Nutanix, Inc.
Q2 2020 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by and welcome to the Nutanix Q2 Fiscal 2020 Earnings Conference Call. I would now like to hand the conference over to your speaker today Tonya Chin, Vice President of Investor Relations and Corporate Communications. Please go ahead, madam.
- Tonya Chin:
- Good afternoon and welcome to today’s conference call to discuss the results of our second quarter of fiscal 2020. This call is also being broadcast over the web and can be accessed in the Investor Relations section of the Nutanix website. Joining me today are Dheeraj Pandey, Nutanix’s CEO; and Duston Williams, Nutanix’s CFO.
- Dheeraj Pandey:
- Thanks, Tonya. Q2 was another strong quarter and I’m pleased to see continued execution from across our organization. Our TCV billings came in on the high end of our guidance range and our TCV revenue gross margin and EPS all exceeded our guidance despite a softer US federal business. Further our deferred revenue surpassed a $1 billion for the first time this quarter growing 35% year-over-year.
- Duston Williams:
- Thank you Dheeraj. In Q2 we made outstanding progress on our continued shift to a subscription business. Subscription billings increased significantly and now account for 79% of total billings up from 73% in Q1. And subscription revenue now accounts for 77% of total revenue and that’s up from 69% in Q1. We repeatedly stated that it’s our desire to move forward through the subscription transition as fast as possible as we made great progress on this goal in the quarter. Our execution in this area far exceeded our expectations in Q2 significantly surpassing our FY ‘20 Q4 goal of 75% and almost equaling our stated CY ‘21 goal of 80% mentioned at least year’s Investor Day. It should come as no surprise that the short-term downside to this faster than expected push to subscription is the impact of the top line. Based both on term compression when compared to life of device deals and some pricing differential between our life of device licenses and our term based offerings. We expect to recover this top line impact as renewals come in overtime. This impact of the faster than expected push to subscription is reflected in our Q3 in fiscal year 2020 top line guidance. Exclusive of our professional services billings, our goal is to ultimately drive our subscription billings to 100% of total billings. The average dollar weighted term length in Q2 ‘20 including renewals was 3.9 years flat with the 3.9 years we reported in Q1 ‘20. As with last quarter this calculation assumes life of device licenses or five-year terms. Some specific Q2 financial highlights; TCV revenue or software and support revenue for the second quarter exceeded our guidance range of $330 million to $335 million coming in at $338 million up from 14% a year ago and up 11% from the previous quarter. TCV billings, our software and support billings were $420 million versus our guidance of $410 million to $420 million up 12% from the year ago quarter and up 13% from the prior quarter. The TCV billings were negatively impacted by approximately $5 million due to the faster than expected shift to subscription. ACV booked in the quarter was $130 million and was up 18% from the year ago quarter. As a reminder with our discussion in Q1, we defined ACV as the annual contract value of new business plus the annual contract of renewals and we calculate ACV by taking the value of each transaction booked in the quarter including renewals but excluding professional services divided by its term length and then summing the total of those values. While we saw a number of positives to our expectations, our federal business underperformed our expectations in the quarter. this business has always been somewhat lumpy in terms of timing and the significant portion of the federal miss was related to large deals that we believe were not lost, but rather pushed out to future quarters whoever the time to close these deals is uncertain. New customers bookings represent 24% of total bookings in the quarter versus 26% in Q2, 2019 and up from 23% in Q1, 2020. Our HPE DX related business continued its strong performance and accounted for 117 new customers. For the second quarter in a row the Americas was our best performing region in Q2. TCV bookings, our software and support bookings from our international regions represent 49% of total bookings versus the same 49% in Q2, 2019. Our non-GAAP gross margin in Q2 was 81.4% exceeding our guidance of 80%. We expect gross margins to hover in the 80% range plus or minus a little bit over the next several quarters. Operating expenses were $396 million below our guidance range to $400 million to $410 million and our non-GAAP net loss was $116 million for the quarter or a loss of $0.60 per share. Now looking at few quick things on the balance sheet, we closed the quarter with cash and short-term investments of $819 million. We used $52 million of cash