Q4 2024 Nutanix Inc Earnings Call
[inaudible]
Speaker Change: Thank you for standing by and welcome to New Tennis, fourth quarter, 2024 earnings conference call at this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during this session you'll need to press star 1-1 on your telephone.
Speaker Change: If your question has been answered, and you'd like to remove yourself from the Q-Scibly Press star 11 again.
Rich Valera: As a reminder, today's program is being recorded, and now I'd like to introduce your host fifth-to-day program, Rich Valera, vice president of investor relations. The captain is, welcome to today's conference call to discuss in Tannix's fourth quarter in this year, 2024 financial results.
Rich Valera: in Tatex's President and CEO, and Rukmini Sivaraman to Tatex and CFO.
Speaker Change: After the month of closed today, Nutanix issued a press release announced in 4th quarter in this year, 24 financial results.
Speaker Change: If you'd like to read the release, please visit the Press Release section of our IR website.
Speaker Change: During today's call, Madison will make forward-looking statements, including financial guidance.
Speaker Change: These school-looking statements involve risk-sements or disease, some of which are beyond our control, which could cause actual results differently and adversely from those anticipated by these statements.
Speaker Change: For more detailed description of these and other risks and uncertainties, Richard Valera, FTC Filings, including our most recent annual report on Form 10K, and our subsequent quarterly reports on Form 10K, as well as our earnings press release, if you'd today.
Unknown Executive: . Thank you for standing by and welcome to Nutanix 4th quarter, 2024 earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: These four of them statements apply as of today and we undertake no obligations to revive these statements after this call. As a result, you should not rely on them as predictions of future events.
Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered, and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded.
Speaker Change: Please note, unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue, are expressed on a non-gap basis and have been adjusted to exclude certain charges.
Speaker Change: We have provided to the extent available when the conciliations of these non-gap financial measures to gap financial measures on our IR website and in our earnings stress release.
Richard Valera: And now I'd like to introduce your host for today's program, Rich Valera, vice president of investor relations. Good afternoon. Welcome to today's conference call to discuss Nutanix's 4th quarter in fiscal year 2024 financial results. Joining me today are Rajiv Ramaswami, Nutanix's president and CEO, and Rafini Sivaraman, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing 4th quarter in fiscal year 2024 financial results. If you'd like to read the release, please visit the press releases section of our IR website.
Speaker Change: New canics will be participating in the Goldman Sachs, the Unicopia, and Technology Conference in San Francisco on September 9th, and the Piper Sandler Growth Frontiers Conference in Nashville on September 10th. We hope to see you at these events.
Speaker Change: Finally, on 1st quarter fiscal 2025 quiet period will begin on Friday, October 18th, and with that, I'll turn the call over to Rajiv. Rajiv?
Rajiv: Thank you, Rich, and good afternoon everyone.
Richard Valera: During today's call, management will make forward-looking statements including financial guidance. These school and looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our FEC filings, including our most recent annual report on form 10K and our subsequent quarterly reports on form 10Q, as well as our earnings press release issued today.
Rajiv: Art World Quarter was a solid finish to our 2024 fiscal year.
Rajiv: We continue to see steady demand for our solutions driven by businesses prioritizing infrastructure modernization initiatives.
Rajiv: While looking to adopt hybrid multi-cloud operating models and optimize their total cost of ownership.
Rajiv: In the post quarter, we are happy to have exceeded all our guided metrics.
Rajiv: We delivered quarterly revenue of 548 million dollars up 11% year over year and saw another quarter of strong free cash flow generation.
Richard Valera: These four-looking statements apply as of today, and we undertake no obligations to revive these statements after this call. As a result, you should not rely on them as predictions of future events. Please note, unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue, are expressed on a non-gap basis and has been adjusted to exclude certain charges. We have provided to be extent available, reconciliation to these non-gap financial measures, the gap financial measures, on our IR website, and in our earnings press release.
Rajiv: We also thought the highest number of new logos we've seen in three years.
Rajiv: An encouraging sign of building traction that some of our go-to-market partnerships and initiatives.
Speaker Change: Arfulya 2020 for Results, the Mastainer Good Progress, on a number of fronts.
Speaker Change: Eventually, we delivered solid top lines of performance driven by continued strong performance from our renewables business.
Richard Valera: Nutanix will be participating in the Goldman Sachs, Communicopia and Technology Conference in San Francisco on September night, and the Piper Sandler Growth Frontiers Conference in Nashville on September 10. We hope to see you at these events.
Speaker Change: We saw good growth in our pipeline of larger deals, as we shifted our focus up market and saw increased engagement from prospects looking for alternatives to their existing infrastructure solutions.
Unknown Executive: Finally, our first quarter fiscal 2025 quiet period will begin on Friday, October 18.
Rajiv Ramaswami: And with that, I'll turn the call over to Rajeev. Rajeev?
Speaker Change: Even as a land and expand business under performance, a relationship to our internal expectations.
Rajiv Ramaswami: Thank you, Rich, and good afternoon, everyone. Our fourth quarter was a solid finish to our 2024 fiscal year. We continue to see steady demand for our solutions driven by businesses prioritizing infrastructure modernization initiatives while looking to adopt hybrid multi-class operating models and optimize their total cost of ownership. In the fourth quarter, we are happy to have exceeded all our guided metrics. We up 11% year-over-year and saw another quarter of strong free cash flow generation.
Speaker Change: Due to the longer than expected sales cycles we see.
Speaker Change: We deliver revenue of 2.15 billion dollars up 15% year over year.
Speaker Change: and ARR of $1.91 billion up 22% year over year.
Speaker Change: Our bottom-line performance would even stronger.
Speaker Change: We generate the free cash flow of $598 million, almost 3 times higher than last year.
Speaker Change: Resulting in a free cash flow margin of 28%.
Speaker Change: and a rule of 40 score of 43.
Rajiv Ramaswami: We also saw the highest number of new logos we've seen in three years, an encouraging sign of building traction with some of our go-to-market partnerships and initiatives. Our full year 2024 results demonstrated good progress on a number of fronts. Financially, we delivered solid top-line performance driven by continued strong performance from our renewals business. We saw good growth in our pipeline of larger deals as we shifted our focus up market and saw increased engagement from prospects looking for alternatives to their existing infrastructure solutions.
Speaker Change: In F-24, we also start tangible progress on the partnership front.
Speaker Change: with significant new or enhanced partnerships with Cisco, Dell and Nvidia.
Speaker Change: And I'm pleased that Dell XC Plus, a new Tone Key HCI based appliance offering with Dell, is now generally available.
Speaker Change: [inaudible] Rukmini Sivaraman, Rukmini Sivaraman, Rukmini Sivaraman,
Speaker Change: Finally, we continue to innovate in F524.
Speaker Change: But important new product releases and enhancements toward the Chanukes cloud platform.
Rajiv Ramaswami: Even as a land and expand business underperformed, related to our internal expectations, due to the longer-than-expected sales cycles we see, we delivered revenue of $2.15 billion up 15% year-over-year and ARR of $1.91 billion up 22% year-over-year. Our bottom-line performance was even stronger. We generated free cash flow of $598 million almost three times higher than last year. Resulting in a free cash flow margin of 28% and a rule of 40 score of 43.
Speaker Change: These included the launch of GPT in a box.
Speaker Change: Our solution for Spielberg, the adoption of gendered AI by Enterprise.
Speaker Change: We made meaningful progress towards our goal of becoming the best platform for modern applications.
Speaker Change: including the launch of Nutanix data services for Kubernetes or NDK, which offers consistent data services across both virtual machines and container assets.
Speaker Change: As well as the recent release of the mechanics component of the platform or NKP to simplify management of modern applications on premises and in any native public cloud service.
Speaker Change: are most significant wins in the quarter. The most stated, the appeal of the Nutanix plot platform, to organizations that are looking to modernize the RIP footprints and adopt hybrid cloud operating models.
Rajiv Ramaswami: In FY 24, we also saw tangible progress on the partnership front with significant new or enhanced partnerships with Cisco, Dell and Nvidia. And I'm pleased that Dell XC Plus, our new, turnkey HCI-based appliance offering with Dell, is now generally available. We see these partnerships as both expanding our addressable market and providing us with meaningful go-to-market leverage. Finally, we continue to innovate in FY 24, with important new product releases and enhancements to our Nutanix Cloud Platform.
Speaker Change: As well as those looking for alternatives in the wake of recent industry M&A.
Speaker Change: Our largest win in Q4, was a multi-million dollar ACV deal, with an automatic in-base 4,200 financial services company.
Speaker Change: following roughly year-to-half engagement with us.
Speaker Change: They chose to replace their existing solution.
Speaker Change: which is an X-Chorc Lasson.
Speaker Change: including RAHV hyperbyser as well as the tank flood manager.
Speaker Change: This customer who has been using a competing HCI solution in much of this footprint.
Rajiv Ramaswami: These included the launch of GPT in a box, our solution for streamlining the adoption of Gen. DRIV AI by enterprises. We made meaningful progress towards our goal of becoming the best platform for modern application. Inc, including the launch of Nutanix Data Services for Kubernetes or NDK, which offers consistent data services across both virtual machines and container assets, as well as the recent release of Nutanix Kubernetes platform or NKP to simplify management of modern applications on premises and in any native public cloud service.
Speaker Change: was able to utilize the existing hardware for the Nutanix software deployment.
Speaker Change: Obviating the need for a hard weather patch.
Speaker Change: We also had a number of significant wins that included our Nutanix cloud clusters or NCT 2 capability, which enables workloads to be seamlessly and efficiently run in both private and public routes.
Speaker Change: One of these was with an existing customer and any of these provider of global research services.
Speaker Change: This customer was looking to accelerate the migration of their workloads to the public loan.
Speaker Change: While ensuring the workloads once migrated were run as efficiently and cost effectively as possible.
Rajiv Ramaswami: Our most significant wins in the quarter demonstrated the appeal of the Nutanix Cloud platform to organizations that are looking to modernize their IT footprints and adopt hybrid cloud operating models, as well as those looking for alternatives in the wake of recent industry M&A. Our largest win in Q4 was a multi-million dollar ACV deal with an automatic and based Fortune 100 financial services company. Following a roughly year and a half engagement with us, they chose to replace their existing solution, which Nutanix Cloud platform, including our AHV hypervisor, as well as Nutanix Cloud Manager.
Speaker Change: Have you already made a commitment to Microsoft Azure?
Speaker Change: The purchase licenses for Nutanic stock platform to the Azure Marketplace.
Speaker Change: with the intent of utilizing its entity capability to shift their on-prem workloads to Azure.
Speaker Change: Another good example was a significant new customer when with a top North American university.
Speaker Change: Most of our customers start with our platform on-play.
Speaker Change: However, this customer was motivated by their permission to migrate away from a competing platform they were using to run their virtual machine workloads at scale in the public cloud on AWS.
Rajiv Ramaswami: This customer who had been using a competing HCI solution in much of their footprint was able to utilize their existing hardware for their Nutanix software deployment, and obviating the need for a hardware refresh. We also had a number of significant wins that included our Nutanix Cloud clusters or NC2 capability, which enables workloads to be seamlessly and efficiently run in both private and public cloud. One of these was with an existing customer, an AMIA-based provider of global research services.
Speaker Change: Due to dissatisfaction with recent changes as their existing supply.
Speaker Change: Daychos, Nutanic Star platform, to migrate their applications running in the public cloud to RNG2 on AWS.
Speaker Change: Valera also adopting our cloud platform to run their on-prem workloads.
Speaker Change: They also plan on adopting a Nutanix Cloud Manager for Convist and Sets Service and Automation across their private and public cloud FK.
Speaker Change: A final notable example is a win with an Asia-based global 2000 Semakana Kaprawada.
Rajiv Ramaswami: This customer was looking to accelerate the migration of their workloads to the public cloud while ensuring the workloads once migrated were run as efficiently and cost effectively as possible. Having already made a commitment to Microsoft Azure, they purchased licenses for Nutanix Cloud platform through the Azure marketplace with the intent of utilizing its NC2 capability to shift their on-prem workloads to Azure. Another good example was its significant new customer win with a top North American University.
Speaker Change: This full stack win.
Speaker Change: which was also a displacement of our primary competitor.
Speaker Change: Enable the customer to streamline their operations.
Speaker Change: Increased their level of automation and reduce their dependence on more expensive proprietary storage solutions.
Speaker Change: It included adoption of Nutamix database service or NDB.
Speaker Change: To enable them to move off of their expensive commercial databases to open source databases managed by NDD.
Rajiv Ramaswami: Most of our customers start with our platform on-prem. However, this customer was motivated by their decision to migrate away from a competing platform they were using to run their virtual machine workloads at scale in the public cloud on AWS due to the satisfaction with recent changes at their existing supplier. They chose Nutanix Cloud platform to migrate their applications running in the public cloud to our NC2 on AWS, while also adopting our cloud platform to run their on-prem workloads.
Speaker Change: This customer also plans to adopt our unified storage solutions, replacing multiple third-party storage options.
Speaker Change: Finally, they also plan a utilizing np2 on Azure
Speaker Change: to enable them to shift applications to the public cloud.
Speaker Change: including performing lift and shifts of IT workloads of acquired companies.
Speaker Change: We see these events as reflecting the value of customer scene or platform as they look for seamless and efficient application portability, while adopting hybrid multi-cloud operating models.
Rajiv Ramaswami: Phillips. They also plan on adopting Nutanix flood manager for consistent self-service and automation across their private and public-cloud estate. A final notable example is a win with an Asia-based global 2000 semacognica provider. This full stack win, which was also a displacement of our primary competitor, enables the customer to streamline their operations, increase their level of automation, and reduce their dependence on more expensive proprietary storage solutions. It included adoption of Nutanix database service or NDD to enable them to move off of their expensive commercial databases to open source databases managed by NDD.
Speaker Change: As well as the value of our partnership with Azure and AWS.
Speaker Change: Interesting, I am pleased with our solid Q4 and fiscal 2024 results.
Speaker Change: and the progress we continue to make on multiple fronts.
Speaker Change: Including our financial model, our partnership.
Speaker Change: and our ongoing innovation in our cloud platform towards our goal of becoming the leading platform for running applications and managing data anywhere.
Speaker Change: We also remain focused on capitalizing on what we view as a long-term opportunity to gain share in face of recent industry disruption.
Speaker Change: and are introduced by early sacrifices.
Speaker Change: including some of the winds I just highlighted.
Speaker Change: Finally, I would like to express my sincere gratitude to our investors, customers and partners.
Rajiv Ramaswami: Let's customer also plans to adopt our unified storage solution, replacing multiple third-party storage options. Finally, they also plan on utilizing NC2 on Azure to enable them to shift applications to the public cloud, including performing lift and shifts of IT workloads of acquired companies. We see the events as reflecting the value customer seen on platform as they look for seamless and efficient application portability, while adopting hybrid multi-cloud operating models, as well as the value of our partnerships with Azure and AWS.
Speaker Change: Podetasinas.
Speaker Change: and to an employees for their hard work that led to these results.
Speaker Change: And with that, I hand it over to Rukmini Sivaraman.
Speaker Change: Rukmini?
Rukmini Sivaraman: Thank you Rajiv and thank you everyone for joining us.
Rukmini Sivaraman: I will first discuss our Q4 of Q4 of Q424 and full fiscal year 2020 for the world. Followed by our guidance for Q1625 and for the full fiscal year 2025.
Rukmini Sivaraman: Results in 24th, came in above the high end of our range across all guided metrics.
Rukmini Sivaraman: ACV Billings in Q4 were $338 million, above the guided range of $295 million, representing year over year growth of 21%.
