nimble storage investor presentation - q2 fy15

Investor Presentation

Suresh Vasudevan, Chief Executive Officer Anup Singh, Chief Financial Officer August 26, 2014

Safe Harbor

This presentation and the accompanying oral presentation contain “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information concerning our financial outlook, business plans and objectives, potential growth opportunities, competitive position, industry environment and potential market opportunities.

Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors including, but not limited to, those related to our future financial performance, market acceptance of our solutions, our ability to increase sales of our solutions, including to attract and retain customers and to selling additional solutions to our existing customers, our ability to develop new solutions and bring them to market in a timely manner, pricing pressure (as a result of competition or otherwise), our ability to maintain, protect and enhance our brand and intellectual property, global economic conditions and our ability to continue to expand our business and manage our growth. Moreover, we operate in very competitive and rapidly changing environments, and new risks may emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Further information on these and other factors that could affect our financial results are included in our filings we make with the Securities and Exchange Commission, and may cause our actual results, performance or achievements to differ materially and adversely from those anticipated or implied by our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although our management believes that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations, except as required by law.

In addition to GAAP financial information, this presentation includes certain non-GAAP financial measures. The non-GAAP measures have limitations and you should not consider them in isolation or as a substitute for our GAAP financial information. There are limitations to the use of non-GAAP measures. For example, bookings and free cash flow are not substitutes for revenues or cash provided by operations. In addition, non-GAAP operating expenses exclude the impact of stock-based compensation expense, which is a recurring expense for us. See the Appendix for a reconciliation of these non-GAAP financial measures to their nearest GAAP equivalent.

2

Table of Contents

3

§  Nimble Storage Opportunity §  Business & Financial Overview

§  Customer Case Studies

Nimble Storage Opportunity

Customer Challenges – Scaling and Simplifying Storage Management

20X Compute

10X Network

Poor Application Performance

Storage Same 40-45%*

CAGR

Increasing Demands of Data Growth

Cloud Computing Virtualization Big Data Social and Collaboration

Exacerbating Trends

Mobility

VM / Application Data Management Complexity

CRM ERP

CRM

ERP

*Source: IDC, The Digital Universe in 2020, sponsored by EMC

5

Founding Thesis

2013 TAM: ~$40B

1980s DAS

1995+ Networked Storage

Opportunity for a ground-up redesign of storage

Today

Flash

Cloud Connectivity

6

Flash and Disk are Complementary

Component Flash Disk Random IO/$ 100X 1X

Sequential IO/$ 1X 3X

Capacity/$ 1X 15X

Write Endurance Poor Proven

Need for Performance Varies Greatly

Analytics

VDI

OLTP

File Services Low High

Core design principles: •  Efficiency: Leverage flash and disk for their complementary characteristics •  Flexibility: Adapt to workloads, and as the merits of flash and disk evolve over time

7

Our Value Proposition

CASL™ Flash-optimized file

system software

InfoSight™ Cloud-based management/support

Non-disruptive, flexible scaling to massive scale

Peak system health and availability

Scale-To-Fit

Rapid Backup and Recovery

Integrated Protection Proactive Wellness

Significantly better performance / $ and

capacity / $

Efficiency

8

Adaptive Flash

Tiering

Flash Arrays for High Performance

Incumbent Response

Flash Requires a Ground-Up Design

Data Management •  Compression •  Snapshots •  Thin provisioning •  Replication •  Others

Application Integration

File System Software

Key Decisions in Ground-Up Design

How do we:

§ Leverage flash for performance, while overcoming endurance concerns?

§ Leverage disk for capacity?

§ Be media-agnostic and flexible as the merits of flash and disk evolve?

§ Leapfrog incumbents on data management?

