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Global Technology IPO Review Q2 2016

Technology Institute

A quarterly look at global trends In the technology IPO market

August 2016

Global Technology IPO Review – Q1 2016 2

After a dismal start, increased technology IPOs in the second quarter point to an improved second half of 2016*

Raman Chitkara Partner and Global Technology Industry Leader PricewaterhouseCoopers LLP [email protected]

*Issue size greater than US$40 million (includes overallotment) and based on trade date; See Methodology

Welcome to the second quarter 2016 issue of PwC’s Global Technology IPO Review. The global technology IPO market showed a few signs of improvement in the second quarter, after hitting its lowest point in recent years in the first quarter. The second quarter performed better than Q1, but worse than historical trends.

In the second quarter 2016, there were 14 technology IPO listings, a 40% increase over the 10 listings in the first quarter, which was the weakest quarter since the fourth quarter of 2012 when just eight technology companies went public. Compared to historical averages, the second quarter was also weak, garnering cumulative proceeds of US$1.48 billion. From the first quarter of 2010 to the second quarter of 2016, only three quarters have had less proceeds than the second quarter of 2016.

Geographically, Asia-Pacific led with seven technology IPOs (five in China and one each in Australia and South Korea), on par with the previous quarter. The US made a comeback with five IPOs, up from none in Q1. Amidst the Brexit turmoil, Europe reported two IPOs, one each from Sweden and Spain, compared to three in the first quarter.

Uncertainty over the outcome of the Brexit referendum through a significant part of the quarter, followed by uncertainty about the impact of the “Leave” decision, unfavorably impacted the IPO market. This was most evident in the UK, where there were no technology IPOs in the second quarter, as was the case in the first quarter as well.

The Software and Internet Software & Services subsectors led in number of IPOs in the second quarter. The disruptive technologies, lower capex and quick scalability of these two sectors continue to attract investors’ interest.

To sum it up, technology IPO numbers and proceeds were relatively lower than average in this quarter, but the improvement over the first quarter raises hope for a better market in the second half.

Sincerely,


Table of contents

1. Q2 2016 global summary 4 US, China gain traction .............................................................................................................................................. 6 UK referendum dampens IPO market ........................................................................................................................ 8 First-half 2016 proceeds were lowest since 2012, but tech IPOs are expected to pick up in the second half .......... 9 Most IPOs came from mature companies ................................................................................................................. 10

2. Geographic IPO trends – Q2 2016 11 United States ............................................................................................................................................................... 13 China ........................................................................................................................................................................... 14 The rest of Asia ........................................................................................................................................................... 15 South Korea ................................................................................................................................................................ 16 Europe ......................................................................................................................................................................... 17

3. Stock exchange distribution – Q2 2016 18 4. Subsector distribution – Q2 2016 19 5. Q2 2016 top 10 technology listings 22 6. Proceeds raised by the largest tech IPOs in the last five quarters 23 7. Cross-border listings – Q2 2016 24 8. Key financials – Q2 2016 25 9. Q2 2016 technology IPO listings – Valuation metrics 29 10. Top three subsectors in Q2 2016 31

Software ...................................................................................................................................................................... 31 Internet Software & Services ..................................................................................................................................... 35 Electronics ................................................................................................................................................................. 39

11. Methodology 43 12. For more information 44


Q2 2016 global summary

Tech IPO market shows signs of improvement despite the adverse impact of Brexit referendum The global technology IPO market began to look up in Q2 2016. The second quarter posted 40% sequential growth from 10 IPOs in Q1 to 14 IPOs, and a 92% increase in total proceeds from US$769 million in Q1 to US$1.48 billion. Year over year, Q2 2016 still saw a 61% decline from 36 IPOs and a 76% decline in total proceeds from US$6.16 billion in Q2 2015.

In light of the market performance in the first quarter—the worst since Q4 2012—and the Brexit referendum that adversely impacted the European and UK markets, the return of US tech IPOs and steady activity in Asia suggest a stronger second half ahead.

Several policy-level decisions and macro-economic factors have generated mixed reaction from investors. The second quarter was well below normal levels of IPO activity in prior years. Uncertainty created by the June 23rd British referendum on its continuing membership in the EU dampened market sentiments in the UK and other EU countries. Also, there was volatility in the US capital markets associated with concerns over a potential US interest rate hike, which kept many US tech companies on the fence.

