Tableau Software (DATA) did a "gourmet" IPO with Goldman & Morgan Stanley co-leading with all the right flavors of "big data," "recurring revenue" and "technology leadership."
The company raised the initial $23 to $26 range to $28 to $30 and priced at $31. The 7.2 million shares will begin trading today. Based on some prior deals in this space and similar deals our best guess for the post-market trading on DATA is $50-52.
Tableau has also been growing over 100% YoY and should do about $200M in sales this year. Operating margins have been positive but the company has stepped up their investments in sales and marketing and R&D at the expense of near-term operating profits.
Below are some significant highlights from the roadshow with a few comments. We also touch on valuation at least in terms of what the comparable companies suggest.
Here are highlights pulled from the transcript. Any comments are in brackets:
- Our mission at Tableau Software couldn't be simpler: it's to help people see and understand data. We believe in making it easy for people to see and understand data.
- Over the last three years, our compound annual growth rate has been over 90%. Today we have over 12,000 early-adopter customer accounts, and our momentum suggests that the world is ready for technology that finally delivers on the promise of making data useful.
- Tableau makes a suite of analytics applications that are easy and fast and for everyone. Based on breakthrough advances in computer science, they enable people of all skill levels to see and understand and harness the power of data.
- Our first core innovation is called VizQL, a visual query language for data. Our second core innovation is our in-memory Data Engine. The third innovation Tableau has pioneered is our Live Query Engine.
- Tableau's in-memory engine and Live Query Engine have been designed and architected to work in harmony. That's why we call the combination our "hybrid data architecture." [Very similar to the architecture used by Business Objects 20 years ago.]
- Our view of the market opportunity is that there are 55 million organizations on the planet [that] could benefit from Tableau products, and we currently have penetrated only 12,000. Our ultimate goal is to make Tableau as ubiquitous and deeply rooted within companies as spreadsheets are today.
- Of course, we do face competition. This summarizes the two major competitive camps and why we win. On the right are the big technology stack providers like IBM (IBM) and Microsoft (MSFT) and Oracle (ORCL) and SAP (SAP). These companies have been scrambling to release "Me Too" versions of Tableau over the last several years without much commercial success. We also face direct competitors like QlikTech and TIBCO Spotfire (TIBX). These are good companies and, like Tableau, are fundamentally growing the size of the business intelligence market.
- Our product line, in many ways, is still in its infancy. We see room for product expansion in the arenas of data integration, and advanced analytics, and across platforms and in the cloud and in many more areas. [Helps explain big ramp in development spending.]
- Now, you'll notice that in Q1 we had an operating loss. Let me give you a little color on that. As we pursue our immense market opportunity, we've been accelerating our OPEX investments. We are increasing spend in both sales and marketing and research and development. We expect to make significant investments in these areas. On the sales and marketing side, we're expanding our sales team both domestically and internationally. We're also investing in the channel to extend the market reach of our products.
- In the long term, we expect gross margins to be between 88-90%, sales and marketing to be between 40-45%, research and development to be between 15-20% and G&A to be between 8-10%. We've already demonstrated leverage in our business, and are confident in our ability to execute and deliver on the long-term financial model. In the long run, we expect our operating margins to be over 20%.
So where might these shares settle in the short term? The most direct comparable in business terms is QlikTech (QLIK), which is trading at 5.7x sales. But QLIK doesn't have the kind of hype surrounding it that a hot IPO does. Other names in our IPO ecosystem that come to mind are Workday (WDAY) which takes the valuation price trading at a staggering 39x sales and Splunk (SPLK) which is changing hands at 22x sales.
We'll follow up with a more fundamental analysis but for now we'll use 20x TTM as a stake in the ground. That would put the shares at about $52.