9

Traditional File Systems / Tiering Nimble Advantage CASL Innovations

CASL: A Breakthrough File System

Uses 30-70% less disk and flash resources

Inline Compression, using variable blocks

Fixed blocks: No compression

Fast random writes need a flash tier

Uses low-cost HDDs to deliver SSD-like write performance

Inline Serialization of all incoming write IO

Disk

SSD (Flash) Cache

More Disk

More Flash Dynamic Caching to serve reads from flash

Uses substantially less, low-cost flash to accelerate reads

Fast reads by migrating between tiers wastes flash

Copy-based snapshots waste capacity and degrade performance

Pointer-Based Snapshots

Integrated, rapid backup and recovery

Non-disruptive scaling in least-cost increments

Scale-to-Fit: Scale-up, deep and scale-out

Scale-Up OR Limited Scale-Out

CASL is more performance and capacity efficient and easy to scale, while delivering integrated data protection 10

Broad Appeal

11

Diversified Workloads*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Diversified Market Verticals*

*Based on 12 month period through Q2 FY15. Y axis represents % of systems in the field that handle this type of workload

13% Financial

12% Service Providers

10% Hi-Tech

11% Education 8%

Healthcare

8% State/local government

8% Mfg.

4% 3%

23%

Energy

Legal

Other

Traditional Storage Management is Inefficient and Expensive

! #

!

# ! #

! #

! #

? ? ?

With modern data analytics tools can vendors predict and prevent

problems before they occur?

In a connected world why can’t vendors proactively monitor

customer deployed systems?

Vendor

12

InfoSight: Cloud-Based Management

Leveraging pervasive network connectivity and big data analytics to automate support and enable cloud-based management

Nimble Approach Customer Benefits

Comprehensive Telemetry

Analysis and Automation Storage Management

SaaS Offering

Proactive Wellness

Community Learning

13

InfoSight Impact Examples

* InfoSight case percentages and customer storage expansion needs based on 12 month period through Q2FY15

14

Proactive Wellness

Prevents problems before they occur

Customers receive unique wellness insights

571

Performance Analytics

1189 Unique users per month visit the Performance Analytics page

125

41

Customers expanded flash*

Customers upgraded controllers*

Planning

458 Customers expanded capacity*

1087 Unique users per month visit the Capacity Planning page

Comprehensive root cause analysis

CPU and flash recommendations to meet growing workload demands

Customers predict capacity growth using proprietary analytics

Capacity recommendations to meet projected growth

Market Landscape and Our Opportunity

Performance Intensive

Mainstream Applications

High-Performance Computing

Cheap and Deep

Hybrid / Disk Arrays

Archival

All Flash Arrays

Server Flash

Archival

Real Time Analytics

Workloads

Adaptive Flash Platform

Oracle / Sql VDI SAP VMware

Vertica Mongo DB Exchange SharePoint

EMC VNX NetApp FAS

HP 3PAR Dell EQL/CML

Pure, SolidFire XtremIO

Industry Nimble Storage

Server Flash

15

Business & Financial Overview

$14.0

$53.8

$125.7

$50.6

FY12 FY13 FY14 1H'FY14 1H'FY15

$ 11.0 $ 14.6

$ 20.2 $ 22.1

$ 28.5 $ 33.4

$ 41.7 $ 46.5

$ 53.8

Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Product Revenue Support and Service Revenue

Quarterly Revenue

Rapid Revenue Growth

Annual and 1H’FY Revenue*

$100.3

Product Revenue Support and Service Revenue

+ 134% + 98%

*Fiscal year ends on January 31

17

Rapid Customer Growth & Strong Repeat Business

18

Cumulative Customer Base 2-Year Bookings After Initial Sale – All Customers

573

1,749

3,756

Q2FY13 Q2FY14 Q2FY15

Note: Bookings defined as a purchase order received; statistics as of July 31, 2014 * Top 50 of all customers that have been Nimble Storage customers for 4 or more quarters; Of the 50, 20 customers have 8 quarters of history.