flow from operations in Q2 which was positively impacted by $19 million of ESPP inflow and free cash flow during the quarter was negative $74 million and this performance was also positively impacted by the $19 million of ESPP inflow. Now turning to the details of our fiscal 2020 guidance on a non-GAAP basis for fiscal 2020. TCV, we expect TCV billings to be between $1.6 billion and $1.67 billion versus our previous guidance of between $1.65 billion and $1.75 billion. TCV revenue to be between $1.29 billion and $1.36 billion versus our previous guidance of $1.3 billion to $1.4 billion. Gross margin of approximately 80.5%. Operating expenses between $1.63 and $1.65 billion versus our previous guidance of $1.65 to $1.7 billion. This guidance is impacted by a much faster than expected transition to subscription and a more cautious view on our business activities in the greater APJ due to the anticipated impact of the Coronavirus. Further, this FY 2020 guidance yields an operating loss and free usage that is roughly in line with current consensus estimates of $550 million and $250 million respectively. The implied ACV based on the FY ‘20 guide is approximately $505 million. The guidance for FY 2020 assumes no change to the current dollar weighted average deal terms currently as 3.9 years. And our guidance also does not assume any meaningful disruption to the global server related supply chain linked to the temporary factory closures in China. For additional clarity, of the $50 million to $80 million decrease in TCV billings guidance range, approximately $25 million to $30 million is related to the faster than expected transition to subscription with the remaining amount attributed to the reduction in our APJ region sales plan. Our APJ region is more dependent on new business in any given quarter. And with the shutdown and China and the slowness and uncertainty being exhibited in other APJ countries, we believe it’s prudent to take a cautious view of APJ performance for the next few quarters. Our cautious APJ view also includes Japan, which generally operates under a March fiscal year end period. We have a few large deals pending in Japan, and which we assume a reduced portion will close in Q3. Based on our current outlook, both the Americas and EMEA region seem to be in a good position to deliver their expected results for the second half of fiscal 2020. This, of course, assumes that the business interruptions in the APJ region from the Coronavirus does not spread to these regions too. As our updated operating guidance suggest, excluding sales teams and a few other select roles, we are recently taking a pause on a significant portion of our planned headcount in the second half of our fiscal year, contributing to $20 million to $50 million expense reduction from our previous guidance range. Regarding our hiring, we have slowed headcount for the following two reasons. First, we would like to have more clarity to see if there might be any further potential disruption related to the impact of the Coronavirus, and whether that disruption spreads to other portions of the world. And secondly, quite honestly, it puts us in a better position to more efficiently integrate the 1,400 or so employees we’ve added over the last year. Regardless of this headcount pause, we still plan to hire for critical roles on an as needed basis. We view this selected headcount pause as simply the right thing to do, and is in no way related to any change to our overall positive view of our business going forward. Now, turning to our Q3 guidance. On a non GAAP basis for Q3, we expect TCV billings to be between $365 million and $385 million, reflecting a year-over-year growth of 13% to 19%.TCV revenue to be between $300 million and $320 million, reflecting year-over-year growth of 13% 20%. Gross margin of approximately 80%; operating expenses between $420 million and $430 million and a per share loss of approximately $0.89, using weighted average shares outstanding of approximately $196 million. The Q3 guidance also reflects the much faster than expected transition to subscription and a more cautious view in our business activities in the greater APJ region due to the Coronavirus, consistent with my comments on our fiscal year 2020 guidance. Additionally, the sequential decline in our FY ‘20 Q3 implied booking guidance, which at the midpoint of the guide assumes a 7% sequential decline is actually better than what we experienced for actual FY ‘18 and FY ‘19 Q2 to Q3 sequential historical bookings performance, which was approximately a 10% sequential decline. Furthermore, the sequential increase in our FY ‘20 Q4 implied booking guidance, which at the midpoint of the guide assumes a 25% sequential increase is also in line with our FY ‘18 and our FY ‘19 actual Q3 to Q4 sequential historical bookings performance, which was a financial increase of 33% and 25% respectively. The current consensus numbers for TCV sequential growth