• Revenue: $591 million, 16% year-over-year growth.
• Annual Recurring Revenue (ARR): $1.966 billion, 18% year-over-year growth.
• Net Dollar-Based Retention Rate (NRR): 110%.
• Non-GAAP Gross Margin: 87.5%.
• Non-GAAP Operating Margin: 20%.
• Non-GAAP Net Income: $122 million, EPS of $0.42 per share.
• GAAP Net Income: $30 million, EPS of $0.10 per share.
• Free Cash Flow: $152 million, 26% free cash flow margin.
• Cash and Short-term Investments: $1.075 billion.
• Share Repurchase: $20 million worth of shares repurchased.

• Warning! GuruFocus has detected 6 Warning Sign with NTNX.

Release Date: November 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nutanix Inc (NASDAQ:NTNX) reported first-quarter results that exceeded their guidance, with revenue reaching $591 million.
• Annual Recurring Revenue (ARR) grew by 18% year-over-year to $1.966 billion, indicating strong demand for their solutions.
• The company saw significant expansion with major clients, including a global IT consulting firm and a North American Fortune 100 company, highlighting the appeal of their cloud platform.
• Nutanix Inc (NASDAQ:NTNX) launched GPT-in-a-Box 2.0, enhancing their offerings in generative AI applications, which could drive future growth.
• The company expanded its strategic partnership with AWS, which could simplify cloud migrations and offer additional benefits to customers.

Negative Points

• The US federal business underperformed year-over-year due to impacts from the elongated continuing resolution, affecting expansion with existing customers.
• Nutanix Inc (NASDAQ:NTNX) continues to experience modestly elongated average sales cycles, influenced by the macroeconomic environment and increased scrutiny on spending.
• The company faces challenges with larger opportunities in their pipeline, which involve strategic decisions and C-suite approvals, causing delays and variability in deal closure.
• Despite a strong first quarter, Nutanix Inc (NASDAQ:NTNX) maintained their full-year revenue guidance due to uncertainty in the spending environment and potential impacts from a new US administration.
• The net dollar-based retention rate was 110%, indicating some challenges in expanding with existing customers, particularly in the US federal sector.

Q & A Highlights

Q: Rajiv, can you discuss customer feedback on the VMC on AWS offering and whether the new partnership with AWS is encouraging customers to move to NC2? A: Rajiv Ramaswami, President and CEO, explained that Broadcom's lack of focus on VMC on AWS has created opportunities for Nutanix. Customers are concerned about the future of their offerings, prompting Nutanix to expand its partnership with AWS to facilitate migrations from VMC to NC2 on AWS. This partnership includes migration credits and support, which has already led to successful migrations, such as a leading university moving to NC2.

Q: Rukmini, the Q1 results were strong, but the full-year guidance wasn't raised. Is this due to cautiousness around sales cycles or other factors? A: Rukmini Sivaraman, CFO, stated that despite a strong Q1, the full-year guidance remains unchanged due to the uncertain environment, including potential impacts from a new US administration. The company continues to see elongated sales cycles and variability in deal timing and structure, which justifies maintaining a cautious outlook for the full year.

Q: Can you provide more details on the federal business expectations and the timing of Dell PowerFlex integration? A: Rajiv Ramaswami noted that while the federal business faced challenges in Q1, they expect it to return to normal levels in Q2. Regarding Dell PowerFlex, Nutanix plans to have it in the market in the first half of calendar 2025, with revenue contributions expected in FY26.

Q: How significant is the federal vertical for Nutanix, and what was its impact on the net retention rate? A: Rukmini Sivaraman mentioned that while they don't disclose specific figures, Q1 is typically the strongest quarter for federal business due to the US federal year-end. The federal business was lower year-over-year, impacting the net retention rate, but specific impacts aren't disclosed.

Q: What are the expectations for AHV integration with other storage arrays, and how does this affect AHV adoption rates? A: Rajiv Ramaswami stated that while Dell PowerFlex is the only announced integration, Nutanix plans to expand to other storage arrays selectively. The goal is to increase AHV adoption without cannibalizing existing HCI opportunities, focusing on workloads not easily captured by HCI.

Q: Why is there a lower operating margin expected in the second half of the year despite strong Q1 performance? A: Rukmini Sivaraman explained that while revenue is expected to be evenly split between the first and second halves, operating expenses will grow throughout the year. Investments in R&D and sales and marketing are planned, leading to lower operating margins in the second half.

Q: How does Nutanix view the growth of the available-to-renew pool in fiscal '25 and beyond? A: Rukmini Sivaraman indicated that the available-to-renew pool is expected to grow nicely in fiscal '25 compared to '24 and continue to grow over the next few years, supporting strong renewal growth.

Q: Can you elaborate on the impact of cloud repatriation trends on Nutanix's business? A: Rajiv Ramaswami noted that while there hasn't been a massive shift of workloads back from the public cloud, enterprises are more cautious about cloud usage. Steady-state workloads are often kept on-prem for cost efficiency, which aligns with Nutanix's offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.