Nutanix Stock Falls As Coronavirus Affects Revenue Guidance

‘We are in an environment that is murky due to the impact of the coronavirus -- dealing with the unknown for the first time in the company’s decade-long history,’ says Nutanix CEO Dheeraj Pandey during the company’s second fiscal quarter 2020 earnings report.

Nutanix’s stock plummeted nearly 25 percent in after-hours trading Wednesday night after the company lowered its revenue and booking guidance for its current fiscal year due to the coronavirus concerns. Additionally, Nutanix said it will “pause” its headcount expansion plan for the time being.

“We are in an environment that is murky due to the impact of the coronavirus -- dealing with the unknown for the first time in the company’s decade-long history,” said Nutanix CEO Dheeraj Pandey during the company’s second fiscal quarter 2020 earnings call with media and analysts Wednesday night. “Hence, we are cautious about our second-half guidance.”

The San Jose, Calif.-based company previously projected total fiscal year 2020 software and support revenues between $1.3 billion and $1.4 billion, with billings between $1.65 billion and $1.75 billion. Nutanix now projects total fiscal year 2020 software and support revenues to be between $1.29 billion and $1.36 billion, with billings between $1.6 billion and $1.67 billion.

“If you look at the impact to the coronavirus in general and the verticals that it hits – it’s retail, transportation, manufacturing, hospitality and travel and all that stuff. It’s kind of a ripple effect,” said Duston Williams, chief financial officer at Nutanix. “We have some very intriguing deals in Japan that we feel really good about, but the timing of those, we just can’t take an aggressive stance on that at this point. … The important thing to understand is we feel good about the business overall.”

[Related: Nutanix Promotes Chris Kaddaras To Lead Global And Channel Sales]

Nutanix stock closed on Wednesday at $32.63 per share. After the company reported its second fiscal quarter earnings, its stock fell 24 percent to $24.76 per share in overnight trading.

Nutanix stock has slowly been rebounding with after hour shares now at $27.75, down 15 percent since Wednesday’s close.

Williams said the drop in revenue guidance is due to coronavirus concerns as well as the company’s faster-than-expected transition to subscription. In Nutanix’s second fiscal quarter, 79 percent of billings came from subscription, surpassing the company’s previously stated goal of 75 percent by the end of fiscal year 2020.

“Of the $50 to $80 million decrease in [total contract value] billing guidance range, approximately $25 to $30 million is related to the faster than expected transition to subscription, with the remaining amount attributed to the reduction in our APJ (Asia-Pacific and Japan) region sales plan,” said Williams. “Our APJ region is more dependent on new business in any given quarter, and with the shutdown in China and the slowness and uncertainly being exhibited in other APJ countries, we believe it’s prudent to take a caution view of our APJ performance for the next few quarters.”

Additionally, Nutanix said -- excluding sales teams and a few other selective roles -- the company will take a “pause on a significant portion of our planned headcount” expansion in the second half of our fiscal year, contributing to a $20 million to $50 million expense reduction from its previous guidance range.

“We have slowed headcount because we would like to have more clarity to see if there might be further potential disruption related to the impact of the coronavirus and whether that disruption spreads through other portions of the world. Secondly, it puts us in a better position to efficiently integrate the 1,400 or so employees we have added over the last year,” said Williams.

Nutanix has a global headcount of 6,100 employees.

In terms of overall revenue, Nutanix reported total second quarter revenues of $347 million, up from $335 million year over year.

Nutanix software and support revenue hit $338 million in the quarter, up 14 percent year over year. The company’s software and support billings reached $420 million, up 12 percent year over year.

Nutanix reported a net loss of $217 million during the quarter, compared to a net loss of $123 million in the same quarter one year ago. Deferred revenue hit $1.06 billion, up 35 percent year over year.

“Business is robust,” said Pandey. “We just have to be a little more cautious.”