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Based in Boston, Massachusetts, Carbonite (proposed symbol: CARB) scheduled a $100 IPO with a market capitalization of $384 at a price range mid-point of $16 for the week of August 8, 2011. The full IPO calendar for the week of August 8 includes 12 scheduled IPOs trying to raise almost $2 billion.

Observations

CARB is a pioneer and leading provider of online backup solutions for consumers and small businesses. Revenue was up 64% comparing the June 2011 six months with the June 2011 six months. Customers were up 42%. However, revenue for the June '11 quarter of $14M was only slightly higher than for the March '11 quarter.

Since the June 2010 quarter CARB's losses are stuck in the $5 million per quarter range, even though top line revenue is edging up each sequential quarter.

Notice the rate of increase for quarterly customer acquisitions is on a downtrend, falling from 18% for the March '10 quarter to 7% for the June '11 quarter. Also, free cash flow for the last two quarters is too low: -26% and -21%

Quarterly results March '10 June '10 Sept, '10 Dec, '10 March, '11 June '11
Total revenues ($mm) $8 $9 $10 $12 $13 $14
Gross profit % of rev 54% 56% 59% 60% 64% 61%
Net income (loss) -$8.2 -$5.9 -$6.6 -$5.0 -$5.4 -$4.7
Net income (loss) % -108% -65% -64% -43% -42% -33%
Total customers 698 782 869 951 1043 1114
Sequential qtr increase in customers 18% 12% 11% 9% 10% 7%
Free cash flow -$6 -$3 -$5 $0 -$3 -$3
Free cash flow % of revenue -74% -27% -44% 3% -26% -21%

Valuation

CARB appears to be fully valued at the price range mid-point of $16 in this particular economic climate and stock market. In a different stock market climate, however, and because CARB is a subscription-based internet company with a 61-64% gross margin, CARB could have been expected to edge up from the price range mid-point of $16.

Valuation Ratios IPO Mrkt Price / Price / Price / Price / % offered
Annualizing June 6 mos Cap (mm) Sales Earnings BookValue TangibleBV in IPO
Carbonite (NASDAQ:CARB) $384 7.1 -19 6.2 6.5 26%

CARB Valuation Metrics

Business

CARB is a pioneer and leading provider of online backup solutions for consumers and SMBs. CARB says "our 'set and forget' automated solution requires little effort and protects customers' stored files even if their computers are lost, stolen, or destroyed."

CARB believes it was one of the first companies to offer consumers unlimited online backup for a fixed price. A consumer subscription costs $59 for one year, with discounts for multi-year plans.

As of June 30, 2011, CARB had more than 1.1 million consumer and small business subscribers in over 100 countries. Since 2005, CARB has backed up over 100 billion files and has restored over seven billion files that might otherwise have been permanently lost. CARB currently backs up more than 200 million files each day.

Intellectual property

CARB has 13 pending patent applications that cover both technical infrastructure and key usability and design concepts.

Competition

CARB competes with both online backup providers and providers of traditional hardware-based backup systems.

Direct competition includes Prosoftnet, CrashPlan, Mozy (a division of VMWare, VMW), Symantec's (NASDAQ:SYMC) Norton Online Backup, McAfee Online Backup (a division of Intel, INTC), SOS Online Backup, and others.

Certain features, including the remote access service, also compete with current or potential services offered by Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and others. Certain of CARB's planned features, including the ability to share data with third parties, also compete with current or potential services offered by DropBox, Mozy, SugarSync, and others.

Use of Proceeds

Shareholders intend to sell 880,000 shares. CARB intends to sell 5.4mm shares, with proceeds of $77 million allocated to general corporate purposes, including working capital, sales and marketing activities, general and administrative matters, and capital expenditures.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: IPO Preview: Carbonite