Initial Sale Total: Year 1 and 2

2X 1X

2-Year Bookings After Initial Sale – Top 50 Customers*


4.5X

1X

Increased Large Enterprise and Cloud Service Provider Penetration

19

46 130

235


53

156

341


Number of Large Enterprises* Large Enterprise Repeat Bookings

Cloud Service Provider Repeat Bookings

*Company estimates of Global 5,000 customers

Number of Cloud Service Providers


3.5X

1X


3.3X

1X

Additional Growth Drivers: International & Large Deals

573

1,749

3,756


Cumulative Customer Base Customers

% Customer Bookings > $100K

Number of Deals > $100K

Bookings <$100K

Bookings >$100k

65%

35%

12 months thru Q2FY15

Deals >$100K

239

444

TTM Q2FY14 TTM Q2FY15

+86%

20

TTM Q2FY14 TTM Q2FY15

+169%

% International Bookings

International Bookings

North America

International

83%

17%

12 months thru Q2FY15

International Expansion

Channel Leverage

Base of Accredited SEs**

Active Reseller AEs*

Engagement Levels

1,001

2,581

Q2FY14 Q2FY15

+158%

Reseller Led New Customer Wins****

Channel Generated Opportunities***

Opportunities & Customer Wins

1,196

1,878

Q2FY14 Q2FY15

+57%

128 250

Q2FY14 Q2FY15

+95%

436

867

Q2FY14 Q2FY15

+99%

* Total number of reseller AEs that closed 1 or more deals during the fiscal quarter ** Total cumulative number of accredited SEs as of the end of each fiscal quarter *** Total number of opportunities generated by partners during the fiscal quarter **** Total number of new customers during the quarter where the reseller contributed 75% (or greater) of total effort to close the deal.

21

Best-in-Class Gross Margins

64.3%

66.4%

67.2%

66.2%

67.4%

Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

67.2% 69.4%

37.3%

52.9%

Q2FY14 Q2FY15

Product Gross Margin Support and Service Gross Margin

Quarterly Gross Margin* Product and Support and Service Gross Margin*

*Reflects Non-GAAP Gross Margin; see slide 27 for reconciliation

22

-47%

-27%

-33%

-21%

FY13 FY14 1H'FY14 1H'FY15

Improving Operating And Cash Flow Margins

v

Cash Flow From Operations, Cash Burn and Free Cash Flow % of Revenue**

Improving Operating Margin*

*Reflects Non-GAAP Operating Margin, which excludes stock based compensation expense. See slide 27 for reconciliation **Free cash flow is defined as net cash from operating activities minus capital expenditures

-35%

5%

-37%

3%

-43%

-2%

Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15

Operating Cash Flow as % of Total Revenue

Cash Burn as % of Total Revenue

Free Cash Flow as % of Total Revenue

23

Target Operating Model

FY13 FY14 1H FY15 Long-Term Model

Gross Margin* 62% 65% 67% Currently operating above target model 63%–65%

R&D as % of Revenue* 28% 26% 25% Leverage from investments we have made in our rich product

roadmap 11%–13%

S&M as % of Revenue* 72% 57% 52%

Continuously improving leverage from channel partners, ramp of sales teams to mature quota carrying levels, continued increase in

repeat business from existing customer base 28%–31%

G&A as % of Revenue* 9% 9% 10% Continuous efficiency and economies of scale 5%–6%

Non-GAAP Operating Margin

-47% -27% -21% 16%–20%

*Reflects Non-GAAP Gross Margin, R&D, S&M, G&A and Operating Margin, see slide 27 for reconciliation Note: due to rounding, numbers presented above may not sum to total.

24

How we get there

Financial Highlights

Strong revenue growth with a significant “land and expand” opportunity

Attractive and best-in-class gross margin profile

Investments to expand differentiation and capitalize on large market opportunity

Improving operating leverage and cash flow margins

Attractive long term financial model

25

Sales and Marketing Invest aggressively to deepen

sales coverage within existing territories, expand internationally, and drive continued

channel leverage

Customers Continue expansion into

large enterprise and service provider customers

People Build best-in-class company

founded on recruiting and retaining the industry’s best talent

Our Strategic Priorities

Technology Platform Build on our broad technology

foundation to further extend our differentiation, broaden feature coverage,

and further expand our target market

26

GAAP to Non-GAAP Reconciliation

27

($ in thousands) FY12 FY13 FY14 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 1H'FY14 1H'FY15

