Tintri (TNTRQ) Risk Factors

We face intense competition from numerous established companies that sell competitive enterprise cloud infrastructure systems or storage solutions. These competitors include large system vendors, consisting primarily of Dell EMC and NetApp, and also Hitachi Data Systems, HP Enterprise, IBM and VMware, which each offer a broad range of data center systems targeting various use cases and end markets. We also face competition from other companies, including companies that offer solutions powered entirely or partially by flash memory technology, such as Nimble Storage, a Hewlett Packard Enterprise company, Nutanix and Pure Storage. These competitors, as well as other potential competitors, when compared to us may have: - greater name recognition and longer operating histories;- larger sales and marketing and customer support budgets and resources;- the ability to bundle enterprise cloud infrastructure systems or storage solutions with other products and services to address customers' needs;- more comprehensive enterprise cloud infrastructure systems or storage solutions;- greater resources to make acquisitions and develop new solutions;- infrastructure solutions that are, or that are perceived to be, simpler and faster to deploy, or able to store and process data more effectively;- infrastructure solutions that store and process both physical and virtualized workloads;- larger and more mature intellectual property portfolios; and - substantially greater financial, technical and other resources. Furthermore, many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at many of our current and prospective customers. We expect that our competitors will seek to leverage these existing relationships to discourage customers from purchasing our solution. If we are unsuccessful in establishing or maintaining relationships with customers, or if customers are reluctant or unwilling to try our solution, our ability to compete in the marketplace or to grow our revenue could be impaired. Our competitors utilize a broad range of competitive strategies. For example, some of our competitors have offered bundled products and services in order to reduce the initial cost of their storage solutions, or seek to exploit concerns of existing and potential customers regarding our financial condition. Our competitors may also compete on purchase price and total cost of ownership, and may choose to adopt more aggressive pricing policies than we choose to adopt in the future. Certain of our competitors may have developed, claim to have developed or have indicated that they intend to develop enterprise cloud technologies that may compete with our solution. We expect our competitors to continue to improve the performance of their solutions, reduce their prices and introduce new services and technologies that may, or that they may claim to, offer greater performance and improved total cost of ownership as compared to our solution. These and other competitive pressures may prevent us from competing successfully against current or future competitors. If we are unable to acquire customers, or if we are forced to reduce prices in order to do so, our business, operating results and financial condition may be adversely affected.

Our enterprise cloud platform, which includes our proprietary Tintri OS and our stand-alone software products, accounts for all of our product revenue and will continue to comprise a significant portion of our revenue for the foreseeable future. As a result, any of the following events or developments could have a comparatively greater impact on our business than they would if we offered a broader range of solutions: - the failure of our current solutions to achieve broad market acceptance;- any decline or fluctuation in demand for our current solutions, whether as a result of customer budgetary constraints, introduction of competing products or technologies or other factors; and - our inability to release enhanced versions of our current solutions, including any related software, on a timely basis. If the market for enterprise cloud infrastructure solutions grows more slowly than anticipated, if demand for our solution declines, or if we fail to deliver new solutions, new features, or new releases that meet customer demand, our business, operating results and financial condition will be adversely affected.

Our future success depends in part on our ability to increase sales of our solution to new customers domestically and internationally, as well as to increase sales of additional solutions and renewals to our existing customers. The rate at which new and existing customers purchase solutions depends on a number of factors, including customers' perceived need for enterprise cloud infrastructure solutions, general economic conditions, our ability to compete effectively with our competitors, spending levels on IT infrastructure solutions and other factors outside of our control. We may also be forced to engage in sophisticated and costly sales efforts, which may not result in additional sales. Furthermore, the rate at which our customers purchase enterprise cloud infrastructure solutions may be impacted by customers' concerns about the ongoing viability of our business. Following our IPO during fiscal 2018, we observed that some customers reduced or delayed purchases of our systems due to concerns about our financial condition and prospects. The Report of Independent Registered Public Accounting Firm issued by KPMG with respect to the accompanying financial statements includes an explanatory note concerning our ability to continue as a going concern, which we believe could create further concerns among our customers and suppliers and potential customers or suppliers concerning our financial condition and prospects, and could impact future order rates and levels. We provide our support services under limited term contracts, which range from one to five years. Our customer renewal rate may decline or fluctuate as a result of a number of factors, including our customers' level of satisfaction with our solution, our customer support and increased competition and the pricing of our, or competing, services. Even if our customers choose to renew their support contracts, they may renew for shorter contract periods or on other terms that are less beneficial to us. We have limited historical data with respect to rates of customer renewals, so we may not accurately predict future renewal trends. We cannot ensure that our customers will purchase our solution or will renew their support contracts, and their failure to make such purchases or renewals may adversely affect our business, operating results and financial condition.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act of 2010 and other anti-bribery and anti-money laundering laws in countries in which we conduct activities. We face significant risks if we fail to comply with the FCPA and other anticorruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any advantage. In addition, we use various third parties to sell our solution and conduct our business abroad. We, our channel partners, and our other third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We continue to implement our FCPA/anti-corruption compliance program and cannot assure you that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, other applicable anticorruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have a material and adverse effect on our reputation, business, operating results and financial condition. In addition, responding to any enforcement action may result in a significant diversion of management's attention and resources and significant defense costs and other professional fees.

Legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") was enacted in December 2017, and contains many significant changes to the U.S. federal income tax laws, the consequences of which have not yet been determined. Changes in corporate tax rates, the realizability of the net deferred tax assets relating to our U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Act or other tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges in the current or future taxable years, and could increase our future U.S. tax expense. The foregoing items could have a material adverse effect on our business, cash flow, results of operations or financial conditions.  In accordance with Staff Accounting Bulletin 118, a company generally has up to one year from the Tax Act enactment date to complete the accounting under ASC 740 to reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.  The Deemed Repatriation Transition Tax, or the Transition Tax, is a tax on previously untaxed accumulated and current earnings and profits of certain of our foreign subsidiaries at reduced tax rates.  We have made a reasonable estimate of the Transition Tax and expect to utilize U.S. net operating losses to reduce the tax. However, we have not collected all of the necessary data to complete our analysis of the effect of the Tax Act on our underlying deferred taxes and as such, the amounts recorded in our financial statements as of January 31, 2018, are provisional.

The United States and other jurisdictions where we offer our solution have laws, regulations and standards governing the protection of information privacy, data protection and information security. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission, or FTC, and various state, local and foreign bodies and agencies. In addition, agreements with our customers and business partners may contain contractual provisions related to the protection of information privacy, data protection and information security. The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of personal information of individuals, including customers and employees. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws to the online collection, use and dissemination of data. In addition, many foreign countries and government bodies, including in Australia, the European Union, Japan and numerous other jurisdictions in which we operate or conduct our business, have laws and regulations concerning the collection and use of personally identifiable information obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Such laws and regulations may require companies to implement privacy and security policies, permit customers to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals' consent to use personally identifiable information for certain purposes. In addition, a foreign government could require that any personally identifiable information collected in a country not be disseminated outside of that country, and we are not currently equipped to comply with such a requirement. We also may find it necessary or desirable to join industry or other self-regulatory bodies or other information security- or data protection-related organizations that require compliance with their rules pertaining to information security and data protection. We also may be bound by additional, more stringent contractual obligations relating to our collection, use and disclosure of personal, financial and other data. We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. In addition, we expect that existing laws, regulations and standards may be interpreted in new manners in the future. For example, an October 2015 decision by the Court of Justice for the European Union invalidated the U.S.-EU Safe Harbor Framework, which facilitated personal data transfers to the U.S. in compliance with applicable EU data protection laws. While we did not rely upon the U.S.-EU Safe Harbor Framework for our transfer of EU personal data to the United States, and do not rely upon its replacement framework, the U.S.-EU Privacy Shield, there remains some regulatory uncertainty surrounding the future of data transfers from the European Union to the United States. In addition, European legislators have adopted a general data protection regulation that will, when effective in May 2018, supersede current EU data protection legislation, impose more stringent EU data protection requirements and provide for greater penalties for noncompliance. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our or our customers' ability to collect, use or disclose information relating to individuals, which could decrease demand for our solution, require us to restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue. Although we are working to comply with those federal, state and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our solution. As such, we cannot assure ongoing compliance with all such laws or regulations, industry standards, contractual obligations and other legal obligations. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected cybersecurity breach, ransomware attack or other security incident, whether or not resulting in unauthorized access to, or acquisition, release or use or transfer of personally identifiable information or other data, may result in government enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business, operating results and financial condition. Changes to laws or regulations affecting privacy could impose additional costs and liabilities on us and could limit our use of such information to add value for customers. If we were required to change our business activities or revise or eliminate services, or to implement burdensome compliance measures, our business and operating results could be harmed. In addition, we may be subject to fines, penalties, and potential litigation if we fail to comply with applicable privacy and/or data security laws, regulations, standards and other requirements. The costs of compliance with and other burdens imposed by privacy-related laws, regulations and standards may limit the use and adoption of our product solutions and reduce overall demand. Furthermore, concerns regarding data privacy may cause our customers' customers to resist providing the data and information necessary to allow our customers to use our product solutions effectively. Even the perception that the privacy and/or security of personal information is not satisfactorily protected or does not meet applicable legal, regulatory and other requirements could inhibit sales of our products or services, and could limit adoption of our solution.

We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. We will need to continue to create valuable software and hardware solutions to be integrated with our enterprise cloud platform. To compete successfully, we must design, develop, market and sell new or enhanced solutions that provide increasingly higher levels of performance, capacity, scalability, security and reliability and meet the cost expectations of our customers. In September 2017, we announced the introduction of a new series of enterprise cloud products. The extent of market acceptance and demand for these and other new products are expected to affect our future financial results. Any failure to anticipate or develop new or enhanced solutions or technologies in a timely manner in response to technological shifts could result in decreased revenue and harm to our business, operating results and financial condition. Any new feature or application that we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve broad market acceptance. If we fail to introduce new or enhanced solutions that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our business, operating results and financial condition will be adversely affected.