Rajiv Ramaswami: In closing, I am pleased with our solid Q4 and fiscal 2024 results. And the progress we continue to make on multiple fronts, including our financial model, our partnerships, and our ongoing innovation in our cloud platform towards our goal of becoming the leading platform for running applications and managing data anywhere. We also remain focused on capitalizing on what we view as a long-term opportunity to gain share in face of recent industry disruption, and are encouraged by our early successes, including some of the wins I just highlighted.
Rukmini Sivaraman: Revenue in Q4 was 548 million dollars, higher than the guided range of 530 to 540 million dollars, representing a year over your growth of 11%.
Rukmini Sivaraman: ARR at the end of Q4 was $1.908 billion representing year over your growth of 22%.
Rukmini Sivaraman: In Q4, we continue to see modestly elongated average circles compared to historical level.
Rukmini Sivaraman: Average contract duration in Q4 was 3.1 years, 0.1 year higher than Q3.
Rajiv Ramaswami: Finally, I would like to express my sincere gratitude to our investors, customers, and partners for their trust in us and to our employees for their hard work that led to these results.
Rukmini Sivaraman: Non-gap growth margin in Q4 was 86.9 percent higher than our guided range of 85 to 86 percent.
Rukmini Sivaraman: And with that, I hand it over to Rukmini Sivaramah. Rukmini, thank you Rajeev and thank you everyone for joining us.
Rukmini Sivaraman: Non-gap operating margin in Q4 was 12.9%.
Rukmini Sivaraman: Higher than our guided range of 9 to 10% largely due to one lower operating expenses as a result of higher than expected non-recurring statement related to one of our partnership agreement.
Rukmini Sivaraman: I will first discuss our Q4, fiscal 2024, and full fiscal year 2024 results followed by our guidance for Q1, fiscal 2025, and for the full fiscal year 2025. Results in Q4, 24 came in above the high end of our range across all guided metrics. ACV Billings in Q4 were $338 million above the guided range of $295-305 million, representing year over your growth of 21%. Revenue in Q4 was $548 million, higher than the guided range of $530 to $540 million, representing a year over year growth of 11%.
Rukmini Sivaraman: and a few other items, and two, slightly higher growth margin and revenue.
Rukmini Sivaraman: Norn Gap net income in Q4 was $76 million, or fully diluted EPS of $27 per share based on fully diluted weighted average shared outstanding of approximately $285 million share.
Rukmini Sivaraman: DSO based on revenue and ending accounts receivable, what 39 days in Q4.
Rukmini Sivaraman: 3 cash flow in Q4 was 224 million dollars, representing a free cash flow margin of 41%.
Rukmini Sivaraman: ARR at the end of Q4 was $1.908 billion, representing year over year growth of 22%. In Q4 we continue to see modestly elongated average sales cycles compared to historical levels. Average contract duration in Q4 was 3.1 years, 0.1 year higher than Q3. Non-gap growth margin in Q4 was 86.9% higher than our guided range of 85 to 86%. Non-gap operating margin in Q4 was 12.9% higher than our guided range of 9 to 10% largely due to 1 lower operating expenses as a result of higher than expected non-recording payments related to one of our partnership agreements and a few other items and 2 slightly higher growth margin and revenue.
Rukmini Sivaraman: Pricaslow in Q4 benefited from the collection on the 8th figure ACV transaction that was booked in fiscal Q3.
Speaker Change: Moving to the balance sheet, we ended Q4 with cash, cash equivalent and short-term investment of $994 million dollars, down from $1.651 billion at the end of Q3.
Speaker Change: The primary reason for the reduction in our cash balance was vain capital's conversion of the 2026 note which we announced in June.
Speaker Change: We settled the conversion in Q4 by paying 817.6 million dollars in cash and delivering approximately 16.9 million shares of common stock.
Speaker Change: Please note that the entire conversion value had previously already been included in our fully diluted weighted average share count on an if converted basis.
Speaker Change: The actual settlement included a portion settled in cash rather than exclusively in shares resulting in the issue of approximately 17 million shares, which is 12 million lower than the 29 million that we had previously included on an isconverted basis.
Rukmini Sivaraman: Non-gap net income in Q4 was $76 million or fully diluted EPS of 27 cents per share based on fully diluted weighted average sales outstanding of approximately 285 million shares. DSOs based on revenue and ending accounts receivable were 39 days in Q4. Free cash flow in Q4 was $224 million, representing a free cash flow margin of 41%. Free cash flow in Q4 benefited from the collection on the 8 figure ACV transaction that was booked in fiscal Q3.
Speaker Change: Moving to capital allocation, we repurchased about 25 million dollars worth of shares in Q4 and 131 million dollars worth of shares in all of 624 under the share repurchased program previously authorized by our Board of Directors.
Speaker Change: Looking at our full-year financial results, we exceeded the high end of all guided metrics of fiscal year 24.
Rukmini Sivaraman: Moving to the balance sheet, we ended Q4 with cash, cash equivalence, and short term investments of $994 million down from $1.651 billion at the end of Q3. The primary reason for the reduction in our cash balance was paying capital's conversion of the 2026 note which we announced in June. We settled the conversion in Q4 by paying 817.6 million dollars in cash and delivering approximately 16.9 million shares of common stock. Please note that the entire conversion value had previously already been included in our fully diluted weighted average share count on an if converted basis.
Speaker Change: ACV Billings in 624 were 1.162 billion dollars higher than our guidance of 1.12 to 1.13 billion dollars and representing a year over your growth of 21%.
Speaker Change: A reminder that the annual ACV Billings is slightly lower than the sum of the ACV Billings from the four quarters due to adjustments for deals with duration of less than a year.
Rukmini Sivaraman: The actual settlement included a portion settled in cash rather than exclusively in shares resulting in the issuance of approximately 17 million shares which is 12 million lower than the 29 million that we had previously included on an if converted basis.
Speaker Change: Revenue in fiscal year 24 was 2.149 billion, higher than our guidance of 2.13 to 2.14 billion dollars. And representing a year over your growth of 15 percent.
Speaker Change: We are pleased to have exceeded the $2 billion revenue threshold in fiscal year 24.
Speaker Change: We ended fiscal year 24 with an ARR of $1.908 billion as mentioned earlier, year over your growth of 22%.
Speaker Change: Net Dollar-based retention rate, or NRR, at the end of fiscal year 24, was 114%.
Rukmini Sivaraman: Moving to capital allocation, we repurchased about $25 million worth of shares in Q4 and $131 million worth of shares in all of fiscal year 24 under the share repurchase program previously authorized by our board of directors. Looking at our full-year financial results, we exceeded the high end of all guided metrics for fiscal year 24, ACV Billings in fiscal year 24 were 1.162 billion dollars, higher than our guidance of 1.12 to 1.13 billion dollars, and representing a year over your growth of 21 percent.
Speaker Change: As the fiscal year progressed, we saw a higher mix of larger deals in our pipeline. These larger opportunities often involve strategic decisions and cease-sweet approvals, causing them to take longer to close and to have greater variability in timing, outcome and de-estructure.
Speaker Change: And as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels.
Speaker Change: Logically due to these dynamics, our fiscal year 24, land and expand ACB, and ARR performance were below our initial expectations at the beginning of the fiscal year. And we expect these dynamics to continue.
Speaker Change: are the rules of performance continue to be good through the fiscal year and a reminder that the rules tend to be at a lower aggregate average concentration compared to land and expand.
Rukmini Sivaraman: [inaudible] we saw a higher mix of larger deals in our pipeline. These larger opportunities often involve strategic decisions and see sweet approvals, causing them to take longer to close and to have greater variability in timing, outcome, and deal structure. And as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Largely due to these dynamics are fiscal year 24, land and expand ACB, and ARR performance were below our initial expectations at the beginning of the fiscal year, and we expect these dynamics to continue.
Speaker Change: Average Contracturation in 624 was 2.95 years, flat-ish to 623 and slightly higher than expected, partly due to some larger deals with greater than average duration.
Speaker Change: Non-gap growth margin in fiscal year 24 was 86.7%.
Speaker Change: Non-gap operating expenses in fiscal year 24 were 1.515 billion dollars and increase of 7% year over year as we began to make additional investments primarily in research and development and sales and marketing.
Speaker Change: Non-gap operating margin in fiscal year 24 was 16% representing an improvement of over 700 basis points year over year.
Speaker Change: We also delivered our first full year of positive gap operating income of 8 million in fiscal year 24.
Speaker Change: Non-gap net income was $384 million or diluted EPS of $1.31 per share based on fully diluted weighted average share outstanding of approximately $2.994 million share.
Speaker Change: Free cash flow in fiscal year 24 was $598 million, higher than our guidance of $520 to $540 million and almost three times higher than last year's free cash flow.
Rukmini Sivaraman: Our renewal performance continues to be good through the fiscal year, and the reminder that renewals tend to be at a lower aggregate average contract duration compared to land and expand. Average contract duration in fiscal year 24 was 2.95 years, flatish to fiscal year 23, and slightly higher than expected partly due to some larger deals with greater than average duration. Non-gap growth margin in fiscal year 24 was 86.7%. Non-gap operating expenses in fiscal year 24 were 1.515 billion dollars, an increase of 7% year over year as we began to make additional investments primarily in research and development and sales and marketing.
Speaker Change: Frikaswar margin in fiscal year 24 was 28 percent, implying Frikaswar margin expansion of 17 percentage points year over year.
Speaker Change: Frikaslow, in particular, 24 benefited from approximately 30 million in non-recurring payments related to a partnership agreement as previously referenced.
Speaker Change: Overall, 6.24 was a significant year, marking our first year with positive gap operating income.
Speaker Change: Significant for Gasco Generation of $598 million in Fricaclo margin of 28%. While growing ARR at 22%, and revenue at 15% year over year.
Rukmini Sivaraman: Non-gap operating margin in fiscal year 24 was 16% representing an improvement of over 700 basis points year over year. We also delivered our first full year of positive gap operating income of 8 million in fiscal year 24. Non-gap net income was 384 million dollars or diluted EPS of 1.31 dollars per share based on fully diluted weighted average shares outstanding of approximately 294 million shares. 3 cash flow in fiscal year 24 was $598 million, higher than our guidance of $520 to $540 million, and almost 3 times higher than last year's 3 cash flow.
Speaker Change: We also delivered a rule of 40 scores, defined as the sum of revenue growth and forecast the margin of 43 for fiscal year 24, an improvement of 14 percentage points year over year and 28 percentage points higher compared to two years ago.
Speaker Change: Moving to fiscal year 25.
Speaker Change: The guidance for the full year is as follows.
Speaker Change: Revenue of 2.435 to 2.465 billion dollars, representing a year over your growth of 14% at the midpoint.
Rukmini Sivaraman: 3 cash flow margin in fiscal year 24 was 28% implying 3 cash flow margin expansion of 17 percentage points year over year. 3 cash flow in fiscal year 24 benefited from approximately 30 million in non-recurring payments related to a partnership agreement as previously referenced.
Speaker Change: Nondas operating margin of approximately 15.5 to 17 percent.
Speaker Change: 3 cash flow of 540 to 600 million dollars, representing a free cash flow margin of approximately 23% at the midpoint.
Speaker Change: I will now provide some commentaries regarding our fiscal year 25 guidance.
Speaker Change: First, as previously mentioned at our 2023 investor day, we are streamlining our metrics by not reporting or guiding ACV billing starting in fiscal year 25.
Rukmini Sivaraman: Overall, fiscal year 24 was a significant year marking our first year with positive gap operating income, significant free cash flow expansion of $598 million and free cash flow margin of 28% while growing ARR at 22% and revenue at 15% year over year. We also delivered a rule of 40 score defined as the sum of revenue growth and free cash flow margin of 43 for fiscal year 24, an improvement of 14 percentage points year over year and 28 percentage points higher compared to two years ago.
Speaker Change: ACV billing was intended as a transitional metric during our subscription evolution, and we believe that now is the time to evolve away from that metric.
Speaker Change: We are also no longer guiding to non-gap growth margin, which was previously useful as we navigated our business model changes, leading to significant improvements in non-gap growth margin.
Speaker Change: We will continue to guide to revenue, non-gap operating margin and free cash flow on an annual basis and to guide to revenue and non-gap operating margin for the subsequent quarter.
Speaker Change: Second, and moving on to assumptions in our guidance, we are seeing continued and significant land and expand opportunities and a growing pipeline for our solutions.
Rukmini Sivaraman: Moving to fiscal year 25, the guidance for the full year is as follows. Revenue of 2.435 to 2.465 billion dollars representing a year over year growth of 14% at the midpoint, non-gap operating margin of approximately 15.5 to 17% pre cash flow of 540 to 600 million dollars representing a pre cash flow margin of approximately 23% at the midpoint.
Speaker Change: However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our land and expand booking.
Speaker Change: These larger opportunities often involve strategic decisions and see suite approvals at the customer or fast-pack causing them to take longer to close and to have greater variability in timing, outcome, and deal structure.
Speaker Change: And as we mentioned previously, we continue to see a modest elongation of average sales cycles, relative historical levels which we expect to continue.
Rukmini Sivaraman: I will now provide some commentary regarding our fiscal year 25 guidance. First, as previously mentioned at our 2023 investor yesterday, we are streamlining our metrics by not reporting or guiding ACV billing starting in fiscal year 25. ACV billing was intended as a transitional metric during our subscription evolution and we believe that now is the time to evolve away from that metric. We are also no longer guiding to non-gap growth margin, which was previously useful as we navigated our business model changes leading to significant improvements in non-gap growth margin.
Speaker Change: 3. The guidance of humans that renewals will continue to perform well in 6 July 25.
Speaker Change: Fourth, the full-year guidance is used that average contact duration would be flat to slightly lower compared to fiscal year 24 as renewals continue to grow as a percentage of our billing.
Speaker Change: Fits, the non-gap operating margin guidance assumes incremental, food and investments in sales and marketing and R&D targeted towards addressing our large market opportunity.
Speaker Change: It also factors in the annualized run rate of the incremental investments we made in fiscal year 24.
Rukmini Sivaraman: We will continue to guide to revenue, non-gap operating margin and pre cash flow on an annual basis and to guide to revenue and non-gap operating margin for the subsequent quarter. Second, and moving on to assumptions in our guidance, we are seeing continued and significant land and expand opportunities and a growing pipeline for our solutions. However, we continue to see a higher mix of larger deals in our pipeline, which is driving greater variability in our land and expand booking.
Speaker Change: It also assumed a 20 to 25 million dollar headwind in operating expenses relative to fiscal year 24 from payments related to one of our partnership agreements.
Speaker Change: Specifically, there was about 44 million of this benefit to the R&D operating expense line in fiscal year 24, and we anticipate it to be $20 to $25 million in fiscal year 25.
Rukmini Sivaraman: These larger opportunities often involve strategic decisions and see sweet approvals at the customer or prospect causing them to take longer to close and to have greater variability in timing, outcome and deal strength, and as we mentioned previously, we continue to see a modest elongation of average sales cycles relative to historical levels which we expect to continue. Third, the guidance assumes that renewal will continue to perform well in fiscal year 25. Fourth, the full year guidance assumes that average contract duration will be flat to slightly lower compared to fiscal year 24 as renewals continue to grow as a percentage of our billing.
Speaker Change: and 6th.
Speaker Change: The Freak Ashlo Biden reflects in approximately 30 million dollar headwind, relative to fiscal year 24.
Speaker Change: from lower interest income as a result of our lower invested cash due to the cash payment on the conversion of the 2026 convertible notes.
