Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our consolidated financial statements and the related notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.Nimble Storage, Inc.
Overview
Our mission is to provide our customers with the industry’s most efficient data storage platform. We have designed and sell a flash-optimized hybrid storage platform that we believe is disrupting the market by enabling significant improvements in application performance and storage capacity with superior data protection, while simplifying business operations and lowering costs. At the core of our innovative platform is our Cache-Accelerated Sequential Layout file system software, which we call our CASL technology, and our cloud-based storage management and support service, InfoSight.
Enterprises and cloud-based service providers today are overwhelmed by numerous storage challenges including increasing costs, capacity and performance tradeoffs, management complexity and data protection issues. These challenges have been exacerbated by key trends in the data center: the rapid proliferation of applications with varying performance requirements, increased use of virtualization and the exponential growth in data. Over the last several years, major technological advancements have been made in flash storage media and data analytics, but traditional storage system providers have been unable to fully capture these improvements into system performance and efficiency at reasonable cost. We believe that a fundamental change to the software architecture underlying storage systems is required to fully take advantage of these advancements.
Our team is comprised of storage and software experts who recognized the opportunity to develop a platform that would transform the industry. We have built our platform from the ground up, starting with a fundamentally new file system software that takes advantage of the high performance characteristics of flash memory and the capacity and low cost of disk. Our platform’s key benefits include high performance and high capacity efficiency, superior data protection and simplified storage lifecycle management. In addition, CASL’s scale-to-fit flexibility enables non-disruptive and independent scaling of performance and capacity. We enable a new approach to storage infrastructure management by leveraging advances in data analytics. InfoSight takes advantage of deep-data analytics and other capabilities embedded across our platform to proactively monitor the health, capacity and performance of customer systems, and provide real-time operational insights to us and our end-customers.
We serve a broad array of enterprises and cloud-based service providers, and our software and storage systems effectively handle mainstream applications, including virtual desktops, databases, email, collaboration and analytics. Since shipping our first product in August 2010, our end-customer base has grown rapidly. We had over 40, 270 and 1,090 end-customers as of January 31, 2011, 2012 and 2013 and, as of July 31, 2013, we had over 1,750 end-customers. Our end-customers span a range of industries such as cloud-based service providers, education, financial services, healthcare, manufacturing, state and local government and technology.
We sell our products through our network of value added resellers and distributors, and also engage our end-customers through our global sales force. As of July 31, 2011, 2012 and 2013, we had over 70, 220 and 600 value added resellers that offered our solutions worldwide. Additionally, we leverage our “land and expand” business model to sell additional products to our existing end-customers. For example, in the three months ended July 31, 2011, 2012 and 2013, approximately 19%, 22% and 28% of the dollar amount of orders received was from existing end-customers. As of July 31, 2013, the top 25 of our 117 end-customers that have been with us for at least two years, on average, made additional purchases that were approximately three times the initial dollar purchase amount in the two years following the initial sale.
We have experienced significant growth in recent periods with total revenue of $1.7 million, $14.0 million, $53.8 million and $50.6 million in the years ended January 31, 2011, 2012 and 2013 and the six months ended July 31, 2013. Our net loss was $6.8 million, $16.8 million, $27.9 million and $19.8 million in the years ended January 31, 2011, 2012 and 2013 and the six months ended July 31, 2013. As our sales and customer base have grown, we have also experienced growth in our deferred revenue from $2.0 million as of January 31, 2012 to $10.9 million as of January 31, 2013 and to $19.9 million as of July 31, 2013. Our gross margin has improved from approximately 55% for the year ended January 31, 2012 to 62% for the year ended January 31, 2013 and to 63% for the six months ended July 31, 2013. As a percentage of total revenue, our operating expenses have declined from 175% for the year ended January 31, 2012 to 114% for the year ended January 31, 2013 and to 101% for the six months ended July 31, 2013.
Industry Background
Data has become a key strategic resource for modern businesses and consequently, data storage has become a mission-critical element of IT infrastructure. IDC estimates that enterprises will spend approximately $42.5 billion worldwide on data storage systems in 2017, while Gartner estimates an additional $21.3 billion in worldwide spend on storage software in 2017. To maximize the benefits from investments in data storage infrastructure and applications, enterprises and cloud-based service providers generally require data storage systems that provide cost-effective storage capacity, high performance, comprehensive data protection, optimized footprint and cost of operations, and simplified management. These requirements have become increasingly difficult to address through traditional storage systems, particularly with the recent changes within enterprise and cloud-based service provider data centers. Specifically, the rapid adoption of virtualization technologies, proliferation of a diverse set of applications and enormous increase in the amount of data gathered and analyzed by organizations are resulting in substantially greater challenges for storage infrastructure than ever before.
