$ZETA Zeta Global is a Software as a Service (Saas) company seeking to raise $250M on a $2.1B valuation, with $368M in 2020 rev,$53M net loss, growing at 25% YoY. 5.43X Price to Sales, but low EBITDA and growth are a concern.

Founded in 2007 by David Steinberg (CEO) the company has raised over $600M in funding so far. It is seeking to sell 15.6M shares (+3.4M additional) at $10 – $12 / share.

$ZETA has build a database marketing platform with 220M “opt-in” individuals in the US, which its 1000+ customers use to target offers, and engage for promotions and marketing.

The market $ZETA is going after is marketing automation software, which is $6.9B according to IDC, but $ZETA claims it can service a $36B market.

One of the co founders of $ZETA is John Sculley, ex CEO of $AAPL, who is the Vice Chairman of ZETA.

$ZETA has over 1200 employees and has a direct sales force. It competes with Acxiom (went private for $2B in 2018).

$ZETA financials dont look too bad, but they are not compelling either, with 25% revenue growth net losses growing. Overall margins are in the 60% range and inconsistent.

While there are no direct comparable companies public, $ZETA is often mentioned in conjunction with marketing automation companies such as $HUBS Hubspot, Acoustic, $CRM Salesforce Pardot, $ADBE Marketo.

Analysis

$ZETA My only draw was that John Sculley was the vice chairman. This is a slow growth company, with a long history and inconsistent execution, so an easy pass for me.

$MQ Marqeta will begin trading next week on Jun 10th. They are looking to sell 44.5M shares (+ 6.8M additional likely) at over $24 per share (significantly oversubscribed, so final price is going to be likely $30).

$MQ market cap will be $12B – $15B for 561 M outstanding shares. $DASH Doordash, Square $SQ – 70% of revenues for $MQ, and Klarna are customers.

$MQ IPO pricing range implies ~15X to 17.5X on 22E revenue and ~33X to 36X 22E Gross Profit. $AFRM and $AFTPY are comparable, but $MQ gross margins are lower.

$MQ Marqeta is a #Fintech company that provides platform and APIs to allow companies to issue virtual or physical cards, process card transactions, and thus, efficiently manage payment programs.

$MQ Marqeta allows companies to offer Visa or Mastercard payment products to customers without having to deal directly with a traditional bank.

On the back end, $MQ Marqeta itself handles the work with banks; its bank partners include Sutton Bank of Ohio, which accounts for nearly all of Marqeta’s business, and MetaBank of South Dakota.

$MQ Marqeta’s top customers include $SQ Square, $UBER Uber, $DASH Doordash, Instacart, $AFRM Affirm, Klarna, $COIN Coinbase, and Marcus by $GS Goldman Sachs.

$MQ will raise $1.2 – $1.5B at the IPO, at $12B – $15B. $MQ has raised over $500M from multiple investors since its founding in 2010 by CEO Jason Gardner.

$SQ and $UBER own warrants to buy $MQ stock.

$MQ Marqeta makes money by charging a fee on payment transactions, based on the interchange fee system that payment processors like $V Visa and $MA Mastercard use. The vast majority of their revenue comes from interchange fees, with some additional revenue from processing fees.

$MQ total net revenue was ~$143M and ~$290M during 2019 and 2020, implying +103% YoY growth. Net revenue growth has accelerated to 123% during 1Q21.

$MQ gross margins are in the 40% – 45% and 20% EBITDA margins long term.

Pros

Growing customer base, strong revenue traction and tremendous growth.

Customer and processing concentration: $SQ is 70% of their revenue, and issuing bank Sutton Bank is 97% of processing volume.

$MQ faces competition from Stripe and $ADYEY Adyen and many other less sophisticated businesses.

Analysis

I like $MQ transaction fee model, its moat on the API and usage, but think the IPO will have a ton of hype which will raise its short term price. In #Fintech I still like $SQ Square $AFRM Affirm and $SOFI SoFi more and $PYPL Paypal, $COIN Coinbase, $FSRV Katapult as well.

$XMTR Xometry, a marketplace for excess manufacturing capacity filed to go public. Founded in 2013 and based in Maryland, the service connects companies with manufacturers with excess production capacity around the world.

CEO and co-founder Randy Altschuler started $XMTR Xometry with co-founder Laurence Zuriff to help companies looking to build custom parts have the ability to do so in a digital way.

$XMTR Rather than working the phones or starting an email chain, they can go into the Xometery marketplace, define parameters for their project and find a qualified manufacturer who can handle the job at the best price.

$XMTR helps customers

Finds work tailored to individual shops

Pay only 30% up front

Eliminate the quoting process

Handle the sales and marketing

The company had built relationships with 5,000 manufacturers around the world and had 30,000 customers using the platform.

