What is MuleSoft?
The main product of MuleSoft is its Anypoint platform, which turns disparate applications, databases and devices into "consumable and discoverable APIs". An API, or application programming interface, is essentially a virtual interface through which one can easily see and use data from another source. This MuleSoft video describes it as a "server" retrieving data from another application, such as a corporate database.
Why is it necessary? MuleSoft presents a hypothetical scenario in which a large company must extract data from multiple sources in a single application. Assembling these sources manually would be very tedious. When using the MuleSoft Anypoint platform, however, each element is displayed as a virtual API referring to each source. These APIs can easily be used or even assembled into a new application, which itself becomes another API.
Impressive customer list
You can see how this could save big business from big headaches. As companies have become increasingly complex with a large number of software applications and a large number of applications, integrating all of these tools can be daunting. Moreover, in today's world, speed and agility are essential. Anypoint allows integrations and iterations to be much freer and easier, and saves considerable time.
MuleSoft's impressive customer list of more than 1,000 customers in more than 60 countries reinforces these benefits. More than 30 customers pay MuleSoft more than $ 1 million a year. Among the big names are AT & T, Netflix, Tesla, Coca-Cola and Accenture.
Its "net retention rate in dollars" is 117%, which means that the company has not only been able to retain its customers, but also sell them at higher prices.
Growth rate and addressable market
Despite the impressive list of customers, MuleSoft is still relatively small. Revenues for 2016 were only $ 188 million, while growth was impressive at 70%. The company is still not profitable because it has aggressively invested in sales and technology, but the bottom line is improving. The net loss attributable to common shareholders was $ 59 million in 2016, which is greater than the $ 65.4 million recorded in 2015. Free cash flow was negative by $ 7.2 million. dollars, much better than the $ 48.6 million recorded in 2015.
MuleSoft estimates that its total potential market is $ 29 billion, well below its current revenue of $ 187 million. The company calculates its opportunity by "identifying the number of companies in the world in all sectors based on certain data independent of the sector ... segmented by cohorts according to the annual turnover." We then multiply the number of companies in each cohort by our average annual contract value of underwriting and support contracts by cohort ".
As MuleSoft already has a number of large customers, I am skeptical about the remaining opportunity, but I agree that the company's addressable market looks much larger than its current revenue.
Is it time to buy?
There is no doubt that this impressive company seems to be a pioneer of application network technologies. However, in its S-1 filing with the SEC, the company lists potential competitors in traditional IT integration, including IBM, Oracle, and TIBCO, as well as smaller API companies such as Apigee, which has just to be acquired by Google.
If MuleSoft starts to prosper, it is likely that some of these well-funded competitors will come up with a competing solution, or even develop one.
An advantage of MuleSoft is that the APIs created on the Anypoint platform will no longer be accessible to a customer if it cancels a subscription. Therefore, I think there are probably high switching costs that can maintain high retention. The retention rate is the key to monitoring the future.
Still, the company trades more than 15 times its sales, and I am wary of recent purchases. For the moment, MuleSoft is too expensive for my taste. However, I am impressed by the company, its product and its CEO, Greg Schott, and I definitely keep it on my watchlist for a better entry point.
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