by Scott Denne
With its recent IPO filing, IT management software vendor PagerDuty lines up to become the first enterprise software company to come to the public markets after an extended drought. A hiccup in the equity markets last autumn followed by the government shutdown effectively closed the door for new tech offerings, but now the pipeline is beginning to fill up after a record 2018.
Last year witnessed 15 enterprise tech offerings (to be clear, the count includes only business technology offerings, not those from consumer tech startups), mostly in the front half of the year (three deals priced in the first quarter and seven in the second). And while this year’s first half isn’t likely to match that, the pace of filings is picking up. To be the first enterprise tech provider to go public this year, PagerDuty will race security vendor Tufin, which filed a week earlier, while Slack announced in early February that it had confidentially filed for a direct listing.
It’s fitting that PagerDuty could be the one to kick off a new round of enterprise IPOs because it’s almost the prototypical Silicon Valley IPO candidate. It’s growing fast and losing money, though not doing either at an unheard-of pace. In its most recently reported quarter, PagerDuty came up just shy of 50% year-over-year growth as it crossed the $100m TTM revenue mark. It posted a $43m loss, though that’s smaller as a share of its overall revenue than in earlier periods.
In the market for on-call management software for IT, PagerDuty is larger than its rivals VictorOps and OpsGenie, which were acquired by Splunk and Atlassian, respectively. (Subscribers to 451 Research’s M&A KnowledgeBase can view our revenue estimates for VictorOps and OpsGenie). But PagerDuty is banking on expanding into larger and more crowded markets, such as IT event intelligence and incident management, as we noted in a November report on the company. Almost all of its revenue today comes from on-call management.
Whether Wall Street ultimately decides to embrace PagerDuty for the potential of its new products or the financial results from its older offerings, the company should have little trouble pushing past the roughly $1.3bn valuation from its series D last summer. To get there, it will need to trade above 12x TTM revenue. That seems doable given Wall Street’s welcoming mood.
As we noted in our analysis of Lyft’s IPO filing , consumer confidence in the stock market sits at a 12-month high. And even though there hasn’t been an enterprise IPO to hit the public markets since SolarWinds issued shares in mid-October, those that went out last year are being generously priced. Smartsheet, for example, trades at nearly 30x revenue and sports a topline that’s about 50% larger than PagerDuty’s, with growth rates just a few percentage points higher.