Venture

Guidewire Hits The Public Market Running; Shares Jump 30% In Early Trading

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While there were some big IPOs in 2011, Zynga and Groupon among them, overall it was a disappointing year for IPOs. Will 2012 be any different? As the first tech IPO of the new year, Guidewire Software certainly hopes so. Back in September, the insurance software company joined MobiTV, Angie’s List, Brightcove, and Jive, filing its S-1, announcing plans to raise up to $100 million and to sell approximately 7.5 million shares at $10 to $12 per share, in advance of its IPO on the New York Stock Exchange.

Guideware ended up exceeding its initial targets, pricing its IPO yesterday above its target range at $13 a share, selling 8.85 million shares and raising $115 million. The company has officially begun trading on the NYSE this morning under the symbol “GWRE” — after granting underwriters a 30-day option to purchase up to 1.3 million additional shares of common stock to cover over-allotments, if any — and again proceeded to beat expectations. Guidewire stock jumped to $16.75 upon its first trade, up 29 percent. Since, it has gone as high as $18, and currently sits at around $17.25 per share.

Founded in 2001, the San Mateo, California-based company is a software vendor for insurance companies that provide property, casualty and workers compensation to their customers. The company offers a web-based claims system that supports personal, commercial, and workers’ compensation insurance, and enterprise app for coordinating and executing transactions, as well as underwriting and policy administrations systems for these carriers. In other words, Guidewire has sought to enable insurance companies to replace their core legacy systems and automate their businesses through web-based software.

After struggling through not-so-profitable early years, the software company managed to turn a profit in the last two years, seeing its first quarterly profit in 2010. In fiscal 2011, revenues rose to $172 million, with the company seeing a net income of $35.6 million compared to $15.5 million in fiscal 2010 — although current financials are not as strong, as revenues have been on the decline in recent quarters.

That being said, sales increased 51 percent to $52.4 million in the most recent quarter, perhaps due to a loyal customer base, as Chief Executive Marcus S. Ryu told the WSY, “No customer has ever left Guidewire. That gives us a lot of security, and allows us to plan our budgeting and investing.” (Check out The Deal Pipeline’s interview with Ryu this morning here.)

While the company counts more than 100 customers, including major insurance companies like Nationwide, CNA and American Family Insurance, Guidewire believes that the available market for their software is far bigger. Gartner, for example, found that insurance carriers spent $4 billion on software and $10.5 billion on IT services in 2010, and many of those are still using outdated technology systems.

And in another good sign for Guidewire, according to the Wall Street Journal, two of its leading investors, U.S. Venture Partners and Bay Partners, have indicated that they are not interested in selling, but buying more stock — as many as 400,000 shares of common stock at its IPO price. (The WSJ actually reported that Battery Ventures, another of the company’s investors, has purchased an additional 400,000 shares of common stock.)

The company is seeing some strong adoption of its software, especially its claims system, and both profits and sales are on the rise. Thus, the immediate outlook for Guideware seems positive, so keep an eye on its stock this week — it, too, may be on the up-and-up.

And just in case you want to see a bunch of people clapping:

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