Nutanix, Inc.

And gentlemen, thank you for standing by and welcome to the Nutanix second quarter fiscal 2021 earnings conference call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Speaker Tanya Chin. Thank you. Please go ahead.

Good afternoon, and welcome to today's conference call to discuss the results of our second quarter of fiscal year 2021. This call is also being broadcast over the web and can be accessed on our investor relations website at ir.nutanix.com. Joining me today are Rajiv Ramaswamy, Nutanix's CEO, and Dustin Williams, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing financial results for its second quarter of fiscal year 2021. If you'd like to read the release, please visit the press releases section of our IR website. During today's call, management will make forward-looking statements, including statements regarding our business plans, goals, strategies, and outlook, including our financial performance, financial targets and performance metrics, and competitive position in future periods. the timing and impact of our current and future business model transition, the factors driving our growth, the success and impact of our CEO transition, macroeconomic and industry trends, and the current and anticipated impact of the COVID-19 pandemic. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a detailed description of these factors, please refer to our SEC filings, including our most recent annual report on Form 10-K for fiscal 2020 filed with the SEC on September 23rd, 2020, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after this call. As a result, you should not rely on them as representing our views in the future. Please note, unless otherwise specifically referenced, all financial measures we use on today's call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Lastly, Nutanix Management will host virtual meetings with investors at the Morgan Stanley Technology Conference on March 2nd. We hope to connect with many of you there. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Tanya. And good afternoon, everyone. Q2 was a strong quarter across the board. We exceeded guidance across all metrics, saw ACV growth, spent less than expected on operating expenses, gained momentum in our renewals engine, and continued to make progress on our transition to subscription. Before I get into more details, I'll begin by talking about how I've spent my time since joining Nutanix in December and provide my initial observations on the business and our priorities going forward. In addition to some introductory meetings with shareholders, I met with many of our major constituents, including customers, partners, and employees since coming on board in December. The observations gleaned from these meetings has provided me with a good perspective with which to form some priorities for our future. These observations include the deep value that our customers get from the simplicity of our software, the importance that our channel partners play in growing our business at scale, the significant opportunity ahead of us with strategic alliances that will help us penetrate bigger accounts and the quality and engagement of our talented employee base who are critical to the execution of our plans. Feedback from these key constituents and collaboration with my engaged leadership team has enabled us to clarify several core priority areas to drive long-term growth. All of these priorities are part of the natural evolution for a company at scale. First, we will drive more simplification of our portfolio and how we take our solutions to market, including our products and packaging for the benefit of our customers. Second, we will focus on deepening our partnerships to provide more impact in how we go to market, as well as create more opportunities within larger accounts. Third, we will continue our transformation of our business model to subscription, with a significant focus on renewals and our path to cash flow positivity. And fourth, we will continue to nurture and grow our talent pool, as well as to ensure that our employee base has a diversity of talent, thought, and experiences to create a better workplace environment and business outcomes. Now, let me provide a little bit more detail on these conversations, observations, and priorities. I've had many encouraging and informative conversations with customers, including our advisory boards. When it comes to our product portfolio, Customers love our simplicity, think our solutions and support are exceptional, and appreciate the end-to-end nature of our portfolio. They've also told me that Nutanix is a critical component of their business transformation plans. On the constructive side, some have expressed that they would like us to make it easier for them to adopt and consume our software by delivering more solutions that bring our portfolio together and to simplify our pricing and packaging. We have built this feedback into our key priorities for our go-to-market strategy. During the quarter, I had the pleasure of presenting at a well-attended global partner event where I met several key partners. They see the value that selling Nutanix software and solutions can bring to their business as they help customers on their multi-cloud journey. Last quarter, we launched our Elevate Partner Program, which focuses on partner competencies through training to increase the quality of partners working with us, and partner enablement, including improving the deal registration process to increase volume. With this focus, we have seen a 12% year-over-year expansion in the number of partners who transacted with us during the quarter, as well as an increase in partner-led deals. Engaged and efficient channel partners will be a critical component of ensuring that we have the leverage needed to grow and scale our business through our subscription transformation. Our partnership with HPE, Lenovo, and other server OEMs remains strong. Our customers recognize tremendous value in having freedom of choice in their selection of hardware with these partners and in a broader ecosystem. allowing us to address the increasingly complex needs of large enterprises. For example, we were selected by a leading financial services company headquartered in EMEA to modernize their data center and to provide virtual desktops to more than 90,000 users. This multi-million dollar one-year subscription deal was with our core software, our AHV hypervisor, and our files solution. We partner with HPE, Citrix, and Atos, one of our global systems integrator partners, to provide the total solution required for their use cases. I've been encouraged by the value that our customers see from our software, the variety of workloads they're deploying on our platform, and our traction with our global 2,000 customer base. We now count 950 global 2000 companies as our customers after adding about 20 in the quarter. We continue to progress with our public cloud partnerships and integration with both Azure and AWS and are exploring how to maximize these relationships to help our customers on their journeys to multi-cloud. Our partnership with Azure is still in its early days. but we are excited about its prospects. We will focus on deepening our integration and relationships in this area. Finally, I've had the pleasure of speaking with many employees at all levels. I've been delighted to see that there is strong talent in this company, and I'm highly impressed with their passion. It's no surprise to me that Nutanix was