Earnings call transcript Q2 2023

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Operator

Hello, and welcome to Nutanix Second Quarter 2023 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker for today, Rich Valera.

You may begin, sir.

Richard Valera

Good afternoon, and welcome to today's conference call to discuss the results of our fiscal second quarter of 2023.

Rajiv CFO. President are Rukmini CEO; today Nutanix's Sivaraman, me Ramaswami, and Nutanix's and Joining

market today, quarter the results After closed for announcing press the financial release fiscal second of Nutanix XXXX. issued a

section to read please Press website. If you'd of the IR like our visit release, the Releases

timely business including ability During today's a our on and and as as our our financial execute benefits make initiatives, thereon vision, in including statements forward-looking and guidance and call, strategies, statements, objectives to impact successfully business, management our regarding financial will the plans, manner and outlook, well results. thereof operations

Our metrics transitions, our investigation, impact its financial factors in including current future regarding anticipated profitability, future results expectations driving new position supply these and targets our impact growth, which including global financial of and business our model of statements, and periods, market and performance expectations financial regarding timing the competitive actual opportunity, statements. involve the guidance, and COVID-XX of These our resolution anticipated performance of its materially control, on and and risks adversely challenges effects. pandemic and and some our could current forward-looking which different chain the the macroeconomic, are our uncertainties, the use our differ those of geopolitical statements cause impact and industry to and from trends beyond the by or

earnings today, today. forward-looking XX, undertake these Form obligation and ended to uncertainties, on on our and after please statements XXXX, XXXX, year For apply XX-Q press a Form for report as July October quarter fiscal to of call. and the our annual These this these fiscal quarterly we filed detailed statements revise for ended refer no risks our as as of filings, other XX-K including description SEC issued and our release report the XX, well

you views our should in on them not As a future. the result, rely as representing

in participating San X, in to TMT there. the we Francisco hope you will Morgan Conference see March and Stanley management Nutanix be Lastly, on

And with that, I'll turn the Rajiv? call to Rajiv. over

Rajiv Ramaswami

Against the delivered good macro of and performance came second Rich, saw we in continue in uncertain see an quarter our afternoon, backdrop, our and in businesses you, guidance modernization to prioritizing respect solid strong to Thank continued our everyone. business. with results quarter, transformation ahead and that center we a backdrop, their second macro initiative our by With digital renewals data platform. enabled

is from partners elongation We our quarter. mentioned I'd However, outlook investigation seen customer we increased instead and of software providers likely to constraints fiscal compared have recently improved consider Supply over was several customers, cycles. inspection chain discovered remainder our more macro deals this We of one the that the the with to proof evaluation in dynamic believe sales which release. third-party this interoperability in of comment of year. modest press period. our the a used being some in driving and for prior by validation uncertain the backdrop, our a we like related multiyear is with for on testing, concept

counsel. investigation not of business on emphasize an impact matter, I'd but provide of still this have prospects. reporting the the is matter, into commenced to overall Committee with this our we assistance implications the significant it Rukmini fundamentals near-term Audit Our outside which that like details do a and will on ongoing more will believe of

flow, Overall, again business. flow continuing free recent quarter. financial quarter, XX% million management, look top-line billings the our the strong solid closer in our of I'm which second growth, helped demonstrated continued our generate in year-over-year second with free performance renewals driven delivered We by at we performance. us cash expense good strong performance ACV $XX Taking growth, a pleased including cash

core to cloud cloud looking modernize cloud to in customer platform, including Federal cloud automate replaced Nutanix's management. as their their legacy is our value Service. the of in largest their in portfolio adjacent particular see reflect applications, their in unstructured in win a results our Infrastructure run solutions our IT Nutanix for building quarter stack simplicity example to second platform business-critical and quarter, our a needs. adopting its with this customers to as service environment Nutanix customer good with example infrastructure. the their Nutanix agency good a with infrastructure. X-tier modernize Our management, data a and They and also A both full was added They seeing new offering our automation We storage strength are leveraging unified which

in Another bank Hat's notable the Red region, running the key APAC had win in the with OpenShift. applications a public business-critical on the in quarter cloud who been was

However, of having were public they performance unhappy were with the response their incident issues providers. and service cloud times

cloud the So options, cloud operating following multiple it platform, concluding platform is cost by suited destination performance that AHV an of professionals. that the hybrid enabling our increasingly on evaluation chose alternative could to model, best is our deal operating on-prem reinforces critical applications that ideally and total IT and and our model, ownership. that of was multi-cloud a customer an Nutanix not deliver OpenShift public view and on-prem favored This cloud including the the run the hypervisors, their to Nutanix cloud

first public optimize with quarter, of is saw footprint looking momentum had their the to availability example in NCX reduce data NCX we services, our in spend. cloud, accelerate with win A an general global we to late headquartered the EMEA migration on public their cloud Azure center quarter. of the and solid second transportation good provider Microsoft a Following their

cloud Azure, expense ongoing alternatives, demonstrates their operating by costs they This and roughly faster without migration, workloads on cloud, their evaluation this Xx clouds provider NCX public including refactoring services a their ability Nutanix platform and with lower appreciate of found management, native the which shift time to the data operating chose lower to public customers migration a how rapidly lower the cloud and costs. enabled consistent customer costs. our Following with seamlessly private and workloads largest and significantly from the the governance provided rigorous of win

quarter, front, we product core and and strengthening delivered the X.X, the release to further of second with of during upgrades to security-related a AOS services features, data platform number capabilities its On enhanced support our networking which offers meaningful applications. the business-critical

closing, In outlook. on provide and I'd like some our thoughts priorities to

First, our renewals investment overarching judicious profitable priority remains growth of growing management. base execution through on diligent the delivering a expense sustainable, business, and in

cash flow, with made the free growth top-line second quarter, this in we solid strong objective. Our date towards progress the reflects along to

we to outlook continue our capitalize profitability, flow free ongoing by in renewals environment reaffirm and top-line on to our of allow base in raise growth. cash and year front focus confident encouraged vast us remain opportunity profitable are growing our continuing macro I of the our strength us to our the while remains to on that model sustainable, outlook. the of underpinned drive uncertain, While a ability fiscal business

And I'll hand Sivaraman. with that, it Rukmini over to Rukmini?