$XMTR will look at raise about $100M – $200M to repay loan debt, which amounted to $15.8M and for expansion.

$XMTR closed 2020 with $141M in revenue — a 76% jump from $80.2M in 2019 revenue and 268% from 2018’s $38.4M. It had $31M in annual losses.

Xometry $XMTR has raised over $200M in funding since and most recently raised $75M in Sep 2020 at $600M in valuation.

$XMTR has 386 employees. It acquired competitor MakeTime in July 2018.

The market for on-demand manufacturing is about $7B and will grow to $9B by 2025. Valuation is not know yet, but will be closer to the IPO day.

Analysis

The pros are high margin marketplace business, with scalable market opportunity. It fills a big need in this JIT (Just in Time) manufacturing and inventory economy. The cons are the huge losses and lower take rate 15%.

I am going to wait on this again and put it on my watchlist because it is well priced and will likely POP.

Post script: The stock priced at $44 and went up 91% on IPO day.

$S Endpoint cybersecurity vendor SentinelOne filed for an IPO, likely to raise about $500M at about $8B-$10B valuation. The final numbers will be known in a few weeks.

$S SentinelOne XDR platform antivirus technology provides autonomous real-time protection across all operating systems, including Windows, Linux, macOS, and cloud-native and containerized workloads. The endpoint protection is powered by distributed AI which resides both on devices as well as in the cloud for always-on, machine-speed protection.

$S SentinelOne was founded by Tomer Weingarten in 2013, and has its HQ in Mountain View, California. The company has raised over $700M and most recently raised $276M from Tiger Global at over $4B valuation.

$S SentinelOne has experienced massive growth in recent years, with sales jumping to $93.1M in 2020, +100.2% from $46.5M in 2019. Losses were $117.6M, or $3.31 per share, 53.6 percent worse than a loss of $76.6M, or $2.34 per share the year earlier.

International sales accounted for 30of% SentinelOne’s revenue.

$S SentinelOne sells its software via channel partners. Its two largest channel partners are France-based distributor Exclusive Networks and N.J.-based direct market reseller (DMR) SHI International. SentinelOne generated 19% of its revenue from Exclusive Networks and 13% of its revenue from SHI.

$S SentinelOne’s main competitor is $CRWD CrowdStrike, which is much larger, but it also competes with $PANW Palo Alto Networks and $ZS ZScaler.

$S SentinelOne had over 4,700 customers in more than 80 countries, up 74.1% from more than 2,700 customers a year earlier. No single customer accounts for more than 3% of SentinelOne’s revenue.

Metrics and Analysis

While the final valuation and numbers are not known, assuming it is growing at 100% and will be $200M+ in 2021, I think the implied valuation or 40X – 50X NTM revenues is rich, but this is in a very hot space (Cybersecurity) and the market is willing to pay for high growth companies.

I still like $CRWD Crowdstrike a lot, $ZS ZScaler and $OKTA Okta in the Cybersecurity space, so I will likely not initiate a position for 3-6 months.

$DLO, DLocal, an Uruguay-based payments startup, has seen its valuation more than quadruple to $5 billion after raising $150 million in an investment round.

DLocal, processes cross-border payments with APIs for emerging markets.

$DLO DLocal provides platforms in 29 countries that allow companies such as Amazon.com Inc. and Booking.com to charge clients in different currencies by accepting local credit cards, bank transfers and other forms of payment. It also helps companies send money to their agents and contractors, such as Uber Technologies Inc.’s drivers.

$DLO primary offerings include:

• dLocal API
• Fraud management tools
• Compliance
• Merchant dashboard
• Marketplace service

$DLO will sell 29.4M shares (plus an additional 4.4M green shoe) at $18 per share raising about $600M.  The market could value $DLO at $5.7B. This implies a valuation of 32X to 39X 2021 revenues.

$DLO has a customer base of more than 330 merchants covering over 2B internet users. dLocal offers over 600 local payment methods.

$DLO dLocal offers its partners one direct API, one technology platform and one contract under its one dLocal model.

$DLO dLocal posted revenue of $104M in fiscal 2020, up 129% YoY. The company reported revenue of $40.3M in the most recent quarter, up 124% YoY. Net income for 2020 was $28M

$DLO had total payment volume of $2.1 billion in 2020 and saw total payment volume grow at a compounded annual growth rate of 97% from 2016 to 2020.

$DLO dLocal has partnering with $SHOP Shopify to enable small businesses to offer local payment methods in more than 19 currencies in emerging markets.

Metrics

DBNER: Net revenue retention rate for the year of 2020 was 171%.

Rule of 40: DLO’s most recent RF40 was 170%, which is awesome.