from Q2 to Q3 and from Q3 to Q4 are quite misaligned to the historical averages. Our Q3 guidance and the applied Q4 guidance brings these sequential growth rates back in line with historical averages. As you are aware, FY ‘20 was our first year providing annual guidance. With this approach, the yearly guidance gets updated each quarter, and we also give quarterly guidance for the upcoming quarter. For example, during Q1 earnings call, we provided an updated annual guidance as well as our guidance for the upcoming quarter that being Q2. At this time, we obviously did not opine on Q3 and Q4, which put the shaping and the sizing of these quarters in the hands of the analyst community. Going forward, during our initial annual guidance setting at the start of any fiscal year, we will add some additional clarity on how we see the fiscal year shaping up, specifically around quarterly seasonality. If we had provided this insight at the beginning of the fiscal year, the sequential growth rate for the Q3 and Q4 top line consensus might have been more in line with historical trends and with our current guidance. And one last comment before we open the call up for questions. You know, clearly the company has been through a tough -- couple of tough transitions over the last few years with significant top line impact related to the hardware elimination and the current subscription transition. Although, when you cut through all the messiness and go back and focus on one simple metric that being total revenue, it is nice to see, like so many other companies that have been through subscription transitions, that finally the year-over-year growth rate has now started to reaccelerate once again. Our total revenue year-over-year growth rate appears to have bottomed out in Q3 and Q4 FY ‘19, growing at a negative 1%. That growth accelerated to 1% in Q1 FY ‘20, 3% in Q2 FY ‘20. And based on the midpoint of the Q3 guidance and implied Q4 guidance, we anticipate that the year-over-year growth rate will further accelerate to approximately 10% in Q3, and 25% in Q4. With that, operator, if you could now please open the call up for questions. That’d be great. Thank you.
- Operator:
- Your first question comes from the line of Rod Hall from Goldman Sachs. Your line is open.
- Unidentified Participant:
- Thank you. This is RK . I wanted to do ask about ACV. You reported 18% growth versus your guidance for 24%. So is the delta all driven by the Federal business or are there any other factors to think about then, could you give us more color there? And I have a follow-up.
- Duston Williams:
- Sure. So a vast majority was driven by the Federal underperformance in the quarter and also just the subscription impact. We mentioned five million of TCV, so there’s some ACV in there. And, you know, if you look at this ACV metric, it is a real-time metric of the business and we decided to provide that last quarter, because I thought it was important to give that kind of metric that you can’t hide from anything. It is what it is. And I think it’s important metric during a subscription transition, that things are messy, and you can’t really get a good feel for the business going forward. But I think, we’ll continue that through this fiscal year, and then probably end up transitioning to a more conventional ACV, which is more of a waterfall -- kind of fourth quarter waterfall type ACV metric that most companies show there. But, yes, it was mostly clearly mostly Federal, and a little bit of the subscription top line impact.
- Unidentified Participant:
- Thank you. And I wanted to take a step back and talk about your subscription transition. You had some problems with setting the pricing, right, and the sales motion and the discounting. So could you talk about where you are with each of these challenges and how you see that moving forward?
- Duston Williams:
- Sure, Dheeraj, you want to?
- Dheeraj Pandey:
- Yes, I mean, both of us should probably chime in. I think, you know, pricing was a big change almost a year and a half ago, I would say, and we have mostly past it. Sales and customers have been surprisingly very receptive. I think, you know, customers -- we thought that the large customers will probably not move to subscription this quickly. But we’ve been pleasantly surprised at how much they’ve actually been forthcoming and willing to actually move from the old license model to the new license model. Even the channel, for that matter, including the global system integrators have actually moved in that direction quite well. I think we had a conservative view on when we’d get to 80%. That was in December, January of 2020-2021, is when we said we’ll get to 80%. But one of the things we learned along the way that we have to plow through this as fast as possible. And as we realized that the large customers are willing to take this, went ahead and said let’s get ready to take 80% even if it means it’s year and a half ahead of time actually.
