Why is OpenTable going public this week while most other internet companies are struggling to survive? A look through its prospectus shows how much mileage the restaurant-reservations site has gotten from having an e-commerce revenue stream at a time when the advertising market is being crushed.
–Stable, Recurring Revenue: OpenTable gets more than half of its revenue from software that restaurants pay for that allows diners to make reservations online. OpenTable’s number of restaurant partners increased to 10,645 in the first quarter 2009 from 8,404 in 2008, indicating subscriptions are growing. (There was no information on whether the average subscription price increased or decreased over the past year; the company didn’t respond to requests for comment.)
Subscription revenue (especially business-to-business, not consumer based) tends to be more stable than advertising revenue because it is typically part of longer-term contracts. While OpenTable lets restaurants cancel their subscriptions, many tend to give a subscription product some time before pulling the plug; ad budgets, by contrast, can fluctuate from quarter-to-quarter or even week-to-week for many small local advertisers.
–Improving Margins. Operating income margins improved to 5 percent during the first quarter of 2009, up from 1 percent during the first quarter of the year earlier — all while the company increased its headcount to 300 employees from 248.
Update: According to an SEC filing, the price range for the IPO is being increased to $16 to $18 per share from $12 to $14, which would net the company about $6 million more in proceeds.