Nimble Storage IPO Packs A Punch

Dec.12.13 | About: Nimble Storage, (NMBL)

Nimble Storage, Inc. (NYSE:NMBL), manufacturer and marketer of a hybrid flash/disk storage platform, plans to raise $136 million in its upcoming IPO on Friday, December 13th.

The San Jose, California-based firm will offer 8.0 million shares at an expected price range of $18.00-$20.00 per share. If the IPO can reach the midpoint of that range at $19.00 per share, NMBL will command a market value of over $1.5 billion. See S-1.

NMBL filed on October 18, 2013
Lead Underwriters: Goldman Sachs, and Morgan Stanley
Underwriters: Needham & Company LLC, Oppenheimer and Co, Pacific Crest Securities LLC, Stifel Nicolaus & Company, William Blair and Co LLC

NMBL is the maker and distributor of a flash-optimized hybrid storage platform designed to address the rapidly increasing storage needs of enterprises and cloud-based services. The firm's platform is built with a new file system software designed to fully take advantage of improvements in flash storage media and data analytics.

The firm has seen very rapid end-customer growth in the past several years, with over 40, 270, 1090, and 2100 end-customers as of January 31, 2011, 2012, 2013 and October 31, 2013, respectively. These customers include cloud-based service providers, education firms, financial services firms, and many other types of companies.

NMBL offers the following figures in its S-1 balance sheet for the nine months ending October 31, 2013:

Revenue: $84,013,000
Net Loss: ($29,970,000)
Total Assets: $81,318,000
Total Liabilities: $57,207,000
Stockholders' Equity: ($74,479,000)

NMBL has seen significant revenue growth in recent years, posting total revenues of $1.7 million, $14.0 million, $53.8 million and $84.0 million for the years ended January 31, 2011, 2012 and 2013 and the nine months ended October 31, 2013. However, net losses have increased over the same intervals, at $6.8 million, $16.8 million, $27.9 million and $30.0 million, respectively.

NMBL must compete with other firms offering similarly targeted storage solutions. These include large storage system vendors like EMC (EMC) and NetApp (NASDAQ:NTAP), along with systems firms like Dell and HP (NYSE:HPQ) that have acquired specialist storage vendors to complement their own internal development efforts. Some of these competitors, especially those in the latter quality, have significantly better capitalization and superior resources to NMBL.

Suresh Vasudevan has served as the CEO of NMBL since 2011. Mr. Vasudevan previously served as CEO of Omneon Video Networks and in various positions with NetApp, including Senior Vice President.

Mr. Vasudevan holds a Post Graduate Diploma in Management from the Indian Institute of Management in Calcutta and a B.S. in Electrical Engineering from the Birla Institute of Technology and Science in Pilani, India.

We are cautiously optimistic on this IPO and rate it a buy at the increased proposed range of $18 to $20. We are very comfortable with Goldman and Morgan leading this deal. They have a lot of incentive to end the year with a great performing technology IPO.

Though NMBL has continued to lose significant quantities of money, the firm seems to be nearing a tipping point: as a percentage of total revenue, the firm's operating expenses have declined from 175% for the year ended January 31, 2012 to 114% for the year ended January 31, 2013 and to 99% for the nine months ended October 31, 2013.

Moreover, NMBL's products seem to have caught on with the firms purchasing them; as of October 31, 2013, the firm's top 50 end-customers that had been with the firm made additional orders that averaged 150% more than the initial sale amount the following year.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NMBL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.