Ladies and gentlemen, thank you for standing by, and welcome to the Nutanix Q1 Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to the speaker today, Tonya Chin, Vice President, Investor Relations and Corporate Communications. Thank you. Please go ahead, madam.
Good afternoon, welcome to today's conference call to discuss the results of our first quarter of fiscal 2020. This call is also being broadcast over the web and can be accessed in the investor relations section of the nutanix website. Joining me today are Dheeraj Pandey, Nutanix's CEO, and Duston Williams, Nutanix's CFO. After the market closed today, Nutanix issued a press release announcing financial results for the first quarter of fiscal 2020. If you'd like to read the release, please visit the press releases section of the nutanix website.
During today's call, management will make forward-looking statements within the meaning of the Safe Harbor provisions of federal securities laws regarding, among other things, the company's anticipated future financial performance in various periods, including anticipated revenue, software and support revenue or TCV revenue, billings, software and support billings or TCV billings, gross margin, operating expenses, net loss, net loss per share, weighted average shares outstanding, and annual contract value or ACV.
The assumptions underlying our anticipated future financial performance in various periods, our plans to provide future projections and financial guidance, our plans and timing for, and the benefits and impact of our transition to a subscription-based and recurring revenue business model, including anticipated impacts thereof on our business and financial results and our ability to complete the transition successfully and in a timely manner, our business plans, initiatives, and objectives and our ability to achieve such business plans, initiatives, and objectives successfully and in a timely manner, and the anticipated benefits and impact thereof on our business, competitive position and financial performance, demand for and customer adoption of our products and services, and our ability to retain and expand upon existing customer relationships, our continued investment in talent, technology, including our subscription-based products and marketing, and the success and impact of such investments.
The benefits and capabilities of our platform, products, services, and technology, our customers' plans regarding their adoption or deployment of our products, our plans for and expectations regarding new products, services, product features, and technology that are under development or in process, the interoperability and availability of our solutions with and on third-party platforms, competitive and industry dynamics, market size and potential market opportunity, and other financial and business-related information. These forward-looking statements involve a number of 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. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation and explicitly disclaim any obligation to update, alter, or otherwise revise these statements after this call.
For a more detailed description of these risks and uncertainties, please refer to our annual report on Form 10-K for fiscal 2019 filed with the SEC on September 24th, 2019, as well as our earnings release posted a few minutes ago on our website. Copies of these documents may be obtained from the SEC or by visiting the investor relations section of our website. Please note, unless otherwise specifically referenced, all financial measures we use on this call today are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures in the investor relations section of our website and in our earnings press release.
Turning to our upcoming conferences, Nutanix management will be at the Wells Fargo TMT Summit in Las Vegas on December 3rd, the Credit Suisse Technology Conference in Scottsdale on December 4th, the Raymond James Technology Investors Conference in New York City on December 10th, the Barclays Global TMT Conference in San Francisco on December 12th, and the Needham Growth Conference in New York City on January 14th. We hope to see many of you there. Lastly, please mark your calendar for our third Investor Day in New York City on Thursday, March 26th. With that, I'll turn it over to Dheeraj.
Thank you, Tonya. Good afternoon, everyone. Thank you for joining us. Very Happy Thanksgiving in advance. In September, we celebrated our 10th anniversary. We reached $1 billion in annual revenue faster than most software companies have in the past 20 years, with deferred revenue at almost $1 billion as well. In the last two years, we have transformed our business model from appliance to software and are now doing so to subscription. As we look to our next 10 years, we see even bigger opportunities to continue to work hard with our customers to ensure that the words frictionless, reliable, and invisible remain synonymous with Nutanix. Q1 was a strong quarter for us based on better-than-expected financial results, progress in subscription, record large deals, as well as continued new product traction.
We built on last quarter's strong momentum with $370 million in software and support billings or TCV billings, and $305 million in software and support revenue or TCV revenue. Both metrics beating consensus. We signed the second highest number ever of large deals in a quarter, which we define as deals greater than half a million dollars. Subscription grew to 73% of total billings, up from 71% last quarter, as we move steadily towards the goal of more than 75%, which is our stated goal by the end of fiscal 2020. Later, I'll talk more about why our move to a subscription model gives us a competitive edge in a world that is increasingly going hybrid. We also had strong 39% year-over-year deferred revenue growth in Q1, reaching nearly $1 billion in the quarter, a notable milestone.
In this call, I want to focus on the three pillars of our execution that are driving this improved financial performance, our go-to-market engine, our move to a subscription model as we establish a new baseline, and the organic adoption of our new products. The headline of the quarter was our continued momentum and execution across both sales and marketing. In addition to increasing our focus on lead generation, our global sales leaders continued to infuse rigorous operational discipline in our sales process around the world. The Americas region delivered record-high software and support or TCV bookings this quarter. We also made excellent progress on sales hiring in the quarter with a record number of net new sales reps. We made another key sales hire during the quarter with the addition of a new VP of Americas Channel.
