Nutanix Inc. NTNX share price fell more than 6% to close at $32.00 on Nov 30, after the company reported disappointing first-quarter fiscal 2017 results. Loss of 37 cents per share was wider than 27 cents reported in the year-ago quarter despite registering a strong top-line growth.
This was Nutanix’s first quarterly earnings release after its Initial Public Offering (IPO) on Sep 30, when it sold 17.1 million shares at a price of $16.00 per share.
Notably, although the stock soared 131.3% to close at $37.00 on debut, the share price has significantly come down in the last couple of months. Since Sep 30, the stock is down 13.51% as compared with the Zacks It-Services industry decline of 1.69%.
Nutanix’s enterprise cloud platform “converges traditional silos of server, virtualization and storage into one integrated solution and can also connect to public cloud services.” The company’s offerings include two software products Acropolis and Prism, which are delivered on x86 servers.
Revenues surged 90.1% from the year-ago quarter to almost $167 million, driven by 84.2% and 114% growth in product and support & other services revenues to $70.4 million and $17.4 million, respectively.
Billings were up almost 87% year over year to $239.8 million (35% from new customers), reflecting strength in the company’s expanding product portfolio.
Nutanix stated that it won well over 100 federal deals, with 12 of them in excess of $1 million. Acropolis Hypervisor (AHV) will be used in over one-third of the total federal nodes shipped during the quarter. From a year-over-year growth perspective, federal bookings grew 78% in the reported quarter.
Nutanix added 705 end-customers during the quarter. Total end-customer count was 4,473 at the end of the first quarter. End-customers with lifetime bookings over $1 million grew to 256 in the quarter. Some of the notable customers in the quarter were Toyota Motors North America, Scotia Bank, GIC and ICICI Bank among others.
During the quarter, Nutanix signed an extended agreement with Dell, which will run through Jun 2021. The deal is significantly positive as it reduces concerns over Dell’s plans to replace Nutanix with VMware VMW products, in which the company has a majority control post EMC acquisition.
Management stated that “Dell was responsible for signing a number of new Global 2000 customers during the quarter.” Moreover, “the teams (Dell and EMC sales) are also engaged in deeper collaboration to bring automation and one-click delight to erstwhile EMC products via Nutanix Prism.”
During the quarter, Nutanix also announced that its software will support Cisco’s CSCO Unified Computing System (UCS) C-Series servers.
Gross margin expanded 40 basis points (bps) from the year-ago quarter to 60.9%.
As percentage of revenues, Sales & Marketing (S&M), Research & Development (R&D) and General & administrative (G&A) decreased 760 bps, 60 bps and 100 bps, respectively.
However, operating loss widened to $44.4 million from a loss of $31.8 million in the year-ago quarter.
For the fiscal second quarter, revenues are anticipated to be in the range of $175–$180 million. Non-GAAP gross margin is expected to be 60%, while loss is anticipated to be in the range of 35–36 cents.
Zacks Rank & Key Picks
Currently, Nutanix carries a Zacks Rank #3 (Hold). Amdocs Limited DOX with a Zacks Rank #2 (Buy) is a better-ranked stock in the sector. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings growth for Amdocs is currently pegged at 7.5%.
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