Global market for B2B cross border payments was an estimated $27 trillion in 2020 and is expected to reach $35 trillion by 2022. The addressable market for $DLO is $152B in the near term (2025).

Competitors include AstroPay and Stripe.

Analysis

I like the company a lot and will initiate a small starter position tomorrow assuming it does not go over $25 per share. If it prices over $25, I will wait for a pull back.

Chinese used electronics trading platform Aihuishou is aiming to raise $500 million to $1 billion in a U.S. initial public offering by early June.

$AHS Aihuishou was founded in 2011 and has $JD (Jd.com) as an investor. The company is seeking a $4B – $5B valuation.

$AHS Aihuishou is the leading marketplace for second-hand electronic products, covering the mainstream second-hand digital markets in China, India, and Brazil.

In 2019, JD announced a strategic merger between its second-hand trading platform Paipai and Aihuishou and invested another $20M in cash to Aihuishou.

$AHS Aihuishou had a total of seven rounds of financing, totaling more than $1.2B. 

The used electronics market is over $15B in China alone.

$AHS Aihuishou recycles second-hand mobile phones, computers, laptops, cameras and other electronics products from individuals and corporations and resells them on its website and apps, as well as offline stores in 140 cities.

$AHS Aihuishou means “Love Recycling” in Chinese.

Total GMV transacted on the platform was $4.2B for the twelve months ended March 31, 2021, representing a year-over-year growth from the twelve months ended March 31, 2020 of 66.1%.

$AHS total revenue for 2020 was $741M +25% YoY, while losses were lower by 100% at $71M, from 2019.

Risks

This is very competitive market, with many local players who service and sell used electronics. The integration with JD’s used electronics marketplace is still underway. Over 80% of products traded in the marketplace are cell phones.

Analysis

$AHS growth rates look reasonable as does the valuation. The company will do about $1B in 2021 revenues and is valued at $4B – $5B with 16% gross margins. If value this relative to $EBAY, which is growing at 29% YoY (Blended last 12 months) and $43B Market cap with $11.2B in 2020 revenues,

$AHS has the big advantage of growth in China, which $EBAY does not.

I am not going to participate in the IPO and wont likely track this stock until it shows me growth in similar lines to $ETSY, $SHOP and $SE

$CXM Sprinklr sells a software as a service (SaaS) customer experience management platform. The company’s product (also called Sprinklr) combines five different products: marketing, advertising, research, care and engagement.

$CXM Sprinklr was founded in 2009 by Ragy Thomas in New York, and has grown 19% YoY in 2020 to $386M in revenue. It was last valued at $2.7B in Sep 2020 when it raised $200M.

$CXM Sprinklr has raised approximately $585M since it was founded.

$CXM sells its platform on a subscription basis annually to over 1000 customers including TikTok, Facebook, Prada, Cisco, Microsoft and Nike.

Over the last decade, Sprinklr $CXM has acquired 12 companies including UserRules, Scup, Little Bird, Branderati & new brand Analytics.

Technology

$CMX Sprinklr platform is architected to ingest unstructured and structured data from more than 30 channels in real time, including audio, video and images.

$CXM Sprinklr has 4 modules.

Modern Research – listen to and learn from the market, customers, and competitors to act inreal-time.

Modern Care – serve customers on the channels they choose, increasing satisfaction, driving loyalty and reducing costs.

Modern Marketing & Advertising – personalize ads with content that is relevant, authentic, timely and effective.

Modern Sales & Engagement – engage with and sell to customers on the channels they use most.

Market

The total addressable market for Unified-CXM (Customer Experience Management) platform is approximately $51B as of 2021, growing at 7% YoY.

Customers

1,179 customers, including more than 50% of the Fortune 100. 69 customers with subscription revenue equal to or greater than $1M for the trailing 12-month period, which represented approximately 47% of subscription revenue. 

Competitors

$ADBE Adobe, $CRM Salesforce, $XM Qualtrics, $MDLA Medallia, $HUBS Hubspot, $SVMK Survey Monkey, $SPT Sprout Social are all competitors, since they are both in the social media software space and the customer experience management space.

Financials

$CXM Revenue of $324.3M (2020) and $386.9M (2021) +19%, YoY and revenue of $93.0M and $111.0M in the three months ended April 30, 2020 and 2021, respectively +19% YoY.

$CXM Net loss was $39.1M (2020) , $41.2M (2021) and $11.2M and $14.7 M during three months ended April 30, 2020 and 2021.

$CXM Operating loss was $34.9M (2020) $28.8M (2021) and $7.9M and $10.7M during three months ended April 30, 2020 and 2021.

