Earnings call transcript Q3 2023

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Operator

Thank you for standing by, and welcome to the Nutanix Q3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded.

I would now like to turn the conference over to your host, Mr. of VP Nutanix's Valera, Investor Relations. Rich ahead, go sir. Please

Richard Valera

conference Good quarter the discuss welcome of today's afternoon, to call results to and XXXX. of our third

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

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

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

XXXX, for which our also XX-Q our website. second of SEC's filed available is fiscal on the We quarter

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

recommendations remedial of on the implement Committee plans all and completion investigation. measures Audit the Our

of expectations its investigation third-party the software from usage impact the and estimated estimates on statements Our that of including a financial guidance. and subject resolution was matter our

use and financial opportunity, the in our our market global growth, the and and Our factors model performance regarding position business chain and including geopolitical competitive driving of targets impact future periods, new expectations current macroeconomic, future of timing performance industry transitions, profitability, metrics trends different or and supply our and challenges.

involve differ and adversely materially of These which anticipated could to results these are risks statements. some statements and uncertainties, which from forward-looking actual beyond our cause control, by those

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

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

are a Please today's specifically basis on exclude have expressed and measures all use charges. for reference otherwise to must financial we non-GAAP certain on adjusted note, revenue call, except been

of in provided measures financial and press available non-GAAP these release. our website, measures have the GAAP earnings our on We IR extent to reconciliations financial

holding we appearing Investor registration Day in Investor see at you Lastly, there. our NASDAQ be September London City press Nutanix for Nutanix hope XX. its some the see on will will on York to of XXXX earnings be also New Conference XX, release information. and June in Please

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

Rajiv Ramaswami

third center Rich, delivered uncertain good macro focus macro transformation saw Against you, performance guidance their data that cost and strong strength to our we strong backdrop, of afternoon, an the in a our and quarter, total we results businesses to Thank came backdrop, prioritizing business. and renewals the ahead initiative continued With a ownership, continued digital of respect on our with see everyone. solid our to third quarter in in modernization plays platform. with of which

to the modest for also our driving the inspection some backdrop, sales uncertain believe in customers, is related cycles. this more consider by we increased we outlook deals However, remainder a which the see is macro in fiscal to We this and year. of dynamic of continue elongation

quarter. to our In third-party the our tonight, fiscal announced also earnings release usage with minimal having constraints chain investigation are on our related of to filing subsequent the point impact Supply the at of for fiscal the now conjunction server and Audit quarter of with software third and appear have business. our normalized partners second Committee this conclusion our XX-Q we

help our identified measures we and working happening prevent financial to address identified result on a As internal again. material over in the process, remedial are weakness weakness control reporting this a of from this and

employees responsible had will forward. on the no have held impact historical material it and accountable. going also our we minimal have impact This believe financials, matter We

details, pleased provide has While we completed. been are more the Rukmini investigation will

year-over-year Taking growth, billings by look topline a of driven renewals strong continued closer at performance our the XX% growth, we business. delivered quarter, ACV third solid including

focus Our management us expense of I'm cash flow million financial cash year-to-date our $XX free strong continuing on the performance. third ongoing helped quarter. generate Overall, with our pleased free in flow, performance

products modernize with decided existing to their the value cloud looking market solutions optimize This quarter a and expect third demand. changing and Our our our its transformation. their they manufacturing our platform platform is both look cloud containerized are operationalize managing seeing to and accelerate applications provider Red cloud around portfolio results costs. XXX semiconductor on of our environment this their their A deploy Fortune reflect on their largest the reduce was in that costs, manufacturing in Nutanix good numerous the customers customer to deploying They private to OpenShift new core quarter meaningfully in as new while this to resources, and enhanced carefully facilities responding based example also in their deal agility world. enabling will infrastructure Hat's while digital

to the We scalability, to this delivered our some within our of the largest benefits and see footprint our by win total world's expand cost ownership ability of as performance, and platform a testament companies.

the leading their by EMEA modernizing ownership operating to Platform, total run and with in the solutions infrastructure the who architecture IT built-in Cloud provider improve quarter region, several their They Cloud applications, our multi-cloud of cost was looking for win its simplicity including automation leveraging across Management notable in Infrastructure-as-a-Service. their Another Nutanix payment a implementing to Nutanix countries. was critical business chose and

They throughout operating stack, Storage annual deploying needs. the adopting Unified their service databases By their for to also this their full and unstructured Nutanix Database and lowering anticipates XX%. Nutanix data cost managing their adopted by organization customer Service Nutanix IT

