There has been chatter since summer about enterprise social software vendor Jive Software having an initial public offering (IPO). It didn’t happen this summer, but it looks like the company will be getting some cash to keep it warm over the winter.
Jive Software’s IPO is no longer just gossip among bankers and bloggers. The company filed with the Securities and Exchange Commission that it plans to list on the NASDAQ under the symbol 'JIVE.' Despite the excitement surrounding the move, there is probably a little apprehension around the Jive offices since the filing required full disclosure of financial details.
The rapidly expanding enterprise social market is clearly benefiting Jive. The company posted a respectable US$ 54.8 million in revenue for the first nine months of 2011. This year's revenue numbers are a significant increase to the US$ 31.6 million the company posted for the same period last year. Jive is growing and making money. However, the company is also spending, and spending a lot, on operating expenses to remain competitive. At the end of September, Jive had used US$ 64.2 million dollars toward research, development, sales, marketing and administrative expenses. The high spending levels are a major contributor to the US$ 38.14 million in losses for Jive as of September 30th.
So to summarize, Jive’s going public. Jive has cool software that enterprise like, and they are doing well in the market. Despite the popularity, they’ve been losing money for the past five years and don’t really know when there will be one of those pesky, what do you call them – profits. This is not just my conjecture. Jive clearly articulated their position on profitability in the amended filing stating,
"Although we have experienced revenue growth in recent periods, you should not consider our recent revenue growth or growth rates as indicative of our future performance. We do not expect to be profitable on a GAAP basis in the foreseeable future and we cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability."
Got it? This may sound bad, but Jive’s financial position is really a result of the high levels of investment required for the company to compete and grow in the the enterprise social market. Jive predicts continued increases in operating expenses. The strategy must be working. Jive's customer installations are increasing and the company appears in top of almost every analyst report for social software.Additionally, Jive has about US$ 72.6 million in cash to help smooth out the rough patches and the money from the IPO will help as well.
What is Jive likely to do with the cash it receives from the IPO? Jive says that it will use the proceeds of the offering to pay down outstanding loans and towards general corporate purposes, including working capital and potential acquisitions.
Does This Mean Anything for Enterprise Social?
The enterprise social collaboration market is growing rapidly as organizations try to take advantage of the consumer social dynamic to grow their business. Companies such as IBM, Telligent and Yammer (kind of) compete in the space. I cannot predict how Jive will ultimately perform, but it is really in no worse position than most of the companies in the new market; they are all struggling to be profitable. However, the tremendous investment that financial firms are willing to make in the company are at least a sign that the enterprise social market has some staying power.