Category: Software Equity Research
Mimecast: Keeping Corporate Email Safe from Attack
Founded in 2003 by Peter Bauer, currently CEO and Chairman, and Neil Murray, currently Chief Technology Officer, and based in London, the UK, Mimecast (NASDAQ: MIME) is a leader in cloud-based email management, including data security and archiving. The company serves over 18,000 customers in a broad range of industries, and added 1,800 new customers in the recently concluded March 31 quarter. Consensus estimates call for revenue of $173 million in fiscal year 2017 (ending March 31), which implies a 22 percent increase over the prior year, while EPS estimates suggest a loss of $0.05 per share, which would compare to a loss of $0.07 in FY’2016.
Mimecast debuted on the NASDAQ on November 19, 2015 in a 7.8 million share IPO priced at $10 per share that enabled the company to raise about $70 million. The deal was led by Goldman Sachs, Barclays Capital, Jeffries, RBC Capital Markets, and Oppenheimer and Company. At a recent share price of $9, Mimecast’s market cap is roughly $475 million.
Mimecast offers a wide range of archiving and data security services that enhance corporate email systems with additional features for storing and retrieving emails, as well as an additional layer of protection for corporate email users, such as those running Microsoft Office 365. Roughly 60 percent of revenue is derived from channel partners, rather than a direct sales force. The company’s customers are based principally in three countries, with the U.K. accounting for 42 percent of sales, the US 38 percent, and South Africa 19 percent.
The company’s email archiving and threat protection services are derived from a broad range of industries, including legal services (17 percent), professional, scientific and technical services (14 percent), manufacturing (13 percent), and finance and insurance (12 percent), with no customer accounting for more than one percent of sales. The company claims a greater than 90 percent plus retention rate among customers for its services. Mimecast competes against a broad range of competitors, including Microsoft through its Exchange Server offering, Barracuda Networks (NYSE: CUDA), Symantec (NASDAQ: SYMC), and Proofpoint (NASDAQ: PFPT).
Mimecast’s net cash position post IPO is $126 million, and the company is generating cash from operations. To learn more about how Mimecast screens relative to its software peers, please contact Battle Road Research.
Alarm.com
Alarm.com (NASDAQ: ALRM), a cloud-based security systems provider is among the recent additions to our Battle Road IPO Review Software sector coverage. Founded in 2000 as part of a research and development unit within MicroStrategy (NASDAQ: MSTR), a provider of business intelligence software, Alarm.com was later spun off from MSTR. Alarm.com is headquartered in Vienna, Virginia, and its CEO and president is Steve Trundle. Consensus estimates call for EPS of $0.14 in 2015, flat with $0.14 in 2014, while revenues are projected to increase by 16 percent in 2015 to $194 million.
Alarm.com debuted on the NASDAQ on June 26, 2015 at $14.00 per share. All proceeds from the seven million share offering went to Alarm.com. Goldman Sachs, Credit Suisse and Merrill Lynch acted as book-running managers for the transaction, with Stifel, Raymond James, William Blair, and Imperial Capital acting as co-managers. At a recent share price of $14.00, the company’s market cap is roughly $635 million.
Alarm.com deploys wireless security systems that can be monitored using video, mobile apps, and web-based apps. In 2010, Alarm.com added to these systems by allowing users to control heating and cooling temperatures using these apps. With 2.3 million subscribers, 25 million connected sensors and devices, and 20 billion data points processed in the last year alone, Alarm.com claims to be the largest connected home platform. This platform has been built specifically for home and business security, with a network of more than 5,000 service providers, with expertise in design, sales, installation, and support for the platform.
The connected home platform designed by Alarm.com has four main segments: Interactive Security, Intelligent Automation, Video Monitoring, and Energy Management. Interactive Security is an always-on security system powered by cellular connection which can survive otherwise detrimental occurrences such as line cuts, power outages and network problems. Interactive Security includes app alerts and triggers and constant emergency response. Intelligent Automation allows users to connect and control security systems, garage doors, lights, locks, thermostats, electricity and other devices. Intelligent Automation learns patterns and recommends adjustments.
Video Monitoring allows for on-demand viewing of security footage which can be accessed at any time, including live streaming, video alerts, constant high definition recording and clip captures. Video Monitoring can be accessed through the web and mobile apps. Energy Management enables users to control energy usage and comfort and is connected to thermostats, power meters, lights, shades, solar panels and appliances. Energy Management controls devices and manages temperatures. Users can also obtain a real-time look into their energy usage and efficiency. The pricing for Alarm.com is a monthly fee starting at $13.99 for homes and $19.99 for businesses, with more features available for a higher cost. There is also an initial set-up fee.
The Alarm.com app, which can control the entire connected home platform, is available on the iPhone, iPad, Android, Windows Phone, Apple Watch, Pebble Watch, and Amazon Fire TV. This app is what brings the connected home platform together, allowing users access to their homes while out and about. Main competitors of Alarm.com include iControl, Frontpoint, Protect America, LiveWatch, Link Interactive, SimpliSafe, LifeShield, AlarmForce, ADT, and Vivint. Post-IPO, we note that Alarm.com has a solid balance sheet, with over $100 million in cash and net debt of just $7 million.