Nutanix, Inc.

and thank you for attending today's Nutanix Q3 fiscal 2022 conference call. My name is Selena and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Rich Valera, Vice President of Investor Relations. Please go ahead.

Good afternoon.

Joining me today are Rajiv Ravaswamy, Nutanix's President and CEO.

Anurk Meenie.

Today, Nutanix issued a press release announcing financial results for its third quarter fiscal 2022.

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, strategies, initiatives, vision, objectives, and outlook, including our financial guidance, 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 metrics in future periods, our competitive position in market opportunity, the timing and impact trends, including the ongoing global supply chain challenges, and the current 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 annual report on Form 10-K for the fiscal year ended July 31st, 2021, and our quarterly reports on Form 10-Q for fiscal quarters ended October 31st, 2021, and January 31st, 2022, as well as our earnings press release issued today. These forward-looking statements apply as of today, and we undertake no obligation to revise these statements after the 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 IRR website and in our earnings press release. Lastly, Nutanix Management will be participating in the 4th of June on June 6th.

And with that, I'll turn the call over to Rajiv. Rajiv? Thank you, Rich, and good afternoon. Exceeding all our guidelines and metrics and seeing in our renewal business.

We continue to see solid demand for our new Nutanix cloud platform, driven by businesses looking to accelerate their digital transformation, modernize their data centers, and adopt hybrid multi-cloud operating models. That said, the quarter didn't finish as we had expected. Late in the third quarter, when we typically book a significant portion of our orders, we saw an unexpected impact from challenges that limited our upside in the quarter and affected our outlook for the fourth quarter. Increased hardware supply chain delays resulted in an increasing percentage of our orders having start dates in future quarters, or in some cases, being delayed pending availability of hardware. This affected in Q3.

Continue in Q4.

After seeing our attrition rate among sales reps,

improved for each of the prior two quarters, we saw it worsen in Q3, driving a lower-than-expected rep headcount entering Q4. She will discuss these issues in more detail in her prepared remarks.

Our third quarter reflected continued execution on our subscription model and improving bottom-line performance. We deliver ACV buildings growth of 28%, bolstered by strong execution on our building base of renewables.

Our revenue, which continues to be affected by term compression, grew 17%. Top line growth, combined with diligent expense management and leveraged from renewals drew a sharp year-round income. While timing of collections adversely impacted, our free cash flow performance prioritized working towards sustainable free cash flow generation in F523.

We're pleased with our third quarter financial and reflected healthy adoption of our core Nutanix cloud.

of infrastructure by customers looking to modernize their data centers and deploy hybrid cloud operating models, as well as good and cloud management. It's a seven-figure deal with a large North American-based energy exploration and operations company that was looking to modernize their traditional three-tier infrastructure while adding the flexibility of extending their workloads into the public cloud. This new customer has decided to adopt Nutanix Cloud Infrastructure, including Nutanix Cloud Cluster, or NP2, for public cloud access, as well as Nutanix Cloud Manager for full-stack self-service automation application lifecycle management, and hybrid multi-cloud management capabilities.

Their Nutanix solution is to simplify their operations and seamlessly extend their workloads into the public cloud.

Another example is an EMEA-based online sports betting platform that was looking to quickly deploy their service with NC2 to a regional AWS location in the Asia Pacific region, going from proof of concept to live deployment in just two weeks. Using NC2, they were able to expand operations into a new region while benefiting from simplicity of a single unified control plane across private and public clubs.

We recently launched our updated product portfolio and aligns our offerings with the solutions we saw our customers looking for.

Roughly one quarter in is what we're seeing. It's streamlining the coding process, increasing our competitive

enabling more high-velocity transactions for our full stack offerings, comprising Nutanix cloud infrastructure, to quickly identify solutions for their specific needs.

Our largest win in the quarter, a multi-million dollar order with an EMEA-based company, in the financial services sector, was a good example of a deal that benefited from the adoption of our updated portfolio pricing and packaging. This new customer, who was unhappy with the performance of their business-critical applications on their existing three-tier infrastructure, chose our new Nutanix Cloud Platform full-stack offering, comprising both cloud infrastructure and cloud management,

due to its simplicity, built-in automation versus competing alternatives.

They also added Nutanix Unified Storage and Nutanix Database Service for their storage and database automation needs, respectively, being impressed by their performance and seamless integration with the broader Nutanix platform. Go-to-market leverage with partners has been one of my top priorities, and we continue to see progress on this front during the third quarter.

I'm especially pleased with the momentum with Red Hat.

As we've been seeing a building pipeline and growing number of joint wins for both OpenShift and Red Hat Enterprise Linux, running on Nutanix Cloud infrastructure. One example is a North American based financial services provider that was looking to reduce the time and resources required to manage OpenShift on their bare metal servers. They decided to move their OpenShift environment running their business critical workloads to Nutanix Cloud infrastructure, including its AHV hypervisor, looking to benefit from the simplicity and compelling total cost of ownership advantages of a Nutanix cloud platform versus their existing infrastructure. We are excited about the large and building opportunity pipeline that we see with Red Hat. In the third quarter, we continue to receive industry recognition for both our core platform and our unified storage solutions. Nutanix was recognized

as a major player in the IGC worldwide distributed scale-out file system 2022 vendor assessment.

And we'll also name customer's choice in Gartner's infrastructure and files and systems object store. We're especially pleased with our strong performance

in the Customer Review-Driven Peer Insights Program, which we see as a reflection of our obsession with delighting our customers.

Now I'd like to talk about our recent progress on another one of my priorities, developing and attracting talent. First, following Dustin Williams' decision to join a pre-ICS with Nutanix, We promoted Rukmini Sivaraman, previously our Senior Vice President of Financial Planning and Analysis, to be our new CFO, effective May 1st. In our five years with Nutanix, Rukmini has a unique understanding of our company and industry.

I see Rukmini's appointment as a great example

of the deep bench of talent we've cultivated at Nutanix. And believe our financial, strategic, operational, and human capital expertise.

The first turning score in a new role.

Second, I'd like to highlight the recent appointment of Mandy Dhaliwal as our new Chief Marketing Officer and Shyam Desiradu as our new head of engineering. Both Mandy and Shyam are exceptional leaders and unique insight into what it takes to build and deliver industry-leading solutions.