UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

001-36233

(Commission File No.)

Nimble Storage, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	26-1418899
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

211 River Oaks Parkway San Jose, California	95134
(Address of principal executive offices)	(Zip Code)

(408) 432-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.001 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No   ☑

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No   ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐  (Do not check if a smaller reporting Company)	Small reporting company	☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☐     No   ☑

The aggregate market value of voting stock held by non-affiliates of the Registrant on July 31, 2016, based on the closing price of $7.44 for shares of the Registrant’s common stock as reported by the New York Stock Exchange, was approximately $64.7 million. Shares of common stock held by each executive officer, director and their affiliated holders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The registrant has no non-voting common equity.

As of March 10, 2017, there were approximately 91.9 million shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for the Registrant’s 2017 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Registrant’s fiscal year ended January 31, 2017.

TABLE OF CONTENTS

		Page
	Part I
Item 1.	Business		1
Item 1A.	Risk Factors		11
Item 1B.	Unresolved Staff Comments		33
Item 2.	Properties		33
Item 3.	Legal Proceedings		33
Item 4.	Mine Safety Disclosures		34
	Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		35
Item 6.	Selected Financial Data		37
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		54
Item 8.	Financial Statements and Supplementary Data		59
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		89
Item 9A.	Controls and Procedures		89
Item 9B.	Other Information		90
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance		91
Item 11.	Executive Compensation		91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		91
Item 13.	Certain Relationships and Related Transactions, and Director Independence		91
Item 14.	Principal Accounting Fees and Services		91
	Part IV
Item 15.	Exhibits and Financial Statement Schedules		92

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or the Form 10-K, contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks 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. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

As used in this report, the terms “Nimble Storage,” “the Company,” “we,” “us,” and “our” mean Nimble Storage, Inc. and its subsidiaries unless the context indicates otherwise.

ITEM 1. BUSINESS

Overview

Our mission is to provide our end-customers with the fastest, most reliable access to data. Our Predictive Cloud Platform combines predictive analytics, flash storage and multicloud infrastructure to radically simplify operations in on-premises data centers and in the cloud. Our products allow end-customers to deploy workloads flexibly on flash arrays, converged infrastructure and the public cloud, without fear of lock-in.

We believe the following are key areas of differentiation:

☐ InfoSight, our cloud-based predictive analytics system, eliminates the complexity of dealing with infrastructure by using cloud-based predictive analytics and machine learning to anticipate and prevent problems before our end-customers’ businesses are impacted. As InfoSight analyzes and correlates millions of sensors per second from our global installed-base, our end-customers’ infrastructures keep getting smarter. InfoSight has allowed Nimble to achieve over 99.9999% (six-nines) of measured availability.

☐ Multicloud Flash Fabric brings flash to all end-customer workloads—whether on-premises or in the cloud. It allows our end-customers to deploy all-flash and hybrid-flash as storage arrays

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and converged infrastructure, or flash capacity as a service in the public cloud. Application data can be transparently migrated between arrays on-premises and the public clouds.

☐ AF-Series All Flash arrays are designed to be a generation beyond other all-flash arrays. They deliver simplicity combined with the performance, scalability and availability required for primary applications.

☐ CS-Series Adaptive (Hybrid) Flash arrays deliver the performance, scale and availability to optimize the price and performance for other primary and secondary mainstream applications. They are frequently used with All Flash arrays as a cost-effective target for backup, disaster recovery and data archiving.

☐ Recently announced, Nimble Cloud Volumes provide an enterprise-grade multicloud storage service for Amazon Web Services and Microsoft Azure. We believe Nimble Cloud Volumes is as-easy-to-use as native cloud storage, but has the enterprise grade reliability and features that our end-customers’ applications need. Because of Nimble Cloud Volumes, all of our on-premises arrays are “Cloud Ready”—as there is now an easy on-ramp to move end-customer data from on-premises to the public cloud.

☐ Converged Infrastructure solutions with Cisco and Lenovo. SmartStack is a range of converged infrastructure solutions, jointly developed with Cisco, that combine our arrays with the Cisco Unified Computing System. SmartStack solutions span pre-validated, pre-tested Cisco Validated Designs, or CVDs, and reference architectures across a range of enterprise applications and workloads. Lenovo ThinkAgile CX Series is a converged infrastructure solution sold by Lenovo, and its channel, that uses our storage arrays.

☐ Our Timeless Storage business model represents an unwavering commitment to the complete satisfaction of our end-customers. Our arrays ship with all-inclusive software, flat support pricing for the life of the product, and an option to receive a free faster controller upgrade after three years.

☐ Our end-customer support has allowed us to achieve a Net Promoter Score of 85, the highest in the storage industry. Since 86% of end-customer support issues were automatically resolved through InfoSight over a twelve-month period, we have built a support organization made up of only Level 3 experts who are able to rapidly resolve even the most complex issues.

Our Predictive Cloud Platform is designed to improve the performance of a full range of business applications and workloads, including virtual servers and desktops, databases, email, collaboration and data analytics. Since shipping our first product in August 2010, our end-customer base has grown rapidly from 40 end-customers as of January 31, 2011 to over 10,200 end-customers as of January 31, 2017. Our end-customers span a range of industries including cloud service providers, education, financial services, healthcare, manufacturing, technology, and state and local government, and include both mid-sized and large global enterprises.

We sell our products and services through a global network of value added resellers, or VARs, global system integrators, and distributors. We also engage our end-customers through our global sales force.

Recent Development

On March 6, 2017, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Hewlett Packard Enterprise Company, or HPE, pursuant to which HPE has agreed to acquire us in a two-step all-cash transaction, consisting of a tender offer for our outstanding shares, followed by a merger of a wholly-owned subsidiary of HPE into us. Pursuant to the transaction, HPE will pay $12.50 per share in cash. In addition, HPE will assume or pay out our unvested equity awards, with a value of approximately $200 million at closing. The transaction is expected to close in the 2017 calendar year,

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subject to certain conditions, including the tender of at least one share more than half of all our common stock outstanding as well as regulatory and other related approvals. For additional information regarding potential risks and uncertainties associated with the proposed merger, please see the information under the caption “Risk Factors” within Part I, Item 1A.

Technology

Our team of storage and software technology experts engineered the Predictive Cloud Platform to leverage the performance and capacity of flash with InfoSight’s predictive analytics to optimize the performance of business applications running across distributed IT environments and simplify IT operations. We believe our key technological differentiator is the software that underpins our platform—our disruptive Multicloud Flash Fabric, based on NimbleOS, and our InfoSight predictive analytics cloud-based management software.

NimbleOS 

Our operating system, NimbleOS, was engineered from the ground up to work with cost-optimized flash memory and was designed to be easily expandable to future storage technologies. As a result, NimbleOS enables our end-customers to achieve the performance and capacity requirements of mainstream enterprise applications in a cost effective and compact footprint. The same version of NimbleOS runs across all of our All Flash and Adaptive Flash (Hybrid) arrays and powers Nimble Cloud Volumes. All NimbleOS features are included with our arrays at no additional cost to our end-customers.

The key attributes of NimbleOS include:

Cache Accelerated Sequential Layout (CASL).    CASL provides a Write-Optimized Data Layout, delivering fast random writes by grouping thousands of random I/O writes from applications into large stripes of data that are written sequentially to cost-optimized solid state drives, or SSDs, (in the case of All Flash arrays) and low RPM disks (in the case of Adaptive Flash arrays).

In AF-Series All Flash arrays: The sequential layout of CASL together with advanced endurance management software allows us to leverage cost-optimized SSDs, and deliver a seven year lifespan by minimizing the write amplification endemic to traditional data layouts. At the same time, we are able to extract 20% more usable capacity through more efficient garbage collection and integrated sparing.

In CS-Series Adaptive Flash arrays: By writing sequentially to hard disk drives, or HDDs, CASL can extract thousands of sustained write I/Os per second, or IOPS, from a single 7,200 RPM HDD than would otherwise be possible. At the same time, the use of low-cost HDDs enables us to deliver significantly higher capacity per dollar than other hybrid storage arrays.

Variable Block Inline Deduplication.    NimbleOS performs inline deduplication, currently available in our AF-Series All Flash arrays, using a variable-block matching algorithm that eliminates duplicate blocks of data while maintaining high performance, and often providing savings in excess of 5x for virtual server and desktop workloads. NimbleOS is also more efficient than other architectures in its memory requirements, needing significantly less memory for a comparable amount of storage capacity to provide high performance inline deduplication, an advantage that translates to lower cost of capacity and higher scalability.

Variable Block Inline Compression.    NimbleOS performs inline compression natively, using a variable-block compression algorithm that allows users to store up to 75% more data per gigabyte with minimal impact on performance or latency. Fixed sized blocks that are compressed become variable sized depending on the compressibility of the underlying data. Traditional storage architectures utilize a

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fixed-size block data layout that is incapable of natively storing variable blocks. As a result, they are typically not able to compress data inline without experiencing performance degradation.

Efficient All Flash Array Architecture.    Our AF-Series All Flash arrays are designed to be a generation beyond other all flash arrays. Our array controllers need 10 to 30 times less memory than other all flash arrays. This allows more flash capacity per array and minimizes the number of arrays required for scaling capacity. Through advanced endurance management and integrated sparing, our arrays also achieve 20% more usable capacity per SSD than other all-flash arrays that use the same type of SSDs. Data reduction is designed to be always-on, without impacting performance even under heavy workloads.

Dynamic Caching for Adaptive Flash Arrays.    In the CS-Series Adaptive Flash arrays, NimbleOS allows for significantly higher throughput and lower latency reads than traditional hybrid platforms. It leverages a large flash read cache based on cost-optimized SSDs. If application patterns change, an intelligent block level index tracks and promotes active data, nearly instantaneously to flash. Compared to architectures that use flash as a tier of data, NimbleOS is significantly more cost-effective in its use of flash because it compresses the data on flash and can leverage cost-optimized SSDs. NimbleOS is also more responsive to workload changes.

Efficient, Instant Snapshots and Replication.    NimbleOS employs an efficient, reliable method for data protection with instant point-in-time snapshots. Snapshots are space efficient because they capture only changes in data and are also compressed, thereby further reducing costs. Furthermore, snapshots eliminate the need to copy data, allowing our systems to store thousands of snapshots. These characteristics allow our end-customers to take frequent snapshots and to retain those snapshots for weeks to months, significantly reducing their dependence on traditional backups. In addition, our space-efficient snapshots enable efficient replication to an offsite disaster recovery system, resulting in reduced bandwidth costs and the deployment of a disaster recovery solution that is affordable and easy to manage.

SmartSecure Encryption and Data Shredding.    The SmartSecure feature enables encryption and data shredding on a per-application basis, a common requirement of our end-customers, including those in highly data sensitive industries such as financial, healthcare and government. It can be enabled per workload with virtually no performance impact. Unlike the limited encryption capabilities available in other storage systems, SmartSecure protects even while being replicated between arrays, and securely separates data belonging to different tenants or workloads by using different encryption keys. SmartSecure also enables deletion on a per-volume basis. SmartSecure is Federal Information Processing Standard certified.

Scalability.    Our Predictive Cloud Platform enables efficient and non-disruptive scaling of both performance and capacity, enabling end-customers to increase performance or capacity incrementally, which generally significantly reduces the need for large up-front investments. We believe our superior scalability makes our products suitable for large and growing enterprises. Scale-up allows end-customers to non-disruptively scale a system’s capacity and/or performance. Scale-out allows end-customers to non-disruptively cluster up to four arrays that are managed as one to achieve up to 8PB of effective all-flash capacity and 1.2 million IOPS of performance.

InfoSight

InfoSight uses cloud-based predictive analytics and machine learning to anticipate and prevent problems before our end-customers’ businesses are impacted and eliminate the complexity of dealing with infrastructure. As InfoSight analyzes and correlates millions of sensors per second from our global installed-base, our end-customers’ infrastructure keeps getting smarter. This cloud-based approach allows our end-customer support personnel to use the gathered telemetry data to quickly resolve

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support cases. We believe the data models developed by our data scientists and our database of telemetry data enable us to provide better support that is more efficient for us and our end-customers. In addition, through InfoSight, we offer the ability for end-customers to improve storage capacity and performance on their own. We have found this both improves end-customer satisfaction and increases the productivity of our end-customer personnel who can be focused on proactive problem resolution. InfoSight has allowed Nimble to achieve over 99.9999% (six-nines) of measured availability.

The benefits of InfoSight for our end-customers experience fall into three areas:

Predict and prevent problems.    Through InfoSight, each of our storage systems provides an active monitoring system that automatically detects and notifies us of problems, enabling us to address end-customers’ problems quickly. InfoSight automatically opens and solves 86% of problems before our end-customers even know there is an issue. Resolution is either automated or prescriptive and InfoSight will only alert the end-customer if needed. By collecting and correlating sensors across the infrastructure stack, InfoSight uncovers the root cause of problems spanning from the storage to the VM, with 54% of the problems it resolves outside of storage.

Global visibility and Learning.    InfoSight uses the cloud to correlate and analyze telemetry sensors from across our installed base and this is used to improve the performance and overall operations of every system. It also provides global visibility of our end-customers’ multi-site environments.

Transforms the support experience.    Since 86% of support issues are automatically resolved through InfoSight, Nimble has been able to build a support organization made up of only Level 3 experts who are able to rapidly resolve our end-customers’ most complex problems. This means our end-customers do not have to deal with basic questions from support, endure escalations and be asked to recreate the problem and send large log files. As a result, we have achieved a Net Promoter Score of 85.

Products and Services

Our storage systems are optimized for a full range of business applications used by mid-sized and large global enterprises and cloud-based service providers. In addition to our storage arrays, we recently announced Nimble Cloud Volumes.

Storage Arrays

We offer AF-Series All Flash arrays and CS-Series Adaptive Flash arrays with a range of capacities and processing power to provide the required performance for high-I/O applications including Oracle, SharePoint, SQL Server, SAP HANA, Exchange, virtual desktop infrastructure and server virtualization as well as high-capacity and cost-optimized environments with less stringent performance requirements. The NimbleOS and all software features are included without additional cost.

Our AF-Series and CS-Series arrays interoperate with a wide range of servers, software applications, operating systems and hypervisors, including those from Cisco, Citrix, Docker, Microsoft, Lenovo, Oracle, SAP and VMware. We have also jointly developed a series of validated designs and reference architectures with Cisco called the SmartStack integrated infrastructure. Our systems also interoperate with leading backup software applications, and in some cases offer deep integration with backup software such as CommVault Simpana and Veeam Availability Suite. Our AF-Series and CS-Series arrays support the Fibre Channel and iSCSI storage protocols.

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AF-Series All-Flash Arrays

☐ AF1000/AF3000.    The AF1000 and AF3000 are designed as entry points for IT organizations that require speed and economy for performance-sensitive workloads.

☐ AF5000/AF7000.    The AF5000 and AF7000 are designed to deliver high performance and attractive economics for performance-sensitive workloads that require an efficient blend of price/performance/scalability.

☐ AF9000.    The AF9000 is designed for consolidating multiple large-scale performance-sensitive applications with aggressive performance and high scalability demands.

CS-Series Adaptive Flash Arrays

☐ CS1000 and CS1000H.    The CS1000 and CS1000H provide value and capacity for small to medium-sized IT organizations or remote offices, for mixed mainstream workloads.

☐ CS3000.    The CS3000 is designed for midsize IT organizations or distributed sites of larger organizations. It offers the best capacity per dollar for mixed mainstream workloads and for virtual server consolidation.

☐ CS5000.    The CS5000 offers high-performance for larger-scale deployments or IO-intensive mixed mainstream workloads and provides the best performance and IOPS per dollar.

☐ CS7000.    The CS7000 is designed for consolidating multiple large-scale critical applications with aggressive performance demands.

Nimble Cloud Volumes

We recently announced Nimble Cloud Volumes, which provide an enterprise-grade multi-cloud storage service for our end-customers to run their applications in Amazon Web Services and Microsoft Azure. The service is designed to be as easy to use as native cloud storage, but with the enterprise-grade reliability and features we believe our end-customers’ applications need. Nimble Cloud Volumes is designed for easy data mobility so our end-customers will have the freedom to move data between public clouds and their datacenters without being locked in.

End-customer Service and Support

We combine our technical support and maintenance with InfoSight to deliver an innovative approach to monitoring, diagnostics, support case resolution and capacity planning. We include InfoSight, technical support and maintenance in all purchased support plans. In addition, we offer the following end-customer service and support to our end-customers:

Timeless Storage.    We include all software features at no additional cost to end-customers when they purchase our storage arrays. We do not charge extra for features like encryption, replication or snapshots. We offer our storage array end-customers a timeless guarantee that includes flat maintenance and support pricing for the life of the product as well as an option to receive a free faster controller upgrade after three years.

Support and Maintenance.    We offer industry standard technical support on our products to our end-customers and channel partners. Our storage array end-customers that purchase a support and services contract receive accelerated shipment of replacement parts, optional onsite hardware repair, and software updates and maintenance releases that become available during the support period. End-customer support personnel are available 24 hours per day, seven days per week. Our support and services contracts are typically offered for periods of one to five years. We offer product support for all of our end-customers, including those end-customers who purchase our products through our channel partners. In addition, some of our international channel partners offer primary support. We also

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subcontract with a third party to provide onsite hardware repair and replacement services for our storage array end-customers.

End-customer Community.    The support capabilities we offer are complemented by NimbleConnect, an active online community of our users, partners and product experts worldwide. Here they can ask questions, engage and get answers from other users as well as our employees. They can also share experiences, insights from their own InfoSight results and best practices with our other users. This is offered at no charge.

End-customers

Our target end-customers are mid-sized and large global enterprises and cloud-based service providers. Our end-customer base has grown by more than 2,600 end-customers over the past year to over 10,200 globally as of January 31, 2017. We sell to end-customers across multiple verticals, including cloud-based service providers, education, financial services, healthcare, manufacturing, state and local government and technology. We did not have any end-customers that represented more than 10% of our total revenue in the years ended January 31, 2015, 2016 and 2017. During the year ended January 31, 2014, we consolidated the majority of our North American sales to three distributors, Avnet, Inc., Ingram Micro Inc. and Carahsoft Technology Corp. During the year ended January 31, 2015, Avnet and Carahsoft individually accounted for more than 10% of our total revenue. During the years ended January 31, 2016 and 2017, Avnet, Inc., Ingram Micro Inc. and Carahsoft Technology Corp. each individually accounted for more than 10% of our total revenue. During the year ended January 31, 2017, these three distributors accounted for, in the aggregate, approximately 80% of our total revenue.

Sales and Marketing

Sales.    Our sales organization is responsible for end-customer acquisition, maintaining end-customer relationships, and overall market development, which includes the management of the relationships with our channel partners, working with our channel partners in obtaining and supporting end-customers, and acting as the liaison between the end-customers and the marketing and product development organizations. We expect to continue to grow our sales headcount across all markets and expand our presence into countries where we currently do not have a sales presence.

Our sales organization is supported by sales engineers with deep technical expertise and responsibility for pre-sales technical support, solutions engineering for our end-customers and technical training for our channel partners.

Channel Program.    Our channel partners provide us with a significant amount of new and existing end-customer opportunities, as well as sell and facilitate the sale of our products to end-customers. We continue to recruit and retain qualified channel partners and train them in our technology and product offerings.

SmartStack Integrated Infrastructure.    SmartStack integrated infrastructure solutions jointly developed by Nimble Storage and Cisco span pre-validated, pre-tested CVDs and reference architectures across a range of enterprise applications and workloads. Our technology partners include Cisco, Citrix, CommVault, Microsoft, Oracle, SAP, Splunk, Veeam and VMware. In addition, because many of our channel partners are already working with our SmartStack partners, we are better able to accelerate end-customer adoption.

Technology Alliance Partners.    We have built, and will continue to add new, strong relationships with key technology alliance partners. These include Amazon, Inc., Cisco Systems, Inc., Citrix Systems, Inc., CommVault Systems, Inc., Docker, Inc., Lenovo, Microsoft Corporation (including Azure), Oracle Corporation, SAP, Splunk Inc., Veeam Software and VMware, Inc.

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Marketing.    Our outbound marketing is focused on building our brand reputation and market awareness of our platform and portfolio and driving end-customer demand. The marketing team consists primarily of product marketing, field marketing, channel marketing, and corporate communications functions spanning public relations and analyst relations. Marketing activities include demand generation, advertising, managing our website, trade shows and conferences, press and analyst relations, and end-customer awareness.

Backlog

Product backlog includes orders confirmed for products scheduled to be shipped generally within two weeks to end-customers. Because of the generally short cycle between order and shipment and occasional end-customer changes in delivery schedules, we do believe that our product backlog, as of any particular date, is not necessarily indicative of actual product revenue for any future period. Orders for services for multiple years are billed upfront shortly after receipt of an order and are included in deferred revenue until such time revenue recognition obligations are satisfied. Timing of revenue recognition for services may vary depending on the contractual service period or when the services are rendered.

Manufacturing

We outsource the manufacturing, assembly, quality assurance testing and packaging of our hardware products to Flextronics International Ltd., or Flex. Our contract manufacturer generally procures the components used in our products directly from third-party suppliers.

We designed our manufacturing process to minimize the amount of inventory we retain in order to meet end-customer demand. We place orders with our contract manufacturer on a purchase order basis, based on our end-customers’ requirements. In general, we engage our contract manufacturer to manufacture products to meet our forecasted demand. Our agreement with our contract manufacturer requires us to provide forecasts for orders. However, we may cancel or reschedule orders, subject to applicable notice periods and fees, and delivery schedules requested by us in these purchase orders vary based upon our particular needs. Our contract manufacturer works closely with us to ensure design for manufacturability and product quality.

Our agreement with Flex establishes basic terms. This agreement is terminable at any time by either party upon written notice and does not provide for any specific volumes of products. Instead, orders are placed on a purchase order basis.

Research and Development

We focus our research and development efforts primarily on improving our existing technology platform, developing new products and enhancing our cloud-based management services. We work closely with our channel partners and end-customers to understand our users’ current and future needs and have designed a product development process that integrates our end-customers’ feedback.

Continued investment in research and development is critical to our business. We have assembled a team of skilled engineers with extensive experience in the fields of data storage, computing, file system architecture, data analytics, enterprise applications, data protection and replication, support automation and sensing and telemetry systems. These individuals have extensive prior experience with many leading digital storage companies. We have invested significant time and financial resources in the development of our storage solutions. Most of our research and development activities take place at our corporate headquarters in San Jose, California. We also opened a research and development facility in Raleigh, North Carolina in 2013. We intend to dedicate significant research

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and development resources to continue to improve the capacity, performance, scalability, reliability, recoverability and other features of our storage solutions and to expand our product and service offerings to address other segments of the enterprise storage market.

Our research and development expenses were $70.3 million, $94.0 million, and $116.2 million in the years ended January 31, 2015, 2016 and 2017, respectively.

Competition

We operate in the intensely competitive data storage market that is characterized by constant change and innovation. Changes in the application requirements, data center infrastructure and trends, and the broader technology landscape result in evolving end-customer requirements for capacity, performance, data protection and scalability of storage systems.

Our main competitors are the large storage and systems vendors such as Dell Technologies, HPE, NetApp, Inc. and Pure Storage, Inc. that offer a broad portfolio of storage systems targeting varied use cases and end markets. We also compete to a lesser extent with a number of other smaller companies and certain well-established companies, as well as certain emerging storage and computing technologies. In addition, the emergence of cloud computing and storage-as-a-service may impact both short-term and long-term growth patterns in the markets in which we compete.

We believe we generally compete favorably with our competitors as a result of the foundational innovations spanning our Predictive Cloud Platform, including: our Multicloud Flash Fabric and InfoSight. Our product capabilities include InfoSight Predictive Analytics, performance and capacity efficiency, integrated data protection, ability to address all mainstream applications from our highly scalable platform, ease of use, total cost of ownership and differentiated end-customer support. However, many of our competitors have substantially greater financial, technical and other resources, greater brand recognition, larger sales and marketing budgets, broader distribution, and larger and more mature intellectual property portfolios. In addition, the continued growth of cloud computing and storage-as-a-service may change buying patterns and end-customers in the storage industry, and may cause us to invest in new channels or new versions of our products to remain competitive.

Intellectual Property

Our success depends in part upon our ability to use and protect our core intellectual property. We rely on U.S. federal, state, international and common law rights, as well as contractual restrictions including license agreements, confidentiality procedures, non-disclosure agreements with third parties and employment agreements, to protect and control access to our intellectual property.

