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Based in Luxembourg, GFI Software (Pending:GFIS) scheduled a $79 million IPO on the NYSE with a market capitalization of $491 million at a price range midpoint of $13 for Friday, November 22, 2013.

Ten operating company IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.

F-1 filed November 8, 2013

Manager, Joint managers: JPMorgan, Credit Suisse, Jefferies

Co-Managers: Stifel, BMO Capital Markets, Needham & Co., Oppenheimer & Co.

Summary

GFIS is a global provider of collaboration, Managed Service Provider (MSP) and IT infrastructure software solutions designed for small and medium-sized businesses, or "SMBs."

GFIS's solutions enable SMBs (defined as organizations with fewer than 1,000 employees) to easily manage, monitor, secure and access their IT infrastructure and business applications.

For the September 2013 quarter compared to the year earlier quarter, sales were up 41% to $43 million, gross margin was 84% (very high), and GFIS finally showed a profit, a 7% (of revenues) profit of $3 million.

Valuation

Accumulated deficit

($620)

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing June 6 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

GFI Software S.A.

$559

3.3

46.6

-21.5

-1.9

14%

Glossary

Conclusion

GFIS has run up a large ($630) million deficit. However, annualizing the September '13 quarter gives GFIS a P/E of 47. If the fourth quarter is indeed seasonally higher, then the stock could move higher from the IPO price.

The rating on GFIS is positive, but it probably needs to be priced down from mid-range.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business

GFIS is a global provider of collaboration, Managed Service Provider and IT infrastructure software solutions designed for small and medium-sized businesses, or "SMBs."

GFIS's solutions enable SMBs (defined as organizations with fewer than 1,000 employees) to easily manage, monitor, secure and access their IT infrastructure and business applications. SMBs currently face many challenges, including increasing IT complexity, intensifying security risks and greater workforce mobility.

GFIS addresses these challenges with simple yet powerful software solutions that are easily deployed and deliver significant value to its customers. GFIS's high-volume go-to-market model simplifies the process for SMBs to discover, evaluate, procure and deploy GFIS's solutions.

Customer base

GFIS's customer base has grown from over 89,000 customers as of December 31, 2008 to over 280,000 customers in over 180 countries as of June 30, 2013 and is highly diversified, with no single customer accounting for greater than 1% of GFIS's total Billings in 2010, 2011 or 2012 or in the first six months of 2013.

Business model

GFIS's differentiated business model and global distribution platform enable it to cost-effectively sell to SMBs in every region of the world. GFIS operates a scalable, data-driven online marketing model with a multi-channel sales strategy targeted at its SMB customers.

Marketing & Sales

GFIS uses highly focused marketing campaigns to drive prospective customers to its websites and to its partners. GFIS tracks and analyzes large volumes of data from its systems to improve the visibility and effectiveness of its sales and marketing activities.

In addition, GFIS reaches SMBs without dedicated IT staff through its MSP customers. GFIS leverages blogs, social media and custom content sites to create online communities that enable existing and prospective customers to connect directly and share information. GFIS's customers purchase its products through its e-commerce sites, inside sales team, and channel partners.

As a result, GFIS is able to cost- GFIS effectively achieve high volumes of low price point transactions. GFIS offers full-featured, free versions of its products for a designated trial period, an approach that allows prospective customers to experience the full range of benefits of GFIS's solutions prior to making their purchase and distinguishes GFIS from the high-cost, up-front sales approach employed by many enterprise software vendors.

Seasonality

GFIS experiences sequential increases in billings during the fourth quarter as a result of a practice of releasing major upgrades and new versions of products in the fourth quarter.

Intellectual Property

GFIS holds two patents registered in the United States and has filed one additional patent application.

Competition

In the Managed Service Provider software solutions market, GFIS competes against five key competitors: Kaseya, LabTech Software, Level Platforms (acquired by AVG), N-able Technologies (acquired by Solarwinds) and Continuum.

Certain of GFIS's other competitors and the products against which its products compete include Citrix Systems' online services, including GoToMyPC and GoToMeeting, LogMeIn, WebEx (acquired by Cisco Systems), Microsoft, Qualys, Inc., Proofpoint, Inc. and various other vendors.

5% stockholders

Entities affiliated with Insight Venture Partners 75.03%

Entities affiliated with Bessemer Venture Partners 12.17%

Jeffrey Horing 75.03%

Robert P. Goodman12.18%

Use of proceeds

GFI Software expects to net $69 million from its IPO. Proceeds are allocated as follows:

  • $20.4 million to repay class B preferred shares.
  • remaining net proceeds for working capital and other general corporate purposes, including financing GFIS's further growth.

Expenditures for future growth could include developing new products, expanding GFIS's sales force in international markets and hiring additional personnel to enable it to bring products to market sooner. GFIS may use a portion of its net proceeds to acquire or invest in other businesses, technologies or products.

Disclaimer: This GFIS IPO report is based on a reading and analysis of GFIS's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: GFI Software