Communiqué de presse

Guidewire Software Announces Fourth Fiscal Quarter and Fiscal Year 2018 Financial Results

FOSTER CITY, Calif., 5 Septembre 2018

Guidewire Software, Inc. (NYSE: GWRE), a provider of software products to Property and Casualty (“P&C”) insurers, today announced its financial results for the fourth fiscal quarter and year ended July 31, 2018.

“Driven by a record number of transactions at new and existing customers in both domestic and international markets, revenue and net income were above our guidance ranges for the fourth quarter and fiscal year 2018,” said
Marcus Ryu, chief executive officer, Guidewire Software. “As insurers strive for differentiation through automation, digital engagement, predictive analytics, and integration to insurtech partners, they increasingly seek cloud solutions that reduce IT complexity and risk. We enter fiscal 2019 well situated to continue Guidewire InsurancePlatform’s progress toward becoming the platform of choice for the $2 trillion P&C insurance industry.”

Fiscal Year 2018 Financial Highlights

Revenue

  • Total revenue for fiscal year 2018 was $661.1 million, an increase of 29% from fiscal year 2017. License and other revenue for fiscal year 2018 was $315.8 million, an increase of 16% from fiscal year 2017. Services revenue was $268.0 million, an increase of 54%, and maintenance revenue was $77.3 million, an increase of 13%.
  • Rolling four-quarter recurring revenue was $381.3 million for the period ended July 31, 2018, an increase of 17% compared to the same metric for the period ended July 31, 2017. With our transition to more subscription-based contracts and our upcoming adoption of the new revenue standard, this metric becomes less indicative of our revenue trends and will not be disclosed in future quarters.

Profitability

  • GAAP loss from operations was $7.3 million for fiscal year 2018, compared with income of $26.6 million in fiscal year 2017.
  • Non-GAAP income from operations was $109.7 million for fiscal year 2018, compared with $110.5 million for fiscal year 2017.
  • GAAP net loss was $19.7 million for fiscal year 2018, compared with net income of $21.2 million for fiscal year 2017. GAAP net loss per share was $0.25 for fiscal year 2018, based on diluted weighted average shares outstanding of 77.7 million, compared to $0.28 net income per share for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million.
  • Non-GAAP net income was $90.9 million for fiscal year 2018, compared to $78.8 million for fiscal year 2017. Non-GAAP net income per share was $1.14 for fiscal year 2018, based on diluted weighted average shares outstanding of 77.7 million, compared to $1.05 for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million.

Fourth Fiscal Quarter 2018 Financial Highlights

Revenue

  • Total revenue for the fourth quarter of fiscal year 2018 was $248.6 million, an increase of 37% from the same quarter in fiscal year 2017. License and other revenue was $151.1 million, an increase of 38%; services revenue was $77.0 million, an increase of 46%; and maintenance revenue was $20.5 million, an increase of 10%.

Profitability

  • GAAP income from operations was $55.2 million for the fourth quarter of fiscal year 2018, compared with $41.0 million in the comparable period in fiscal year 2017.
  • Non-GAAP income from operations was $83.7 million for the fourth quarter of fiscal year 2018, compared with $64.0 million in the comparable period in fiscal year 2017.
  • GAAP net income was $83.4 million for the fourth quarter of fiscal year 2018, compared with $26.9 million for the comparable period in fiscal year 2017. GAAP net income per share was $1.02, based on diluted weighted average shares outstanding of 82.2 million, compared with $0.36 for the comparable period in fiscal year 2017, based on diluted weighted average shares outstanding of 75.8 million.
  • Non-GAAP net income was $66.3 million for the fourth quarter of fiscal year 2018, compared with $44.8 million in the comparable period in fiscal year 2017. Non-GAAP net income per share was $0.81, based on diluted weighted average shares outstanding of 82.2 million, compared with $0.59 in the comparable period in fiscal year 2017, based on diluted weighted average shares outstanding of 75.8 million.

Liquidity

  • The Company had $1.3 billion in cash, cash equivalents and investments at July 31, 2018, compared with $687.8 million at July 31, 2017. The increase was primarily due to total net proceeds of $608.2 million related to the public offering of our common stock and convertible notes and $140.5 million in cash generated from operations, partially offset by the use of $130.1 million of cash in connection with our acquisition of Cyence.

