Today we have new filings from Couchbase and Kaltura: Couchbase set an initial price range for its IPO, something we’ve been waiting for, and Kaltura’s offering is back from hiatus with a new price range and some fresh financial information to boot.
Both bits of news should help us get a handle on how the Q3 2021 IPO cycle is shaping up at the start.
TechCrunch has long expected the third quarter’s IPO haul to prove strong; investors said as 2020 closed that quarters one, three and four would prove very active in terms of public market exits this year. Then the second quarter surpassed expectations, with more companies going public than at least some market observers anticipated.
With that in mind, you can imagine why the newly launched Q3 could prove an active period.
So! Let’s start with a dig into the filing from NoSQL provider Couchbase, working to understand its first price range and what the numbers may say about market demand for technology debuts. Here’s our first look at the company’s value. Then we are taking the Kaltura saga back up, checking into the pricing and second-quarter results from the technology company that provides video-streaming software and services.
Frankly, I’ve been waiting for these filings to drop. So, let’s cut the chat and get into the numbers:
Couchbase’s IPO price range
In its new S-1/A filing, Couchbase reports that it anticipates a $20 to $23 per share IPO price. With a maximum sale of just over 8 million shares, Couchbase could raise as much as $185.15 million in its public offering.
The company will have 40,072,801 shares outstanding after its IPO, not including 1,050,000 shares that are reserved for possible release. The math from here is simple. To calculate Couchbase’s possible simple IPO valuation we can just do a little multiplication:
- Couchbase simple valuation at $20 per share: ~$802 million.
- Couchbase simple valuation at $23 per share: ~$922 million.
If you want to include the company’s reserved shares, add $21 million to the first figure, and $24.2 million to the second. Notably, TechCrunch wrote before it priced that using a historical analog from the Red Hat-IBM sale — both Couchbase and Red Hat work in the OSS space — the company would be worth around $900 million. So, we were pretty close.
But lots of folks prefer diluted share counts to be used when calculating IPO valuations. So, let’s do that.
Inclusive of 10,605,478 shares present in vested options and warrants, the total share count sans extra IPO equity at Couchbase rises to 50,678,279. This yields the following:
- Couchbase fully diluted valuation at $20 per share: $1.01 billion.
- Couchbase fully diluted valuation at $23 per share: $1.17 billion.
Again, feel free to add $21 million to the first figure, and $24.2 million to the second if you want to take into account the extra million shares or so that are reserved as part of the IPO and may be issued.
That was simple — ahem! — enough. So, what do we think of the prices? As a reminder, Couchbase grew its revenues around 21% in its most recent fiscal period (the quarter ended April 30, 2021), to just under $28 million. Its most recent quarterly results provide the company an annual run rate of $111.8 million.
You can already see that the company is not about to attract a top-decile revenue multiple when it lists. Regardless, here’s the math:
- Simple IPO valuation price range/run rate multiple: 7.2x to 8.2x.
- Fully diluted IPO valuation price range/run rate multiple: 9.0x to 10.5x.
Those are perfectly fine multiples by historical norms, but a bit light for the modern era. Why are they low? Simply that Couchbase’s growth rates are not utterly fantastic — and they’re slowing.
Our read? Couchbase is able to get public at a price that is up to around double the private price at which it raised capital last May, per PitchBook data. That’s frankly pretty good for a company on the slower end of the growth mix than we see from tech IPOs these days. Bullish, we reckon.
Kaltura is back!
Yes, yes, yes, one of the IPOs that fell into the cracks during the short-lived dead zone for new offerings that came as Q1 became Q2 has returned. And good, as TechCrunch has covered Kaltura quite a lot over the years and we’ve been anticipating its debut as a public company.
So, what’s new? The following:
- From an IPO price range of $14 to $16 per share in late March, the company now anticipates an offering price between $9 and $11.
- From an IPO share sale figure of 17,400,000 from the company and 6,100,000 from outsiders, Kaltura now anticipates 15,000,000 shares sold from itself, and none from insiders.
Those are very different numbers, from top to bottom. How to understand them? Well, we can kick off by digging into the company’s newly reported Q2 data. Here are its results estimates:
Cool. This is what we need to get a handle on the company’s massive IPO price decline. Recall that Kaltura previously trumpeted accelerating revenue growth over time in its S-1 filing:
Our question, then, is how quickly did the company grow during its most recent quarter — at both the top and bottom ends of its estimates — compared to its year-ago period? Here’s how quickly:
- Low end: 39.6%.
- High end: 45.8%.
At its midpoint, then, the company will post growth that is a tad under what it managed in Q1 2021, but a figure that will represent its second-best growth rate in recent memory. That’s pretty good! Which makes its lowered IPO price range a bit surprising. What’s going on? Did the company’s profitability go to hell in the quarter?
Not really. Here’s the company’s net loss to adjusted EBITDA reconciliation:
Smaller net losses and slightly worse adjusted EBITDA results do not scare me. Are investors spooked by the deficits? Not with those growth rates, surely.
Per Renaissance Capital, “at the midpoint of the proposed range, Kaltura would command a fully diluted market value of $1.4 billion.” Given that the company has a midpoint run rate of $164.4 million, we’re looking at piddly multiples for the firm. So, our guess is that this valuation range is deliberately conservative, allowing Kaltura to raise its range and generally rebuild the narrative around its debut.
Pulling an IPO is not a great look. But raising your IPO price range is always a gold-star moment. So, Kaltura can get to the latter to combat the former with a somewhat cautious first price range.
Unless, of course, Kaltura prices in range. That would be very confusing, but is possible, we suppose. While we wait on the company’s final pricing, we’re calling the Kaltura situation neutral pending more information.
More as it comes.
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