OpenTable, the online restaurant reservation site that was founded in 1998, is hoping to raise as much as $40 million in an IPO, according to a filing with the SEC (embedded below). The prospectus offers a detailed look at the company’s finances and operations.
Revenues through the nine months ended September 30, 2008 were $41.3 million, a 41 percent increase from the same period in 2007. The company makes money from the restaurants, which pay both subscription fees (54 percent of revenues) and reservation fees for each diner that shows up through the system (42 percent of revenues). It also makes a small amount on installation fees (4 percent of revenues).
The company lost 149,000 in net income, but turned an operating profit of 261,000. That is a rather slim margin, however, it appears that the company was spending as much as it could to grow and take market share, especially internationally where it is just getting started. Operating income in North America for teh period was $6.8 million, whereas the company took an operating loss of $6.5 million internationally. Those are startup costs, since it is just getting its foot in the door at restaurants outside the U.S. and Canada.
As of September 30, 2008, OpenTable offered reservations at 9,709 restaurants worldwide, 8,788 of which were in North America It seated 25.5 million diners the first nine months of last year, up 45 percent. It employed 292 people, and had $17.4 million in cash.
I have a feeling any IPO money will go towards international expansion. A successful IPO would be a coup for CEO Jeff Jordan, a former eBay executive who is well regarded in Silicon Valley.
Erick-
Heads up…spell check wasn’t used:
“Operating income in North America for teh period was $6.8 million, whereas the company took an operating loss of $6.5 million internationally.”
Other than that, interesting article
What % does the $40 million get you?
what I need
freefreebiefinder.com
OpenTable once lost a reservation I had made for me and my grandparents, who were in town visiting from Iowa. The hostess at the restaurant tried to make it up to us, but we weren’t seated and we had to drive around Fremont looking for a new place to eat. I can’t believe this company is actually gonna go public. EPIC FAIL.
Taking your parents to eat in Fremont? EPIC FAIL
Lmao – agreed.
I second the Epic Fail on Fremont.
It was has grandparents, not parents. Fremont is fine for Grandparents.
AFAIK, Fremont has more Afgan restaurants that any other other Bay Area city. Some are good, others mediocre.
–rj
I hope you aren’t serious that you think your one data point of a bad experience is relevant. I mean, this might shock you, but Microsoft occasionally ships buggy software, and even the Google gods has been known to make the occasional mistake.
I’m a delighted OpenTable user, and they’ve provided a welcome service here in NYC. But I don’t see myself ever become an investor. I just don’t see them as having a spectacular growth opportunity.
Shit happens buddy. Build a bridge.
The funding data for opentable seems off. I believe they had raised collectively north of $60 million.
That said, I am surprised they are going public now, the rumors for them going public has been around for 2 years now. This means they could not get a good deal in VC market, and are forced to go public.
Be interesting to see what sort of market cap they’ll get. When the ipo rumors first came out the number that I had heard opentable was hopping for was around $1 billion in valuation. It’s a different world now.
Capital Raised?
Convertible A – $07m
Convertible B – $15m
Common Stock – $59m
Total – $81m
from SEC Application
“When the ipo rumors first came out the number that I had heard opentable was hopping for was around $1 billion in valuation. It’s a different world now.”
Yeah, not too many IPOs for breakeven companies at 25x revenue these days.
I’d be curious to see if this is the new Silicon Valley reality. Instead of raising Series B or Series C going the IPO route. Strikes me as bizarre and counter-productive. Who would want to deal with SarbOx?
Startups based on MS technologies are recession – proof.
I use these guys all the time in Chicago. Great service that could use a new logo.
Kind of the xpedia of the restaurant business.
OpenTable
Its going to be an interesting test of the IPO market. Valuations are getting crushed daily especially in the consumer sector. Wonder what investment bank is doing the deal?
Merrill Lynch aka Bank of America
I don’t understand how they gonna go public.
Power to them! Id love to be in on this deal.
Operating income in North America for teh period was $6.8 million, whereas the company took an operating loss of $6.5 million internationally. Those are startup costs, since it is just getting its foot in the door at restaurants outside the U.S. and Canada.
