Global Technology IPO Review Q2 2015 - PwC [PDF]

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Global Technology IPO Review Q2 2015 Technology Institute A quarterly look at global trends in the technology IPO market August 2015

Table of contents 1.

A resilient first half of 2015*

3

2.

Executive summary

4

Number of offerings rise, but average proceeds declined

3.

Chinese technology IPOs lead second quarter listings globally

5

Innovation in mobile commerce and software-defined value drives investment in Internet Software & Services subsector

6

Global technology IPO trends

7

4.

Top 10 technology IPOs – Q2 2015

8

5.

Geographic IPO trends – Q2 2015

9

6.

Global Technology IPO Review – Q2 2015

4

United States

12

China

13

Europe

14

All other geographies

15

Stock exchange distribution –Q2 2015

16

7.

Cross-border IPOs – Q2 2015

20

8.

Subsector distribution – Q2 2015

21

9.

Key financials – Q2 2015

22

10. Technology IPOs valuation metrics – Q2 2015

27

11.

Top three subsectors – Q2 2015

29

Internet Software & Services

29

Software

33

Computers & Peripherals

37

12. Methodology

41

13. For more information

43

2

A resilient first half of 2015 * Welcome to the second quarter 2015 issue of PwC’s Global Technology IPO Review. Strength in the global technology IPO market continued in the second quarter with 36 IPOs and total proceeds of US$6.2 billion. Looking back over second quarter performance to 2010, only the second quarter of 2014 posted more technology IPOs than 2015 with 40 IPOs. While the number of technology IPOs grew 57% sequentially from the first to the second quarter of 2015, proceeds advanced only 2% due to the lack of billion dollar offerings. Compared to the second quarter of 2014, the amount of proceeds raised dropped by 49% from US$12.1 billion to US$6.2 billion and the number of deals declined by 10%. It seems many successful startups are delaying their IPOs due to the availability of late-stage funding from not just venture capital funds, but hedge funds, mutual funds, sovereign wealth funds and corporate venture arms. Globally in the second quarter, 21 unicorns — technology companies with billion-dollar valuations — raised US$7.8 billion compared with the US$6.2 billion across 36 IPOs.1 Global geographic participation also remained strong in the second quarter with 11 countries participating. In terms of proceeds, the US led the way with US$2.8 billion across 11 offerings and the largest technology IPO of the quarter, followed by Europe with US$ 1.3 billion and three of the top 10 offerings. Rest of World, with six technology IPOs, and the second largest of the quarter, posted US$1.1 billion. With the highest number of offerings (14), China posted US$1.0 billion in total proceeds. This was the first time in the past seven quarters there were no Chinese technology companies in the top 10. Chinese exchanges had a strong presence with 12 of the 14 Chinese technology IPOs listing in China and two listing with NASDAQ. With the new registration-based system, it was expected that the majority of Chinese technology companies would list on domestic exchanges.

Raman Chitkara Partner and Global Technology Industry Leader PricewaterhouseCoopers LLP [email protected]

* Issue size greater than US$40 million (includes overallotment) and based on trade date

The US recorded 11 offerings and US$2.8 billion in proceeds, bouncing back from a surprisingly modest first quarter of just four technology IPOs that raised US$1.4 billion. The largest technology IPO of the quarter was a wearables company, Fitbit Inc (US$841 million). Europe continues to deliver consistent technology IPO activity, with five IPOs totaling US$1.3 billion in proceeds in the second quarter. Looking forward to the remainder of 2015, listings on Chinese exchanges will likely decline as the China Securities Regulatory Commission (CSRC) recently announced a six-month suspension of IPOs due to recent fluctuations in their capital markets. Please reach out to me or any member of our global technology team listed at the back of this document if you would like to discuss how these findings may impact your business. Sincerely,

1. Crunchbase.com and Dow Jones VentureSource and The Wall Street Journal, “The Billion Dollar Startup Club,” published 18 Feb., 2015 and updated regularly. Global Technology IPO Review – Q2 2015

3

Executive summary

The second quarter of 2015 observed 36 technology companies go public across 11 countries, with US$6.2 billion raised. In terms of number of IPOs, this represents a 57% rise over the first quarter of 2015, but the aggregate amount raised remained flat in Q2 resulting in average proceeds declining 35%. The decrease in proceeds was due to a lack of big-ticket IPOs this quarter. The largest technology IPO of the quarter and year to date (YTD) was FitBit Inc, a US wearables company that raised US$841 million. In contrast, in the second quarter of 2014, there were three IPOs with proceeds of US$1 billion or more (IMS Health Holdings Inc, JD.com, Markit Ltd). Over the last six years, Q3 2014 recorded the highest proceeds ever of US$24.8 billion, due to the US$21.8 billion Alibaba IPO. The lack of big-ticket IPOs can be attributed to market volatility and the increasing number of start-ups with billion dollar valuations. The most commonly cited gauge of investor fear, the CBOE Volatility Index (VIX), has moved above and below its January 1, 2015 value of 17.76, ending June 30 at 18.23 (high volatility), but then moderating in July and closing today (August 18 th) at 13.79 (low volatility). Investor sentiment globally

Figure 1: Global technology IPO trends US$ millions 30,000

45

40 36

34

25,000

35

$24,785 20,000

30 23

15,000 10,000

40

25

18

20

$12,116

15 $7,453

5,000

Number of IPOs

Number of offerings rise but average proceeds declined in the face of volatile markets and lofty private valuations

10 $6,063

$6,162

0

5 0

Q2 2014 Total proceeds

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Number of IPOs

Source: S&P Capital IQ with analysis by PwC

has been, and will likely remain, cautious in view of ongoing volatile market conditions.