In addition to contractual arrangements, we protect our intellectual property rights by relying on a combination of copyrights, trademarks, patents, trade secrets, domain names and trade dress. As of January 31, 2017, we had twenty-five issued patents and other pending patent applications pending in the United States. Our issued patents expire between 2029 and 2035. Where appropriate, we pursue the registration of trademarks, domain names and service marks in the United States, the European Union and in other jurisdictions.

Employees

As of January 31, 2017, we had approximately 1,290 employees worldwide. None of our U.S. employees is represented by a labor union with respect to his or her employment. Employees in certain European countries may be represented by labor unions or have the benefits of collective bargaining arrangements. We have not experienced any work stoppages.

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Information about Segment and Geographic Revenue

Information about segment and geographic revenue is set forth in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 2 and 10 of our Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

Corporate Information

We were incorporated in Delaware in November 2007 as Nimble Storage, Inc. We completed our initial public offering in December 2013 and our common stock is listed on the New York Stock Exchange under the symbol “NMBL.” Our principal executive offices are located at 211 River Oaks Parkway, San Jose, California 95134, and our telephone number is (408) 432-9600.

Nimble Storage, the “Nimble Storage” logo, InfoSight, SmartStack, CASL, NimbleConnect, Timeless Storage, Nimble Cloud Volumes, Predictive Cloud Platform, Multicloud Flash Fabric, and other names appearing in this Form 10-K are registered trademarks or common law trademarks of Nimble Storage in the United States and/or other jurisdictions. This Form 10-K 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.

Available Information

Our website address is www.nimblestorage.com. Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, proxy and information statements and amendments to items filed pursuant to Sections 13(a), 14, 15(d) and 16 of the Exchange Act are filed with the U.S. Securities and Exchange Commission, or the SEC. We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements and other information with the SEC. Such documents and other information filed by the Company with the SEC are available free of charge on our website at www.investors.nimblestorage.com when such reports are available on the SEC’s website.

The public may read and copy any materials filed by Nimble Storage with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The contents of the websites referred to above are not incorporated into this Form 10-K. Further, our references to the URLs for these websites are intended to be inactive textual references only.

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ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including our consolidated financial statements and related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, operating results and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business and Our Industry

The announcement and pendency of the HPE transaction may materially adversely affect our business.

Uncertainty about the effect of the proposed merger on our employees, customers and other parties may have a material adverse effect on our business. Our employees may experience uncertainty about their roles following the proposed merger. There can be no assurance that our employees, including key personnel, can be retained to the same extent that we have previously been able to attract and retain employees. Any loss of such employees could have a material adverse effect on our business, operations and financial position.

Parties with which we do business may also experience uncertainty associated with the proposed merger, including with respect to current or future business relationships with us. Such uncertainty could cause channel partners, end-customers, suppliers and others to seek to change existing business relationships or delay or defer certain business decisions with us, which could have a material adverse effect on our business, operations and financial position.

Pursuant to the terms of the Merger Agreement, we are subject to certain restrictions on the conduct of our business, including the ability in certain cases to enter into supplier contracts, until the proposed merger closes or the Merger Agreement terminates. The restrictions may prevent us from pursuing otherwise attractive business opportunities and taking other actions with respect to our business that we may consider advantageous and result in our inability to respond effectively to competitive pressures and industry developments, and may otherwise harm our business and operations.

In addition, we have diverted, and will continue to divert, significant management resources towards the completion of the transaction, which could materially adversely affect our business and operations.

Failure to consummate the transaction could have a material adverse impact on our business and financial results.

There can be no assurance that the proposed merger with HPE will occur. If the merger is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the merger, we may experience negative reactions from the financial markets, including negative impacts on the price of our common stock and litigation related to any failure to complete the merger. A failed transaction may result in negative publicity and a negative impression of us in the investment community. Further, any disruptions to our business resulting from the announcement and pendency of the merger, including any adverse changes in our relationships with our customers, partners and employees, could continue or accelerate in the event of a failed transaction.

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Consummation of the merger is subject to certain conditions, including, among others, (i) a successful tender offer by HPE; (ii) the absence of an order or law prohibiting consummation of the merger; (iii) the receipt of consents under specified foreign antitrust laws; (iv) the absence of a material adverse effect on us; (v) the accuracy of the parties’ respective representations and warranties; and (vi) the parties’ respective compliance with agreements and covenants contained in the Merger Agreement. Many of the conditions to closing of the merger are not within our control and there can be no assurance that these and other conditions to closing will be satisfied.

The Merger Agreement provides for limited remedies for us in the event of a breach by HPE or its affiliates that results in termination of the Merger Agreement, including the right to specific performance under certain specified circumstances. There can be no assurance that a remedy will be available to us in the event of such a breach.

In addition, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed merger. We will be required to pay such costs relating to the transaction whether or not the merger is completed.

We have a history of losses, anticipate increasing our operating expenses in the future, and may not be able to achieve or maintain profitability. If we cannot become profitable or maintain our profitability in the future, our business and operating results may suffer.

We have incurred net losses in all fiscal years since our inception, including net losses of $43.1 million, $98.8 million, $120.1 million, $121.9 million and $158.3million in the years ended January 31, 2014, 2015, 2016 and 2017, respectively. As of January 31, 2017, we had an accumulated deficit of $478.3 million. We anticipate that we will continue to operate in a net loss position for the foreseeable future as we continue to develop our technology, enhance our product and service offerings, expand our sales channels, expand our operations and hire additional employees, particularly in sales, marketing and research and development. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. In future periods, our profitability could be adversely affected for a number of possible reasons, including slowing demand for our products or services, increasing competition, returns on investments we make in our business that are less than expected, changes in the way storage services are consumed, a decrease in the growth of the storage market or general economic conditions. If we are unable to meet these risks and challenges as we encounter them, our business and operating results may suffer.

Our limited operating history makes it difficult to evaluate our current business and future prospects.

We were incorporated in November 2007 and shipped our first products in August 2010. The majority of our revenue growth has occurred in the years ended January 31, 2012 and later. Our limited operating history makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth and profitability. We have encountered and will continue to encounter risks and difficulties frequently experienced by rapidly growing companies in constantly evolving industries, including the risks described in this report. If we do not address these risks successfully, our business and operating results will be adversely affected, and our stock price could decline. Further, we have limited historical financial data. As such, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.

If the market for our storage products does not grow as we anticipate, our revenue may not grow and our operating results would be harmed.

We are vulnerable to fluctuations in overall demand for storage products. Our business plan assumes that the demand for storage products will increase as organizations collect, process and store

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an increasing amount of data. However, if storage markets in general or markets for captive storage experience downturns or grow more slowly than anticipated, or if demand for our products does not grow as quickly as we anticipate, whether as a result of competition, product obsolescence, budgetary constraints of our end-customers, technological changes, unfavorable economic conditions, uncertain geopolitical environments or other factors, we may not be able to increase our revenue sufficiently to ever achieve profitability and our stock price would decline. For example, the emergence of cloud computing and storage-as-a-service may impact both short-term and long-term growth patterns in the markets in which we compete.

Our revenue growth rate in recent periods may not be indicative of our future performance.

You should not consider our revenue growth rate in recent periods as indicative of our future performance. While we have recently experienced significant revenue growth rates, we may not achieve similar revenue growth rates in future periods. You should not rely on our past revenue growth rates for any prior periods as any indication of our future revenue or revenue growth rates.

Our quarterly operating results may fluctuate significantly, which could cause the trading price of our common stock to decline.

Our operating results have historically fluctuated and may continue to fluctuate from quarter to quarter, and we expect that this trend will continue as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:

☐ the budgeting cycles and purchasing practices of end-customers;

☐ increasing number and size of orders from Global 5000 companies and other large enterprises and cloud service providers that may require longer sales cycles;

☐ price competition;

☐ our ability to attract and retain new channel partners and end-customers;

☐ the timing and success of new product and service introductions by us or our competitors, including the success of our AF-Series All Flash arrays and Nimble Cloud Volumes;

☐ the increasing use of cloud computing and storage-as-a-service by our end-customers;

☐ deferral of orders in anticipation of new products or product enhancements announced by us or our competitors;

☐ our ability to sell additional products to existing channel partners and end-customers;

☐ changes in end-customer requirements or market needs and our inability to make corresponding changes to our business;

☐ any potential disruption in our sales channels or termination of our relationship with important channel partners;

☐ changes in the competitive landscape, including consolidation among our competitors or end-customers;

☐ potential seasonality in the markets we serve;

☐ general economic conditions, both domestically and in our foreign markets;

☐ material changes in end-customer adoption of our product or service offerings, such as our Storage on Demand, or SoD, offering, that may change the timing of revenue recognition;

☐ our inability to provide adequate support to our end-customers;

☐ our inability to control the costs of manufacturing our products, including the cost of components;

☐ our inability to fulfill our end-customers’ orders due to supply chain delays or events that impact our manufacturers or their suppliers;

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☐ our inability to adjust certain fixed costs and expenses, particularly in research and development, for changes in demand;

☐ the timing of certain payments and related expenses, such as sales commissions;

☐ increases or decreases in our revenue and expenses caused by fluctuations in foreign currency exchange rates, as an increasing portion of our revenue is collected and expenses are incurred and paid in currencies other than the U.S. dollar;

☐ the cost of and potential outcomes of existing and future claims or litigation, which could have a material adverse effect on our business;

☐ future accounting pronouncements and changes in our accounting policies; and

☐ changes in tax laws or tax regulations.

Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results. In particular, because we have historically received a substantial portion of sales orders during the last few weeks of each fiscal quarter, we are particularly vulnerable to any delay in order fulfillment, failure to close anticipated orders or any other problems encountered during the last few weeks of each fiscal quarter. This variability and unpredictability could result in our failure to meet our revenue or other operating result expectations or those of investors for a particular period. The failure to meet or exceed such expectations could have a material adverse effect on our business, results of operations and financial condition that could ultimately adversely affect our stock price.

We have limited visibility into future sales, which makes it difficult to forecast our future operating results.

Because of our limited visibility into end-customer demand, our ability to accurately forecast our future revenue is limited. We sell our products primarily through our network of channel partners that accounted for 92%, 98%, 99%, and 99% of our total revenue in the years ended January 31, 2014, 2015, 2016, and 2017, respectively. We place orders with our third-party manufacturer based on our forecasts of our end-customers’ requirements and forecasts provided by our channel partners. These forecasts are based on multiple assumptions, each of which might cause our estimates to be inaccurate, thereby affecting our ability to provide products to our end-customers. When demand for our products increases significantly, we may not be able to meet it on a timely basis, and we may need to expend a significant amount of time working with our end-customers to allocate limited supply and maintain positive end-customer relationships, or we may incur additional costs to accelerate the manufacture and delivery of additional products. If we or our channel partners underestimate end-customer demand, we may forego revenue opportunities, lose market share and damage our end-customer relationships. Conversely, if we overestimate demand for our products and consequently purchase significant amounts of components or hold inventory, we could incur additional costs and potentially incur related charges, which could adversely affect our operating results.

Adverse economic conditions or reduced IT spending may adversely impact our business.

Our business depends on the overall demand for IT and on the economic health of our current and prospective end-customers. In general, worldwide economic conditions remain unstable, and these conditions make it difficult for our current and prospective end-customers and us to forecast and plan future business activities accurately, and such conditions could cause our end-customers or prospective end-customers to reevaluate their decision to purchase our products or services. Weak global economic conditions, or a reduction in IT spending even if economic conditions improve, could adversely impact our business and operating results in a number of ways, including longer sales cycles, lower prices for our products or services, reduced bookings and lower or no growth.

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We are dependent on a small number of product lines, and the lack of continued market acceptance of these product lines would result in lower revenue.

Our CS-Series of storage products accounted for a majority of our total revenue in the year ended January 31, 2017. In February 2016, we introduced our AF-Series of storage products and in February 2017, we introduced Nimble Cloud Volumes. We anticipate that our AF products and our CS products will account for a majority of our revenue for the foreseeable future. As a result, our revenue could be reduced as a result of:

☐ any decline in demand for these products;

☐ the introduction of products and technologies by us or our competitors that serve as a replacement or substitute for, or represent an improvement over, these products;

☐ technological innovations or new communications standards that our products do not address;

☐ our failure or inability to predict changes in our industry or end-customers’ demands or to design products or enhancements that meet end-customers’ increasing demands; and

☐ our inability to release enhanced versions of our current products or new product lines on a timely basis.

We rely on third-party channel partners to sell substantially all of our products, and if our partners fail to perform, our ability to sell and distribute our products and services will be limited, and our operating results will be harmed.

We depend on our channel partners to sell our products. Our contracts with channel partners typically are terminable without cause upon written notice to the other party. Our channel partner agreements do not prohibit channel partners from offering competitive products or services and do not contain any purchase commitments. Many of our channel partners also sell our competitors’ products. If our channel partners give higher priority to our competitors, we may be unable to grow our revenue and our net loss could increase. Further, in order to develop and expand our channels, we must continue to scale and improve our processes and procedures that support our channel partners, including investments in systems and training, and those processes and procedures may become increasingly complex and difficult to manage. If we fail to maintain existing channel partners or develop relationships with new channel partners, our revenue opportunities will be reduced.

We receive a substantial portion of our total revenue from a limited number of channel partners and the loss of, or a significant reduction in, orders from one or more of our major channel partners would harm our business.

We receive a substantial portion of our total revenue from a limited number of channel partners. For the years ended January 31, 2014, 2015, 2016 and 2017 our top ten channel partners accounted for 47%, 90%, 94% and 94%, respectively, of our total revenue. We have transitioned order fulfillment in North America largely to three distributors. The majority of our existing VARs now contract directly with one or all of these three distributors, Avnet, Inc., Ingram Micro Inc. and Carahsoft Technology Corp. Avnet accounted for more than 10% of our revenue for the years ended January 31, 2014, 2015, 2016 and 2017. Carahsoft accounted for more than 10% of our revenue for the years ended January 31, 2015, 2016 and 2017, but less than 10% of our revenue for the year ended January 31, 2014. Ingram Micro started to account for more than 10% of our revenue beginning in the year ended January 31, 2016 and continued to do so in the year ended January 31, 2017. During the year ended January 31, 2017, these three distributors accounted for, in the aggregate, approximately 80% of our total revenue. We anticipate that we will continue to depend upon a limited number of channel partners for a substantial portion of our total revenue for the foreseeable future and, in some cases, the portion of our revenue attributable to individual channel partners may increase in the future. The loss of one or more key channel partners or a reduction in sales through any major channel partner would reduce our revenue.

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We face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

A number of very large corporations have historically dominated the storage market. We consider our primary competitors to be companies that provide enterprise storage products, including Dell Technologies, HPE, NetApp, Inc. and Pure Storage, Inc. We also compete to a lesser extent with a number of other private companies and certain well-established companies. Some of our competitors have made acquisitions of businesses that allow them to offer more directly competitive and comprehensive solutions than they had previously offered. In addition, the emergence of cloud computing and storage-as-a-service may impact both short-term and long-term growth patterns in the markets in which we compete. We expect to encounter new competitors domestically and internationally as other companies enter our market or if we enter new markets.

Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

☐ potential for broader market acceptance of their storage architectures and solutions;

☐ greater name recognition and longer operating histories;

☐ larger sales and marketing and end-customer support budgets and resources;

☐ broader distribution and established relationships with distribution partners and end-customers;

☐ the ability to bundle storage products with other technology products and services, or offer a broader range of storage solutions to better fit certain end-customers’ needs;

☐ lower labor and development costs;

☐ larger and more mature intellectual property portfolios;

☐ substantially greater financial, technical and other resources; and

☐ greater resources to make acquisitions.

If we are not successful in executing our strategy to increase sales of our products to larger enterprise end-customers, our operating results may suffer.

Our growth strategy is dependent, in part, upon continuing to increase sales of our products to larger enterprises. Sales to these types of end-customers involve risks that may not be present or that are present to a lesser extent with sales to smaller entities. These risks include:

☐ competition from larger competitors that traditionally target larger enterprises and that may have pre-existing relationships or purchase commitments from those end-customers;

☐ successfully selling and supporting our AF-Series All Flash arrays;

☐ successfully introducing and supporting other new products in the future that are either required or preferred by large enterprises;

☐ increased purchasing power and leverage held by large end-customers in negotiating price and other contractual arrangements;

☐ more stringent support requirements;

☐ longer sales cycles and the associated risk that substantial time and resources may be spent on potential end-customers that elect not to purchase our products; and

☐ certain end-customers may have already adopted modern competitive storage system architectures in some of their operations, thereby making adoption of our architecture a more difficult value proposition for our sales force to make.

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Large enterprises often undertake a significant evaluation process that results in a lengthy sales cycle. Although we have a channel sales model, our sales representatives may invest substantial time and resources in engaging with sales to larger end-customers without being successful in generating any sales. In addition, product purchases by large enterprises are frequently subject to bidding processes involving multiple competing suppliers, budget constraints, multiple approvals, and unplanned administrative, processing and other delays. Finally, large enterprises typically have longer implementation cycles, require greater product functionality and scalability and a broader range of services, demand that vendors take on a larger share of risks, sometimes require acceptance provisions that can potentially lead to a delay in revenue recognition, and expect greater payment flexibility from vendors. All of these factors can add risk to business conducted with these end-customers. If we fail to realize an expected sale from a large end-customer in a particular quarter or at all, our business, operating results and financial condition could be adversely affected.

Our sales cycle is unpredictable, which makes it difficult to predict our results even in the near term.

A substantial portion of our quarterly sales typically occurs during the last month of the quarter, which we believe largely reflects sales cycles of storage products and other products in the technology industry generally. We have little visibility at the start of any quarter as to which existing end-customers, if any, will make additional purchases and when any additional purchases may occur, if at all.

Our sales cycles vary based on factors such as customer size, customer type, order size, competition, industry trends, and customer anticipation of new or updated products. For example, potential end-customers (including large enterprises) may undertake a longer evaluation process with multiple competing storage providers that has, in the past, resulted in a longer sales cycle. Customers also may delay their purchases of our current products after the introduction of new products that are not yet shipping in volume. In addition, our sales cycle may be extended if potential end-customers decide to re-evaluate other aspects of their storage infrastructure at the same time they are considering a purchase of our products. As a result, our quarterly operating results are difficult to predict even in the near term.

If we do not successfully anticipate market needs and develop products and product enhancements that meet those needs, or if those products do not gain market acceptance, our business will suffer.

The storage market is characterized by rapidly evolving technology, end-customer needs and industry standards. We might not be able to anticipate future market needs or changes in existing technologies, and we might not be able to develop new products or product enhancements to meet such needs, either in a timely manner or at all. Also, one or more new technologies could be introduced that compete favorably with our storage products or that cause our storage products to no longer be of significant benefit to our end-customers.

The process of developing new technology is complex and uncertain, and we may not be able to develop our products in a manner that enables us to successfully address the changing needs of our end-customers. For example, in February 2016, we introduced our AF-Series of storage products in order to address the demands of our end-customers for an all flash product. If our AF-Series product line does not perform to expectations, appropriately address the needs of our end-customers or otherwise fails to achieve market acceptance, our business and operating results will be harmed. Similarly, in February 2017, we announced our Nimble Cloud Volumes service, which is currently in the beta process with customers. If we are unable to launch a customer preview or “go-live” with Nimble Cloud Volumes, our operating results also could be harmed.

Moreover, slow market acceptance of new products and product enhancements will delay or eliminate our ability to recover our investment in these products and product enhancements. We must

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commit significant resources to developing new products and product enhancements before knowing whether our investments will result in products the market will accept. Additionally, we may not achieve the cost savings or the anticipated performance improvements we expect, and we may take longer to generate revenue, or generate less revenue, than we anticipate. If we are not able to successfully identify new product and product enhancement opportunities, develop and bring new products and product enhancements to market in a timely manner, or achieve market acceptance of our products and product enhancements, our business and operating results will be harmed.

Failure to adequately expand our sales force will impede our growth.

We will need to continue to expand and optimize our sales infrastructure in order to grow our end-customer base and our business. In particular, our ability to increase our business with both large enterprises as well as international end-customers will require qualified personnel with experience selling into these types of end-customers. We plan to continue to expand our sales force globally. Identifying, recruiting and training qualified personnel requires significant time, expense and attention. It can take time before our sales representatives are fully-trained and productive. Moreover, strategies that may be successful in one region may not be relevant for another region. Our business may be adversely affected if our efforts to expand and train our sales force do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop and retain talented sales personnel globally or if new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenue.

Our growth depends in part on the success of our strategic relationships with third parties.

Our future growth will depend on our ability to enter into successful strategic relationships with third parties. For example, our strategic partnership with Lenovo, our alliance activity with Citrix Systems, Inc., Commvault Systems, Inc., Microsoft Corporation, Oracle Corporation, SAP, Splunk Inc., Veeam Software, and VMware, Inc., and our SmartStack initiative with Cisco Systems, Inc. are intended to create broader integrated technology solutions to address our end-customers’ needs. In addition, we work with global distributors to streamline and grow our sales channel. These relationships may not result in additional end-customers or enable us to generate significant revenue. These relationships are typically non-exclusive and do not prohibit the other party from working with our competitors or from offering competing services. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results could suffer.

Our products handle mission-critical data for our end-customers and are highly technical in nature. If our products have defects, failures occur or end-customer data is lost or corrupted, our reputation and business could be harmed.

Our products are highly technical and complex and are involved in storing and replicating mission-critical data for our end-customers. Our products may contain undetected defects, failures or vulnerabilities when they are first introduced or as new versions are released. We have in the past and may in the future discover software errors in new versions of our existing products, new products or product enhancements after their release or introduction, which could result in lost revenue. Despite testing by us and by current and potential end-customers, errors might not be found in new releases or products until after commencement of commercial shipments, resulting in loss of or delay in market acceptance. Our products may also have security vulnerabilities and be subject to intentional attacks by viruses that seek to take advantage of these bugs, errors or other weaknesses. If defects, failures or vulnerabilities occur in our products, a number of negative effects to our business could result, including:

☐ lost revenue or lost end-customers;

☐ increased costs, including warranty expense and costs associated with end-customer support;

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☐ delays, cancellations, reductions or rescheduling of orders or shipments;

☐ product returns or discounts;

☐ diversion of management resources;

☐ legal claims for breach of contract, product liability, tort or breach of warranty; and

☐ damage to our reputation and brand.

Because our end-customers use our products to manage and protect their data, we could face claims resulting from any loss or corruption of our end-customers’ data due to a product defect, failure or vulnerability. While our sales contracts contain provisions relating to warranty disclaimers and liability limitations, these provisions might not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention from our business and could result in public perception that our products are not effective, even if the occurrence is unrelated to the use of our products. In addition, our business liability insurance coverage might not be adequate to cover such claims. If any data is lost or corrupted in connection with the use or support of our products, our reputation could be harmed and market acceptance of our products could suffer.

We rely on a limited number of suppliers, and in some cases single-source suppliers, and any disruption or termination of these supply arrangements, failure to successfully manage our relationships with our key suppliers or component quality problems could delay shipments of our products and damage our channel partner or end-customer relationships.

We rely on a limited number of suppliers, and in some cases single-source suppliers, for several key components of our products. We generally purchase components on a purchase order basis and do not have long-term supply contracts with our suppliers. Our reliance on key suppliers reduces our control over the manufacturing process and exposes us to risks, including reduced control over product quality, production costs, timely delivery and capacity. It also exposes us to the potential inability to obtain an adequate supply of required components because we do not have long-term supply commitments. In particular, replacing the single-source suppliers of our solid state drives and chassis would require a product re-design that could take months to implement.

We generally maintain minimal inventory for repairs, evaluation and demonstration units and acquire components only as needed. We do not enter into long-term supply contracts for these components. As a result, our ability to respond to channel partner or end-customer orders efficiently may be constrained by the then-current availability, terms and pricing of these components. Our industry has experienced component shortages and delivery delays in the past, and we may experience shortages or delays of critical components in the future as a result of strong demand in the industry or other factors. If we or our suppliers inaccurately forecast demand for our products or we ineffectively manage our enterprise resource planning processes, our suppliers may have inadequate inventory, which could increase the prices we must pay for substitute components or result in our inability to meet demand for our products, as well as damage our channel partner or end-customer relationships.

Component quality is particularly important with respect to disk drives. We have in the past and may in the future experience disk drive failures, which could cause our reputation to suffer, our competitive position to be impaired and our end-customers to select other vendors. To meet our product performance requirements, we must obtain disk drives of extremely high quality and capacity. In addition, there are periodic supply-and-demand issues for disk drives and flash memory that could result in component shortages, selective supply allocations and increased prices of such components. We may not be able to obtain our full requirements of components, including disk drives, that we need for our storage products or the prices of such components may increase.