Rukmini Sivaraman

I be likely first with costs would investigation the Thank the that are note noted. address to to Rajiv it in impact, the cases we you, would previously respect additional that the incurred use process and to is mentioned, like financial assessing Rajiv. reporting of

information our for As regarding a year result, or in third outlook expenses the or quarter preliminary not quarter financial fiscal XXXX. results have provided our second full we

provide to Day do and financials While address the allowed our prescribed not specific XXXX to we time we as date of rescheduling period intended on Investor summer are be are April a we Relatedly, able XX-Q to working extension XXXX as or to will finalize and XXb-XX. possible, X-day under matter expect our file our it diligently soon this to we hold confirmed. following once is had X, on

in representing billings. that year-over-year million, finally, guidance majority our a XX%. provide from growth fiscal for at talk million our our QX year and ACV of an was higher of significant than said, growth $XXX billings of in The and billion, QX outlook. in 'XX better our than in guidance. $XXX QX with that our then results a now a on QX move With through $XXX solid of rate growth update was will the on a XX%. of end million, $XXX million and of guidance million to growth I of followed QX; to Revenue was than 'XX QX results, by renewals quarter year-over-year higher that was outlook $XXX $X.XXX to our year-over-year XX%. million came growth ARR $XXX came

additions about logo New Contract at stayed expected. flat quarter-over-quarter were XXX duration as in three QX. years

of percentage supply estimate future of of the XX%. QX described came approximately start revenue previously, was chain on million constraints dates due As million XX quarter in QX. DSOs with QX start $XX more revenue Free deferred, than good, slightly in key be improvement QX the dates days linearity This as were our $XX more recognized Billings we percentage 'XX benefited partner had our and to to assumption in from cash continue flow in was was flow record below it last in a percentage margin was the lower million, implying in in our license guidance. likely expectations. than and provided free than QX cash also earnings orders call. $XX future

we class under balance to and court expected of additional net securities QX: agreement of recovery month, litigation, We the for $XXX which This insurance. reached convertible approximately million settle outstanding an XXXX inclusive documentation, A of amount, subject sheet. on January cash last fees notice a the is principal from approval. charge the of One, members actions million net settlement. Two, the of and on notes is the expenses, to retired D&O recorded our our our $XX notes with remaining approximately class couple we amount to legal

defense be in with remainder expect ended paid was slightly 'XX. paid cash from investments billion the We $X.XXX to equivalents billion, costs cash, million and We already while in in approximately QX short-term settled previous of for and QX, $X.XXX legal down $XX QX quarters.

is follows: of Moving guidance and million for billings The ACV of million. to $XXX QX $XXX $XXX million outlook. on to $XXX revenue QX 'XX million as to

our some guidance. more I'll around now provide context

less the our to that QX It down to also more QX chain dynamics slightly supply QX assumes guidance partners 'XX. assumes same that First, approximately durations QX compared 'XX. for flat server remain would contract would compared for top-line stay to or 'XX the in

is to our deferred, Said time, $X our last we and we would than from constraints recognize in benefit more revenue decline to revenue months. of to QX. as the future date normalize revenue differently, normalize, over expect percentages guidance chain start orders dates partner well. resolves with start future dynamic the percentage few similar supply includes the saw dynamic Over as this approximately of we license million the QX expect in Second, in

XXXX an on provide now will I update guidance. full our year

our with half flow expense continued focus solid strong business growth outlook. to our our prior and our had for raise while billings efficiency. first factors, a for renewals the continues a to year foundation us have cash ACV combined free disciplined and allow on and outlook We management, Those reaffirming provide revenue

Our billion 'XX to billion, updated at billings of the XX% million million, for million fiscal to as growth year of the is free guidance midpoint; $X.X $XXX follows: full of to midpoint; year-over-year revenue $XXX cash guidance $XXX year growth XX% of and at flow of $XXX $X.XX year-over-year ACV million.

on additional full I'll color guidance. our now provide year some

continued First, seeing we macro solutions uncertain for new and our environment. expansion despite opportunities are the

However, likely a increased seen of deal as Rajiv have to sales modest due we mentioned, elongation inspection. cycles

updated in guidance. have dynamic this considered our We

reminder ACV in significant billings into We uncertainty for because in new will of in growth for continue deals simply expectations four ACV the year 'XX the to fiscal billings that billings. of one A of come renewals year ACV with contract expect ACV environment not ACV our quarters year factored less our for summation is billings macro duration. expansion billings full growth from and the with the the majority than in that

ACV full four ACV the X% that relative quarters. discounted of the billings sum by is expect billings We approximately to from year

second of also similar half. to first that full that to the 'XX dates year quarter, percentage year fiscal future of 'XX. last comments half revenue compared guidance decrease the contract would with orders ease compared to the the our assumes The in year the assumes guidance fiscal would slightly start slightly year durations Second, fiscal

outflows. These to cash our RSUs month other were fiscal usage reaffirmed approximately expected includes of impact the guidance million related employee prior of free not the impact the guidance the vesting obligations cash QX a tax flow. settlement. $XXX in and Third, outflow cash $XXX from million also previously portion includes approximately year flow of $XX mentioned for for cash to outflows annual QX million $XX of in 'XX our in this million free of anticipated net It litigation cash nonrecurring cash included in

to flow I'd Finally, fiscal note year least to cash like $XXX we of in expect generate that XXXX. at million continue to free

our reflect we continued are we focus. of that execution our stated closing, pleased to In QX and towards objective our continue sustainable, that expect growth, profitable results

the operator, open that, With please line for questions.

