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Guidewire Software Announces Second Quarter Fiscal 2019 Financial Results

FOSTER CITY, Calif., 6 de marzo de 2019

Guidewire Software, Inc. (NYSE: GWRE), provider of the industry platform Property and Casualty (“P&C”) insurers rely upon, today announced its financial results for the fiscal quarter ended January 31, 2019.

“We exceeded our guidance ranges for revenue and profitability in the second quarter,” said Marcus Ryu, chief executive officer, Guidewire Software. “During the quarter, we extended our overall market momentum and demonstrated particular success with our cloud and digital initiatives, completing another InsuranceSuite Cloud deal and signing significant new business for digital enablement. We continue to invest in Guidewire Insurance Platform to service the growing demand we see for cloud-based core systems and to strengthen our role as a trusted partner for enabling digital transformation in the $2 trillion global P&C industry.”

As of the first quarter of fiscal 2019, Guidewire began reporting results under Accounting Standards Codification Topic 606, Revenue Recognition (“ASC 606”), using the modified retrospective method. Financial results for reporting periods prior to fiscal year 2019 are presented as previously disclosed in conformity with then existing guidance.

Second Quarter Fiscal 2019 Financial Highlights

Revenue

  • Total revenue for the second quarter of fiscal year 2019 was $169.3 million, an increase of 3% from the same quarter in fiscal year 2018. License and subscription revenue was $87.1 million, an increase of 3%; services revenue was $60.9 million, an increase of 1%; and maintenance revenue was $21.3 million, an increase of 11%.

Profitability

  • GAAP loss from operations was $5.5 million for the second quarter of fiscal year 2019, compared with a $0.7 million loss in the comparable period in fiscal year 2018.
  • Non-GAAP income from operations was $26.1 million for the second quarter of fiscal year 2019, compared with a $32.0 million non-GAAP income in the comparable period in fiscal year 2018.
  • GAAP net income was $0.8 million for the second quarter of fiscal year 2019, compared with a $45.6 million loss for the comparable period in fiscal year 2018, which was adversely impacted by the effects of the provisions of The Tax and Jobs Act passed in December 2017. GAAP net income per share was $0.01, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.59 net loss per share for the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 76.9 million.
  • Non-GAAP net income was $27.9 million for the second quarter of fiscal year 2019, compared with $25.5 million non-GAAP net income in the comparable period in fiscal year 2018. Non-GAAP net income per share was $0.34, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.33 net income per share in the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 76.9 million.

Liquidity

  • The Company had $1.24 billion in cash, cash equivalents, and investments at January 31, 2019, compared with $1.26 billion at July 31, 2018. The Company used $13.0 million in cash from operations during the six months ended January 31, 2019.

Business Outlook

Guidewire is issuing the following outlook for the third fiscal quarter and fiscal year of 2019 based on current expectations:

(in $ millions, except per share outlook)  

Third Quarter Fiscal 2019

 

Fiscal Year 2019

Revenue   152.5   -   156.5   725.0   -   732.0
License and subscription revenue   68.0   -   72.0   381.0   -   389.0
Maintenance revenue   19.5   -   20.5   82.0   -   84.0
Services revenue   63.0   -   66.0   257.0   -   265.0
GAAP operating loss   (31.1)   -   (27.1)   (13.6)   -   (7.6)
Non-GAAP operating income     -   4.0   112.0   -   118.0
GAAP net income (loss)   (9.7)   -   (8.4)   4.5   -   6.5
GAAP net income (loss) per share   (0.12)   -   (0.10)   0.06   -   0.08
Non-GAAP net income   4.1   -   7.5   110.8   -   115.8
Non-GAAP net income per share   0.05   -   0.09   1.35   -   1.41
                         

Conference Call Information

What:   Guidewire Software Second Quarter Fiscal 2019 Financial Results Conference Call
When:   Wednesday, March 6, 2019
Time:   2:00 p.m. PT (5:00 p.m. ET)
Live Call:   (866) 548-4713, Domestic
    (323) 794-2093, International
Replay:   (844) 512-2921, Passcode 1442591, Domestic
    (412) 317-6671, Passcode 1442591, 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

This press release contains the following non-GAAP financial measures: Non-GAAP operating income (loss), Non-GAAP net income (loss), Non-GAAP income tax provision (benefit), and Non-GAAP net income (loss) per share. Non-GAAP operating income (loss) excludes stock-based compensation and amortization of intangibles. Non-GAAP net income (loss), Non-GAAP income 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 and the related tax effects of the non-GAAP adjustments. The estimated annual tax rates used in the business outlook to compute GAAP and Non-GAAP net income exclude discrete items such as forecasted tax benefits related to stock-based compensation.