Nutanix seeing distribution advantage efficiently also to across or public take clouds. their Clusters We optimize the of and of customers NCX and rapidly are capabilities Cloud workload on-prem

the on-prem agency government they workload to was to migration. workloads public cloud in on a workloads a to They government third shift that keeping in be running mandate. cloud-first using the Platform to An Nutanix Cloud of quarter EMEA contingency for Azure a thought what NCX example was with for initially a would plan looking variety region in the chose shift

However, without as speed afforded to decided NCX NCX primary simplicity the found workloads well the public their on for and transitioning refactoring, migration. Azure, effectiveness cost they cloud as on they given quickly by for workloads NCX running make solution

without their our the and workloads This refactoring the with operating lower largest of to public time and expense services provided customers win appreciate demonstrates management, data with their Platform consistent their and clouds provider rapidly from to by seamlessly governance private Nutanix and how workloads shift cloud the ability ongoing the the Cloud costs.

and investment in in-person product-related our from saw and continued Moving we early several reflecting almost hybrid May, partners. announcements, strong conjunction with In first in attendance important innovation our our user conference .NEXT, engagement platform. made and multi-cloud on, into customers four held we years the .NEXT

which cloud SX the mobility Nutanix's multi-cloud And new class native we power data cross-cloud First, with storage, data and enterprise storage, snapshots announced technology, recovery of for disaster to snapshots, services, will will deliver including directly introduced by service. to we AWS' enabling Services which bring applications. Data storage object snapshot full starting Kubernetes, Nutanix Kubernetes

on-prem, cloud management and will public truly visibility, Nutanix hosted a by We monitoring solution also enable a for cloud-delivered environments. across universal Central, that or cloud, management model single providing operating announced edge console a

Hybrid vision a on Project or Beacon, native deliver Finally, our we public multi-year introduced Platform-as-a-Service data-centric Platform-as-a-Service, for Nutanix offerings to on Multicloud effort cloud. natively

build developers Project the to underlying aims application the and of infrastructure, decoupling With Beacon to goal the run and its applications enable them anywhere. from data once

while our that encouraged focused growth. while year of line outlook proposition the in we and raise our of We compelling continuing to closing, model drive the delivering In profitable macro us remains topline bottom are enable outlook. platform the the our to and and now uncertain, sustainable, our cloud innovation customers environment business for remain on strength fiscal value future,

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

Rukmini Sivaraman

you, Thank Rajiv.

software customer found over providers multi-year of used validation, our period. I of our Audit testing, provide Before that and software our summary discuss two I Audit the would implications. Committee's Committee a Upon completion in from support of for investigation, a the interoperability the the a outlook, customer review result and and completed to like evaluation usage training of resulting third-party non-compliant manner financial first was third-party proof-of-concept,

Audit with respect Committee software certain of employees one of our In business to and concluded addition, that in the engaged providers evaluation use conceal in intentional ethics conduct third-party other to our of code misconduct policies. and of violation

be who We our identified employment primarily responsible misconduct. certain investigation, for over have intentional weakness to in the for Through we financial reporting. material internal found a were control the terminated employees

we processes, non-compliant software. are communication raising use remedial communication did determined a In manner. effectively To and measures, enhanced not this controls or material continued address enhanced importance weakness, that integrity to internal particular, implement in provide necessary will we training third-party timely concerns of including of identify several the information implementing and regarding the and our

have cumulative estimated impact XXXX, accrued for which represents usage the of non-compliant software future $XX this a past expenses of over payments period. from for issue amount accounted multi-year recording QX vendors estimable by estimated We financial the million of as these of of two

accordingly in period financials the filed prior earlier also shown the have today. corrected We XX-Q

annual software to dollars. millions to third-party single-digit the We operating low approximately impact expect expenses ongoing this the be incremental of in of usage

the estimated today information financial QX review software earlier remedial SEC. impact You in XXXX including XX-Q report third-party our related XXXX about the can and quarterly complete find for with measures filed additional we to that information, QX and the our results

this We has are pleased that been completed. investigation

now our the by QX $XXX ACV and of good growth to XXXX. provide and we higher beat than and $XXX XXXX QX million in QX was our year-over-year $XXX was Revenue was guidance million billion, quarter $XXX year-over-year the million than growth QX of will full-year year-over-year outlook higher $XXX growth ARR in at commentary metrics. followed million QX of of guided $X.XXX million, results, XX%. all XX%. was of I $XXX which of representing a for million during XX%. a end billings on XXXX our the to QX guidance a a

was about Average expected. logo in New were quarter-over-quarter QX. duration QX XXX flat additions years as in three contract

