This analysis of Velti (VELT) was provided to TradingIPOs subscribers in advance of its Thursday January 27th IPO. The company priced at $12.00 per share, above the range of $9-$11, raising $150 million.
Velti plans on offering 14 million shares (assuming over-allotments) at a range of $9-$11. Insiders will be selling 1.9 million shares in the deal. Jefferies is leading the deal, Needham, RBC, Cannaccord and ThinkEquity are co-managing. Post-IPO VELT will have 50.8 million shares outstanding for a market cap of $508 million on a pricing of $10. IPO proceeds will be used to repay debt and fund an acquisition.
CEO and COO will each own 7%-8% of VELT post-IPO.
**Note that VELT has been trading on the London Stock Exchange since 5/06 under the symbol VEL. The close on 1/21/11 was $9.76 per share in US dollars. This is technically a secondary, although the first time VELT has floated shares in the US.
In the past these initial US listings of companies listed elsewhere in the world tend to run up into US offering and then initially sell off post US placing. VELT has run up 30%+ in London over the past 1-2 months. 52 week range of $5-$10, VELT is right at the top of its trading range in London.
From the prospectus:
We are a leading global provider of mobile marketing and advertising technology that enable brands, advertising agencies, mobile operators and media companies to implement highly targeted, interactive and measurable campaigns by communicating with and engaging consumers via their mobile devices.
In addition to mobile, VELT's platform allows their customers via a single online userface to use traditional media such as television, print, radio and outdoor advertising.
Through the first nine months of 2010, 600 clients used VELT's platform to conduct 1,500 campaigns. Clients include 13 of the 20 largest worldwide mobile operators. Other campaign clients include AT&T (T), Vodafone (VOD), J&J (JNJ) and McCann Erickson.
Ads can be placed in 30+ countries.
Real-time monitoring of ads. Platform enables clients to manage media buys, create mobile applications, design websites, build mobile CRM campaigns and track performance.
Acquisition - in 9/10 VELT acquired Mobclix, a US-based mobile ad exchange. In addition, VELT acquired Ad Infuse in 2009 and Media Cannon in 6/10.
Interesting niche here with the massive growth in use of mobile technology to communicate and access data and entertainment. We've seen numerous web based online advertising IPOs over the past decade +, one would expect the focus going forward will be to maximize ad spending and power on mobile devices.
Word-wide mobile marketing/ad spending is expected to increase from 2007's $1.64 billion to $29 billion by 2014.
Two customers accounted for 30% of revenue the first nine months of 2010.
75% of revenue is in Euros. UK accounts for 1/3 of revenues with both Russia and Greece accounting for 10%+.
VELT owns a majority in 2 joint ventures, one in India and one in China.
$1 per share in net cash post-ipo.
Very seasonal here as VELT notes holiday spending and ad budgets combine to make the 4th quarter the strongest annually, by far. VELT derives all of their operating margin annually in the 4th quarter.
2010 - Financials are a bit difficult to decipher because of an odd revenue recognition blip in the 4th quarter of 2009. As VELT is already trading in London, we'll simply use those top-line estimates for 2010 and 2011. Revenue should be $120 million, a 30% increase over 2009. Operating margins slightly positive in the 10% range. Earnings of $0.16.
2011 - $160 million in revenues, another 33% increase annually. Good spot here for future growth, VELT however has not quite been able to post much in the way of operating margins. Would not expect more than 12%-15% operating margins total in 2011. Earnings of $0.30. On a pricing of $10, VELT would trade 33 X's 2011 estimates.
Conclusion - I like this niche quite a bit and would like this deal much more were it not already trading for years on another worldwide exchange. VELT in London has risen 30%+ over the past 6 weeks or so heading into this deal. This is a recommend, but keep in mind these type of IPOs/secos that run up into offering tend to cool off before moving higher. Interesting deal in a niche that should show strong growth mid-term+.