The U.S. IPO calendar swells to 11 IPOs this week, but no one expects this week's offerings to soar. The IPO market did not emerge unscathed from the bloodbath of last week: employee-benefit software provider WageWorks (WAGE) slashed its price range by 35% and pushed back its offering, while healthcare company WhiteGlove (WGH) and Chinese biofuel producer Cathay Industrial Biotech (CBIO) delayed their IPOs due to weak market conditions.
With investors reeling and the markets awash in red, the IPOs with the best chance of pulling through will be those with strong business models and compelling secular growth. Likely to escape the carnage this week are three tech offerings with solid stories: Online backup solutions provider Carbonite (CARB), motion sensor manufacturer InvenSense (INVN), and on-demand security software provider Trustwave Holdings (TWAV).
Carbonite, the leading provider of online backup solutions for individuals and businesses, has amassed more than 1.1 million subscribers in over 100 countries (94% U.S.) since 2005. The company's "set and forget" solution automatically and continuously uploads encrypted copies of customers' files to the Carbonite Personal Cloud, requiring minimal effort on the consumers' part. Having established a leading position with consumers (92% of revenue) it recently launched services for small to mid-sized businesses that could become a significant component of revenue. Carbonite's business model offers a highly predictable revenue stream through subscriptions to its services. Its revenue has grown at an impressive CAGR of 289% since 2006, reaching $39 million in 2010. Although it will likely remain unprofitable until at least 2014 as it invests in marketing and technology, Carbonite's track record thus far suggests that it is poised to take advantage of its huge and expanding addressable market of one billion PCs worldwide.
InvenSense is a provider of motion sensors used in consumer electronics, such as the Nintendo Wii. Over the past three years, Nintendo has represented an average of 80% of the company's net revenue. As the Nintendo Wii nears the end of its product cycle, InvenSense has shown great adaptability by successfully transitioning to the smart phone/tablet market. For the three months ended July 3, 2011, only 14% of the company's $36 million in net revenue was derived from Nintendo, while 24% was derived from HTC, and 13% from LG Electronics. InvenSense has impressive margins for a small chip company (35% operating margin in the most recent quarter) and the forecast 62% CAGR for motion sensor-installed devices through 2014 should continue to result in rapid growth.
Trustwave, managed by VeriSign alums, offers on-demand compliance management software mostly to enterprises and small-to-medium size businesses. It has 1 million subscriptions for its core TrustKeeper product, which assists organizations in validating compliance and identifying vulnerabilities. Trustwave has a partner network of 80 major banks, credit card companies and payment processors that use its platform and refer it to the enterprises and SMBs they serve. The company looks to grow its subscriber base within its existing partner network, as well as expand internationally. Trustwave recorded $64.7 million in revenue for the six months ended June 30, 2011, an increase of 34% over the year-ago period.
Technology has been the most popular sector for the U.S. IPO market, representing 30% of deals priced over the last 12 months, and has also accounted for some of the most successful deals - LinkedIn (LNKD) (+79% from IPO), ServiceSource (SREV) (+64%), Zillow (Z) (+31%) and Fusion-io (FIO) (+31%). Carbonite, InvenSense and Trustwave look to extend this trend of success, holding solid track records and positioned in growing markets. With the financial crisis dampening broader investor interest in IPOs, these tech deals could potentially be diamonds in the rough.