==
This is technically incorrect. Investments are not part of the income/loss statement (only the depreciations of these investments are).
I have zero affiliation with the company but I think you are suppose to extrapolate from the “sales and marketing” line. I’m guessing they easily cut operation expense to be profitable but right now reinvesting back into growth. Just my analysis.
if they can do it, i will be good for the rest of us!!
They really find a great time to go public, here in NYC, restaurants are closing right and left. The bad economy is going to dramatically change the high end restaurant business as there are just too many of these and many will close, and they are the ones that use open table the most. Its a service that restaurants and people use alright (not me), but it doesn’t play well in this economy for an investment.
Feels like a last resort. Imminent record restaurant market contraction as world economy slows puts significant downward pressure on growth velocity and margins. Was another VC round an option? Why open the kimono into this perfect storm? Not to denigrate building a $40M+ business around taking reservations – an amazing accomplishment.
Fewer restaurants means OT covers a greater percentage of the remaining ones.
Are you kidding with 54% of revenue and 42% of revenue? What restaurant can afford to give that up?
Oh jeez, you’re not actually thinking the restaurant gives up 54% of the revenue PER RESERVATION, are you?
The 54/42/4% is the breakdown of the sources of Opentable’s revenue sources. 100% total, get it?
@Jim: He means percentage of OpenTable’s revenue, not the restaurant’s.
From their operational data one can see that they are sending 10 clients per day to an average restaurant, a three fold increase compared to 5 years ago.
@man, @stephen:
I think you’re oversimplifying this. Even if the restaurant industry was cut in half (which won’t happen), OpenTable still has plenty of room for expansion. In a contracting economy, my bet is that more and more restaurants will use them for the added distribution and revenues.
According to the Restaurant Industry of America, there are nearly 1,000,000 restaurants in the US ( http://tinyurl.com/bgpzty )
Opentable currently serves only ~9,000 of them!
I’d say that’s lots of opportunity – even accounting for fast food chains, which are currently outside the OT scope.
-G
They do not take reservations at fast food restaurants – so you are over estimating the size of market….
Many good operators think they have successful enough operations without being members of Opentable and have no desire to pay commision on reservations from their own web site.
“We target our solutions towards both reservation-taking restaurants and diners. We believe based on our internal estimates that there are approximately 30,000 reservation-taking restaurants in North America that seat approximately 600 million diners through reservations annually, though this number fluctuates with economic and other conditions.”
From SEC Application
Let’s hope Opentable can make it to the public markets. The tech world needs an IPO badly!!!
50M run rate after ten years in biz? sounds awful.
This looks like a real winner in my book. They’ve been at it 10 years and only have lost $57MM of their investor’s money. Terrific! And it sure makes sense to file now. And why would Jordan leave eBay for this at 4% and $360k per year? great judgement all around.
They may have better luck getting tarp money.
Questions –
How well are Opentable doing in Europe? I suppose this a “proof of concept” in other major trading regions of the world.
How much has Opentable spent to acquire 500 customers in the UK?
What is Opentable’s “churn” rate in the UK?
Can it be assumed some pretty mature competitors in other parts of the world will simply roll over and die because Opentable has entered their market? look at the rapid expansion of Livebookings and Toptable in the UK, Europe and Scandinavia.
Can we be sure that the US success can be easily replicated throughout the world?
Will be interesting to see where this goes?
Opentable rocks – I haven’t called in to make a dinner reservation in years — no more “Can I put you on hold?” I use OpenTable at least once/week and have never had any real problem. It’s also a great solution for travelers – both domestically and internationally. For example, we were in London last Christmas and asked our hotel concierge for a dinner recommendation. We walked by the place that day and it looked pretty dreadful. On a whim, we tried OpenTable – and found a GREAT restaurant right around the corner. A few ‘bad’ points – their mobile version is lame and if you make a reservation through the restaurant website (using OpenTable) instead of via http://www.OpenTalbe.com – you don’t receive the dining points (which is another cool feature).