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If we fail to effectively manage our relationships with our key suppliers, or if our key suppliers increase prices of components, experience delays, disruptions, capacity constraints, quality control problems in their manufacturing operations or adverse changes to their financial condition, our ability to ship products to our channel partners or end-customers could be impaired and our competitive position and reputation could be adversely affected. Qualifying a new key supplier is expensive and time-consuming. If we are required to change key suppliers or assume internal manufacturing operations, we may lose revenue and damage our channel partner or end-customer relationships.

Because we depend on a single third-party manufacturer to build our products, we are susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping orders on time, if at all, or on a cost-effective basis, which would cause our business to suffer.

In the first quarter of the year ended January 31, 2015, we completed the transition of our manufacturing activities from two third-party manufacturers to one, Flextronics International Ltd., or Flex. Our reliance on this third-party manufacturer reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs and product supply and timing. Any manufacturing disruption by Flex could severely impair our ability to fulfill orders. Our current agreement with Flex, which is terminable at will or upon short notice by Flex, does not contain any minimum commitment to manufacture our products, and any orders are fulfilled only after a purchase order has been delivered and accepted. As a result, Flex may stop taking new orders or fulfilling our orders on short notice or limit our allocations of products. Moreover, our orders represent a relatively small percentage of the overall orders received by Flex from its end-customers; therefore, fulfilling our orders may not be a priority in the event Flex is constrained in its ability to fulfill all of its end-customer obligations. If we are unable to manage our relationship with Flex effectively, or if Flex suffers delays or disruptions for any reason, experiences increased manufacturing lead-times, capacity constraints or quality control problems in its manufacturing operations, limits our allocations of products, stops taking new orders or fulfilling our orders on short notice, or otherwise fails to meet our future requirements for timely delivery, our ability to ship products to our end-customers would be impaired, and our business and operating results would be harmed.

Our business and operations have experienced rapid growth in recent periods. If we do not effectively manage any future growth or are unable to improve our systems and processes, our operating results could be harmed.

We have experienced rapid growth over the last few years. Our employee headcount and number of end-customers have increased significantly, and we expect to continue to grow our headcount over the next 12 months. Since we initially launched our products in August 2010, our number of end-customers has grown to over 10,200 as of January 31, 2017. The growth and expansion of our business and product and service offerings places a continuous significant strain on our management, operational and financial resources.

To manage any future growth effectively, we must continue to improve and expand our IT and financial infrastructure, our operating and administrative systems and controls, our enterprise resource planning systems and processes and our ability to manage headcount, capital and processes in an efficient manner. In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud. Our failure to improve our systems and processes, or their failure to operate in the intended manner, may result in our inability to manage the growth of our business and to accurately forecast our revenue and expenses, or to prevent losses. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Failure to manage any future growth effectively could result in increased costs, negatively impact our end-customers’ satisfaction and harm our operating results.

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Our ability to sell our products is dependent on the quality of our technical support services, and our failure to offer high quality technical support services could have a material adverse effect on our sales, operating results and end-customers’ satisfaction with our products and services.

Once our products are deployed within our end-customers’ networks, our end-customers depend on our technical support services to resolve any issues relating to our products. We may be unable to respond quickly enough to accommodate short-term increases in end-customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by competitors. Increased end-customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. Any failure by us to effectively help our end-customers quickly resolve post-deployment issues or provide high-quality technical support, or a market perception that we do not maintain high-quality support, could harm our reputation and adversely affect our ability to sell our solutions to existing and prospective end-customers.

Our future growth plan depends in part on expanding outside of the United States, and we are therefore subject to a number of risks associated with international sales and operations.

As part of our growth plan, we intend to expand our operations globally. We have a limited history of marketing, selling and supporting our products and services internationally. International sales and operations are subject to a number of risks, including the following:

☐ greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;

☐ increased expenses incurred in establishing and maintaining office space and equipment for our international operations;

☐ fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business;

☐ management communication and integration problems resulting from cultural and geographic dispersion;

☐ difficulties in attracting and retaining personnel with experience in international operations;

☐ risks associated with trade restrictions and foreign legal requirements, including the importation, certification and localization of our products required in foreign countries;

☐ greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;

☐ the uncertainty of protection for intellectual property rights in some countries;

☐ greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including antitrust regulations, the U.S. Foreign Corrupt Practices Act and any trade regulations ensuring fair trade practices; and

☐ general economic and political conditions in these foreign markets.

These factors and other factors could harm our ability to generate future international revenue and, consequently, materially impact our business and operating results. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.

Interruptions to and failures of our IT infrastructure could disrupt our operations and services.

We depend on our IT infrastructure, which includes our data centers and networks, to operate our business and to provide services to our end-customers through our InfoSight platform. This

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infrastructure, including our back-up systems, resides in two locations. Currently we do not have a complete disaster recovery program, but we are in the process of implementing such a program in the upcoming quarters. Any interruptions to or failures of, or attacks on, our IT infrastructure, whether due to natural disasters, system failures, computer viruses, security breaches, computer hacking attacks or other causes, whether through third-party action or employee error or malfeasance, would affect our ability to operate our business and to also provide services through our InfoSight platform. As a result, it could be difficult to operate our business and we could also face liability with respect to any diminished performance of our InfoSight platform or support services generally during the periods when our IT infrastructure is compromised and any subsequent periods required to repair such interruptions or failures. Moreover, we would likely suffer reputational damage, and our ability to sell our solutions to existing and prospective end-customers could be harmed.

The inability of our products to interoperate with leading business software applications, hypervisors and data management tools would cause our business to suffer.

Our products are also designed to interoperate with virtualization solutions in the market. Virtual environment solutions require a fast and flexible network storage foundation. If our products are not compatible with leading business software applications, hypervisors and data management tools, demand for our products will decline. We must devote significant resources to enhancing our products to continue to interoperate with these software applications, hypervisors and data management tools. Any current or future providers of software applications, hypervisors or data management tools could make future changes that would diminish the ability of our products to interoperate with them, and we might need to spend significant additional time and effort to ensure the continued compatibility of our products, which might not be possible at all. Any of these developments could harm our business.

If our products do not interoperate with our end-customers’ infrastructure, sales of our products could be negatively affected, which would harm our business.

Our products must interoperate with our end-customers’ existing infrastructure, which often have different specifications, utilize multiple protocol standards, deploy products from multiple vendors, and contain multiple generations of products that have been added over time. As a result, when problems occur in a network, it may be difficult to identify the sources of these problems. If we find errors in the existing software or defects in the hardware used in our end-customers’ infrastructure or problematic network configurations or settings, we may have to modify our software or hardware so that our products will interoperate with our end-customers’ infrastructure. In such cases, our products may be unable to provide significant performance improvements for applications deployed in our end-customers’ infrastructure. In addition, government and other end-customers may require our products to comply with certain security or other certifications and standards. If our products are late in achieving or fail to achieve compliance with these certifications and standards, or our competitors achieve compliance with these certifications and standards, we may be disqualified from, or disadvantaged in, selling our products to such end-customers, which could harm our business and operating results.

If our industry experiences declines in average sales prices, our revenue and gross profit may also decline.

The data storage products industry is highly competitive and has historically been characterized by declines in average sales prices. It is possible that the market for our storage products could experience similar trends in equal or greater degree than the rest of the industry. Our average sales prices could decline due to pricing pressure caused by several factors, including competition, the introduction of competing technologies, overcapacity in the worldwide supply of flash memory or disk drive components, increased manufacturing efficiencies, implementation of new manufacturing processes and expansion of manufacturing capacity by component suppliers. If we are required to

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decrease our prices to be competitive and are not able to offset this decrease by increases in the volume of sales or the sales of new products with higher margins, our gross margins and operating results could be adversely affected.

Governmental regulations affecting the export or import of certain of our solutions could negatively affect our business.

Our products, technology and software are subject to U.S. export control laws and economic sanctions, and we incorporate encryption technology into certain of our products. These encryption products and the underlying technology may be exported outside the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of an encryption registration. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments and persons and for certain end-uses. In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements. Governmental regulation of encryption technology and regulation of exports or imports, or our failure, or inability due to governmental action or inaction, to obtain required export or import approval for our products could harm our international sales and adversely affect our revenue. Obtaining the necessary export or import license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities even if the export or import license ultimately may be granted. Even though we take precautions to ensure that our channel partners comply with all relevant regulations, any failure by our channel partners to comply with such regulations could have negative consequences, including reputational harm, government investigations and penalties.

We have in the past had to make a voluntary disclosure to the Office of Export Enforcement of the U.S. Commerce Department to report a failure to obtain an encryption registration number prior to shipment of a particular hardware appliance product to a limited number of international end-customers. In the future, failure to comply with export regulations could result in penalties, costs, and restrictions on export privileges, which could also harm our operating results, as well as our inability to service certain products already in the hands of our end-customers, which could have negative consequences, including reputational harm. The U.S. Commerce Department’s Bureau of Industry and Security has granted the service authorization and closed the enforcement matter by issuing us a warning letter, rather than assessing a civil penalty.

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

We may in the future increase sales to government entities. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that these efforts will result in a sale. Government certification requirements for products like ours may change and in doing so restrict our ability to sell into certain government sectors until we have attained the revised certification. Government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products and services. Government entities may have statutory, contractual or other legal rights to terminate contracts with our channel partners for convenience or due to a default, and any such termination may adversely impact our future operating results. Government entities may require contract terms that differ from standard arrangements and may impose compliance requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions, or are otherwise time consuming and expensive to satisfy. Government entities routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government entity refusing to

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continue buying our products and services, a reduction of revenue, fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could adversely impact our operating results.

We may be subject to claims that our employees have wrongfully disclosed or we have wrongfully used proprietary information of our employees’ former employers. These claims may be costly to defend and if we do not successfully do so, our business could be harmed.

Many of our employees were previously employed at current or potential competitors. We may be subject to claims that these employees have divulged or we have used proprietary information of these employees’ former employers. For example, in 2013 and 2014, NetApp filed lawsuits against us alleging that we and certain of our employees violated NetApp’s proprietary rights. Although we have settled the NetApp lawsuits and both matters have been dismissed with prejudice, litigation may be necessary to defend against other similar future claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to develop new products and features for existing products, which could severely harm our business. Even if we are successful in defending against future claims, litigation could result in substantial costs and be a distraction to management.

Our proprietary rights may be difficult to enforce or protect, which could enable others to copy or use aspects of our products without compensating us.

We rely and expect to continue to rely on a combination of confidentiality agreements, as well as trademark, copyright, patent and trade secret protection laws, to protect our proprietary rights with our employees, consultants and third parties with whom we have relationships. We have filed various applications for certain aspects of our intellectual property. Valid patents may not issue from our pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect our technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to misappropriate, copy aspects of our products or obtain and use information that we regard as proprietary. We generally enter into confidentiality or license agreements with our employees, consultants, vendors and end-customers, and generally limit access to and distribution of our proprietary information. However, we cannot assure you that the agreements we have entered into will not be breached. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States.

From time to time, we may need to take legal action to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business and operating results. Attempts to enforce our rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us, or result in a holding that invalidates or narrows the scope of our rights, in whole or in part. Any of these events would have a material adverse effect on our business and operating results.

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Claims by others that we infringe their proprietary technology or other rights could harm our business.

Companies in the storage industry own large numbers of patents, copyrights, trademarks, domain names and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights. Third parties have asserted and may in the future assert claims of infringement of intellectual property rights against us or our end-customers and channel partners. Our standard license and other agreements obligate us to indemnify our end-customers and channel partners against claims that our products infringe the intellectual property rights of third parties, and in some cases this indemnification obligation is uncapped as to the amount of the liability. As the number of products and competitors in our market increases and overlaps occur, and our profile within this market grows, infringement claims may increase. While we intend to increase the size of our patent portfolio, our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may therefore provide little or no deterrence or protection. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that requires us to pay substantial damages, royalties or other fees. Any of these events could harm our business and operating results.

Although third parties may offer a license to their technology or other intellectual property, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could materially and adversely affect our business and operating results. If a third party does not offer us a license to its technology or other intellectual property on reasonable terms, or at all, we could be enjoined from continued use of such intellectual property. As a result, we may be required to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue to offer our affected products or services), effort and expense, and may ultimately not be successful.

If we are unable to hire, retain, train and motivate qualified personnel and senior management, our business could be harmed.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. In particular, we are highly dependent on the contributions of our executive team as well as members of our research and development organization. The loss of any key personnel could make it more difficult to manage our operations and research and development activities, reduce our employee retention and revenue and impair our ability to compete. Although we have entered into employment offer letters with our key personnel, these agreements have no specific duration and constitute at-will employment.

Competition for highly skilled personnel is often intense, especially in the San Francisco Bay Area where we have a substantial presence and need for highly skilled personnel. We may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our stock declines, it may adversely affect our ability to hire or retain highly skilled employees. In addition, since we expense all stock-based compensation, we may periodically change our equity compensation practices, which may include reducing the number of employees eligible for equity awards or reducing the size of equity awards granted per employee. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed.

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If we or our channel partners fail to timely and correctly install our storage products, or if our channel partners face disruptions in their business, our reputation will suffer, our competitive position could be impaired and we could lose end-customers.

In addition to our small team of installation personnel, we rely upon some of our channel partners to install our storage products at our end-customer locations. Although we train and certify our channel partners on the installation of our products, end-customers have in the past encountered installation difficulties with our channel partners. In addition, if one or more of our channel partners suffers an interruption in its business, or experiences delays, disruptions or quality control problems in its operations, our revenue could be reduced and our ability to compete could be impaired. As a significant portion of our sales occur in the last month of a quarter, our end-customers may also experience installation delays following a purchase if we or our channel partners have too many installations in a short period of time. If we or our channel partners fail to timely and correctly install our products, end-customers may not purchase additional products and services from us, our reputation could suffer and our revenue could be reduced. In addition, if our channel partners are unable to correctly install our products, we might incur additional expenses to correctly install our products.

We are exposed to the credit risk of some of our channel partners and direct end-customers, which could result in material losses and negatively impact our operating results.

Some of our channel partners and direct end-customers have experienced financial difficulties in the past. A channel partner or direct end-customer experiencing such difficulties will generally not purchase or sell as many of our products as it would under normal circumstances and may cancel orders. Our typical payment terms are 30 days from invoice. Because of local customs or conditions, payment terms may be longer in some circumstances and markets. In addition, a channel partner or direct end-customer experiencing financial difficulties generally increases our exposure to uncollectible receivables. If any of our channel partners or direct end-customers that represent a significant portion of our total revenue becomes insolvent or suffers a deterioration in its financial or business condition and is unable to pay for our products, our results of operations could be harmed.

Changes in laws, regulations and standards related to data privacy and the Internet, and evolving regulation of cloud computing could harm our business.

Federal, state or foreign government bodies or agencies have in the past adopted, and could in the future adopt, laws and regulations affecting data privacy and the use of the Internet as a commercial medium. Changing laws, regulations and standards applying to the solicitation, collection, processing or use of various information could affect our end-customers’ ability to use and share data, potentially restricting our ability to store, process and share data with our end-customers through our InfoSight platform, and in turn limit our ability to provide real-time and predictive end-customer support. For example, in Europe, the Court of Justice of the European Union has invalidated the “US-EU Safe Harbor framework,” (which created a safe harbor under the European Data Protection Directive for certain European data transfers to the U.S.) and the European Commission and U.S. Department of Commerce have replaced this with the “Privacy Shield” framework. However, the Privacy Shield has been the subject of much criticism from European regulators and it is unclear whether it will be subject to further challenge in European courts. In addition, text of a new EU General Data Protection Regulation has been agreed which will be implemented by May 2018, creating a new data privacy regime in Europe. As such, the privacy landscape in Europe is in a state of flux and any stricter regulation with regards to the solicitation, collection, processing or use of various information (including European data transfers to the U.S.) in the future may impact our end-customers and our business. If we are not able to adjust to changing laws, regulations and standards related to the Internet, our business could be harmed.

Furthermore, concerns regarding data privacy may cause our customers to resist providing the data necessary to allow them to use our services effectively. Even the perception that the privacy of

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personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could limit adoption of our cloud-based solutions. Similarly, if a well-publicized breach of data security at a customer of any other cloud-based data protection or archiving service provider or other major enterprise cloud services provider were to occur, there could be a loss of confidence in the cloud-based storage of sensitive data and information generally.

Some of our products use “open source” software, which may restrict how we use or distribute our products or require that we release the source code of certain software subject to open source licenses.

Some of our products may incorporate software licensed under so-called “free,” “open source” or other similar licenses where the licensed software is made available to the general public under the terms of a specific non-negotiable license. Some open source licenses require that software subject to the license be made available to the public and that any modifications or derivative works based on open source software be licensed in source code form under the same open source licenses. Few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty. We rely on multiple software programmers to design our proprietary technologies, we are not able to exercise complete control over the development methods and efforts of our programmers, and we cannot be certain that our programmers have not incorporated open source software into our products without our knowledge or that they will not do so in the future. Some of our products incorporate third-party software under commercial licenses. We cannot be certain whether such third-party software incorporates open-source software without our knowledge. In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our products, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our products and materially and adversely affect our ability to sustain and grow our business. Many open source licenses include additional obligations and restrictions, such as providing attribution to the authors of the open source software or providing a copy of the applicable open source license to recipients of the open source software. If we distribute products outside the terms of applicable open source licenses, we could be exposed to claims of breach of contract or intellectual property infringement.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business.

We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. In the future, we may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the per share value of our common stock could decline. Furthermore, if we engage in debt financing, the holders of debt would have priority over the holders of common stock, and we may be required to accept terms that restrict our ability to incur additional indebtedness. We may also be required to take other actions that would otherwise be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business and operating results. If we need additional capital and cannot raise it on acceptable terms, we might not be able to, among other things:

☐ develop or enhance our products;

☐ continue to expand our sales and marketing and research and development organizations;

☐ acquire complementary technologies, products or businesses;

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☐ expand operations in the United States or internationally;

☐ hire, train and retain employees; or

☐ respond to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these things could harm our business and operating results.

If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange. We expect the requirements of these rules and regulations will increase our legal, accounting, financial compliance and audit costs, make some activities more challenging, time consuming and costly, and place strain on our personnel, systems and resources. For example, to comply with the requirements, we have taken various actions, such as implementing new internal controls and procedures and hiring accounting and internal audit staff.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. We are continuing to enhance and refine our disclosure controls and other procedures designed to ensure information required to be disclosed in the reports filed with the SEC, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

Our current controls, and any new controls developed, may become inadequate because of changes in external conditions and in our business. Any failure to update, implement and maintain effective internal controls could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting required in periodic reports filed with the SEC under Section 404 of the Sarbanes-Oxley Act. Further, weaknesses in our internal controls may be discovered in the future and result in a restatement of our financial statements for prior periods. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results, or cause us to fail to meet our reporting obligations.

To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and will continue to expend significant resources, including accounting and professional services fees related costs and in providing diligent management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could impair our ability to operate our business. In the event that our disclosure controls and procedures and/or our internal controls are assessed or perceived as inadequate, we are unable to produce timely and accurate financial statements, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, investors may lose confidence in our reported financial results and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange and we may be subject to investigation or sanctions by the SEC.

We have performed system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Commencing with the audit of our fiscal year ended January 31, 2016, we have complied with the attestation requirements of

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Section 404(b) of the Sarbanes-Oxley Act and our independent registered public accounting firm has formally attested to the effectiveness of our internal control over financial reporting.

If we fail to comply with environmental requirements, our business, operating results and reputation could be adversely affected.

We are subject to various environmental laws and regulations including laws governing the hazardous material content of our products and laws relating to the collection of and recycling of electrical and electronic equipment. Examples of these laws and regulations include the European Union, or EU, Restriction of Hazardous Substances Directive, or RoHS, and the EU Waste Electrical and Electronic Equipment Directive, or WEEE, as well as the implementing legislation of the EU member states. Similar laws and regulations have been passed or are pending in China, South Korea, Norway and Japan and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations.

The EU RoHS and similar laws of other jurisdictions ban the use of certain hazardous materials such as lead, mercury and cadmium in the manufacture of electrical equipment, including our products. Currently, the manufacturer of our hardware appliances and our major component part suppliers comply with the EU RoHS requirements. However, if there are changes to this or other laws (or their interpretation) or if new similar laws are passed in other jurisdictions, we may be required to re-engineer our products to use components compatible with these regulations. This re-engineering and component substitution could result in additional costs to us or disrupt our operations or logistics.

The WEEE requires electronic goods producers to be responsible for the collection, recycling and treatment of such products. Changes in interpretation of the directive may increase the burden associated with complying with the directive.

Our failure to comply with past, present and future similar laws could result in reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties and other sanctions, any of which could harm our business and operating results. We also expect that our products will be affected by new environmental laws and regulations on an ongoing basis. To date, our expenditures for environmental compliance have not had a material impact on our results of operations or cash flows, and although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured, which could have a material adverse effect on our business and operating results.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results.

Our sales contracts are primarily denominated in U.S. dollars. In addition, we also invoice in British pound sterling, Australian dollar, Canadian dollar and Euro. A strengthening of the U.S. dollar could increase the real cost of our products to our end-customers outside of the United States, which could adversely affect our operating results. For example, the Brexit referendum has caused significant volatility in global stock markets and currency exchange rate fluctuations, resulting in the strengthening of the U.S. dollar against many foreign currencies. In addition, an increasing portion of our operating expenses is incurred and an increasing portion of our assets is held outside the United States. These operating expenses and assets are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected.

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Our business is subject to the risks of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by man-made problems such as terrorism.

A significant natural disaster, such as an earthquake, fire, flood, or significant power outage could have a material adverse impact on our business or operating results. Both our corporate headquarters and the location where our products are manufactured are located in the San Francisco Bay Area, a region known for seismic activity. In addition, natural disasters could affect our supply chain, manufacturing vendors, or logistics providers’ ability to provide materials and perform services such as manufacturing products or assisting with shipments on a timely basis. In the event we or our service providers are hindered by any of the events discussed above, shipments could be delayed, resulting in missed financial targets, such as revenue and shipment targets, for a particular quarter. Changes in weather where we operate may increase the costs of powering and cooling computer hardware we use to develop software and provide cloud-based services. In addition, acts of terrorism and other geo-political unrest could cause disruptions in our business or the businesses of our supply chain, manufacturers, logistics providers, partners or end-customers, or the economy as a whole. Any disruption in the business of our supply chain, manufacturers, logistics providers, partners or end-customers that impacts sales at the end of a fiscal quarter could have a significant adverse impact on our quarterly results. All of the aforementioned risks may be further increased if we do not implement a disaster recovery plan or our suppliers’ disaster recovery plans prove to be inadequate. To the extent that any of the above should result in delays or cancellations of end- customer orders, or delays in the manufacture, deployment or shipment of our products, our business and operating results would be adversely affected.

The SEC’s conflict minerals rule has caused us to incur additional costs, could limit the supply and increase the cost of certain minerals used in manufacturing our products, and could make us less competitive in our target markets.

The SEC’s conflict minerals rule requires disclosure by public companies of information relating to the origin, source and chain of custody of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule requires companies to obtain sourcing data from suppliers, engage in supply chain due diligence, and file annually with the SEC a specialized disclosure report on Form SD covering the prior calendar year. The rule could limit our ability to source at competitive prices and to secure sufficient quantities of certain minerals (or derivatives thereof) used in the manufacture of our products, specifically tantalum, tin, gold and tungsten, as the number of suppliers that provide conflict-free minerals may be limited. We have and will continue to incur costs associated with complying with the rule, such as costs related to the determination of the origin, source and chain of custody of the minerals used in our products, the adoption of conflict minerals-related governance policies, processes and controls, and possible changes to products or sources of supply as a result of such activities. Within our supply chain, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the data collection and due diligence procedures that we implement, which may harm our reputation. Furthermore, we may encounter challenges in satisfying those end-customers that require that all of the components of our products be certified as conflict free, and if we cannot satisfy these end-customers, they may choose a competitor’s products. We filed our Conflict Minerals Report with the SEC on May 31, 2016.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of January 31, 2017, we had federal and state net operating loss, or NOL, carryforwards of $341.1 million and $247.8 million due to prior period losses, which if not utilized, will begin to expire in 2037. If these NOLs expire unused and are unavailable to offset future income tax liabilities, our profitability may be adversely affected. In addition, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, a corporation that undergoes an

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“ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes and, if we undergo an ownership change in the future, our ability to utilize our NOLs could be further limited by Section 382. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382. Regulatory changes, such as suspension of the use of NOLs, could result in the expiration of our NOLs or otherwise cause them to be unavailable to offset future income tax liabilities. Our NOLs could also be impaired under state law. As a result, we might not be able to utilize a material portion of our NOLs.

Risks Related to Ownership of Our Common Stock

The price of our common stock has been, and is likely to continue to be, volatile and may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price at which you purchased your shares.

