Unlike the late 90s, it isn’t every day we see a network services provider go public, so I was pleased when a reader pointed me to Wednesday’s updated S-1 filing and a PR from Masergy Communications (news, filings), which suggests the IPO is imminent. Masergy is a company whose name I run into frequently but which I have never known all that much about. That’s largely because it is privately held and smaller than its principal giant competitors, who tend to dominate the news. Masergy serves the large enterprise market with managed network services, leveraging bandwidth leased from wholesale carriers, competing with the likes of Verizon Business, AT&T, BT Global, Tata, and Global Crossing, as well as similarly large system integrators. So let’s take a quick look at Masergy’s numbers, which now include their Q4 results too:
| $ in millions | Q1/10 | Q2/10 | Q3/10 | Q4/10 |
|---|---|---|---|---|
| – Services | 24.8 | 25.6 | 26.8 | 27.9 |
| – USF | 0.9 | -4.8 | 1.0 | 0.9 |
| Total Revenue | 25.7 | 20.7 | 27.8 | 28.7 |
| COS | 14.1 | 8.7 | 14.8 | 15.1 |
| SG&A | 8.0 | 8.2 | 8.4 | 8.8 |
| Adj. EBITDA | 3.7 | 3.9 | 4.6 | 4.9 |
| Net Income (ex one time items) | 2.0 | 2.2 | 2.7 | 3.0 |
In addition to being profitable and growing at about a 14% annual clip, they have no long term debt – very tightly managed. While events will determine the details when the time comes, the S-1 puts forth the sale of 7.7M shares (half being those held by current owners) at $12-14, which would raise something like $100M, of which half would go into the company treasury. Their current owners would still hold 40-something percent of the company, depending on how many shares actually get sold.
They don’t need the cash for their current operations and could probably access the credit markets easily enough if they wanted, so this filing to go public is clearly opportunistic. Well, their current backer may simply want to monetize the investment, but it may also be true that Masergy wishes to expand the scope of its operations and its public profile at the same time. Their use for the cash might be inorganic or organic, however either way I think it will have to do with the expansion of the company’s cloud offerings.
The reader who poked me on their S-1 filing asked if I thought they were acquiring or looking to be acquired. I think they’re probably simply expanding their list of options at this stage. The market they play in seems poised to evolve rapidly, so it pays to be prepared.
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Categories: Financials
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I’ve been following since the last time they almost went. Interesting company with leased assets and an exec team who can’t deliver on what The Board wants to happen. I see them possibly being purchased.
http://www.sec.gov/Archives/edgar/data/1127579/000119312511039223/drw.htm
At this time, due to the current pricing environment for initial public offerings, the Company has determined not to proceed with the proposed offering. The Registration Statement was not declared effective and no securities were sold in connection with the proposed offering.