Valuation

$CXM revenue puts it in the top quartile of SaaS companies and growth in the bottom quartile. Sprinklr has not provided any of the SaaS metrics of customer retention or DBNER in its filing. Assuming a $4B valuation (likely) and $386M in last year’s revenue the valuation of 10.36 looks interesting but growth of 19% is not very appealing.

Risks

The biggest risk with Sprinklr will be the lack of visibility into key operational metrics (which I think will be shared quarterly) and the competitive market for Customer experience management. Qualtrics $XM is the category leader and it is much bigger than Sprinklr, which means an acquisition is likely.

Analysis

$CXM is an easy pass for me until they show faster growth. Given that $XM Qualtrics is the segment leader, I will prefer to watch this from the sidelines.

$DOCS Doximity offers an online service and app for physicians that allows them to collaborate with colleagues, coordinate patient care, conduct and virtual patients visits. Its service has been used by more than 1.8M (million) physicians — about 80% of all such professionals in the U.S.

San Francisco-based Doximity, was founded in 2010 by co-founders Jeff Tangney, Nate Gross and Shari Buck, and is a professional network for physicians with telehealth and scheduling tools. $DOCS filed on Friday with the SEC to raise up to $100M.

$DOCS 2020 revenue grew by 78% to $206.9M, while its net income jumped about 69% to $50.2M. In 2020, the firm expanded into telemedicine and rolled out the telehealth app Doximity Dialer Video, which enables physicians to conduct video calls with patients using a smartphone.

$DOCS said it’s allocating up to 15% of shares in the IPO offering for physicians through a “reserved share program.” That means eligible doctors can get stock at the same price as institutional investors, who so benefit from the IPO pop because they get early allocation and don’t have to wait for trading to begin to buy shares.

$DOCS hasn’t raised outside capital since 2014. It raised a total of about $80M in venture funding and spends very little on marketing.

$DOCS generates 80% of revenue from medical and pharmaceutical companies who use the app as a way to reach doctors. The top 20 Pharma companies are all customers of Doximity. The remaining 20% comes from hiring fees it generates from hospitals.

$DOCS Doximity said it has more than 600 subscription customers, including 200 that spent $100,000 in 2020.

Of those, 29 spent at least $1M. Subscriptions accounted for 93% of total revenue.

 $DOCS competes with $MSFT LinkedIn (but is more specific and focused), as well as with $TDOC (Teledoc) and $AMWL (American Well).

$DOCS estimates the total addressable market to be approximately $18.5B. This comprises a $7.3B in U.S. pharmaceutical marketing to medical professionals, a $6.9B in U.S. health system marketing and staffing, and a $4.3B in U.S. software telehealth.

Risks

Revenue is relatively concentrated within a small number of key customers, and the loss of one or more of such key customers could slow the growth rate of revenue or cause our revenue to decline.

Valuation

While the valuation of the company and share price is still unknown, it is likely to be in the $2B – $3B range. I will update this post when we have more information on comparables.

$PAY Paymentus provides SaaS Billing software and solutions to enterprises. The company is seeking ~ $200M at $2.4B in it is IPO this week, pricing shares at $20

$PAY Founded in 2004 by Dushyant Sharma, Paymentus has 1300+ customers, providing payment acceptance solutions to businesses.

$PAY has raised over $35M over the years from investors including Accel-KKR, which is investing another $50M at the IPO.

$PAY solution solves the manual and complicated process of accepting and managing payments from customers for mid-sized and large enterprises.

Instead of creating a bill, getting checks or transfers and then reconciling payments, customers use $PAY to send electronic bills and get paid immediately.

Paymentus currently processes about 1% of US payment volume at $38B, and the global market is over $5T.

$PAY makes money by charging a convenience fee per transaction by the consumer and transaction fees paid by billers.

Metrics

Gross DBNER is 97% and Net DBNER is 117% indicating strong customer retention.

They have 1300+ customers and 212M Bill transactions processed monthly. There is no customer concentration.

Financials

$PAY recorded $324M in revenue for LTM Q1 2021 (March) and is growing at 33% YoY. They have 31% Gross Margins and are adjusted gross margin profitable.

$PAY recorded $28M adjusted EBITDA in 2020, +10% YoY.

$PAY has over 500 employees and is headquartered in Charlotte, North Carolina.

$PAY revenue for 2020 was $92M (+32.5% YoY) and gross margins were 30.6%.

Valuation

$PAY is seeking $2.4B market cap, which translates to a 7.15X Price to Sales, and 115 EV / EBITDA valuation.

Comparable valuations for competitors $FISV (Fiserv) at 5X P/S, but growing at 11% YoY, which indicates this is a reasonable valution.

Recommendation

There is no compelling reason for me to invest on the IPO day, since the growth is not very compelling (30%) and the valuation is not attractive either.

In the #FinTech space, this is a fairly unique company, but not an unique investment opportunity overall.