Category: The Battle Road IPO Review
Nutanix (NASDAQ: NTNX): Battle Road IPO Review Hardware Sector Coverage
Nutanix (NASDAQ: NTNX), a provider of cloud-infrastructure appliances, becomes a recent addition to our Battle Road IPO Review Hardware sector coverage. Founded in 2009, and based in San Jose California, Nutanix has helped to develop a new class of appliances designed to optimize resources in the data center. Consensus estimates call for revenue of $740 million in the current fiscal year ending July 31, along with a loss of $1.39. Next year, it is expected that the company will reach $1 billion in revenue, along with a loss per share of $0.86.
Nutanix priced its 14.9 million Class A share IPO on September 30th at an opening price of $16, with all proceeds going to the company, thus raising about $230 million, after deducting underwriting and other IPO costs. Along with 120 million Class B shares, which have 10 times the voting power of Class A shares, the company’s total shares outstanding are 135 million. The transaction was led by Goldman, Sachs & Co., Morgan Stanley, J.P. Morgan Securities, RBC Capital Markets, along with eight additional investment banks. At a recent share price of $28, Nutanix’s market cap is about $3.8 billion.
Founded by Mohit Aron, Ajeet Singh, and Dheeraj Pandey, who is currently, chairman and CEO, Nutanix has helped to define a new class of appliances around the notion of a “hyper-converged” architecture. Previously, appliances were largely dedicated to optimizing the separate tasks of computational intensity, storage, virtualization, or networking. With Nutanix’s approach, a single box combines the elements of all four tasks. In only the last several years, Nutanix has grown to serve over 3,700 customers, including 300 Global 2000 Enterprise companies.
As a fast-growing venture-backed company, Nutanix has generated a lot of buzz in IT circles, particularly given Nutanix’s claim that it can help companies achieve the same type of benefits that Google, Facebook, and Microsoft have achieved in their own data centers, without the extensive investment in proprietary hardware and software.
Nutanix has become a nuisance to several industry leaders, including VMware, Cisco Systems, and HP, each of whom have something to lose should Nutanix continue to gain credibility with heads of IT. Each of the above-mentioned companies has, in the last year, launched so-called hyper-converged appliances of their own, and in some cases, severed all ties to Nutanix, by no longer allowing it to participate in their coveted partner programs.
Post-IPO, Nutanix has an excellent balance sheet, with $347 million in net cash. However, the company ranks near the bottom of our Hardware sector coverage, based on the expectation for operating losses this year and next.
SecureWorks: Security Hybrid
SecureWorks (NASDAQ: SCWX), based in Atlanta, Georgia, is the newest addition to our Battle Road IPO Review Software coverage. The company provides managed IT security services and subscription software to over 4,300 companies in 59 countries. For the fiscal year ending January 31, 2017, Consensus estimates call for revenue of $425 million (up 25 percent from the prior year) and a loss per share of $0.32. For FY’18, revenues are expected to rise by 20 percent to $509 million, while its loss is expected to narrow to $0.10 per share.
SecureWorks priced its 8 million Class A share IPO at $14 per share on the NASDAQ on April 21, 2016, below an expected range of $15.50 to $17.50 per share, thus becoming the first technology IPO of 2016, ending a significant drought. The company is a spin out from Denali Holdings (formerly Dell). Denali continues to own 70 million Class B shares, along with 98 percent of the voting rights. The IPO, which raised over $100 million for the company was led by Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs, J.P. Morgan, and 13 other securities underwriters-investment banks. At a recent share price of $14, SCWX’s market cap is roughly $1.3 billion.
Founded in 1999, and acquired by Dell in 2011, SecureWorks is something of a hybrid between a software company, and an IT services company. SecureWorks offers a broad range of managed security services and software solutions designed to protect companies against security threats, with an emphasis on early warning and detection of suspicious activity stemming from security breaches, the introduction of malware, and threats from hackers. The company’s more than 4,300 customers are represented across a wide range of industries, including banks, telecom service provers, healthcare services and product companies, and retail chains. Bank of America was its largest customer last year, accounting for nine percent of revenue.
In the most recent quarter, SecureWorks continued to improve its gross margin, which reached 50 percent from 43 percent last year, assisted by the growing percentage of revenues driven by subscriptions, which totaled more than 80 percent last year. At the same time, the company narrowed its operating loss from $26 million in the prior year, to $19 million. Post IPO SecureWorks has a strong balance sheet with $124 million in cash and no debt. SCWX trades in the second half of our Battle Road IPO Review Software sector coverage.