Unicorns* continued to shy away from the IPO market. Start-ups with negative cash flows and over-the-top valuations always struggle to complete IPOs in tough market conditions and that was the case during the second quarter as well.

*Startups with valuations of US$1 billion or more

Figure 1: Q2 2015-Q2 2016 global technology IPO trends

Source: S&P Capital IQ, PwC analysis

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No. of IPOsUS$ millions

Total proceeds (US$mn) Number of IPOs

“The US displayed resilience. With capital markets largely stabilizing, technology IPOs have started to come back, though valuations remain challenged. We expect the tech IPO market to gain more traction in the second half of 2016.”

~Raman Chitkara Global Technology Industry Leader


Compared to the second quarters of the last five years, Q2 2016 generated the lowest total proceeds, at US$1.48 billion. And there were no big-ticket IPOs. The average proceeds of US$106 million was also the lowest. Captivity Holdings Inc issued the largest IPO this quarter with proceeds of US$237.5 million.

Figure 2: Q2 global technology IPO trends, 2012-2016


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Total proceeds (US$mn) Average proceeds Number of IPOs


US, China gain traction

First-time technology issuers returned to the US stock exchanges after a complete absence in Q1 2016, the worst quarter since 2009. In Q2, the US had five IPOs with proceeds of US$694 million. Year on year, however, it is a 55% drop in number of IPOs, from 11 a year earlier, and a 75% decrease in proceeds, from US$2.77 billion. Improved oil prices, low benchmark interest rates, and decreased volatility in equities for a major part of the quarter drove the market.

Uncertainty continues in the IPO market primarily due to Brexit and the upcoming US presidential election. Many tech companies have deferred IPO plans to the second half of the year and investors have taken a wait-and-watch policy.

Figure 3: US technology IPOs since Q2 2014


$4,048

$524

$1,715

$1,421

$2,765

$103

$4,041

$694

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Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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US total proceeds (US$mn) US total number of IPOs

“Despite lingering uncertainty, the US showed a slight uptick in IPO activity following a slow first quarter. While we expect continued momentum in 2016, potential new issuers looking to capitalize on improving IPO market conditions will be carefully monitoring the outcome of the US presidential election, the Fed’s decision on interest rates and potential market moving IPOs.”

–Alan Jones Technology Deals Partner, PwC US


China also experienced a comeback of sorts from a disappointing Q1 2016. It issued five IPOs in Q2, up from three in Q1, a 67% increase. Q2 proceeds amounted to US$368 million, compared to US$267 million in Q1, a 38% increase. Proceeds were still far below their historical average. Year over year, the number of IPOs declined 64%, from 14, and the proceeds declined 63%, from US$1 billion.

Big-ticket IPO plans were pushed to the second half of the year, as issuers sought to weather the impact of Brexit and the slowdown in growth rate in China. The Chinese Regulatory authority also delayed the implementation of the new IPO registration process. CSRC slowed the approval for new share sales in an effort to boost investor confidence. As a result, a large number of IPO applications were pending at the beginning of June.

Figure 4: China technology IPOs since Q2 2014


$3,673

$22,968

$1,435 $1,055 $1,002 $1,467 $551 $267 $368

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Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

5,000

10,000

15,000

20,000


China total proceeds (US$mn) China total number of IPOs

“Regulators held back listings in China, delaying registration clearances to control the rhythm of listings in order to maintain the stability of the capital market. Despite this, we had five technology IPOs in the second quarter.”

–Jianbin Gao Technology Industry Leader, PwC China


UK referendum dampens IPO market

Similar to the previous quarter, Q2 2016 did not have a single technology IPO of a UK-domiciled company. The last time UK technology companies issued IPOs was in Q4 2015, with five issuances raising US$4.77 billion. Companies and investors do not yet understand the impact of the “Leave EU” referendum. As a result, many companies postponed or canceled their IPO plans until greater clarity is reached.

The referendum in favor of exit from the EU further weakened the UK equity market and led to increased volatility. There has also been a significant depreciation in the British Pound. The UK tech IPO market will likely remain subdued for the rest of the year. However, a devalued British Pound may attract outside investors to UK-based tech companies.

