Anti-virus software maker AVG Technologies NV filed to raise up to $125 million in an initial public offering, looking to cash in on the increased demand for technology IPOs.
AVG, which is known for its free suite of anti-virus products, monetizes its large user base through targeted advertisements and by driving traffic to online search companies such as Google Inc and Yahoo Inc.
"The whole 'freemium' model has been effective in gaining subscribers, so their strategy seems to be less focused on growing the subscription revenue - if you look at the growth rate year over year." William Blair & Co analyst Jonathan Ho said.
Under the 'freemium' model, a company provides a free basic service and charges for more advanced features.
For the first nine months of 2011, AVG's subscription revenue rose marginally to $130.1 million, while its platform-derived revenue almost doubled to $68.02 million.
The Netherlands-based company, which is backed by Intel Capital, Grisoft Holdings and private equity firm TA Associates, had 106 million active users as of September 30, 2011, according to the filing. But only 15 million users paid for its services.
Analyst Ho, who follows internet security companies such as Symantec, said demand for security software stocks was on the rise given some of the recent concerns related to widespread hacking.
"I think that (there is) strong demand for security, given the recent cyber-security headlines, and that's giving the folks (a) chance to take advantage of the high valuations these stocks are attracting."
Friday's filing comes less than a month after Avast Software BV, another Europe-based anti-virus software maker, filed for a $200 million IPO.
Earlier last year, data security firm Imperva Inc raised $90 million in its IPO. The stock has climbed over 66 percent since its debut.
"The momentum in the IPO market in the U.S. and the demand for such deals is much higher than Europe and they will definitely achieve a much higher valuation here than in the European market," Josef Schuster, founder of IPOX Schuster, a fund that specializes in investing in newly public companies, told Reuters.
AVG reported a net income of $99.7 million on total revenue of $198.1 million for the nine months ended September 30.
Yahoo accounted for 21.6 percent of the AVG's total revenue in 2010, while Google contributed less than 10 percent to its revenue in the fourth quarter of the same year, the filing said.
AVG, which plans to list its shares on the New York Stock Exchange under the symbol "AVG," competes with Symantec and McAfee, which was acquired by Intel Corp.
The book-running managers for the AVG offering are Morgan Stanley & Co, J.P. Morgan Securities and Goldman Sachs & Co.
The proposed offering is expected to consist of ordinary shares to be sold by AVG and certain selling shareholders. The filing did not reveal the number of shares to be sold in the IPO or their expected price.
The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO can be different.
(Reporting by Brenton Cordeiro and Himank Sharma in Bangalore; Editing by Sriraj Kalluvila, Maju Samuel)