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Rubrik's IPO: Financial, Strategic, and Market Analysis

GOOVER DAILY REPORT 6/7/2024
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TABLE OF CONTENTS

  1. Introduction
  2. Rubrik's IPO Details
  3. Financial Performance
  4. Strategic Evolution
  5. Investor and Shareholder Information
  6. Market Conditions and IPO Context
  7. Glossary
  8. Conclusion
  9. Source Documents

1. Introduction

  • This report analyzes the recent public debut of Rubrik, a data management software company, on the New York Stock Exchange. It focuses on the company's financial performance, strategic evolution, investor details, and market conditions leading up to and post-IPO.

2. Rubrik's IPO Details

  • 2-1. IPO Pricing

  • Rubrik's shares debuted on the New York Stock Exchange at $38 per share, which was above the expected range of $28 to $31 per share. The company initially priced its shares at $32 apiece on Wednesday night prior to the IPO. The pricing allowed Rubrik to raise $752 million.

  • 2-2. Initial Share Performance

  • Rubrik's shares opened trading at $38.60 per share and ended the day at $37 per share, representing a nearly 16% increase from the IPO price. This performance reflects a strong appetite for tech IPOs among public market investors. Despite the share price movement, Rubrik settled at $37 a share at the end of its debut trading day.

  • 2-3. Fundraising and Valuation

  • By raising $752 million through the sale of 23.5 million shares, Rubrik achieved a fully diluted valuation of $6.6 billion, a significant increase from its last primary valuation of $3.5 billion in 2019. The company's valuation showcases robust financial backing and investor confidence. Major investors include Lightspeed Venture Partners with a 23.9% stake, Greylock Partners with a 12.2% stake, and co-founder and CEO Bipul Sinha owning 7.6% of the shares. Rubrik reported a revenue growth of about 5% in the fiscal year ending January, from $599.8 million to $627.9 million. However, the company's net loss also widened from $277.7 million to $354.2 million over the same period, indicating ongoing financial challenges.

3. Financial Performance

  • 3-1. Revenue and Growth

  • Rubrik's revenue for the fiscal year that ended January rose about 5% from the previous year, reaching $627.9 million. This is a slight increase from $599.8 million in the fiscal 2023 year. The company raised $752 million through its IPO, giving it a fully diluted valuation of $6.6 billion, up 88% from its last primary valuation of $3.5 billion in 2019.

  • 3-2. Profit and Loss

  • Despite its increase in revenue, Rubrik has continued to experience growing losses. The company's net loss for the fiscal year ended January widened to $354.2 million from $277.7 million a year earlier. The net loss percentage grew from 46% in fiscal 2023 to 56% in fiscal 2024.

  • 3-3. Subscription Revenue

  • One of the notable bright spots in Rubrik's financial performance is its subscription revenue, which has shown significant growth. In the most recent fiscal quarter, subscriptions accounted for 91% of the total revenue, up from 73% a year earlier. Additionally, almost 100 customers were contributing over $1 million in subscription annual recurring revenue (ARR) at the end of the fiscal year. Overall, annual recurring revenue from subscriptions jumped 47%.

4. Strategic Evolution

  • 4-1. Transition from Hardware to Cloud-based Cybersecurity

  • Rubrik started as a company selling hardware designed for modern data backup and storage functionalities. Over time, the company transitioned to providing cloud-based cybersecurity software. Rubrik's cloud-based solutions help secure data in cloud applications and public clouds, preventing data loss from ransomware attacks. This shift has become a major source of its revenue, with 91% of its revenue now derived from subscriptions for its cloud-based security software, up from 59% two years ago.

  • 4-2. Product Offerings and Competitors

  • Rubrik's primary products are focused on cloud-based cybersecurity, marketed to enterprise customers. The company now has 1,700 customers with contracts worth more than $100,000 and 100 customers paying more than $1 million annually. Among its clients are notable names such as Barclays, Carhartt, and Home Depot. Rubrik faces competition from major players in the industry, including Dell, IBM, Veeam, and Cohesity.

  • 4-3. Subscription Model Adoption

  • With a strategic pivot to a subscription-based model, Rubrik’s revenue from subscriptions has seen significant growth. In the most recent fiscal quarter, 91% of its revenue came from subscription services, a notable increase from 73% the previous year. Subscription revenue is considered more stable and predictable, which has provided a bright spot in Rubrik's financial metrics despite the overall unprofitability of the company. This model has attracted investor confidence amidst growing net losses.

5. Investor and Shareholder Information

  • 5-1. Major Investors

  • Rubrik has a diverse set of major investors, with significant stakes held by venture capital firms. Lightspeed Venture Partners is the largest shareholder, holding 23.9% of Rubrik’s shares prior to the IPO according to the company's S-1 filing. Greylock Partners follows with a 12% stake. These venture capital firms have been a crucial part of Rubrik's funding journey, with Lightspeed leading the Series A round and Greylock leading the Series B round. Additionally, Khosla Ventures, IVP, and Bain Capital Ventures have all supported Rubrik through various funding rounds, although their current shareholdings are below 5%. Prominent individual investors also include NBA all-star Kevin Durant’s Thirty Five Ventures.

