2016 IPO Prospects: Nutanix Files For IPO

| About: Nutanix (NTNX)

Summary

Billion-Dollar Unicorn club member and hyperconverged storage provider Nutanix recently filed to go public with plans to raise $200 million.

The company operates in the Infrastructure as a Service market, which is expected to grow 38.4% in 2016 to reach $22.4 billion.

The company has a base of approximately 2,100 end-customers, including 226 Global 2000 enterprises.

According to Gartner, the Infrastructure as a Service market is expected to grow 38.4% in 2016 to reach $22.4 billion. Billion-Dollar Unicorn club member and hyperconverged storage provider Nutanix (NASDAQ:NTNX) has recently filed to go public with plans to raise $200 million.

Nutanix's Offerings

San Jose-based Nutanix was founded in 2009 by Dheeraj Pandey, Ajeet Singh and Mohit Aron - all technology experts who had built scalable systems such as Google File System and Oracle Exadata. In October 2011, they started selling the initial version of the Nutanix Operating System, which pioneered hyperconverged infrastructure by providing block storage for virtualized environments on VMware. According to an IDC report, Nutanix is the market leader in the hyperconverged infrastructure industry with 52% share of revenue.

Nutanix's offerings include two key suites. The Nutanix Prism is a comprehensive management solution designed to simplify datacenter storage and virtualization operations, and the Nutanix Acropolis is a turnkey infrastructure platform that converges compute, storage and virtualization resources to run any application, at any scale.

Their platform is primarily sold through channel partners, including distributors and resellers, and delivered directly to end-customers. They have a base of approximately 2,100 end-customers, including 226 Global 2000 enterprises such as Best Buy (NYSE:BBY), Kellogg (NYSE:K), NASDAQ, Nintendo (OTCPK:NTDOY) and Nordstrom (NYSE:JWN). They have about 1,368 employees. Distributors Carahsoft Technology and Promark Technology accounted for 23% and 15%, respectively, of its revenue in 2015.

Nutanix's Financials

Total revenue was $30.5 million, $127.1 million and $241.4 million for fiscal 2013, 2014 and 2015, respectively, representing year-over-year growth of 316% and 90%, respectively. Net loss was $44.7 million, $84.0 million and $126.1 million for fiscal 2013, 2014 and 2015, respectively.

Sales and marketing expenses accounted for 72% and 67% of total revenue in 2014 and 2015, respectively. Net cash used in operating activities was $29.1 million, $45.7 million and $25.7 million for fiscal 2013, 2014 and 2015, respectively. In the first quarter ending October 31, 2015, net loss was $38.5 million on revenue of $87.7 million and cumulated deficit was $312 million.

Nutanix competes in a rapidly evolving market with traditional storage vendors EMC (EMC), NetApp (NASDAQ:NTAP) and Hitachi (OTCPK:HTHIY), traditional IT systems vendors HP (NYSE:HPQ), Cisco (NASDAQ:CSCO), Lenovo (OTCPK:LNVGY), Dell, Hitachi and IBM (NYSE:IBM), and hyperconverged infrastructure and software-defined storage vendors like VMware (NYSE:VMW).

In its IPO filing, Nutanix also alludes to the risks associated with Dell's recent mammoth $67 billion acquisition of EMC and its 80% holding in VMware.

"Dell is not just a competitor but also is an OEM partner of ours and the combined company may also be more likely to promote and sell its own solutions over our products. EMC also holds the majority of the outstanding voting power in VMware, Inc. and if the acquisition is completed, Dell will control VMware, and could combine the Dell, EMC and VMware product portfolios into unified offerings optimized for their platforms."

Nutanix recently entered into an OEM partnership with Lenovo.

They are venture-funded with investments of $312.2 million from investors Fidelity Investments, Riverwood Capital, Sapphire Ventures, Battery Ventures, Greenspring Associates, Khosla Ventures, Lightspeed Venture Partners, Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), Wellington Management, and Blumberg Capital. Their last round of funding was held in August 2014 when they raised $140 million at a valuation of over $2 billion. An earlier round of funding in January 2014 had valued them at $950 million.

Kurt Marko on Forbes says that:

"Given ongoing consolidation in the server and storage business, it's conceivable that Nutanix never makes it to IPO. Using a price-to-sales ratio of 8-10, Nutanix could fetch upwards of $3 billion in an acquisition; high, but feasible for a company like Cisco or Oracle looking for a competitive edge over Dell-EMC-VMware."

It is quite possible, given the state of the industry.

Disclosure: None.