Anyone else wondering why the “Technology” numbers are trending so damn linearly with the revenue numbers, wtf? This is a wack CFS.
They need to better manage this opportunity, 12 mil in operating expenses, what the hell do they do, send a runner out from the main office like pony express to make your reservation for you?
Their UI is terrible. I just looked for reastaurants near me, and it gave me a list of about 100 cities in my area, IN ALPHABETICAL ORDER. Some of them were township names, some were city names. They need to use geography. Also, when I chose a city (which had (2) restaurants indicated beside it) it did not list the restaurants on the next page. It asked me to enter search criteria to qualify where I was going. It’s 2 restaurants… list them!
I love Open Table – one of my most-used sites. I hope they do well in this.
It would be interesting to see what their numbers are for their new iphone app.
I think they have a great concept, it is just a matter of time until every restaurant owner realizes that. The great thing about it is that once they sign up with a restaurant, it would be very hard for a possible competitor to enter that market.
They’ve never been profitable. Would be interesting to have a look at road show pitches – what’s the point?
As a former OT employee I’d say this is great news..not a perfect company but very well run and Jeff Jordan is a great, genuine guy and I hope them all the best
opentable should acquire tablexchange.com to add another revenue stream. i’m big fans of both
OpenTable has had a monopoly in the online restaurant reservation sector for a decade and hasn’t been able to find a way to make it profitable.
Also, 9,000 North American restaurants is a ridiculously small percentage, probably under 5% of restaurants, for a company without any relevant nationwide competitors. Talk about EPIC=FAIL.
The only reason they are going public is that they can’t get another VC dime without giving away the whole company. It’s IPO or bust.
Right now, OpenTable pays diners in points to make reservations through their website.
As per the S-1, “…The standard award is 100 points per reservation, but diners can earn 1,000 points for reservations during featured times … When a diner accumulates a minimum of 2,000 points, he or she may redeem them for a $20 Dining Cheque. Every 100 Dining Points is equal to one dollar…”. In other words, OpenTable pays $1 or more to loyal diners who book through their website.
Now, that $1 is what OpenTable charges restaurants per seated diner. See http://www.thes...backed-ipo-2009 and several other stories on the web. So, it is unclear to me how they make lot of money by seating diners. They do get $0.25 from the restaurant if the restaurant just uses their software to manage call-in reservations.
To me, Opentable looks an enterprise software business targeted at high-end restaurants. And that is OK. Though I have never used the service myself, I have friends who really love the service.
I’ve posted a very in-depth analysis of the SEC report here: http://blog.jwe...rant-marketing/
@DaTruff
OpenTable is in fact very profitable in north america, making $6.7 profit on $39M revenue. That’s a 17% margin! (see page 38). It’s only because they’re pouring all their money into a international expansion (and heavily subsidizing installation equipment to try to get traction) that they’re operating at a loss.
And btw, there are 30,000 restaurants that take reservations. So they’ve got 9000 = 30% of the market.
It’s all on my post: http://blog.jwe...rant-marketing/
The software includes a comprehensive CRM component which automatically builds a customizable database for sites to leverage against. With customized codes, which can be applied to multiple, or few, customers they can tailer searches around specific events. They`can also search by frequency of visits etc. This cannot be discounted, as it can be as valuable as the site makes it to be. I’ve found sites that have frequent events are best suited to take the greatest advantage.
This “comprehensive CRM component” is not a unique selling point. Many other software solutions for the restaurant reservation market includes integrated CRM and e-marketing.
Online restaurant reservation!!!
It’s a great idea; I will definitely try to do something of this kind India.
What a terrible homepage. It looks like a parked domain.
Sad, just plain sad, VC wanting to cash out. OpenTable’s invested a lot in their reservation system, but MS Dynamics GP their accounting system will not get them to the next level… $13/share forgetta about it!
I have zero affiliation with the company but I think you are suppose to extrapolate from the “sales and marketing” line. I’m guessing they easily cut operation expense to be profitable but right now reinvesting back into growth. Just my analysis.
Online restaurant reservation!!!
It’s a great idea; I will definitely try to do something of this kind India.