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Cloud Based Software, Cloud Software Stocks, Independent Research On Surveymonkey

SVMK: Not about to Monkey Around

SVMK (NASDAQ: SVMK), a recent addition to our Battle Road IPO Review Software sector coverage, is a leading provider of cloud-based survey software products that enable companies to better engage with customers and employees. Founded in 1999, and based in San Mateo, California, the company is best known for its flagship SurveyMonkey customer feed-back software. Consensus estimates call for revenue of $252 million in 2018, followed by $287 million in 2019. EPS expectations call for a loss of $0.13 this year, followed by a $0.06 loss next year.

SVMK priced its 15 million share IPO at $12 per share on the NASDAQ on September 25th. The underwriters subsequently exercised their option to purchase an additional 2.25 million shares. The IPO was led by J.P. Morgan Securities, Allen & Company, and Bank of America Merrill Lynch (BAML). Credit Suisse, UBS, Wells Fargo, SunTrust Robinson Humphrey, Code Advisors, Foros, JMP Securities and LionTree Advisors also participated in the transaction. SVMK also completed a private placement with Salesforce Ventures LLC concurrent with the timing of its IPO. All told, the company raised $225 million. At a recent share price of $13, SVMK’s market cap is roughly $1.6 billion, based on 123 million shares outstanding.

SVMK’s product line features SurveyMonkey, a cloud-based questionnaire that is primarily used for customer feed-back, TechValidate, a marketing content automation software solution, and SurveyMonkey Engage, which is focused on internal employee surveys and feed-back. The company is among the pioneers of the “freemium” monetization model, in which it provides free customizable surveys, and is paid based on solutions that include sample selection, data analysis, and bias elimination tools, among others. The company counts 60 million registered users, along with 16 million active users among 300,000 “organizational domains,” which we speculate may be equivalent to customers.

As a result of a long history of debt and equity financing, including debt financing from two of its underwriters, BofA Merrill Lynch, and SunTrust Robinson Humphrey, SVMK came public with an unusual amount of debt on its balance sheet, including over $300 million in short and long term debt, and $92 million in facilities leases. Following the offering, the company had a negative net cash position of $152 million. In its first quarter as a public company SVMK reported revenue of $65 million, a 19 percent increase over the prior year. Exclusive of roughly $100 million in stock-based compensation, the company reported near break-even results. Following the results of its IPO, SVMK ranks well below the mid-point of our Software sector coverage.

tenable holdings logo
Cyber security IPOs, Cyber Security Stocks, Independent Stock Research On Tenable Holdings, IT Security

Tenable Holdings: Defending Against Cyber Attacks

tenable holdings logoTenable Holdings (NASDAQ: TENB) provides cybersecurity software, infrastructure, and services, and becomes the most recent addition to our Software sector coverage. The company was founded in 2002, and is based in Columbia, Maryland. Consensus estimates call for revenue of $260 million in 2018, and $331 million in 2019. The company is expected to record a loss of $0.71 in the current year, followed by a loss of $0.75 in 2019.

Tenable debuted on the NASDAQ on July 26th, 2018, in a 12.6 million share common stock offering, inclusive of an underwriters’ option to purchase an additional 1.6 million shares. At an IPO price of $23, Tenable generated roughly $288 million in gross proceeds from the offering, all of which went to the company. Following the offering, there are 91 million shares of common stock outstanding. The IPO was led by J.P. Morgan, Morgan Stanley, Allen & Company, Deutsche Bank, William Blair, and BTIG. At a recent share price of $30, Tenable carries a market cap of roughly $2.7 billion.

Tenable Holdings, formerly known as Tenable Network Security, claims over 24,000 customers for its network security products, and is best known for its Nessus vulnerability scanner, which helps an enterprise assess and prioritize network vulnerabilities to cybersecurity threats. The company has pursued a freemium sales strategy, through which it provides a free version of Nessus, which has culminated in over two million downloads over the last 20 years, along with 19,000 Nessus Professional customers. Revenue from Nessus accounts for roughly 26 percent of sales currently.

Tenable disclosed in late 2015 that it was then on an annual revenue run rate of roughly $100 million, with an undisclosed level of profitability, having experienced bookings growth exceeding 50 percent. The disclosure was made at the same time that the company raised $230 million in a Series B venture round led by Insight Venture Partners, and Accel. Parlaying its geographic position close to the nation’s capital, Tenable achieved strong success selling security solutions to the federal government.

Competing neck and neck against Qualys (NASDAQ: QLYS) and Rapid7 (NYSE: RPD) in the vulnerability assessment market over the last number of years, Tenable identified web application scanning as a growth segment, and developed a strategy to address the convergence of IT security with IT assets in the form of a framework and product line for guarding network assets, including IoT assets. Tenable now offers Tenable.io, a managed SaaS offering, which measures threat exposure across networking infrastructure, desktops and on-premises servers, as well as web applications, and IoT assets. SecurityCenter is an alternative offering, which can be run on premise, or in the cloud. Together, these products account for 74 percent of revenue.

Overall, 86 percent of revenue comes from subscriptions and perpetual licenses sold through channel partners, as Tenable pursues a two-tiered distribution model. Importantly, Ingram Micro, a large computer and software distributor, accounts for 45 percent of sales. 72 percent of revenue comes from enterprise subscriptions, typically paid in advance and lasting for one year, though some customer subscriptions last as long as three years. Tenable trades near the bottom of our Software sector coverage, based on expectations for losses this year and next, along with a comparatively high EV/sales ratio of 8.7x 2019 revenue.