quarter the in deferred described revenue revenue recognized over supply the had reduction QX time in $X assumption of QX benefited orders estimate likely our with with percentage dates of As due license last guidance. previously, line approximately to continue start million million partner earnings dates in our provided start than percentage the on in from constraints more $X as be to future an call. was we future chain

challenges chain as faced impact well. partners to our business supply As by its have expect on appear normalized, we server to our normalize

provide future dates. a revenue impact from not forward, start going this with quantification of to will we As continue result, orders

of of impact was QX Non-GAAP the the expenses to vested non-recurring QX margin operating which QX portion related our about XX%. employee delay Non-GAAP both and of million QX in in margin non-recurring in operating $XX X%, related and advisory RSUs obligations that software million. gross was third-party a XX-Q in of in for to our Non-GAAP filing $X the legal tax and $XXX were in including QX. review expenses, million approximately

non-GAAP these QX operating would Excluding been one-time items, margin X%. have approximately in

income based in million on net of shares. of weighted fully diluted was or approximately linearity share $XX was per QX. QX and Non-GAAP XX days Billings outstanding $X.XX DSOs EPS were in XXX shares good million average

is which securities flow QX million outstanding flow. of X%. few cash payment notes cash million, class the margin amount and settlement $XX routine rather now action implying $XX The as paid process. in legal Free for on One, expected our approximately previously D&O the expenses additional expected. the flow under change to and settled is QX the litigation, free inclusive in and was our cash due of previously insurance of is be free QX A recovery than net timing QX in of to in expected fees

$XX million on and $XX our delay RSUs call usage by for expected vested in filing. our related QX cash tax non-recurring employee approximately the the earnings and XX-Q obligations the includes free impact to of our a in in Two, last mentioned QX that in flow of of QX of cash caused portion as million March

four, we XX-Q net of outflow million flow QX program, free our would estimated occur QX cash paused $XX $X.XXX and the software meant by in QX up to filing with delay delaying related cash an in normally million also in the cash, non-recurring ESPP, to Three, our expenses QX And that ESPP QX. We was of XXXX. which related from QX legal billion review. also short-term for investments $X.XXX of and impacted equivalents approximately to $X third-party in ended billion, slightly payments advisory cash

to to of ACV $XXX on XX% million, to $XXX $XXX operating XX%. million, million $XXX of Moving is guidance approximately and for fiscal X% of revenue to of margin The non-GAAP QX million XXXX as margin non-GAAP QX. follows: billings gross

year the at $XXX billion guidance to full-year year-over-year a of of growth as million, at year-over-year midpoint margin midpoint; $XXX midpoint. X% for non-GAAP cash one XX% of XXXX to $XXX of at $X.XX The XX%; operating the a margin quarter free the to of of approximately left. revenue growth range; million, Moving implying margin the non-GAAP flow of fiscal of a is outlook $XXX follows: with a million million to year-over-year at billings ACV of margin on cash flow gross points XX% X%, over $X.XX X% midpoint; to XX improvement the the free of billion, of

some provide I will full-year our now color on guidance.

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

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

XXXX expansion the is remains is below our ACV year performance potential longer slightly these by term macro and believe and and what Our expectations entering impacted fiscal dynamics is. of performing new we some year

considered updated have this We business continues renewal well. dynamic to in guidance. The perform our

However, new and business. our tends expansion duration to lower compared at aggregate be a average to it contract

Our improve team renewals continued also the relative over as economics has execution. improved time on have their to renewals

the Second, last to full-year to compared assumes similar decrease quarter, our slightly contract year fiscal that duration XXXX. would comments guidance

margin previously, stated to non-GAAP outlook operating fiscal is as year XXXX X%. Third, for X%

to range X%. been Excluding review, the have one-time would the to software related expenses third-party X% this

items of $XX $XXX Finally, totaling million. following $XXX cash to impact the the updated about of includes non-recurring flow the free guidance million million

million QX. of of the to which for net was Approximately mentioned non-recurring related review and finally, potential the $XX million tax portion cash Approximately an advisory software to litigation QX XX-Q. in across filing $XX our million obligations And our a from outflow resolution it software million the fees with for of is employee settlement. non-recurring the expected RSUs and $XX Approximately estimated in payment vendors. the usage for QX third-party previously to vesting, related QX because in $XX third-party cash due legal QX delayed in