“The strong second quarter results are impressive in the face of volati le capital markets and high levels of liquidity available to late stage pre-IPO companies from a growing list of VCs, sovereign wealth funds, and hedge funds. Looking forward, the suspension of IPOs in China suggests a less active third quarter but likely more cross-border activity.” — Raman Chitkara Global Technology Industry Leader, PwC


4

There were 14 Chinese companies that completed IPOs with total proceeds of US$1.0 billion, a 75% increase in IPOs quarter over quarter. Despite the increase in IPOs, the amount raised declined both sequentially and from the prior year. Year-overyear proceeds decreased by 73% from US$3.7 billion to US$1.0 billion though the number of IPOs was almost identical.

Figure 2: Q2 2014-Q2 2015 Chinese technology IPOs US$ millions 25,000

16 14

$22,968 20,000

14 13

12

11

10

15,000 10

8 8

10,000

6

Number of IPOs

Chinese technology IPOs lead second quarter listings globally

4 5,000 2

$3,673 0 Q2 2014

Q3 2014

Total proceeds (US$mn)

$1,435

$1,055

$1,002

Q4 2014

Q1 2015

Q2 2015

0

Number of IPOs


Technology IPOs on Chinese exchanges are expected to decline in the second half of 2015 as Chinese regulators have suspended IPOs for the next six months while they work to shore up the two main share markets (Shenzhen and Shanghai). In addition to an increase in cross-border deals, it is anticipated we will see increasing alternative financing on the part of private equity firms, hedge funds and sovereign wealth funds.


5

Innovation in mobile commerce and software-defined value drives investment in Internet Software & Services subsector

Figure 3: Subsector proceeds Q2 2014-Q2 2015 US$ millions

The Internet Software & Services subsector remained at the top this quarter with 16 IPOs, representing 44% of the total number of IPOs. Total proceeds were US$2.3 billion. Software came in second with six IPOs (17% of total number of IPOs) with US$1.8 billion. Continued innovation in mobile commerce, social networks and softwaredefined value is driving investor interest and activity.

$7,000

The recent surge in Computers & Peripherals IPOs continued with five companies completing their IPOs and raising U$1.1 billion in Q2 2015.

$2,000

$22,813

$6,000 $5,131 $5,000 $3,772 $4,000

$3,424

$3,095

$3,000 $2,317

$2,371

$1,272 $1,788 $501 $376

$1,000

$315

$503 $533 $718

$782

$1,286 $1,126

$167

$Internet Software & Services Q2 2014

Software Q3 2014

Semiconductor Q4 2014

Q1 2015

Computers & Peripherals Q2 2015



6

Global technology IPO trends Figure 4: Second quarter global tech IPO trends US$ millions 20,000

45

18,000

40 $17,779

16,000

40

35

14,000

30

32

12,000

25

$12,116 10,000

25

20

8,000

20

15

17

6,000

$6,162

$5,999 4,000


10

$4,670

2,000

The second quarter of 2015 posted the strongest second quarter since Q2 2014 with 36 technology IPOs raising US$6.2 billion. In terms of number of IPOs, this was a 57% increase quarter over quarter, but year over year; this represented a 10% dip. In terms of proceeds raised, it was relatively flat with a marginal increase of 2% quarter over quarter, but a sharp drop of 49% year over year.

Number of IPOs

36

5

$2,870

0

0 Q2 2010

Q2 2011


Q2 2012

Q2 2013

Q2 2014

Q2 2015

Number of IPOs


The largest Q2 2015 IPO was Fitbit Inc, one of the first significant private wearables companies to go public. Consistent with Q1 2015, there was strong global participation in Q2, with 11 countries represented. Overall, 36 companies were listed across 13 exchanges.

7

Top 10 technology IPOs – Q2 2015 Internet Software & Services and the Software subsectors again dominated the top 10 technology IPOs with four each; but in terms of proceeds raised, Software led with US$1.7 billion. In contrast, in Q1 2015 there was one Software company in the top 10. Furthermore, Chinese companies and exchanges were conspicuously missing from the top 10 list, something that had not occurred for the past seven quarters. Europe continues to show strong technology IPO activity with three IPOs in the top ten. The top 10 IPOs constituted 67% of total Q2 proceeds compared to 82% last quarter and 70% in Q2 2014 when there were one and three US$1 billion dollar offerings, respectively.

Table 1: Q2 2015 IPO summary – Top 10 listings

Company

Subsector

Proceeds (in US$ millions)

Primary exchange

Domicile nation

Fitbit Inc

Computer Storage & Peripherals

841

New York

United States

MYOB Group Ltd

Software

668

Australia

Australia

Sophos Group Plc


554

London

United Kingdom

Black Knight Financial Svcs

Software

507

New York

United States

Siltronic AG

Semiconductors

374

Frankfurt

Germany

Etsy, Inc.


306

NASDAQ

United States

Press Ganey Holdings Inc

Software

256

New York

United States

Evolent Health

Software

225

New York

United States

windeln.de AG


205

Frankfurt Prime

Germany


180

New York

United States

Teladoc Inc



8

Geographic IPO trends – Q2 2015

US technology IPOs bounced back from a slow first quarter with growth of 95% and 175% in terms of total proceeds and number of IPOs, respectively. However, year-over-year results lagged Q1 2014, down 32% in proceeds and 21% in number of IPOs. Europe had five IPOs with proceeds of US$1.3 billion. Compared to the first quarter, total proceeds declined by 58% in Europe, and though the total number of global technology IPOs declined only marginally year over year (36 versus 40), proceeds dropped by 49% due to a lack of billion dollar offerings.


Figure 5: Q2 2015 Geographic distribution of technology IPOs US$ millions 3,500

16 14 14

3,000 2,500

$2,765

12

11

10

2,000 8 1,500

$1,271

6

$1,002

Number of IPOs

In Q2 2015, the geographic distribution was across 11 countries. In terms of proceeds the US led with US$2.8 billion and 11 IPOs, followed by Europe with five IPOs and US$1.3 billion of proceeds. China came in at US$1.0 billion with 14 offerings, while Canada and the Rest of the World raised US$265 million (2) and US$859 million (4), respectively. Rest of World countries included Australia, with the second largest IPO of the quarter (MYOB Group Ltd, US$668 million), Israel, Taiwan and Japan with one IPO each.