The new leadership is focused on helping our partners virtualize, simplify, and integrate the multi-cloud experience of our customers. As we noted on last quarter's call, we spent the last three years building a robust enterprise business. Our goal is now to balance that with an equally strong mid-market business, as commercial customers are just as aspirational as enterprises on their hybrid cloud transformation. Not surprisingly, we discover many of our million-dollar accounts in this segment. One great example of a new customer win in this segment was with a U.S.-based internet service provider. This deal, which was $750,000 comprised our core AOS operating system, Prism Pro, Files, and native AHV hypervisor to build a scalable private cloud. They're leveraging Nutanix to run several of their enterprise apps, including their Oracle databases.
We also recently added a seasoned technology veteran to our executive team with the hire of Tarkan Maner as Chief Commercial Officer. In his multifaceted role, Tarkan will lead business development, M&A, global system integrators, service providers, and some of our cloud and platform products. I've watched Tarkan build two very meaningful companies in the last 15 years, Wyse Technology and Nexenta. He brings an entrepreneurial mindset and an acute awareness of the computing landscape. His authentic leadership style, a clear bias for action, and a broad industry network, have helped him create high-energy companies in the space of end-user computing and storage. I'm thrilled to have an extremely hardworking leader who's passionate about cloud, telcos, people, and clarity in communication. Speaking of clarity, let me share some of our progress in the simplification of our go-to-market messaging that emphasizes customer solutions rather than individual products.
We focused on three solutions around private cloud, end-user computing, and databases. One of the most common themes we hear from customers is that they want their computing silos to work seamlessly, from performance, security, APIs, and ease of use point of view. This frictionless delivery is the focus of our new global ad campaign, launched this quarter, that shows how Nutanix software brings it all together now to virtualize, simplify, and integrate data, applications, and infrastructure. This outside-in approach was very well received at our European .NEXT conference this October. We brought together 4,500 attendees in Copenhagen at our biggest EMEA event to date. Customers, prospects, employees, and more than 1,200 Nutanix channel partners participated in over 100 technical breakout sessions to hear about the why, the how, and the what of our future, and how it relates to their multi-cloud journey of the next three to five years.
Our customers now want to take our software to hyperscaler substrates in the public cloud, as they realize that compute and storage need to sit side by side in these highly virtualized network environments. At our conference, we showcased how we are approaching this problem by making the private and public cloud symmetric for our customers. They can build secondary sites, burst computing to accommodate seasonal peaks, and globally load balance a distributed application across these data centers with a single portable software license orchestrated by a single pane of glass that manages both sides of the aisle. It's events like .NEXT that help us drive strong momentum in large deals with new and existing customers. Shortly after .NEXT in Copenhagen, we signed a multimillion-dollar deal with a leading financial services firm in Germany that attended the event. They're now using Nutanix to run their mission-critical financial services applications.
This win is a great example of how we leverage our premier marketing events to build trust with our prospects. That customer was just one of the 66 customers we signed in the quarter that were worth over $1 million, a record for us. 13 of those customers also spent at least $1 million with us in Q4, with 50% of them increasing their engagement with us to support new workloads in Q1. In addition, this quarter, we closed nine deals worth more than $3 million. Finally, we are close to reaching a milestone of having nearly 1,000 customers with a lifetime spend of more than $1 million, up 39% year-over-year. Notwithstanding the compression in our top line due to subscription. Our biggest deal this quarter was with a repeat marquee client that invested nearly $9 million in subscription licenses to modernize their infrastructure.
This Fortune 10 company has lifetime bookings with us of over $38 million. The use case fuels a new edge computing solution that will manage their climbing use of IoT sensors and provide additional security to their digital transactions. This relationship accentuates what we are known for in the market, reliability, and reliability of our products, our processes, and our people in customer support and customer success. Finally, this relationship also underscores how we are helping our Fortune Global 100 customers transform from ownership of technology to access to technology with a subscription consumption model. To own music with iTunes or to stream music with Spotify is a simple way to think about trade-offs of ownership versus access.
Given how rapidly technology is changing and companies are introducing new products, enterprise customers are waking up to this idea of subscription to a product portfolio being streamed to them in a very similar way. In just a short amount of time, we have shown strong progress in transforming our business to cater to this new cloud consumption mentality. This transition will enable us to offer what we believe is one of the infrastructure segment's only true license mobility models to protect our customers' investments in multi-cloud computing. It'll help our customers to move investments fluidly between private and public clouds as their business needs dictate. Our flexible licensing is a competitive differentiator and a clear customer benefit.
Equally important is how the subscription model paves the way for our long-term profitability as we set go-to-market incentives, respectively for hunting versus farming of Annual Contract Value or ACV driven by sales versus Total Contract Value or TCV driven by customer success. Speaking of customer success, one of our top subscription deals in the quarter came from a large civilian department in the U.S. government and is worth nearly $5 million. The deal represents this customer's first private cloud solution with our AHV hypervisor to manage and scale mission-critical workloads. The customer will use Nutanix to run Oracle in addition to selecting Era for their database management and Frame to deliver virtual desktops to its growing user base. They chose us for our product quality and breadth, simplicity, and strong customer references.
