MULE provides a platform that makes it easier for IT departments to build software applications using what are known as APIs (Application Program Interface). An API is a set of routines, protocols, and tools for building software applications. An API specifies how software components should interact and APIs are used when programming graphical user interface (GUI) components.
Once an API is created, it can be discovered via search and used over and over by future IT department personnel so that when they are building a software application, they can plug-in that API that was already created by another developer. They are not re-inventing the wheel and starting from scratch every time they need to develop a new software application.
Currently, many companies use custom-code integrations on a project-by-project basis. While this initially may be the path of least resistance, the aggregation of many custom-coded integrations eventually results in a brittle tangle of code, commonly referred to as "spaghetti code." Developers are forced to spend a large amount of their time duplicating integration work, rather than innovating. MuleSoft's platform fixes this problem.
In terms of its customers, MULE has over 1,000 customers in 60+ countries across every major industry, including 30 customers with $1+ mln in annual subscription/support revenue. Although its platform can be adopted by organizations of nearly any size, the company focuses on the largest organizations. Its direct sales force targets CIOs, IT architects, and other business leaders. It also partners with systems integrators and independent software vendors to provide a comprehensive offering.
MULE generates revenue from two sources: (i) subscription and support revenue, which is comprised of subscription fees from customers accessing its cloud-based software and from term-based licenses of its software and support services; and (ii) professional services, such as consulting and training related to the implementation and configuration of MULE's platform.
Taking a quick look at the financials, probably the best thing is the strong top line growth. Revenue grew 91% in 2015 to $110.3 million then it grew another 70% in 2016 to $187.7 million. Another positive is that its gross margin is pretty strong in the low 70% range and gross margin improved by a good amount in 2016 as you can see below.
There are definitely negatives too. The main negative is that MULE has never been profitable and they look to be a long way off. In FY16, it had a net loss of nearly ($50) million. Also, management sounds like it's going to focus more on growing the business than turning a profit in the near term.
In terms of operating metrics, MULE is growing nicely as customers have nearly doubled to more than 1.07 million at the end of 2016. In addition to more customers, it's nice to see that the average Subscription & Support revenue per customer as grown as well to $143 in 2016 from $82 in 2014. The dollar-basis customer retention rate has been solid at 117% in FY16.