$859

1,000 5

4 2

500

4 2

$265

0 United States Total proceeds

China

Europe

Canada

0 RoW

Number of IPOs

Source: S&P Capital IQ with analysis by PwC .

9

Year-over-year comparison for Q2 2015

United States China Europe

Deal volume

Deal value

21%

32%

8%

73%

38%

67%

The US experienced a significant decline of 21% in year-over-year technology IPO volume and 32% in proceeds. In China, IPO volume increased marginally year over year, but the proceeds declined by 73%. Regulatory pressure on Chinese companies to price offerings at the middle- to low end of the range contributed to the decline in proceeds. In Europe, the lack of billion-dollar offerings drove the significant decline in proceeds. A strong showing from other parts of Asia, notably Australia, with the second largest technology IPO of the quarter, led to an increase in both number and value of IPOs in Q2 over Q1 2015. Figure 6: Year-over-year comparison by geography US$ millions $5,000

30

$4,500 Source: S&P Capital IQ with analysis by PwC

27 $4,049

$4,022

$4,000

24

$3,673

$3,500 $3,000

21 18

$2,765

$2,500 14 $2,000 11

15

14

13

12 $1,312

$1,500

9 $1,002

$1,000

$1,083

8

6 5

5

$500

6 3

$372

$-

0 US Q2 2014 Proceeds

China Q2 2015 Proceeds

Europe Q2 2014 IPOs

RoW Q2 2015 IPOs



10

Regional comparison North America led with US$3 billion in proceeds; but in terms of number of IPOs, Asia led with 18 IPOs. In North America, the number of IPOs also increased sharply sequentially from four to 13 (225%). Europe reported a 58% decline in proceeds quarter over quarter to US$1.3 billion from US$3.1 billion with no change in the number of IPOs. Figure 7: Q2 2015 regional analysis – Proceeds US$ millions

$23,153

10,000 8,000 6,000 $4,141

$4,022

4,000

$3,903 $3,104 $2,192

$3,030

$1,715 $1,421

2,000

$3,501 $1,630 $1,861

$1,271

$524

$58

$1,051 $50

$44

0 North America Q2 2014

Europe Q3 2014

Q4 2014

Q1 2015

Asia Q2 2015

RoW

Figure 8: Q2 2015 regional analysis - Number of listings

25 20

20 13

15 9

10 5

18

16

15

14

12 8

4 2

5

4

5

1

1

3

1

0

0

0 North America

Europe Q2 2014

Q3 2014

Asia Q4 2014

Q1 2015

RoW

Q2 2015

Figures 7 and 8 source: S&P Capital IQ with analysis by PwC


11

The US recorded a strong second quarter with 11 IPOs and proceeds of US$2.8 billion, on the heels of a lackluster first quarter impacted by market volatility and high private valuations. The second quarter saw the highest number of technology IPOs in the last three quarters, with only a year ago reporting a higher number of IPOs (14) and proceeds raised (US$4.04 billion). Despite this increase, the total number of deals and proceeds in the first half of 2015 was significantly down from the first half of last year due in large part to late-stage financing options now available. Many technology companies are increasingly choosing to delay their IPOs and instead raise money via private equity to avoid stringent postIPO required compliance and financial reporting regulations or to allow for more freedom in running the business. Furthermore, with private capital competing for the most sought after private companies, the dearth of billion dollar IPOs is likely to continue.

Figure 9: US technology IPO trends US$ millions 4,500

16

14

4,000

14

$4,048 3,500

11

3,000

9

12 10

2,500

$2,765

8

2,000 1,500

$1,715

1,000

6

4

4

2 $1,421

500

Number of IPOs

United States

2

$524

0

0 Q2 2014

Q3 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs


“US technology IPOs rebounded in the second quarter after a slow start to the year. While the active venture capital market and a strong private company environment have contributed to a slight reduction in pace over last year, we continue to see a significant level of demand in the investment community for tech IPOs. That paired with a number of strong candidates in the pipeline bodes well for sustained activity through the end of the year.” – Alan Jones Deals Partner, PwC US


12

In Q2 2015 China had 14 IPOs with US$1.0 billion in proceeds. In terms of number of IPOs, this represents a 75% growth sequentially, but proceeds are flat. Year over year, the number of IPOs increased by one, but the amount raised decreased by 73% from US$3.7 billion to US$1.0 billion. Of the 14 Chinese technology companies that went public, only two listed outside of China. In the past year we have seen more listings on China's Shenzhen exchange, where previously it was known for smaller offerings. A more streamlined and transparent listing procedure for IPOs has made domestic exchanges a more attractive option. Due to the recent capital market challenges in China the Chinese government has moved to halt new company listings on its stock markets for six months or more. This move provides an opportunity for private equity firms, hedge funds and sovereign wealth funds to fill private companies' funding needs, and potentially may also pave the way for more M&A activity.

Figure 10: Chinese technology IPO trends US$ millions 25,000

14 13

$22,968 11

20,000

15

12

10 8

15,000

9

10,000

5,000

6

Number of IPOs

China

3

$3,673 $1,435

$1,055

$1,002

Q4 2014

Q1 2015

Q2 2015

0

0 Q2 2014

Q3 2014


Number of IPOs


“With the ramp up of China’s stock market for the first half of 2015 and the increase in domestic IPOs, tech IPOs built momentum to reach a new high in Q2 2015. However, tech listings on domestic exchanges are anticipated to slow down in the second half of 2015 given the temporary IPO freeze by the Chinese regulatory body to cope with the recent significant capital market fluctuation. In the long run, we still anticipate significant growth of tech listings on domestic exchanges as a result of the introduction of the new board of Strategic Emerging Market for the Shanghai Stock Exchange ("SSE") and the new registration-based system.” – Jianbin Gao, Technology Industry Leader, PwC China


13

Europe

Germany led the way with two IPOs (US$579 million) followed by the UK (US$554 million), Sweden (US$59 million) and Poland (US$79 million) with one IPO each. The Sophos Group from the UK was the largest European IPO with US$554 million of proceeds, followed by Siltronics AG from Germany with proceeds of US$374 million. The European region raised the second most IPO proceeds this quarter, but like other markets, total proceeds dropped significantly from last quarter. Increasing speculation and risk regarding Greece’s capacity to repay its debt obligations and its ability to remain in the Eurozone led to volatile equity markets throughout the region during the second quarter.