Speaker Change: We expect free cash flow in fiscal year 25 to also benefit from the approximately 30 million in non-recurring payments related to a partnership agreement similar to the benefit we saw in fiscal year 24. It is expected to tail off towards the end of fiscal year 25.
Speaker Change: Moving to Q1 25, our guidance for Q1 is as follow.
Speaker Change: Revenue of $565 to $575 million, non-gaps operating margin of 14.5 to 15.5%.
Rukmini Sivaraman: Fifth, the non-gap operating margin guidance assumes incremental prudent investments in sales and marketing and R&D targeted towards addressing our large market opportunity. It also factors in the annualized run rate of the incremental investments we made in fiscal year 24. It also assumes a 20 to 25 million dollar headwind in operating expenses relative to fiscal year 24 from payments related to one of our partnership agreements. Specifically, there was about 44 million of this benefit to the R&D operating expense line in fiscal year 24 and we anticipate it to be 20 to 25 million dollars in fiscal year 25.
Speaker Change: Fully diluted, weighted average shares outstanding of approximately 287 million shares.
Speaker Change: In closing, we are pleased that our Q4 and 5024 performance exceeded guidance across all metrics.
Speaker Change: We are excited about the long-term market opportunity and new genetics is a ability to deliver compelling outcomes for customers and prospects.
Speaker Change: We remain committed to continue the progress aligned with our state's philosophy of sustainable, profitable growth, both through durable, top-line growth and expanding margin.
Speaker Change: Would that operator please open the line for questions?
Rukmini Sivaraman: And sixth, the free cash flow guidance reflects an approximately 30 million dollar headwind relative to fiscal year 24 from lower interest income as a result of our lower invested cash due to the cash payment on the conversion of the 2026 convertible notes. We expect free cash flow in fiscal year 25 to also benefit from the approximately 30 million in non-recording payments related to a partnership agreement similar to the benefit we saw in fiscal year 24. It is expected to tail off towards the end of fiscal year 25.
Speaker Change: Certainly, and ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. You may get back to the queue as time allows. Our first question comes to the line of George Wayne from Barclays. Your question, please.
George Wayne: Oh yes, thanks for taking my question. Hopefully, just curious if you have any update on the Broadcom kind of turn, especially in the last two quarters, you just talk about the after the initial wave of the strong engagement that actually slowed, just because of the Broadcom walking back some of the initial initiatives, so we now more in favor of retaining some of the prior customers, just curious if that dynamic has changed.
Rukmini Sivaraman: Moving to Q1 25, our guidance for Q1 is as follows revenue of 565 to 575 million dollars non-gap operating margin of 14.5 to 15.5 percent fully diluted weighted average shares outstanding of approximately 287 million shares.
Rajivya: Hi George, I'm Rajivya. It's largely an unchanged multi-year opportunity to gain share, like we said last quarter.
Speaker Change: While the same side is having a bit longer than we initially anticipated, this far we haven't really seen any meaningful changes in our when or last rates on these opportunities.
Rukmini Sivaraman: In closing, we are pleased that our Q4 and fiscal year 24 performance exceeded guidance across all metrics. We are excited about the long-term market opportunity and Nutanix's ability to deliver compelling outcomes for customers and prospects. We remain committed to continue progress aligned with our stated philosophy of sustainable profitable growth both through durable top line growth and expanding margin.
Speaker Change: And as we talked about an apropetic of our remarks, we are seeing some of these larger opportunities close. We gave you a few examples in the apropetic remarks.
Speaker Change: and I do expect that we continue to see more of these over time.
Speaker Change: Now in the mid-sized small customer segments we are seeing significant increase in engagement and opportunity. As many of these small companies look for alternatives and generally let competitive engagements related to the larger customer opportunities.
Unknown Executive: Would that operator please open the line for questions? Certainly and ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. You may get back to the Q's time allows.
Speaker Change: Along with our increased leverage from our go-to-market partnership that we've talked about as well as our programs and incentives that we have in place.
Speaker Change: This dynamic has also been one of our drivers for our larger, stronger new logo performance.
George Wang: Our first question comes from the line of George Wayne from Barclays. Your question please. Oh, yes, thanks for tuning my question. Firstly, just curious if you have any update on the Broadcom kind of term, especially in a lot of quarters, you just talk about the after initial wave of strong engagement. The activity slowed just because of the Broadcom walking back some of the initial initiatives. So we are now more in favor of retaining some of the prior customers. Just curious if that dynamic has changed.
Rajiv: Okay, great, just as if I think quickly, it's guys to see one customer in financial services and you guys mentioned that without changing the underlying hardware, you know, basically that the dating sites are, you know, one of the dating sites are being, so they're upgrading, the underlying hardware to wait for the hardware refresh. It has came to talk about, so they, you know, better pass going forward and kind of, that now seems to, especially after the outpour mission, maybe you kind of removing some of the constraints related to the underlying hardware refresh, maybe you can give a little bit more color on that. Well, that's a very good question, Rajiv. I think if you look at these short base out there in data centers, you know,
Rajiv Ramaswami: Hi George, Radivia. Yeah, we are largely an unchanged multi-year opportunity again share like we said last quarter. While the sales sites have been a bit longer than we had initially anticipated. This far we haven't really seen any meaningful changes in our win or loss rates on these opportunities. Thank you very much. As we talked about in our preparatory remarks, we are seeing some of these larger opportunities close. We gave you a few examples in the preparatory remarks.
Speaker Change: Last majority of it, I don't have the exact number, but roughly around 80% of it is what we call 3 tier infrastructure, separate storage compute and networking.
Speaker Change: and you as you know we have a HCI solution today in the market and if you want to replace the 3-year with HCI it's a better architecture and more cost effective long term but it does require hardware refresh.
Rajiv Ramaswami: And I do expect that we'll continue to see more of these over time. Thank you, Mr. Chair, customer opportunities. You know, along with our increased leverage from our gold market partnership that we've talked about as well as our programs and incentives that we have in place. This dynamic has also been one of our drivers for our larger, stronger new logo performance. Okay, okay, great. If I can squeeze in quickly, you know, it's nice to see one customer in financial service as you guys mentioned, without changing the underlying hardware, you know, critically, the dating sites are, you know, one of the dating sites is being so they upgrading the underlying hardware to wait for the hardware refresh.
Speaker Change: Now the remaining 21st of the ZCI office near Vera Market Lealer and her competition has come to rest.
Speaker Change: Now, in this particular case, the diagram that we talked about, the customer will already on HCI, with a competing product.
Speaker Change: and when you're already on HCI, you're being quite successful at having our software be able to run on existing hardware because it's already HCI hardware.
Speaker Change: And that's what happened in this particular account. And so for that subset of customers that are already on HCI, the migration path of VGS, in some subset of those cases we don't need hardware impressions, that's what happened here.
Speaker Change: On the 3th year, it does require a hardware reference.
Speaker Change: Now, we are also addressing the senior market to your point, you know, one aspect of our partnership with Dell is that we said, you know, we would, they would be the first that we would support at external storage, Dell power slings.
Rajiv Ramaswami: I guess, can you talk about so they, you know, better path going forward, the kind of now things especially after Galparnish, maybe you can be removing some of the constraints related to the underlying hardware refresh. Yeah, maybe you can be a little bit more calm on that.
Speaker Change: And now the whole idea of doing that is now we can find an easier insertion into creature deployments without timing to change out the hardware.
Speaker Change: Now that solution is not available in the market today, it's only going to be available sometime next year, and over time we anticipate being able to offer that support to a broader set of third-party storage device.
Rajiv Ramaswami: That's a very good question, George. I think if you look at the install base out there in data centers, vast majority of it. I don't have the exact number, but roughly around 80% of it is what we call three-tier infrastructure, separate storage compute and networking. And you know, we have a HCI solution today in the market and if you want to replace the three-tier with HCI, it's a better architecture, more cost-effective long term, but it does require a hardware refresh.
Speaker Change: Okay, thank you. I'll go back to the tune.
Speaker Change: Thank you, and our next question comes from the line of Jim Fish from Piper Sandler, your question, please.
Speaker Change: Thanks for the questions here. Chief, do you want to ask around essentially?
Jim Fish: You alluded to a little bit of GPT in a box here. I don't think we can be on a conference calling anymore with that talk about AI. But are you seeing any sort of trend of repatriation of workloads back to private clouds or just a core workload as well as for AI? I guess any update on the GPT in a box.
Rajiv Ramaswami: Now, the remaining 21st set is HCI of which, you know, we are a market leader and our competition has come of the rest. Now, in this particular case, there's a grant that we talked about, the customer will already on HCI with the competing product. And when you're already on HCI, you have even quite successful at having our software be able to run on existing hardware because it's already HCI hardware. And that's what happened in this particular account.
Speaker Change: Yeah, I'll first gym, good question. I'll give you a 2.1 answer to that first, in general purposes, walk out in then second on GPT.
Speaker Change: for general purpose blockers to your point.
Rajiv Ramaswami: And so for that subset of customers that are already on HCI, the migration parts of these years, in some subset of those cases, we don't need a hardware refresh, and that's what happened here. On the three-tier, it does require a hardware refresh. Now, we're also addressing the three-tier market to your point. You know, one aspect about partnership with Dell is that we said, you know, they would be the first that we would support at external storage, Dell power flex.
Speaker Change: You know, for steady state workloads, I think people are getting to the conclusion that it's much more cost effective to run those on prime in a private cloud environment.
Speaker Change: We've seen some representation, we've also seen...
Speaker Change: much more deliberation in terms of whether that workload goes to the public cloud in the first place, because the lot of the deployment is still on track of enterprise workloads. So, we certainly think that trend and realization customers to say, you know, the steady-state workloads we can run them more conceptively in private class.
Rajiv Ramaswami: And now the whole idea of doing that is now we can find an easier insertion into feature deployments without having to change out the hardware. Now, that solution is not available in the market today. It's only going to be available sometime next year. And over time, we anticipate, you know, being able to offer that support to a broader set of third-party storage rates. Okay. Thank you. I'll go back to you.
Speaker Change: And now on GPT specifically, I think a lot of the initial interest in January has been in this creation and training of the LLM.
Unknown Executive: Thank you.
Speaker Change: Rajivad Models and a lot of them are being done in the public cloud and massive DTU farms. And we don't have a, we don't play that fully best. But on the other hand, we think the bulk of the enterprise opportunity in terms of how companies are actually going to use it.
Speaker Change: is potential going to be on print because at the end of the day, the January I've worked with applications have to be run wherever the customer data is.
Jim Fish: And our next question comes from the line of Jim Fish from Piper Sandler. Your question, please. Hey guys, thanks for the questions here. Chief, do you want to ask around essentially, you alluded to a little bit of GPT in a box here. I don't think we can be on a conference call anymore without talking about AI, but are you seeing any sort of trend of repatriation of workloads back to private clouds or just a core workload as well as for AI, I guess, you know, any update on the GPT in a box.
Speaker Change: And in a long case of sensitive customer data, it is either inside data centers or the edges.
Speaker Change: and so a platform like ours, DPD in the box provides a very simple easy to use, secure way of running, DNA applications.
Speaker Change: and so the use cases that we've seen so far have been around co-pilotating around documents, and analysis around customer support, and hence fraud detection we are seeing certainly continued traction, this is the only date for us.
Jim Fish: Yeah, so Jim, good question. I'll give you a two point answer to that first. General purpose workloads and then second on GPT. For general purpose workloads to your point, you know, for steady state workloads, I think people are getting to the conclusion that it's much more cost-effective to run those on prime in a private cloud environment. We've seen some repatriation. We've also seen much more deliberation in terms of whether that workload goes to the public cloud in the first place because a lot of the deployment is still on print of enterprise workloads.
Speaker Change: Barakal of multiple verticals, healthcare, financial services and government.
Jim Fish: So we certainly seen that trend and realization customers to say, you know, steady state workloads, we can run them more cost-effectively in private clouds. Now on GPT specifically, I think a lot of the initial interest in GNIIs has been in this creation and in training of LLMs, large-angle models, and a lot of that is being done in the public cloud and massive GPU farms. And we don't have a, we don't play that fully well.
Speaker Change: So, all it is for DPT adoption in the private cloud enterprise.
Speaker Change: but I think that's going to be a growing market for our fine-tuning, a regular tribal augmented generation and for influencing.
Jim Fish: But on the other hand, we think the bulk of the enterprise opportunity in terms of how companies are actually going to use it, is potentially going to be on print because at the end of the day, the GNI workloads applications have to be run wherever the customer data is. And in a lot of cases, sensitive customer data is either inside data centers or at the edges. And so a platform like ours, GPT in a box provides a very simple, easy-to-use, secure way of running GNII applications.
Speaker Change: In terms of running the AI workloads close to the data in a private insecure way.
Speaker Change: Like Sensen and Rukmini, I'm sure you're anticipating this question already, but we think about that 25-guide, how much incremental contribution are you expecting either from a growth, dollar perspective, however you want to put it, between the VMware opportunity, the Cisco and Dell partnerships.
Speaker Change: First is the expansion within your existing install base that way. If memory serves me right, should be accelerating a little bit in terms of the renewals of the grabs this year. And it's a way to think about where ARR actually exists this year. Thanks, guys.
Speaker Change: Thank you, Jim, for that question. So in terms of contribution from the various buckets that you called out, Jim, so I'll give you some qualitative color on that. So we've talked about, in general, we have, you know, happy with our pipeline generation overall. And we have talked about the growing pipeline and the fact that the pipeline from larger deals is growing faster.
Speaker Change: and that can lead to variability, with respect to timing or outcome or more complex deals structures and so on. And so some of those dynamics we expect to continue next year, similarly with just modestly long-scale sales cycles across the board, not just large deals, right, but across the board and we expect that to continue next year as well.
Jim Fish: And so the use cases that we've seen so far have been around co-pilotating around documents such as analysis and on customer support and enhanced fraud detection. We are seeing certainly continued traction. It's still early days for us, but across multiple verticals, health care, financial services, government. So early days for GPT adoption in the private cloud enterprise, but I think that's going to be a growing market for fine-tuning, rack retrieval augmented generation and for inferencing in terms of running the AI workloads close to the data in a private and secure way.
Jim Fish: Makes sense.
Speaker Change: In terms of the contribution from Cisco, we do expect the Cisco contribution to grow in Cisco Leard 25 relative to last year and we do expect a small initial contribution from a Dell XC Plus which is new often that's generally available now.
Speaker Change: And we expect small initial contributions from that in 25 and expect that to grow as well over time. And so all of that is taken into account when you think about the Siskulit 25 stopland ride that we provided. Jim, the other thing you alluded to is Reynolds.
Rukmini Sivaraman: And Rick Mani, I'm sure you're anticipating this question already, but I guess how much, as we think about that 25 guide, how much incremental contribution are you expecting, either from a growth dollar perspective, however you want to put it between the VMware opportunity, the Cisco and Dell partnerships versus the expansion within your existing install base that memory certainly right should be accelerating a little bit in terms of the renewals up for grabs is here. And is there a way to think about where there are actually exit booths here?
Speaker Change: So yes, I don't know what business continues to grow nicely year over year so that's factored in there as well.
Speaker Change: And I think the last part of your question.
Jim Fish: What's around ARR?
Speaker Change: So, we will continue to report ARR on a quarterly basis, and while we noted that ARR on the perform, just for fiscal 1994 relative to our internal expectations, we're not providing guidance for ARR.
Rukmini Sivaraman: Thanks, guys. Thank you, Jim, for that question. So in terms of contribution from the various buckets that you called out, Jim, so I'll give you some qualitative color on that, right? So we've talked about in general, we have, you know, happy with our pipeline generation overall, we have talked about the growing pipeline and the fact that the pipeline from larger deals is growing faster. And that can lead to variability, right, with respect to timing or outcome or more complex deals structures and so on.