Speaking of simplicity, recently a Nutanix customer posted on an online forum about how easy it is to update Nutanix Clusters. The customer said, and I quote, "I just wanted to give a shout-out to Nutanix on here so everyone knows how great and easy it is to set up an entire cluster from scratch." unquote. This customer had previous experience with multi-million-dollar projects with incumbents, which took weeks. They said with Nutanix it would have taken two hours. They went on to say, and I quote, "I know Nutanix talks about this, but they really need to be shouting this from the rooftops." unquote. We intend to bring the same level of invisible ops when customers are instantiating workloads in the hyperscaler data center of the public cloud. Another example of a million-dollar-plus subscription deal in Q1 was with a new customer that is a high-profile U.S.-based apparel manufacturer.
We're helping this customer modernize their infrastructure to move off of a legacy 3-tier solution into a cloud-first architecture for their data centers. Their primary workloads include databases and VDI. We partnered with a global SI who's helping us integrate Beam, Calm, Files, Flow, and Prism Pro with our native virtualization technology, AHV. The customer chose us for our simple ease of use, single pane of glass, and the flexibility for their IT team to scale an elastic infrastructure. On the topic of flexibility, one of the key benefits of subscription is that it allows customers complete freedom to choose to spend operating or capital budget $. The hybrid consumption model, in this case, unlocks mobility of the entire stack, including data, applications, networks, and licenses. The 2019 Enterprise Cloud Index, or ECI, issued just over two weeks ago, supports these pieces of app mobility.
The independent third-party survey asked over 2,600 global IT decision-makers about the state of global enterprise cloud deployments and adoption plans for hybrid cloud. 85% of ECI respondents said hybrid cloud is the ideal IT operating model. 95% reported that it's essential or desirable to be able to easily move applications between cloud environments. Moreover, 73% said they are moving applications back on premises, indicating a clear need for mobility. Switching gears to our third pillar of execution in the quarter, which was traction of our new product portfolio. Customers know and love us for our reliable HCI core and our customer success ethos. Architecturally, we brought together storage, compute, and networking into a platform combining the benefits of web-scale architecture with the consumer-grade simplicity of a smartphone, delivered with a genius bar-like customer support experience.
Over time, this trust and loyalty made our customers realize they wanted and needed more from us higher up the stack. Given how poor their other IT relationships are, our new products continue to gain traction in the market. In fact, this holistic approach of a hybrid cloud stack is often a critical reason why we win deals. In Q1, our number of deals that included at least one product beyond our core HCI offerings increased once again to 28% on a rolling four-quarter basis. Showing nice progression from 26% in the previous quarter. Our software and services portfolio now covers the trifecta of data plane, control plane, and management plane, where the data plane comprises the runtime for the machines, which themselves are pure software in the world of software-defined.
The control plane is where the machines orchestrate other machines, and the management plane is where humans interact with machines, increasingly with the help of AI in an era of AIOps. One example of the power of our product portfolio is at one of the world's leading organ transplant non-profit organizations. This customer purchased over $2 million of our software, including our core AOS operating system, Calm, Flow, Files, and AHV hypervisor to run their SQL databases. Their use of Nutanix software is a critical part of the full-scale modernization of their computing platform. When trialing our software earlier this year, they saw a 1.5 times performance improvement over their legacy infrastructure. This customer is now evaluating Xi Leap, our cloud-based disaster recovery solution. We also scored a competitive win with the largest organic farming cooperative in North America in the quarter.
The farming industry has been going through significant changes, which drove this customer to look at new and innovative IT solutions to address their database performance issues and support future growth needs. They turned to us to reduce operating costs by significantly shrinking their database licensing fees. In a great example for our TCO, cost savings on these licenses alone funded the purchase of our software. On the topic of hyperscaler platforms, we announced Nutanix Clusters earlier this year to enable our software to run in public cloud data centers. Our approach to multi-cloud is architecturally different, just like HCI was so different than converged infrastructure or CI. CI was nothing more than a Band-Aid strapping large technology providers under one roof.
We founded this company on the premise that CI was a hack, a temporary coalition of big brands that would not withstand the test of time, because it was packaging expensive hardware and software under an umbrella term of convergence with no change to the operating and consumption models. HCI, on the other hand, was a fundamental rethink on an empty canvas of commodity servers, commodity networks, and enterprise-grade software coming together with an elegant consumer-grade design. How we look at the new multi-cloud world as the new HCI challenge with their commodity servers, their commodity networks, and our software and design is the journey of this decade. I'll share more about Clusters in the coming months. We hope to convince Gartner one more time about the real convergence of cloud's Magic Quadrant. Virtualizing, simplifying, and integrating them all together into one delightful experience is in our DNA.
Speaking of delight, providing our customers with the freedom to choose which hardware platform to run our software was a massive stroke for us in 2014. When we decided to open our appliance route to market to competition from other server vendors who started to OEM our software. We are pleased to see our new relationship with HPE start to blossom, this being the first quarter since the integrated products GA'd. HPE's huge customer base can now easily adopt Nutanix, as we announced the general availability of our software on HPE ProLiant DX servers, fully integrated with our enviable support. HPE's hybrid cloud as a service GreenLake solution with built-in Nutanix AHV hypervisor is also generally available now. As a result, we saw a number of new customer wins on these solutions during the quarter.