Guidewire believes that these non-GAAP financial measures 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 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.

Acerca de Guidewire Software

Guidewire ofrece la plataforma en la que se basan las compañías de seguros generales para adaptarse y prosperar en un contexto de rápidos cambios. Proporcionamos software, servicios y un ecosistema de partners que permiten a nuestros clientes gestionar, diferenciar y hacer crecer su negocio. Tenemos el privilegio de prestar servicios a más de 350 compañías en 34 países. Para obtener más información, visite www.guidewire.es. Síganos en Twitter: @Guidewire_PandC.

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 revenue; our services revenue produce lower gross margins than our license and maintenance revenue; 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; changes in accounting guidance on revenue recognition, such as contained in ASC 606, have and may cause us to experience greater volatility in our quarterly and annual results; 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.

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
         
    January 31,
2019
  July 31,
2018
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents   $ 360,169     $ 437,140  
Short-term investments   706,203     630,008  
Accounts receivable, net   119,699     124,849  
Unbilled accounts receivable, net   47,493      
Prepaid expenses and other current assets   30,234     30,510  
Total current assets   1,263,798     1,222,507  
Long-term investments   171,873     190,952  
Unbilled accounts receivable, net   11,459      
Property and equipment, net   30,017     18,595  
Intangible assets, net   81,037     95,654  
Goodwill   340,877     340,877  
Deferred tax assets, net   83,922     87,482  
Other assets   35,330     22,525  
TOTAL ASSETS   $ 2,018,313     $ 1,978,592  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES:        
Accounts payable   $ 20,967     $ 30,635  
Accrued employee compensation   44,448     60,135  
Deferred revenue, net   90,979     114,138  
Other current liabilities   13,276     20,280  
Total current liabilities   169,670     225,188  
Convertible senior notes, net   311,141     305,128  
Deferred revenue, net   21,381     23,758  
Other liabilities   1,739     774  
Total liabilities   503,931     554,848  
STOCKHOLDERS’ EQUITY:        
Common stock   8     8  
Additional paid-in capital   1,346,620     1,297,979  
Accumulated other comprehensive loss   (7,554 )   (7,748 )
Retained earnings   175,308     133,505  
Total stockholders’ equity   1,514,382     1,423,744  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 2,018,313     $ 1,978,592  
 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
                 
    Three Months Ended January 31,   Six Months Ended January 31,
    2019   2018   2019   2018
Revenue:                
License and subscription   $ 87,124     $ 84,221     $ 181,393     $ 114,314  
Maintenance   21,264     19,110     42,267     38,040  
Services   60,878     60,457     125,289     119,605  
Total revenue   169,266     163,788     348,949     271,959  
Cost of revenue:                
License and subscription   14,739     9,040     28,069     15,755  
Maintenance   3,954     3,593     7,822     7,060  
Services   60,937     55,136     126,198     107,848  
Total cost of revenue   79,630     67,769     162,089     130,663  
Gross profit:                
License and subscription   72,385     75,181     153,324     98,559  
Maintenance   17,310     15,517     34,445     30,980  
Services   (59 )   5,321     (909 )   11,757  
Total gross profit   89,636     96,019     186,860     141,296  
Operating expenses:                
Research and development   46,471     43,657     91,967     79,368  
Sales and marketing   31,173     31,961     63,492     55,571  
General and administrative   17,541     21,066     35,886     39,737  
Total operating expenses   95,185     96,684     191,345     174,676  
Loss from operations   (5,549 )   (665 )   (4,485 )   (33,380 )
Interest income   7,553     1,573     14,404     3,485  
Interest expense   (4,287 )   (7 )   (8,531 )   (11 )
Other income (expense), net   1,148     1,658     (341 )   1,396  
Income (loss) before income taxes   (1,135 )   2,559     1,047     (28,510 )
Provision for (benefit from) income taxes   (1,891 )   48,114     (5,198 )   25,959  
Net income (loss)   $ 756     $ (45,555 )   $ 6,245     $ (54,469 )
Net income (loss) per share:                
Basic   $ 0.01     $ (0.59 )   $ 0.08     $ (0.72 )
Diluted   $ 0.01     $ (0.59 )   $ 0.08     $ (0.72 )
Shares used in computing net income (loss) per share:                
Basic   81,217,511     76,859,040     81,058,562     76,023,237  
Diluted   82,191,668     76,859,040     82,289,773     76,023,237  

