Rally Software Development: a post IPO Summary
August 12 2013
The Battle Road IPO Review is a monthly screen of more than 150 growth-oriented initial public offerings of the last six years. Each month we add new stocks to our Battle Road IPO Review coverage universe as companies become public and consensus estimates begin to emerge. Our monthly analysis features companies in the following six sectors: software, internet, hardware, consumer, business Services, and health sciences and healthcare IT. Each month we update our Exploration List, which is an idea-oriented sub-set of the coverage universe, which we determine based on qualitative and quantitative inputs.
New to our software sector universe is Rally Software Development (NYSE: RALY), a provider of cloud-based software for software development teams. Founded in 2001, and formerly known as F4 Technologies, the company changed its name to Rally Software Development in 2004. Based in Boulder Colorado, the company issued six million shares at $14 per share in an IPO led by Deutsche Bank and Piper Jaffrey on April 12, 2013.
Rally sells three versions of its software development system, which are generally priced based on the size of a software development team. Among the many features Rally offers are the ability to track code changes and bug fixes, as well as collaboration tools that help developers communicate and keep projects on track for completion. The company boasts over 1,000 customers and over 168,000 paid users, including many household brands, such as Intel, Disney, Oracle, eBay, McGraw Hill, Cisco, Microsoft, AOL, and HP.
The company sells its development system, primarily through a direct sales force, to a wide range of industries that develop custom software, including manufacturing, communications, energy, financial services, healthcare, insurance, retail, and transportation.
Along the way to its IPO, Rally Software, backed by numerous VCs, acquired several small software developers that offer features for its software solutions, including AgileZen in April of 2010, which added a visual project collaboration tool, which identifies bottlenecks in software development processes.
Roughly 77 percent of sales come from one-year subscriptions that are paid up front, with about 10 percent of sales stem from perpetual licenses, and the remainder from customer support. No single customer accounted for more than four percent of sales in the last year, and about 13 percent of sales come from markets outside the US.
To see how Rally Software Developments screens against its software peers within the Battle Road IPO Review software coverage universe, please contact: [email protected].