marketing, our plans and timing for, and the
success and impact of, our transition to a subscription-based and
recurring revenue business model, any impact of the actions we have
undertaken to address inadequate marketing spending for pipeline
generation and slower than expected sales hiring, and anticipated future
financial results, including but not limited to our guidance on
estimated revenues, billings, non-GAAP gross margin, non-GAAP operating
expenses and non-GAAP net loss per share for future fiscal periods.
These forward-looking statements are not historical facts and instead
are based on our current expectations, estimates, opinions, and beliefs.
Consequently, you should not rely on these forward-looking statements.
The accuracy of such forward-looking statements depends upon future
events and involves risks, uncertainties, and other factors beyond our
control that may cause these statements to be inaccurate and cause our
actual results, performance or achievements to differ materially and
adversely from those anticipated or implied by such statements,
including, among others: failure to develop, or unexpected difficulties
or delays in developing, new products, services, product features or
technology in a timely or cost-effective basis; delays in or lack of
customer or market acceptance of our new products, services, product
features or technology; delays in the transition to focus primarily on
software-only transactions and a subscription-based and recurring
revenue business model; failure of the actions we have undertaken to
address inadequate marketing spending for pipeline generation and slower
than expected sales hiring to yield the results we expect; the rapid
evolution of the markets in which we compete; our ability to sustain or
manage future growth effectively; factors that could result in the
significant fluctuation of our future quarterly operating results,
including, among other things, anticipated changes to our revenue and
product mix which will slow revenue growth during such transition and
make forecasting future performance more difficult, the timing and
magnitude of orders, shipments and acceptance of our solutions in any
given quarter, our ability to attract new and retain existing
end-customers, changes in the pricing of certain components of our
solutions, and fluctuations in demand and competitive pricing pressures
for our solutions; the introduction, or acceleration of adoption of,
competing solutions, including public cloud infrastructure; and other
risks detailed in our quarterly report on Form 10-Q for the fiscal
quarter ended October 31, 2018, filed with the SEC on December 10, 2018.
Additional information will also be set forth in our Form 10-Q that will
be filed for the quarter ended January 31, 2019, which should be read in
conjunction with these financial results. Our SEC filings are available
on the Investor Relations section of the company’s website at ir.nutanix.com
and on the SEC’s website at www.sec.gov.
These forward-looking statements speak only as of the date of this press
release and, except as required by law, we assume no obligation to
update forward-looking statements to reflect actual results or
subsequent events or circumstances.

About Nutanix

Nutanix is a global leader in cloud software and hyperconverged
infrastructure solutions, making infrastructure invisible so that IT can
focus on the applications and services that power their business.
Companies around the world use Nutanix Enterprise Cloud OS platform to
bring one-click application management and mobility across public,
private and distributed edge clouds so they can run any application at
any scale with a dramatically lower total cost of ownership. The result
is organizations that can rapidly deliver a high-performance IT
environment on demand, giving application owners a true cloud-like
experience. Learn more at www.nutanix.com
or follow us on Twitter @nutanix.

© 2019 Nutanix, Inc. All rights reserved. Nutanix, the Nutanix logo,
Nutanix Era, and all product and service names mentioned herein are
registered trademarks or trademarks of Nutanix, Inc. in the United
States and other countries. All other brand names mentioned herein are
for identification purposes only and may be the trademarks of their
respective holder(s).

   

NUTANIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
As of
July 31,
2018
    January 31,
2019
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 305,975 $ 466,010
Short-term investments 628,328 499,915
Accounts receivable, net 258,289 247,600
Deferred commissions—current 33,691 36,934
Prepaid expenses and other current assets 36,818   49,456  
Total current assets 1,263,101 1,299,915
Property and equipment, net 85,111 125,924
Deferred commissions—non-current 80,688 93,100
Intangible assets, net 45,366 75,473
Goodwill 87,759 184,819
Other assets—non-current 37,855   41,907  
Total assets $ 1,599,880   $ 1,821,138  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 65,503 $ 69,045
Accrued compensation and benefits 85,398 86,460
Accrued expenses and other current liabilities 31,682 16,424
Deferred revenue—current 275,648   337,424  
Total current liabilities 458,231 509,353
Deferred revenue—non-current 355,559 442,435
Convertible senior notes, net 429,598 444,012
Other liabilities—non-current 29,713   39,807  
Total liabilities 1,273,101   1,435,607  
Stockholders’ equity:
Common stock 4 4
Additional paid-in capital 1,355,907 1,630,834
Accumulated other comprehensive loss (1,002 ) (149 )
Accumulated deficit (1,028,130 ) (1,245,158 )
Total stockholders’ equity 326,779   385,531  
Total liabilities and stockholders’ equity $ 1,599,880   $ 1,821,138  
 
       