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

    Three Months Ended January 31,   Six Months Ended January 31,
    2019   2018   2019   2018
    (unaudited, in thousands)
Stock-based compensation expense:                
Cost of license and subscription revenue   $ 535     $ 258     $ 869     $ 432
Cost of maintenance revenue   558     481     1,092     936
Cost of services revenue   6,191     5,446     12,159     10,672
Research and development   6,440     7,697     12,844     12,609
Sales and marketing   5,074     5,024     9,695     9,241
General and administrative   5,555     6,126     11,027     10,765
Total stock-based compensation expense   $ 24,353     $ 25,032     $ 47,686     $ 44,655
 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
                 
    Three Months Ended January 31,   Six Months Ended January 31,
    2019   2018   2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss)   $ 756     $ (45,555 )   $ 6,245     $ (54,469 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and amortization   9,789     9,681     19,442     16,315  
Amortization of debt discount and issuance costs   3,027         6,013      
Stock-based compensation   24,353     25,032     47,686     44,655  
Charges to bad debt and revenue reserves   114         352      
Deferred income tax   (3,355 )   47,995     (7,340 )   24,287  
Amortization of premium (accretion of discount) on available-for-sale securities   (2,026 )   151     (3,816 )   361  
Other non-cash items affecting net income (loss)   141         515      
Changes in operating assets and liabilities:                
Accounts receivable   (24,198 )   (17,200 )   4,414     (16,345 )
Unbilled accounts receivable   (4,529 )       (30,190 )    
Prepaid expenses and other assets   (4,815 )   436     (66 )   (3,139 )
Accounts payable   (6,544 )   2,966     (14,475 )   4,834  
Accrued employee compensation   13,786     6,406     (15,262 )   (17,547 )
Other liabilities   2,802     1,160     1,111     804  
Deferred revenue   4,925     16,622     (27,650 )   16,690  
Net cash provided by (used in) operating activities   14,226     47,694     (13,021 )   16,446  
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of available-for-sale securities   (209,433 )   (43,977 )   (462,902 )   (110,820 )
Sales and maturities of available-for-sale securities   172,194     77,277     410,583     170,316  
Purchases of property and equipment   (8,061 )   (2,721 )   (11,006 )   (4,620 )
Capitalized software development costs   (644 )   (252 )   (1,103 )   (769 )
Acquisitions of business, net of acquired cash       (130,376 )       (130,376 )
Net cash used in investing activities   (45,944 )   (100,049 )   (64,428 )   (76,269 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from issuance of common stock upon exercise of stock options   414     362     1,103     727  
Net cash provided by financing activities   414     362     1,103     727  
Effect of foreign exchange rate changes on cash and cash equivalents   151     1,881     (625 )   1,207  
NET DECREASE IN CASH AND CASH EQUIVALENTS   (31,153 )   (50,112 )   (76,971 )   (57,889 )
CASH AND CASH EQUIVALENTS—Beginning of period   391,322     255,399     437,140     263,176  
CASH AND CASH EQUIVALENTS—End of period   $ 360,169     $ 205,287     $ 360,169     $ 205,287  
 
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 January 31,   Six Months Ended January 31,
    2019   2018   2019   2018
Income (loss) from operations reconciliation:                
GAAP income (loss) from operations   $ (5,549 )   $ (665 )   $ (4,485 )   $ (33,380 )
Non-GAAP adjustments:                
Stock-based compensation (1)   24,353     25,032     47,686     44,655  
Amortization of intangibles (1)   7,309     7,669     14,618     12,445  
Non-GAAP income (loss) from operations   $ 26,113     $ 32,036     $ 57,819     $ 23,720  
                 