The trading price of our common stock has been volatile, and could be subject to wide fluctuations in response to various factors, many of which are beyond our control, including:

• overall performance of the equity markets;

• our operating performance and the performance of other similar companies;

• changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock;

• announcements of technological innovations, new applications or enhancements to services, acquisitions, strategic alliances or significant agreements by us or by our competitors;

• announcements of end-customer additions and end-customer cancellations or delays in end-customer purchases;

• recruitment or departure of key personnel;

• the economy as a whole, market conditions in our industry, and the industries of our end-customers;

• the size of our market float; and

• any other factors discussed in this report.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. We are the target of this type of litigation as described in Note 6. Commitments and Contingencies in the “Notes to the Consolidated Financial Statements” included elsewhere in this report. Securities litigation against us could result in substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

If securities or industry analysts choose to publish or refrain from publishing research, publish inaccurate or unfavorable research, or discontinue publishing research, about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If industry analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline. If one or more of the analysts who cover

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us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price could decline.

Our directors, executive officers and their affiliates have significant influence over us.

Our directors and executive officers, together with their affiliates, beneficially own, in the aggregate, 19% of our outstanding common stock as of March 10, 2017. As a result, these stockholders, acting together, have the ability to significantly influence the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. Accordingly, this concentration of ownership could harm the market price of our common stock by:

☐ delaying, deferring or preventing a change in control of us;

☐ impeding a merger, consolidation, takeover or other business combination involving us; or

☐ discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of us.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our Company more difficult, including the following:

☐ our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;

☐ only our board of directors has the right to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

☐ only our chairman of the board, our chief executive officer, our president or a majority of our board of directors are authorized to call a special meeting of stockholders;

☐ certain litigation against us can only be brought in Delaware;

☐ our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of common stock; and

☐ advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters are located in approximately 165,000 square feet in San Jose, California. The 96-month lease commenced on November 1, 2013. We use this facility for administration, sales and marketing, research and development, end-customer support, and professional services. We also maintain offices in other locations in the United States, including approximately 87,000 square feet in Durham, North Carolina, and internationally, including the United Kingdom, Australia, and various other locations; we use these office spaces primarily for sales and marketing. We believe our existing facilities are adequate to meet our current needs, and we intend to procure additional space as needed as we add employees and expand our operations. We believe that, if required, suitable additional or substitute space would be available to accommodate any such expansion of our operations.

ITEM 3. LEGAL PROCEEDINGS

Between December 17, 2015 and February 5, 2016, three purported securities class actions were filed in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. All three complaints allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, based on allegedly misleading statements regarding the Company’s business and financial results. On March 28, 2016, the Court ordered that the three actions be consolidated under the caption In re Nimble Storage, Inc. Securities Litigation and a consolidated amended complaint was filed on June 10, 2016. Defendants filed a motion to dismiss the consolidated amended complaint on July 25, 2016. The Court granted defendants’ motion to dismiss with leave to amend on December 9, 2016. A second consolidated amended complaint was filed on January 20, 2017. The defendants filed a motion to dismiss the second amended complaint on February 17, 2017. Given the early stage in the litigation, we are unable to estimate a possible loss or range of possible loss.

On February 23, 2016, a purported shareholder derivative action entitled Schwartz v. Vasudevan, et al., or Schwartz, was filed in the United States District Court for the Northern District of California against certain of the Company’s officers and directors. The complaint alleges that defendants breached their fiduciary duties by allowing the Company to make allegedly misleading statements regarding the Company’s business and financial results, and by selling stock while in possession of material non-public information. On April 26, 2016, a purported shareholder derivative action entitled Goldstein v. Vasudevan, et al., or Goldstein, was filed in the United States District Court for the Northern District of California, against certain of the Company’s officers and directors. The complaint makes substantially the same allegations as in the Schwartz matter, alleging causes of action for breach of fiduciary duty, unjust enrichment, waste, and violation of Section 14(a) of the Securities Exchange Act. On June 14, 2016, the Court entered an order pursuant to a stipulation by the parties to consolidate the Schwartz and Goldstein matters under the caption In re Nimble Storage, Inc. Derivative Litigation and to stay the consolidated matter until the In re Nimble Sec. Lit. matter is dismissed with prejudice, or defendants file an answer in the In re Nimble Sec. Lit. matter. Given the early stage in the litigation, we are unable to estimate a possible loss or range of possible loss.

On May 19, 2016, a purported shareholder derivative action entitled Chua v. Vasudevan, et al., or Chua, was filed in the Superior Court of California, County of Santa Clara, against certain of the Company’s officers and directors. The complaint makes substantially the same allegations as the Schwartz and Goldstein matters. On August 8, 2016, the Court entered an order pursuant to a stipulation by the parties to stay the matter until the In re Nimble Sec. Lit. matter is dismissed with prejudice, or defendants file an answer in the In re Nimble Sec. Lit. matter. Given the early stage in the litigation, we are unable to estimate a possible loss or range of possible loss.

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On March 21, 2017, Dennis Huston, a purported stockholder of the Company, filed a putative securities class action complaint in the United States District Court for the Northern District of California against the Company and the individual members of the Company’s board of directors, captioned Huston v. Nimble Storage Inc., et. al., or the Huston Complaint. On March 22, 2017, Paul Parshall, a purported stockholder of the Company, filed a putative securities class action complaint in the United States District Court for the Northern District of California against the Company, Hewlett Packard Enterprise Company, Nebraska Merger Sub, Inc. and the individual members of the Company’s board of directors, captioned Parshall v. Nimble Storage Inc., et. al., or the Parshall Complaint, and together with the Huston Complaint, the Securities Complaints. The Securities Complaints each assert that the Company and certain of the Company’s directors violated sections 14(e), 14(d)(4), and 20(a) of the Securities Exchange Act by making untrue statements of material fact and omitting certain material facts related to the merger, the tender offer and the other transactions contemplated by the merger agreement, or the Transactions, in the Solicitation/Recommendation Statement on Schedule 14D-9 originally filed by the Company with SEC on March 17, 2017. The Securities Complaints allege that the Schedule 14D-9 fails to disclose information concerning the background of the process and events leading up to the proposed transaction, the potential conflicts of interest of the Company’s officers and directors, as well as its financial advisor and the timing and nature of communications, if any, regarding future employment of the Company’s officers and directors. The Parshall Complaint also alleges that the Schedule 14D-9 omits certain information regarding the financial projections and financial analyses by the Company’s financial advisor in support of its fairness opinion and, among other things, that the merger consideration and offer price are inadequate and that certain “deal protection devices” contained in the merger agreement have “locked up” the Transactions and precluded the entry of other bidders. The Huston Complaint seeks, among other things, (i) a declaration that the Schedule 14D-9 is materially false and misleading, (ii) to enjoin the tender offer, (iii) in the event that the Transactions are consummated prior to a final judgment, a rescission thereof or an award of rescissory damages, (iv) money damages and (v) an award of attorneys’ fees and experts’ fees. The Parshall Complaint seeks, among other things, (i) to enjoin the Transactions, (ii) in the event that the Transactions are consummated, a rescission thereof or an award of rescissory damages, (iii) direction to the members of the Company’s board of directors to file a Schedule 14D-9 correcting the alleged misstatements and omissions, (iv) a declaration that the defendants violated sections 14(e), 14(d)(4) and 20(a) of the Securities Exchange Act and (v) an award of attorneys’ fees and experts’ fees. The Company intends to vigorously defend against this litigation.

In addition, from time to time, the Company may become involved in legal proceedings arising in the ordinary course of business.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock has been listed on the New York Stock Exchange under the symbol “NMBL” since December 13, 2013, the date of our initial public offering.

The following table sets forth for the indicated periods the high and low sales prices of our common stock as reported by the New York Stock Exchange.

	High		Low
Year ended January 31, 2016
First quarter	$	27.61	$	20.82
Second quarter	$	32.16	$	23.32
Third quarter	$	27.96	$	21.40
Fourth quarter	$	23.64	$	6.09
Year ended January 31, 2017
First quarter	$	8.43	$	5.64
Second quarter	$	9.49	$	6.18
Third quarter	$	9.90	$	7.14
Fourth quarter	$	9.45	$	7.11

The last reported sale price for our common stock on the New York Stock Exchange was $12.56 per share on March 10, 2017.

Holders of Record

As of March 10, 2017, there were 82 registered stockholders of record of our common stock. Because many of our shares of common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.

Dividend Policy

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. In addition, our credit facility contains restrictions on our ability to pay dividends.

Securities Authorized for Issuance under Equity Compensation Plans

The information concerning our equity compensation plans is incorporated by reference herein to the section of the Proxy Statement entitled “Equity Compensation Plan Information.”

Stock Performance Graph

The following shall not be deemed “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing.

This chart compares the cumulative total return on our common stock with that of the S&P 500 Index and the S&P Information Technology Index from December 13, 2013 (the date our common

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stock commenced trading on the New York Stock Exchange) through January 31, 2017. The chart assumes $100 was invested at the close of market on December 13, 2013, in each of our common stock, the S&P 500 Index and the S&P Information Technology Index, and assumes the reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

Recent Sale of Unregistered Securities and Use of Proceeds

Sale of Unregistered Securities

None.

Use of Proceeds

On December 12, 2013, the SEC declared our registration statement on Form S-1 (File No. 333-191789) effective for our initial public offering, pursuant to which we sold an aggregate of 9,200,000 shares of our common stock at a price to the public of $21.00 per share. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on December 13, 2013 pursuant to Rule 424(b).

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the fourth quarter of the year ended January 31, 2017, we repurchased the following shares of common stock from former employees by exercising our right to repurchase unvested shares upon termination of employment at a price equal to the lower of the fair market value on the repurchase date or the original exercise price paid for such shares:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
November 1, 2016 to November 30, 2016		N/A		N/A		N/A		N/A
December 1, 2016 to December 31, 2016		1,146	$	4.71		1,146	$	5,398
January 1, 2017 to January 31, 2017		N/A		N/A		N/A		N/A

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ITEM 6.SELECTED FINANCIAL DATA

The selected consolidated statements of operations data for the years ended January 31, 2017, 2016 and 2015 and the consolidated balance sheet data as of January 31, 2017 and 2016 are derived from our audited consolidated financial statements included elsewhere in this Form 10-K. The selected consolidated statement of operations data for the years ended January 31, 2014 and 2013 and the consolidated balance sheet data as of January 31, 2015 and 2014 have been derived from our audited consolidated financial statements, which are not included in this Form 10-K. The selected consolidated financial data below should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected in any future period. The selected consolidated financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this Form 10-K.

	Year Ended January 31,
	2017			2016			2015			2014			2013
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue:
Product	$	322,114		$	265,602		$	198,129		$	112,812		$	49,765
Support and service		80,483			56,613			29,544			12,921			4,075
Total revenue		402,597			322,215			227,673			125,733			53,840
Cost of revenue:
Product(1)		110,651			86,506			62,780			36,231			17,266
Support and service(1)		35,002			26,129			16,173			7,980			3,184
Total cost of revenue		145,653			112,635			78,953			44,211			20,450
Total gross profit		256,944			209,580			148,720			81,522			33,390
Operating expenses:
Research and development(1)		116,222			93,990			70,338			35,247			16,135
Sales and marketing(1)		254,919			197,979			143,575			75,107			39,851
General and administrative(1)		42,420			36,247			30,884			13,737			5,168
Total operating expenses		413,561			328,216			244,797			124,091			61,154
Loss from operations		(156,617	)		(118,636	)		(96,077	)		(42,569	)		(27,764	)
Interest income, net		274			240			139			21			32
Other expense, net		(629	)		(656	)		(2,071	)		(150	)		(26	)
Loss before provision for income taxes		(156,972	)		(119,052	)		(98,009	)		(42,698	)		(27,758	)
Provision for income taxes		1,343			1,017			837			425			99
Net loss		(158,315	)		(120,069	)		(98,846	)		(43,123	)		(27,857	)
Accretion of redeemable convertible preferred stock		—			—			—			(36	)		(34	)
Net loss attributable to common stockholders	$	(158,315	)	$	(120,069	)	$	(98,846	)	$	(43,159	)	$	(27,891	)
Net loss per share attributable to common stockholders, basic and diluted	$	(1.85	)	$	(1.52	)	$	(1.37	)	$	(1.61	)	$	(1.53	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		85,541			78,932			72,304			26,772			18,236

(1) Includes stock-based compensation expense as follows:

	Year Ended January 31,
	2017		2016		2015		2014		2013
	(in thousands)
Cost of product revenue	$	2,860	$	1,972	$	1,508	$	232	$	48
Cost of support and service revenue		6,394		4,743		2,380		468		114
Research and development		30,027		23,259		15,137		3,049		874
Sales and marketing		39,636		39,648		27,752		3,674		1,029
General and administrative		16,625		13,682		10,290		1,726		539
Total stock-based compensation expense	$	95,542	$	83,304	$	57,067	$	9,149	$	2,604

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	As of January 31,
	2017		2016		2015		2014
		(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	184,814	$	211,160	$	208,394	$	208,486
Working capital		134,276		176,423		177,384		195,787
Total assets		333,020		331,749		301,574		259,071
Deferred revenue, current and non-current		144,064		114,845		74,446		33,509
Total stockholders’ equity		107,030		155,608		168,572		191,686

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Form 10-K.

Overview

Our mission is to provide our end-customers with the fastest, most reliable access to data. Our Predictive Cloud Platform combines predictive analytics, flash storage and multicloud infrastructure to radically simplify operations in on-pemises data centers and in the cloud. Our products allow end-customers to deploy workloads flexibly on flash arrays, converged infrastructure and the public cloud, without fear of lock-in.

In February 2016, we introduced our AF-Series All Flash arrays, which combine the high performance of flash with the predictive analytics of InfoSight to deliver the performance, scalability and availability required to optimize high-performance applications with deterministic latency requirements. In addition, for All Flash arrays introduced in February 2016, our end-customers that opt to renew three-year support contracts have an option to receive a free controller upgrade that is guaranteed to be faster. In August 2016, we started shipping our AF1000, which is a full-featured entry level All-Flash array. In addition, we also introduced a new family of Adaptive Flash arrays with up to double the performance and up to 40% lower cost of capacity. In October 2016, we announced a strategic partnership with Lenovo, which is aimed at leveraging Lenovo’s global reach to deliver our All Flash arrays and InfoSight predictive analytics to Lenovo customers, with the initial focus being on a joint converged infrastructure solution. In February 2017, we introduced the first multicloud storage service, Nimble Could Volumes, which is the only enterprise-grade multicloud storage service for running applications in Microsoft Azure and Amazon Web Services (AWS).

We typically recognize product revenue upon the shipment of these products. We also offer support and maintenance services including InfoSight, for periods ranging from one to five years, and recognize revenue over the term of the related support and maintenance agreement. In addition, we recognize revenue for our SoD business as services are performed.

Since shipping our first product in August 2010, our end-customer base has grown rapidly. We had over 10,200, 7,500 and 4,900 end-customers as of January 31, 2017, 2016 and 2015, respectively. 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. To continue to grow our business, it is important that we both obtain new end-customers and sell additional products and services to our existing end-customers. For example, in the years ended

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January 31, 2017, 2016 and 2015, approximately 51%, 48% and 41%, respectively, of the dollar amount of orders received were from existing end-customers.

We sell our products through our network of channel partners and also engage our end-customers through our global sales force. Our channel partners act as an extension of our sales force to market our solutions directly to end-customers and do not hold inventory. For certain end-customer orders, products are shipped to resellers, distributors and third-party systems integrators for various reasons, including importing of products to non-U.S. countries and systems integration (including SmartStack integrations) prior to shipment to the end-customer or the end-customer specified locations. We have sales offices located in several international locations, including Australia, England, Germany and Singapore. Our revenue outside North America was 23%, 21% and 18% of our total revenue for the year ended January 31, 2017, 2016 and 2015, respectively, as we increased our sales and marketing efforts on a global basis.

We outsource the manufacturing of our hardware products to our contract manufacturer, Flextronics International Ltd., or Flex, which assembles and tests our products. Our contract manufacturer generally procures the components used in our products directly from third-party suppliers. Inventory and shipment are handled by our third-party logistics partners. Distributors generally handle fulfillment and, in some situations, shipment for our domestic and international end-customers, but do not hold inventory.

We have experienced significant growth in recent periods with total revenue of $402.6 million, $322.2 million and $227.7 million in the years ended January 31, 2017, 2016 and 2015, respectively. Our net loss was $158.3 million, $120.1 million and $98.8 million in the years ended January 31, 2017, 2016 and 2015, respectively. As our sales and end-customer base have grown, we have also experienced growth in our deferred revenue from $74.4 million as of January 31, 2015 to $114.8 million as of January 31, 2016 and to $144.1 million as of January 31, 2017. Our gross margin has been flat at approximately 65% for the years ended January 31, 2016 and 2015 and declined to 64% for the year ended January 31, 2017. As a percentage of total revenue, our operating expenses have declined from 108% for the year ended January 31, 2015 to 102% for the year ended January 31, 2016 and increased to 103% for the year ended January 31, 2017. As a percentage of total revenue, our loss from operations has declined from (42%) for the year ended January 31, 2015 to (37%) for the year ended January 31, 2016 and increased to (39%) for the year ended January 31, 2017. As a percentage of total revenue, our non-GAAP operating loss has declined from (17%) for the year ended January 31, 2015 to (11%) for the year ended January 31, 2016 and increased to (15%) for the year ended January 31, 2017. A reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures is provided under “—Key Business Metrics”.

As a consequence of the rapidly evolving nature of our business and our limited operating history, we believe that period-to-period comparisons of revenue and other operating results, including gross margin, operating expenses, loss from operations and non-GAAP operating loss as a percentage of our total revenue, are not necessarily meaningful and should not be relied upon as indications of future performance. Although we have experienced significant percentage growth in our total revenue, we do not believe that our historical growth rates are likely to be sustainable or indicative of future growth.

Since our founding, we have invested heavily in growing our business, particularly in research and development and sales and marketing. We intend to continue to invest in development of our solutions and sales and marketing programs to drive sustainable long-term growth.

The successful growth of our business will depend on our ability to continue to expand our end-customer base by gaining new end-customers and in turn growing revenue from our existing end-customer base. As a result, we intend to hire additional sales and marketing personnel. While these areas represent significant opportunities for us, they also pose risks and challenges that we must

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successfully address in order to sustain the growth of our business and improve our operating results. For example, our investments in these areas might not result in a significant increase in productive sales personnel or channel partners. If this were to occur, we might not be able to expand our base of new end-customers or succeed in selling additional products to existing end-customers, which would affect our ability to continue to grow our revenue.

Our future performance will also depend on our ability to continue to innovate, improve functionality in our products and adapt to new technologies or changes to existing technologies. Accordingly, we also intend to continue to invest in our research and development activities. It is difficult for us to predict the timing and impact that these investments will have on future revenue. Additionally, we face significant competition in the storage market, which makes it more important that the investments we make in our business are successful. Potential weak global economic conditions, particularly market and financial uncertainty in the United States, Europe, and Asia or a reduction in spending even if economic conditions improve, could adversely impact our business, financial condition and operating results. If we are unable to address these challenges, our business could be adversely affected.

Key Business Metrics

We monitor the key business metrics set forth below in managing our business. We discuss revenue and gross margin below under “—Components of Operating Results.” Deferred revenue, cash flow from operating activities, non-GAAP free cash flow, non-GAAP net loss, non-GAAP operating loss and adjusted EBITDA are discussed immediately below the following table, with a reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures.

	Year Ended or as of January 31,
	2017			2016			2015
	(dollars in thousands)
Total revenue	$	402,597		$	322,215		$	227,673
Year-over-year percentage increase		25	%		42	%		81	%
Gross margin		63.8	%		65.0	%		65.3	%
Deferred revenue, current and non-current		144,064			114,845			74,446
Net cash provided by (used in) operating activities		(15,596	)		5,755			5,376
Net loss		(158,315	)		(120,069	)		(98,846	)
Non-GAAP net loss		(62,773	)		(36,765	)		(41,779	)
Loss from operations		(156,617	)		(118,636	)		(96,077	)
Non-GAAP operating loss		(61,075	)		(35,332	)		(39,010	)
Loss from operations as a percentage of total revenue		-39	%		-37	%		-42	%
Non-GAAP operating loss as a percentage of total revenue		-15	%		-11	%		-17	%
Adjusted EBITDA		(39,108	)		(20,390	)		(32,328	)
Non-GAAP free cash flow		(39,524	)		(23,668	)		(15,444	)

Deferred Revenue

Our deferred revenue consists of amounts that have been either invoiced or prepaid but have not yet been recognized as revenue as of the period end. The majority of our deferred revenue consists of the unrecognized portion of revenue from sales of our support and service contracts. We monitor our deferred revenue balance because it represents a portion of revenue to be recognized in future periods.

Cash Flow from Operating Activities

We monitor cash flow from operating activities as a measure of our overall business performance. Our cash flow from operating activities is driven in large part by our net losses. Monitoring cash flow

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from operating activities enables us to analyze our financial performance without the non-cash effects of certain items such as depreciation and amortization and stock-based compensation costs, thereby allowing us to better understand and manage the cash needs of our business.

Non-GAAP Free Cash Flow

We monitor non-GAAP free cash flow as a measure of our overall business performance. We define non-GAAP free cash flow as our net cash provided by (used in) operating activities, less the cash outflow used to purchase property and equipment. Monitoring non-GAAP free cash flow enables us to analyze our ability to generate cash after accounting for capital expenditures, thereby allowing us to better understand and manage the cash needs of our business. We have provided reconciliations below of non-GAAP free cash flow to net cash provided by (used in) operating activities, the most directly comparable U.S. GAAP financial measure.

Non-GAAP Net Loss and Non-GAAP Operating Loss

To provide investors with additional information regarding our financial results, we have disclosed in this Form 10-K non-GAAP net loss and non-GAAP operating loss. We define non-GAAP net loss as our net loss adjusted to exclude stock-based compensation. We define non-GAAP operating loss as our operating loss adjusted to exclude stock-based compensation. We have provided reconciliations below of non-GAAP net loss to net loss and non-GAAP operating loss to operating loss, the most directly comparable U.S. GAAP financial measures.

Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed in this Form 10-K adjusted EBITDA, a non-GAAP financial measure. We define adjusted EBITDA as our net loss, adjusted to exclude stock-based compensation, interest income, provision for income taxes and depreciation and amortization. We have provided a reconciliation below of adjusted EBITDA to net loss, the most directly comparable U.S. GAAP financial measure.

We have also included non-GAAP net loss, non-GAAP operating loss and adjusted EBITDA in this Form 10-K because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operational and compensation plans. In particular, the exclusion of certain expenses in calculating non-GAAP net loss, non-GAAP operating loss and adjusted EBITDA can provide useful measures for period-to-period comparisons of our core business. Accordingly, we believe that non-GAAP net loss, non-GAAP operating loss and adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of non-GAAP net loss, non-GAAP operating loss, adjusted EBITDA and non-GAAP free cash flow has limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

☐ Non-GAAP net loss, non-GAAP operating loss and adjusted EBITDA do not consider the potentially dilutive impact of equity-based compensation, which is an ongoing expense for us;

☐ Adjusted EBITDA does not reflect cash capital expenditure requirements for additional capital expenditures;

☐ Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

☐ Non-GAAP free cash flow excludes cash provided by financing and investing activities, except for cash used for purchase of property and equipment; and

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☐ Other companies, including companies in our industry, may calculate non-GAAP net loss, non-GAAP operating loss, adjusted EBITDA and non-GAAP free cash flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider non-GAAP net loss, non-GAAP operating loss, adjusted EBITDA and non-GAAP free cash flow alongside other financial performance measures, including various cash flow metrics, net loss and our other U.S. GAAP results.