In Q1, more than half of our HPE DX customers were also new logos to Nutanix, validating this new partnership and our software's increased exposure to HPE's install base. One example of how our new relationship with HPE is ramping faster than any of our past OEM partnerships is a nearly $2 million deal in Q1 with a new customer, which is a large EMEA-based insurance company. Early success is compelling this customer to already explore database as a service use case with Nutanix Era. One very critical initiative within the company is our Xi Test Drive service running on Google GCP. To me, this is one of our most important projects to get right for a true digital transformation of the company.
How our prospective customers go from a digital banner ad to trying out our entire product portfolio hosted in the public cloud in a one-click, self-guided experience is a testament to how far we've come from being an appliance company a couple of years ago. If we get this right, it'll immensely improve our profitability in the commercial mid-market, as most of the prospects would then be enabled with a digital touch, and only the self-selected ones would require a human touch. I'm proud to say that in this last year, we also done 1,000-odd credit card transactions to sell our cloud services with zero human touch. Digital transactions are core to our future, including for subscription renewal, and eventually to our profitability.
Finally, we were humbled to be recognized by Comparably as a great company for millennials to work for in the San Francisco Bay Area, and also by Bloomberg Intelligence as one of the 50 companies to watch for in 2020. Before I turn it over to Duston, I want to bring it all together now. Strong quarter, continued progress in the rollout of a subscription model, record number of large deals, growing demand for our new products, and an increasingly digital go-to-market strategy. Beneath it all, the care and attention we give customers remains one of our most substantial competitive differentiators. Our proven track record and passion for simplifying complexity makes us a trusted partner for enterprises building their computing platform. Our long-term differentiation continues to be at the intersection of public and private clouds in how we virtualize, simplify, and integrate the silos to make computing invisible anywhere.
Now I'd like to turn it over to Duston. Duston?
Thank you, Dheeraj. Q1 was a quarter during which we met or exceeded our guidance for software and support billings, software and support revenue, gross margin, operating expenses, and earnings per share. We were pleased with the amount of pipeline we generated in the quarter, and that our backlog position showed very little change from Q4 FY 2019 to Q1 FY 2020. This was in sharp contrast to the fact that over the last three years, we have experienced, on average, about a 25% decline in backlog from Q4 to Q1. During the quarter, we also made good progress on our shift to a recurring subscription business. In Q1, subscription billings accounted for 73% of total billings, up from 71% in Q4, and subscription revenue now accounts for 69% of total revenue, up from 65% in Q4.
This subscription shift for the quarter was in line with our guidance last quarter, at which time we mentioned that the subscription percentages would fluctuate a bit, plus or minus, for the next couple of quarters, with a goal of 75% of billings from subscriptions by Q4 of fiscal 2020. Q1 marked our fifth quarter into the subscription transition. We have strived during this transitionary period to find an ideal financial metric to portray an apples to apples comparison of our top-line growth, one that mixes the attributes of the old life-of-device model with the new subscription model. Historically, we've had one metric, TCV, or total contract value for software and support, that we applied to show the growth rates for the entire company, which combined the old life-of-device business model and the new subscription-based business model.
Using TCV as a growth metric works well for the old life-of-device model, but not for the new subscription-based model, as TCV ignores changes in term lengths, and therefore significantly understates the true growth of the business in a period of decreasing term lengths. As such, we believe the single best metric to measure the true growth profile of the company during our transition to our new subscription-based model is new annual contract value plus renewals, or ACV for short, booked in the quarter, which includes sales of life-of-device licenses based on an assumed five-year term. By calculating in this way, we take into account the changing term lengths while still showing the impact of our continued sales of life-of-device licenses. Having aggregate ACV in any given period will allow us for a cleaner apples to apples comparison of period-over-period growth rates.
In its most simplistic form, we define ACV booked in the quarter as the annual contract value of new business, plus the annual contract value of renewals. We calculate ACV booked in the quarter by taking the value of each transaction booked in the quarter, including renewals but excluding professional services, divided by its term length, then summing the total of those values. We have updated our investor deck to include this new ACV metric. The average dollar-weighted term length in Q1 2020, including renewals, was 3.9 years versus 3.9 years in Q4 2019. This calculation assumes life-of-device licenses are five-year terms. Moving on to some specific Q1 financial highlights. For simplicity purposes, and as we said last quarter, we use the term TCV, or total contract value, to describe our software and support revenue and billings.
TCV revenue, or software and support revenue, for the first quarter exceeded our guidance range of $290 million-$300 million, coming in at $305 million, up 9% from a year ago and up 6% from the previous quarter, reflecting the revenue compression from the company's ongoing transition to subscription and the significant reduction of hardware revenue. TCV billings, or software and support billings, were $370 million versus our guidance of $360 million-$370 million, up 5% from the year-ago quarter and up 3% from the prior quarter, also reflecting the billings compression from the company's ongoing transition to subscription and the significant reduction of hardware billings. ACV booked in the quarter was $123 million and up 18% from the year-ago quarter. New customer bookings represented 24% of total bookings in the quarter, the same as Q1 2019 and up from 23% in Q4 2019.
