What stuck out for me - apart from the points you already made - is that
1.) their projection for $3 bil rev for FY21 seems very reasonable and almost conservative and
2.) this $3 bil in revenue stacks against an expected TAM of $178 bil!
Nutanix Operating Model:
Revenue Growth >30% (this is a decrease from 62% currently, but is bound to fall as market cap grows to 3 billion)
Gross Margin improves from 62% to >75%
This is compared to a subscription software model, and the numbers seem conservative. But are forward projections, and we’ll see if they happen. But it would be awesome to see it.
It would be nice to know all the other companies listed in their rule of 40 analysis in their favourable quadrant >40% from slide 53. We could use that info on Saul’s board for investing screening!
We don’t see who the plots are from slide 54, but on slide 56 they share a few of the representative comparisons…
NOW
VMW
CRM
SPLK
WDAY
By the way the $3Bn figure seems to be mixed up in terms of how folks have recalled this in the reviews here.
It is $3Bn in Billings in 2021.
Not revenues and definitely not market cap.
I think they will blow that away - especially if HCIS is worth $10.7Bn in 2021 and the broader integrated systems market worth $20Bn (slide 8) and the TAM is $178Bn
I really like the rule of 40 concept and am going to use it going forward. Gets at my 2 favorite metrics, revenue growth and cash flow. NTNX really was stressing how one is usually at the expense of the other.
However when I look at the metric for one of my favorites, ANET.
Rev. growth : 45%
FCF % : 37%
For a rule of 40 score of over 80! Off the chart.
Just underscores what an exceptional company ANET is, can do both revenue growth and cash flow.
strenla. The way to correct for that is to take revenue grow and add FCF/revenue. For example lets say a company has a revenue of 100million, FCF of negative 20 million and they are growing their revenue by 50%. 50+(-20/100) =30%. You could compare that to another company that is growing their 100 million revenue 30%, 2 million of positive FCF and you would get 32% for them. It isn’t perfect but is a starting point for looking at these companies that are doing the land and expand that most of these Saas companies are doing.
You also have to add in room for how much room there is to improve leverage moving forward.
I mean Mongo clearly has a ton of room to improve its leverage and reason why its ratio may be lower now, such as low revenues, building out a still inexperienced sales force, and that sort of thing.
But a company that is more mature, say a ZEN, there will be much less room to increase their earnings leverage moving forward.
Didn’t PSTG go FCF positive for the quarter and the year? A
If I remember correctly, they were cash flow positive in Q4 the prior year. Last year they were cash flow positive in Q3 and Q4 which was enough to make the year CF+. With the Q1 guidance, I think they will dip back negative this quarter but is possible they go CF+ in Q2-Q4 this year
I do not have the time to research properly so I just take MS as gospel, which shows FCF for PSTG has not yet been positive for any full year - but encouragingly, now reads -5 for the TTM.
I do not have the time to research properly so I just take MS as gospel, which shows FCF for PSTG has not yet been positive for any full year - but encouragingly, now reads -5 for the TTM.
They were positive overall, just not every quarter. From their investor deck: