Guidewire (NYSE: GWRE) today announced its financial results for
the fiscal quarter ended October 31, 2022.
“We are off to a solid start to the fiscal year with first
quarter ARR, revenue, and profitability all exceeding our guidance
range, driven by subscription revenue growth and improved
subscription and support gross margins,” said Mike Rosenbaum, Chief
Executive Officer, Guidewire. “We continued to build on the
momentum and enthusiasm for our cloud platform with record
in-person attendance at our annual customer conference,
Connections.”
First Quarter Fiscal Year 2023 Financial Highlights
Revenue
- Total revenue for the first quarter of fiscal year 2023 was
$195.3 million, an increase of 18% from the same quarter in fiscal
year 2022. Subscription and support revenue was $99.1 million, an
increase of 25%; services revenue was $55.3 million, an increase of
18%; and license revenue was $41.0 million, a decrease of 2%.
- As of October 31, 2022, annual recurring revenue, or ARR, was
$673 million, compared to $664 million as of July 31, 2022. ARR
results for interim quarterly periods in fiscal year 2023 are based
on actual currency rates at the end of fiscal year 2022, held
constant throughout the year.
Profitability
- GAAP loss from operations was $74.6 million for the first
quarter of fiscal year 2023, compared with $65.4 million for the
same quarter in fiscal year 2022.
- Non-GAAP loss from operations was $35.9 million for the first
quarter of fiscal year 2023, compared with $28.7 million for the
same quarter in fiscal year 2022.
- GAAP net loss was $69.3 million for the first quarter of fiscal
year 2023, compared with $51.3 million for the same quarter in
fiscal year 2022. GAAP net loss per share was $0.83, based on
diluted weighted average shares outstanding of 83.3 million,
compared with $0.62 for the same quarter in fiscal year 2022, based
on diluted weighted average shares outstanding of 83.2
million.
- Non-GAAP net loss was $9.9 million for the first quarter of
fiscal year 2023, compared with $18.1 million for the same quarter
in fiscal year 2022. Non-GAAP net loss per share was $0.12, based
on diluted weighted average shares outstanding of 83.3 million,
compared to Non-GAAP net loss per share of $0.21 for the same
quarter in fiscal year 2022, based on diluted weighted average
shares outstanding of 83.2 million.
Liquidity and Capital Resources
- The Company had $0.9 billion in cash, cash equivalents, and
investments at October 31, 2022, compared to $1.2 billion at July
31, 2022. The Company used $87.4 million in cash from operations
during the first quarter of fiscal year 2023.
- During the first quarter of fiscal year 2023, the Company
authorized a $400 million share repurchase program. As part of this
program, the Company entered into an accelerated share repurchase
agreement (“ASR”) to repurchase an aggregate of $200 million of
Guidewire’s outstanding shares of common stock. Under the terms of
the ASR, the Company received an aggregate initial share delivery
of 2,581,478 shares, with the remainder expected to be delivered
upon the final settlement under the ASR, which is scheduled to
occur no later than the third quarter of its fiscal year 2023, upon
completion of the repurchases.
Business Outlook
Guidewire is issuing the following outlook for the second
quarter of fiscal year 2023 based on current expectations:
- ARR between $695 million and $700 million
- Total revenue between $221 million and $226 million
- Operating income (loss) between $(41) million and $(37)
million
- Non-GAAP operating income (loss) between $(4) million and $0
million
Guidewire is issuing the following updated outlook for fiscal
year 2023 based on current expectations:
- ARR between $745 million and $760 million
- Total revenue between $886 million and $896 million
- Operating income (loss) between $(176) million and $(166)
million
- Non-GAAP operating income (loss) between $(28) million and
$(18) million
- Operating cash flow between $50 million and $80 million
Conference Call Information
What:
Guidewire First Quarter Fiscal Year 2023
Financial Results Conference Call
When:
Tuesday, December 6, 2022
Time:
2:00 p.m. PT (5:00 p.m. ET)
Live Call:
(877) 704-4453, Domestic
Live Call:
(201) 389-0920, International
Replay:
(844) 512-2921, Passcode 13734587,
Domestic
Replay
(412) 317-6671, Passcode 13734587,
International
Webcast:
http://ir.guidewire.com/ (live and
replay)
The webcast will be archived on Guidewire’s website
(www.guidewire.com) for a period of three months.
Non-GAAP Financial Measures and Other Metrics
This press release contains the following non-GAAP financial
measures: non-GAAP gross profit, non-GAAP income (loss) from
operations, non-GAAP net income (loss), non-GAAP tax provision
(benefit), non-GAAP net income (loss) per share, and free cash
flow. Non-GAAP gross profit and non-GAAP income (loss) from
operations exclude stock-based compensation, amortization of
intangibles, the COVID-19 Canada Emergency Wage Subsidy benefit,
and acquisition consideration holdback. Non-GAAP net income (loss),
non-GAAP tax provision (benefit), and non-GAAP net income (loss)
per share also exclude the amortization of debt discount and
issuance costs from our convertible notes, changes in fair value of
our strategic investments, and the related tax effects of the
non-GAAP adjustments. Free cash flow consists of net cash flow
provided by (used in) operating activities less cash used for
purchases of property and equipment and capitalized software
development costs. These non-GAAP measures enable us to analyze our
financial performance without the effects of certain non-cash items
such as amortization, stock-based compensation, and changes in fair
value of strategic investments.
Annual recurring revenue ("ARR") is used to quantify the
annualized recurring value outlined in active customer contracts at
the end of a reporting period. ARR includes the annualized
recurring value of term licenses, subscription agreements, support
contracts, and hosting agreements based on customer contracts,
which may not be the same as the timing and amount of revenue
recognized. All components of the licensing and other arrangements
that are not expected to recur (primarily perpetual licenses and
professional services) are excluded. In some arrangements with
multiple performance obligations, a portion of recurring license
and support or subscription contract value is allocated to services
revenue for revenue recognition purposes, but does not get
allocated for purposes of calculating ARR. This allocation only
impacts the initial term of the contract. This means that as we
increase arrangements with multiple performance obligations that
include services at discounted rates, more of the total contract
value will be recognized as services revenue, but our reported ARR
amount will not be impacted. During the fiscal quarter ended
October 31, 2022, the recurring license and support or subscription
contract value recognized as services revenue was $10.9
million.
Guidewire believes that these non-GAAP financial measures and
other metrics provide useful information to management and
investors regarding certain financial and business trends relating
to Guidewire’s financial condition and results of operations. The
Company’s management uses these non-GAAP measures and other metrics
to compare the Company’s performance to that of prior periods for
trend analysis, for purposes of determining executive and senior
management incentive compensation, and for budgeting and planning
purposes. The Company believes that the use of these non-GAAP
financial measures and other metrics provides an additional tool
for investors to use in evaluating ongoing operating results and
trends and in comparing the Company’s financial measures with other
software companies, many of which present similar non-GAAP
financial measures and other metrics to investors.
Management of the Company does not consider these non-GAAP
measures in isolation or as an alternative to financial measures
determined in accordance with GAAP. The principal limitation of
these non-GAAP financial measures is that they exclude significant
expenses and income that are required by GAAP to be recorded in the
Company’s financial statements. In addition, they are subject to
inherent limitations as they reflect the exercise of judgment by
management about which expenses and income are excluded or included
in determining these non-GAAP financial measures. Guidewire urges
investors to review the reconciliation of its non-GAAP financial
measures to the comparable GAAP financial measures, which it
includes in press releases announcing quarterly financial results,
including the financial tables at the end of this press release,
and not to rely on any single financial measure to evaluate the
Company’s business.
About Guidewire
Guidewire is the platform P&C insurers trust to engage,
innovate, and grow efficiently. We combine digital, core,
analytics, and AI to deliver our platform as a cloud service.
Approximately 520 insurers in 38 countries, from new ventures to
the largest and most complex in the world, run on Guidewire.
As a partner to our customers, we continually evolve to enable
their success. We are proud of our unparalleled implementation
track record, with 1,000+ successful projects, supported by the
largest R&D team and partner ecosystem in the industry. Our
marketplace provides hundreds of applications that accelerate
integration, localization, and innovation.
For more information, please visit www.guidewire.com and follow
us on twitter: @Guidewire_PandC and LinkedIn.
NOTE: For information about Guidewire’s trademarks, visit
https://www.guidewire.com/legal-notices.
GWRE-F
Cautionary Language Concerning Forward-Looking
Statements
This press release contains “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to, statements regarding our financial outlook and our future
business momentum regarding our cloud sales, product innovation and
cloud migration, and our associated cloud leadership, vision and
strategy. These forward-looking statements are made as of the date
they were first issued and were based on current expectations,
estimates, forecasts and projections as well as the beliefs and
assumptions of management. Words such as “expect,” “anticipate,”
“should,” “believe,” “hope,” “target,” “project,” “goals,”
“estimate,” “potential,” “predict,” “may,” “will,” “might,”
“could,” “intend,” variations of these terms or the negative of
these terms and similar expressions are intended to identify these
forward-looking statements. Forward-looking statements are subject
to a number of risks and uncertainties, many of which involve
factors or circumstances that are beyond Guidewire’s control.
Guidewire’s actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including but not limited to, risks detailed in
Guidewire’s most recent Forms 10-K and 10-Q filed with the
Securities and Exchange Commission as well as other documents that
may be filed by the Company from time to time with the Securities
and Exchange Commission. In particular, the following factors,
among others, could cause results to differ materially from those
expressed or implied by such forward-looking statements: quarterly
and annual operating results may fluctuate more than expected;
seasonal and other variations related to our customer agreements
and related revenue recognition may cause significant fluctuations
in our results of operations and cash flows; our reliance on sales
to and renewals from a relatively small number of large customers
for a substantial portion of our revenue; our ability to
successfully manage any changes to our business model, including
the transition of our products to cloud offerings and the costs
related to cloud operations and security; recent global events
(including, without limitation, the continuing COVID-19 pandemic,
the ongoing conflict between Russia and Ukraine, inflation higher
than we have seen in decades, and supply chain issues) and their
impact on our employees and our business and the businesses of our
customers, system integrator (“SI”) partners, and vendors; data
security breaches of our cloud-based services or products or
unauthorized access to our customers’ data, particularly in
connection with our transition to a hybrid in-person and remote
workforce; our competitive environment and changes thereto; our
services revenue produces lower gross margins than our license,
subscription and support revenue; our product development and sales
cycles are lengthy and may be affected by factors outside of our
control; the impact of new regulations and laws, including tax laws
and accounting standards; assertions by third parties that we
violate their intellectual property rights; weakened global
economic conditions may adversely affect the P&C insurance
industry, including the rate of information technology spending;
general political or destabilizing events, including war, conflict
or acts of terrorism; our ability to sell our products is highly
dependent on the quality of our professional services and SI
partners; the risk of losing key employees; the challenges of
international operations, including changes in foreign exchange
rates; and other risks and uncertainties. Past performance is not
necessarily indicative of future results. The forward-looking
statements included in this press release represent Guidewire’s
views as of the date of this press release. Guidewire anticipates
that subsequent events and developments will cause its views to
change. Guidewire undertakes no intention or obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. These forward-looking
statements should not be relied upon as representing Guidewire’s
views as of any date subsequent to the date of this press
release.
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands)
October 31,
2022
July 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
263,163
$
606,303
Short-term investments
442,023
369,865
Accounts receivable, net
88,273
143,797
Unbilled accounts receivable, net
90,742
71,515
Prepaid expenses and other current
assets
59,355
61,223
Total current assets
943,556
1,252,703
Long-term investments
163,335
187,507
Unbilled accounts receivable, net
15,346
13,914
Property and equipment, net
79,040
80,740
Operating lease assets
86,519
90,287
Intangible assets, net
18,574
21,361
Goodwill
372,214
372,192
Deferred tax assets, net
218,769
191,461
Other assets
51,155
56,732
TOTAL ASSETS
$
1,948,508
$
2,266,897
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
41,649
$
40,440
Accrued employee compensation
43,171
90,962
Deferred revenue, net
137,546
170,776
Other current liabilities
30,398
35,340
Total current liabilities
252,764
337,518
Lease liabilities
100,614
105,123
Convertible senior notes, net
395,891
358,216
Deferred revenue, net
7,155
7,500
Other liabilities
6,923
6,883
Total liabilities
763,347
815,240
STOCKHOLDERS’ EQUITY:
Common stock
8
8
Additional paid-in capital
1,682,722
1,755,476
Accumulated other comprehensive income
(loss)
(23,963
)
(19,845
)
Retained earnings (accumulated
deficit)
(473,606
)
(283,982
)
Total stockholders’ equity
1,185,161
1,451,657
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
1,948,508
$
2,266,897
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands except
share and per share data)
Three Months Ended October
31,
2022
2021
Revenue:
Subscription and support
$
99,068
$
78,990
License
40,952
40,153
Services
55,262
46,791
Total revenue
195,282
165,934
Cost of revenue(1):
Subscription and support
55,691
48,050
License
1,873
2,339
Services
65,566
47,151
Total cost of revenue
123,130
97,540
Gross profit:
Subscription and support
43,377
30,940
License
39,079
37,814
Services
(10,304
)
(360
)
Total gross profit
72,152
68,394
Operating expenses(1):
Research and development
58,170
55,124
Sales and marketing
46,468
41,005
General and administrative
42,067
37,642
Total operating expenses
146,705
133,771
Income (loss) from operations
(74,553
)
(65,377
)
Interest income
4,638
674
Interest expense
(1,674
)
(4,794
)
Other income (expense), net
(13,824
)
1,183
Income (loss) before provision for
(benefit from) income taxes
(85,413
)
(68,314
)
Provision for (benefit from) income
taxes
(16,095
)
(17,038
)
Net income (loss)
$
(69,318
)
$
(51,276
)
Net income (loss) per share:
Basic and diluted
$
(0.83
)
$
(0.62
)
Shares used in computing net income (loss)
per share:
Basic and diluted
83,320,967
83,225,743
(1)Amounts include stock-based
compensation expense as follows:
Three Months Ended October
31,
2022
2021
(unaudited, in thousands)
Stock-based compensation expense:
Cost of subscription and support
revenue
$
3,468
$
3,030
Cost of license revenue
147
182
Cost of services revenue
5,349
5,189
Research and development
9,291
7,997
Sales and marketing
6,887
7,113
General and administrative
9,954
8,729
Total stock-based compensation expense
$
35,096
$
32,240
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in
thousands)
Three Months Ended October
31,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(69,318
)
$
(51,276
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
7,623
8,434
Amortization of debt discount and issuance
costs
423
3,524
Amortization of contract costs
4,490
3,001
Stock-based compensation
35,096
32,240
Changes to allowance for credit losses and
revenue reserves
(72
)
35
Deferred income tax
(18,035
)
(17,551
)
Amortization of premium (accretion of
discount) on available-for-sale securities, net
98
1,601
Other non-cash items affecting net income
(loss)
34
131
Changes in operating assets and
liabilities:
Accounts receivable
55,245
24,088
Unbilled accounts receivable
(20,659
)
(6,137
)
Prepaid expenses and other assets
(839
)
(7,046
)
Operating lease assets
3,768
2,879
Accounts payable
847
(1,333
)
Accrued employee compensation
(45,548
)
(62,637
)
Deferred revenue
(33,575
)
(30,456
)
Lease liabilities
(4,441
)
(3,386
)
Other liabilities
(2,572
)
(3,153
)
Net cash provided by (used in) operating
activities
(87,435
)
(107,042
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale
securities
(169,232
)
(241,247
)
Sales of available-for-sale securities
97,023
27,331
Maturities of available-for-sale
securities
22,268
272,943
Purchases of property and equipment
(604
)
(3,333
)
Capitalized software development costs
(3,697
)
(3,783
)
Acquisition of strategic investments
(181
)
—
Acquisition of business, net of acquired
cash
—
(43,830
)
Net cash provided by (used in) investing
activities
(54,423
)
8,081
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
upon exercise of stock options
—
17
Repurchase and retirement of common
stock
(200,000
)
(26,262
)
Net cash provided by (used in) financing
activities
(200,000
)
(26,245
)
Effect of foreign exchange rate changes on
cash, cash equivalents, and restricted cash
(2,992
)
(984
)
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH
(344,850
)
(126,190
)
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH—Beginning of period
614,686
384,910
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH—End of period
$
269,836
$
258,720
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Financial Measures
(unaudited, in thousands)
The following tables reconcile the
specific items excluded from GAAP in the calculation of non-GAAP
financial measures for the periods indicated below:
Three Months Ended October
31,
2022
2021
Gross profit reconciliation:
GAAP gross profit
$
72,152
$
68,394
Non-GAAP adjustments:
Stock-based compensation
8,964
8,401
Amortization of intangibles
1,905
1,944
Non-GAAP gross profit
$
83,021
$
78,739
Income (loss) from operations
reconciliation:
GAAP income (loss) from operations
$
(74,553
)
$
(65,377
)
Non-GAAP adjustments:
Stock-based compensation
35,096
32,240
Amortization of intangibles
2,787
3,754
Acquisition consideration holdback
773
673
Non-GAAP income (loss) from operations
$
(35,897
)
$
(28,710
)
Net income (loss)
reconciliation:
GAAP net income (loss)
$
(69,318
)
$
(51,276
)
Non-GAAP adjustments:
Stock-based compensation
35,096
32,240
Amortization of intangibles
2,787
3,754
Acquisition consideration holdback(1)
773
673
Amortization of debt discount and issuance
costs
423
3,524
Tax impact of non-GAAP adjustments
20,378
(6,966
)
Non-GAAP net income (loss)
$
(9,861
)
$
(18,051
)
Tax provision (benefit)
reconciliation:
GAAP tax provision (benefit)
$
(16,095
)
$
(17,038
)
Non-GAAP adjustments:
Stock-based compensation
27,626
11,548
Amortization of intangibles
2,194
1,345
Acquisition consideration holdback (1)
608
241
Amortization of debt discount and issuance
costs
333
1,262
Tax impact of non-GAAP adjustments
(51,139
)
(7,430
)
Non-GAAP tax provision (benefit)
$
(36,473
)
$
(10,072
)
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Financial Measures
(unaudited, in thousands except
share and per share data)
The following tables reconcile the
specific items excluded from GAAP in the calculation of non-GAAP
financial measures for the periods indicated below:
Three Months Ended October
31,
2022
2021
Net income (loss) per share
reconciliation:
GAAP net income (loss) per share –
diluted
$
(0.83
)
$
(0.62
)
Non-GAAP adjustments:
Stock-based compensation
0.42
0.39
Amortization of intangibles
0.03
0.05
Acquisition consideration holdback (1)
0.01
0.01
Amortization of debt discount and issuance
costs
0.01
0.04
Tax impact of non-GAAP adjustments
0.24
(0.08
)
Non-GAAP dilutive shares excluded from
GAAP net income (loss) per share calculation
—
—
Non-GAAP net income (loss) per share –
diluted
$
(0.12
)
$
(0.21
)
Shares used in computing Non-GAAP
income (loss) per share amounts:
GAAP weighted average shares – diluted
83,320,967
83,225,743
Non-GAAP dilutive shares excluded from
GAAP income (loss) per share calculation
—
—
Pro forma weighted average shares –
diluted
83,320,967
83,225,743
The following table summarizes our free
cash flow for the periods indicated below (in thousands):
Three Months Ended October
31,
2022
2021
Free cash flow:
Net cash provided by (used in) operating
activities
$
(87,435
)
$
(107,042
)
Purchases of property and equipment
(604
)
(3,333
)
Capitalized software development costs
(3,697
)
(3,783
)
Free cash flow
$
(91,736
)
$
(114,158
)
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Outlook
The following table reconciles
the specific items excluded from GAAP outlook in the calculation of
non-GAAP outlook for the periods indicated below (in millions):
Second Quarter
Fiscal Year 2023
Fiscal Year 2023
Income (loss) from operations outlook
reconciliation:
GAAP income (loss) from operations
$(41)
—
$(37)
$(176)
—
$(166)
Non-GAAP adjustments:
Stock-based compensation
35
—
35
138
—
138
Amortization of intangibles
1
—
1
7
—
7
Acquisition consideration holdback
1
—
1
3
—
3
Non-GAAP income (loss) from operations
$(4)
—
$0
$(28)
—
$(18)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221206005480/en/
Investor Contact: Alex Hughes Guidewire (650) 356-4921
ir@guidewire.com
Media Contact: Diana Stott Guidewire (650) 781-9955
dstott@guidewire.com
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