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

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

Operator

question first line Jim Our Instructions] Piper [Operator you. comes of the from Thank Fish Sandler. of

line Your open. is

James Fish

given guess lower going to just that customers? this a have space. as some to I retention and rate as off being we here. Maybe quarter entering existing what actually before the the are closer Hey about on slowed and much fairly or of rates elongated are it but minimal guys. were where we net talked guide Nice around give behind sales hindered elongated year? of now. now kind and not congrats a bit We're I hearing getting you assumptions And in sales kind all investigation the macro with the about sales it how this seeing exact, impact gets essentially guys from than of starting cycle Or cycles. expansion on XXX you kind time talked know for just economy? you're with Obviously, we've cycle others

Rajiv Ramaswami

you Jim, can with and me there. let numbers some there start Rukmini some comments qualitative give

So first issues the I you first the solid, about talked all, at macro of okay? you NRR, is renewals, our from look No way, think all, piece. renewals, when really of by

business impact, the our in new look macro of with you customers. as when it at itself Now as terms logos the both well impacts expansion existing

customers. longer. more sales which longer we've seen impact has – gotten inspected the is, terms by Now deals therefore, in what what the we takes to cycle modestly last saw similar is of quarter, And some are is

money. that spend the of other kind expansion more run of as to is has sweat both some this terms continue the they before of at might in tend impact can environment customers they They which, an assets is can environment us. and common to during existing their here, current least in as for business which factor Now an new course, long

you is business what is what potential. expansion FYXXXX and the for I'd qualitative entering if expansion is because ACV our of and believe these that us and So dynamics. year also new on for at the look that, slightly expectations impact below is below long-term our performing that And say overall, new that, color we

you anything? to do Rukmini, want add

Rukmini Sivaraman

Yes. Jim. noted, about as I NRR. disclose on question And basis, in Jim, Investor that don't a But sort And talked XXX%, we what that at range Day you last for is of really our had will the thanks range. still in the XXX% quarterly say we think on I that that it's

specifically. And so regard leave I'll that with it NRR to at

James Fish

I with that. question. sweating guess, I Obviously, of Yes. some direct appreciate from and competition, just offerings favorite point your That's traditional outside your and Any from Rajiv. of for yet helpful really ongoing hyperscaler your And impact native you, of you maybe acquisition alluded competitor seeing Rajiv, top Rukmini raise? and the what the are assets. that vantage you to

the trying solid you competitive Just landscape to guys are putting still Thanks. here growth. understand as up

Rajiv Ramaswami

Yes.

Jim, change a first last of compared not lot think, on of to I that. whole all, quarter

potential the clearly, their we're level acquisition, to that Broadcom continuing do terms to of are on at acquisition. look this higher looking engagement, So customers world the who certainly associated the manage around piece risks seeing with options, that with of in many

XX cycles talked our to Now to nine sales tend be about months. as we

this in And seen so FYXXXX. in benefit factoring we haven't quite meaningful from

if Now careful have other hyperscaler the public it's would is, to cloud gotten going the anything, cloud. the public to a or think in simply customers versus the I about all I on native the of equation side cloud more much of What it. piece our dynamic, put from what competitive say

be I look public at running terms So cloud? the How focus that? have we using what optimizing of been see on-prem, I in should more should can what much in

helping operate multi-cloud customers us our us whole and actually strategy a this our helping at playing around that's in helping certainly to – world is And our strength hybrid time.

Operator

of comes Thank next the Instructions] from Needham. Our you. line Mike Cikos [Operator question of

is Your line open.

Michael Cikos

Was getting the the for you quarter Thanks behind Audit comments here investigation as then to And uptick next far highlight strength how linearity really it Can me specific and as worked as Committee us the more it is called on Or congrats the similar in maybe within I'll you to was from here. on out? think month wanted out Or of echo the guys. guys the guide. the I quarter? on through through Hey played quarter a course the more in help trends this each moving dedicated getting peer quarter – my how played building? quarter? you that the the snowballing chapter. perspective outperformance as over to the month out, progressive far as to a

And then Is about as driving wrap see that there sustainable now. margins uptick business? – again. slight on heads I'll you the the that can gross how in margins of and it what's anything gross But we longevity ask Thank just you to follow-up, uptick the is my help as well. do good us around, our to think

Rukmini Sivaraman

Mike. you, Thank

first, question on So a linearity.

largely on typical unusual to of what significant would to any would focused Mike? QX, trends we And So gross margin, linearity. efficiency then I and compared is say really all I on as linearity that. on wasn't say be expected. There was continue So the that's

sustainable XXs move bit. I range, terms low will was a that this is, think, I in around your question, right, we maybe think, be think how little that in So we of,

that are so. them things services are it some we're professional we do focused the to our them makes continuing adopting the especially make newer make to helping effectively, attaching for of portfolio on of where and sense, we One sure customers of sure are parts is

the this and So those the but saw at which here as of around pieces factors guide it all there, moving move in point. for might well, full-year we bit little a

Michael Cikos

very sense. Makes Thank Rukmini. lot of much a you

Rukmini Sivaraman

Thank you, Mike.

