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 April 30, 2020.
“We delivered strong financial results in the third quarter highlighted by 105% year-over-year growth in subscription revenue that, along with total revenue and profitability, exceeded our guidance ranges," saidMike Rosenbaum, chief executive officer, Guidewire Software. "I am very proud of how our team and community have responded to the headwinds caused by COVID-19. During our third quarter, we made significant progress on our Guidewire Cloud Platform release, closed a new InsuranceSuite Cloud deal withAviva Italia, and added three new Cyence customers."
Third Quarter Fiscal Year 2020 Financial Highlights
Total revenue for the third quarter of fiscal year 2020 was $168.2 million, an increase of 3% from the same quarter in fiscal year 2019. License and subscription revenue was $93.2 million, an increase of 22%; services revenue was $54.3 million, a decrease of 17%; and maintenance revenue was $20.7 million, which remained relatively flat.
Annual recurring revenue, or ARR, was $483 million as of April 30, 2020, up from $460 million as of July 31, 2019. Quarterly ARR results for fiscal year 2020 are based on actual currency rates at the end of fiscal year 2019, held constant throughout the year.
GAAP loss from operations was $25.6 million for the third quarter of fiscal year 2020, compared with $15.8 million for the comparable period in fiscal year 2019.
Non-GAAP income from operations was $5.8 million for the third quarter of fiscal year 2020, compared with $12.6 million for the comparable period in fiscal year 2019.
GAAP net loss was $31.0 million for the third quarter of fiscal year 2020, compared with less than $0.1 million for the comparable period in fiscal year 2019. GAAP net loss per share was $0.37, based on diluted weighted average shares outstanding of 83.0 million, compared with less than $0.01 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 81.6 million.
Non-GAAP net income was $7.7 million for the third quarter of fiscal year 2020, compared with $15.2 million for the comparable period in fiscal year 2019. Non-GAAP net income per share was $0.09, based on diluted weighted average shares outstanding of 83.5 million, compared with $0.18 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 82.6 million.
The Company had $1.3 billion in cash, cash equivalents, and investments at April 30, 2020, the same as at July 31, 2019. The Company generated $5.9 million in cash from operations and had negative free cash flow of $16.3 million during the nine months ended April 30, 2020.
Guidewire is issuing the following outlook for the fourth quarter of fiscal year 2020 and fiscal year 2020 based on current expectations:
(in $ millions)
Fourth Quarter Fiscal Year 2020
Fiscal Year 2020
License and subscription
GAAP income (loss) from operations
Non-GAAP income (loss) from operations
GAAP net income (loss)
GAAP net income (loss) per share
Non-GAAP net income (loss)
Non-GAAP net income (loss) per share
ARR growth on a constant currency basis is now expected to be between 9% and 11% in fiscal year 2020 compared to our previous range of 11% to 12%.
The Company today announced that chief sales officerSteve Sherry plans to retire next fiscal year and that Frank O’Dowd has been named his successor. Additionally, the Company announced the permanent appointment ofJeff Cooper to the chief financial officer role, after serving in an interim capacity, as well as the promotion ofPriscilla Hung to president, chief operating officer.
After nearly 15 years as a sales leader at Guidewire, which was preceded by an extraordinary career in enterprise software,Steve Sherry has decided to retire. “Guidewire is incredibly indebted to Steve for the contribution and leadership he provided during his tenure at Guidewire. He is an incredible sales leader and has built a truly first class sales division here at Guidewire,” saidMr. Rosenbaum. The Company today announced Mr. Sherry’s successor, Frank O’Dowd, who joins Guidewire from Oracle, where he was most recently group vice president and a member of the sales team for over 21 years. “While Steve’s retirement is bittersweet, we are incredibly excited to welcome Frank O’Dowd to the leadership team here at Guidewire,” saidMr. Rosenbaum. Mr. O’Dowd will join Guidewire on June 15, working with Mr. Sherry and the sales team through the end of the fiscal year, before taking over the leadership role.Mr. Sherry will continue with the Company as senior vice president, strategic accounts into the Company’s next fiscal year, to ensure a complete and seamless transition, after which he plans to retire.
After conducting an extensive and thorough search, Guidewire determined thatJeff Cooper was the best individual to lead the finance organization, resulting in the Board of Directors appointing him permanently to the chief financial officer role, after his service in an interim capacity. “Jeff’s command of the very detailed and complex cloud business model transition, combined with the trust he has engendered and the leadership shown during this interim period, clearly demonstrated Jeff is the right chief financial officer for Guidewire,” saidMr. Rosenbaum.
Guidewire also announced thatPriscilla Hung, who has been with Guidewire since 2005, including serving as chief operating officer since June 2017, has been promoted to president, chief operating officer. “Priscilla has been a key leader of the organization, embodying the grit, determination, and resilience of our culture. I’m excited to continue to partner with her as we drive the next chapter for Guidewire, Guidewire Cloud and our partner ecosystem,” saidMr. Rosenbaum. “Through most of Guidewire's history, Priscilla has been an essential leader, driving many of our most important initiatives and finding a way to succeed for our customers. The Board and I look forward to her continued leadership in her new role,” saidMarcus Ryu, chairman of the board.
Conference Call Information What: Guidewire Software Third Quarter Fiscal Year 2020 Financial Results Conference Call When: Wednesday, June 3, 2020 Time: 2:00 p.m. PT (5:00 p.m. ET) Live Call: (877) 705-6003, Domestic (201) 493-6725, International Replay: (844) 512-2921, Passcode 13704201, Domestic (412) 317-6671, Passcode 13704201, 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 income 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 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, 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 depreciation, amortization, stock-based compensation, and changes in fair value of strategic investments.
Annual recurring revenue ("ARR") is used to identify the annualized recurring value of active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, maintenance 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 usage arrangements that are not expected to recur (primarily perpetual licenses and services) are excluded.
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.