TechDogs-"Guidewire Announces Second Quarter Fiscal Year 2023 Financial Results"

Software Development

Guidewire Announces Second Quarter Fiscal Year 2023 Financial Results

By Business Wire

Business Wire
Overall Rating

SAN MATEO, Calif.--(BUSINESS WIRE)--Guidewire (NYSE: GWRE) today announced its financial results for the fiscal quarter ended January 31, 2023.

“We are thrilled with our second quarter results. We closed eight cloud transactions and improved operating efficiency, resulting in strong top-line growth and improved subscription and support gross margins,” said Mike Rosenbaum, Chief Executive Officer, Guidewire. “Continued progress on our cloud platform enabled us to exceed the top end of our guidance range for revenue, ARR, and profitability.”

Second Quarter Fiscal Year 2023 Financial Highlights

Revenue

  • Total revenue for the second quarter of fiscal year 2023 was $232.6 million, an increase of 14% from the same quarter in fiscal year 2022. Subscription and support revenue was $105.8 million, an increase of 25%; services revenue was $53.7 million, an increase of 6%; and license revenue was $73.1 million, an increase of 5%.
  • As of January 31, 2023, annual recurring revenue, or ARR, was $707 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 $23.2 million for the second quarter of fiscal year 2023, compared with $39.5 million for the same quarter in fiscal year 2022.
  • Non-GAAP income from operations was $15.1 million for the second quarter of fiscal year 2023, compared with $3.0 million for the same quarter in fiscal year 2022.
  • GAAP net loss was $9.2 million for the second quarter of fiscal year 2023, compared with $40.7 million for the same quarter in fiscal year 2022. GAAP net loss per share was $0.11, based on diluted weighted average shares outstanding of 82.1 million, compared to $0.49 for the same quarter in fiscal year 2022, based on diluted weighted average shares outstanding of 83.4 million.
  • Non-GAAP net loss was $17.4 million for the second quarter of fiscal year 2023, compared with $4.8 million for the same quarter in fiscal year 2022. Non-GAAP net loss per share was $0.21, based on diluted weighted average shares outstanding of 82.1 million, compared to $0.06 for the same quarter in fiscal year 2022, based on diluted weighted average shares outstanding of 83.4 million.

Liquidity and Capital Resources

  • The Company had $870.0 million in cash, cash equivalents, and investments at January 31, 2023, compared to $1.2 billion at July 31, 2022. The Company used $86.2 million in cash from operations during the six months ended January 31, 2023.
  • In September 2022, 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, which was finalized in February 2023, the Company received a share delivery of 2,581,478 shares of common stock in September 2022 and of 648,001 shares of common stock in February 2023, representing total shares repurchased of 3,229,479 at an average price of $61.93 per share. As of January 31, 2023, $200 million remains under the September 2022 authorized and approved share repurchase program.

Business Outlook

Guidewire is issuing the following outlook for the third quarter of fiscal year 2023 based on current expectations:

  • ARR between $715 million and $720 million
  • Total revenue between $211 million and $216 million
  • Operating income (loss) between $(64) million and $(59) million
  • Non-GAAP operating income (loss) between $(20) million and $(16) 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 $894 million and $904 million
  • Operating income (loss) between $(175) million and $(164) million
  • Non-GAAP operating income (loss) between $(17) million and $(7) million
  • Operating cash flow between $50 million and $80 million

Conference Call Information

What:

Guidewire Second Quarter Fiscal Year 2023 Financial Results Conference Call

When:

Monday, March 6, 2023

Time:

2:00 p.m. PT (5:00 p.m. ET)

Live Call:

(877) 704-4390, Domestic

Live Call:

(201) 389-0932, International

Replay:

(844) 512-2921, Passcode 13736033, Domestic

Replay

(412) 317-6671, Passcode 13736033, 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), 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 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 six months ended January 31, 2023, the recurring license and support or subscription contract value recognized as services revenue was $19.7 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. More than 500 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, platform efficiency, 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, 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; 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)

January 31,
2023

July 31,
2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

274,899

$

606,303

Short-term investments

439,833

369,865

Accounts receivable, net

127,627

143,797

Unbilled accounts receivable, net

100,313

71,515

Prepaid expenses and other current assets

63,591

61,223

Total current assets

1,006,263

1,252,703

Long-term investments

155,306

187,507

Unbilled accounts receivable, net

14,576

13,914

Property and equipment, net

78,544

80,740

Operating lease assets

85,479

90,287

Intangible assets, net

17,207

21,361

Goodwill

372,214

372,192

Deferred tax assets, net

218,308

191,461

Other assets

56,050

56,732

TOTAL ASSETS

$

2,003,947

$

2,266,897

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

38,025

$

40,440

Accrued employee compensation

58,064

90,962

Deferred revenue, net

145,963

170,776

Other current liabilities

33,157

35,340

Total current liabilities

275,209

337,518

Lease liabilities

99,045

105,123

Convertible senior notes, net

396,316

358,216

Deferred revenue, net

6,022

7,500

Other liabilities

7,183

6,883

Total liabilities

783,775

815,240

STOCKHOLDERS’ EQUITY:

Common stock

8

8

Additional paid-in capital

1,719,020

1,755,476

Accumulated other comprehensive income (loss)

(16,061

)

(19,845

)

Retained earnings (accumulated deficit)

(482,795

)

(283,982

)

Total stockholders’ equity

1,220,172

1,451,657

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,003,947

$

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 January
31,

Six Months Ended January
31,

2023

2022

2023

2022

Revenue:

Subscription and support

$

105,754

$

84,297

$

204,822

$

163,287

License

73,115

69,798

114,067

109,951

Services

53,742

50,538

109,004

97,329

Total revenue

232,611

204,633

427,893

370,567

Cost of revenue(1):

Subscription and support

48,924

48,276

104,615

96,326

License

1,845

2,254

3,718

4,593

Services

58,379

51,912

123,945

99,063

Total cost of revenue

109,148

102,442

232,278

199,982

Gross profit:

Subscription and support

56,830

36,021

100,207

66,961

License

71,270

67,544

110,349

105,358

Services

(4,637

)

(1,374

)

(14,941

)

(1,734

)

Total gross profit

123,463

102,191

195,615

170,585

Operating expenses(1):

Research and development

61,702

55,804

119,872

110,928

Sales and marketing

44,781

48,507

91,249

89,512

General and administrative

40,196

37,337

82,263

74,979

Total operating expenses

146,679

141,648

293,384

275,419

Income (loss) from operations

(23,216

)

(39,457

)

(97,769

)

(104,834

)

Interest income

5,392

699

10,030

1,373

Interest expense

(1,677

)

(4,833

)

(3,351

)

(9,627

)

Other income (expense), net

11,291

(8,045

)

(2,533

)

(6,862

)

Income (loss) before provision for (benefit from) income taxes

(8,210

)

(51,636

)

(93,623

)

(119,950

)

Provision for (benefit from) income taxes

979

(10,955

)

(15,116

)

(27,993

)

Net income (loss)

$

(9,189

)

$

(40,681

)

$

(78,507

)

$

(91,957

)

Net income (loss) per share:

Basic and diluted

$

(0.11

)

$

(0.49

)

$

(0.95

)

$

(1.10

)

Shares used in computing net income (loss) per share:

Basic and diluted

82,051,867

83,413,643

82,686,420

83,430,693

(1)Amounts include stock-based compensation expense as follows:

Three Months Ended January
31,

Six Months Ended January
31,

2023

2022

2023

2022

(unaudited, in thousands)

Stock-based compensation expense:

Cost of subscription and support revenue

$

3,440

$

3,406

$

6,908

$

6,436

Cost of license revenue

119

189

266

371

Cost of services revenue

4,397

5,552

9,746

10,741

Research and development

10,301

8,719

19,592

16,716

Sales and marketing

8,024

10,379

14,911

17,492

General and administrative

9,898

9,620

19,852

18,349

Total stock-based compensation expense

$

36,179

$

37,865

$

71,275

$

70,105

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Three Months Ended January
31,

Six Months Ended January
31,

2023

2022

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

(9,189

)

$

(40,681

)

$

(78,507

)

$

(91,957

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

6,606

8,545

14,229

16,979

Amortization of debt discount and issuance costs

425

3,572

848

7,096

Amortization of contract costs

4,107

3,309

8,597

6,310

Stock-based compensation

36,179

37,865

71,275

70,105

Changes to allowance for credit losses and revenue reserves

(243

)

122

(315

)

157

Deferred income tax

(323

)

(12,698

)

(18,358

)

(30,249

)

Amortization of premium (accretion of discount) on available-for-sale securities, net

(820

)

1,714

(722

)

3,315

Other non-cash items affecting net income (loss)

42

97

76

228

Changes in operating assets and liabilities:

Accounts receivable

(38,721

)

(32,028

)

16,524

(7,940

)

Unbilled accounts receivable

(8,801

)

5,689

(29,460

)

(448

)

Prepaid expenses and other assets

(3,981

)

(6,289

)

(4,820

)

(13,335

)

Operating lease assets

1,040

2,788

4,808

5,667

Accounts payable

(3,136

)

(378

)

(2,289

)

(1,711

)

Accrued employee compensation

13,009

15,314

(32,539

)

(47,323

)

Deferred revenue

7,284

12,630

(26,291

)

(17,826

)

Lease liabilities

(1,276

)

(3,431

)

(5,717

)

(6,817

)

Other liabilities

(982

)

850

(3,554

)

(2,303

)

Net cash provided by (used in) operating activities

1,220

(3,010

)

(86,215

)

(110,052

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of available-for-sale securities

