Nutanix Raises $238 Million in IPO

Good operation?
This is a Press Release edited by on 2016.10.03

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Nutanix, Inc. announced the pricing of its upsized IPO of 14,870,000 shares of class A common stock at a price of $16.00 per share.

The shares are expected to begin trading on the NASDAQ Global Select Market on September 30, 2016 under the symbol NTNX.

All of the shares are being offered by Nutanix. Additionally, the company has granted the underwriters a 30-day option to purchase up to 2,230,500 additional shares of class A common stock from Nutanix at the PO price.

Goldman, Sachs & Co. and Morgan Stanley & Co. LLC are acting as lead book-running managers, J.P. Morgan Securities LLC and RBC Capital Markets, LLC are acting as book-running managers for the offering. Robert W. Baird & Co. Incorporated; Needham & Company LLC; Oppenheimer & Co. Inc.; Pacific Crest Securities, a division of KeyBanc Capital Markets Inc.; Piper Jaffray & Co.; Raymond James; Stifelh; and William Blair & Company, L.L.C. are acting as co-managers.

Our Comments

Nutanix first filed for an IPO in December 2015 for an aggregate offering price of $200 million, and once more in April 2016, to finally debuted it on September 30, 2016 on the NASDAQ under the symbol NTNX.

Stock opened the day at $26.50, valuing the San Jose, CA-based company at $3.6 billion. At the closing bell, shares were priced at $37, a 131% pop from the $16 IPO price. Nutanix sold 14.87 million shares last Thursday, more than the expected 14 million, and priced them above the expected range of $13 and $15, to raise about $238 million.

It was the largest tech IPO this year, and the 6th VC-backed tech IPO in the US in 3Q16.

It seems a great success, but not really for the start-up's VCs. $238 million is far from $370 million invested in the company:

Financial funding:

  • • $15.5 million in 2010
  • • $25.3 million in 2011
  • • $33.0 million in 2012
  • • two rounds in 2014, $151.5 million and $145.0 million

Total: $370.3 million

In April 2016, the firm issued an aggregate principal amount of $75.0 million of senior notes due April 15, 2019

Principal stockholders:

  • • Lightspeed Venture Partners 22.4%
  • • Jeffrey T. Park 22.4%
  • • Khosla Ventures 10.6%
  • • Dheeraj Pandey 9%
  • • Mohit Aron 8.6%

If you look at the 32 IPOs in the storage industry since 1995 (see the bottom of this page), the average amount raised reached $128 million; it's more than $111 million, the average total funding. For two of the former storage IPOs last year, Pure Storage raised $470 million compared to $425 million put by investors. It's $83 million and $73.5 million for Mimecast, respectively.

Incorporated in the State of Delaware in September 2009, Nutanix came out of stealth mode in August 2011 with the Complete Cluster, one of the first hyperconverged storage products rebranded as the Virtual Compute Platform in June 2013. This platform delivers enterprise data storage as an on-demand service by employing a distributed software architecture eliminating the need for traditional SAN and NAS, and delivers a set of software-defined services that are VM-centric, including snapshots, high availability, disaster recovery, de-dupe.

The solution is comprised of two software, Acropolis and Prism, and is delivered on commodity x86 servers. Acropolis delivers high performance distributed storage, application mobility capabilities and a built-in hypervisor, software that allows multiple OSs to share a single hardware host. Prism delivers integrated virtualization and infrastructure management, operational analytics and administration capabilities. The solutions is dedicated to a range of workloads, including enterprise applications, databases, virtual desktop infrastructure, or VDI, unified communications and big data analytics and the company has recently announced the capability to support both virtualized and non-virtualized applications.

The hardware NX-3000 Series is comprised of several nodes of commodity x86 servers with dual-core Intel Haswell processor with SSDs and HDDs, and 1GbE or 2GbE connections. Components are generally purchased through Super Micro.