Figure 5: Q2 2015-Q2 2016 UK technology IPOs


$554 $130

$4,768

1

2

5

0

1

2

3

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Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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2,000

3,000

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5,000

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First-half 2016 proceeds were lowest since 2012, but tech IPOs are expected to pick up in the second half

The mid-year tech IPO proceeds for 2016 are the lowest since the second half of 2012. In 1H 2016, 24 tech IPOs were issued, marginally higher than the 19 issued in 2H 2012, the previous low. But 1H 2016 saw slightly less total proceeds, US$2.25 billion to US$2.34 billion in 2H 2012. The same factors that led to the lackluster performance in Q2 impacted the entire first half of 2016:

Brexit; Slowdown in the Chinese economy; Volatility in oil prices; and Uncertainty over Fed rates.

Fear of listing at lower than pre-IPO valuations persisted, but companies with low valuations took the plunge to raise funds. Highly valued tech startups postponed IPOs until there is greater clarity on the impact of the UK’s exit from the EU, and other factors contributing to market uncertainty.

But post-Brexit, markets have shown resilience. The big tech start-ups may finally enter the IPO market. Early signs for the second half could be seen in a few listings from late Q2 and early Q3 2016. Twilio, a communications software start-up, had a listing with high demand. Line, the Japanese messaging app company, demonstrated strength in its early July IPO, helping to sustain momentum from June toward a stronger second half.

Figure 6: Global technology IPOs by half year, 2010-2016


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$8,710 $7,147

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Most IPOs came from mature companies

The trend of investors preferring mature companies while investing in technology IPOs has continued in Q2 2016. Relatively mature technology companies, with an average 16 years in operation, issued IPOs. In the second quarter, there was no IPO from a company less than five years old. This indicates a shift away from the trend of highly funded young start-ups getting listed at astronomical valuations.

Most countries had an average of more than 15 years of operations for technology IPOs listed from their domiciles. China is the only country where the companies listed were less—an average 12 years in operation. Though we expect US tech IPOs to continue to be much younger in terms of years of operation, in this quarter it was 15 years. South Korea had the high of 32 years, followed by Australia with 22 years. Spain and Sweden had one company each with 17 years in operation.

Figure 7: Q2 2016 technology IPOs – Domicile based average years in operation


Figure 8: Q2 2016 technology IPOs – Number of years in operation


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Geographic IPO trends – Q2 2016

In Q2 2016, the geographic distribution of technology IPO activity shifted back to the US and China, with five IPOs each, raising total proceeds of US$694 million and US$368 million, respectively. Other than the US and China, four countries—Australia, Sweden, Spain and South Korea—had one IPO each. Asia topped with seven tech IPOs, followed by North America with five and Europe with two.

Figure 9: Geographic distribution of technology IPOs


Figure 10: Regional analysis of IPO proceeds


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Figure 11: Regional analysis of number of IPOs


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United States

After no tech IPOs in the US in Q1 2016, Q2’s five tech IPOs and total proceeds of US$694 million were certainly an improvement. But year over year, it was significantly lower than the 11 IPOs and total proceeds of US$2.77 billion in Q2 2015. The good news is, there is still demand for properly priced IPOs from growth-oriented tech companies. In Q2, for example, all US IPOs were small ticket with proceeds of less than US$250 million. This indicates investor interest. However, billion-dollar plus IPOs were missing as the enthusiasm was low.

Figure 12: US technology IPO trends


$2,765

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$694

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Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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China

China had five tech IPOs in Q2 2016, raising US$368 million—a 38% increase in proceeds sequentially and 67% growth in number of IPOs. Year over year, the proceeds declined by 63% and number of IPOs by 64%. The longer-than-expected wait for the IPO registration process is impacting the China IPO market. Unable to raise funds for capital requirements, technology companies are not deferring or shelving IPOs for markets to improve once cleared, but going ahead with the offering.

Figure 13: Chinese technology IPO trends


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Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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The rest of Asia

The rest of Asia had two IPOs, one each from South Korea and Australia, contributing 11% to the total proceeds this quarter. As a result of the two IPOs, Asia as a region led in number of IPOs (seven) compared to North America (five). Still, the Asian regional proceeds were lower compared to the last few quarters. Sequentially, proceeds declined by 32% and the number of IPOs declined by 50%. Year over year, there was a 71% decline in proceeds and 67% decline in number of listings.

