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The Tintri storage hourglass is almost out of sand

Time is winding down for Tintri, whose slow-motion fall could come by the end of June. The remaining question is whether the publicly traded hybrid storage vendor can complete a last-second Hail Mary to force overtime.

Tintri postponed a June earnings call and has yet to announce a rescheduling date. The delay likely is tied to several factors. First, Tintri storage sales aren’t growing at a rate sufficient to cover a high burn rate. That first dynamic has created a second: Tintri’s effort to renegotiate loans and attract much-needed operating capital – and thus incur more debt. Not exactly a winning formula to satisfy investors, much less lure new ones.

Short of a major surge in organic growth, Tintri does “not have the ability to repay” existing debt, nor does it have “sufficient liquidity to continue our operations beyond June 2018,” according to a May 31 filing with the U.S. Securities and Exchange Commission.

Public companies are required to disclose investor risks within their financial statements, but it is unusual for a company to specify a calendar date on which it may be forced to suspend routine business operations. It is noteworthy that Tintri cited the date after disclosing it had recently been able to extend the maturity of existing credit lines and loans.

The Tintri storage platform launched in 2008 with all-flash VMstore arrays that catered to VMware shops. It was a promising market, but Tintri got passed by with the advent of cloud and containers. Most of its sales now are for EC 6000 Series all-flash and T800 hybrid cloud arrays, which Tintri markets to hyper-scale data centers and service providers.

Fiscal year revenue of $125.9 million was flat with 1% growth. Tintri product sales accounted for $91 million, with support and maintenance contracts generating deferred revenue of $35.1 million.

Tintri’s losses widened last year, with the company spending nearly $97 million more than it took in in product sales. Total operating expenses topped $222.5 million, including nearly $1 million in restructuring costs linked to a round of layoffs enacted in January, dropping headcount from 561 to 445 employees.

Although it has direct sales teams in nine countries, 90% of Tintri storage revenue is derived from its 447 channel partners.

Less than one year after its initial public offering (IPO), Tintri said it isn’t generating enough money to repay existing debt. It also faces unappetizing choices to close the gap; namely, to satisfy debt by taking on more debt, or to sell more shares, which would dilute the value of shareholders’ equity.

Debt terms were renegotiated earlier this year with Silicon Valley Bank, which reduced the aggregate principal available to it from $20 million to $12.5 million. The revolving loan facility allows Tintri to borrow the money, repay it, and then re-borrow it up until May 2019.  Tintri also reworked the loan terms with TriplePoint Capital LLC to extend maturity until April 2019.

New CEO Thomas Barton has yet to publicly disclose a turnaround strategy for Tintri. Barton took the reins in April following the voluntary resignation of Ken Klein, who had led Tintri since 2013. Tintri CFO Ian Halifax resigned several weeks later after Klein’s departure. Tintri declined requests to interview Barton.

Tintri’s slow slide actually began prior to completing the IPO. Spooked by anemic Tintri storage growth, and its staggering debt load, investors forced Tintri to postpone the offering. When it popped one day later, Tintri shares opened at $7 – well off the $11 target price. Tintri expected to net $109 million; it settled for proceeds of $60 million.

The ominous beginning foreshadowed struggles to come. Shares of Tintri, traded under the stock ticker TNTR, hit a high of $7.75 several weeks after its market debut, but have fallen steadily ever since. The stock was selling for 35 cents per share as recently as May. TNTR closed Tuesday at 56 cents.

June ends in 18 days. Will Tintri be able to find a way out of the doldrums in time? We shall know soon enough.

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