- Duston Williams:
- And on the discounting that you asked about their, we continue to focus that, obviously a lot in the back office work there and changed some processes and things. So that’s ongoing. It will continue to be ongoing. I think we’ve made some pretty good progress there. But, clearly, we have some more progress to go. And then we’ve, realigned some of the pricing -- list pricing and things like that, but it takes a while for that to flush through. But, we continue to focus on both those.
- Unidentified Participant:
- Thanks, guys. Good luck.
- Operator:
- Your next question comes from line of Aaron Rakers from Wells Fargo. Your line is open. Aaron, your line is open.
- Aaron Rakers:
- I want to go back to the sales kind of motion. Can you talk a little bit about with your plans to kind of, pause the spending or the investments in the sales organization, how we should think about, the guidance relative to the productivity ramp you’re seeing in some of the new sales hires? And I think if I calculate productivity, right, it looks like you’re down 20% or 25% versus what you were call it a year ago on a billings basis. Do you think that we can see productivity back at the levels that we’ve seen back a year plus ago? And I have a follow-up.
- Duston Williams:
- Yeah. Let me let me start and Dheeraj can chime in here. Two things. First of all, we mentioned that we’re not pausing sales teams. So that’s very important that that comes across clearly. We’ll continue to hire sales teams, because any downturn period, the worst thing in my mind you can do is halt sales teams, because -- so you have a little pause. In this case, it’s completely out of our hands. I think we’re being prudent. But if you start pausing on sales teams then it takes you twice as long to get back to an accelerated growth, because then you got to go hire folks and ramp them and things like that. So we’ll continue with the vast majority of our sales teams hiring there. And then the productivity, you mentioned, I’m not sure how you’re calculating that. But it’s not close to, what we’ve seen from a productivity degradation came down a little bit in ‘19.Came pretty close to what we expected here in Q2. And, Q1 was up from Q4, so --
- Dheeraj Pandey:
- And ACV.
- Duston Williams:
- Yes. And we really look at it on ACV basis, because it takes any term change out of the equation and it puts it on a equal playing.
- Dheeraj Pandey:
- If anything, that has only stayed better.
- Duston Williams:
- Yes.
- Dheeraj Pandey:
- Yes.
- Aaron Rakers:
- Okay, fair enough. And then as a quick follow-up, you talk to you in this quarter about the engagement with HP Enterprise. I think there’s 117 new customers. I think, last quarter you did 25. So, as you kind of continue to deepen the engagement there, how are you seeing that relationship evolve? Is there more to potentially come or deepen with regard to the HP go-to-market? When might that happen if there is? Thank you.
- Dheeraj Pandey:
- It’s an ongoing partnership discussion. Every quarter we get into know more about their aspirations as well. And, obviously, primarily, they have a pretty large server centric business. And while we -- as I said, you know, we’ve done a pretty good job with Dell and Lenovo and Fujitsu and others. I think HP is becoming a pretty substantial portion of our both enterprise and commercial go-to-market. So, you know, I don’t want to speculate anything about the future. But all I can say is that it’s looking like it’s a win-win for both sides. And demand being more things to come with subscription of our software in their hand with Green Lake and, especially some things around how we can -- go to market together and sell together, including their existing products.
- Aaron Rakers:
- Thank you.
- Operator:
- Next question comes from a line of Jason Ader from William Blair. Your line is open.
- Jason Ader:
- Thanks. Duston, just on the APJ impact from the virus. Is it right to think that’s all demand and not supply at this point?
- Duston Williams:
- Correct. Yes, we’ll have to look at the supply thing. I think Q3 is -- from what I see and what I’m told here is that Q3 looks to be okay. And maybe a little tight and then depending on what happens with the factories and folks coming back to work here, it’s a little bit -- we’ll have to see there. But, yes, that’s, that’s not a not a supply issue. And what’s happening in the region, quite honestly, is -- if you look at this, nothing happening in China. There’s really no meetings happening in several other countries and we’ve got -- if you look at the impacts to the Coronavirus in general in the verticals that it hits. Its retail, transportation and manufacturing and hospitality and travel and all that stuff. So, it’s kind of a ripple effect of this. We got our initial roll up from our APJ folks. And, as I mentioned, we’ve got a couple very intriguing, interest and deals in Japan that we feel really good about, but the timing of those, we just can’t take aggressive stance on that at this point.