Current storage products remain inadequate for meeting the broad demands of modern enterprises and cloud-based service providers due to the following limitations:
Existing Storage System Architectures Use File Systems that Are Not Optimized for Today’s Storage Demands and Available Technology. File system software is the foundation of the enterprise storage system. File systems define the manner in which data is laid out on the underlying storage media, which in turn governs the performance, capacity, scalability and management functionality of the storage system. Traditional storage architectures relied on hard disk drives as the only underlying storage medium, and their file systems were designed using a basic approach of mapping application data to locations on hard disk drives. However, over the last decade, hard disk drive performance has not kept up with server compute performance improvements, resulting in ever-slower storage system read and write performance. This problem has become even more acute with the rapid adoption of virtualization. To meet application performance requirements, traditional storage systems have had to resort to significant over-provisioning of hard disk drives, which results in only modest performance improvements, inefficiently using storage capacity and increasing total cost.
Existing “Hybrid” Architectures Do Not Efficiently Utilize Flash Technology. To improve input/output, or I/O, performance, some storage vendors have simply “bolted on” flash to existing hard disk drive-based systems, an approach that does not optimize for the unique characteristics of flash. These “hybrid” systems generally require over-provisioning of flash, are complex to manage and typically require more expensive high-endurance flash, all of which significantly increase total cost.
Scaling Limitations. Traditional storage systems are limited in their ability to cost-effectively scale capacity, performance or both as storage user needs evolve. “Scale-up” architectures typically do not allow the aggregation or sharing of resources or the management of multiple systems in a unified manner. An alternative “scale-out” model, which can aggregate individual systems into one clustered, multi-node system, generally forces IT departments to scale both capacity and performance even if only one is required.
Inadequate Data Protection. Traditional approaches to data backup are time-intensive and as a result, most enterprises typically take only one backup per day, risking substantial data loss in the event of a storage system failure. In addition, today’s remote replication solutions consume a significant amount of expensive network bandwidth, forcing enterprises to replicate only a small portion of their data for disaster recovery and rely on off-site tape copies to protect the rest.
Operational Complexity. Existing storage systems are complex and time consuming to manage, resulting in high operating costs. With legacy storage systems, IT departments can be challenged to identify and address root causes of problems and have difficulty predicting future performance and capacity demands and preventing future service disruptions.
Opportunity for a Next Generation Storage Platform
Enterprises and cloud-based service providers today are overwhelmed by the growing inefficiency, cost and complexity of storage. However, recent technology advances such as the emergence of high performance flash storage media, cloud-based monitoring capabilities and predictive data analytics software have created a unique opportunity to fundamentally disrupt the storage market and significantly improve storage system capabilities. Our innovative platform, built on software designed from the ground up, leverages the strengths of both flash and disk to provide transformative benefits in application performance and data protection while simplifying business operations.
We believe we have a significant market opportunity. According to IDC, the worldwide market for storage systems with a cost greater than $15,000 is $23.5 billion in 2013 and growing to approximately $28.0 billion in 2017. Gartner estimates the worldwide market for software in Core Storage Management, Data Replication and Device Resource Management to be an additional $6.3 billion in 2013 and up to $7.9 billion in 2017. We believe the combination represents our addressable markets.
Our Solution
Our team of storage and software technology experts built our flash-optimized hybrid storage platform to leverage the strengths of both flash and disk and to simplify business operations. We believe our key technological differentiator is the software that underlies our disruptive CASL file system and our cloud-based InfoSight service. CASL enables our platform to deliver high performance and capacity efficiency with integrated data protection. InfoSight transforms storage lifecycle management, enabling us and our end-customers to manage and support their storage infrastructure from the cloud.
The key benefits of our platform include:
Enhanced Performance and High Capacity Efficiency. CASL optimizes storage system performance and capacity by collecting random write I/Os and writing them as large coalesced sequential I/Os to low-cost hard disk drives. This allows us to effectively accelerate the write performance of a low-cost disk. For read performance, CASL caches copies of active data into flash-based solid state drives, so I/Os can be delivered in real time. The use of flash as a read cache is much more efficient since it eliminates the need for redundant provisioning of extra flash to protect against loss of data. Further, CASL enables all data stored on flash and on hard disk drives to be compressed in real time, further lowering costs. In total, CASL enables us to deliver significantly better performance with far less hardware and at lower cost than traditional solutions.