Figure 14: The rest of Asia technology IPO trends


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Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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South Korea

South Korea has issued at least one tech IPO in five of the last six quarters, with DOUBLEUGAMES Co Ltd in Q4 2015 being the biggest, with proceeds of US$244 million. South Korea is ranked among the top countries for its research and development capability, productivity, technology density and patent activity. It has transformed into an emerging technology hub, having systematically applied substantial resources to research and development and has become a major player in information and communication technology.1

1 http://www.forbes.com/sites/alanmcglade/2014/02/06/why-south-korea-will-be-the-next-global-hub-for-tech-startups/#f4a2de774d90

Figure 15: South Korea technology IPO trends


$298

$72

$244

$41

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Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

50

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350No. of IPOsUS$ millions


"DOUBLEUGAMES Co Ltd, the largest tech IPO of the last six quarters in South Korea, demonstrates that innovation and entrepreneurship are strong and growing. With three Unicorns and numerous other tech startups, we expect South Korea to continue to contribute to the global technology IPO market." -- Hoonsoo Yoon,

Technology Industry Leader, PwC South Korea


Europe

Europe experienced a 3% sequential decline in proceeds and a 33% drop in number of IPOs in Q2 2016. It was marginally slower than the last quarter due to uncertainty over EU policies following Brexit and the shift in economic momentum post exit. Investors were also uncertain about the overall EU political situation. Performance compared to the year-ago quarter was down 65% in proceeds and 50% in number of IPOs. For the second quarter in a row, there were no UK tech IPOs.

Figure 16: Europe (excluding UK) technology IPO trends


$717

$1,497

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4

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Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 20160

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Stock exchange distribution – Q2 2016

In Q2 2016, IPOs were well distributed, with eight exchanges participating in tech IPOs above the US$40 million threshold:

US exchanges led the way with the NYSE and NASDAQ reporting four and two tech IPOs, respectively, and proceeds of US$216 million and US$544 million, respectively.

China exchanges followed with four IPOs, two each on the Shanghai (SHSE) and Shenzhen (SZSE) exchanges, and proceeds of US$123 million and US$180 million, respectively.

The NYSE captured 37% of total proceeds and 29% of listings.

The European exchanges had 17% of total proceeds and 14% of listings.

NASDAQ had 15% of total proceeds and 14% of listings.

Figure 17: Q2 2016 stock exchange distribution


$180 $123 $126

$185

$41 $65

$216

$544

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SZSE SHSE ASX Spain (BME) KOSE OMX NordicExchange

NASDAQ NYSE0

100

200

300

400

500

600No. of IPOsUS$ millions



Subsector distribution – Q2 2016

In Q2 2016, Software led the subsectors, with six IPOs and US$660 million in proceeds. Internet Software & Services was second, with three IPOs and US$341 million raised. The biggest IPO for the quarter, Cotiviti Holdings Inc, belongs to the Software subsector. These two subsectors cornered 68% of proceeds and 64% of the IPOs. Driven by digital innovation, the ability to scale globally in a short time and less capital requirements than hardware-dependent companies, these sub-sectors have consistently led the tech IPO market for the past several years. Compared to Q2 last year, all subsectors had fewer IPOs. All had less proceeds except IT Consulting & Services, the only subsector with more proceeds in Q2 2016 than in Q2 2015. Q2 2016 performance was better than Q1 for all the subsectors, except for Communications Equipment, which had no IPOs.

Figure 18: Subsector distribution – Q2 2016


$660

$341

$185 $149 $145

6

3

1

2 2

0

1

2

3

4

5

6

Software Internet Software &Services

IT Consulting &Services

Electronics Semiconductors0

100

200

300

400

500

600

700




Table 1: Q2 2016: Tech IPOs by region – Asia, including Australia (Shanghai, Shenzhen, Tokyo Stock Exchange, Hong Kong Stock Exchange and Australia Stock Exchange)*

Issue date Company Subsector Proceeds (in US$ mn)

Primary exchange Domicile nation

04/11/2016 Wisetech Global Limited Internet Software & Services

126 Australian Securities Exchange (ASX)

Australia

06/20/2016 HAESUNG DS Co., Ltd Semiconductors 42 Korea Stock Exchange (KOSE) South Korea

04/24/2016 Nanjing Doron Technology Co., Ltd Software 75 Shanghai Stock Exchange (SHSE)

China

06/22/2016 Wuxi New Hongtai Electrical Technology Co Ltd Electronics 48 Shanghai Stock Exchange (SHSE)

China

06/23/2016 Shenzhen Shengxunda Technology Co., Ltd Software 79 Shenzhen Stock Exchange (SZSE)

China

05/16/2016 Hubei Jiuzhiyang Infrared System Co Ltd Electronics 101 Shenzhen Stock Exchange (SZSE)

China

*IPOs have been classified based on the exchange where capital was raised.


