Carbonite Updates IPO Paperwork, Growth Continues As IPO Approaches (CARB)

Carbonite, Inc. is closer to coming public.  The online subscription service for data storage backup for consumers and businesses has just filed its first amendment to its prospectus filing and we care because we listed this as one of our own Top 17 IPOs To Watch in 2011.  With all of the hype and low-float IPOs that have been coming out for online services, we expect a strong reception for this one.  Our one big concern here remains the same as in several other IPO candidates: zero barriers to entry for competition. Caveats aside, we still see this as a crucial IPO for internet shares and we still believe that its advertising and presence will outpace many of the other ‘online data storage’ companies that make up “the cloud.”  Carbonite will take the stock ticker “CARB” on NASDAQ upon its listing.

When we first covered this, it had raised roughly $67 million in various venture rounds.  Sales had doubled each year since its launch in 2006.  As of May 31, 2011, Carbonite claims to have over one million consumer and small to mid-sized business subscribers in over 100 countries. Since 2005, it has now backed up over 100 billion files and has restored more than seven billion files that might otherwise have been permanently lost.  The company backs up over 200 million files each day.   Inc. Magazine even placed it as #9 on its Inc. 500 list for 2010 of the 500 fastest growing private companies.  With “the cloud” remaining a very hot topic and with basic subscriber services starting at $55.00 per year, the interest will remain.

So, while the competition in online storage has low barriers to entry, the company has bucked any real significant threats.  It even claims to have “a highly predictable subscription revenue model” and it claims to have a consistent 96% to 97% quarterly customer retention rate with a scalable infrastructure that can support future growth.

Carbonite’s amended filing showed that revenue was $38.6 million in all of 2010 and that was actually $12.8 million in the three months ended March 31, 2011.  Its net loss was $25.8 million in 2010 and its loss was $5.3 million in the three months ended March 31, 2011.  As far as bookings, those have grown from $14.1 million in 2008 to $54.1 million in 2010.

No financial terms have yet been set as far as a share count nor for a price range.  We do not even have an amended “up to $X” as far as what to expect as of today. The book-running managers of the offering are to be BofA/Merrill Lynch and J.P. Morgan; and co-managers are listed as William Blair, Canaccord Genuity, Oppenheimer & Co., and Pacific Crest Securities.

One of the key backers is Menlo Ventures with a stake listed as being 31.7% of the pre-IPO stake.  This is why we continue to be attracted to Carbonite: the company’s filing notes, “We founded Carbonite on one simple idea: all computers need to be backed up, and in this always-connected and highly-mobile world, online backup is the ideal approach. Our “set and forget” automated solution requires little effort and protects our customers’ stored files even if their computers are lost, stolen, or destroyed.”

We like this one.  Stay tuned.

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• Carbonite’s amended S-1 can be found here

JON C. OGG