Key notes from the MuleSoft IPO: S-1 SEC filing

S-1 Breakdown

In February 2017, MuleSoft announced that they have filed a registration statement on Form S-1 with the U.S. SEC for the proposed IPO of its Class A common stock.

  • Similar to TalenD and Duo World which went/ or filled for IPO in 2016, MuleSoft filled under the federal law Jumpstart Our Business Startups Act (JOBS), enabling young companies that generate less than $1b in revenue to file for IPOs.

MuleSoft plans to raise $100m by offering some of its Class-A Common Stocks through its IPO, price of its shares are not yet disclosed.

The analysis below looks at its S-1 and evaluate company’s funding history, M&As, financials performance, positioning, stability, competitive landscape, and MuleSoft’s position within it.

FUNDING/ PRE-IPO

The Company has raised ~$260m through funding, since it launched 11 years ago.

  • Valuation: the Company valuation at its last round was $1.5b (in 2015), while in 2014 the company was valued at $800m.

Current investors include:

  • Lightspeed Venture Partners (17.1% stake), New Enterprise Associates (14.3%), Meritech Capital Partners, Hummer Winblad Venture Partners (15.8%) and Morgenthaler Ventures (7.5%).
  • Also it has attracted funding from corporate-connected investors including Salesforce Ventures, Cisco Systems, ServiceNow and Sapphire Ventures (6.8%).
ACQUISITIONS

In 2013, MuleSoft acquired ProgrammableWeb, a popular online destination used by developers worldwide to help build Web, mobile and other connected applications through APIs.

  • In 2016, MuleSoft was ranked #20 on the Forbes Cloud 100 list (the top 100 private companies in cloud computing).
FINANCIALS

For FY 2016, MuleSoft had revenues of $188m with a EBITDA loss of (-$48m) — much of the loss due to the $122m (52% of total expenses) spent on sales and marketing.

Rev growth: Total YoY revenue grew by 91% in 2015 and by 70% in 2016.

EBITDA: Incurred EBITDA losses of (-$47m), (-$64m), and (-$48m) in 2014, 2015, and 2016, respectively.

Rev growth driver: The Company’s revenue growth was fueled by the global demand for its Anypoint Platform — which was launched in 2014:

  • “Anypoint Platform brought all of MuleSoft’s core capabilities together — a hybrid integration platform that supports any integration use case, including on-premises integration, cloud-based integration, and full-life cycle API management” (From Company’s S-1)

Rev by geographic region: In 2014, 2015, and 2016, MuleSoft derived approximately 36%, 37%, and 38% revenue from customers located outside the United States.

Gross margin: Overall GM% remained relatively consistent over all periods presented.

  • CoS for subscription consists primarily of cloud-hosting costs (increase of $2.2m in 2016), personnel-related costs of the customer support organization (+$1.5m), and outside contractor cost (+$1.4m).
  • CoS for professional services and other consists primarily of personnel-related costs of MuleSoft’s consulting and training department (+$5.8m), outside contractor cost (+$2.9m), and travel cost (+1m).
EXPENSES

More than 50% of the total expenses throughout 2014–2016 was due to sales and marketing, which majority of it came as a result of HR/salary related costs due to increase in headcount.

S&M expenses: Increased by $30m, or 32%, to $123m during 2016 from $93m during 2015.

  • Primarily due to an increase in HR/salary related costs of $22m as a result of increase in headcount.
  • Also, there was an increase of $8m in sales commissions.

R&D expenses: Increase were primarily due to increase in employee compensation related to increased headcount — 2014 vs. 2015 cost of R&D HR/salary related costs increased by 45% while 2015 vs. 2016 it increased by 33%.

  • A significant number of MuleSoft’s R&D employees are located in Argentina (60% of the R&D total headcount)

G&A expenses: Increased by 105% YoY in 2015 and in 30% YoY in 2016 — primarily due to an increase in headcount.

CASH

The Company had cash and cash equivalents of $50m, $20m, and $35m as of Dec 31, 2014, 2015, and 2016, respectively — cash equivalents are comprised primarily of bank deposits and money market funds.

INVESTMENTS

The Company had current investments in marketable securities of $57m and $63m as of December 31, 2015 and 2016, respectively.

Investments are comprised of marketable securities such as corporate bonds, foreign bonds and U.S. Treasury securities.

OTHER INFO:

Headcount: Increased headcount from 444 employees as of Dec 31, 2014 to 841 employees as of Dec 31, 2016.

Customers:

Over 1,000 customers located in 60+ countries, including 30 customers with over $1m in annual contract value of subscription and support contracts.

UPDATE/ POST S-1

The Company had a successful IPO — on the first day of trading MuleSoft’s shares increased by ~45%; traded at $17 a share, above the expected range of $14 to $16. Its shares closed at $25 a share with a high of $26. The Company’s valuations soared to $4b post-IPO.