Although we only had a partial quarter of shipments, our HPE DX related bookings got off to a good start with about $8 million in sales, including 25 new customers to Nutanix. We will not normally disclose this level of detail, but we felt it was important to provide an initial indication of the progress early in the relationship. Americas was our best performing region in Q1. On a year-over-year basis, the enterprise-related business outperformed the commercial business. Our federal business performed slightly better than expected. In Q1, TCV bookings or software and support bookings from our international regions represented 40% of total bookings versus 40% in Q1 2019. Our non-GAAP gross margin in Q1 was 80%, in line with our guidance. Operating expenses were $386 million and at the lower end of our guidance range of $385 million-$390 million.
Our non-GAAP net loss was $135 million for the quarter, or a loss of $0.71 per share. A few balance sheet highlights. We closed the quarter with cash and short-term investments of $889 million, down $20 million from Q4. We used $26 million of cash flow from operations in Q1, which was negatively impacted by $10 million of ESPP outflow. Free cash flow during the quarter was negative $44 million, and this performance was also negatively impacted by the $10 million of ESPP outflow in the quarter. Turning to our details of our Q2 guidance on a non-GAAP basis for Q2, we expect TCV billings or software and support billings to be between $410 million-$420 million versus current consensus estimates of $410 million. TCV revenue or software and support revenue to be between $330 million-$335 million versus current consensus estimates of $328 million.
Gross margins of approximately 80%. Operating expenses between $400 million-$410 million versus current consensus estimates of $407 million. A per-share loss of approximately $0.70 using weighted average shares outstanding of approximately 193 million. The TCV billings or software and support billings guidance assumes the dollar-weighted average deal terms remain constant quarter-over-quarter at 3.9 years. Based on the TCV billings or software and support billings at the guidance midpoint of $415 million, ACV for Q2 would approximate $135 million, reflecting an approximate year-over-year growth rate of 24%. Now turning to the fiscal 2020 guidance. Our guidance for fiscal 2020 remains unchanged, which we believe to be prudent based on the uncertain macro environment referenced by many infrastructure-related companies over the last several months. Specifically for fiscal 2020, we expect TCV billings or software and support billings between $1.65 billion-$1.75 billion.
TCV revenue or software and support revenue between $1.3 billion and $1.4 billion. Gross margins of approximately 80%, and operating expenses between $1.65 billion and $1.7 billion. For representative purposes, based on the TCV billings or software and support billings at the guidance midpoint of $1.7 billion, ACV for fiscal 2020 would approximate $535 million, reflecting an approximate year-over-year growth rate of 25%. The guidance for fiscal 2020 assumes no major economic downturn during the fiscal year and no change to the current dollar-weighted average deal terms currently at 3.9 years. With that operator, you could now open the call up for questions. Thank you.
At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile a Q&A roster. Your first question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.
Hey guys. Thanks for taking my questions. First of all, happy 10th anniversary, and congrats on the strong results, guys. I wanted to touch on, maybe just first a macro spending question, then I had a question on partnerships. Obviously, good results here. It sounds like you had good progress in the Americas, strong large deal performance. I'm curious if you could talk about rest of world and maybe some of the things you've learned in the Americas that can be applied to the rest of the world, and maybe just, Dheeraj, just overall comments on IT buying patterns, spending patterns.
Well, thanks for the question, Matt. I think at the high level, when we look at our overall quarterly performance, 40% from international has been in line with what we did a year ago. We don't see anything unusual in APAC and EMEA. Obviously, Chris's leadership has been telling in Americas, and we'd love to actually go and apply a lot of that rigor to both APAC and EMEA as well.
I guess in terms of your partnerships, you specifically called HP, which it was great to hear some of the success there. You commented briefly, Dheeraj, on GCP with Xi. I'm wondering if you can give us a little bit more of an update on GCP in particular. If there's anything that you have in terms of joint customer or momentum that you could share there would certainly be helpful.
On GCP, I talked about Xi Test Drive, one of our most important projects to get right, for us to increasingly have a digital go-to-market motion. It's a very important project for us to really improve the efficiency for our commercial segment. We're working very closely on Kubernetes. Calm and Anthos are coming together well, and our approach is to integrate Anthos with the control plane of Calm rather than raw hypervisor like AHV or something. There's some really good progress we've made over the last three to six months on Anthos with GCP.
We are hopeful that with the recent acquisition of CloudSimple, it'll open up new doors for bare metal as a service and bring GCP on par with what we are doing with AWS and Azure.
Super helpful. Thanks a lot.
Your next question comes from the line of Rod Hall from Goldman Sachs. Your line is open.
Yeah. Hi. Thanks for the question. I wanted to ask, for starters, just to double check that our math is right on the top-line impact this quarter. The ACV grew 18% year-over-year, and then software and support up nine. The difference in the two is, I guess, what you would say is the top-line impact from the transition. Just double checking that, Duston.
It's not as simple as that necessarily because the ACV calc, obviously, different term lengths are weighted differently within the ACV. You can get some feel there for the difference, but I wouldn't take that literally.
