Specifically, NTNX posted a loss of ($0.21), missing the ($0.19) consensus, despite a 41% jump in revenue to $289.4 mln, which was comfortably ahead of the $279 mln expectation.
NTNX is a developer of computer storage technology which makes it easier and more cost-effective for companies to run servers. The technology it uses is called "hyperconverged", a cloud platform that converges traditional silos of servers, virtualization, and storage into one integrated system.
Its two core products are called Acropolis and Prism. Acropolis is software that delivers distributed storage, application mobility capability, and a built-in "hypervisor", which is software that allows multiple operating systems to share a single hardware host. Prism provides integrated virtualization and infrastructure management, operational analytics, and administrative capabilities.
The company has been in transition mode over the past several quarters as it looks to move away from hardware and focus more on selling software. For the quarter, software and support revenue was $227 mln, representing 78.5% of the total. NTNX targeted to eliminate $45 mln of pass-through hardware revenue, and it exceeded that goal by eliminating $52 mln. The strategy here is to focus on higher margin software sales in order to boost its profitability over the long term. Indeed, gross margin did improve sharply this quarter coming in at 68.4% compared to 61.2% in the year ago quarter. This was driven by its transition to the software-defined business model.
Circling back to the top-line, the 41% jump in revenue was largely driven by its success in winning large deals. During the quarter, 44% of its bookings come from large deals and it now has 67 customers with over $5 mln in lifetime bookings.
But, as noted above, NTNX ramped up its hiring during the quarter, cutting into its profitability. The company added over 60 new sales teams, and overall, NTNX hired more new employees in Q3 than in any other previous quarter. As a result, overall expenses were up 37%.
Looking ahead, the company is expecting similar results as Q3 as it issued downside EPS guidance for Q4, seeing ($0.22)-($0.20) versus the ($0.13) consensus, but, with revenue ahead of estimates at $295-$300 mln compared to the $289 mln consensus.