Table 2: Q2 2016 IPOs by region – Europe (Nordic Exchange; BME [Spain])*

05/26/2016 Paradox Interactive AB (publ) Software 65 OMX Nordic Exchange Stockholm (OM)

Sweden

04/26/2016 Global Dominion Access, SA IT Consulting & Services

185 Bolsas y Mercados Espanoles (BME) Spain




Table 3: Q2 2016 IPOs by region – North America (NYSE, NASDAQ)*

Issue date Company Subsector Proceeds (in US$ mns)


04/21/2016 SecureWorks Corp Software 112 NASDAQ Global Select (NASDAQ GS) United States

05/12/2016 Acacia Communications, Inc Semiconductors 104 NASDAQ Global Select (NASDAQ GS) United States

05/25/2016 Cotiviti Holdings, Inc Software 238 New York Stock Exchange (NYSE) United States

06/02/2016 NantHealth LLC Software 91 New York Stock Exchange (NYSE) United States

06/09/2016 China Online Education Group Internet Software & Services 66 New York Stock Exchange (NYSE) China

06/22/2016 Twilio, Inc Internet Software & Services 150 New York Stock Exchange (NYSE) United States




Q2 2016 top 10 technology listings

With proceeds of US$238 million, Cotiviti Holdings, Inc led the top 10 IPO listings for Q2 2016. That was much lower than the historical average, though more than the Q1 2016 top proceed of US$132 million. The Software subsector dominated the top 10 with five of the offerings. Internet Software & Services had two IPOs in the top 10. The US had five of the top 10; China had three, and Australia and Spain had one each.

In aggregate, the top 10 tech IPOs raised US$1.3 billion, which constituted 85% of the total proceeds raised during this quarter. In total, six exchanges participated in the top 10 IPOs, with the NYSE topping the chart.

Table 4: IPO summary – Top 10 listings

Issue date Company Subsector Proceeds (in US$ mns)


05/25/2016 Cotiviti Holdings, Inc Software 238 New York Stock Exchange (NYSE)

United States

04/26/2016 Global Dominion Access, SA

IT Consulting & Services

185 Bolsas y Mercados Espanoles (BME)

Spain

06/22/2016 Twilio, Inc Internet Software & Services

150 New York Stock Exchange (NYSE)

United States

04/11/2016 Wisetech Global Limited Internet Software & Services

126 Australian Securities Exchange (ASX)

Australia

04/21/2016 SecureWorks Corp Software 112 NASDAQ Global Select (NASDAQ GS)

United States

05/12/2016 Acacia Communications, Inc

Semiconductors 104 NASDAQ Global Select (NASDAQ GS)

United States

05/16/2016 Hubei Jiuzhiyang Infrared System Co Ltd

Electronics 101 Shenzhen Stock Exchange (SZSE)

China

06/02/2016 NantHealth LLC Software 91 New York Stock Exchange (NYSE)

United States

06/23/2016 Shenzhen Shengxunda Technology Co., Ltd

Software 79 Shenzhen Stock Exchange (SZSE)

China

04/24/2016 Nanjing Doron Technology Co., Ltd

Software 75 Shanghai Stock Exchange (SHSE)

China



Proceeds raised by the largest tech IPOs in the last five quarters

In the last five quarters, the IPOs with the highest proceeds have had a good geographical spread. The largest IPOs are not coming from one specific country anymore, leading to more globalized technology IPO participation. Though Computers, Com-munications Equipment and Electronics companies require more capital, the innovation from Internet Software & Services and Software companies is garnering more investor interest. Three of the five largest offerings of the past five quarters were from these sectors.

Table 5: Highest proceeds IPOs – Q2 2015-Q2 2016

Quarter Company Sector Proceeds (in US$ mn)

Domicile nation

Q2 2015 Fitbit Inc Computer Storage & Peripheral

841 United States

Q3 2015 Scout24 AG Internet Software & Services 1,497 Germany

Q4 2015 WorldPay Group Plc Internet Software & Services 3,842 UK

Q1 2016 Tongyu Communication Inc Communications Equipment 132 China

Q2 2016 Cotiviti Holding Inc Software 238 United States Source: S&P Capital IQ, PwC analysis

Figure 19: IPOs with the highest proceeds – Q2 2016


$841$1,497

$3,842

$132 $2380

1,500

3,000

4,500

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Total proceeds (US$mn)


Cross-border listings – Q2 2016

Only one company, China Online Education Group, had a cross-border listing in Q2 2016. It is a China-domiciled company listed on the NYSE, in line with historical trends. The previous quarter was an anomaly with no Chinese company listing cross-border. The lack of cross-border deals reflected the lower technology IPO count overall. With all major markets exhibiting caution, most offering companies were skeptical of listing in countries other than their own.