Kukmini: The only thing I'd like to do is that Kukmini would be, I think Jimi also had a question on the broad calm opportunity. Like I said, that's largely unchanged, but it's also very difficult to explicitly pass the outcome because every one of our deals historically we have been competing against we invented the past and that continues.
Speaker Change: There are some level of influence, these are the only reason why people come to us, it's a little hard for us to tease it out separately.
Rajiv: Yes, thank you Rajiv. That attribution is certainly nuanced. We do expect it to continue to contribute to some, but we wouldn't be overly precise on that. Thank you Rajiv and thank you Jim for the question.
Rukmini Sivaraman: And so some of those dynamics we expect to continue next year, similarly with just modestly longer sales cycles across the board, not just large deals, right, but across the board and we expect that to continue next year as well. In terms of the contribution from Cisco, we do expect the Cisco contribution to grow in fiscal year 25 relative to last year. And we do expect a small initial contribution from a Dell XC plus, which is the new often that's generally available now and we expect small initial contribution from that in 25 and expect that to grow as well over time.
Speaker Change: Thank you, and our next question comes from a line of medical from Morgan Stanley, your question, please.
Speaker Change: and great thanks!
Speaker Change: I wanted to get a sense of being circling back to the question that's been asked a couple of times. In terms of, do you feel like you've kind of figured out where, you know, broad comms line is, where kind of the definition of your customer is?
Rukmini Sivaraman: And so all of that is taken into account when you think about the fiscal year 25 top-line grid that we provided. Jim, the other thing you alluded to is renewals. So yes, our renewals business, you know, continues to grow nicely year over year. So that's factored in there as well. And I think the last part of your question was around ARR. So we will of course continue to report ARR on a quarterly basis.
Speaker Change: Are you kind of refining where you think the most actionable opportunities are or you still kind of in that discovery mode of figuring out what are the most actionable opportunities?
Speaker Change: I don't know...
Rukmini Sivaraman: And while we noted that ARR under perform just for fiscal year 24 relative to our internal expectations, we're not providing guidance for for a. R.R. Yeah, the only thing I'll add to that Rukmini would be, I think Jimmy Holt had a question on the Broadcom opportunity and like I said that's largely unchanged, but it's also very difficult to explicitly pass the route because everyone of our deals historically, you know, we've been, you know, we have been competing against the environment in the past and that continues.
Speaker Change: Jim just asked about it, but just kind of any of the, you know, timing of renewals or co-terming just given that we've had some kind of early renewal dynamics and kind of co-terming issues over the past couple of years that we should just be mindful of as we go into fiscal 25 things.
Speaker Change: I am Mija Alstad and they look pretty good and for the second part.
Speaker Change: An independent of the brought-on situation as we look at our addressable market. Historically, engineers have been quite strong in what I would call the smaller side of enterprises and the higher end of commercial with market. But over the last few years, we have deliberately made a tilt for the raw market towards larger enterprises, because...
Rukmini Sivaraman: So, you know, there's some level of influence. Is it only, these are the only reason why people come to us. It's a little hard for us to piece the route separately. Yes, thank you, Rajiv, that contribution is, it's certainly nuanced. So, we, you know, we do expect it to continue to contribute some, but we wouldn't be overly precise on that. So, thank you, Rajiv, and thank you, Jim, for the question.
Speaker Change: That's where we are underpinitrated and the biggest time opportunity sets. So we have realigned our segmentation over the past few years to focus more on that market. Now, the product is ready.
Meta Marshall: Thank you, and our next question comes from the line of Metabarshall from Morgan Stanley. Your question, please. Great, thanks.
Speaker Change: We've done a lot of work on the product side. The GTM side now we're ready. We've got some good partnerships.
Speaker Change: Now, we also clearly understand that when you get to the large customers, the G2K accounts, for example, or the Fortune 100 type accounts.
Meta Marshall: I wanted to get a sense maybe kind of circling back to the question that's been asked a couple of times just in terms of, you know, do you feel like you've kind of figured out where, you know, Broadcom's line is where kind of the, the definition of your customer is, or are you kind of refining where you think the most actionable opportunities are, or are you still kind of in that discovery mode of figuring out what are the most actionable opportunities. And then I know Jim just asked about it, but just kind of any of the, you know, timing of renewals or co-termine just given that we've had some kind of early renewal dynamics and kind of co-termine issues over the past couple of years that we should just be mindful of as we go into fiscal 25. Thanks.
Speaker Change: and those are going to be more competitive. And that's where clearly brought down a small focus on. And those engagements tend to be long, they tend to be bigger, but also very fruitful, if and when we do win it.
Speaker Change: and as you can see here we are starting to win some of those. We talked about an 8th degree C-Viven last quarter. That's quarter which I had a multimillion dollar C-Viven. So those tend to take time but are well worth it when they do happen.
Speaker Change: So we've got a focus there for sure. The mid-market of the smaller side of the enterprise has been installed at the Svizbot.
Speaker Change: And it's also a lesson for focus for dot com given their explicit focus on the bigger accounts.
Speaker Change: It also tends to be less competitive and easier migrations as well. So that continues to be, you know, our historical three-part continues to be a three-part. But the bigger opportunity for us in growth is also now sitting at the top end of the pyramid.
Rajiv Ramaswami: Hi, I'll start and then look when you can answer the second part. An independent of the Broadcom situation, as we look at our addressable market, historically, Nijaniq has been quite strong in what I would call the smaller side of enterprises and the higher end of commercial with market. But over the last few years, we have deliberately made the tent further up market towards larger enterprises because that's where we are under penetrated and the biggest time opportunity sets.
Speaker Change: And I'll take the question meter on renewals and expectations for renewals in fiscal year 25.
Speaker Change: So, first I say, you know, we did have in fiscal year 24, overall good performance in the world and I think to your point
Speaker Change: It did include...
Speaker Change: Really good disappearance from the team around economics, whether or not it was in terms of pricing. It didn't include some early and co-term renewals and as we said before those...
Rajiv Ramaswami: So we have re-aligned our segmentation over the past few years to focus more on that market. Now the products are ready. We've done a lot of work on the product side. The GTM side now we're ready. We've got some good partnerships. Now we also clearly understand that when you get to the large customer, the G2K accounts, for example, or the fortune 100 type accounts, those are going to be more competitive. And that's where clearly Broadcom is more focused on and those engagements tend to be long, they tend to be bigger, but also very fruitful if and when we do win it.
Speaker Change: are good in our mind as long as they come in at good economics, because the customer is willing to renew with us and renew their commitment to us earlier and often give us the cash earlier as well. And then, the court terms are full of simplification of their real estate, right? So, that's both the customer and us well in terms of managing their footprint.
Speaker Change: So, we did have some of that. Now, when we look at fiscal year 25, are available to the new pool, or you can think of that as effectively a pipeline for renewals, continues to grow. It's the strong year of year growth, and it's roughly similar year of year growth similar to what we saw in fiscal year
Rajiv Ramaswami: And as you can see here, we are starting to win some of those. We talked about an 8-figure ACB win last quarter. This quarter we had a multimillion dollar ACB win. So those tend to take time, but are well worth it when they do happen. So we've got to focus there, for sure. The mid market or the smaller side of the enterprise has been historically a sweet spot. And it's also less of a focus for Broadcom given their explicit focus on the bigger accounts. It's also tends to be less competitive and easier migrations as well. So that continues to be our historical sweet spot and continues to be a sweet spot.
Speaker Change: And then in terms of timing, I think perhaps the question is around seasonality of that meter. It does move around a little bit, but in general, R fiscal Q2 and Q4 tend to be sort of higher quarters for us, given Q2 has the calendar year end and budgets and flush and things like that. And of course, fiscal year Q4 is end of R fiscal year and the incentives are on that, so...
Speaker Change: Q2 and Q4, he started the entire higher in general available to the new polls, or as if the Q1 and Q3. But that's sort of how we think about the renewals' opportunity in fiscal year 25.
Rukmini Sivaraman: But the bigger opportunity for us growth is also now sitting at the top end of the page, and I'll take the question meter on renewals and expectations for renewals in fiscal year 25. So first as you know we we did have in fiscal year 24 just overall good performance in renewals and I think to your point, it did include really good discipline from the team around economics for the renewals in terms of pricing.
Speaker Change: Thanks so much. Thank you, you go.
Speaker Change: Thank you, and our next question comes from a line of Wimsy Mohan from Bank of America. Your question, please.
Ruklu Filingen: Hi, thanks for taking the questions. It's Ruklu Filingen for Wambi today. I've won for Rajiv and won for Rukmini.
Ruklu Filingen: Rajiv is the demand environment, materialy, different from 90 days ago. And can you talk about the pricing environment?
Rukmini Sivaraman: It did include some early and court term renewals and as we said before those are good in our mind as long as they come in and good economics because the customer is willing to renew with us and renew their commitment to us earlier and often give us the cash earlier as well and then court terms are for the simplification of their real estate right so that's about the customer and as well in terms of managing their footprint. So we did have some of that now when we look at fiscal year 25 are available to renew pool or you can think of that as effectively a pipeline for renewals continues to be continues to grow it's the strong year of year growth and it's roughly similar year of year growth.
Speaker Change: Specifically, you know, I think you've said in the past that some customers may wait for their hardware to be depreciated. It's pricing and leverage you can use to maybe drive faster share games.
Speaker Change: [inaudible] People who do throw for all the very good questions, and as far as the demand in management has not changed.
Speaker Change: and it's been fairly stable. As we said, you know over the last several quarters, we are seeing some modern long-gettet sales cycles, people, you know, getting more approvals and more awareness of PC or before they make a purchasing decision.
Rukmini Sivaraman: Similar to what we saw in fiscal year 24 and then in terms of timing, I think perhaps your question around sort of seasonality of that meter it does move around a little bit but in general our fiscal Q2 and Q4 tend to be sort of higher quarters for us given Q2 has the calendar year end and budgets flush and things like that and of course fiscal year Q4 is the end of our fiscal year and there are incentives around that so. So Q2 and Q4 started to have higher in general available to the new pools relative to Q1 and Q3 but that's sort of how we think about the renewals opportunity in fiscal year 25. Great, thanks so much. Thank you.
Speaker Change: So that part has not changed. Now in terms of how we look at the opportunity.
Speaker Change: Now hardware refresh as you can see right I mean when we do need a hardware refresh.
Speaker Change: that tends to be a significant factor in terms of a customer's timing on a deal. Now, you know, the key key things keep in mind is that the hardware refresh is not just a one point at the time, hardware refresh has happened, depending on the size of the estate at various points.
Speaker Change: and we can use those points to secure an insertion. It may not be a full insertion because you know, hardware always gets replaced over time and multiple cycles. So, we may be able to insert for say one workload, where a portion of the hardware is getting replaced, say this year and maybe other portions of the hardware will only get refreshing 2 to 3 years from now. So, that's sort of a normal engagement.
Ruplu Bhattacharya: Thank you and our next question comes from a line up. Wemcee Mohan from Bank of America. Your question please. Hi, thanks for taking the questions. It's Ruplu filling in for WAMZI today. I have one for Rajeev and one for Rukmini.
Rajiv Ramaswami: Rajeev is the demand environment materially different from 90 days ago and can you talk about the pricing environment? Specifically, you know, I think you've said in the past that some customers may wait for their hardware to be depreciated. It's pricing a lever you can use to maybe drive faster share gains. For example, can a smaller customer be induced more to go with the Nutanix? And as a management team, how do you trade off share gain versus margins and have a follow up for Rukmini?
Speaker Change: Now we have offered some promotions to customers in terms of providing them some overlapping windows where we can give them discounted licenses for a period of time.
Speaker Change: Now, I will say that hardware costs tend to be quite significant, so it's not that we're able to necessarily subsidize hardware costs ourselves. But sometimes we may be able to work with partners, hardware partners will more interested in doing that themselves.
Speaker Change: So that can be a possibility as well when it comes to the hardware program.
Rajiv Ramaswami: Yes, Ruplu. Those are all very good questions. At the top level, the demand environment has not changed. And it's been fairly stable. As we see said, you know, over the last several quarters, we are seeing some odd elongated sales cycles. People, you know, getting more approvals and more awareness of PCO before they make the purchasing position. So, so that part has not changed. Now, in terms of how we look at the opportunity, now hardware refresh, as you can see, right?
Speaker Change: And then look, I think when it comes to landing new customer, especially significant ones, we are ready to be quite aggressive.
Speaker Change: In terms of, we already have aggressive promotions out there and the incentives for customers and we will do what is needed within reasonable bounds to go win these deals while at the same time protecting our margins.
Speaker Change: So that's a probably broad answer. I would say that's that we are being aggressive, wherever needed, we are working with hardware partners to see if we can mitigate some hardware opportunities. And at the same time, keep in mind the clue we are also working to broaden the set of places where we can insert.
Rajiv Ramaswami: I mean, when we do need a hardware refresh, that tends to be a significant factor in terms of the customer's timing on a deal. Now, you know, the key key things keep in mind is that the hardware refresh is not just one point in time. Hardware refresh has happened depending on the size of the estate at various points. And we can use those points to secure an insertion. And it may not be a full insertion because, you know, hardware always gets replaced over time and multiple cycles.
Rajiv Ramaswami: So, we may be able to insert for, say, one workload where a portion of the hardware is getting replaced, say this year, and maybe other portions of the hardware will only get refreshed in two, three years from now. So, that's sort of normal engagement. Now we have offered some promotions to customers in terms of providing them sort of some overlapping windows where we can give them discounted licenses for a period of time.
Speaker Change: Without requiring a hardware refresh, existing HTA environments are the ability to reuse servers that customers may already invested in and then over time as we get our third party storage support, we'll be able to do more even more of that.
Rukmini Sivaraman: Okay, thank you, Reggie, for the detailed answer there. Rukmini, I wanted to ask you your free cash flow guidance for fiscal 25 is very strong above the prior 2023 investor-day guidance. How should we think about the cadence of that in the first half versus the second half of this goal 25? And then when we look at the remaining metrics, for example, revenue is now at the lower end of what you had thought, what you guided in the analyst day. Is it given that is it reasonable for investors to expect that the outer year, say fiscal 27 expectations, should also be lower or could there be a material acceleration over the next two years even the dynamics of renewables and available to renew as well as new logos that you're.
Rajiv Ramaswami: Now I will say that hardware costs tend to be quite significant, so it's not that we're able to necessarily subsidize hardware costs ourselves, okay, but sometimes we may be able to work with partners, hardware partners are more interested in doing that themselves, so that can be a possibility as well when it comes to these hardware projects. And then look, I think when it comes to landing new customers, especially significant ones, we are willing to be quite aggressive in terms of we already have aggressive promotions out there and the incentives for customers and we will do what is needed within reasonable bounds to go with these deals while at the same time protecting our margins, so that's probably a broad answer.
Rukmini Sivaraman: Rukmini Sivaraman.
Rukmini Sivaraman: Hi to blue, thank you for that question. So first I think your first question was around free cash flow.
Speaker Change: And so here we will be pleased with our Freak Astro Performance at 6.24 and happy to guide you know Freak Astro where we did, which as you noted, the midpoint above the high end of the range.
Speaker Change: of what we had put out.
Rajiv Ramaswami: I would say net net, we are being aggressive wherever needed. We are working with hardware partners to see if we can mitigate some hardware refresh opportunities and at the same time keep in mind to prove we're also working to broaden the set of places where we can insert without requiring a hardware refresh, accessing HTA environments or the ability to reuse servers that customers may already invested in. And then over time as we get our third party storage support, we'll be able to do even more of that.