  • 5-2. Ownership Structure

  • Rubrik's ownership structure includes major stakes held by Lightspeed Venture Partners (24%), Greylock Partners (12%), and various other venture capital firms with shares under 5%, including Khosla Ventures, IVP, and Bain Capital Ventures. Rubrik’s co-founder and CEO Bipul Sinha holds 7.6% of the company shares, while co-founder Arvind Jain holds a 7% stake and co-founder Arvind Nithrakashyap holds 6.7%. The company also has backing from corporate investors like Microsoft, which highlights its strategic alignment in the tech ecosystem. Rubrik had 3,100 employees and 6,100 clients as of January.

  • 5-3. Stake of Co-founders and Venture Capital Firms

  • Co-founders and venture capital firms hold prominent stakes in Rubrik. CEO Bipul Sinha owns 7.6% of Rubrik’s shares. Co-founder Arvind Jain, now CEO of Glean, owns 7% of Rubrik. Arvind Nithrakashyap, Rubrik’s CTO, holds 6.7%. On the venture capital side, Lightspeed Venture Partners is the top stakeholder with a 24% stake. Greylock Partners holds a 12% stake. Other VCs including Khosla Ventures, IVP, and Bain Capital Ventures, have also been significant backers but hold less than 5% each.

6. Market Conditions and IPO Context

  • 6-1. Market Trends

  • The IPO market had been relatively dormant, experiencing a lull since late 2021 due to soaring inflation and rising interest rates which deterred investors from risky tech assets. However, recent months have seen a revival with the public offerings of Reddit, Astera Labs, and Ibotta, all of which performed positively on their debut days. This renewed activity has generated optimism about the IPO landscape and encouraged more tech companies, like Rubrik, to consider going public. Reports indicate that the reopening of the IPO market is gradually gaining momentum, despite expectations that interest rate cuts may not occur as soon as previously predicted.

  • 6-2. Comparison with Other Recent IPOs

  • Rubrik's public debut at $38 per share, slightly above its target range, mirrors the optimism surrounding IPOs of companies like Reddit, Astera Labs, and Ibotta. However, unlike these companies which either debuted profitably or had turned a GAAP net profit recently, Rubrik remains unprofitable with growing losses. While Reddit and Astera Labs saw initial gains and have performed satisfactorily post-IPO, Rubrik's financial performance showed a modest revenue increase of about 5%, from $599.8 million in fiscal year 2023 to $627.9 million in fiscal year 2024, accompanied by worsening net losses. Despite this, Rubrik's high subscription revenue growth hints at strong future revenue stability and investor confidence.

  • 6-3. Investor Sentiment and Market Reception

  • Rubrik raised $752 million from its IPO, giving it a fully diluted valuation of $6.6 billion, a significant increase from its last valuation of $3.5 billion in 2019. The IPO saw Rubrik's shares settle at $37 per share on the New York Stock Exchange. This positive reception reflects strong investor interest and optimism despite the company's ongoing losses. Key investors like Lightspeed Venture Partners and Greylock Partners, holding 23.9% and 12.2% of shares respectively, expressed continued confidence in Rubrik's potential. Investor sentiment has been buoyed by Rubrik's evolution from hardware to cloud-based security solutions and its high subscription revenue, which now accounts for 91% of its total revenue, signaling robust future growth prospects.

7. Glossary

  • 7-1. Rubrik [Company]

  • A data management and cloud-based cybersecurity software company that recently went public on the New York Stock Exchange under the ticker symbol RBRK. Rubrik was founded in 2014 and has transitioned from data backup hardware to subscription-based software solutions.

  • 7-2. Bipul Sinha [Individual]

  • CEO and co-founder of Rubrik. Sinha holds 7.6-8% of Rubrik's shares and was a former partner at Lightspeed Venture Partners.

  • 7-3. Lightspeed Venture Partners [Company]

  • A venture capital firm that holds a 23.9-24% stake in Rubrik. Lightspeed has been a major investor in Rubrik since its Series A round and is the largest shareholder post-IPO.

  • 7-4. Greylock Partners [Company]

  • A venture capital firm holding 12% of Rubrik's shares. Greylock has been a significant investor since Rubrik’s Series B round.

  • 7-5. Microsoft [Company]

  • An investor in Rubrik since 2021. Microsoft supported Rubrik's shift to cloud-based cybersecurity and has a strategic partnership with the company.

  • 7-6. Subscription Revenue [Financial Metric]

  • A key financial metric for Rubrik, representing 91% of the company's revenue. This indicates a successful transition to a subscription-based model for their cloud-based services.

8. Conclusion

  • Rubrik's IPO marks a significant event in the tech industry's return to public markets. The company's evolution from hardware sales to cloud-based cybersecurity solutions, combined with strong investor backing, positions it well despite current market challenges.

9. Source Documents