Nutanix Financials And What Comes .NEXT

I’m at the Nutanix .NEXT conference this week, as a guest of Nutanix, so here’s some background on my thinking about the company and the kinds of questions I’ll be looking to get answered.
First off, let’s take a look at the overall financials of the company, based on public filings so far. There’s a decent amount of data in the pre-IPO S-1 filings Nutanix has published to date, so we can take a look at some trend information.

We know Nutanix intends to go public, and that it took money in 2014 at a $2 billion valuation. There are also rumors that Cisco offered $4 billion for the company in 2015. That suggests that Nutanix is looking to either match, or beat, that valuation at its IPO.

But that’s tricky in the current environment, because the market seems to be skittish about tech stocks in general, and new offerings in particular. Analysts are grumpy with Pure Storage, for example, which on my analysis seems a tad unfair given that Pure is meeting guidance (not that I put much stock in guidance in general, short-termism is stupid in my opinion) and the animals spirits seems to be trending bearish lately.

Let’s look at some figures! All 2016F figures are based on a fairly simple extrapolation from the first three quarters of 2016, as published in S-1 updates lodged with the SEC. All of this is public numbers, massaged a little by me using simple spreadsheet math like =FORECAST().

Nutanix Profit Gap
Nutanix Profit Gap. Source: SEC filings, PivotNine analysis.

Here we see that Nutanix is trending towards profitability at a fairly steady pace over the past three years. On this trend, we should expect to see a positive operational and net profit from Nutanix in about 2 to 2.5 years.

Since Nutanix isn’t making money yet, we need to be concerned with burn rate: how much cash it takes to keep the business running, and hopefully growing. Nutanix has helpfully provided quarterly free cash flow rates for us in the latest S-1 amendment, but note that these are non-GAAP figures because it includes purchase of property and equipment. This isn’t unreasonable, and provides a pessimistic idea of operating cash as we’ll see in a minute.