IPO Preview: YuMe

Aug. 6.13 | About: YuMe, Inc. (YUME)

Based in Redwood City, CA, YuMe (NYSE:YUME) scheduled an $65 million IPO with a market capitalization of $412 million at a price range mid-point of $13, for Wednesday, August 7, 2013.

Nine other IPOs were scheduled for the week of August 5. The full IPO calendar can be found at IPOpremium.

  • S-1 filed July 26, 2013
  • Manager, Joint Managers: Citigroup; Deutsche; Barclays
  • Co-Managers: Needham; Piper Jaffray

Summary

YUME is a leading independent provider of digital video brand advertising solutions, and facilitates targeted digital video advertising.

YUME can be compared to Tremor Video (NYSE:TRMR) June 27, 2013 at $10 (down 17% from the price range mid-point). TRMR is now down 16% from its IPO price.

Valuation

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q2 '13

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

YuMe

$412

3.0

-79.3

3.6

3.8

16%

Tremor Video

$406

4.1

-20.3

2.5

3.9

Click to enlarge

Glossary: http://gaskinsco.com/glossary.htm

Conclusion

Today the market seems to be selling off a little and Tremor Video is also sliding down.

YUME's price-to-sales ratio is less than TRMR's (3 vs 4.1) but the rating is neutral for YUME.

To put the above conclusions and observations in context, the following is reorganized, edited, and summarized from the full S-1 referenced above:

Business

YUME is a leading independent provider of digital video brand advertising solutions.

YUME's software is used by global digital media properties to monetize professionally-produced content and applications. YULE generates revenue by delivering digital video advertisements on Internet-connected devices

YUME has a wide audience reach, with over 257 million monthly unique viewers worldwide during May 2013, and with large customer base that includes 64 of the top 100 U.S. advertisers.

Note: if YUME can't make money now with that kind of wide audience perhaps there is something wrong with pricing and their business model.

Intellectual property

In the United States, YUME has five patents issued, 17 non-provisional patent applications pending and one provisional patent application pending. YUME also has 11 foreign patent applications pending. The issued patents expire between the years 2026 and 2029. YUME expects to apply for additional patents to protect its intellectual property both in the United States and internationally.

Competition

YUME competes with Hulu and Google (YouTube and DoubleClick) as well as many privately-owned ad exchanges, demand side advertiser platforms and ad networks.

YUME also faces competition from direct response advertisers who also seek to target brands. Some large advertising agencies, which may represent current customers, build their own relationships with digital media properties and can directly connect advertisers with digital media properties.

Other companies that offer analytics, mediation, exchange or other third party solutions may also become intermediaries between advertisers and digital media properties and thereby compete with YUME.

5% stockholders pre-IPO

Entities affiliated with Khosla Ventures, 19.5%
Entities affiliated with Accel Partners, 18.7%
Entities affiliated with DAG Ventures, 12%
Entities affiliated with Menlo Ventures, 9.3%
Entities affiliated with BV Capital, 7.2%

Use of proceeds

YUME expects to net $58 million from its IPO. Proceeds are allocated for working capital and general corporate purposes.

Disclaimer: This YUME IPO report is based on a reading and analysis of YUME's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.