Guidewire (NYSE: GWRE) today announced its financial results for
the fiscal quarter ended October 31, 2023.
“We are thrilled with our first quarter financial results and
the continued momentum in Guidewire Cloud Platform with another
seven cloud deals closed,” said Mike Rosenbaum, chief executive
officer, Guidewire. “The excitement around Guidewire Cloud Platform
was on full display at our annual customer conference, Connections,
where approximately 3,000 members from our customer and partner
communities came together to share success stories, collaborate,
and learn more about Innsbruck, our latest and ninth cloud
release.”
“We are off to a strong start to the fiscal year with ARR
finishing above the high end of our outlook, and margins
significantly beating our expectations,” said Jeff Cooper, chief
financial officer, Guidewire. “We are at an exciting inflection
point with respect to profitability and are raising our
profitability targets for the year.”
First Quarter Fiscal Year 2024 Financial Highlights
Revenue
- Total revenue for the first quarter of fiscal year 2024 was
$207.4 million, an increase of 6% from the same quarter in fiscal
year 2023. Subscription and support revenue was $127.6 million, an
increase of 29%; services revenue was $45.8 million, a decrease of
17%; and license revenue was $34.0 million, a decrease of 17%.
- As of October 31, 2023, annual recurring revenue, or ARR, was
$770 million, compared to $763 million as of July 31, 2023. ARR
results for interim quarterly periods in fiscal year 2024 are based
on actual currency rates at the end of fiscal year 2023, held
constant throughout the year.
Profitability
- GAAP loss from operations was $33.8 million for the first
quarter of fiscal year 2024, compared with GAAP loss from
operations of $74.6 million for the same quarter in fiscal year
2023.
- Non-GAAP income from operations was $4.1 million for the first
quarter of fiscal year 2024, compared with Non-GAAP loss from
operations of $35.9 million for the same quarter in fiscal year
2023.
- GAAP net loss was $27.1 million for the first quarter of fiscal
year 2024, compared with $69.3 million for the same quarter in
fiscal year 2023. GAAP net loss per share was $0.33, based on
diluted weighted average shares outstanding of 81.7 million,
compared to a GAAP net loss per share of $0.83 for the same quarter
in fiscal year 2023, based on diluted weighted average shares
outstanding of 83.3 million.
- Non-GAAP net loss was $0.3 million for the first quarter of
fiscal year 2024, compared with Non-GAAP net loss of $9.9 million
for the same quarter in fiscal year 2023. Non-GAAP net income/loss
per share was $0.00, based on diluted weighted average shares
outstanding of 81.7 million, compared to a Non-GAAP net loss per
share of $0.12 for the same quarter in fiscal year 2023, based on
diluted weighted average shares outstanding of 83.3 million.
Liquidity and Capital Resources
- The Company had $853.6 million in cash, cash equivalents, and
investments at October 31, 2023, compared to $927.5 million at July
31, 2023. The Company used $72.1 million in cash from operations
during the first quarter of fiscal year 2024.
Business Outlook
Guidewire is issuing the following outlook for the second
quarter of fiscal year 2024 based on current expectations:
- ARR between $793 million and $798 million
- Total revenue between $237 million and $243 million
- Operating income (loss) between $(24) million and $(19)
million
- Non-GAAP operating income (loss) between $15 million and $20
million
Guidewire is updating the outlook for fiscal year 2024 based on
current expectations as follows:
- ARR between $846 million and $858 million
- Total revenue between $976 million and $986 million
- Operating income (loss) between $(75) million and $(65)
million
- Non-GAAP operating income (loss) between $82 million and $92
million
- Operating cash flow between $115 million and $135 million
Conference Call Information
What:
Guidewire First Quarter Fiscal Year 2024
Financial Results Conference Call
When:
Thursday, December 7, 2023
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 13742810,
Domestic
Replay
(412) 317-6671, Passcode 13742810,
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, and acquisition consideration holdback. Non-GAAP net
income (loss) and non-GAAP tax provision (benefit) also exclude the
amortization of debt issuance costs from our convertible notes, and
the related tax effects of the non-GAAP adjustments. Additionally,
Non-GAAP net income (loss) per share excludes the interest expense
on convertible debt. 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, and stock-based compensation.
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 revenue 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, 2023, the recurring license and support or subscription
contract value recognized as services revenue was $3.0 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 machine learning to deliver our platform as a cloud
service. More than 540 insurers in 40 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 more than 1,600 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 X (formerly known as Twitter) @Guidewire_PandC and
LinkedIn.
NOTE: For information about Guidewire’s
trademarks, visit https://www.guidewire.com/legal-notices.
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 product leadership, cloud deals,
financial targets, gross and operating margins, profitability, and
our associated business plan, 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 Guidewire 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, ARR, 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 and ARR; 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; the timing, success, and number of professional services
engagements and the billing rates and utilization of our
professional services employees and contractors; recent global
events (including, without limitation, the ongoing wars between
Israel and Hamas and between Russia and Ukraine, escalating
tensions in the South China Sea, inflation higher than we have seen
in decades, global pandemics, bank failures and associated
financial instability and crises, 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; issues
in the development and use of artificial intelligence and machine
learning combined with an uncertain regulatory environment; 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, without
limitation, security, privacy, artificial intelligence and machine
learning, tax regulations and 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 in countries such as Argentina;
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,
2023
July 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
301,419
$
401,813
Short-term investments
411,528
396,872
Accounts receivable, net
93,083
151,034
Unbilled accounts receivable, net
109,231
87,752
Prepaid expenses and other current
assets
61,537
62,132
Total current assets
976,798
1,099,603
Long-term investments
140,644
128,782
Unbilled accounts receivable, net
6,883
11,112
Property and equipment, net
55,280
54,499
Operating lease assets
50,402
52,373
Intangible assets, net
13,106
14,473
Goodwill
372,214
372,214
Deferred tax assets, net
239,822
226,875
Other assets
64,448
67,957
TOTAL ASSETS
$
1,919,597
$
2,027,888
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
19,210
$
34,627
Accrued employee compensation
46,686
103,980
Deferred revenue, net
171,103
206,923
Other current liabilities
25,376
27,731
Total current liabilities
262,375
373,261
Lease liabilities
40,872
42,972
Convertible senior notes, net
397,601
397,171
Deferred revenue, net
3,915
5,988
Other liabilities
9,185
9,030
Total liabilities
713,948
828,422
STOCKHOLDERS’ EQUITY:
Common stock
8
8
Additional paid-in capital
1,867,467
1,831,267
Accumulated other comprehensive income
(loss)
(16,805
)
(13,859
)
Retained earnings (accumulated
deficit)
(645,021
)
(617,950
)
Total stockholders’ equity
1,205,649
1,199,466
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
1,919,597
$
2,027,888
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands except
share and per share data)
Three Months Ended October
31,
2023
2022
Revenue:
Subscription and support
$
127,627
$
99,068
License
34,025
40,952
Services
45,755
55,262
Total revenue
207,407
195,282
Cost of revenue(1):
Subscription and support
48,054
55,691
License
1,219
1,873
Services
45,842
65,566
Total cost of revenue
95,115
123,130
Gross profit:
Subscription and support
79,573
43,377
License
32,806
39,079
Services
(87
)
(10,304
)
Total gross profit
112,292
72,152
Operating expenses(1):
Research and development
62,469
58,170
Sales and marketing
44,581
46,468
General and administrative
39,023
42,067
Total operating expenses
146,073
146,705
Income (loss) from operations
(33,781
)
(74,553
)
Interest income
10,613
4,638
Interest expense
(1,683
)
(1,674
)
Other income (expense), net
(13,742
)
(13,824
)
Income (loss) before provision for
(benefit from) income taxes
(38,593
)
(85,413
)
Provision for (benefit from) income
taxes
(11,522
)
(16,095
)
Net income (loss)
$
(27,071
)
$
(69,318
)
Net income (loss) per share:
Basic and diluted
$
(0.33
)
$
(0.83
)
Shares used in computing net income (loss)
per share:
Basic and diluted
81,690,912
83,320,967
(1) Amounts include stock-based
compensation expense as follows:
Three Months Ended October
31,
2023
2022
Stock-based compensation expense:
Cost of subscription and support
revenue
$
3,462
$
3,468
Cost of license revenue
95
147
Cost of services revenue
4,789
5,349
Research and development
9,986
9,291
Sales and marketing
7,729
6,887
General and administrative
10,036
9,954
Total stock-based compensation expense
$
36,097
$
35,096
GUIDEWIRE SOFTWARE, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended October
31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(27,071
)
$
(69,318
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
5,442
7,623
Amortization of debt issuance costs
430
423
Amortization of contract costs
4,064
4,490
Stock-based compensation
36,097
35,096
Changes to allowance for credit losses and
revenue reserves
128
(72
)
Deferred income tax
(13,220
)
(18,035
)
Amortization of premium (accretion of
discount) on available-for-sale securities, net
(2,927
)
98
Other non-cash items affecting net income
(loss)
(29
)
34
Changes in operating assets and
liabilities:
Accounts receivable
57,193
55,245
Unbilled accounts receivable
(17,250
)
(20,659
)
Prepaid expenses and other assets
(6,560
)
(839
)
Operating lease assets
1,971
3,768
Accounts payable
(16,982
)
847
Accrued employee compensation
(54,576
)
(45,548
)
Deferred revenue
(37,893
)
(33,575
)
Lease liabilities
(1,601
)
(4,441
)
Other liabilities
701
(2,572
)
Net cash provided by (used in) operating
activities
(72,083
)
(87,435
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale
securities
(160,239
)
(169,232
)
Maturities and sales of available-for-sale
securities
137,386
119,291
Purchases of property and equipment
(998
)
(604
)
Capitalized software development costs
(3,692
)
(3,697
)
Acquisition of strategic investments
(250
)
(181
)
Net cash provided by (used in) investing
activities
(27,793
)
(54,423
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common
stock
—
(200,000
)
Net cash provided by (used in) financing
activities
—
(200,000
)
Effect of foreign exchange rate changes on
cash, cash equivalents, and restricted cash
(4,303
)
(2,992
)
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH
(104,179
)
(344,850
)
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH—Beginning of period
406,790
614,686
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH—End of period
$
302,611
$
269,836
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,
2023
2022
Gross profit reconciliation:
GAAP gross profit
$
112,292
$
72,152
Non-GAAP adjustments:
Stock-based compensation
8,346
8,964
Amortization of intangibles
485
1,905
Non-GAAP gross profit
$
121,123
$
83,021
Income (loss) from operations
reconciliation:
GAAP income (loss) from operations
$
(33,781
)
$
(74,553
)
Non-GAAP adjustments:
Stock-based compensation
36,097
35,096
Amortization of intangibles
1,367
2,787
Acquisition consideration holdback
386
773
Non-GAAP income (loss) from operations
$
4,069
$
(35,897
)
Net income (loss)
reconciliation:
GAAP net income (loss)
$
(27,071
)
$
(69,318
)
Non-GAAP adjustments:
Stock-based compensation
36,097
35,096
Amortization of intangibles
1,367
2,787
Acquisition consideration holdback
386
773
Amortization of debt issuance costs
430
423
Tax impact of non-GAAP adjustments
(11,493
)
20,378
Non-GAAP net income (loss)
$
(284
)
$
(9,861
)
Tax provision (benefit)
reconciliation:
GAAP tax provision (benefit)
$
(11,522
)
$
(16,095
)
Non-GAAP adjustments:
Stock-based compensation
3,379
27,626
Amortization of intangibles
128
2,194
Acquisition consideration holdback
36
608
Amortization of debt issuance costs
40
333
Tax impact of non-GAAP adjustments
7,910
(51,139
)
Non-GAAP tax provision (benefit)
$
(29
)
$
(36,473
)
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,
2023
2022
Net income (loss) per share
reconciliation:
GAAP net income (loss) per share –
diluted
$
(0.33
)
$
(0.83
)
Non-GAAP adjustments:
Stock-based compensation
0.44
0.42
Amortization of intangibles
0.02
0.03
Acquisition consideration holdback
—
0.01
Amortization of debt issuance costs
0.01
0.01
Tax impact of non-GAAP adjustments
(0.14
)
0.24
Non-GAAP net income (loss) per share –
diluted
$
—
$
(0.12
)
Shares used in computing Non-GAAP
income (loss) per share amounts:
GAAP and pro forma weighted average shares
— diluted
81,690,912
83,320,967
The following table summarizes our free
cash flow for the periods indicated below:
Three Months Ended October
31,
2023
2022
Free cash flow:
Net cash provided by (used in) operating
activities
$
(72,083
)
$
(87,435
)
Purchases of property and equipment
(998
)
(604
)
Capitalized software development costs
(3,692
)
(3,697
)
Free cash flow
$
(76,773
)
$
(91,736
)
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 2024
Fiscal Year 2024
Income (loss) from operations outlook
reconciliation:
GAAP income (loss) from operations
$
(24
)
—
$
(19
)
$
(75
)
—
$
(65
)
Non-GAAP adjustments:
Stock-based compensation
38
—
38
150
—
150
Amortization of intangibles
1
—
1
6
—
6
Acquisition consideration holdback
—
—
—
1
—
1
Non-GAAP income (loss) from operations
$
15
—
$
20
$
82
—
$
92
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231207562224/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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