- Jason Ader:
- Okay. All right, because, Microsoft just preannounced
- Duston Williams:
- Yes.
- Jason Ader:
- I mean, I don’t know if you saw that. But they talked about supply.
- Duston Williams:
- Jason, I think the important thing to understand here is, is we feel good about the business. There’s two things happening. One that’s got 100% completely in our control, and there’s another thing that’s 100% out of our control. And, we’re really happy about the subscription transition, because, again, the quicker we get through here, the better it sets up the model when the renewals come -- start to flow in here. So we’re really pleased on that. And we’ll take the hit on the top line any day to go faster there. And then, you know, hopefully, we’re taking a reasonably prudent view on some unknown factors related to the virus, so we’ll see how that plays out. But the business itself, which we talked about in the script, and everything else. We feel good, large customers, repeat purchases, big -- Global 2000, new products. Everything is tilted in the right direction, except, we’ve got one big unknown here that we can’t control.
- Jason Ader:
- Yes, and so qualitatively just.
- Dheeraj Pandey:
- That’s why we keep asserting that business is robust and quantitatively we just have to be a little bit more cautious.
- Jason Ader:
- And on the subscription transition, do you have a forecast you had at 75. Obviously, you’re going to far surpass that. What would you say would be a good guesstimate for Q4 right now in terms of percentage of billings from subscription?
- Duston Williams:
- Yes, it’s probably going to bounce around a little bit. We had a pretty good acceleration this quarter, so probably not too much different. But, we’ll again, update a couple of these thoughts at Investor Day here coming up on March 26th. So.
- Dheeraj Pandey:
- Yes. For the first time you put this new sales comp this past.
- Duston Williams:
- Yes, yes, and we’re starting to tweak our sales comp. We put a roadmap in over the next several years for sales comp and how we end up morphing the sales comp ultimately to take advantage of the leverage effectively of this -- of our subscription business and the renewals and things like that. And this is the first period that we’ve actually put a negative multiplier on some LOD business and in the next 6 months we’ll put a negative multiplier on any LOD business. So I think that naturally there will start shifting some of our bigger legacy customers over to subscription over the next 6 here too.
- Jason Ader:
- Thank you.
- Operator:
- Your next question comes from the line of from Wamsi Mohan Bank of America. Your line is open.
- Wamsi Mohan:
- Thank you. Just to follow up a little more on the Coronavirus situation. Can you give us some color on how you’re coming up with that estimate? I mean, when you say that it’s based purely on APJ demand, it seems like demand in other regions is also getting impacted as this situation remains quite fluid. And secondarily supply -- for the server supply chain seems like that might be impacted, very near term, so is there more clarity -- can you give us some clarity on why you think supply might not really be an issue in the near term, and I will follow up.
- Duston Williams:
- No, what I mentioned is Q3, from what we’re being told, it doesn’t -- it looks tight, but it doesn’t look at this point to be a serious issue from our perspective.Q4, I don’t know, it depends on how this progresses here. I think the reason why we have a little bit more point of view on APJ is that, there’s been a longer issue there. And, we’ve had a chance to kind of digest that and get some forecasts and things like that. We mentioned that EMA we’ve -- looks good, and we’ve got good pipeline there and the second half looks really good. But this assumes that there is not significant impact that migrates into there. And we just can’t at this point, guess what might happen or guess what my happen with the server supply chain.
- Dheeraj Pandey:
- And then, I think, HP hasn’t told us anything to the contrary. And some of our legacy supply chain is Taiwan, not China. So I think it’s not in the list of countries that people at least have talked about in the past. So I mean, we are making an educated guess in saw this stuff as well. But we do feel like this is a pretty good guess for the next half.
- Wamsi Mohan:
- Okay, thanks for that. And then, Dheeraj, there have been some high profile changes in management at IBM and Google Cloud. How do you think this changes the competitive landscape? Do you think it does or not? And also the M&A landscape around this? Thank you.