Operator

question first comes Bora line of Our Instructions] with the Pinjalim JPMorgan. [Operator from

Pinjalim Bora

like quarter. seems leaner help wanted were you It a right? maybe understanding vendor. us that it what a to bit investigation an just a Could Congrats. little like go it's happened what like Am you exactly? it the And I I explain -- it sounds pretty in to legal good understand bit talking in less to terms. back a little about. Or a underpayment of

Rajiv Ramaswami

Yes.

unchanged. thing to But Let you here, say me details Rukmini, thing that of business and fundamentals are the the right? one is can the start the want I explain -- first our

solutions. opportunity to very focused and profitable are growth. impact So on sustainable our quickly And our driving it this are matter resolve we as as for or possible, the diligently demand working we doesn't market

with respect you matter, to doing. it what just specific explain details that can Now maybe behind we're Rukmini, and the

Rukmini Sivaraman

Yes. Sure. Pinjalim.

So used our what so multiyear is evaluation third-party instead interoperable, software, intended was and validation, that a concept providers, software, for eval we testing of one who us proof discovered of for evaluation provides which somebody software, was from purposes period. over certain

timely unable XX-Q resolved So to And the the we announced our that is on because given that, is that that first. make a we ongoing. said in file call, as on disclose expect Pinjalim, weren't expense and to matter we -- we and this manner, want sure to that information is call, able of a we've that be we to discovered

of this top-line the Now I this. we by as my when to impact cash little bit I also billings use free from cash full are and our in after for for cash year the guidance pleased this, on million outflows our also color were impact third-party results, comfortable guidance, settlement be we're the of in it, that remarks, the flow unimpacted factoring want a to we of as all approximately look our And the free guide, from the -- the prepared And of we to the million potential noted forward call. software free flow $XX to we mentioned year reported flow. we believe ACV are litigation $XXX $XX of tax provide given in flow able includes vesting. obligations we million that and guidance employee revenue these the with the that raise for to usage RSUs QX this nonrecurring to and million $XXX free guidance And still are cash prior of cash related cash included our in not impact the

Pinjalim Bora

the the wanted seem -- Yes. of of taking some Understood. And that of VMs, complex with of course. with Rajiv, to our partners is tens move your that of had discussions But as thousands one some It's to suggest ask I you, alternative. shape. of at just an of VMware might highlighted of to VMware discussions we opportunity kind some one from complexity kind large of very just who the looking other, using Nutanix customers the be to

been has ask large those to you or over you, wanted Nutanix? those little doing of of those to of I what large to are have And Nutanix companies how kind what can progressing? So discussions you VMware move at some make feel to bit those a environments kind do --

Rajiv Ramaswami

Absolutely.

As you right many with can imagine, these Pinjalim, we engaged of now. are customers

is, we many, solution they're been the explore use over these level doing AHV, Customers VMware of these own of for manage you in In may acquisition. time, migrations. We ones, the our is keep go all aren't right? we've AOS, potential of on instead options have many What their these top go a there, cases, our risks looking customers we are we vSphere, there hypervisor. in related customers to storage. these hypervisor And a doing existing when running software-defined out engagement. been many A we which should mind and things. to platform, significantly choose years, higher of insert We've insert to our prospective that are lot and VMware and

with our a of doing have for experience we So customers. migrations lot

case we complex for workload large do And pick and They this Now do all is more is a workloads, example. and the all other then typically, one used it expand at use over time, and we Historically, the We to us this. these of will know the do databases. will time, use be it for in cases. environment, one we the will but we days, mission-critical computing, that.

what of yes, doing outlook. time, think any we said, -- our So this heard not is I to we why a in it's are benefit experience these and this complex, migrations. fiscal you take in significant lot That 'XX Pinjalim, have is going factoring

some typically deals. We long, be larger nine, expect XX cycles of months to these for the

Operator

Our next Sandler. Jim question Fish comes of from the line with Piper

Jim Fish

also quantify for factors macro off Maybe sounds what the especially are to think build there on storage to Is taking? of the much of net and of that is landscape, a a ability these deal questions, to versus way even to wanted talking my perspective push-pull with consolidate demand increased HCI how all So traditional I given longer And there like, seeing storage on cycles. as could are taking? demand? about push-pull on an you're of way you longer deals these It question about lengthening the how deals Rajiv, much seeing are about the is, kind talk side guys against environment you're last the effect as general you those market the environment. VMware well actually. couple maybe traditional the the just the competitive

