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Teladoc (NYSE: TDOC)
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Teladoc (NYSE: TDOC)

Teladoc (NYSE: TDOC)Teladoc (NYSE: TDOC), based in Dallas, Texas, is a recent addition to our Battle Road IPO Review Business Services sector coverage. Founded in 2002, Teladoc provides healthcare services, which may be accessed via the phone, or through the web via an internet connected device. Consensus estimates call for revenue of $75 million and a Loss per Share of $1.58 in 2015, followed by revenue of $118 million and a Loss per Share of $1.02 in 2016.

Teladoc priced its 8.3 million share IPO at $19 per share on the NASDAQ on June 30, 2015 for first trade the following day. All shares were offered by the company. Subsequently the underwriters exercised their over-allotment of 1.24 million shares for a total offering of 9.5 million shares, enabling the company to raise about $170 million. The deal was led by J.P. Morgan Securities, Deutsche Bank Securities, William Blair, Wells Fargo Securities, and SunTrust Robinson Humphrey. At a recent share price of $21, Teladoc’s market cap is roughly $800 million.

Teladoc is one of a number of growing healthcare services providers catering to the on-the-go professional, as well as those that wish to avoid fees and expenses incurred by visiting a doctor. Teladoc members pay a $40 fee for a “virtual visit” with a physician or licensed healthcare provider. The visit may be a video collaboration, telephone consultation, or email query. The fee is paid directly by the member or through their healthcare service provider.

The company provides phone based counseling on a range of conditions, disorders, and maladies, including anxiety and smoking cessation treatments, as well as diagnoses of skin conditions and acute infections. Teladoc connects 12 million subscribers to over 1,500 board-certified doctors and health professionals, and claims a median response time of 10 minutes to a user query. During the second quarter of 2015, the company recorded 125,322 patient “visits” versus 61,379 the year before. Teladoc has grown both organically and through acquisitions, including four executed in the last two years. Teladoc’s top ten customers accounted for 28 percent of revenue in 2014, down from 41 percent in 2013. Through the first six months of 2015, the top ten customers accounted for less than 25 percent of revenue.

A number of telemedicine services providers have cropped up in recent years, including privately-held MDLive, Doctor on Demand, and American Well. The segment has been gaining recognition and endorsement from several leading healthcare services providers, including Anthem, Aetna, Cigna, UnitedHealth Group, and others. CVS is currently working with Teladoc, as well as Doctor on Demand and American Well.

Despite its alluring value proposition, Teladoc’s lack of profitability is disconcerting. During the third quarter of 2015, Teladoc recorded sales growth of 83 percent, reaching $20 million, with subscriptions and access fees accounting for 85 percent of sales, and visit fees the remaining 15 percent. The company’s operating loss widened from $3.9 million a year ago to $12.6 million in the most recent period, a disconcerting sign that the company is failing to make progress toward profitability.

Rapid7 (NASDAQ: RPD)
Cloud Based Software, independent internet stock research, independent research on IPOs, Independent Stock Research, independent stock research on Rapid7, IPO Research, Rapid7 Research, recent IPO research, Stock Research, The Battle Road IPO Review

Rapid7 (NASDAQ: RPD)

Rapid7 (NASDAQ: RPD)Rapid7 (NASDAQ: RPD), based in Boston, Massachusetts, is a recent addition to our Battle Road IPO Review Software sector coverage. The company was founded 15 years ago in New York City, where its founders took the city’s rapid transit train to work in mid-town Manhattan. RPD focuses on IT security software and services, with an emphasis on vulnerability and threat detection. The company recorded revenue of $77 million and a net loss of $33 million in 2014. For 2015 Consensus estimates call for revenue of $104 million and a Loss per Share of $1.53, followed by revenue of $131 million and a Loss per Share of $0.85.

Rapid7 priced its 6.45 million share IPO at $16 per share –above an expected range of $13-15—on the NASDAQ on June 16, 2015 for first trade the following day. All shares were offered by the company. Subsequently the underwriters exercised their over-allotment, enabling the company to raise about $110 million in its IPO. The deal was led by Morgan Stanley, Barclays Capital, KeyBanc Capital Markets/Pacific Crest, William Blair, Raymond James, and Cowen.

Rapid7 is led by Corey Johnson, President and CEO, who has risen through the ranks of the company in the last seven years, and served as Chief Operating officer, prior to his current position. His experience includes five years at Microsoft, where he was a Group Project Manager, with responsibility for the world-wide launch of SQL Server in 2005. Steve Gatloff, CFO, formerly CFO of iPass, held financial roles at United Online, Sterling Commerce, and VeriSign.

Rapid7 provides a portfolio of cloud-based software and managed services to detect and analyze cybersecurity threats for over 4,100 customers across a broad range of industries, including 34 percent of the Fortune 1000. In the last year, RPD added BJ’s Wholesale Club, Boyd Gaming, Dollar Tree, Fastenal, Iowa State University, Johnson Controls, Parker Hannifin, Samsung Electronics, and the Smithsonian to its growing list of business and government customers.

Roughly two-thirds of sales in each of the last three years comes from its Nexpose vulnerability and threat assessment software, which among other things, identifies weak points in a company’s data network, and helps to prevent cyber attacks across computer networks. About 88 percent of sales comes from the US, and the company utilizes a direct salesforce as well as channel partners that account for 41 percent of sales. RPD boasts an 87 percent renewal rate for existing products. The company recognizes about 80 percent of sales each quarter from backlog. At the end of the September 30, 2015 quarter, the company’s DSOs stood at 103, up from 95 in the previous quarter, a level that we consider to be high relative to other software companies that we research.

The market for security threat detection and assessment is a large and competitive one, with IBM, HP, and Intel, through its acquisition of McAfee, quite active in the market. In addition, RPD faces competition from several dedicated security software and services vendors, such as FireEye (NASDAQ: FEYE), Qualys (NASDAQ: QLYS), and others.