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Guidewire Announces Third Quarter Fiscal Year 2022 Financial Results

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SAN MATEO, Calif., June 07, 2022--(BUSINESS WIRE)--Guidewire (NYSE: GWRE) today announced its financial results for the fiscal quarter ended April 30, 2022.

"In the third quarter, we exceeded our outlook for revenue and ARR driven by continued momentum for Guidewire Cloud, closing another eight cloud deals in the quarter," said Mike Rosenbaum, chief executive officer, Guidewire. "This momentum is a result of the terrific progress we are making with Guidewire Cloud and also the resilience and durability of our customer base and the industry we serve."

Third Quarter Fiscal Year 2022 Financial Highlights

Revenue

  • Total revenue for the third quarter of fiscal year 2022 was $197.4 million, an increase of 20% from the same quarter in fiscal year 2021. Subscription and support revenue was $86.9 million, an increase of 34%; services revenue was $56.7 million, an increase of 18%; and license revenue was $53.9 million, an increase of 6%.

  • Annual recurring revenue, or ARR, was $637 million as of April 30, 2022, compared to $582 million as of July 31, 2021. ARR results for interim quarterly periods in fiscal year 2022 are measured on a constant currency basis, using the actual currency rates at the end of fiscal year 2021 throughout the year.

Profitability

  • GAAP loss from operations was $62.4 million for the third quarter of fiscal year 2022, compared with $46.8 million for the same quarter in fiscal year 2021.

  • Non-GAAP loss from operations was $24.9 million for the third quarter of fiscal year 2022, compared with $16.3 million for the same quarter in fiscal year 2021.

  • GAAP net loss was $57.4 million for the third quarter of fiscal year 2022, compared with $36.6 million for the same quarter in fiscal year 2021. GAAP net loss per share was $0.69, based on diluted weighted average shares outstanding of 83.7 million, compared with $0.44 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.6 million.

  • Non-GAAP net loss was $21.8 million for the third quarter of fiscal year 2022, compared with $13.2 million for the same quarter in fiscal year 2021. Non-GAAP net loss per share was $0.26, based on diluted weighted average shares outstanding of 83.7 million, compared with $0.16 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.6 million.

Liquidity

  • The Company had $1.1 billion in cash, cash equivalents, and investments at April 30, 2022, compared to $1.3 billion at July 31, 2021. The Company used $121.5 million in cash from operations during the first nine months of fiscal year 2022 and $43.8 million for the acquisition of HazardHub during the first quarter of fiscal year 2022.

Business Outlook

Guidewire is issuing the following outlook for the fourth quarter of fiscal year 2022 based on current expectations:

  • ARR between $668 million and $674 million

  • Total revenue between $226 million and $232 million

  • Operating income (loss) between $(37) million and $(31) million

  • Non-GAAP operating income (loss) between $(2) million and $4 million

Guidewire is issuing the following updated outlook for fiscal year 2022 based on current expectations:

  • ARR between $668 million and $674 million

  • Total revenue between $794 million and $800 million

  • Operating income (loss) between $(205) million and $(199) million

  • Non-GAAP operating income (loss) between $(53) million and $(47) million

  • Operating cash flow between $10 million and $20 million

Conference Call Information

What:

Guidewire Third Quarter Fiscal Year 2022 Financial Results Conference Call

When:

Tuesday, June 7, 2022

Time:

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

Live Call:

(877) 704-4453, Domestic

Live Call:

(201) 389-0920, International

Replay:

(844) 512-2921, Passcode 13730098, Domestic

Replay

(412) 317-6671, Passcode 13730098, 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, amortization of intangibles, the COVID-19 Canada Emergency Wage Subsidy benefit, and acquisition consideration holdback. 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. 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 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 nine months ended April 30, 2022, the recurring license and support or subscription contract value recognized as services revenue was $16.1 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 450 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.

For more information, please visit www.guidewire.com and follow us on twitter: @Guidewire_PandC.

NOTE: For information about Guidewire’s trademarks, visit https://www.guidewire.com/legal-notices.

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, product enhancements 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; the impact of the COVID-19 pandemic, inflation, and other global events, such as the conflict between Russia and Ukraine, on our employees and our business and the businesses of our customers, system integrator ("SI") partners, and vendors; seasonal and other variations related to our customer agreements and related 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 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; our products or cloud-based services may experience data security breaches; we face intense competition in our market; 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; changes in accounting guidance, such as revenue recognition, which have and may cause us to experience greater volatility in our quarterly and annual results; 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 and the amount of direct written premiums; 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 and hiring sufficient 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. 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)