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
Three Months Ended
January 31,
Six Months Ended
January 31,
2018     2019 2018     2019
(in thousands, except share and per share data)
Revenue:
Product $ 223,170 $ 236,932 $ 442,222 $ 461,278
Support, entitlements and other services 63,574   98,428   120,074   187,365  
Total revenue 286,744   335,360   562,296   648,643  
Cost of revenue:
Product (1)(2) 83,217 45,966 168,379 85,227
Support, entitlements and other services (1) 25,311   40,016   48,771   74,861  
Total cost of revenue 108,528   85,982   217,150   160,088  
Gross profit 178,216   249,378   345,146   488,555  
Operating expenses:
Sales and marketing (1)(2) 151,201 213,707 296,606 410,204
Research and development (1) 70,924 123,037 135,436 233,568
General and administrative (1) 15,948   28,788   32,000   56,127  
Total operating expenses 238,073   365,532   464,042   699,899  
Loss from operations (59,857 ) (116,154 ) (118,896 ) (211,344 )
Other expense, net (861 ) (4,399 ) (1,050 ) (7,102 )
Loss before provision for (benefit from) income taxes (60,718 ) (120,553 ) (119,946 ) (218,446 )
Provision for (benefit from) income taxes 1,913   2,210   4,172   (1,418 )
Net loss $ (62,631 ) $ (122,763 ) $ (124,118 ) $ (217,028 )
Net loss per share attributable to Class A and Class B common
stockholders—basic and diluted
$ (0.39 ) $ (0.68 ) $ (0.78 ) $ (1.22 )
Weighted average shares used in computing net loss per share
attributable to Class A and Class B common stockholders—basic and
diluted
161,737,428   179,444,648   159,251,964   177,428,029  
 

_____________________

(1)     Includes the following stock-based compensation expense:
 
       
Three Months Ended
January 31,
Six Months Ended
January 31,
2018     2019 2018     2019
(in thousands)
Product cost of revenue $ 684 $ 872 $ 1,254 $ 1,570
Support, entitlements and other services cost of revenue 2,133 3,373 4,205 6,530
Sales and marketing 15,942 23,462 29,708 46,068
Research and development 17,023 34,679 32,565 65,688
General and administrative 6,229   10,179   9,794   18,634
Total stock-based compensation expense $ 42,011   $ 72,565   $ 77,526   $ 138,490
 

_____________________

(2)     Includes the following amortization of intangible assets:
 
       
Three Months Ended
January 31,
Six Months Ended
January 31,
2018     2019 2018     2019
(in thousands)
Product cost of sales $ 1,164 $ 3,692 $ 2,059 $ 6,860
Sales and marketing 192   666   403   1,216
Total amortization of intangible assets $ 1,356   $ 4,358   $ 2,462   $ 8,076
 
   

NUTANIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
Six Months Ended
January 31,
2018     2019
(in thousands)
Cash flows from operating activities:
Net loss $ (124,118 ) $ (217,028 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 23,015 35,005
Stock-based compensation 77,526 138,490
Amortization of debt discount and debt issuance costs 738 14,415
Change in fair value of contingent consideration (3,955 ) (795 )
Other 141 (1,121 )
Changes in operating assets and liabilities:
Accounts receivable, net (490 ) 13,579
Deferred commissions (26,101 ) (15,655 )
Prepaid expenses and other assets (1) (2,832 ) (16,495 )
Accounts payable (16,560 ) 7,554
Accrued compensation and benefits 17,789 1,062
Accrued expenses and other liabilities 2,415 (19,029 )
Deferred revenue 108,944   148,332  
Net cash provided by operating activities (1) 56,512   88,314  
Cash flows from investing activities:
Maturities of investments 84,927 297,596
Purchases of investments (183,102 ) (167,066 )
Purchases of property and equipment (31,993 ) (72,383 )
Payment for an acquisition, net of cash and restricted cash acquired   (18,662 )
Net cash (used in) provided by investing activities (130,168 ) 39,485  
Cash flows from financing activities:
Proceeds from sales of shares through employee equity incentive
plans, net of repurchases
36,819 33,364
Payment of debt in conjunction with an acquisition (991 )
Proceeds from issuance of convertible senior notes, net 564,219 (75 )
Proceeds from issuance of warrants 87,975
Payments for the cost of convertible note hedges (143,175 )
Payments of offering costs (85 )  
Net cash provided by financing activities 545,753   32,298  
Net increase in cash, cash equivalents and restricted cash (1) $ 472,097 $ 160,097
Cash, cash equivalents and restricted cash—beginning of period (1) 139,497   307,098  
Cash, cash equivalents and restricted cash—end of period (1) $ 611,594   $ 467,195  
Restricted cash (1) (2) 1,148   1,185  
Cash and cash equivalents—end of period $ 610,446   $ 466,010  
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 4,077 $ 24,023
Supplemental disclosures of non-cash investing and financing
information:
Issuance of common stock for business combinations $ $ 102,978
Purchases of property and equipment included in accounts payable and
accrued liabilities
$ 4,673 $ 9,026
Vesting of early exercised stock options $ 435 $ 120
Convertible notes issuance costs included in accounts payable and
accrued liabilities
$ 707 $
 

Contacts

Investor Contact:
Tonya Chin
408-560-2675
[email protected]

Media Contact:
Kate Reed
973-534-9292
[email protected]

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