Nutanix(NTNX) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nutanix reported record ACV billings of $183 million, reflecting a 33% year-over-year growth, which is the highest growth rate in over 2.5 years [17] - Revenue for the quarter was $379 million, growing 21% year-over-year, exceeding the Street consensus of $369 million [18] - ARR at the end of Q1 was $0.95 billion, growing 67% year-over-year, slightly ahead of the expectation of 65% growth [17] - Non-GAAP net loss was $47 million for the quarter, translating to a loss of $0.22 per share [21] Business Line Data and Key Metrics Changes - The average contract term length decreased to 3.1 years from 3.4 years in Q4 '21, primarily due to the federal business having shorter contract terms [18] - New logo average selling prices increased, aligning with the strategy to focus on quality and efficiency of new logo additions [19] - Emerging product new ACV bookings grew 11% year-over-year in Q1 '22, despite difficult year-over-year comparisons [20] Market Data and Key Metrics Changes - The federal business performed strongly, with significant expansions in usage from major federal customers [10][52] - EMEA showed strong performance in Q1, becoming the top-performing region for the quarter [51] Company Strategy and Development Direction - Nutanix is focused on enhancing its hybrid multi-cloud platform and has made significant progress in strategic partnerships with companies like Red Hat, Lenovo, HPE, and Citrix [15][13] - The company aims for sustainable positive free cash flow by the second half of calendar year 2022, with a target of 25% plus annualized ACV billings growth through fiscal year 2025 [9][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment, citing ongoing investments in digital transformation and modernization of infrastructure as key drivers [56] - The company is closely monitoring supply chain challenges but has seen minimal impact on its business thus far [8][29] Other Important Information - Nutanix was named a leader in Gartner's Magic Quadrant for Hyperconverged Infrastructure for the fifth consecutive time [14] - The company announced a new partnership with Citrix to deliver remote work solutions across private and public clouds [13] Q&A Session Summary Question: How much push or pull are you seeing from supply chain impacts? - Management indicated that customers have been able to procure necessary hardware due to the variety of hardware platforms available, resulting in minimal net impact on business [29] Question: Why the decision to no longer incentivize sales for stand-alone emerging products? - The focus has shifted to selling emerging products as part of the overall solutions portfolio to drive both sales and consumption [34] Question: Any updates on the traction with Red Hat partnership? - The partnership is progressing well, with notable wins in the first quarter, including customers adopting OpenShift on the Nutanix cloud platform [32] Question: Can you provide details on federal vertical performance? - Federal business performed strongly with new customer wins and upsell opportunities, and there is increasing adoption of cloud offerings within federal agencies [51][52] Question: What is the outlook for new logo additions? - New logo additions were slightly weaker than expected, but the focus remains on quality over quantity, with expectations for an increase in new logos in Q2 [79] Question: What are the dynamics affecting free cash flow guidance? - The company expects to reach breakeven in free cash flow by the second half of calendar year 2022, driven by strong linearity and collections [82] Question: Any changes in the competitive environment with VMware/Dell? - Management noted that the competitive landscape remains largely unchanged, with continued focus on value propositions and partnerships [75]