Notes from the Guidewire Software S1 IPO Filing

Guidewire Software, Inc just released their S-1 IPO filing to raise a proposed $100M. Guidewire provides software for property and casualty insurance companies to run their back-office including underwriting, policy administration, claims management, and billing. Basically, behind-the-scenes software necessary for insurance companies to operate. Now it isn’t as sexy as marketing automation software, but it is a critical component of business.

Here are some notes from the Guidewire Software S-1 IPO filing:

• Average initial client contract length is five years (pg 1)
• Factors driving the industry: (pg 3)
  Aging IT infrastructure and increasing scarcity of experienced workforce
  Increased business risk due to continued reliance on inefficient processes
  Financial loss due to fraud and error in the claims process
  Changing insurance customer expectations
  Continued pressure on underwriting margins
• Growth strategy: (pg 3)
  Continue to innovate and extend our technology leadership
  Expand our customer base
  Upsell our existing customer base
  Deepen and expand strategic relationships with our system integration partners
  Increase market awareness of our brand and solutions
• Revenues: (pg 6)
  2008 – $70.6M (losses of $16.8M)
  2009 – $84.7M (losses of  $10.9M)
  2010 – $144.6M (profits of $15.5M)
  2011 first nine months – $121.4M (profits of $33.4M — $24.4 related to a tax issue, so really $9M in profits)
• Q2 and Q4 are best quarters due to fiscal year end with sales rep incentives and calendar year end due to buying patterns (pg 10)
• Some customers get to buy a perpetual license at the end of the contract term (pg 10) — they aren’t a SaaS business
• Top 10 customers accounted for 38% of revenue (pg 10)
• Services revenues were 48% of revenues for this year (pg 11) — that’s extraordinarily high
• Accenture is suing Guidewire over patents (pg 12)
• Product implementation takes 6 – 24 months (pg 15)
• Products are typically deployed in a customer’s environment (pg 25)
• As of April 30, 2011, they had 610 employees, including 93 in sales and marketing, 270 in services and support, 190 in research and development and 57 in a general and administrative capacity (pg 92)
• Co-founders own between 3.9% and 5.1% of the fully diluted equity (pg 127)

This S-1 IPO filing for Guidewire Software represents a fast growing traditional enterprise software company that is doing great. It’s especially impressive to see a company grow revenues so fast while barely increasing sales and marketing expense.

What else? What did you think of the Guidewire Software S-1 IPO filing?