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Battle Road IPO Review, IPO Research, IPO research on software stocks, Research On Bigcommerce Holdings

BigCommerce Holdings: Powering Online Sales

BigCommerce Holdings logoBigCommerce Holdings (NASDAQ: BIGC), an ecommerce software company, is a recent addition to our Battle Road IPO Review & Stock Screen coverage. Founded in 2009, the company is headquartered in Austin, Texas, where it is led by Chairman, President, and CEO, Brent Bellm. For 2020, Consensus estimates call for $142 million in revenue, along with a loss of $1.01.  The outlook improves in 2021, as analysts foresee the company producing $170 million in revenue, with a loss per share of $0.41.

BigCommerce debuted on the NASDAQ on August 5th, 2020, at an opening price of $24, in a 10.4 million Series 1 common stock offering, of which 7.9 million were sold by the company, with the remainder sold by shareholders.  Following the transaction, the company has about $215 million in cash, with a net cash position of $144 million.  At a recent share price of $83, the company spent little time as a small cap stock, and now possesses the remarkable market cap of $5.5 billion.  Morgan Stanley and Barclays were lead book-running managers for the offering, with assistance from six other firms.

BigCommerce aims to provide the best SaaS ecommerce platform in the world for all steps of customer growth, with a focus on building online store fronts, and the infrastructure to manage them.  In addition to developing the customer’s ecommerce site, BigCommerce develops cross-channel connections to other online marketplaces, social networks, and offline point-of-sale systems.  The company provides free direct integrations with online marketplaces such as Amazon and eBay, search engines like Google, social networks including Facebook and Instagram, and point-of-sale platforms, such as Square, Clover, and Vend.

The company’s solution includes modules for checkout, order management, store design, catalog management, reporting, and hosting, with pre-integration into third-party services, such as payments, accounting, and shipping.  The company claims that its customers’ stores are run on a single cloud base with a global, multi-tenant architecture developed for high levels of security, performance, and innovation.

When first founded, BigCommerce focused on targeting small businesses, but under new leadership, beginning in 2015, expanded its target market to include the mid-market, or companies with annual online sales between $1 million and $50 million, as well as large enterprises. In total, BigCommerce supplies solutions to roughly 60,000 online stores in 120 countries.  About 75 percent of the sites BigCommerce serves are in the United State, and notable customers include Sony, Ben & Jerry’s, SkullCandy, and SC Johnson.

According to eMarketer, retail ecommerce accounted for roughly 10 percent of all retail spending in 2017.  eMarketer projects that this number will balloon to 21 percent of global retail spending by 2023. The International Data Corporation (IDC) estimates that the worldwide market for digital commerce applications, or ecommerce platforms, was $4.7 billion in 2019, and is expected to jump to $7.8 billion in 2024.  BuiltWith.com ranks BigCommerce as the second most utilized ecommerce platform in the world.

BigCommerce sells its platform through a monthly subscription model, with prices starting at $29.95 per month and increasing with business size and functionality requirements.  In its fiscal year ending December 31st, 2018, BigCommerce recorded $92 million in revenue, with a net loss of $39 million.  While revenue increased to $112 million in its fiscal year ending December 31st, 2019, its net loss grew to $43 million. The stock screens near the bottom of our Battle Road IPO Review Software sector coverage, carrying an EV/sales ratio of 31x projected 2021 Consensus revenue estimates.

Battle Road IPO Review, Independent coverage of IPOs, Independent IPO Research, IPO Research on ZoomInfo Technologies, Software IPO Research

ZoomInfo Technologies: Zeroing in on Sales Leads

Zoominfo LogoZoomInfo Technologies (NASDAQ: ZI), not to be confused with Zoom Video Communications (NASDAQ: ZM), is the first software IPO in many months. Based in Vancouver, Washington, ZoomInfo provides a database utilized by sales and recruitment professionals to identify key decision makers, and accelerate the sales process. Company revenue in 2019 was $293 million, up from $144 million in the prior year. In 2019, the company generated operating income of $36 million.

ZoomInfo priced its 44.5 million share Class A common stock IPO on June 4, 2020 at $21, with the stock closing at $34. Net proceeds of roughly $887 million will be used to redeem the outstanding Series A preferred units of ZoomInfo Holdings for roughly $274, repay $370 million aggregate principal of its outstanding second lien term loans, repay $35 million of debt under its first lien revolving credit facility, and buy ZoomInfo OpCo equity interests from certain equity holders for roughly $43 million. It also intends to pay expenses relating to the offering. This would leave it with roughly $140 million for general corporate purposes.

The deal was led by sizable number of investment banks, all of which will also provide research on the company to investors, after receiving compensation for their participation in the IPO. These include J.P. Morgan, Morgan Stanley, Credit Suisse, and Barclays, along with BofA Securities, Deutsche Bank Securities, RBC Capital Markets, UBS Investment Bank, Wells Fargo, Canaccord Genuity, JMP Securities, Mizuho Securities, Piper Sandler, Raymond James, Stifel, SunTrust Robinson Humphrey, and Roberts & Ryan.

At a recent share price of $51, ZoomInfo has a market cap of roughly $21 billion, based on 56 million Class A, 239 million Class B, and 98 million Class C shares. We note that public shareholders will own about 12 percent of the company’s outstanding common stock, and hold less than 1.5 percent of the voting rights.

ZoomInfo serves roughly 15,000 companies with a cloud database platform that collects company-specific information relating to personnel, location of facilities, news and events, products and services sold, as well as technologies utilized—among other attributes—on roughly 14 million companies.   The information is utilized by sales, marketing, and recruiting professionals to target key decision-makers, in order to sell their products and services. ZoomInfo’s database is updated frequently, and draws upon artificial intelligence to help determine the accuracy of the information that it collects.

ZoomInfo is the combination of two companies: Zoom Info (originally Eliyon Technologies), and DiscoverOrg. Eliyon Technologies was established in 2000. After having been acquired private equity firm Great Hill Partners in August of 2017 for an estimated $240 million, the company acquired RainKing in 2017, and NeverBounce in 2018.

Separately, Henry Schuck and Kirk Brown created DiscoverOrg in 2007. In November of 2019 DiscoverOrg acquired Zoom Information in 2019 for an estimated $500 million, and renamed the combined company ZoomInfo Technologies. As a result of the merger, the company serves a wide range of customers across multiple sectors, including software, business services, manufacturing, telecom, financial services including insurance, and retail.

Nearly all of ZoomInfo’s revenue comes from software subscriptions. Six hundred thirty, or less than five percent of the company’s 15,000 customers generate subscription revenue exceeding $100,000 per year. In 2019, the combined companies generated $293 million, up from $144 million. Income from operations on a pro forma basis grew from $27 million to $36 million. As a result of multiple rounds of private equity and venture capital funding, ZoomInfo, prior to its IPO, had just $63 million in cash, along with $1.2 billion in long term debt. Based on the company’s stated post-IPO plans, it will still have over $800 million in long term debt on a pro-forma basis following the offering.