Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul><li>This is our first report on SaaS player, nCino Inc.</li><li>The company's third quarter fiscal 2024 performance presented both opportunities and challenges in the midst of a complex economic environment.</li><li>The company announced a significant product win in relation to a consumer lending deal with an enterprise bank in the United States of over $200 billion.</li></ul>

This is our first report on SaaS player, nCino Inc.The company's third quarter fiscal 2024 performance presented both opportunities and challenges in the midst of a complex economic environment.The company announced a significant product win in relation to a consumer lending deal with an enterprise bank in the United States of over $200 billion.

nCino Inc: Initiation of Coverage – How nCino's Digital Solutions are Capturing the Financial Market! - Major Drivers

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/root-inc" target="_blank" data-smartkarma-citation="entities:29692:1" rel="noopener">Root Inc (ROOT US)</a><a href="https://www.businesswire.com/news/home/20201020005703/en/Root-Inc.-Announces-Launch-of-Initial-Public-Offering" target="_blank" rel="noopener">announced</a> its IPO terms and it will offer 24.16 million shares of common shares in the IPO (22 million shares offered by Root and 2.16 million shares sold by a major shareholder). The IPO price is currently expected to be between $22 and $25 per share. However, we expect this IPO to receive a very high demand, and the IPO price range is likely to be raised prior to final pricing. 
We are including Root Inc in our model portfolio.
</div>We forecast the company to generate revenue of $616.1 million in 2020 (up 112.3% YoY) and $1,070.2 million in 2021 (up 73.7% YoY). From 2019 to 2022, we have assumed the company's revenue to increase by 78.9% CAGR. The combination of the company's exploding revenue growth and improvement in the reduction of net losses as a percentage of revenue is very impressive indeed.Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO price range of $25 per share. Given the very high upside, we have a positive view of the Root IPO and we include this stock in our model portfolio.


Root Inc (ROOT US)announced its IPO terms and it will offer 24.16 million shares of common shares in the IPO (22 million shares offered by Root and 2.16 million shares sold by a major shareholder). The IPO price is currently expected to be between $22 and $25 per share. However, we expect this IPO to receive a very high demand, and the IPO price range is likely to be raised prior to final pricing. 
We are including Root Inc in our model portfolio.
We forecast the company to generate revenue of $616.1 million in 2020 (up 112.3% YoY) and $1,070.2 million in 2021 (up 73.7% YoY). From 2019 to 2022, we have assumed the company's revenue to increase by 78.9% CAGR. The combination of the company's exploding revenue growth and improvement in the reduction of net losses as a percentage of revenue is very impressive indeed.Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO price range of $25 per share. Given the very high upside, we have a positive view of the Root IPO and we include this stock in our model portfolio. 

Root Inc IPO Valuation Analysis (Insurtech SaaS)

BigCommerce Holdings / Equity Capital Markets

BigCommerce Holdings (BIGC US) is a company with a SaaS platform that helps thousands of small and medium businesses to build online stores and it is preparing to complete an IPO on the NASDAQ exchange in the next few weeks.Similar to Shopify, BigCommerce's e-commerce platform helps customers to launch and expand their e-commerce stores and connect to popular online marketplaces and social networks. As of June 1, 2020, BuiltWith.com ranked BigCommerce the world’s second most-used SaaS ecommerce platform and top five overall among the top one million sites globally by traffic.Major investors of BigCommerce include SoftBank, Goldman Sachs, Revolution, General Catalyst, and GGV Capital.The company had sales of $112.1 million (up 22% YoY) in 2019 and $33.2 million (up 29.7% YoY) in 1Q 2020. The COVID-19 has helped the company's business to pick up in 1Q 2020 as more people spend more time at home and many of them try to start new e-commerce businesses using BigCommerce's platform. Operating losses increased slightly from $38 million in 2018 to $41 million in 2019. Operating loss as a percentage of revenue declined from -41.3% in 2018 to -36.6% in 2019. Operating loss as a percentage of revenue improved materially from -40.3% in 1Q 2019 to -22.5% in 1Q 2020.

BigCommerce Holdings (BIGC US) is a company with a SaaS platform that helps thousands of small and medium businesses to build online stores and it is preparing to complete an IPO on the NASDAQ exchange in the next few weeks.Similar to Shopify, BigCommerce's e-commerce platform helps customers to launch and expand their e-commerce stores and connect to popular online marketplaces and social networks. As of June 1, 2020, BuiltWith.com ranked BigCommerce the world’s second most-used SaaS ecommerce platform and top five overall among the top one million sites globally by traffic.Major investors of BigCommerce include SoftBank, Goldman Sachs, Revolution, General Catalyst, and GGV Capital.The company had sales of $112.1 million (up 22% YoY) in 2019 and $33.2 million (up 29.7% YoY) in 1Q 2020. The COVID-19 has helped the company's business to pick up in 1Q 2020 as more people spend more time at home and many of them try to start new e-commerce businesses using BigCommerce's platform. Operating losses increased slightly from $38 million in 2018 to $41 million in 2019. Operating loss as a percentage of revenue declined from -41.3% in 2018 to -36.6% in 2019. Operating loss as a percentage of revenue improved materially from -40.3% in 1Q 2019 to -22.5% in 1Q 2020. 