Business Outlook

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

                 
(in $ millions, except per share outlook)      

First Fiscal Quarter
2019

      Fiscal Year 2019
Revenue       159.0   - 163.0         740.5   - 752.5  
License and other revenue       73.0   - 77.0         365.0   - 377.0  
Maintenance revenue       19.0   - 20.0         79.5   - 81.5  
Services revenue       65.0   - 68.0         290.0   - 300.0  
GAAP operating loss       (17.0 ) - (13.0 )       (27.8 ) - (15.8 )
Non-GAAP operating income       14.5   - 18.5         104.5   - 116.5  
GAAP net loss       (12.6 ) - (9.5 )       (19.5 ) - (10.1 )
GAAP net loss per share       (0.16 ) - (0.12 )       (0.24 ) - (0.13 )
Non-GAAP net income       14.5   - 17.6         94.8   - 104.3  
Non-GAAP net income per share       0.18   - 0.22         1.15   - 1.26  
                                 

 

 

Conference Call Information

What:

        Guidewire Software Fourth Fiscal Quarter and Fiscal Year 2018 Financial Results Conference Call
When:         Wednesday, September 5, 2018
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 7506545, Domestic
          (412) 317-6671, Passcode 7506545, 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 and are impacted by the passage of the Tax Cuts and Jobs Act.

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.

À propos de Guidewire Software

Guidewire fournit aux assureurs IARD la plateforme métier Assurance sur laquelle ils vont pouvoir s’appuyer pour s’adapter et réussir dans une période d’accélération du changement. Nous mettons à disposition les logiciels, les services et l’écosystème de partenaires nécessaires à nos clients pour permettre de gérer, de différencier et de faire prospérer leur activité. Nous avons le privilège de servir plus de 350 entreprises dans 40 pays. Pour plus de renseignements, veuillez consulter notre site www.guidewire.fr. Suivez-nous sur 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; 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)
                 
        July 31,
2018
      July 31,
2017
ASSETS                
CURRENT ASSETS:                
Cash and cash equivalents       $ 437,140         $ 263,176  
Short-term investments       630,008         310,027  
Accounts receivable, net       124,849         79,433  
Prepaid expenses and other current assets       30,510         26,604  
Total current assets       1,222,507         679,240  
Long-term investments       190,952         114,585  
Property and equipment, net       18,595         14,376  
Intangible assets, net       95,654         71,315  
Deferred tax assets, net       87,482         37,430  
Goodwill       340,877         141,851  
Other assets       22,525         20,104  
TOTAL ASSETS       $ 1,978,592         $ 1,078,901  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES:                
Accounts payable       $ 30,635         $ 13,416  
Accrued employee compensation       60,135         48,882  
Deferred revenue, current       114,138         91,243  
Other current liabilities       20,280         10,075  
Total current liabilities       225,188         163,616  
Convertible senior notes, net       305,128          
Deferred revenue, non-current       23,758         19,892  
Other liabilities       774         2,112  
Total liabilities       554,848         185,620  
STOCKHOLDERS’ EQUITY:                
Common stock       8         8  
Additional paid-in capital       1,297,979         830,014  
Accumulated other comprehensive loss       (7,748 )       (5,796 )
Retained earnings       133,505         69,055  
Total stockholders’ equity       1,423,744         893,281  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY       $ 1,978,592         $ 1,078,901  
                         
 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
                                 
        Three Months Ended July 31,       Year Ended July 31,
        2018       2017       2018       2017
Revenue:                                
License and other       $ 151,103         $ 109,695         $ 315,776         $ 271,462  
Maintenance       20,548         18,671         77,337         68,643  
Services       76,988         52,734         267,954         174,179  
Total revenue       248,639         181,100         661,067         514,284  
Cost of revenue: (1)                                
License and other       9,955         6,627         35,452         17,046  
Maintenance       3,895         3,513         14,783         13,397  
Services       77,873         47,121         246,472         161,116  
Total cost of revenue       91,723         57,261         296,707         191,559  
Gross profit:                                
License and other       141,148         103,068         280,324         254,416  
Maintenance       16,653         15,158         62,554         55,246  
Services       (885 )       5,613         21,482         13,063  
Total gross profit       156,916         123,839         364,360         322,725  
Operating expenses: (1)                                
Research and development       45,502         35,458         171,657         130,323  
Sales and marketing       38,168         31,431         124,117         109,239  
General and administrative       18,009         15,902         75,916         56,551  
Total operating expenses       101,679         82,791         371,690         296,113  
Income (loss) from operations       55,237         41,048         (7,330 )       26,612  
Interest income       6,034         1,581         13,281         5,867  
Interest expense       (4,203 )       (7 )       (6,442 )       (13 )
Other income (expense), net       (531 )       1,146         509         811  
Income before income taxes       56,537         43,768         18         33,277  
Provision for (benefit from) income taxes       (26,889 )       16,841         19,683         12,053  
Net income (loss)       $ 83,426         $ 26,927         $ (19,665 )       $ 21,224  
Net income (loss) per share:                                
Basic       $ 1.04         $ 0.36         $ (0.25 )       $ 0.29  
Diluted       $ 1.02         $ 0.36         $ (0.25 )       $ 0.28  
Shares used in computing net income (loss) per share:                                
Basic       80,433,450         74,776,333         77,709,592         73,994,577  
Diluted       82,162,624         75,769,530         77,709,592         75,328,343  
                                         

