Mergers and Acquisitions, MSP

Kaseya Considers IPO Filing 2nd Half 2018

Kaseya CEO Fred Voccola
Kaseya CEO Fred Voccola

Kaseya is back in growth mode and contemplating a potential IPO (initial public offering) filing in the second half of 2018, CEO Fred Voccola told ChannelE2E today.

In an extended interview about Kaseya's business, technology and MSP software strategy, Voccola touched on the company's R&D and potential M&A moves (Updated May 9, 2017: Kaseya acquires Unigma for AWS, Azure, Google Cloud Cost Mgmt). He also shared several financial data points that suggest the MSP-centric software company could be ripe for a potential IPO over the long haul. The conversation, held earlier today, arrives as Kaseya prepares to kick off the Connect 2017 conference in Las Vegas.

Kaseya's Growth KPIs

Consider these business metrics:

  • Kaseya's  recurring SaaS business is "well North" of $100 million annually, and growing 30 percent to 40 percent annually.
  • EBITDA profit margins are in the high 20 percent neighborhood, with a march toward 30-plus percent EBITDA profit margins under way.
  • The company's MSP and customer retention rate is 95 percent.

If Kaseya continues to execute along those metrics and goals, the company will explore a potential IPO filing in the second half of 2018, Voccola says. "Look at those financials and you’re one of the few growth companies markets love," Voccola asserts.

MSP Software Market: Growth Mode

No doubt, Voccola took a few shots at rivals during our call (more on that later). But his tone softened and shifted to the overall MSP software indsutry toward the end of our conversation. "All of us are in the best market. It's the biggest total addressable market,"

Voccola's thesis: SMBs are spending more and more on IT infrastructure because enterprise-class capabilities are now available to smaller companies. "All of us will continue to grow -- and grow profitably -- if we execute well."

Yes, the MSP software market is growing nicely. But IPOs within the sector have been rare. Key players like Autotask, Continuum and Kaseya are backed by private equity. SolarWinds -- which has an MSP software arm -- was once publicly held but shifted to private equity ownership last year. And ConnectWise is closely held by its founders.

First from the IPO Gates: Datto?

Datto -- which sells business continuity, data protection and networking via MSPs -- could be the first MSP-centric player to launch an IPO. The company, which is venture-backed, achieved a $1 billion valuation in late 2015. And there's market speculation from time to time about a potential ConnectWise IPO or financial event, though I've never heard anything firm.

Other players, such as Barracuda Networks and Carbonite, are publicly held and engaged the MSP market mostly through M&A deals.

I gotta admit: I didn't expect Kaseya to be mulling a path toward IPO. My best guess before today's interview: I figured Kaseya's private equity owners would sell the company to another PE firm or a software business within the next one to two years.

Kaseya stumbled in 2014 and early 2015 amid new private equity ownership and executive turnover. But Voccola, who arrived in mid-2015, has gradually righted the ship, restored growth and reduced MSP customer churn.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.