Rajiv Ramaswami

a you pull Yes. say. this, Jim, as indeed, and there on push is

course, that's reduce guide strong the renewals put and from business our our the performance out model that of risk continuing. that we and And on helps first in So been there. We see macro. the

environment. have we the account current Now taken into macro

As seeing, you inspection. we been right, in have say, seeing we that greater the impact terms of are

we're customers being to Now The what increase time the it say -- is, some modest new I the would They're it to looking right? bit been up customers expand, takes the little would cycle, everything average very a or a careful, taking in more and the at and logos I is, both time more so say, of existing TCO that review has seeing new benefits. to just right? goes across this bit, what a and far, in means economics close looking deal sales

have that legacy infrastructure. compared Now benefits said, we that do to strong TCO typically

for ability So when say, really show refresh TCO, But to second compare you X-tier of is in those will hasn't and the which much modern the what a or not effort, compared look storage, of I but VMware I or cloud build kind dynamics a the time customers for Clearly, increase changed. party term, at for vis-a-vis same. in go term, When platform. piece better a level to the think in them the are is short engagement. And long versus largely help the dynamics is, would example, legacy more modernization able the then short dynamic there HCI any of that to certainly term. it, a the dynamics the third X-tier,

push So there's clearly pull. and a

-- the renewals foundation. summarize, have provides got We business that we've to the a

deal new On elongation and business, small cycles. the

VMware seeing side, we're a other engagement the basis. from On more

in gave we do into our factor to tried these we've you. to that of the so guide best all And dynamics

Jim Fish

Impressive on free beat the cash flow helpful. this quarter. That's

numbers outlook driven Just kind in, understand to OpEx working how capital any the have this operations really you free versus and just issues assume of potential where expense of potential? on trying flow impact would added underneath, mentioned trying was the also this the essentially that much here, Rukmini, to make of we're barring sure come to these sorry included but cash layer and Does by had investigation. the catch-up of here,

Rukmini Sivaraman

questions. Thank All you, good Jim.

me let So parse that. try to

for on we expense not or remarks, said So in -- as on expenses I QX either my Jim, a basis. commenting forward-looking are

say of performance talked terms call, cash the I But as I'll QX, cash I free XX about would low So the within to terms think kind And DSOs in we're right, DSOs flow in with for on to, free right, that stop which the was right, I typically, our of QX. said, in we was QX unusually you back XX happy flow, and days. It there. just are will in say, payment XX come saw QX, because days. it we range, for

to so be And of it expect I in area. sort would that

year million flow the call software $XXX to your from are the items -- cash so million this settlement that the use onetime mentioned comfortable sort arising third-party we related discussed. the matter, million for $XX from of potential right, second and full Now to $XXX Jim, the to the $XX yes, we and question, million including with guidance, the free on impact we obligations around other tax our

Operator

from comes line & Cikos question next of Mike Needham with Our Company. the

Mike Cikos

a have did questions. couple I of

Audit Committee, to want to Just the and make circle back this right. I to had everyone sure that

anticipated So is this -- the that expense right of totally independent for you the correct? have settlement, XQ sure right regarding investigation I'm $XX cited now, getting now in I'm the a million litigation the had we not numbers that

Rukmini Sivaraman

Mike. That's correct,

Mike Cikos

outside And so Audit was did when you When I investigation engaged the the look provide if commenced us counsel? When audit specifically, did discovered? I'd like investigation? the its Nutanix issue Committee can we just a like under are events see hood? that line get just this because Again, playing being we have today. can time provided if out the we're limited how guidance to for at these

Rukmini Sivaraman

resolve so appropriately position your very in limited the we we If share Yes. guidance there's be more working manner. as I not point, is this to At in timely and we I with timelines Thank sure that make kind working can Mike, to this of specific here, diligently but quickly we're can is this as question, you, to diligently, a and we to resolving are a for what provide we are say you. possible this can able Mike, we given are ongoing, what understand that is right, that our the outside counsel say -- review Committee Audit with to question. and

Mike Cikos

here. But butcher to it I'm that just know guys using was I legal provider wanted software I I are it, all struggling on involved one that I of supposed the but -- with And to things evaluate. to don't see are misunderstanding this for side, and again, that want probably saying just my was a comportment think on it's like of you the third-party be…

Rukmini Sivaraman

Yes, let me try…

Mike Cikos

Yes, you're have it and that the trying expense billings is this you there guide, results? but by we see, able potential investigation And result is and cash on the untouched I'm is don't as I'm Like to revenue revenue guys like, a at this? expenses giving it free get how to of to the is refer impact Because entirely here, the any impact is us an flow. point? trying way this top-line ACV are Or then it to base? there again, for this in your is like, follow-up

want what sure that's apologize just clear. to being question, for I'm make but long-winded think the And I I'm I side. I wrestling my on

Rukmini Sivaraman

Mike. Yes. Thank you,

So try some let me pieces. those and clarify of

we correct impact you point are that do we've topline to. specifically ACV on not disclosed metrics, we're as which you believe billings, So out, and has revenue, any that our guiding this matter

the there that. more So just sorry, was -- think part after second And what that's of of terms Mike, question? your part of in it. one I was one question

Mike Cikos

Yes. Yes.

So...

Rukmini Sivaraman

Yes. flow, cash I right? think, On free

Mike Cikos

Exactly. Exactly.

