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Guidewire (GWRE) Q1 Loss Narrower Than Expected, Revenues Up Y/Y

Guidewire Software GWRE reported non-GAAP loss of 12 cents per share in first-quarter fiscal 2023 (ended Oct 31), narrower than the Zacks Consensus Estimate of a loss of 39 cents per share. This compared favorably with the year-ago quarter’s non-GAAP loss of 21 cents per share.

The company reported revenues of $195.3 million, rising 18% year over year and beating the Zacks Consensus Estimate by 2.5%.

Guidewire Cloud continued to gain momentum in the reported quarter among new and existing clients.

Guidewire Software, Inc. Price, Consensus and EPS Surprise

Guidewire Software, Inc. Price, Consensus and EPS Surprise
Guidewire Software, Inc. Price, Consensus and EPS Surprise

Guidewire Software, Inc. price-consensus-eps-surprise-chart | Guidewire Software, Inc. Quote

Quarter in Detail

Subscription and support segments’ revenues (50.7% of total revenues) soared 25% from the year-ago quarter’s levels to $99.1 million, owing to higher subscription revenues. Subscription’s revenues surged 38.2% year over year to $79 million. Support’s revenues declined 8% year over year to $21 million.

License’s revenues (21% of total revenues) were down 2% year over year to $41 million.

Services’ revenues (28.3% of total revenues) climbed 18.1% year over year to $55.3 million, driven by increased cloud implementation programs.

Annual recurring revenues (ARR) were $673 million as of Oct 31, up 13.3% year over year.

Non-GAAP gross margin contracted 500 basis points (bps) on a year-over-year basis to 42.5%.

Subscription and support segments’ gross margin expanded 390 bps on a year-over-year basis to 49.2%. This year-over-year improvement was due to increased cloud infrastructure efficiency and slower hiring. Services’ non-GAAP gross margin was negative 9% compared with a gross margin of 10.3% in the year-ago reported quarter.

Total operating expenses increased 9.7% year over year to $146.7 million. Non-GAAP operating income was $35.9 million compared with the operating income of $28.7 million reported in the year-ago quarter.

Financial Details

As of Oct 31, cash and cash equivalents and short-term investments came in at $0.9 billion compared with $1.2 billion as of Jul 31.

Guidewire used $87.4 million in cash from operations during the fiscal first quarter, with a free cash outflow of nearly $91.7 million.

Guidance

For second-quarter fiscal 2023, revenues are expected in the range of $221-$226 million. ARR is expected to be between $695 million and $700 million. Non-GAAP operating income (loss) is expected between $(4) million and $0 million. GAAP operating income (loss) is expected to be between $(41) million and $(37) million.  

For fiscal 2023, the company expects total revenues between $886 million and $896 million. ARR is expected to be between $745 million and $760 million.

Non-GAAP operating loss for fiscal 2023 is projected in the range of $18-$28 million. Cash flow from operations is projected in the range of $50-$80 million.

Zacks Rank & Other Stocks to Consider

At present, Guidewire carries a Zacks Rank #2 (Buy).

Other stocks worth consideration from the broader technology space are Arista Networks ANET, Blackbaud BLKB and Plexus PLXS. Arista Networks and Plexus currently sport a Zacks Rank #1 (Strong Buy), while Blackbaud carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $4.37 per share, up 8.2% in the past 60 days. The long-term earnings growth rate is anticipated at 17.5%.

Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET have increased 2.9% in the past year.

The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.59 per share, up 1.6% in the past 60 days. The long-term earnings growth rate is anticipated at 4%.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.9%. Shares of BLKB have declined 26.6% in the past year.

The Zacks Consensus Estimate for Plexus’ fiscal 2023 earnings is pegged at $5.98 per share, up 8.9% in the past 60 days.

Plexus’ earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 17.5%. Shares of PLXS have increased 15% in the past year.

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