Figure 11: European technology IPO trends US$ millions 4,500

8

4,000

8 $4,022

3,500 3,000

6 5

2,500 4 2,000

$3,014

1,500

5

4

$2,192 $1,271

1,000

1

Number of IPOs

This quarter, Europe maintained its level of activity with five technology IPOs, but raised just US$1.3 billion in proceeds. In terms of proceeds, it was a 58% drop sequentially and a 68% drop year over year.

2

500 $59

0 Q2 2014

0

Q3 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs


“The healthy and lively German tech start-up ecosystem, which has further gained momentum and strength, is positioned as one of the two leading tech start-up hubs in Europe. It attracts a strong and growing interest from local and foreign investors, especially the Americans. The opportunities for tech companies in Germany have opened up.” -- Werner Balhause Technology Industry Leader, PwC Germany "The IPO of Sophos has shown that the UK listed market can be the chosen market for strong, robust technology companies. There are a number of other strong candidates which we hope to see in the weeks and months ahead." – Jass Sarai Technology Industry Leader, PwC UK Global Technology IPO Review – Q2 2015

14

All other geographies had six IPOs with US$1.1 billion raised. This was a 96% increase in proceeds versus Q1 2015, but the number of IPOs remained at six. Technology IPO proceeds increased by 249% year over year, from US$322 million to US$1.1 billion. In the last five quarters, only Q4 2014 had higher proceeds (US$2.1 billion) , led by Samsung SDS Co Ltd, which was a billion-dollar IPO from South Korea. The second quarter witnessed technology IPOs from Australia, Canada, Israel, Taiwan and Japan. The Australian company, MYOB Group Ltd, was the second largest technology IPO during the quarter with proceeds of US$668 million.

Figure 12: Technology IPO trends – all other geographies (excluding the US, China and Europe) US$ millions 4,500

12 10

4,000

10 3,500 3,000

8 6

2,500

6 6

2,000

$2,111

4

1,500

4 2

1,000

$1,124

500

2

$574

$322

$185

Q2 2014

Q3 2014

0

0


“Following a modest number of Canadian Tech IPOs over the last couple years, two strong IPOs in one quarter is encouraging news. Several Canadian tech companies are well positioned to IPO over the next year which is overdue considering Canada's deep ecosystem of talented and innovative tech leaders. Let's hope this activity is infectious."

Number of IPOs

All other geographies (excluding the US, China and Europe)

Q4 2014

Q1 2015

Q2 2015

Number of IPOs


– Chris Dulny Technology Industry Leader, PwC Canada


15

Stock exchange distribution – Q2 2015

Figure 13: Q2 2015 stock exchange distribution US$ millions 2,500

10

10

$2,224 2,000

8 7

1,500

7

6

1,000

4

Number of IPOs

In terms of proceeds, the NYSE led with US$2.2 billion, representing 36% of total proceeds, followed by NASDAQ with 14%. Sequentially, the proceeds increased by 202% and the number of IPOs also increased by 133% for the NYSE. The rest of the major stock exchanges (NASDAQ, Shenzhen, Shanghai, Hong Kong and London) experienced declines in proceeds quarter over quarter. The number of IPOs increased for NASDAQ, Shenzhen and LSE by 133%, 100% and 100%, respectively. US stock exchanges listed 39% of the total number of technology IPOs, followed by the Chinese exchanges with 33%. Year over year, Shenzhen led the way with 383% growth in proceeds and 900% growth in number of IPOs.

$841 500

2

$614 1 $170

1

$579

$668 1

$68

$79

0 NYSE

NASDAQ Shenzhen Shanghai

SEHK

Frankfurt SE


Number of IPOs

ASX

2

2 1

1 $64

1 $114

1

$595 $87

Warsaw Taiwan SE Toronto SE London SE Tokyo SE SE (Mothers)

1 $59 0 OMX Nordic Exchange (OM)



16

Table 2: Q2 2015 IPOs by region – North America (NASDAQ, NYSE)* Issue date

Company

Subsector


Primary exchange

Domicile nation

6/30/2015

Teladoc Inc


180

NYSE

United States

6/25/2015

Alarm.com Holdings Inc


113

NASDAQ

United States

6/25/2015

AppFolio Inc


86

NASDAQ

United States

6/25/2015

Xactly Corp


65

NYSE

United States

6/18/2015

MINDBODY Inc


100

NASDAQ

United States

6/17/2015

Fitbit Inc


841

NYSE

United States

6/4/2015

Evolent Health

Software

225

NYSE

United States

5/21/2015

Baozun Inc


110

NASDAQ

China

5/21/2015

Press Ganey Holdings Inc

Software

256

NYSE

United States

5/20/2015

Shopify Inc


151

NYSE

Canada

5/19/2015

Black Knight Financial Svcs

Software

507

NYSE

United States

4/23/2015

Apigee Corp


87

NASDAQ

United States

4/16/2015

Etsy Inc


306

NASDAQ

United States

4/8/2015

Wowo Ltd


40

NASDAQ

China

*IPOs have been classified based on the exchange where capital was raised. Source: S&P Capital IQ with analysis by PwC


17

Table 3: Q2 2015 IPOs by region – Asia including Australia (Shanghai, Shenzhen, Tokyo Stock Exchange, Taiwan Stock Exchange, Hong Kong Stock Exchange, Australian Stock Exchange)* Issue date

Company

Subsector

Proceeds Primary exchange (in US$ millions)

Domicile nation

6/16/2015

Beijing Transtrue Technology

IT Consulting & Services

42

Shenzhen Stock Exchange (SZSE)