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

                 
        Three Months Ended July 31,       Year Ended July 31,
        2018       2017       2018       2017
        (unaudited, in thousands)
Stock-based compensation expense:                                
Cost of license and other revenue       $ 296         $ 142         $ 1,002         $ 373
Cost of maintenance revenue       488         429         1,886         1,694
Cost of services revenue       5,874         4,652         21,856         18,621
Research and development       5,595         4,498         25,440         18,123

Sales and marketing

      4,619         4,166         18,387         16,664
General and administrative       4,248         4,246         21,043         16,319
Total stock-based compensation expense       $ 21,120         $ 18,133         $ 89,614         $ 71,794
                                               
 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
                                 
       

Three Months Ended
July 31,

     

Year Ended July 31,

        2018       2017       2018       2017
CASH FLOWS FROM OPERATING ACTIVITIES:                                
Net income (loss)       $ 83,426         $ 26,927         $ (19,665 )       $ 21,224  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                
Depreciation and amortization       9,494         6,517         35,611         18,725  
Amortization of debt discount and issuance costs       2,944                 4,512          
Provision for doubtful accounts       1,062                 1,062          
Stock-based compensation       21,120         18,133         89,614         71,794  
Excess tax benefit from stock-based compensation               (10,029 )               (9,067 )
Deferred income tax       (28,085 )       5,552         15,336         (1,227 )
Amortization of premium on available-for-sale securities, and other non-cash items       (1,384 )       261         (1,418 )       1,462  
Changes in operating assets and liabilities:                                
Accounts receivable       (24,023 )       15,995         (40,832 )       (9,750 )
Prepaid expenses and other assets       (811 )       (2,291 )       (2,783 )       (9,463 )
Accounts payable       10,248         765         16,792         1,311  
Accrued employee compensation       16,684         10,727         9,230         7,138  
Other liabilities       7,973         9,296         8,859         8,211  
Deferred revenue       3,437         3,770         24,140         36,802  
Net cash provided by operating activities       102,085         85,623         140,458         137,160  
CASH FLOWS FROM INVESTING ACTIVITIES:                                
Purchases of available-for-sale securities       (324,347 )       (118,274 )       (859,657 )       (462,035 )
Sales of available-for-sale securities       187,457         104,800         464,143         547,630  
Purchases of property and equipment       (2,712 )       (2,650 )       (9,398 )       (5,886 )
Capitalized software development costs       (981 )       (410 )       (2,613 )       (784 )
Strategic investment                               (4,677 )
Acquisitions of business, net of acquired cash                       (130,058 )       (187,590 )
Net cash used in investing activities       (140,583 )       (16,534 )       (537,583 )       (113,342 )
CASH FLOWS FROM FINANCING ACTIVITIES:                                
Proceeds from issuance of convertible senior notes, net of issuance costs                       387,239          
Proceeds from issuance of common stock, net of issuance costs                       220,948          
Purchase of capped calls                       (37,200 )        
Proceeds from issuance of common stock upon exercise of stock options       958         2,144         2,013         5,563  
Excess tax benefit from exercise of stock options and vesting of restricted stock units               10,029                 9,067  
Net cash provided by financing activities       958         12,173         573,000         14,630  
Effect of foreign exchange rate changes on cash and cash equivalents       (1,421 )       1,748         (1,911 )       1,146  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS       (38,961 )       83,010         173,964         39,594  
CASH AND CASH EQUIVALENTS—Beginning of period       476,101         180,166         263,176         223,582  
CASH AND CASH EQUIVALENTS—End of period       $ 437,140         $ 263,176         $ 437,140         $ 263,176  
                                                 