Figure 20: Cross-border listings – Q2 2016

No. of IPOs


4 04

2 1

32

11

18

8 13

0

5

10

15

20

25

30

35

40

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Domestic deals Cross-border deals

11%

0%

18%

20%7%


Key financials – Q2 2016

Financial results are based on 13 of the 14 companies. Financial information was not available for HAESUNG DS Co Ltd. Nine of the 13 companies reported positive net income, but average last twelve months’ (LTM) net loss in Q2 2016 was US$4 million. Acacia Communications, Inc from the Semiconductors subsector reported the highest net income, at US$51 million. NantHealth LLC from the Software subsector reported the highest net loss, at US$91 million. The Internet Software & Services subsector, with three IPOs, reported the lowest average LTM net income for Q2 2016, with China Online Education Group’s net loss of US$56 million and Twilio, Inc’s net loss of US$33 million offsetting Wisetech Global Limited’s net income of US$6 million by a large margin. The IT Consulting & Services subsector reported the highest average LTM revenue of US$583 million in this quarter. However, the subsector listed only one IPO (Global Dominion Access). The Semiconductors subsector reported the highest average LTM EBITDA, at US$57 million, in Q2 2016 based on just one IPO (Acacia Communications, Inc) due to lack of financial information on HAESUNG DS Co. Ltd. The Electronics subsector reported the highest average enterprise value (EV), at US$3,144 million, in Q2 2016. However, of the two IPOs in this subsector, only one, Hubei Jiuzhiyang Infrared System Co Ltd, reported EV.

Figure 21: Q2 2016 tech IPOs – Net income

Source: S&P Capital IQ with analysis by PwC

Note: Financials for HAESUNG DS Co., Ltd were not available so percentages have been calculated on the basis of the other 13 companies.

69%

31%

Q2 2016

Positive net income Negative net income


Figure 22: Q2 2016 – Average LTM revenue


Figure 23: Q2 2016 – Average LTM EBITDA


$58 $96

$583

$276$199 $189

23

12

6

14

0

2

4

6

8

10

12

14

16

$0

$100

$200

$300

$400

$500

$600

$700

$800

Electronics Internet Software &Services

IT Consulting &Services

Semiconductors Software All sectors

No.

of I

POs

LTM revenue No. of IPOs

In U

S$ m

n

$17

-$24

$42$57

$21 $14

2

31

2

6

14

0

2

46

8

10

1214

16

-$60

-$40

-$20$0

$20

$40

$60$80

$100


IT Consulting & Services Semiconductors Software All sectors

No.

of I

POs

LTM EBITDA No. of IPOs

In U

S$ m

n


Figure 24: Q2 2016 – Average LTM net income


Figure 25: Q2 2016 – Average total debt


$14

-$28

$19

$51

-$11-$4

2

31

2

6

14

0

2

4

6

8

10

12

14

16

-$60

-$40

-$20

$0

$20

$40

$60

$80

$100



No.

of I

POs

LTM net income No. of deals

In U

S$ m

n

$12 $8

$173

$3

$178

$99

23

12

6

14

0

2

4

6

8

10

12

14

16

$0

$25

$50

$75

$100

$125

$150

$175

$200



No.

of I

POs

Total debt No. of deals

In U

S$ m

n


Figure 26: Q2 2016 – Average enterprise value


$3,144

$1,526

$502

$1,279$1,627 $1,605

23

1

2

6

14

0

2

4

6

8

10

12

14

16

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000



No.

of I

POs

Enterprise value No. of IPOs

In U

S$ m

n


Q2 2016 technology IPO listings – Valuation metrics

Figure 27: Q2 2016 EV/LTM revenue


The average EV/LTM revenue for listed IPOs in Q2 2016 was 8.5x, up from 2.6x in Q1 2016. The Electronics subsector reported the highest revenue multiple of 54.5x.