Ruklu Filingen: Last year at our investor day. Now, in terms of the quarterly cadence there, Ruklu, we don't of course guide quarterly to free cashers so they can be some some variation there, including, you know, as we pointed out in the last couple of quarters, where because we collect cash from multiple years of front generally.
Rukmini Sivaraman: Okay, thank you Reggie for the detailed answer there.
Ruklu Filingen: And...
Ruklu Filingen: Meaningful deals right if there are larger deals that we collect cash for upfront or if it's a long duration transaction than that those can cost wins, those lose so yes, we don't die to quarterly but that's sort of a quality of color. I will say that when you think about the operating expense increase over time, you know we've talked about you can sort of see the implied optics growth year over year in our origin guide and that that will be more gradual over time right we're going to invest in sales and marketing and in R&D and some of that will be over time the optics does include for example all of the analyzed run rate from investment in 24 all those are analyzed into 25
Rukmini Sivaraman: Rukmini, I wanted to ask you your free cash flow guidance for fiscal 25 is very strong above the prior 2023 investor day guidance. How should we think about the cadence of that in the first half versus the second half of fiscal 25? And then when we look at the remaining metrics, for example, revenue is now at the lower end of what you had thought, what you had guided in the analyst day.
Rukmini Sivaraman: Is it given that is it reasonable for investors to expect that the outer years say fiscal 27 expectations should also be lower or could there be a material acceleration over the next two years, even the dynamics of renewables and available to renew as well as new logos that you're winning. Hi, Diplo, thank you for that question. So first, I think your first question was around free cash flow. And so, yeah, we're pleased with our free cash reform and fiscal 24 and happy to guide you know free cash flow where we did, which as you noted, the midpoint is above the high end of the range of what we had put out last year at our investor day.
Ruklu Filingen: Plastic include salary raises for our employees that became effective. But some of those are more run rate and others will be more gradual as we run into the spend overtime.
Speaker Change: So that's the first part of your question and I think the second part was more around the
Speaker Change: So the medium to longer-term financial targets that we put out at our last investor day. So while we don't plan on commenting on those medium-term financial targets on an interim basis.
Rukmini Sivaraman: Now in terms of the quarterly cadence there, we don't of course guide quarterly to free cash flow, so they can be some some variation there, including, you know, as we pointed out in the last couple of quarters, we're because we collect cash for multiple years upfront generally. Meaningful deals, right, if there are larger deals that we collect cash for upfront or if it's a longer duration transaction, then that those can cost wings.
Ruklu Filingen: We are happy to know that you just said, Ruklu, that the fiscal 25th week after guidance at the midpoint is above the range of what we put at the investor day and our initial fiscal 25 revenue guide is within the range that we provided at that time.
Speaker Change: We continue to focus on driving durable top line growth and expanding free cash flow and operating margin and driving to operating sustainably at a rule of 40 plus over time.
Speaker Change: So that's sort of been our philosophy, we continue to drive that philosophy and we're not commenting specifically on those numbers.
Speaker Change: Sivaraman, Rukmini Sivaraman, Rukmini Sivaraman,
Rukmini Sivaraman: Okay, thank you for all the details and congratulations on the results. Thank you. Thank you, Roblo.
Rukmini Sivaraman: So, so yes, we don't guide quarterly, but that's sort of a quality of color. I will say that when you think about the operating expense increase over time, you know, we talked about you can sort of see the implied optics growth year over year in our margin guide. And that that would be more gradual over time, right, because we're going to invest in sales and marketing and an R&D and some of that will be over time.
Speaker Change: Thank you, and our next question comes from the line of Jason Adler from William Blair, your question please.
Jason Adler: Yeah, thank you. One quick one is on the 8th figure deal that you announced last quarter. Did you recognize any revenue this quarter from that deal? And then what's the kind of schedule look like on RevRack for that particular transaction?
Rukmini Sivaraman: The optics does include, for example, all of the analyzed run rate from investments in 24, all those are analyzed into 25 plus it includes salary raises for our employees that became effective. But some of those are more run rate and others will be more gradual as we run into the spend over time. So that's the first part of your question. And I think the second part was more around the sort of medium to longer term financial targets that we've put out at our last investor day.
Speaker Change: Dear, thank you Jason. So as you said, I think last quarter we did collect the cash for that transaction. The entire CCTV value of that transaction. But all the revenue recognition is over multiple years, starting in 6th year 25.
Speaker Change: So, we're going to give you the small professional services options that began in Q4, Jason, but all the licensed revenue is in Q225 and Bion.
Rukmini Sivaraman: So while we don't plan on commenting on those medium term financial targets on an interim basis, we are happy to know, as you just said, Ruplu, that the fiscal 25 free cash for guidance at the midpoint is above the range at what we put at investor day and our initial fiscal 25 revenue guide is within the range that we're providing. We continue to focus on driving durable top line growth and expanding free cash flow and operating margin and driving to operating sustainably at the rule of 40 plus over time. So that's sort of been our philosophy and we continue to drive that philosophy and we're not commenting specifically on those numbers at this point.
Speaker Change: Okay, thank you. And then, um...
Rukmini Sivaraman: Rukmini Sivaraman, Rukmini Sivaraman.
Rukmini Sivaraman: I think a bunch of people have asked this question around the VMware displacement opportunity but I wanted to kind of frame it like this which is
Rukmini Sivaraman: Do you think you have a little bit of misalignment from a grotto to market standpoint right now, just because you're moving up market.
Rukmini Sivaraman: Over the last couple of years in terms of the types of customers that you're targeting and yet, it seems like most of the low hanging fruit from VMware disruption is coming more and that kind of low end of the market and kind of low end of the enterprise.
Speaker Change: So, to be clear, just and I don't think we're misaligned, because we are targeting
Ruplu Bhattacharya: Okay, thank you for all the details and congrats on the results. Thank you. Thank you, Ruplu.
Speaker Change: Our GTM resources on web is in the maximum dollar opportunity life, right? And the more the dollar opportunity is sitting higher up in the pyramid.
Jason Adler: Thank you, and our next question comes from the line of Jason Adler from William Blair. Your question, please. Yeah, thank you. One quick one is on the eight figure deal that you announced last quarter. Did you recognize any revenue this quarter from that deal? And then what's the kind of schedule look like on Rev Rec for that particular transaction? Yeah, thank you, Jason. So as we said, I think last quarter, we did collect the cash for that transaction, the entire sort of TTV value of that transaction.
Speaker Change: Welcome to the same reason by brought up in equally focused and do aft customer, right?
Speaker Change: So, for us to grow, I mean, we already have, you know, we are well-penetrated in the lower end of the market, we continue to, we still have very much focused there, right? We haven't moved away from that. That's our sweet spot, that's our installed base, and that's where we can go in and capture more customers. We are talking about everything, when you come to school districts, to retailers, to those types of public sector. These are all types, you know, very much a sweet spot.
Speaker Change: But the bigger same opportunity for us suddenly sitting in the top of the pyramid and so we have to as a company to be successful. We have to go after those and we have the products, we have the GTM, yes we know those are going to be harder for it. But when we do win them, like you saw with the great figure opportunities that we won.
Jason Adler: But all the revenue recognition is over multiple years starting in six years, 25. So no, we didn't, you know, I think there was a small professional services portion that began in Q4 Jason, but all the license revenue is in particular 25 and beyond.
Rajiv Ramaswami: Okay, thank you. And then Reggie, for you, just I think a bunch of people have asked this question around the VMware displacement opportunity, but I wanted to kind of frame it like this, which is, do you think you have a little bit of misalignment from a grow to go to market standpoint right now? Just because you're moving up market over the last couple of years in terms of the types of customers that you're targeting, and yet it seems like most of the low hanging fruit from VMware disruption is coming more in that kind of low end of lower end of the market and kind of low end of the enterprise.
Speaker Change: and last quarter, those can be pretty significant.
Speaker Change: Gotcha, but I thought that a figure one that you on last quarter was like a three year.
Speaker Change: 2.5 years of self-cycle. That wasn't really eight.
Speaker Change: [inaudible]
Speaker Change: They started thinking about what they're going to do. It didn't wait for these close unlike many of the small customers to see what will happen.
Speaker Change: So this customer, we had certainly our unique value proposition in the use case that they were driving the thinking and then the broad calm piece of course was an added boost. So it's one of these things where it's hard to attribute how much a bit of a broad calm how much something else. But that's a good example.
Rajiv Ramaswami: So to be clear, Jason, I don't think we're misaligned because we are targeting all GTM resources on where we think the maximum dollar opportunity lies, right? And the more the dollar opportunity is sitting higher up in the pyramid, whether which is the same reason by brought on equally focused on those customers, right? So for us to grow, I mean, we already have, you know, we are well penetrated in the lower end of the market and we will continue to, we still have very much focused there.
Speaker Change: Similarly, the example from this quarter's call also is very much the same, right? This fortune 100 financial capital is customer, very much driven by the broken situation.
Rajiv Ramaswami: We haven't moved away from that. That's our sweet spot. That's our installed base. And that's where we can go in and capture more customers. We are talking about everything ranging from school districts to retailers to those types of public sector. These are all types, you know, very much a sweet spot, but the biggest same opportunities for us, certainly sitting in the top of the pyramid. And so we have to as a company, we have to go after those, right?
Speaker Change: Great, thank you.
Raymond James: Thank you, and our next question. Come to the line and send me a report from Raywin James. Your question, please.
Raymond James: Hi guys, this is Victor Chu in first time and I wanted to follow up on that last
Victor Chu: Question, you know kind of regarding customer migrations, you know within VMware's footprint of, you know, the three tier infrastructure customers that you describe. Can you help us think about it?
Rajiv Ramaswami: And we have the products, we have the GTM. Yes, we know those are going to be harder for. But when we do win them, like you saw with the rate figure opportunities that we won last quarter, those can be pretty significant. Gacha, but I thought the figure one that you won last quarter was like a three-year or two and a half year sales cycle or something. That wasn't really related to the Broadcom.
Speaker Change: What percentage of those would be able to fairly easily adapt their adjusting application in platforms to HP and kind of what?
Speaker Change: and the percentage for better abortion kind of married to VMware because of their dependency on some of the more advanced kind of virtualization functionalities on that. So that's a good question Victor. I would say the vast majority of applications running on a VMware hypervite on 3 years can run very well on a 3 in HCI environment.
Speaker Change: Then, you know, perhaps things at the edges were...
Speaker Change: It's not technical gaps, it's really more ecosystem certification gaps.
Speaker Change: that my hinder, some of them, they might be an application that certified only a 6 but not certified on a 3. And over the last few years we've built that out as well. So there are going to be some corner cases that are not certified, but for the most part we can address.
Rajiv Ramaswami: It was close unlike many of the smaller customers to see what was going to happen. So this customer, we had certainly our unique value proposition in the use cases that they were driving the thinking and then the Broadcom piece of course was an added boost. So it's one of these things where it's hard to attribute how much a bit was Broadcom, how much was something else, but that's a good example. Similarly, the example from this quarter's call also is very much the same, right, this 14-100 financial service customer, very much driven by the Broadcom situation.
Rajiv Ramaswami: Great, thank you.
Speaker Change: very much anything that is running on a three-tier infrastructure on VMware and run that effectively on Nutanic FHCI on AHV. But there are the other barriers that we talked about, right, in terms of hardware refresh cycles and then the timing of the renewals.
Speaker Change: Those are some of the other things that we should have to factor in, but it's not a technical barrier.
Speaker Change: That's very helpful, and then maybe if you help us think about how the economics, you know, compare, you know, with the mechanics, you know, having a high production included in the platform, the economics, does that make the economic material a different, or is it just kind of...
Victor Chu: Thank you. And our next question comes from a line that's seemingly a port from Raymond James. Your question please. Hi guys, this is Victor Chu in person. I wanted to follow up on that last question kind of regarding customer migrations within VMware's footprint of the three-tier infrastructure customers that you described. Can you help us think about what percentage of those would be able to fairly easily adapt their existing application platforms to a kind of what percentage for better or worse, a kind of merit to VMware because of their dependency on some of the more advanced kind of virtualization functionalities on that.
Speaker Change: Margil, Diffension Mord, I keep building kind of thing. Yeah, I think, so we're on that again. So clearly historically this has been the case when a customer may go from a 3-tier deployment or to a head-tier deployment.
Speaker Change: They save a lot, right? They save 30, 40% at least in terms of TCO costs. If you're back to rent, everything including the hardware costs, the operating costs, all of its pretty substantial savings.
Victor Chu: So that's a good question Victor. I would say the vast majority of applications running on a VMware hypervisor on three tiers can run very well on HV in HCI environment. There are perhaps things at the edges where it's not technical gaps. It's really more ecosystem certification gaps that might hinder some of them. They might be an application that certified on ESX but not certified on HV. And over the last few years we've built that out as well.
Speaker Change: And so that continues to be the case today, right? I think the barrier of course is you've got you know you've invested in the hardware you wanted to appreciate it before you actually go by in your hardware, but those savings in the value of HCI related to 3T are very established and that continues.
Victor Chu: So there are going to be some corner cases that are not certified. But for the most part, we can address pretty much anything that is running on a three-tier infrastructure on VMware and run that effectively on Nutanix HCI on HV. But there's the other barriers that we talked about in terms of hardware refresh cycles and then the timing of the renewals. Those are some of the other things that we still have to factor in, but it's not a technical barrier.
Speaker Change: is the transition for an existing VM where HCI customer to mutate, you know, much easier. My TV and I... yeah, this fortunate 100, the wind that we talked about was exactly that situation.
Speaker Change: The customer had a lot of competitive ACI offering to deploy.
Speaker Change: It was an easier migration, because for them they didn't have to change out their harbour. We could just replace the other software without software.
Speaker Change: Rukmini Sivaraman, Rukmini Sivaraman, Rukmini Sivaraman, [inaudible]
Speaker Change: Thank you Victor.
Speaker Change: Thank you.
Speaker Change: and our next question comes from the line of Matt Heberg from RBC Capital Markets. Your question, please.
Rajiv Ramaswami: Okay, that's that's very helpful. And then you know, maybe, you know, can you help us think about how the economics, you know, compare, you know, with mechanics, you know, having an age peak, you know, having the kind of a hypervisor included in the platform. The economics that make the economic material a different version. It's just kind of, you know, more different and more of a capabilities kind of thing. Yeah, I think so we're on that again.
Zimmerman: Hey guys, this is Zimmerman on for Matt Headberg. Thanks for taking your question and congrats on the quarter. May I have one? Can you touch more on the linearity of large shields within the quarter? And did you see any deals being pushed out or pulled in this quarter?
Speaker Change: and then looking ahead what early trends have you been seeing so far in August and then maybe just general linearity for 2025 given some of the uncertainty of these large steel timings.
Rajiv Ramaswami: So clearly, historically, this has been the case when a customer migrates from a three-tier deployment over to a healthier deployment. They save a lot, right? They say 30, 40% at least in terms of TCO costs. If we factor in everything, including the hardware cost, the operating cost, all of which are pretty substantial savings. And so that continues to be the case today, right? I think the value of course is, you've got to, you know, you invested in the hardware you wanted to appreciate it before you actually go buy a new hardware.
Rajivan Yushuk: I'll take that Rajivan Yushuk for a bit of idea and so for the lillarity in Q4
Speaker Change: I would say it was more or less as we expected. I think your question specifically was on linearity with respect to large deals.
Speaker Change #100: and those we've talked about can be...
