I have yet to get a chance to read through this deep dive, but am looking forward to it.
On the topic of Nutanix, after reading through Saul’s monthly write-up and looking at the price action of Nutanix recently, I get the impression that Nutanix’s latest quarter actually warrants a share price in the $60-ish range, maybe even $65-ish, but that the market in general is engaging in price anchoring. It seems that the market is disbelieving that the move up from around $20-ish/share in the fall to $60-ish/share now is actually warranted by the growth numbers.
For the sake of a quick reference, I will paste Saul’s summary here (with my emphasis added in bold):
Nutanix was a new position last September. I entered at about $21.70 with a fairly good sized position. It closed Friday at 51.57, so it’s up 140% in nine months. Sure, stock picking doesn’t work. We’ll all return to the mean some day. Statistics prove it! Hah!
Nutanix’s area is “hyper-converged infrastructure” in data storage. I don’t have a clue what that means, but Gartner rated Nutanix first on completeness of vision, and first on the ability to execute. It is doing away with the pass-through zero-margin hardware that it was selling, and pivoting to be a pure software company (also moving towards a SaaS model). This makes their revenue growth look deceptively slow because the hardware sales are no longer being counted, and because of subscription revenue being counted only month by month, even if all paid in advance. (Pretty odd to talk about revenue growth of 41% looking deceptively slow, isn’t it?). Nutanix apparently just won a $45 million contract with the Air Force, its biggest contract ever.
Nutanix has a Net Promoter Score of 90 !!! (For those who aren’t familiar with it, NO ONE gets a Net Promoter Score of 90 !!! It means just about all your customers absolutely love you.)
Here’s what their April quarter looked like:
• Revenue: up 41%, but this is with the elimination of the pass-through hardware revenue that they are no longer counting. If you compare apples to apples, revenue was up 65.5%. That’s extraordinary revenue growth! (volfan84 note: that is right around the level of Shopify’s most recent quarter
• And for a little consensual validation, Bert called this a blow-out quarter and came to the same 66% real revenue growth figure that I did. And he’s value oriented and conservative.
• Software and support billings up 67%
• Adj Gross Profit up 57%
• Adj gross margin of 68.4%, up from 61.2% !
• Adj Net Loss of $34.6 million, improved from a loss of $45.7 a year ago.
• That’s a loss of 12% of revenue, down from a loss of 22% a year ago, as well as the dollar loss decreasing.
• Adj net loss per share of 21 cents, improved from a loss of 32 cents.
• Cash was $924 million (volfan84 note: with LT debt of $423M this net $500M cash position means their enterprise value is only $6.3B compared to their market cap of $6.8B)
• Deferred Revenue: $540 million, up 62% !
• Positive Operating Cash Flow of $13 million, improved from a loss of $16 million
• Free Cash Flow: A loss of $1 million, improved from a loss of $29.2 million !!!
Just read that over again and you’ll see why I don’t have to know what hyperconverged infra-structure is to know that Nutanix is a disruptive category leader. Start with this enormous growth (billings up 67%, gross margins up 7%, deferred revenue up 62%, operating cash flow of positive $13 million, improved from a loss of $16 million, etc), add on Gartner rating them #1 in two categories, and tack on that unbelievable Net Promoter Score showing that their customers are beyond satisfied. That’s enough for me.
long NTNX along with several NTNX call option strikes and expirations