China

6/15/2015

Vital Mobile Holdings Limited


68

Stock Exchange of Hong Kong (SEHK) China

6/5/2015

General Interface Solutions


64

Taiwan Stock Exchange

Taiwan

6/1/2015

Shenzhen Soling Industrial Co

Electronics

57


China

5/29/2015

Victory Giant Tech(Huizhou)


95


China

5/29/2014

Navtech Inc (China)

Electronics

48


China

5/18/2015

Global Infotech


62


China

5/15/2015

Sichuan Xun You Network Technology Co Ltd Software

55


China

5/14/2015

Shenzhen Forms Syntron Info

Software

77


China

5/4/2015

MYOB Group Ltd

Software

668

Australian Securities Exchange (ASX) Australia

5/4/2015

All Winner

Semiconductors

83


China

4/30/2015

GuangDong Failong Crystal Tech

Semiconductors

44


China

4/25/2014

Beijing Hanbang Technology Corp

Electronics

51


China

4/19/2012

Hunan Aihua Group Co Ltd

Electronics

170

Shanghai Stock Exchange (SHSE)

China

4/17/2015

Gunosy Inc


87

Tokyo Stock Exchange Mothers

Japan



18

Table 4: Q2 2015 IPOs by region– Europe (London, Frankfurt SE, Warsaw SE, Nordic Exchange Stockholm) Issue date

Company

Subsector


Primary exchange

Domicile nation

6/26/2015

Sophos Group Plc


554

London SE

United Kingdom

6/10/2015

Siltronic AG

Semiconductors

374

Frankfurt SE

Germany

6/5/2015

Adgorithms LTD


41

London SE AIM Market

Israel

4/28/2015

Wirtualna Polska Holding SA


79

Warsaw SE

Poland

4/23/2015

windeln.de AG


205

Frankfurt Prime SE

Germany

4/13/2015

Tobii AB (publ)


59

OMX Nordic Exchange Stockholm

Sweden



19

Cross-border technology IPOs – Q2 2015 There were four cross-border offerings (11%) this quarter compared to three offerings (13%) in the last quarter. On a percentage basis, the last three quarters have been fairly consistent with cross-border deals making up between 9% and 13% of total listings. This is in contrast to the second and third quarters of 2014 when cross-border deals made up 28% and 33% of the total technology IPOs, respectively. Only two Chinese companies had cross-border listings this quarter. Israel and Canada had one cross-border IPO each. The largest cross-border deal was Shopify Inc, a Canadian technology company that listed on the New York Stock Exchange and raised US$150.4 billion, considerably less than the value of some of the big-ticket cross-border IPOs seen in 2014. Figure 14: Q2 2015 cross-border IPOs

45

28%

40 29 35

32

31

30

13%

25 20

33%

15

12

10

11%

9%

20

11

5

6

0 Q2 2014 Cross-border IPOs2

Q3 2014

3

3

4

Q4 2014

Q1 2015

Q2 2015

Domestic IPOs



20

Subsector distribution – Q2 2015

Compared to last quarter, Internet Software & Services had a 100% increase in the number of IPOs, but the proceeds dipped by 32%. The Software sector also performed well, with a sequential increase of 200% in terms of number of IPOs and 376% in terms of proceeds. Year over year, Computers & Peripherals had a 400% increase in number of IPOs and a 44% increase in proceeds raised. In the Electronics sector, the number of IPOs increased by 100%, but proceeds dipped by 47% compared to Q2 2014. The Semiconductors subsector had three IPOs with a year-over-year increase in proceeds of 59%, but sequentially proceeds remained flat at US$501 million. IT Consulting & Services had two IPOs with US$103 million of proceeds. The amount raised declined 61% sequentially and 95% year over year.

Figure 15: Q2 2015 IPO subsector distribution US$ millions 2,500

18

$2,317

16 2,000

16

$1,788

14 12

1,500

10 8

6

1,000

5

4

$501 3

$326

0 Internet Software & Services

Software


6 4

2

500

Semiconductors

Electronics

2

$1,126 $103 Computers & Peripherals

Number of IPOs

Consistent with the past few quarters, Internet Software & Services again recorded the most offerings: 16 IPOs and US$2.3 billion in proceeds. It was followed by the Software sector with six IPOs and US$1.8 billion in proceeds. Computers & Peripherals came in third with five IPOs and US$1.1 billion raised.

0


Number of IPOs


Q2 2015 YoY comparison Deal volume

Deal value


20%

55%

Software

45%

42%

Semiconductors

50%

59%

400%

44%

0%

95%

Computers & Peripherals IT Consulting & Services Source: S&P Capital IQ with analysis by PwC


21

Key financials – Q2 20151 Figure 16: Technology IPOs – Net income

78%

57%

Q1 2015

22%

Positive net income

Q2 2015

43%

Positive net income


Out of the 36 IPOs in Q2 2015, financials for one company were not available at the time of preparing this report. Hence, the data in the financial section is based upon results of 35 companies. The said company belonged to the Semiconductors subsector. 1


22

The number of technology IPOs in Q2 2015 increased by 57% quarter over quarter, recording 36 deals compared to 23 in Q1 2015. The Q2 2015 activity, however, recorded a year-over-year decline of 10% from 40 IPOs in Q2 2014.

debt of US$71.7 million. The remaining subsectors (Semiconductors, IT Consulting & Services and Electronics) reported much lower LTM debt levels of below US$25 million. Computers & Peripherals also had the highest average enterprise value (EV) of US$2.3 billion due to the IPO of Fitbit Inc which contributed an EV of US$8.6 billion.