Rukmini Sivaraman

Yes. Correct.

that. about Sorry

think I free cash million that's right? free QX So reported cash that Like reported we flow, out. the flow, on we $XX

important. is this think I year, full the for Now

impact million right? settlement. separate this flow after and on you million, free are year cash call a the million software from outstanding So we as use items, Mike, $XXX asked question, previously the for that litigation to matter third-party from comfortable the the $XX other said, that the which a factoring two mentioned we you in with glad I'm a So $XXX potential

So million that's of RSUs this obligations month. our employee million tax before, related factored usage in nonrecurring that $XX for portion to vesting and in a $XX was this not cash of QX

Mike Cikos

Okay.

third-party like just And just here using but being in versus naive with this first make of just provider, be Okay. the to how investigation aware you it want testing? make I then different I sure, far want how to the phrase is this we're I'm as were software me the they again, interoperability nuances today again, here. its was sure seeing the what There like maybe, will, causing what's to as place. Again, supposed for

Rukmini Sivaraman

Yes. Understood, Mike.

let So me is intended purposes, being that software third-party of provider. used by we for concept. for so evaluation and were be a was software and this evaluation used the instead, -- to software It from interoperability what validation it -- us using proofs was testing,

that being So that's matter the is right now. reviewed

Mike Cikos

see. I

very a of it And validation the and so that. for instead a there's that because what -- Is had it paying mischaracterizing probably using guys because that usage intended putting lot for provider. evaluation, a I you for testing were different you different cost interoperability you of but way of was simple software, that of potentially been that? know I'm

Rukmini Sivaraman

Yes.

Mike Cikos

Okay.

Rukmini Sivaraman

right, Mike. that's Yes,

be that used these used right other what's discovered software, and was so instead and for to and proof validation of being now. inoperability, that's So it's we for intended evaluation under review yes, concept,

Rajiv Ramaswami

means, thing of just that. be using there, I'd one say this And of Yes. usage right, some expense, additional therefore, what Rukmini, terms there might in and

Rukmini Sivaraman

That's correct.

Rajiv Ramaswami

So can't we is expenses. until -- that's this we specifically really have are done, we -- you why give

Operator

line from of question Marshall Morgan Meta the next with Our Stanley. comes

Meta Marshall

meet just in to to this question, contextualize or kind what way a of question were still and to like the how why just of Maybe just I'm the increase beat would one have belabor much cash me but question point, of just from earlier kind a second kind for And me then just with on that blend get a outlook. there even of trying not the able kind of better target much in maybe that flow of sense the to of to various first is much upside kind less for of of just that year moving to sense trying get how you a free payments just is of dates were? how contributors sense laid of vendor you So is from start confidence a be those payments, then you And the get in? the an out. fiscal future renewals? to 'XX future the that to

Rukmini Sivaraman

Meta. you Thank the question, for

So one one. take let me that by

think your just for So and around the I full the that. first contributed to what year, right, question raise was

So guide us QX, certainly in right? that we for so on revenue, And billings I mean, I raising feel clearly, comfortable and the beat the full ACV both year. makes think more on

piece, in revenue to did the future color remarks try you prepared provide percentage start the some we for dates. around of On the

So impact. an that does have

expect in quarter of million you deferred. gets about it revenue we that And that recognized license So be $X impact QX. had versus more for QX, saw million $XX to about in

so and there on that And that doing effect I has year. that, again, your the think done And already of business that some our is of that continues was to that majority Meta, and the given said Rajiv somewhat on so is we've the lowers emphasize growth on in, and are underpin well, significant coming risk our renewal for this up factored to of as too all renewal. I renewals, full question based deals

and Meta, able the we before, specific is as question continuing we'd are quantification to ongoing. But try be some this dissolved. to that not able to to of these I whether review on said second was diligently at I this work Now payments, quantify of the point, we given are think your and any part provide get

Meta Marshall

greater just Okay. been quarters, following Got it. have early Clearly, to piece. just maybe mean the those contributor in are doing on past maybe renewal a upside. renewals the well, I but up

So well. just we trying there's early get just a component be if renewal should thinking no of to as that sense here -- I'm

Rukmini Sivaraman

say, Yes. I not the would it's norm, Meta. outside

date the other about of as X before, do So customers of discussions. vendors we typically anything go do to to months a well, advance we've discussed renewal as begin our those even lot

will vendors do. there. do co-terming movements like some there timing We subscription be here most some So and

the So would -- but what we nothing to outside contributed of expect or normal that renewals.

Operator

Our next from of question Cleveland Research. Ben comes Bollin line the with

Ben Bollin

footprint how I I is had that how little you of follow-up. in And bit into wanted a fiscal speak renewal renewal the renewals. 'XX? a for up on to up 'XX? Could back circle was the then And or develops much for fiscal to

Rukmini Sivaraman

the Hi, thanks Ben, for Yes. question.

renewal, for ARR, a of your percentage we think, quite right, provided question. I is up So of haven't almost that's kind

our given So that licensing I we quantified is software, software will business. the quite professional is haven't really a sell small we services, say all subscription we other portion now of where in overall than right, overall, term Ben, that, journey, which are but

of So in, expect additional are we that starting as to -- do trims renewals ARR urgent right? kind but growth up that time, right? that and this base a is say we over So see flow year. in of growing or the have -- of So of kind provided in would a of software renewals haven't continued that's to that we layer number on specific our I we percentage we a sold renewals, base

Ben Bollin

are XQ the into What Okay. drives And When XQ. acceleration I you're look XQ you're you year, That’s following fiscal and what notable you. it item. and it. the other at into billings in targets Thank a then expecting the acceleration then that in what implies seeing pretty guiding that XQ? to

Rukmini Sivaraman

things. few a think I So

growth? I QX things, that's expected. it's for than would and mean year say better is, us because you the end say, and fiscal our when for acceleration, quarter so is seasonally I So you that right? think couple did a is QX of So a Ben, the typically, of us

our QX of implied look last I from what of we I dynamics easier -- of billings billings But -- think from QX you We bit QX QX comp say, the at within it's, also were would in of given year, happening range ACV a a the QX. year. QX, would provides somewhat guidance when expect of for quarter-over-quarter, last the and -- to an the for what's ACV some have that

