digibyte - no wonder the old guard storage players fear Nutanix - check the revised S1

Den Howlett Profile picture for user gonzodaddy September 13, 2016
Summary:
Nutanix has put on spectacular growth i the last few years. Now it is poised for an IPO. Check out the numbers.

nutanix-growth-and-operating-loss

Ever since Nutanix filed it S1 last December, the world and his dog in the enterprise storage space (aka hyper converged data center) has been wondering what might have happened. Make no mistake, Nutanix is up against some formidable rivals, principally in the shape of VMWare. Rivalry between them has been downright hostile.

Then came the story that Nutanix had taken a chunk of change from Goldmans and questions were then floating about as to whether things at Nutanix had stalled. Well, they have - by its past growth record - but not when compared to others in pretty much any other sector in the enterprise market place. Check the revised S1 filed the other day. Check also the graph at top to see the extent to which Nutanix has grown into a company with reported revenue of $445 million but operating losses of $165 million. The hockey stick effect on revenue is clearly in action.

If those numbers sound eye watering then check the growth from 2015 to 2016 which reads as 84% and 38% respectively. That means while Nutanix continues to bleed at a good clip, it is bringing costs under control, as margins widened from 59% to 62%. Now check the graph below to see the impact of Nutanix growth, expanded margins and manage3d expenses.

nutanix-growth

The question remains, when does the company stop bleeding cash? From the S1:

An improvement in our cash flow from operating activities from a use of cash of $6.9 million in the three months ended October 31, 2014 to a generation of $2.4 million of cash in the three months ended July 31, 2016. Over the same periods, our free cash flows have improved from a use of cash of $11.4 million to a use of cash of $6.5 million.

Looking at available cash resources of $112 million, it appears that the raise from Goldmans was little more than a cushioning exercise. In addition, the fact that Nutanix has been able to convert some $320 million in warrants and preferred stock to Common Stock suggests that the company's advisors think there is a good chance of the company making a strong debut in any upcoming IPO.

My guess is that there is significant optimism for an early IPO. These numbers look very good, there's strong deferred revenue and strong billings. Combine this with recent success from Twilio and a much anticipated IPO from Coupa and you have the market ingredients for a good launch. It helps that the competition has just come off an insipid user event that left critics snoozing.

It just remains to be seen whether the advisors price the company sensibly to leave a good margin for growth or go all out for a killing on the opening strike price. My hope is for the former rather than the latter because the pressure to succeed will not ease off after an IPO.

Whichever way it goes, Nutanix has proven that modern technology can take a serious bite out of incumbent markets. That matters at a time when modern infrastructures will be sorely needed for the data centers of tomorrow.

Image credit - graphs via the author, featured image of Dheeraj Pandey, CEO via Nutanix

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