Out of the 36 IPOs in Q2 2015, 57% (20 of the 35 companies) reported a positive LTM net income. This is much lower than the 78% of technology companies with positive LTM net income in the last quarter. Companies in the Internet Software & Services subsector have been the major contributor to the negative net income; 69%, or 11 of the total 16 companies raising IPOs, had negative net income in Q2 2015. In terms of average LTM revenue, the Computers & Peripherals subsector led the way with US$789.5 million, followed by Software with US$263.0 million and IT Consulting & Services with US$135.5 million. In terms of average LTM EBITDA and net income, Computers & Peripherals led the way with US$102.2 million and US$49.8 million, respectively. The Software subsector came in second in terms of average LTM EBITDA, with US$71.4 million. However, it was the lowest in terms of average net income among all subsectors, with an average of negative US$28.7 million. The Internet Software & Services subsector reported average LTM EBITDA of negative US$3.5 million. The remaining three subsectors (Semiconductors, IT Consulting & Services and Electronics) reported LTM EBITDA in the range of US$10 million US$30 million. The average LTM debt levels were the highest for the Software subsector at US$593.4 million, followed by Computers & Peripherals at a distant second with US$111.1 million. The Internet Software & Services subsector had average LTM


23

Figure 17: Q2 2015 Average LTM revenue US$ millions 900

45 $789

36

40

700

35

600

30

500

25

400 300

20

16 $239

200

5

$125

$136

$118

100

2 3

0 All sectors

Computers & Peripherals LTM revenue

Semiconductors


IT Consulting & sServices

4

$263

15

6

10 5

$108 Electronics

Number of IPOs

800

0 Software

Number of IPOs


Figure 18: Q2 2015 Average LTM EBITDA US$ millions 120

36 36 $102 30

80

$71 16

60 40

24 18 12

$27

$23

5

20

$14 3

0 All sectors


-20

LTM EBITDA

Semiconductors

$10 -$3 Internet Software & Services

2 IT Consulting & Services

6

Number of IPOs

100

6 4 0 Electronics

Software -6

Number of IPOs



24

Figure 19: Q2 2015 Average LTM net income US$ millions 36

40

$50

50

30

40 16

30 20

5

10

20 $15

$13 2

0 (10)

6

$8 3

10

4

Number of IPOs

60

0

-$4 -10

(20)

-$29

-$20

(30) All sectors


LTM Net income

Semiconductors


-20 IT Consulting & Services

Electronics

Software

Number of IPOs


Figure 20: Q2 2015 Average total debt US$ millions 700

42 $593

36

36

500

30

400

24 16

300 200

$154

$111

100 5

0 All sectors

Computers & Peripherals LTM Debt

18 12

3

$72 $16

Semiconductors


2 $9 IT Consulting & Services

4 $23

Number of IPOs

600

6 6 0

Electronics

Software

Number of IPOs



25

Figure 21: Q2 2015 Average enterprise value US$ millions 2,500

50

$2,348

2,000

36

1,500

$1,326

40 30

$1,355 $1,163

1,000

$1,102 20

$769

500

5

3

16

4

6

Number of IPOs

$2,152

10

2 0

0 All sectors

Computers & Peripherals Enterprise value

Semiconductors



Electronics

Software

Number of IPOs



26

Technology IPOs valuation metrics – Q2 2015 The average technology sector EV/LTM revenue multiple was 5.5x in Q2 2015, which is significantly higher than 3.7x in the last quarter. The higher valuation was driven predominantly by the Chinese companies Navtech Inc and Sichuan Xun You Network Technology Co Ltd, which had multiples of 45.3x and 52.6x, respectively. Apart from these, two other Chinese companies and one US-based company reported revenue multiples of greater than 21x: Shenzhen Forms Syntron Information Ltd (listed on the Shenzhen exchange) and Wowo Ltd. (listed on NASDAQ) from China and Teladoc Inc. (listed on NYSE) from the US. The Semiconductors subsector had the highest EV/LTM revenue multiple of 10.8x followed by the Electronics subsector with 10.2x. Software had the third highest average EV/LTM revenue multiple of 8.2x. The highest EV/LTM revenue multiple of the quarter was 52.6x, reported by Sichuan Xun You Network Technology Co Ltd in the Software subsector. The Computers & Peripherals subsector, which led in the revenue, EBITDA and net income categories, had the lowest average EV/LTM revenue multiple of 3.0x. The IT Consulting & Services subsector reported the highest EV/EBITDA multiple of 112.9x, followed by Semiconductors at 96.5x. Computers & Peripherals had the lowest EV/EBITDA multiple of 23.0x. Figure 22: Q2 2015 EV/LTM revenue

16.0 x 36

35

12.0 x

10.8 x

10.2 x

10.0 x

8.6 x

8.0 x 6.0 x

28 8.2 x 21

6.5 x 5.5 x

14 16

3.0 x

4.0 x

3

2.0 x

6 2

4

7

5

$All sectors

Computers & Peripherals EV/LTM revenue

Number of IPOs

14.0 x

42

0 Semiconductors


IT Consulting & services

Electronics

Software

Number of IPOs



27

Figure 23: Q2 2015 EV/LTM EBITDA

112.9 x

120.0 x 96.5 x

36

35

80.0 x 60.0 x

28 48.8 x

21

47.7 x

40.0 x 20.0 x

30.2 x

16

23.0 x 3

2

4

All sectors

Computers & Peripherals EV/LTM EBITDA

7 6

5

$-

14

Number of IPOs

100.0 x

42

0 Semiconductors



Electronics

Software

Number of IPOs



28

Top three subsectors – Q2 2015 Internet Software & Services The Internet Software & Services subsector reported 16 IPOs in Q2 2015, a 100% increase from the previous quarter but a 20% year-over-year decline. In terms of average revenue, the subsector has reported successive declines in the last three quarters starting from Q4 2014. The average LTM revenue this quarter was at US$118.0 million, the lowest in the last five quarters as well as a decline of 65% quarter over quarter and 86% year over year. The sector didn’t report any big ticket IPO this quarter. The highest proceeds came from the Sophos Group Plc IPO of US$554.2 million. The average LTM EBITDA was negative US$3.5 million. The subsector also reported an average LTM net loss of US$19.6 million. Average EV was US$769.4 million, which again was the lowest in the last five quarters. In terms of valuation matrix, the subsector reported a marked increase in the average EV/LTM revenue multiple of 6.5x as compared to 3.9x in the previous quarter. The average EV/LTM EBITDA multiple was immaterial as it was negative. Figure 24: Internet Software & Services – LTM revenue US$ millions 2,500