54.5x

15.8x0.9x 4.6x

8.2x 8.5x2

3

12

6

14

0

2

4

6

8

10

12

14

16

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

70.0x

80.0x



No.

of I

POs

EV/LTM revenue No. of IPOs

Mul

tiple

s


Figure 28: Q2 2016 EV/LTM EBITDA


Overall, the average EV/EBITDA multiple was 115.8x in Q2 2016 compared to 49.5x in Q2 2015. The Electronics subsector led with the highest average EV/EBITDA multiple of 188.3x.

188.3x

-64.7x

11.9x 22.6x

77.6x

115.8x

2

3 12

6

14

0

2

4

6

8

10

12

14

16

-150.0x

-100.0x

-50.0x

0.0x

50.0x

100.0x

150.0x

200.0x

250.0x



No.

of I

POs

EV/LTM EBITDA No. of deals

Mul

tiple

s


Top three subsectors in Q2 2016

Software Figure 29: Software – LTM revenue


Figure 30: Software – LTM EBITDA


$71

($17)

$31

($11)

$21

6

4 4

2

6

01234567

($40)($20)

$0$20$40$60$80

$100

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n


$263

$64

$223

$21

$199

6

4

4 2

6

0

1

2

3

4

5

6

7

$0

$50

$100

$150

$200

$250

$300

$350

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 31: Software – LTM net income


Figure 32: Software – Enterprise value


($29)

($13)

($4) ($4)

($11)

6

4

4

2

6

0

1

2

3

4

5

6

7

($35)

($30)

($25)

($20)

($15)

($10)

($5)

$0

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n

LTM net income No. of IPOs

$2,152

$351

$2,675

$320

$1,627

6

4 4

2

6

0

1

2

3

4

5

6

7

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 33: Software – Total debt


Figure 34: Software – EV/LTM revenue


$593

$6 $0 $2

$178

6

4 4

2

6

0

1

2

3

4

5

6

7

$0

$100

$200

$300

$400

$500

$600

$700

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n

Total debt No. of IPOs

8.2 x

5.5 x 12.0 x

15.2x

8.2x

6

4 4

2

6

0

1

2

3

4

5

6

7

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

18.0x

21.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s



Figure 35: Software – EV/LTM EBITDA


30.2 x

-21.3x

85.3 x

-29.1x

77.6x

6

4 4

2

6

0

1

2

3

4

5

6

7

-40.0x

-20.0x

0.0x

20.0x

40.0x

60.0x

80.0x

100.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s

EV/LTM EBITDA No. of IPOs


Internet Software & Services Figure 36: Internet Software & Services – LTM revenue


$118 $143

$1,082

$52 $96

16

3

13

3 3

0

2

4

6

8

10

12

14

16

18

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 37: Internet Software & Services – LTM EBITDA


Figure 38: Internet Software & Services – LTM net income


($3)

$44

$309

$4

($24)

16

3

13

3 3

0

2

4

6

8

10

12

14

16

18

$(50)

$-

$50

$100

$150

$200

$250

$300

$350

$400

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n

LTM EBITDA No. of deals

($20)

($7)

($26)

$4

($28)

16

3

13

3 3

0

2

4

6

8

10

12

14

16

18

$(35)

$(30)

$(25)

$(20)

$(15)

$(10)

$(5)

$-

$5

$10

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 39: Internet Software & Services – Enterprise value


Figure 40: Internet Software & Services – Total debt


$769 $1,569

$5,286

$351 $1,526

16

3

13

3 3

02468

1012141618

$0$1,000$2,000$3,000$4,000

$5,000$6,000$7,000$8,000$9,000

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n


$72 $235

$2,390

$1 $8

16

3

13

3 3

024681012141618

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 41: Internet Software & Services – EV/LTM revenue


Figure 42: Internet Software & Services – EV/LTM EBITDA


6.5 x

11.0 x

4.9 x 6.8x

15.8x16

3

13

3 3

024681012141618

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x16.0x18.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s


-222.9x

35.4x17.1x

85.5x

-64.7x

16

3

13

3 3

024681012141618

-300.0x-250.0x-200.0x-150.0x-100.0x-50.0x

0.0x50.0x

100.0x150.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s



Electronics

Figure 43: Electronics – LTM revenue


$99

$445

$0 $95 $58

5

1

0

1

2

0

1

2

3

4

5

6

$0

$80

$160

$240

$320

$400

$480

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 44: Electronics – LTM EBITDA