GAAP Product Gross Profit 7,880 32,499 76,581 8,624 12,218 13,151 17,240 20,564 25,626 28,224 32,326 30,391 60,550% GAAP Product Gross Margin 60.1% 65.3% 67.9% 64.3% 65.6% 65.6% 67.0% 68.8% 69.0% 68.4% 68.6% 66.4% 68.5%(+) Stock-based Compensation 10 48 232 11 29 40 38 52 102 231 374 78 605

Non-GAAP Product Gross Profit 7,890 32,547 76,813 8,635 12,247 13,191 17,278 20,616 25,728 28,455 32,700 30,469 61,155Non-GAAP Product Gross Margin 60.2% 65.4% 68.1% 64.4% 65.7% 65.8% 67.2% 69.0% 69.2% 69.0% 69.4% 66.6% 69.2%

GAAP Support and Service Gross Profit (145) 891 4,941 312 195 430 940 1,458 2,113 1,988 2,919 1,370 4,907% GAAP Support and Service Gross Margin -16.1% 21.9% 38.2% 27.2% 12.6% 20.7% 34.1% 41.3% 46.4% 37.4% 44.0% 28.3% 41.1%(+) Stock-based Compensation 31 114 468 31 37 43 88 127 210 393 593 131 986

Non-GAAP Support and Service Gross Profit (114) 1,005 5,409 343 232 473 1,028 1,585 2,323 2,381 3,512 1,501 5,893Non-GAAP Support and Service Gross Margin -12.7% 24.7% 41.9% 30.0% 14.9% 22.8% 37.3% 44.9% 51.0% 44.8% 52.9% 31.0% 49.3%

GAAP Gross Profit 7,735 33,390 81,522 8,936 12,413 13,581 18,180 22,022 27,739 30,212 35,245 31,761 65,457% GAAP Gross Margin 55.2% 62.0% 64.8% 61.4% 61.5% 61.4% 63.8% 65.9% 66.5% 64.9% 65.6% 62.8% 65.3%(+) Stock-based Compensation 41 162 700 42 66 83 126 179 312 624 967 209 1,591

Non-GAAP Gross Profit 7,776 33,552 82,222 8,978 12,479 13,664 18,306 22,201 28,051 30,836 36,212 31,970 67,048% Non-GAAP Gross Margin 55.5% 62.3% 65.4% 61.7% 61.8% 61.8% 64.3% 66.4% 67.2% 66.2% 67.4% 63.2% 66.8%

GAAP Research and Development 7,903 16,135 35,247 4,300 5,120 6,318 8,058 9,361 11,510 14,217 17,417 14,376 31,634(-) Stock-based Compensation 268 874 3,049 231 295 367 547 781 1,354 2,440 3,692 914 6,132

Non-GAAP Research and Development 7,635 15,261 32,198 4,069 4,825 5,951 7,511 8,580 10,156 11,777 13,725 13,462 25,502

GAAP Sales and Marketing 12,863 39,851 75,107 10,494 15,489 14,160 17,268 19,902 23,777 29,202 36,639 31,428 65,841(-) Stock-based Compensation 244 1,029 3,674 275 357 498 623 850 1,703 4,921 8,664 1,121 13,585

Non-GAAP Sales and Marketing 12,619 38,822 71,433 10,219 15,132 13,662 16,645 19,052 22,074 24,281 27,975 30,307 52,256

GAAP General and Administrative 3,756 5,168 13,737 1,240 1,930 2,301 3,041 3,130 5,265 6,437 7,101 5,342 13,538(-) Stock-based Compensation 267 539 1,726 139 164 207 331 455 733 1,572 1,846 538 3,418

Non-GAAP General and Administrative 3,489 4,629 12,011 1,101 1,766 2,094 2,710 2,675 4,532 4,865 5,255 4,804 10,120

