Guidewire (GWRE) to Commence Public & Senior Notes Offerings
Guidewire Software, Inc. GWRE recently announced its intention to raise funds through concurrent underwritten public offerings and convertible unsecured senior notes. In this regard, the company intends to offer concurrent public offering of $200 million of its common stock and $300 million in aggregate principal amount of its senior notes. The notes will mature in 2025.
The company will also provide a 30-day option to underwriters of equity offerings and note offerings to purchase up to an additional $30 million of common stock and $45 million of senior notes, respectively. This additional amount is intended to cover over-allotments, if any. Consequently, Guidewire will be raising $575 million in total with the equity and senior note offerings.
The company will disclose interest rate, conversion rate and other terms after determining the pricing of the offering. However, the company has stated that the interest payment will be semi-annual. The offering is subject to customary closing conditions.
J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are acting as joint book-running managers for both the offerings, along with a few other lenders.
Guidewire intends to use the net proceeds from the aforementioned offerings to pay the cost of the capped call transactions. It also intends to use the remaining of the net proceeds for general corporate purposes, strategic acquisitions and working capital.
Stock Performance & Cash Position
Shares of Guidewire have been steadily treading higher over the past year. Guidewire stock has gained 57.7% year over year, substantially outperforming the 39.5% rally of the industry it belongs to.
We believe that the company has a strong balance sheet, which will help it in capitalizing on investment opportunities and pursuing strategic acquisitions, further improving growth prospects. Moreover, the senior notes offering will lower Guidewire’s cost of capital, consequently strengthening balance sheet and supporting growth.
The company displayed an impressive cash position in recently reported second-quarter of fiscal 2018. The company had cash and cash equivalents and investments of $569.5 on Jan 31, 2018.Cash flow from operations in the second quarter was $47.7 million and free cash flow was $44.7 million.
Guidewire reported stellar second-quarter results and raised fiscal 2018 guidance. The company’s elaborate partnership programs, strong performance of subscription products and strategic collaborations are major growth drivers. The company’s Partner Connect Program has been implemented worldwide, benefiting its customers in the property and casualty insurance industry.
Guidewire’s acquisition strategies majorly contribute to growth. The acquisition of ISCS (now called Insurance Now), FirstBest (now called Guidewire Underwriting Management) and EagleEye Analytics (now known as Guidewire Predictive Analytics) are not only boosting revenue growth but also aiding to expand clientele.
Zacks Rank and Key Picks
Guidewire carries a Zacks Rank #3 (Hold).
Better-ranked stocks from the Business Software Services industry are Msci Inc MSCI, sporting a Zacks Rank #1 (Strong Buy) and Cognizant Technology Solutions Corporation CTSH, carrying a Zacks Rank #2 (Buy). In the broader technology sector, Nvidia Corporation NVDA sporting a Zacks Rank #1 is worth considering. You can see the complete list of today’s Zacks #1 Rank stocks here.
Msci, Cognizant and Nvidia have a long-term earnings growth rate of 10.00%, 12.60% and 10.25%, respectively.
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