Competitors include software providers such as VMware and Red Hat, as well as IT systems vendors such as HPE, Cisco Systems, Lenovo, Dell EMC, HDS, IBM and NetApp, Nimble Storage, Pivot3, Pure Storage and SimpliVity.

Average total end-customer growth is approximately 22% on a quarterly basis over the last eight fiscal quarters, which grew from 782 as of July 31, 2014 to 3,768 as of July 31, 2016. There were 657 new ones acquired during the three months ended July 31, 2016. Among the customers, there are many Global 2000 enterprises and they include Activision Blizzard, Inc., Best Buy Co., Inc., Covance Inc., Jabil Circuit, Inc., Kellogg Co., Nasdaq, Inc., Nintendo Co., Ltd., Nordstrom, Inc., NTT SmartConnect Corporation, Total S.A., Toyota Motor of North America, U.S. Department of Defense Office of the Secretary of Defense and Yahoo! JAPAN Corporation.

For last known financial quarter, distributors Carahsoft and Promark represented 15% and 20% of total revenue, respectively.

Now with 1,980 employees worldwide, Nutanix grew very fast. Average revenue growth of 17% on a quarterly basis was recorded for the last eight fiscal quarters, which grew from $46.1 million in the three months ended October 31, 2014 to $139.8 million in the three months ended July 31, 2016.

But the company has a perpetual history of growing losses, never was and being far to be profitable. As of July 31, 2016, it has an accumulated deficit as high as $441.9 million.

Revenue and profitability for FY Ended July 31
(in $ thousand)

Year Revenue Y/Y growth Net loss
2012 6,586 NA (13,962)
2013 30,533 364% (44,734)
2014 127,127 316%  (84,003)
2015  241,432 90%  (126,127)
2016 444,928 84% (168,499)

Revenue and profitability for the quarter ended July 31, 2016
(in $ thousand)

Quarter Revenue Y/Y growth Net loss
2015 74,085 NA (37,185)
2016 139,785 87% (49,929)

Support and services is only 22% of total sales compared to 78% for products in the last three-month financial period.

Revenue's repartition by region for FY ended July 31, 2016

USA 73%
EMEA 16%
AsiaPac 11%
Other Americas 0%
Total 100%

Remember that Nutanix acquired last August, a company based in Singapore which specializes in container and DevOps automation, for 0.5 million shares of class B common stock and $1.2 million of cash, and, one month later, PernixData, in scale-out data acceleration and analytics, for only $9.7 million, according to Forbes.

Total compensation of main executives in 2015 and 2016

Name, position 2015 2016
Dheeraj Pandey, CEO and COB $21,954,200 $448,258
Sudheesh Nair Vadakkedath, president   $21,954,200
Sunil Potti, chief product and development officer $9,005,476 $3,930,758

32 IPOs in storage industry

Company IPO year Amount raised* Total funding*
Silicon Storage Technology
1995 15 NA
StorageNetworks 2000 260 205
BakBone 2000 NA NA
McData 2000 350 NA
STEC 2000 65 NA
FalconStor** 2001 NA 33
Xyratex 2004 48 NA
Rackable Systems 2005 75 21
CommVault 2006 161 75
Double-Take 2006 55 70
Isilon 2006 108 69
Riverbed 2006 86 38
3PAR 2007 95 183
Compellent 2007 85 53
Data Domain 2007 111 41
Mellanox 2007 102 89
Netezza 2007 124 68
Voltaire 2007 47 75
Rackspace Hostings 2008 145 NA
OCZ Technology 2010 101 NA
Carbonite 2011 62.5 67
Fusion-io 2011 223 112
JCY International 2011 238 NA
Parade Technologies 2011 34 21.5
Violin Memory 2013 162 186
Nimble Storage 2013 168 99
Barracuda Networks 2013 75 40
Hortonworks 2014 110 173
Box 2015 554.5 175
Mimecast 2015 83 77.5
Pure Storage 2015 470 425
Nutanix 2016 238 370
Average of known figures   128 111

* in $ million
** became public via a merger with Network Peripherals

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Nutanix Files Registration Statement for IPO
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