Nutanix, Inc.

Good day and thank you for standing by. Welcome to the Nutanix Q1 Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star zero. And now I'd like to hand the conference over to your first speaker today, Rich Valera, Vice President, Investor Relations. Thank you. Please go ahead.

Good afternoon and welcome to today's conference call to discuss the results of our first quarter fiscal 2022. Joining me today are Rajiv Ramaswamy, Nutanix's President and CEO, and Dustin Williams, Nutanix's CFO. After the market closed today, Mechanics issued a press release announcing financial results for its first quarter fiscal 2022. If you'd like to read the release, please visit the press release section of our IR website. During today's call, management will make forward-looking statements, including statements regarding our business plans, strategies, initiatives, vision, objectives, and outlook, as well as our ability to execute thereon successfully and in a timely manner, and the benefits and impact thereof on our business, operations, and financial results, our financial performance and targets, and use of new or different performance metrics in future periods, our competitive position and market opportunity, the timing and impact of our current and future business model transitions, the factors driving our growth, 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 risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K, filed with the SEC on September 21st, 2021, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we would undertake no obligation to revise 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, except for revenue, 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 be participating in both the fifth annual Wells Fargo PMT Summit and the 45th NASDAQ Investor Conference on December 1st, and the 24th Annual Niedermann Company Growth Conference on January 10th. We'll also be holding our annual meeting of stockholders on December 10th. We hope to see many of you at these upcoming events. And with that, I'll turn the call over to Rajiv. Rajiv?

Thank you, Rich. And good afternoon, everyone. Our first quarter was a good start to fiscal 2022. building on the momentum we established in our prior fiscal year. Despite ongoing challenges from COVID-19, we delivered another solid quarter, exceeding all our guided metrics, seeing better than expected free cash flow, delivering significant new product innovations, and making progress with our strategic partnerships. We saw healthy demand for Nutanix's cloud platform, driven by businesses looking to accelerate their digital transformation, modernize their data centers, and adopt hybrid multi-cloud operating models. While ongoing supply chain challenges have made it more difficult for our customers and partners to procure their hardware, thus far we have seen minimal impact on our business. but we continue to watch the situation closely. Taking a closer look, our fiscal first quarter reflected continued execution on our ACV-based model and was marked by strong top and bottom line performance. We saw record ACV billings, which grew 33% year over year, our highest growth rate in over two and a half years. We also grew revenue 21% year over year, our highest growth rate in over three years, despite seeing expected term compression. Once again, we saw excellent linearity, which combined with diligent expense management enabled us to nearly achieve free cash flow breakeven in the quarter, putting us well on track to achieving our target of sustainable positive free cash flow by the second half of calendar year 2022. We achieved these results while continuing to add to our backlog. Overall, we are pleased with our fiscal first quarter financial results and believe we remain on track to achieving our target of 25% plus annualized ACV billings growth through fiscal year 2025. We continue to see strong adoption of our hybrid multi-cloud portfolio and solutions during the quarter. Our first quarter is typically a strong one for our federal business, and this one was no exception. Our largest customer in the quarter was a federal civilian agency that substantially expanded their usage of Nutanix's cloud platform, including our unified storage and database automation solutions. This customer is also using clusters on AWS to birth additional resource capacity to the public cloud to quickly augment their on-prem environment. Having a unified environment between on-prem and public cloud allows them to leverage the same team to manage both environments and more readily meet their business service level agreements. In another example, national retailer Land's End purchased our Nutanix cloud platform, including clusters on AWS, to enable bursting of their virtual desktop into the public cloud during the peak holiday selling season they are also utilizing our platform to run cpu intensive crm applications more efficiently and support their security and compliance needs we see lance end as a great example of the natural fit of our clusters offering for businesses with seasonal workloads finally during the quarter A European-based multinational pharmaceutical company substantially expanded their usage of a hybrid multi-cloud platform, including our unified storage and database automation solution to run a number of virtualized applications and enable virtual desktops in their branch offices. In September, Nutanix customers, prospects, and partners from all over the world joined us for our .NEXT digital experience. We were pleased with the attendance and engagement at our signature event, where we saw a record number of new Nutanix professional certifications and viewership for our keynote and breakout sessions. We made several announcements at .NEXT, starting with the launch of a major release of our cloud platform, AOS 6.0. with new integrated zero trust security, disaster recovery, and virtual networking innovation. We also introduced new capabilities that make it easier for our customers to simplify data management and optimize database and big data workload performance on a Nutanix cloud platform. Finally, we announced a new partnership with Citrix. through which the two companies will deliver remote work solutions that can be deployed across private and public clouds, combining the simplicity of the Nutanix Cloud Platform with Citrix virtual apps and desktop services to provide secure, on-demand, and elastic access to apps, desktops, and data from any device in any location at any scale. Nutanix is now a preferred choice for HCI and hybrid multi-cloud solutions for Citrix virtual apps and desktop services. And Citrix is a preferred choice for enterprise end user computing on the Nutanix cloud platform. The two companies will also partner on customer support and product roadmaps to ensure a seamless customer experience and timely validation and interoperability, respectively. Finally, our go-to-market teams will partner to sell to new and existing customers and enable channel partners. We see this partnership as another proof point in our strategy of furthering customer choice and enhancing our platform by partnering with other best in class providers. We're pleased with the industry recognition we continue to receive for our solutions. Earlier today, Nutanix was named as a leader in Gartner's magic quadrant for hyperconverged infrastructure for the fifth time in a row. And in a testament to the growing breadth of our platform, the company was also recently named for the first time as a visionary in Gartner's magic quadrant for distributed files and object storage. I am excited about our recent announcement that Dominic Delfino will be joining Nutanix as our chief revenue officer on December 6. Dom brings deep and relevant domain knowledge as well as go-to-market experience at scale. He will be a great spokesperson for us with customers, partners, and the industry at large. And we expect him to hit the ground running when he joins us in a couple of weeks. As I approach my one-year anniversary as CEO and reflect on an eventful year, the journey so far has been unquestionably gratifying. And I'm proud of what we've been able to achieve against a challenging backdrop. We unveiled our new vision, shared our multi-year strategy and financial plan, and delivered significant enhancements to our Nutanix Cloud Platform. while reshaping it with a focus on solutions. We also made significant progress on our strategic partnerships, signing new or expanded agreements with Red Hat, Lenovo, HPE, and Citrix. Finally, we began to see the benefits of our subscription transition in the form of consistent delivery of results ahead of expectations, an accelerating top line, and a meaningfully improving bottom line. As I look forward, I'm excited by what's ahead. We address large and growing markets which are benefiting from the secular tailwind of an increasingly digital world. We have a strong hybrid multi-cloud platform to address this opportunity. Our subscription business model positions us to continue to deliver strong growth with the opportunity for substantial sales and marketing expense leverage as renewals become a larger portion of our business. To it all, we continue to delight our customers, and they continue to love us. In closing, I am pleased with our performance in the first quarter and optimistic about our ability to continue to deliver against the vast opportunity ahead of us. And with that, I will hand it over to Dustin Williams.