There has been some concern that Lyft's (LYFT) rocky start would set the IPO market back, but, so far, that does not appear to be the case. Along with PD's strong showing, Tradeweb Markets (TW), Silk Road Medical (SILK), and NGM Biopharmaceuticals (NGM) also drew healthy demand and have performed exceptionally well.
This bodes well for next week's busy schedule, which includes the highly-anticipated Pinterest (PINS) and Zoom Video (ZOOM) IPOs.
Circling back to PD, it isn't overly surprising that investors gravitated towards its IPO, due to its impressive growth rates and strong margins. Also, shares were hard to come by with only 9.1 million involved in the deal. The fact that main competitor Atlassian (TEAM) has rocketed higher by nearly 30% year-to-date also doesn't hurt PD's cause. The combination of these factors created a favorable supply and demand scenario for PD, leading to the better-than-expected pricing this morning.
In all, the company raised $218.4 million in total gross proceeds, about 20% more than anticipated. The lead underwriters on the deal were included Morgan Stanley, JP Morgan, and RBC Capital.
Shares are set to open for trading later this morning on the NYSE.
PD is a cloud software company that has developed an incident response platform that collects, aggregates, and interprets signals from any kind of device in the form of machine data. This data is analyzed in order to identify incidents or events across a business that could impact a customer's experience. From there, it helps orchestrate the right teams to take the right action to address the issue in real time.
The company has a global customer base of over 11,000 organizations of all sizes and across all industries. The platform is used by a community of over 380,000 paid users, including teams across software developers, IT, customer support, security operations, and business operations departments.
PG leverages a go-to-market model that allows it to reach organizations of all sizes. One of the drivers of its success has been its land and expand business model. PG's online self-service model is the primary mechanism for landing new customers and makes it easier for customers to expand their use of its platform.
Financials and Valuation
For FY19 (ending Jan. 31), revenue increased by $38.2 million, or 48%. PD estimates that approximately 85% of the increase in revenue was attributable to growth from existing customers, and the remaining 15% was attributable to new customers, relating to a 14% increase in total customers.
Gross margin slightly increased from 84% to 85%. The overall increase in gross margin reflects its increased revenue for the period, as well as its continued commitment to managing personnel expenses and costs related to its third-party hosting services.
Sales and marketing expenses increased by $16.7 million, or 35%. This increase was primarily due to an increase of $10.7 million in personnel expenses as a result of increased headcount and increased variable compensation for its sales personnel (including amortization of deferred contract costs).
As a result of the above, PD had an operating loss of ($42.3) million, compared to ($38.3) million in the year ago period.
Lastly, based on its $24 IPO price, PD has a market cap of nearly $1.8 billion, translating to a P/S of about 15x FY19 sales.
Key Takeaways: PD's IPO drew robust demand, which not only is a positive for the company itself, but is also a positive sign for the IPO market in general as we approach Pinterest's (PINS) landmark deal next Thursday. Given the enthusiasm for PD's IPO from institutional investors, we would expect it to open for trading with a considerable pop -- especially since there are only 9.1 million shares available. Fundamentally, there is plenty to like, including its high double-digit revenue growth, but, the rich valuation could become a factor once this initial buzz fades.