April 30,
2022

July 31,
2021

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

326,861

$

384,910

Short-term investments

481,086

734,517

Accounts receivable, net

85,703

104,068

Unbilled accounts receivable, net

104,359

79,061

Prepaid expenses and other current assets

58,260

52,729

Total current assets

1,056,269

1,355,285

Long-term investments

281,069

227,164

Unbilled accounts receivable, net

17,626

24,361

Property and equipment, net

80,079

80,061

Operating lease assets

89,438

97,447

Intangible assets, net

24,148

19,743

Goodwill

372,189

340,877

Deferred tax assets, net

184,910

138,428

Other assets

51,607

38,479

TOTAL ASSETS

$

2,157,335

$

2,321,845

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

30,257

$

27,830

Accrued employee compensation

67,939

102,137

Deferred revenue, net

111,685

138,699

Other current liabilities

27,217

31,648

Total current liabilities

237,098

300,314

Lease liabilities

105,735

115,374

Convertible senior notes, net

354,544

343,825

Deferred revenue, net

3,809

7,237

Other liabilities

6,499

10,201

Total liabilities

707,685

776,951

STOCKHOLDERS’ EQUITY:

Common stock

8

8

Additional paid-in capital

1,721,241

1,617,204

Accumulated other comprehensive income (loss)

(18,647

)

(6,218

)

Retained earnings (accumulated deficit)

(252,952

)

(66,100

)

Total stockholders’ equity

1,449,650

1,544,894

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,157,335

$

2,321,845

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands except share and per share data)

Three Months Ended April 30,

Nine Months Ended April 30,

2022

2021

2022

2021

Revenue:

Subscription and support

$

86,851

$

64,836

$

250,138

$

182,365

License

53,894

50,937

163,845

194,132

Services

56,703

48,195

154,032

137,335

Total revenue

197,448

163,968

568,015

513,832

Cost of revenue(1):

Subscription and support

54,758

41,284

155,654

118,448

License

1,951

1,991

6,544

7,762

Services

63,779

48,790

169,453

148,724

Total cost of revenue

120,488

92,065

331,651

274,934

Gross profit:

Subscription and support

32,093

23,552

94,484

63,917

License

51,943

48,946

157,301

186,370

Services

(7,076

)

(595

)

(15,421

)

(11,389

)

Total gross profit

76,960

71,903

236,364

238,898

Operating expenses(1):

Research and development

64,049

54,155

184,378

159,964

Sales and marketing

48,142

40,879

142,940

116,739

General and administrative

27,173

23,695

76,284

67,695

Total operating expenses

139,364

118,729

403,602

344,398

Income (loss) from operations

(62,404

)

(46,826

)

(167,238

)

(105,500

)

Interest income

1,000

1,559

2,373

6,363

Interest expense

(4,885

)

(4,698

)

(14,512

)

(13,969

)

Other income (expense), net

(6,932

)

5,259

(13,794

)

14,632

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

(73,221

)

(44,706

)

(193,171

)

(98,474

)

Provision for (benefit from) income taxes

(15,777

)

(8,073

)

(43,770

)

(32,999

)

Net income (loss)

$

(57,444

)

$

(36,633

)

$

(149,401

)

$

(65,475

)

Net income (loss) per share:

Basic and diluted

$

(0.69

)

$

(0.44

)

$

(1.79

)

$

(0.78

)

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

Basic and diluted

83,689,429

83,600,327

83,440,231

83,693,045

(1)

Amounts include stock-based compensation expense as follows:

Three Months Ended April 30,

Nine Months Ended April 30,

2022

2021

2022

2021

(unaudited, in thousands)

Stock-based compensation expense:

Cost of subscription and support revenue

$

4,051

$

2,780

$

11,172

$

8,336

Cost of license revenue

170

183

541

579

Cost of services revenue

5,879

5,395

17,597

16,516

Research and development

9,293

6,930

27,340

21,781

Sales and marketing

7,529

6,587

25,843

19,370

General and administrative

6,006

6,348

20,540

19,621

Total stock-based compensation expense

$

32,928

$

28,223

$

103,033

$

86,203

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Three Months Ended April 30,

Nine Months Ended April 30,

2022

2021

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

(57,444

)

$

(36,633

)

$

(149,401

)

$

(65,475

)

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

Depreciation and amortization

8,766

8,057

25,745

29,028

Amortization of debt discount and issuance costs

3,623

3,428

10,719

10,143

Amortization of contract costs

3,410

3,143

9,720

8,498

Stock-based compensation

32,928

28,223

103,033

86,203

Changes to allowance for credit losses and revenue reserves

2,550

(108

)

2,707

10

Deferred income tax

(17,208

)

(10,000

)

(47,457

)

(30,294

)

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

1,300

1,794

4,615

4,922

Other non-cash items affecting net income (loss)

(7

)

(55

)

221

745

Changes in operating assets and liabilities:

Accounts receivable

23,470

21,007

15,530

43,375

Unbilled accounts receivable

(18,002

)

(15,829

)

(18,450

)

(47,887

)

Prepaid expenses and other assets

(329

)

(1,146

)

(13,664

)

(4,587

)

Operating lease assets

2,342

2,893

8,009

2,984

Accounts payable

5,998

4,194

4,287

(118

)

Accrued employee compensation

15,068

12,607

(32,255

)

16,451

Deferred revenue

(13,392

)

(13,670

)

...