SaaS is back: HubSpot sets terms for $100 million IPO

HubSpot, which provides a cloud-based marketing platform to over 11,500 customers, announced terms for its IPO on Friday. The Cambridge, MA-based company plans to raise $100 million by offering 5.0 million shares at a price range of $19 to $21. At the midpoint of the proposed range, HubSpot would command a fully diluted market value of $687 million.

Business
The company's automated "inbound" marketing platform supports SEO, blogging, social media, website content management and email. For the the three months ended June 30, 2014, the company had 11,600 customers (up 29% from the 2Q13) each producing  an average subscription revenue of $8,800 (up 6%). Subscription dollar retention rate increased 540 bps to 90%, and its customer acquisition cost increased 2% to $11,800. The company has over 11,500 customers, up  With just $7 million of cash and $8 million of operating losses in the quarter ended June 30, an IPO should provide much-needed working capital for the company.

Primary shareholders
Primary shareholders include General Catalyst Partners, Matrix Partners, Sequoia Capital, co-founder and CTO Dharmesh Shah, Scale Venture Partners, Charles River Ventures and co-founder and CEO Brian Halligan.

Recent financials
Revenue increased 46% to $51 million for the six months ended June 30, 2014 as the company increased the number of customers and subscription revenue per customer. HubSpot's gross profit margin improved over 6 percentage points to 67%. Its loss from operations widened 8% to $18 million as the company ramped up sales and marketing expenses. At the end of June, it had $32 million of deferred revenue, up from $25 million at the end of FY13.

Ad-tech IPOs
Marketing peer Marketo (MKTO) popped 78% on its May 2013 IPO, and trades about 140% above its IPO price. The stock is down 16% year-to-date, but has rallied in the past 90 days. July 2014 ad-tech IPO Tube-Mogul (TUBE) has gained 73% from the offer price, but only after slashing its valuation.

HubSpot, which was founded in 2005 and booked $94 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol HUBS. Morgan Stanley, J.P. Morgan and UBS Investment Bank are the joint bookrunners on the deal. It is expected to price during the week of October 6, 2014.