Nutanix CEO: ‘No Plans’ For Layoffs Ahead With New Vision

“We’re talking about how sales and marketing expenses as a function of revenue are coming down,” Nutanix’s CEO Rajiv Ramaswami tells CRN.

Nutanix’s strategy to becoming cash flow positive by 2022 will not come at the expense of its roughly 6,200 employees, according to CEO Rajiv Ramaswami.

Although there were recently some minor employee layoffs in sales and marketing, Ramaswami said Nutanix’s operational improvements plan and expected 25 percent annual subscription growth rate will enable his company to scale and thrive without any staffing reductions for the foreseeable future.

“We certainly have no plans of additional layoffs,” said Ramaswami in an interview with CRN. “We did talk at our last earnings call about some reductions in our sales force, but the sales force and marketing efficiency [strategy] is all about getting leverage through renewals. We’re talking about how sales and marketing expenses as a function of revenue are coming down. For that coming down, we continue to drive productivity through having more bundled solutions versus individual products; scaling through channel partners; as well as the renewal business coming back up in a significant way. So those are the drivers for why our sales and marketing costs as a function of revenue are going down.”

[Related: Rajiv Ramaswami On Nutanix Stock, New Chainman And Driving Profitability]

Ramaswami, who became Nutanix’s CEO in December, said Nutanix has historically had high cost associated with its sales and marketing due to the company striving to capture as many new customers and accounts as possible.

However, with customer renewals approaching, sales and marketing costs won’t be as high compared to the previous costs related to capturing new customers. Nutanix’s sales and marketing costs are targeted to decrease from 79 percent in fiscal year 2020 to 45 percent in fiscal year 2025 in terms of percentage of revenue.

Additionally, Nutanix is expecting annual contract value (ACV) billings to grow at a compound annual growth rate (CAGR) of 25 percent through fiscal year 2025.

“Keep in mind that the revenue is going up 25 percent. So we don’t need to increase our sales and marketing cost in proportion because a lot of that is just the fact that more and more of the business is coming through renewals, which means that we can keep hold of our sales and marketing cost, but you get a lot more leverage,” said Ramaswami. “That’s why the overall sales and marketing cost are lowering in the next few years compared to where we are at today. And again, lower as a percentage of revenue, not in absolute terms.”

Nutanix’s CEO said his San Jose, Calif.-based company is “not reducing our absolute dollars that we spend on sales and marketing.”

With this vision, Nutanix expects to become cash flow positive by the second half of calendar year 2022. Although the company typically posts revenue growth quarter after quarter, Nutanix hasn’t reported a profit because of its efforts to transform into a subscription and SaaS company over the past several years.

In its most recent third fiscal quarter, which ended April 30, Nutanix generated a total of $345 million in revenue, an increase of 8 percent year over year. Total sales in ACV [annual contract value] billings climbed to $160 million in the third quarter, up a whopping 18 percent year over year.

Nutanix’s total operating expense was $450 million in the third quarter 2021, down from $476 million during the same quarter one year ago. Overall, Nutanix posted a net loss of $123 million in the third quarter of 2021, significantly less than Nutanix’s net loss of $236 million in third quarter 2020.

One executive who is an all-in Nutanix channel partner said he is happy to see Nutanix turn a profit by next year without any more layoffs expected.

“There’s definitely a new Nutanix in town with Rajiv taking over from [former CEO] Dheeraj [Pandey],” said the executive, who declined to be named. “Being net positive just opens up the door for them like around new markets, easier investing in innovation and staffing things versus having to go find new money, maybe there’s even an acquisition down the line. … I’ve never had more faith in Nutanix than I do now, and we’ve working with them for over five years.”

Last year, co-founder Pandey resigned as CEO and chairman after 11 years at Nutanix. Former VMware top executive Ramaswami was selected to lead the company as CEO in late 2020. In June, Virginia Gambale was named Nutanix’s new chairman of the board.

“We have a special company here,” said Ramaswami. “I’m excited about the future and our growth ahead.”