Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and is a brief overview of key aspects of the offering. Before investing in our Series 1 common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes and the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Some of the statements in this prospectus constitute forward-looking statements. See the section titled “Special Note Regarding Forward-Looking Statements” for more information.RETAILMENOT, INC.
Overview
We operate the world’s largest digital coupon marketplace, connecting consumers with leading retailers and brands. In 2012, our marketplace featured digital coupons from over 60,000 retailers and brands, and according to our internal data compiled using Google Analytics, we had more than 450 million total visits to our desktop and mobile websites. As of December 31, 2012, we had contracts with more than 10,000 retailers, or paid retailers. We own and operate the largest digital coupon websites in the U.S. (RetailMeNot.com) and the U.K. (VoucherCodes.co.uk).
We are the leading digital coupon destination for consumers. In 2013, our marketplace featured more than 500,000 digital coupons in each month. Digital coupons are coupons, coupon codes and brand or category specific discounts made available online or through mobile applications that are used by consumers to make online or in-store purchases directly from retailers. Our websites, mobile applications, email newsletters, alerts and social media presence enable consumers to search for, discover and redeem hundreds of thousands of relevant digital coupons from retailers and brands. Our marketplace features digital coupons across multiple product categories, including clothing; electronics; health and beauty; home and office; travel, food and entertainment; personal and business services; and shoes. We believe our investments in digital coupon content quality, product innovation and direct retailer relationships allow us to offer a compelling experience to consumers looking to save money, whether online or in-store.
We believe we are a trusted partner to retailers and brands. During 2010, 2011 and 2012, our paid retailers realized over $0.2 billion, $1.2 billion and $2.4 billion, respectively, in sales attributable to consumer traffic from digital coupons in our marketplace. We estimate that during the five-day period from November 22, 2012, Thanksgiving Day, through November 26, 2012, commonly known as Cyber Monday, sales attributable to consumer traffic from digital coupons in our marketplace accounted for approximately 2% of retail e-commerce spending in the U.S. We provide our retailers and brands access to a large and engaged consumer audience. We help retailers and brands drive sales and acquire new customers online through our websites and mobile applications, and in-store by displaying a digital coupon on our mobile applications. We enter into contracts with retailers using a pay-for-performance model that enables us to have a mutually beneficial relationship with our paid retailers, as they pay a commission to us only after a sale is made. Retailers are able to identify consumer traffic referred by our websites and measure the sales they realize from it.
We believe our marketplace benefits from network effects. As more consumers use our marketplace, we are better able to obtain high quality digital coupons from retailers and brands, which in turn attracts a larger consumer audience. We seek to reinforce our position as the leading digital coupon destination by continuing to increase consumer traffic and growing the breadth and depth of our digital coupons, as well as our retailer and brand relationships.
Since we entered the digital coupon market in 2009, we have experienced significant growth. Our net revenues increased from $16.9 million in 2010 to $144.7 million in 2012, representing a 192.9% compound annual growth rate, or CAGR. In the same period, our net income increased from $2.3 million to $26.0 million, representing a 233.0% CAGR, and adjusted EBITDA increased from $6.8 million in 2010 to $70.4 million in 2012, representing a 221.7% CAGR. Our historic growth has been driven organically and through acquisitions. From 2011 to 2012, our consolidated net revenues grew from $80.4 million to $144.7 million. During this period, net revenues from RetailMeNot.com grew organically from $60.5 million to $113.4 million. This $52.9 million increase in net revenues from RetailMeNot.com represents 82.3% of our consolidated net revenues growth. During the three-month period ended March 31, 2013, we generated net revenues of $40.6 million, representing a 36.8% increase from the $29.6 million in net revenues we generated during the three-month period ended March 31, 2012. Net income for the three months ended March 31, 2013 increased to $7.0 million, representing an 11.9% increase from the $6.2 million of net income generated during the three months ended March 31, 2012. Adjusted EBITDA for the three months ended March 31, 2013 grew to $18.2 million, resulting in a 5.5% increase from the $17.3 million in adjusted EBITDA generated during the three months ended March 31, 2012. From the three months ended March 31, 2012 to the three months ended March 31, 2013, net revenues from RetailMeNot.com and VoucherCodes.co.uk collectively grew organically from $27.3 million to $37.5 million, respectively. This $10.2 million increase represented 92.7% of our consolidated net revenues growth. For further discussion regarding adjusted EBITDA, our use of this measure, the limitations of this measure and a reconciliation of adjusted EBITDA to net income, see the section titled “Selected Consolidated Financial and Other Data” on page 51.
In 2012 and the first three months of 2013, we generated 82.9% and 78.3% of our net revenues, respectively, in the U.S. and the balance in the U.K., France, Germany and the Netherlands. Effective March 1, 2013, we established operations in the Netherlands through the acquisition of Actiepagina.nl. As of March 31, 2013, we had 331 full-time employees and operations in the U.S., U.K., France, Germany and the Netherlands.
