Q3 IPO Cycle: Couchbase IPO & Kaltura Relisting

Couchbase and Kaltura IPO Updates

Recent filings have been submitted by both Couchbase and Kaltura. Couchbase has announced its preliminary IPO price range, a development keenly anticipated. Simultaneously, Kaltura’s offering has resumed following a pause, accompanied by updated financial details.

Assessing the Q3 2021 IPO Landscape

These announcements provide valuable insight into the potential strength of the Q3 2021 IPO market. Early predictions indicated that the third quarter would be particularly robust for initial public offerings.

Indeed, the second quarter of the year exceeded expectations, witnessing a higher number of companies going public than many analysts had forecast.

Considering this momentum, a strong performance in Q3 was widely expected.

Couchbase IPO Details

Let's begin with an examination of Couchbase’s filing, a NoSQL provider. We will analyze its initial price range to gauge market interest in new technology IPOs and assess the company’s valuation.

Kaltura’s Resumed Offering

Next, we will revisit the Kaltura story, focusing on its revised pricing and financial results for the second quarter. Kaltura specializes in video-streaming software and related services.

These filings were eagerly awaited, and a direct review of the financial data is now possible.

Therefore, let’s proceed directly to the key figures and analysis.

• Couchbase is a NoSQL database provider.
• Kaltura offers video-streaming solutions.
• Q3 2021 is expected to be a strong IPO period.

Couchbase’s Proposed IPO Pricing

According to its latest S-1/A filing, Couchbase anticipates an initial public offering (IPO) price between $20 and $23 per share. Considering a potential sale of slightly over 8 million shares, the company could generate up to $185.15 million through this public offering.

Following the IPO, Couchbase will have 40,072,801 shares outstanding, excluding 1,050,000 shares designated for potential future release. Calculating Couchbase’s potential IPO valuation is straightforward through simple multiplication.

• Couchbase’s valuation at $20 per share: approximately $802 million.
• Couchbase’s valuation at $23 per share: approximately $922 million.

Including the company’s reserved shares would add $21 million to the lower valuation and $24.2 million to the higher one. Previously, TechCrunch suggested, based on a comparison to the Red Hat-IBM acquisition – given both companies operate within the Open Source Software (OSS) sector – a valuation around $900 million was likely. Our initial assessment proved quite accurate.

However, many analysts favor utilizing diluted share counts when evaluating IPO valuations. Let's proceed with that calculation.

When incorporating the 10,605,478 shares associated with vested options and warrants, Couchbase’s total share count, excluding additional IPO equity, reaches 50,678,279. This results in the following:

• Couchbase’s fully diluted valuation at $20 per share: $1.01 billion.
• Couchbase’s fully diluted valuation at $23 per share: $1.17 billion.

Again, adding $21 million and $24.2 million respectively, accounts for the potential issuance of the reserved shares as part of the IPO.

This valuation process was relatively uncomplicated. Now, let’s consider the proposed prices. As a reminder, Couchbase experienced revenue growth of approximately 21% in its most recent fiscal period, ending April 30, 2021, reaching nearly $28 million. This performance translates to an annual run rate of $111.8 million.

It’s evident that the company is unlikely to command a premium revenue multiple upon listing. Here’s a breakdown of the calculations:

• Simple IPO valuation price range/run rate multiple: 7.2x to 8.2x.
• Fully diluted IPO valuation price range/run rate multiple: 9.0x to 10.5x.

These multiples are acceptable based on historical standards, but somewhat conservative for the current market. The reason for this lies in Couchbase’s growth rates, which are not exceptionally high – and are, in fact, decelerating.

In our assessment, Couchbase is successfully launching its IPO at a price potentially double the private valuation it achieved last May, according to PitchBook data. This is a favorable outcome for a company exhibiting slower growth compared to many recent tech IPOs. We view this as a positive indicator.

Kaltura's Return to the IPO Market

Indeed, Kaltura, a company that initially postponed its initial public offering during a period of market uncertainty between the first and second quarters, is now back on track. TechCrunch has followed Kaltura’s progress for some time and anticipated its eventual public listing.

What changes have occurred? Here’s a summary:

• The initial IPO price expectation, ranging from $14 to $16 per share in late March, has been revised to a range of $9 to $11 per share.
• The planned share sale has been adjusted from 17,400,000 shares (company) and 6,100,000 shares (outsiders) to 15,000,000 shares from the company alone, with no shares offered by insiders.

These figures represent a significant shift. To understand this, let's examine the company’s recently released Q2 financial data.

This data is crucial for understanding the substantial decrease in the proposed IPO price. Kaltura previously highlighted accelerating revenue growth in its S-1 filing.

The key question is: how did the company’s growth perform in the latest quarter, both in terms of revenue and profitability, compared to the same period last year?

• Growth at the lower end of estimates: 39.6%.
• Growth at the higher end of estimates: 45.8%.

Therefore, the company’s growth rate is slightly below that of Q1 2021, but still represents its second-highest growth rate recently. This is a positive outcome! However, the lowered IPO price range remains somewhat unexpected. What factors are at play?

Let’s consider the company’s profitability. Here’s a breakdown of its net loss and adjusted EBITDA:

Marginally smaller net losses and slightly weaker adjusted EBITDA results are not particularly concerning. Are investors reacting negatively to the reported deficits? Given the observed growth rates, this seems unlikely.

According to Renaissance Capital, “at the midpoint of the proposed range, Kaltura’s fully diluted market capitalization would be $1.4 billion.” With a midpoint run rate of $164.4 million, the resulting multiples appear quite modest. We believe this valuation range may be intentionally conservative, allowing Kaltura to potentially increase it and positively reshape the narrative surrounding its public debut.

Withdrawing an IPO is generally unfavorable. Conversely, increasing the IPO price range is a significant achievement. Kaltura can aim for the latter to mitigate the impact of the former by initially setting a cautious price range.

However, if Kaltura ultimately prices its shares within the current range, it would be a puzzling outcome, though still possible. We will continue to monitor the company’s final pricing and currently maintain a neutral outlook on the Kaltura situation pending further information.

Further updates will be provided as they become available.