Operator

question Our of Hedberg from RBC. line comes the Matt with next

Matthew Hedberg

a you maybe issues believe, when just feels on I'm levels It of year. You some sales last today? time general if of kind though, talk the the about hiring I one-year remainder now. of up, had from stand sort attrition coming like anniversary the about guys long could plans attrition overall wondering, you are how And ago year? for

Rajiv Ramaswami

Matt. can I take that, Yes.

given the environment things tech gotten a that were from situation, with So think from as going to better. start-ups I gotten that lot potentially of respect to, other have as our lot well well companies better both the the out right? way, a a the hiring the people large perspective by has lot there markets, in as general, a what's year last over in So retention happening the as

Now we've higher -- has in grow do been FY productivity. to to at. your continuing We And of focused time, we're rep modestly 'XX expect every question course, repatriation are are very from roughly again, on seeing quarter-over-quarter. where our the retention rep we on count to And headcount the flat. at rep we drive sales quarter, same actually doing -- front our improve specifically, been

Matthew Hedberg

And sort that expand on kind on Maybe about how it. -- bit Federal a like congrats just driver Got much from helpful. and agency expect That's for continue how here? of a that then do you talk general, can Thanks. you? been public And aperture just sector of that in has large spend the win. of the

Rajiv Ramaswami

Yes.

the verticals. So -- the public One of have and way, only first is by we in just is all, sector U.S. two healthcare. the I'll say, other

us. clearly is for very sector public So important

penetrated across as board We local state, government well civilian, education. are well into public across as agencies defense, both sector the

a market. vertical So business source I targeted have it that solid to it's very at very why And say, of it a market. a we be in us. for presence important would That's continues

drive to modernization continue efforts. We their

continued deployed, opportunities we We there as broadly are but see fairly well.

continued good it's and So very spending. with important for sector a us

bump the Now quarters you tend they right? that's as would see But the usual, in that we as cycles, to for quarter. have I mean all course, sector where a certain I during of budget again, know, it's every sales -- year, depending on public their say. year-end,

Operator

Rakers next from Fargo. with line Wells of Our question Aaron the comes

Aaron Rakers

ask about duration. I dynamics, the you I the also if about wanted the of it's sequential. talked possibly still you high guidance can. well, a decline maybe talked as or macro of XX% at I that looking guidance. to but the first two the ACV got range, know XX% I slight about end have know just in I about piece down

below something possible macro? there slight just So that that Just Is Is years. I'm that seasonalities ACV in quarter. all kind last decline maybe what in like or the definitely of look to couple over this curious, quantify guidance trying that's unpack else duration? for that of factoring you're

Rukmini Sivaraman

Aaron. you, Sure. Thank

imply like And we QX. which talked saw raise modest over billings I a saw is ACV right, that was say, you're be and elongation second Aaron, one billings a anecdotal And guidance. to both first does yes, which modest I and it. what that to sort of able -- over half, were in half in about, half. So would We decline ACV happy in half guess, revenue We elongation you've this cycles is already sales in pointed there QX. we we it out

it but conservatism we have of factored in, so right, mentioned portion, the portion ACV expansion specifically I overall in to write as And to guide. the ACV, and the as my relates about remarks, billings new some

there's definitely rate growth look at you growth second still that. a there's And a So meaningful I year-over-year if half. year-over-year for rate, think the

that's are So ACV half. the full implied second how year kind thinking of we and guidance the for about

Aaron Rakers

million it, If year, half on Yes, very, take you the that million a talked the $XXX at the first just back to decline that and of very call you $XX going relative particularly free this, the back is quantified million factor adjustments you large $XXX did I $XXX for to apologize into, that first midpoint the $XX the to look the half. I of helpful. about million, flow And of -- still in you've million factoring if cash about the let's flow. then cash and free but

understand element I unquantified an to that there's investigation this So dynamic.

versus what outlined. half question changing flow just cash first free guess why aside be first half I'm it I guidance working capital in the you flow dynamics, half? anything to trying factors free those that's the down that changed there your from saw just cash of relative to is, in the the within you is So back understand second half

Rukmini Sivaraman

in you Good question, as half as billings does sort see in of an free around the it math point. as from and does are I factor So this on think at to clarification impact does have pointed right? second that then we billings out, imagine, question, we potential you the third-party you lower use And asking out, and the just for done I the a impact which first said, revenue just can we right cash as well, actually, have we quantifying Aaron, not thank you've flow. a expect direct is, of which think we impact, software the do and pointed this items

material capital full to rest the year. sort don't of think year the working for to cash about changes anything guide. like how the flow free that's We or significant So any anticipate of that

Operator

Our William of the next from question Jason Ader Blair. comes line with

Jason Ader

I third-party just, I evaluation think, on ask for may this confusing wanted be it software. folks to

you I people are that software? I of evaluation think what? wondering, What with that guys -- think may evaluating be

Rajiv Ramaswami

you color, software Maybe try it. you Yes. give I'll eval has So right? meant some eval right? view, So for go

then cases, the it software What some it proof validating. or were point, for reval try go for some it. interoperability in customer using try we testing whatever concepts, doing and You found we out using at out, of for you're was, purchase you we

what of scope for. goes So the beyond that software the eval was being used

Jason Ader

you're very it a lot So therefore, to was because software, for. idea? things you to Is a the meant pay and now more were it it amount for just wasn't you eval small that the because using that paying going eval software, have were