- Dheeraj Pandey:
- Well, I think, we definitely feel like, we will be becoming more and more of a software company running -- I mean, as I mentioned this in the last paragraph of the script that the cloud becomes the new server for us. And the big issue with the public cloud right now is enterprise workloads have a tough time to lift and shift. And all of sudden if our software can bring that level of virtualization where it doesn’t matter where it’s running on commodity servers on-prem, or commodity servers off-prem, I think it really opens up new surface area for our software. And I think we are looking at the next 3 to 4 years to be such a transition. No different than when we transitioned from pure appliances to OEM and to Dell back in 2014.I mean, over the course of the next 3-4 years, a quarter of our business was running on Dell nodes. And I think a lot of that stuff we expect to see from hyperscalers too actually. So, you know, IBM, with the Red Hat thing will definitely be a partnership opportunity for us, especially around containers and hybrid cloud and IBM Cloud as well. And also, some of the work that we’re doing with them on their Power and AIX software -- they have an operating system in AIX that we believe can we can modernize. I think, in Amazon and Azure, really good, I would say, engineering work going on. You will see this year to be the year when the hyperscalers get really close to us and we do the same with them. And we think that will actually prepare them for a true lift and shift that is not at the mercy of just global system integrators coming and trying to rearchitect the approximately, because rearchitecting the app to go -- move it to the public cloud is really, really hard and risk prone.
- Wamsi Mohan:
- Thanks, Dheeraj.
- Operator:
- Your next question comes from a line of Katy Huberty from Morgan Stanley. Your line is open.
- Katy Huberty:
- Thanks for the question. Going back up, Duston, to your reference to sales force compensation changes. What are you doing around shifting compensation from TCV to ACV? And then related, you mentioned that you’re confident that you can close the gap between term and life of device pricing on renewal. Is it the sales force compensation changes that can help you around pricing? Have you seen renewals yet? Such that you have confidence that you can -- you could raise prices as customers come up on their renewal?
- Duston Williams:
- Well, we haven’t seen many renewals, quite honestly, on true subscription. You know, most of these haven’t timed out yet on it from that perspective. We do know, I mean, if we just will show a graph here at Investor Day if you simply take an average three-year CBL deal, and assume that renews for another three years. So two to three-year CBL deal, compared to a five-year life of device, and if that renewed for one-year of support, so you had comparable six-year periods. That the two to three - year CBL deals clearly exceed the value of that life of device five-year plus one-year renewal. So there’s no doubt when you look at the averages of what we’re pricing things, it’s just that we take a hit up front. But through that six-year period we’re much better off. So we just have to wait a little bit here. And then on the sales comp. I think the good news about the sale comp is that we can again we do commissions in six months period, which is really great in a period like this that we can kind of morph things every six months instead of year. So we will highly likely morph to ACV way before we need to and because we’re kind of being seen was from that perspective we believe and then will kind of run with that mentality and photo setting and things like that. So when the renewals flow in, I think we’ll be in pretty good shape to actually get some leverage from those renewals because just like any subscription business those renewals have to come in at a much higher efficiency factor. Hopefully we can show this in a reasonably thoughtful interesting way how this more so over the next several years at Investor Day and how we see leverage playing in once these subscription renewals come at various efficiency factors and how the percentage of the business becomes pretty large portion in the outer years, as subscription renewals and things like that. I mean we’re really happy about the faster pace to subscription, but a lot of the benefits are going to come in a couple of years.
- Katy Huberty:
- So the shift to ACV that will be six months out or more that’s not in the current sales compensation changes.
- Duston Williams:
- Correct. Yes, what we’ve done in the current sales comp that we started to put some negative multipliers on LD business.
- Katy Huberty:
- Okay and then just lastly from me. Sorry.
- Duston Williams:
- And to the next phase, we’ll probably have some type of ACV transition.
- Katy Huberty:
- Okay and just lastly, you surpassed margin guidance and took it up for the full year. Can you just talk about drivers of upside and gross margin?
