More than 150 Nutanix employees have lost their jobs as the company cut 2.5% of its global workforce.

The layoffs were announced during Nutanix’s third-quarter earnings call.

Rajiv Ramaswami is Nutanix’s president and CEO. He said the cuts were an “important part of our path to profitability.” There were more than 6,100 Nutanix employees as of earlier this year.

Nutanix’s Rajiv Ramaswami

“We have increased our go-to-market productivity, including more efficient digital marketing spend, increased leverage of our channel partners and optimized headcount in geographies based on market opportunity,” he said. “In connection with these efforts, we recently decreased our global headcount by 2.5% from within the sales and marketing functions as we continue to refine our go-to-market model. We expect these actions to yield approximately $50 million in annual savings.”

The layoffs are exclusively in sales and marketing, Ramaswami said. It was based on eliminating excess coverage where “we didn’t need that many people …. in specific market regions.” Moreover, Nutanix eliminated certain functions.

“So it was fairly distributed across the spectrum,” he said. “And of course, wherever possible we tried to not impact quota-carrying reps, but look at the non-quota-carrying reps in terms of this process. Not specific to one particular area.”

Big Quarterly Loss

For the quarter, Nutanix reported record annual contract value (ACV) billings year over year, reaching nearly $160 million. Revenue was $344.5 million, up from $318.3 for the year-ago quarter. However, it reported a $123.6 million loss for the quarter, which was still down from a $240.6 million net loss in the year-ago quarter.

Ramaswami said the last quarter was a strong one across the board.

“We delivered another quarter of improved execution, continued momentum and outperformance on all our guided metrics,” he said. “We continue to execute on our transition to an ACV-based revenue model. And as expected, our renewal pipeline is continuing to build. These economics continue to improve due to shorter duration terms combined with uplift from our emerging products. In addition, we saw good linearity in the quarter as a result of our ongoing operational improvements through our go-to-market engine. And finally, while we typically see a seasonal decline in backlog in the third quarter, we were able to hold steady, further demonstrating the strength of demand in the quarter. Overall, we are pleased with our execution and can see that the hard work of moving to a subscription model is paying off.”

Nutanix has been transforming to a subscription business model.

“Our average contract term continues to decline, coming down from last quarter to 3.3 years, helping drive higher unit economics,” Ramaswami said. “We also see our growing base of renewals as an increasingly important driver of top line growth and sales and marketing efficiency. With this transition well under way and with our increased focus on efficiency, we see a clear path to cash flow positivity and operating profit.”