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1 Like
I’m watching Dreamer .
I don’t see this staying down this much tomorrow, but still, third largest holding for me, stings just a little. There has to be more to the low guidance than just “not hiring enough sales staff”. Doesn’t sit right with me.
Hey you win some you lose some.
The companies perfoming hit it out of the park and the price follows.
NTNX is not a ZS or a TWLO.
Interesting that the trading last few days was heading down, and today on pretty heavy volume.
One of my smaller positions, but still if this AH price holds I’ll be down about 28%.
I’ll wait for more commentary to decide if this company is worth continuing to invest in, or one to avoid.
Chris
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Just an observation…
NTNX lacked any relative strength in the past 12 months…compare that to AYX, TWLO, TTD,OKTA etc…
I know people on this board avoid the word “momentum”, but interchange that term with “relative strength”…
Those companies that have high Relative Strength continue to do so, while those that are stagnant and “hope” to get through a bad quarter or two struggle…
add it to your toolbox…
just providing another perspective…
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So true Darrell.
wnewyorktokyo: For a company that’s 10 years old…
One of my primary red flag wickets…
Been in biz ten years, still losing money??? (It’s bound to be great soon? In ten more years?)
Who are they? The next Amazon? Trade Desk? eBay? Apple? Or?
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Totally aimless. Just one more pivot and they will be winners. More Products! Innovation!
The CEO said multiple times “Let chaos reign, then reign in the chaos.” As an explanation of how this could happen. That is not the kind of strategy and leadership I will invest in.
Compare that to the strategic and operational clarity from Everbridge, TTD,TWLO,SQ,OKTA…
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Yea, I’m in restaurants. We are working on our 8th location now. Been in the business for 20 plus years.
I can’t imagine telling my investors
“so there’s an incredible opportunity to do a hell of a lot more business, but because of our poor marketing decisions last quarter and our slow hiring practices and our inability to find great staff, our next quarter isn’t going to be as good as previously thought. Sorry about that. Maybe the following quarter we can get our act together”.
I would say that would put me in the “incompetent” category.
Chris
13 Likes
I got out of NTNX a few days ago after reading all those Glassdoor review mainly from current and ex-marketing employees. There must be exodus of current marketing talent based on review. I would be very cautious to buy the dip. The situation here is totally different from ESTC which was also dropping after earning.
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After significant time reviewing the numbers I see all too numerous concerns and a “trust me” story in a management team that has now proved to have serious questions marks.
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Holding off on the elephant in the room regarding guidance, management first failed to call the mix of their business this quarter from two months out - guidance was for non-GAAP GM % of 78.5% at the midpoint and they hit 76.8%
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This GM% miss on mix was due to a combination of selling LESS Software and MORE Hardware - this is the absolutely critical transition we are investing in but software has grown less than 40% each of the last two quarters (SW & Support combined grew 43% Y/Y, but SW standalone grew 37% Y/Y). They have called out some nuances in the transition from perpetual (up-front) to term (ratable), BUT their SW & Support Billings only grew 36.5% - YIKES. That destroys the narrative.
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Now that the <40% SW growth is a trend in actuals, why would I believe this growth will now accelerate at some point going forward, especially given the guidance? I don’t want to own NTNX if their SW growth will remain at this level - SW growth is the whole thesis!
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The $300M guidance is HORRIBLE. To put it in perspective, I was modeling ~$360M which was 46% SW growth, -60% HW growth, 55% Subscription growth. All of these numbers were reasonable based on historical trend and the story about SW. If we keep HW and subscription the same (HW is only a $24M forecast at this growth rate and Subscription growth has been +55% last three quarters) NTNX would do $320M even with only 20% Y/Y SW Rev growth!
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Before you rationalize “low ball” guidance, keep in mind doing $320M would be a ~7% beat. Doing $360M would be a 20% beat. Those are big numbers for any company, but NTNX only beat by 1% in Q1 and 0% in Q2. They have no recent history of over-achievement. Even if they did… $320M still destroys the current buy thesis many have shared on this board. Only something around $360M is keeping in line with successful transition in my opinion.
