Guidewire Software, Inc. (NYSE: GWRE), a provider of software products to Property and Casualty insurers, today announced its financial results for the fiscal quarter ended January 31, 2018.
“The breadth of Guidewire InsurancePlatform contributed to a successful second quarter in which we exceeded our guidance for revenue and non-GAAP profitability,” said Marcus Ryu, chief executive officer, Guidewire Software. “We continue to benefit from the enduring demand for legacy core system replacement in all our major markets, as well as adoption of our complementary offerings for digital engagement, data management and visualization, and advanced analytics.”
Ryu continued, “By continuing to invest in new products, distribution in international markets, and delivery of InsurancePlatform in the cloud, we are enabling P&C insurers to adapt their products and operations to a time of rapid industry change.”
Second Quarter Fiscal 2018 Financial Highlights
Total revenue for the second quarter of fiscal 2018 was $163.8 million, an increase of 42% from the same quarter in fiscal 2017. License and other revenue was $84.2 million, an increase of 31%, services revenue was $60.5 million, an increase of 73%, and maintenance revenue was $19.1 million, an increase of 15%. License and other revenue benefited from approximately $4.6 million of payments received in the quarter in advance of their due date.
Rolling four-quarter recurring revenue was $345.9 million for the period ended January 31, 2018, an increase of 21% compared to the same metric for the period ended January 31, 2017.
GAAP loss from operations was $0.7 million for the second quarter of fiscal 2018, compared with income of $8.2 million in the comparable period in fiscal 2017.
Non-GAAP income from operations was $32.0 million for the second quarter of fiscal 2018, compared with income of $28.4 million in the comparable period in fiscal 2017.
GAAP net loss, adversely impacted by a net tax expense of $28.6 million, driven primarily by the effects of the provisions of The Tax and Jobs Act passed in December 2017, was $45.6 million for the second quarter of fiscal 2018, compared with a net income of $4.0 million for the comparable period in fiscal 2017. GAAP net loss per share was $0.59, based on diluted weighted average shares outstanding of 76.9 million, compared with $0.05 net income per share for the comparable period in fiscal 2017, based on diluted weighted average shares outstanding of 74.8 million. The net tax expense of $28.6 million resulted from the remeasurement of deferred tax assets and liabilities required by the passage of the Tax Cuts and Jobs Act which lowered the Company’s U.S. statutory tax rate.
Non-GAAP net income was $25.5 million for the second quarter of fiscal 2018, compared with a net income of $20.6 million in the comparable period in fiscal 2017. Non-GAAP net income per diluted share was $0.33, based on diluted weighted average shares outstanding of 78.3 million, compared with net income per diluted share of $0.28 in the comparable period in fiscal 2017, based on diluted weighted average shares outstanding of 74.8 million.
The Company had $569.5 million in cash, cash equivalents and investments at January 31, 2018, compared with $687.8 million at July 31, 2017. The decline was due to the use of approximately $130.1 million of cash in connection with the acquisition of Cyence, offset by approximately $47.7 million of cash generated from operations in the second quarter of fiscal 2018, compared to $42.6 million cash from operations in the second quarter of fiscal 2017.
Guidewire is issuing the following outlook for the third quarter and fiscal 2018, based on current expectations:
Conference Call Information
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Non-GAAP operating income, Non-GAAP net income (loss), Non-GAAP income tax provision (benefit), and Non-GAAP net income (loss) per share. These Non-GAAP financial measures exclude stock-based compensation and amortization of intangibles, and the tax effect of these adjustments for Non-GAAP net income (loss) and Non-GAAP net income (loss) per share.
Guidewire believes that these non-GAAP measures of financial results 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 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 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 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 this press release, and not to rely on any single financial measure to evaluate the Company’s business.
Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.
About Guidewire Software
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 400 insurers, 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.
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, market positioning and future investments. 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: the market for our software may develop more slowly than expected or than it has in the past; quarterly and annual operating results may fluctuate more than expected; seasonal and other variations related to our 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 revenues; our services revenues produce lower gross margins than our license and maintenance revenues; assertions by third parties that we violate their intellectual property rights could substantially harm our business; we face intense competition in our market; weakened global economic conditions may adversely affect the P&C insurance industry including the rate of information technology spending; our product development and sales cycles are lengthy; the risk of losing key employees; changes in foreign exchange rates; general political or destabilizing events, including war, conflict or acts of terrorism; 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. The Company 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.