named in both the Fortune Best Workplaces in the Bay Area 2021 and a great place to work in India during the quarter. I already mentioned that an area of opportunity for us is to advance our efforts to diversify our talented employee base. In addition, we will increase our focus on ESG and related disclosures. Now, let me talk about the market opportunity in front of us, as well as provide more color on the momentum and execution we saw during the quarter. During the quarter, industry analysts highlighted the market potential for hyper-converged infrastructure, or HCI, and its path to multi-cloud. IDC released reports concluding that HCI can create a consistent experience across all platforms, whether on-premises or in the cloud, how multi-cloud strategies are now the enterprise norm, and how a large majority of IT managers plan to migrate or repatriate workloads from public clouds to an on-premises for ease of management. In addition, Gartner raised its forecast for HCI systems during the quarter to $8.1 billion, a five-year CAGR of 16% from 2019 through 2024. They noted that organizations are expanding their HCI systems footprint on a wider set of enterprise workloads, with emphasis on a new set of software capabilities, such as orchestration in a multi-cloud world. Now let me provide some highlights about our performance this quarter. We delivered record ACV Billings growth of 14% year over year, which included notable strength coming from emerging products. Our OpEx was less than expected and we will continue a disciplined approach to managing our OPEX going forward. Our thesis of the benefits to a shift to term licenses continues to play out with better deal economics and reduced average term length, driving shorter renewal cycles. As we have said, getting this right will be critical to our success, both in growing the top line and in reducing our operating costs. A year into the pandemic, we continue to see various industries and verticals impacted differently. While some industries face headwinds, there are a number that have the resources to focus on innovation and transformation with IT as their enabler. To that end, we saw strength and demand from the financial services, healthcare, and state and local government sectors in the quarter. Our emerging products, particularly our database management solution, ERA, and our file storage solution, Files, had a strong quarter. Emerging product, ACV, was up over 100% year over year, and we had a 37% attach rate to deals on a rolling four-quarter basis. We are encouraged by the fact that nearly half of the Fortune 100 have adopted our emerging products. Our ERA solution is showing great momentum and market fit, and I see this as a competitive differentiator for us going forward. We've seen repeat purchases from large enterprises who are early adopters. This quarter, a U.S.-based financial services company purchased ERA and our core software in a multimillion-dollar deal. They are using ERA to provide a single database management platform to enable their app developers to provision new environments, clone and refresh multiple tier one workloads, and now have the ability to replicate and recover large databases in a fraction of the time that their current solution takes. ERA has become a competitive differentiator for us in the telco, finance, retail, and manufacturing sectors in particular. And we now count three of the top 10 Global 2000 customers as era customers. We saw growing interest in our clusters and AWS solutions since its launch last quarter. One customer example this quarter is a pension services company in EMEA, an existing customer who is building on their Nutanix hyperconverged infrastructure software as they continue their journey to multi-cloud. They were looking to increase the mobility of their applications and workloads across multiple clouds, as well as to have options for bursting. And clusters fit the requirement. Ultimately, they selected the Nutanix solution so that they could get a single solution to consistently manage their private, hybrid, and multi-cloud environment. We remain focused on go-to-market sales productivity and execution. They're pleased with our progress so far, which is a reflection, in part, on Chris Kedaraj's leadership. During this quarter, Chris was promoted to Chief Revenue Officer after leading the global sales organization for the last year. We're also seeing material progress in demand-gen productivity across the board, including our virtual events and overall digital marketing performance, all at significantly lower costs. We also continue to see benefits from our test drive, which has seen an increasing number of trials over the past year and has proved to increase conversion rates when compared to sales where test drive isn't used. We are encouraged by our momentum, and we will continue to focus on overall go-to-market efficiency. We continue to innovate our storage offerings with the recent release of new features, enabling our customers to simplify data management and effectively manage costs, moving IT teams even closer to true hybrid and multi-cloud operating models. The new capabilities include cloud tiering for object storage, hybrid cloud file storage, and simplified disaster recovery for both objects and files. Recently, we also announced new features in our cloud platform to help protect customers against ransomware attacks, which are becoming even more common as a result of increased remote work. These new capabilities, all natively built into the Nutanix stack, add to Nutanix's rich data services for network security, files and object storage, and business continuity to help enterprises prevent, detect, and recover against ransomware attacks across multiple cloud environments. We are pleased with the external recognition we continue to receive for our solutions and our market share. In Q2, we were recognized by Gartner as a leader in their magic quadrant for hyperconverged infrastructure for the fourth year in a row and were positioned best in execution when compared to all vendors in the report. Also, Gartner released its software market share numbers for hyperconverged infrastructure, and Nutanix was once again ranked number one in market share for HCI and saw our market share increase year over year. In addition, in IDC's new software-only view of the market, the software-defined infrastructure tracker, Nutanix is the leading vendor in the space. This new view is not influenced by hardware sales. Let me conclude by reiterating how excited I am to be leading Nutanix into its next phase of growth and execution. We remain focused on our vision of making clouds invisible, and freeing customers to focus on their business outcomes, and our North Star continues to be our customers. We believe our mission of delighting customers with a simple, open, hybrid, and multi-cloud software platform with rich data services to build, run, and manage any application will help us achieve that vision. Our strengths lie in our significant experience designing software that is easy to use, and in our expertise in key areas for the journey to multicloud, including storage and data services. I have confidence in our continued momentum going into the second half of the year, balanced with cautious optimism about the global macroeconomic environment. I very much look forward to sharing more details with all of you at our investor day on June 22nd. I'd now like to turn it over to Dustin, for more details about our financial performance.