GAAP Operating Expenses 24,522 61,154 124,091 16,034 22,539 22,779 28,367 32,393 40,552 49,856 61,157 51,146 111,013(-) Stock-based Compensation 779 2,442 8,449 645 816 1,072 1,501 2,086 3,790 8,933 14,202 2,573 23,135

Non-GAAP Operating Expenses 23,743 58,712 115,642 15,389 21,723 21,707 26,866 30,307 36,762 40,923 46,955 48,573 87,878

GAAP Operating Loss (16,787) (27,764) (42,569) (7,098) (10,126) (9,198) (10,187) (10,371) (12,813) (19,644) (25,912) (19,385) (45,556)% of Revenue -120% -52% -34% -49% -50% -42% -36% -31% -31% -42% -48% -38% -45%(+) Stock-based Compensation 820 2,604 9,149 687 882 1,155 1,627 2,265 4,102 9,557 15,169 2,782 24,726

Non-GAAP Operating Loss (15,967) (25,160) (33,420) (6,411) (9,244) (8,043) (8,560) (8,106) (8,711) (10,087) (10,743) (16,603) (20,830)% of Revenue -114% -47% -27% -44% -46% -36% -30% -24% -21% -22% -20% -33% -21%

Net Cash Provided by (Used in) Operating Activities (14,841) (18,754) (6,742) (5,115) (3,898) (4,876) (3,780) (271) 2,185 452 2,837 (8,656) 3,289% of Revenue -105.9% -35% -5% -35% -19% -22% -13% -1% 5% 1% 5% -17% 3%(-) Property and Equipment, Net 1,303 3,954 13,613 1,202 1,424 1,884 1,542 4,726 5,461 3,728 4,179 3,426 7,907

Free Cash Flow (16,144) (22,708) (20,355) (6,317) (5,322) (6,760) (5,322) (4,997) (3,276) (3,276) (1,342) (12,082) (4,618)% of Revenue -115.2% -42% -16% -43% -26% -31% -19% -15% -8% -7% -2% -24% -5%

Customer Case Studies

Fortune 500 Engineering & Construction Company

Competitor Solution

Fortune 500 Engineering & Construction Company

§  80% physical servers; EMC & NetApp SAN §  Struggled with performance for Autonomy e-

discovery & Oracle data warehouse §  Application backups taking over 10 hours

Challenges §  Performance up by 2X, despite using virtual servers §  Data reduction of 2.3X lowers $/GB substantially §  Snapshots -based backup eliminated backup window §  Replication for DR §  Power, cooling and space costs lower by $3,500/month

Nimble Advantage

Nimble SmartStack

DR with 90 days of replicated snapshots

Prod (Houston) DR (Austin)

Replication

§  6U! §  110TB with 2.3X

data reduction §  30 days of

snapshots

Primary SAN: 2 Racks

Pre-Nimble Environment

Daily backup to tape

29

Lower TCO: Global Office Products Company

Competitor Solution 3 Racks of “Tier 1” storage

40TB Usable Storage in 126U

Nimble Solution 2 CS 460 arrays

59TB Usable Storage in 6U

“Nimble has given us much more flexibility with primary storage and data protection and a much more resilient infrastructure – all at a much lower cost.”

—IT Platform Lead

§  SQL Server, SAP applications and other VMs using traditional “Tier 1” Storage

§  Core project drivers: – Minimize data center

costs like power, cooling – Reduce storage

capacity costs – Reduce complexity

9X Reduction in Storage Costs

20X Reduction Footprint

50% Savings in Data Protection Costs

Zero Impact to Performance

Replaced With

Challenges

30

Consolidation and Efficiency at a Global Oil and Gas Leader

§  Global Energy leader with hundreds of remote sites

§  Initial VDI project goal to consolidate thousands of employee desktops at hundreds of field locations

§  XenDesktop deployment with incumbent storage experienced serious performance issues, prompting a competitive bake-off with Nimble

Challenges

§  Price-performance: 72% lower cost per IOPS

§  Cost of capacity: 37% compression, coupled with low-cost, Nearline HDDs

§  50% lower recovery time for virtual PCs §  Calls to help desk reduced dramatically

