Nutanix, Inc. (NASDAQ:NTNX) Q2 2023 Earnings Call Transcript

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But in the short term, what I would say, is increase the level of engagement. So there’s clearly a push and pull. We have the — to summarize, we’ve got the renewals business that provides a foundation. On the new business, small elongation and deal cycles. On the other side, we’re seeing more engagement from a VMware basis. And so we’ve tried to do our best to factor in all of these dynamics into the guide that we gave you.

Jim Fish: That’s helpful. Impressive on the free cash flow beat this quarter. Just trying to make sure here, how much of this was driven by essentially the operations versus working capital numbers and really underneath, we’re trying to understand where OpEx would have kind of come in, barring any of these added expense issues and Rukmini, sorry to layer on here, but you just had mentioned the free cash flow outlook included the potential impact of this investigation. Does that also assume the catch-up potential?

Rukmini Sivaraman: Thank you, Jim. All good questions. So let me try to parse that. So as I said in my remarks, Jim, we are not commenting on expense — expenses either for Q2 or on a forward-looking basis. So I’ll stop there. But in terms of free cash flow, right, for Q2, as you said, we’re happy with the free cash flow performance in Q2. And I will just say that I think we talked about DSOs on the call, right, which was 28 days. It was unusually low in Q1, and we saw it kind of come back to, I would say, within the range, right, in Q2 because typically, our payment terms for DSOs are 30 to 45 days. And so I would expect it to be sort of in that area. Now to your second question, so yes, we are comfortable with our full year $100 million to $125 million free cash flow guidance, Jim, including the potential impact from — arising from this matter, right, related to the third-party software use that we mentioned on the call and the other sort of items around the $33 million for the settlement and the onetime $12 million tax obligations we discussed.

Operator: Our next question comes from the line of Mike Cikos with Needham & Company.

Mike Cikos: I did have a couple of questions. Just to circle back to the Audit Committee, and I want to make sure that everyone had this right. So this investigation that we have right now is totally independent of the — I’m not sure I’m getting the numbers right now, the anticipated expense in 3Q that you had cited regarding a $33 million for the litigation settlement, correct?

Rukmini Sivaraman: That’s correct, Mike.

Mike Cikos: And so if I look at the audit investigation specifically, can you provide us like when was the issue discovered? When did the Audit Committee commenced its investigation? When did Nutanix engaged outside counsel? I’d just like to see if we can get a time line for how these events are playing out under the hood? Again, just because we have this limited guidance that we’re being provided today.

Rukmini Sivaraman: Yes. Thank you, Mike, for the question. If I understand that there’s limited guidance here, Mike, and we — what I can say is that given this review is ongoing, what we can say is that we are working diligently, right, with the Audit Committee and our outside counsel to resolve this as quickly as possible so we can be in a position to share more with you. At this point, we’re not able to kind of provide very specific timelines to your question, but we are working diligently to make sure we are resolving this appropriately and in a timely manner.

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