Rajiv Ramaswami: But those savings and the value of HCI related to three tiers is very established and that.., continues. And it's a transition for an existing VMware HCI customer to Nutanix, you know, much easier, much easier. Yeah, this fortune 100 win that we talked about was exactly that situation. The customer had a lot of competitive HCI offerings deployed. It was an easier migration because for them, they didn't have to change out their hardware. We could just replace the other software without software.
Speaker Change #101: in a more unpredictable than other portions of the business is given they tend to be often more strategic involved, see speed up, pull, things like that, we can be more unpredictable, but overall I would say the linearity in Q4 was largely as expected. In terms of push out or pull in I think the next part of the question, as we think about.
Speaker Change #101: last Q4.
Speaker Change #101: Coming into this year.
Speaker Change #101: Nothing unusual there, I would know, I think it would expect for that time of the earth. So nothing unusual there. And then again on August, the only thing I'd sort of to call out into one is it's the US federal end of fiscal year in September, of course.
Victor Chu: Great, that's very helpful. Thank you. Thank you, Victor. Thank you.
Matt Hedberg: And our next question comes from the line that Matt Hedbert from RBC Capital Markets, your question please. Hey guys, this is Zimmernon from Matt Hedbert. Thanks for taking your question and congrats on the quarter.
Speaker Change #101: That's all factored into how we think about our guidance and ability to collect free cash flow and things like that. But as I said earlier, I think...
Rukmini Sivaraman: I just have one. Can you touch more on the linearity of large shields within the quarter? And did you see any deals being pushed out or pulled in this quarter? And then looking ahead, what early trends have you been seeing so far in August? And then maybe just general linearity for 2025, given some of the uncertainty of these large steel timings.
Speaker Change #102: The overall linearity can become a little more unpredictable because of the mix of the large geos. As that grows over time and it is something that we are continuing to watch closely.
Speaker Change #103: Thank you. Thank you.
Speaker Change #104: Thank you and our next question comes from the line of Mike Seiko from Needham. Your question, please.
Rukmini Sivaraman: Thanks. I'll take that, but even you should prefer to add in. So for linearity in Q4, I would say it was more or less as we expected. I think your question specifically was on linearity with respect. To large deals. And those we've talked about can be more unpredictable than other portions of the business is given, they tend to be often more strategic, involve seafood approvals, things like that. It can be more unpredictable.
Mike Seiko: Thanks for taking my questions, guys. I just want to tell you, I know last quarter the company gave some great color on the number of million dollar plus ACD opportunities in the pipeline, going 30% year on year growing more than 50% of people looking at on a dollar basis.
Rukmini Sivaraman: But overall, I would say linearity in Q4 was largely as expected. In terms of push outs or pull in, I think was the next part of the question. As we think about last Q4 coming into this year, nothing unusual there, I would know. I think it was sort of what we would expect for that time of years, nothing unusual there. And then again, on August linearity, the only thing I'd sort of call out in Q1 is it's US federal end of fiscal year in September, of course, but again, that's all factored into how we think about our guidance and ability to collect free cash flow and things like that.
Speaker Change #106: To these statistics still hold in Q4 and do we have a sizable enough cohort to start really understanding how much longer these sales cycles are for these deals.
Speaker Change #106: Hi, Mike. Yeah, good question. We're not going to, you know, provide that metric necessarily quarterly, Mike, but you know, as we said, I think we are happy overall with
Speaker Change #107: Pipe Creation and our seeing meaningful opportunity with those larger deals segments. So that continues to be a good in terms of pipe creation. And I think your second question around, do we have enough data points?
Speaker Change #107: The relatively early, the pipeline has grown nicely, but as we've talked about, some of these larger deals can take.
Speaker Change #107: A really long time, maybe we'd give one example with two years, another one discord, where it was the year and a half, and so it is variable and it can take long. And so I say, I don't think we have, you know, a lot of that data or, um,
Rukmini Sivaraman: But as I said earlier, I think the overall linearity can become a little more unpredictable because of the mix of the large deals as that grows over time, and it is something that we're continuing to watch closely.
Speaker Change #107: in of data points, under our bells, this sort of draw too many conclusions from that. And that's what I, even in the previous question here that was asked in terms of, it is something we watch closely, right, in terms of tracking those deals, but also thinking about...
Unknown Executive: Great.
Mike Cikos: Thank you.
Speaker Change #107: Do we have multiple ways to get to the number, right? If it deals X and Y clothes or don't close, do we have other deals A and B that could get us there? So that's definitely a discussion that we have internally and factor that into our guide.
Mike Cikos: And our next question comes from the line of Mike Seacos from Needham. Your question, please. Thanks for taking the questions, guys. I just wanted to ask, I know less quarter, the company gave some great color on the number of million dollar plus ACD opportunities in the pipeline. Going 30% year on year, growing more than 50% if we look at it on a dollar basis. Did these statistics still hold in Q4 and do we have a sizable enough cohort to start really understanding how much longer these sales cycles are for these deals?
Speaker Change #108: God, thank you for that. And I guess just for a quick follow-up, appreciate all this.
Speaker Change #109: Color on the assumptions here. Can you help us understand that coal of $30 million benefits to precast what we're expecting from the partner payments this year? Again, just because we're...
Speaker Change #110: This is essentially the second back-to-back year we're now receiving this kind of payment. Is it the same corner like any other color would be beneficial?
Mike Cikos: Hi, Mike. Yeah. Good question. We're not going to provide that metric necessarily quarterly, Mike, but as we said, I think we are happy overall with pipe creation and are seeing meaningful opportunities. So that continues to be good in terms of pipe creation. And I think your second question around, do we have enough data points? It's relatively early, the pipeline has grown nicely, but as we've talked about here, some of these larger deals can take a really long time.
Speaker Change #111: Yes, thank you, Mike, for that question. I think it would be happy to clarify that. So there is, there are these non-recoding payments from the, from the, from the partner. And there is a timing difference between, uh, objects and freakashflow. And so the commentary that we had provided was we had about a 44 million dollar benefit.
Mike Cikos: Maybe give one example where it was two years, another one this quarter where it was a year and a half. And so it is variable and it can take long. And so I'd say, I don't think we have, you know, a lot of that data or enough data points under our belt to sort of draw too many conclusions from that. And that's what I even in the previous question here. That was asked in terms of it is something we watch closely in terms of tracking those deals, but also thinking about, do we have multiple ways to get to the number, right, if it deals X and Y close or don't close, do we have other deals A and B that could get us there.
Speaker Change #111: in fiscal year 24 over the course of the year to the R&D Optics line in fiscal year 24.
Speaker Change #111: And we expect that same 44 million dollar benefit, right, it has become more like 20 to 25 million in fiscal year 25. So that's the 20 to 25 million dollar headwind that I was referring to in OPEC, in 25 relative to fiscal year 24.
Speaker Change #111: So all of that is operating expense commentary. Now when you look at Fikaash Flow there's a bit of a delay in when the cash comes in relative to that payment.
Speaker Change #111: So, we got about 30 million of a cash benefit from that in fiscal year 24, we expect another 30 million in 25 and then we taper off, there may be a small portion in 26 but we will then taper off as we end this fiscal year in 25.
Mike Cikos: So that's definitely a discussion that we have internally and factor that into our into our guidance. Got it. Thank you for that. And I guess just for a quick follow-up, appreciate all the color on the assumptions here. Can you help us understand that call a $30 million benefit to precast what we're expecting from the Portland payments this year? Again, just because we're, this is essentially the second back, back to back here.
Speaker Change #111: And it's non-racurring, because we don't expect this to be an ongoing thing, it is continuing into this year, which we didn't fully anticipate about three months ago, but we do think that over time it will take us off.
Speaker Change #111: God, thank you so much. Thank you, Mike.
Speaker Change #112: Thank you. This does include the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation. You may now disconnect. Good day.
Mike Cikos: We're now receiving this kind of payment. Is it the same corner like with any other color would be beneficial? Yes. Thank you, Mike, for that question, because I think it's, I would be happy to clarify that. So there is, there are these non recurring payments from the, from this partner and there is a timing difference between OPEX and free cash flow. And so the commentary that we had provided was we had about a $44 million benefit in fiscal year 24 over the course of the year to the R and the OPEX line in fiscal year 24.
Mike Cikos: And we expect that same $44 million benefit to become more like 20 or 25 million in fiscal year 25. So that's the 20 or 25 million dollar headwind that I was referring to in OPEX in 25 relative to fiscal year 24. So all of that is operating expense commentary. Now, when you look at free cash flow, there's a bit of a delay in when the cash comes in relative to that payment.
Speaker Change #112: [inaudible]
Mike Cikos: So we got about 30 million of a cash benefit from that in fiscal year 24. We expect another 30 million in 25 and then it will taper off. There may be a small portion in 26, but it will then taper off as we end this fiscal year in 25. And it's not recurring because we don't expect this to be an ongoing thing. It is continuing into this year, which we didn't fully anticipate about three months ago, but we do think that over time it will taper off. Thank you so much. Thank you, Mike. Thank you.
Speaker Change #113: I'm going to take a look at this.
Speaker Change #113: [inaudible]
Unknown Executive: This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation. You may now disconnect. Good day. Thank you. Rukmini Sivaraman, Dr. Rukmini Sivaraman, Dr. Rukmini Sivaraman[inaudible] Rukmini Sivaraman, Dr. Rukmini Sivaraman, Dr. Rukmini[inaudible] Sivaraman, Dr. Rukmini Sivaraman, Dr.[inaudible] Holtz.
Speaker Change #113: [inaudible]
Rukmini Sivaraman: [inaudible] Rukmini, Rukmini, Rukmini,
Rukmini Sivaraman: Music
Speaker Change #114: Thank you for standing by, and welcome to New Tennis, fourth quarter, 2024 earnings conference call at this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during this session you'll need to press star 1-1 on your telephone.
Joining me today are Rajiv Ramaswami, Nutanix's president and CEO, and Rafini Sivaraman, Nutanix's CFO. After the month is closed today, Nutanix issued a press release announcing fourth quarter and this year, 2024 financial results. If you'd like to read the release, please visit the press releases section of our IR website.
During today's call, management will make forward-looking statements, including financial guidance. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our FEC filings, including our most recent annual report on form 10K and our subsequent quarterly reports on form 10Q as well as our earnings press release issued today.
These forward-looking statements apply as of today and we undertake no obligations to revive these statements after this call. As a result, you should not rely on them as predictions of future events. Please note, unless otherwise specifically referenced, all financial measures we use on today's call, except for revenue, are expressed on a website. We have provided, to the extent available, reconciliation of these non-gap financial measures to gap financial measures on our IR website and in our earnings press release.
Nutanix will be participating in the Goldman Sachs Communicopia and Technology Conference in San Francisco on September 9th and the Piper Sandler Growth Frontiers Conference in Nashville on September 10th. We hope to see you at these events.
Finally, our first quarter fiscal 2025 quiet period will begin on Friday October 18th and with that I'll turn the call over to Rajeev. Rajeev? Thank you, Rich and good afternoon, everyone.
Our fourth quarter was a solid finish to our 2024 fiscal year. We continue to see steady demand for our solutions driven by businesses privatizing infrastructure modernization initiatives while looking to adopt hybrid multi-cloud operating models and optimize their total cost of ownership. In the fourth quarter, we are happy to have exceeded all our guided metrics. We delivered quarterly revenue of $548 million up 11% year over year and saw another quarter of strong free cash code generation.
We also saw the highest number of new logos we've seen in three years, an encouraging sign of building traction with some of our go-to-market partnerships and initiatives. Our full year 2024 results demonstrated good progress on a number of fronts. Financially, we delivered solid top-line performance driven by continued strong performance from our renewals business. We saw good growth in our pipeline of larger deals as we shifted our focus up market and saw increased engagement from prospects looking for alternatives to their existing infrastructure solutions.
Even as a land and expand business underperformed, related to our internal expectations, due to the longer than expected sales cycles we see, we deliver revenue of $2.15 billion, up 15% year over year, and ARR of $1.91 billion, up 22% year over year. Our bottom line performance was even stronger, we generated free cash flow of $598 million, almost three times higher than last year, resulting in a free cash flow margin of 28% and a rule of 40 score of 43.
In FI-24, we also saw tangible progress on the partnership front with significant new or enhanced partnerships with Cisco, Dell, and Nvidia. And I'm pleased that Dell XC Plus, a new, turnkey HCI-based appliance offering with Dell is now generally available. We see these partnerships as both expanding our addressable market and providing us with meaningful go-to-market leverage. Finally, we continue to innovate in FI-24, with important new product releases and enhancements toward Nutanix cloud platform.
These included the launch of GPT in a box, our solution for streamlining the adoption of gendered AI by enterprises. We made meaningful progress towards our goal of becoming the best platform for modern applications, including the launch of Nutanix data services for Kubernetes or NDK, which offers consistent data services across both virtual machines, and container-stats, as well as the recent release of Nutanix Kubernetes platform or NKP to simplify management of modern applications on premises and in any native public cloud service.
Our most significant wins in the quarter demonstrated the appeal of the Nutanix cloud platform to organizations that are looking to modernize their IP footprints and adopt hybrid cloud operating models, as well as those looking for alternatives in the wake of recent industry M&A. Our largest win in Q4 was a multi-million dollar ACV deal with an automatic and based Fortune 100 financial services company. Following a roughly year and a half engagement with us, they chose to replace their existing solution, which Nutanix cloud platform, including our AHV hypervisor, as well as Nutanix cloud manager.
This customer, who has been using a competing HCI solution in much of the footprint, was able to utilize the existing hardware for the Nutanix software deployment, obviating the need for a hardware refresh. We also had a number of significant wins that included our Nutanix Cloud clusters or NC2 capability which enables workloads to be seamlessly and efficiently run in both private and public clubs. One of these was with an existing customer, an immediate base provider of global research services.
This customer was looking to accelerate the migration of their workloads to the public club while ensuring the workloads once migrated were run as efficiently and cost effectively as possible. Having already made a commitment to Microsoft Azure, they purchased licenses for Nutanix Cloud Platform through the Azure marketplace with the intent of utilizing its NC2 capability to shift their on-prem workloads to Azure. Another good example was a significant new customer win with a top North American university.
Most of our customers start with our platform on-prem. However, this customer was motivated by their decision to migrate away from a competing platform they were using to run their virtual machine workloads at scale in the public cloud on AWS due to the satisfaction with recent changes at their existing supplier. They chose Nutanix Cloud Platform to migrate their applications running in the public cloud to our NC2 on AWS while also adopting our cloud platform to run their on-prem workloads.
They also plan on adopting Nutanix Cloud Manager for consistent sales service and automation across their private and public cloud estate. A final notable example is a win with an Asia-based global 2000 semiconductor provider. This full stack win, which was also a displacement of our primary competitor, enables the customer to streamline their operations, increase their level of automation, and reduce their dependence on more expensive proprietary storage solutions. It included adoption of Nutanix Database Service or NDB to enable them to move off of their expensive commercial databases to open source databases managed by NDB.
This customer also plans to adopt our unified storage solutions, replacing multiple third-party storage options. Finally, they also plan on utilizing NC2 on Azure to enable them to ship the applications to the public cloud, including performing lift and ships of IT workloads of acquired companies. VCG events are reflecting the valued customer scene or platform as they look for seamless and efficient application portability, while adopting hybrid multi-cloud operating model, as well as the value of our partnerships with Azure and AWS.
In closing, I am pleased with our solid Q4 and fiscal 2024 results. And the progress we continue to make on multiple fronts, including our financial model, our partnerships, and our ongoing innovation in our cloud platform towards our goal of becoming the leading platform for running applications and managing data anywhere. We also remain focused on capitalizing on what we view as a long-term opportunity to gain share in face of recent industry disruption and our interest by our early successes, including some of the wins I just highlighted.