Rajiv Ramaswami

Yes.

therefore, quantified that into expense were of here, yes, haven't we use we So kind get likely that at. additional to how is right? the can't right, But but required cases for some you're -- and right? there mean, looking usage much, detail we I

Jason Ader

Great. then you, Okay. whole on Rajiv, debate. question And just for another on-prem cloud this versus

last this that we've seeing so? Specifically, X in of months are cloud or just customer of migration sensitivity cost slowdown over the because recent environment you to any been in the in the workloads

Rajiv Ramaswami

Yes.

a much sensitive in cost in an of you are seeing especially gave many prepared are our we of world Definitely, fact, customers in when public saying, the in and we In And areas much, what? now, go of public to economics remarks important more at should this here. whole a part. the repatriation look cloud example terms I the -- for cloud cloud particular and very cloud, the starting -- at they're looking is to

workload, mission-critical because a of they response this on-prem by support in better to the cloud and could because public from we a workload in migrate example, get showed, so. sense they could customer is So TCO. and decided the that actually They production get example better it doing experience for also running vendors

not more now. it about seeing It's more public not being we're cloud. So is what you. nuanced to what going -- have everything definitely much put much you It's where taking going that nuanced and in cost you going to being the

Operator

question next Leopold from the of James. Our with Simon line comes Raymond

Simon Leopold

maybe that? between the discernible elongation could there's by Or process, seeing verticals quick wanted any got not this very patterns kind follow-up. types, a or customers variation address existing behavior see And I if of I've and then like something whether you're to in of you customers? or decision customer new whether

Rajiv Ramaswami

seen but both, Yes, are think expansion -- new, Clearly, will a we also point. seeing elongation good and deal in a existing past, that right, an for easier because prospects. quicker for compared have anecdotal, in existing customers, customers to is modest generally and for this Simon, elongation we this say, new But typically net a very visibility I it's don't at in it's question. and I of right? new we've that's level it for of both the is lot us, somewhat and

that, anecdotally, at a that level a example, may and do have going just So for budget it's for VP I'm say, well, yes, to VP go just and something ahead it.

expansion. you a say, level, that have money the think, to I as Now out Is of, hard kind and TCO me this at that with okay, quantify benefit varies CFO wait? you specifically go for but quickly? as can seeing Can the that's you scrutinized do dynamics spend now? by new parse this being really there So lot It's seeing. both it for are we a we're to customers,

Simon Leopold

sort this sold where figure yet? software not Or just goods into then or out of you just to you cost line? insight these the I'm that would of R&D this affects do on quick one have or charges third-party your know trying And up. whether issue, I don't show guess a is,

Rajiv Ramaswami

Yes. Rukmini?

Rukmini Sivaraman

the point, expenses Thank or the to types Yes, specific able fall. of is on P&L, given ongoing, get it this you, more where this we're might not at Simon. Simon,

Operator

question with America. Ruplu from comes of next Bank Bhattacharya Our

Ruplu Bhattacharya

real for question I'm Mohan Rukmini, today. filling in one for you quick. Wamsi

statements? maybe historical restating you Just financials? that this file earnings you to financials? when clarify the you be and on And the And third-party will this your software be issue, think you lower? of does last restating lower your will margins impact that couple years' impacts And do

Rukmini Sivaraman

point, Thank diligently Ruplu. on working -- this. there's the any question, the really add quickly review of this can on and to can't is but Ruplu, clarity really Again, this able is and But this that, we're are you make of at ongoing, provide sure all specifics. we nothing on comment so for we to more more I

Ruplu Bhattacharya

Okay.

for one Maybe Rajiv. Okay.

deals customer to really and is modest more like was adds, I about the talked at back going new this adds the it look in a XXXX. customers You inspecting right, When slight cycle. quarter, increase the lowest for which XXX, sales quarter new

then competitive on any thoughts because I on with and number thoughts and dynamics about dollar is like price number ads pricing. you are lower? that mean strengthening you price dynamics pricing and you're how quarter, net talk this the any also of seeing? this environment? recently, adds of competitive you're on the to So the the you dollars your can on the lower -- And having that -- FX just on that? Or thoughts seeing in any new So could

Rajiv Ramaswami

new than logos, of But Rukmini logo on I'll quality, Yes. ASP comment first let new higher about FX. all, on talk of and two those, so I'll are comp. focusing higher we more

go and get us right, we to opportunities. productivity more our make logo, we new up drives much deal, when a expansion and provides So a make we sales provides to we our sure put so efforts also more -- bigger winning the that when want count,

to we more than in new a than So logo count. target. terms hit a in rather shows more on to are a it focus what number result our of The been count that's logo up terms new so is. new the focus of that It's trying logo of trying

can remained the of then I comment. FX, terms very right? thing our way. in they're we have Rukmini, holding And would second going are is, stable, prices, in of you and -- it, perhaps down up any very prices not our much Unit say The third part

Rukmini Sivaraman

Yes.

of transaction parts in strengthened. effectively So that price we increase? Which dollars, that Ruplu, in is your has dollar our question, denominate all is given U.S. the it I some right, it the of think, a where world, was

pricing some economics markets. is, the Rajiv's we're overall so some unit and cases, some the we've sort good transactions, point, it seeing on what place. I anecdotal, And is right? pressure think But of our seen our put in a of overall, to is timing in this In especially emerging

that of haven't impact significant on a these of seen systematic any sort so And from drivers. we or

Ruplu Bhattacharya

one what's you reduce the sneak of Okay. for year? high coming backlog backlog fiscal If rest year. for was expectation I the in quick the this backlog Did quarter? one very into also in can the And

Rukmini Sivaraman

Thank you for question, Ruplu. the

this entered consume normalized the we use at year expect say level QX the we by we had We continue to backlog, on and course you're backlog, and of that the end of record of year. some levels to the get our a this with year expectations, So did yes, that the again, that the of will use rest over more year. to line backlog in expect July, we end When fiscal time of in the of during that we right. to did over course backlog we

Operator

Our the comes next question with of George from Wang line Barclays.

