Nutanix's software and services sales soared during its latest quarter with total revenue hitting $289 million but the the hyper-converged pioneer reported a higher loss than Wall Street was anticipating.
The company reported a loss of 21 cents per share, excluding certain items, versus the loss of 19 cents per share that analysts were forecasting. Company shares were down nearly 4 percent in after-hours trading on Thursday, trading at $53.35 as of 7 p.m.
Even with the steeper-than-expected loss, Nutanix said it hired more employees than ever before with a renewed focus on the channel.
The San Jose, Calif.-based company added more than "60 new sales teams" in addition to nearly 85 employees acquired from Nutanix's recent acquisitions of Netsil and Minjar, said Duston Williams, chief financial officer at Nutanix during the company's third quarter earnings call Thursday. As of April 30, Nutanix has a total of 3,710 employees worldwide
"We executed our full-court [hiring] press flawlessly and ended up hiring more new employees in quarter three than in any previous quarter by a wide margin," Williams said.
Dheeraj Pandey, founder and CEO of Nutanix, said there's a focus on channel partners with the influx of new hires.
"As we segment a lot of our own sales force, we're focused on, 'How does the channel actually go and deal with the SMB and the midmarket?'" said Pandey. "We've actually had a renewed focus on the channel with new customer logos. We have a rebate program in place now for the first time in the history of the company. We're really excited about what's happening in the channel with pipeline for new logos. There's been an acceleration focus there."
Pandey said he's expecting channel partners to displace market competitors and expand Nutanix reach. "There's a lot of legacy to go displace," he said. "We expect a lot from the channel in the coming months and years. We know the higher up we go in the global 2,000, the more the brand will trickle down to the midmarket."
For its third fiscal quarter, which ended April 30, Nutanix reported total revenue of $289 million, up 41 percent year over year, beating Wall Street estimates of $279 million. The sales reflect the elimination of approximately $52 million in hardware revenue in the quarter as Nutanix shifts towards selling only software products. Software now accounts for 78 percent of total product sales compared to 22 percent in hardware.
"It was the third quarter in our transition to our software-defined business model and I can say we have managed changed immensely well," said the CEO.
Software revenue reached $159 million, an increase of 57 percent compared to the same quarter one year ago. Services sales hit $68 million, up 51 percent compared to $45 million during the same quarter one year ago.
Deferred revenue jumped 62 percent year over year to $540 million, while billings grew 50 percent to $351 million. Nutanix's reported gross margin of 67 percent, up from 59.5 percent in the third quarter of 2017.
"We had good growth in both billings and revenue. We saw a rapid gross margin expansion. We ramped up hiring to support our growth plans and delivered on our milestones to shift to a software-defined business model," said Williams. "We are well positioned to reach our goal of $3 billion in billings for fiscal year 2021."
For its upcoming fourth fiscal quarter, Nutanix is expecting revenue between $295 million to $300 million.