 
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 July 31,       Year Ended July 31,
        2018       2017       2018       2017
Income (loss) from operations reconciliation:                                
GAAP income (loss) from operations       $ 55,237         $ 41,048         $ (7,330 )       $ 26,612  
Non-GAAP adjustments:                                
Stock-based compensation (1)       21,120         18,133         89,614         71,794  
Amortization of intangibles (1)       7,348         4,776         27,462         12,089  
Non-GAAP income from operations       $ 83,705         $ 63,957         $ 109,746         $ 110,495  
                                 
Net income (loss) reconciliation:                                
GAAP net income (loss)       $ 83,426         $ 26,927         $ (19,665 )       $ 21,224  
Non-GAAP adjustments:                                
Stock-based compensation (1)       21,120         18,133         89,614         71,794  
Amortization of intangibles (1)       7,348         4,776         27,462         12,089  
Amortization of debt discount and issuance costs (2)       2,944                 4,512          
Tax impact of non-GAAP adjustments (3)       (48,548 )       (5,080 )       (11,006 )       (26,323 )
Non-GAAP net income       $ 66,290         $ 44,756         $ 90,917         $ 78,784  
                                 
Tax provision (benefit) reconciliation:                                
GAAP tax provision (benefit)       $ (26,889 )       $ 16,841         $ 19,683         $ 12,053  
Non-GAAP adjustments:                                
Stock-based compensation (1)       4,820         5,973         24,481         23,145  
Amortization of intangibles (1)       2,369         1,573         8,085         3,913  
Amortization of debt discount and issuance costs (2)       902                 1,328          
Other income tax effects and adjustments (3)       40,457         (2,466 )       (22,888 )       (735 )
Non-GAAP tax provision       $ 21,659         $ 21,921         $ 30,689         $ 38,376  
                                 
Net income (loss) per share reconciliation:                                
GAAP net income (loss) per share - Diluted       $ 1.02         $ 0.36         $ (0.25 )       $ 0.28  
Non-GAAP adjustments:                                
Stock-based compensation (1)       0.26         0.24         1.15         0.96  
Amortization of intangibles (1)       0.09         0.06         0.35         0.16  
Amortization of debt discount and issuance costs (2)       0.04                 0.06          
Tax impact of non-GAAP adjustments (3)       (0.60 )       (0.07 )       (0.14 )       (0.35 )
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation (4)                       (0.03 )        
Non-GAAP net income per share - Diluted       $ 0.81         $ 0.59         $ 1.14         $ 1.05  
                                 
Shares used in computing Non-GAAP income per share amounts:                                
GAAP weighted average shares - Diluted       82,162,624         75,769,530         77,709,592         75,328,343  
Non-GAAP dilutive shares excluded from GAAP loss per share calculation (4)                       1,785,533          
Pro forma weighted average shares - Diluted       82,162,624         75,769,530         79,495,125         75,328,343  
                                         

(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 income (loss) per share, as they would have had an anti-dilutive effect. However, as net income was earned on a non-GAAP basis, these shares have a dilutive effect on Non-GAAP income (loss) per share.

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Outlook
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP outlook for the periods indicated below:
(in $ millions)      

First Fiscal
Quarter 2019

      Fiscal Year 2019
Operating income (loss) outlook reconciliation:                        
GAAP operating loss       (17.0 ) - (13.0 )       (27.8 ) - (15.8 )
Non-GAAP adjustments:                        
Stock-based compensation       23.7   - 24.7         101.7   - 104.7  
Amortization of intangibles       7.1   - 7.6         28.6   - 29.6  
Non-GAAP operating income       14.5   - 18.5         104.5   - 116.5  
                         
Net income (loss) outlook reconciliation                        
GAAP net loss       (12.6 ) - (9.5 )       (19.5 ) - (10.1 )
Non-GAAP adjustments:                        
Stock-based compensation       23.7   - 24.7         101.7   - 104.7  
Amortization of intangibles       7.1   - 7.6         28.6   - 29.6  
Amortization of debt discount and issuance costs       3.0   - 3.0         12.2   - 12.2  
Tax impact of non-GAAP adjustments       (7.4 ) - (7.3 )       (30.3 ) - (30.1 )
Non-GAAP net income       14.5   - 17.6         94.8   - 104.3  
                             

Media Contact:
Guidewire Software, Inc.
Diana Stott, 650-356-4941
dstott [at] guidewire.com
or
Investor Contact:
ICR, LLC
Garo Toomajanian, 650-357-5282
ir [at] guidewire.com