MW ServiceTitan's IPO growth story wins over Wall Street with huge market opportunity in building trades

By Steve Gelsi

At the closing bell, the IPO was up 42% over its $71 price after the company touted potential upside in the $1.5 trillion trade-services business

Building trades such as roofing, renovations and fire safety present a massive opportunity for ServiceTitan Inc.'s growth, and the initial public offering from the provider of billing, dispatch and payment software has apparently won over Wall Street.

At the closing bell on Thursday, ServiceTitan's (TTAN) IPO ended its first trading day at $101 a share, flat with its first trading price but up more than 42% over its offering price of $71 a share. During the session, the stock hit a low of $100.05 a share and a high of $105 a share.

Signs of a strong debut came as lead underwriters priced the IPO at $71 a share, above its estimated range of $65 to $67 a share, for its first day of trading on Thursday. With 8.8 million shares in the deal, ServiceTitan raised about $625 million in its IPO.

Also read: ServiceTitan raises IPO price on deal demand and appetite for new issuers

Wall Street investors love growth, and ServiceTitan offers the potential for plenty of it.

The company's revenue in the 12 months that ended July 31 rose 24% to $685 million.

But ServiceTitan sees room for much more expansion in a business that has historically been underserved by technology.

The company started out with a focus on plumbing, electrical, heating and air conditioning, garage doors, pest control and landscaping, but it sees more opportunity as a back-office service provider for other sectors.

"We believe the addressable market for technology for the trades is large and significantly underpenetrated," the company said in its IPO prospectus. "Our deep domain expertise, as well as the depth and breadth of our platform, position us to win in this attractive market opportunity."

All told, customers in the U.S. and Canada spend about $1.5 trillion a year on trade services.

ServiceTitan estimates that it is currently addressing about $650 billion of that total market, which includes construction of homes and buildings as well as servicing of existing residences and commercial buildings.

If the company captures an average 2% of the gross transaction value of its customer base, it estimated that its serviceable market opportunity is about $13 billion.

"We believe that this opportunity will continue to grow as we continue to expand our platform to reach trade spend we currently do not fully service," the company said.

It's looking to boost its presence in trade verticals and businesses focused on heavy commercial and construction work, as well as down-market trades businesses with five or fewer employees.

While ServiceTitan faces competition in the marketplace, the playing field is large.

"ServiceTitan's public debut is a great achievement for the company, but more significant is the statement it makes about the long-underappreciated home-services category and the sheer size of the opportunity," said Sam Pillar, chief executive of Jobber, a ServiceTitan competitor.

While ServiceTitan has booked rapid revenue growth, it has yet to turn a profit, but its net losses are coming down.

For the six months that ended July 31, ServiceTitan's net loss was $91.7 million, down from about $104 million in the year-ago period.

During the same period, its revenue rose to $348.2 million from $276.1 million.

Goldman Sachs, Morgan Stanley, Wells Fargo Securities and Citigroup led the large banking team for ServiceTitan's IPO.

-Steve Gelsi

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December 14, 2024 08:46 ET (13:46 GMT)

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