Nimble VDI Solution

§  3000 VDI users §  64TB and 30K

IOPS on average

Nimble Expanded Use Cases

Phase 2: Exchange §  11,500 mailboxes §  ~60TB used §  HA across two data centers

Phase 3: ESX Farm §  600 VMs §  Over 200 TBs across three

data centers

10 systems and over 600 TB of capacity in 18 months

31

§ Storage challenges in meeting the needs of a high-performance Vertica cluster -  Constant trade-off

between IO and capacity -  Adding nodes to support

storage was not cost effective

-  Lack of consolidated provisioning and management

-  Data protection difficult for separate storage pools

Challenges

§ Reduced cost by reducing the number of required HP Vertica nodes

-  Performance to meet the IO needs of the analytics workload

-  Scale-to-fit architecture allows for separately scaling IO or capacity

§ Consolidated storage management

§ Nimble snapshots, clones and replication improve data protection and eliminate risk

Nimble Advantage Nimble Solution

Customer Case Study: Fortune 50 Telecommunications Company

§  Vertica cluster processing Billions of events / hour

§  170TB capacity §  Hourly snapshots

for data protection

32

Customer Case Study: Global Managed Services Firm

§  Global firm with over 19,000 professionals

§ Managed Services focused on delivering hosted Microsoft Applications

§  EMC storage deployed as core storage platform

Situation

19 Nimble systems in 5 countries

Goals from an alternative solution: §  Lower capital costs §  Small foot-print to lower monthly

data center costs of $14,000 §  Faster backup and recovery, to

avoid traditional backup challenges §  Scalable platform for expansion

Challenges

§  EMC VNX 7500 for 10,000 Exchange users

Nimble Solution

§  6U of Nimble storage replaced 2 racks of EMC

Nimble Advantage: § Much lower capital costs §  Data center and rack space cost

savings of ~$10,500/ month §  Compression of 1.5X §  Snapshots for backup and recovery §  Non-disruptive upgrades

33

Customer Case Study: Leading Cloud Services Provider

§ Service Provider with presence across the US

§ Core drivers: •  Datacenter consolidation •  Rapid provisioning •  Performance scaling

§  Large Telecom customer with scaling challenges prompted POC

Challenges

§ Much higher performance at substantially lower capital costs: §  Compression savings of 50% site-wide §  High-density HDDs and more effective

use of flash optimize both performance and capacity

§ Much simpler management and faster on-boarding time

§ Current environment comprises over 600 TB (pre-compression) hosting over 6000 VMs for hundreds of customers and a variety of workloads

Nimble Advantage Nimble SmartStack

10G iSCSI 10G UCS

VMWare

+

Cisco

Nimble

+

34

Transforming Storage Efficiency at a Large Bank

§  Storage costs were 30% of the capital budget

§  Core project drivers: •  Performance scaling •  Storage budget •  Datacenter footprint

Challenges

§  1.5x usable capacity and 50% lower capital costs

§  10x lower power and cooling costs

§ Dramatically simpler storage management

Phase 1: Exchange ½ Rack

6 Racks

§  2.5x performance and 2x usable capacity at much lower capital costs

§  75% lower power and cooling costs

§ Dramatically simpler storage management

Phase 2: SQL

Databases ¾ Rack

3 Racks

Competitor Hybrid Disk-Flash Solution Nimble Advantage Nimble VS.

35

§ Nimble chosen as the platform for all 11 sites

§ Each site protected with hourly snapshots for rapid recovery

§ Data replicated between offices for cost-effective and simple DR

§ Significant savings on storage and bandwidth

Nimble Approach

Transforming Data Protection at a Global Consulting Firm

Boston Data Center

Chicago Data Center

9 Remote Sites

Inadequate data protection in 9 remote sites: •  Tapes for backup •  Offsite tape copies for disaster recovery

Aging storage infrastructure in their main data centers: Boston and Chicago

Challenges Rethinking infrastructure at all of their 11 sites

36

nimble storage investor presentation - q2 fy15

Investor Relations