CRCM IPO Facts
Care.com Inc. (CRCM), an online marketplace for finding and managing family care with principal offices in Waltham, Massachusetts, plans to raise $80 million in its upcoming IPO on Friday, January 24th.
The firm will offer 5.4 million shares at an expected price range of $14-$16 per share. If the IPO can find the midpoint of that range at $15 per share, CRCM will command a market value of $485 million.
CRCM filed on December 12, 2013.
Lead Underwriters: BofA Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co LLC
Underwriters: Alley & Company LLC, Stifel Nicolaus & Company Inc.
Care.com is an online marketplace designed to connect families with care providers. The site's 9.7 million members are comprised of approximately 5.2 million families and 4.5 million caregivers across 16 countries.
The marketplace is designed to fulfill a wide variety of care needs, including childcare, senior care, special needs care, and non-medical needs like pet care, tutoring and housekeeping. The system allows caregivers to develop profiles to advertise their skills and experience, and to seek out both part-time and full-time work. The firm also allows care-related firms to market their services and recruit employees through the website. Families can pay caregivers through the website, assuring both parties that payment will be prompt and fully documented.
Valuation Of Care.Com
CRCM offers the following figures in its S-1 balance sheet for the nine months ended September 28, 2013:
Net Loss: ($24,665,000.00)
Total Assets: $122,302,000.00
Total Liabilities: $36,212,000.00
Stockholders' Equity: ($66,146,000.00)
CRCM has seen rapid expansion both in terms of members and revenue in recent years. Membership grew from 1.9 million as of September 30, 2010 to more than 9.1 million as of September 28, 2013, representing a 70% compounded annual growth rate. Revenue has grown from $12.9 million for the fiscal year ended December 31, 2010 to $48.5 million for the fiscal year ended December 31, 2012, representing a 94% compounded annual growth. Revenue for the nine months ended September 28, 2013 increased to $59.0 million, representing an 81% increase from the $32.6 million of revenue generated during the nine months ended September 30, 2012.
However, these gains in revenue have been accompanied by significantly increased net losses: the firm experienced net losses of $3.5 million in 2010, $12.2 million in 2011 and $20.4 million in 2012.
CRCM must compete with other resources that provide access to caregivers, including online classifieds like Craigslist and care-specific resources like SitterCity. The firm's online payment system must compete with similar systems like eBay's (EBAY) PayPal and Google (GOOG) Payments.
Founder, President, Chairman and CEO Sheila Lirio Marcelo has been with Care.com since 2006. Her total compensation for 2012 according to page 96 of the company's S-1 was $463,917, which we find excessive for a company that is losing millions and millions of dollars for its shareholders.
She previously was an Entrepreneur-in-Residence at Matrix Partners, a venture capital firm, and served as Vice President and General Manager of TheLadders.com. She also spent five years at Upromise, Inc. in various executive roles. Ms. Marcelo holds a degree in economics from Mount Holyoke College received her M.B.A. and J.D. from Harvard University. Marcelo was one of Fortune's Most Powerful Women Entrepreneur Winners in 2009.
We are neutral to negative on this IPO in the proposed range of $14 to $16. The various venture capital firms that own most of the company seem to be stretching the valuation of this puppy given the huge losses that the company keeps incurring and may continue to keep incurring into the foreseeable future.
Despite Care.com's high profile in the Boston area (It would be the first venture-backed tech company to go public in the region in two years.), as well as the strong publicity Marcelo brings, we do not believe this is enough to make Care.com successful long term. Though the firm has effectively expanded its revenue over the past several years, growth has not been accompanied by profitability.
CRCM is counting on an increase in revenue per member in order to attain profitability, which it can achieve through members using more of its services as it expands its offerings. However, we're unconvinced that members will pay for the expanded services-it's hardly clear that families will be willing to take on additional costs above the already significant price of care, especially if they're able to find the caregivers they need through the services they already have access to.