Finally, I would like to express my sincere gratitude to our investors, customers, and partners for their trust in us and to our employees for their hard work that led to these results.
And with that, I'll hand it over to Rukmini Sivarama, Rukmini. Thank you, Rajiv, and thank you everyone for joining us.
I will first discuss our Q4, fiscal 2024 and full fiscal year 2024 results followed by our guidance for Q1, fiscal 2025 and for the full fiscal year 2025. Results in Q4 24 came in above the high end of our range across all guided metrics. ACV buildings in Q4 were $338 million, above the guided range of $295 to $305 million, representing year over year growth of 21%. Revenue in Q4 was $548 million, higher than the guided range of $530 to $540 million, representing a year over year growth of 11%.
ARR at the end of Q4 was $1.908 billion, representing year over year growth of 22%. In Q4, we continue to see modically elongated average sales cycles compared to historical levels. Average contract duration in Q4 was 3.1 years, 0.1 year higher than Q3. Non-gap growth margin in Q4 was 86.9%, higher than our guided range of 85% to 86%. Non-gap operating margin in Q4 was 12.9%, higher than our guided range of 9% to 10%, largely due to one lower operating expenses as a result of higher than expected non-recording payments related to one of our partnership agreement.
And a few other items, and two, slightly higher growth margin and revenue. Non-gap net income in Q4 was $76 million, or fully diluted EPS of 27 cents per share based on fully diluted weighted average sales outstanding of approximately 285 million shares. DSOs based on revenue and ending accounts receivable were 39 days in Q4. Free cash flow in Q4 was $224 million representing a free cash flow margin of 41%. Free cash flow in Q4 benefited from the collection on the 8-figure ACV transaction that was booked in fiscal Q3.
Moving to the balance sheet, we ended Q4 with cash, cash equivalence and short term investment of $994 million down from $1.651 billion at the end of Q3. The primary reason for the reduction in our cash balance was paying capital's conversion of the 2026 note which we announced in June. We settled the conversion in Q4 by paying $817.6 million in cash and delivering approximately 16.9 million shares of common stock. Please note that the entire conversion value had previously already been included in our fully diluted weighted average share count on an if converted basis.
The actual settlement included a portion settled in cash rather than exclusively in shares resulting in the issuance of approximately 17 million shares which is 12 million lower than the 29 million that we had previously included on an if converted basis.
Moving to capital allocation, we repurchased about $25 million worth of shares in Q4 and $131 million worth of shares in all of fiscal year 24 under the share repurchased program previously authorized by our board of directors.
Looking at our full-year financial results, we exceeded the high end of all guided metrics of fiscal year 24. ACV Billings in fiscal year 24 were $1.162 billion higher than our guidance of $1.12 to $1.13 billion and representing a year over your growth of 21%. A reminder that the annual ACV Billings is slightly lower than the sum of the ACV Billings from the four quarters due to adjustments for deals with duration of less than a year.
Revenue in fiscal year 24 was 2.149 billion higher than our guidance of 2.13 to 2.14 billion dollars and representing a year over your growth of 15%. We are pleased to have exceeded the $2 billion revenue threshold in fiscal year 24. We ended fiscal year 24 with an ARR of $1.908 billion as mentioned earlier, a year over your growth of 22%. Net dollar-based retention rate or NRR at the end of fiscal year 24 was 114%.
As the fiscal year progressed, we saw a higher mix of larger deals in our pipeline. These larger opportunities often involve strategic decisions and see sweet approvals, causing them to take longer to close and to have greater variability in timing, outcome and deal structure. And as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Larger due to these dynamics are fiscal year 24, land and expand ACD and ARR performance were below our initial expectations at the beginning of the fiscal year and we expect these dynamics to continue.
Our renewal performance continued to be good through the fiscal year and a reminder that renewal tend to be at a lower aggregate average contract duration compared to land and expand. Average contract duration in fiscal year 24 was 2.95 years, flatish to fiscal year 23 and slightly higher than expected partly due to some larger deals with greater than average duration. Non-gap growth margin in fiscal year 24 was 86.7%. Non-gap operating expenses in fiscal year 24 were 1.515 billion dollars and increase of 7% year over year as we began to make additional investments primarily in research and development and sales and marketing.
Non-gap operating margin in fiscal year 24 was 16% representing an improvement of over 700 basis points year over year. We also delivered our first full year of positive gap operating income of 8 million in fiscal year 24. Non-gap net income was 384 million dollars or diluted EPS of 1.31 dollars per share based on fully diluted weighted average share of standing of approximately 294 million shares. Free cash flow in fiscal year 24 was 598 million dollars higher than our guidance of 520 to 540 million and almost 3 times higher than last year's free cash flow.
Free cash flow margin in fiscal year 24 was 28% implying free cash flow margin expansion of 17% percentage points year over year. Free cash flow in fiscal year 24 benefited from approximately 30 million in non-recurring payments related to a partnership agreement as previously referenced.
Overall, fiscal year 24 was a significant year marking our first year with positive gap operating income. Significant free cash flow generation of 598 million dollars and free cash flow margin of 28% while growing ARR at 22% and revenue at 15% year over year. We also delivered a rule of 40 score defined as the sum of revenue growth and free cash flow margin of 43 for fiscal year 24. An improvement of 14% percentage points year over year and 28% percentage points higher compared to two years ago.
Moving to fiscal year 25, the guidance for the full year is as follows, revenue of 2.435 to 2.465 billion dollars, representing a year-over-year growth of 14% at the midpoint, non-gap operating margin of approximately 15.5 to 17%, pre-cash flow of 540 to 600 million dollars, representing a pre-cash flow margin of approximately 23% at the midpoint. I will now provide some commentary regarding our fiscal year 25 guidance.
First, as previously mentioned at our 2023 investor day, we are streamlining our metrics by not reporting or guiding ACV Billings starting in fiscal year 25. ACV Billings was intended as a transitional metric during our subscription evolution and we believe that now is the time to evolve away from that metric. We are also no longer guiding to non-gap growth margin which was previously useful as we navigated our business model changes, leading to significant improvements in non-gap growth margin.
We will continue to guide to revenue, non-gap operating margin and pre-cash flow on an annual basis and to guide to revenue and non-gap operating margin for the subsequent quarter. Second, and moving on to assumptions in our guidance, we are seeing continued and significant land and expand opportunities and a growing pipeline for our solutions. However, we continue to see a higher mix of larger deals in our pipeline which is driving greater variability in our land and expand booking.
These larger opportunities often involve strategic decisions and see sweet approvals at the customer or prospect causing them to take longer to close and to have greater variability in timing, outcome and deal structure. And as we mentioned previously we continue to see a modest elongation of average sales cycles relative to historical levels which we expect to continue. Third, the guidance assumes that renewals will continue to perform well in fiscal year 25. Fourth, the full year guidance assumes that average contract duration will be flat to slightly lower compared to fiscal year 24 as renewals continue to grow as a percentage of our billing.
Fifth, the non-gap operating margin guidance assumes incremental prudent investments in sales and marketing and R&D targeted towards addressing our large market opportunities. It also factors in the annualized run rate of the incremental investments we made in fiscal year 24. It also assumes a 20 to 25 million dollar headwind in operating expenses relative to fiscal year 24 from payments related to one of our partnership agreements. Specifically, there was about 44 million of this benefit to the R&D operating expense line in fiscal year 24 and we anticipated to be 20 to 25 million dollars in fiscal year 20.
[inaudible] To also benefit from the approximately 30 million in non-recording payments related to a partnership agreement, similar to the benefit we saw in fiscal year 24. It is expected to tail off towards the end of fiscal year 25.
Moving to Q1 25, our guidance for Q1 is as follows, revenue of 565 to $575 million, non-gap operating margin of 14.5 to 15.5%, fully diluted weighted average shares outstanding of approximately 287 million shares.
In closing, we are pleased that our Q4 and fiscal year 24 performance exceeded guidance across all metrics. We are excited about the long-term market opportunity and Nutanix's ability to deliver compelling outcomes for customers and prospects. We remain committed to continue progress aligned with our stated philosophy of sustainable, profitable growth, both through durable top-line growth and expanding margins.
Would that operator please open the line for questions? Certainly, and ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows.
Our first question comes from the line of George Wang from Barclays. Your question, please. Oh, yes, thanks for bringing my question. Unfortunately, just curious if you have any update on the Broadcom kind of term, especially in a lot of corners, you can talk about the after the initial wave of strong engagement that activity slowed just because of Broadcom walking back some of the initial initiatives. So we now more in favor of who retain some of the prior customers. Just curious if that dynamic has changed.
Hi, George. It's largely an unchanged multi-year opportunity again share, like we said last quarter, while the same size has been a bit longer than we had initially anticipated. This far we haven't really seen any meaningful changes in our win or loss rates on these opportunities. As we talked about in our preparatory remarks, we are seeing some of these larger opportunities close. We gave you a few examples in the prepared remarks. And I do expect that we'll continue to see more of these over time.
Now in the mid-size and smaller customer segments, we're seeing significant increase engagement and opportunity. As many of these smaller companies look for alternatives and generally less competitive engagements relative to the larger customer opportunities. Along with our increased leverage from our go-to-market partnerships that we've talked about as well as our programs and incentives that we have in place. This dynamic has also been one of our drivers for our larger, stronger new logo performance.
Okay, great. If I can squeeze in quickly, it's nice to see one customer in financial service and you guys mentioned that without changing the underlying hardware, you know, principally, the gaming sector, the world, the gaming sector is being, so they upgrading the underlying hardware to wait for the hardware refresh. I just came to talk about, so the, you know, bad path going forward, the kind of, now things, especially after Gail Palmer should maybe you kind of remove some of the constraints related to the underlying hardware refresh. Yeah, maybe you can give a little bit more comment on that.
So that's a very good question, George. I think if you look at the install base out there in data centers, vast majority of it, I don't have the exact number, but roughly around 80% of it is what we call three-tier infrastructure, separate storage compute and networking. And you know, we have a HCI solution today in the market and if you want to replace the three-tier with HCI, it's a better architecture, more cost-effective long term, but it does require hardware refresh.
Now, the remaining 20% is HCI of which, you know, we are a market leader and our competition has come of the rest. Now, in this particular case, there's a grant that we talked about, the customer was already on HCI with the competing product. And when you're already on HCI, you know, we've been quite successful at having our software be able to run on existing hardware because it's already HCI hardware. And that's what happened in this particular account.
And so for that subset of the customers that are already on HCI, the migration part of these years, in some subset of those cases, we don't need hardware refresh, and that's what happened here. On the three-tier, it does require a hardware refresh. Now, we're also addressing the three-tier market to your point. You know, one aspect about partnership with Dell is that we said, you know, they would be the first that we would support at external storage, Dell power flex.
And now the whole idea of doing that is now we can find an easier insertion into feature deployments without having to change out the hardware. Now, that solution is not available in the market today. It's only going to be available sometime next year. And over time, we anticipate, you know, being able to offer that support to a broader set of third-party storage rates.
Okay, thank you. I'll go back to the chair. Thank you.
And our next question comes from the line of Jim Fish from Piper Sandler. Your question, please. Hey guys, thanks for the questions here. Chief, do you want to ask around, essentially, you alluded to a little bit of GPT in a box here. I don't think we'd be on a conference call anymore without talking about AI. But are you seeing any sort of trend of repatriation of workloads back to private clouds or just a core workload? As well as for AI, I guess, you know, any update on the GPT in a box? Yeah, and so Jim, good question.
I'll give you a two point answer to that first general purpose workloads and then second on GPT. For general purpose workloads to your point, you know, for steady state workloads. I think people are getting to the conclusion that it's much more cost-effective to run those on prime in a private cloud environment. We've seen some repatriation. We've also seen much more deliberation in terms of whether that workload goes to the public cloud in the first place, because a lot of this deployment is still on-prem of enterprise workloads.
So we certainly seen that trend and realization customers to say, you know, steady state workloads. We can run them more cost-effectively in private. Sivaraman, Certainly continued traction. It's still early days for us, but across multiple verticals, healthcare, financial services, government.
So early days for GPT adoption in the private cloud enterprise, but I think that's going to be a growing market for fine tuning, rag, retrieval augmented generation and for inferencing in terms of running these AI workloads close to the data in a private insecure way.
Makes sense and Rukmini, I'm sure you're anticipating this question already, but they have how much, as we think about that 25 guide, how much incremental contribution are you expecting, either from a growth dollar perspective, however you want to put it between, you know, the VMware opportunity, the Cisco and Dell partnerships versus the expansion within your existing install base that if memory serves me right should be accelerating a little bit in terms of the way to think about where ARR actually exists this year. Thanks, guys.
Thank you, Jim, for that question. So in terms of contribution from the various buckets that you called out, Jim, so I'll give you some qualitative color on that, right? So we've talked about in general, we have, you know, happy with our pipeline generation overall, we have talked about the growing pipeline and the fact that the pipeline from larger deals is growing faster and that can lead to variability, right? With respect to timing or outcome or more complex deals, structures, and so on.
And so some of those dynamics we expect to continue next year, similarly with just modestly longer sales cycles across the board, not just large deals, right, but across the board and we expect that to continue next year as well. In terms of the contribution from Cisco, we do expect the Cisco contribution to grow in fiscal year 25 relative to last year, and we do expect a small initial contribution from a Dell XC plus, which is a new often that's generally available now.
And they expect small initial contribution from that in 25 and expect that to grow as well over time. And so all of that is taken into account when you think about the fiscal year 25 top-line grid that we provided. Jim, the other thing you alluded to is renewals. So yes, our renewals business, you know, continues to grow nicely year over year. So that's factored in there as well. And I think the last part of your question was around ARR.
So we will continue to report ARR on a quarterly basis. And while we noted that ARR under performed for fiscal year 24, relative to our internal expectations, we're not providing guidance for that. So we're providing guidance for that. Aron. Yeah, the only thing I'll add to that, Kukmini would be, I think Jimmy Holt had a question on the Broadcom opportunity and like I said, that's largely unchanged but it's also very difficult to explicitly pass the route because everyone of our deals historically, you know, we've been, you know, we have been competing against the environment in the past and that continues.
So, you know, there's some level of influence. Is it only, these are the only reason why people come to us. It's a little hard for us to piece the route separately. Yes, thank you, Rajiv, that contribution is, it's certainly nuanced. So, we, you know, we do expect it to continue to contribute some, but we wouldn't be overly precise on that. So, thank you, Rajiv and thank you, Jim, for the question. Thank you.
And our next question comes from the line of Metamarshall from Morgan Stanley. Your question, please. Great, thanks. I wanted to get a sense maybe kind of circling back to the question that's been asked a couple of times. Just in terms of, you know, do you feel like you've kind of figured out where, you know, Broadcom's line is where kind of the definition of your customer is or are you kind of refining where you think the most actionable opportunities are or are you still kind of in that discovery mode of figuring out what are the most actionable opportunities.
And then I know Jim just asked about it, but just kind of any of the, you know, timing of renewals or co-termine just given that we've had some kind of early renewal dynamics and kind of co-termine issues over the past couple of years that we should just be mindful of as we go into fiscal 25. Thanks. Hi, I'm Mita.
I'll start and then look when you can answer the second part. In the end of the Broadcom situation, as we look at our addressable market, historically, Nijani has been quite strong in what I would call the smaller side of enterprises and the higher end of commercial with market. But over the last few years, we have deliberately made it till further up market towards larger enterprises because that where we are under penetrated and the biggest time opportunity sets.