George Wang

Congrats quarter. on the

channel channel, area unpack as kind a SP about kind Last you update service Rajiv, of kind you new can, quarter, customers. you any of the sort maybe of of talked to land kind of Just provider have. new

of if updates on just this? you have So curious kind any

Rajiv Ramaswami

for George, market terms route using our certainly this think, in that we I to of new to we are very us. relatively route excited because are Yes, about market

innings for deal still our capabilities possible. we as to And build and continue that quarter the it's quarter, still growing trying very largest it's done channel. the enhance service through as we're opportunity Last the So provider to an offering in We're partners. that SP product in broad the stages business us. very to a we a said, up early was there, -- in provide

business. continued have still to overall a a of of small significant business. to chunk a So us -- multiple portion our so we our Right a it's it it's and becoming journey, it's now, take going start quarters -- for it's

George Wang

have create a follow-up. to I Okay.

on your traction AHV in are of you the kind X quarter of hypervisor of how of sort reception? terms in XX% seeing own Just color own some just is mix, of give of kind the customer migration your this sequentially. hypervisor? And you terms points up the Can

Rajiv Ramaswami

would as of the Absolutely. say, in VMware-Broadcom more well. it's whole becoming And now context I the more important acquisition and

it's We customers keeps opportunity of course, a of going into in insert back fact, AHV, Now percentage our inserting okay? there's ago, the was we to -- been terms like footprints. of used hypervisor. But would in a side, for blend. else's time, course, that up. into that workload us, will years same more at We us default. that's go huge see other default. if our the hypervisor hypervisor environment, it many somebody be It And a you a like using always to On see, would one AHV of our the mean as which,

because that opportunity want there's huge So continue a still to we there.

model start in our with the So been, on of we stack. go some a of with has and customers rest top cases, hypervisor third-party will the solution

migrate AHV. some And So over to of our will example. for then storage, choose time, that software-defined to they

from new We where also in they all day customers, with many dynamic a go have as one in AHV well.

of the insert balance go solution. to course, those both customers have as But hypervisors the want have hypervisor at do stack other and able and after to environment on be that customers own have we them we full be maintain dynamics, and into time, want we both our their to want same to, able sell to of well. So those because a we

trying overall, becoming being say but and -- I'd that's more to is customers we're continues comfortable it. Ecosystem to mature. More using So and broader. the get blend so that broader it with,

certifications third-party Hat like have and We Red now. it others on

for becoming, at it, let's mission-critical point. all this it's So ready call workloads

Operator

final comes time, Due line our KeyBanc. Blakey the question to Thomas of the of with from interest

Thomas Blakey

some the speak hit targets? renewal trend? from that And Nice fiscal you What longer-term targets. asked questions 'XX, to numbers those free Could maybe a moving direction? quarter. start about just fiscal 'XX. flow fiscal it's I Is 'XX hitting trends. just to you're simplify 'XX cash in a the lot I No fiscal renewal for the opportunity in to very mean important were just wanted to just in seeing the there. right of trend

Rukmini Sivaraman

question. the for thanks Tom,

direction, the as it's talked and coming year It's emphasized in think stream. and we've about So clarify still renewals our so question number and to happy to, our we also growth well. 'XX, 'XX, fiscal I that it's we to cash not that's And work efficiency, perform generally, of thesis right? you, that good yes, we a just just and do I a overall driver 'XX, right about look, I'm reiterate going holds. We've free Tom. did believe of but few in flow a more sort continue mention in, continues of million-plus we talked on it believe for for both And majority $XXX in for think that, why growth times I we think, the how

Thomas Blakey

are maybe the solid on what driving from with net rate from the renewals? maybe these terms what the was of get Can where a downtick commentary up? And hearing retention of dollar calls some higher of combined macro, that? we and my around -- feedback I'm those are numbers What kind quarter in was in of And some opinion results. given here last the the what couple

Rukmini Sivaraman

Right.

Tom? retention on if question NRR, think metric, the I our dollar-based So net Is that your question? rate

Thomas Blakey

From the renewals, yes. Yes.

Rukmini Sivaraman

Yes.

that. for you thank So

clarify portion, So billings, talk first to is expansion NRR, the renewals, not factor renewals of ACV. we of does to any quarterly new I That's when that right? point right? about expansion a purely think and want disclose into only that in I It factored we're don't about incremental actually your talking on basis. sort we our on,

if look of still NRR number. is terms in had we of XXX to our that last percent range, ranges given that back XXX-ish though, in we it say, the will and in sort is Day, that in I what to So range some Investor

we the talked is business. how in And so new it yes, we've the we're year expansion to as what about baking as also where full in given seeing and relates for are caution and some guide,

Operator

gentlemen, today's your Thank concludes this for call. you and conference participation. Ladies

disconnect. now may You

Nutanix (NTNX) 6 Mar 232023 Q2 Earnings call transcript