- Duston Williams:
- Yes, it’s pretty simple when you look at it because right now the cost of bucket that we operate within, obviously software is 100% margin, but the cost bucket now is with the support model and now the support teams historically done a pretty good job of gaining leverage there and so in this case, we had a pop up and top line and we can leverage that support structure. So it’s just more top line a small increase in the support cost and other cost internally here. So I know we guided 80% next quarter but that’s just because it’s a smaller top line base on a similar cost structure. But as I think we can continue to leverage that slightly as the top line continues to increase.
- Katy Huberty:
- Great, thank you.
- Operator:
- Your next question comes from the line of Mehdi Hosseini from Susquehanna. Your line is open.
- Unidentified Participant:
- This is Nick filling in for Mehdi. So turning to the full stack of next fruition, how much is that impacting your billings and specifically is it, what percentage of the billings are actually for the entire stack?
- Dheeraj Pandey:
- I think we mentioned last quarter was 11%, this quarter it’s 13% of our bookings.
- Duston Williams:
- Yes, it’s concerned to new products.
- Dheeraj Pandey:
- New products on top of the core product itself. I think they are fairly accretive in many ways. There’s a lot that we talked about in my earnings script as well, where many of these customers actually are buying our enter stack because they’re really comparing it to cloud. The private cloud has to look like the public cloud in many which ways. If anything, we’re really pleasantly surprised to see that this attach in the overall contribution in global 2000 is higher than the overall company average that number 13% is higher in the global 2000 which basically tells us that, this is not one of those conventional mid-market first sort of portfolios that we’re actually selling, compared to let’s say our hypervisor which really started more in the mid-market for the first three, four years before it went up market. I think many of our new products especially the ones around automation and databases and security. They’re really starting equally if not better actually in the global 2000.
- Unidentified Participant:
- And do you break down that 13% base off of new customers versus maybe existing customers who are upgrading or do you not have those numbers?
- Duston Williams:
- We don’t. I mean the only interesting statistic there than the 13% when you look at the global 2000 that 13% is actually a little bit bigger. So you might have some perception that this might be mid-market type customers trying things out. It’s actually playing very well in our, these new products are playing well within our big customers.
- Unidentified Participant:
- Okay perfect and then just one follow-up on cash burn. that’s concerning you guys in the near term. I know that the balance sheet looked a little bit better but maybe talking about that little bit.
- Duston Williams:
- Even with little bit of change in the top line guide we still believe we’re in the same range that we’ve been talking about what the consensus is roughly today $250 million or so. So we’ll try to continue to kind of manage that bucket.
- Unidentified Participant:
- Okay, perfect. Thank you.
- Operator:
- Your last question comes from the line of Jack Andrews from Needham. Your line is open.
- Q –Jack Andrews:
- I was wondering if you could shed some additional light on just where things stand with your solutions based approach on the go-to-market side. Nice to hear that you’re seeing some success, but could you provide some broader tough context in terms of just how much is your sales force is fully enabled with this approach. And similarly, where do you stand with your partners in terms of getting them to embrace this solutions based approach?
- Dheeraj Pandey:
- Great question. I mean you know there’s two parts to this. One is, the way we talk to our customers which are new customers or new campaigns call it more North South and there we are really leading with things like databases and end user computing and private cloud and remote/edge and things like that. And all our sellers especially in the – I would say global 10,000 where you really go sell solutions because when you start to get lower in the mid-market it’s hard to sell a solution to a first time commercial customer. Obviously there’s a lot of HCI, plus Files, maybe a little bit of operations management that’s going on in the mid-market. So the answer is a little bit more nuance because of the segment but I would say that, all of our enterprise sellers are really been doing this and that’s the way they actually can go create a pipeline. The pipe is not created, we’re just doing a bottom up selling off infrastructure. It’s more work load driven and solution driven actually. The channel is getting there. I think we’ve not yet started to track pipeline for solutions that’s where the next sort of evolution of this solution driven approach is when we start to really track entire funnels that are driven by pipeline itself, but that’s the next phase of the journey.
- Q –Jack Andrews:
- Got it, thank you very much.
- Operator:
- This concludes today’s earnings call. We thank you for your participation. Have a great day.
Other Nutanix, Inc. earnings call transcripts:
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