Valtech Proposes Terms For $100 Million U.S. IPO

About: Valtech (VTEC)
by: Donovan Jones


Valtech aims to sell $100 million of its Class A shares in a U.S. IPO.

The firm provides IT consulting and digital transformation services to medium and large enterprises worldwide.

VTEC is growing and has a big enough footprint to compete for business on a global basis.

valtech ipo

Quick Take

Valtech (VTEC) intends to raise gross proceeds of $100 million from a U.S. IPO, according to an F-1/A registration statement.

The firm provides data-driven IT consulting and digital transformation services to enterprises worldwide.

VTEC has a promising growth trajectory and favorable long-term market prospects.

Company & Business

Paris, France-based Valtech was founded in 1993 to assist medium and large organizations with the adoption of new digital technologies through IT and digital transformation consulting.

Management is headed by Chairman of the Board and CEO Sebastian Lombardo, who has been with the firm since 2010 and is also the Co-Founder and Chairman at Jop.

Valtech provides clients with a streamlined portfolio of data-driven solutions, including integrated offerings, such as business strategy, design, technology, and marketing.

Below is a brief overview video of Valtech's Lab Innovation:

(Source: Valtech Canada)

The company has expertise across select industry verticals, including retail, automotive, government, media, financial services, travel and hospitality, and healthcare.

Customer Acquisition

As of June 30, 2018, Valtech has multidisciplinary teams of engineers, programmers, business consultants, creative designers and marketers located in 39 offices based in 16 countries on five continents.

Sales and marketing expenses as a percentage of revenue have been fluctuating with no discernible trend, per the table below:

Sales & Marketing Expenses vs. Revenue



1H 2018






(Source: Company Prospectus and IPO Edge)

The firm focuses its customer acquisition efforts on medium and large enterprises in Europe, North America, South America, Asia, and Australia.

Market & Competition

According to a 2016 market research report by HTF Market Report, the global IT consulting services market is projected to grow at a CAGR of 3.6% during the period between 2016 and 2020.

According to another market research report by Technavio, the top five emerging trends that impact the global IT consulting services market until 2020 will be:

  • Adoption of environment-friendly technology
  • Growing preference for remote working environments
  • Increase in service offshoring
  • Increase in market consolidation
  • Rise in use of cloud-based IT infrastructure

Major competitors that provide IT consulting services include:

Financial Performance

VTEC's recent financial results can be summarized as follows:

  • Increasing top-line revenue at an accelerating rate
  • Increased gross profit
  • Stable gross margin
  • Decreasing cash flow from operations

Below are the company's financial results for the past three and a half years (Audited IFRS for full years):

(Source: VTEC F-1/A)

Total Revenue

  • 1H 2018: $159.5 million, 19% increase vs. prior
  • 2017: $272.9 million, 12.5% increase vs. prior
  • 2016: $239 million

Gross Profit

  • 1H 2018: $56.5 million
  • 2017: $92.6 million
  • 2016: $82.7 million

Gross Margin

  • 1H 2018: 35.4%
  • 2017: 33.9%
  • 2016: 34.6%

Cash Flow from Operations

  • 1H 2018: $2.2 million cash flow from operations
  • 2017: $8.3 million
  • 2016: $17.1 million

As of June 30, 2018, the company had $59.2 million in cash and $187.9 million in total liabilities (Unaudited, interim).

Free cash flow during the six months ended June 30, 2018, was a negative ($146,000).

IPO Details

VTEC intends to raise $100 million in gross proceeds in an IPO from the sale of 6.67 million of its Class A shares at a midpoint price of $15.00 per share, not including customary underwriter options.

Class A shareholders will be entitled to one vote per share and Class B shareholders, which will be held by controlling shareholder SiegCo SA, will be entitled to 10 votes per share.

Multiple share classes are a way for management or existing shareholders to retain voting control of the company even after losing economic control. The S&P 500 index no longer admits firms with multiple share classes into its index.

Assuming a successful IPO, the company's enterprise value at IPO would approximate $648 million.

Management says it will use the net proceeds from the IPO as follows:

We currently expect to use the net proceeds from this offering for general corporate purposes, such as for working capital, potential strategic acquisitions of, or investments in, other businesses or technologies that we believe will complement our current business and expansion strategies, opening new offices and hiring additional employees.

So, the firm didn't provide any meaningful information on how it intends to use the proceeds.

Management's presentation of the company roadshow is available here.

Listed underwriters of the IPO are J.P. Morgan, Morgan Stanley, Cowen, Oddo BHF, and William Blair.

Valuation Metrics

Below is a table of relevant capitalization and valuation metrics for the firm:

Measure [TTM]


Market Capitalization at IPO


Enterprise Value




EV / Revenue




Earnings Per Share


Total Debt To Equity


Float To Outstanding Shares Ratio


Proposed IPO Midpoint Price per Share


Net Free Cash Flow


(Source: Company Prospectus and IPO Edge)

As a reference, VTEC's clearest public comparable would be Globant; below is a comparison of their primary valuation metrics:









EV / Revenue








Earnings Per Share




(Source: Company Prospectus and IPO Edge)

Expected IPO Pricing Date: October 17, 2018.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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