Friday, April 5, 2013

Tableau IPO: Let The Gold Rush Begin For Enterprise Software IPOs!


The year 2013 is going to be the year of enterprise software IPOs.  That is not a prediction but well discussed point in Silicon Valley.  Everybody believes that there is a pent-up demand from return hungry investors for the enterprise software IPOs.  Consumer software IPOs have failed to live up to their promise in the last couple of years but the enterprise software IPOs have continued to deliver (examples: WDAY, NOW, SPLK), case-in-point.   

In the last couple of days, two of my favorite companies, Marketo and Tableau have announced plans to go public.  Here are the links to Marketo's S1 and Tableau's S1.  I have had the good fortune to study, evaluate and follow both companies since 2010.  Both the companies have done very well in their respective segments, SaaS marketing automation and on-premise self-serve BI.  They have both exceeded expectations on all fronts (employees, customers, analyst  markets, competitors) after a long hard slog.  

To all my friends, colleagues, investors and readers of this blog, enterprise software is a hard slog, you are in it for a long-haul.  Tableau is a 10-year old company and Marketo is 7 years old (Source:  SEC Filings).

Valuation
Since Tableau ("DATA") has announced its plan to go IPO this year, I decided to put the striped-down version of my due-diligence, performed in early 2011, on my slide-share account.  Back then, I used relative valuation using QlikView ("QLIK") as a close proxy to put a number on Tableau.  I used PE (earnings multiple) and PS (revenue multiple) of QLIK and assessed a market value of $380million based on Tableau's 2010 revenues of $40 million (from their press release in 2011, this number has been revised down to $34million in S1, huh, strange!)

Now, if one were to use QLIK's current revenue multiple of 5.5 (Source: Yahoo Finance), Tableau could be valued between $700million (based on trailing revenue of $128million) and 1.4billion (based on  $256million in expected revenue for 2013 assuming that they grow their revenue YET AGAIN by 100% in 2013.)

I personally don't think that the street should use QLIK as a proxy instead apply Splunk's ("SPLK") lens to value Tableau.  So using SPLK's multiple of ~19.7 (Source: Yahoo Finance), Tableau will be valued at $2.5billion based on their 2012 revenues.  ServiceNow ("NOW") also has a PS multiple of ~19. 

I have strong reasons to believe that street will be valuing Tableau in this range based on a great growth story till this point and amazing opportunities ahead as we are just starting to drill the BigData mountain.  I will not be surprised to see the valuation range from $2.5billion to $5billion. Amazing!

Tableau's S1
I studied Tableau's S1 filing briefly looking for information on valuation and offering on number of shares.  Not much is disclosed there just yet.  It will likely be disclosed in the subsequent filings as they hit the roadshow to assess the demand from the institutional investors.  Just like Workday, Tableau will also have dual class shares (Class A and Class B) with different voting rights.  The Class A will be offered to investors by converting the Class B shares. 

The last internal valuation of employee options priced the stock at ~$15.  To raise $150million, Tableau will at least be putting 10 million shares of Class A on the block.  Now of course, this will change as the demand starts to build up following their road-show.  One thing is certain that the stock will be definitely priced above $15.  Now, how many points above $15, we will find out in the next few months.  

Let the mad rush begin!!!

3 comments:

  1. Why using SPLK not QLIK? QLIK is a direct competitor, so would make a better proxy? However, I do agree the market will not value Tableau at anything like 5.5x (esp. giving their YoY growth numbers), so your estimates on multiples are probably in the right ballpark.

    However, Tableau having a 2.5b valuation on $128m and QLIK having a 2b valuation on 390m... when both are direct competitors in the same space, and neither doing much in the way of profit... something isn't right with that picture. Time to go long QLIK?

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