Nutanix(NTNX) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nutanix reported quarterly revenue of $525 million, exceeding the guided range of$510 million to $520 million, representing a year-over-year growth rate of 17$1.82 billion [8][18] - Non-GAAP gross margin was 86.5%, higher than the guided range of approximately 85% [19] - Non-GAAP operating margin was 14%, exceeding the guided range of 7.5% to 8.5% [19] - Free cash flow in Q3 was $78 million, representing a free cash flow margin of 15$289 million, above the guided range of $265 million to$275 million, representing year-over-year growth of 20% [18] - The company experienced modestly elongated average sales cycles compared to historical levels, with average contract duration in Q3 being three years, higher than Q2 [18] Market Data and Key Metrics Changes - The number of opportunities greater than $1 million in ACV in the pipeline has grown at higher than 30$1 million in ACV has grown at well over 50% for each of the last three quarters compared to the corresponding quarters last year [23] Company Strategy and Development Direction - Nutanix is focusing on enhancing the functionality of its cloud platform and broadening partnerships, particularly in support of modern applications and enterprise AI [12] - The company announced partnerships with Hugging Face and NVIDIA to enhance its enterprise AI offerings [13] - Nutanix is also expanding its partnership with Dell to deliver integrated hyper-converged solutions [15] Management's Comments on Operating Environment and Future Outlook - Management noted steady demand for solutions driven by businesses prioritizing digital transformation and infrastructure modernization [7] - The company expects continued variability in timing and outcomes for larger deals due to longer sales cycles and strategic decision-making processes [24] - Management remains committed to driving top-line growth and strong free cash flow generation [52] Other Important Information - Nutanix's annual .NEXT conference in Barcelona attracted over 4,000 attendees, showcasing the company's innovations and partnerships [12] - The company has repurchased approximately $106 million worth of shares year-to-date through Q3 '24 [20] Q&A Session Summary Question: Insights on extending AHP to support compute-only nodes - Management explained that supporting AHP with Dell PowerFlex allows faster entry into accounts without requiring hardware refresh, facilitating migration to HCI architecture [28][29] Question: Size of the eight-figure deal and its impact on free cash flow guidance - Management refrained from disclosing specific deal sizes but confirmed that the deal's total contract value was larger than expected, contributing positively to free cash flow guidance [34] Question: Updates on partnerships with Cisco - Management reported good progress with Cisco, including new wins and certification of Nutanix's hypervisor to run on Cisco UCS servers [36][38] Question: Changes in guidance philosophy due to larger deal variability - Management stated that the guidance philosophy remains unchanged, focusing on creating visibility and scrutiny around pipeline opportunities [70] Question: Trends in repatriation and hybrid cloud - Management noted that while repatriation is not a major trend, there are instances of customers moving workloads back on-prem, emphasizing the need for modern applications in a hybrid cloud model [86][87]