Right. Just puts us in a ballpark anyway. Okay. Thanks for that. The main thing I wanted to ask is ACV's accelerating to 25% growth in the forward quarter. At least that's where we are on the midpoint. I wonder if you guys could maybe comment on what's driving that. Is that GreenLake or is it some other thing that is driving that acceleration in ACV?
Well, part of it is just creating a new baseline because we just flushed through a big chunk of the transformation. We think we have a stable term length now. Our salespeople are getting used to selling subscription. Our customers are getting used to hearing about subscription. Our channel partners have gotten enabled. We know how to defend value, protect value of pure software. It's getting better as well, in that sense. I think all in all, this was a tough 12 months for us, but I think it was well worth it. I think to summarize, it's really a new baseline, and of course, we've put some real meat behind the bones when it comes to pipeline and marketing and demand generation and things like that.
Just one last question, then I'll give up the floor. Do you guys, Dheeraj, have hopes for expansion beyond GreenLake to other on-prem cloud services like AWS Outposts or other things like that? Is it a good possibility maybe we'll see you in some of those in the future? Can you just comment on what the strategy there is?
Absolutely. I think AWS definitely wants their hardware Outposts to really run our software as well. We hope to actually do a lot of that stuff in a way that is reliable and stable and because we take longer. One of the things that people don't know about us is how we tested the heck out of the flash drives coming out of the platform vendors. Now our test suite is the industry standard, and we've kept failing many of the very large SSD providers because of our rigor. We'll want to apply a very similar rigor when it comes to these platforms coming out from hyperscalers as well.
That's great. All right. Thank you. Appreciate it.
Your next question comes from the line of Aaron Rakers from Wells Fargo. Your line is open. Mr. Rakers, your line is open.
He's busy at Palo Alto right now.
Your next question.
Hey, guys. Can you hear me?
Yes. Hi, Aaron.
Okay. Sorry about that. It's that tricky mute button. Congratulations on the quarter. As you guys move through the subscription transition, one thing that you've talked about in the past was the next transitional phase for the company would move to more of a ratable type model. Can you just give us any updated thoughts you have around that? What maybe the timing might be and what exactly that would entail as the next phase?
Sure. Obviously, our new products are effectively mostly all ratable in nature now. They're still a relatively small piece of the equation there. It's something that's on our minds, but quite honestly, I think we have a few more quarters to get through first to, I think, maybe earn that right to do another movement in the model. I think right now the focus is on consistent execution, continuing to get the business back to a level of expectations that we have for the business, certainly, and that's the focus. Ultimately, we'll need to do that, I think, to ultimately complete the transition and get to a very predictable revenue model, billing model, et cetera.
Even before the ratable change, there's just the sales comps.
Yeah
of that this involves change management and enablement and obviously we're more agile in our quota setting, which is twice a year. We do six-month quotas unlike most other enterprise-heavy companies. We are really trying to understand when we move to an ACV-based sales comp.
That's perfect. The follow-up question. The number of deals now involving more than one product or one product above core at 28%, that's a notable trend that the company started to see over the last few quarters. I think last quarter you also noted that you've yet to drive a more bundled sales approach across your organization. Can you talk a little bit about what's driving the success of that continued increase and when, looking forward, we can expect maybe a sales motion that bundles a bit more effectively the additional or add-on products?
We're approaching this more top-down, like customer in, more solutions driven than product driven. Each solution will drive a mini portfolio of products. That's how we are educating our sales force and our prospects. In many which ways, we are asking them to segment their campaigns based on solutions. They don't have to go and really talk about six or seven different products, maybe just three different products. We've not gone ahead and created a SKU out of this bundle. At the very least, we're really helping them think about a mini portfolio based on a solution they're approaching.
Thank you.
Your next question comes from the line of Katy Huberty from Morgan Stanley. Your line is open.
Hi, this is Elizabeth on for Katy. Two questions. One, what would your view have been on ACV growth if you had a full quarter of HPE compared to the 18% growth that was reported? Where do you expect ACV growth for the full year? Then I have a follow-up.
Yeah. It's hard to answer on the HPE thing. Clearly, it depends on the length of the contracts and how much extra we could have done. That's a tough one to theorize on that one. We did mention, I think in the script here, that ACV growth for the year would roughly be 25% based on the TCV billings that we presented.
Also this GreenLake thing, which is a fully ratable consumption model, is very early for us to comment on. I think over the course of the next four quarters, as we understand the opportunities and the challenges in this hardware subscription model that HPE has, we'll be able to come and talk more about it.
Thank you. A follow-up but related to the deals outside of the core offerings. What are some of the software products that are most outperforming your expectations? Could you give us an idea of what % of customers have purchased something outside of the core HCI?
Yeah. On the former, I think I talked about it in my narrative as well. Obviously, AHV we don't charge for, and that's been 47% of our business on a rolling four-quarter basis. Prism Pro has been doing really well in terms of attach Files, which is our software-defined filer. Our micro-segmentation product called Flow, which is now integrating with our SaaS product called Beam, that together they'll become the unified security posture for the company in a multi-cloud world. There is Era and Frame. These products, we definitely see a lot of conversations going on and a lot of attach as well.
Thank you. Did you have an idea of what % of customers have purchased something outside of the core offerings?