So we have realigned our segmentation over the past few years to focus more on that market. Now the products are ready. We've done a lot of work on the product side. The GTM side now we're ready. We've got some good partnerships. Now we also clearly understand that when you get to the large customers, the G2K accounts, for example, or the fortune 100 type accounts, those are going to be more competitive. And that's where clearly Broadcom is more focused on and those engagements tend to be long, they tend to be bigger, but also very fruitful if and when we do win it.
And as you can see here, we are starting to win some of those. We talked about an 8-figure AC, we win last quarter, this quarter we had a multi-million dollar AC, we win. So those tend to take time, but are well worth it when they do happen. So we've got to focus there for sure. The mid market or the smaller side of the enterprise has been historically a sweet spot and it's also less of a focus for Broadcom given their explicit focus on the bigger accounts. It's also tends to be less competitive and easier migrations as well. So that continues to be our historical sweet spot and continues to be a sweet spot.
But the bigger opportunity for us growth is also now sitting at the top end of the day, and I'll take the question meter on renewals and expectations for renewals in fiscal year 25. So, first I say, you know, we we did have in fiscal year 24, just overall good performance in renewals and I think to your point, it did include really good discipline from the team around economics for the renewals in terms of pricing.
It did include some early and co-term renewals. And as we said before, those are good in our mind as long as they come in and good economics because the customer is willing to renew with us and renew their commitment to us earlier and often give us a cash earlier as well. And then co-terms are for the simplification of their real estate, right. So that's for the customer and as well in terms of managing their footprint.
So we did have some of that. Now when we look at fiscal year 25 are available to renew pool, or you can think of that as effectively a pipeline for renewals continues to be continues to grow. It's a strong year of year growth. And it's roughly similar year of year growth. It's similar to what we saw in fiscal year 24. And then in terms of timing, I think perhaps your question is around sort of seasonality of that meter.
It does move around a little bit. But in general, our fiscal Q2 and Q4 tend to be sort of higher quarters for us given Q2 has the calendar year end and budgets flush and things like that. And of course fiscal year Q4 is end of our fiscal year and there are incentives around that. So Q2 and Q4 started to enter higher in general available to the new pools relative to Q1 and Q3. But that's sort of how we think about the renewals opportunity in fiscal year 25.
Great. Thanks so much. Thank you.
And our next question comes from a line up. Wemcee Mohan from Bank of America. Your question please.
Hi. Thanks for taking the questions. It's Ruplu filling in for WAMZI today. I have one for Rajeev and one for Rukmini. Rajeev is the demand environment materially different from 90 days ago. And can you talk about the pricing environment? Specifically, you know, I think you've said in the past that some customers may wait for their hardware to be depreciated. It's pricing a lever you can use to maybe drive faster share gains.
For example, can a smaller customer be induced more to go with the Nutanix? And as a management team, how do you trade off share gain versus margins? And I have a follow up for Rukmini. Yes, Rukmini. Those are all very good questions. At a couple of as the demand environment has not changed. And it's been fairly stable. As we see said, you know, over the last several quarters, we are seeing some odd elongated sales cycles.
People, you know, getting more approvals and more awareness of TCO before they make the purchasing decision. So so that part has not changed. Now in terms of how we look at the opportunity, now hardware refresh, as you can see, right, I mean, when we do need a hardware refresh, that tends to be a significant factor in terms of the customer's timing on a deal. Now, you know, the key key things keep in mind is that the hardware refresh is not just one point in time hardware refresh has happened, depending on the size of the estate at various points.
And we can use those points to secure an insertion. It may not be a full insertion because hardware always gets replaced over time and multiple cycles. So we may be able to insert for say one workload where a portion of the hardware is getting replaced, say this year and maybe other portions of the hardware will only get refreshed in two to three years from now. So that's sort of normal engagement. Sivaraman.
Now, we have offered some promotions to customers in terms of providing them some overlapping windows where we can give them discounted licenses for a period of time. Now, I will say that hardware costs tend to be quite significant, so it's not that we are able to necessarily subsidize hardware costs ourselves. But sometimes we may be able to work with partners, hardware partners are more interested in doing that themselves. So that can be a possibility, as well when it comes to the hardware products.
And then look, I think when it comes to landing new customers, especially significant amounts, we are willing to be quite aggressive in terms of we already have aggressive promotions out there and the incentives for customers and we will do what is needed within reasonable bounds to go windy zealys while at the same time protecting our margins. So that's probably a broad answer. I would say in that net, we are being aggressive wherever needed.
We are working with hardware partners to see if we can mitigate some hardware refresh opportunities. And at the same time, keep in mind to prove we are also working to broaden the set of places where we can insert without requiring hardware refresh, existing HCI environments or the ability to reuse servers that customers may already invested in. And then over time, as we get our third party storage support, we'll be able to do even more of that.
Okay, thank you, Reggie, for the detailed answer there. Rukmini, I wanted to ask you your free cash flow guidance for fiscal 25 is very strong above the prior 2023 investor day guidance. How should we think about the cadence of that in the first half versus the second half of fiscal 25. And then when we look at the remaining metrics, for example, revenue is now at the lower end of what you had thought, what you had guided in the analyst day.
Is it given that is it reasonable for investors to expect that the outer years say fiscal 27 expectations should also be lower or could there be a material acceleration over the next two years, even the dynamics of renewables and available to renew as well as new logos that you're meaning. Hi, Diplo, thank you for that question. So first, I think your first question was around free cash flow. And so we will, we will please with our free cash report performance is clear 24 and happy to guide you know free cash flow where we did which as you noted, the midpoint is above the high end of the range of what we had put out last year at our investor day.
Now in terms of the quarterly cadence there, we don't of course guide quarterly to free cash flow, so they can be some some variation there, including, you know, as we pointed out in the last couple of quarters, where because we collect cash for multiple years upfront generally. Meaningful deals right if there are larger deals that we collect cash for upfront a little bit longer duration transaction and that those can cost wings.
So, so yeah, so we don't guide to quarterly, but that's sort of a quality of color. I will say that when you think about the operating expense increase over time, you know, we've talked about you can sort of see the implied optics growth year over year in our margin guides and that that would be more gradual over time right because we're going to invest in sales and marketing and an R and D. Some of that will be over time the optics does include, for example, all of the analyzed run rate from investments in 24 all those are analyzed into 25 plus it includes salary raises for our employees that became effective for some of those are more run rate and others will be more gradual as we ramp into the into the spend overtime.
So that's the first part of your question. And I think the second part was more around the sort of medium to longer term financial targets that we put out at our last investor day. So while we don't plan on commenting on those medium term financial targets on an interim basis, we are happy to know that you just said, Ruplu, that the fiscal 25 free cash for guidance at the midpoint is above the range at what we put out at investor day.
And our initial fiscal 25 revenue guide is within the range that we're providing. We continue to focus on driving durable top line growth and expanding free cash flow and operating margin and driving to operating sustainably at the rule of 40 plus overtime. So that's sort of been our philosophy and we continue to drive that philosophy and we're not commenting specifically on those numbers at this point.
Okay, thank you for all the details and congrats on the results. Thank you. Thank you, Ruplu.
Thank you, and our next question comes from the line of Jason Adler from William Blair. Your question, please. Yeah, thank you. One quick one is on the 8th figure deal that you announced last quarter. Did you recognize any revenue this quarter from that deal? And then what's the kind of schedule look like on Rev Rec for that particular transaction? Yeah, thank you, Jason. So as we said, I think last quarter, we did collect the cash for that transaction, the entire sort of TTV value of that transaction.
But all the revenue recognition is over multiple years starting in fiscal year 25. So no, we didn't, you know, I think there was a small professional services portion that began in Q4 Jason, but all the license revenue is in particular 25 and beyond.
Okay, thank you. And then Reggie, for you, just, I think a bunch of people have asked this question around the VMware displacement opportunity, but I wanted to kind of frame it like this, which is, do you think you have a little bit of misalignment from a road to market standpoint right now, just because you're moving up market. Over the last couple of years in terms of the types of customers that you're targeting, and yet it seems like most of a low hanging fruit from VMware disruption is coming more in that kind of low end of lower end of the market and kind of low end of the enterprise.
So to be clear, Jason, I don't think we're misaligned because we are targeting our GTM resources on where we think the maximum dollar opportunity lies, right, and the more the dollar opportunity is sitting higher up in the pyramid, whether which is the same reason by brought on equally focused on those customers, right. So for us to grow, I mean, we already have, you know, we are well penetrated in the lower end of the market, and we will continue to, we still have very much focused there and we haven't moved away from that.
That's our sweet spot. That's our install base and that's where we can go and capture more customers. We are talking about everything ranging from school districts to retailers to those types of public sector. These are all types, you know, very much a sweet spot, but the bigger same opportunities for us, certainly sitting in the top of the pyramid, and so we have to as a company to be successful, we have to go after those, right, and we have the products, we have the GTM.
Yes, we know those are going to be harder for, but when we do win them, like you serve with the rate figure opportunities that we won last quarter, those can be pretty significant. Gacha, but I thought the figure one that you on last quarter was like a three year or two and a half year sales cycle something. That wasn't really related to the Broadcom. It was close, unlike many of the smaller customers to see what was going to happen.
So this customer, we had certainly our unique value proposition and use cases that they were driving the thinking and then the Broadcom piece of course was an added boost. So it's one of these things where it's hard to attribute how much of it was Broadcom, how much something else, but that's a good example. Similarly, the example from this quarter's call also is very much the same, right, this fortune 100 financial service customer, very much driven by the Broadcom situation.
Great, thank you. Thank you.
And our next question comes from a line that's seemingly a port from Raymond James, your question please. Hi guys, this is Victor Chu in person. I wanted to follow up on that last question kind of regarding customer migrations within VMware's footprint of the three tier infrastructure customers that you describe. Can you help us think about what percentage of those would be able to fairly easily adapt their existing application platforms to a hb kind of what percentage for better or worse, I kind of married to VMware because of their dependency on some of the more advanced kind of virtual.
So that's a good question Victor. I would say the vast majority of applications running on a VMware hyperbiter on three tier can run very well on hb and hca environment. There are perhaps things at the edges where it's not technical gaps. It's really more ecosystem certification gaps that might sinder some of them. There might be an application that certified on ESX but not certified on a tree. And over the last few years, we've built that out as well.
So there are going to be some corner cases that are not certified. But for the most part, we can address very much anything that is running on a three tier infrastructure on VMware and run that effectively on the damage HCI on a tree. But there's the other barriers that we talked about right in terms of hardware refresh cycles and then the timing of the renewals. Those are some of the other things that we still have to factor in, but it's not a technical barrier.
That's very helpful. And then, you know, maybe, you know, can you help us think about how the economics, you know, compare, you know, with mechanics, you know, having an age peak, you know, having the kind of a hyperbiter included in the platform, the economics that make the economic materialy different. It's just kind of, you know, marginal difference in more of a capabilities kind of thing. Yeah, I think so, which on that again, so clearly, historically, this has been the case when a customer migrates from a three tier deployment over to a healthier deployment, they save a lot, right?
They say 30, 40% at least in terms of TCO costs to be back trend, everything including the hardware cost, the operating cost, all of which are pretty substantial savings. And so that continues to be the case today, right? I think the value, of course, is, you've invested in the hardware you wanted to appreciate it before you actually go buy new hardware. But those savings and the value of HCI related to three tiers is very established.
And that's it, continues. And it's a transition for an existing VMware HCI customer to Nutanix, you know, much easier, much easier than that. Yeah, this fortune 100 win that we talked about was exactly that situation. The customer had a lot of competitive HCI offerings deployed. It was an easier migration because for them, they didn't have to change out their hardware. We could just replace the other software without software.
Great. That's very helpful. Thank you. Thank you, Victor. Thank you.
And our next question comes from the line that Matt Hedbert from RBC Capital Markets. Your question, please. Hey, guys, this is Zimmerman from Matt Hedbert. Thanks for taking a question and congrats on the quarter. I just have one. Can you touch more on the linearity of large shields within the quarter? And did you see any deals being pushed out or pulled in this quarter? And then looking ahead, what early trends have you been seeing so far in August? And then maybe just general linearity for 2025, given some of the uncertainty of these large steel timings. Thanks.
I'll take that, Rajiv and you should prefer to add in. So for linearity in Q4, I would say it was more or less as we expected. I think your question specifically was on linearity with respect to large deals. And those we've talked about can be more unpredictable than other portions of the business is given they tend to be often more strategic involved. But overall, I would say linearity in Q4 was largely as expected.
In terms of push outs or pull in, I think was the next part of the question. We think about last Q4 coming into this, coming into this year, nothing unusual there, I would know. I think it was sort of what we would expect for that time of years and nothing unusual there. And then again, on August linearity, the only thing I'd sort of to call out in Q1 is it's a US federal end of fiscal year in September, of course.
But again, that's all factored into how we think about our guidance and ability to collect free cash flow and things like that. But as I said earlier, I think the overall linearity can become a little more unpredictable because of the mix of the large deals as that grows over time. And it is something that we're continuing to watch closely.
Great. Thank you.
And our next question comes from the line of Mike Seacos from Needham. Your question, please. Thanks for taking the questions, guys. I just want to ask I know less quarter the company gave some great color on the number of million dollar plus ACD opportunities in the pipeline growing 30% year on year growing more than 50% if we look at it on a dollar basis. Did these statistics still hold in Q4 and do we have a sizable enough cohorts to start really understanding how much longer these sales cycles are for these deals?
Hi, Mike. Yeah, good question. We're not going to, you know, provide that metric necessarily quarterly, Mike. But you know, as we said, I think we are happy overall with pipe creation and are seeing meaningful opportunities with those larger deals segments. So that continues to be good in terms of pipe creation. And I think your second question around, do we have enough data point. Relatively early, the pipeline has grown nicely, but as we've talked about here, some of these larger deals can take a really long time.
I would give one example where it was two years, another one this quarter where it was a year and a half. And so it is variable and it can take long. And so I say, I don't think we have, you know, a lot of that data or enough data points under our belt to sort of draw too many conclusions from that. And that's what I even in the previous question here. That was asked in terms of it is something we watch closely in terms of tracking those deals, but also thinking about, do we have multiple ways to get to the number right if it deals X and Y close or don't close, do we have other deals A and B that could get us there.
So that's definitely a discussion that we have internally and factor that into our into our guidance. Got it. Thank you for that. And I guess just for a quick follow up, appreciate all the color on the assumptions here. Can you help us understand that call a $30 million benefit to precast what we're expecting from the corner payments this year again, just because we're. This is essentially the second back, back to back year, we're now receiving this kind of payment is it the same corner like with any other color would be beneficial.
Yes, thank you, Mike, for that question, because I think it's I would be happy to clarify that. So there is these there are these non recurring payments from the from this partner and there is a timing difference between op X and free cash flow. And so the commentary that we had provided was we had about a $44 million benefit in fiscal year 24 over the course of the year to the odd in the op X line in fiscal year 24.
And we expect that same $44 million benefit to become more like 20 or 25 million in fiscal year 25. So that's the 20 or 25 million dollar headwind that I was referring to in op X in 25 relative to fiscal year 24. So all of that is operating expense commentary. Now, when you look at free cash flow, there's a bit of a delay in when the cash comes in relative to that payment.
So we got about 30 million of a cash benefit from that in fiscal year 24. We expect another 30 million in 25 and there's a taper off there may be a small portion in 26, but we'll then taper off as we end this fiscal year in 25. And it's not recurring because we don't expect this to be an ongoing thing. It is continuing into this year, which we didn't fully anticipate about three months ago, but we do think that over time it will taper off. Thank you so much. Thank you, Mike. Thank you. This does include the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation. You may now disconnect. Good day.