Reconciliations of non-GAAP net loss and adjusted EBITDA to net loss, non-GAAP operating loss to loss from operations and non-GAAP free cash flow to GAAP net cash provided by (used in) operating activities are provided below:

	Year Ended January 31,
	2017			2016			2015
	(in thousands)
Net loss	$	(158,315	)	$	(120,069	)	$	(98,846	)
Stock-based compensation expense		95,542			83,304			57,067
Non-GAAP net loss	$	(62,773	)	$	(36,765	)	$	(41,779	)
Interest income, net		(274	)		(240	)		(139	)
Provision for income taxes		1,343			1,017			837
Depreciation and amortization		22,596			15,598			8,753
Adjusted EBITDA	$	(39,108	)	$	(20,390	)	$	(32,328	)
Loss from operations	$	(156,617	)	$	(118,636	)	$	(96,077	)
Stock-based compensation expense		95,542			83,304			57,067
Non-GAAP operating loss	$	(61,075	)	$	(35,332	)	$	(39,010	)
GAAP net cash provided by (used in) operating activities	$	(15,596	)	$	5,755		$	5,376
Purchase of property and equipment		(23,928	)		(29,423	)		(20,820	)
Non-GAAP free cash flow	$	(39,524	)	$	(23,668	)	$	(15,444	)

Components of Operating Results

Revenue

Our total revenue is comprised of the following:

Product Revenue.    We generate the substantial majority of our product revenue from the sales of our storage products. It is our practice to identify an end-customer from our distributors prior to shipment. In the majority of instances, products are shipped directly to the end-customers. For certain end-customer orders, products are shipped to resellers, distributors and third-party systems integrators for various reasons including importing of products to non-U.S. countries and systems integration (including SmartStack integrations) prior to shipment to the end-customer or the end-customer specified location. Assuming all other revenue recognition criteria have been met, we generally recognize revenue upon shipment from our origin location in California, as title and risk of loss are transferred at that time. For certain distributors, title and risk of loss is transferred upon delivery to the end-customers and revenue is recognized after delivery has been completed. Our arrangements with distributors do not contain rights of return, subsequent price discounts, price protection or other allowances for shipments completed.

Support and Service Revenue.    We generate our support and service revenue primarily from support and service contracts, which include our InfoSight cloud-based management service. The majority of our product sales are bundled with support and service contracts with terms ranging from one to five years. We recognize revenue from support and service contracts over the contractual

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service period. Our support and service revenue also includes our Storage on Demand, or SoD, service offering. Under this pay-as-you-go subscription model, end-customers are generally billed on a monthly basis based on the amount of data consumed during the month. The SoD service offering includes all support services including InfoSight. Revenue is recognized as services are performed. As a percentage of total revenue, we expect our support and service revenue to increase as we add new end-customers and renew existing support and service contracts, and our end-customers use more of our SoD service.

See “—Critical Accounting Policies and Estimates, Revenue Recognition” for further information on our revenue recognition policy.

Cost of Revenue

Our total cost of revenue is comprised of the following:

Cost of Product Revenue.    Cost of product revenue primarily includes costs paid to our third-party contract manufacturer, which includes the costs of our components, and personnel costs associated with our manufacturing operations. Personnel costs consist of salaries, benefits, bonuses and stock-based compensation. Our cost of product revenue also includes inventory related expenses, freight and allocated overhead costs. Overhead costs consist of certain facilities, depreciation, benefits and IT costs. We expect our cost of product revenue to increase as our product revenue increases.

Cost of Support and Service Revenue.    Cost of support and service revenue includes personnel costs associated with our global end-customer support organization, operation and administration of our service depots, cost from service inventory reserves and allocated overhead costs. Personnel costs consist of salaries, benefits, bonuses and stock-based compensation. Overhead costs consist of certain facilities, depreciation, benefits and IT costs. We expect our cost of support and service revenue to increase as our installed end-customer base grows.

Gross Margin

Gross margin, or gross profit as a percentage of total revenue, has been and will continue to be affected by a variety of factors, including the average sales price of our storage products and related support and service contracts, manufacturing and overhead costs including personnel costs, component costs, the mix of products sold, sales incentive payments paid to our channel partners, and our ability to leverage our existing infrastructure as we continue to grow. We expect our gross margins to fluctuate over time depending on the factors described above.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expense. Personnel costs are the most significant component of our operating expenses.

Research and Development.    Research and development expense consists primarily of personnel costs and allocated overhead and also includes depreciation expense from property and equipment purchases, and consulting and other costs to support our development activities. We have expensed all research and development costs as incurred. We expect research and development expense to continue to increase in absolute dollars as we continue to invest in our research and product development efforts to enhance our product capabilities, expand our product offerings and access new end-customer markets, although such expense may fluctuate as a percentage of total revenue.

Sales and Marketing.    Sales and marketing expense consists primarily of personnel costs, sales commission costs and allocated overhead. We expense sales commission costs as incurred.

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Sales and marketing expense also includes costs for recruiting and training channel partners, market development programs, promotional and other marketing activities, travel, office equipment, depreciation of proof-of-concept evaluation units, amortization of intangible asset and outside consulting costs. We expect sales and marketing expense to continue to increase in absolute dollars as we expand our sales and marketing headcount in all markets and expand our international operations, although such expense may fluctuate as a percentage of total revenue.

General and Administrative.    General and administrative expense consists of personnel costs, professional services and allocated overhead. General and administrative personnel include our executive, finance, human resources, investor relations, compliance, administrative, IT, facilities and legal personnel. Professional services consist primarily of legal, auditing, accounting and other consulting costs. We expect general and administrative expense to continue to increase in absolute dollars as we have recently incurred, and expect to continue to incur, additional general and administrative expenses as we grow our operations and operate as a public company, including higher legal, corporate insurance and accounting expenses.

Interest Income and Other Expense, Net

Interest income consists of interest earned on our cash and cash equivalent balances. We have historically invested our cash in money-market funds. We expect interest income, which has not been historically significant to our operations, to vary each reporting period depending on our average investment balances during the period, types and mix of investments and market interest rates.

Other expense, net consists primarily of gains and losses from foreign currency transactions and revaluation of non-U.S. dollar denominated assets and liabilities.

Provision for Income Taxes

Provision for income taxes consists primarily of state income taxes in the United States and income taxes in certain foreign jurisdictions in which we conduct business. We provide a full valuation allowance for U.S. deferred tax assets, which includes net operating loss, or NOL, carryforwards and tax credits related primarily to research and development. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that the assets will not be realized based on our history of losses.

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Results of Operations

The following tables summarize our consolidated results of operations for the periods presented and as a percentage of our total revenue for those periods. The period-to-period comparison of results is not necessarily indicative of results for future periods.

	Year Ended January 31,
	2017			2016			2015
	(in thousands)
Consolidated Statements of Operations Data:
Revenue:
Product	$	322,114		$	265,602		$	198,129
Support and service		80,483			56,613			29,544
Total revenue		402,597			322,215			227,673
Cost of revenue:
Product(1)		110,651			86,506			62,780
Support and service(1)		35,002			26,129			16,173
Total cost of revenue		145,653			112,635			78,953
Total gross profit		256,944			209,580			148,720
Operating expenses:
Research and development(1)		116,222			93,990			70,338
Sales and marketing(1)		254,919			197,979			143,575
General and administrative(1)		42,420			36,247			30,884
Total operating expenses		413,561			328,216			244,797
Loss from operations		(156,617	)		(118,636	)		(96,077	)
Interest income, net		274			240			139
Other expense, net		(629	)		(656	)		(2,071	)
Loss before provision for income taxes		(156,972	)		(119,052	)		(98,009	)
Provision for income taxes		1,343			1,017			837
Net loss	$	(158,315	)	$	(120,069	)	$	(98,846	)

(1) Includes stock-based compensation expense as follows:

	Year Ended January 31,
	2017		2016		2015
	(in thousands)
Cost of product revenue	$	2,860	$	1,972	$	1,508
Cost of support and service revenue		6,394		4,743		2,380
Research and development		30,027		23,259		15,137
Sales and marketing		39,636		39,648		27,752
General and administrative		16,625		13,682		10,290
Total stock-based compensation expense	$	95,542	$	83,304	$	57,067

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Comparison of the Years Ended January 31, 2017 and 2016

Revenue

	Year Ended January 31,
	2017		2016		Change
	Amount		Amount		Amount		%
	(dollars in thousands)
Revenue:
Product	$	322,114	$	265,602	$	56,512		21	%
Support and service		80,483		56,613		23,870		42
Total revenue	$	402,597	$	322,215	$	80,382		25	%

Total revenue increased by $80.4 million, or 25%, during the year ended January 31, 2017 compared to the year ended January 31, 2016. The revenue growth reflects increased demand for our storage products and related support and service. The increase in product revenue was driven by higher sales of our All Flash arrays and new family of Adaptive Flash arrays to existing and new end-customers, faster growth from enterprises and cloud service providers, larger deployments, and international expansion. We acquired over 2,600 new end-customers during the year ended January 31, 2017. The increase in support and service revenue, which includes our maintenance and InfoSight cloud-based predictive analytics service, was driven by higher product sales and the resulting expansion in our installed base of end-customers.

Cost of Revenue and Gross Margin

	Year Ended January 31,
	2017			2016			Change
	Amount			Amount			Amount		%
	(dollars in thousands)
Cost of revenue:
Product	$	110,651		$	86,506		$	24,145		28	%
Support and service		35,002			26,129			8,873		34
Total cost of revenue	$	145,653		$	112,635		$	33,018		29	%
Gross margin		63.8	%		65.0	%

Cost of revenue increased by $33.0 million, or 29%, during the year ended January 31, 2017 compared to the year ended January 31, 2016. The increase in cost of product revenue was driven primarily by higher product sales. The increase in cost of product revenue was also impacted by higher costs of $1.9 million in our manufacturing operations, primarily driven by personnel costs associated with increased headcount. The increase in cost of support and service revenue was primarily attributable to higher costs of $6.9 million in our global end-customer support organization, primarily driven by personnel costs associated with increased headcount.

Gross margin decreased from 65.0% during the year ended January 31, 2016 to 63.8% during the year ended January 31, 2017, mainly due to lower product gross margin, partially offset by higher support and service gross margin. Product gross margin decreased by 1.8 percentage points from 67.4% to 65.6% during the year ended January 31, 2017 compared to the year ended January 31, 2016. The decrease in product gross margin from the prior year was mainly driven by changes in pricing and product mix. Support and service gross margin increased by 2.7 percentage points from 53.8% to 56.5% during the year ended January 31, 2017 compared to the year ended January 31, 2016. The improvements in support and service gross margin from the prior year were driven by

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increased revenue from our larger base of end-customers and economies of scale from our support organization, enabled by the automation capabilities of InfoSight.

Operating Expenses

	Year Ended January 31,
	2017		2016		Change
	Amount		Amount		Amount			%
	(dollars in thousands)
Operating expenses:
Research and development	$	116,222	$	93,990	$	22,232			24	%
Sales and marketing		254,919		197,979		56,940			29
General and administrative		42,420		36,247		6,173			17
Total operating expenses	$	413,561	$	328,216	$	85,345			26	%
Includes stock-based compensation expense of:
Research and development	$	30,027	$	23,259	$	6,768			29	%
Sales and marketing		39,636		39,648		(12	)		(0	)
General and administrative		16,625		13,682		2,943			22
Total	$	86,288	$	76,589	$	9,699			13	%

Research and Development

Research and development expense increased by $22.2 million, or 24%, during the year ended January 31, 2017 compared to the year ended January 31, 2016. The increase was primarily due to a $15.7 million increase in personnel costs, including stock-based compensation, resulting from headcount growth to support further development of our storage products, a $3.2 million increase in depreciation expense from property and equipment purchases as we further invested in our laboratory and test infrastructure, and a $1.5 million increase in allocated overhead resulting from higher facilities utilization.

Sales and Marketing

Sales and marketing expense increased by $56.9 million, or 29%, during the year ended January 31, 2017 compared to the year ended January 31, 2016. The increase was primarily due to a $20.4 million increase in personnel costs, including stock-based compensation, resulting from headcount growth, a $16.4 million increase in commission expense related to higher sales, and a $6.2 million increase in advertising and tradeshow expenses.

General and Administrative

General and administrative expense increased by $6.2 million, or 17%, during the year ended January 31, 2017 compared to the year ended January 31, 2016. The increase was primarily due to a $6.0 million increase in personnel costs, including stock-based compensation, resulting from headcount growth.

Interest Income and Other Expense, Net

	Year Ended January 31,
	2017			2016			Change
	Amount			Amount			Amount		%
	(dollars in thousands)
Interest income, net	$	274		$	240		$	34		14	%
Other expense, net		(629	)		(656	)		27		(4	)%

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Other expense, net consisted primarily of gains (losses) from the remeasurement of our foreign currency denominated assets. The decrease in the losses from the remeasurement of our foreign currency denominated assets during the year ended January 31, 2017 compared to the year ended January 31, 2016 resulted from the realized gains from our foreign currency forward contracts, partially offset by the net remeasurement losses from the appreciation of the U.S. dollar against foreign currencies. We entered into foreign currency forward contracts that generally matured within 30 days to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables. For the years ended January 31, 2017 and 2016, we recognized $0.1 million and $0.2 million in realized gains related to foreign currency forward contracts, respectively.

Provision for Income Taxes

	Year Ended January 31,
	2017		2016		Change
	Amount		Amount		Amount		%
	(dollars in thousands)
Provision for income taxes	$	1,343	$	1,017	$	326		32	%

The increase in the provision for income taxes during the year ended January 31, 2017 compared to the year ended January 31, 2016 was primarily due to an increase in foreign taxes related to inter-company cost plus agreements with our international subsidiaries.

Comparison of the Years Ended January 31, 2016 and 2015

Revenue

	Year Ended January 31,
	2016		2015		Change
	Amount		Amount		Amount		%
	(dollars in thousands)
Revenue:
Product	$	265,602	$	198,129	$	67,473		34	%
Support and service		56,613		29,544		27,069		92
Total revenue	$	322,215	$	227,673	$	94,542		42	%

Total revenue increased by $94.5 million, or 42%, during the year ended January 31, 2016 compared to the year ended January 31, 2015. The revenue growth reflects increased demand for our storage products and related support and service, partially offset by lower revenue from the foreign currency impact on our non-U.S. dollar billings. The increase in product revenue was driven by higher sales of our storage products to existing and new end-customers, expansion into Global 5000 enterprises and cloud service providers, and international expansion. We acquired 2,601 new end-customers during the year ended January 31, 2016. The increase in support and service revenue was driven by higher product sales and the resulting expansion of our installed base of end-customers.

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Cost of Revenue and Gross Margin

	Year Ended January 31,
	2016			2015			Change
	Amount			Amount			Amount		%
	(dollars in thousands)
Cost of revenue:
Product	$	86,506		$	62,780		$	23,726		38	%
Support and service		26,129			16,173			9,956		62
Total cost of revenue	$	112,635		$	78,953		$	33,682		43	%
Gross margin		65.0	%		65.3	%

Cost of revenue increased by $33.7 million, or 43%, during the year ended January 31, 2016 compared to the year ended January 31, 2015. The increase in cost of product revenue was driven primarily by higher product sales. The increase in cost of product revenue was also impacted by higher costs of $1.6 million in our manufacturing operations, primarily driven by personnel costs, including stock-based compensation, associated with increased headcount and an increase in allocated overhead resulting from higher facilities utilization. The increase in cost of support and service revenue was primarily attributable to higher costs of $7.6 million in our global end-customer support organization primarily driven by personnel costs, including stock-based compensation, associated with increased headcount and an increase in allocated overhead resulting from higher facilities utilization.

Gross margin decreased from 65.3% during the year ended January 31, 2015 to 65.0% during the year ended January 31, 2016, mainly due to lower product gross margin and the unfavorable impact of fluctuations in foreign currencies, partially offset by higher support and service gross margin. Product gross margin decreased by 0.9 percentage points from 68.3% to 67.4% during the year ended January 31, 2016 compared to the year ended January 31, 2015. The decrease in product gross margin from the prior year was mainly driven by unfavorable fluctuations in foreign currencies. Support and service gross margin increased by 8.5 percentage points from 45.3% to 53.8% during the year ended January 31, 2016 compared to the year ended January 31, 2015. The improvements in support and service gross margin from the prior year were driven by increased revenue from our larger base of end-customers and economies of scale from our support organization, enabled by the automation capabilities of InfoSight.

Operating Expenses

	Year Ended January 31,
	2016		2015		Change
	Amount		Amount		Amount		%
	(dollars in thousands)
Operating expenses:
Research and development	$	93,990	$	70,338	$	23,652		34	%
Sales and marketing		197,979		143,575		54,404		38
General and administrative		36,247		30,884		5,363		17
Total operating expenses	$	328,216	$	244,797	$	83,419		34	%
Includes stock-based compensation expense of:
Research and development	$	23,259	$	15,137	$	8,122		54	%
Sales and marketing		39,648		27,752		11,896		43
General and administrative		13,682		10,290		3,392		33
Total	$	76,589	$	53,179	$	23,410		44	%

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Research and Development

Research and development expense increased by $23.7 million, or 34%, during the year ended January 31, 2016 compared to the year ended January 31, 2015. The increase was primarily due to a $17.9 million increase in personnel costs, including stock-based compensation, resulting from headcount growth to support further development of our storage products, a $3.2 million increase in depreciation expense from property and equipment purchases as we further invested in our laboratory and test infrastructure, and a $1.9 million increase in allocated overhead resulting from higher facilities utilization.

Sales and Marketing

Sales and marketing expense increased by $54.4 million, or 38%, during the year ended January 31, 2016 compared to the year ended January 31, 2015. The increase was primarily due to a $32.7 million increase in personnel costs, including stock-based compensation, resulting from headcount growth, a $7.1 million increase in commission expense related to higher sales, a $5.1 million increase in advertising and tradeshow expenses, and a $2.5 million increase in allocated overhead resulting from higher facilities utilization.

General and Administrative

General and administrative expense increased by $5.4 million, or 17%, during the year ended January 31, 2016 compared to the year ended January 31, 2015. The increase was primarily due to a $5.3 million increase in personnel costs, including stock-based compensation, resulting from headcount growth.

Interest Income and Other Expense, Net

	Year Ended January 31,
	2016			2015			Change
	Amount			Amount			Amount		%
	(dollars in thousands)
Interest income, net	$	240		$	139		$	101		73	%
Other expense, net		(656	)		(2,071	)		1,415		(68	)%

Other expense, net consisted primarily of gains (losses) from the remeasurement of our foreign currency denominated assets. The decrease in the losses from the remeasurement of our foreign currency denominated assets during the year ended January 31, 2016 compared to the year ended January 31, 2015 resulted from realized gains from our foreign currency forward contracts, partially offset by the appreciation of the U.S. dollar against foreign currencies. We entered into foreign currency forward contracts that generally mature within 30 days to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables. For the year ended January 31, 2016 and 2015, we recognized $0.2 million and $0.7 million in realized gains related to foreign currency forward contracts, respectively.

Provision for Income Taxes

	Year Ended January 31,
	2016		2015		Change
	Amount		Amount		Amount		%
	(dollars in thousands)
Provision for income taxes	$	1,017	$	837	$	180		22	%

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The increase in the provision for income taxes during the year ended January 31, 2016 compared to the year ended January 31, 2015 was primarily due to an increase in foreign taxes related to inter-company cost plus agreements with our international subsidiaries.

Liquidity and Capital Resources

	As of January 31,
	2017		2016		2015
	(in thousands)
Cash and cash equivalents	$	184,814	$	211,160	$	208,394

	Year Ended January 31,
	2017			2016			2015
	(dollars in thousands)
Cash provided by (used in) operating activities	$	(15,596	)	$	5,755		$	5,376
Cash used in investing activities		(24,872	)		(25,514	)		(20,903	)
Cash provided by financing activities		14,228			23,018			15,684
Foreign exchange impact on cash and cash equivalents		(106	)		(493	)		(249	)
Net increase (decrease) in cash and cash equivalents	$	(26,346	)	$	2,766		$	(92	)
Other Financial and Operational Metrics:
Days Sales Outstanding(1)		49			43			36
Days Sales Inventory(2)		51			48			42

(1) Average days sales outstanding. This is calculated by taking the average beginning and ending accounts receivable divided by billings for the periods presented multiplied by the number of days in the year.

(2) Average number of days we hold our inventory before sale. This is calculated by taking the average beginning and ending inventory divided by total cost of revenue excluding stock-based compensation for the periods presented multiplied by the number of days in the year.

At January 31, 2017, our cash and cash equivalents were $184.8 million, of which approximately $6.5 million was held outside of the United States and not immediately available to fund domestic operations and obligations. We do not enter into investments for trading or speculative purposes.

In October 2013, we entered into an agreement with Wells Fargo Bank, National Association, or Wells Fargo, to provide a secured revolving credit facility, or the Credit Facility, that allows us to borrow up to $15.0 million for general corporate purposes. There was a $0.9 million reduction of the available line related to a letter of credit issued in July 2014 for our facility lease in North Carolina. In April 2015, we increased our letter of credit from $0.9 million to $1.1 million, with the landlord named as the beneficiary. In January 2016, there was a $3.9 million reduction of the available line related to a letter of credit issued for our headquarters facility lease in California, with the landlord named as the beneficiary. This replaced the letter of credit with another bank and was collateralized with our restricted cash. As a result, the restricted cash was released to our cash balance and presented as an investing cash inflow during the year ended January 31, 2016. In March 2016, there was a $0.5 million reduction of the available line of credit related to a letter of credit issued as collateral to secure various business operating activities. In November 2016, there was a $0.2 million reduction of the available line of credit related to a letter of credit issued for our facility lease in Australia, with the landlord named as the beneficiary. As of January 31, 2017, the remaining Credit Facility available for borrowings was $9.3 million. In July 2016, the Company extended the term of the Credit Facility, which now expires in August 2018. As of January 31, 2017, no amounts had been drawn against the Credit Facility and we were in compliance with all covenants associated with the Credit Facility.

We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. Our future capital requirements will depend on

51

many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, and the continuing market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Operating Activities

During the year ended January 31, 2017, cash used in operating activities was $15.6 million. The primary factors affecting our cash flows from operations during this period were our net loss of $158.3 million, partially offset by non-cash charges of $95.5 million for stock-based compensation, $22.6 million for depreciation and amortization of our property and equipment and intangible asset, $0.6 million for provision for excess and obsolete inventories, and net cash outflows of $23.8 million provided by changes in our operating assets and liabilities. The primary driver of the changes in operating assets and liabilities was a $29.2 million increase in deferred revenue due to higher sales of support and service contracts, and a $20.7 million increase in accounts payable and accrued liabilities as a result of an increase in inventory purchases and timing of payments. This was partially offset by a $13.9 million increase in accounts receivable, a $9.0 million increase in inventories and a $3.6 million increase in prepaid expenses. We expect operating cash flows to continue to be affected by our net loss as well as the timing of sales and collections.

During the year ended January 31, 2016, cash provided by operating activities was $5.8 million. The primary factors affecting our cash flows from operations during this period were our net loss of $120.1 million, partially offset by non-cash charges of $83.3 million for stock-based compensation, $15.6 million for depreciation of our property and equipment, and net cash flows of $26.9 million provided by changes in our operating assets and liabilities. The primary driver of the changes in operating assets and liabilities was a $40.4 million increase in deferred revenue due to higher sales of support and service contracts and a $6.7 million increase in accounts payable and accrued liabilities as a result of an increase in inventory purchases and timing of payments. This was partially offset by the increase of $15.2 million in accounts receivable which was attributable to increased sales, a $3.9 million increase in inventories, a $0.8 million increase in short term restricted cash, and a $0.7 million increase in prepaid expenses.

During the year ended January 31, 2015, cash provided by operating activities was $5.4 million. The primary factors affecting our cash flows from operations during this period were our net loss of $98.8 million, partially offset by non-cash charges of $57.1 million for stock-based compensation, $8.8 million for depreciation of our property and equipment, and net cash flows of $38.5 million provided by changes in our operating assets and liabilities. The primary driver of the changes in operating assets and liabilities was a $40.9 million increase in deferred revenue due to higher sales of support and service contracts, and a $23.2 million increase in accounts payable and accrued liabilities as a result of an increase in inventory purchases and timing of payments. This was partially offset by the increase of $17.6 million in accounts receivable which was attributable to increased sales, a $6.2 million increase in inventories as a result of increased purchases to meet higher overall demand for our storage products, and a $1.8 million increase in prepaid expenses.

Investing Activities

Cash used in investing activities during the year ended January 31, 2017 was $24.9 million, primarily resulting from $23.9 million for purchase of property and equipment due to an increase in expansion of our research and development for our new products, including our new All Flash arrays, and overall infrastructure. We expect to continue to make such purchases of property and equipment to support the continued growth of our business.

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Cash used in investing activities during the year ended January 31, 2016 was $25.5 million, primarily resulting from $29.4 million for purchase of property and equipment due to an increase in expansion of our research and development for our new products including our new All Flash arrays and overall infrastructure. This was partially offset by the release of the letter of credit which was a prior condition of our facility lease agreement on our corporate headquarters.

Cash used in investing activities during the year ended January 31, 2015 was $20.9 million, primarily resulting from $20.8 million used to purchase property and equipment due to an increase in expansion of our research and development and leasehold improvements related to our corporate headquarters and other facility locations.

