Benchmarking 5 SaaS IPOs in the First Half of 2017
An Analysis of Yext, Okta, Mulesoft, Cloudera, and Appian
It’s been a relatively good year for tech stocks. After last year’s dearth of IPOs, 2017 has gone off with a bang and is looking to continue its hot streak of IPOs throughout the year.
Now at the half-way point of the year, its a good time to benchmark some of the activity and look at any major trends in these newly-public companies.
We took a deep-dive look at five SaaS businesses that had an IPO in the first half of 2017: Yext, Okta, Mulesoft, Cloudera, and Appian. With each of these companies, I will be discussing some major comparative financial metrics taken from each of these publicly-traded companies’ S-1 filings and Google Finance.
The chart above shows the stock price of each of these companies since their IPO. Stock prices for each have remained relatively stable with none of the companies fluctuating ±10% of their IPO price other than Appian (+24%). Only Yext and Okta are down on their original price. There doesn’t seem to be a pattern on how the stock prices of these SaaS companies are moving, but they haven’t exactly reaped the benefit of IPO stock underpricing.
Revenue, Growth, and Gross Margin
Revenue continues to climb for each of the companies, with all of the companies except Appian doubling their revenue over the last 3 years. Okta and Yext are the only companies to not break the $100M mark yet, but their YoY revenue growth (chart below) is very impressive.
Growth is still the main value driver of these companies, and growing this quickly at their scale is incredibly impressive. Mulesoft in particular has had massive scale with 91% growth in 2015 and 71% in 2016. Most of the growth among these companies is driven by new customer acquisition vs. expansion of current customers.
Gross Margin also steadily improved for all of the companies. Depending on the business model and percentage of revenue from services, Gross Margin will fluctuate, but most SaaS benchmarks show that a 70–80% clip without services is a good sign.
Operating Expenses and Income
Operating expenses seemed to be scaling directly with revenue growth for these businesses. These are mostly driven by Sales and Marketing expenses due to their growth focus, but there were also other operational costs that rose as well. As the chart below details, though, most of the companies are coming closer to profitability.
Interestingly, Yext and Mulesoft were both profitable after operations in 2016, which is a good sign for them to be able to turn the corner from growth mode to profitability if needed, while Okta and Cloudera are still unprofitable. Appian has been the only consistently profitable company out of this batch, however.
Sales & Marketing and R&D Expenses
Sales & Marketing spend was a major focus for most of the companies with Cloudera and Okta spent nearly 100% of revenue in 2016 on S&M. Yext and Appian have the lowest S&M to Revenue ratio, but are growing significantly. S&M overall has grown for both Appian and Yext, but dropped significantly for Cloudera, Mulesoft, and Okta.
R&D expenditures have dropped for every company other than Appian. It’s very interesting to see Cloudera and Okta both have such a high R&D spend in 2015 (the beginning of their S-1 data). This is especially interesting given Okta’s age and how long their product has been in market. Just for fun, I’ve plotted below each company’s time to IPO vs. their 2016 revenue.
Overall, 2017 has been a good year for IPOs and all of the five companies above are doing well so far since their IPO. They are all in very different stages of their lifecycle, so it’s a bit difficult to directly compare them, but there are a lot of interesting data points about each company that gives a bit more color to their story and where they are in their lifecycle. At the same time, it will be interesting to see if any of these companies can create enough growth or acceleration to become the next Salesforce or Oracle.
*Also — a big shout out to Srikar Kalvakolanu at High Alpha for all of the help with the analysis and putting together this article.
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