Operator

Thank next Bora you. Instructions] Pinjalim the Our question JPMorgan. from comes of [Operator line of

line is open. Your

Pinjalim Bora

of hear Beacon. Project is Great. it the like a Hey Nutanix investigation. of holy innovation you Congrats and to Rajiv, grail. in out guys. a on the about coming like the great talked seems of It .NEXT, the lot quarter seems conclusion

GA? building Talk that, to blocks tried is VMware I to are what platform? where kind where as to a the long for multi-hybrid of us think see around us of it kind take PaaS it product technology – a well. going cloud about are we? of launch of kind has And How the

Rajiv Ramaswami

Yes.

whether of on let’s portable cloud So the an set look that say to and services on build a be on-prem. recap whether to it Platform-as-a-Service able app data any offerings if help using run them you on companies just anywhere, a truly it cloud Beacon the substrate, and completely focused or at be Project once underlying any multi-cloud public quick of be native is,

So that's the quick vision. of recap the

at Now multi-year happens clearly you is .NEXT, what we – if and that this steps. is said is a for this it look us, in at journey multiple

substrate where we look we Nutanix companies – of variety our on-prem have databases. we a today today at that Nutanix in manage for you help offer consistent database a service, a way If are, and a on with foundation underlying that databases

on public a top to substrates. We cloud of offering on are path that available make native

the first comment on be specific in the will we releasing terms So road And of when in get execution that it. to closer map. we that will step

messaging, add other then like that over will cashing, that example, things beyond services, on. streaming, would we And cetera, time et for be

could also done partnerships. in Some be of these

and this database we get people truly in I apps journey. terms us will we to said, I like we like everywhere. multiple of expect that also – hybrid started there them able to establishing of offering ecosystem a are with being broader building will that And Nutanix like-minded our vision be over for So and run years, who

Pinjalim Bora

the bit forward. going for when if Thank Help the read or you I wrong guidance and the the beat like maybe by or if me worse? correctly. I And guidance, of raising look that numbers is But what by XX, $XX a little – XX my little like getting you're you million, confidence seems revenue think bit something a is macro here at getting gives I'm actually cautious you maybe Understood. there's that. wrong. It I math Rukmini, sentiment

Rukmini Sivaraman

question. for Pinjalim, you, Thank that

few So right. has I'll a guide pieces,

start just well, me But guide I that a question pointed revenue. So ACV up out, with took XXX know as I we as your XXX take was with second, start from to we if you billings here right, and on for did well. revenue let up as

good in which we that is out cycles, touched to of one earlier, assets cases, sales new all believe, stretch right, a a elongation some choosing the in So sort given logo, terms it's feel to you the longer. point little the upon see about caveats I we customers their of modest if

dynamics playing So out. some of those are

the And things of revenue But guide a pretty of other I'll point I waterfall think the a sort right. few for that billings when time, we we built are obviously to from things that that we quarter, believe our foundation a make more the time. sort as number, in transactional in has of quarter-over-quarter is day over strong bolsters one is flows business, well, renewals perform form then one with started over a that if from us year, ACV helps right, overall the overall. guidance growing as is that continued And mix but said

billing So which on on revenue side. is the quarter more net side the are there's a that date from also the were we a recognizing year revenue, start seem more deferring right, seeing, we've we about talked seed boost benefit orders each than this this future and the from than revenue license

that So some those driving that guide, things Pinjalim. of are are the

Pinjalim Bora

date start kind of QX kind I on for one of assumption down? you follow-up bring guidance Can Did that lastly. your

Rukmini Sivaraman

but but chain that fair we are normalize seen for normal, overall, So say But does think like what dynamics those are assumed better, that would to largely partners it had assumed assumptions we end those normalized. hadn’t the it this Pinjalim, it's specifically the in, I things completely server our at the going point, we be diverse towards be supply right, right. haven't we seem year, could have of

Pinjalim Bora

Got you much. very Thank it.

Rukmini Sivaraman

Thank you.