Flexible “Scale-to-Fit” Capability. Our systems have a modular architecture that allows our end-customers to “scale-to-fit” system performance, capacity or both by adding compute, flash or hard disk drives as needed in small, discrete increments. This allows our systems to scale cost effectively. For demanding environments, our systems enable scaling of both performance and capacity beyond a single system by combining multiple systems into scale-out storage clusters.
Superior Data Protection. Our platform enables our end-customers to take thousands of point-in-time snapshots without impacting system performance or consuming a large amount of space. Consequently, when they encounter accidental deletions, database corruptions or other logical failures, the amount of data at risk is significantly less than with traditional data protection approaches. In addition, there is no need to copy data between primary and backup storage, resulting in materially faster recovery times and significantly higher application availability. To mitigate physical failures, our platform replicates data between systems by transferring only compressed block-level changes, making disaster recovery easy and affordable.
Innovative Cloud-Enabled, Multi-Tenant Storage Lifecycle Management. Built on powerful deep-data analytics, InfoSight monitors systems deployed across our end-customer base from the cloud to deliver a complete and insightful perspective of the overall health of our storage systems at individual end-customers and across our end-customer community. We believe InfoSight also provides an unmatched level of proactive support with alerts, comprehensive dashboard views, capacity forecasting and performance planning, enabling our end-customers to significantly reduce the time they have to invest in managing their storage infrastructure.
Our Strategy
Our growth strategies include the following:
Extend Our Technology Leadership. We intend to extend our technology leadership by continuing to innovate and investing in research and development to expand the breadth of our platform into additional markets and deliver more cloud-based management services.
Drive Greater Penetration into Our Installed Base of End-Customers. Our large installed base of end-customers provides us a strong foundation in which to drive incremental sales through our “land and expand” model. We plan to continue to assist our end-customers to migrate additional workloads and applications to our storage platform. We also plan to continue to use InfoSight’s predictive capabilities to help our end-customers identify potential expansion needs in their storage environments, thereby driving greater sales of our systems.
Expand and Deepen Our Channel Presence to Accelerate New End-Customer Acquisition. We have carefully and systematically cultivated a strong channel partner network that has been a key contributor to our rapid customer growth. We intend to grow and deepen our value added reseller network and expand our channel model across a broad range of industries and geographies to increase our rate of new end-customer acquisition.
Continue to Build Our Sales Organization to Fuel Our Growth and Acquire New End-Customers. We will continue to expand our sales organization with additional teams focused on field sales, enterprise, government, and our channel partners. We also believe we have significant opportunities for international expansion and are continuing to invest in key markets.
Expand Our Integration with Alliance Partners. We have invested heavily in our SmartStack reference architecture initiative and have been focused on improving integration with industry-leading applications, hypervisors and servers from Cisco Systems, Inc., Citrix Systems, Inc., CommVault Systems, Inc., Microsoft Corporation and VMware, Inc. to make it easier to deploy our storage systems. We intend to continue to develop SmartStack solutions with our existing technology partners, as well as invest in new alliance relationships.
Risks Affecting Us
Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” immediately following this prospectus summary. These risks include, but are not limited to, the following:
See “Risk Factors” beginning on page 13.
Corporate Information
We were incorporated in November 2007 as Nimble Storage, Inc., a Delaware corporation. Our principal executive offices are located at 2740 Zanker Road, San Jose, California 95134, and our telephone number is (408) 432-9600. Our website address is www.nimblestorage.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus. Unless the context indicates otherwise, as used in this prospectus, the terms “Nimble Storage,” “we,” “us” and “our” refer to Nimble Storage, Inc., a Delaware corporation, and its subsidiaries taken as a whole. We have registered the trademark Nimble Storage in the United States, the European Union and Japan and we have a pending trademark application for the trademark Nimble Storage in other jurisdictions. We have registered the trademark CASL in the United States and the European Union. We also have pending trademark applications for the trademark InfoSight in the United States and the European Union and for NimbleConnect in the United States. The “Nimble Storage” logo, SmartStack and certain product names contained in this prospectus are our common law trademarks. This prospectus contains additional trade names, trademarks and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
JOBS Act
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of the last day of the fiscal year following the fifth anniversary of the completion of this offering, the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, the date on which we are deemed to be a large accelerated filer (this means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year), or the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period.
In addition, the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.