From the Dust bin - NTNX

The most recent quarter is: Software and Support Revenue: $265.8 million, up 17% year-over-year from $226.8 million in the third quarter of fiscal 2018. So if not for the transition to subscriptions, this would have been 25% growth

Hi 12x,

You are looking at the quarter before this past one. You have those numbers correct and the right idea on valuing the company on software and subscription alone. The 8% compression is stated for next year’s revenue guide. Presumably the compression was larger than that this quarter and the one before that as they have moved toward a more ratable model.

This is still a significant deceleration for a company that was growing 45% a year ago. I’m curious why there is an impression that growth will accelerate next year?

The deceleration is for 2 reasons. The move to a ratable model and the lack of sales execution. And the reason growth would be expected to resume to desirable levels is based on fixing the sales (mis)execution. We will be able to watch that in terms of revenues and deferred revenues. Deferred revenues grew 44% this past fiscal year.

And by growth accelerating are you referring to overall growth including hardware sales, or growth in software sales?

I may not have explained this very well, but hardware sales are almost completely eliminated. They should largely be ignored and are in my synopsis. This quarter hardware pass through was $13M or 4% of revenues. Nutanix does not supply hardware for the most part. However, it can be debated whether or not they are in the hardware business. Dreamer would suggest they are irrespective of whether or not their primary focus is on software, and I respect his opinion quite a bit. I am not of the belief hardware should be ignored though. And this pertains to both NTNX and PSTG.

So by software sales growing next year, you expect it to grow faster than this year after even accounting the 8% compression? What I’m getting at is how do you see Nutanix getting back on to match the hypergrowth curve HCI is currently experiencing?

Yes, I expect software sales to grow the year after this. This is based on the DBNRR and the introduction of new products over the past year plus the comparisons will be apples to apples. They will have similar pass through hardware which is nil. They will be comparing to quarters where the transition to a subscription model is almost complete though not quite.

Finally, I don’t “know” anything. Just reviewing the company as I see it.
But I definitely appreciate the questions, 12x.

I hope this helps answer your questions and thanks for asking.

A.J.

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There is just no facts we can rely on now other than trust in management that they will find their new killer paradigm. Tinker

For me, therein lay the rub. I lost confidence in management. I don’t trust the executive leadership to be straight forward and honest. I lost faith in BOFI quite some time ago as I felt that management was untrustworthy. I feel the same way about NTNX. With so many other really good investment opportunities with executives that I perceive to be honest and trustworthy I just can’t bring myself to invest in a come back story with executive leadership which I have grown to mistrust.

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For me, therein lay the rub. I lost confidence in management. I don’t trust the executive leadership to be straight forward and honest.

That is certainly the majority consensus on this board. I still haven’t figured out what led to that. Management let shareholders know (months before they announced any negative financial results) that things were getting weaker than expected, despite knowing that it would have a really significant negative impact on the stock price.

For me, management is one of the main reasons I still have a significant position in Nutanix (and have grown it in recent weeks). Not trying to sway anyone else, but that is just where I am at based on what I’ve seen since I first started following the company.

-mekong

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