new IPO: $KNBE KnowBe4 – Security Training and awareness SaaS

$KNBE Knowbe4 (Know Before) is a Security Training and awareness SaaS company that went public last week.

$KNBE was founded in 2010 by Stu Sjouwerman in Tampa Florida and has famed hacker Kevin Mitnick on board as well.

$KNBE listed at $16/share, raising $201 Million at a valuation of $2.4B for the company, which recorded $174.8M in 2020 revenues growing at 45% YoY.

The company has over 37K customers paying over $4000 per year to provide security training services, which prevent attacks such as data breaches and speak phishing.

$KNBE has a 3 steps process to train users, simulate attacks and review results to ensure compliance. They also provide free tools to test users and network which help to identify the problems of social engineering, spear phishing and ransomware attacks.

$KNBE opened at $19.95 per share Thursday, above expectations, and peaked at $25.94 shortly before closing at $24.14. At the highest price, the company’s was worth nearly $4.3B

$KNBE saw revenues of $174.9M in 2020, up from $120.6M in 2019 and $71.3M in 2018. It did not, however, turn a profit in any of those years. Last year’s net loss was $2.4M a dramatically lower number than the $125M loss the year earlier.

$KNBE has 84%+ gross margins and will be on track to be EBITDA positive by 2021 end (estimated).

$KNBE has been mentioned as a leader in the Forrester wave for Security awareness and training solutions.

The market for Security awareness and training is about $1B annually, growing at 7% CAGR and is expected to be at $1.9B by 2025.

Global Security Awareness Training Software market

There are multiple players in the market, including KnowBe4,  Webroot,  Infosec IQ,  Inspired eLearning,  Proofpoint $PFPT, The Defence Works, SANS, Symantec, and Ataata.

$KNBE has received at least $158M from investors including Elephant Partners, KKR, Goldman Sachs, Tiger Global, Vista Equity Partners and Kevin Mitnick.

$KNBE has a direct sales force as well as channel partners (drive 37% of revenues) and managed service providers.

Metrics: Average revenue per customer is about $4700 (+17% YoY), while rule of 40 is at 44. DBNER and CAC were not provided in the SEC filings, so it is hard to compare $KNBE to other providers in SaaS.

Valuation: At 22X 2020 revenues and 15X 2021 revenues, $KNBE is richly valued, while growing at 40%-45%.

Recommendation: I am adding $KNBE to my watchlist but not buying yet. I expect the company to base for 3-6 months ($20 – $30 per share until Jun / Aug 2021). I would watch 2 Quarters of public performance closely to give us an indication if this is worth buying.