BigCommerce IPO Preview (A SaaS Competitor to Shopify)

nCino announced terms of its IPO including the price range of $22 to $24 per share. The company plans to offer 7.62 million shares and at the top end of the price range, the company would raise $182.4 million. nCino is expected to start trading on July 15th.<div class="content-highlight">
Our valuation analysis of nCino Tech suggests an implied market cap of $4.6 billion or $50.70 per share, representing a 111% upside to the high end of the IPO price range of $24 per share. Given the big upside, we rate this IPO as very attractive and we include this stock in our model portfolio. 
To value nCino Tech, we used a 20% discount P/S multiple of the peers in 2021 (16.2x). We then applied this 16.2x P/S multiple against our sales estimate of $282.8 million in 2021 (fiscal year ending Jan 2022) to derive a market cap of $4.6 billion. We then applied shares outstanding of 90.3 million (including greenshoe option) to derive implied price per share of $50.70.
Two major reasons why we applied a 20% lower valuation multiple than the peers is because the comps improved their operating margins slightly better than nCino in the past two years. We also took into consideration liquidity since, among the six comps, only one other company (Zuora) has lower market cap than nCino. We did not use an even lower valuation multiple since we like the fact that the company's organic sales growth remains solid. 
</div>

nCino announced terms of its IPO including the price range of $22 to $24 per share. The company plans to offer 7.62 million shares and at the top end of the price range, the company would raise $182.4 million. nCino is expected to start trading on July 15th.
Our valuation analysis of nCino Tech suggests an implied market cap of $4.6 billion or $50.70 per share, representing a 111% upside to the high end of the IPO price range of $24 per share. Given the big upside, we rate this IPO as very attractive and we include this stock in our model portfolio. 
To value nCino Tech, we used a 20% discount P/S multiple of the peers in 2021 (16.2x). We then applied this 16.2x P/S multiple against our sales estimate of $282.8 million in 2021 (fiscal year ending Jan 2022) to derive a market cap of $4.6 billion. We then applied shares outstanding of 90.3 million (including greenshoe option) to derive implied price per share of $50.70.
Two major reasons why we applied a 20% lower valuation multiple than the peers is because the comps improved their operating margins slightly better than nCino in the past two years. We also took into consideration liquidity since, among the six comps, only one other company (Zuora) has lower market cap than nCino. We did not use an even lower valuation multiple since we like the fact that the company's organic sales growth remains solid. 


NCino IPO Valuation Analysis - A SaaS Company for Banks & Financial Institutions

nCino (NCNO) plans to complete an IPO in the U.S. in the next several weeks, trying to raise $100 million (placeholder).The high-quality SaaS companies have been one of the best performing sectors in the U.S. over the past three months as well as in the past three years. nCino is a Saas company providing cloud-based software to numerous financial institutions in the U.S. including banks and credit unions. The main services offered include deposit account opening, retail loan origination, auto loans, specialty lending, and document management.Two important financial metrics that investors look for in SaaS companies include strong sales growth and improving operating margins and this company has both. Its sales growth has been very impressive over the past three years. It also had an excellent sales growth of 49.9% YoY in the three months ending April 30, 2020. Its operating margins improved from -32.3% in CY2017 to -25.4% in CY2018, and -20.4% in CY2019. nCino's operating margins also improved from -11.7% in 1Q CY19 to -9.6% in 1Q CY20.<div class="content-highlight">The fact that this company has clear evidence of improving operating leverage will likely attract many investors and is one of the important signposts of a successful IPO. </div>

nCino (NCNO) plans to complete an IPO in the U.S. in the next several weeks, trying to raise $100 million (placeholder).The high-quality SaaS companies have been one of the best performing sectors in the U.S. over the past three months as well as in the past three years. nCino is a Saas company providing cloud-based software to numerous financial institutions in the U.S. including banks and credit unions. The main services offered include deposit account opening, retail loan origination, auto loans, specialty lending, and document management.Two important financial metrics that investors look for in SaaS companies include strong sales growth and improving operating margins and this company has both. Its sales growth has been very impressive over the past three years. It also had an excellent sales growth of 49.9% YoY in the three months ending April 30, 2020. Its operating margins improved from -32.3% in CY2017 to -25.4% in CY2018, and -20.4% in CY2019. nCino's operating margins also improved from -11.7% in 1Q CY19 to -9.6% in 1Q CY20.The fact that this company has clear evidence of improving operating leverage will likely attract many investors and is one of the important signposts of a successful IPO. 

United States

nCino, Inc. provides cloud banking solutions. The Company offers solutions to improves employee efficiency while enhancing the customer experience for onboarding, loans, and deposits across all lines of business. nCino serves customers worldwide.

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nCino (NCNO US)

nCino Inc: Initiation of Coverage – How nCino's Digital Solutions are Capturing the Financial Market! - Major Drivers

This is our first report on SaaS player, nCino Inc. The company's third quarter fiscal 2024 performance presented both opportunities and...

Baptista Research

Root Inc IPO Valuation Analysis (Insurtech SaaS)

Our base case valuation for Root is an implied market cap of $13.2 billion, or $52.1 per share, which is 108% higher than the high end of the IPO...

Douglas Kim

BigCommerce IPO Preview (A SaaS Competitor to Shopify)

BigCommerce Holdings (BIGC US) is a company with a SaaS platform that helps thousands of small and medium businesses to build online stores and it...

Douglas Kim

NCino IPO Valuation Analysis - A SaaS Company for Banks & Financial Institutions

nCino announced terms of its IPO including the price range of $22 to $24 per share. The company plans to offer 7.62 million shares and at the top...

Douglas Kim

NCino IPO Preview

nCino (NCNO) plans to complete an IPO in the U.S. in the next several weeks, trying to raise $100 million (placeholder).The high-quality SaaS...

Douglas Kim

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