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This one is a little more conjecture, but given the SW/HW mix and how close they came to their guidance in Q2 it seems to me they were going full send and doing everything they could to hit last quarters number. This may sound good, but that can burn out a sales team and customer relationships pretty quick. It also gives me a “sense” (again, conjecture) that management may be out of touch with the realities of the business. Seems they have leadership that operate in a “speak it into existence” / if we believe it hard enough and long enough it will happen.
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Final nail in coffin for me is the rationale on the miss: “inadequate marketing spending for pipeline generation and slower than expected sales hiring”. First, they have already used this rationale / excuse several months ago. Second, their Opex grew 53.5% Y/Y last quarter and they are saying this isn’t enough! Granted their S&M expense “only” grew 41% Y/Y which for a hyper growth story could be light, but as I already noted above their SW is currently growing under 40% Y/Y and combined SW & Support is growing roughly as fast as Opex. If management is telling me we need even higher Opex spend to maintain this level of growth that equates to Opex growth > Rev growth. In extreme high growth cases that doesn’t bother me, but this is a rather mature company with very significant S&M spend to begin with.
I never wish a company / investment poor fortunes so hopefully NTNX turns it around in a spectacular fashion and this is a bump in the road. However, at this point there is a lot of hope in this narrative and not much to back it up.
38 Likes
SM expense grew 41% this Q but grew less in past Qs per management (I have not done the cals but seems like that way in Q1). They say they started increasing SM spend in December. Even if they had sufficient sales if the team has been tasked to sell a lot of new products, explain to the customer the transition from hw to sw and then to subscription model they are bound to lose their efficiency. They should have hired more sales to do all of these. Management was trying too many new things at the same time and clearly blind sided. One interesting they stated was that EMEA grew this year, US did not. EMEA is 1 year behind so they expect EMEA to show the same slowdown next year. Seems like they have some sense now.
Btw if they hit $295M next Q and we assume 10% hw I get sw and support rev growth of 17% which is definitely a sharp slow down but not of the type of NVDA which guided to lower rev and seriously missed as well.
You really don’t want software and support growing. You want to see subscriptions growing. Software and support is the technical support on the software portion of the business.
Andy
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If you look at their investor presentation they call software and support rev as all rev excluding hw. So, it includes subscription
If you look at their investor presentation they call software and support rev as all rev excluding hw. So, it includes subscription
From NTNX’s 10Q
Software and support billings— We calculate software and support billings by adding the change in software and support deferred revenue, net of acquisitions, between the start and end of the period to software and support revenue recognized in the same period. Software and support revenue and billings include software and support, entitlements and other services revenue and billings.
Andy
See slide 15, 16 below
https://seekingalpha.com/article/4245522-nutanix-2019-q2-res…
This Q
Total rev = 335M
hw = 38M (slide 16)
software and support rev = 297M (slide 15). The 297M includes 157M in subscription rev(slide 16)
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overall disappointing… and losing trust…
getting out of this one… fast and furious…
I do not want to give any proprietary information away. For those who are Bert subscribers (and TY Saul for sending me there through your posts here), you should read his email a few minutes ago on NTNX.
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I’ve read all the recent posts on this board surrounding NTNX, and keep seeing the words “narrative” “story” and “complicated.” I remember Saul writing about story stocks in the Knowledgebase. Additionally, in many other posts on this board, about avoiding companies that have significant headwinds on the way to profits.
I’ve taken those words to heart, and sold out of my small NTNX position this morning.
Brandon
So I’m going the other way on this one and building a position.
Just bought at 33.19.
Management seems to not be operating like a well oiled machine, but they are still in transition and they seem to have products that people want.
If next quarter is more of what this last one gave us, I’ll most likely bail then.
I don’t see how it could get much worse for them, they just have to execute.
They may even be a great buyout candidate at this point.
Chris
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