Operator

[Operator comes line you. Instructions] next of Wang from question George Thank Barclays. of the Our

Your open. line is

George Wang

the Hey, competition of quarter guys. questions. two Congrats have and successful on the I investigation. the

against providers. Broadcom service VMware, from of do on merger, Any the more partners, post comments First love especially can on providers, the backdrop especially you this any thoughts the on have guys all, and that? channel get service hopefully, you

Rajiv Ramaswami

you, a only the have time Absolutely, on partners. provider opportunity that really spent not have engaging route that's to larger tell recently I'll untapped George. large of a market us started mean, that's because I and historically for with lot service we

fact, fruit it's already and In bearing us. for

in quarter of last before, quarter service think came quarter largest provider or the I the channel. through deals the some the

providers We keep adding actually going forward. to that partners. we for terms our us of high being strong hopes channel So service in set have a of

certainly partners, What when forward. it Investor our still that your to more terms very with I game service would a to analogy And work of more going are to still with service I comes us the out market. point, going Day providers large billings those think, channel that we say only building to so channel and be established a are of now inclined first in service there's we're inning baseball put provider and to the in ours of I of that providers think some clearly, is

George Wang

Rajiv, a Also, Great. quick follow-up.

given expand, of stack the kind additional of the time land kind whole of use mature increasing Maybe kind the of unpack business more of growing especially for are In terms of of seeing the over attach and cases. survey entire and attach to platform? some a kind you the can the model quantify you kind so

Rajiv Ramaswami

think you through our And I now an no we of portion Yes, solution-oriented doubt. came our seen while course, ago. product new portfolio portfolio. of if coming have I increasing we that deals, out a simplified recall, there's mean with

of for as management of is things Now Nutanix that, very as that specific part what cloud seen Nutanix we part we've higher sell attach the cloud notably management, today.

logical attach infrastructure, Nutanix see we happening impact. there's very a that we and cloud whenever certainly So sell cloud of management,

versus it database think I other more infrastructure. of targeting be is to think then admins service the And I somewhat core developers the database specialized a because and Nutanix cell tends on pieces,

I the think So that's which an attach we storage, component is is good then of workloads on of our seeing attach. database also not our although attach, to a And as much are Certainly, portfolio last trying platform. unified more there. running with that

adopted certainly entire quite is So being of more more going portfolio. how we are and the customers actually are and with adopt market. revised portfolio this in to And happy wanting the

So to – build to NCI CM taking in some plus which when whole be the it's and you're them consider stack, U.S. said, thing, a cloud, want whole people would it's very the like common I for

George Wang

thanks queue. Great. go I will again, the Okay. to And back

Operator

Thank you the Morgan next Marshall Meta comes from question line [Operator Instructions] Stanley. of Our of

is line open. Your

Meta Marshall

sort you names modernization data Congrats the theme Maybe Great. clearly quarters. on past of I a across projects appreciate optimization or quarter, it. guys over center have commented on guys. few the cloud projects multiple

kind Just does are journey you kind where data I'm what And Nutanix what state in does wondering, about be hybrid just used So conversation that Nutanix? involve – kind do from products on of are end that kind involve of kind their cloud? a of more where involve just of upfront just state could of deeper like? of kind of maybe deeper adoption And upfront? out we kind services figuring portfolio, just are on guess think out that that of about I the the but centers spoke looking kind their you of figuring end what of of does customers

Rajiv Ramaswami

Yes.

a that's good think very question, Meta. I

period, right. we cloud going I one operating model conversation with the but yesterday of ago of of is of now public just a there model they of what it's I set CapEx enterprise who cloud were consumption. services agility, What cloud say a much necessarily So like said, instead location, terms self-service, in this that, on a to fact, I in a large set is go offers like cloud not a terms the an years are to customers they would rich OpEx first. and I'm had customers. our the sometimes And were – of only think They which model, about in more five

you go cloud, in what and today. if realize important So do just everything deal and have cost the is a that growing optimization with of part public to they they

around what hybrid now run seeing are So more this to workloads across is we much multi-cloud. right wanted discussion locations. both People

if operate do base actually them us, to have fact one the things because actually is all offerings narrative enabling working hard hard out customers working recall, within of people we relevant most HCI we've to the get infrastructure. we company, a terms we terms do are build can that of out for of a them And very our this do customer for as are company, to own we in awareness our across to what of right, And us as that history today. – in our you know been started about that hyperconverged to them

And actually efficiently. help well, across we we can operate environments how both about when very them talked very these

that start strategic the of our using portfolio the think our as capabilities of implement much services more more customers with I they certainly to becomes and conversation and our well more there. of some

customers I still mindset our So for and from there's say, here is of, opportunity again, operations that I us, lot a the think, whole – would this up. opening hybrid

Meta Marshall

kind of I'm onetime Thanks. And maybe there that impacts this envelope, stepped Thanks. QX if underlying and quarter-on-quarter Great. as that just in stable? actually on guide. OpEx just OpEx all it that doing back seem missing anything down Rukmini, you relatively saw so of from to Or the there? the is just Is fiscal I’m would but

Rukmini Sivaraman

exactly these I that's about, items some The talked but some really relatively pieces, Meta. small. that right, there's mean, underlying nonrecurring OpEx stable. of moving No, I out back you when one-time

to stable. correct out you should are that you back if So be those QX QX relatively

Meta Marshall

Thanks. Perfect. Okay.