Net income (loss) reconciliation:                
GAAP net income (loss)   $ 756     $ (45,555 )   $ 6,245     $ (54,469 )
Non-GAAP adjustments:                
Stock-based compensation (1)   24,353     25,032     47,686     44,655  
Amortization of intangibles (1)   7,309     7,669     14,618     12,445  
Amortization of debt discount and issuance costs (2)   3,027         6,013      
Tax impact of non-GAAP adjustments (3)   (7,501 )   38,364     (16,724 )   18,081  
Non-GAAP net income (loss)   $ 27,944     $ 25,510     $ 57,838     $ 20,712  
                 
Tax provision (benefit) reconciliation:                
GAAP tax provision (benefit)   $ (1,891 )   $ 48,114     $ (5,198 )   $ 25,959  
Non-GAAP adjustments:                
Stock-based compensation (1)   4,030     6,721     7,890     13,191  
Amortization of intangibles (1)   1,210     2,060     2,419     3,635  
Amortization of debt discount and issuance costs (2)   501         995      
Other income tax effects and adjustments (3)   1,760     (47,145 )   5,420     (34,907 )
Non-GAAP tax provision (benefit)   $ 5,610     $ 9,750     $ 11,526     $ 7,878  
                 
Net income (loss) per share reconciliation:                
GAAP net income (loss) per share - diluted   $ 0.01     $ (0.59 )   $ 0.08     $ (0.72 )
Non-GAAP adjustments:                
Stock-based compensation (1)   0.30     0.33     0.58     0.59  
Amortization of intangibles (1)   0.09     0.10     0.18     0.16  
Amortization of debt discount and issuance costs (2)   0.04         0.07      
Tax impact of non-GAAP adjustments (3)   (0.10 )   0.49     (0.20 )   0.23  
Non-GAAP net income (loss) per share - diluted   $ 0.34     $ 0.33     $ 0.71     $ 0.26  
                 
Shares used in computing Non-GAAP income (loss) per share amounts:                
GAAP weighted average shares - diluted   82,191,668     76,859,040     82,289,773     76,023,237  
Non-GAAP dilutive shares excluded from GAAP loss per share calculation (4)       1,460,188         1,429,707  
Pro forma weighted average shares - diluted   82,191,668     78,319,228     82,289,773     77,452,944  

(1) Adjustments relate to amortization of acquired intangibles and stock-based compensation recognized during the period for GAAP purposes.
(2) Adjustments reflect the amortization of debt discount and issuance costs related to the issuance of our Senior Convertible Notes recognized during the period for GAAP purposes.
(3) Adjustments reflect the tax benefit (provision) resulting from all non-GAAP adjustments.
(4) Due to the occurrence of a net loss on a GAAP basis, potentially dilutive securities were excluded from the calculation of GAAP earnings per share, as they would have an anti-dilutive effect. However, as net income was earned on a non-GAAP basis, these shares have a dilutive effect on a non-GAAP earnings per share and are included here.

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Outlook
The following tables reconcile the specific items excluded from GAAP outlook in the calculation of non-GAAP outlook for the periods indicated below:
         
(in $ millions)   Third Quarter Fiscal 2019   Fiscal Year 2019
Operating income (loss) outlook reconciliation:                        
GAAP operating loss   (31.1)   -   (27.1)   (13.6)   -   (7.6)
Non-GAAP adjustments:                        
Stock-based compensation   23.3   -   24.3   95.0   -   98.0
Amortization of intangibles   7.0   -   7.5   28.6   -   29.6
Non-GAAP operating income     -   4.0   112.0   -   118.0
                         
Net income (loss) outlook reconciliation                        
GAAP net income (loss)   (9.7)   -   (8.4)   4.5   -   6.5
Non-GAAP adjustments:                        
Stock-based compensation   23.3   -   24.3   95.0   -   98.0
Amortization of intangibles   7.0   -   7.5   28.6   -   29.6
Amortization of debt discount and issuance costs   3.1   -   3.1   12.2   -   12.2
Tax impact of non-GAAP adjustments   (20.3)   -   (18.3)   (31.4)   -   (28.5)
Non-GAAP net income   4.1   -   7.5   110.8   -   115.8

 

Media Contact:
Diana Stott
Guidewire Software, Inc.
(650) 356-4941
dstott [at] guidewire.com

Investor Contact:
Garo Toomajanian
ICR, LLC
(650) 357-5282
ir [at] guidewire.com