Not at our hands right now. I think it's 28% of our deals this quarter on a rolling four-quarter basis.
Got it. Thank you.
Your next question comes from the line of Jason Ader from William Blair. Your line is open.
Yeah, thank you. On the guidance for the year, you talked about macro being a little bit weaker at some of your competitors. Just to be clear, is that something that you have seen in your business up to this point?
It's early, actually, it was from four quarters ago. I don't know, Jason, if Duston you want to comment on it.
Yeah. It's something obviously that we keep our eye on, Jason, just because of the frequency, I think, that you hear about it now. When we look at spending, we're trying to take a prudent approach to the spending equation looking forward, but there's nothing that significant that we can point to. You always hear a story here or there, but there's no trend that we've uncovered from that perspective.
Now, large enterprise in Americas, we actually do see doing well. There is a lot of noise in Brexit and China. We continue to monitor that and be cautious about it.
Okay. Just a follow-up, Dheeraj. Clearly, things have gotten better for you guys. Maybe you could talk about some areas of the business where you still feel like you could be doing a lot better.
Well, I think the big investments that we're making in commercial and how we really need to make it extremely digital and a lot more efficient is a big part of this. How we can go and get even more developer productivity, I think that's one thing that we don't talk about externally, but it's on my mind and the minds of a lot of our people as well, is how do we really bring delight to our developers who are also customers, actually. We think a lot about our customers outside, but sometimes the cobbler's children have no shoes. I think that's one thing we really focused on for the last six months. I think it's going to bring a lot of sort of efficiency to our R&D as well. We believe there's a lot that we can unlock there too.
Between commercial and doing things with Test Drive and dev productivity.
What do you mean by dev productivity, Dheeraj? Is it more DevOps practices? I'm not quite sure what you mean by that.
Well, we have sort of disaggregated our products in the last year, and the more we disaggregate, the more independence we give them to release independent of each other. Because in a multi-product portfolio, it does come up with the challenges of how do you do release management and how do you do integration and testing of integrated products, and at the same time provide autonomy to individual product owners to go and release code at an even more agile pace. I think those are the kind of things that unlocks a lot of value for growing companies.
Thank you.
Your next question comes from the line of Simon Leopold from Raymond James. Your line is open.
Great. Thanks for taking the question. I wanted to touch on the competitive environment, given that some of the others within sort of the IT supply chain have talked about some players becoming more competitive and cutting price. Whether or not you've seen any change in behavior from the folks you're going up against? I've got a follow-up.
Yeah, I think the win rates have not changed much. It's pretty much consistent for the last four quarters. I would say three, four years ago, the competitive pressure was from converged infrastructure and big incumbents in the space of storage and virtualization and networking. Now, it just happens to be two of us, VMware and us, and we are talking about how do we navigate this multi-cloud environment over the next five years, and we think we have different approaches. I think hyperconvergence as a Magic Quadrant is really driven by software now as opposed to hardware. I think it was a battle that we had to win over the last three, four years, and I think the dust has finally settled, and it's really an operating system play.
I would say that the multi-product portfolio is probably the next big battleground for both companies. How to really do this well. We are doing this organically with small teams that we come together with and acquire. We believe that over the long haul, I think this is a much better approach than going and acquiring revenue. We believe that there is obviously going to be competition. It's a very large market, and large markets are red oceans. Red oceans have whales, and red oceans are bloody. We got to be the faster shark that knows how to really navigate change. Just in the last 18 months itself, this notion of running our software and hyperscaler public cloud environment was something that we probably didn't conceive of three years ago.
As we go and really expand the surface area for software, we get into other battlegrounds that we hadn't thought about before.
Just as a follow-up, I wanted to see how you're thinking about getting back to generating cash. Early in fiscal 2019, you had very strong cash from operations, and then you sort of pivoted to making more investments. I just want to think about what's sort of the trajectory to being a cash-generating company. Thanks.
Yeah, thank you. I think this goes back to the transformation of our sales force. Being more disciplined about extracting more value for software. It's a big change for a company that used to sell appliances till about 18 months ago. I would say that a lot of it is around operational rigor, and setting those enablement goals for our sellers who are now selling pure software and subscription and going educating the market on this transition itself.
I think, clearly over time, this is obviously through the next several years, it's how do we take advantage of the efficiencies that come from a subscription model? We have to have a flow of renewals coming in first. What we're doing in the interim is starting to structure the business, thinking from a productivity perspective, a channel productivity. How do we position some of the things that we need to in advance of the subscription renewal inflow, if you will, how do we take advantage of those efficiencies? That's over time, what's clearly going to help drive that. Now, when are we exactly going to get back to we've given you guidance for FY 2020, you know what that looks like. Then, we'll clearly give some updates at Investor Day upcoming in March.
Thank you.
Your next question comes from the line of Mehdi Hosseini from Susquehanna Financial. Your line is open.