(101,097

)

(125,867

)

(270,329

)

(367,114

)

Sales of available-for-sale securities

105,092

23,030

202,115

50,361

Maturities of available-for-sale securities

11,000

142,322

33,268

415,265

Purchases of property and equipment

(1,333

)

(3,657

)

(1,937

)

(6,990

)

Capitalized software development costs

(2,421

)

(2,414

)

(6,118

)

(6,197

)

Acquisition of strategic investments

(5,660

)

(10,521

)

(5,841

)

(10,521

)

Acquisition of business, net of acquired cash

(43,830

)

Net cash provided by (used in) investing activities

5,581

22,893

(48,842

)

30,974

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon exercise of stock options

2

81

2

98

Repurchase and retirement of common stock

(11,189

)

(200,000

)

(37,451

)

Net cash provided by (used in) financing activities

2

(11,108

)

(199,998

)

(37,353

)

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

4,933

(1,823

)

1,941

(2,807

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

11,736

6,952

(333,114

)

(119,238

)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period

269,836

258,720

614,686

384,910

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period

$

281,572

$

265,672

$

281,572

$

265,672

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 January
31,

Six Months Ended January
31,

2023

2022

2023

2022

Gross profit reconciliation:

GAAP gross profit

$

123,463

$

102,191

$

195,615

$

170,585

Non-GAAP adjustments:

Stock-based compensation

7,956

9,147

16,920

17,548

Amortization of intangibles

485

1,905

2,390

3,849

Non-GAAP gross profit

$

131,904

$

113,243

$

214,925

$

191,982

Income (loss) from operations reconciliation:

GAAP income (loss) from operations

$

(23,216

)

$

(39,457

)

$

(97,769

)

$

(104,834

)

Non-GAAP adjustments:

Stock-based compensation

36,179

37,865

71,275

70,105

Amortization of intangibles

1,367

3,770

4,154

7,524

Acquisition consideration holdback

730

836

1,503

1,509

Non-GAAP income (loss) from operations

$

15,060

$

3,014

$

(20,837

)

$

(25,696

)

Net income (loss) reconciliation:

GAAP net income (loss)

$

(9,189

)

$

(40,681

)

$

(78,507

)

$

(91,957

)

Non-GAAP adjustments:

Stock-based compensation

36,179

37,865

71,275

70,105

Amortization of intangibles

1,367

3,770

4,154

7,524

Acquisition consideration holdback

730

836

1,503

1,509

Amortization of debt discount and issuance costs

425

3,572

848

7,096

Tax impact of non-GAAP adjustments

(46,863

)

(10,165

)

(26,485

)

(17,131

)

Non-GAAP net income (loss)

$

(17,351

)

$

(4,803

)

$

(27,212

)

$

(22,854

)

Tax provision (benefit) reconciliation:

GAAP tax provision (benefit)

$

979

$

(10,955

)

$

(15,116

)

$

(27,993

)

Non-GAAP adjustments:

Stock-based compensation

56,765

5,347

84,391

16,895

Amortization of intangibles

2,145

532

4,339

1,877

Acquisition consideration holdback

1,145

118

1,753

359

Amortization of debt discount and issuance costs

667

504

1,000

1,766

Tax impact of non-GAAP adjustments

(13,859

)

3,664

(64,998

)

(3,766

)

Non-GAAP tax provision (benefit)

$

47,842

$

(790

)

$

11,369

$

(10,862

)


Contacts

Investors:
Alex Hughes
Guidewire
(650) 356-4921
ir@guidewire.com

Media:
Diana Stott
Guidewire
(650) 781-9955
dstott@guidewire.com

Read full story here

First published on Tue, Mar 7, 2023

Enjoyed what you read? Great news – there’s a lot more to explore!

Dive into our content repository of the latest tech news, a diverse range of articles spanning introductory guides, product reviews, trends and more, along with engaging interviews, up-to-date AI blogs and hilarious tech memes!

Also explore our collection of branded insights via informative white papers, enlightening case studies, in-depth reports, educational videos and exciting events and webinars from leading global brands.

Head to the TechDogs homepage to Know Your World of technology today!

Disclaimer - Reference to any specific product, software or entity does not constitute an endorsement or recommendation by TechDogs nor should any data or content published be relied upon. The views expressed by TechDogs’ members and guests are their own and their appearance on our site does not imply an endorsement of them or any entity they represent. Views and opinions expressed by TechDogs’ Authors are those of the Authors and do not necessarily reflect the view of TechDogs or any of its officials. All information / content found on TechDogs’ site may not necessarily be reviewed by individuals with the expertise to validate its completeness, accuracy and reliability.

Tags:

Guidewire Software Development Platform P&C Insurers Cloud Service Annual Recurring Revenue ("ARR")

Join The Discussion

- Promoted By TechDogs -

Are You Ready To Accelerate Your Cloud Migration And Data Modernization?