Liquidity Public Markets Venture

IPO Update: DouYu, Phreesia, And Medallia Edition

Morning Markets: The 2019 IPO cycle continues. Here’s who’s expected to get out this week.

As a year, 2019 is coalescing into a slingshot of sorts for a host of tech, and tech-related companies. Years of disappointing IPO cohorts are now fading as, finally, a seemingly-reasonable number of venture-backed companies are going public.

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After some big names went out earlier in 2019 (Slack, Uber, Lyft, Pinterest, etc), it would be more than fair to pause paying as close attention to the next set of companies going public. But that would be a mistake. While this week’s IPO pickings don’t have the same sort of star power as Uber et al, they are still important public debuts.

And if we are going to understand the state of late-stage venture, we’ll need to know how exits themselves are performing. So, these IPOs matter. That in hand, let’s get to it.

Three IPOs

We’ll consider the deals in order of when they are expected to trade. There are three to dig through. First up:

The China-based DouYu follows Huya into the U.S. public markets as a company focused on the worlds of game streaming and esports. The company, as we previously reported, has a history of gross-margin negative revenue.

However, in recent quarters DouYu’s finances have improved. Indeed, in its most recent quarter, DouYu’s revenue more than doubled to $221.9 million. The company earned just $30.3 million in gross profit off its top line, leading to a $7.2 million operating loss. Luckily, the firm’s huge cash position ($641.9 million) and some foreign exchange gains pushed the firm into profitability.

The company’s IPO is, therefore, a bet that its revenue growth will soon allow the firm enough gross profit to cover its operating costs. The company’s impending IPO raise will further pad its already wealthy accounts, giving the firm an unusually long runway to reach breakeven while still growing rapidly.

Born in 2005, Phreesia’s march to the public markets is long even by today’s standards. And the company’s small-ish revenue base and moderate growth make it an odd duck amidst other venture-backed offerings. All the same, Phreesia did raise money from venture capitalists, including Polaris Partners, Ascension Ventures, and others.

You can read the company’s filing here or our notes on the document here.

This customer-experienced focused SaaS shop is pretty much our speed in terms of what it does, and how it does it. Selling software on a recurring basis with some consulting revenue mixed in is our standard fare.

So, the numbers: Medallia’s revenue grew from $70.7 million to $93.6 million in the most recent quarter, including revenue growth from $55.6 million to $71.7 million for its subscription business. That works out to an aggregate revenue gain of 32.4 percent, and a subscription revenue gain of 29.0 percent.

Happily, Medallia’s operating and net losses are trending down, leaving the firm near break-even on both counts in its most recent quarter. The results represent a dramatic improvement over its year-ago results for the quarter ending April 30. In that period the firm was smaller but lost around ten times as much on a net basis.

And that’s that. Expect more from us as the week continues. Stay tuned!

Illustration: Li-Anne Dias.

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