When technology executives discuss initial public offerings these days, they usually say how the goal has shifted from rapid growth to fiscal responsibility. In other words, investors want to see a path to profitability more than wild revenue increases.
That has particularly been the case in storage. The recent initial public offerings (IPOs) of flash pioneer Pure Storage and hyper-converged vendor Nutanix showed companies that grew revenue significantly often spent so much money doing so that they mounted hundreds of millions of dollars in losses. Because of the recent poor IPO market, investors started preaching that companies needed to pay more attention to the bottom line than top line growth.
Then along comes the Tintri IPO. Tintri filed its S-1 with the SEC last week to become a public company. Its finances look a lot like those of Pure and Nutanix — and Nimble Storage and Violin Storage before them — when they went public. Storage array vendor Tintri has grown its revenue and sales significantly in recent years, only to see its losses accelerate anyway. In Tintri’s case, it has lost $339 million since inception.
That means either investors have decided they don’t mind losses so much after all, or Tintri will have trouble raising the $100 million or so it is looking for from its IPO.
Tintri started shipping its VMstore arrays in 2011, but the bulk of its revenue and losses have come over the past three years. The Tintri IPO filing reports revenue of $50 million for its fiscal year ending Jan. 31, 2015, $86 million for the following year and $125 million last year. That comes to revenue growth of 73% and 45% over the past two years. But annual losses over that period were $70 million, $101 million and $106 million, showing that more revenue only produced greater losses. Tintri raised $260 million in five venture funding rounds to pay off most of the deficit.
As with Pure, Nutanix and other smaller storage companies, Tintri faces the problem of having to pour more money into sales and marketing than it generates from sales to compete with IT giants. Only in the past year has Tintri’s revenue exceed its sales and marking budget, which came to $109 million. But it pumped another $53 million into research and development. That is a small sum compared to Dell EMC, NetApp, Hewlett Packard Enterprise (HPE), Hitachi Data Systems and IBM, but enough to keep Tintri in the red.
Tintri IPO filing details spending increases
The Tintri IPO filing made it clear the vendor remains in growth mode, which means its expenses will rise.
“We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to hire additional employees, develop our technology and enhance our product and service offerings, expand our sales and marketing teams, make investments in our distribution channels, expand our operations and prepare to become a public reporting company,” Tintri said in its S-1 filing.
Tinitri’s revenue growth has come from its tapping into flash and enterprise cloud storage. It began selling virtual machine-centric storage for VMware customers. That has evolved into a private cloud platform through Tintri’s Connect services that include analytics, automation and self-service. To boost performance, Tintri added an all-flash platform in 2015. With the help of Tintri’s VMstore T5000 all-flash systems, the vendor’s average selling price rose from $111,000 to $160,000 over the past two years.
Tintri’s customer base quadrupled over the past three years to 1,273, while its employee headcount rose from 177 to 527 in that span.
If the Tintri IPO goes forward as planned, it will be in the same situation as Pure and Nutanix, trying to grow its way to profitability. Or it could end up like Nimble Storage, which sold itself to HPE after it became clear it would not reach its break-even goal anytime soon.