25 20

20 16

1,500

15 10

1,000

8

$866.1

10

6 $469.4

500

$339.2

Number of IPOs

$2,066.3

2,000

5 $118.0

-

0 Q2 2014

Q3 2014 LTM revenue

Q4 2014

Q2 2015

Q2 2015

Number of IPOs



29

Figure 25: Internet Software & Services – LTM EBITDA US$ millions 1,000

30

$896

25 20

600

20 16

400

15 10 8

200

10

6 $34

0

5 -$4

-$7

-$18

Number of IPOs

800

-200

0 Q2 2014

Q3 2014 LTM EBITDA

Q4 2014

Q1 2014

Q2 2015

Number of IPOs


Figure 26: Internet Software & Services – LTM net income 20

20

$828

800

16

700

16

600 10

500 400

12 8

300

8

6

200 100

Number of IPOs

US$ millions 900

4

-$1

0 -100

-$19

-$34 Q2 2014

Q3 2014 LTM net income

Q4 2014

Q1 2014

-$20 Q2 2015

0

Number of IPOs



30

Figure 27: Internet Software & Services – Enterprise value US$ millions 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

25

$44,873

20

15 10 8

10

6

5 $3,457 Q2 2014

Q3 2014

Enterprise value

$2,047

$1,319

Q4 2014

Q1 2015

$769

Number of IPOs

20 16

0

Q2 2015

Number of IPOs


Figure 28: Internet Software & Services – Total debt US$ millions 2,500

25

$2,296

20 16

1,500

15 10 8

1,000

10

6 $420

500

$363

Number of IPOs

20 2,000

5 $72

$38 0

0 Q2 2014

Q3 2014 Total debt

Q4 2014

Q1 2015

Q2 2015

Number of IPOs



31

Figure 29: Internet Software & Services – EV/LTM revenue US$ millions 25.0 x

20

20 16

15.0 x

15 10

8

10.0 x 5.0 x

4.0 x

4.4 x

3.9 x

Q4 2014

Q1 2015

10 6.5 x 5

Number of IPOs

20.0 x

25

21.7 x

6 $-

0 Q2 2014

Q3 2014 EV/LTM revenue

Q2 2015

Number of IPOs


Figure 30: Internet Software & Services – EV/LTM EBITDA

60.0 x

36 50.1 x 30 38.5 x

40.0 x 30.0 x

24

20

18 16 10

20.0 x

12

8

6 10.0 x

Number of IPOs

50.0 x

6

$-

0 Q2 2014

Q3 2014 EV/LTM EBITDA

Q4 2014

Q1 2015

Q2 2015

Number of IPOs



32

Software

The Software subsector marked its comeback in the top three this quarter after a dull Q1. The subsector saw a 200% quarter-over-quarter increase in the number of IPOs in Q2. However, this was still a 45% year-over-year decline from 11 deals in Q2 2014. The Software subsector saw a 43% rise in average revenue compared to the last quarter to US$263.0 million, but declined 53% year over year. Average EBITDA also followed a similar pattern, with a quarter-over-quarter increase of 98% but a year-over-year decrease of 26% at US$71.4 million. The highest deal value in the subsector was US$668.0 million by MYOB Group Ltd, the Australian accounting software company. The subsector featured two Chinese and three US IPOs apart from the above. Average EV also increased by 10% quarter over quarter and was in line with the last five quarters. The EV multiples decreased from Q1 2015 despite the high revenue and EBITDA multiples of 52.6x and 135.3x, respectively, fetched by the Chinese company Sichuan Xun You Network Technology Co Ltd. Figure 31: Software – LTM revenue US$ millions 700

30

$554

500

25

400

20 13

300

15

$263

11 200

$185

6

100

2

Number of IPOs

600

35

$664

10 6

5

$92 0

0 Q2 2014

Q3 2014

LTM revenue

Number of IPOs

Q4 2014

Q1 2015

Q2 2015



33

Figure 32: Software – LTM EBITDA US$ millions 120

16

100 12 80 11 60 40

$64

6

6

8

$36

$96

20

2

$71

Q1 2015

Q2 2015

Number of IPOs

13

4

$9

0

0 Q2 2014

Q3 2014 LTM EBITDA

Q4 2014 Number of IPOs


Figure 33: Software – LTM net income US$ millions 13

40

12 6

20

8 2

10 0

16

$34

$5

6

$10

$0

4 0

-10

-4

-20

-$29

-30

Number of IPOs

30

11

-8 -12

-40

-16 Q2 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs



34

Figure 34: Software – Enterprise value US$ millions 35

$2,352 $2,278

2,300 2,200

30 $2,152

$2,158

2,100

20 13

2,000 1,900 1,800

25

$1,965

15

Number of IPOs

2,400

10

6 11

2

5

6

1,700

0 Q2 2014

Q3 2014 Enterprise value

Q4 2014

Q1 2015

Q2 2015

Number of IPOs


Figure 35: Software – Total debt US$ million 700

$35 $593

500

$30 $25

$374

400 300

$20 $15

11

13

200

$10

6 2

100 $3

$12

0.0

Q3 2014

Q4 2014

Q1 2015

0 Q2 2014 Total debt

6

Number of IPOs

600

$5 $0

Q2 2015

Number of IPOs



35

Figure 36: Software – EV/LTM revenue 30.00x

30

25.00x

25

20.00x

20

15.00x

15 13 11

10.00x 5.00x

10.6 x 8.2 x

3.9 x

3.4 x 6

6

2

0.00x

10

Number of IPOs

25.5 x

5 0

Q2 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs


Figure 37: Software – EV/LTM EBITDA

300.00x

30

250.00x

25

200.00x

20

150.00x

13

100.00x 50.00x

15

11 6

54.5 x 35.8 x

22.5 x

6

2

30.2 x

Q1 2015

Q2 2015

0.00x

10

Number of IPOs

258.0 x

5 0

Q2 2014


Q4 2014 Number of IPOs



36

The subsector maintained its third position in terms of number of deals in Q2 2015. For the second straight quarter, this subsector recorded the highest average revenue of US$789.5 million among all subsectors. It was, however, a decrease of 29% quarter over quarter.