Financing Activities

During the year ended January 31, 2017, financing activities provided $14.2 million in cash, primarily resulting from $10.1 million of proceeds from the issuance of common stock under our 2013 Employee Stock Purchase Plan, or ESPP, and $4.1 million of proceeds from the exercise of stock options, net of repurchases of unvested early exercised shares.

During the year ended January 31, 2016, financing activities provided $23.0 million in cash, primarily resulting from $14.3 million of proceeds from the issuance of common stock under our ESPP, and $8.1 million of proceeds from the exercise of stock options, net of repurchases of unvested early exercised shares.

During the year ended January 31, 2015, financing activities provided $15.7 million in cash, primarily resulting from $9.2 million of proceeds from the issuance of common stock under our ESPP, and $7.7 million of proceeds from the exercise of stock options, net of repurchases of unvested early exercised shares, partially offset by $1.3 million payment of issuance costs related to our initial public offering in December 2013.

Contractual Obligations and Commitments

The following summarizes our contractual obligations and commitments as of January 31, 2017:

	Payments Due by Period
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
	(in thousands)
Operating leases(1)	$	36,770	$	8,509	$	14,566	$	13,139	$	556
Purchase commitments(2)		51,320		51,320		—		—		—
License commitments(3)		7,013		4,399		2,614		—		—
Total	$	95,103	$	64,228	$	17,180	$	13,139	$	556

(1) We have several operating leases in the United States and at various international locations. This includes a 96-month lease commenced on November 1, 2013 for a 164,608 square feet facility for our headquarters in San Jose, California, and an 84-month lease commenced on August 1, 2014 for an 86,895 square feet facility for our North Carolina office. Future minimum commitments under these operating leases are as follows (in thousands):

Years ending January 31:
2018	$	8,509
2019		7,300
2020		7,266
2021		7,149
2022		5,990
Thereafter		556
	$	36,770

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(2) As of January 31, 2017, we had purchase commitments of $51.3 million to fulfill inventory requirements.

(3) During the year ended January 31, 2017, we entered into several additional non-cancelable one to three-year software license and service agreements for the internal use of software and services for desktop applications, and productivity and customer relationship management.

Off-Balance Sheet Arrangements

As of January 31, 2017 and 2016, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Segment and Geographic Information

We have one primary business activity and operate in one reportable segment. See Note 10. Segments in the “Notes to Consolidated Financial Statements” in Item 8 of Part II of this Form 10-K for a full description.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

Our sales contracts are primarily denominated in U.S. dollars with a number of contracts denominated in foreign currencies. A portion of our operating expenses are incurred outside the United States and denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound sterling, Australian dollar, Canadian dollar and Euro.

The combination of our higher non-U.S. dollar denominated net asset balances from increased international expansion, primarily in our U.S. entity, and the foreign currency fluctuations, net of hedging, caused us to recognize transaction losses of $0.6 million and $0.7 million during the years ended January 31, 2017 and 2016, respectively, in other expense, net, in the Consolidated Statements of Operations. The $0.6 million in foreign exchange transaction losses recognized for the year ended January 31, 2017 included $0.1 million in gains from foreign currency forward contracts which we entered into during the year ended January 31, 2017. We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables. These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements as the gains and losses associated with foreign currency balances are offset with the gains and losses on the forward contracts. These instruments are marked to market through earnings every period and generally have an original maturity term of one month. We do not enter into foreign currency forward contracts for trading or speculative purposes. As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in currency rates. It is difficult to predict the impact hedging activities could have on our results of operations. The fair value of foreign currency forward contracts outstanding as of January 31, 2017 was a loss of $0.2 million.

Interest Rate Risk

We had cash and cash equivalents of $184.8 million as of January 31, 2017, consisting of bank deposits. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A

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hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Revenue Recognition

We generate revenue from sales of software-enabled storage products and related support. Our software that is integrated on the storage products is more than incidental, and functions together with the storage product to deliver its essential functionality. We also offer an optional support plan (typically one to five years). The support plan includes automated support (Proactive Wellness), bug fixes, updates and upgrades to product firmware and our management platform, including InfoSight, telephone support and expedited delivery times for replacement hardware parts. While support is not contractually mandatory, substantially all products shipped have been purchased together with a support plan. We also periodically sell optional installation services with our products that are not essential to the functionality of the storage product.

Substantially all of our end-customer arrangements contain multiple deliverables. As a result, we account for the revenue for these sales in accordance with Accounting Standards Codification (ASC) 605-25 Revenue Recognition – Multiple Element Arrangements. Arrangements are divided into separate units of accounting based on whether the delivered items have stand-alone value. In our typical end-customer arrangements, we consider the following to be separate units of accounting: the storage product (together with the integrated software), support services and installation services. We have determined that each unit of accounting has stand-alone value because they are sold separately by us or could be resold by an end-customer on a stand-alone basis. We allocate the total consideration to all deliverables based on our determination of the units of accounting and their relative selling prices.

As we have not yet established vendor-specific objective evidence, or VSOE, or identified third-party evidence of fair value for our storage product (together with the integrated software) and installation services, we use the best estimate of the selling price, or BESP, of each deliverable to allocate the total arrangement fee among the separate units of accounting. Our process to determine BESP for our products and installation services is based on qualitative and quantitative considerations of multiple factors, which primarily include historical stand-alone sales, margin objectives and discount behavior. Additional considerations are given to factors such as end-customer demographics, competitive alternatives, anticipated sales volume, costs to manufacture products or provide services, pricing practices and market conditions.

We have established VSOE of fair value for support services based on stand-alone renewals offered to our end-customers, and allocate the fair value of consideration related to support services based on VSOE of fair value for our support services.

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Revenue is recognized when all of the following criteria are met:

• Persuasive Evidence of an Arrangement Exists.    We rely upon non-cancelable sales agreements and purchase orders to determine the existence of an arrangement.

• Delivery Has Occurred.    We use shipping documents to verify delivery.

• The Fee Is Fixed or Determinable.    We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction.

• Collectability Is Reasonably Assured.    We assess collectability based on credit analysis and payment history.

Our SoD service offering is a pay-as-you-go subscription model which the end-customers are generally billed on a monthly basis based on the amount of data consumed during the month. The SoD service offering includes all support services such as InfoSight. Revenue is recognized as services are performed. SoD revenue is recognized in support and service revenue in the consolidated statements of operations.

Stock-Based Compensation

Compensation expense related to stock-based transactions, including employee and non-employee director stock options, is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award and purchases under our ESPP is estimated on the grant date using the Black-Scholes-Merton option-pricing model. Stock-based compensation expense is recognized, net of forfeitures, over the requisite service periods of the awards, which is generally four years for stock options, and six months to two years for stock purchased under our ESPP.

Our use of the Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

These assumptions and estimates are as follows:

• Fair Value of Common Stock.    Prior to our initial public offering in December 2013, we estimated the fair value of common stock using various valuation methodologies, including valuation analyses performed by third-party valuation firms. After the initial public offering, we used the publicly quoted price as the fair value of our common stock.

• Risk-Free Interest Rate.    We base the risk-free interest rate used in the Black-Scholes-Merton option-pricing model on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equivalent to that of the options for each option group.

• Expected Term.    The expected term represents the period that our stock-based awards are expected to be outstanding. We base the expected term assumption on our historical exercise behavior combined with estimates of the post-vesting holding period.

• Volatility.    Prior to fiscal 2017, we determined the price volatility factor based on the historical volatilities of our publicly traded peer group as we did not have a sufficient trading history for our common stock. Industry peers consisted of several public companies in the technology industry that were similar to us in size, stage of life cycle, and financial leverage. We did not rely on implied volatilities of traded options in our industry peers’ common stock because the volume of activity was relatively low. Starting in fiscal 2017, we had over two years of trading

56

history for our common stock and call options. As a result, we determined the expected volatility based on a combination of our historical volatility of our common stock price and implied volatility of our call options.

• Dividend Yield.    The expected dividend assumption is based on our current expectations about our anticipated dividend policy. Consequently, we used an expected dividend yield of zero.

We estimate the fair value of the restricted stock units, or RSUs, using the closing market price of our common stock on the date of grant. RSUs typically vest over a four-year period.

We issue RSUs to employees, which are based on Company and individual performance thresholds. We estimate the fair value of these performance based RSUs using the closing market price of our common stock on the date of grant. We assess the probability of the amount of these RSUs expected to vest based on our estimated achievement of performance thresholds for each reporting period until the total shares granted are determined.

We issue RSUs to certain employees, contingent on the achievement of the Company’s comparative market-based returns which is based on our common stock price compared against a market index. We estimate the fair value of these market-based RSUs using the Monte Carlo option-price model on the date of grant as the RSUs contain both service and market conditions.

We must also estimate a forfeiture rate to calculate the stock-based compensation expense for our awards. Our forfeiture rate is based on an analysis of our actual forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.

Income Taxes

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In addition, deferred tax assets are recorded for the future benefit of utilizing NOLs and research and development credit carryforwards. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.

We apply the authoritative accounting guidance prescribing a threshold and measurement attribute for the financial recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

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Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our judgments are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may impact the provision for income taxes in the period in which such determination is made.

Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Estimates of future taxable income are based on assumptions that are consistent with our plans. Assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Should actual amounts differ from our estimates, the amount of our tax expense and liabilities could be materially impacted.

Inventory Valuation

Our inventories are stated at the lower of cost (on a first-in, first-out method), or market value. A provision is recorded to adjust inventory to its estimated realizable value when inventory is determined to be in excess of anticipated demand or obsolete. In determining the provision, we also consider estimated recovery rates based on the nature of the inventory. Factors influencing these adjustments include technological changes, product life cycles, and development plans.

Recent Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies contained in the “Notes to Consolidated Financial Statements” in Item 8 of Part II of this Form 10-K for a full description of the recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial conditions.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm		60
Consolidated Balance Sheets		62
Consolidated Statements of Operations		63
Consolidated Statements of Comprehensive Loss		64
Consolidated Statements of Stockholders’ Equity		65
Consolidated Statements of Cash Flows		66
Notes to Consolidated Financial Statements		67

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Nimble Storage, Inc.

We have audited the accompanying consolidated balance sheets of Nimble Storage, Inc. as of January 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended January 31, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nimble Storage, Inc. at January 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 31, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nimble Storage, Inc.’s internal control over financial reporting as of January 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 24, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Jose, California

March 24, 2017

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Nimble Storage, Inc.

We have audited Nimble Storage, Inc.’s internal control over financial reporting as of January 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Nimble Storage, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Nimble Storage, Inc. maintained, in all material respects, effective internal control over financial reporting as of January 31, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nimble Storage, Inc. as of January 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended January 31, 2017 of Nimble Storage, Inc. and our report dated March 24, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Jose, California

March 24, 2017

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Nimble Storage, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

	As of January 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	184,814		$	211,160
Restricted cash, current		409			793
Accounts receivable, net of allowance for doubtful accounts of $25 as of January 31, 2017 and 2016, respectively		64,336			50,432
Inventories		21,944			15,994
Prepaid expenses and other current assets		8,540			5,212
Total current assets		280,043			283,591
Property and equipment, net		51,258			47,404
Intangible asset, net		1,007			—
Other long-term assets		712			754
Total assets	$	333,020		$	331,749
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	33,008		$	24,330
Accrued compensation and benefits		28,914			19,325
Deferred revenue, current portion		71,121			54,580
Other current liabilities		12,724			8,933
Total current liabilities		145,767			107,168
Deferred revenue, non-current portion		72,943			60,265
Other long-term liabilities		7,280			8,708
Total liabilities		225,990			176,141
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, par value of $0.001 per share; 5,000 shares authorized, no shares issued and outstanding as of January 31, 2017 and 2016		—			—
Common stock, par value of $0.001 per share; 750,000 shares authorized as of January 31, 2017 and 2016, respectively; 88,865 and 82,120 shares issued and outstanding as of January 31, 2017 and 2016, respectively		79			75
Additional paid-in capital		586,111			476,271
Accumulated other comprehensive loss		(838	)		(731	)
Accumulated deficit		(478,322	)		(320,007	)
Total stockholders’ equity		107,030			155,608
Total liabilities and stockholders’ equity	$	333,020		$	331,749

See Notes to Consolidated Financial Statements.

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Nimble Storage, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

	Year Ended January 31,
	2017			2016			2015
Revenue:
Product	$	322,114		$	265,602		$	198,129
Support and service		80,483			56,613			29,544
Total revenue		402,597			322,215			227,673
Cost of revenue:
Product		110,651			86,506			62,780
Support and service		35,002			26,129			16,173
Total cost of revenue		145,653			112,635			78,953
Gross profit		256,944			209,580			148,720
Operating expenses:
Research and development		116,222			93,990			70,338
Sales and marketing		254,919			197,979			143,575
General and administrative		42,420			36,247			30,884
Total operating expenses		413,561			328,216			244,797
Loss from operations		(156,617	)		(118,636	)		(96,077	)
Interest income, net		274			240			139
Other expense, net		(629	)		(656	)		(2,071	)
Loss before provision for income taxes		(156,972	)		(119,052	)		(98,009	)
Provision for income taxes		1,343			1,017			837
Net loss	$	(158,315	)	$	(120,069	)	$	(98,846	)
Net loss per share, basic and diluted	$	(1.85	)	$	(1.52	)	$	(1.37	)
Weighted-average shares used to compute net loss per share, basic and diluted		85,541			78,932			72,304

See Notes to Consolidated Financial Statements.

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Nimble Storage, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

	Year Ended January 31,
	2017		2016			2015
Net loss	$	(158,315)	$	(120,069	)	$	(98,846	)
Other comprehensive loss, net of taxes:
Change in cumulative translation adjustment		(107)		(481	)		(275	)
Comprehensive loss	$	(158,422)	$	(120,550	)	$	(99,121	)

See Notes to Consolidated Financial Statements.

64

Nimble Storage, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands)

	Common Stock					Additional Paid-In			Accumu- lated Other Compre- hensive Income (Loss)			Accumu- lated Deficit			Total Stock- holders’ Equity
	Shares			Amount		Capital
Balance at January 31, 2014		71,643			67		292,686			25			(101,092	)		191,686
Issuance costs for initial public offering		—			—		(283	)		—			—			(283	)
Issuance of common stock upon stock option exercises, net of repurchases		3,508			3		7,671			—			—			7,674
Issuance of common stock for settlement of restricted stock units (RSUs)		532			—		—			—			—			—
Shares withheld related to net share settlement of RSUs		(3	)		—		(125	)		—			—			(125	)
Issuance of common stock under employee stock purchase plan		511			1		9,226			—			—			9,227
Vesting of early exercise of stock options		—			—		2,340			—			—			2,340
Tax effects from employee stock plans		—			—		163			—			—			163
Stock-based compensation		—			—		57,011			—			—			57,011
Net loss		—			—		—			(275	)		(98,846	)		(99,121	)
Balance at January 31, 2015		76,191			71		368,689			(250	)		(199,938	)		168,572
Issuance of common stock upon stock option exercises, net of repurchases		3,241			3		8,205			—			—			8,208
Issuance of common stock for settlement of restricted stock units (RSUs)		1,920			—		—			—			—			—
Issuance of common stock under employee stock purchase plan		768			1		14,320			—			—			14,321
Vesting of early exercise of stock options		—			—		1,265			—			—			1,265
Tax effects from employee stock plans		—			—		550			—			—			550
Stock-based compensation		—			—		83,242			—			—			83,242
Net loss		—			—		—			(481	)		(120,069	)		(120,550	)
Balance at January 31, 2016		82,120			75		476,271			(731	)		(320,007	)		155,608
Issuance of common stock upon stock option exercises, net of repurchases		1,626			2		4,087			—			—			4,089
Issuance of common stock for settlement of restricted stock units (RSUs)		3,539			—		—			—			—			—
Issuance of common stock under employee stock purchase plan		1,580			2		10,130			—			—			10,132
Vesting of early exercise of stock options		—			—		604			—			—			604
Tax effects from employee stock plans		—			—		(475	)		—			—			(475	)
Stock-based compensation		—			—		95,494			—			—			95,494
Net loss		—			—		—			(107	)		(158,315	)		(158,422	)
Balance at January 31, 2017		88,865		$	79	$	586,111		$	(838	)	$	(478,322	)	$	107,030

See Notes to Consolidated Financial Statements.

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Nimble Storage, Inc.

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended January 31,
	2017			2016			2015
Cash flows from operating activities:
Net loss	$	(158,315	)	$	(120,069	)	$	(98,846	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		22,596			15,598			8,753
Stock-based compensation expense		95,542			83,304			57,067
Loss on disposal of property and equipment		145			182			—
Provision (recoveries) for allowance for doubtful accounts		3			25			(32	)
Provision (recoveries) for excess and obsolete inventories		635			157			(101	)
Changes in operating assets and liabilities:
Accounts receivable		(13,907	)		(15,186	)		(17,563	)
Inventories		(9,018	)		(3,930	)		(6,158	)
Prepaid expenses and other assets		(3,611	)		(663	)		(1,841	)
Short term restricted cash		464			(793	)		—
Accounts payable		8,890			7,661			8,451
Deferred revenue		29,219			40,399			40,937
Accrued and other liabilities		11,761			(930	)		14,709
Net cash provided by (used in) operating activities		(15,596	)		5,755			5,376
Cash flows from investing activities:
Purchase of property and equipment		(23,928	)		(29,423	)		(20,820	)
Purchase of intangible asset		(938	)		—			—
Change in restricted cash		(6	)		3,909			(83	)
Net cash used in investing activities		(24,872	)		(25,514	)		(20,903	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		—			—			(1,310	)
Proceeds from exercise of stock options, net of repurchases		4,097			8,146			7,729
Proceeds from issuance of stock under employee stock purchase plan		10,131			14,321			9,227
Excess tax benefit from employee stock plans		—			551			163
Payment of taxes related to net settlement of restricted stock units		—			—			(125	)
Net cash provided by financing activities		14,228			23,018			15,684
Foreign exchange impact on cash and cash equivalents		(106	)		(493	)		(249	)
Net increase (decrease) in cash and cash equivalents		(26,346	)		2,766			(92	)
Cash and cash equivalents, beginning of period		211,160			208,394			208,486
Cash and cash equivalents, end of period	$	184,814		$	211,160		$	208,394
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,432		$	594		$	394
Cash paid for interest		93			105			23
Supplemental disclosure of noncash investing and financing activities:
Transfers of evaluation units from inventory to property and equipment	$	7,984		$	3,724		$	5,782
Purchase of property and equipment not yet paid		3,497			3,505			6,279
Vesting of early exercised stock options		605			1,265			2,340
Purchase of intangible asset not yet paid		312			—			—

See Notes to Consolidated Financial Statements.

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Nimble Storage, Inc.

Notes to Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Description of Business

Nimble Storage, Inc., or the Company was incorporated in the state of Delaware in November 2007. The Company’s mission is to provide its end-customers with the fastest, most reliable access to data. The Company’s Predictive Cloud Platform combines predictive analytics, flash storage and multicloud infrastructure to radically simplify operations in on-pemises data centers and in the cloud. The Company is headquartered in San Jose, California, with employees in several international locations, including the United Kingdom, Australia, Canada, Germany, and Singapore.

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, and include the consolidated accounts of the Company and its subsidiaries. Inter-company accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates include, but are not limited to, the determination of the best estimated selling prices of deliverables included in multiple-deliverable revenue arrangements; the allowance for doubtful accounts; provision for excess or obsolete inventory; the useful lives of property and equipment and intangible asset; the determination of the best estimated achievement of financial performance metrics related to the Company’s performance-based stock awards, and the fair value of the Company’s market-based stock awards. Actual results could differ from these estimates.

Concentrations

The Company’s financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents and trade accounts receivable. Cash and cash equivalents are maintained primarily at one financial institution, and deposits may exceed the amount of insurance provided on such deposits. Risks associated with cash and cash equivalents are mitigated by banking with a creditworthy institution. The Company has not experienced any losses on its deposits of cash and cash equivalents.

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The Company performs ongoing credit evaluations of its end-customers’ financial condition whenever deemed necessary and generally does not require collateral. The Company’s policy is to maintain an allowance for doubtful accounts based upon the expected collectability of its accounts receivable, which takes into consideration specific end-customer creditworthiness and current economic trends. Of all the Company’s customers, the following individually accounted for more than 10% of the Company’s revenue and accounts receivable for each and at the end of period presented:

	% of Revenue									% of Accounts Receivable
	Year Ended January 31,									As of January 31,
	2017			2016			2015			2017			2016
Customer A		34	%		41	%		48	%		31	%		41	%
Customer B		33	%		22	%		*			37	%		26	%
Customer C		14	%		16	%		21	%		*			*

* Represents less than 10%.

There are no concentrations of business transacted with a particular market that would severely impact the Company’s business in the near term. However, the Company currently relies on one key contract manufacturer and supplier to produce most of its products; any disruption or termination of these arrangements could materially adversely affect the Company’s operating results.

Foreign Currency Translation and Transactions

The functional currency of each of the Company’s foreign subsidiaries is its respective local currency. The Company translates all monetary assets and liabilities denominated in foreign currencies into U.S. dollars using the exchange rates in effect at the balance sheet dates and other assets and liabilities using historical exchange rates. Revenue and expenses are translated at average exchange rates in effect during the year. Translation adjustments are recorded within accumulated other comprehensive loss, a separate component of stockholders’ equity.

Foreign currency denominated transactions are initially recorded and re-measured at the end of each period using the applicable exchange rate in effect. Foreign currency re-measurement losses are recognized in other expense, net, in the Consolidated Statements of Operations. For the year ended January 31, 2017, 2016 and 2015, the $0.6 million, $0.7 million and $2.1 million net losses from foreign currency remeasurement included $0.1 million, $0.2 million and $0.7 million gains related to foreign currency forward contracts, respectively.

Fair Value

The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximates fair value.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist principally of cash accounts and investments in money market accounts.

Restricted Cash

Beginning January 2016, the Company was required to maintain a monthly balance of $0.8 million for its employee medical and dental self-funded reimbursement plan. This restricted cash balance has been excluded from the Company’s cash and cash equivalents balance and is classified as restricted cash, current on the Company’s Consolidated Balance Sheets. As of January 31, 2017, the amount of restricted cash, current was $0.4 million.

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Accounts Receivable

Accounts receivable are recorded at the invoiced amounts and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. An allowance for doubtful accounts is calculated based on the aging of the Company’s trade receivables, historical experience, and management judgment. The Company writes off trade receivables against the allowance when management determines a balance is uncollectible and no longer actively pursues collection of the receivable. As of January 31, 2017 and 2016, the allowance for doubtful accounts was not material.

Inventories

Inventories consist primarily of raw materials related to component parts, finished goods, which include both inventory held for sale and service inventory held at service depots in support of end-customer service agreements, and end-customer evaluation inventory. Service inventory held at service depots was $9.1 million and $5.6 million as of January 31, 2017 and 2016, respectively.

The following is a summary of the Company’s inventories, net of inventory provisions recorded to adjust inventory to its estimated realizable value, by major category (in thousands):

	As of January 31,
	2017		2016
Raw materials	$	3,589	$	2,296
Finished goods		12,367		9,005
Evaluation inventory		5,988		4,693
	$	21,944	$	15,994

Inventory values are stated at the lower of cost (on a first-in, first-out method), or market value. A provision is recorded to adjust inventory to its estimated realizable value when inventory is determined to be in excess of anticipated demand or obsolete. In determining the provision, the Company also considers estimated recovery rates based on the nature of the inventory. Inventory write-downs are charged to the provision for inventory, which is a component of the Company’s cost of revenue. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In addition, inventory reserves, which consist of mainly reserves for service inventory, were $7.9 million and $4.5 million as of January 31, 2017 and 2016, respectively.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Demonstration units are not sold and are transferred from inventory at cost. Depreciation is computed using the straight-line method over the following estimated useful lives:

Property and Equipment	Useful Life
Computer equipment, lab equipment, software and Storage on Demand equipment	3 years
Furniture and fixtures	5 years
Leasehold improvements	Shorter of estimated useful life or remaining lease term
Demonstration equipment	2 years

Repairs and maintenance are expensed as incurred.

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The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage. Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful lives of the assets, which is generally three years.

Intangible Asset

Intangible asset is stated at cost, net of accumulated amortization. During the year ended January 31, 2017, the Company purchased the intellectual property rights of software to be used internally for $1.25 million. The Company estimated the useful life of this intangible asset to be three years. As of January 31, 2017, the net book value of this intangible asset was $1.01 million, which was net of $0.24 million accumulated amortization.

Impairment of Long-Lived Assets

The Company evaluates events and changes in circumstances that could indicate carrying amounts of long-lived assets, including property and equipment and intangible asset, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future undiscounted cash flows is less than the carrying amount of an asset, the Company records an impairment charge for the amount by which the carrying amount of the assets exceeds the fair value of the asset.

