Responsys (proposed MKTG) is scheduling a $61 million IPO with a market capitalization of $408 million at a price range mid-point of $9.25 for Thursday, April 21, 2011.
Full IPO Calendar lists 4 other IPOs for this week.
SUMMARY – For the year ended December 2010, sales increased 40% to $94 million from $67 million in 2009. 2010 net income increased 43% to $8.6 million from $6 million in 2009.
MKTG started off as an email marketing company and remains primarily an email marketing company. In its S-1 filing MKTG says, “We expect that email will continue to be the primary channel used by our customers for the foreseeable future.” S-1 page 12
MKTG uses an on-demand approach to delivering its services, and apparently is trying to get a Software as a Service (SaaS) P/E multiple. Pure SaaS/cloud computing companies have very high multiples, see ‘valuation’ below.
MKTG’s market is expected to grow at a compound annual growth rate of 22%.
"According to Forrester, U.S. interactive marketing spend on email, mobile and social media, the primary interactive channels currently used for relationship marketing, is expected to grow from $2.9 billion in 2010 to nearly $6.5 billion by 2014, representing a compound annual growth rate of 22%.” S-1 page 1
MKTG had 277 customers as of December 31, 2010, up 12.6% from 246 customers December 31, 2009. It is adding larger customers with higher messaging volumes.
VALUATION -- Pricing appears reasonable at $9.25 for MKTG. At the price point mid-range of $9.25 the P/E for the year ended December 2010, is 45, the book value is 4.2.
MKTG is not to be confused with true SaaS/cloud computing companies such as Salesforce.com (CRM) and Qlik Technologies (QLIK), with trailing 12 month P/Es of 280 and 201.
The only public competitor focused on MKTG’ s business mentioned in the S-1 is Acxiom Corp (ACXM). ACXM’s stock price declined 20% in the last six months, revenues declined 20% in 2010 vs 2009. ACXM sells at a trailing 12 months P/E of 26.
MKTG Valuation Metrics
BUSINESS -- MKTG bills itself as “a leading provider of on-demand software that enables companies to engage in relationship marketing across the interactive channels that consumers are embracing today—email, mobile, social and the web.” However, it also says, “We expect that email will continue to be the primary channel used by our customers for the foreseeable future.” S-1 page 12
Leading SaaS vendors, such as Salesforce.com have moved into cloud computing. MKTG makes no mention of cloud computing. Wikipedia defines cloud computing here.
MARKET GROWTH -- According to market research firm Forrester, U.S. interactive marketing spend on email, mobile and social media, the primary interactive channels currently used for relationship marketing, is expected to grow from $2.9 billion in 2010, to nearly $6.5 billion by 2014, representing a compound annual growth rate of 22%. S-1, page 1
NEW CUSTOMERS HAVE HIGHER MESSAGING VOLUMES -- MKTG has added larger enterprise customers with higher subscription commitments, higher messaging volumes and greater professional services demands. As of December 2010, MKTG had 277 customers, up 12.6% from 246 customers December 31, 2009.
MKTG’s 20 largest customers accounted for 35.1% and 37.0% of total revenue for the years ended December 31, 2009, and 2010, respectively. S-1 page 13
SEASONALITY & EXPECTATIONS -- MKTG anticipates subscription revenue for the quarter ending March 31, 2011, will be between 10% and 15% lower than subscription revenue for the quarter ended December 31, 2010. S-1 page 39
It’s the normal seasonal pattern for MKTG: December quarter revenue exceeded each of the succeeding quarters for 2010 and 2009.
COMPETITION -- Primary competitors include:technology providers such as Aprimo, Inc., which has been acquired by Teradata Corporation (TDC), BlueHornet, a subsidiary of Digital River, Inc. (DRIV), Eloqua Corporation, ExactTarget, Inc., Silverpop Systems Inc., StrongMail Systems, Inc. and Unica Corporation, which has been acquired by IBM.
Other competitors include marketing services providers such as Acxiom Digital, Epsilon Data Management LLC and Experian CheetahMail and Yesmail, a division of infoGROUP Inc.
MKTG “may also face competition from new companies entering our market, which may include large established businesses, such as Google Inc. (GOOG), IBM, Microsoft Corporation (MSFT), Oracle Corporation (ORCL), salesforce.com, inc., SAP AG or Yahoo! Inc.(YHOO).” S-1 page 9
USE OF PROCEEDS
$45.5mm from 5.5 million shares; for working capital and other general corporate purposes. Shareholders intend to offer 1.1mm shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.