Rukmini Sivaraman

Thank you.

Operator

comes Instructions] Blair. the of Jason line Ader [Operator of next question Our you. from William Thank

line Your open. is

Jason Ader

Yes. Thank to you. just on follow up asked wanted that I last to Rajiv. question

of you've moving say, kind you have a what, customers in years. a XX so sort pace seen the a and optimization, give talked say, you've over and were the last, take a a the the seen back bit maybe maybe you for about us terms little public know step over shifting enterprises you kind in five we TCO, environment of of little months In this four picture of prior too know, to refactoring let's the quickly of more cloud, evaluation just of last the of thought versus applications, of last lot initiatives what and years? that and five cost terms In what don't around this I seen years, paint workloads things

Rajiv Ramaswami

last will changed Yes, topic. has Jason, this definitely over on year say this I dialogue the

think and and for into refactor, pretty ramp, public of going it I once go that like expensive set they forth. customers a let's on right, into And cloud, sense cloud. second, place. then we the use you ran of to was are very And and everything easy, the two got ease in said, they've an the did who at public everything scale, in them they think move so the I to refactor was the to upfront operate they're starting I actually mean, is One easy it's that to refactor ran first issues.

your a as before. the seeing doing that premium significant then start there's to services, bill soon start a you compared lot there But you then up and going what of were you you using realize

And very our key is cost consciousness optimization much of is part very customers many so much that a of now thinking.

public mentioned no definitely close everything let at is my right. And it's to now Meta's to a like question, eyes, longer refactor all, That's so conversation cloud. I – me the there not more the

have about, I to footwear. to okay, a process going figuring go think out more I'm going for it's I'm what much

do one et And center. establishing that portfolio, decide have It state architecture their it I for make what as they're the heard to to Does a in be mention they're going then in app going app. about that it that refactor sense every fact, is target data and they running cetera. to customer approach to

now they more careful people their application I are portfolio managing than think So about before. much were being

Jason Ader

you. Got a that. just quick then follow-up as on And

lift if it's stop I the use then a you things just and what's of pushback a app? AWS, that have is in lose about that and think as the app I you mind risk the sort that's customer we like that that an always route refactoring guess want and NCX easy potentially on does app great an the gap, go got As shift, your and it's step And but NCX, refactored. sort inevitable on and to VMware right? well, Ultimately, and that of

Rajiv Ramaswami

Yes.

points. customers the public can it. of Yes, I ship Jason, to cloud and lift doubt no two all, think first and about take it easily

fully that the we run take a cloud-native start app that's scenario, version refactor savings, environments and little in they as efficiently, help even refactored cloud-native ability manage understood bare right. cloud single app in been that's a say, and one run pure creating very is a on-prem their cost native that and one that advantages, metal it of with on also to of and things actually have NCX can in get on NCX can team but cloud of Now less Even management, of AWS in ease terms terms or set our app, tools. the app, about their for both and of you Azure significant potentially of the a

So sustainable. those are

cost the We've examples well. runtime where deliver in substantial can costs as itself, of terms of also seen application on depending we ongoing savings quite

plus build So where that a look things you our we like services, center them. to when cannot look at combination of people as at and Project Beacon, land set future, want they apps cloud-native can data portable these using where then they decide

what provider's you an It you apps the as you're AWS they're cloud look consuming then using temporary, So we a migrate and Azure, us, Nutanix hyperscaler the services. at of or you're for perspective, and don't environment. think are or from is about a migrate And whether it picture. as actually customers if also long Amazon NCX care matter out hey, operate. of think our is really in running those doesn't not, on We as if

combination so – quite time. makes sticky a NCX not there's what this is So over

Jason Ader

Thanks. Very helpful.

