My thoughts about Nutanix’s results

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My thoughts about Nutanix’s results are the same as those of Bert and others: the results were misunderstood by robo-analyzers. They were great results.

Let’s look at some figures:

Gross revenue was only up 20% from last year, but that’s only because they weren’t counting $95 million of hardware that they would have counted in the same quarter last year. Put that back in for apples-to-apples and revenue was up 58%
Subscription revenue was up 49%, which is the future of the company.
Deferred revenue is huge (more than twice as large as this quarters entire revenue) and was up 71% yoy!!! And up 17% sequentially.

Gross Billings were “only” up 37%, but subscription billings were up 66%.

Free Cash Flow was positive $6.5 million, up from negative $6.5 million a year ago. For the fiscal year ending this quarter, Free Cash Flow was positive $30 million up from negative $36 million a year ago!!!
Operating Cash Flow was $23 million up from $6 million yoy.
For the fiscal year ending this quarter, Operating Cash Flow was $93 million up from $14 million a year ago!!!

Is there anyone left who doesn’t think that this was a blow-out quarter?

Adjusted Net Loss was 6% of revenue, improved from 10% of revenue a year ago.
Adjusted loss per share was 11 cents, improved from 17 cents yoy and from 21 cents sequentially, and which is the smallest loss in cents that it’s ever been.

Customers were 10,600, adding 1000 new customers in the quarter. Note that’s not in the year, that’s in the quarter.

They had their biggest deal ever this quarter, a $20 million deal with a part of the Dept of Defense. (We know from previously that it was the US Air Force.)

That’s just some of the information. This was a great report. I added a tiny bit just after the opening at $56.92.

Just my opinion. Draw your own conclusions.

Best,

Saul

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Word from Mr. Market appears to be the stock price was kept down by this:

For its [upcoming] fiscal first quarter, Nutanix said it expects revenue in the range of $295 million to $310 million. That’s below the consensus estimate of $311.8 million.

https://www.investors.com/news/technology/nutanix-stock-quar…

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The reason for this (according to management in the earnings call) was that they are going to eliminate an additional 1-2 points of pass through revenue. Original forecast was for pass through to be 7% of total revenue. Now they are forecasting 5-6%. I think if you back that out they would have a forecast beat. But the street doesn’t understand. They will.

Darth

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Word from Mr. Market appears to be the stock price was kept down by this:

For its [upcoming] fiscal first quarter, Nutanix said it expects revenue in the range of $295 million to $310 million. That’s below the consensus estimate of $311.8 million.

As Bert aptly noted, the company has really raised guidance! In its seasonally slowest quarter no less.

They raised the bill to book ratio above street estimates (1.26x), 50-55% growth in software and licensing bookings, and as Saul mentioned, if you compare apples to apples (stripping out pass thru hardware) billings will be around $320 million, higher than the consensus.

Subscribing to Bert’s ticker target is well well worth it, in my opinion. And very reasonably priced, just like most of the MF subscriptions.

Best,
Matt

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Saul,
Deferred revenue is huge (more than twice as large as this quarters entire revenue) and was up 71% yoy!!!

I read that deferred revenue was up 71% YOY in the press release, and was happy about that too, but when I looked at the deferred revenue Q4 18 at $631.2 million vs. Q4 17 deferred revenue at $526.1 million, I get 20% deferred revenue growth. Am I missing something?

Best,

bulwnkl

Long NTNX

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Hi Bulwnkl,
I am reading it off the Balance sheet under liabilities and I come up with 71% 2018 631,207 / 369,056 in 2017.

Andy

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Hi Andy,
You’ll have to bear with me. I tried the trusty Control F, and have not been able to find those numbers in the press release. I didn’t see those numbers next to Deferred Revenue on the balance sheet. Should I be adding a few things, I am bit lost. Sorry.

bulwnkl

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You’ll have to bear with me. I tried the trusty Control F, and have not been able to find those numbers in the press release. I didn’t see those numbers next to Deferred Revenue on the balance sheet. Should I be adding a few things, I am bit lost. Sorry.

That is ok, in the press release they stated.

Deferred Revenue: $631.2 million, up 71% from the fourth quarter of fiscal 2017

So they are claiming that they are comparing this to Fiscal (whole) of 2017. So to makes this a true comparison you need to take Fiscal 2018.

So if you go to the balance sheet you need to look at.

Liabilities and Stockholders’ Equity

           
                                             **2017**                       **2018**

Deferred revenue—current			170,123	 			275,648

Now that is for the current quarter so we need to look at non current to get the Fiscal year.

 
                                              **2017**                      **2018**
Deferred revenue—non-current			198,933				355,559

Add those two numbers up and you get $631,207 for 2018 and you get $369,056 for 2017.

So how this works is that on the balance sheet they add the same amount to cash and then remove the same amount as a liability.

If you look at the cashflow statement you will also see deferred revenue but that is only the cash that they have “earned” for that quarter. They can not account for it until the subscription for that quarter is earned, although they still have the money.

I hope that helps bulwnkl.

Andy

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Andy,
Perfect. Thanks for taking the time to help me sort this out.

Best,

bulwnkl

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Your welcome Bulwnkl,
I am not an accountant nor have I had any formal training. Everything that I know on accounting was picked up on the fool and from reading John Tracy’s book, How to read a financial report, a few times. I just want to give you that caveat. There are people on these boards that are way more qualified than I.

Andy

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Hi buynholdisdead, do you feel like the book is still relevant to pickup? I looked it up and it was originally published in 1980. I am also trying to learn how to analyze and read financial reports to glean insights but I have not found any good resource recommendations.

Thanks

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Mercatorn,

Not Andy but Andy and a group of us worked our way through the book on the TMF boards several years ago. Each person took on a chapter to explain and provide more details. The book I think is still very relevant and easy to get through.

Would be great if Andy or someone else could find a link to those old board posts. We took over an abandoned board but with TMF’S search features being what they are I couldn’t find the old board. It may have been deleted.

Short answer is I would buy the book. Can be found relatively cheaply on Amazon. I imagine an older copy would be just fine.

https://www.amazon.com/How-Read-Financial-Report-Wringing/dp…

David

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Hi David,

Thanks for the link, I’m sure many new members will find it useful. I noticed there are two versions of this book. One has the header of being the “comprehensive guide” and is 357 pages while the standard version is 241 pages. Wondering whats in the extra 116 pages - is that the better one to read?

Thanks

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Hi Mercatorn,

His latest edition was copyrighted in 2014.

[https://www.amazon.com/How-Read-Financial-Report-Wringing/dp...](https://www.amazon.com/How-Read-Financial-Report-Wringing/dp/1118735846/ref=sr_1_1?ie=UTF8&qid=1536351832&sr=8-1&keywords=john+tracy+how+to+read+a+financial+report)

It is easy to understand and if you email him he will give you all of the diagrams in the book in a pdf.

I thought it was well worth it to better understand the financial sheets.

Andy
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Hi David,
This will be my last post on this, I do not want to clog the board up. But here is the class you were talking about and how we all have grown. You really can teach yourself how to invest.

Would be great if Andy or someone else could find a link to those old board posts. We took over an abandoned board but with TMF’S search features being what they are I couldn’t find the old board. It may have been deleted.

http://discussion.fool.com/other-investing-books-112946.aspx?mid…

Andy

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