We heard about Active (proposed ACTV) a few months before they filed from an investor and liked what we saw. The sporting and active lifestyle "niche" is a fairly large one and Active has carved out a solid position in the space.
There's been some talk about Active being "another OpenTable" which is exciting but a bit of a stretch. One thing we can say based on the peer analysis below is that the shares are fairly attractive based on the proposed filing range of $16-18.
All investors should view the company presentation roadshow (available at retailroadshow.com) and read the S-1 but the basics are that Active started out as a way to organize and run endurance events like marathons. From there they grw into more types of sporting events, community activities, general outdoor use including camping and fishing and aim to extend their model into more commercial and business-oriented events as well.
Their business model is fairly direct which is to provide all the technology services for the automation and collection of the activity fees collected (over $100B in the North America alone) and receive a fee (company assumes 9%.) This is an industry and area that is fragmented and ripe for an online, reegineered business process.
Active already has 47,000 organizations and 70m users signed up on their system and generated $280m in sales for 2010. Active offers organizations a combination of reduced costs and improved abilty to scale and add revenue in exchange for a fee which is paid incrementally from participants (so there is no up front cost or outlay.) This is a good model.
Our Intrinsic Valuation shown below suggests a $23 valuation for the company although as we have seen lately the short term trading of IPO stocks may be disconnected from fundamental analysis.
There are a few reasons we would be reluctant to "chase" the shares far above the current filing range:
- Growth and margins are good, but not great. The company also uses this "Adjusted EBITDA" charade which is pure obfuscation. They are not alone in this but that doesn't make it right. We do back out the major item which is non-cash amortization of intangibles but that's it.
- There is a technology transition going on and the company capitalizes some software development expenses. OpenTable faced some technology challenges as well so as long as the company has a significant lead (which Active does in our view) they can fix these things before they become an operational challenge.
We like Active Networks and could see it in the IPO Candy Folio if the price remains reasonable. But the talk of a "potential OpenTable" may push the shares too high. The peer group trades betwen 2x and 5x sales versus the proposed multiple of 3x for Active. OpenTable is trading at a lofty 18.5x but they are growing three times faster than Active and have much higher margins.