PayPal has confirmed it is acquiring iZettle, a Stockholm-based point-of-sale payments startup for $2.2 billion. The all-cash deal is expected to close in 3Q’18 and comes just days after iZettle filed for an IPO, intending to raise $227 million for a valuation of around $1.1 billion. CEO Jacob de Geer will stay on to lead iZettle.
Elsewhere in SaaS financial news, Pluralsight began trading on the Nasdaq yesterday morning. The online learning company opened its first trading day at $20 per share, 33% higher than the $15 PPS it set in its initial public offering, and closed the day at the same price. Having raised $310 million ahead of its market debut, Pluralsight earned an implied valuation of c.$1.97 billion despite 1Q’18 loss margins widening year-over-year. The Utah-based tech company stands to earn a total of $357.1 million if the underwriters exercise all purchase options granted on the additional 3.1 million shares available. JP Morgan and Morgan Stanley acted as lead advisors on the deal.
In e-commerce news, Walmart recently shared Q1 earnings showing that they surpassed expectations for its fiscal Q1. Following a disappointing end to 2017, Walmart’s e-commerce US sales grew 33% this past quarter, likely indicating that recent investments in online grocery sales have proven successful. International net sales also grew 11.7% in the last quarter, for a total volume of $30.3 billion, as Walmart increases its activity in the Indian market.
Digital marketing news saw the Interactive Advertising Bureau (IAB) release its 2017 year-end report on the state of the digital advertising industry. Digital advertising revenue rose 21.4% for a total spend of $88 billion in 2017, demonstrating growth across formats and devices. Among the most prominent of the growing formats are video search and mobile, as CPMs for in-stream video were up 3% year-over-year, and mobile’s share grew across all formats for a CAGR of 71.4% since 2010. Alongside the growth in mobile, desktop revenue hit a CAGR of 6% over 2016-17.
In SaaS App news, Google has announced YouTube Music, its most direct competitor to the recently-IPOd Spotify. Coming in both mobile and desktop App formats, the music streaming service will follow the same pricing structure as Spotify: free with ads or $9.99 per month. Additionally, the service’s USP does not fall far from Spotify’s, as central to the platform will be music discovery and diversity of playlists.
New in App business listings this week we have a $968K B2B mobile payment integration, with continuous revenue growth reaching a CAGR of 100% for the 2016 to (e)2018 period through strong margins, first-mover advantage, hundreds of 5-star reviews, c.8,400 monthly active users, c.72,000 lifetime downloads and low owner involvement. If you are interested in this business, follow the link to request a prospectus.
Thanks to everyone who attended LTV Conf in London last week. We had a great time sharing ideas about scaling SaaS business and networking with many fellow SaaS founders, operators and investor. Photos from the conference are up on the LTV Conf Facebook page, so please tag yourself and share!
Next week, Founder Thomas Smale will be attending Business of Software Europe in London from May 21-22, where FE is also a lead sponsor. After this, Thomas will be heading to SaaStock Helsinki on May 23. Make sure to respond to this email to set up a meeting if you will be around!
Continue reading below for more on PayPal’s acquisition of iZettle, Pluralsight’s IPO, Walmart’s most recent quarterly earnings and the IAB’s digital advertising report.
Listings
New:
App – B2B Mobile Payment Integration – $31K gross/mo
- Continuous revenue growth reaching a CAGR of 100% for the period 2016 to (e)2018
- Multiple first mover advantages with hundreds of five-star reviews in the lucrative mobile point of sale niche
- Wide market acceptance with c.8,400 monthly active users and c.72,000 lifetime downloads
- Low owner involvement with strong margins and plenty of growth opportunities
Yearly net profit: $296,000
Asking price: $968,000
Sold:
Affiliate – Lifestyle – $10.3K gross/mo
E-commerce – Collector Games & Accessories – $24K gross/mo
Display Advertising – Education – $3K gross/mo
Affiliate – Hardware Tools – $2.1K gross/mo
Display Advertising – Public Information – $1.9K gross/mo
Display Advertising – Education – $1.1K gross/mo
Display Advertising – Education – $1K gross/mo
Display Advertising – Education – $1K gross/mo
Display Advertising – Online Tools – $1.2K gross/mo
Display Advertising – Education – $1K gross/mo
Display Advertising – Education – $300 gross/mo
In The News…
PayPal Acquires iZettle
PayPal has confirmed they are acquiring iZettle, a point-of-sale payments startup based in Stockholm.