Figure 45: Electronics – LTM net income


$21

$50

$0 $0 $17

5

1

0

1

2

0

1

2

3

4

5

6

$0

$10

$20

$30

$40

$50

$60

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n


$14

$24

$0

$15 $14

5

1

0

1

2

0

1

2

3

4

5

6

$0

$5

$10

$15

$20

$25

$30

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 46: Electronics – Enterprise value


Figure 47: Electronics – Total debt


$1,062

$0 $0 $0

$3,144 5

1

0

1

2

0

1

2

3

4

5

6

$0

$600

$1,200

$1,800

$2,400

$3,000

$3,600

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n


$25 $11

$0 $0

$12

5

1

0

1

2

0

1

2

3

4

5

6

$0

$5

$10

$15

$20

$25

$30

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

In U

S$ m

n



Figure 48: Electronics – EV/LTM revenue


Figure 49: Electronics – EV/LTM EBITDA


10.7x

0.0x 0.0x 0.0x

54.5x5

1

0

1

2

0

1

2

3

4

5

6

0

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s


50.8x

0.0x 0.0x 0.0x

188.3x5

1

0

1

2

0

1

2

3

4

5

6

0

40.0x

80.0x

120.0x

160.0x

200.0x

240.0x

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

No.

of I

POs

Mul

tiple

s



Methodology

The Global Technology IPO Review for Q2 2016 is based on PwC’s analysis of transaction data extracted from S&P Capital IQ. The analysis considers IPOs across all countries during the period 1 April 2016 to 30 June 2016 (Q2), and from 2010-2015. Financial data was also obtained from S&P Capital IQ.

The definition of the Technology sector is based on the S&P Capital IQ database industry classifications and includes the following subsectors:

Internet Software & Services IT Consulting & Services Professional Services (e.g., Application Software, Software Solutions) Semiconductors Software Computers & Peripherals

– Computers, Computers Peripheral Equipment – Computers, Storage Device Manufacturing

Electronic Computers Manufacturing (“Electronics”) Communications Equipment

Only IPOs with issue size greater than US$40 million were included in the analysis.

All monetary amounts are in US dollars unless otherwise indicated.

LTM – Last twelve months

Most figures are rounded to one decimal.


For more information

If you would like to discuss how these findings might impact your business or your future strategy, please reach out to any of our technology industry leaders listed below.

Raman Chitkara Global Technology Leader Phone: 1 408 817 3746 Email: [email protected]

Rod Dring – Australia Phone: 61 2 8266 7865 Email: [email protected]

Estela Vieira – Brazil Phone: 55 1 3674 3802 Email: [email protected]

Christopher Dulny – Canada Phone: 1 416 869 2355 Email: [email protected]

Jianbin Gao – China Phone: 86 21 2323 3362 Email: [email protected]

Pierre Marty – France Phone: 33 1 5657 58 15 Email: [email protected]

Werner Ballhaus – Germany Phone: 49 211 981 5848 Email: [email protected]

Sandeep Ladda – India Phone: 91 22 6689 1444 Email: [email protected]


Masahiro Ozaki – Japan Phone: 81 3 5326 9090 Email: [email protected]

Hoonsoo Yoon – Korea Phone: 82 2 709 0201 Email: [email protected]

Ilja Linnemeijer – The Netherlands Phone: 31 88 792 4956 Email: [email protected]

Yury Pukha – Russia Phone: 7 495 223 5177 Email: [email protected]

Mark Jansen – Singapore Phone: 65 6236 7388 Email: [email protected]

Philip Shepherd – UAE Phone: 97 1 43043501 Email: [email protected]

Jass Sarai – UK Phone: 44 0 1895 52 2206 Email: [email protected]

Pierre-Alain Sur – US Phone: 1 646 471 6973 Email: [email protected]

Alan Jones – US (Deals Partner) Phone: 1 415 498 7398 Email: [email protected]

About PwC’s Technology Institute The Technology Institute is PwC’s global research network that studies the business of technology and the technology of business with the purpose of creating thought leadership that offers both fact-based analysis and experience-based perspectives. Technology Institute insights and viewpoints originate from active collaboration between our professionals across the globe and their first-hand experiences working in and with the technology industry.

About PwC At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at http://www.pwc.com/

This content is for general information purposes only and should not be used as a substitute for consultation with professional advisors.

© 2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

IPO Review Q2 2016 - PwC · IPO Review Q2 2016 ... Q2 2016 technology IPO listings – Valuation...

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