Operator

next Bank of comes Wamsi you. America. the [Operator Instructions] question from of line Mohan Thank of Our

open. line Your is

Wamsi Mohan

by you those quarter? services trends what Yes. Thank seeing on anything or I government particularly healthcare demand wondering or you. you are see comment verticals? in different, maybe Do you in was if financial could vertical? this And currently

Rajiv Ramaswami

Wamsi. Hey,

the will and are changes. for what's about financial verticals I If banking with know important engagement any not been from than So seen not larger yes, anything seeing people services significant now us. banks, seen we patterns. we have changes before. I say happening significant But in are world. any talk mean, we demand have some both more the in I of us healthcare

to us changes. terms And in of significant nothing so report for

Wamsi Mohan

the environment weak but Thanks, I your pockets that frankly, across center. And is follow-up, gross Okay. data kind obviously of gotten many market and the Rajiv. broader the increased overall a strong, there demand have lots of levels more competitive. as very And discounting are areas of mean, margins, of in

went table? part saw any of wondering kind those was take, didn't leave on table billings if you if did revenue of I the So you you trends. And or

Rajiv Ramaswami

most benefits manage solution. sell. we economic any ASPs deals can our value that of the quite We of of is build and models our look significant at gets that, have actually talk justify economists you selling that have using by a cloud of and a and of imagine, the customer the team the – steady. we is about how – and our who been the almost look have And for course, that's showcase we TCO reason Part as closely Yes. And at very we pricing.

that's impacting yes, competitive our a So haven't environment but course, significant there, we there's yet seen anything gross of out margins.

Wamsi Mohan

drawdown impact what Can Okay. for a And in. might headwind fiscal sort having through that fiscal Thank kind you. XXXX? us what maybe last could you help And just backlog if sneak XXXX? one is one I of think on pose of

Rukmini Sivaraman

Wamsi. one. that the I'll question, Thank take you for

to backlog said dynamic as both past, on year entered recognition is we've which typically results, revenue record specify that. we and from reflect benefiting yes, billings think Wamsi, both but from the of kind So level in beginning of we've from year, year. ACV or this backlog future backlog, deferred So we license And these as for I of benefit revenue with like fiscal of company, from right? this has or entering a don't about year, will right, benefited this the guide talked specifically just a this have ACV as a which have both But we revenue, benefited from growth level strong start of anything also expect date the and revenue the the we growth software orders of did billings. the full-year

Wamsi Mohan

Okay. very Thank you much.

Rukmini Sivaraman

you. Thank

Operator

RBC Thank comes question you. Capital from Bergstrom next Our [Operator Instructions] Markets. Dan of

open. is Your line

Daniel Bergstrom

the the previous on Hey. a outlook? question for to despite here. Maybe versus third the in the with did in you for level us for approach some consistent a build guidance Or positive anything change conservatism It's Matt quarter? the squeezing of Thanks using and quarter, macros fourth Dan outlook around Bergstrom are Hedberg.

Rukmini Sivaraman

I'll take Dan. that Hi, question.

been We in pretty consistent have our approach.

we So believe which more Did the correctly? as to question related for get your become QX conservative question. necessarily haven't I was I QX, less or

Daniel Bergstrom

Thanks. Perfect. fourth Yes. And then to the verify quarter from cash for free remarks. on flow prepared the maybe

in will and $XX expected $XX that be million million a quarter but fourth correct? third have outflow in may like the Is the Sounds that there's been quarter.

Rukmini Sivaraman

QX way of that, about we I cash That minute if flow, for So talk So right? just also at done think you the a free outflow, to to bit quarter-to-quarter little onetime cash flow right? XXX. can $XX a year-to-date if of cash there to And maybe that we full-year, guide some is for to And the reasonable you said about provided free would XXX flow is that are correct. add a already take million the QX be a And that million about million $XXX-or-so normalized a $XXX now less year. normal we've with $XXX adjustments. a million free

Daniel Bergstrom

Perfect. Thank you.

Operator

Instructions] comes Erik the question JMP of from [Operator Our Suppiger Securities. next you. line Thank of

Your open. line is

Erik Suppiger

us use had how the for congrats Yes. vendors question. you the with work to taking quarter that And to compliance you regards With issue, do on to tell that? the this? the you learned audit. continuing the And software software from two you to are and Thanks about can on the

Rajiv Ramaswami

Yes.

I think I that, Erik. can take

it, as are for the cases use yes, about. that And continuing a discovered the we discovered to and discovered use software it, non-production So But we talked review. was of purchase it again, software. management yes, part we

Rukmini Sivaraman

towards add And both this thing commercial the those are working is resolution. contact at a vendors in with of we time would I are and only

Erik Suppiger

All good. you. right. Very Thank

Operator

all conference. participating. I'm no today's [Operator and further at you time. Instructions] Thank for conclude this showing Ladies does gentlemen, Thank you. this questions

disconnect. now Have day. great may You a

Nutanix (NTNX) 24 May 232023 Q3 Earnings call transcript