Warranties

The Company provides a standard one-year warranty for hardware components covering material defects in materials and workmanship. In addition, the Company provides a 90-day warranty on the embedded software in its products for non-conformance with documented specifications. The Company accrues for estimated warranty costs based upon historical experience, and periodically assesses the adequacy of its recorded warranty liability at the end of each period. These costs are expensed as incurred and included in cost of product revenue in the Company’s Consolidated Statements of Operations. In addition, failed parts recovered from customers are submitted to the Company’s suppliers for repair or replacement. These cost recoveries are offset against the Company’s warranty costs. The Company records warranty liability in other current liabilities in its Consolidated Balance Sheet. As of January 31, 2017, the Company’s warranty liability was not material.

Revenue Recognition

The Company generates revenue from sales of software-enabled storage products and related support. The Company’s software that is integrated on the storage products is more than incidental, and functions together with the storage product to deliver its essential functionality. The Company also offers an optional support plan (typically one to five years). The support plan includes automated support (Proactive Wellness), bug fixes, updates and upgrades to product firmware and the Company’s management platform, including InfoSight, telephone support and expedited delivery times for replacement hardware parts. While support is not contractually mandatory, substantially all products shipped have been purchased together with a support plan. The Company also periodically sells optional installation services with its products that are not essential to the functionality of the storage product.

Substantially all of the Company’s end-customer arrangements contain multiple deliverables. As a result, the Company accounts for the revenue for these sales in accordance with Accounting Standards Codification (ASC) 605-25 Revenue Recognition – Multiple Element Arrangements. Arrangements are divided into separate units of accounting based on whether the delivered items have

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stand-alone value. In its typical end-customer arrangements, the Company considers the following to be separate units of accounting: the storage product (together with the integrated software), support services and installation services. The Company has determined that each unit of accounting has stand-alone value because they are sold separately by the Company or could be resold by an end-customer on a stand-alone basis. The Company allocates the total consideration to all deliverables based on its determination of the units of accounting and their relative selling prices.

As the Company has not yet established vendor-specific objective evidence, or VSOE, or identified third-party evidence of fair value for its storage product (together with the integrated software) and installation services, it uses the best estimate of the selling price, or BESP, of each deliverable to allocate the total arrangement fee among the separate units of accounting. The Company’s process to determine its BESP for its products and installation services is based on qualitative and quantitative considerations of multiple factors, which primarily include historical stand-alone sales, margin objectives, and discount behavior. Additional considerations are given to factors such as end-customer demographics, competitive alternatives, anticipated sales volume, costs to manufacture products or provide services, pricing practices, and market conditions.

The Company has established VSOE of fair value for support services based on stand-alone renewals offered to its end-customers, and allocates the fair value of consideration related to support services based on VSOE of fair value for its support services.

Revenue is recognized when all of the following criteria are met:

• Persuasive Evidence of an Arrangement Exists. The Company relies upon non-cancelable sales agreements and purchase orders to determine the existence of an arrangement.

• Delivery Has Occurred. The Company uses shipping documents to verify delivery.

• The Fee Is Fixed or Determinable. The Company assesses whether the fee is fixed or determinable based on the payment terms associated with the transaction.

• Collectability Is Reasonably Assured. The Company assesses collectability based on credit analysis and payment history.

It is the Company’s practice to identify an end-customer from its distributors prior to shipment. In the majority of instances, products are shipped directly to the end-customers. For certain end-customer orders, products are shipped to resellers, distributors and third-party systems integrators for various reasons including importing of products to non-U.S. countries and systems integration (e.g. SmartStack integrations) prior to shipment to the end-customer or the end-customer specified location. Assuming all other revenue recognition criteria have been met, the Company generally recognizes revenue upon shipment from its origin location in California, as title and risk of loss are transferred at that time. For certain distributors, title and risk of loss is transferred upon delivery to the end-customer and revenue is recognized after delivery has been completed. The Company’s arrangements with distributors do not contain rights of return, subsequent price discounts, price protection or other allowances for shipments completed.

The majority of the Company’s deferred revenue consists of the unrecognized portion of revenue from sales of its support and service contracts. The Company records amounts to be recognized during the twelve months following the balance sheet date in deferred revenue, current portion in the consolidated balance sheets, and the remainder in deferred revenue, non-current portion in the consolidated balance sheets. As of January 31, 2017, the weighted average remaining contract period related to non-current deferred revenue was approximately 2.1 years.

The Company’s Storage on Demand, or SoD, service offering is a pay-as-you-go subscription model which the end-customers are generally billed on a monthly basis based on the amount of data consumed during the month. The SoD service offering includes all support services such as InfoSight.

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Revenue is recognized as services are performed. SoD revenue is recognized in support and service revenue in the consolidated statements of operations.

Shipping Costs

Shipping charges billed to end-customers are included in product revenue and the related shipping and handling costs are included in cost of revenue.

Research and Development

Research and development expense consists of personnel costs, including stock-based compensation expense, for the Company’s research and development personnel and product development costs, including engineering services, development software and hardware tools, depreciation of capital equipment and facility costs. Research and development costs are expensed as incurred.

Advertising Costs

Advertising costs are expensed as incurred and are included in sales and marketing expense. Advertising costs for the years ended January 31, 2017, 2016 and 2015 were $10.8 million, $6.6 million and $3.0 million, respectively.

Stock-Based Compensation

The Company determines the fair value of its stock-based awards, including employee and non-employee director stock options, and purchases under its employee stock purchase plan, or the ESPP, on the date of grant utilizing the Black-Scholes-Merton option-pricing model, and is impacted by the fair value of its common stock, as well as changes in assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected common stock price volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and expected dividend yield. The Company generally recognizes compensation expense for stock option grants and ESPP on a straight-line basis over the requisite service period, which is generally four years for stock options, and six months to two years for ESPP. Stock-based compensation expense recognized at fair value includes the impact of estimated forfeitures.

The Company estimates the fair value of the restricted stock units, or RSUs, using the closing market price of its common stock on the date of grant. RSUs typically vest over a four-year period. Stock-based compensation expense is recognized at fair value and includes the impact of estimated forfeitures.

The Company issues RSUs to employees, which are based on Company and individual performance thresholds. The Company estimates the fair value of these performance based RSUs using the closing market price of its common stock on the date of grant. The Company assesses the probability of the amount of these RSUs expected to vest based on its estimated achievement of performance thresholds for each reporting period until the total shares granted are determined. Stock-based compensation expense is recognized at fair value and includes the impact of estimated forfeitures.

The Company issues RSUs to certain employees, contingent on the achievement of the Company’s comparative market-based returns which is based on its common stock price compared against a market index. The Company estimates the fair value of these market-based RSUs using the Monte Carlo option-price model on the date of grant as the RSUs contain both service and market conditions. Stock-based compensation expense is recognized at fair value and includes the impact of estimated forfeitures.

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Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the years in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Derivative Financial Instruments

The Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables. These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements as the gains and losses associated with foreign currency balances are offset with the gains and losses on the forward contracts. The Company does not enter into foreign currency forward contracts for trading or speculative purposes. These instruments are marked to market through earnings every period and generally are one month in original maturity. The net gains or losses from the settlement of these foreign currency forward contracts are recorded in other expense, net in the Consolidated Statements of Operations.

Net Loss Per Share

The following potentially dilutive securities were excluded (as common stock equivalents) from the computation of diluted net loss per share for the periods presented as their effect would have been antidilutive (in thousands):

	As of January 31,
	2017		2016		2015
Unvested restricted stock units		13,107		9,902		5,743
Shares subject to options to purchase common stock		6,746		8,593		12,360
Employee stock purchase plan		1,166		1,205		320
Unvested early exercised common shares		23		184		704

Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board, or FASB, released an Accounting Standard Update, or ASU, related to the classification of certain cash receipts and cash payments on the statement of cash flows. This standard is effective for the Company for its first quarter of fiscal 2019, although early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB released an ASU related to how stock-based payments are accounted for and presented in the financial statements, including income taxes, forfeitures and statutory tax withholding requirements. This standard is effective for the Company for its first quarter of fiscal 2018, although early adoption is permitted. The Company is currently evaluating adoption methods and whether this standard will have a material impact on its consolidated financial statements and related disclosures.

In February 2016, the FASB released an ASU that requires the recognition of lease assets and lease liabilities by lessees for operating leases. The standard is effective for the Company for its first quarter of fiscal 2020, although early adoption is permitted. The Company is currently evaluating adoption methods and whether this standard will have a material impact on its consolidated financial statements and related disclosures.

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In November 2015, the FASB released an ASU, Balance Sheet Classification of Deferred Taxes, which is intended to simplify and improve how deferred taxes are classified on the balance sheet. The guidance in this ASU eliminates the current requirement to present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet and now requires entities to classify all deferred tax assets and liabilities as noncurrent. The standard is effective for the Company for its first quarter of fiscal 2018, although early adoption is permitted. The standard is a change in balance sheet presentation only. The Company early adopted this ASU prospectively in fiscal 2016, and prior periods were not retrospectively adjusted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In July 2015, the FASB issued amendments to simplify the measurement of inventory. Under the amendments, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The guidance defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” No other changes were made to the current guidance on inventory measurement. The amendments are effective for the Company for its first quarter of fiscal 2018, although early adoption is permitted. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.

In May 2014, the FASB released an ASU, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition and permits the use of either the retrospective or modified retrospective transition method. In March 2016, the FASB issued an ASU, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the principal versus agent guidance in the new revenue recognition standard. In April 2016, the FASB issued an ASU, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, which clarifies the guidance on accounting for licenses of intellectual property and identifying performance obligations in the new revenue recognition standard. In May 2016, the FASB issued an ASU, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedient, which clarifies the transition, collectability, noncash consideration and the presentation of sales and other similar taxes in the new revenue recognition standard. These standards are effective for the Company for its first quarter of fiscal 2019. Early adoption to the original public company adoption timelines is permitted.

The Company established an implementation team which includes a combination of third-party service providers and internal resources who performed an impact assessment of this new guidance and established a detailed implementation timeline. The Company does not plan to early adopt, and accordingly, will adopt the new standard effective February 1, 2018. The Company believes the most significant impacted areas relate to the deferral of costs to obtain a contract, which are primarily commissions directly incurred as a result of sales of products, related support and service revenue, and the allocation of revenue from support and service to products for certain arrangements which ASC 605-25 previously limited to the amount not contingent on future deliverables. The deferral of costs to obtain a contract will result in the related expenses to be recognized at the time of shipment for product revenue and over the estimated period of benefit for support and service revenue. Currently, the costs to obtain a contract are expensed when the Company receives a purchase order from customers for product and support. The removal of the contingent revenue limit will result in an increase of revenue to be allocated from support and service to product for certain arrangements. The Company plans to use the full retrospective transition method.

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3. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, to measure the fair value:

• Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

• Level 3—Inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

The Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables. These are not designated hedge instruments. These instruments are marked to market through earnings every period and generally have an original maturity period of one month. These instruments are classified within level 2 of the fair value hierarchy. The Company’s derivative assets and derivative liabilities as of January 31, 2017 and 2016 are as follows (in thousands):

	As of January 31, 2017					As of January 31, 2016
	Nominal     Amount		Fair Value Gain (Loss)			Nominal     Amount		Fair Value Gain (Loss)
Forward Contracts:
Purchased	$	—	$	—		$	—	$	—
Sold	$	16,723	$	(162	)	$	14,535	$	58

4. Balance Sheet Components

Property and Equipment

Property and equipment, net consisted of the following (in thousands):

	As of January 31,
	2017			2016
Computer equipment	$	16,649		$	14,012
Lab equipment		41,066			28,734
Software		10,760			5,470
Furniture and fixtures		6,174			4,497
Leasehold improvements		19,869			17,514
Construction in progress		3,296			3,692
Demonstration equipment		3,935			2,287
Total property and equipment		101,749			76,206
Less: accumulated depreciation		(50,491	)		(28,802	)
Total property and equipment, net	$	51,258		$	47,404

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Depreciation expense related to property and equipment for the years ended January 31, 2017, 2016 and 2015 was $22.4 million, $15.6 million and $8.8 million, respectively.

Intangible Asset

The Company purchased the intellectual property rights of software to be used internally for $1.25 million during the year ended January 31, 2017. As of January 31, 2017, the net book value of this intangible asset was $1.01 million, which was net of $0.24 million accumulated amortization.

Amortization expense related to this intangible asset was $0.24 million for the year ended January 31, 2017.

As of January 31, 2017, estimated future amortization expenses related to this intangible asset were as follows (in thousands):

Years ending January 31:
2018	$	417
2019		417
2020		173
	$	1,007

5. Commitments and Contingencies

Leases

The Company leases its facilities under various noncancelable operating leases with fixed rental payments. Rent expense totaled $8.0 million, $6.2 million and $5.3 million for the years ended January 31, 2017, 2016 and 2015, respectively. Future minimum commitments under these operating leases as of January 31, 2017 were as follows (in thousands):

Years ending January 31:
2018	$	8,509
2019		7,300
2020		7,266
2021		7,149
2022		5,990
Thereafter		556
	$	36,770

In July 2014, the Company entered into a facility lease agreement for its North Carolina office. The 84-month lease commenced on August 1, 2014. Total rent, including common area maintenance expense and fixed operating expense, payable over the lease period is $5.0 million. As part of the lease agreement, the Company received an allowance of $1.4 million for tenant improvements during the year ended January 31, 2016. This allowance was included in the calculation of rent expense and related deferred rent balances. In December 2014, the Company amended the lease agreement for its North Carolina office giving the Company access to an additional space on February 1, 2016 through the same term as the original facility lease. As part of the lease amendment, the Company received an allowance of $1.0 million for tenant improvements during the year ended January 31, 2017.

In April 2013, the Company entered into a facility lease agreement for its headquarters in San Jose, California. The 96-month lease commenced on November 1, 2013. Total rent, including operating expenses, payable over the lease period is $35.5 million. As part of the lease agreement, the

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Company received an allowance of $4.9 million in tenant improvements during the year ended January 31, 2014. This allowance was included in the calculation of rent expense and related deferred rent balances. As a condition of the lease agreement, the Company is required to maintain a letter of credit of $3.9 million, with the landlord named as the beneficiary. The Company has the option to extend the term of the lease for an additional period of 60 months.

Contingencies

From time to time, the Company is party to litigation and subject to claims that arise in the ordinary course of business, including actions with respect to employment claims and other matters. Although the results of litigation and claims are inherently unpredictable, the Company believes that the final outcome of such matters will not have a material adverse effect on the business, consolidated financial position, results of operations or cash flows.

Between December 17, 2015 and February 5, 2016, three purported securities class actions were filed in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. All three complaints allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, based on allegedly misleading statements regarding the Company’s business and financial results. On March 28, 2016, the Court ordered that the three actions be consolidated under the caption In re Nimble Storage, Inc. Securities Litigation and a consolidated amended complaint was filed on June 10, 2016. Defendants filed a motion to dismiss the consolidated amended complaint on July 25, 2016. The Court granted defendants’ motion to dismiss with leave to amend on December 9, 2016. A second consolidated amended complaint was filed on January 20, 2017. The defendants filed a motion to dismiss the second amended complaint on February 17, 2017. Given the early stage in the litigation, the Company is unable to estimate a possible loss or range of possible loss.

On February 23, 2016, a purported shareholder derivative action entitled Schwartz v. Vasudevan, et al., or Schwartz, was filed in the United States District Court for the Northern District of California against certain of the Company’s officers and directors. The complaint alleges that defendants breached their fiduciary duties by allowing the Company to make allegedly misleading statements regarding the Company’s business and financial results, and by selling stock while in possession of material non-public information. On April 26, 2016, a purported shareholder derivative action entitled Goldstein v. Vasudevan, et al., or Goldstein, was filed in the United States District Court for the Northern District of California, against certain of the Company’s officers and directors. The complaint makes substantially the same allegations as in the Schwartz matter, alleging causes of action for breach of fiduciary duty, unjust enrichment, waste, and violation of Section 14(a) of the Securities Exchange Act. On June 14, 2016, the Court entered an order pursuant to a stipulation by the parties to consolidate the Schwartz and Goldstein matters under the caption In re Nimble Storage, Inc. Derivative Litigation and to stay the consolidated matter until the In re Nimble Sec. Lit. matter is dismissed with prejudice, or defendants file an answer in the In re Nimble Sec. Lit. matter. Given the early stage in the litigation, the Company is unable to estimate a possible loss or range of possible loss.

On May 19, 2016, a purported shareholder derivative action entitled Chua v. Vasudevan, et al., or Chua, was filed in the Superior Court of California, County of Santa Clara, against certain of the Company’s officers and directors. The complaint makes substantially the same allegations as the Schwartz and Goldstein matters. On August 8, 2016, the Court entered an order pursuant to a stipulation by the parties to stay the matter until the In re Nimble Sec. Lit. matter is dismissed with prejudice, or defendants file an answer in the In re Nimble Sec. Lit. matter. Given the early stage in the litigation, the Company is unable to estimate a possible loss or range of possible loss.

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Indemnification

Some of the Company’s sales contracts require the Company to indemnify its end-customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets, and to pay judgments entered on such claims. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid by the end-customer under the contract. However, certain contracts include indemnification provisions that could potentially expose the Company to losses in excess of the amount received under the contract. In addition, the Company indemnifies its officers, directors, and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

Purchase Commitments

The Company purchases components from a variety of suppliers and one contract manufacturer to provide manufacturing services for products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, the Company enters into agreements with its contract manufacturer and suppliers that either allow them to procure inventory based upon criteria as defined by the Company or that establish the parameters defining the requirements. These agreements generally do not include any legally binding minimum commitment obligations. As of January 31, 2017, the Company had an aggregated $58.3 million in several operating commitments to fulfill inventory requirements, several non-cancelable software license and service agreements for the internal use of software and services for vendor and customer relationship management, human resource, inventory forecasting application and communication and desktop applications.

6. Common Stock

The Company’s Certificate of Incorporation, as amended and restated, authorizes it to issue capital stock of 755.0 million shares, comprising: (i) 750.0 million shares of common stock, par value $0.001 per share and (ii) 5.0 million shares of preferred stock, par value $0.001 per share.

As of January 31, 2017, there were 750.0 million shares of common stock authorized with a par value of $0.001 per share. The Company had reserved the following shares of authorized but unissued common stock (in thousands):

	As of January 31, 2017
Unvested restricted stock units		13,107
Issued and outstanding stock options		6,746
Equity incentive plans		4,390
Employee stock purchase plan		2,002
		26,245

7. Equity Incentive Plans

Plan Descriptions

2008 Equity Incentive Plan

In May 2008, the Company adopted the 2008 Equity Incentive Plan, or the 2008 Plan, for the benefit of its eligible employees, consultants, and independent directors. The 2008 Plan provides for the grant of stock awards, including incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights and RSUs. The Company grants stock options with an exercise price

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equal to the fair market value of its common stock on the date of the grant, as determined by the board of directors. The Company’s equity awards vest over a period of time as determined by the board of directors and expire no later than 10 years from the date of grant. Grants to new employees generally vest over a four-year period, at a rate of 25% one year from the date the optionee’s service period begins and 1/48 monthly thereafter. Subject to adjustment for certain changes in the Company’s capital structure, the maximum aggregate number of shares of common stock that may be issued under the 2008 Plan is 55.6 million.

In December 2013, in connection with the closing of the Company’s initial public offering, the 2008 Plan was terminated and shares authorized for issuance under the 2008 Plan were cancelled (except for those shares reserved for issuance upon exercise of outstanding stock options). As of January 31, 2017, options to purchase and RSUs to convert to a total of 6.8 million shares of common stock were outstanding under the 2008 Plan pursuant to their original terms and no shares were available for future grant.

2013 Equity Incentive Plan

In September 2013, the Company adopted the 2013 Equity Incentive Plan, or the 2013 Plan, which became effective on December 12, 2013 and serves as the successor to the Company’s 2008 Plan. Upon completion of the Company’s initial public offering, the Company ceased granting awards under the 2008 Plan and any remaining shares available for issuance under the 2008 Plan were added to the shares reserved under the 2013 Plan. The 2013 Plan will terminate in September 2023, unless sooner terminated by the board of directors.

The 2013 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, stock bonus awards, stock appreciation rights, RSUs and performance awards, all of which may be granted to eligible employees, consultants or directors.

Under the terms of the 2013 Plan, awards may be granted at prices not less than 100% of the fair value of the Company’s common stock, as determined by the Company’s board of directors, on the date of grant for stock options. Options vest over a period of time as determined by the board of directors, generally a four-year period, and expire ten years from date of grant.

Initially, the aggregate number of shares of the Company’s common stock that may be issued pursuant to stock awards under the 2013 Plan after the 2013 Plan became effective was 10.2 million shares, plus any reserved shares not issued or subject to outstanding grants under the 2008 Plan on the date the 2013 Plan became effective, shares that are subject to stock options or RSUs granted under the 2008 Plan that cease to be subject to such stock options or other awards by forfeiture or otherwise or are issued and later forfeited or repurchased by the Company after the date the 2013 Plan became effective, and shares that are subject to stock options or other awards under the 2008 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award. The number of shares available for grant and issuance under the 2013 Plan will automatically increase on February 1^st of each of the calendar years 2014 through 2022, by the lesser of (i) 5% of the number of shares issued and outstanding on each January 31^st immediately prior to the date of increase or (ii) such number of shares determined by the Company’s board of directors. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2013 Plan is 300.0 million shares. As of January 31, 2017, stock options to purchase and RSUs to convert to a total of 13.0 million shares of common stock were outstanding under the 2013 Plan and 4.4 million shares were reserved for future issuance.

2013 Employee Stock Purchase Plan

In September 2013, the Company adopted the ESPP which became effective on December 12, 2013.

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The ESPP initially authorizes the issuance of 2.0 million shares of the Company’s common stock pursuant to purchase rights granted to eligible employees. The number of shares of common stock reserved for issuance will automatically increase on February 1^st of each calendar year, by an amount equal to (i) 1% of the total number of outstanding shares of common stock and common stock equivalents on the immediately preceding January 31^st, or (ii) such lesser number of shares of common stock as determined by the Company’s board of directors. The maximum number of shares that may be issued pursuant to the ESPP is 30.0 million shares. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

The ESPP was implemented through a series of offerings of purchase rights to eligible employees. Except for the initial offering period, each offering period is for 24 months beginning March 10^th and September 10^th of each year, with each such offering period consisting of four six-month purchase periods. The initial offering period began December 12, 2013 and ended on March 9, 2016, with purchase dates on September 9, 2014, March 9, 2015, September 9, 2015 and March 9, 2016.

Eligible employees may participate through payroll deductions of 1% to 15% of their earnings. Common stock will be issued to participating employees at a price per share equal to 85% of the lesser of (i) the fair market value on the offering date, or (ii) the fair market value on the purchase date. As of January 31, 2017, the Company had 2.0 million shares reserved for future issuance.

Early Exercises of Stock Options

Stock options granted under the 2008 Plan provide employee option holders, if approved by the board of directors, the right to exercise unvested options in exchange for restricted common stock, which is subject to a repurchase right held by the Company at the lower of (i) the fair market value of its common stock on the date of repurchase or (ii) the original purchase price. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are recorded as a liability. As of January 31, 2017 and 2016, there were 23,000 and 184,000 shares, respectively, subject to repurchase related to stock options early exercised and unvested. These amounts are reclassified to common stock and additional paid-in capital as the underlying shares vest. As of January 31, 2017 and 2016, the Company recorded a liability related to these shares subject to repurchase in the amount of $0.1 million and $0.7 million, respectively, within other long-term liabilities in its Consolidated Balance Sheets.

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Stock Options and RSUs

The following is a summary of the Company’s stock option and RSU activity during the year ended January 31, 2017 (in thousands, except per-share amounts):

				Shares Subject to Options Outstanding					Outstanding RSUs
	Shares Available for Grant			Shares Subject to Outstanding Options			Weighted- Average Exercise Price		Outstanding RSUs			Weighted- Average Grant Date Fair Value
Balance as of January 31, 2016		6,806			8,593		$	3.32		9,902		$	22.70
Additional options and RSUs authorized for issuance		4,106			—			N/A		—			N/A
Options exercised		—			(1,630	)		2.53		—			N/A
Options canceled		217			(217	)		5.79		—			N/A
Options repurchased		4			—			N/A		—			N/A
RSUs granted		(8,672	)		—			N/A		8,672			7.41
RSUs vested		—			—			N/A		(3,538	)		20.59
RSUs canceled		1,929			—			N/A		(1,929	)		18.05
Balance as of January 31, 2017		4,390			6,746		$	3.43		13,107		$	13.80

The following table summarizes information about the Company’s stock options outstanding as of January 31, 2017 (in thousands, except per-share amounts and years):

	Shares Subject to Options Outstanding
	Number of Shares Subject to Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
					(years)
Vested and expected to vest as of January 31, 2017		6,735	$	3.42		5.52	$	34,930
Exercisable as of January 31, 2017		6,477	$	3.24		5.47	$	34,708

The options exercisable as of January 31, 2017 included options that are exercisable prior to vesting. The intrinsic value of options vested and expected to vest and become exercisable as of January 31, 2017 was calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of January 31, 2017. The intrinsic value of exercised options for the years ended January 31, 2017, 2016 and 2015 was $9.0 million, $63.1 million and $89.1 million, respectively, and was calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

The fair value of stock options that vested in the years ended January 31, 2017, 2016 and 2015 was $6.5 million, $8.4 million and $11.4 million, respectively.