Many of our employees were previously employed at current or potential competitors. Although we require our employees to not use the proprietary information or know-how of others in their work for us and we are not currently subject to any claims that they have done so, we have in the past received inquiries from former employers of our employees and we may in the future become subject to claims that these employees have divulged, or we have used, proprietary information of these employees' former employers. Litigation may be necessary to defend against these claims. If we are unable to successfully defend any such claims, we may be required to pay monetary damages and to discontinue our commercialization of certain solutions. In addition, 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 solutions and features for our existing solutions, which could severely harm our business. Even if we are successful in defending against these claims, litigation efforts are costly, time-consuming and a significant distraction to management.

Our solution must interoperate with our customers' existing infrastructure, specifically their hypervisors, networks, servers, and other software, which are provided by a wide variety of vendors. For example, our VMstore solutions support hypervisors marketed by Citrix, Microsoft, Open Stack, Red Hat, and VMware. When new or updated versions of these hypervisors or software applications are introduced, we must sometimes develop updated versions of our software so that our solution will interoperate properly. These efforts require capital investment and engineering resources and we may not be able to deliver or maintain interoperability quickly, cost-effectively or at all. If we fail to maintain compatibility of our solution with these infrastructure components, our customers may not be able to fully utilize our solution, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our solution, which may harm our business, operating results and financial condition.

Although we have a channel sales model, our sales representatives typically engage in direct interaction with our prospective customers. Therefore, we continue to be substantially dependent on our sales force to obtain new customers and sell additional solutions to our existing customers. As such, we have invested and expect to continue to invest substantially in our sales organization. Competition for sales personnel with the skills and technical knowledge that we require is intense and our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. In August 2017, we announced changes to the structure of our sales organization, including the departure of our former Chief Sales Officer, and Ken Klein, our former Chief Executive Officer, assuming more direct involvement with our sales organization. In March 2018, we announced the promotion of Tom Cashman to Executive Vice President, Worldwide Sales and Alliances.  In March 2018, we also announced that the Board had named Tom Barton as our new Chief Executive Officer, who began his employment in April 2018. On May 15, 2018, we also appointed Tom Barton as interim Chief Financial Officer. These changes and other changes may impact our ability to attract and retain sales personnel. A significant percentage of our sales force is new to our company and therefore less effective than our more seasoned sales personnel. New hires require significant training and may take significant time before they achieve full productivity; we estimate based on past experience that sales team members typically do not fully ramp and are not fully productive during the first several quarters of employment with us. Our recent hires and planned hires may not become productive as quickly as we expect. Furthermore, hiring sales personnel in new countries requires additional set up and upfront costs that we may not recover if the sales personnel fail to achieve full productivity. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new customers or increasing sales to our existing customer base, our business, operating results and financial condition will be adversely affected.

We depend on channel partners and distributors for a substantial majority of our sales. Approximately 89%, 85%, and 90% of our revenue in fiscal 2016, 2017, and 2018, respectively, was derived from sales to our channel partners and distributors. We also depend upon our channel partners to manage the customer sales process and to generate sales opportunities. To the extent our channel partners are unsuccessful in fulfilling our sales, managing the sales process or selling our solution, or we are unable to enter into arrangements with, and retain a sufficient number of high-quality, motivated partners in each of our sales regions, our ability to sell our solution will be adversely affected. Our contracts with channel partners are typically terminable without cause by either party after an initial term of one year. Our channel partner agreements do not prohibit them from offering competitive products or services and do not contain any purchase commitments. Many of our channel partners also sell our competitors' solutions. If our channel partners give higher priority to our competitors' storage solutions, 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 business, operating results and financial condition may be adversely affected.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and the rules and regulations of the NASDAQ Stock Market. The requirements of these rules and regulations have resulted in an increase in our legal, accounting and financial compliance costs as compared to prior periods, make some activities more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing the costly process of implementing and testing our systems to report our results as a public company, to continue to manage our growth and to implement internal controls. We have been and will be required to implement and maintain various other control and business systems related to our equity, finance, treasury, information technology, other recordkeeping systems and other operations. As a result of this implementation and maintenance, management's attention may be diverted from other business concerns, which could adversely affect our business. Furthermore, we rely on third-party software and system providers for ensuring our reporting obligations and effective internal controls, and to the extent these third parties fail to provide adequate service including as a result of any inability to scale to handle our growth and the imposition of these increased reporting and internal controls and procedures, we could incur material costs for upgrading or switching systems and our business could be affected. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected. In addition, we expect these laws, rules and regulations to make it more difficult and more expensive for us to maintain director and officer liability insurance, and we may be required to incur substantial costs to maintain appropriate levels of coverage. These factors could also make it more difficult for us to attract and retain qualified members of the Board, particularly to serve on our audit committee, and qualified executive officers. As a result of disclosure of information in filings required of a public company, our business and financial condition have become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the time and resources of our management and adversely affect our business, operating results and financial condition.