Hit submit by accident.
They ar moving to a software subscription revenue model that generates more deferred revenue, than non-portable software sales, that has no deferred revenue.
Exactly the point. Deferred revenue is great and holy cow they have a lot of it and are accumulating it at a rate rarely seen if ever seen. Most software companies build up deferred revenue at various points in the year and then it draws down over several quarters as its recognized. Maybe it slowly moves higher over time. AYX is the one of the only comparables but not by a long shot.
NTNX deferred revenue has grown 6.3x in 3 years. AYX about the closest I found of the 5 or so SaaS companies I looked at grew deferred revenue 2.8x over same period.
I may not have a firm grasp on HCI other than it makes a bunch of different IT work like it’s one IT. But does it not say something that your customers subscribe to your product for an average of 3.6 years and pay up front for that at such a high rate.
They have been selling their software whether it was the core or the various add ons or stand alone software as a subscription for quit some time.
The first monetization of our software and the initiation of our recurring subscription business actually began when we first started shipping appliances in late 2011, early 2012 with customers, engaging in subscription-based software and support – software and support entitlement contracts, basically recognizing the value of receiving continued software enhancements on an ongoing basis.
In 2014 and 2015, we began selling stand-alone software including software and support entitlements to our OEM partners,
Talking about it 2011 or 2014, before they were even public, would have been a case of yeah who cares, small base. But now they have a whole pile of pure SaaS products and are just this last quarter starting to transition the non subscription type licenses to subscription. The organic non cannibalizing growth has carried subscriptions into over half of Billings with subscription revenue growing not from a small base anymore at 104%.
If all of next quarters growth guidance (top because they’ll likely beat) is added to subscription revenue only. That’s $22M sequential added to $127M for $149M in subscription revenue. That would be 107% growth yoy(from $74M). Midpoint would yield 95%.
If the non portable SW revenue decreases as a result of transition to “new term” licensing, then whatever is recognized as revenue from that different billing license gets added to that subscription revenue and that component growth rate for subscription goes even higher than 95% or 107%. And the remainder of those billings grows deferred revenue even more.
For next quarter at least, 100% +/- 5% is pretty much the floor of what that component will grow yoy. Barring any unknowns like a huge miss or non portable software actually growing instead of flat or declining as expected.
Where the problem would lie is with what happened to Pivotal. In their Q1 subscription was growing at 70% while legacy was flat. With those numbers the thesis looked good that overall growth would pick up as subscription overtook the overall business. But then Q2 saw only 50% revenue growth in subscription. That 30% reduction in growth rate knee-capped the thesis. Maybe that was a one off but guidance didn’t support that either. PVTL guides to increase subscription from $0 to less than 1% subscription growth sequentially.
Not so with Nutanix at all.
Darth