PayPal’s investment in the payments processor represents its biggest stake in a point-of-sale transaction, small business and non-US market yet. In an effort to combat Square, Stripe and other big players in the online payments space, the $2.2 billion all-cash deal will likely close in 3Q’18. This deal comes shortly after iZettle filed for IPO on the Stockholm market, with plans to raise $227 million on the Nasdaq, though had reportedly been in the works for a few years. This would grant the startup a valuation of c.$1.1 billion. PayPal’s market cap is currently $94 billion, and the company reported in its most recent earnings that they had $7.8 billion in cash, cash equivalents and investments. iZettle co-founder Jacob de Geer will stay on and lead the business, and will report to PayPal COO Bill Ready.
PayPal President and CEO Dan Schulman said of the deal that the two companies are a strategic fit, with complementary offerings and shared values. iZettle’s de Geer noted the positives of “combining our assets and expertise with a global industry leader like PayPal,” like delivering more value to small businesses.
Pluralsight IPOs on the Nasdaq
Pluralsight opened and closed at $20 per share on the public markets yesterday.
With an initial target for pricing per share of $12 to $14, Pluralsight set their per share price to $15 ahead of the IPO yesterday. The online education company raised $310.5 million in its IPO and underwriters had the option to purchase an additional 3.1 million shares to bring it to a total of $357 million. Pluralsight offers software development courses specifically targeted to employees looking to gain new skills, and is one of several Utah tech companies on track to IPO this year. The company was founded in 2004 and was bootstrapped until their first round of funding in 2013 when Insight Venture Partners invested $27.5 million in the firm—and to this day remains the largest shareholder in the company. Pluralsight went on to raise close to $200 million in financing to date.
As a smaller tech company with reliable growth, Pluralsight’s performance will prove to be a test of interest in IPOs for non-giants among public investors.
Walmart Reports Q1 Earnings
Walmart this week announced the first quarter earnings came in above analyst predictions.
Last quarter for the retail yielded disappointing e-commerce results, however this quarter saw US online sales grow by 33 percent. Walmart has reportedly invested heavily in its online grocery service and website redesign, sparking comments that these recent investments have been paying off. CFO Brett Biggs told CNBC, “Online grocery continued to accelerate and [we] had the new Walmart.com site redesign late in the quarter. We also have new brands in e-commerce including the partnership with Lord & Taylor, so there are a lot of different things driving growth there.” Walmart has placed a heavy emphasis on optimizing its stores for online returns, so while competition in the online grocery space increases from Amazon and Kroger, same-store sales grew 2.1%, surpassing analyst estimates. Year over year, earnings for the first quarter of 2018 are down to $2.12 billion (72 cents per share) from $3.04 billion ($1 per share) the year before.
Walmart has focused investment heavily in the US while divesting from opportunities in the UK, Canada and Chile.
IAB Releases 2017 State of Digital Advertising
The IAB this week released their report on the digital advertising market in 2017.
Highlights from the report show that digital video increased its overall share of the advertising pie in 2017 by 33% to $11.9 billion. Search also grew by 17.5% to $40.6 billion, as well as banner, sponsorships and rich media revenues which totaled $27.5 billion in 2017, up 23% from 2016. Mobile continues its gain in market share, as it made up more than 50% of the digital marketing share in 2017 for a grand total of $49.9 billion. While the IAB does not release data regarding specific companies, the top 10 companies took 74% of total revenues in 2017. Brian Wieser of Pivotal Research concluded that Google and Facebook’s share of the market in the US now make up about 74% of total revenues. Social media as a whole reached $22.2 billion in 2017, with Facebook driving the majority of that share.
Google and Facebook are credited with approximately 90% of revenue growth.