Figure 38: Computers & Peripherals – LTM revenue US$ millions 1200

6 $1,109

1000

5 $790

800

5 4

4

Average EBITDA and net income displayed a similar pattern with quarter-over-quarter declines of 41% and 39%, respectively.

600

The subsector featured the largest deal of the quarter, which lacked any big ticket IPO deals in the overall technology sector. The Fitbit Inc IPO earned proceeds of US$841.2 million at decent revenue and EBITDA multiples of 8.8x and 35.5x, respectively.

200

3

400

2 1

Number of IPOs


1 $0

0

0 Q2 2014

$46

$0

Q3 2014

Q4 2014

LTM revenue

0

0 Q1 2014

Q2 2015

Number of IPOs



37

Figure 39: Computers & Peripherals – LTM EBITDA US$ millions 200

5

5

$172

180

4 4

140 120

3

$102

100 80

2 1

60 40

Number of IPOs

160

1 0

$17

Q2 2014

Q3 2014

20

0

0

0

LTM EBITDA

Q4 2014

Q1 2015

Q2 2015

Number of IPOs


Figure 40: Computers & Peripherals – LTM net income US$ millions 100

5

5

$82.50 4 4 60

$50.00

40

3 2

20

1

1 0

$11.30

Number of IPOs

80

0

0

0 Q2 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs



38

Figure 41: Computers & Peripherals – Enterprise value US$ millions 5,000

5

5

4 4

3,000

$3,828.28

3 $2,348.08

2,000

2 1

1,000

Number of IPOs

4,000

1 0

0

$554.20

0 Q2 2014

0

Q3 2014 Enterprise value

Q4 2014

Q1 2015

Q2 2015

Number of IPOs


Figure 42: Computers & Peripherals – Total debt US$ millions $433.38

400

5

5 4

4

300

3

200

2 $111.08

1 100

1 0

$2.40

0

Q2 2014

Q3 2014

Q4 2014

0

Number of IPOs

500

0

Total debt

Q1 2015

Q2 2015

Number of IPOs



39

Figure 43: Computers & Peripherals – EV/LTM revenue 7

12.0 x

12.00x

6

5

10.00x

5

4

8.00x

4

6.00x

3 3.5 x

4.00x 2.00x

1

3.0 x

1

0

0

2

Number of IPOs

14.00x

0.00x

0 Q2 2014


Q4 2014

Q1 2015

Q2 2015

Number of IPOs


Figure 44: Computers & Peripherals– EV/LTM EBITDA

35.00x

7

32.4 x

6

25.00x

22.2 x

5

5

20.00x

4

23.0 x

4

15.00x

3

10.00x

2

5.00x

1

1

0

0.00x Q2 2014


Number of IPOs

30.00x

0 Q4 2014

0 Q1 2015

Q2 2015

Number of IPOs



40

Methodology The Global Technology IPO Review for Q2 2015 is based on PwC’s analysis of transaction data extracted from S&P Capital IQ. The analysis considers IPOs across all countries worldwide during the period 1 April 2015 to 30 June 2015 (Q2). Financial data was also obtained from S&P Capital IQ. The definition of the Technology sector is based on the S&P Capital IQ database industry classifications and includes the following subsectors: 







Professional Services (e.g., Application Software, Software Solutions)



Semiconductors



Software



Computers & Peripherals – –

Computers, Computers Peripheral Equipment Computers, Storage Device Manufacturing



Electronic Computers Manufacturing



Communications Equipment

Only IPOs with issue size greater than US$40million were included in the analysis. All monetary amounts are in US dollars unless otherwise indicated. LTM – Last twelve months Figures are rounded to one decimal.


41

For more information If you would like to discuss how these findings might impact your business or your future strategy, please reach out to any of our technology industry leaders listed below. Raman Chitkara Global Technology Leader Phone: 1 408 817 3746 Email: [email protected] Rod Dring – Australia Phone: 61 2 8266 7865 Email: [email protected] Estela Vieira – Brazil Phone: 55 1 3674 3802 Email: [email protected] Christopher Dulny – Canada Phone: 1 416 869 2355 Email: [email protected] Jianbin Gao – China Phone: 86 21 2323 3362 Email: [email protected] Pierre Marty – France Phone: 33 1 5657 58 15 Email: [email protected] Werner Ballhaus – Germany Phone: 49 211 981 5848 Email: [email protected]

Sandeep Ladda – India Phone: 91 22 6689 1444 Email: [email protected] Masahiro Ozaki– Japan Phone: 81 3 5326 9090 Email: [email protected]

Pierre-Alain Sur – US Phone: 1 646 471 6973 Email: [email protected] Alan Jones – US (Deals Partner) Phone: 1 415 498 7398 Email: [email protected]

Hoonsoo Yoon – Korea Phone: 82 2 709 0201 Email: [email protected] Ilja Linnemeijer – The Netherlands Phone: 31 88 792 4956 Email: [email protected] Yury Pukha – Russia Phone: 7 495 223 5177 Email: [email protected] Mark Jansen – Singapore Phone: 65 6236 7388 Email: [email protected] Philip Shepherd – UAE Phone: 97 1 43043501 Email: [email protected] Jass Sarai – UK Phone: 44 0 1895 52 2206 Email: [email protected]


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About PwC’s Technology Institute The Technology Institute is PwC’s global research network that studies the business of technology and the technology of business with the purpose of creating thought leadership that offers both fact-based analysis and experience-based perspectives. Technology Institute insights and viewpoints originate from active collaboration between our professionals across the globe and their first-hand experiences working in and with the technology industry.

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