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Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense related to stock options, RSUs and ESPP (in thousands):

	Year Ended January 31,
	2017		2016		2015
Cost of product revenue	$	2,860	$	1,972	$	1,508
Cost of support and service revenue		6,394		4,743		2,380
Research and development		30,027		23,259		15,137
Sales and marketing		39,636		39,648		27,752
General and administrative		16,625		13,682		10,290
Total stock-based compensation expense	$	95,542	$	83,304	$	57,067

The Company did not issue any stock options in the year ended January 31, 2017 and 2016. The weighted-average fair value of options granted was $14.52 per share for the years ended January 31, 2015. The Company started to issue RSUs in the year ended January 31, 2014. The weighted-average fair value of RSUs granted was $7.41, $19.61 and $31.30 per share for the years ended January 31, 2017, 2016 and 2015, respectively. The weighted average fair value of stock purchase rights granted was $5.69, $7.04 and $7.20 per share for the year ended January 31, 2017, 2016 and 2015, respectively.

The Company grants RSUs to employees based on the Company and individual performance thresholds. The estimated probability of the number of these RSUs expected to vest is assessed for each reporting period until the total shares granted are determined. For the year ended January 31, 2017, 2016 and 2015, the Company recognized expense of $8.1 million, $5.0 million and $7.2 million in stock-based compensation related to these RSUs, respectively. The increase of expense related to these RSUs in the year ended January 31, 2017 is due to new grants authorized during the year.

Beginning in March 2016, the Company granted RSUs to certain employees, contingent on the achievement of the Company’s comparative market-based returns which is based on the Company’s stock price compared against a market index. The fair value of these market-based RSUs is estimated using the Monte Carlo option-price model on the date of grant as the RSUs contain both service and market conditions. The stock-based compensation expense related to these RSUs was $0.4 million for the year ended January 31, 2017.

As of January 31, 2017, there was $2.7 million of unrecognized stock-based compensation expense for stock options that will be recognized over the remaining weighted-average period of 0.8 years. As of January 31, 2017, there was $143.7 million of unrecognized stock-based compensation expense for RSUs that will be recognized over the remaining weighted-average period of 2.2 years. As of January 31, 2017, there was $5.7 million of unrecognized stock-based compensation expense for stock purchase rights that will be recognized over the remaining offering period, through September 2018.

The Company accounted for the stock purchase rights under ESPP at the grant date (first day of the offering period) by valuing the four purchase periods separately. The option was valued using the Black-Scholes-Merton option-pricing model with the following assumptions:

	Year Ended January 31,
	2017		2016		2015
Expected term (in years)		0.5 - 2.0		0.5 - 2.0		0.5 - 2.0
Volatility		58% - 94%		29% - 35%		32% - 47%
Risk-free interest rate		0.5% - 0.9%		0.1% - 0.8%		0.1% - 0.6%
Dividend yield		0%		0%		0%

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Expected Term.    The expected term for the ESPP is based on the length of the offering period.

Expected Volatility.    Prior to fiscal 2017, the Company determined the expected volatility based on volatility of similar entities as the Company did not have sufficient trading history for its common stock. In evaluating similarity, the Company considered factors such as industry, stage of life cycle, size, and financial leverage. Starting from fiscal 2017, the Company had over two years of trading history for its common stock and call options. As a result, the Company determines the expected volatility based on a combination of the historical volatility of its common stock price and implied volatility of its call options.

Risk-Free Interest Rate.    The risk-free rate that the Company used is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the ESPP.

Dividend Yield.    The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero in the valuation model.

The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest.

8. 401(k) Plan

The Company has a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code covering eligible employees. Participants may make pre-tax contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit on pre-tax contributions under the Internal Revenue Code. Although the plan provides for a discretionary employer matching contribution, to date the Company has not made such a contribution on behalf of employees.

9. Income Taxes

The provision for income taxes is based upon the loss before provision for income taxes as follows (in thousands):

	Year Ended January 31,
	2017			2016			2015
U.S. operations	$	(161,471	)	$	(122,116	)	$	(100,136	)
Non-U.S. operations		4,499			3,064			2,127
	$	(156,972	)	$	(119,052	)	$	(98,009	)

The Company’s provision for income taxes of $1.3 million, $1.0 million and $0.8 million for the year ended January 31, 2017, 2016 and 2015, respectively, consisted of current foreign taxes, current state taxes and deferred foreign taxes.

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The Company’s effective tax rate differs from the U.S. federal statutory tax rate due to the following (in thousands):

	Year Ended January 31,
	2017			2016			2015
U.S. federal taxes at statutory tax rate	$	(53,371	)	$	(40,478	)	$	(33,323	)
State taxes, net of federal benefit		(5,724	)		(4,196	)		(2,743	)
Nondeductible expenses		540			405			396
Nondeductible stock-based compensation		7,091			4,808			5,293
Research and development credits		(4,033	)		(3,284	)		(2,739	)
Foreign stock-based compensation charge out		(2,423	)		—			—
Foreign operation		(407	)		(144	)		—
Change in valuation allowance		59,654			43,935			33,942
Other		16			(29	)		11
Provision for income taxes	$	1,343		$	1,017		$	837

The significant components of net deferred tax assets were as follows (in thousands):

	As of January 31,
	2017			2016
Deferred tax assets:
Net operating losses	$	90,303		$	62,578
Depreciation		1,786			614
Accruals and reserves		10,764			9,038
Deferred revenue		22,970			15,819
Stock-based compensation		13,043			14,395
Research and development tax credits		13,663			9,612
Gross deferred tax assets		152,529			112,056
Depreciation and amortization		(2	)		(18	)
Foreign Branch Tax		(21	)		—
Net deferred tax assets prior to valuation allowance		152,506			112,038
Valuation allowance		(152,090	)		(111,380	)
Total net deferred tax assets	$	416		$	658

The net valuation allowance increased by $40.7 million during the year ended January 31, 2017. Management has recorded a full valuation allowance against its net domestic deferred tax assets as it is not more likely than not that the assets will be realized based on the Company’s history of losses.

The passage of Protecting Americans from Tax Hike Act of 2015, on December 18, 2015, retroactively and permanently reinstated the U.S. federal R&D tax credit effective January 1, 2015. As of January 31, 2017, the Company had net operating loss, or NOL, carryforwards and research and development credits as follows (in thousands):

	Amount		Expiration Year
Net operating losses, federal	$	341,099	2028-2037
Net operating losses, state		247,796	2028-2037
Research and development credits, federal		12,870	2028-2037
Research and development credits, California		12,228	Indefinite
Research and development credits, North Carolina		254	2029 - Indefinite

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The Company uses the ‘with-and-without’ approach to determine the recognition and measurement of excess tax benefits. Accordingly, the Company has elected to recognize excess income tax benefits from stock option exercises in additional paid in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the Company. As of January 31, 2017, the amount of such excess tax benefits from stock options included in NOLs was $102.1 million and $23.5 million for federal and California purposes. In addition, the Company has elected to account for the indirect effects of stock-based awards on other tax attributes, such as the research and alternative minimum tax credits, through its statements of operations.

Under Section 382 of the Internal Revenue Code, the Company’s ability to utilize NOL carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if the Company experiences an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of the Company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of the Company’s NOL carryforwards or other tax attributes. Due to the existence of the valuation allowance, future changes in unrecognized tax benefits will not impact the Company’s effective tax rate.

The Company does not intend on remitting undistributed earnings of foreign subsidiaries and, accordingly, no deferred tax liability has been established relative to these earnings. As of January 31, 2017, the Company’s undistributed earnings of foreign subsidiaries were $7.9 million.

The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of its income tax provision. The Company recognized de minimis interest and penalties related to uncertain tax positions for the years ended January 31, 2017, 2016 and 2015.

A reconciliation of the beginning and ending balances of gross unrecognized tax benefits, before interest and penalties is as follows (in thousands):

	Amount
Balance as of January 31, 2014		2,047
Additions for tax positions related to prior year		153
Additions for tax positions related to current year		1,594
Reductions for tax positions related to prior year		(6	)
Balance as of January 31, 2015	$	3,788
Additions for tax positions related to prior year		1,491
Additions for tax positions related to current year		2,206
Reductions for tax positions related to prior year		(775	)
Balance as of January 31, 2016	$	6,710
Additions for tax positions related to current year		2,635
Reductions for tax positions related to prior year		(427	)
Balance as of January 31, 2017	$	8,918

The gross unrecognized tax benefits, if recognized, would affect the effective tax rate by approximately $11,000 and $410,000 as of January 31, 2017 and 2016, respectively. While it is often difficult to predict the final outcome of any particular uncertain tax position, the Company does not believe it is reasonably possible that the total amount of unrecognized tax benefits as of January 31, 2017 will materially change in the next 12 months.

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The Company files federal, state, and foreign income tax returns in many jurisdictions in the United States and abroad. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for all years due to the Company’s NOL carryforwards. The Company is not currently under examination in any jurisdiction.

10. Segments

The Company’s chief operating decision maker is its chief executive officer. The chief executive officer reviews consolidated financial information accompanied by information about revenue by product line for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, or operating results for levels or components. In addition, the majority of the Company’s operations and end-customers are located in the United States. As such, the Company has a single reporting segment and a single operating unit structure.

Revenue by region, based on the bill to mailing address of the end-customer, for the periods presented was as follows (in thousands):

	Year Ended January 31,
	2017		2016		2015
North America	$	311,569	$	253,307	$	186,160
EMEA		56,025		46,062		28,210
APAC		35,003		22,846		13,303
Total revenue	$	402,597	$	322,215	$	227,673

Long-lived assets located in the following countries and regions as of each period end were as follows (in thousands):

	As of January 31,
	2017		2016
North America	$	51,997	$	47,277
Other		980		881
Total long-lived assets	$	52,977	$	48,158

11. Line of Credit

In October 2013, the Company entered into an agreement with Wells Fargo Bank, National Association, or Wells Fargo, to provide a secured revolving credit facility, or the Credit Facility, that allows the Company to borrow up to $15.0 million for general corporate purposes. There was a $0.9 million reduction of the available line related to a letter of credit issued in July 2014 for the Company’s facility lease in North Carolina. In April 2015, the Company increased its letter of credit from $0.9 million to $1.1 million, with the landlord named as the beneficiary. In January 2016, there was a $3.9 million reduction of the available line related to a letter of credit issued for the Company’s headquarters facility lease in California, with the landlord named as the beneficiary. As a consequence, the Company released its restricted cash of $3.9 million. In March 2016, there was a $0.5 million reduction of the available line of credit related to a letter of credit issued as collateral to secure various business operating activities. In November 2016, there was a $0.2 million reduction of the available line of credit related to a letter of credit issued for the Company’s facility lease in Australia, with the landlord named as the beneficiary. As of January 31, 2017, the remaining Credit Facility available for borrowings was $9.3 million.

In July 2016, the Company extended the term of the Credit Facility, which now expires in August 2018. Under this renewal, amounts outstanding under the Credit Facility bear interest at 2.25% above

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LIBOR with accrued interest payable on a monthly basis. In addition, the Company is obligated to pay a commitment fee of 0.20% per annum on the unused portion of the Credit Facility, with such fee payable on a quarterly basis. As of January 31, 2017, the commitment fee was capitalized and being amortized on the Company’s Consolidated Balance Sheet. Under this renewal, the Company granted Wells Fargo a first priority lien in its accounts receivable and other corporate assets, agreed to not pledge its intellectual property to other parties and became subject to certain reporting and financial covenants, as follows: (i) maintain minimum tangible net worth, defined as the aggregate of total stockholders’ equity plus subordinated debt less any intangible assets and less any loans or advances to, or investments in, any related entities or individuals, of $65 million; and (ii) maintain a monthly ratio of not less than 1.25 to 1.00, based on the aggregate of its cash and net accounts receivable divided by total current liabilities minus current deferred revenue. As of January 31, 2017, no amounts had been drawn against the Credit Facility and the Company was in compliance with all covenants associated with the Credit Facility.

12. Selected Quarterly Financial Data (unaudited)

The following tables set forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in fiscal 2017 and 2016 (in thousands, except per share data):

	Quarter Ended
	April 30, 2015			July 31, 2015			October 31, 2015			January 31, 2016			April 30, 2016			July 31, 2016			October 31, 2016			January 31, 2017
Net revenues	$	71,288		$	80,109		$	80,727		$	90,091		$	86,417		$	97,111		$	102,041		$	117,028
Gross profit		46,495			52,345			52,690			58,050			54,819			62,743			65,056			74,326
Net loss	$	(28,986	)	$	(30,109	)	$	(28,574	)	$	(32,400	)	$	(42,682	)	$	(39,950	)	$	(39,272	)	$	(36,411	)
Net loss per share, basic and diluted	$	(0.38	)	$	(0.38	)	$	(0.36	)	$	(0.40	)	$	(0.51	)	$	(0.47	)	$	(0.45	)	$	(0.41	)

13. Subsequent Events

On March 6, 2017, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Hewlett Packard Enterprise Company, or HPE, pursuant to which HPE has agreed to acquire the Company in a two-step all-cash transaction, consisting of a tender offer for the Company’s outstanding shares, followed by a merger of a wholly-owned subsidiary of HPE into the Company. Pursuant to the transaction, HPE will pay $12.50 per share in cash. In addition, HPE will assume or pay out the Company’s unvested equity awards, with a value of approximately $200 million at closing. The transaction is expected to close in the 2017 calendar year, subject to certain conditions, including the tender of at least one share more than half of all the Company’s common stock outstanding as well as regulatory and other related approvals. The Company has agreed to operate its business in the ordinary course of business in all material respects and has agreed to certain other customary restrictions on its operations, as set forth more fully in the Merger Agreement.

On March 21, 2017, Dennis Huston, a purported stockholder of the Company, filed a putative securities class action complaint in the United States District Court for the Northern District of California against the Company and the individual members of the Company’s board of directors, captioned Huston v. Nimble Storage Inc., et. al., or the Huston Complaint. On March 22, 2017, Paul Parshall, a purported stockholder of the Company, filed a putative securities class action complaint in the United States District Court for the Northern District of California against the Company, Hewlett Packard Enterprise Company, Nebraska Merger Sub, Inc. and the individual members of the Company’s board of directors, captioned Parshall v. Nimble Storage Inc., et. al., or the Parshall Complaint, and together with the Huston Complaint, the Securities Complaints. The Securities Complaints each assert that the Company and certain of the Company’s directors violated sections 14(e), 14(d)(4), and 20(a) of the Securities Exchange Act by making untrue statements of material fact and omitting certain material

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facts related to the merger, the tender offer and the other transactions contemplated by the merger agreement, or the Transactions, in the Solicitation/Recommendation Statement on Schedule 14D-9 originally filed by the Company with SEC on March 17, 2017. The Securities Complaints allege that the Schedule 14D-9 fails to disclose information concerning the background of the process and events leading up to the proposed transaction, the potential conflicts of interest of the Company’s officers and directors, as well as its financial advisor and the timing and nature of communications, if any, regarding future employment of the Company’s officers and directors. The Parshall Complaint also alleges that the Schedule 14D-9 omits certain information regarding the financial projections and financial analyses by the Company’s financial advisor in support of its fairness opinion and, among other things, that the merger consideration and offer price are inadequate and that certain “deal protection devices” contained in the merger agreement have “locked up” the Transactions and precluded the entry of other bidders. The Huston Complaint seeks, among other things, (i) a declaration that the Schedule 14D-9 is materially false and misleading, (ii) to enjoin the tender offer, (iii) in the event that the Transactions are consummated prior to a final judgment, a rescission thereof or an award of rescissory damages, (iv) money damages and (v) an award of attorneys’ fees and experts’ fees. The Parshall Complaint seeks, among other things, (i) to enjoin the Transactions, (ii) in the event that the Transactions are consummated, a rescission thereof or an award of rescissory damages, (iii) direction to the members of the Company’s board of directors to file a Schedule 14D-9 correcting the alleged misstatements and omissions, (iv) a declaration that the defendants violated sections 14(e), 14(d)(4) and 20(a) of the Securities Exchange Act and (v) an award of attorneys’ fees and experts’ fees. The Company believes that the possibility of the Securities Complaints resulting in a material loss is remote.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Regulations under the Exchange Act require public companies to maintain “disclosure controls and procedures.” Rule 13a-15(e) and Rule 15d-15(e) require that a company’s controls and other procedures are designed to ensure information required to be disclosed in the reports it files, or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and other procedures designed to ensure information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Limitation of the Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls and procedures are met. Additionally, in designing disclosure controls and procedures and internal control over financial reporting, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Form 10-K for the financial year ended January 31, 2017. Based on the evaluation, as of January 31, 2017, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on the assessment, management has concluded that our internal

89

control over financial reporting was effective as of January 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We reviewed the results of management’s assessment with the Audit Committee of our board of directors.

Our independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of the company’s internal control over financial reporting, as stated in the firm’s attestation report, which is included within Part II, Item 8 of this Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended January 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference to information contained in the Proxy Statement for our 2017 Annual Meeting of Stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and any persons who own more than 10% of the Company’s common stock (collectively “reporting persons”), to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

Codes of Business Conduct and Ethics

We have adopted codes of ethics, our Code of Business Conduct and Ethics for employees, which applies to all employees, including our principal executive officers, our principal financial officer and all other executive officers, and our Code of Business Conduct and Ethics for Directors, which applies to our board of directors. The Codes of Business Conduct and Ethics are available on our website at www.investors.nimblestorage.com under “Governance Documents.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on our website at the address and location specified above.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to information contained in the Proxy Statement for our 2017 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to information contained in the Proxy Statement for our 2017 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to information contained in the Proxy Statement for our 2017 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference to information contained in the Proxy Statement for our 2017 Annual Meeting of Stockholders.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

We have filed the following documents as a part of this Form 10-K:

(a) Financial Statements

	Page
Reports of Independent Registered Public Accounting Firm		60
Consolidated Balance Sheet		62
Consolidated Statements of Operations		63
Consolidated Statements of Comprehensive Loss		64
Consolidated Statements of Stockholders’ Equity		65
Consolidated Statements of Cash Flows		66
Notes to Consolidated Financial Statements		67

(b) Financial Statement Schedules

All schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedules or because the information required is included in the Consolidated Financial Statements or notes thereto.

(c) Exhibits

The list of exhibits filed with this Form 10-K is set forth in the Exhibit Index following the signature pages and is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in San Jose, California, on the 24th day of March, 2017.

NIMBLE STORAGE, INC.
By:	/s/    Suresh Vasudevan
	Suresh Vasudevan Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Suresh Vasudevan and Anup Singh, and each of them, as his true and lawful attorneys-in-fact, proxies and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxies and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Suresh Vasudevan       Suresh Vasudevan	Chief Executive Officer and Director (Principal Executive Officer)	March 24, 2017
/s/  Anup Singh       Anup Singh	Chief Financial Officer (Principal Accounting and Financial Officer)	March 24, 2017
/s/  Varun Mehta     Varun Mehta	Founder, Chief Strategy Officer and Director	March 24, 2017
/s/  Frank Calderoni       Frank Calderoni	Director	March 24, 2017
/s/  James J. Goetz       James J. Goetz	Director	March 24, 2017
/s/  William D. Jenkins, Jr.       William D. Jenkins, Jr.	Director	March 24, 2017
/s/  Jerry M. Kennelly       Jerry M. Kennelly	Director	March 24, 2017
/s/  William J. Schroeder       William J. Schroeder	Director	March 24, 2017
/s/  Robert Kelly       Robert Kelly	Director	March 24, 2017

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EXHIBIT INDEX

Exhibit		Incorporated by Reference					Filed Herewith
Number	Exhibit Description	Form	File No.		Exhibit	Filing Date
3.1	Restated Certificate of Incorporation.	S-1		333-191789	3.2	December 2, 2013
3.2	Restated Bylaws.	S-1		333-191789	3.4	December 2, 2013
4.1	Form of Common Stock Certificate.	S-1		333-191789	4.1	December 10, 2013
4.2	Amended and Restated Investors Rights Agreement, dated August 10, 2012, by and among the Registrant and certain of its stockholders, as amended.	S-1		333-191789	4.2	October 18, 2013
10.1+	Form of Indemnification Agreement.	10-Q		001-36233	10.1	December 9, 2015
10.2+	2008 Equity Incentive Plan and forms of award agreements.	S-1		333-191789	10.2	October 18, 2013
10.3+	2013 Equity Incentive Plan, as amended and restated, and forms of award agreements.	10-Q		001-36233	10.3	December 12, 2014
10.4+	2013 Employee Stock Purchase Plan and form of subscription agreement.	S-1		333-191789	10.4	December 2, 2013
10.5+	Offer Letter, accepted and agreed to January 3, 2011, by and between the Registrant and Suresh Vasudevan.	S-1		333-191789	10.5	October 18, 2013
10.6+	Offer Letter, accepted and agreed to October 22, 2011, by and between the Registrant and Anup Singh.	S-1		333-191789	10.6	October 18, 2013
10.7+	Offer Letter, accepted and agreed to April 27, 2015, by and between the Registrant and Dennis Murphy.	10-Q		001-36233	10.3	June 8, 2015
10.8	Office Lease, dated April 19, 2013, by and between the Registrant and RO Parkway Associates, LLC.	S-1		333-191789	10.8	October 18, 2013
10.9	First Amendment to Office Lease, dated February 19, 2016, by and between the Registrant and ARC NSSNJCA001, LLC as assignee of RO Parkway Associates, LLC.	10-Q		001-36233	10.1	June 8, 2016
10.10+	Change in Control Severance Policy.	S-1		333-191789	10.9	October 18, 2013
10.11	Credit Agreement dated October 1, 2013, by and between the Registrant and Wells Fargo Bank, National Association.	S-1		333-191789	10.10	October 18, 2013
10.12	Security Agreement dated October 1, 2013, by and between the Registrant and Wells Fargo Bank, National Association.	S-1		333-191789	10.11	October 18, 2013
10.13	First Amendment to Credit Agreement dated April 23, 2014, by and between Registrant and Wells Fargo Bank, National Association.	10-K		001-36233	10.12	March 31, 2016

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10.14	Second Amendment to Credit Agreement dated June 17, 2014, by and between Registrant and Wells Fargo Bank, National Association.	10-K	001-36233	10.13	March 31, 2016
10.15	Third Amendment to Credit Agreement dated September 19, 2014, by and between Registrant and Wells Fargo Bank, National Association.	10-Q	001-36233	10.4	December 12, 2014
10.16	Fourth Amendment to Credit Agreement, dated April 6, 2015, by and between the Company and Wells Fargo Bank, National Association.	10-Q	001-36233	10.4	June 8, 2015
10.17	Fifth Amendment to Credit Agreement, dated December 9, 2016, by and between the Company and Wells Fargo Bank, National Association.	10-K	001-36233	10.16	March 31, 2016
10.18	Sixth Amendment to Credit Agreement, dated July 29, 2016, by and between the Company and Wells Fargo Bank, National Association.	10-Q	001-36233	10.1	September 9, 2016
10.19	Seventh Amendment to Credit Agreement, dated November 3, 2016, by and between the Company and Wells Fargo Bank, National Association.					X
10.20+	Offer Letter between the Registrant and Robert Kelly dated as of November 24, 2016.					X
21.1	Subsidiaries of the Registrant.	S-1	333-191789	21.1	October 18, 2013
23.1	Consent of Independent Registered Public Accounting Firm.					X
24.1	Power of Attorney (see signature page to this report).					X
31.1	Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .					X

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101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Schema Linkbase Document	X
101.CAL	XBRL Taxonomy Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Labels Linkbase Document	X
101.PRE	XBRL Taxonomy Presentation Linkbase Document	X

+ Indicates a management contract or compensatory plan.

* As contemplated by Securities Exchange Commission Release No. 33-8212, these exhibits are furnished with this Annual Report on Form 10-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Nimble Storage, Inc. under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.

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