Milestone Going to IPO?By: John Honovich, Published on Feb 04, 2014
A UK news report and conflicting statements from Milestone to IPVM indicate that the company is imminently preparing to go to public, the culmination of a much discussed plan for the Danish VMS developer.
The news report [link no longer available] indicates that Milestone has hired UK investment bank, Rothschild, to manage the process on the London stock exchange with a target IPO date in the 'next few months'.
At first, in response to our question, one Milestone spokesperson said that "There are no plans for this right now" citing a Danish article talking about a future goal of an IPO, not a short term execution.
However, another Milestone spokesperson later responded:
"We have previously stated our interest in going public with the company when we both the company and the financial markets are ready. This has been covered by the Danish media several times and it has been picked up by international sources over time. We continually assess our options for the future of the business."
This is a non-denial, especially since the UK article did not talk about it generically but about the specific and very important step of hiring a banker. Also, we asked Milestone if they would deny the Rothschild claim but they have not responded to that.
What Does a Milestone IPO Mean?
A key advantage of going public, beyond liquidity for employees and investors, is raising funds for expansion. As Avigilon's IPO and subsequent fund raising has shown, the extra funds received have helped them to grow faster and acquire multiple companies. While Milestone recently acquired their own training subsidiary, that was a relatively minor move.
We estimate a market valuation for Milestone at $150 to $250 million USD. Milestone's 2012 revenue was $55.2 million USD [link no longer available] and, presuming repeat 20% growth in 2013, their 2013 revenue would be ~$66 million. Using Axis ~3x revenue multiple as a comparable, that puts Milestone at ~$200 million valuation. On the other hand, Milestone's profitability, after normalizing their accounting practices, remains weak.
Now would be a good time. Equity markets had a great 2013. Plus, investor interest and excitement about surveillance technologies is relatively high, partially, and ironically, driven by the phenomenal stock price appreciation of competitor Avigilon. Finally, the introduction of their Husky line could give them a revenue boost as they have historically only sold software, which has a lower price per channel than appliances.