Valuation of Public Hosting Companies - March 19, 2014

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that may also affect their valuations. (All data was taken from publicly available financial statements and please see this post for how we calculate Enterprise Value.)

View fullsize

Note - Melbourne IT's large cash balance may distort its valuation ratios.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Valuation of Public Hosting Companies - February 21, 2014

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that may also affect their valuations. (All data was taken from publicly available financial statements and please see this post for how we calculate Enterprise Value.)

View fullsize

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

WIX IPO Valuation - Final

Congratulations to the folks at WIX on the completion of their IPO.  It was priced Wednesday at $16.50/share and closed yesterday at $16.56/share.  Our estimated valuation (assuming no exercise of the underwriters overallotment option) is an Enterprise Value of approximately $680 million, approximately 8x annualized revenues (based on the Q3 2013.) Their EBITDA is too low to produce a meaningful EBITDA multiple.

Wix is in the category of new shared hosters that have emerged over the last few years that feature an easy to use but advanced website design tool much like Weebly, SquareSpace, etc. These hosters offer use of their design tool for free and while some offer free basic hosting, all offer paid shared hosting services.  These services have been growing rapidly and represent one of the few strong growth sectors in shared hosting.

Please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Wix - Estimated IPO Valuation - REVISED

REVISED: The values below have been adjusted to include the impact of outstanding in-the-money options and warrants.

The offering is expected during the week of 11/4/13.

Wix, an Israeli company that offers a free website design tool together with shared hosting, updated its IPO documents to include an estimated offering price range.  At the midpoint of this range, their Enterprise Value would be approximately $630 million or more than 7x annualized revenues (based on the Q3 2013.) (Their EBITDA is too low to produce a meaningful valuation.)

Wix is in the category of new shared hosters that have emerged over the last few years that feature an easy to use but advanced website design tool much like Weebly, SquareSpace, etc. These hosters offer use of their design tool for free and while some offer free basic hosting, all offer paid shared hosting services.  These services have been growing rapidly and represent one of the few strong growth sectors in shared hosting.

Please treat this as a very preliminary estimate as there are a number of assumptions in this calculation that can have a meaningful impact on the final valuation. (In particular, the valuation does not include exercise of the underwriters 15% overallotment option or the impact of outstanding Employee options.)  As we get more information we will update our estimates.

Please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Endurance International Group - Estimated IPO Valuation

Endurance updated its SEC filings last week to include an estimated offering range for their upcoming IPO.  At the midpoint of this range ($15/share) and their estimated Q3 EBITDA ($47-$48 million), the valuation of Endurance would be approximately 14.4x annualized EBITDA. 

Please treat this as a very preliminary estimate as there are a number of assumptions in this calculation that can have a meaningful impact on the final valuation. (In particular, the valuation does not include exercise of the underwriters 15% overallotment option, the Directi acquisition or the impact of outstanding Employee options.)  As we get more information we will update our estimates.

Please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Endurance International Group - Acquisition Valuations

    A few weeks ago, the Endurance International Group released an S-1 filing for a planned IPO of its Common Stock.  The S-1 has a lot of great information on Endurance, its operations and the many acquisitions it has completed.  I'd like to highlight two of their acquisitions here.

        The first was the purchase of Endurance itself on December 22, 2011 (referred to in the S1 as the Sponsor Acquisition.)  An investor group purchased Endurance by paying approximately $683 million in cash, securities and other consideration, and assuming liabilites of approximately $459 million resulting in a total value of approximately $1.14 billion.  Based on calendar 2011 results, this works out to roughly 6.0x revenue and 12.2x EBITDA.   (One note of caution: Using trailing twelve-month revenues/EBITDA may produce higher multiples than the actual multiples the transaction was completed at as Endurance is a rapidly growing company and the purchasers would have based the valuation on the revenues and EBITDA of the company at the time of the purchase.)

        The second transaction was Endurance's purchase of Hostgator on July 13, 2012. Endurance paid approximately $300 million in cash and assumed liabilites of approximately $21.8 million resulting in a total value of approximately $321.6 million.  Annualizing Hostgators results for the first 6.5 months of 2012, results in multiples of roughly 2.4x revenue and 7.5x EBITDA. 

Please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Valuation of Public Hosting Companies - January 31, 2013

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that may also affect their valuations. (All data was taken from publicly available financial statements and please see this post for how we calculate Enterprise Value.)

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Enterprise Value Calculation

REVISED MARCH 11, 2018: We've been asked recently about the concept of Enterprise Value and how it is calculated. Briefly, Enterprise Value attempts to calculate the value of the operating business of a firm without regard to its capital structure or (ideally) other non-operating factors like an unusually large cash balance.

Here are the two formulas we typically use for public companies.

1 - Enterprise Value = (Outstanding Shares * Current Stock Price) plus Debt (long and short term, including capital leases) less cash & marketable securities.  [UPDATE 9/8/10:  We changed our calculation to subtract off cash and marketable securities as noted. UPDATE 3/11/18: We're no longer using fully diluted shares and option exercise proceeds in the calculations.]

2 - Enterprise Value = (Outstanding Shares * Current Stock Price) less Current Assets plus Total Liabilities.  (UPDATE 3/11/18: We're no longer using fully diluted shares and option exercise proceeds in the calculations.)

While the formula many use is probably something similar to #1, we  also look at #2 as some companies have unusual balance sheet items that can distort the result of #1. #2 may also be more applicable when you are trying to look at valuations for asset purchase transactions where the bulk of current assets and total liabilities are left behind with the seller (as in hosting.)  It is also important to keep an eye on the amount of un-exercised, in the money options as these can distort valuation as well. Circumstances may dictate using a hybrid formula to ensure a logical result.

As always, if you have any questions please do not hesitate to contact us. 

Author: Hillary Stiff,  Managing Director of Cheval Capital. Hillary has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including NTT/Verio, The Endurance International Group and Web.Com among many others.  She has helped complete over 250 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale. 

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed.  Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.