Yes, thanks for taking my question. It's Mehdi Hosseini from Susquehanna International. Dheeraj, I want to go to slide number 14. I want to reference your view that the industry is becoming more like a duopoly where Nutanix is coexisting with VMware. I think the bar chart to the left of slide 14 captures that you're coexisting with your main competitor. In that context, when I look at two, three years from now, what % of your billing should capture the entire stack of products that you are marketing? In other words, the second bar chart on slide 14, when would it represent more than 50%, 60% of the entire stack of products? I have a follow-up.
Yeah. Thank you, Mehdi, for the question. One thing, really, to show that the balloon can be made to look bigger by pressing it on the core side, you can always financially engineer things that come out of the core and go into the new products. To do it as accretive revenue is where the real sort of goodness belongs to any multi-product portfolio company, and we are very much focused on that. It actually improves seller productivity and channel productivity, and it actually is accretive dollars. I would say that in the next three years, if we can actually get 25% of our business accretively to come from there, that'll be huge, actually. Doing this right methodically without having to take money out of the left pocket and put it in the right pocket will be key to this transformation.
In the longer term, two to three years, we should see basically at least a quarter of your billing driven by the entire stack of products. Is that what you're saying?
New products. Yeah.
New products.
At least based on ACV right now, we are tracking to 10%, 11% or something.
Got it. One other question. Outside the U.S., yes, there is a migration towards a multi-cloud, but I still don't see a more organized way of doing this. There's a lot of standardization in North America, Europe, but not much in the Asian market. How do you see you capitalizing on this? In the past, you've had relationships with the likes of Lenovo. Is there anything there that you can capitalize on? Is there any views or thoughts that you can share with us?
Yeah. I think China definitely, with Inspur and Lenovo as the server platform partners. There's something there with Alibaba. We've not had the bandwidth to go much deeper there, but it's actually coming up more and more. Alibaba is also pretty prevalent with SoftBank in Japan. There's some regional players coming up in that part of the world that we have to get really good with over the course of the next 12 to 18 months. Tarkan is passionate about international, and he talks a lot about it. I'm learning a lot from him as well on some of these things. I think there is going to be the Japanese server platform partners, Fujitsu being an important one, NEC, Hitachi. We're doing a lot of good work with Fujitsu in Germany as well.
I think there'll be a lot of local partners that we have to go and share some of the profits with, and that's the value of software, that the cost of an additional unit is $0. You can actually expand the market by sharing some of the margins with other partners, and that's our intent, really. Doing this with the hyperscalers, Alibaba in particular in APAC, but also the server platform vendors who are regional players like Lenovo and Inspur and NEC and Fujitsu and Hitachi.
Should I be concerned with OpEx commitment? Does this require more investment to be able to drive incremental billing?
I wouldn't think it's going to be anything substantial. A lot of this is porting of software to these platforms. There's another one where we believe service providers in Asia Pacific will also be a very important part of our overall go-to-market transition as well. We talk about Xi. Xi right now is our data centers. In the next 12, 18, 24 months, we really want to do this with our software running on partners' capital. Their data centers and their hardware investments, and if they're willing to actually use our billing and our payments and our identity, then all of a sudden, we actually get the best of both worlds with an asset-light model of Nutanix with assets really coming from the partners.
Got it. Thank you.
Your last question comes from the line of Jack Andrews from Needham. Your line is open.
Great. Thanks for taking my question. Dustin, I wanted to see if you could drill down a little bit more on your comments regarding the backlog. I think you mentioned it was largely unchanged versus typically a sequential decline from 4Q to 1Q. Could you go into a little more detail about what is comprised in the backlog now? Do you have a series of much larger deals at this point than you typically see?
I don't think the composition is that much different. Again, for us, it's just backlog again is defined as a PO that we've received that we have not billed. There's a different mix of customers and transactions and things like that. There's nothing in there unusual that one customer's dominating it or something along those lines. It's pretty much a similar composition, and it's just the fact that at this point in this Q1, we were able to hold that flat, and usually Q1, we rely on that a little bit more, quite honestly, with the weaker-- both EMEA and APAC are typically weaker for us in Q1. Americas had a good Q1 for us. Federal had a pretty good Q1 and things like that, so nothing unusual there.
Okay, thanks for the color. Just as a quick follow-up, as you've gone through the educational and enablement process with your sales force and the channel around all your new subscription products, what are people most excited about? Which product or a couple of subscription products do you think represents the most significant upside from here?
Frame, for sure. It's the desktop as a service product. A lot of good proofs of concept going on. Files, for those who were actually selling hardware before, we are really looking at how do you really connect with channel partners who related to hardware, but these days will relate to similar services, except being pure software. I think Files is another one. Databases is a work in progress. Many of the VARs don't relate to it but the SIs do. The global SIs definitely working on DevOps and PaaS. They relate to Era a lot, I would say. Many of the mid-market resellers also relating to micro-segmentation. Flow has become a very big part of the AHV drag.
We don't go and sell AHV by itself because you can't just sell free, like, "Oh, it's cheap, it's free." You really don't have a good way to sell that. If you go and talk about Flow and micro-segmentation and the fact that you're democratizing something that's very expensive otherwise, people are actually embracing both Flow and AHV.
Great. Well, thanks, [Sundar]. Congratulations on the results.
Thank you.
This concludes today's earnings call. Thank you for your participation. You may now disconnect. Have a great day.