Earlier this morning, digital communication platform developer SendGrid (SEND) priced its up-sized 8.2 million share IPO at $16, above the $13.50-$15.50 expected price range. Its strong pricing restores some momentum for the IPO market, which had cooled off a bit over the past week with several deals pricing at the low end of expectations or worse -- such as Funko (FNKO), Bandwidth (BAND), and PPDAI Group (PPDF).
SEND's IPO was originally expected to consist of 7.7 million shares, but, healthy demand allowed it to bump the size up to 8.2 million shares. So, in all, its deal raised $131.2 million in gross proceeds, or, about 18% more than anticipated.
The lead underwriters on the deal were Morgan Stanley, and JP Morgan. Shares are set to open for trading later this morning on the NYSE.
SEND is a developer of a digital communication platform, enabling businesses to engage with their customers via email reliably, effectively and at scale. Its cloud-based platform allows for frictionless adoption and immediate value creation for businesses, providing their developers and marketers with the tools to seamlessly and effectively reach their customers using email.
SEND was founded by developers who were frustrated with their own experiences in managing email delivery. They wanted to build a system "that just worked" for developers and allowed them to focus on strategic business activities. They developed a robust technology platform incorporating their domain expertise and created an application programming interface, or API, that allowed for easy integration by businesses. It built its business model around serving the developer, including self-service adoption and a frictionless user experience.
The company offers its customers three services:
- Email API: This service allows developers to use its API in their preferred development framework to leverage SEND's platform to add email functionality to their applications within minutes. This service enables businesses to send thousands or billions of emails, all with the same high level of service and reliability, and incorporates proprietary technology and domain expertise to significantly improve deliverability rates.
- Marketing Campaigns: Its Marketing Campaigns service allows marketers to upload and manage customer contact lists, create and test email templates, and then execute and analyze multi-faceted email campaigns that engage customers and drive growth.
- Expert Services: Expert Services help businesses further optimize their email delivery. With SEND's platform, businesses can achieve industry leading email deliverability that translates into higher brand engagement with their customers.
As of September 30, 2017, SEND had over 58,000 customers globally, an increase of 36% year over year. It believes a relatively small number of businesses have more than one unique paying account with it, and it counts each of these accounts as a separate customer.
Taking a closer look at its results for the 9 months ended September 30, 2017, revenue climbed by 41% to $58.5 million. The increase was attributable to an increase in email volume from, and sales of additional services to, existing customers and sales of its Email API service and other services to new customers. Revenue from existing customers comprised $17.8 million, or 76%, of the $23.3 million increase, with the remaining increase attributed to revenue from new customers.
Gross margin improved to 73% from 72% primarily due to total revenue increasing at a higher rate than the associated costs. Specifically, cost of goods increased 34% compared to the 41% increase in revenue.
Turning to expenses, total operating expenses were up 43% to $63 million. As a percentage of revenue, operating expenses were at 79% compared to 77% in the year ago period. As a result, SEND had an operating loss of ($4.2) million for the period, slightly wider than the ($3.2) million operating loss in the year ago period.