Nutanix, Inc. (NASDAQ: NTNX) plunged after reporting its results for the third quarter of Fiscal 2022 (ended April 30, 2022). Its loss per share in the quarter was 77.3% less than the consensus estimate, and revenues surpassed the estimate by 1.4%.
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Despite better-than-expected results for the quarter, it was the company’s lackluster projections that disappointed investors. Shares of this $3.6-billion hybrid multi-cloud computing company are currently down 24% on the news.
Financial and Operational Highlights
In the quarter, Nutanix reported a loss (non-GAAP) of $0.05 per share, much better than the consensus estimate of a loss of $0.22 per share. Also, the bottom line improved from the year-ago loss of $0.41 per share.
Revenues were $403.7 million in the quarter, above the consensus estimate of $398 million. On a year-over-year basis, the top line expanded 17.2% on the back of an increase of 22.6% in Subscription revenues, 36.3% in Hardware revenues, and 15.4% in Professional Services revenues. However, Non-Portable Software revenues decreased 44% year-over-year.
Billings in the quarter increased 20.7% year-over-year. Annual contract value (ACV) billings were up 28%, and annual recurring revenue grew 46.2%. Also, the run-rate annual contract value increased by 19.4%.
The company’s cost of revenue in the quarter grew 7.2% year-over-year while gross profits expanded 19.9% from the year-ago quarter, and the non-GAAP gross margin increased 160 basis points (bps) to 83.3%. Its operating expenses decreased 5.5%.
Exiting the quarter, Nutanix’s cash and cash equivalents stood at $386.7 million, up 35.3% from the end of Fiscal 2021 (ended July 31, 2021). Its total liabilities were $3,077.8 million, down 6.4% from the Fiscal 2021-end.
Cash used for operating activities in the quarter was $3.2 million and for capital spending was $16.9 million. Free cash outflow in the quarter was $20.1 million. In the first three quarters of Fiscal 2022, the company repurchased shares worth $58.6 million.
Projections
For the fourth quarter of Fiscal 2022 (ending July 2022), Nutanix anticipates revenues of $340-$360 million and a gross margin (non-GAAP) of 79%-80%.
Also, the company predicts revenues to be within the $1.535-$1.555 billion range for the Fiscal Year 2022, down from the previous expectation of $1.625-$1.63 billion. Non-GAAP gross margin is expected to be roughly 82%, down slightly from 82.5% states earlier.
The company’s President and CEO, Rajiv Ramaswami, said, “Increased supply chain delays with our hardware partners account for the significant majority of the impact to our outlook, and higher-than-expected sales rep attrition in the third quarter was also a factor.”
Management Commentary
Nutanix’s CFO, Rukmini Sivaraman, said, “We continue to see good execution on our building base of subscription renewals, which is helping us drive towards profitable growth.”
Wall Street’s Take
Today, Erik Suppiger of JMP Securities reiterated a Buy rating on Nutanix with a price target of $35 (114% upside potential).
Overall, the Street has a cautiously optimistic view of NTNX and has a Moderate Buy consensus rating based on six Buys and four Holds. The average Nutanix price forecast of $26.78 suggests 63.9% upside potential from current levels.
Over the past year, shares of Nutanix have decreased 48%.
Bloggers Sentiment
The financial bloggers tracked by TipRanks have a 100% Bullish view on NTNX compared with the sector average of 68%.
Conclusion
Looking at the top-line metrics, Nutanix seems well-positioned to leverage a healthy demand environment in the quarters ahead. It is also working to handle near-term hiccups, including supply-chain issues.
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