The below charts set forth the growth in our visits, net revenues, net income and adjusted EBITDA for the years ended December 31, 2010, 2011 and 2012:
Our Industry
We enable consumers to save money while shopping online and in-store, and help retailers to drive sales and acquire new customers. The retail industry is large. According to data compiled by Euromonitor International, the worldwide retail industry, excluding grocery retailers, totaled $7.5 trillion in 2012, of which $2.6 trillion was in the markets in which we currently operate. The following trends are driving our industry:
Consumers and retailers face various challenges that represent barriers to increased retail commerce activity, online and in-store.
Consumers face the following challenges:
Retailers face the following challenges:
Our Solution
We operate the world’s largest digital coupon marketplace, connecting consumers with leading retailers and brands. Consumers are able to visit a trusted destination that allows them to search for, discover and redeem digital coupons from leading retailers, online or in-store. We aggregate digital coupons from retailers, performance marketing networks, our large user community, our employees and outsourced providers. Retailers are able to drive sales and acquire new customers by effectively attracting and engaging a large audience of consumers who are shopping across multiple channels. Our solution enables retailers to better manage their customer acquisition spend and effectively measure their marketing ROI.
Solutions for Consumers
digital coupons made available through our marketplace to tell us if a digital coupon made available through our marketplace is valid or not and to submit comments about digital coupon content. Our merchandising team monitors the comments submitted by consumers for additional feedback on digital coupons, such as whether or not the description of the digital coupon contains an error, or is expired, and updates our digital coupon content accordingly.
Solutions for Retailers
Our Competitive Strengths
Global leader with scale and strong brands. According to comScore data, we are the largest web property focused on digital coupons as measured by unique visitors. Unique visitors are visitors who have visited one of our websites at least once in a given month. We believe that our strong brand recognition has allowed our marketplace to become the leading destination for consumers looking to save money on retail purchases. As a result, over 90% of traffic to our websites was generated from unpaid sources in 2012. In addition to RetailMeNot.com, our international brand portfolio includes VoucherCodes.co.uk in the U.K., Web.Bons-de-Reduction.com and Poulpeo.com in France, Actiepagina.nl in the Netherlands and Deals.com in Germany.
Trusted partner to leading retailers. In 2012, we maintained relationships with more than 10,000 paid retailers, including 367 of the top 500 retailers as ranked in the Internet Retailer 2012 Top 500 Guide, or the 2012 IR500. Additionally, our relationships with most of our top paid retailers are growing. Our top 500 paid retailers paid us, on average, total commission revenues of $235,544 in 2012, demonstrating growth from 2011, when we had paid relationships with 488 of these same retailers, with average total commission revenues of $121,523.
Network effects. As more consumers use our marketplace, we are better able to obtain high quality digital coupons from retailers and brands, which in turn attracts a larger consumer audience.
Strong technology platform and proprietary data. Our technology platform is designed to provide the reliability and security necessary to support a large and growing base of consumers, retailers and brands in our marketplace. As engagement through our marketplace increases, we are able to collect more proprietary data on consumer shopping behavior, which allows us to further develop and improve our marketplace in order to better serve consumers and offer more value and insight to our paid retailers. Additionally, our scalable technology serves as a basis to design and support innovative solutions and to further automate and standardize our processes.
Large community of actively engaged users. We leverage our user community’s passion for savings by allowing them to submit digital coupons to our marketplace and to rank and comment on the digital coupons they find the most compelling and relevant, thereby enhancing the content made available to our broad consumer audience. We believe that this engagement by our consumers increases the quality of our content, while lowering our costs to curate and moderate that content ourselves.
Attractive business model with compelling value proposition. In the last three years, we have achieved a compelling combination of growth and profitability. From 2010 to 2012 our net revenues, net income and adjusted EBITDA grew at CAGRs of 192.9%, 233.0% and 221.7%, respectively. We believe our strong financial performance is in part a result of our mutually beneficially relationship with our paid retailers: we generate revenues on a commission basis when retailers complete a sale and consumers save money. For further discussion regarding adjusted EBITDA, our use of this measure, the limitations of this measure and a reconciliation of adjusted EBITDA to net income, see the section titled “Selected Consolidated Financial and Other Data” on page 51.
Our Growth Strategies
Our objective is to expand our position as the largest digital coupon marketplace, connecting consumers with leading retailers and brands. Our strategies to achieve this goal include:
Risks Affecting Us
Our business is subject to a number of risks that you should understand before making an investment decision. These risks are discussed more fully in the section titled “Risk Factors” following this prospectus summary. Some of these risks are:
Corporate Information
We were organized in May 2007 under the name smallponds LLC, which we incorporated into a corporation in September 2007, and are headquartered in Austin, Texas. Our principal executive offices are located at 301 Congress Avenue, Suite 700, Austin, Texas 78701. Our telephone number is (512) 777-2970. Our corporate website address is www.retailmenot.com. The information contained in, or that can be accessed through, our website is not part of this prospectus.
RetailMeNot, VoucherCodes.co.uk, Deals2Buy, Web.Bons-de-Reduction, Poulpeo, Deals.com and Actiepagina.nl are trademarks or logos appearing in this prospectus owned by RetailMeNot, Inc. or one of its subsidiaries. All other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.